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Pacific Mercantile Company Limited
Xxxxx 000 Xxxxx Xxxxx Xxxxx
0000 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
October 8, 0000
Xxxxxxx Xxxxxxx Inc.
000 - 000 Xxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: Xxxx X. Xxxxxxxx
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Dear Sirs:
We understand that Midland Holland Inc. (the "Corporation") proposes to
issue to holders of its issued and outstanding common shares ("Common Shares")
rights ("Rights") to subscribe for 2,532,623 Common Shares at a price of
US$0.15 per share (the "Rights Offering"). Each holder of Common Shares will
be entitled to receive one Right for each Common Share held. One Right will
entitle the holder to purchase one Common Share at a price of US$0.15 per
share. Any holder of Common Shares who exercises his right (the "Basic
Subscription Right") to subscribe for all the Common Shares that can be
initially purchased upon exercise of all Rights issued to such holder shall be
entitled to subscribe for, at the price of US$0.15 per share, additional
Common Shares (the "Additional Subscription Privilege") in the manner to be
set forth in the rights offering circular of the Corporation dated October 8,
1999 (the "Rights Offering Circular"). The Rights shall be in form and terms
satisfactory to us, acting reasonably.
Upon and subject to the following terms and conditions, Pacific Mercantile
Company Limited (the "Standby Purchaser") hereby agrees to purchase from the
Corporation, and the Corporation hereby agrees to sell to the Standby
Purchaser, at the price of US$0.15 per share, all of the Common Shares not
otherwise purchased under the Rights Offering, including both the Basic
Subscription Right and the Additional Subscription Privilege, to a maximum of
2,000,000 Common Shares.
For the purposes of this agreement, the terms "material change", "material
fact" and "misrepresentation" shall have the respective meanings ascribed
thereto in the Securities Act (British Columbia).
The following are the terms and conditions of the agreement between the
Corporation and the Standby Purchaser:
1. The Common Shares to be issued to the Standby Purchaser hereunder shall be
duly and validly authorized and issued and shall be outstanding as fully
paid and non-assessable.
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2. The Corporation represents and warrants to the Standby Purchaser that it
has prepared and filed with the British Columbia Securities Commission
under the Securities Act (British Columbia) and under the applicable laws
of each of the other provinces of Canada (the Province of British Columbia
and such other provinces being collectively referred to as the "Qualifying
Provinces") a Rights Offering Circular relating to the proposed
distribution of Rights.
3. The closing of the purchase by the Standby Purchaser and sale by the
Corporation of Common Shares hereunder shall be completed at the offices
of the Corporation, at Xxxxx 000, 000 Xxxxx Xxxxxx, Xxxxxxxxx, X.X. X0X
0X0 at 4:00 p.m. (Vancouver time) on the same day as closing occurs under
the Additional Subscription Privilege or at such other time and on such
other date and at such other place as the Corporation and the Standby
Purchaser may agree upon (the "Time of Closing" and "Closing Date",
respectively), provided that it shall be a condition of the Standby
Purchaser's obligations under this agreement that the Rights expire not
later than November 12, 1999, and that closing of the purchase of Common
Shares by the Standby Purchaser hereunder occur not later than November
12, 1999. At the Time of Closing on the Closing Date, there shall be
delivered by the Corporation to the Standby Purchaser:
(a) one definitive certificate representing the Common Shares to be
purchased by the Standby Purchaser hereunder registered in the name
of the Standby Purchaser or its nominee;
(b) a certificate of Montreal Trust Company of Canada, as registrar and
transfer agent for the shares of the Corporation, as to the number of
shares of each class (including Common Shares) in the capital of the
Corporation outstanding as at a date not more than three business
days prior to the Closing Date; and
(c) such further documentation as may be contemplated herein or as the
Standby Purchaser may reasonably require,
against payment by certified cheque to the Corporation of the aggregate
purchase price for the Common Shares to be purchased by the Standby
Purchaser hereunder.
4. The Corporation represents, warrants, covenants and agrees to and with the
Standby Purchaser that:
(a) at the respective times of filing and at the Time of Closing, the
Rights Offering Circular did or will, as the case may be, comply with
the requirements, if any, of the securities laws pursuant to which it
has been filed and the respective regulations thereunder; provided
that the foregoing shall not apply to any information or statements
contained in the Rights Offering Circular relating to the Standby
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Purchaser which the Standby Purchaser has specifically approved in
writing for inclusion in such Rights Offering Circular;
(b) the Corporation has promptly informed and will promptly inform the
Standby Purchaser in writing during the period prior to the Time of
Closing of the full particulars of any material change (actual,
anticipated, proposed or prospective, financial or otherwise) in the
assets, liabilities (contingent or otherwise), business, affairs,
operations, financial condition or capital of the Corporation and its
subsidiaries taken as a whole or of any change in any material fact
contained or referred to in the Rights Offering Circular, or any
amendment thereto, which is, or may be, of such a nature as to render
the Rights Offering Circular untrue, false or misleading in any
material respect or result in a misrepresentation therein;
(c) other than as has been publicly disclosed prior to the date hereof
and except as contemplated herein, there has been no material change
(actual, anticipated, proposed or prospective, whether financial or
otherwise) in the assets, liabilities (contingent or otherwise),
business, affairs, operations, financial condition or capital of the
Corporation and its subsidiaries taken as a whole since December 31,
1998;
(d) the Corporation will take or cause to be taken all steps as may be
necessary to ensure that the distribution of the Rights, the Common
Shares issuable upon exercise of the Rights and the Common Shares to
be purchased by the Standby Purchaser hereunder pursuant to the
Rights Offering Circular complies with all applicable securities laws
and regulations and the Corporation will use its best efforts to
cause such distribution to take place in accordance with all such
laws, regulations, rules, policies and notices;
(e) the Corporation will immediately notify the Standby Purchaser in
writing of any demand, request or inquiry by any securities
regulatory authority or other governmental or regulatory body
concerning any matter relating to the affairs of the Corporation, the
Rights Offering or any other matter contemplated by this agreement
and of the issuance, or threatened issuance, by any such authority of
any cease trading or similar order or ruling relating to any
securities of the Corporation. Any notice delivered to the Standby
Purchaser as aforesaid shall contain reasonable details of the
demand, request, inquiry, order or ruling in question;
(f) the Corporation will deliver promptly to the Standby Purchaser copies
of all correspondence which may be sent to, or received from, any
securities regulatory authority or other governmental or regulatory
body by or on behalf of the Corporation which in any way relates to
the Rights Offering or the matters contemplated by this agreement;
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(g) Rights certificates representing the Rights shall be delivered to
holders of Common Shares entitled to receive same promptly following
the record date for determining holders of Common Shares entitled to
receive Rights and, upon such delivery, the Rights will be validly
issued and outstanding and the holders thereof will be entitled to
the rights and privileges relating thereto described in the Rights
Offering Circular;
(h) upon the exercise of Rights in accordance with the provisions
thereof, the Common Shares issued by the Corporation in connection
therewith will be validly issued and outstanding as full paid and
non-assessable;
(i) the authorized capital of the Corporation consists of an unlimited
number of Common Shares of which there were, as at October 8, 1999,
2,532,623 Common Shares issued and outstanding. In addition, as at
October 8, 1999, there were outstanding options to purchase 120,000
Common Shares of the Corporation and outstanding warrants to acquire
an aggregate of 200,000 Common Shares;
(j) except as set forth in subsection (i) above, no person, firm or
corporation has any agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an
agreement or option for the purchase from the Corporation of any
Common Shares or other securities of the Corporation;
(k) the Corporation is not in default or breach of any contract,
agreement, indenture or other instrument to which it is a party and
which is material to the Corporation and there exists no state of
facts which, after notice or lapse of time or both, would constitute
such a default or breach;
(l) this agreement has been duly authorized, executed and delivered by
the Corporation and constitutes legal, valid and binding obligations
of the Corporation enforceable in accordance with its terms;
(m) the Corporation will cause Montreal Trust Company of Canada to
deliver to the Standby Purchaser, as soon as is practicable following
the expiry date of the Rights and as soon as is practicable following
the deadline for receipt by Montreal Trust Company of Canada of
payment of the subscription price for Common Shares to be purchased
under the Additional Subscription Privilege, details concerning the
total number of Common Shares duly subscribed and paid for under the
Basic Subscription Right and the Additional Subscription Privilege;
and
(n) the Corporation will use such reasonable best efforts as the Standby
Purchaser may reasonably request to enforce payment in respect of, or
to otherwise ensure the valid exercise of, all Rights purported to be
exercised under either the Basic Subscription Right or the Additional
Subscription Privilege.
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5. Whether or not the issuance of the Rights and the sale of Common Shares to
the Standby Purchaser shall be completed, all expenses of or incidental
thereto and to all matters in connection with the transactions herein set
out shall be borne by the Corporation, including, without limitation, the
expenses payable in connection with the qualification of the Rights and
Common Shares for distribution or distribution to the public, as the case
may be, the fees and expenses of counsel to the Corporation, the fees and
expenses of counsel to the Standby Purchaser and its financial advisors
and all other out-of-pocket expenses of the Standby Purchaser, including
all costs incurred in connection with the preparation, translation and
printing of the Rights Offering Circular.
6. The Corporation covenants and agrees to protect, indemnify and hold
harmless the Standby Purchaser for and on behalf of itself and for and on
behalf of and in trust for each of its directors, officers, employees and
agents from and against any and all losses, claims, damages, liabilities,
costs or expenses caused or incurred:
(a) by reason of or in any way arising, directly or indirectly, out of
any misrepresentation or alleged misrepresentation in the Rights
Offering Circular;
(b) by reason of or in any way arising, directly or indirectly, out of
any order made or inquiry, investigation or proceeding commenced or
threatened by any securities regulatory authority or other competent
authority in Canada or the United States or before or by any court,
tribunal or other authority, domestic or foreign, based upon or
relating to the offering of Rights or the sale of Common Shares to
the Standby Purchaser hereunder including, without limitation, any
actions taken or statements made by the Corporation or any investment
dealer acting on its behalf in connection with the Rights Offering or
any statement or omission or alleged statement or omission in the
Rights Offering Circular or any other document relating to the Rights
Offering; or
(c) by reason of or in any way arising, directly or indirectly, out of
any breach or default of or under any representation, warranty,
covenant or agreement of the Corporation contained herein.
The indemnification contained in this section will not apply in respect of
any losses, claims, damages, liabilities, costs or expenses caused or
incurred by reason of or arising out of any misrepresentation, order,
inquiry, investigation or other matter or thing referred to herein which
is based upon or results from any information relating solely to the
Standby Purchaser contained in the Rights Offering Circular that has been
approved by the Standby Purchaser in writing for inclusion in such Rights
Offering Circular or that results primarily from any action taken by the
Standby Purchaser which is contrary to applicable law or any published
policy of any securities regulatory authority.
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In the event that any claim, action, suit or proceeding, including,
without limitation, any inquiry or investigation (whether formal or
informal), is brought or instituted against any of the persons or
corporations in respect of which indemnification is or might reasonably be
considered to be provided for herein, such person or corporation (an
"indemnified party") shall promptly notify the Corporation and the
Corporation shall promptly retain counsel who shall be reasonably
satisfactory to the indemnified party to represent the indemnified party
in such claim, action, suit or proceeding, and the Corporation shall pay
all of the reasonable fees and disbursements of such counsel relating to
such claim, action, suit or proceeding.
Notwithstanding anything herein contained, neither the Corporation nor the
Standby Purchaser shall agree to any settlement of any such claim, action,
suit or proceeding unless the other has consented in writing thereto, and
the Corporation shall not be liable for any settlement of any such claim,
action, suit or proceeding unless it has consented in writing thereto.
7. The following are conditions to the Standby Purchaser's obligation to
purchase Common Shares hereunder:
(a) all documents required to be delivered to the Standby Purchaser
hereunder on or prior to the Time of Closing will have been so
delivered and will be in form and substance satisfactory to the
Standby Purchaser, acting reasonably;
(b) the representations and warranties of the Corporation contained
herein shall be true and accurate as of the Time of Closing as if
made on and as of such time;
(c) the Corporation shall have duly fulfilled and complied with all of
its respective covenants contained herein; and
(d) the Corporation will have made or obtained all necessary filings,
approvals, orders, rulings and consents of all relevant securities
regulatory authorities and other governmental and regulatory bodies
required in connection with the Rights Offering or the purchase of
Common Shares by the Standby Purchaser as contemplated in this
agreement.
8. The Corporation agrees that the conditions contained in section 7 will be
complied with so far as the same relate to acts to be performed or caused
to be performed by the Corporation, that it will use its reasonable best
efforts to cause such conditions to be complied with and that, if any of
the said conditions are not complied with, the Standby Purchaser may give
notice to the Corporation terminating the Standby Purchaser's obligations
hereunder and in such event the obligations of the Standby Purchaser
hereunder shall be at an end.
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9. All warranties, representations, covenants and agreements of the
Corporation contained herein or contained in any document submitted
pursuant to this agreement and in connection with the transaction of
purchase and sale herein contemplated shall survive the purchase of Common
Shares by the Standby Purchaser and continue in full force and effect
notwithstanding any investigation, inquiry or other steps which may be
taken by or on behalf of the Standby Purchaser.
10. All terms and conditions of this agreement shall be construed as
conditions, and any breach or failure to comply with any such term or
condition shall entitle the Standby Purchaser to terminate its obligations
to purchase the Common Shares by written notice to that effect given to
the Corporation prior to the Time of Closing. It is understood that the
Standby Purchaser may expressly waive in whole or in part, or extend the
time for, compliance with any of such terms and conditions without
prejudice to the rights of the Standby Purchaser in respect of any other
such term or condition of any other or subsequent breach or non-compliance
with that or any other term or condition, provided that in order to be
binding on the Standby Purchaser, any such waiver or extension must be in
writing.
11. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered, in the case of the
Corporation, at its address on page 1 hereof, and in the case of the
Standby Purchaser, at Xxxxx 000 Xxxxx Xxxxx Xxxxx 0000 0xx Xxxxxx X.X.,
Xxxxxxx, Xxxxxxx X0X 0X0.
12. Time shall be of the essence hereof.
13. Neither of the parties hereto shall issue any press release or public
announcement relating to matters provided for herein without the approval
of the other party hereto, which approval may not be unreasonably
withheld.
14. This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
15. This agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
16. This agreement may be executed by facsimile and in any number of
counterparts, each of which shall constitute an original, and all of which
shall constitute one and the same agreement.
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If this letter accurately reflects the terms of the transactions which we
are to enter into and if such terms are agreed to, please communicate
acceptance by executing where indicated below and delivering to the Standby
Purchaser two copies of this letter on or before 4:00 p.m. on October 8, 1999.
Yours very truly,
PACIFIC MERCANTILE COMPANY LIMITED
Per: /s/ Xxxxx Eng
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Xxxxx Eng
The foregoing accurately reflects the terms of the transactions which we
are to enter into and such terms are hereby agreed to and accepted.
DATED this 8th day of October, 1999.
MIDLAND HOLLAND INC.
Per: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
