SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
March 24, 2006, among North American Palladium Ltd., a company incorporated
under the Canada Business Corporations Act (the "COMPANY"), and each of the
purchasers identified on the signature pages hereto (each a "PURCHASER" and,
collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and Rule 506 of Regulation D promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, certain
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agrees as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this SECTION
1.1:
"AMEX" means the American Stock Exchange.
"ACTUAL MINIMUM" means, as of any date, the maximum aggregate
number of Common Shares then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable
upon conversion in full or full repayment in Common Shares of all Notes and
exercise of all Warrants and Additional Units (including pursuant to the Unit
Warrants), ignoring any limits on the number of Common Shares that may be owned
by a Purchaser at any one time and (a) assuming that (i) any previously
unconverted Notes are held until the final repayment date applicable thereto and
all interest payments thereon are paid in Common Shares, and (ii) the Closing
Price at all times on and after the date of determination equals 100% of the
actual Closing Price on the Trading Day immediately prior to the date of Initial
Closing, and (b) giving effect to the Conversion Price (as defined in the Note)
as in effect on such date, without regard to potential changes in the Closing
Price that may occur thereafter; provided, however, that prior to the issuance
of the Notes, the Conversion Price for such Notes will be assumed to equal
US$12.18 per share (as adjusted for stock splits, stock dividends, stock
combinations or other similar events).
"ADDITIONAL UNITS" means the units each consisting of (i) a Note
and (ii) a Warrant to acquire Common Shares, issuable upon exercise of the Unit
Warrants.
"AFFILIATE" of a Person means any other Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with the first Person. Without limiting the foregoing
with respect to a Purchaser, any investment fund or
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managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which is a federal legal holiday or a day on which banking institutions in New
Xxxx Xxxx xx Xxxxxxx, Xxxxxx are authorized or required by law or other
governmental action to close.
"CANADIAN GAAP" means Canadian generally accepted accounting
principles, as recognized by the Canadian Institute of Chartered Accountants,
consistently applied and maintained on a consistent basis for the Company and
its Subsidiaries throughout the period indicated.
"CANADIAN SECURITIES LAWS" means the securities legislation and
regulations of, and the instruments, policies, rules, orders, codes, notices and
published interpretation notes of, the securities regulatory authorities of the
provinces and territories of Canada.
"CAPITAL LEASE" means, with respect to the Company and its
Subsidiaries, any lease of any property that, in accordance with Canadian GAAP,
is classified and accounted for as a capital lease on a consolidated balance
sheet of the Company and its Subsidiaries.
"CLOSING PRICE" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Shares are then
listed or quoted on an Eligible Market, the closing bid price per Common Share
for such date (or the nearest preceding date) on the primary Eligible Market; or
(b) if the Common Shares are not then listed or quoted on an Eligible Market,
the closing bid price per Common Share for such date (or the nearest preceding
date) on the TSX; or (c) in all other cases, the fair market value of a Common
Share as determined by an independent appraiser selected in good faith jointly
by the Purchasers and the Company, the cost of which shall be paid by the
Company.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMON SHARE EQUIVALENTS" mean, collectively, Common Shares,
Options and Convertible Securities.
"COMMON SHARES" means the common shares of the Company and any
securities into which they may be reclassified or for which they may be
exchanged.
"COMPANY CANADIAN COUNSEL" means Gowling Xxxxxxx Xxxxxxxxx LLP,
Canadian counsel to the Company.
"COMPANY U.S. COUNSEL" means Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, United States counsel to the Company.
"CONTINGENT OBLIGATION" means, with respect to any Person,
without duplication, any obligation, contingent or otherwise, of such Person
pursuant to which such Person has directly or indirectly guaranteed any Debt or
other payment obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such first Person (a) to purchase or pay (or advance or supply
funds for the
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purchase or payment of) such Debt or other obligation (whether arising by
agreement to keep well, to purchase assets, goods, securities or services or to
take-or-pay), (b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part) or
(c) to pay any royalty or make any other payment out of the proceeds from the
mining, production or sale of palladium or other minerals; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business obligations.
"CONVERTIBLE SECURITIES" means any evidence of indebtedness,
shares, options, warrants or other securities directly or indirectly convertible
into or exercisable or exchangeable for Common Shares.
"DEBT" means, with respect to the Company and its Subsidiaries
at any date and without duplication, any of the following: (a) all liabilities,
obligations and indebtedness for money borrowed; (b) all obligations to pay the
deferred purchase price of property or services of any Person; (c) all
obligations secured by a Lien on any asset of the Company or its Subsidiaries,
other than Permitted Liens; (d) all Contingent Obligations, including any
asserted claim with respect to any indemnified matter; (e) obligations in the
form of earn-out obligations to be paid in cash; (f) all obligations under
Capital Leases; (g) all obligations, contingent or otherwise, relative to the
face amount of letters of credit, whether or not drawn, including any
reimbursement obligation with respect thereto; (h) all obligations incurred
pursuant to Hedging Agreements; (i) any synthetic lease or other lease
obligations; (j) any obligations in respect of off-balance-sheet agreements or
transactions that are in the nature of, or in substitution of, financings; (k)
any other item that would be required to be classified as a liability in an
audited financial statement under Canadian GAAP (other than deferred revenue and
other than judgments subject to appeal and bonded); (l) [omitted]; (m) all
obligations under any partnership agreement, employment agreement (other than
wages paid in the ordinary course), joint venture agreement, or any other
contract or agreement; and (n) any indebtedness or other obligations of the type
specified in any of the foregoing classes, the payment or collection of which
has been guaranteed or in respect of which the Company or any of its
Subsidiaries is liable, contingently or otherwise, including liable by way of
agreement to purchase products or securities, to provide funds for payment, to
maintain working capital or other balance sheet conditions or otherwise to
assure a creditor against loss.
"DISCLOSURE LETTER" means the letter prepared by the Company and
delivered to the Purchasers with this Agreement that provides the information
required by this Agreement to be set forth in the Disclosure Letter and that
lists each exception to, or other information called for by, a representation or
warranty made by the Company in this Agreement; provided, however, that the
Disclosure Letter shall modify a representation or warranty made by the Company
in this Agreement if and only to the extent that it (a) identifies the specific
representation or warranty affected by a matter disclosed in the Disclosure
Letter and (b) describes the matter and the manner in which it modifies a
representation or warranty with reasonable particularity.
"EFFECTIVE DATE" means the date that the applicable Underlying
Shares Registration Statement is first declared effective by the Commission.
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"ELIGIBLE MARKET" means any of the AMEX, the New York Stock
Exchange, the Nasdaq National Market, or the Nasdaq Capital Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" means any Common Shares or Common Share
Equivalents issued or issuable (a) upon the issuance of Common Share Equivalents
to, or exercise of Common Share Equivalents by, officers, directors or employees
of, or consultants to, the Company, in each case pursuant to a bona fide
incentive plan approved at any time by the Company's board of directors if and
only to the extent that grants of Common Share Equivalents, stock appreciation
rights or similar benefits made after the date of this Agreement under such
plans (including without limitation the aggregate number of Options, restricted
shares of Common Stock and stock appreciation rights granted under such plans
and at any time outstanding relative to the number of shares of Common Stock
then outstanding, the method of pricing of grants and terms for their vesting)
are generally consistent with the Company's employee benefit practices over the
period from January 1, 2003 to December 31, 2005, (b) upon the issuance of
Common Shares with favorable flow-through tax treatment relating to Canadian
exploration expenses under the Income Tax Act (Canada), or (c) in connection
with a bona fide transaction involving a merger or acquisition of an entity,
business or assets, not principally for the purpose of obtaining cash
(including, for greater certainty, the Common Shares issuable to Gold Fields in
connection with the Company and Gold Field's joint venture property in Finland).
"GOLD FIELDS" means Gold Fields Exploration BV.
"HEDGING AGREEMENT" means any agreement or arrangement designed
to protect against fluctuations in palladium values (including any option with
respect to any of the foregoing and any combination of the foregoing agreements
or arrangements), and any confirmation executed in connection with any such
agreement or arrangement, all as amended or modified.
"INITIAL CLOSING" has the meaning specified in SECTION 2.2(A).
"INITIAL CLOSING DATE" has the meaning specified in SECTION
2.2(A).
"INITIAL UNITS" means the units each consisting of (i) a Note,
and (ii) a Warrant to acquire up to 41.0462 Common Shares for each US$1,000 of
Notes purchased (including a proportional number of Common Shares for any
fractions thereof), to be issued pursuant to this Agreement.
"KFOC" means Xxxxxx-Xxxxxxx Oil Company.
"KFOC COUNSEL" means Xxxxxxxx Xxxxxxx, Lawyers of Tulsa,
Oklahoma.
"KFOC CREDIT FACILITY" means that certain loan agreement dated
as of November 30, 2001, by and among KFOC, the Company and Lac des Iles Mines
Ltd., a Subsidiary of the Company, and the related promissory note, security
agreement, financing
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statements and other loan documents, all as amended through the date hereof and
as the same may be amended by the loan parties thereto.
"LIEN" means any lien, mortgage, pledge, charge, claim, security
interest, encumbrance, right of first refusal or other restriction upon or in
any property or assets (including accounts and contract rights).
"LOSSES" means any and all damages, fines, penalties,
deficiencies, liabilities, claims, losses (including loss of value), judgments,
awards, settlements, taxes, actions, obligations and costs and expenses in
connection therewith (including, without limitation, interest, court costs and
fees and expenses of attorneys, accountants and other experts, or any other
expenses of litigation or other Proceedings or of any default or assessment).
"NEW PURCHASER" means [new purchaser].
"NEW PURCHASER COUNSEL" means Proskauer Rose LLP.
"NOTES" means the Series 1 Senior Convertible Notes issued by
the Company to the Purchasers hereunder in the form of EXHIBIT A.
"OPTIONS" means any rights, warrants or options to subscribe,
directly or indirectly for or purchase Common Shares or Convertible Securities.
"PERMITTED DEBT" means (a) up to US$21,500,000 under that
certain Credit Facility between the Company and General Electric as in effect as
of the date hereof, (b) up to US$8,000,000 incurred in the ordinary course of
business under a joint venture in Finland or Espanola, Ontario in which the
Company has statutory and/or regulatory obligations relating to reclamations,
(c) trade payables incurred by the Company in the ordinary course of business
not outstanding for more than 120 calendar days, (d) Capital Leases and leases
relating to real property incurred by the Company in the ordinary course of
business, (e) prepaid delivery by the Company of concentrate to smelters and
refiners, (f) loans or advances to Subsidiaries, (g) bona fide Hedging
Agreements incurred in connection with the operation of the Company's business
and against assets or proven reserves of the Company, (h) royalties disclosed by
the Company in the Disclosure Letter, (i) before the earlier of June 30, 2006
and the Second Closing only, up to US$13,500,000 under the KFOC Credit Facility,
plus any interest accrued and fees thereon, if any, and (j) any refinancing,
renewal or extension of any Debt described in (a), (b), (d) and (f) hereof
provided such refinancing, renewal or extension is not less favorable to the
Company than the arrangements in effect on the date hereof (excluding
differences in interest rates caused by general changes in borrowing rates).
"PERMITTED LIENS" means (a) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings, (b) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (c) any Lien
securing Permitted Debt, any Debt set forth on SCHEDULE 3.1(Z) of the Disclosure
Letter or any Debt that the Company is permitted to incur under SECTION 4.15 of
this Agreement, and (d) any minor imperfection of title or similar Lien which
individually or in the
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aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PROCEEDING" means any action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, among the Company and the Purchasers, in
the form of EXHIBIT B.
"REQUIRED MINIMUM" means, as of any date, the maximum aggregate
number of Common Shares then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable
upon conversion in full or full repayment in Common Shares of all Notes and
exercise of all Warrants and Additional Units (including pursuant to the Unit
Warrants), ignoring any limits on the number of Common Shares that may be owned
by a Purchaser at any one time and (a) assuming that (i) any previously
unconverted Notes are held until the final maturity date applicable thereto and
all interest payments thereon are paid in Common Shares, and (ii) the Closing
Price at all times on and after the date of determination equals the actual
Closing Price on the Trading Day immediately prior to the date of Closing, and
(b) giving effect to the Conversion Price (as defined in the Note) as in effect
on such date, without regard to potential changes in the Closing Price that may
occur thereafter; provided, however, that prior to the issuance of the Notes,
the Conversion Price for such Notes will be assumed to equal US$12.18 per share
(as adjusted for stock splits, stock dividends, stock combinations or other
similar events).
"RESTRICTED DEBT AMOUNT" means, on a consolidated basis,
US$25,000,000, which amount shall be increased (a) upon expiration of the Unit
Warrants, by that amount equal to US$10,000,000 less the amount of Notes
purchased pursuant to exercise(s) of the Unit Warrants, and further (b) on March
24, 2008, by US$10,000,000 if by that date all payments due and payable between
the Initial Closing and such date pursuant to the Transaction Documents have
been paid and less than 40% of the aggregate principal amount of the Notes that
have been issued remains outstanding.
"RULE 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECOND CLOSING" has the meaning specified in SECTION 2.2(B).
"SECOND CLOSING DATE" has the meaning specified in SECTION
2.2(B).
"SECURITIES" means the Unit Warrants, the Notes, the Warrants,
the Initial Units, the Additional Units and the Underlying Shares issued or
issuable to the applicable Purchaser pursuant to the Transaction Documents.
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"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended.
"SUBSEQUENT PLACEMENT" means any instance in which the Company
or any Subsidiary directly or indirectly offers, sells, grants any option to
purchase, or otherwise disposes of (or announces any offer, sale, grant or any
option to purchase or other disposition of) any of its or any Subsidiary's
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for Common Shares or Common Share Equivalents.
"SUBSIDIARIES" means the Company's wholly-owned subsidiaries,
Lac des Iles Mines Ltd. and North American Palladium Finland Oy, and any other
subsidiaries of the Company hereinafter created (it being understood that the
representations and warranties in Article III are made only as to the
Subsidiaries in existence on the date such representations and warranties are
made).
"TRADING DAY" means (a) any day on which the Common Shares are
listed or quoted, and traded, on the AMEX, or (b) if the Common Shares are not
then listed or quoted, and traded, on the AMEX, then any Business Day.
"TRADING MARKET" means the AMEX, the TSX or any other national
securities exchange, market or trading or quotation facility on which the Common
Shares are then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Registration Rights Agreement, the Warrants, the Unit Warrants and any other
documents or agreements executed or delivered in connection with the
transactions contemplated hereunder or thereunder.
"TSX" means the Toronto Stock Exchange.
"UNDERLYING SHARES" means the Common Shares issuable (a) upon
conversion of the Notes and upon exercise of the Warrants (including the Notes
and Warrants issuable upon exercise of the Unit Warrants), (b) as payment of
principal and/or interest under the Notes, and (c) in satisfaction of any other
obligation (if any) of the Company to issue Common Shares pursuant to the
Transaction Documents.
"UNDERLYING SHARES REGISTRATION STATEMENT" means any
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of Underlying Shares by the Purchasers.
"UNITS" means, collectively, the Initial Units and the
Additional Units.
"UNIT WARRANTS" means the Additional Unit warrants, in the form
of EXHIBIT F.
"VOLUME WEIGHTED AVERAGE PRICE" or "VWAP" means, with respect to
any particular Trading Day, the volume weighted average trading price per Common
Share on such Trading Day on the primary Eligible Market on which the Common
Shares are traded on such
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Trading Day, as reported by Bloomberg, L.P., or any successor thereto performing
similar functions.
"WARRANTS" means the Common Share purchase warrants, in the form
of EXHIBIT C.
ARTICLE II.
PURCHASE AND SALE
2.1 PURCHASE AND SALE OF THE UNITS.
(a) INITIAL CLOSING.
Subject to the terms and conditions of this Agreement,
each Purchaser agrees, severally and not jointly, to purchase from the Company,
and the Company agrees to sell and issue to each Purchaser, at the Initial
Closing, for the aggregate purchase price set forth opposite such Purchaser's
name on SCHEDULE A hereto under the heading "Initial Purchase Price":
(i) an Initial Unit, consisting of a Note and a
Warrant in the amounts set forth on SCHEDULE A hereto; and
(ii) a Unit Warrant exercisable for an Additional
Unit consisting of a Note and a Warrant in the amounts set forth
on SCHEDULE A hereto.
(b) SECOND CLOSING.
(i) Subject to the terms and conditions of this
Agreement and the option of New Purchaser set forth in SECTION 2.1(B)(II), at
any time on or prior to June 30, 2006, the Company shall have the option to sell
to KFOC, and if exercised KFOC shall purchase, at the Second Closing all or any
portion of an additional Initial Unit (the "ADDITIONAL DEBT UNIT") consisting of
a Note and Warrant in the amounts set forth on SCHEDULE A for an aggregate
purchase price equal to the principal amount of the Note purchased thereby (the
"SECOND CLOSING PURCHASE PRICE").
(ii) The notice required of the Company under SECTION
2.3(B) of this Agreement to exercise its option to require KFOC to purchase the
Additional Debt Unit shall also be delivered by the Company to New Purchaser on
the date on which it is given to KFOC. New Purchaser shall then have the option,
exercisable by notice to KFOC and the Company delivered within three Trading
Days of receipt of the Company's notice, to elect to purchase from the Company
up to one-half the Additional Debt Unit, which election, when made, shall be
binding on New Purchaser and shall absolve KFOC of any obligation to purchase
that portion of the Additional Debt Unit that New Purchaser shall elect to
purchase.
(c) UNIT WARRANT CLOSING.
Subject to the terms of the Unit Warrants, each
Purchaser shall have the option to exercise such Purchaser's Unit Warrant at a
Unit Warrant Closing.
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2.2 CLOSING.
(a) INITIAL CLOSING.
The purchase and sale of the Initial Unit and the Unit
Warrant pursuant to the terms of SECTION 2.1(A) (the "INITIAL CLOSING") shall
take place at the offices of New Purchaser Counsel in New York City, New York,
at 10:00 A.M. (New York City Time) on the date each of the conditions set forth
in SECTION 2.3(A) have been satisfied, or at such other time and place as the
Company and the Purchasers mutually agree upon in writing (the "INITIAL CLOSING
DATE").
(b) SECOND CLOSING.
The purchase and sale of an Additional Debt Unit
pursuant to the terms of SECTION 2.2(A) (the "SECOND CLOSING") shall take place
at the offices of New Purchaser Counsel in New York City, New York, if New
Purchaser has exercised the option provided it in SECTION 2.1(B)(II). If such
option shall not be exercised, the Second Closing shall take place at the
offices of KFOC Counsel in Tulsa, Oklahoma. In either case, the Second Closing
shall take place as provided in SECTION 2.3(B), at 10:00 A.M. (New York City
Time) on the date each of the conditions set forth in SECTION 2.3(B) have been
satisfied, or at such other time and place as the Company and KFOC (and, if New
Purchaser has exercised its option provided in SECTION 2.1(B)(II), New
Purchaser) have mutually agreed upon in writing (the "SECOND CLOSING DATE").
(c) UNIT WARRANT CLOSING.
Upon the exercise of any Unit Warrant, the Company will
hold an additional closing (each, a "UNIT WARRANT CLOSING") pursuant to the
terms of, and on the dates indicated by, SECTIONS 4 and 5(A) of the Unit
Warrants (each, a "UNIT WARRANT CLOSING DATE").
2.3 CLOSING DELIVERIES.
(a) INITIAL CLOSING DELIVERIES.
At the Initial Closing, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) a Note registered in the name of such Purchaser
(or such other name as such Purchaser may direct in writing) in
the principal amount indicated opposite such Purchaser's name on
SCHEDULE A hereto under the heading "Initial Unit - Principal
Note Amount";
(ii) a Warrant, registered in the name of such
Purchaser (or such other name as such Purchaser may direct in
writing), pursuant to which such Purchaser shall have the right
to acquire the number of Common Shares indicated on SCHEDULE A
hereto under the heading "Initial Unit - Warrant Shares;
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(iii) a Unit Warrant, registered in the name of such
Purchaser (or such other name as such Purchaser may direct in
writing), as set forth in SECTION 2.1(A)(II) above, entitling
such Purchaser to be issued (A) a Note in the principal amount
indicated opposite such Purchaser's name on SCHEDULE A hereto
under the heading "Additional Unit - Principal Note Amount", and
(B) a Warrant exercisable for the number of Common Shares
indicated on SCHEDULE A hereto under the heading "Additional
Unit - Warrant Shares;"
(iv) the Registration Rights Agreement duly executed
by the Company;
(v) the legal opinion of Company U.S. Counsel, in
the form of EXHIBIT D-1, executed by such counsel, and the legal
opinion of Company Canadian Counsel, in the form of EXHIBIT E-1,
executed by such counsel, and delivered to the Purchasers;
(vi) written evidence that both the AMEX and the TSX
have approved the transactions contemplated by the Transaction
Documents; and
(vii) any other documents reasonably requested by the
Purchasers, New Purchaser Counsel or KFOC Counsel in connection
with the Initial Closing.
At the Initial Closing, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) the purchase price set forth opposite such
Purchaser's name on SCHEDULE A hereto under the heading "Initial
Purchase Price," in United States dollars and in immediately
available funds, by wire transfer to an account designated in
writing by the Company for such purpose;
(ii) the Registration Rights Agreement duly executed
by such Purchaser; and
(iii) any other Transaction Document to which such
Purchaser is a signatory, duly executed by such Purchaser.
(b) SECOND CLOSING DELIVERIES.
At any time on or prior to June 23, 2006, the Company
may exercise its option to require a Second Closing by delivering to KFOC and
New Purchaser a written notice setting forth the portion of the Additional Debt
Unit that the Company wishes to sell at the Second Closing and the date of the
Second Closing, which shall be not more than ten Trading Days nor less than five
Trading Days after the date of delivery of the notice. At the Second Closing,
the Company shall deliver or cause to be delivered to the Purchaser or
Purchasers of the Additional Debt Unit the following:
(i) one or more Notes, each registered in the name
of the applicable Purchaser (or such other name as such
Purchaser may direct in writing) in the
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amount of the Additional Debt Unit that such Purchaser shall
have elected to purchase pursuant to SECTION 2.1(B);
(ii) one or more Warrants, registered in the name of
the applicable Purchaser (or such other name as such Purchaser
may direct in writing), pursuant to which such Purchaser shall
have the right to acquire the number of Common Shares as
indicated on SCHEDULE A hereto under the heading "Additional
Debt Unit - Warrant Shares", reduced proportionately to the
extent that such Purchaser is purchasing less than $13,500,000
in principal amount of Notes at such Second Closing;
(iii) the legal opinion of Company U.S. Counsel, in
the form of EXHIBIT D-2, executed by such counsel, and the legal
opinion of Company Canadian Counsel, in the form of EXHIBIT E-2,
executed by such counsel, and delivered to each Purchaser that
purchases a portion of the Additional Debt Unit;
(iv) a wire transfer to KFOC in an amount equal to
the lesser of the Second Closing Purchase Price paid or payable
to the Company for the Additional Debt Unit to be purchased at
the Second Closing or the amount outstanding under the KFOC
Credit Facility, to be paid in repayment of debt to KFOC
pursuant to KFOC Credit Facility; and
(v) any other documents reasonably requested by New
Purchaser or KFOC or their counsel in connection with the Second
Closing.
At the Second Closing, each Purchaser purchasing a portion of
the Additional Debt Unit shall deliver or cause to be delivered to the Company
its portion of the Second Closing Purchase Price in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.
(c) UNIT WARRANT CLOSING DELIVERIES.
At any Unit Warrant Closing, the Company shall deliver or cause
to be delivered to each Purchaser participating in such Unit Warrant Closing,
and each participating Purchaser shall deliver or cause to be delivered to the
Company, those deliveries contemplated by SECTIONS 4 and 5(A) of the Unit
Warrants.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to each of the
Purchasers:
(a) SUBSIDIARIES. The Company does not directly or
indirectly control or own any interest in any other corporation, partnership,
joint venture or other business association or entity other than the
Subsidiaries. The Company owns, directly or indirectly, all of the capital stock
of each Subsidiary free and clear of any Lien other than those listed on
Schedule 3.1(a) of
11
the Disclosure Letter, and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
the Subsidiaries is an entity duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the
requisite power and authority to own, lease and use its properties and assets
and to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation and bylaws, as amended. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have, or could reasonably be expected to result in, a material
adverse effect on the results of operations, assets, business or financial
condition of the Company and the Subsidiaries, taken as a whole, or (iii)
adversely impair the Company or any Subsidiary's ability to perform fully on a
timely basis its obligations under any of the Transaction Documents (any of (i),
(ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of each of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated hereunder and thereunder have been duly
authorized by all necessary action on the part of the Company and no further
consent or action is required by the Company, its Board of Directors (except as
expressly contemplated by SECTIONS 4.6 and 4.21 hereof) or its shareholders.
Each of the Transaction Documents has been (or upon delivery will be) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors' rights and
remedies, and except that the enforcement of any rights to indemnity and
contribution in the Registration Rights Agreement may be limited by federal and
state securities laws and the principles of public policy underlying those laws.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) subject to obtaining the Required Approvals (as
defined below), conflict with, or constitute a default (or an event that 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 (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise or
other understanding to which the Company or any Subsidiary is a party or by
which any
12
property or asset of the Company or any Subsidiary is bound or affected), or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including without limitation
Canadian or U.S. federal, provincial, state, local and foreign securities laws
and regulations) and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject, or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not, individually or
in the aggregate, have, or could reasonably be expected to result in, a Material
Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Except for the approval
of KFOC under the KFOC Credit Agreement, which approval KFOC has previously
provided, neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other U.S. or Canadian federal,
national, state, provincial, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than (i) the filings required under SECTION
4.9, (ii) the filing with the Commission of any Underlying Shares Registration
Statement, (iii) the application(s) to each Trading Market for the listing of
the Securities for trading thereon in the time and manner required thereby, (iv)
applicable Blue Sky filings, (v) the filing with the Commission of one or more
notices on Form D under the Securities Act, which will be completed promptly
after the Initial Closing, (vi) any Material Change Report that may be required
by OSC Rule 61-501 concerning the transactions contemplated by this Agreement
and (vii) in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable (with
respect to the Underlying Shares), free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of shareholders. The Securities,
when issued and paid for in accordance with the Transaction Documents, will be
issued in compliance with applicable securities laws, rules and regulations and
the issuance and sale of the Securities contemplated by the Transaction
Documents does not conflict with any rules or regulations of the Trading
Markets. The Company has reserved from its duly authorized share capital a
number of Common Shares for issuance upon the conversion or exercise of the
Securities at least equal to the Required Minimum on the date hereof. The
issuance of the Securities to the Purchasers will not subject either of the
Purchasers to any liability or obligation of any kind in respect of or relating
to the operation of the business of the Company. The Purchasers shall be
entitled to all rights accorded to the holders of the Securities under
applicable Canadian or U.S. law. The Securities comply with the provisions of
the Canada Business Corporations Act. No registration, filing or recording is
necessary under the laws of Canada or any Canadian province in order to permit
the valid offer, issue and sale of the Securities in the manner contemplated by
this Agreement or to preserve or protect the validity or enforceability of the
Securities.
13
(g) CAPITALIZATION. The number of shares and type of all
authorized, issued and outstanding share capital, options and other securities
of the Company (whether or not presently convertible into, or exercisable or
exchangeable for, shares in the capital stock of the Company) is set forth in
SCHEDULE 3.1(G) of the Disclosure Letter. All outstanding shares of capital of
the Company have been duly authorized, validly issued fully paid and are
nonassessable and have been issued in compliance with all applicable U.S.
federal and state securities laws and Canadian Securities Laws and Canadian
corporate laws. Except as a result of the purchase and sale of the Securities
and except as disclosed in SCHEDULE 3.1(G) of the Disclosure Letter there are no
outstanding options, warrants, pre-emptive or similar rights, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into, or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any Common Shares, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue additional
Common Shares, or securities or rights convertible into, or exercisable or
exchangeable for, Common Shares. Except as disclosed in SCHEDULE 3.1(G) of the
Disclosure Letter there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issue and sale of the Securities will not
obligate the Company to issue Common Shares or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities. To the knowledge of the Company, except as specifically
disclosed in SCHEDULE 3.1(G) of the Disclosure Letter, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Shares, ignoring for such purposes any limitation on the
number of Common Shares that may be owned at any single time. The Company is not
a party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any Common Shares or, except as specifically disclosed in SCHEDULE
3.1(G) of the Disclosure Letter any agreement granting registration rights to
any person with respect to any of its equity or debt securities.
(h) TAXES. The Company and the Subsidiaries have prepared
and timely filed all income tax returns and other material tax returns that are
required to be filed, and have paid, or made provision in accordance with
Canadian GAAP for the payment of, all taxes that have or may have become due
pursuant to said returns or pursuant to any assessments that have been received
by the Company or the Subsidiaries. All tax returns are true and correct in all
material respects. Except as set forth in SCHEDULE 3.1(H) of the Disclosure
Letter, all taxes shown to be due and payable by the Company or the Subsidiaries
have been paid or will be paid prior to the time they become delinquent. To the
Company's knowledge there is no liability for any tax to be imposed upon its or
any of its Subsidiaries' properties or assets as of the date of this Agreement
for which adequate provision has not been made. No material tax returns of the
Company have been audited and, to the Company's knowledge, no deficiency
assessment or proposed adjustment of the Company's or the Subsidiaries material
taxes is pending.
(i) REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports (including by furnishing Current Reports on Form 6-K) required to be
filed by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file
14
such material) (the foregoing materials being collectively referred to herein as
the "SEC REPORTS" and, together with this Agreement and the Disclosure Letter,
the "DISCLOSURE MATERIALS") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers,
prior to the execution and delivery of this Agreement, a copy of any SEC Report
filed by the Company within the 10 days preceding the date hereof. As of their
respective dates, the SEC Reports complied in all material respects (except as
disclosed in SCHEDULE 3.1(I) of the Disclosure Letter) with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Reports complied in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with Canadian GAAP, except
as may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are
subject that are required to be filed with the Commission are included as part
of or specifically identified in the SEC Reports. Each press release
disseminated during the 12 months preceding the date hereof did not at the time
of release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Company is a reporting issuer in good standing under the
securities laws of each of the provinces of Canada, and no material change
relating to the Company has occurred with respect to which a material change
report has not been filed under Canadian Securities Laws and no such disclosure
has been made on a confidential basis. As of March 24, 2006, the Company is up
to date on all of its Canadian securities filings and none of the documents
filed by or on behalf of the Company with Canadian securities regulators in each
of the provinces where the Company is a reporting issuer contains any
misrepresentation, as defined under the Securities Act (Ontario). The documents
filed under the Canadian Securities Laws comply in all material respects with
the requirements of Canadian Securities Laws.
(j) MATERIAL CHANGES. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than liabilities not
required to be reflected in the Company's financial statements pursuant to
Canadian GAAP, disclosed in filings made with the Commission or liabilities
incurred by it in the ordinary course of its business that, individually or in
the aggregate, has not had nor could be expected to result in a Material Adverse
Effect, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its
15
shareholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company equity compensation plans.
(k) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION"), except as disclosed in SCHEDULE 3.1(K) of
the Disclosure Letter, which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. SCHEDULE 3.1(K) of the
Disclosure Letter contains a complete list and summary description of any
pending or, to the knowledge of the Company, threatened, proceeding against or
affecting the Company or any of its Subsidiaries, without regard to whether it
would have a Material Adverse Effect. Except as disclosed in SCHEDULE 3.1(K) of
the Disclosure Letter, neither the Company nor any Subsidiary nor any director
or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been and, to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its assets or
properties is bound or affected (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, Canadian, federal, state, provincial and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have, or could reasonably be expected to
result in, a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
U.S. or Canadian federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or result in a Material Adverse Effect
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
16
(n) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and except as disclosed in
SCHEDULE 3.1(N) of the Disclosure Letter. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance, except where any such non-compliance is not material and does not
interfere with the use made and proposed to be made of such property and
facilities.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable, except for failures which, individually or in the aggregate could
not have a Material Adverse Effect.
(p) INSURANCE. The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as
set forth in SEC Reports filed at least ten days prior to the date hereof, none
of the officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or any Subsidiary
is presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with Canadian GAAP and to maintain asset accountability, (iii) access
to assets is
17
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(s) SOLVENCY. Based on the financial condition of the
Company immediately following the Initial Closing Date, the Second Closing Date
and any Unit Warrant Closing Date, as applicable, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(t) CERTAIN FEES. Except for the fees described in SCHEDULE
3.1(T) of the Disclosure Letter, all of which are payable to registered
broker-dealers, no brokerage or finder's fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions.
(u) INVESTMENT COMPANY; FIRPTA. The Company is not, and is
not an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company is not a United States
real property holding corporation within the meaning of the Foreign Investment
in Real Property Tax Act of 1980.
(v) FORM F-10 ELIGIBILITY. Pursuant to the Canada-U.S.
Multi-Jurisdictional Disclosure System, the Company is eligible to register its
Common Shares for resale by the Purchasers under Form F-10 promulgated under the
Securities Act.
(w) LISTING AND MAINTENANCE REQUIREMENTS. The Common Shares
are listed and posted for trading on the TSX and AMEX and the Company has not,
in the two years preceding the date hereof, received notice (written or oral)
from any Trading Market on which the Common Shares are or have been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements, except with
respect to Section 121A(f) of the AMEX Company Guide, from which the Company has
received a waiver from AMEX pursuant to Section 110 of the AMEX Company Guide.
(x) REGISTRATION RIGHTS. Except as set forth on SCHEDULE
3.1(X) of the Disclosure Letter, the Company has not granted or agreed to grant
to any Person any rights
18
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(y) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's articles or certificate of
incorporation (or similar charter documents) or the laws of its jurisdiction of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(z) DEBT. Except as set forth on SCHEDULE 3.1(Z) of the
Disclosure Letter and the Permitted Debt, the Company does not have any Debt.
Neither the Company nor any Subsidiary is in default with respect to any Debt,
nor has any event occurred that would cause (including after passage of time,
delivery of notice, or both) a default under any Debt.
(aa) NO MANIPULATION; DISCLOSURE. Neither the Company nor any
of its Subsidiaries nor any of its officers or directors nor any Person acting
on its or their behalf, has taken, directly or indirectly, any action designed
to cause or to result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company. The Company confirms that neither it nor any other
Person acting on its behalf, has provided the New Purchaser or any of its agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that the New
Purchaser will rely on the foregoing representations in effecting transactions
in securities of the Company. As of the date of this Agreement, there is no
material information concerning the Company that has not been publicly disclosed
by the Company. The Company confirms that neither it nor any other Person acting
on its behalf, has provided KFOC or any of its Affiliates or any of their
respective agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and confirms
that KFOC will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosures provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Letter, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act). The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in SECTION 3.2. The
Company acknowledges and agrees that no Purchaser makes or has made any
statement, commitment or promise to the Company or, to its knowledge, any of its
representatives
19
(including any promises or commitments to make any additional investment in the
Company), which is or was an inducement to the Company to enter into this
Agreement or otherwise, other than those set specifically set forth in SECTION
3.2.
(bb) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. Without limiting the generality of the foregoing,
the Company confirms that (i) during the course of KFOC's involvement as a
Purchaser, neither KFOC nor any of its Affiliates has advised the Company
regarding the transactions contemplated by this Agreement or participated in any
of the Company's deliberations with respect to the same or otherwise exercised
any control or influence over the Company's decision to enter into this
Agreement and engage in the transactions contemplated hereby, and to the extent
that KFOC or any of its Affiliates may be a fiduciary of the Company and/or its
shareholders, to the knowledge of the Company, neither KFOC nor any of its
Affiliates have breached its fiduciary duty, if any; and (ii) during the course
of KFOC's involvement as a Purchaser, Mr. Xxxxx Xxxxxx, who was previously an
Affiliate of KFOC, has not advised the Company regarding the transactions
contemplated by this Agreement, and following the practice of the board of
directors (the "BOARD") of the Company in circumstances where a director may
have a direct or indirect interest in a matter being considered by the Board, he
was not present nor did he participate in any deliberations or vote regarding,
or otherwise exercise any control or influence over, the Company's decision to
enter into this Agreement and engage in the transactions contemplated hereby,
and to the knowledge of the Company Mr. Berlin has not breached his fiduciary
duty.
(cc) ENVIRONMENTAL LAWS. Except as disclosed in SCHEDULE
3.1(CC) of the Disclosure Letter, and except as would not individually or in the
aggregate reasonably be expected to result in a Material Adverse Effect, (i)
none of the Company and its Subsidiaries is in violation of any applicable law
relating to pollution or occupational health and safety, the environment
(including ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including laws relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively, "HAZARDOUS
MATERIALS") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"ENVIRONMENTAL LAWS"), (ii) each of the Company and its Subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (iii)
there are no pending or, to the knowledge of the Company, threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, investigation or
proceedings relating to any Environmental Laws against the Company or its
Subsidiaries, and (iv) there are no events or circumstances that would
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company and its
Subsidiaries relating to Hazardous
20
Materials or any Environmental Laws. Except as disclosed in SCHEDULE 3.1(CC) of
the Disclosure Letter, none of the Company and its Subsidiaries is the subject
of any international, foreign, federal, provincial, municipal or private action,
suit, litigation, grievance, arbitration proceeding, governmental proceeding,
investigation or claim involving a demand for damages or other potential
liability with respect to violations of Environmental Laws.
(dd) MINING RIGHTS. All interests in mining leases and mining
claims, concessions, exploitation or extraction rights ("MINING RIGHTS") of the
Company or the Subsidiaries that are held by the Company or the Subsidiaries,
are in good standing, are valid and enforceable, are free and clear of any
material liens or charges and, except for the royalties described in SCHEDULE
3.1(DD) of the Disclosure Letter, no material royalty is payable in respect of
any of them. No other property rights are necessary for the conduct of the
Company's or the Subsidiaries' business as currently conducted, and there are no
material restrictions on the ability of the Company or the Subsidiaries to use,
transfer or otherwise exploit any such property rights except as required by
applicable law. Mining Rights held by the Company or its Subsidiaries cover the
properties required by the Company for such purposes. Subject to obtaining and
maintaining permits therefore, the Company or its Subsidiaries are entitled to
extract minerals from its mines.
(ee) MINERAL RESERVES. The information set forth in the
Company's Renewal Annual Information Form dated March 29, 2005 relating to the
estimates by the Company and the Subsidiaries of the proven and probable mineral
reserves and mineral resources has been prepared in accordance with the Canadian
industry standards set forth in National Instrument 43-101 - "Standards of
Disclosure for Mineral Projects". The method of estimating the mineral reserves
and resources has been verified by mining experience and the information upon
which the estimates of reserves and resources were based, was, at the time of
delivery thereof, complete and accurate in all material respects and there have
been no material adverse changes to such information since the date of delivery
or preparation thereof.
(ff) RANKING. Except as set forth on SCHEDULE 3.1(FF) of the
Disclosure Letter and except for Permitted Debt, as of the date of this
Agreement, no Debt of the Company is senior to or pari passu with the Notes in
right of payment, whether with respect to principal, interest or upon
liquidation or dissolution, or otherwise.
(gg) EMPLOYEE MATTERS. Except as disclosed in SCHEDULE
3.1(GG) of the Disclosure Letter, no material strike, work stoppage, slow down
or other material labor problem exists or, to the knowledge of the Company, is
threatened or imminent with respect to any of the employees of the Company or
the Subsidiaries.
(hh) NO PUBLIC SALE OR DISTRIBUTION. Except with respect to
offers and sales to Institutional Accredited Investors (as defined below) within
the United States in reliance upon an exemption from registration under Section
4(2) of the Securities Act and Rule 506 of Regulation D thereunder, neither the
Company nor any of its Affiliates, nor any person acting on its or their behalf,
has made or will make any offer to sell, or any solicitation of an offer to buy,
any Notes, Warrants or Unit Warrants. Neither the Company nor any of its
Affiliates, nor any person acting on its or their behalf has engaged in or will
engage in any form of general solicitation or general advertising (as those
terms are used in Regulation D) with respect to offers or sales of the Notes,
21
Warrants or Unit Warrants, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media, or
broadcast over radio, or television, or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising. Except with
respect to the offer and sale of the Notes, Warrants and Unit Warrants offered
hereby, the offer of securities of the Company to Gold Fields, and offers and
sales of Common Shares pursuant to the Company's employee benefit plans, the
Company has not, for a period of six months prior to the date hereof sold,
offered for sale or solicited any offer to buy any of its securities in the
United States.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser, as to itself only and for no other Purchaser, hereby represents and
warrants to the Company as follows:
(a) ORGANIZATION. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder.
(b) AUTHORITY; ENFORCEMENT. The purchase by such Purchaser
of the Securities hereunder has been duly authorized by all necessary action on
the part of such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
(c) NO PUBLIC SALE OR DISTRIBUTION. Such Purchaser is (i)
acquiring the Notes, the Warrants and the Unit Warrants and (ii) upon conversion
and/or repayment of the Notes and exercise of the Warrants and the Unit
Warrants, will acquire the Underlying Shares issuable upon such conversion,
repayment and/or exercise, in each case, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the Securities
Act. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold securities for any period of time.
(d) PURCHASER STATUS. Such Purchaser is an institutional
"accredited investor" within the meaning of Rule 501(a)(l), (2), (3) or (7) of
Regulation D under the Securities Act (an "INSTITUTIONAL ACCREDITED INVESTOR"),
an "accredited investor" as defined in National Instrument 45-106 of the
Canadian Securities Laws or an investor purchasing under the minimum amount
investment exemption if required for Canadian purposes, and is also a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act or a
"large" Institutional Accredited Investor within the meaning of the Black Box,
Inc. and Squadron, Ellenoff, Pleasant & Xxxxxx SEC No-Action Letters (available
June 26, 1990 and February 28, 1992, respectively).
(e) RELIANCE ON EXEMPTIONS. Such Purchaser understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from (i) the registration requirements of U.S. federal and state
securities laws and (ii) the prospectus and registration
22
requirements of Canadian Securities Laws, and that the Company is relying in
part upon the truth and accuracy of, and such Purchaser's representations and
warranties set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities.
(f) NO GENERAL SOLICITATION. Such Purchaser acknowledges
that it is not purchasing the Notes, the Unit Warrants and the Warrants as a
result of any general solicitation or general advertising, as such terms are
used in Regulation D under the Securities Act.
(g) ACCESS TO INFORMATION. Such Purchaser and its advisors,
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by such Purchaser. Such
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Such Purchaser understands that its investment in the
Securities involves a high degree of risk and is able to bear the economic risk
of such investment. Such Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Securities and has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel, nor any other provisions of this
SECTION 3.2, shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(h) NO GOVERNMENT REVIEW. Such Purchaser understands that no
United States or Canadian federal, state or provincial agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in the U.S.
pursuant to an effective registration statement under the Securities Act or
pursuant to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable state securities laws. In
connection with any transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set forth herein,
the Company may require the transferor to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with its transfer agent, without any such legal
opinion, any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
23
As a condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement (and any other applicable Transaction
Document) and shall have the rights of a Purchaser under this Agreement.
(b) The Purchasers agree to the imprinting on any
certificate evidencing Securities, except as otherwise permitted by SECTION
4.1(C), of the restrictive legends in substantially the form as follows,
together with any additional legend required by (i) any applicable state
securities laws, and (ii) any securities exchange upon which such Securities may
be listed:
A. "NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE] HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. NOTWITHSTANDING
THE FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
[CONVERSION][EXERCISE] OF THESE SECURITIES MAY BE PLEDGED TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A)(1),(2), (3) OR (7) UNDER THE SECURITIES ACT IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES. "
B. "UNLESS PERMITTED UNDER CANADIAN SECURITIES LAWS, THE
HOLDER OF THESE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE THE
DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE DATE OF ISSUE OF THESE
SECURITIES."
(c) Certificates evidencing Securities shall not be required
to contain the legend set forth in (x) SECTION 4.1(B) (and such legends shall be
removed) following any sale of such Securities pursuant to the "Plan of
Distribution" of an effective Registration Statement covering the resale of such
Securities under the Securities Act and compliance with the prospectus delivery
requirements of Section 5 of the Securities Act in connection with such resale,
(y) SECTION 4.1(B)(A) (and such legend shall be removed) (i) following any sale
of such Securities in compliance with Rule 144 regulations or any other
exemption from registration requirements, (ii) if such Securities are eligible
for sale under Rule 144(k), and (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission), and
(z) SECTION 4.1(B)(B) (and such legend shall be removed) four months and a day
after the respective dates of issue of the Notes and Warrants comprising
24
the Initial Units, the Notes and Warrants comprising the Additional Debt Units
and the Unit Warrants. The Company shall cause its counsel to issue a legal
opinion to the Company's U.S. transfer agent in connection with any transfer
occurring after the Effective Date. In the case of clause (y) above, the Company
shall have received an opinion of counsel of recognized standing, the form and
substance of which shall be reasonably satisfactory to the Company, to the
effect that such legend is no longer required. Following the Effective Date or
at such earlier time as a legend is no longer required for certain Securities,
as evidenced by the Company's receipt of the opinion described in the preceding
sentence, the Company will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that is
free from all restrictive and other legends provided in this Agreement, PROVIDED
that certificates representing Warrants and Unit Warrants shall be required to
contain the legend set forth in SECTION 4.1(B) until the exercise thereof. The
Company may not make any notation on its records or give instructions to its
U.S. transfer agent that enlarge the restrictions on transfer set forth in
SECTION 4.1(B).
(d) The Company acknowledges and agrees that a Purchaser may
from time to time pledge or grant a security interest in some or all of the
Securities to any Institutional Accredited Investor in connection with a bona
fide margin agreement secured by the Securities and, if required under the terms
of such agreement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of selling shareholders
thereunder.
4.2 [Omitted].
4.3 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Securities will result in dilution of the outstanding Common
Shares, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue the Securities
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim that the Company may have against
any Purchaser; PROVIDED that the Company's obligation to issue the Securities
may be limited by (i) the Issuable Maximum pursuant to SECTION 4.6(D) if
shareholder approval is not obtained pursuant to SECTION 4.21, and (ii) in
respect of KFOC, the KFOC Maximum pursuant to SECTION 4.6(E) if shareholder
approval is not obtained pursuant to SECTION 4.21.
4.4 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
25
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of the Securities
may reasonably request, all to the extent required from time to time to enable
such Purchaser to sell such Securities without registration under the Securities
Act and within the limitation of the exemptions provided by Rule 144.
4.5 INTEGRATION. The Company shall not, and shall use its best
efforts to ensure that all Affiliates of the Company shall not, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of Securities Act.
4.6 RESERVATION AND LISTING OF SECURITIES.
(a) The Company shall reserve a sufficient number of
authorized Common Shares for issuance pursuant to the Transaction Documents in
such number as may be required to fulfill its obligations in full under the
Transaction Documents.
(b) The Company shall do the following: (i) in the time and
manner required by each Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of Common
Shares at least equal to the greater of (x) the Required Minimum on the Initial
Closing Date, and (y) the Required Minimum on the date of such application; (ii)
take all steps necessary to cause such Common Shares to be approved for listing
on each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Common Shares on each such Trading Market or another Eligible Market.
(c) If, on any date, the number of shares of Common Stock
previously listed on a Trading Market is less than 125% of the Actual Minimum on
such date, then the Company shall take the necessary actions to list on such
Trading Market, as soon as reasonably possible, a number of Common Shares at
least equal to the Required Minimum on such date; provided that the Company will
not be required at any time to list a number of Common Shares greater than the
maximum number of Common Shares that could possibly be issued pursuant to the
Transaction Documents.
(d) Notwithstanding any other provision in this Agreement,
the maximum number of Common Shares that the Company may issue pursuant to the
Transaction Documents shall not exceed 19.9% of all issued and outstanding
Common Shares as of March 24, 2006 (the "ISSUABLE MAXIMUM") unless shareholder
approval for issuances of Common Shares in excess of the Issuable Maximum is
obtained pursuant to SECTION 4.21. If, at the time any Purchaser requests an
exercise or conversion of any Securities, the Actual Minimum exceeds the
Issuable Maximum, then the Company shall issue to the Purchaser requesting such
exercise or conversion
26
a number of Underlying Shares not exceeding such Purchaser's pro-rata portion of
the Issuable Maximum (based on such Purchaser's share of the aggregate purchase
price paid hereunder and considering any Underlying Shares previously issued to
such Purchaser), and the remainder of the Underlying Shares issuable in
connection with such exercise or conversion (if any) shall constitute "EXCESS
SHARES" pursuant to SECTION 4.6(F) below.
(e) Notwithstanding any other provision in this Agreement,
the maximum number of Common Shares that the Company may issue to KFOC pursuant
to the Transaction Documents may not exceed 5,221,677 Common Shares (the "KFOC
MAXIMUM"), unless shareholder approval for issuances of Common Shares in excess
of the KFOC Maximum is obtained pursuant to SECTION 4.21. If, at the time KFOC
requests an exercise or conversion of any Securities, the Actual Minimum exceeds
the Issuable Maximum, then the Company shall issue to KFOC a number of
Underlying Shares not exceeding the KFOC Maximum, and the remainder of the
Underlying Shares issuable in connection with such exercise or conversion (if
any) shall constitute "EXCESS SHARES" pursuant to SECTION 4.6(F) below.
(f) Any Purchaser whose receipt of Excess Shares upon
exercise or conversion of the Securities is restricted based on the Issuable
Maximum shall have the option, by notice to the Company, to require the Company
to, within five Trading Days after such notice, pay cash to such Purchaser, as
liquidated damages and not as a penalty, in an amount equal to the number of
Excess Shares multiplied by the average of the VWAP for each of the five Trading
Days immediately prior to the date of such notice or, if greater, the five
Trading Days immediately prior to the date of payment (the "CASH AMOUNT"), upon
which the Company shall have no further obligation to issue any such Excess
Shares.
4.7 CONVERSION AND EXERCISE PROCEDURES. The form of Exercise Notice
included in the Warrants and the Unit Warrants, respectively, and the form of
Conversion Notice included in the Notes set forth the totality of the procedures
required in order to exercise the Warrants and the Unit Warrants, or convert the
Notes under the Transaction Documents. Except as specifically described therein,
no additional legal opinion or other information or instructions shall be
necessary to enable the Purchasers to exercise their Warrants and Unit Warrants,
or convert their Notes. The Company shall honor exercises of the Warrants and
Unit Warrants, and conversions of the Notes and shall deliver Underlying Shares
in accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.8 SUBSEQUENT PLACEMENTS.
(a) For so long as any Notes are outstanding, the Company
will not effect any Subsequent Placement unless the Company shall have first
complied with this SECTION 4.8(A).
(i) The Company shall deliver to each Purchaser a
written notice (the "OFFER") of any proposed or intended
issuance or sale or exchange of the securities being offered
(the "OFFERED SECURITIES") in a Subsequent Placement, which
Offer shall (v) identify and describe the Offered Securities,
(w) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (x) have
attached copies of any purchase agreement and any other
27
documents in connection with the proposed Offer, (y) if known,
identify the Persons or entities to which or with which the
Offered Securities are to be offered, issued, sold or exchanged,
and (z) offer to issue and sell to or exchange with each
Purchaser (A) a pro rata portion of 25% of the Offered
Securities, based on one-half being allocated to the New
Purchaser and its assignees and one-half being allocated to KFOC
and its assignees (the "BASIC AMOUNT"), and (B) with respect to
each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities as such Purchaser
shall indicate it will purchase or acquire attributable to the
Basic Amounts of other Purchasers should the other Purchasers
subscribe for less than their Basic Amounts (the
"UNDERSUBSCRIPTION AMOUNT").
(ii) To accept an Offer, in whole or in part, a
Purchaser must deliver a written notice to the Company prior to
the end of the third (3rd) Trading Day following such
Purchaser's receipt of the Offer (not including the day on which
such Offer is received by such Purchaser) setting forth the
portion of the Purchaser's Basic Amount that such Purchaser
elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount,
if any, that such Purchaser elects to purchase (in either case,
the "NOTICE OF ACCEPTANCE"). If the Basic Amounts subscribed for
by all Purchasers are less than the total of all of the Basic
Amounts, then each Purchaser who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed
for; PROVIDED, HOWEVER, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all
the Basic Amounts and the Basic Amounts subscribed for (the
"AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Purchaser who has
subscribed for any Undersubscription Amount shall be entitled to
purchase that portion of the Available Undersubscription Amount
as the Basic Amount of such Purchaser bears to the total Basic
Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of
Directors to the extent its deems reasonably necessary.
(iii) The Company shall have fifteen (15) Trading Days
from the expiration of the period set forth in SECTION
4.8(A)(II) above to consummate the issue, sale or exchange of
all or any part of such Offered Securities as to which a Notice
of Acceptance has not been given by the Purchasers (the "REFUSED
SECURITIES"), but only to the offerees identified in the Offer,
if any, and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more
favorable to the acquiring Person or Persons than those set
forth in the Offer; PROVIDED that if the terms of any financing
or market conditions change during such fifteen Trading Day
period, any election under 4.8(a)(ii) shall be void and the
Offered Securities must first be re-offered to Purchasers under
and in accordance with this SECTION 4.8 prior to consummating
any transaction described in the Offer.
28
(iv) In the event the Company shall propose to sell
less than all the Refused Securities (any such sale to be in the
manner and on the terms specified in SECTION 4.8(A)(III) above),
then each Purchaser may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the Offered
Securities that the Purchaser elected to purchase pursuant to
SECTION 4.8(A)(II) above multiplied by a fraction, (x) the
numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to
Purchasers pursuant to SECTION 4.8(A)(II) above prior to such
reduction), and (y) the denominator of which shall be the
original amount of the Offered Securities. In the event that any
Purchaser so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company
may not issue, sell or exchange more than the reduced number or
amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in
accordance with SECTION 4.8(A)(I) above.
(v) Upon the closing of an issuance, sale or
exchange of all or less than all of the Refused Securities, each
Purchaser shall acquire from the Company, and the Company shall
issue to each Purchaser, the number or amount of Offered
Securities specified in the applicable Notices of Acceptance, as
reduced pursuant to SECTION 4.8(A)(IV) above if any Purchaser
has so elected, upon the terms and conditions specified in the
Offer. The purchase by a Purchaser of any Offered Securities is
subject in all cases to the receipt of any necessary approvals
(shareholder, third party or government) and preparation,
execution and delivery by the Company and such Purchaser of a
purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to such Purchaser,
the Company and their respective counsels. In addition, a
Purchaser shall not be required to close the purchase of
securities pursuant to this Section prior to three Business Days
after all conditions to the closing have been satisfied.
(vi) Any Offered Securities not acquired by the
Purchasers or other Persons in accordance with SECTION
4.8(A)(III) above may not be issued, sold or exchanged until
they are again offered to the Purchasers under the procedures
specified in this Agreement.
(b) The restrictions contained in paragraph (a) of this
Section shall not apply to Excluded Stock.
4.9 SECURITIES LAWS DISCLOSURE; PUBLICITY. On the Initial Closing
Date, and the Second Closing Date and any Unit Warrant Closing Date, if
applicable, the Company shall furnish a Current Report on Form 6-K to the
Commission describing the terms of the transactions contemplated by the
Transaction Documents, and attaching the material Transaction Documents as
exhibits to such Form 6-K (including all attachments, the "FORM 6-K"). On the
Initial Closing Date, and on the Second Closing Date and any Unit Warrant
Closing Date, if applicable, the Company shall also file with Canadian
securities regulators a Material Change Report, if applicable, and issue and
file with such authorities a press release describing the terms
29
of the transactions contemplated by the Transaction Documents as required by
Canadian Securities Laws, and attaching all required exhibits. From and at all
times after the furnishing of the Form 6-K to the Commission or the filing of
the Material Change Report and press release with the Canadian securities
regulators, the Purchasers shall not be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the Form 6-K. The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents
not to, provide the New Purchaser with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the furnishing
of the Form 6-K to the Commission without the express written consent of the New
Purchaser. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, the New Purchaser or the Company shall have the right to
make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material nonpublic information without the prior approval
by the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; PROVIDED, HOWEVER, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the Form 6-K and contemporaneously therewith, and (ii) as is
required by applicable U.S. and Canadian laws and regulations or Trading Market
requirements (provided that in the case of clause (i) the Purchasers shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the New Purchaser, or include
the name of the New Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of the
New Purchaser, except to the extent such disclosure (but not any disclosure as
to the controlling Persons thereof) is required by U.S. or Canadian law or
Trading Market regulations, in which case the Company shall provide the New
Purchaser with prior notice of such disclosure.
4.10 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and any other bona
fide corporate purpose, other than to repurchase any Company equity or
equity-equivalent securities. Immediately upon issuance of one or more of the
Notes pursuant to the Second Closing, if any such Notes are issued, the Company
shall use the net proceeds from the Second Closing to repay the principal and
interest on the KFOC Credit Facility.
4.11 INDEMNIFICATION. If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling person, employee or agent of a
Purchaser or any of its Affiliates (a "RELATED PERSON") becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of the transactions contemplated by the Transaction Documents,
the Company will indemnify and hold harmless such Purchaser or Related Person
for its reasonable legal and other expenses, including the costs of any
investigation, preparation and travel, and for any Losses incurred in connection
therewith, as such expenses or Losses are
30
incurred, except to the extent that any such Losses result from the gross
negligence or willful misconduct of the applicable Purchaser or Related Person
under the Transaction Documents or do not relate to the Company's obligations
under the Transaction Documents. In addition, the Company shall indemnify and
hold harmless each Purchaser and Related Person from and against any and all
Losses, as incurred, arising out of or relating to any breach by the Company of
any of the representations, warranties or covenants made by the Company in this
Agreement or any other Transaction Document, or any allegation by a third party
that, if true, would constitute such a breach. The conduct of any Proceedings
for which indemnification is available under this paragraph shall be governed by
Section 6 of the Registration Rights Agreement. The indemnification obligations
of the Company under this paragraph shall be in addition to any liability that
the Company may otherwise have and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Purchasers and any such Related Persons. The Company also agrees that neither
the Purchasers nor any Related Persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the transactions contemplated by the
Transaction Documents, except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall
promptly pay or reimburse the Purchasers on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses). Without
limiting the generality of the foregoing, the Company specifically agrees to
reimburse the Purchasers on demand for all costs of enforcing the
indemnification obligations in this paragraph.
4.12 DEFAULT RATE. If the Company fails to make any cash payment
required by any Transaction Document in full when due, then the Company shall
pay interest thereon at a rate of 12% per annum (or such lesser maximum rate
that is permitted to be paid under applicable law) from the date such payment
was due until such amount, plus all such interest thereon, is paid in full.
4.13 RIGHTS OF SHAREHOLDERS. Each time the Company delivers a notice
or other communication to holders of the Common Shares it will contemporaneously
deliver a copy of such notice or communication to the Purchasers only for so
long as they own any Securities. The Company acknowledges and agrees that, for
so long as a Purchaser holds any Securities (whether or not such Purchaser holds
Common Shares) such Purchaser will be entitled to all rights and remedies with
respect to the delivery of notice or other communication as are available to a
holder of Common Shares under the Canada Business Corporations Act.
4.14 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by
the Company or any Affiliate of the Company that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect as of the date hereof (if any) or hereafter adopted by the Company, or
that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, solely by virtue of receiving Underlying Shares under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
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4.15 INDEBTEDNESS.
(a) So long as any Note is outstanding, the Company shall
not, and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Debt in excess of
the Restricted Debt Amount then in effect, other than Permitted Debt.
(b) So long as any Note is outstanding, the Company shall
not, and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any Lien, other than Permitted Liens.
4.16 [Omitted]
4.17 NO IMPAIRMENT. At all times after the date hereof, the Company
will not take or permit any action, or cause or permit any Subsidiary to take or
permit any action that has a Material Adverse Effect on the rights of the
Purchasers under any of the Transaction Documents.
4.18 FUNDAMENTAL CHANGES.
In addition to any other rights provided by law or set forth
herein, from and after the date of this Agreement and for so long as not less
than US$10,000,000 of Notes remains outstanding, the Company shall not without
first obtaining the approval, by written consent, of the holders of a majority
in principal amount of the Notes then outstanding:
(a) effect any merger, arrangement, amalgamation or
consolidation of the Company with or into another Person;
(b) effect any sale of all or substantially all of the
Company's assets in one or a series or related transactions;
(c) effect any tender offer, exchange offer or issuer bid
pursuant to which holders of Common Shares are permitted to tender or exchange
their shares for other securities, cash or property;
(d) effect any reclassification of the Common Shares or any
compulsory share exchange pursuant to which the Common Shares are effectively
converted into or exchanged for other securities, cash or property (other than
as a result of a subdivision or combination of Common Shares);
(e) purchase, redeem (other than pursuant to equity
incentive agreements with non-officer employees giving the Company the right to
repurchase shares upon the termination of services) or set aside any sums for
the purchase or redemption of, or declare or pay any dividend (including a
dividend payable in shares of the Company) or make any other distribution with
respect to, any share capital or any other securities that are convertible into
or exercisable for such shares (other than the Notes and the Warrants);
(f) change the nature of the Company's business to any
business which is fundamentally distinct and separate from the business
currently conducted by the Company; or
32
(g) cause or permit any subsidiary of the Company (other
than the companies holding the Company's joint venture property in Finland)
directly or indirectly to take any actions described in clauses (a) through (f)
above, other than issuing securities to the Company.
4.19 REPAYMENT OF NOTES. Each of the parties hereto agrees that (a)
all repayments of the Notes (including any accrued interest thereon) by the
Company (other than by conversion of the Notes) will be paid pro rata to the
holders thereof based upon the principal amount then outstanding to each of such
holders, PROVIDED that, in the case of repayments of Notes made on dates when
less than all outstanding Notes are subject to a scheduled repayment, repayments
shall be considered pro rata if allocated among the holders of Notes subject to
repayment on such date based on the principal amount then outstanding of Notes
which are subject to payment on such date, and (b) except as otherwise set forth
herein, all payments on the Notes shall be applied to the payment of accrued but
unpaid interest before being applied to the payment of the principal.
4.20 AMENDMENTS TO TRANSACTION DOCUMENTS. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into, become or remain
subject to any agreement or instrument, except for the Transaction Documents,
that would prohibit or require the consent of any Person to any amendment,
modification or supplement to any of the Transaction Documents.
4.21 SHAREHOLDER APPROVAL. The Company shall seek, and use its best
efforts to obtain as soon as possible, but in no event later than the first
annual meeting of the Company's shareholders following the Initial Closing Date
(the "ANNUAL MEETING"), shareholder approval for (i) the issuance of any Common
Shares in excess of the KFOC Maximum (the "KFOC PROPOSAL") which approval shall
meet the requirements of the AMEX and the TSX, and (ii) the issuance of Common
Shares in an aggregate amount in excess of the Issuable Maximum (the "EXCESS
ISSUANCE PROPOSAL," together with the KFOC Proposal, the "SHAREHOLDER
PROPOSALS") which approval shall meet the requirements of the AMEX and the TSX.
The Company shall use its reasonable best efforts to issue proxy materials in
connection with the Annual Meeting seeking approval of the Shareholder
Proposals. The Company's Board of Directors shall recommend approval of the
Shareholder Proposals by the Company's shareholders. The Company shall mail and
distribute its proxy materials for the Annual Meeting to its shareholders at
least 21 days prior to the date of the Annual Meeting and shall actively solicit
proxies to vote for the Shareholder Proposals. To the extent they do not contain
any material non-public information and relate to the Shareholder Proposals, the
Company shall provide the Purchasers'counsel an opportunity to review and
comment on such proxy materials by providing copies of such proxy materials and
any revised version of such materials to such counsel at least five days prior
to its mailing and distribution. The Company shall (i) furnish to each of the
Purchasers and their respective counsel a copy of the Company's definitive proxy
materials for the Annual Meeting and any amendments or supplements thereto
promptly after the same are first mailed to shareholders, (ii) inform the
Purchasers of the progress of solicitation of proxies for the Annual Meeting,
and (iii) inform the Purchasers of any adjournment of the Annual Meeting and
report the result of the vote of shareholders on the Shareholder Proposals at
the conclusion of the Annual Meeting. If for any reason the Shareholder
Proposals are not approved at the Annual Meeting or by June 30, 2006, upon
instruction by 30 days advance notice from any Purchaser who would be eligible
to receive a larger number of Common Shares had such KFOC Proposal or Excess
Issuance Proposal been approved, subject to regulatory approval, the
33
Company will take such additional acts or actions as are necessary to hold a
special meeting of its shareholders to consider the Shareholder Proposals and in
conjunction therewith shall hire a nationally recognized proxy solicitation
firm, selected by such Purchaser(s) which is reasonably satisfactory to the
Company, to assist the Company in obtaining the necessary shareholder votes to
approve the Shareholder Proposals. The Company shall bear all costs and expenses
of the preparation and filing of any and all proxy materials and additional
special meetings, including but not limited to the costs and expenses of the
proxy solicitation firm if needed. Notwithstanding anything to the contrary
contained in this SECTION 4.21, the Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective officers, directors,
employees, agents and counsel, not to, provide the New Purchaser or KFOC with
any material nonpublic information in, or in connection with, the proxy
materials for the Annual Meeting.
4.22 RELATIONSHIP BETWEEN KFOC AND COMPANY. All transactions between
KFOC and the Company will be conducted on an arm's length basis, and each such
transaction will be on terms at least as favorable to the Company as could be
obtained by it from a third party with no pre-existing relationship with the
Company.
ARTICLE V.
CONDITIONS
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS. The
obligation of each Purchaser to acquire the Initial Units and the Unit Warrants
at the Initial Closing, is subject to the satisfaction or waiver by such
Purchaser, at or before the Initial Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained herein shall be true and correct as of the
date when made and as of the Initial Closing as though made on and as of such
date;
(b) PERFORMANCE. The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Initial Closing;
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) APPROVALS. All required approvals given in connection
with the transactions contemplated by the Transaction Documents shall be valid
and in effect as of the date of the Initial Closing;
(e) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING. The
Common Shares (i) shall be designated for quotation or listed on the Trading
Markets, and (ii) shall not have been suspended by the Commission, a Canadian
securities regulator or the Trading Markets from trading on the Trading Markets
nor shall suspension by the Commission, a Canadian securities regulator or the
Trading Markets have been threatened either (A) in writing by the Commission,
34
a Canadian securities regulator or the Trading Markets, or (B) by falling below
the minimum listing maintenance requirements of the Trading Markets; and
(f) ADVERSE CHANGES. Since the date of execution of this
Agreement, no event or series of events shall have occurred, which individually
or in the aggregate, could be expected to have or result in a Material Adverse
Effect.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to sell the Initial Units and the Unit Warrants at
the Initial Closing, the Additional Debt Unit at the Second Closing and the
Additional Units at any Unit Warrant Closing are subject to the satisfaction or
waiver by the Company, at or before the Initial Closing, Second Closing or any
Unit Warrant Closing, as applicable, of each of the following conditions, to the
extent relevant:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Initial Closing Date as
though made on and as of such date;
(b) PERFORMANCE. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Initial Closing; and
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.
(d) APPROVALS. All required approvals given in connection
with the transactions contemplated by the Transaction Documents shall be valid
and in effect as of the date of the Initial Closing.
5.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASERS AT THE
SECOND CLOSING. In addition to the conditions set forth in SECTIONS 5.1 AND 5.2
of this Agreement, a Purchaser's obligations to purchase the Additional Debt
Unit at the Second Closing shall be subject to the satisfaction or waiver by
that Purchaser, at or before the Second Closing, of each of the following
conditions:
(a) ADVERSE CHANGES. Between the date hereof and the date of
such Second Closing no event or series of events shall have occurred, which
individually or in the aggregate, could be expected to have or result in a
Material Adverse Effect.;
(b) REPRESENTATIONS AND WARRANTIES. The Company shall make
and restate each of its representations, warranties and covenants contained
herein as of the date of such Second Closing;
35
(c) PERFORMANCE. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Purchasers at or prior to the Second Closing;
(d) APPROVALS. All approvals given in connection with the
Initial Closing shall be valid and in effect as of the date of the Second
Closing;
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents to be effected by the Second Closing;
and
(f) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING. The
Common Shares (i) shall be designated for quotation or listed on the Trading
Markets, and (ii) shall not have been suspended by the Commission, a Canadian
securities regulator or the Trading Markets from trading on the Trading Markets
nor shall suspension by the Commission, a Canadian securities regulator or the
Trading Markets have been threatened either (A) in writing by the Commission, a
Canadian securities regulator or the Trading Markets, or (B) by falling below
the minimum listing maintenance requirements of the Trading Markets.
5.4 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PURCHASER
PARTICIPATING IN ANY UNIT WARRANT CLOSING.
(a) ADVERSE CHANGES. Between the date hereof and the date of
such Unit Warrant Closing no event or series of events shall have occurred,
which individually or in the aggregate, could be expected to have or result in a
Material Adverse Effect.;
(b) REPRESENTATIONS AND WARRANTIES. The Company shall make
and restate each of its representations, warranties and covenants contained
herein as of the date of such Unit Warrant Closing;
(c) PERFORMANCE. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Purchasers at or prior to any Unit Warrant Closing;
(d) APPROVALS. All approvals given in connection with the
Initial Closing shall be valid and in effect as of the date of the Unit Warrant
Closing;
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents to be effected by the Unit Warrant
Closing; and
36
(f) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING. The
Common Shares (i) shall be designated for quotation or listed on the Trading
Markets, and (ii) shall not have been suspended by the Commission, Canadian
securities regulators or the Trading Markets from trading on the Trading Markets
nor shall suspension by the Commission, Canadian securities regulators or the
Trading Markets have been threatened either (A) in writing by the Commission or
the Trading Markets, or (B) by falling below the minimum listing maintenance
requirements of the Trading Markets.
ARTICLE VI.
MISCELLANEOUS
6.1 TERMINATION. This Agreement may be terminated by the Company or
either Purchaser by written notice to the Company, if the Initial Closing has
not been consummated by the fifth Trading Day following the date of this
Agreement; provided that no such termination will affect the right of any party
to xxx for any breach by the other party (or parties).
6.2 FEES AND EXPENSES. At the Initial Closing, the Company shall pay
to New Purchaser Counsel US$50,000 and to KFOC Counsel US$50,000, in each case
for their legal fees and expenses incurred in connection with the preparation
and negotiation of the Transaction Documents. In lieu of the foregoing payments,
the Purchasers may retain the amount of such payments instead of delivering such
amount to the Company at the Initial Closing. Except as expressly set forth in
the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of any Securities.
6.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
Exhibits and Schedules thereto and the Disclosure Letter, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters (including the executed term sheet dated March 2, 2006), which
the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Initial Closing and the Second Closing and any Unit
Warrant Closing Date, if applicable, and without further consideration, the
Company will execute and deliver to the Purchasers such further documents as may
be reasonably requested in order to give practical effect to the intention of
the parties under the Transaction Documents. Notwithstanding anything to the
contrary herein, the Securities may be assigned to any Institutional Accredited
Investor in connection with a bona fide margin account or other loan or
financing arrangement secured by such Securities. This Agreement does not modify
any provision of the KFOC Credit Facility, or waive the right of any party to
the KFOC Credit Facility to require full compliance with each agreement, term or
condition contained in any agreement, instrument or document delivered by and
binding upon a party thereto, except for any waiver with respect to any of the
Transaction Documents or the transactions contemplated thereby which may be
required pursuant to the KFOC Credit Facility
37
6.4 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:30 P.M. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Agreement later than 5:30 P.M. (New York City
time) on any date and earlier than 11:59 P.M. (New York City time) on such date,
(iii) the Trading Day following the date of sending, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
6.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
6.6 CONSTRUCTION. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities provided such
Person agrees in writing to be bound by the provisions thereof.
6.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of SECTION 4.11 and may enforce the provisions of such Section
directly against the Company.
6.9 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT
AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
38
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL
RIGHTS TO A TRIAL BY JURY.
6.10 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Initial Closing and the Second
Closing and any Unit Warrant Closing Date, if applicable, and the delivery,
conversion and/or exercise of the Securities, as applicable. 6.11 EXECUTION.
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an original
thereof.
6.12 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
6.14 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in
39
exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a replacement certificate or instrument, bearing the same
restrictive legends, if any, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity. The applicants for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs associated
with the issuance of such replacement Securities.
6.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
6.16 PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.17 USURY. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "MAXIMUM RATE"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate of interest
applicable to the Transaction Documents from the effective date forward, unless
such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.
40
6.18 INDEPENDENT NATURE OF PURCHASERS. The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Securities
pursuant to this Agreement has been made by such Purchaser independently of any
other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of the Subsidiaries which may have been made or
given by any other Purchaser or by any agent or employee of any other Purchaser,
and no Purchaser or any of its agents or employees shall have any liability to
any other Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company hereby confirms that it understands and agrees that the Purchasers are
not acting as a group as that term is used in Section 13(d) of the Exchange Act.
Each Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Without limiting the
generality of the foregoing, the New Purchaser, for itself and for any person or
entity to which it may assign or transfer any interest in the Securities, hereby
(a) acknowledges that KFOC, in addition to being a lender to the Company under
the KFOC Credit Agreement, the Notes and under any other lending agreement it
and the Company (or a Subsidiary) may enter into at any time in the future,
holds as of the date hereof in excess of 50% of the voting securities, and (b)
waives as a condition to the entry by KFOC into this Agreement, any claim or
cause of action, regardless of when arising, that may seek to limit, enjoin,
hinder or reduce the full value, exercise or enjoyment by KFOC or any of its
affiliates of any asset or right any of them may have with respect to the
Company, or that might seek damages from KFOC or any of its affiliates as a
result the exercise or failure to exercise any such asset or right, in each case
solely to the extent such claim or cause of action is based on that ownership by
KFOC or any of its affiliates of equity in the Company or the exercise by any of
them of any right associated with such ownership (and, for purpose of clarity,
excluding any claim based on or arising out of a violation by KFOC of any of its
representations, warranties or covenants made in the Transaction Documents).
6.19 ADJUSTMENTS IN SHARE NUMBERS AND PRICES. In the event of any
stock split, subdivision, dividend or distribution payable in Common Shares (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly Common Shares), combination or other similar
recapitalization or event occurring after the date hereof, each reference in any
Transaction Document to a number of shares or a price per share shall be amended
to appropriately account for such event.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
42
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NORTH AMERICAN PALLADIUM LTD.
By: "Xxx X. MacNeily"(signed)
Name: Xxx X. MacNeily
Title: Vice President, Finance & CFO
Address for Notice:
000 Xxxxx Xxxxxxxx Xxxxxx X., Xxx.
0000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Ian MacNeily
With a copy to:
Gowling, Xxxxxxx Xxxxxxxxx LLP
0 Xxxxx Xxxxxxxx Xxxxx, Xxx. 0000
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Xxxxxx Xxxx
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS]
PURCHASERS:
[PURCHASER]
By: "Authorized Signatory"
Name: _________________________
Title: _________________________
Address for Notice:
Telephone No.:
Facsimile No.:
Attn:
With a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.:
Telephone No.:
Attn:
XXXXXX-XXXXXXX OIL COMPANY
By: "Xxx Xxxxxxxx" (signed)
Name: Xxx Xxxxxxxx
Title: CFO
Address for Notice:
X.X. Xxx 00000
Xxxxx, Xxxxxxxx 00000-0000
Telephone No.:
Facsimile No.:
Attn: Chief Financial Officer
With a copy to:
Xxxxxxxx Xxxxxxx, Lawyers
000 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Telephone No.:
Facsimile No.:
Attn:
EXHIBITS
A Form of Note
B Registration Rights Agreement
C Form of Warrant
D-1 Opinion of Company U.S. Counsel
D-2 Opinion of Company U.S. Counsel
E-1 Opinion of Company Canadian Counsel
E-2 Opinion of Company Canadian Counsel
F Form of Unit Warrant
