U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB NO. 1
General form for registration of securities of small business
issuers Under Section 12(b) or (g) of the Securities
Exchange Act of 1934
Shannon International Resources, Inc.
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(Name of Small Business Issuer in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
98-0204956
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(I.R.S. Employer Identification No.)
Principal Executive Offices
---------------------------
4020, 7 Street S.W.
Calgary Alberta T2G2Y8
(Issuer's Telephone No.)
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(403) 543-0970
Securities to be Registered under Section 12(b) of the Act: None
Securities to be Registered under Section 12(g) of the Act: Common Stock (Title
of Stock)
Total number of pages: 60
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Index to Exhibits Appears on page: 29
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Item 1
(a) Business Development
Shannon International Resources, Inc. (the Company) was incorporated in
February, 1999 under the laws of the State of Nevada for the purpose of
financing and owning oil and natural gas development properties. On February 18,
1999, the Company acquired a 25% working interest in petroleum, natural gas and
coalbed methane leases (Oil and Natural Gas Permit No. 9606) covering 116,279
acres of Prince Edward Island, Canada (the Working Interest) in exchange for
2,000,000 shares of the common stock of the Company from CMB Energy Corp., of
Toronto, Ontario (formerly 1326703 Ontario Inc.) The agreement also grants the
Company the option to acquire an additional twelve and one half percent of the
working interest by the expenditure of $1,500,000 Cdn., by October 2000 and a
further twelve and one half percent of the working interest by the expenditure
of $1,500,000 Cdn., by October 2001 and the right to enter into a joint venture
agreement with the holder or holders of the remaining 50% working interest by
the expenditure of $3,000,000 Cdn., on the property over the next thirty months.
(b) Narrative Description of Business
Shannon International Resources Inc. (The Company) is an independent, natural
gas and oil company primarily engaged in the acquisition development and
production of coalbed methane properties in Prince Edward Island, Canada. The
development plan for the Working Interest is seek out a larger oil and gas
company to joint venture a drilling exploration program. The Company and CMB
Energy Corp., are obligated to maintain the leases in good standing by the
expenditure of $16,279 Cdn., per year. To date, $44,185 Cdn., has been expended
of which the Company's twenty-five percent contribution was $11,046 Cdn., which
was deemed paid through the common stock issued to CMB Energy Corp. A "Working
Interest" is an oil and gas industry term meaning that the holders of a "Working
Interest" for an oil and gas property have a proportionate ownership interest in
the property and the obligation to perform or pay their proportionate share of
the exploration, development and production cost for the property and the right
to share proportionately in any profits derived from the property. By holding a
twenty-five percent working interest in the Prince Edward Island leases, the
Company has the obligation to pay twenty-five percent of the costs and has the
right to receive twenty-five percent of any profits. The Prince Edward Island
property is not currently producing oil or gas and has no proven reserves. The
Company has not generated any revenue to date.
Prince Edward Island lies in the southwestern part of a large, mainly
non-marine, Carboniferous to Permian basin called the Maritimes Basin. The basin
fill consists of fluvial, alluvial, lacustrine, and minor marine strata.
"Fluvial" "alluvial" and "lacustrine" strata are sedimentary rock deposits.
Seismic (geological data complied by measuring underground movement caused by
test explosions) and borehole (exploratory drilling) data suggest Prince Edward
Island is underlain by coal measures strata, as estimated by the Geological
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Survey of Canada, Paper 77-20. 26P. The offshore extension of the coal measures
strata contain up to 20-25 coal seams, ranging in thickness between 0.6 - 3
meters (2-10 feet) with a net coal thickness from 15 to 40 meters (48 to 131
feet). The coal rank is bituminous. Structural features associated with major
northeast trending faults systems and salt tectonism may have created favorable
permeability conditions for enhanced coal-bed methane recovery.
Source rock studies indicate that the early Carboniferous rocks are oil prone
with more than 2% total oil capacity and greater than 5 milligrams per gram of
rock. Conversely, the upper Carboniferous rocks are mainly gas prone. In
addition, excess coal gas expelled during coalification may have charged near by
reservoirs. Porosities up to 25% and permaeablities up to 300 millidarcies have
been reported from the lower Carboniferous rocks, whereas porosities up to 15%
have been reported for the upper Carboniferous rocks.
Regulation: The Company's operations are subject to extensive regulation for the
protection of the environment by the Canadian Federal Government and the
Provincial Government where acreage is located. The Company is also subject to
the typical regulation of any business. The Company must submit exploration and
development plans to the Department of the Environment for the Province of
Prince Edward Island for approval prior to execution of such plans. Compliance
with environmental regulation may be expected to result in $50,000 Cdn., of
estimated expenses to the Company over the next twelve months. Environmental
protection expenses are expected to include the cost of site preparation such as
road construction, fencing and earthen berms or retaining walls to contain
potential overflows or spillage of oil or drilling fluids. If production is
begun, the temporary measures must be made permanent, if production is not
warranted, the temporary measures must be removed and the land restored to its
prior condition.
Employees: The company employs one person full time and will contract the
services of consultants in the various areas of expertise as required for the
next six to twelve months. However it is anticipated that a full time staff of
up to six people will be required as the Company develops and begins to
implement the exploration and development programs over the next twelve to
eighteen months. The Company is currently dependent upon a single individual,
its President, Blair Coady. The Company does not have an employment agreement
with Mr. Coady and does not carry key person insurance for Mr. Coady.
Material Risks
The Company and its business are subject to the following material risks which
may adversely effect the market price for the company's common stock in the
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event a market develops as well as adversely effect the company's ability to
successfully execute its plan of operation.
Development Stage Company with Limited Operating History. The Company is a
development stage company in its first year of existence. The Company has no
revenues and no proven reserves on its property. The Company is subject to all
of the risks inherent in a start-up company including lack of operating history
and adequate capital.
Adequate Insurance. The Company does not presently maintain any key man
insurance on the life of its president or any form of liability insurance for
its operations. The loss of the services of the president would adversely effect
the Company's ability to conduct its plan of operations. The Company anticipates
that adequate liability insurance coverage will be included in any exploration
or development plan for the Company's working interest.
Reliance on Third Parties The Company will depends on third parties for all
important aspects of its business, including its exploration and development of
the working interest. The Company has limited control over these third parties,
and will not be their only client. The Company may not be able to maintain
satisfactory relationships with any of them on acceptable commercial terms.
Further, it cannot be certain that the quality of services that they provide
will remain at levels needed to enable it to conduct our business effectively.
Competition. The Company believes that its business will face extensive
competition. These competitors are likely to be larger and have greater
financial resources than the Company. As a result no assurances can be given
that the Company will be able to be successful in furthering its plan of
operations beyond its existing property.
Risk of being a Penny Stock. The Securities and Exchange Commission has adopted
rules that define a "penny stock" as a security which is not traded on a major
exchange and has a market price of less than $5 per share. It is likely that the
Company's securities will be characterized as penny stock. Broker-dealers
dealing in the securities will be subject to the disclosure rules for
transactions involving penny stocks which require the broker-dealer among other
things to (i) determine the suitability of purchasers of the securities, and
obtain the written consent of purchasers to purchase such securities and (ii)
disclose the best (inside) bid and offer prices for such securities and the
price at which the broker-dealer last purchased or sold the securities. The
additional burdens imposed upon broker-dealers may discourage them from
effecting transactions in penny stocks, which could reduce the liquidity of the
Company's securities.
Potential Adverse Effect of Shares Issuable as Consideration for Acquistions.
The Company intends to issue its common stock as consideration for acquisitions
of oil and gas properties or other business development purposes. The issuance
of additional shares could have an material adverse effect on the market for the
Shares as well as substantially dilute the percentage ownership and book value
of presently outstanding shares.
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operations Results of Operations
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As a company in its initial stages of development, the company has no revenues
from operations. The Company intends to focus its efforts entirely on the Prince
Edward Island working interest for the foreseeable future. However, the company
plans to formulate a development program for its Prince Edward Island working
interest, which will include the implementation of a drilling program in
conjunction with C M B Energy Corp., or a larger oil and gas company who will
enter into a joint venture agreement for exploratory drilling and possible
development. The Company has not yet entered into any discussions with any
company regarding the formation of a joint venture for exploratory drilling. The
Company's Plan of Operations is to wait until the Company is approached by third
parties seeking to explore the entire 650,000 leased acres of Prince Edward
Island of which the Company has its twenty-five percent working interest in
116,279 acres. The Company believes such a third party is likely to be a large
oil and gas company capable of undertaking an exploratory program for the entire
area. As a result the Company anticipates only having to provide its
proportional cost of the exploration program in order to participate. The
Company does not have any exploration or development equipment and does not
intend to purchase any as it anticipates that the exploration program will be
conducted by contracted third parties.
Though no assurance can be given, this development program is expected to
provide for the drilling of a sufficient number of wells to determine whether
there is sufficient reserves of oil or gas to then develop a program to
establish production. Management believes that the general and administrative
expenses, capital and operating expenditures related to the implementation of
the development program is approximately $3,000,000 Cdn., of which the Company
may be expected to provide up to $750,000 Cdn. The Company intends to raise this
capital through the private placement or public offering of securities.
The Company anticipates spending $750,000 Cdn., in connection with maintaining
its twenty-five percent working interest. In order to do so the Company must be
able to raise capital through the sale of its securities. The Company believes
it will be able sell a sufficient amount of its securities to raise the
estimated $750,000 Cdn., through the oil and gas industry contacts of its
President, Blair Coady and those of its Working Interest Partner, CMB Energy
Corp. The Company cannot predict if it will exercise its option to acquire up to
an additional twelve and one half percent (12.5%) of the Working Interest from
CMB Energy Corp., for the expenditure of approximately $1,500,000 Cdn., by
October 2000 or its second option to acquire up to an additional twelve and one
half percent (12.5%) of the Working Interest from CMB Energy Corp., for the
expenditure of approximately $1,500,000 Cdn., by October 2001. Exercise of these
options is dependent upon whether the Company and CMB Energy Corp., receive an
offer to participate in an exploration program, whether a market is established
for the Company's securities and whether the Company can successfully raise such
capital through the sale of its securities. In the event, the Company is unable
to pay its obligations under its existing twenty-five percent working interest,
its working interest can be proportionally reduced in favor of whatever working
interest partner pays the delinquent amount.
The Company believes that no expenditure of funds will be required for at least
the next six months due to the fact that no offers to participate in an
exploration program have been made to date. It is the Company's expectation that
it will receive an offer to participate this winter and that an exploration
program would begin until the spring of 2000. At such time, the Company believes
its expenditures will be primarily in paying its proportional share of the cost
of a third party contractor which will conduct an exploration program.
5
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The Company has filed this Form 10SB Registration Statement in order to
establish itself as a fully reporting company under the Securities Exchange Act
of 1934. On the basis of the public information provided thereby, the Company
intends to seek a listing of its common stock on the National Association of
Securities Dealers, Inc., OTC Electronic Bulletin Board Market. It is the
Company's belief that an independent market for its common stock will be
advantageous to the Company by establishing an objective measure of value for
the common stock.
The Company's business plan is to raise additional capital through private
placements or public offerings of its equity securities and use the capital to
pay its proportional share of the costs of development of its current Working
Interest. Thereafter the Company intends to place its securities with and
through the industry contacts and opportunities known to the company's
management. The Company has not established any limitations on the amount or
type of securities it will sell. Such amount will be determined by the market
price for the Company's securities if the Company is successful in establishing
this market. However, the Company also does not intend sell such securities as
would result in a change in voting control the Company.
Liquidity and Capital Resources.
The company is not at present producing revenues and its main source of funds
has been the sale of the company's equity securities. The company had $39,970 in
cash and receivables and other current assets as of June 30, 1999. The Company
has a receivable of $35,000 U.S., from Calgary Chemical, of Calgary, Alberta,
which the Company's President, Blair Coady is also President. All cash is a
present being used to fund ongoing general and administrative expenses, plus
consulting expenses, with the total of such expenses estimated to be
approximately $5,000 per month. As a result the Company has enough present cash
to meet its needs for twelve months. The company will need to raise additional
capital to meet its ongoing overhead obligations and the contemplated
development program. Such funding may be obtained through the sale of additional
securities. If the company is unable to obtain sufficient funds, then the
company may seek to find development partners and increase funds available to
the company through the sale of some portion of its working interest in the
Prince Edward Island leases. The ability of the company to sell a portion of its
working interest is not a certainty and the proceeds derived from such sales
will be subject to the ongoing economic viability of the project.
The capital resources of the company are limited. At present the company is not
producing revenues and is not expected to produce revenues until after November
2001. The main source of funds for working capital at present is the sale of the
company's equity securities. Other possible sources of funding are loans from
financial institutions with the company's leasehold interests as collateral.
However, the collateral value of such leasehold interests is limited.
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Result of Operations
During the period from the company's inception to June 30, 1999, there were no
revenues being realized from sale of assets, production or from any other
source. Expenses incurred as of June 30, 1999 from general and administrative
were $8,449 and offering expenses of $17,700.
Effect of Inflation: The Company believes that inflation does not have a
material affect on its business.
Year 2000 Computer Problems: Many existing computer programs use only two digits
to identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Year 2000 issue affects virtually all companies and
organizations.
Although many companies undertake major projects to address the Year 2000 issue,
Management does not believe that its operations are highly dependent upon
computer programs. However, the Company has undertaken to ensure that its
associated computer fields were designed and constructed to receive and
manipulate four digit integers instead of only two. The Company?s computer
system has been evaluated and found to adequately address the Year 2000 Issue .
As a result, no additional costs are expected to be incurred. The Company does
not anticipate any material risk resulting from Year 2000 issues in that its
computer programs are relatively simple word processing and accounting programs
which have been certified as Year 2000 ready. In addition, the Company maintains
physical files of all essential documents and data.
Item 3. Description of Property
The Company owns a 25% working interest in petroleum, natural gas and coalbed
methane leases (Oil and Natural Gas Permit No. 9606) covering 116,279 acres of
Prince Edward Island, Canada (the Working Interest). The acreage covered by the
Working Interest has not been sufficiently developed to indicate any proven or
probable reserves of recoverable petroleum, natural gas and coalbed methane.
There has been no production on the Working Interest. The Company's offices in
Calgary, Alberta are provided by Calgary Chemical, of Calgary, Alberta, which
the Company's President, Blair Coady is also Preident on a month to month lease
at no cost to the Company.
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Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners holding five percent or
greater of the 10,000,000 shares of common stock outstanding as of May 31, 1999
Title of Class Name and Address Amount and Nature % of
of Beneficial Owner of Beneficial Owner Class
- --------------------------------------------------------------------------------
Common CMB Energy Corp. 2,220,000(1) 22.2%
C/O McLeod Dixon
Standard Life Tower
Suite 1800, 121 King St W Box 46
Toronto Ontario Canada M5H 3T9
(1) Includes 220,000 shares registered in the name of Laughlin McLean, but does
not include 200,000 shares held be Gus McLean, Laughlin McLean's uncle
which he disclaims beneficial ownership. Mr. McLean is the beneficial owner
of twenty five percent of CMB Energy Corp. Calder Company, Ltd., a closely
held corporation is also a twenty five percent owner of CMB Energy Corp.,
and Investimo S.A., a closely held corporation owns the remaining fifty
percent of CMB Energy Corp.
(b) Security Ownership of Management
Name and Address Amount and Nature % of
Title of Class of Beneficial Owner of Beneficial Owner Class
- --------------------------------------------------------------------------------
Common Blair Coady 750,000(1) 7.5%
All officers and Directors
as a Group (1 person) 750,000 7.5%
(1) The shares held by Danford Management, Ltd. a corporation beneficially
owned by the adult sons of Mr. Coady and are hereby deemed indirectly owned
by Mr. Coady. Mr. Coady is neither an officer, director or shareholder of
Danford Management, Ltd., and disclaims beneficial ownership in these
shares.
Changes in Control: There are no arrangements, which may result in a change in
control of the issuer.
Item 5. Directors, Executive Officers, Promoters and Control Persons
(a) Directors and Executive Officers
Blair Coady: Age 60. Mr. Coady is the Company's sole officer and director. He
served as the President and Chairman of the Board of Wolf Industries, Inc., from
August 1996 to April, 1998. Since October 1996 Mr. Coady has been the president
and chief executive officer of Calgary Chemical, a custom blender of petroleum
production chemicals. Since May 1999, Mr. Coady has served as a director of
Autoco.com, a publicly held corporation traded on the OTC Bulletin Board. From
1992 to 1995 Mr. Coady served as chairman of the Board of Earthwhile
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Developments Inc., a Canadian corporation involved in waste management,
specifically solvent recycling, bioremediation and composting. From 1985 to 1992
he served as Chairman and Director of Calto Industries Ltd., a Canadian
corporation engaged in biomedical waste remediation. From 1978-1982, he was
Director and President and from 1982 to 1984 a Director of Terato Resources
Ltd., a Canadian public corporation engaged in the exploration, development and
production of oil and gas in Western Canada and the Southern United States. From
1966 to 1976, Mr. Coady was a Partner, Director and Vice President in Bongard,
Leslie & Co., Ltd. a Canadian Investment Dealer and Brokerage firm.
As the Company develops and implements exploration and development programs over
the next twelve to eighteen months, the Company intends to appoint up to four
new directors to the Board as and when qualified and interested individuals are
identified and accept appointment to the Board. As of this date, the Company has
not offered such appointment to any individual.
(b) Significant Employees: None
Item 6. Executive Compensation
(a) Name & Position Year Salary Paid
- --------------------------------------------------------------------------------
Blair Coady, President 1999 $0*
*No other cash compensation or bonuses paid or accrued.
(b) Option/SAR Grants in Last Fiscal Year (Individual Grants): No options
have been granted to date.
The Company has a Stock Option Plan, entitled the "Shannon International
Resources, Inc. 1999 Stock Option Plan" (the "Plan"). Its purpose is to advance
the business and development of the Company and its shareholders by affording to
the employees, officers, directors and independent contractors or consultants of
the Company the opportunity to acquire a proprietary interest in the Company by
the grant of Options to such persons under the Plan's terms. The effective date
of the Plan is June 1, 1999. Article 3 of the Plan provides that the Board shall
exercise its discretion in awarding Options under the Plan, not to exceed an
aggregate of 1,000,000 shares. The per share Option price for the stock subject
to each Option shall be as the Board may determine. All Options must be granted
within ten years from the effective date of the Plan. There is no express
termination date for the Options, although the Board may vote to terminate the
Plan. Under the Plan, there have been no Options granted.
(c) Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end
Option/SAR Values : None
(d) Long-term Incentive Plans -- Awards in Last Fiscal Year: None
The Company has not otherwise awarded any stock options, stock appreciation
rights or other form of derivative security or common stock or cash bonuses to
its executive officers and directors.
(e) Compensation of Directors
1. Standard Arrangements: The members of the Company's Board of Directors
are reimbursed for actual expenses incurred in attending Board meetings.
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2. Other Arrangements: There are no other arrangements.
(f) Employment Contracts And Termination of Employment, And
Change-in-control Arrangements
Blair Coady, the Company's sole officer and director does not have an employment
agreement and does not presently draw a salary. The Company expects that as and
when additional funding or revenue is obtained and the time Mr. Coady devotes to
the Company's affairs increase a salary and other compensation such as stock
options will be adopted. Mr. Coady's future compensation will be determined by
an outside director and will be submitted to the shareholders for approval.
Item 7. Certain Relationships and Related Transactions
The Company's Director is the Company's Founder and Promoter. Darrin Campbell of
CMB Energy Corp., may also be considered a promoter of the Company. In
anticipation of additional directors, the Company's By-Laws include a provision
regarding Related Party Transactions which requires that each participant to
such transaction identify all direct and indirect interests to be derived as a
result of the Company's entering into the related transaction. A majority of the
disinterested members of the board of directors must approve any Related Party
Transaction. However at the present time, the sole director is only accountable
to the shareholders for any related party transaction he may enter into.
On February 18, 1999, the Company acquired a 25% working interest in petroleum,
natural gas and coalbed methane leases covering 116,279 acres of Prince Edward
Island, Canada from CMB Energy Corp., of Toronto, Ontario in exchange for
2,000,000 shares of the common stock of the Company. The agreement also grants
the Company the option to acquire an additional twelve and one half percent of
the working interest by the expenditure of $1,500,000 Cdn., by October 2000 and
a further twelve and one half percent of the working interest by the expenditure
of $1,500,000 Cdn., by October 2001 and the right to enter into a joint venture
agreement with the holder or holders of the remaining 50% working interest by
the expenditure of $3,000,000 Cdn., on the property over the next thirty months.
CMB Energy Corp., acquired the working interest in November, 1998 from Prince
Edward Island Gas Company in exchange for 400,000 shares of Raly Energy Corp.,
at a value of $1.50 Cdn., based upon the market price for said shares as then
quoted by the Canadian Dealing Network. Laughlin McLean owns one hundred percent
of Regal Tours Atlantic, Inc., which owns twenty five percent of CMB Energy
Corp. Calder Company, Ltd., a closely held corporation is also a twenty five
percent owner of CMB Energy Corp., and Investimo S.A., a closely held
corporation owns the remaining fifty percent of CMB Energy Corp. Calder Company,
Ltd., and Investimo, S.A., have no other direct or indirect interest in shares
of the Company and the Company's President has no direct or indirect interest in
CMB Energy Corp., or any of its shareholders.
On March 31, 1999, the company issued 750,000 shares of common stock to Danford
Management, Ltd. in consideration of the services of the company's President in
the formation of the company. Danford Management, Ltd., is a corporation
beneficially owned by the adult sons of Mr. Coady. Mr. Coady is neither an
officer, director or shareholder of Danford Management, Ltd., and disclaims
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beneficial ownership in these shares. The Company believes that compensation
paid for its president's services are reasonable and below that which Mr. Coady
could receive for comparable employment for which he is qualified.
On April 30, 1999 and on June 3, 1999 the Company loaned $30,000US and $5,000US
to Calgary Chemical, an Alberta corporation of which Mr. Coady is the president.
The loans are payable on demand and accrue no interest. The Company's offices
are located at the offices of Calgary Chemical and are provided at no cost to
the Company.
Item 8. Description of Securities
The authorized capital stock of Company consists of 200,000,000 shares of $.001
common stock. No warrants to acquire common stock have been authorized. There
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of the Company's common stock.
The common stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The common stock
affords the holders no cumulative voting rights, and the holders of a majority
of the shares voting for the election of the directors can elect all of the
directors if they should choose to do so. The common stock is entitled to pro
rata distribution of the company's assets upon liquidation after the payment of
all debts and obligations of the company.
Dividends upon the common stock may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property or in shares of the common stock, subject to the provisions of the
Articles of Incorporation. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalising
dividends or for repairing or maintaining any property of the corporation or for
such other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created. The Company does not foresee the declaration of
dividends during this or the next fiscal year. However the Company reserves the
right to declare a dividend when operations merit.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Shareholder Matters
(a) Market Information
The Company's stock is not listed for sale on any exchange or trading medium.
The Company intends to seek the listing of its Common Stock on the OTC
Electronic Bulletin Board upon the effectiveness of this Form 10-SB. Until such
time, there is no public market for the Company's Common Stock. In February and
March of 1999, the Company sold 7,230,000 shares for $72,300 to twenty-eight
investors in a private placement of securities exempt from registration pursuant
to Rule 504 of Regulation D. The Company also sold 770,000 shares for services
valued at $7,700 as part of the Rule 504 offering. The Company also sold
2,000,000 shares in exchange for its working interest as part of the Rule 504
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offering. There are two holders of restricted securities as defined by Rule 144,
which have not been held in excess of one year. The shares 7,030,000 shares held
by non-affiliates may be traded in market transactions without restriction. The
shares held by the affiliates may only be sold pursuant to Rule 144. The Company
has not agreed to file any registration statements for its existing
shareholders.
It is the Company's Plan of Operation to use its common stock or other
securities as consideration for the acquisition of properties or other business
development purposes. The issuance of additional shares of common stock may
materially and adversely effect the market price of the common stock in the
event a market is established.
(b) Holders
There are thirty holders of the Company's Common Stock as of October 8, 1999.
(c) Dividends
The Company has paid no dividends to date on its Common Stock. The Company
reserves the right to declare a dividend when operations merit.
Item 2. Legal Proceedings
There is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of the
Company, threatened, against or affecting the Company, or any of its properties,
business affairs or business prospects of the Company.
Item 3. Changes in and Disagreements with Accountants: None
Item 4. Recent Sales of Unregistered Securities
During the past three years, the Company sold securities, which were not
registered under the Securities Act of 1933, as amended, as set forth below.
<TABLE>
<CAPTION>
Date Name # of shares issued Consideration
(U.S. $)
- ---- ---- ------------------ -------------
<S> <S> <C> <C>
02/26/99 Barica Mrakuzic 11,250 112.50
02/26/99 Marijan Mrakuzic 11,250 112.50
02/26/99 Paul Okada 52,500 525
02/26/99 Quantumvest Holdings Ltd. 225,000 2,250
03/10/99 Mae Wandinger 300,000 3,000
03/22/99 Beda Strub 150,000 1,500
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03/25/99 Glenora Distillers Int. Limited 480,000 4,800
03/28/99 South American Consultants, S.A. 495,000 4,950
03/28/99 Jason Matheson 360,000 3,600
03/28/99 Laughlin MacLean 220,000 2,200
03/28/99 Judith MacLeod 480,000 4,800
03/29/99 Tom Murdoch 400,000 4,000
03/29/99 Brian Bradbury 350,000 3,500
03/29/99 Eaglerock Investments, Ltd. 490,000 4,900
03/30/99 Robert Scott 300,000 3,000
03/30/99 Michael R. Lorden & Natalie A. Lorden 50,000 500
03/30/99 New Release Video 100,000 1,000
03/30/99 Topeka S.A. 485,000 4,850
03/30/99 Kerry Leverman 325,000 3,250
03/30/99 Dennis Brovarone 20,000 200(1)
03/30/99 S. J. Hal 60,000 600
03/31/99 Lionel O. Rolfe 200,000 2,000
03/31/99 R. Stajen Warness 150,000 1,500
03/31/99 Danford Management Ltd. 750,000 7,500(2)
03/31/99 Resource Consultants Services, Ltd. 310,000 3,100
03/31/99 Annette Mason 325,000 3,250
03/31/99 Gus MacLean 200,000 2,000
03/31/99 Prince Edward Gas Company, Inc. 300,000 3,000
03/31/99 Saks Fund International, Inc. 400,000 4,000
03/31/99 CMB Energy Corp. 2,000,000 Exchange(3)
</TABLE>
(1) Issued for services to the company's legal counsel.
(2) Issued for services to the company's president.
(3) Shares exchanged for Working Interest.
The Company was not a reporting company pursuant to the Securities Exchange Act
of 1934 nor was it a development stage company with no business plan. Thus it
was eligible to rely upon Rule 504 as a safe harbor exemption from the
registration requirements of the Securities Act of 1933. Moreover, Rule 504 was
available in that the Company sold less than$1,000,000.00 worth of securities in
the previous 12 month period and except for the Company's officers and
directors, the purchasers were unaffiliated investors. The Company relied upon
the Rule 504 safe harbor exemption for the sales of securities for cash. These
sales were entirely private transactions pursuant to which all material
information as specified in Rule 502(b)(2) was made available to the purchasers.
The Company relied upon the exemption from registration set forth in section
4(2) of the Securities Act of 1933 for its sale of shares pursuant to the
acquisition of the Working Interest in the Company's property. The purchaser in
this sale was a sophisticated investor who was provided all material information
regarding the Company. In addition, the Company placed a restrictive legend upon
the certificates issued to the purchaser denoting the securities are "restricted
securities" or held by a control person of the Company and may only be sold in
compliance with Rule 144. Thus the exemptions from registration afforded by Rule
4(2) and Rule 3(b) were available to the issuer.
Item 5. Indemnification of Directors and Officers
Article 11 of the Company's By-laws provides that every person who was or is a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or a person for whom he is the legal representative
is or was a director or officer of the corporation or is or was serving at the
request of the corporation or for its benefit as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the General Corporation Law of the State of
Nevada against all expenses, liability and loss (including attorney's fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith.
13
<PAGE>
The expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as they are incurred
and in advance of the final disposition of the action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the corporation. Such right of
indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of
any other right which such directors, officers or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under Article 11.
Nevada Revised Statutes Section 78.7502 provides for discretionary and mandatory
indemnification of officers, directors, employees and agents as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed legal
proceeding, except by or in the right of the corporation, by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding if the person acted in good faith
and in a manner which was reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by the person in connection
with the defense or settlement of the action or suit if the person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify the person against expenses,
including attorneys' fees, actually and reasonably incurred in connection with
the defense.
Nevada Revised Statutes Section 78.751 requires authorization for
discretionary indemnification; advancement of expenses and limitation on
indemnification and advancement of expenses as follows:
14
<PAGE>
1. Any discretionary indemnification under NRS 78.7502 unless ordered by a
court or advanced pursuant to subsection 2, may be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the action,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
15
<PAGE>
PART F/S
The following financial statements are filed as part of this registration
statement:
C O N T E N T S
Page
----------------
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-9
-16-
<PAGE>
MILLER AND MCCOLLOM
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
Board of Directors
Shannon International Resources, Inc.
We have audited the accompanying balance sheet of Shannon International
Resources, Inc. (a Development Stage Company) as of June 30, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
period February 17, 1999 (inception) to June 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Shannon
International Resources, Inc. (a Development Stage Company) as of June 30, 1999,
and the results of its operations and its cash flows for the period February 17,
1999 (inception) to June 30, 1999, in conformity with generally accepted
accounting principles.
/s/ Miller and Mc Collom
Denver, Colorado
August 18, 1999
-17-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Balance Sheet
June 30, 1999
ASSETS
CURRENT ASSETS
Cash $ 7,198
Loans - receivable, net of discount of
$2,275 (Note 4) 32,725
Prepaid expense 47
---------------------
Total current assets 39,970
Unevaluated oil and gas properties (using the
full cost method) (Note 3) 45,000
---------------------
Total assets $ 84,970
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,120
---------------------
STOCKHOLDERS' EQUITY (Note 4)
Common stock - authorized 200,000,000
shares of $.001 per value; issued and
outstanding 10,000,000 shares 10,000
Additional paid-in capital 80,299
Deficit accumulated during development stage (8,449)
---------------------
Total stockholders' equity 81,850
---------------------
Total liabilities and stockholders' equity $ 84,970
=====================
The accompanying notes are an integral part of these statements.
2
-18-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Statement of Operations
For the Period from February 17, 1999 (inception) through June 30, 1999
Expenses
Administrative $ 8,449
----------------------
Net loss $ (8,449)
======================
Net loss per share *
======================
Weighted number of shares outstanding 7,486,734
======================
* Less than ($.01)
The accompanying notes are an integral part of these statements.
3
-19-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Statement of Stockholders' Equity
For the Period from February 17, 1999 (inception) through June 30, 1999
<TABLE>
<CAPTION>
Accumulated
Additional Deficit during
Common Shares Paid-In development
--------------------------- stage
Shares Par Value Capital Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ - $ - $ - $ - $ -
Common shares issued:
Issuance of common stock
for cash on February 26, 1999 300,000 300 2,700 - 3,000
Issuance of common stock
for cash on March 10, 1999 300,000 300 2,700 - 3,000
Issuance of common stock
for cash on March 22, 1999 150,000 150 1,350 - 1,500
Issuance of common stock
for cash on March 25, 1999 480,000 480 4,320 - 4,800
Issuance of common stock
for cash on March 28, 1999 1,555,000 1,555 13,995 - 15,550
Issuance of common stock
for cash on March 29, 1999 1,240,000 1,240 11,160 - 12,400
Issuance of common stock
for cash on March 30, 1999 1,320,000 1,320 11,880 - 13,200
Issuance of common stock
for services on March 30, 1999 20,000 20 180 - 200
Issuance of common stock
for cash on March 31, 1999 1,885,000 1,885 16,965 - 18,850
Issuance of common stock
for services on March 31, 1999 750,000 750 6,750 - 7,500
Issuance of common stock
for oil and gas properties
on March 31, 1999 2,000,000 2,000 28,000 - 30,000
Offering costs - - (19,701) - (19,701)
Net loss for period - - - (8,449) (8,449)
------------- ------------ ------------- ----------------- ---------------
Balance, end of period $10,000,000 $ 10,000 $ 80,299 $ (8,449) $ 81,850
============= ============ ============= ================= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
4
-20-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Statements of Cash Flows
For the Period from February 17, 1999 (inception) through June 30, 1999
Operating activities:
Net loss $ (8,449)
Unamortized discount on loans receivable 2,275
Changes in operating assets and liabilities
Increase in prepaid expenses (47)
Increase in accounts payable 3,120
-----------------
Net cash provided by operations (3,101)
-----------------
Investing activities
Acquisition of oil and gas properties (15,000)
Loans receivable (35,000)
-----------------
Net cash (used by) investing activities (50,000)
-----------------
Financing activities
Issuance of common stock 72,300
Offering costs (12,001)
-----------------
Net cash provided by financing activities 60,299
-----------------
Increase in cash 7,198
Cash at beginning of period -
-----------------
Cash at end of period $ 7,198
=================
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest -
Income taxes -
Supplemental schedule of noncash investing
and financing activities
Issuance of 770,000 shares of
common stock for services $ 7,700
Issuance of 2,000,000 shares of
common stock for oil and gas properties $ 30,000
The accompanying notes are an integral part of these statements.
5
-21-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
June 30, 1999
Note 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Shannon International
Resources, Inc. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Organization
The Corporation was incorporated pursuant to the provisions of the corporate
charter of the State of Nevada on February 17, 1999.
The Corporation's primary business activity is the acquisition, development and
production of coalbed methane properties in the province of Prince Edward
Island, Canada. Currently, the Corporation only has an interest in non-producing
properties. The Corporation is in the development stage as its operations
principally involve oil and gas activities and they have no revenue from oil and
gas activities.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Earnings (Loss) Per Share
Earnings (loss) per share of common stock is computed based on weighted average
number of common shares outstanding during the period. Fully diluted earnings
per share are not presented because they are anti-dilutive.
6
-22-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
June 30, 1999
Note 1 - Summary of Significant Accounting Policies, Continued
Accounting for Oil and Gas Operations
Presently, the full cost method is not inapplicable because the Company has not
commenced its oil and gas activities. The Company intends to follow the full
cost method of accounting for oil and gas properties. Accordingly, all costs
associated with acquisition, exploration, and development of oil and gas
reserves, including directly related overhead costs, are capitalized.
All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the
projects can be determined or until impairment occurs. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
In addition, the capitalized costs are subject to a "ceiling test," which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.
Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in income.
Abandonments of properties are accounted for as adjustments of capitalized costs
with no loss recognized.
Note 2 - Oil and Gas Properties
The Corporation has acquired a 25% interest in certain non-producing oil and gas
properties in the province of Prince Edward Island, Canada.
This interest was acquired by the Corporation issued 2,000,000 common shares at
an agreed value of $0.015 per share ($30,000) for the interest in the property
and fees related to the acquisition of $15,000. The agreement also grants the
Company two options to acquire an additional 25% working interest and the right
to into a joint venture agreement with the holder or holders of the remaining
50% working interest by the expenditure of $3,000,000 cdn., on the property over
the next thirty months.
Note 3 - Loan Receivable
At June 30, 1999, loans receivable consisted of the following unsecured
non-interest bearing notes, which are due on demand The loans have been
discounted on an imputed interest rate of 8.50% assuming repaid in one year from
date of issuance.
Unamortized
Principal Discount
-------------- ------------
Promissory note dated, April 13, 1999 $ 30,000 $ 1,900
Promissory note dated, June 3, 1999 5,000 375
-------------- -------------
$ 35,000 $ 2,275
============== =============
7
-23-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
June 30, 1999
Note 4 - Stock Option Plan
The Company has a Stock Option Plan, entitled the "Shannon International
Resources, Inc. 1999 Stock Option Plan" (the "Plan"). Its purpose is to advance
the business and development of the Company and its shareholders by affording to
the employees, officers, directors and independent contractors or consultants of
the Company the opportunity to acquire a proprietary interest in the Company by
the grant of Options to such persons under the Plan's terms. The effective date
of the Plan is June 1, 1999. Article 3 of the Plan provides that the Board shall
exercise its discretion in awarding Options under the Plan, not to exceed
1,000,000 shares. The per share Option price for the stock subject to each
Options shall be as the Board may determine. All Options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the Options, although the Board may vote to terminate the Plan. Under
the Plan, there have been no Options granted.
Note 5 - Income Taxes
No provision for income taxes have been provided in the accompanying financial
statement. The Corporation has a net operating loss carryforward of $6,174 which
will expire in 2019. The tax benefit of the net operating loss carryforward has
not been recognized due to the uncertainty of realization.
The net deferred tax asset due to loss carryforward is as follows:
Deferred tax asset $ 2,099
Valuation allowance (2,099)
---------------------
$ -
=====================
Note 6 - Basis of Presentation
The Company has no revenue and limited resources to develop its oil and gas
properties. It is the Company's intent to raise additional capital through
private placements or public offerings of its equity securities and use the
capital for development of its current Working Interest. Thereafter the Company
intends to establish or acquire assets with development and exploitation
potential through industry contacts and opportunities known to the company's
management. Whenever possible, the Company intends to use its common stock as
consideration for such acquisitions. The ultimate objective is to conduct a
balanced exploration and development program and seek to acquire operating
control and majority ownership of interests in order to optimize the efficiency
of operations.
8
-24-
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
June 30, 1999
Note 7 - Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date.
The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure, which
could affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
Note 8 - Concentration of Risk
The Company's oil and gas properties are located on Prince Edward Island,
Canada.
9
-25-
<PAGE>
PART III
Item 1. Index to Exhibits
3.1 Articles of Incorporation
3.2 By-laws
10.1 Working Interest Acquisition Agreement
10.2 Purchase and Joint Venture Agreement
10.3 Oil and Natural Gas Permit No. 96-06
27 Financial Data Schedule
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHANNON INTERNATIONAL RESOURCES, INC.
By:
BLAIR COADY
Blair Coady, President, Secretary, Sole Director
October 13, 1999
26
<PAGE>
ARTICLES OF INCORPORATION
OF
SHANNON INTERNATIONAL RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated ourselves together
for the purpose of forming a corporation under the laws of the State of Nevada
and do hereby certify:
ARTICLE ONE
The name of this corporation is SHANNON INTERNATIONAL RESOURCES, INC.
ARTICLE TWO
The resident agent of said corporation shall be Pacific Corporate Services Inc.,
7631 Bermuda Road, Las Vegas, NV., 89123 and such other offices as may be
determined by the By-Laws in and outside the State of Nevada.
ARTICLE THREE
The objects to be transacted, business and pursuit and nature of the business,
promoted or carried on by this corporation are and shall continue to be engaged
in any lawfull activity.
ARTICLE FOUR
The members of the governing board shall be styled Directors and the first Board
of Directors shall consist of one (1). The number of stockholders of said
corporation shall consist of one (1). The number of directors and shareholders
of this corporation may, from time to time, be increased or decreased by an
amendment to the By-Laws of this corporation in that regard, and without the
necessity of amending these Articles of Incorporation. The name and address of
the first Board of Directors and of the Incorporator signing these Articles as
follows:
DENNIS BROVARONE
11249 W. 103RD DR.
WESTMINSTER, CO 80021
ARTICLE FIVE
The Corporation is to have perpetual existence.
27
<PAGE>
ARTICLE SIX
The total authorized capitalization of this Corporation shall be and is the sum
of 200,000,000 shares of Common Stock at $0.001 par value, said stock to carry
hill voting power and tile said shares shall be issued fully paid at such time
as the Board of Directors may designate in exchange for cash, property, or
services, the stock of other corporations or other values, rights, or things,
and the judgement of the Board of Directors as to the value thereof shall be
conclusive.
ARTICLE SEVEN
The capital stock shall be and remain non-assessable. The private property of
the stockholders shall not be liable for the debts or liabilities of the
Corporation.
IN WITNESS WHEREOF, I have set my hand this 12th day of February, 1999.
/s/ Dennis Brovarone
- -------------------------------
Dennis Brovarone, Incorporator
On this 12th day of February, 1999 before me, a Notary Public in and for
Jefferson County, Colorado personally appeared, Dennis Brovarone known to me to
be the person whose name is subscribed to the foregoing instrument, and he duly
acknowledged to me that he executed the same for the purpose therein mentioned.
/s/ (Notary)
- ---------------
Notary Public
My Commission Expires 5/31/99
28
<PAGE>
BYLAWS
OF
SHANNON INTERNATIONAL RESOURCES, INC.
A Nevada Corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation shall be in the County
of Clark, State of Nevada.
Section 2. The corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may
from time to time determine or the business of the corporation may
require.
ARTICLE 2
Meetings of Stockholders
Section 1. All annual meetings of the stockholders shall be held at the
registered office of the corporation or at such other place within or
without the State of Nevada as the Directors shall determine. Special
meetings of the stockholders may be held at such time and place within
or without the State of Nevada as shall be stated in the notice of the
meeting, or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders, commencing with the year
1999 shall be held on the 2nd of April, each year if not a legal
holiday and, if a legal holiday, then on the next secular day
following, or at such other time as may be set by the Board of
Directors from time to time, at which the stockholders shall elect by
vote a Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the President or the Secretary by
resolution of the Board of Directors or at the request in writing of
stockholders owning a majority in amount of the entire capital stock
of the corporation issued and outstanding and entitled to vote. Such
request shall state the purpose of the proposed meeting.
Section 4. Notices of meetings shall be in writing and signed by the
President or Vice-President or the Secretary or an Assistant Secretary
or by such other person or persons as the Directors shall designate.
Such notice shall state the purpose or purposes for which the meeting
is called and the time and the place, which may be within or without
this State, where it is to be held. A copy of such notice shall be
either delivered personally to or shall be mailed, postage prepaid, to
each stockholder of record entitled to vote at such meeting not less
than ten nor more than sixty days before such meeting. If mailed, it
shall be directed to a stockholder at his address as it appears upon
the records of the corporation and upon such mailing of any such
notice, the service thereof shall be complete and the time of the
notice shall begin to run from the date upon which such notice is
29
<PAGE>
deposited in the mail for transmission to such stockholder. Personal
delivery of any such notice to any officer of a corporation or
association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or
partnership. In the event of the transfer of stock after delivery of
such notice of and prior to the holding of the meeting it shall not be
necessary to deliver or mail notice of the meeting to the transferee.
Section 5. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 6. The holders of a 10% of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by
the Articles of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the
stockholders entitled to vote there at, present in person or
represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the
meeting as originally notified. The Company may have more than one
shareholder.
Section 7. When a quorum is present or represented at any meeting, the vote
of the holders of a 10% of the stock having voting power present in
person or represented by proxy shall be sufficient to elect directors
or to decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of
the Articles of Incorporation, a different vote shall govern and
control the decision of such question.
Section 8. Each stockholder of record of the corporation shall be entitled
at each meeting of stockholders to one vote for each share of stock
standing in his name of the books of the corporation. Upon the demand
of any stockholder, the vote for Directors and the vote upon any
question before the meeting shall be by ballot.
Section 9. At any meeting of the stockholders any stockholder may be
represented and vote by a proxy or proxies appointed by an instrument
in writing. In the event that any such instrument in writing shall
designate two or more persons to act as proxies, a majority of such
persons present at the meeting, or, if only one shall be present, then
that one shall have and may exercise all of the powers conferred by
such written instrument upon all of the persons so designated unless
the instrument shall otherwise provide. No proxy or power of attorney
to vote shall be used to vote at a meeting of the stockholders unless
it shall have been filed with the secretary of the meeting when
required by the inspectors of election. All questions regarding the
qualifications of voters, the validity of proxies and the acceptance
of or rejection of votes shall be decided by the inspectors of
election who shall be appointed by the Board of Directors, or if not
so appointed, then by the presiding officer of the meeting.
Section 10. Any action which may be taken by the vote of the stockholders
at a meeting may be taken without a meeting if authorised by the
written consent of stockholders holding at least a majority of the
voting power, unless the provisions of the statutes or of the Articles
of Incorporation require a greater proportion of voting power to
authorise such action in which case such greater proportion of written
consents shall be required.
ARTICLE 3
Directors
Section 1. The business of the corporation shall be managed by it's Board
of Directors which may exercise all such powers of the corporation and
30
<PAGE>
do all such lawful acts and things as are not by statute or by the
Articles of Incorporation or by these Bylaws directed or required to
be exercised or done by the stockholders.
Section 2. The number of Directors which shall constitute the whole board
shall be One. The number of Directors may from time to time be
increased or decreased to not less than one nor more than fifteen by
action of the Board of Directors. The Directors shall be elected at
the annual meeting of the stockholders and except as provided in
section 2 of this Article, each Director elected shall hold office
until his successor is elected and qualified. Directors need not be
stockholders.
Section 3. Vacancies in the Board of Directors including those caused by an
increase in the number of directors, may be filled by a majority of
the remaining Directors, though less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office
until his successor is elected at an annual or a special meeting of
the stockholders. The holders of a two-thirds of the outstanding
shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the Directors by vote at
a meeting called for such purpose or by a written statement filed with
the secretary or , in his absence, with any other officer. Such
removal shall be effective immediately, even if successors are not
elected simultaneously and the vacancies on the Board of Directors
resulting therefrom shall only be filled from the stockholders.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in case of the death, resignation or removal of any Directors,
or if the authorised number of Directors be increased, or if the
stockholders fail at any annual or special meeting of stockholders at
which any Director or Directors are elected to elect the full
authorised number of Directors to be voted for at that meeting.
The stockholders may elect a Director or Directors at any time to fill
any vacancy or vacancies not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board or the stockholders shall have
power to elect a successor to take office when the resignation is to
become effective.
No reduction of the authorised number of Directors shall have the
effect of removing any Director prior to the expiration of his term of
office.
ARTICLE 4
Meetings of the Board of Directors
Section 1. Regular meetings of the Board of Directors shall be held at any
place within or without the State which has been designated from time
to time by resolution of the Board or by written consent of all
members of the Board. In the absence of such designation regular
meeting shall be held at the registered office of the corporation.
Special meetings of the Board may be held either at a place so
designated or at the registered office.
Section 2. The first meeting of each newly elected Board of Directors shall
be held immediately following the adjournment of the meeting of
stockholders and at the place thereof. No notice of such meeting shall
be necessary to the directors in order legally to constitute the
meeting, provided a quorum be present. In the event such meeting is
not so held, the meeting may be held at such time and place as shall
be specified in a notice given hereinafter provided for special
meetings of the Board of Directors.
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Section 3. Regular meetings of the Board of Directors may be held without
call or notice at such time and at such place as shall from time to
time be fixed and determined by the Board of Directors.
Section 4. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the Vice-President or by any two
directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director, or sent to each director by
mail or by other form of written communication, charges prepaid,
addressed to him at his address as it is shown upon the records or if
not readily ascertainable, at the place in which the meetings of the
directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or
delivered to the telegraph company at least forty-eight (48) hours
prior to the time of the holding of the meeting. In case such notice
is delivered as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the
meeting. Such mailing, telegraphing or delivery as above provided
shall be due, legal and personal notice to such director.
Section 5. Notice of the time and place of holding an adjourned meeting
need not be given to the absent directors if the time and place be
fixed at the meeting adjourned.
Section 6. The transaction of any meeting of the Board of Directors,
however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a
quorum be present, and if, either before or after the meeting, each of
the directors not present signs a written waiver of notice, or a
consent to holding such meeting, or approvals of the minutes thereof.
All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 7. A majority of the authorised number of directors shall be
necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done
or made by a majority of the directors present at a meeting duly held
at which a quorum is present shall be regarded as the act of the Board
of Directors, unless a greater number be required by law or by the
Articles of Incorporation. Any action of a majority, although not at a
regularly called meeting, and the record thereof, if assented to in
writing by all of the other members of the Board shall be as valid and
effective in all respects as if passed by the Board in regular
meeting. In the event of a tie vote on any matter, the Chairman of the
Board shall cast the deciding vote.
Section 8. A quorum of the directors may adjourn any directors meeting to
meet again at stated day and hour; provided, however, that in the
absence of a quorum, a majority of the directors present at any
directors meeting, either regular or special, may adjourn from time to
time until the time fixed for the next regular meeting of the Board.
ARTICLE 5
Committees of Directors
Section 1. The Board of Directors may, by resolution adopted by a majority
of the whole Board, designate one or more committees of the Board of
Directors, each committee to consist of two or more of the directors
of the corporation which, to the extent provided in the resolution,
shall and may exercise the power of the Board of Directors in the
management of the business and affairs of the corporation and may have
power to authorise the seal of the corporation to be affixed to all
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papers which may require it. Such committee or committees shall have
such name or names as may be determined from time to time by the Board
of Directors. The members of any such committee present at any meeting
and not disqualified from voting may, whether or not they constitute a
quorum, unanimously appoint another member of the Board of Directors
to act at the meeting in the place of any absent or disqualified
member. At meetings of such committees, a majority of the members or
alternate members at any meeting at which there is a quorum shall be
the act of the committee.
Section 2. The committee shall keep regular minutes of their proceedings
and report the same to the Board of Directors.
Section 3. Any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case
may be, and such written consent is filed with the minutes of
proceedings of the Board or committee.
ARTICLE 6
Compensation of Directors
Section 1. The directors may be paid their expenses of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may
be allowed like reimbursement and compensation for attending committee
meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by
mail shall be deemed to be given at the time when the same shall be
mailed. Notice to directors may also be given by telegram.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the records
of the meeting or filed with the secretary, or by presence at such
meeting and oral consent entered on the minutes, or by taking part in
the deliberations at such meeting without objection, the doings of
such meeting shall be as valid as if had at a meeting regularly called
and noticed, and at such meeting any business may be transacted which
is not excepted from the written consent to the consideration of which
no object for want of notice is made at the time, and if any meeting
be irregular for want of notice or of such consent, provided a quorum
was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity
or defect therein waived by a writing signed by all parties having the
right to vote at such meeting; and such consent or approval of
stockholders may be by proxy or attorney, but all such proxies and
powers of attorney must be in writing.
Section 3. Whenever any notice whatever is required to be given under the
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provisions of the statutes, of the Articles of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE 8
Officers
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. Any
person may hold two or more officers.
Section 2. The Board of Directors at it's first meeting after each annual
meeting of stockholders shall choose a Chairman of the Board who shall
be a director, and shall choose a President, a Secretary and a
Treasurer, none of whom need be directors.
Section 3. The Board of Directors may appoint a Vice-Chairman of the Board,
Vice-Presidents and one or more Assistant Secretaries and Assistant
Treasurers and such other officers and agents as it shall deem
necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office at the
pleasure of the Board of Directors. Any officer elected or appointed
by the Board of Directors may be removed any time by the Board of
Directors. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise shall be filled by the Board
of Directors.
Section 6. The Chairman of the Board shall, preside at meetings of the
stockholders and the Board of Directors, and shall see that all orders
and resolutions of the Board of Directors are carried into effect.
Section 7. The Vice-Chairman shall, in the absence or disability of the
Chairman of the Board, perform the duties and exercise the powers of
the Chairman of the Board and shall perform other such duties as the
Board of Directors may from time to time prescribe.
Section 8. The President shall be the chief executive officer of the
corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all
instruments requiring such execution except to the extent the signing
and execution thereof shall be expressly designated by the Board of
Directors to some other officer or agent of the corporation.
Section 9. The Vice-President shall act under the direction of the
President and in the absence or disability of the President shall
perform the duties and exercise the powers of the President. They
shall perform such other duties and have such other powers as the
President or the Board of Directors may from time to time prescribe.
The Board of Directors may designate one or more Executive
Vice-Presidents or may otherwise specify the order of seniority of the
Vice Presidents. The duties and powers of the President shall descend
to the Vice-Presidents in such specified order of seniority.
Section 10. The Secretary shall act under the direction of the President.
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Subject to the direction of the President he shall attend all meetings
of the Board of Directors and all meetings of the stockholders and
record the proceedings. He shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board
of Directors, and will perform other such duties as may be prescribed
by the President or the Board of Directors.
Section 11. The Assistant Secretaries shall act under the direction of the
President. In order of their seniority, unless otherwise determined by
the President or the Board of Directors, they shall, in the absence or
disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform other such duties and have
such other powers as the President or the Board of Directors may from
time to time prescribe.
Section 12. The Treasurer shall act under the direction of the President.
Subject to the direction of the President he shall have custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all monies and other valuable effects in
the name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors. He shall disburse the
funds of the corporation as may be ordered by the President or the
Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at it's
regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial
condition of the corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond in such sum and with such surety as shall be
satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation,
in case of his death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
corporation.
Section 14. The Assistant Treasurer in the order of their seniority, unless
other wise determined by the President or the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. They shall perform
such other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder shall be entitled to have a certificate signed
by the President or a Vice-President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the
corporation. If the corporation shall be authorised to issue more than
one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series thereof
and the qualifications, limitations or restrictions of such rights,
shall be set forth in full or summarised on the face or back of the
certificate which the corporation shall issue to represent such stock.
Section 2. If a certificate is signed (a) by a transfer agent other than
the corporation or it's employees or (b) by a registrar other than the
corporation or it's employees, the signatures of the officers of the
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corporation may be facsimiles. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate shall
cease to be such officer before such certificate is issued, such
certificate may be issued with the same effect as though the person
had not ceased to be such officer. The seal of the corporation, or a
facsimile thereof, may, but need not be, affixed to certificates of
stock.
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When
authorising such issue of a new certificate or certificates, the Board
of Directors may, in it's discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer,
it shall be the duty of the corporation, if it is satisfied that all
provisions of the laws and regulations applicable to the corporation
regarding transfer and ownership of shares have been complied with, to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon it's books.
Section 5. The Board of Directors may fix in advance a date not exceeding
sixty (60) days nor less than ten (10) days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend,
or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a
date in connection with obtaining the consent of stockholders for any
purpose, as a record date for the termination of the stockholders
entitled to notice of and to vote at any such meeting, and any
adjournment thereof, or entitled to receive payment of any such
dividend, or to give such consent, and in such case, such
stockholders, and only such stockholders as shall be stockholders of
record on the date so fixed, shall be entitled to notice of and to
vote at such meeting, or any adjournment thereof, or to receive such
payment of dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
Section 6. The corporation shall be entitled to recognise the person
registered on it's books as the owner of shares to be the exclusive
owner for all purposes including voting and dividends, and the
corporation shall not be bound to recognise any equitable or other
claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property or in
shares of the capital stock, subject to the provisions of the Articles
of Incorporation.
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Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums
as the directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for
equalising dividends or for repairing or maintaining any property of
the corporation or for such other purpose as the directors shall think
conducive to the interest of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was
created.
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
Section 5. The corporation may or may not have a corporate seal, as may be
from time to time be determined by resolution of the Board of
Directors. If a corporate seal is adopted, it shall have inscribed
thereon the name of the corporation and the words "Corporate Seal" and
"Nevada". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in any manner reproduced.
ARTICLE 11
Indemnification
Every person who was or is a party or is a threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for it's
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
General Corporation Law of the State of Nevada time to time against all
expenses, liability and loss (including attorney's fees, judgements, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as it's representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
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such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may from time to time adopt further Bylaws with respect
to indemnification and amend these and such Bylaws to provide at all times the
fullest indemnification permitted by the General Corporation Law of the State of
Nevada.
ARTICLE 12
Amendments
Section 1. The Bylaws may be amended by a majority vote of all the stock
issued and outstanding and entitled to vote at any annual or special
meeting of the stockholders, provided notice of intention to amend
shall have been contained in the notice of the meeting.
Section 2. The Board of Directors by a majority vote of the whole Board at
any meeting may amend these Bylaws, including Bylaws adopted by the
stockholders, but the stockholders may from time to time specify
particular provisions of the Bylaws which shall not be amended by the
Board of Directors.
APPROVED AND ADOPTED this 18th day of February, 1999
/s/ Blair Coady
- ----------------------------------
Blair Coady, President, Secretary
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Letter of Agreement
BETWEEN:
Shannon International Resources Inc.
4020-7th Street SE
Calgary, Alberta
T2G 2Y8
AND:
CMB Energy Corp.
C/O Mcleod Dixon
Standard Life Tower
Suite 1800, 121 King Street W
Box 46
Toronto, Ontario
M5H 3T9
Attention: Mr. Richard Lachcik
WHEREAS Shannon International Resources Inc. is desirous of entering into an
arrangement with CMB Energy Corp., to acquire an interest in a block of
petroleum, natural gas and coal bed methane leases, located on Prince Edward
Island of Canada as described in the Oil and Natural Gas Permit, No.: 9606
WHEREAS the terms of this acquisition will be as follows:
1. Shannon International Resources Inc. will purchase a 25% working interest in
Blck 96-06 comprised of 116,279 acres of PNG and CBM rights for a Consideration
of 2 million treasurey shares of Shannon International Resources Inc., at on
ascribed value of $0.015 U.S. per shares dollars for a total consideration of
$30.000.00 U.S.
2. Shannon International Resources Inc. will have an option to earns an
additional 12.5% additional working interest in Block 96-06 by expending or
causing to be spent, $1.5 Canadian on the property over an eighteen month period
from the date of this Letter of Intent.
3. Shannon International Resources Inc. will have a further option to earn as
additional 12.5% working interest in Block 96-06 by expending or causing to be
spent, $1.5 million Canadian on the property over a twelve month period
beginning at the date of expiry of the option in (2) above.
If these two options are exercised, then Shannon International Resources Inc.
will have an undivided 50% working interest in the property and will be entitled
to enter into a joint venture arrangement with the holder or holders of the
balance of the Working Interest.
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Agreed to this 18th day of February, 1999.
/s/ Darrin Campbell /s/ Blair Coady
- ----------------------- ------------------
CMB ENERGY CORP. SHANNON RESOURCES INC.
per: Darrin Campbell Per: Blair Coady
President President
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PURCHASE AND JOINT VENTURE AGREEMENT
THIS AGREEMENT made as of the 23rd day of November, 1998.
BETWEEN:
PRINCE EDWARD GAS COMPANY INC.,
(hereinafter referred to as the "Optionor")
OF THE FIRST PART
- - and -
1326703 ONTARIO INC.,
(hereinafter referred to as the "Optionee")
OF THE SECOND PART
BACKGROUND AGREEMENT
(a) the Optionor is the recorded and beneficial holder of a one hundred percent
(100%) undivided interest in certain property (herein called the
"Property")situated in Prince Edward Island, more particularly described in
Schedule "A" hereto;
(b) the Optionee wishes to purchase a fifty percent (50%) interest in the
Property from the Optionor; and
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(c) a joint venture will be formed to further explore and, if feasible, develop
the Property.
TERMS OF AGREEMENT
For good and valuable consideration, (the receipt and sufficiency of which are
hereby acknowledged) the Optionor and Optionee make the representations,
warranties, agreement, and acknowledgment, hereinafter set forth:
ARTICLE I
INTERPRETATION
1.1 Definitions
- ---------------
The following terms, wherever used in this Agreement, shall have the meanings
set forth below:
(a) "Acts" means all legislation as amended from time to time of Prince
Edward Island, applicable to the Property, including title to, and
Operations on, the Property;
(b) "Affiliate" shall have the meaning attributed to it in the Canada
Business Corporations Act, as amended;
(c) "Expenditures" means all costs, expenses and charges, direct or
indirect, of or incidental to the Property including, without limiting
the generality of the foregoing. A charge for administrative services
of the Operator not exceeding fifteen percent (15%) of the amount of
those costs, expenses and charges; which costs, expenses and charges
shall be determined in accordance with the Operator's accounting
practices
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applicable from time to time to the extent that those practices are
not inconsistent with Canadian generally accepted accounting
principles;
(d) "Joint Venture" shall have the meaning attributed to it in Article
4.1;
(e) "Operations Agreement" means the standard form Operating Procedure
published by the Canadian Association of Petroleum Land dated 1990;
(f) "Operator" shall mean the Optionee;
(g) "Option" shall have the meaning attributed to it in Article 2.1;
(h) "Property" means all of the mineral claims more particularly described
in Schedule "A"; and
(i) "this Option Agreement" refers to and collectively includes this
agreement and every Schedule attached to this agreement and the
Operations Agreement except that if an identical word, phrase or
expression is defined in this Option Agreement and again in the
Operations Agreement the definition of that word, phrase or expression
shall be restricted to this Option Agreement, or the joint Operations
Agreement as the case may be, in which it appears.
1.2 Headings
- --------------
The headings of this Option Agreement and the Schedules hereto are solely for
convenience of reference and do no affect the interpretation thereof or define,
limit or construe the contents of any provision of this Option Agreement.
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<PAGE>
1.3 Number and Gender
- -----------------------
Words importing the singular number shall include the plural and vice-versa,
words importing the neuter gender shall include the masculine and feminine
genders, and words importing persons shall include firms and corporations and
vice-versa.
1.4 Governing Law
- -------------------
This Option Agreement and the rights and obligations and relations of the
parties hereto shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein (but
without giving effect to any conflict of law rules). The parties hereto agree
that the Courts of Ontario shall have jurisdiction to entertain any action or
other legal proceedings based on any provisions of this Agreement. Each party
hereto does hereby attorn to the jurisdiction of the Courts of the Province of
Ontario.
1.5 Currency
- --------------
All references to currency herein are references to Canadian currency.
ARTICLE II
TITLE TO AND PURCHASE OF THE CLAIMS
2.1 Optionor's Representations and Warranties
- -----------------------------------------------
The Optionor represents and warrants to the Optionee that:
(a) It is the beneficial and registered or recorded owner of a One Hundred
Percent (100%) interest in the Property;
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(b) the Property is in good standing, and free and clear of all
encumbrances;
(C) it has the full and undisputed right to deal with the Property as
provided for in this Option Agreement;
(d) subject to the provisions of this Option Agreement, the Optionor
agrees that during the currency of the Option, the Optionee shall have
quiet enjoyment of the Property; and
(e) the Optionor is not a non-resident for the purposes of Section 116 of
the Income Tax Act (Canada).
2.2 Purchase of Interest
- --------------------------
The Optionor hereby sells, transfers and assigns the Optionee fifty percent
(50%) interest in the Property for the consideration of 400,000 common shares of
Rally Energy Corp. ("Rally") and 400,000 options to purchase common share of
Rally, each option exercisable to purchase on 1 common share of Rally for $1.50
until 5:00 p.m., Toronto time on November 22, 2000. Concurrent with the
execution of this Option Agreement the Optionor shall deliver to the Optionee a
conveyance in proper registrable form in favour of the Optionee of all right,
title and interest of the Optionor in the Property, duly executed by the
Optionor, to be held in trust by the Optionee for the purposes of this Option
Agreement. The Optionee may register or record any such conveyance in its name
for such purposes, and the Optionor may register this option agreement or notice
of this Option Agreement against title to the property.
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2.3 Grant of Option to Earn Additional Interest
- -------------------------------------------------
The Optionor hereby grants to the Optionee the sole, exclusive and immediate
working right and option with respect to the Property, for the period of three
(3) years from the date of this Option Agreement, to earn an additional 25
percent (25%) undivided interest in the Property (herein called the "Option").
Such right may be exercised in the manner referred to in Section 2.4 hereof.
2.4 Exercise of Option
- ------------------------
In order to exercise the Option, the Optionee must expand or cause to be
expended at least $3,000,000 on the Property on or before November 22, 2001.
2.5 Lapse or Acceleration of Options
- --------------------------------------
The Optionee may let the Option lapse by failing to incur
expenditures referred to in Articles 2.4 hereof. The Optionee
may accelerate such expenditures.
2.6 Purchase Right
- --------------------
In addition to the Option, the Optionee may purchase a twenty-five percent (25%)
interest in the Property from the Optionor at any time for the purchase price of
$5,000,000.
2.7 Conditions to Option Agreement
- ------------------------------------
It is a condition of this Option Agreement and of the payment or expenditure by
the Optionee of any monies hereunder that the Optionee shall obtain from its
counsel an opinion that:
46
<PAGE>
(a) the title to the Property is registered, recorded or filed in the name
of the Optionor, free and clear of all encumbrances; and
(b) the conveyance referred to in Article 2.3 hereof is in proper form and
duly executed and delivered.
In the event that the Optionee is unable to obtain the said opinion, this
Agreement may be terminated at the option of the Optionee, and any payment made
or proceeds expended by the Optionee shall be reimbursed by the Optionor.
ARTICLE III
OPTIONEE CONDUCT
The Optionor shall be the Operator of the Property, and all operations on the
Property will be carried out pursuant tot he Operations Agreement. As soon as
the Optionee is prepared to expend any amount of money on the Property, it shall
have the right to become the Operator at its election.
ARTICLE IV
FORMATION OF JOINT VENTURE
4.1 Initial Interests and Expenditures
- ----------------------------------------
Upon the date of formation of the Joint Venture the parties shall, for purposes
of the Operations Agreement, be deemed to have the following initial interest:
47
<PAGE>
Interest
Undivided Interest
------------------
Optionor 50%
Optionee 50%
4.2 Title to Property
- -----------------------
The title to the Property shall be recorded upon the formation of the Joint
Venture in the name of the Optionee.
4.3 Payment of Royalty
- ------------------------
If the Optionor and Optionee have formed the Joint Venture under Article 4.1
hereof, then until either the Optionee or Optionor ceases to have any interest
in the Joint Venture and the Property, the Optionee and Optionor shall pay their
proportionate shares(based on their respective undivided interests in the Joint
Venture) of any royalty payable to any governmental body.
ARTICLE V
GENERAL
5.1 Assignment of Interest
- ----------------------------
The Optionor shall not, except all hereinafter set out, sell, transfer nor
assign this Option Agreement or their right or beneficial interest in the
Property without the consent of the other party, which shall not be unreasonably
withheld. The Optionee may assign its interest in this Agreement. Either party
shall be permitted to assign this Option Agreement to an Affiliate upon the said
assigning party providing a guarantee, in form satisfactory to the other party,
of the obligations of that Affiliate under this Option Agreement. Any assignment
shall be subject to the assignee
48
<PAGE>
entering into a agreement, in form and substance satisfactory to counsel for the
other party, to be bound by this Option Agreement.
5.2 Further Assurances
- ------------------------
The parties shall, without further consideration, from time to time execute and
deliver such further instruments and assurances as may be reasonably required
for registering or recording changes in ownership interests in the Property.
5.3 Limitation of Obligations of Optionee
- -------------------------------------------
It is understood and agreed that:
(a) Nothing contained in this Option Agreement, nor any payment made,
operations conducted or expenditure incurred by the Optionee on or in
connection with the Property or part thereof, nor the doing of any act
or thing by the Optionee under the terms of this Option Agreement
shall obligate the Optionee to do anything else hereunder other than
make payment and incur expenditure to the extent that it may have
expressly undertaken to do so pursuant to the terms of this Option
Agreement;
(b) subject to the terms of this Option Agreement, the Optionee may at any
time abandon the working right and option granted to it under Article
2.3 hereof and the Optionee may abandon all or part of the Property;
and
(c) In the event that the Optionee abandons all or part of the Property
pursuant to Article 5.3(b) hereof, the liabilities and obligations of
the Optionee hereunder shall cease with respect to the Property or the
part hereof so abandoned and the Optionee shall reconvey to the
Optionor the Property or part thereof so abandoned, which reconveyance
shall be accepted by the Optionor.
49
<PAGE>
5.4 Time
- ----------
Time shall be of the essence of this Agreement and of every part hereof and no
extension or variation of this Agreement shall operate as a waiver of this
provision.
5.5 Confidentiality of Information
- ------------------------------------
There shall be no public release by the Optionor of any information concerning
the Property without the prior written consent of the Optionee (such consent not
to be unreasonably withheld or delayed) unless such information is required by a
lawful authority or other regulatory body having jurisdiction, in which case the
Optionee shall have the right to approve the information to be disclosed. The
Optionee shall notify the Optionor prior to any public release of material
information concerning the Property.
5.6 Entire Agreement
- ----------------------
With respect to the subject matter of this Agreement, this Agreement (a) sets
forth the entire agreement between parties hereto and any persons who have in
the past or who are now representing either of the parties hereto,(b) supercedes
all prior understandings and communications between the parties hereto or any of
them, oral or written, and (c) constitutes the entire agreement between the
parties hereto. Each party hereto acknowledges and represents that this
Agreement is entered into after full investigation and that no party is relying
upon any statement or representation made by any other which is not embodied in
this Agreement. Each party hereto acknowledges that he or it shall have no right
to rely upon any amendment, promise, modification, statement or representation
made or occurring subsequent to the execution of this Agreement unless the same
is in writing and executed by each of the parties hereto.
50
<PAGE>
5.7 Notices
- -------------
All payments and communications which may be or are required to be given by
either party to the other herein, shall (in the absence of any specific
provision to the contrary) be in writing and delivered or sent by prepaid
registered mail to the parties, at their following respective addresses:
Optionee:
c/o Macloed Dixon
BCE Place, 181 Bay Street
Bay Wellington Tower
Suite 4220
Toronto, Ontario M5J 2T3
Attention: Mr. Richard Lachcik
Telecopier: (416) 360-8277
Optionor:
Prince Edward Gas Company Inc.
Telecopier: (902) 569-1817
and if any such payment or communication is sent by prepaid registered mail, it
shall, subject to the following sentences, be conclusively deemed to have been
received on the third business day following the mailing thereof and, if
delivered, it shall be conclusively deemed to have been received at the time of
delivery. Notwithstanding the foregoing provisions with respect to mailing, in
the event that it may be reasonably anticipated that, due to any strike,
lock-out or similar event involving and interruption in postal service, any
payment or communication will not be received by the addressee by no later than
the third business day following the mailing thereof, then the mailing of any
such payment or communication as aforesaid shall not be an effective means of
sending the same but rather any payment or communication must then be sent by an
alternative means of
51
<PAGE>
transportation which it may reasonably be anticipated will cause the payment or
communication to be received reasonably expeditiously by the addressee. Either
party may from time to time change its address hereinbefore set forth by notice
to the other of them in accordance with this section.
5.8 Benefit of Successors
- ---------------------------
This Agreement shall enure to the benefit and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties hereto have signed and sealed this Agreement.
SIGNED, SEALED AND DELIVERED ) Prince Edward Gas Company
) Inc.
)
/s/ Signature ) By: /s/ Signature
- ------------- ) -----------------
)
)
)
) 1326703 ONTARIO INC.
)
) By: /s/ Signature
) -----------------
)
)
52
<PAGE>
Schedule "A"
1. Permit 96-04 being:
All of Grid Area Lat. 46o 30'N
Long. 63o 45
South Half of Grid Area Lat. 46o 40'N
Long. 63o 45'W
Acreage - 116,279 acres
2. Permit 96-05, being:
South Half and North East Quadrant
of Grid Area Lat. 46o 20'N
Long. 63o 15'W
Acreage - 58,139 acres
3. Permit 96-06, being:
All of Grid Area Lat. 46o 30'N
Long. 63o 30'W
South Half of Grid Area Lat. 46o 40'N
Long. 63o 30'W
Acreage - 116,279 acres
4. Permit 96-07, being:
All of Grid Area Lat. 46o 20'N
Long. 63o 30'W
North East Quadrant of
Grid Area Lat. 46o 20'N
Long. 63o 45'W
Acreage: 96,898 acres
5. Permit 97-08, being:
All of Grid Area Lat. 46o 20'N
Long. 63o 00'W
South Half of Grid Area Lat. 46o 30'N
Long. 63o 00'W
Acreage: 116,279 acres
53
<PAGE>
6. Permit 96-09, being:
All of Grid Area Lat. 46o 20'N
Long. 62o 45'W
South Half of Grid Area Lat. 46o 30'N
Long. 62o 45'W
Acreage: 116,279
7. Permit 96-10, being:
North West Quadrant of
Grid Area Lat. 46o 10'N
Long. 63o 00'W
Acreage: 21,983 acres
54
<PAGE>
Her Majesty the Queen in the right of Prince Edward Island, represented by the
Minister charged by the Lieutenant-Governor in Council with the Administration
of the Oil and Natural Gas Act, hereinafter referred to as "the Permitter."
THE OIL AND NATURAL GAS ACT, R.S.P.E.I. 1988, CAP. 0-5
OIL AND NATURAL GAS PERMIT
Date Issued: July 21, 1998 Permit No.: 95-06
Term: 1 Year - From July 21, 1998
Blocks: All of Grid Area Lat. 46o 30' N. Long. 63o 30' W. and South
Half of Grid Area Lat. 46o 40' N. Long. 63o 30' W.
Annual Rental: $5,813.95 ($0.05/Acre)
Acreage: 116,279 Acres
Permittee: Prince Edward Gas Company, Inc.
The Permitter doth hereby grant unto the Permittee, pursuant to, and subject to
the provisions of Part VIII of the Oil and Natural Gas Act, R.S.P.E.I. 1988,
CAP. 0-5, (hereinafter referred to as "the Act") the exclusive right to do or
cause to be done geological and geophysical work and exploratory drilling for
all Crown Reserves of oil and natural gas in the location herein described, and
the Permittee doth hereby covenant and agree at all times to perform, observe,
and comply with the provisions of the Act, and amendments thereto from time to
time enacted, and the provisions of any regulations which may from time to time
be made under the authority thereof. The provisions of any other Act of the
Province of Prince Edward Island that prescribes, relates to or affects the
Permittee, shall be deemed to be incorporated into this Permit and shall bind
the Permittee from the date it comes into force. In the event of conflict
between any regulation made after the execution of this permit and any
regulation previously made, the regulation last made shall prevail.
The provision of Part VII of the Act shall not be applicable in this permit, nor
shall any rights accrue to the Permittee under the said Part VII.
Subject to the Act, the Permittee shall have the right to apply to continue the
term of this Permit upon such terms and conditions as are acceptable to the
Permitter.
55
<PAGE>
A Permittee which has complied with the provisions of this Permit shall during
the term of the Permit and subject to the provisions of this Permit and the Act,
have the exclusive right to apply for a Lease covering any or all of the lands
for which the right to explore is granted by this Permit.
If default is made by the Permittee in the performance or observance of any of
the terms and conditions provided for in his Permit and is not corrected within
thirty days from the date of the sending by registered mail of a notice to the
Permittee advising of such default, the Permittee can cancel this Permit.
Subject to the provisions of this Permit and the Act, a Permittee may surrender
all or any portion of the lands contained in the Permit upon giving notice to
the Permitter, any lands being surrendered bing in minimum one quarter grid
areas. Notwithstanding the foregoing, the Permit remains liable for any act for
which it was liable at the time of the surrender pursuant to the provisions of
the Act or this Permit.
The Permittee shall keep the Permitter indemnified against all actions, claims
and demands that may be brought or made against the Permitter by reason of
anything done by the Permittee, his servants, workmen, or agents, in the
exercise or purported exercise of the rights, powers, and privileges hereby
granted.
Special provision:
This permit is issued subject to any further terms which the permitter may
require to on negotiated between the permitter and permittee.
IN WITNESS WHEREOF the permitter and permittee have hereunto set their hands and
seals the day and year first above written.
/s/ Signature
- -------------
Witness
/s/ Signature
- -------------
Permittee
/s/ Signature
- -------------
Chief Officer, Witness
/s/ Signature
- -------------
Minister, Permitter
Description of Location
As described by Grid Areas below:
Map Title:
Oil and Natural Gas Map - Permit and Options Areas - Prince
Edward Island
Grid Areas: N. Lat. 46o 30' W. Long. 63o 30'
South Half N. Lat. 46o 40' W. Long. 63o; 30'
N. Lat. W. Long.
N. Lat. W. Long.
56
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> FEB-17-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,198
<SECURITIES> 0
<RECEIVABLES> 32,725
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,970
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,970
<CURRENT-LIABILITIES> 3,120
<BONDS> 0
0
0
<COMMON> 10,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 84,970
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.001)
<EPS-DILUTED> (.001)
</TABLE>
