EXHIBIT 10.1
AGENCY AGREEMENT
June 22, 2004
Adsero Corp.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxx
Chief Financial Officer
Dear Sirs:
Re: Offering of Special Warrants
The undersigned, DGM Bank & Trust Inc. (the "AGENT"), understands that Adsero
Corp. (the "CORPORATION") proposes to issue and sell (the "OFFERING"), subject
to the terms and conditions set out below, up to 4,250,000 special warrants (the
"SPECIAL WARRANTS") at a price of US$1.00 per Special Warrant (the "PURCHASE
PRICE"), for maximum gross proceeds of US$4,250,000. The proceeds of the Second
Offering (as subsequently defined) will be held in escrow pending the closing of
the acquisition by the Corporation of Teckn-O-Laser Global Inc.
Upon and subject to the terms and conditions set forth herein, the Corporation
hereby appoints the Agent to act as the Corporation's exclusive Agent to effect
the sale of the Special Warrants under the Offering, and the Agent hereby agrees
to act as the agent of the Corporation for such purposes and to effect such sale
of the Special Warrants on its behalf on a best efforts basis to Purchasers (as
hereinafter defined) of the Special Warrants resident in the United States, the
Canadian Offering Jurisdictions (as hereinafter defined) or in those other
jurisdictions outside of Canada where the Special Warrants may be lawfully sold
pursuant to the terms and conditions hereof. Sale of the Special Warrants to
Purchasers who are resident in the United States, if any, will only occur in the
Second Offering (as hereinafter defined) and will be made solely to accredited
investors in compliance with Rule 5.06 of Regulation D under the Securities Act
of 1933, as amended, and all sales of the Special Warrants to Purchasers who are
not resident in the United States will be made in compliance with Regulation S
under the Securities Act of 1933, as amended. It is understood and agreed that
the Agent is under no obligation to purchase any of the Special Warrants,
although the Agent may subscribe for Special Warrants if it so desires.
The Offering shall be comprised of a first offering consisting of up to 750,000
Special Warrants (the "FIRST OFFERING") and a second offering consisting of up
to 3,500,000 Special Warrants (the "SECOND OFFERING"). In the First Offering,
each Special Warrant is exercisable, for no additional consideration, to receive
one A unit ("A UNIT"). Each A Unit consists of one share of common stock
(US$.001 par value) in the capital of the Corporation (a "COMMON SHARE") and one
common share purchase warrant (each whole common share purchase warrant, a
"WARRANT") of the Corporation. In the Second Offering, each Special Warrant is
exercisable, for no additional consideration, to receive one B Unit ("B UNIT").
Each B Unit consists of one Common Share and one-half of a Warrant. Each Warrant
will entitle the holder to purchase one Common Share at a price of US$1.50 at
any time prior to 5:00 p.m. (eastern standard time) on the date that is
twenty-four (24) months from the First Closing Date (as hereinafter defined).
The Special Warrants shall be exercisable by the holder at any time on or before
5:00 p.m. (eastern standard time) on the date (the "EXPIRY DATE") that is 30
days following the First Closing Date. Special Warrants that are not exercised
prior to 5:00 p.m. (eastern standard time) on the Expiry Date will be deemed
exercised immediately prior thereto without any further action by the holder.
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DEFINITIONS
In this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:
"AGREEMENT" means the agreement resulting from the acceptance by the Corporation
of the offer made hereby;
"BROKER WARRANTS" shall have the meaning ascribed thereto in subparagraph 2(a);
"BUSINESS DAY" means a day which is not a Saturday, Sunday or statutory or civic
holiday in the City of Toronto, Canada;
"CANADIAN OFFERING JURISDICTIONS" means each of the provinces of Canada;
"CLOSING" means the closing on the First Closing Date or the Second Closing Date
of the transaction of purchase and sale in respect of the Special Warrants as
contemplated by this Agreement;
"CLOSING TIMES" means 11:00 a.m. (eastern standard time) on the First Offering
Closing Date and the Second Offering Closing Date or such other time on such
dates as the Corporation and the Agent may agree;
"FIRST OFFERING CLOSING DATE" means June 30, 2004 or such other date as the
Corporation and the Agent may mutually agree upon in writing for the Closing of
the First Offering;
"INDEMNIFIED PARTY" shall have the meaning ascribed thereto in subparagraph (a);
"INTELLECTUAL PROPERTY" shall have the meaning ascribed thereto in subparagraph
(a)(xix);
"LICENCES" shall have the meaning ascribed thereto in subparagraph (a)(xix);
"MATERIAL LEASED PREMISES" shall have the meaning ascribed thereto in
subparagraph (a)(xxi);
"MISREPRESENTATION", "MATERIAL FACT", "MATERIAL CHANGE", "SUBSIDIARY",
"AFFILIATE", "ASSOCIATE", and "DISTRIBUTION" have the respective meanings
ascribed thereto in the Securities Act (Ontario);
"PERSON" means any individual, corporation, partnership, joint venture,
association, trust or other legal entity;
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"PURCHASERS" means the persons (which may include the Agent) who, as purchasers,
acquire Special Warrants by duly completing, executing and delivering
Subscription Agreements and permitted assignees or transferees of such persons
from time to time;
"SECURITIES LAWS" means all applicable securities laws in each of the United
States, the Canadian Offering Jurisdictions and in any other jurisdiction in
which the Offering may be offered or sold, and the respective regulations, rules
and instruments made thereunder, together with applicable published fee
schedules, prescribed forms, policy statements, orders, blanket rulings and
other regulatory instruments of the securities regulatory authorities in such
jurisdictions;
"SECOND OFFERING CLOSING DATE" means July 31, 2004 or such other date as the
Corporation and the Agent may mutually agree upon in writing for the Closing of
the Second Offering;
"SUBSCRIPTION AGREEMENT" means a subscription agreement in the form agreed upon
by the Agent and the Corporation pursuant to which Purchasers agree to subscribe
for and purchase the Special Warrants herein contemplated and shall include, for
greater certainty, all schedules thereto;
"SUBSIDIARY" shall have the meaning ascribed thereto in subparagraph (a)(ii);
"UNDERLYING SECURITIES" means the Common Shares and Warrants issuable upon
exercise of the Special Warrants; and
"WARRANT SHARES" means the Common Shares issuable on exercise of the Warrants.
TERMS AND CONDITIONS
1. (a) SALE ON EXEMPT BASIS. The Agent hereby agrees to use its best
efforts to arrange for Purchasers of the Special Warrants:
in the Canadian Offering Jurisdictions in compliance with all
applicable Securities Laws; and
in such other jurisdictions in compliance with all applicable
securities laws of such other jurisdictions.
APPOINTMENT OF CO-AGENTS AND SUB-AGENTS. The Corporation agrees that the
Agent will be permitted to appoint other registered dealers (or
other dealers duly qualified in their respective jurisdictions) as
co-agents or sub-agents to form an agency group to assist in the
Offering and to participate in the soliciting of offers to purchase
Special Warrants. The Corporation agrees that the Agent will have
the exclusive right to select agency group members and to control
agency group arrangements and may determine the remuneration payable
to such other dealers appointed by it (provided that the Agent shall
be responsible for the payment of such remuneration) provided that
any co-agent or sub-agent appointed by the Agent pursuant to this
subparagraph 0(b) shall comply with the representations, warranties
and covenants of the Agent in subparagraphs (b)(i), (ii) and (iii)
hereof.
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FILINGS. The Corporation undertakes to file or cause to be filed all forms
or undertakings required to be filed by the Corporation in
connection with the purchase and sale of the Special Warrants so
that the distribution of the Special Warrants may lawfully occur
without the necessity of filing a prospectus or an offering
memorandum in the United States or Canada, and the Agent undertakes
to use its commercially reasonable best efforts to cause Purchasers
of Special Warrants to complete any forms required by applicable
Securities Laws. All fees payable in connection with such filings
shall be at the expense of the Corporation. The Agent will notify
the Company prior to offering to sell the Special Warrants to
Purchasers in a specific State, Province or other jurisdiction to
ensure compliance with all applicable regulatory requirements with
respect to the offering of securities in such jurisdictions.
NO OFFERING MEMORANDUM. Neither the Corporation nor the Agent shall;
(i) provide to prospective purchasers any document or other material
that would constitute an offering memorandum within the meaning of
applicable Securities Laws; or (ii) engage in any form of general
solicitation or general advertising in connection with the offer and
sale of the Special Warrants, including but not limited to, causing
the sale of the Special Warrants to be advertised in any newspaper,
magazine, printed public media or similar medium of general and
regular paid circulation, broadcast over radio, television or
telecommunications, including electronic display, relating to the
offer and sale of the Special Warrants or Underlying Securities
whose attendees have been invited by general solicitation or
advertising.
2. (b) COMMISSION. In consideration of the Agent's services in (i)
obtaining Purchasers for the Special Warrants and assisting in the
completion of the Offering of Special Warrants contemplated by this
Agreement; (ii) distributing, both directly and through other
registered dealers and brokers, the Special Warrants in the United
States, the Canadian Offering Jurisdictions and any other
jurisdiction in which the Special Warrants or Underlying Securities
shall be offered or sold; and (iii) all other matters in connection
with the issue and sale of the Special Warrants in the United
States, the Canadian Offering Jurisdictions and any other
jurisdiction in which the Special Warrants or Underlying Securities
shall be offered or sold, the Corporation shall pay to the Agent at
Closing a commission equal to 10% of the gross proceeds realized by
the Corporation in respect of the sale of the Special Warrants,
subject to subparagraph 2 (b), and the gross proceeds raised by the
Corporation from the date hereof up to and including the Second
Offering Closing Date, excluding subordinated debt (such as the
proposed Dancap Private Equity Inc. transaction) and bank financing
(the "COMMISSION"). The Agent may elect to receive the Commission in
cash or in the form of Special Warrants representing 10% of the
Special Warrants sold pursuant to the Offering, or some combination
thereof as elected by the Agent in written notice to the
Corporation. The obligation of the Corporation to pay the Commission
shall arise at the Closing and the Commission shall be fully earned
by the Agent at that time.
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(b) PRESIDENT'S LIST. The Corporation acknowledges that an amount
equivalent to the cash component of the Commission will be withheld
from the proceeds of the Offering in respect of the Commission. The
Corporation and the Agent will agree upon a president's list of
investors that will include management and existing shareholders as
set out in Schedule "A" to this Agency Agreement (the "PRESIDENT'S
LIST"). If any person on the President's List subscribes for Special
Warrants, the Commission shall be reduced to 5% with respect to the
amount of such subscription. The Corporation reserves the right to
add persons to the President's List until the Second Offering
Closing Date and all such additions will be submitted to the Agent
in writing at the time of effecting such additions.
(c) BROKER WARRANTS. The Corporation shall issue to the Agent at Closing
that number of Special Warrants that is equal to 10% of the Special
Warrants sold in each of the First Offering and the Second Offering
(the "BROKER WARRANTS").
(d) WORK FEE. Provided that aggregate gross proceeds of not less than
US$500,000 are realized by the Corporation in respect of the sale of
the Special Warrants in the First Offering, the Corporation shall
issue to the Agent 100,000 Common Shares on the First Offering
Closing Date.
(e) BREAK FEE. The Corporation shall pay to the Agent a fee of
US$212,500, together with all of the Agent's expenses and
disbursements if the Corporation decides not to proceed with the
Offering, except where the decision not to proceed is directly
related to the gross negligence or malfeasance of the Agent or due
to Agent's failure to raise gross proceeds of US$4,250,000 inclusive
of proceeds raised from President's List subscribers.
3. FIRST RIGHT OF REFUSAL - FUTURE FINANCINGS. Provided that aggregate gross
proceeds of at least US$750,000 are realized by the Corporation in respect of
the sale of the Special Warrants, the Corporation shall grant to the Agent a
right of first refusal to act as lead agent or underwriter or lead advisor with
respect to any offering of securities or any acquisitions, dispositions or
takeovers, where the Corporation is the acquiror or the target, where an
investment dealer or advisor is involved or proposes to be involved, during the
period ending 24 months after the Second Offering Closing Date. The Agent shall
have a period of ten (10) days from the date of receipt of written notice from
the Corporation of any such proposed financing or transaction, in which notice
the Corporation shall set forth in reasonable detail the terms of such proposed
offering or transaction, to provide written notice to the Corporation that the
Agent intends to exercise its right of first refusal. If the Agent does not give
written notice within such ten (10) day period, it shall be deemed to have
waived its right in respect of such transaction. Should the Agent fail, or be
deemed to fail, to give notice within ten (10) days of the receipt of the
Corporation's notice, the Corporation may then make other arrangements to engage
another source to obtain financing or advice on terms no less favourable to the
Corporation than as set out in the written notice for a period of sixty (60)
days thereafter. The Agent's waiver of its right in respect of any one or more
transactions will not constitute a waiver of its right of first refusal in
respect of any other transaction. If another party is not engaged in connection
with a transaction where the Agent waives or is deemed to have waived its right
of first refusal within sixty (60) days following the date on which the ten (10)
day period set forth above expires, the transaction shall be deemed to be a new
transaction requiring the Corporation to give written notice to the Agent as set
forth above.
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4. COVENANTS. The Corporation hereby covenants to the Agent and to the
Purchasers and their permitted assigns and acknowledges that each of them is
relying on such covenants in purchasing Special Warrants, that the Corporation
shall:
(a) prior to the Closing, make available to the Agent and its
representatives all corporate, business and operating records and
financial information and to provide access to key officers in order
to permit the Agent to make a complete due diligence investigation
of the business and affairs of the Corporation, the Subsidiary and
Teckn-O-Laser Inc.;
(b) duly execute and deliver the Special Warrants and the Broker
Warrants at the Closing Time, and comply with and satisfy all terms,
conditions and covenants therein contained to be complied with or
satisfied by the Corporation;
(c) use its best efforts to fulfil or cause to be fulfilled, at or prior
to each of the First Offering Closing Date and the Second Offering
Closing Date, each of the conditions set out in paragraph 8;
(d) ensure that the Special Warrants shall be duly and validly created,
authorized and issued on payment of the purchase price therefor, and
shall have attributes corresponding in all material respects to the
description thereof set forth in this Agreement and the Subscription
Agreements;
(e) ensure that the Common Shares and the Warrants, shall, upon
issuance, in the case of the Common Shares, be duly issued as fully
paid and non-assessable securities in the capital of the
Corporation, and in the case of the Warrants be validly created, and
shall have attributes corresponding in all material respects to the
description thereof set forth in this Agreement and the Subscription
Agreements;
(f) ensure that at all times prior to the expiry thereof, sufficient
Common Shares are allotted and reserved or deposited for issuance
upon the due exercise of the Special Warrants, the Warrants and the
Broker's Warrants, as the case may be;
(g) except for securities issuances related to the Teckn-O-Laser Global
Inc. acquisition, the proposed Dancap Private Equity Inc.
transaction, and a present obligation to issue 50,000 common shares
to its US Securities Counsel, not issue or announce the issuance of
any Common Shares or other securities exercisable, convertible or
exchangeable into Common Shares (other than pursuant to the exercise
or conversion of securities outstanding as of the date hereof)
without the prior consent of the Agent, which consent shall not be
unreasonably withheld, until the Expiry Date;
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(h) as soon as practicable following the closing of the Second Offering,
file a registration statement with the Securities and Exchange
Commission with respect to the primary issuance or resale from time
to time of the Common Shares issuable upon exercise of the Special
Warrants, the Warrants and the Broker Warrants on the terms and
conditions set out in the Subscription Agreements;
shall obtain prior to the applicable Closing, all consents, approvals,
permits, authorizations or filings as may be required under
Securities Laws necessary for the execution and delivery of this
Agreement, the certificates representing the Special Warrants and
the certificates representing the Broker Warrants have been made or
obtained, as applicable;
5. MATERIAL CHANGES DURING DISTRIBUTION. During the period from the date hereof
to the completion of distribution of the Underlying Securities issuable on the
exercise of the Special Warrants, the Corporation shall promptly notify the
Agent (and, if requested by the Agent, confirm such notification in writing) of
any material change (actual, anticipated, contemplated or threatened, financial
or otherwise) in the business, affairs, operations, assets, liabilities
(contingent or otherwise) or capital of the Corporation. The Corporation shall
in good faith discuss with the Agent any fact or change in circumstances
(actual, anticipated, contemplated or threatened, and financial or otherwise)
which is of such a nature that there is reasonable doubt as to whether notice in
writing need be given to the Agent pursuant to this paragraph 5.
6. (c) REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation represents and warrants to the Agent and to the
Purchasers, and acknowledges that each of them is relying upon such
representations and warranties in purchasing Special Warrants, that:
the Corporation has been duly incorporated and is validly existing under
the laws of the State of Delaware, has all requisite power and
authority and is duly qualified to carry on its business as now
conducted and to own its properties and assets and the Corporation
has all requisite power and authority to carry out its obligations
under this Agreement, the certificates representing the Special
Warrants and the certificates representing the Broker Warrants;
excluding a Canadian acquisition subsidiary to be formed in connection
with the Teckn-O-Laser Global Inc. acquisition, the Corporation has
no material subsidiary (as defined in the Business Corporations Act
(Ontario)) or any investment in any person which is or would be
material to the business and affairs of the Corporation on a
consolidated basis other than Adsero Canada Corp. (formerly Reink
Canada Corp.) (the "SUBSIDIARY");
all of the issued and outstanding shares of the Subsidiary are owned by
the Corporation, and the Subsidiary has been duly incorporated and
is validly existing under the laws of its jurisdiction of
incorporation and has all requisite power and authority and is duly
qualified to carry on its business as now conducted and to own its
properties and assets;
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except as otherwise set forth in its SEC Reports, including any financial
statements contained therein, the Corporation and the Subsidiary are
the absolute legal and beneficial owner of, and have good and
marketable title to, all of their respective material assets, free
of all mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands whatsoever and no other property
rights are necessary for the conduct of the Corporation's or the
Subsidiary's business and there are no restrictions on the ability
of the Corporation or the Subsidiary to use, transfer or otherwise
exploit any such property rights, and neither the Corporation nor
the Subsidiary knows of any claim or basis for a claim that may
adversely affect such rights;
except as otherwise set forth in its SEC Reports, including any financial
statements contained therein, any and all agreements pursuant to
which the Corporation or the Subsidiary hold their assets are valid
and subsisting agreements in full force and effect, enforceable in
accordance with their respective terms, the Corporation or the
Subsidiary are not in material default of any of the provisions of
any such agreements nor has any such default been alleged and such
assets are in good standing under the applicable statutes and
regulations of the jurisdictions in which they are situate, all
leases and licences pursuant to which the Corporation or the
Subsidiary derives its interest in such assets are in good standing
and there has been no material default under any such leases and any
taxes required to be paid with respect to such assets to the date
hereof have been paid;
except as otherwise set forth in its SEC Reports, including any financial
statements contained therein, the Corporation and the Subsidiary do
not have any responsibility or obligation to pay any commission,
royalty, licence fee or similar payment to any person with respect
to their property rights;
except as otherwise set forth in its SEC Reports, including any financial
statements contained therein, no legal or governmental proceedings
are pending to which the Corporation or the Subsidiary is a party or
to which its property is subject that would result individually or
in the aggregate in any material adverse change in the operation,
business or condition of the Corporation or the Subsidiary and, to
the knowledge of the Corporation, no such proceedings have been
threatened against or are contemplated with respect to the
Corporation or the Subsidiary or with respect to the respective
property of the Corporation and the Subsidiary;
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the execution and delivery of each of this Agreement, the Subscription
Agreements, the certificates representing the Special Warrants and
the certificates representing the Broker Warrants, the performance
by the Corporation of its obligations hereunder or thereunder, the
issue and sale of the Special Warrants hereunder and the
consummation of the transactions contemplated in this Agreement,
including the issuance and delivery of the Underlying Securities, do
not and will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under,
(whether after notice or lapse of time or both): (A) any statute,
rule or regulation applicable to the Corporation including, without
limitation, the Securities Laws; (B) the constating documents,
by-laws or resolutions of the directors or shareholders of the
Corporation which are in effect at the date hereof; (C) any
mortgage, note, indenture, contract, agreement, instrument, lease or
other document to which the Corporation or the Subsidiary is a party
or by which it is bound; or (D) any judgment, decree or order
binding the Corporation or the Subsidiary or the property or assets
of the Corporation or the Subsidiary;
the audited consolidated financial statements of the Corporation as at
and for the year ended December 31, 2003 have been prepared in
accordance with United States generally accepted accounting
principles, and present fully, fairly and correctly in all material
respects the financial position of the Corporation as at the its
date thereof and the results of its operations and the changes in
its financial position for the periods then ended;
since March 31, 2004 (A) there has been no material adverse change
(actual, anticipated, contemplated or threatened, whether financial
or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the Corporation
on a consolidated basis; and (B) except for the Teckn-O-Laser Global
Inc. transaction and the proposed Dancap Private Equity Inc.
transaction, no transaction has been entered into or proposed by the
Corporation or the Subsidiary which is or would be material to the
Corporation or the Subsidiary other than in the ordinary course of
business;
no order, ruling or determination having the effect of suspending the
sale or ceasing the trading in any securities of the Corporation has
been issued by any regulatory authority and is continuing in effect
and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of such officers, contemplated or
threatened by any regulatory authority;
as at the First Offering Closing Date and as at the Second Offering
Closing Date, except as contemplated by this Agreement, the
Teckn-O-Laser Global Inc. transaction, and the proposed Dancap
Private Equity Inc. transaction, and other than as disclosed in the
Corporation's SEC Reports or audited consolidated financial
statements of the Corporation for the year ended December 31, 2003,
no holder of outstanding shares in the capital of the Corporation
will be entitled to any pre-emptive or any similar rights to
subscribe for any of the Common Shares or other securities of the
Corporation and no rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares in the
capital of the Corporation or the Subsidiary are outstanding;
except as set forth in the Corporation's SEC Reports or disclosed to the
Agent in writing, since March 31, 2004 neither the Corporation nor
the Subsidiary;
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has paid or declared any dividends or incurred any material capital
expenditure or made any commitment therefor,
has incurred any obligation or liability, direct or indirect, contingent
or otherwise that remains outstanding, except in the ordinary course
of business and which is not, and which in the aggregate are not,
material, or
has entered into any material transaction (other than the Teckn-O-Laser
Global Inc. transaction, the proposed Dancap Private Equity Inc.
transaction or any transaction in the ordinary course of business);
except as set forth in the Corporation's SEC Reports, or disclosed to the
Agent in writing, or related to the Teckn-O-Laser Global Inc.
acquisition, or the proposed Dancap Private Equity Inc. transaction,
none of the Corporation or the Subsidiary has approved, is
contemplating, has entered into any agreement in respect of, or has
any knowledge of:
the purchase of any material assets or any interest therein or the sale,
transfer or other disposition of any property or any interest
therein currently owned, directly or indirectly, by the Corporation
or the Subsidiary whether by asset sale, transfer of securities or
otherwise,
a change of control (by sale or transfer of Common Shares or sale of
all or substantially all of the assets of the Corporation or the
Subsidiary or otherwise) of the Corporation or the Subsidiary, or
a proposed or planned disposition of Common Shares by any principal
shareholder of the Corporation;
except as disclosed in the Corporation's SEC reports or to the Agent in
writing, to the best of the knowledge of the Corporation and the
Subsidiary, none of the directors or officers of the Corporation or
the Subsidiary or any associate or affiliate of any of the foregoing
had, has or intends to have any material interest, direct or
indirect, in the transactions contemplated by this Agreement or in
any proposed material transaction with the Corporation or the
Subsidiary which, as the case may be, materially affects, is
material to or will or may reasonably be expected to materially
affect the Corporation or the Subsidiary;
each of the Corporation and the Subsidiary has conducted and is
conducting its business in material compliance with all applicable
federal, provincial, state and municipal laws, regulations and other
lawful requirements of any governmental or regulatory body of each
jurisdiction in which it carries on business and has not received a
notice of non-compliance, or knows of, or has reasonable grounds to
know of, any facts that could give rise to a notice of
non-compliance with any such laws or regulations which would have a
material adverse effect on the Corporation or the Subsidiary;
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except as set forth in the Corporation's SEC Reports, there is no action,
proceeding or investigation (whether or not purportedly on behalf of
the Corporation or the Subsidiary) pending or, to the knowledge of
the Corporation, threatened against or affecting the Corporation or
the Subsidiary at law or in equity or before any federal,
provincial, state, municipal or other governmental department,
commission, board or agency, domestic or foreign, which could in any
way materially adversely affect the Corporation or the Subsidiary or
the condition of the Corporation or the Subsidiary or which
questions the validity of the issue of the Special Warrants, Broker
Warrants or Underlying Securities or any action taken or to be taken
by the Corporation pursuant to or in connection with this Agreement;
the minute books of the Corporation and the Subsidiary, all of which
have been made available to the Agent or its counsel, are complete
and accurate in all material respects;
each of the Corporation and the Subsidiary has all licenses, permits,
authorizations and other approvals (collectively, "LICENSES") and
the proprietary rights provided in law to all patents, trademarks,
copyrights, industrial designs, software, firmware, trade secrets,
know-how, show-how, concepts, information and other intellectual and
industrial property (collectively, "INTELLECTUAL PROPERTY")
necessary to permit it to conduct its business, except where the
failure to do so would not have a material adverse effect on the
Corporation or the Subsidiary;
each of the Corporation and the Subsidiary is the holder of and in good
standing under all of its material Licenses and is the exclusive
owner of material Intellectual Property free and clear of any
encumbrances which would have a material adverse effect on the
Corporation or the Subsidiary, and has no knowledge of any claim of
adverse ownership in respect thereof;
with respect to each leased premises which is material to the Corporation
and the Subsidiary and which the Company or Subsidiary occupies as
tenant (the "MATERIAL LEASED PREMISES"), the Corporation or
Subsidiary occupies the Material Leased Premises and has the
exclusive right to occupy and use the Material Leased Premises;
each of the leases pursuant to which the Corporation or the Subsidiary
occupies the Material Leased Premises is in good standing and in
full force and effect, and neither the Corporation nor the
Subsidiary is in breach of any material covenants, conditions or
obligations contained therein;
each of the Corporation and the Subsidiary has not used or permitted to
be used any of the Material Leased Premises or any other premises
which the Corporation or the Subsidiary occupies as tenant or any of
its owned properties or facilities, to generate, manufacture,
process, distribute, use, treat, store, dispose of, transport or
handle any pollutants, contaminants, chemicals or industrial toxic
or hazardous wastes or substances;
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except as disclosed to the Agent in writing, the properties and the
operations of the Corporation and the Subsidiary comply in all
material respects with all applicable federal, state, provincial and
local environmental, health and safety statutes, regulations and
permits, none of such properties or operations is subject to any
judicial or administrative proceeding alleging the violation of any
federal, state, provincial or local environmental, health or safety
statute or regulation or, to the knowledge of the Corporation, is
subject to any investigation;
the website of the Corporation and the Subsidiary does not contain
material information with respect to the Corporation or the
Subsidiary which is incomplete, incorrect or omits a fact so as to
render such information misleading;
except as set forth in the Corporation's SEC Report or disclosed in
writing to the Agent, neither the Corporation nor the Subsidiary
owes any money to, nor has the Corporation or the Subsidiary any
present loans to, or borrowed any monies from, or is otherwise
indebted to any officer, director, employee, shareholder or any
person not dealing at "arms length" (as such term is defined in the
Income Tax Act (Canada)) with the Corporation except for usual
employee reimbursements and compensation paid in the ordinary and
normal course of the business of the Corporation and the Subsidiary;
except as set forth in the Corporation's SEC Report or disclosed to the
Agent in writing, neither the Corporation nor the Subsidiary is a
party to any contract, agreement or understanding with any officer,
director, employee, shareholder or any other person not dealing with
it at "arm's length" (as such term is defined in the Income Tax Act
(Canada)), other than employment agreements;
each of the Corporation and the Subsidiary has filed all necessary
federal, provincial, state, local and foreign tax returns and
notices and has paid or made provision for all applicable taxes of
whatever nature to the extent such taxes have become due or have
been alleged to be due and the Corporation is not aware of any
material tax deficiencies or material interest or penalties accrued
or accruing, or alleged to be accrued or accruing thereon which have
not otherwise been provided for by the Corporation and the
Subsidiary;
except as set forth in the Corporation's SEC Reports, neither the
Corporation nor the Subsidiary has made any loans to or guaranteed
the obligations of, any person other than the Corporation or the
Subsidiary;
12
except as set forth in the Corporation's SEC Reports and except as
disclosed to the Agent in writing, to the best of the knowledge of
the Corporation, no present or former officer, director or
shareholder of the Corporation or the Subsidiary has any cause of
action, or other claim whatsoever, against, or owes any amount to,
the Corporation or the Subsidiary other than for any liabilities
reflected in the audited consolidated financial statements of the
Corporation for the year ended December 31, 2003 and claims in the
ordinary and normal course of the business of the Corporation or the
Subsidiary such as for accrued vacation pay and accrued benefits
under any employee plans;
except as set forth in the Corporation's SEC Reports, other than the usual
customary health benefit plan for all employees or as otherwise
disclosed to the Agent in writing, there is presently no material
plan in place for retirement bonus, stock option, deferred
compensation, severance or termination pay, insurance, medical,
hospital, dental, vision care, drug, sick leave, disability, salary
continuation, legal benefits, unemployment benefits, vacation,
incentive or otherwise contributed to or required to be contributed
to, by the Corporation or the Subsidiary for the benefit of any
current or former director, officer, employee or consultant of the
Corporation or the Subsidiary and, to the extent that any such
employee benefit plan is in place, each such employee plan has been
maintained in compliance with its terms and with the requirements by
any and all statutes, orders, rules and regulations that are
applicable to each such employee plan; neither the Corporation nor
the Subsidiary currently has and has not had any pension plan;
except as set forth in the Corporation's SEC Reports, all material
accruals for unpaid vacation pay, premiums for unemployment
insurance, health premiums, pension plan premiums, accrued wages,
salaries and commissions and employee benefit plan payments have
been reflected in the books and records of the Corporation and the
Subsidiary and the Corporation is up-to-date with respect to all
statutory remittances required in respect thereof;
neither the Corporation nor the Subsidiary has made any contracts with any
labour union or employee association nor made commitments to or
conducted negotiations with any labour union or employee association
with respect to any future agreement and the Corporation is not
aware of any current attempts to organize or establish any labour
union or employee association nor is there any certification of any
such union with regard to a bargaining unit;
this Agreement has been duly authorized, executed and delivered by the
Corporation and constitutes a valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with
its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting the rights of creditors generally and
except as limited by the application of equitable principles when
equitable remedies are sought, and by the fact that rights to
indemnity, contribution and waiver, and the ability to sever
unenforceable terms, may be limited by applicable law;
13
each of this Agreement, the Subscription Agreements, the Special Warrants
and the Broker Warrants has been duly authorized and constitutes, or
upon execution and delivery thereof will constitute, a valid and
binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting the rights of
creditors generally and except as limited by the application of
equitable principles when equitable remedies are sought, and by the
fact that rights to indemnity, contribution and waiver, and the
ability to sever unenforceable terms, may be limited by applicable
law;
all necessary corporate action has been taken by the Corporation to
allot and authorize the issuance of the Special Warrants, the
Underlying Securities, the Warrant Shares, and the Broker Warrants
and, upon due exercise of the Special Warrants and the exercise of
the Warrants and the Broker Warrants in accordance with the
provisions thereof, the Common Shares and Warrant Shares (as the
case may be) will be validly issued as fully paid and non-assessable
securities in the capital of the Corporation;
the authorized capital of the Corporation consists of 100,000,000 Common
Shares, $.001 par value per share, and 20,000,000 shares of
Preferred Xxxxx, x.0000 par value per share, of which 10,925,755
Common Shares and no Preferred Shares are issued and outstanding.
All of the issued and outstanding common shares are fully paid and
non-assessable;
other than the Agent (and its co-agents or sub-agents) there is no person
acting or purporting to act at the request or on behalf of the
Corporation, that is entitled to any brokerage or finder's fee in
connection with the transactions contemplated by this Agreement;
the Corporation has duly complied with all the terms, covenants and
conditions of this Agreement on its part to be complied with through
the date hereof; and
the Corporation and the Subsidiary have not withheld, and will not
withhold, from the Agent any facts relating to the Corporation, the
Subsidiary or to the Offering of the Special Warrants that would be
material to a prospective purchaser of the Special Warrants.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENT. The Agent hereby
represents, warrants and covenants to the Corporation and
acknowledges that the Corporation is relying upon such
representations and warranties, that:
14
in respect of the offer and sale of the Special Warrants, the Agent
will comply with all applicable Securities Laws and all applicable
laws of the jurisdictions in which it offers Special Warrants;
the Agent and its representatives have not engaged in or authorized, and
will not engage in or authorize, any form of general solicitation or
general advertising in connection with or in respect of the Special
Warrants or the Underlying Securities in any newspaper, magazine,
printed media of general and regular paid circulation or any similar
medium, or broadcast over radio or television or otherwise or
conducted any seminar or meeting concerning the offer or sale of the
Special Warrants or the Underlying Securities whose attendees have
been invited by any general solicitation or general advertising;
the Agent has not and will not solicit offers to purchase or sell the
Special Warrants so as to require the filing of a prospectus with
respect thereto or the provision of a contractual right of action
under the laws of any jurisdiction; and
the Agent is an "accredited investor" as defined in Ontario Securities
Commission Rule 45-501.
It is understood and agreed that the Corporation and, for purposes of the
opinions to be delivered pursuant to paragraph 8, counsel to the
Corporation, will rely on the accuracy and truth of the representations
and warranties set forth in this subparagraph 6(b).
7. SPECIAL WARRANT CLOSING DELIVERIES. The purchase and sale of the Special
Warrants shall be completed at the Closing Times at the offices of Xxxxx Winter
LLP, Toronto, or at such other place as the Agent and the Corporation may agree
upon. At or prior to the Closing Times, the Corporation shall duly and validly
deliver to the Agent, certificates in definitive form representing Special
Warrants, registered in the names of such Purchasers or as indicated on their
respective Subscription Agreements, against payment at the direction of the
Corporation of the subscription price therefor, in lawful money of the United
States by certified cheque or banker's draft.
8. SPECIAL WARRANT CLOSING CONDITIONS. Each Purchaser's obligation to purchase
the Special Warrants, as the case may be, at the Closing Time shall be
conditional upon the fulfilment at or before the Closing Time of the following
conditions:
the Agent shall have received at the Closing Time certificates dated the
Closing Date, signed by an appropriate officer or officers of the
Corporation addressed to the Agent and its counsel, with respect to
the articles and by-laws of the Corporation, the resolutions of the
Corporation's board of directors relating to this Agreement, the
Special Warrants, the Broker Warrants and the transactions
contemplated hereby and thereby, the incumbency and specimen
signatures of signing officers and such other matters as the Agent
may reasonably request;
15
the Subscription Agreements, the certificates representing the Broker
Warrants and the certificates representing the Special Warrants
shall have been executed and delivered by the parties thereto in
form and substance satisfactory to the Agent and its counsel, acting
reasonably;
the Agent shall have received favourable legal opinions addressed to the
Agent, in form and substance satisfactory to the Agent's counsel,
dated the Closing Date, from Gottbetter & Partners LLP, counsel for
the Corporation and, where appropriate, counsel in the Canadian
Offering Jurisdictions or foreign jurisdictions as necessary, on
which counsel in turn may rely, and as to matters of fact, on
certificates of auditors, public officials and officers of the
Corporation, with respect to the following matters:
as to the incorporation and subsistence of the Corporation under the
laws of the State of Delaware and as to the corporate power of the
Corporation to carry on its business as presently carried on, to own
its properties and to carry out its obligations under this
Agreement, the Subscription Agreements and the Broker Warrants and
to issue the Special Warrants, the Underlying Securities, the
Warrant Shares and the Broker Warrants;
as to the incorporation and subsistence of the Subsidiary under the
laws of its jurisdiction of incorporation and as to the corporate
power of the Subsidiary to carry on its business as presently
carried on and to own its properties;
as to the authorized capital of the Corporation and the Subsidiary, the
issued and outstanding capital of the Corporation and the registered
holders of the issued and outstanding capital of the Subsidiary;
none of the execution and delivery of this Agreement, the Subscription
Agreements, the certificates representing the Special Warrants and
the Broker Warrants, the performance by the Corporation of its
obligations hereunder and thereunder, or the sale or issuance of the
Special Warrants, the Underlying Securities and the Broker Warrants
will conflict with or result in any breach of the constating
documents or by-laws of the Corporation;
each of this Agreement, the Subscription Agreements, the certificates
representing the Special Warrants, and the certificates representing
the Broker Warrants has been duly authorized, executed and delivered
by the Corporation, and constitutes a valid and legally binding
agreement of the Corporation enforceable against it in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, liquidation, reorganization, moratorium or
similar laws affecting the rights of creditors generally and except
as limited by the application of equitable principles when equitable
remedies are sought, and the qualification that the enforceability
of rights of indemnity and contribution may be limited by applicable
law;
16
the Underlying Securities have been authorized and allotted for issuance
to the holders of the Special Warrants and the Agent (as the case
may be) and, upon the due exercise of the Special Warrants, the
Warrants and the Broker Warrants in accordance with the provisions
thereof, the Common Shares forming part of the Underlying Securities
and the Warrant Shares will be validly issued as fully paid and
non-assessable securities in the capital of the Corporation;
the Special Warrants have been validly executed and issued by the
Corporation;
the issuance and sale by the Corporation of the Special Warrants to the
Purchasers and the Broker Warrants to the Agent are exempt from the
prospectus requirements of applicable Securities Laws and no
documents are required to be filed (other than specified forms
accompanied by requisite filing fees), proceedings taken or
approvals, permits, consents or authorizations obtained under the
applicable Securities Laws to permit such issuance and sale; and the
issuance of the Underlying Securities, the Warrant Shares upon the
exercise of the Special Warrants, the Warrants and the Broker
Warrants (as the case may be) is exempt from the prospectus
requirements of applicable Securities Laws subject to certain
provisos and specified resale restrictions;
the certificates representing the Special Warrants, Broker Warrants and
Warrants comply with applicable corporate law; and
such other matters as the Agent's legal counsel may reasonably request
prior to the Closing Time;
the Agent shall have received certificates of status or similar
certificates with respect to the jurisdiction in which each of the
Corporation and the Subsidiary is incorporated.
9. RIGHTS OF TERMINATION
LITIGATION. If any enquiry, action, suit, investigation or other
proceeding whether formal or informal is instituted or threatened or
any order is made by any federal, provincial, state or other
governmental authority in relation to the Corporation or any of the
officers or directors of the Corporation or any of its principal
security holders which, in the reasonable opinion of the Agent,
operates to prevent or restrict the distribution or trading of the
Special Warrants or the Underlying Securities which may reasonably
be seen to materially and adversely affect the financial markets or
the business, affairs or profitability of the Corporation or the
future market price or the present or future value of the securities
of the Corporation, the Agent shall be entitled, at its option and
in accordance with subparagraph (j) of this Agreement, to terminate
its obligations under this Agreement (and the obligations of the
Purchasers arranged by them to purchase Special Warrants, as the
case may be) by notice to that effect given to the Corporation any
time prior to the Closing Time.
17
DISASTER OUT CLAUSE. In the event that prior to the Closing Time there
should develop, occur or come into effect any occurrence of national
or international consequence or any event, action, condition, law,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the sole opinion of the Agent, adversely
affects or involves, or may adversely affect or involve, the
Canadian financial markets or the business, affairs or profitability
of the Corporation, the Agent shall be entitled at its option, in
accordance with subparagraph (j) of this Agreement, to terminate its
obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase Special Warrants, as the case
may be) by written notice to that effect given to the Corporation
prior to the Closing Time.
CHANGEIN MATERIAL FACT. In the event that prior to the Closing Time there
should occur any material change, there should be discovered any
previously undisclosed material fact, or there should occur any
material change such as is contemplated by paragraph 5, which, in
the reasonable opinion of the Agent, has or could reasonably be
expected to have a material adverse effect on the business, affairs
or profitability of the Corporation or on the market price or value
of the Special Warrants or the Underlying Securities, the Agent
shall be entitled, at its option, in accordance with subparagraph
(j), to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by it to purchase Special
Warrants, as the case may be) by written notice to that effect given
to the Corporation prior to the Closing Time.
NON-COMPLIANCE WITH CONDITIONS. The Corporation agrees that all terms and
conditions in this Agreement shall be construed as conditions and
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 best
efforts (or all commercially reasonable efforts, as applicable) to
cause such conditions to be complied with, and any breach or failure
by the Corporation to comply with any of such conditions shall
entitle the Agent, at its option in accordance with subparagraph
(j), to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by it to purchase Special
Warrants, as the case may be) by notice to that effect given to the
Corporation at or prior to the Closing Time. The Agent may waive, in
whole or in part, or extend the time for compliance with, any terms
and conditions without prejudice to its rights in respect of any
other of such terms and conditions or any other or subsequent breach
or non-compliance, provided that any such waiver or extension shall
be binding upon the Agent only if the same is in writing and signed
by it.
CEASE TRADE ORDER. In the event that any order to cease trading in
securities of the Corporation is made or threatened by a securities
regulatory authority, the Agent shall be entitled, at its option, in
accordance with subparagraph (j) of this Agreement, to terminate its
obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase Special Warrants, as the case
may be) by written notice to that effect given to the Corporation
prior to the Closing Time.
DUE DILIGENCE INVESTIGATION. In the event that the Agent, in its sole
discretion, is not satisfied with the results of its due diligence
review and investigation of the Corporation, the Agent shall be
entitled, at its option, in accordance with subparagraph (j), to
terminate its obligations under this Agreement (and the obligations
of the Purchasers arranged by it to purchase Special Warrants, as
the case may be) by written notice to that effect given to the
Corporation prior to the Closing Time.
18
MARKETOUT CLAUSE. In the event that the state of the financial markets is
such that, in the sole opinion of the Agent, it would be
unprofitable to offer or continue to offer for sale the Special
Warrants, the Agent shall be entitled, at its option, in accordance
with subparagraph (j), to terminate its obligations under this
Agreement (and the obligations of the Purchasers arranged by it to
purchase Special Warrants, as the case may be) by written notice to
that effect given to the Corporation prior to the Closing Time.
INVESTIGATIONS. In the event that there is any inquiry, action, suit
proceeding or investigation (whether formal or informal, instituted
or announced or threatened) in relation to the Corporation, or any
of the directors, officers or principal shareholders of the
Corporation, the Agent shall be entitled, at its option, in
accordance with subparagraph (j), to terminate its obligations under
this Agreement (and the obligations of the Purchasers arranged by it
to purchase Special Warrants, as the case may be) by written notice
to that effect given to the Corporation prior to the Closing Time.
REPRESENTATIONS AND WARRANTIES. In the event that any representation or
warranty given by the Corporation in this Agreement is or becomes
untrue, false or misleading, the Agent shall be entitled, at its
option, in accordance with subparagraph (j), to terminate its
obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase Special Warrants, as the case
may be) by written notice to that effect given to the Corporation
prior to the Closing Time.
EXERCISE OF TERMINATION RIGHTS. The rights of termination contained in
subparagraphs (a) to (i) may be exercised by the Agent and are in
addition to any other rights or remedies the Agent may have in
respect of any default, act or failure to act or non-compliance by
the Corporation in respect of any of the matters contemplated by
this Agreement or otherwise. In the event of any such termination,
there shall be no further liability on the part of the Agent to the
Corporation or on the part of the Corporation to the Agent except in
respect of any liability for acts or omissions prior to such
termination under paragraphs 0, 0 and 0.
10. EXPENSES. Whether or not the sale of the Special Warrants or the issuance of
the Underlying Securities upon exercise of such Special Warrants is completed,
all expenses of or incidental to the issue and delivery of the Special Warrants
and the Underlying Securities or incidental to all matters in connection with
the transactions herein set out shall be borne by the Corporation, including,
without limitation, expenses in connection with the issuance and sale of the
Special Warrants, all fees required under the Securities Laws, the fees and
expenses of counsel to the Corporation and all local counsel selected by the
Corporation, the reasonable fees and expenses of counsel to the Agent (inclusive
of disbursements and all applicable GST), the fees and expenses of the
Corporation's transfer agent (if any), the fees and expenses of all trust
companies or outside consultants (if any), all out-of-pocket expenses of the
Agent (including travel expenses), all costs incurred in connection with the
preparation for and holding of information meetings and all costs incurred in
connection with the preparation and printing of documentation required in
connection with the sale of the Special Warrants. The Agent shall provide
detailed invoices to the Corporation evidencing its expenses and shall return
any funds not required to pay such expenses to the Corporation forthwith after
completion of the transactions contemplated herein. Out-of-pocket expenses of
the Agent (other than the fees and expenses of the Agent's counsel) in excess of
$2,000 shall be pre-approved in writing by the Corporation. The Corporation
acknowledges that an amount will be withheld from the proceeds of the Offering
in respect of the Agent's out-of-pocket expenses.
19
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All warranties, representations,
covenants and agreements herein contained or contained in any documents
submitted pursuant to this Agreement and in connection with the transaction
herein contemplated shall survive the purchase and sale of the Special Warrants
and the exercise of such Special Warrants for the Underlying Securities by the
Purchasers and continue in full force and effect for the benefit of the
Purchasers for a period of two years from the last Closing Date and shall not be
limited or prejudiced by any investigation made by or on behalf of the Agent in
connection with the purchase and sale of the Special Warrants, or otherwise.
12. (d) INDEMNITY. The Corporation shall indemnify and save harmless the
Agent and/or any of its affiliates and subsidiaries and the
directors, officers, employees, agents, consultants and shareholders
of each of the Agent and/or any of its affiliates or subsidiaries
(each an "INDEMNIFIED PARTY") from and against any and all expenses,
losses (other than loss of profits), claims, actions, damages or
liabilities, joint or several (including the aggregate amount paid
in settlement of any actions, suits, proceedings or claims and the
fees and expenses of their counsel that may be incurred in advising
with respect to and/or defending any claim that may be made against
an Indemnified Party) to which the Indemnified Party may become
subject or otherwise involved in any capacity under any statute or
common law or otherwise insofar as such expenses, losses, claims,
damages, liabilities or actions arise out of or are based, directly
or indirectly, upon the performance of professional services
rendered to the Corporation by any Indemnified Party hereunder or
otherwise in connection with the issue and sale of the Special
Warrants in the United States, the Canadian Offering Jurisdictions
and any other jurisdiction in which the Special Warrants or
Underlying Securities may be offered or sold, provided, however,
that this indemnity shall not apply to the extent that a court of
competent jurisdiction in a final judgment that has become
non-appealable shall determine that:
an Indemnified Party has been negligent or dishonest or has committed
any fraudulent act or engaged in wilful misconduct in the course of
such performance or has breached any material provision of this
Agreement; and
the expenses, losses, claims, damages or liabilities, as to which
indemnification is claimed were caused by the negligence,
dishonesty, fraud, wilful misconduct or material breach of Agreement
referred to in clause (i).
20
The Corporation hereby agrees to waive any right it may have of first requiring
the Agent and/or any Indemnified Person to proceed against or enforce any other
right, power, remedy, security or claim payment from any other person before
claiming under this indemnity.
NOTIFICATION OF CLAIMS. Promptly after receipt of notice of the
commencement of any legal proceeding against an Indemnified Party or
after receipt of notice of the commencement of any investigation
which is based, directly or indirectly, upon any matter in respect
of which indemnification may be sought from the Corporation, the
Indemnified Party will notify the Corporation in writing of the
commencement thereof and the Corporation shall undertake the
investigation and defence thereof on behalf of the Indemnified
Party, as applicable, including the prompt employment of counsel
reasonably acceptable to the Indemnified Party and the payment of
all reasonable expenses. Failure by an Indemnified Party to so
notify the Corporation shall not relieve the Corporation of its
obligation of indemnification hereunder unless (and only to the
extent that) such failure results in forfeiture by the Corporation
or material impairment of its substantive rights or defences. The
Corporation shall, throughout the course of any investigation as
contemplated herein, provide copies of all relevant documentation to
the Indemnified Party, will keep the Indemnified Party advised of
the progress thereof and will discuss with the Indemnified Party all
significant actions proposed. No admission of liability and no
settlement of any action shall be made without the prior written
consent of the Corporation and the Indemnified Party, such consent
not to be unreasonably withheld or delayed.
RIGHT OF INDEMNITY IN FAVOUR OF OTHERS. With respect to any Indemnified
Party who is not a party to this Agreement, the Agent shall obtain
and hold the rights and benefits of this paragraph 0 and paragraph 0
in trust for and on behalf of such Indemnified Party.
RETAININGCOUNSEL. Notwithstanding that the Corporation shall undertake the
investigation and defence of any action, an Indemnified Party shall
have the right to employ separate counsel in any such action and
participate in the defence thereof, but the fees and expenses of
such counsel will be at the expense of the Indemnified Party unless:
(a) employment of such counsel has been authorized by the
Corporation; (b) the Corporation shall not have assumed the defence
of the action within a reasonable period of time after receiving
notice of the action; (c) the named parties to any such action
include both the Corporation and an Indemnified Party and the
Indemnified Party shall have been advised by counsel that there may
be a conflict of interest between the Corporation and Indemnified
Party, as the case may be; or (d) there are one or more legal
defences available to the Indemnified Part which are different from
or in addition to those available to the Corporation.
The Corporation agrees that in case: (i) any legal proceeding shall
be brought against the Corporation and/or an Indemnified Party by
any governmental commission or regulatory authority or any stock
exchange; or (ii) an entity having regulatory authority, either
domestic or foreign, shall investigate the Corporation and/or an
Indemnified Party, and any Indemnified Party shall be required to
testify in connection therewith or shall be required to respond to
procedures designed to discover information regarding, in connection
with, or by reason of the performance of professional services
rendered to the Corporation by the Indemnified Party, the
Indemnified Party shall have the right to employ its own counsel in
connection therewith, and the reasonable fees and expenses of such
counsel as well as the reasonable costs (including an amount to
reimburse the Indemnified Party for time spent by the Indemnified
Party in connection therewith on a per diem basis based on normal
consulting fees) and out-of-pocket expenses incurred by the
Indemnified Party in connection therewith shall be paid by the
Corporation as they occur.
21
13. (e) CONTRIBUTION. In order to provide for a just and equitable
contribution in circumstances in which the indemnity provided in
paragraph 0 would otherwise be available in accordance with its
terms but is, for any reason (other than the occurrence of any of
the events set out in paragraph (a)(i) or (ii) above), held to be
unavailable to or unenforceable by an Indemnified Party or
enforceable otherwise than in accordance with its terms, the
Corporation and the Indemnified Party shall severally contribute to
the aggregate of all claims, expenses, costs and liabilities and all
losses (other than loss of profits) of a nature contemplated in
paragraph 0 in such proportions as is appropriate to reflect not
only the relative benefits received by the Corporation on the one
hand and the Indemnified Party on the other hand, but also the
relative fault of the Corporation and the Indemnified Party, as well
as any other relevant equitable considerations. An Indemnified Party
shall not in any event be liable to contribute, in the aggregate,
any amounts in excess of such aggregate fee or any portion of such
fee actually received by the Agent.
RIGHT OF CONTRIBUTION AND INDEMNITY IN ADDITION TO OTHER RIGHTS. The
rights to contribution and indemnity provided in this paragraph 0
and paragraph 0 shall be in addition to and not in derogation of any
other right to contribution or indemnity which an Indemnified Party
may have by statute or otherwise at law and shall be binding upon
and enure to the benefit of any successors, assigns, heirs and
personal representations of the Corporation and any Indemnified
Party.
CALCULATION OF CONTRIBUTION. In the event that the Corporation may be held
to be entitled to contribution from the Agent under the provisions
of any statute or at law, the Corporation shall be limited to
contribution in an amount not exceeding the lesser of:
the portion of the full amount of the loss or liability giving rise to
such contribution for which the Agent is responsible, as determined
in subparagraph (a) above; and
the amount of the aggregate fee actually received by the Agent from the
Corporation under this Agreement.
22
NOTICE. If an Indemnified Party has reason to believe that a claim for
contribution may arise, it shall give the Corporation notice of such
claim in writing, as soon as reasonably possible, but failure to
notify the Corporation shall not relieve the Corporation of any
obligation which it may have to the Indemnified Party under this
paragraph.
14. ADVERTISEMENTS. The Corporation acknowledges that the Agent shall have the
right, subject always to clauses 0(a) and (d) of this Agreement, at its own
expense, to place such advertisement or advertisements relating to the sale of
the Special Warrants or the Underlying Securities contemplated herein
(including, without limitation, posting a notice on its website) as the Agent
may consider desirable or appropriate and as may be permitted by applicable law.
The Corporation and the Agent each agree that they will not make or publish any
advertisement in any media whatsoever relating to, or otherwise publicize, the
transaction provided for herein so as to result in any exemption from the
prospectus and registration requirements of applicable securities legislation in
any of the Canadian Offering Jurisdictions or any other jurisdiction in which
the Special Warrants or Underlying Securities shall be offered or sold being
unavailable in respect of the sale of the Special Warrant to prospective
purchasers.
15. NOTICES. Unless otherwise expressly provided in this Agreement, any notice
or other communication to be given under this Agreement (a "NOTICE") shall be in
writing addressed as follows:
If to the Corporation, to:
Adsero Corp.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telecopier: (000) 000-0000
with a copy to:
Gottbetter & Partners, LLP
000 Xxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX
00000-0000
Attention: Xxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
If to the Agent, to:
DGM Bank & Trust Inc.
Xxxxxxxx Xxxxx
Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx, W.I.
Attention: Xxxxxx X. Page
Telecopier: (000) 000-0000
with a copy to:
Xxxxx Winter LLP
000 Xxxxxxxx Xx. X.
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxxx
Telecopier: (000) 000-0000
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or to such other address as any of the parties may designate by
notice given to the others.
Each notice shall be sent to the addressee by prepaid courier or
facsimile transmission and (i) a notice which is sent by prepaid
courier shall, if delivered on a Business Day, be deemed to be given
and received on that day and, in any other case, be deemed to be
given and received on the first Business Day following the day on
which it is delivered; and (ii) a notice which is sent by facsimile
transmission shall be deemed to be given and received on the first
Business Day following the day on which it is sent.
16. TIME OF THE ESSENCE. Time shall, in all respects, be of the essence hereof.
17. UNITED STATES DOLLARS. All references herein to dollar amounts are to lawful
money of the United States of America unless specifically stated otherwise.
18. HEADINGS. The headings contained herein are for convenience only and shall
not affect the meaning or interpretation hereof.
19. SINGULAR AND PLURAL, ETC. Where the context so requires, words importing the
singular number include the plural and vice versa, and words importing gender
shall include the masculine, feminine and neuter genders.
20. ENTIRE AGREEMENT. This Agreement constitutes the only agreement between the
parties with respect to the subject matter hereof and shall supersede any and
all prior negotiations and understandings. This Agreement may be amended or
modified in any respect by written instrument only.
21. SEVERABILITY. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect or limit the validity or enforceability of
the remaining provisions of this Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
23. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement shall be
binding upon and enure to the benefit of the Corporation, the Agent and the
Purchasers and their respective executors, heirs, successors and permitted
assigns; provided that, except as provided herein or in the Subscription
Agreements, this Agreement shall not be assignable by any party without the
written consent of the others party hereto.
24. FURTHER ASSURANCES. Each of the parties hereto shall do or cause to be done
all such acts and things and shall execute or cause to be executed all such
documents, agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out the provisions and intent of this
Agreement.
25. EFFECTIVE DATE. This Agreement is intended to and shall take effect as of
the date first set forth above, notwithstanding its actual date of execution or
delivery.
26. LANGUAGE. The parties hereby acknowledge that they have expressly required
this Agreement and all notices, statements of account and other documents
required or permitted to be given or entered into pursuant hereto to be drawn up
in the English language only. Les parties reconnaissent avoir expressment
demandees que la presente Convention ainsi que tout avis, tout etat de compte et
tout autre document a etre ou pouvant etre donne ou conclu en vertu des
dispositions des presentes, soient rediges en langue anglaise seulement.
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27. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
which taken together shall form one and the same agreement.
If the Corporation is in agreement with the foregoing terms and conditions,
please so indicate by executing a copy of this letter where indicated below and
delivering the same to the Agent. Yours very truly,
DGM BANK & TRUST INC.
By: /s/ Xxxxxx Xxxx
-------------------------------
Name: Xxxxxx Xxxx
Title: President & C.E.O.
The foregoing is hereby accepted on the terms and conditions therein set forth.
DATED the 23rd day of June, 2004.
ADSERO CORP.
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
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SCHEDULE "A"
PRESIDENT'S LIST
Xx. X. Xxxxxxxx
Xx. X. Xxxx
Xx. X. Xxxxxxx
Mr. P. Trigianni
Xx. X. Xxxxxxxx
Xx.X. Xxxx
Xx. X. Xxxxxxx
Xx. X. Xxxxxx
L.I.V.N.A.
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