Share Exchange Agreement

SHARE EXCHANGE AGREEMENT


THIS AGREEMENT is dated August 8, 2005


BETWEEN:


KEN PEARSON, an individual residing in the Province of Alberta;

966358 ALBERTA LTD., a company incorporated pursuant to the laws of the Province of Alberta;

989320 ALBERTA LTD., a company incorporated pursuant to the laws of the Province of Alberta;

332601 ALBERTA LTD., a company incorporated pursuant to the laws of the Province of Alberta; and

BEN MARSHALL, an individual residing in the Province of Alberta; and


(hereinafter the " Shareholders" )

AND


CAPITAL RESERVE CANADA LTD., a company incorporated pursuant to the laws of the Province of Alberta.


(hereinafter " Capital Canada" )


AND


CAPITAL RESERVE CANADA PROJECTS LTD., a company incorporated pursuant to the laws of the Province of Alberta.


(hereinafter " Capital Projects" )


AND


KCP INNOVATIVE SERVICES INC., a company incorporated pursuant to the laws of the Province of Alberta.


(hereinafter " KCP" )


WHEREAS:


A.

KCP is a reporting Alberta company having a registered office address of 4304 74th Avenue, Edmonton, Alberta


B.

The Shareholders are the registered and beneficial owners of 78.2% percent of the issued and outstanding shares of KCP, being 17,335,814 common shares, (the " Shareholders Shares" ) from a total of 22,170,114 each with no par value (the " KCP Shares" );


C.

Capital Canada is a reporting company registered with the U.S. Securities and Exchange Commission, having an office address of 1530 9th Ave SE, Calgary, Alberta, Canada T2G 0T7;


D.

Capital Projects is a wholly owned subsidiary of Capital Canada, having an office address of 1530-9th Ave S.E., Calgary, Alberta, Canada T2G 0T7;


E.

Capital Projects desires to acquire the Shareholders Shares on the basis of one share of Capital Projects to be exchanged for one share of Capital Canada for each one share of KCP, from the Shareholders, for a total of 17,335,814 Class A common shares to be issued by Capital Projects and exchanged for 17,335,814 shares of Capital Canada (the " Capital Canada Shares" ) to the Shareholders; and


F.

The parties to this Agreement wish to acknowledge that Capital Projects will use its commercial best efforts to offer to acquire by share exchange, amalgamation or arrangement, from the remaining shareholders of KCP (the " Remaining Shareholders" ) their shares based on an offer of one (1) share of Capital Projects to be exchanged for one share of Capital Canada for each one (1) share of KCP held by Remaining Shareholders (the " Remaining Shares" ) .


NOW THEREFORE THIS AGREEMENT WITNESSES that for and in consideration of the mutual premises and the mutual covenants and agreements contained herein, the parties covenant and agree each with the other as follows:


ARTICLE I

DEFINITIONS


Section 1.01. The following terms shall have the following respective meanings:

(a)

" Closing Date" shall mean on or before August 10, 2005 or any other date that the parties hereto agree to in writing;

(b)

" KCP Solicitor" shall mean the law firm of Bennett Jones


(c)

" Share Exchange" shall mean the transfer, by the Shareholders, of the KCP Shares to Capital Projects in exchange for the issuance, by Capital Projects of shares to the KCP Shareholders and the exchange of the Capital Projects shares to shares of Capital Canada with the Shareholders;

(d)

" Capital Canada and Capital Projects (collectively " Capital Companies" ) Solicitor" shall mean the law firm of Lawler & Associates of 1530 9th Avenue SE, Calgary, Alberta.


ARTICLE II

THE SHARE EXCHANGE


Section 2.01.

Exchange. Based upon the terms and subject to the conditions of this Agreement, on the Closing Date, the Shareholders agree to transfer the KCP Shares to Capital Projects in exchange for Capital Projects issuing to the Shareholders 17,335,114 shares which shall be exchanged for 17,335,814 Capital Canada Shares, as set forth in Schedule 2.01, and as referred to in Sections 10.02 and 10.03.


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF KCP


Section 3.01.

Organization, Standing and Authority; Qualification.

(a)

KCP is a corporation duly organized, validly existing and in good standing under the laws of the Province of Alberta with all requisite power and authority to enter into, and perform the obligations under the Agreement. KCP has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now being and as heretofore conducted.

(b)

KCP is duly qualified or otherwise authorized to transact business and is in good standing in the jurisdiction of the Province of Alberta, which is the only jurisdiction in which such qualification or authorization is required by law. No other jurisdiction has claimed, in writing or otherwise, that KCP is required to qualify or otherwise be licensed therein. KCP does not file any franchise, income or other tax returns in any other jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom.


Section 3.02.

Capitalization. The KCP Shares are duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights.


Section 3.03.

Corporate Status of KCP.

(a)

KCP has heretofore delivered to Capital Canada true, correct and complete copies of the Certificate or Articles of Incorporation (certified by the Province of Alberta) and By-laws or comparable instruments (certified by the corporate secretary thereof) of KCP.

(b)

The minute books of KCP accurately reflect all actions taken at all meetings and consents in lieu of meetings of its stockholders, and all actions taken at all meetings and consents in lieu of meetings of each of their boards of directors and all committees.


Section 3.04.

Execution and Delivery. This Agreement has been duly executed and delivered by KCP and thereby constitutes a valid and binding agreement, enforceable against KCP in accordance with its terms.


Section 3.05.

Consents and Approvals. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein do not require KCP to obtain any consent, approval or action of, or make any filing with or give any notice to, any person or entity.


Section 3.06. No Conflict. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)

violate any provisions of the Articles or Certificate of Incorporation, By-laws or other charter or organizational document of KCP;

(b)

violate, conflict with or result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both, constitute) a default under, any contract or agreement to which KCP is a party to by or to which any of them or any of their respective assets or properties may be bound or subject;

(c)

violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon KCP or upon the KCP Shares or the properties or business of KCP;

(d)

violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to KCP; or

(e)

result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license.


Section 3.07.

Options or Other Rights.

(a)

There is no outstanding right, subscription, warrant, call, unsatisfied preemptive right, option, contract or other agreement of any kind to purchase or otherwise to receive from KCP any of the outstanding, unauthorized or treasury shares of the Common Stock of KCP, other than those disclosed in this Agreement; and

(b)

there is no outstanding security of any kind convertible into any common shares of KCP, and, except as aforesaid, there is no outstanding contract or other agreement to purchase, redeem or otherwise acquire any of the KCP Shares.


Section 3.08.

KCP Financial Statements.

(a)

KCP has, or will have prior to the Closing Date, provided to the Capital Companies the audited financial statements of KCP, accompanied by the report thereon by Ernst and Young, LLP, KCP' s independent public accountants, for the period ended August 30, 2004 and the unaudited, prepared by management financial statements for the period ended December 31, 2004 ( together the " KCP Financial Statements" ).

(b)

The KCP Financial Statements shall be true, correct and complete in all material respects and fairly present the financial condition of KCP and its subsidiaries and the results of its operations for the period then ended and shall be prepared in conformity with Canadian generally accepted accounting principles applied on a consistent basis.


Section 3.09.

Material Information.

(a)

This Agreement, the Schedules hereto, the KCP Financial Statements and all other information provided in writing by KCP, or representatives thereof, to the Capital Companies, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.

(b)

There are no facts or conditions, which have not been disclosed to the Capital Companies in writing, which, individually or in the aggregate, could have a material adverse effect on KCP or a material adverse effect on the ability of KCP to perform any of its obligations pursuant this Agreement.


Section 3.10.

Absence of Certain Changes. Since

the date of the KCP Financial Statements, there has been no event, change or development which could have a material adverse effect on KCP.


Section 3.11.

Undisclosed Liabilities. Except as reflected or reserved against in the KCP Financial Statements, as of and for the period reflected therein, KCP was not on that date subject to, and since that date KCP has not incurred, any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, of a kind required by generally accepted accounting principles to be reflected or reserved against on a financial statement (" Liabilities" ), which individually or in the aggregate exceeds $100,000.


Section 3.12. Operations of KCP. Except as contemplated by this Agreement, since the date of the KCP Financial Statements, KCP has not:

(a)

amended its Certificate or Articles of Incorporation or By-laws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business;

(b)

issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of its capital stock or any bonds, notes, debentures or other evidence or indebtedness;

(c)

incurred any indebtedness for borrowed money or incurred or assumed any other liability in excess of $100,000 in any one case (or, in the aggregate, in the case of any related series of occurrences) or $250,000 in the aggregate;

(d)

declared or paid any dividends or declared or made any other distributions of any kind to its shareholders;

(e)

made any change in its accounting methods or practices or made any change in depreciation or amortization policies, except as required by law or generally accepted accounting principles;

(f)

made any loan or advance to any of its shareholders or to any of its directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

(g)

entered into any lease (as lessor or lessee) under which KCP is obligated to make or would receive payments in any one year of $50,000 or more;

(h)

sold, abandoned or made any other disposition of any of its assets or properties;

(i)

granted or suffered any lien on any of its assets or properties;

(j)

entered into or amended any contracts to which it is a party, or by or to which it or its assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Section 3.16;

(k)

made any acquisition of all or a substantial part of the assets, properties, securities or business of any other person or entity;

(l)

paid, directly or indirectly, any of its material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

(m)

terminated or failed to renew, or received any written threat (that was not subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise of KCP); or

(n)

entered into any other contract or other transaction that materially increases the liabilities of KCP or it' s subsidiaries.


Section 3.13.

Compliance with Laws. KCP is not in violation of any applicable order, judgment, injunction, award or decree nor is it in violation of any Federal, provincial, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on KCP, KCP has not received written notice that any violation is being alleged.


Section 3.14. Permits and Licences

(a)

KCP has all permits and licences that are necessary for the ownership and conduct of its business, and such permits and licences are or, shall be, in full force and effect and are or, shall be, sufficient for the ownership and conduct of such business;

(b)

no violations exist or have been recorded in respect of any such permit or licence; and, to the best of KCP' s knowledge, no proceeding is pending or threatened that would suspend, revoke or limit any such permit.


Section 3.15. Actions and Proceedings.

(a)

there are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving KCP, or against or involving any of the KCP Shares; and

(b)

to the best of KCP' s knowledge, there are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or threatened against or involving KCP, the KCP subsidiaries, or any of the KCP Shares.


Section 3.16. Contracts.

(a)

there have been delivered or made available to the Capital Companies true, correct and complete copies of each of the contracts set forth in Schedule 3.16 or in any other Schedule. Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither KCP nor any of KCP' s subsidiaries or other affiliates , as the case may be, is in default in any respect under any of them; and

(b)

without limiting the generality of section 3.16(a), KCP is not a party to any:

(i)

contracts with any current or former officer, director, employee, consultant, agent or other representative which is not disclosed on Schedule appended hereto;

(ii)

contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety days' or more notice;

(iii)

contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its or their assets or properties;

(iv)

contracts (including with limitation, leases of real property) calling for an aggregate purchase price or payments in any one year of more than $100,000 in any one case (or in the aggregate, in the case of any related series of contracts);

(v)

contracts relating to the acquisition by KCP of any operating business of, or the disposition of any operating business by, any other person;

(vi)

executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)

joint venture contracts or agreements;

(viii)

contracts under which KCP agrees to indemnify any party, other than in the ordinary course of business or in amounts not in excess of $100,000, or to share tax liability of any party;

(ix)

contracts containing covenants of KCP not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with KCP in any line of business or in any geographical area;

(x)

contracts relating to the making of any loan by KCP;

(xi)

contracts relating to the borrowing of money by KCP or the direct or indirect guaranty by KCP of any obligation for, or an agreement by KCP to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation,

(1)

any contract with respect to lines of credit;

(2)

any contract to advance or supply funds to any other person other than in the ordinary course of business;

(3)

any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

(4)

any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(5)

any guarantee with respect to any lease or other similar periodic payments to be made by any other person;

(xii)

contracts for or relating to computers, computer equipment, computer software or computer services; and

(xiii)

any other material contract whether or not made in the ordinary course of business.


Section 3.17.

Liens. KCP has marketable title to all of its assets and properties free and clear of any liens, other than those liens disclosed in Schedule 3.17 appended hereto.


Section 3.18.

Officers, Directors and Key Employees.

(a)

KCP does not have any contract or agreement with any of its officers, directors, employees or consultants whose annual salary equals or exceeds $100,000 or who received or has accrued in respect of such period a bonus equal to or in excess of $100,000; and

(b)

KCP does not have any commitments or contracts to increase the wages or to modify the condition or terms of employment or consultancy of any of the employees or consultants of KCP, including the aggregate cost to KCP of all such commitments or contracts.


Section 3.19.

Brokerage. No broker or finder has acted, directly or indirectly, for the Shareholders nor have the Shareholders incurred any finder' s fee or other commission, in connection with the transactions contemplated by this Agreement.


ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS


Section 4.01.

Execution and Delivery. This Agreement has been duly executed and delivered by the Shareholders and thereby constitutes a valid and binding agreement, enforceable against the Shareholders in accordance with its terms.


Section 4.02.

Consents and Approvals. The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein do not require the Shareholders to obtain any consent, approval or action of, or make any filing with or give any notice to, any person or entity.


Section 4.03.

Title to Stock.

(a)

The Shareholders have valid title to the KCP Shares free and clear of all liens or encumbrances, including, without limitation, any community property claim; and

(b)

Upon delivery of the KCP Shares on the Closing Date, as herein provided, Capital Projects shall acquire good and marketable title thereto, free and clear of any lien, including, without limitation, any community property claim.


Section 4.04. Actions and Proceedings.

(a)

there are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving any of the KCP Shares held by the Shareholders; and

(b)

to the best of the Shareholder' s knowledge, there are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or threatened against or involving the KCP Shares.


ARTICLE V

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