EXHIBIT 10.3
STANDARD SECURITIES CAPITAL CORPORATION
AGENCY AGREEMENT
December 9, 2003
Workstream Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Mr. Xxxxxxx Xxxxxxxxx, President and Chief Executive Officer
Dear Sirs:
RE: PRIVATE PLACEMENT OF COMMON SHARES AT A PRICE OF $1.60 PER COMMON SHARE
Standard Securities Capital Corporation (the "AGENT") understands that
Workstream Inc. (the "CORPORATION") desires to issue and sell to Purchasers (as
defined below) in the Designated Province (as defined below) up to US$4,000,000
worth of Common Shares (the "OFFERING").
The form of agreement between the Corporation and each Purchaser providing
for the subscription by each Purchaser of Common Shares (the "SUBSCRIPTION
AGREEMENT") is attached as Exhibit "A".
1. INTERPRETATION
1.1 Unless expressly provided otherwise, where used in this Agreement or any
schedule hereto, the following terms shall have the following meanings,
respectively:
"AGENT" shall have the meaning ascribed thereto in the first paragraph of
this Agreement;
"AGENT'S COUNSEL" means Fraser Xxxxxx Casgrain LLP or such other legal
counsel as the Agent may appoint;
"AGENT'S EXPENSES" has the meaning ascribed thereto in Section 10.1 of
this Agreement;
"AGENT'S FEE" has the meaning ascribed to such term in Section 5.1;
"ALTERNATIVE TRANSACTION" means (a) an issuance of securities of the
Corporation or securities convertible, exchangeable or exercisable into
such securities in the capital of the Corporation, in excess of 5% of the
total value or number of securities currently outstanding in the capital
of the Corporation, but excluding securities issuable upon the conversion,
exchange or exercise of securities outstanding on the date hereof,
including, for greater certainty, the Compensation Warrant Shares; or (b)
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a merger, amalgamation, arrangement, reorganization, joint venture, sale
of all or substantially all assets, exchange of assets involving the
Corporation or any material subsidiary of the Corporation or any similar
transaction other than as set out in this Agreement;
"APPLICABLE SECURITIES LAWS" means, collectively, the applicable Canadian
Securities Laws and U.S. Securities Laws;
"AUDITORS" means PricewaterhouseCoopers LLP, the auditors of the
Corporation;
"BUSINESS DAY" means any day other than a Saturday, Sunday or statutory or
civic holiday in Toronto, Ontario;
"CANADIAN SECURITIES LAWS" means, collectively, the securities laws of the
Designated Province the respective regulations and rules made and forms
prescribed thereunder together with all applicable published policy
statements, blanket orders, rulings and notices of the Ontario Securities
Commissions and the SEC;
"CLAIM" has the meaning ascribed to such term in Section 11.1;
"CLOSING" means the closing of the Offering of the Common Shares on the
Closing Date;
"CLOSING DATE" means December 9, 2003 or such earlier or later date as the
Corporation and the Agent may agree;
"COMMON SHARE" or "COMMON SHARES" means the common shares in the capital
of the Corporation;
"COMPENSATION WARRANTS" and "COMPENSATION WARRANT SHARES" have the meaning
ascribed to such terms in Section 5.1;
"CORPORATION" means Workstream Inc. (and any predecessor corporation);
"CORPORATION'S COUNSEL" means Xxxxxx-Xxxxxxxxx, Hill and XxXxxxxxx LLP;
"DESIGNATED PROVINCE" means Ontario;
"FINANCIAL INFORMATION" means:
(a) the audited consolidated financial statements of the Corporation for
the period ending May 31, 2003 consisting of the audited
consolidated balance sheets, consolidated statements of operations,
consolidated statements of comprehensive loss, consolidated
statements of shareholders' equity, consolidated statements of cash
flows together with the notes to the consolidated financial
statements; and
(b) the unaudited interim consolidated financial statements of the
Corporation for the period ending August 31, 2003 consisting of the
interim unaudited consolidated three month balance sheets,
consolidated statements of operations, consolidated statements of
comprehensive loss, and consolidated statements of cash flows as at
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such date, and together with the Notes to the interim consolidated
financial statements for such period;
"GROSS PROCEEDS" means the aggregate gross proceeds to the Corporation
from the sale of Common Shares to Purchasers pursuant to the Offering;
"G.S.T." means taxes, interest, penalties and fines imposed under Part IX
of the Excise Tax Act (Canada) and the regulations made thereunder;
"INCLUDING" means including without limitation;
"INDEMNIFIED PARTY" has the meaning giving to is in Section 11.1;
"INTELLECTUAL PROPERTY RIGHTS" means all patent rights, trademarks,
copyrights, industrial designs and technical information (including any
claims or rights to xxx for past infringement of same), relating to the
business of the Corporation owned by or licensed to the Corporation;
"KNOWLEDGE" and "TO THE KNOWLEDGE OF" mean, when referring to the
Corporation, the actual knowledge of the directors and executive officers
of the Corporation and of its Subsidiaries and, when referring to an
individual, the actual knowledge of such individual and, in either case,
the actual knowledge that any such person shall have acquired upon due and
reasonable inquiry in the circumstances;
"LEGAL COSTS" has the meaning ascribed to such term in Section 10.1;
"MATERIAL ADVERSE EFFECT" means an effect which is materially adverse to
the business, assets or properties, condition, (financial or otherwise) or
results of operations of the Corporation or any of its Subsidiaries, taken
as a whole;
"MATERIAL CHANGE" means a change in the business, results of operations,
assets, condition (financial or otherwise) or capital of the Corporation
or any of its Subsidiaries that would reasonably be expected to have a
significant effect on the market price or value of any of the
Corporation's securities and includes a decision to implement such a
change made by the Corporation's board of directors or by senior
management of the Corporation who believe that confirmation of the
decision by the board of directors is probable;
"MATERIAL FACT" means a fact that significantly affects, or would
reasonably be expected to have a significant effect on the market price or
value of any of the Corporation's securities;
"MISREPRESENTATION" means (i) an untrue statement of a material fact, or
(ii) an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in the light of the
circumstances in which it was made;
"NET PROCEEDS" means the Gross Proceeds minus the Agent's Fee and Agent's
Expenses including the Legal Costs;
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"NON-DISCLOSURE AGREEMENT" means the non-disclosure agreement dated
December 1, 2003 between the Corporation and the Agent;
"OFFERED SECURITIES" shall mean, collectively, the Common Shares,
Compensation Warrants and the Compensation Warrant Shares;
"OFFERING" has the meaning ascribed to such term in the first paragraph of
this Agreement;
"OUTSTANDING CONVERTIBLE SECURITIES" means all options, including options
granted or proposed to be granted to officers, directors, employees or
consultants, warrants, other rights to acquire securities and other
convertible securities of the Corporation or any of its Subsidiaries
outstanding as at the date of this Agreement, whether issued pursuant to
an established plan or otherwise, and including any agreement or
understanding with respect to the issuance or granting of the same;
"PERSON" includes any individual, corporation, limited partnership,
general partnership, joint stock company or association, joint venture
association, company, trust, bank, trust company, land trust, investment
trust, society or other entity, organization, syndicate whether
incorporated or not, trustee, estate trustee, executor or other legal or
personal representative, and governments and agencies and political
subdivisions thereof;
"PRIVATE PLACEMENT EXEMPTIONS" means the registration and prospectus
exemptions available pursuant to the Canadian Securities Laws pursuant to
which the Common Shares are to be issued in the Designated Province;
"PURCHASERS" means, collectively, each of the purchasers of Common Shares
pursuant to the Offering;
"REGISTRATION RIGHTS AGREEMENT" has the meaning ascribed to such term in
Section ;
"SEC" means the United States Securities and Exchange Commission;
"SEC FILINGS" means the Corporation's most recent Form 10-K for the fiscal
year ended May 31, 2003 and all other reports, schedules, forms or
statements filed by the Corporation or its subsidiaries with the SEC under
the 1933 Act or the 1934 Act on or during the 18 months preceding the date
hereof;
"SELLING GROUP" has the meaning ascribed to such term in Section 2.3;
"STOCK EXCHANGES" means the NASDAQ Small Cap Market and the Boston Stock
Exchange;
"SUBSCRIPTION AGREEMENTS" means, collectively, the subscription agreements
entered into between the Purchasers and the Corporation in respect of the
purchase of Common Shares, a form of which is attached as Exhibit "A";
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"SUBSIDIARY" or "SUBSIDIARIES" has the meaning as ascribed to such term in
the Canada Business Corporations Act;
"TIME OF CLOSING" means the Closing Date;
"TRANSACTION DOCUMENTS" has the meaning ascribed to such term in Section
6.1(ee);
"U.S. SECURITIES LAWS" means, collectively, the 1933 Act, the 1934 Act,
all applicable federal and state securities laws in the United States,
including all "Blue Sky" laws, and all regulations and forms prescribed
thereunder, together with all applicable published policy statements,
releases and rulings of the SEC and any applicable state securities
regulatory authorities;
"1933 ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder;
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
1.2 The division of this Agreement into sections, subsections, paragraphs and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. Unless something in the subject matter or context is inconsistent
therewith, references herein to sections, subsections, paragraphs and other
subdivisions are to sections, subsections, paragraphs and other subdivisions of
this Agreement.
1.3 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein and time shall be of the essence hereof.
1.4 Unless otherwise stated herein, all amounts expressed herein in terms of
money refer to the lawful currency of the United States and all payments to be
made hereunder shall be made in such currency.
1.5 The following are the Schedules and Exhibits attached to this Agreement,
which schedules and exhibits (including the representations, warranties and
covenants set out therein) are deemed to be a part hereof and are hereby
incorporated by reference herein:
Schedule 6.1(q) - Contingent Liabilities
Schedule 6.1(mm) - Encumbrances
Exhibit "A" - Subscription Agreement
Exhibit "B" - Legal Opinions
Exhibit "C" - Registration Rights Agreement
2. GENERAL TERMS AND CONDITIONS
2.1 Subject to the terms and conditions of this Agreement, the Corporation
hereby appoints the Agent as, and the Agent hereby agrees to act as, the sole
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and exclusive agent of the Corporation to offer for sale in Canada on behalf of
the Corporation up to US$4,000,000 worth of Common Shares at a price of $1.60
per Common Share, and to use its commercially reasonable best efforts to solicit
and procure Purchasers of the Common Shares on behalf of the Corporation.
The Agent acknowledges that the Offering may be done concurrently, or within a
short time thereafter, with an United States offering of up to $1,000,000 of
Common Shares.
2.2 Contemporaneously with the sale of the Common Shares, the Corporation, the
Agent and each of the Purchasers will execute and deliver a Registration Rights
Agreement in the form attached hereto as Exhibit "C" ( the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Corporation will agree to provide certain
registration rights under the 0000 Xxx.
2.3 It is understood and agreed by the parties that the Agent shall act as agent
only and at no time shall the Agent have any obligation whatsoever to purchase
any Common Shares. The Agent shall have the right to form a selling group (the
"SELLING GROUP") consisting of other registered securities dealers acting as
sub-agents upon the terms and conditions set out in a selling group agreement to
be entered into between the Agent and the members of the Selling Group and the
Agent shall have the right to determine such terms and conditions, provided that
they are not inconsistent with the terms and conditions of this Agreement, and
that any fee charged by any such member shall not exceed the Agent's Fee set out
in Section 5.1 and shall be payable by the Agent. The Agent shall have the
exclusive right to control all compensation arrangements between the members of
the Selling Group.
2.4 The Agent acknowledges and agrees that any offer to purchase Common Shares
may be accepted or rejected, in whole or in part, by the Corporation acting
reasonably.
2.5 The Corporation agrees that the Common Shares shall be offered for sale
solely through the Agent in accordance with this Agreement, except those Common
Shares offered for sale in the Designated Province through members of the
Selling Group acting as sub-agents qualified to trade in Common Shares under the
laws of the Designated Province appointed or authorized by the Agent as provided
herein.
2.6 The Agent agrees not to solicit offers to purchase or sell the Common Shares
in such a manner as to require registration of the Common Shares, or the filing
of a prospectus with respect to the Common Shares, under the laws of any
jurisdiction outside the Designated Province including, without limitation, the
United States, and not to solicit offers to purchase or sell the Common Shares
in Canada except in the Designated Province and only in accordance with Canadian
Securities Laws. The Agent will ensure that any agreements between the Agent and
any other investment dealers or brokers, including without limitation members of
the Selling Group, contain equivalent restrictions to those contained in this
section.
3. NATURE OF TRANSACTION
3.1 Each Purchaser resident in the Designated Province shall purchase Common
Shares under a Private Placement Exemption so that the purchases of the Common
Shares will be exempt from the registration and prospectus requirements of the
Canadian Securities Laws. The Corporation hereby agrees to use all reasonable
commercial efforts to secure compliance with all securities regulatory
requirements on a timely basis in connection with the distribution of the Common
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Shares to the Purchasers, including, without limitation, by filing within the
periods stipulated under Canadian Securities Laws, and at the Corporation's
expense, all private placement forms required to be filed by the Corporation and
the Purchasers, respectively, in connection with the Offering and paying all
filing fees required to be paid in connection therewith so that the distribution
of the Common Shares may lawfully occur without the necessity of filing a
registration statement or a prospectus or any similar document under the
Applicable Securities Laws, including, an offering memorandum as defined in
Ontario Securities Commission Rule 14-501. The Agent agrees to assist the
Corporation in all reasonable respects to secure compliance with all regulatory
requirements in connection with the Offering. The Agent will notify the
Corporation with respect to the identity of each Purchaser as soon as
practicable and with a view to leaving sufficient time to allow the Corporation
to secure compliance with all relevant regulatory requirements under Applicable
Securities Laws relating to the sale of the Common Shares.
4. COVENANTS AND REPRESENTATIONS OF THE AGENT
4.1 The Agent covenants with the Corporation that it will (and will use its
reasonable efforts to cause the members of the Selling Group to ensure that they
will): (i) conduct its activities in connection with arranging for the sale of
the Common Shares in compliance with the Applicable Securities Laws; (ii) not
deliver to any prospective Purchaser any document or material without the
consent of the Corporation; (iii) not solicit offers to purchase or sell the
Common Shares so as to require registration thereof or filing of a prospectus
with respect thereto under the laws of any jurisdiction outside of Canada where
the solicitation or sale of the Common Shares would result in any ongoing
disclosure requirements in such jurisdiction, or in any registration
requirements in such jurisdiction except for the filing of a notice or report of
the solicitation or sale; (iv) obtain from each Purchaser an executed
Subscription Agreement in the form attached hereto as Appendix "A", together
with all documentation as may be necessary in connection with subscriptions for
Common Shares; and (v) not make any representations or warranties with respect
to the Corporation or the Common Shares, other than as set forth in the
Subscription Agreement, this Agreement or in publicly available information
filed by the Corporation.
4.2 Neither the Agent nor any of its affiliates, nor any person acting on its
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with the
Offering.
4.3 The Agent (i) is an "Accredited Investor," as such term is defined in Rule
501 of Regulation D of the 1933 Act.
4.4 The Agent acknowledges that it has been afforded the opportunity to ask
questions of, and receive answers from, the Corporation concerning the Common
Shares and the terms and conditions of the Offering and to obtain any additional
information the Agent may consider necessary in making an informed investment
decision or in order to verify the accuracy of any information set forth in this
Agency Agreement or otherwise provided to the Agent.
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5. AGENT'S COMPENSATION
5.1 In consideration of the Agent's services to be rendered to the Corporation
in connection herewith, including, without limitation, soliciting offers to
purchase the Common Shares, acting as financial advisor to the Corporation in
respect of the sale of the Common Shares, preparation of the Transaction
Documents, performing administrative work in connection with such matters, and
all other services arising out of this Agreement, the Corporation agrees,
subject to and upon the terms and conditions set out herein, to pay or cause to
be paid (and issue or cause to be issued) to the Agent at the Time of Closing:
(a) a cash fee (the "AGENT'S FEE") equal to 7.0% of the amount of the Gross
Proceeds (or the Canadian currency equivalent thereof); and (b) Common Share
purchase warrants (the "COMPENSATION WARRANTS") to purchase the number of Common
Shares as is equal to 10% of the number of Common Shares sold under the
Offering. Each Compensation Warrant shall entitle the Agent to purchase one
Common Share (collectively, the "COMPENSATION WARRANT SHARES") at a price of
$1.60 per Compensation Warrant Share for a period of twenty-four months
following the Closing Date. The issuance of Compensation Warrants shall be
subject to receipt of the necessary regulatory approvals.
5.2 The parties confirm that in the event the Agent appoints other registered
dealers as sub-agents to assist in the Offering, then such sub-agents shall be
entitled in place of the Agent to receive Compensation Warrants as part of their
compensation directly registered in such sub-agent's names on the same basis as
the Agent is entitled to receive Compensation Warrants.
5.3 It is the
understanding of both the Corporation and the Agent that G.S.T. is not exigible
on any portion of the Agent's Fee. However, should it be determined by the
Canada Customs and Revenue Agency that G.S.T. should have been charged on all or
any part of the Agent's Fee, the Corporation shall pay to the Agent an amount
equal to the G.S.T. determined to be exigible.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION
6.1 The Corporation hereby represents, warrants and covenants to and with the
Agent and the Purchasers and acknowledges that the Agent and the Purchasers are
relying upon such representations, warranties and covenants in completing the
Closing as follows:
(a) the proceeds of the sale of the Common Shares shall be used by the
Corporation to repay debt, for working capital and general corporate
purposes, including payment of the costs incurred by the Corporation
in connection with the Offering;
(b) it will as soon as practicable after the Closing Date and, in any
event, within applicable time periods under the Applicable
Securities Laws, file such documents as may be required under the
Applicable Securities Laws relating to the private placement of the
Common Shares which shall include, but not be limited to, those
filing requirements as prescribed by OSC Rule 45-501 and as
prescribed by CSA Multilateral Instrument 45-102 Resale of
Securities, and pay all filing fees required to be paid in
connection therewith;
(c) it will use its commercially reasonable best efforts to ensure that
the Common Shares and the Compensation Warrant Shares issuable on
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the exercise of the Compensation Warrants, will be listed for
trading on the Stock Exchanges upon their issue;
(d) as soon as practicable after the Closing Date, the Corporation shall
make application for listing of the Common Shares on the Toronto
Stock Exchange and to take all commercially reasonable steps to have
the application approval as promptly as practicable;
(e) promptly following the Closing Date, but in any event no later than
45 days following the Closing Date, the Corporation shall prepare
and file with the SEC a Form S-3 or, if Form S-3 is not then
available to effect a resale of the Common Shares, on such other
form of registration statement as is then available to effect,
subject to approval by the SEC, a registration for the resale of the
Common Shares, such that such Common Shares shall be freely
tradeable securities;
(f) it has complied and will comply with all of the Applicable
Securities Laws in connection with the Offering. Neither the
Corporation nor anyone acting on its behalf, directly or indirectly,
has or will sell, offer to sell or solicit offers to buy the Common
Shares or similar securities to, or solicit offers with respect
thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Agent
Purchasers), so as to bring the issuance and sale of the Common
Shares under the registration or prospectus provisions of the
Applicable Securities Laws. Neither the Corporation nor any of its
affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
in connection with the offer or sale of Common Shares;
(g) the Corporation and each of its material Subsidiaries: (i) have been
incorporated and organized and are validly existing and in good
standing under the laws of their respective jurisdictions of
incorporation; and (ii) have all requisite corporate power and
authority and are qualified and authorized to carry on their
respective businesses as now conducted and to own, lease and operate
their respective properties and assets, in all jurisdictions where
such qualification or authorization is required except where such
failure to be so qualified or the absence of any such licence,
registration or qualification does not and will not have a material
adverse effect;
(h) the Corporation is eligible to use Form S-3 to register the
Registrable Securities (as such term is defined in the Registration
Rights Agreement) for sale by Purchasers as contemplated by the
Registration Rights Agreement;
(i) the Corporation and each of its material Subsidiaries are current
and up-to-date with all filings required to be made by each of them
respectively under all applicable laws of Canada and the United
States, as applicable;
(j) the Corporation and its Subsidiaries, collectively, are the
registered and beneficial owners of all of the issued and
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outstanding securities of the Subsidiaries which securities have
been issued as fully paid and non-assessable and which securities
are free and clear of all mortgages, liens, charges, pledges,
security interest encumbrances, claims or demands whatsoever;
(k) the Corporation and each of the material Subsidiaries are, in all
material respects, conducting their respective businesses in
compliance with all applicable laws, rules and regulations and, in
particular, all applicable licensing, food, drug and environmental
legislation or other lawful requirement of any governmental or
regulatory bodies applicable to the Corporation or its Subsidiaries
of each jurisdiction in which its business is carried on and is duly
licensed, registered or qualified in all jurisdictions in which it
owns, leases or operates its property or carries on business to
enable its business to be carried on as now conducted and its
property and assets to be owned, leased and operated and all such
licences, registrations and qualifications are and will at the Time
of Closing be valid, subsisting and in good standing, except where
such failure to be so qualified or the absence of any such licence,
registration or qualification does not and will not have a material
adverse effect;
(l) the Corporation and each of the material Subsidiaries possess all
franchises, certificates, authority, permits or licences issued by
the appropriate state, provincial, municipal or federal regulatory
agencies or bodies necessary to conduct the business now owned or
operated by each of them and neither the Corporation nor any of its
material Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority, permit or licence which, if the subject of an
unfavourable decision, ruling or finding would have a material
adverse effect ;
(m) except as disclosed in the SEC Filings, the Corporation does not
have any Outstanding Convertible Securities; (n) the Corporation is
authorized to issue an unlimited number of Common Shares and an
unlimited number of Class A Preferred Shares issuable in series of
which, as of the date hereof, 23,200,659 Common Shares and 0 Class A
Preferred Shares are issued and outstanding as fully paid and
non-assessable;
(o) the minute books of the Corporation, which have been made available
to the Agent or their counsel, are complete and accurate in all
material respects and the excerpts of the corporate records of each
of the Subsidiaries which have been made available to the Agent or
their counsel are accurate in all material respects;
(p) except as disclosed in the SEC Filings, since May 31, 2003:
(i) has not been any material change in the assets, liabilities or
obligations (absolute, accrued, contingent or otherwise) of
the Corporation, on a consolidated basis, that has not been
publicly disclosed in the manner required by Applicable
Securities Laws;
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(ii) there has not been any material change in the capital stock or
long-term debt of the Corporation that has not been publicly
disclosed in the manner required by Applicable Securities
Laws;
(iii) there has not been any material change that has not been
publicly disclosed in the manner required by Applicable
Securities Laws; and
(iv) except as has been publicly disclosed in the manner required
by Applicable Securities Laws since its last fiscal year end,
the Corporation and each of its Subsidiaries has carried on
its respective business in the ordinary course;
(q) except as disclosed in the SEC Filings or in the Financial
Information or as set forth in Schedule 6.1(q), the Corporation and
its Subsidiaries do not have any liabilities, contingent or
otherwise, except those included in the ordinary course of business,
consistent (as to amount and nature) with past practices since
August 31, 2003, none of which, individually or in the aggregate,
have had or could reasonably be expected to have a material adverse
effect;
(r) the Financial Information fairly presents, in all material respects
and to the knowledge of the Corporation and its Subsidiaries in
accordance with generally accepted accounting principles in the
United States consistently applied, the financial position and
condition of the Corporation and the Subsidiaries as at their dates
and the results of the operations of the Corporation and the
Subsidiaries for the periods then ended and reflect all liabilities
(absolute, accrued, contingent or otherwise) of the Corporation and
the Subsidiaries as at their dates, except, in the case of unaudited
interim statements, to the extent that they may exclude footnotes or
may be condensed or summary statements;
(s) except as set forth in Schedule 6.1 (q), there is no action,
proceeding or investigation (whether or not purportedly by or on
behalf of the Corporation or any of its Subsidiaries) pending or, to
the knowledge of the Corporation or any of its Subsidiaries,
threatened against or affecting the Corporation or any of its
Subsidiaries, at law or in equity (whether in any court, arbitration
or similar tribunal) or before or by any federal, provincial, state,
municipal or other governmental department, commission, board or
agency, domestic or foreign, which in any way will have a material
adverse effect, or which questions the validity of the Common
Shares, the Compensation Warrants, the Compensation Warrant Shares
or of the issuance thereof as fully paid and non-assessable
securities or any action taken or to be taken by the Corporation
pursuant to or in connection with this Agreement. There are no
judgments, awards, orders, decrees or executions outstanding against
the Corporation or any of its Subsidiaries, its or their business or
any of its or their property or assets;
(t) the execution and delivery of this Agreement, the Subscription
Agreements, the Registration Rights Agreement, the certificates
representing the Compensation Warrants by the Corporation, the
performance and compliance with the terms of this Agreement, the
Subscription Agreements, the Registration Rights Agreement and the
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Compensation Warrants, the offer and sale of the Common Shares and
the issuance of the Compensation Warrants and the Compensation
Warrant Shares by the Corporation, will not: (i) result in any
material breach of, or be in conflict with or constitute a default
under, or create a state of facts which, after notice or lapse of
time, or both, would constitute a default under any term or
provision of the constating documents or resolutions of the
Corporation; or (ii) would constitute a default or an event which
with notice or lapse of time or both would become a default under,
or give to others any rights of termination, amendment, acceleration
or cancellation of any mortgage, deed of trust, note, indenture,
contract, agreement, instrument, lease or other document to which
the Corporation is a party or by which it is bound or any judgment,
decree, order, statute, rule or regulation applicable to the
Corporation; or (iii) create or impose a lien, charge or encumbrance
on any property of the Company under any agreement or any commitment
to which the Corporation is a part or by which the Corporation is
bound or by which any of its respective properties or assets are
bound; or (iv) result in a violation of any federal, state local or
other foreign statute, rule, regulation, order, judgement or decree
(including any federal or state securities laws and regulations)
applicable to the Corporation or any Subsidiaries or by which any
property or asset of the Corporation or any Subsidiaries are bound
or affected, except, in all cases, for such conflicts. Defaults,
termination, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material
adverse effect;
(u) the issued and outstanding Common Shares are listed for trading on
the Stock Exchanges, the Corporation is not in default or breach of
any of the rules, policies or by-laws of the Stock Exchanges which
default or breach would have a material adverse effect, no order
ceasing or suspending trading in any securities of the Corporation
or prohibiting the sale of the Common Shares, the issuance of the
Compensation Warrants or the Compensation Warrant Shares or the
trading of any of the Corporation's issued securities has been
issued and no proceedings for such purpose are pending or, to the
knowledge of the Corporation, threatened;
(v) no consent, approval, authorization, order, registration or
qualification under any federal, state, provincial or local law or
regulation or of any court or governmental agency or body is
required for the sale and delivery of the Common Shares, the
issuance of the Compensation Warrants or the Compensation Warrant
Shares or the consummation by the Corporation of its obligations
under this Agreement, except (i) those that are required to be made
under Applicable Securities Laws, and (ii) for the consent and
conditional approval of the Stock Exchanges (subject only to the
usual filing requirements), which consent and approval shall have
been obtained prior to the Time of Closing;
(w) the auditors of the Corporation who audited the financial statements
of the Corporation most recently delivered to the securityholders of
the Corporation and who delivered their report with respect thereto
are independent public accountants as required by the Applicable
Securities Laws;
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(x) the Corporation and each of its Subsidiaries have established on its
books and records reserves that are adequate for the payment of all
taxes not yet due and payable and there are no liens for taxes on
the assets of the Corporation or any of its Subsidiaries and, to the
knowledge of the Corporation, there are no audits pending of the tax
returns of the Corporation or any of its Subsidiaries (whether
federal, state, provincial, local or foreign) and there are no
claims which have been or may be asserted relating to any such tax
returns, which audits and claims, if determined adversely, would
result in the assertion by any governmental agency of any deficiency
that does not and will not have a material adverse effect;
(y) all taxes (including income tax, capital tax, goods and services
tax, sales tax, payroll taxes, employer health tax, workers'
compensation payments, custom and land transfer taxes, duties,
royalties, levies, imposts, assessments, deductions, charges or
withholdings and all liabilities with respect thereto including any
penalty and interest payable with respect thereto (collectively,
"TAXES") due and payable by the Corporation and each of its
Subsidiaries have been paid, other than those being contested in
good faith and for which adequate reserves have been provided or
where the failure to pay such tax or assessment would not,
individually or in the aggregate have a material adverse effect. All
tax returns, declarations, remittances and filings required to be
filed by the Corporation and each of its material Subsidiaries have
been filed with all appropriate governmental authorities and all
such returns, declarations, remittances and filings are complete and
accurate in all material respects. No domestic or foreign taxation
authority has asserted or, to the Corporation's knowledge,
threatened to assert any assessment, claim or liability for taxes
due or to become due in connection with any review or examination of
the tax returns of the Corporation or any of its material
Subsidiaries (including, without limitation, any predecessor
companies) filed for any year which would have a material adverse
effect;
(z) neither the Corporation, any of its material Subsidiaries nor, to
the Corporation's knowledge, any other party, is in default in the
observance or performance of any term or obligation to be performed
by it under any material contract, joint venture agreement, license
or other instrument and no event has occurred which with notice or
lapse of time or both would constitute such a default, in any such
case, which default or event would have a material adverse effect;
(aa) all information and statements contained in the SEC Filings and
other materials filed by or on behalf of the Corporation with any
securities regulatory authority as with the Stock Exchanges were
true and correct in all material respects as of the date of such
issuance or filing, and, the information contained therein as of the
date thereof did not contain any untrue statement of material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made not misleading;
(bb) all necessary corporate action has been taken to authorize the issue
and sale of, and the delivery of certificates representing the
Common Shares to the Purchasers and upon receipt by the Corporation
of the purchase price as consideration for the issue of the Common
- 14 -
Shares, such Common Shares will be validly issued as fully paid and
non-assessable;
(cc) this Agreement, the Subscription Agreements, the Compensation
Warrants, and all other contracts and instruments required in
connection with the issue and distribution of the Common Shares
(collectively, the "TRANSACTION DOCUMENTS") shall comply with the
provisions of the laws of the Corporation's jurisdiction of
incorporation, as applicable, and the regulations of the Stock
Exchanges, and, on or prior to the Closing Date, shall be duly
authorized, executed and delivered by the Corporation and shall be
valid and binding obligations of the Corporation enforceable in
accordance with their respective terms, subject to any applicable
bankruptcy, reorganization, winding-up, insolvency, moratorium or
other laws of general application, the unavailability of any
equitable remedies, and that the enforcement of any rights against
the Corporation under this Agreement with respect to indemnity or
contribution may be limited by applicable law and may or may not be
ordered by a court on grounds of public policy. The Corporation has
the corporate power and authority to enter into the Transaction
Documents and to perform its obligations thereunder;
(dd) the Corporation has the power and authority to issue the Common
Shares, and at the Time of Closing, the Common Shares will be duly
and validly authorized, allotted and reserved for issuance and, upon
receipt of the purchase price for the Common Shares, will be duly
and validly issued and outstanding;
(ee) the Corporation has the corporate power and authority to issue the
Compensation Warrants to the Agent, and at the Time of Closing,
(i) the Compensation Warrants will be duly and validly created and
authorized and will be duly and validly issued and outstanding
and will constitute valid and binding obligations of the
Corporation in accordance with their terms; and
(ii) the Compensation Warrant Shares will be duly and validly
authorized, allotted and reserved for issuance and, upon
exercise of the Compensation Warrants in accordance with their
terms, will be issued as fully paid and non-assessable shares;
(ff) other than the Agent, there is no person acting or purporting to act
at the request of the Corporation, who is entitled to any brokerage,
agency or other fiscal advisory or similar fee in connection with
the Offering;
(gg) the Corporation will promptly notify the Agent in writing if there
shall occur any material change or change in a material fact (in
either case, whether actual, anticipated, contemplated or threatened
and other than a change or change in fact relating solely to the
Agent) or any event or development involving a prospective material
change or a change in a material fact or any other change in any or
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all of the business, affairs, operations, assets (including
information or data relating to the estimated value or book value of
assets), liabilities (contingent or otherwise), capital, ownership,
control or management of the Corporation, on a consolidated basis.
The Corporation will promptly notify the Agent in writing with full
particulars of any such actual, anticipated, threatened or
prospective change referred to in this paragraph;
(hh) neither the Corporation nor any Subsidiary is aware of any licensing
or environmental legislation, regulation, by-law or lawful
requirement presently in force which the Corporation anticipates
that it or any of its Subsidiaries will be unable to comply with, to
the extent that compliance is necessary, which would reasonably be
likely to result in a material adverse effect;
(ii) with respect to Intellectual Property Rights not owned by the
Corporation, to the knowledge of the Corporation, no such
Intellectual Property Rights are used by the Corporation other than
with the consent of or licence from the rightful owner thereof;
(jj) the Intellectual Property Rights owned by the Corporation are in
full force and effect, all required registration or other fees have
been paid to maintain the Intellectual Property Rights in those
jurisdictions where the Intellectual Property Rights are used;
(kk) with respect to Intellectual Property Rights created or developed by
the Corporation, to the knowledge of the Corporation, the use of
such rights does not infringe any third party rights, and such
rights have only been created by persons who have an obligation to
assign all of their rights therein to the Corporation; and
(ll) the Intellectual Property Rights are complete to the extent
necessary to enable the Business to be carried on in all material
respects in the manner in which it is carried on by the Corporation
at the date hereof;
(mm) the Corporation and the Subsidiaries are the absolute legal and
beneficial owner of, and have good and marketable title to, all of
their respective interests in their respective material assets as
described in the SEC Filings, free of all mortgages, liens, charges,
pledges, security interests, encumbrances, claims or demands
whatsoever except as disclosed in Schedule 6.1 (mm), the SEC Filings
or in the Financial Information or which, to the knowledge of the
Corporation, has been incurred by the Corporation or its
Subsidiaries since August 31, 2003 in their ordinary course of
business, and no other property rights are necessary for the conduct
of the business of the Corporation or any of the Subsidiaries, the
Corporation and the Subsidiaries do not know of any claim or basis
for a claim that might or could adversely affect their respective
rights to use, transfer or otherwise exploit such property rights
and none of the Corporation or any of the Subsidiaries have any
responsibility or obligation to pay any commission, royalty, licence
fee or similar payment to any person with respect to the property
rights thereof;
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(nn) any and all material agreements pursuant to which the Corporation or
any of the material Subsidiaries holds their respective assets are
validly existing agreements in full force and effect, enforceable in
accordance with their respective terms, none of the Corporation or
any of the Subsidiaries is in material default of any of the
provisions of any such agreements nor has any such material default
been alleged; and
(oo) any press release relating to the Offering shall be in the form and
content agreed to by the Agent acting reasonably and promptly
provided that nothing shall prevent the Corporation from complying
with Applicable Securities Laws.
7. CONDITIONS TO PURCHASE OBLIGATION
7.1 The following are conditions of the Purchasers' obligations to close the
purchase of the Common Shares from the Corporation as contemplated hereby, which
conditions the Corporation covenants to exercise its commercially reasonable
best efforts to have fulfilled at or prior to the Closing Date and which
conditions may be waived in writing in whole or in part by the Agent on its own
behalf and on behalf of the Purchasers:
(a) the Corporation shall have made and/or obtained the necessary
filings, approvals, consents and acceptances to or from, as the case
may be, the SEC and the Stock Exchanges required to be made or
obtained by the Corporation in connection with the Offering and in
order to complete the same, on terms which are acceptable to the
Corporation and the Agent, acting reasonably, prior to the Closing
Date;
(b) the Common Shares and Compensation Warrant Shares issued in
connection with the Offering shall have been accepted for and/or
reserved for listing by the Stock Exchanges, subject to the usual
conditions and payment of the applicable additional listing fees to
the Stock Exchanges;
(c) the Corporation Shall have executed and delivered the Registration
Rights Agreement;
(d) the Corporation shall have provided to the Agent a lock-up agreement
executed by Xxxxxxx Xxxxxxxxx restricting him from making any sale
of securities of the Corporation for a period ending on the earlier
of: (i) the dated registration statement filed by the Corporation in
respect of the Common Shares and Compensation Warrant Shares issued
pursuant to the Offering becomes effective; and (ii) 120 days after
the closing of the terms of the Registration Rights Agreement
becomes effective; and (ii) 120 days after the Closing Date, the
foregoing restrictions shall not apply to the tendering of any
securities of the Corporation made pursuant to a bona fide take-over
bid made to all securityholders of the Corporation.
(e) the Corporation's board of directors shall have authorized and
approved this Agreement, the Registration Rights Agreement, the form
of Subscription Agreements, the form of Compensation Warrants and
all other agreements and instruments prepared in connection with the
- 17 -
Offering, the sale of the Common Shares, the issuance of the
Compensation Warrant Shares and all matters relating to the
foregoing;
(f) as at the Closing Date, the Corporation will deliver a certificate
addressed to the Agent and to the Purchasers, signed by its Chief
Executive Officer certifying that:
(i) there has been no adverse material change (whether financial
or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the
Corporation on a consolidated basis, since August 31, 2003,
which has not been generally disclosed;
(ii) since August 31, 2003, no material change, except for the
Offering, has occurred with respect to which the requisite
material change statement or report has not been filed and no
such disclosure has been made on a confidential basis;
(iii) the representations and warranties of the Corporation
contained in this Agreement are true and correct at the Time
of Closing, with the same force and effect as if made by the
Corporation as at the Time of Closing after giving effect to
the transactions contemplated hereby;
(iv) the Corporation has complied with all the covenants and
satisfied all the terms and conditions of this Agreement on
its part to be complied with or satisfied except as waived in
writing by the Agent at or prior to the Time of Closing;
(v) no order, ruling or determination having the effect of
suspending the sale or ceasing the trading of the securities
of the Corporation (including the Common Shares and
Compensation Warrant Shares) has been issued or made by the
Stock Exchanges, the SEC or any other regulatory authority and
is continuing in effect and no proceedings for that purpose
have been instituted or are pending or to the knowledge of the
Corporation, contemplated or threatened by the Stock
Exchanges, the SEC or any other regulatory authority;
(vi) the charter documents, including any amendments thereto
attached to the officer's certificate are full, true and
correct copies and are in full force and effect; and
(vii) such other matters as the Agent or the Agent's Counsel may
reasonably request.
(g) the Corporation will have caused an opinion to be delivered by the
Corporation's Counsel, addressed to the Agent, Agent's Counsel and
the Purchasers dated as of the Closing Date, substantially in the
form of the legal opinion annexed as Exhibit "B". In giving such
opinion, Corporation's Counsel shall be entitled to rely, to the
- 18 -
extent appropriate in the circumstances, upon local counsel
including United States counsel and shall be entitled as to matters
of fact not within its knowledge to rely upon a certificate of fact
from responsible persons in a position to have knowledge of such
facts and their accuracy including a certificate of the
Corporation's registrar and transfer agent as to the outstanding
securities of the Corporation; and
(h) the delivery by the Corporation of such other certificates,
statutory declarations, agreements or materials, in form and
substance satisfactory to the Agent and Agent's Counsel as the Agent
and Agent's Counsel may reasonably request.
8. CLOSING
8.1 The Offering will be completed on the Closing Date at the offices of Fraser
Xxxxxx Casgrain LLP, 1 First Canadian Place, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx,
Xxxxxxx and Xxxxxx-Xxxxxxxxx, Xxxx and XxXxxxxxx LLP, 00 Xxxxxx Xxxxxx, 0xx
xxxxx, Xxxxxx, Xxxxxxx at the Time of Closing or such other place, date or time
as may be mutually agreed to; provided that if the Corporation has not been able
to comply with any of the covenants or conditions set out herein, or in any
Subscription Agreement, required to be complied with by the Time of Closing or
such other date and time as may be mutually agreed to, the respective
obligations of the parties will terminate without further liability or
obligation except for payment of expenses, indemnity and contribution provided
for in this Agreement.
8.2 At the Time of Closing, the Corporation shall deliver to the Agent on behalf
of the Purchaser:
(a) certificates duly registered as the Agent may in writing direct and
not inconsistent with the terms hereof or of any Subscription
Agreement representing the Common Shares and the Compensation
Warrants;
(b) the requisite legal opinion and certificates as contemplated in
Section 7.1 above; and
(c) such further documentation as may be contemplated herein or as
Agent's Counsel or the applicable regulatory authorities may
reasonably require.
8.3 At the Time of Closing, the Agent shall deliver to the Corporation:
(a) the Subscription Agreements and other documentation required to be
provided by or on behalf of the Purchasers pursuant to this
Agreement and the Subscription Agreements; and
(b) a certified cheque, bank draft or solicitor's trust cheque made
payable to the Corporation in the amount of the Net Proceeds
(subject to Section 10).
9. TERMINATION OF OBLIGATIONS
9.1 Without limiting any of the foregoing provisions of this Agreement, and in
addition to any other remedies which may be available to it, the Agent (on its
own behalf and on behalf of the Purchasers) shall be entitled, at its sole
- 19 -
discretion acting reasonably, to terminate and cancel, without any liability on
its part (or on the part of the Purchasers), its obligations (and the
obligations of the Purchasers) under this Agreement to purchase the Common
Shares, by giving written notice to the Corporation at any time through to the
Time of Closing on the Closing Date if:
(a) any order to cease or suspend trading in any securities of the
Corporation, or prohibiting or restricting the distribution of any
of the Common Shares, the Compensation Warrants or any securities
issuable thereunder, is made, or proceedings are announced,
commenced or threatened for the making of any such order, by the
Ontario Securities Commission, the SEC, the Stock Exchanges or by
any other competent authority, and has not been rescinded, revoked
or withdrawn;
(b) any order or ruling is issued, any inquiry, investigation or other
proceeding (whether formal or informal) in relation to the
Corporation or any of the directors or officers thereof is made,
threatened or announced by any officer or official of the Ontario
Securities Commission, the SEC or the Stock Exchanges or other
competent authority or any law or regulation is promulgated or
changed which, in the reasonable opinion of the Agent, operates to
prevent or restrict trading in the Common Shares of the Corporation
or distribution of the Offered Securities;
(c) there should develop, occur or come into effect or existence any
event, including without limiting the generality of the foregoing,
an act of terrorism, action, state, condition or major financial
occurrence of national or international consequence, any law or
regulation, or any other occurrence of any nature whatsoever, which,
in the Agent's sole reasonable opinion has a material adverse effect
or would reasonably be likely to have a material adverse effect, or
involve, the financial markets or the business, operations or
affairs of the Corporation (on a consolidated basis), such that it
would not be practical (in the Agent's sole reasonable opinion) to
market the Common Shares;
(d) there should occur any material change or change in a material fact
which, in the sole opinion of the Agent would be reasonably expected
to have a material adverse effect on the market price or value of
the Common Shares;
(e) the Agent determines that the Corporation is in breach of, or in
default under or in non-compliance with any material representation,
warranty, term, covenant or condition of this Agreement; or
(f) as a result of investigations after the date hereof, the Agent
determines that there exists any fact or circumstance not generally
disclosed to the public by the Corporation, at the date hereof,
which would have in the Agent's opinion, acting reasonably, a
significant adverse effect on the market price or the value of the
Common Shares,
the occurrence or non-occurrence of any of the foregoing events or circumstances
to be determined in the sole discretion of the Agent, acting reasonably.
- 20 -
The Agent shall make reasonable efforts to give notice to the Corporation
(in writing or by other means) of the occurrence of any of the events or
circumstances referred to in this section, provided that neither the giving nor
the failure to give such notice shall in any way affect the Agent's entitlement
to exercise this right at any time through to the Time of Closing.
The Agent may exercise any or all of the rights provided for in Sections
9, 11, 12, 13 and 14 of this Agreement notwithstanding any material change,
event or state of facts and notwithstanding any act or thing taken or done by
the Agent or any inaction by the Agent (other than acts or things taken or done
or any inaction, by or on the part of the Agent, in breach of this Agreement)
whether before or after the occurrence of any material change, event or state of
facts including, without limitation, any act of the Agent related to the
Offering of the Common Shares for sale and the Agent shall only be considered to
have waived or be estopped from exercising or relying upon any of its rights
under or pursuant to Sections 9, 11, 12, 13 and 14 if such wavier of estoppel
was in writing and the Agent specifically waives or estops such exercise or
reliance.
The Agent's rights of termination contained in this section are in
addition to any other rights or remedies it may have in respect of any default,
act or failure to act or non-compliance by the Corporation in respect of any of
the matters contemplated by this Agreement.
9.2 The Corporation may terminate this Agreement by notice in writing to the
Agent at or prior to the Time of Closing if the Corporation determines, acting
reasonably, that the Agent is in breach of or in default under or in
non-compliance with any material representation or warranty, or in default under
or in non-compliance with any material term, covenant or condition of this
Agreement. No such termination however shall discharge or otherwise affect any
obligation of the Corporation under Sections 11 and 12 of this Agreement.
9.3 Either the Corporation or the Agent may terminate its obligations under this
Agreement by notice in writing to the other if Closing does not occur on or
before December 9, 2003, unless the party seeking to so terminate its
obligations under this agreement has delayed the Closing beyond such date. No
such termination however shall discharge or otherwise affect any obligations of
the Corporation under Sections 10, 11 and 12 of this Agreement.
10. EXPENSES
10.1 The Corporation shall pay all costs and expenses incurred in connection
with the Offering, including without limitation, the reasonable fees and
expenses of the Agents as set forth in reasonable detail in an invoice, all
expenses of or incidental to the creation, issuance, sale or distribution of the
Common Shares, and the auditor's, transfer agent's and filing fees. The
Corporation shall also pay Agents' Counsel with regard to its reasonable fees
(which shall be capped at CDN$30,000 unless otherwise agreed to by the Agent and
the Corporation) and disbursements of Agent's Counsel incurred in respect of the
Offering as set forth in reasonable detail in an invoice, together with the
applicable G.S.T. (the "LEGAL COSTS"). This cap on Legal Costs is based upon the
- 21 -
premise that the form of Subscription Agreement, Compensation Warrant
Certificate and Registration Rights Agreement shall be that of Agent's Counsel
subject to any comments and/or proposed amendments of the Corporation and its
counsel, acting reasonably. The fees and expenses referred to in this Section
10.1 are collectively referred to as the "AGENTS' EXPENSES". The Agents'
Expenses shall be payable by the Corporation at the Time of Closing on the
Closing Date or upon the Corporation receiving an invoice or invoices from the
Agent. The Agents' Expenses shall be payable by the Corporation whether or not
the Offering is completed.
11. INDEMNITY
11.1 The Corporation covenants and agrees to indemnify the Agent and its
directors, officers, employees, partners, agents, advisors and shareholders
(each being hereinafter referred to as an "INDEMNIFIED PARTY"), against, and to
reimburse the Agent promptly upon demand for any legal or other expenses
reasonably incurred by the Agent in connection with investigating or defending,
all losses (excluding loss of profits), claims, actions, damages, liabilities or
expenses (collectively, a "CLAIM") caused or incurred in connection with this
Offering by reason of:
(a) any statement, other than a statement relating solely to the Agent,
contained in this Agreement or the Subscription Agreements which
constitutes a misrepresentation;
(b) any order made or inquiry, investigation or proceeding commenced or
threatened by any Securities Commission or other competent authority
based upon any misrepresentation or alleged misrepresentation in the
SEC Filings (other than a statement included in reliance upon and in
conformity with information furnished to the Corporation by or on
behalf of the Agent specifically for use therein) which prevents or
restricts the trading in the Common Shares or the distribution of
the Common Shares, in any of the Designated Provinces;
(c) the non-compliance or alleged non-compliance by the Corporation with
any Applicable Securities Laws in connection with the Offering; or
(d) any breach of any representation or warranty of the Corporation
contained herein or the failure of the Corporation to comply with
any of its obligations hereunder,
and will reimburse each Indemnified Party promptly upon demand for any legal
expenses reasonably incurred in connection with investigating or defending any
Claims or in enforcing the indemnity.
11.2 The indemnification contained in this Section 11 does not and will not
apply to the extent that a court of competent jurisdiction in a final judgment
that has become non-appealable determines that:
(a) the Indemnified Party has been negligent or dishonest or has
committed any fraudulent act or was guilty of wilful misconduct in
the course of their performance of their obligations or breached
applicable laws or materially breached any of the terms of this
Agreement;
(b) the Indemnified Party has breached any material terms of this
Agreement; and
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(c) the Claim, as to which indemnification is claimed directly or
indirectly, was directly caused by the negligence, dishonesty, fraud
or wilful misconduct referred to in paragraph (a).
11.3 If any Claim shall be asserted against an Indemnified Party in respect of
which indemnity may be sought from the Corporation pursuant to the provisions of
Section 11.1 or if any potential Claim contemplated hereby shall come to the
knowledge of an Indemnified Party, the Indemnified Party shall promptly notify
the Corporation in writing; but the omission to so notify the Corporation will
not relieve the Corporation from any liability it may otherwise have to the
Indemnified Party pursuant to Section 11.1. The Corporation shall be entitled
but not obligated to participate in or assume the defence thereof; provided,
however, that the defence shall be through legal counsel acceptable to the
Indemnified Party, acting reasonably. In addition, the Indemnified Party shall
also have the right to employ separate counsel in any such action and
participate in the defence thereof and the fees and expenses of such counsel
shall be borne by the Indemnified Party unless:
(a) the employment thereof has been specifically authorized in writing
by the Corporation;
(b) the Indemnified Party has been advised by counsel that
representation of the Corporation and the Indemnified Party by the
same counsel would be inappropriate due to actual or potential
differing interests between them; or
(c) the Corporation has failed within a reasonable time after receipt of
such written notice to assume the defense of such action or claim;
provided that in no event shall the Corporation be required to assume the
reasonable fees and expenses of more than one counsel for all Indemnified
Parties. Neither party shall effect any settlement of any such Claim or make any
admission of liability without the written consent of the other party, such
consent to be promptly considered and not to be unreasonably withheld. The
indemnity hereby provided for shall remain in full force and effect and shall
not be limited to or affected by any other indemnity in respect of any matters
specified herein obtained by the Indemnified Party from any other person.
11.4 To the extent that any Indemnified Party is not a party to this Agreement,
the Agent shall obtain and hold the right and benefit of the indemnity
provisions of Section 11.1 in trust for and on behalf of such Indemnified Party.
If the Corporation has pursuant to Section 11.3 assumed the defence with
respect to a Claim, the Corporation hereby agrees to take all necessary and
reasonable steps to ensure that no default judgement or other default
proceedings are brought against an Indemnified Party in any jurisdiction in
respect of any Claim brought or made in connection with any matter set forth in
Section 11.1 and, where required for that purpose, will consent to or submit to
the jurisdiction of any court and defend any such Claim on behalf of any
- 23 -
Indemnified Party in any such jurisdiction, provided that nothing herein shall
limit the Corporation's right or ability to contest, at its expense, on behalf
of an Indemnified Party the appropriate jurisdiction or forum for the
determination of any such Claim so long as default judgement or other default
proceedings are not in the interim brought by a party making such Claim.
12. CONTRIBUTION
12.1 In the event that the indemnity provided for in Section 11 is, for any
reason, illegal, unenforceable or otherwise unavailable, in whole or in part, as
being contrary to public policy or for any other reason, the Agent and the
Corporation shall contribute to the aggregate of all losses, claims, actions,
costs, damages, expenses or liabilities (including any legal or other costs or
expenses reasonably incurred by the Indemnified Party in connection with
investigating or defending any Claim which is the subject of this section but
excluding loss of profits or consequential damages) of the nature provided for
above such that the Agent shall be responsible for that portion represented by
the percentage that the Agent's Fee payable by the Corporation to the Agent
bears to the Gross Proceeds and the Corporation shall be responsible for the
balance, provided that, in no event, shall the Agent be responsible for any
amount in excess of the amount of the Agent's Fee actually received by it. In
the event that the Corporation may be held to be entitled to contribution from
the Agent under the provisions of any statute or law, the Corporation shall, in
respect of the Agent, be limited to contribution in an amount not exceeding the
lesser of: (i) the portion of the full amount of losses, claims' costs, damages,
expenses and liabilities, giving rise to such contribution for which the Agent
is responsible, as determined above, and (ii) the amount of the Agent's Fee
actually received by the Agent. Notwithstanding the foregoing, a party guilty of
fraud, fraudulent misrepresentation, or gross negligence, shall not be entitled
to contribution from the other party. Any party entitled to contribution will,
promptly after receiving notice of commencement of any claim, action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this section, notify such party from whom
contribution may be sought. In no case shall such party from whom contribution
may be sought be liable under this Agreement unless such notice has been
provided but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
otherwise than under this section. The right to contribution provided in this
section shall be in addition and not in derogation of any other right to
contribution which the Agent or the Corporation may have by statute or otherwise
by law.
12.2 If any of the provisions of Section 12.1 is determined to be void, voidable
or unenforceable, in whole or in part, such determination shall not affect or
impair or be deemed to affect or impair the validity of any other provision of
this Agreement and such void, voidable or unenforceable provision shall be
severable from this Agreement.
13. SURVIVAL OF WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENTS
13.1 All warranties, representations, covenants and agreements of the
Corporation herein contained, or contained in documents submitted or required to
be submitted pursuant to this Agreement, shall survive the purchase by the
Purchasers of the Common Shares and shall continue in full force and effect for
the benefit of the Purchasers for a period of one year following the Closing
Date. Notwithstanding the foregoing, the provisions contained in this Agreement
- 24 -
in any way related to the indemnification of the Agent by the Corporation, or
the contribution obligations of the Agent or those of the Corporation, shall
survive and continue in full force and effect, until liability to the
Indemnified Parties arising out of the transactions contemplated by this
Agreement has been extinguished by operation of law.
14. ALTERNATIVE TRANSACTION
14.1 If the Corporation enters into an agreement with respect to or otherwise
completes an Alternative Transaction prior to the Closing Date, the Corporation
shall pay to Agent, as a commission, an aggregate amount equal to the greater of
$100,000 and 3% of the total value of the Alternative Transaction by bank draft
or certified funds forthwith upon the completion of the Alternative Transaction.
The parties agree that this payment will constitute a payment of liquidated
damage and not a penalty and shall be accepted by the Agent in full satisfaction
of all claims against the Corporation which the Agent may have in connection
with the Alternative Transaction and the failure to complete the Offering,
except a claim for indemnity or contribution pursuant to Section 11 or Section
12, as applicable of this Agreement.
15. Restrictions on Offerings
15.1 Other than in connection with the Offering, the Corporation agrees that for
a period ending 90 days after the Closing Date, it shall not sell or issue, or
negotiate or enter into any agreement to sell or issue or announce an intention
to do so, any Common Shares or any securities exchangeable, convertible or
exercisable into Common Shares without the consent of the Agent, such consent
not to be unreasonably withheld; provided that the foregoing will not restrict
the Corporation from (a) granting options pursuant to the Corporation's
incentive stock option plan or the issuance of Common Shares on the exercise of
such options or the issuance of Common Shares under any Outstanding Convertible
Securities; or (b) selling up to an additional $1,000,000 worth of Common Shares
in the United States.
16. GENERAL CONTRACT PROVISIONS
16.1 Any notice or other communication to be given hereunder shall be in writing
and shall be given by delivery or by telecopier, as follows:
if to the Corporation:
Workstream Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Mr. Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxxx-Xxxxxxxxx, Hill and XxXxxxxxx LLP
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
or if to the Agent:
Standard Securities Capital Corporation
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
with a copy to:
Fraser Xxxxxx Casgrain LLP
Suite 4100
1 First Canadian Place
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx Rapuch
Fax: (000) 000-0000
and if so given, shall be deemed to have been given and received upon
receipt by the addressee or a responsible officer of the addressee if
delivered, or four hours after being telecopied and receipt confirmed
during normal business hours at the location of the recipient, as the case
may be. Any party may, at any time, give notice in writing to the others
in the manner provided for above of any change of address or telecopier
number.
16.2 This Agreement and the other documents herein referred to (including the
Subscription Agreements and the Non-Disclosure Agreement) constitute the entire
agreement between the Agent and the Corporation relating to the subject matter
hereof and supersede all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the Agent and the Corporation with
respect to their respective rights and obligations in respect of the Offering,
including the Letter Agreement dated December 2, 2003.
17. SUCCESSORS
17.1 This Agreement shall enure to the benefit of, be binding upon, the
Corporation and the Agent and their respective successors (including successors
by reason of amalgamation, merger, business combination or arrangement) and
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legal representatives and nothing expressed or mentioned in this Agreement is
intended and shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person.
18. COUNTERPARTS
18.1 This Agreement may be executed by any one or more of the parties to this
Agreement in any number of counterparts, including by facsimile transmissions,
each of which shall be deemed to be an original, including those sent by
facsimile transmission, but all such counterparts shall together constitute one
and the same instrument.
[Signatures on next page]
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If this Agreement accurately reflects the terms of the transaction which we are
to enter into and if such terms are agreed to by the Corporation, please
communicate your acceptance by executing where indicated below and returning one
originally executed copy to the Agent.
Yours very truly,
STANDARD SECURITIES CAPITAL CORPORATION
By: /s/ Xxxx Xxxxxxxx
---------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director, Investment Banking
The foregoing accurately reflects the terms of the transaction which we
are to enter into and such terms are agreed to with effect as of the date first
above written.
WORKSTREAM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
---------------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President and Chief Executive Officer
