UNDERWRITING AGREEMENT
June 19, 2002
Spectrum Signal Processing Inc.
One Spectrum Court
000-0000 Xxxxxxxxxx Xxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
ATTENTION: XX. XXXXXX XXXXXXXXX,
VICE-PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
Dear Sirs:
Pursuant to a letter agreement dated June 6, 2002 (the "Letter Agreement")
between Spectrum Signal Processing Inc. (the "Corporation") and Sprott
Securities Inc. ("Sprott"), the Corporation agreed to issue and sell and Sprott
agreed to purchase (or find substituted purchasers for) 2,310,000 common shares
in the capital of the Corporation (the "Offered Shares"). In furtherance of the
Letter Agreement, Xxxxxx, Xxxxxxx Xxxxx Ltd. and Xxxxxxxxx XxXxxxxx & Partners
(collectively, the "Underwriters") hereby severally (but not jointly or jointly
and severally) agree to purchase, or find substituted purchasers for the Offered
Shares upon and subject to the terms and conditions contained herein at a
purchase price of $3.00 per Offered Share for aggregate gross proceeds of
$6,930,000. The offer of the Offered Shares by the Corporation is hereinafter
referred to as the "Offering". If the Corporation is not able or willing to sell
all of the Offered Shares hereunder (whether or not such action is a default
hereunder by the Corporation), the Underwriters shall not be obligated to
purchase any of the Offered Shares, but may do so if it elects to waive this
condition in accordance with the terms hereof. It is understood that the
Underwriters may arrange for substituted purchasers of the Offered Shares (i) in
Canada, it being acknowledged that sales of Offered Shares will take place only
in the Provinces of Ontario and British Columbia (the "Offering Jurisdictions");
and (ii) in other jurisdictions, other than Canada and the United States, on a
private placement basis, provided that the Corporation is not required to file a
prospectus or other disclosure document or become subject to continuing
obligations in such other jurisdictions, in each case in accordance with the
provisions of this Agreement. It is understood and agreed that the Corporation
may sell a portion of the Offered Shares directly to Institutional Accredited
Investors (as defined below) in the manner and subject to the restrictions set
forth in Section 7 of this Agreement.
1. INTERPRETATION
Unless expressly provided otherwise, where used in this Agreement or any
schedule hereto, the following terms shall have the following meanings,
respectively:
Xxxx & Berlis LLP Execution Copy: June 19, 2002
Underwriting Agreement
"1933 ACT" means the United States Securities Act of 1933, as amended;
"APPLICABLE SECURITIES LAWS" means, collectively, the applicable securities laws
of the Offering Jurisdictions, the regulations, rules, rulings and orders made
thereunder, the applicable published policy statements issued by the Securities
Commissions thereunder and the securities legislation and published policies of
each other jurisdiction the securities laws of which are applicable to the sale
of the Offered Shares on the terms and conditions set out in this Agreement;
"AUDITED FINANCIAL STATEMENTS" means the audited consolidated financial
statements of the Corporation as at and for the twelve month period ended
December 31, 2001;
"BROKER WARRANTS" shall have the meaning ascribed thereto in section 3 hereof;
"BUSINESS DAY" shall mean any day except Saturday, Sunday or a statutory holiday
in Toronto, Ontario or Vancouver, British Columbia;
"CLOSING" means the completion of the issue and sale by the Corporation of the
Offered Shares pursuant to this Agreement;
"CLOSING DATE" means the date of the Closing, namely June 19, 2002, or such
other date as the Underwriters and the Corporation may agree;
"COMMON SHARES" means the common shares in the capital of the Corporation;
"CORPORATION" means Spectrum Signal Processing Inc.;
"DISCLOSURE DOCUMENTS" means all of the documentation which has been filed by or
on behalf of the Corporation since December 31, 2001 with the relevant
securities regulatory authorities pursuant to the requirements of Applicable
Securities Laws, including all press releases filed on SEDAR;
"EXCHANGE" means the Toronto Stock Exchange;
"GROSS PROCEEDS" means the gross proceeds raised from the sale of the Offered
Shares;
"HAZARDOUS SUBSTANCES" shall have the meaning ascribed thereto in subsection
5(jj) of this Agreement;
"LETTER AGREEMENT" shall have the meaning ascribed thereto in the first
paragraph of this Agreement;
"MATERIAL AGREEMENTS" has the meaning ascribed thereto in subsection 5(n) of
this Agreement;
"MATERIAL CHANGE" means a material change for the purposes of the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws of a jurisdiction means a change in the business, operations or
capital of the Corporation that would reasonably be expected to have a
significant effect on the market price or value of any of the Corporation's
securities and includes a decision to implement such a change made by the
Corporation's board of directors or by senior management of the Corporation who
believe that confirmation of the decision by the board of directors is probable;
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"MATERIAL FACT" means a material fact for the purposes of the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws of a jurisdiction means a fact that significantly affects, or
would reasonably be expected to have a significant effect on, the market price
or value of the Corporation's securities;
"MISREPRESENTATION" means a misrepresentation for the purposes of the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws of a jurisdiction means (i) an untrue statement of a material
fact, or (ii) an omission to state a material fact that is required to be stated
or that is necessary to make a statement not misleading in the light of the
circumstances in which it was made;
"NASDAQ" means The NASDAQ National Market;
"OFFERED SHARES" shall have the meaning ascribed thereto in the first paragraph
of this Agreement;
"OFFERING" shall have the meaning ascribed thereto in the first paragraph of
this Agreement;
"OFFERING JURISDICTIONS" has the meaning ascribed thereto in the first paragraph
of this Agreement;
"PERSON" includes any individual, corporation, limited partnership, general
partnership, joint stock company or association, joint venture association,
company, trust, bank, trust company, land trust, investment trust, society or
other entity, organization, syndicate, whether incorporated or not, trustee,
executor or other legal personal representative, and governments and agencies
and political subdivisions thereof;
"PRIVATE PLACEMENT EXEMPTIONS" means (i) in respect of Ontario, the "accredited
investor" exemption under section 2.3 of Ontario Securities Commission Rule
45-501 - Exempt Distributions; (ii) in respect of British Columbia, the
"accredited investor" exemption or the "friends and family" exemption under
Multilateral Instrument 45-103 - Capital Raising Exemptions or the "$97,000"
exemption under subsections 45(2)(5) and 74(2)(4) of the Securities Act (British
Columbia);
"PURCHASERS" means, collectively, those persons or companies who are purchasing
the Offered Shares as contemplated herein;
"SECURITIES COMMISSIONS" means the applicable securities regulatory authorities
in the Offering Jurisdictions;
"SPECTRUM USA" means Spectrum Signal Processing (USA) Inc., a corporation
existing under the laws of Delaware;
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"SUBSCRIPTION AGREEMENTS" means, collectively, the subscription agreements to be
entered into between the Purchasers, the Corporation and Sprott (on behalf of
the Underwriters) in respect of the Offering;
"SUBSIDIARIES" means collectively, Spectrum USA and Spectrum Signal Processing
(UK) Inc. and "SUBSIDIARY" means any one of them;
"TIME OF CLOSING" means 10:00 a.m. (Toronto time) on the Closing Date or such
other time on the Closing Date as the Corporation and the Underwriters may
agree;
"UNDERWRITERS" shall have the meaning ascribed thereto in the first paragraph of
this Agreement;
"UNDERWRITERS' PERSONNEL" has the meaning ascribed thereto in section 12 of this
Agreement;
"UNDERWRITING FEE" shall have the meaning ascribed thereto in subsection 3(a) of
this Agreement;
"UNITED STATES" means the United States of America, its territories and
possessions, any state of the United States, and the District of Columbia;
"US SECURITIES LAWS" means the 1933 Act, all rules and regulations promulgated
thereunder and the applicable securities ("blue sky") laws of the states of the
United States; and
"WARRANT SHARES" shall have the meaning ascribed thereto in subsection 8(b) of
this Agreement.
The division of this Agreement into sections, subsections, paragraphs and other
subdivisions and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.
Unless something in the subject matter or context is inconsistent therewith,
references herein to sections, subsections, paragraphs and other subdivisions
are to sections, subsections, paragraphs and other subdivisions of this
Agreement. Unless otherwise expressly provided, all amounts expressed herein in
terms of money refer to lawful currency of Canada and all payments to be made
hereunder shall be made in such currency.
If any provision of this Agreement shall be adjudged by a competent authority to
be invalid or for any reason unenforceable, such invalidity or unenforceability
shall not affect the validity, enforceability or operation of any other
provision herein.
The following are the schedules attached to this Agreement, which schedules are
deemed to be a part hereof and are hereby incorporated by reference herein:
Schedule "A" - United States Placement Agent Certificate
Schedule "B" - List of Options, Warrants and Convertible Securities
Schedule "C" - Form of Broker Warrant Certificate
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2. NATURE OF TRANSACTION
(a) Each Purchaser shall purchase Offered Shares under a Private
Placement Exemption. The Underwriters will notify the
Corporation with respect to the identity of any such Purchaser
as soon as practicable and with a view to leaving sufficient
time to allow the Corporation to secure compliance with all
relevant regulatory requirements of the applicable Offering
Jurisdictions relating to the sale of the Offered Shares and,
in any event not later than 2:00 p.m. (Toronto time) on the
day before the Closing Date. The Corporation undertakes to
file or cause to be filed all forms or undertakings required
to be filed by the Corporation and to pay all filing fees in
connection with the purchase and sale of the Offered Shares so
that the distribution of such securities may lawfully occur
without the necessity of filing a prospectus in Canada or
comparable document elsewhere.
(b) Any offer and sale of Offered Shares in the United States or
to, or for the account or benefit of, any U.S. person (such
term being used in this Agreement as defined in Regulation S
under the 0000 Xxx) shall be made in accordance with the terms
and conditions set out in Section 7 to this Agreement. The
Corporation and each Underwriter shall, and each Underwriter
shall cause each U.S. broker-dealer through which sales of
Offered Shares in the United States are to be effected to,
comply with the terms and conditions set out herein.
(c) It is understood and agreed that the Underwriters may also
arrange for substituted purchasers of the Offered Shares in
other jurisdictions, other than Canada and the United States,
on a private placement basis, provided that the Corporation is
not required to file a prospectus or other disclosure document
or made subject to continuing obligations in such other
jurisdictions.
(d) The certificates representing the Offered Shares delivered at
Closing shall contain the following legends:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES REPRESENTED HEREBY SHALL NOT TRADE THE SECURITIES BEFORE
OCTOBER 20, 2002.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT"). THESE SECURITIES MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) IN A
TRANSACTION OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT, OR (C) IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN CONNECTION WITH ANY
TRANSFER PURSUANT TO THE FOREGOING CLAUSE (C), THERE MUST BE FURNISHED
TO THE CORPORATION A WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO THE CORPORATION TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE
REGULATION REQUIREMENTS OF ALL APPLICABLE UNITED STATES FEDERAL AND
STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA AND, IN CONNECTION WITH ANY SALE OF SUCH SECURITIES PURSUANT TO
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THE FOREGOING CLAUSE (B) AT A TIME WHEN THE CORPORATION IS A "FOREIGN
ISSUER" AS DEFINED IN RULE 902 UNDER THE U.S. SECURITIES ACT, THE
LEGEND MAY BE REMOVED BY PROVIDING A DECLARATION TO THE CORPORATION'S
TRANSFER AGENT IN SUCH FORM AS THE CORPORATION MAY REASONABLY
PRESCRIBE, TO THE EFFECT THAT THE SALE OF THE SECURITIES IS BEING MADE
IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT."
3. UNDERWRITERS' COMPENSATION
(a) In consideration for the performance of their obligations
hereunder, the Corporation shall, subject to the provisions of
this Agreement, pay to the Underwriters an aggregate fee of
$485,100 (the "Underwriting Fee"), being $0.21 for each Common
Share purchased hereunder by the Underwriters or any Purchaser
that may be substituted therefor. The Corporation acknowledges
that each of Sprott and Xxxxxxx Xxxxx Ltd. shall be entitled
to a praecipuum equal to $0.007875 per share and $0.002625 per
share, respectively. For greater certainty, such praecipua
shall be deducted from the aggregate Underwriting Fee.
(b) The Underwriters may retain one or more registered securities
brokers or investment dealers to act as selling agent in
connection with the sale of the Offered Shares but the
compensation payable to such selling agents shall be the sole
responsibility of the Underwriters.
(c) In addition to the Underwriting Fee, as additional
consideration for the performance of their obligations
hereunder, the Corporation shall issue to the Underwriters (in
such name or names as the Underwriters direct in writing) at
the Time of Closing on the Closing Date, broker warrants (the
"Broker Warrants"), substantially in the form set out in
Schedule "C" hereto, entitling the Underwriters to acquire, in
the aggregate a number of Common Shares equal to 7% of the
aggregate number of Offered Shares sold hereunder at a price
of $3.14 per share for a period of 14 months following the
Closing Date.
4. COVENANTS OF THE UNDERWRITERS
Each of the Underwriters covenants with the Corporation that it will and will
cause each U.S. Affiliate acting on its behalf to: (i) conduct activities in
connection with arranging for purchasers of the Offered Shares in compliance
with the Applicable Securities Laws and will indemnify the Corporation from all
losses incurred by it as a result of a violation by such Underwriter or selling
agent retained by it of such Applicable Securities Laws; (ii) not deliver to any
prospective Purchaser any document or material which constitutes an offering
memorandum under Applicable Securities Laws; (iii) not solicit offers to
purchase or sell the Offered Shares so as to require registration thereof or
filing of a prospectus with respect thereto or continuing obligations on the
part of the Corporation under the laws of any jurisdiction including, without
limitation, the United States of America or any state thereof, and not solicit
offers to purchase or sell the Offered Shares in any jurisdiction outside of
Canada where the solicitation or sale of the Offered Shares would result in any
statutory ongoing disclosure requirements in such jurisdiction or any
registration requirements in such jurisdiction on the part of the Corporation
except for the filing of a notice or report of the solicitation or sale; (iv)
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obtain from each Purchaser an executed Subscription Agreement in a form
reasonably acceptable to the Corporation and to the Underwriters relating to the
transactions herein contemplated, together with all documentation as may be
necessary in connection with subscriptions for Offered Shares; (v) refrain from
advertising the Offering in (A) printed media of general circulation, (B) radio,
(C) television, or (D) electronic media, and not make use of any green sheet or
other internal marketing document without the consent of the Corporation, such
consent to be promptly considered and not to be unreasonably withheld; and (vi)
comply with, and ensure that its and its selling agents and their and its
respective directors, officers, employees and affiliates comply with all
Applicable Securities Laws.
All steps which must or may be taken by the Underwriters in connection with this
Agreement, including any agreement, waiver, order, notice (other than a notice
pursuant to section 9 or section 12), direction, receipt or other action to be
made, given or taken by the Underwriters hereunder shall be made, given or taken
by Sprott on behalf of the Underwriters and the Corporation shall accept
notification of any such steps from, and shall deliver the certificates
representing the Offered Shares to, or to the order of, Sprott.
5. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to and with the Underwriters (on
their own behalf and on behalf of each of the Purchasers) that as at the date
hereof:
(a) the Corporation and each of the Subsidiaries has been duly
incorporated and is existing under the laws of its
jurisdiction of incorporation and has all requisite power and
authority necessary to, and is qualified to, carry on its
business as now conducted and to own or lease its properties
and assets in all jurisdictions in which it currently carries
on business and/or owns or leases its properties and assets;
and the Corporation has all required corporate power and
authority to allot, issue and sell the Offered Shares, to
enter into this Agreement and the Subscription Agreements, and
to carry out the provisions of each of such agreements;
(b) the authorized capital of the Corporation consists of
50,000,000 Common Shares, of which, as of the date hereof,
12,420,108 Common Shares are issued and outstanding as fully
paid and non-assessable shares in the capital of the
Corporation;
(c) the Corporation has no subsidiaries other than the
Subsidiaries and the Corporation does not beneficially own or
exercise control or direction over, 10% or more of the
outstanding voting shares of any company other than such
subsidiaries; the Corporation beneficially owns, directly or
indirectly, 100% of the issued and outstanding shares in the
capital of each of the Subsidiaries free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands of any kind whatsoever; to the
best of the Corporation's knowledge all of such shares have
been duly authorized and validly issued and are outstanding as
fully-paid shares and, in respect of the Subsidiaries only, no
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person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming a
right, agreement or option, for the purchase from the
Corporation of any interest in any of such shares or for the
issue or allotment of any unissued shares in the capital of
any Subsidiary or any other security convertible into or
exchangeable for any such shares;
(d) Spectrum Signal Processing (UK) Limited has no material assets
or liabilities, is not party to any Material Agreements and no
revenues are booked through such Subsidiary;
(e) no order ceasing or suspending trading in any securities of
the Corporation or prohibiting the sale of the Offered Shares
or the trading of any of the Corporation's issued securities
has been issued and no proceedings for such purpose are
pending or, to the knowledge of the Corporation, threatened;
(f) to the knowledge of the Corporation, no agreement is in force
or effect which in any manner affects the voting or control of
any of the securities of the Corporation or any of its
Subsidiaries;
(g) except as described in the Disclosure Documents or as set
forth in Schedule "B" hereto and except as contemplated
hereby, no person, firm or corporation, as of the date hereof,
has any agreement or option, or any right or privilege
(whether pre-emptive or contractual) capable of becoming an
agreement or option, for the purchase, subscription or
issuance of any securities of the Corporation;
(h) the Corporation is a reporting issuer under the Applicable
Securities Laws in each of British Columbia, Alberta and
Ontario, and is a "qualifying issuer" within the meaning of
Multilateral Instrument 45-102 - Resale of Securities ("MI
45-102"); the Corporation is not in default in any material
respect of any requirement of the Applicable Securities Laws
of the Offering Jurisdictions and the Corporation is not
included in a list of defaulting reporting issuers maintained
by the securities commissions of the Offering Jurisdictions.
In particular, without limiting the foregoing, the Corporation
is in compliance at the date hereof with its obligations to
make timely disclosure of all material changes relating to it
and, since December 31, 2001 (other than in respect of
material change reports previously filed on a confidential
basis and thereafter made public or material change reports
previously filed on a confidential basis and in respect of
which no material change ever resulted), no such disclosure
has been made on a confidential basis and there is no material
change relating to the Corporation which has occurred and with
respect to which the requisite material change statement has
not been filed, except to the extent that the Offering
constitutes a material change;
(i) the currently issued and outstanding Common Shares of the
Corporation are listed and posted for trading on the Exchange
and NASDAQ and no order ceasing or suspending trading in any
securities of the Corporation or prohibiting the sale of the
Offered Shares has been issued and no proceedings for such
purpose are pending or, to the knowledge of the Corporation,
threatened;
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(j) the definitive form of certificate representing the Common
Shares is in proper form under the laws of the Province of
British Columbia and complies with the requirements of each of
the Exchange and NASDAQ and does not conflict with the
constating documents of the Corporation;
(k) each of the Corporation and its Subsidiaries has conducted and
is conducting its business in material compliance with all
applicable laws, rules and regulations of each jurisdiction in
which its business is carried on and is licensed, registered
or qualified in all jurisdictions in which it owns, leases or
operates its property or carries on business to enable its
business to be carried on as now or proposed to be conducted
and its property and assets to be owned, leased and operated
and all such licences, registrations and qualifications are
and will at the Time of Closing be valid, subsisting and in
good standing, except in each case in respect of matters which
do not and will not result in any material adverse change to
the business, business prospects or condition (financial or
otherwise) of the Corporation and its Subsidiaries (on a
consolidated basis), and except for the failure to be so
qualified or the absence of any such license, registration or
qualification which does not and will not have a material
adverse effect on the assets or properties, business, results
of operations, prospects or condition (financial or otherwise)
of the Corporation and its Subsidiaries (on a consolidated
basis) or on the power or authority of the Corporation to
perform its obligations under this Agreement;
(l) except as qualified by the disclosure in the Disclosure
Documents, each of the Corporation and its Subsidiaries is the
beneficial owner of the properties, business and assets or the
interests in the properties, business or assets referred to as
owned by it in the Disclosure Documents, all agreements under
which the Corporation or its Subsidiaries holds an interest in
a property, business or asset are in good standing according
to their terms except where the failure to be in such good
standing does not and will not have a material adverse effect
on the Corporation and its Subsidiaries (on a consolidated
basis) or its properties, business or assets, and the
Disclosure Documents were as at the date thereof true and
correct in all material respects concerning the Corporation
and its Subsidiaries, and contained no misrepresentations;
(m) none of the Corporation nor its Subsidiaries has received any
notice of proceedings relating to the revocation or
modification of any material certificate, authority, permit or
license necessary to conduct the business now owned or
operated by it which, if the subject of an unfavourable
decision, ruling or finding would materially and adversely
affect the conduct of the business, operations, financial
condition or income of the Corporation and its Subsidiaries
(on a consolidated basis);
(n) the Corporation is not in default nor in breach in any
material respect of, and the execution and delivery of this
Agreement, the performance and compliance with the terms
hereof and the completion of the transactions described herein
by the Corporation will not result in any material breach of,
or be in conflict with or constitute a material default under,
or create a state of facts which, after notice or lapse of
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time, or both, would constitute a material default under any
term or provision of the constating documents or any
resolutions of the Corporation or any material mortgage, note,
indenture, contract, agreement (written or oral), instrument,
lease or other document to which the Corporation is a party or
by which it or a material portion of its assets are bound (a
"Material Agreement"), or any judgment, decree, order,
statute, rule or regulation applicable to any of them;
(o) the auditors of the Corporation who audited the Audited
Financial Statements are independent public accountants as
required by the Applicable Securities Laws and there has never
been any reportable disagreement (within the meaning of
National Policy Statement No. 31 of the Canadian Securities
Administrators) with the present or any former auditor of the
Corporation;
(p) the Corporation and each of its Subsidiaries has filed all
federal, provincial, state, local and foreign tax returns that
are required to be filed or have requested extensions thereof
(except in any case in which the failure so to file would not
have a material adverse effect on the assets and properties,
business, results of operations, prospects or condition
(financial or otherwise) of the Corporation and its
Subsidiaries (on a consolidated basis)) and has paid all taxes
required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good
faith;
(q) the Corporation and each of its Subsidiaries has established
on its books and records reserves that are adequate for the
payment of all taxes not yet due and payable and there are no
liens for taxes on the assets of the Corporation or any of its
Subsidiaries, and there are no audits known by the
Corporation's management to be pending of the tax returns of
the Corporation or any of its Subsidiaries (whether federal,
state, provincial, local or foreign) and there are no claims
which have been or may be asserted relating to any such tax
returns, which audits and claims, if determined adversely,
would result in the assertion by any governmental agency of
any deficiency that would have a material adverse effect on
the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Corporation and its Subsidiaries (on a consolidated basis);
(r) no domestic or foreign taxation authority has asserted or, to
the best of the Corporation's knowledge, threatened to assert
any assessment, claim or liability for taxes due or to become
due in connection with any review or examination of the tax
returns of the Corporation or any of its Subsidiaries
(including, without limitation, any predecessor companies)
filed for any year which would have a material adverse effect
on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Corporation or any of its Subsidiaries;
(s) neither the Corporation nor, to the best of the Corporation's
knowledge, any other party is in material default in the
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observance or performance of any term or obligation to be
performed by it under any Material Agreement and no event has
occurred which with notice or lapse of time or both would
constitute such a default, in any such case which default or
event would have a material adverse effect on the assets or
properties, business, results of operations, prospects or
condition (financial or otherwise) of the Corporation and its
Subsidiaries (on a consolidated basis);
(t) at the Time of Closing, the Corporation will have filed all
documents, taken all proceedings and obtained all regulatory
consents necessary in connection with the sale of the Offered
Shares;
(u) upon completion of all of the transactions contemplated in
this Agreement the Offered Shares will be validly issued and
outstanding as fully paid and non-assessable and will not have
been issued in violation of or subject to any pre-emptive
rights or other contractual rights to purchase securities
issued by the Corporation;
(v) the execution and delivery of each of this Agreement and the
Subscription Agreements and the performance of the
transactions contemplated thereunder, the offering and sale of
the Offered Shares at the Time of Closing and any compliance
by the Corporation with the other provisions of each of such
Agreements to be complied with by it does not and will not:
(i) require the consent, approval, authorization,
registration or qualification of or with any
governmental authority, stock exchange, securities
regulatory authority or other third party, except: (i)
such as have been obtained; or (ii) such as may be
required under the applicable by-laws, policies,
regulations and prescribed forms of the Exchange or
NASDAQ;
(ii) result in a breach of or default under, nor create a
state of facts which, after notice or lapse of time or
both, would result in a breach of or default under, nor
conflict with:
(1) any of the terms, conditions or provisions of the
constating documents or resolutions of the
shareholders, directors or any committee of
directors of the Corporation or any of its
Subsidiaries or any material indenture, agreement
or instrument to which the Corporation or any of
its Subsidiaries is a party or by which it or they
are contractually bound; or
(2) any statute, rule, regulation or law applicable to
the Corporation, or any of its Subsidiaries
including, without limitation, the Applicable
Securities Laws of the Offering Jurisdictions, or
any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the
Corporation or any of its Subsidiaries; and
(iii) give rise to any lien, charge or claim in or with
respect to the properties or assets now owned or
hereafter acquired by the Corporation or its
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Subsidiaries or the acceleration of or the maturity of
any debt under any indenture, mortgage, lease, agreement
or instrument binding or affecting any of them or any of
their properties;
(w) the Corporation is not aware of any legislation, or proposed
legislation (published by a legislative body), which it
anticipates will materially and adversely affect the business,
affairs, operations, assets, liabilities (contingent or
otherwise) or prospects of the Corporation and its
Subsidiaries, considered as a whole;
(x) the financial statements, press releases, material change
reports, management information circulars or annual
information forms filed by or on behalf of the Corporation
since December 31, 2001 with any Securities Commission, the
Exchange or NASDAQ taken together as a whole, are true and
correct and do not contain a misrepresentation, determined as
at the date of filing, which has not been corrected;
(y) other than the Underwriters, there is no person acting or
purporting to act at the request of the Corporation, who is
entitled to any brokerage or agency fee in connection with the
transactions contemplated herein;
(z) the minute books and records of the Corporation made available
to counsel for the Underwriters in connection with its due
diligence investigation of the Corporation for the periods
from its date of incorporation to the date of examination
thereof are all of the minute books and records of the
Corporation and contain copies of all proceedings (or
certified copies thereof) of the shareholders, the boards of
directors and all committees of the boards of directors of the
Corporation to the date of review of such corporate records
and minute books and there have been no other meetings,
resolutions or proceedings of the shareholders, boards of
directors or any committees of the boards of directors of the
Corporation to the date of review of such corporate records
and minute books not reflected in such minute books and other
records, other than those which have been disclosed to the
Underwriters or which are not material in the context of the
Corporation;
(aa) there is not, in the constating documents of the Corporation
or in any material agreement, mortgage, note, debenture,
indenture or other instrument or document to which the
Corporation is a party, any restriction upon or impediment to
the declaration or payment of dividends by the directors of
the Corporation or the payment of dividends by the Corporation
to the holders of its Common Shares;
(bb) Computershare Trust Company of Canada, at its principal office
in the City of Vancouver, has been duly appointed transfer
agent and registrar for the Common Shares;
(cc) the Audited Financial Statements and the unaudited interim
consolidated financial statements for the three month period
ended March 31, 2002:
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(i) have been prepared in accordance with United States
generally accepted accounting principles applied on a
basis consistent with those of preceding fiscal periods;
(ii) present fully, fairly and correctly, in all material
respects, the assets, liabilities and financial
condition of the Corporation as at December 31, 2001 and
March 31, 2002, respectively, and the results of its
operations and the changes in its financial position for
the periods then ended; and
(iii) contain and reflect adequate provision or allowance for
all reasonably anticipated liabilities, expenses and
losses of the Corporation;
(dd) since December 31, 2001 there has been no material adverse
change in the financial position or condition of the business
of the Corporation from that indicated by the Audited
Financial Statements, nor has there been any material adverse
change in the affairs, business, prospects, liabilities,
assets, operations or condition of the business, financial or
otherwise that has not been publicly disclosed;
(ee) with respect to each premises which is material to the
Corporation on a consolidated basis and which the Corporation
or any of its Subsidiaries occupies as tenant (the "Leased
Premises"), the Corporation or such Subsidiary occupies the
Leased Premises and has the exclusive right to occupy and use
the Leased Premises and each of the leases pursuant to which
the Corporation and/or its Subsidiaries occupies the Leased
Premises is in good standing and in full force and effect;
(ff) there has not been and there is not currently any labour
disruption or conflict which is adversely affecting or could
adversely affect, in a material manner, the carrying on of the
Corporation's or any Subsidiaries' business, considered as a
whole;
(gg) the Corporation and each of its Subsidiaries has procured and
maintains adequate insurance against all insurable risks which
are material to the Corporation and its Subsidiaries (taken as
a whole);
(hh) other than as set out in the Disclosure Documents, there are
no actions, suits, proceedings or inquiries pending or
threatened against or affecting the Corporation or any of its
Subsidiaries at law or in equity or before or by any federal,
provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which in
any way materially adversely affects the business, operations
or condition (financial or otherwise) of the Corporation and
its Subsidiaries or their properties or assets or which
affects or may affect the distribution of the Offered Shares
and none of the actions, suits, proceedings or inquiries, if
any, referred to in the Disclosure Documents is expected to
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materially adversely affect, the business, operations or
condition (financial or otherwise) of the Corporation and its
Subsidiaries or their properties or assets;
(ii) except as disclosed in the Disclosure Documents, none of the
directors, officers or employees of the Corporation or its
Subsidiaries, any known holder of more than ten per cent of
any class of shares of the Corporation, or any known associate
or affiliate of any of the foregoing persons or companies (as
such terms are defined in the Securities Act (Ontario)), has
had any material interest, direct or indirect, in any material
transaction within the previous two years or any proposed
material transaction which, as the case may be, materially
affected, is material to or will materially affect the
Corporation and its Subsidiaries;
(jj) except in compliance with applicable legislation, the
Corporation has not used any of its 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 waste
or substances ("Hazardous Substances");
(kk) except in compliance with applicable legislation, the
Corporation has not caused or permitted the release, in any
manner whatsoever, of any Hazardous Substances on or from any
of its properties or assets or any such release on or from a
facility owned or operated by third parties but with respect
to which the Corporation is or may reasonably be alleged to
have material liability or has received any notice that it is
potentially responsible for a federal, provincial, municipal
or local clean-up site or corrective action under any
applicable laws, statutes, ordinances, by-laws, regulations or
any orders, directions or decisions rendered by any ministry,
department or administrative regulatory agency relating to the
protection of the environment, occupational health and safety
or otherwise relating to dealing with Hazardous Substances;
(ll) each of the Corporation and its Subsidiaries has good and
valid title to all material intellectual property rights used
by the Corporation or relating to the operation of its
business, including copyrights, industrial designs, trade
marks, trade secrets, know how and proprietary rights
necessary to carry on its business (the "Intellectual
Property") free and clear of any and all encumbrances, except
for royalty obligations and general bank security incurred or
granted, as the case may be, in the ordinary course of
business. No royalty or other fee is required to be paid by
the Corporation or its Subsidiaries to any other person in
respect of the use of any of the Intellectual Property. To the
best of the knowledge of the Corporation, no employee of the
Corporation or its Subsidiaries is in violation of any term of
any non-disclosure, proprietary rights or similar agreement
between such employee and the Corporation or its Subsidiaries
or between such employee and any former employer. To the best
of the knowledge of the Corporation, all technical information
developed by and belonging to the Corporation and/or its
Subsidiaries which has not been copyrighted or patented has
been kept confidential; and
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(mm) there are no material restrictions on the ability of the
Corporation or its Subsidiaries to use and exploit all rights
in the Intellectual Property required in the ordinary course
of the Corporation's or its Subsidiaries' business. None of
the rights of the Corporation or its Subsidiaries in the
Intellectual Property will be impaired or affected in any way
by the transactions contemplated by this agreement. To the
best of the knowledge of the Corporation, the conduct of the
business of the Corporation and its Subsidiaries and the use
of the Intellectual Property does not infringe, and each of
the Corporation and its Subsidiaries has not received any
notice, complaint, threat or claim alleging infringement of,
any patent, trade xxxx, trade name, copyright, industrial
design, trade secret or other Intellectual Property or
proprietary right of any other person, and the conduct of the
business of each of the Corporation does not include any
activity which may constitute passing off. Each of the
Corporation and its Subsidiaries has no notice of any
infringements of the Intellectual Property or material claims
against the Intellectual Property by any third party.
The Corporation acknowledges that the Underwriters and each of the Purchasers
are relying upon such representations and warranties.
6. COVENANTS OF THE CORPORATION
The Corporation hereby covenants to and with each of the Underwriters (on their
own behalf and on behalf of the Purchasers) that:
(a) the Corporation will enter into Subscription Agreements with
each of the Purchasers;
(b) the Corporation will use its reasonable best efforts to
maintain its status as a reporting issuer not in default in
each of the Offering Jurisdictions for a period of 14 months
from the Closing Date;
(c) the Corporation will use its reasonable best efforts to
maintain the listing of the Common Shares on the Exchange to
the date which is one year following the Closing Date and to
ensure that the Offered Shares will be listed and posted for
trading on the Exchange upon their issue;
(d) other than as contemplated herein, the Corporation will not,
directly or indirectly, without the prior written consent of
Sprott (on behalf of the Underwriters), which consent shall
not be unreasonably withheld or delayed, issue, sell or grant
any securities of the Corporation for a period commencing on
the date hereof and ending 90 days thereafter nor shall the
Corporation publicly announce during such period the intention
to do so, except for (i) the issuance of Common Shares in
connection with the exercise of any currently outstanding
stock options, warrants or other convertible securities, (ii)
the issuance of Common Shares pursuant to the exercise of any
Broker Warrants; (iii) the issuance of stock options in the
normal course pursuant to the Corporation's stock option plan
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and/or the Corporation's employee share purchase plan, or (iv)
the issuance of securities of the Corporation pursuant to an
arm's length acquisition;
(e) in the event any person acting or purporting to act for the
Corporation establishes a claim from the Underwriters for any
brokerage or agency fee in connection with the transactions
contemplated herein, the Corporation shall indemnify and hold
harmless each of the Underwriters with respect thereto and
with respect to all costs reasonably incurred in the defence
thereof
(f) until the Time of Closing, at the request of the Underwriters,
which request shall not be unreasonably denied, the
Corporation will give to the Underwriters, the Underwriters'
counsel and other authorized representatives of the
Underwriters, full access during normal business hours to all
locations where the business of the Corporation is carried on
and to the properties, books, contracts, commitments and
records of the Corporation pertaining to its business (taken
as a whole);
(g) until the Time of Closing, subject to any applicable legal
restrictions, the Corporation shall furnish the Underwriters
in confidence with all information concerning the affairs of
the business of the Corporation as the Underwriters may
reasonably request;
(h) the Corporation shall, as soon as practicable, use its
commercially reasonable best efforts to receive all necessary
consents to the transactions contemplated herein; and
(i) the Corporation shall use its reasonable best efforts to
maintain and defend all of the Corporation's and its
Subsidiaries' rights to use the Intellectual Property.
7. UNITED STATES SALES
(a) As used in this Section 7, the following terms shall have the
meanings indicated:
(i) "DIRECTED SELLING EFFORTS" means directed selling
efforts as that term is defined in Regulation S. Without
limiting the foregoing, but for greater clarity, it
means, subject to the exclusions from the definition of
directed selling efforts contained in Regulation S, any
activity undertaken for the purpose of, or that could
reasonably be expected to have the effect of,
conditioning the market in the United States for the
Offered Shares and includes the placement of any
advertisement in a publication with a general
circulation in the United States that refers to the
offering of the Offered Shares;
(ii) "INSTITUTIONAL ACCREDITED INVESTOR" means an institution
that is an accredited investor as that term is defined
in Rule 501(a) (1), (2), (3) or (7) of Regulation D;
(iii) "REGULATION D" means Regulation D promulgated under the
1933 Act;
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(iv) "REGULATION S" means Regulation S promulgated under the
1933 Act;
(v) "SEC" means the United States Securities and Exchange
Commission;
(vi) "SUBSTANTIAL U.S. MARKET INTEREST" means substantial
U.S. market interest as that term is defined in
Regulation S;
(vii) "U.S. AFFILIATE" means an affiliate of an Underwriter
which is a duly registered broker or dealer with the SEC
and is a member of the National Association of
Securities Dealers, Inc.;
(viii) "U.S. EXCHANGE ACT" means the United States Securities
Exchange Act of 1934, as amended; and
(ix) "U.S. PERSON" means a U.S. person as that term is
defined in Regulation S.
(b) The Corporation and each Underwriter:
(i) acknowledge that the Offered Shares have not been and
will not be registered with the SEC under the 1933 Act
and that the Offered Shares are being offered and sold:
(x) outside the United States pursuant to the exclusion
from registration provided by Regulation S; and (y) in
the United States to Institutional Accredited Investors
pursuant to the exemption from registration provided by
Rule 506 of Regulation D; and
(ii) agree that neither they, nor any of their respective
affiliates, nor any person acting on behalf of the
foregoing have made or will make, except to the extent
permitted by Subparagraph 7(d)(vii): (x) any offer to
sell or solicitation of an offer to buy any of the
Offered Shares to any person in the United States or (y)
any sale of the Offered Shares to any person unless the
seller of such Offered Shares and any person acting on
its behalf reasonably believes that at the time such
person placed the order to purchase Offered Shares such
person was outside the United States.
(c) The Corporation hereby represents, warrants, covenants
and agrees with each Underwriter that:
(i) the Corporation is, and until the Time of Closing
will be, a "foreign private issuer" within the
meaning of Regulation S; and the Corporation is
not and does not own or control (and for two years
from the Time of Closing will not be and will not
own or control) an open-end investment company,
closed-end investment company, unit investment
trust or face-amount certificate company that is
or is required to be registered under Section 8 of
the United States Investment Company Act of 1940,
as amended;
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(ii) none of the Corporation, its Subsidiaries, their
affiliates or anyone acting on its or their behalf
(other than the Underwriters, their affiliates,
any subagent, or any person acting on its or their
behalf, as to which no representation is made)
directly or indirectly, has taken or will take any
action in violation of Regulation M under the U.S.
Exchange Act in connection with the offer and sale
of the Offered Shares;
(iii) none of the Corporation, its Subsidiaries, their
affiliates or any person acting on their behalf
(other than the Underwriters, their affiliates,
any subagent, or any person acting on its or their
behalf, in respect of which no representation is
made) (x) has engaged or will engage in any
Directed Selling Efforts with respect to the
Offered Shares, and has not taken and will not
take any action that would cause Rule 903 of
Regulation S to be unavailable for offers and
sales of the Offered Shares, or (y) has offered or
will offer to sell, or has solicited or will
solicit offers to buy, the Offered Shares in the
United States by means of any form of general
solicitation or general advertising (as those
terms are used in Regulation D) or in any manner
involving a public offering within the meaning of
Section 4(2) of the 1933 Act, including
advertisements, articles, notices, or other
communications published in any newspaper,
magazine or similar media broadcast over radio or
television or in any seminar or meeting whose
attendees have been invited by general
solicitation or advertising in connection with the
offer or sale of the Offered Shares to U.S.
Persons; and
(iv) the Corporation will execute and file with the SEC
on a timely basis a Form D relating to the offer
and sale of the Offered Shares and execute and
file such other documents as may be required under
applicable United States state securities ("blue
sky") laws.
(d) Each of the Underwriters, on a joint and several basis,
represents, warrants, covenants and agrees to and with
the Corporation that:
(i) it is aware that the Offered Shares have not been
and will not be registered under the 1933 Act and
have not and may not be offered or sold outside
the United States except pursuant to Rule 903 of
Regulation S or within the United States except to
Institutional Accredited Investors pursuant to an
exemption from the registration requirements of
the 1933 Act provided by Rule 506 of Regulation D,
in the manner contemplated in this Section 7;
(ii) such Underwriter, its affiliates or any persons
acting on its behalf (other than the Corporation,
its affiliates or any person acting on their
behalf, as to which no representation is made)
have not engaged and will not engage in any
Directed Selling Efforts with respect to the
Offered Shares, and has not taken nor will take
any action that would cause Rule 903 of Regulation
S or the exemption afforded by Rule 506 of
- 18 -
Regulation D to be unavailable for offers and
sales of the Offered Shares pursuant to this
Agreement;
(iii) offers to sell the Offered Shares within the
United States have been and will be made on behalf
of the Corporation only through its U.S. Affiliate
and all sales of the Offered Shares in the United
States shall be made by the Corporation pursuant
to Rule 506 of Regulation D;
(iv) it has not entered and will not enter into any
contractual arrangement with respect to the
distribution of the Offered Shares, except with
its affiliates or any selling group members in
accordance with this Subsection 7(d) or with the
prior written consent of the Corporation;
(v) it will require its U.S. Affiliate to agree in
writing, for the benefit of the Corporation, to
comply with, and shall use its best efforts to
ensure that its U.S. Affiliate complies with, the
provisions of this Subsection 7(d) as if such
provisions applied to such affiliate;
(vi) all offers and sales of the Offered Shares in the
United States will be effected in transactions
exempt from the registration or qualification
provisions of applicable state securities ("blue
sky") laws and in accordance with all applicable
U.S. federal and state broker-dealer requirements;
(vii) it has not, either directly, or through any person
acting on its or their behalf, solicited and will
not solicit offers for, and has not offered and
will not offer to sell, the Offered Shares in the
United States by means of any form of general
solicitation or general advertising (as those
terms are used in Regulation D) or in any manner
involving a public offering within the meaning of
Section 4(2) of the 1933 Act, including
advertisements, articles, notices or other
communications published in any newspaper,
magazine, or similar media broadcast over radio or
television or in any seminar or meeting whose
attendees have been invited by general
solicitation or advertising in connection with the
offer or sale of the Offered Shares to U.S.
Persons;
(viii) offers to sell and solicitation of offers to buy
the Offered Shares in the United States shall be
made only to persons with whom an Underwriter or
its U.S. Affiliate has a pre-existing relationship
and to whom such Underwriter has reasonable
grounds to believe and believes to be
Institutional Accredited Investors and only in
states of the United States where such Underwriter
or its U.S. Affiliate is registered or otherwise
exempt from registration and where the offer and
sale of such securities is permitted under
applicable state securities ("blue sky"), laws and
sales of Offered Shares in the United States will
be made only to persons reasonably believed to be
Institutional Accredited Investors and who execute
and deliver a Representation Letter in the form of
- 19 -
Schedule "A" to the Subscription Agreement
completed, executed and delivered by such persons;
(ix) at Closing, it will deliver to the Corporation a
certificate, substantially in the form of Schedule
"A" to this Agreement executed by its U.S.
Affiliate relating to the manner of the offer and
sale of Offered Shares in the United States; and
(x) neither such Underwriter, its affiliates or any
person acting on its or their behalf (other than
the Corporation, its third party affiliates and
any third party acting on their behalf, as to
which no representation is made) has taken or will
take, directly or indirectly, any action in
violation of Regulation M under the U.S. Exchange
Act in connection with offer and sale of the
Offered Shares.
8. CONDITIONS TO CLOSING
The following are conditions to the closing of the transactions involving the
issuance and sale of the Offered Shares contemplated hereby, which conditions
the Corporation covenants to exercise its reasonable best efforts to have
fulfilled on or prior to the Time of Closing and which conditions may be waived
in writing in whole or in part by the Underwriters:
(a) the Corporation will have made and/or obtained the necessary
filings, approvals, consents and acceptances of the appropriate
regulatory authorities required to be made or obtained by the
Corporation in connection with the sale of the Offered Shares to the
Purchasers prior to the Time of Closing on the Closing Date as
herein contemplated, it being understood that the Underwriters shall
do all that is reasonably required to assist the Corporation to
fulfil this condition;
(b) the Corporation's board of directors shall have authorized and
approved the execution and delivery of this Agreement, the
acceptance of the Subscription Agreements, the allotment, issuance
and delivery of the Offered Shares issuable, the creation and
issuance of the Broker Warrants and the allotment, issuance and
delivery of the Common Shares issuable upon the due exercise of the
Broker Warrants (the "Warrant Shares") and all matters relating
thereto;
(c) the Corporation shall have accepted one or more Subscription
Agreements with the Purchasers;
(d) the Underwriters shall have received an opinion, dated the Closing
Date, of the Corporation's counsel (it being understood that such
counsel may rely to the extent appropriate in the circumstances, (i)
as to matters of fact, on certificates of the Corporation executed
on its behalf by a senior officer of the Corporation and on
certificates of Computershare Trust Company of Canada, the registrar
and transfer agent for the Common Shares, as to the issued capital
of the Corporation; and (ii) as to matters of fact not independently
established, on certificates of the Corporation's auditors) which
shall, as appropriate, include the following opinions:
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(i) the Corporation is duly incorporated under the Company Act
(British Columbia) and is, with respect to the filings of
annual reports with the Registrar of Companies for British
Columbia, in good standing, and has all requisite corporate
power and capacity to carry on its business to own or lease
its assets and properties and to carry out the provisions of
this Agreement and the Subscription Agreements;
(ii) an opinion as to the authorized and issued capital of the
Corporation;
(iii) all requisite corporate actions have been taken by or on
behalf of the Corporation to authorize the issuance and sale
of the Offered Shares;
(iv) the execution and delivery of this Agreement and the
Subscription Agreements has been duly authorized by, and has
been executed and delivered on behalf and is legally binding
upon, the Corporation and is enforceable in accordance with
its terms, subject to the usual qualifications;
(v) the Offered Shares will have been and the Warrant Shares will
be issued as fully paid and non-assessable shares in the
capital of the Corporation;
(vi) no documents need be filed, proceedings taken or approvals,
permits, consents or authorizations obtained under the
Applicable Securities Laws of the Offering Jurisdictions and
the rules, regulations and policies thereunder to permit the
offer and sale of the Offered Shares in the Offering
Jurisdictions and the issuance of the Broker Warrants;
(vii) the first trade of the Offered Shares and the Warrant Shares,
as the case may be, will not (except as specified) be subject
to any statutory hold period under the Applicable Securities
Laws of the Offering Jurisdictions and no other documents will
be required to be filed, no proceedings will be required to be
taken and no approvals, permits, consents, orders or
authorizations will be required to be obtained by the
Corporation or the holder of the Offered Shares or the Warrant
Shares, as the case may be, making such first trade under such
Applicable Securities Laws in connection with the first trade
of such shares through registrants registered under such
Applicable Securities Laws in compliance with such Applicable
Securities Laws, provided that at the time of such trade:
(1) the Corporation has been a reporting issuer in one of
the Offering Jurisdictions for the four months
immediately preceding the trade;
(2) a period of at least four months has elapsed from the
date of the issuance of the Offered Shares or the Broker
Warrants, as the case may be; and
- 21 -
(3) no unusual effort is made to prepare the market or to
create a demand for such securities and no extraordinary
commission or other consideration is paid in respect of
such trade;
(viii) the execution and delivery of this Agreement and the
fulfilment of the terms hereof, do not and will not result in
a breach of, do not create a state of facts which after notice
or lapse of time or both will result in a breach of, and do
not and will not conflict with, any of the terms, conditions
or provisions of the constating documents of the Corporation;
(ix) the Exchange has approved the listing and posting for trading
of all of the Offered Shares and the Warrant Shares subject to
the satisfaction of the conditions set out in its conditional
listing letter; and
(x) such other opinions as may be reasonably requested by the
Underwriters.
(e) the Underwriters shall have received an opinion from the
Corporation's United States counsel that Spectrum USA is validly
existing under the laws of the State of Delaware and has all
requisite power and capacity to carry on its business and to own or
lease its assets and properties;
(f) the Underwriters shall have received an Incumbency Certificate dated
the Closing Date including specimen signatures of the Chief
Executive Officer, the Chief Financial Officer and any other officer
of the Corporation signing this Agreement or any document delivered
hereunder;
(g) the Underwriters shall have received a certificate, dated the
Closing Date, of the Chief Executive Officer and the Chief Financial
Officer of the Corporation (or such other officer or officers of the
Corporation acceptable to the Underwriters, acting reasonably),
addressed to the Underwriters and their counsel to the effect that,
to the best of their knowledge, information and belief, after due
enquiry and without personal liability:
(i) the representations and warranties of the Corporation in this
Agreement are true and correct in all material respects as if
made at and as of the Time of Closing and the Corporation has
performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied in all
material respects at or prior to the Time of Closing;
(ii) no order, ruling or determination having the effect of
suspending the sale or ceasing, suspending or restricting the
trading of Common Shares in any of the Offering Jurisdictions
has been issued or made by any stock exchange, securities
commission or regulatory authority and is continuing in effect
and no proceedings, investigations or enquiries for that
purpose have been instituted or are pending;
- 22 -
(iii) the memorandum and articles of the Corporation attached to the
certificate are full, true and correct copies, unamended, and
in effect on the date thereof;
(iv) the minutes or other records of various proceedings and
actions of the Corporation's Board of Directors attached to
the certificate relating to the Offering are full, true and
correct copies thereof and have not been modified or rescinded
as of the date thereof;
(v) since the date of the Letter Agreement, there has been no
material adverse change in the business, affairs, operations,
assets, liabilities or capital of the Corporation and its
Subsidiaries taken as a whole;
(vi) none of the materials filed by or on behalf of the Corporation
within the last twelve months under Applicable Securities Laws
contained a misrepresentation as at the time the relevant
material was filed; and
(vii) except as disclosed in the Disclosure Documents, the
Corporation has not incurred any material liabilities or
obligations (absolute, accrued, contingent or otherwise), or
entered into any material transaction, not in the ordinary
course of business and there has been no material change,
financial or otherwise, in the assets, liabilities (contingent
or otherwise), capital, business or results of operations of
the Corporation of any of its Subsidiaries.
(h) the Offered Shares and the Warrant Shares shall have been approved
for listing on the Exchange, subject only to the official notices of
issuance and fulfilment of such other conditions of the Exchange as
set out in the conditional listing letter;
(i) the Underwriters shall have received certificates, issued under
applicable provisions of the securities laws of the Offering
Jurisdictions stating that the Corporation is not in default under
the Applicable Securities Laws of the Offering Jurisdictions,
respectively; and
(j) the Underwriters will have received, at the Time of Closing, a
favourable legal opinion from the Corporation's U.S. counsel that
the offer and sale of the Offered Shares in the United States is
exempt from registration under the 1933 Act.
It is understood that the Underwriters may waive in whole or in part or extend
the time for compliance with any of such terms and conditions without prejudice
to their rights in respect of any other of the foregoing terms and conditions or
any other or subsequent breach or non-compliance, provided that to be binding on
the Underwriters any such waiver or extension must be in writing and signed by
it.
The Corporation agrees that the aforesaid legal opinions and certificate to be
delivered at the Time of Closing will also be addressed to the Purchasers and
that the Underwriters may deliver copies thereof to such persons and to any
persons who purchase Offered Shares.
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9. TERMINATION OF OBLIGATIONS
If at any time before the Time of Closing on the Closing Date:
(a) there shall have occurred any adverse material change or there shall
be discovered any previously undisclosed adverse material fact in
relation to the Corporation (on a consolidated basis); or
(b) there shall have occurred any change in the applicable securities
laws of any province of Canada or any inquiry, investigation or
other proceeding is made or any order is issued under or pursuant to
any statute of Canada or any province thereof or any statute of the
United States or any state thereof or any stock exchange in relation
to the Corporation or any of its securities (except for any inquiry,
investigation or other proceeding based upon activities of the
Underwriters and not upon activities of the Corporation);
which, in the opinion of the Underwriters, prevents or restricts trading in or
the distribution of the Common Shares or adversely affects or would reasonably
be expected to adversely affect the market price or value of the Common Shares;
or
(c) if there should develop, occur or come into effect or existence any
event, action, state, condition or major financial occurrence or
catastrophe of national or international consequence or any law or
regulation which, in the reasonable opinion of the Underwriters,
seriously adversely affects or involves, or will seriously adversely
affect or involve, the financial markets or the business, operations
or affairs of the Corporation and its Subsidiaries, taken as a
whole;
(d) a cease trading order is made by any Securities Commission or other
competent authority by reason of the fault of the Corporation or its
respective directors, officers and agents and such cease trading
order is not rescinded within 48 hours; or
(e) the Corporation is in material breach of a material term, conditions
or covenant of this Agreement which has not been cured,
the obligations of the Underwriters contained in this Agreement may be
terminated by one or more of the Underwriters in their sole discretion.
Any termination pursuant to the foregoing provisions shall be effected by notice
in writing delivered by the terminating Underwriters to the Corporation at its
address as herein set out. Notwithstanding the giving of any notice of
termination hereunder, the expenses agreed to be paid by the Corporation shall
be paid by the Corporation as herein provided and the obligations of the
Corporation under sections 11, 12 and 13 hereof shall survive. The right of an
Underwriter to terminate this Agreement shall be exercised by it in its sole
discretion.
In the event of a termination pursuant to and in accordance with the provisions
hereof and notice having been given, as aforesaid, there will be no further
liability on the part of the terminating Underwriter under this Agreement. The
- 24 -
rights of the Underwriters to terminate their obligations hereunder are in
addition to, and without prejudice to, any other remedies they may have.
10. CLOSING
The sale of Offered Shares (the "Closing") will be completed concurrently at the
offices of XxXxxxxx Xxxxxxxx LLP, Suite 1300, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx,
X.X., X0X 0X0 and Xxxx & Berlis LLP, Suite 1800, 000 Xxx Xxxxxx, Xxxxxxx,
Xxxxxxx X0X 0X0, or such other place or places as may be agreed upon by the
Corporation and the Underwriters, at the Time of Closing on the Closing Date,
provided that if the Corporation has not been able to comply with any of the
conditions to closing set forth under "Conditions to Closing" prior to the Time
of Closing on the Closing Date, the Closing Date may be extended by mutual
agreement of the Corporation and the Underwriters, failing which, the respective
obligations of the parties will terminate without further liability or
obligation except as set out under sections 11, 12 and 13 hereof.
At the Time of Closing, the Corporation shall deliver to the Underwriters:
(a) a certificate or certificates, duly registered as the Underwriters
may direct, representing the Offered Shares purchased, such
certificates to be delivered to the Underwriters' counsel in
Toronto, Ontario;
(b) certificates, duly registered as the Underwriters may direct,
representing the Broker Warrants;
(c) the requisite legal opinions and certificates as contemplated in
Section 8 hereof;
(d) a direction addressed to Sprott (on behalf of the Underwriters)
directing Sprott to pay the Gross Proceeds in accordance with
section 2 hereof; and
(e) such further documentation as may be contemplated herein,
against payment of the purchase price for the Offered Shares by certified cheque
or bank draft to the Corporation or as otherwise contemplated by section 2
hereof as contemplated herein.
All representations and warranties contained herein and all of the covenants and
agreements of the Corporation herein, to the extent that they are required to be
performed on or before Closing, shall be construed as conditions and any breach
or failure to comply with any thereof shall entitle each of the Underwriters, at
its option, in addition to and not in lieu of any other remedies such
Underwriter has in respect thereof, to terminate and cancel its obligations
hereunder by written notice to that effect given to the Corporation prior to the
Time of Closing on the Closing Date. It is understood that the Underwriters may
waive in whole or in part or extend the time for compliance with any of such
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 to be binding on the Underwriters any such waiver or extension
must be in writing and signed by each Underwriter.
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11. EXPENSES
Whether or not Closing occurs, the Corporation shall pay all costs and expenses
of or incidental to the Offering, including, without limitation, the costs and
filing fees with respect to the private placement of the Offered Shares, the
listing of the Offered Shares on the Exchange, the cost of printing the
certificates representing the Offered Shares, the cost of registration and
delivery of such certificates, and the fees and expenses of each of the
Corporation's auditors, counsel and local counsel. Whether or not Closing
occurs, the Corporation shall be responsible for the reasonable fees and
disbursements (including GST) of the Underwriters' counsel (up to a maximum in
respect of the fees of the Underwriters' counsel of $25,000, excluding
disbursements and GST) and the Underwriters' reasonable out-of-pocket expenses,
which shall be paid forthwith by the Corporation to Sprott (on behalf of the
Underwriters) upon advice from Sprott as to such costs and expenses.
12. INDEMNITY
The Corporation covenants and agrees to indemnify and save harmless each of the
Underwriters and their respective directors, officers, employees, shareholders
and agents (collectively, the "Underwriters' Personnel"), against all losses
(other than loss of profits), claims, damages, liabilities, costs or expenses,
whether joint or several, caused or incurred by reason of or in connection with
the transactions contemplated hereby including, without limitation, the
following:
(a) any information or statement (except any information or statement
relating solely to the Underwriters) contained in any offering
document, amendments thereto or documents incorporated therein by
reference, which at the time and in light of the circumstances under
which it was made contains or is alleged to contain a
misrepresentation or any omission or any alleged omission to state
therein any act or information (except facts or information relating
solely to the Underwriter) required to be stated therein or
necessary to make any of the statements therein not misleading in
light of the circumstances in which they are made;
(b) any order made or in any inquiry, investigation or proceeding
commenced or threatened by any securities regulatory authority,
stock exchange or by any other competent authority, based upon any
misrepresentation (as defined in the Securities Act (Ontario)) or
alleged misrepresentation (except a misrepresentation relating
solely to the Underwriters) in any offering document, amendments
thereto or documents incorporated therein by reference, (except any
document or material delivered solely by the Underwriters) based
upon any failure or alleged failure to comply with Canadian or
United States securities laws (other than any failure or alleged
failure to comply by the Underwriters) preventing and restricting
the trading in or the sale of the Common Shares in the provinces of
Canada;
(c) the non-compliance or alleged non-compliance by the Corporation with
any requirement of applicable securities laws, including the
Corporation's non-compliance with any statutory requirement to make
any document available for inspection; or
- 26 -
(d) any breach of any representation, warranty or covenant of the
Corporation contained herein or the failure of the Corporation to
comply with any of its obligations hereunder,
and will reimburse each such Underwriter promptly upon demand for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such losses, claims, damages, liabilities or actions in respect
thereof, as incurred.
The Corporation shall not, without the prior written consent of the
Underwriters, which shall not be unreasonably withheld, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not the Underwriters or any Underwriters' Personnel are a party to
such claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Underwriters and each
Underwriters' Personnel from all liability arising out of such claim, action,
suit or proceeding.
Notwithstanding the foregoing, an indemnifying party shall not be liable for the
settlement of any claim or action in respect of which indemnity may be sought
hereunder effected without its written consent, which consent shall not be
unreasonably withheld.
If any matter or thing contemplated by this paragraph shall be asserted against
any person in respect of which indemnification is or might reasonably be
considered to be provided, such person (the "Indemnified Party") will notify the
Corporation as soon as possible and in any event on a timely basis, of the
nature of such claim and the Corporation shall be entitled (but not required) to
assume the defence of any suit brought to enforce such claim; provided, however,
that the defence shall be through legal counsel acceptable to the Indemnified
Party, acting reasonably, and that no settlement may be made by the Corporation
or the Indemnified Party without the prior written consent of the other.
In any such claim, the Indemnified Party shall have the right to retain other
counsel to act on the Indemnified Party s behalf, provided that the fees and
disbursements of such other counsel shall be paid by the Indemnified Party,
unless (i) the Corporation and the Indemnified Party mutually agree to retain
such other counsel or (ii) the named parties to any such claim (including any
third or implicated party) include both the Indemnified Party on the one hand
and the Corporation, on the other hand, and the representation of the
Corporation and the Indemnified Party by the same counsel would be inappropriate
due to actual or potential conflicting interests, in which event such fees and
disbursements shall be paid by the Corporation to the extent that they have been
reasonably incurred.
To the extent that any Indemnified Party is not a party to this Agreement, the
Underwriter to which such Indemnified Party is related shall obtain and hold the
right and benefit of the indemnity provisions hereunder in trust for and on
behalf of such Indemnified Party.
The Corporation hereby waives all rights which it may have by statute or common
law to recover contribution from any Underwriter in respect of losses, claims,
costs, damages, expenses or liabilities which any of them may suffer or incur
- 27 -
directly or indirectly (in this paragraph, "losses") by reason of or in
consequence of a document containing a misrepresentation; provided, however,
that such waiver shall not apply in respect of losses by reason of or in
consequence of any misrepresentation which is based upon or results from
information or statements furnished by or relating solely to one or more of the
Underwriters.
13. CONTRIBUTION
In the event that the indemnity provided for above is, for any reason, illegal
or unenforceable as being contrary to public policy or for any other reason,
each of the Underwriters and the Corporation shall contribute to the aggregate
of all losses, claims, costs, damages, expenses or liabilities (including any
legal or other expenses reasonably incurred by the Indemnified Party in
connection with investigating or defending any action or claim which is the
subject of this section but excluding loss of profits or consequential damages)
of the nature provided for above such that each Underwriter shall be responsible
for that portion represented by the percentage that the Underwriting Fee paid by
the Corporation to such Underwriter bears to the Gross Proceeds realized from
the sale of the Offered Shares and the Corporation shall be responsible for the
balance, whether or not it has been sued, provided that, in no event, shall an
Underwriter be responsible for any amount in excess of the amount of the
Underwriting Fee actually received by it. In the event that the Corporation may
be held to be entitled to contribution from an Underwriter under the provisions
of any statute or law, the Corporation shall be limited to contribution in an
amount not exceeding the lesser of: (i) the portion of the full amount of
losses, claims, costs, damages, expenses and liabilities, giving rise to such
contribution for which such Underwriter is responsible, as determined above, and
(ii) the amount of the Underwriting Fee actually received by such Underwriter.
Notwithstanding the foregoing, a party guilty of fraudulent misrepresentation
shall not be entitled to contribution from the other party. Any party entitled
to contribution will, promptly after receiving notice of commencement of any
claim, action, suit or proceeding against such party in respect of which a claim
for contribution may be made against the other party under this section, notify
such party from whom contribution may be sought. In no case shall such party
from whom contribution may be sought be liable under this Agreement unless such
notice has been provided, but the omission to so notify such party shall not
relieve the party from whom contribution may be sought from any other obligation
it may have otherwise than under this section.
The rights to indemnity and contribution provided in this Agreement shall be in
addition and not in derogation of any other right to indemnity or contribution
which the Underwriters or the Corporation may have by statute or otherwise by
law.
14. NOTICE
Any notice or other communication to be given hereunder shall, in the case of
notice to the Corporation, be addressed to the Corporation at the address
appearing on page 1 of this Agreement, Attention: Xxxxxx XxXxxxxxx,
Vice-President, Finance and Chief Financial Officer, Telecopier No. (604)
421-1764, and in the case of notice to the Underwriters:
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if to Sprott: Sprott Securities Inc.
Xxxxx Xxxx Xxxxx, Xxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx
Telecopier No.: (000) 000-0000
if to Xxxxxxx Xxxxx Ltd.: 000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
if to Xxxxxxxxx XxXxxxxx: 000 Xxxx Xxxxxx Xxxx
& Partners Suite 1100
Toronto, Ontario M5H 1J8
Attention: Xxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
and if so given, shall be deemed to have been given and received upon receipt by
the addressee or a responsible officer of the addressee if delivered, or one
hour after being telecopied and receipt confirmed during normal business hours,
as the case may be. Any party may, at any time, give notice in writing to the
others in the manner provided for above of any change of address or telecopier
number.
15. LIABILITY OF THE UNDERWRITERS
The obligation of the Underwriters to purchase the Offered Shares hereunder
shall be several (and not joint or joint and several) and:
(a) each Underwriter shall be obligated to purchase and pay for only the
percentage of the Offered Shares set out opposite its name below;
(b) if one of the Underwriters shall fail to purchase the applicable
percentage of the Offered Shares which it has agreed to purchase
under this Agreement and such failure constitutes a default under
any of its obligations under this Agreement, the other Underwriters
(the "Continuing Underwriters") may, but shall not be obligated to,
purchase the total number of Offered Shares and the Continuing
Underwriters shall have the right, by notice in writing to the
Corporation to postpone the Time of Closing by not more than 48
hours to effect such purchase;
(c) the applicable percentage of the Offered Shares which each
Underwriter shall severally be obligated to purchase and pay for is
as follows:
- 29 -
Sprott - 55%
Xxxxxxx Xxxxx Ltd. - 30%
Xxxxxxxxx XxXxxxxx & Partners - 15%
(d) if the Continuing Underwriters shall not elect to purchase the
balance of the Offered Shares pursuant to subsection 15(b) hereof
then:
(i) the Corporation shall not be obliged to sell less than all of
the Offered Shares; and
(ii) the Corporation shall be entitled to terminate its obligations
under this Agreement, in which event there shall be no further
liability on the part of the Corporation or the Underwriters
under this Agreement except in respect of any liability of the
Corporation which may have arisen or may thereafter arise
under sections 11, 12 or 13 hereof.
Nothing in this section and no action taken pursuant to this section shall
relieve any defaulting Underwriter from liability to the Corporation in respect
of such default hereunder.
16. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement and every part hereof.
17. ASSIGNMENT
Except as contemplated herein, no party hereto may assign this Agreement or any
part hereof without the prior written consent of the other parties hereto.
Subject to the foregoing, this agreement shall enure to the benefit of, and
shall be binding upon, the Corporation and the Underwriters and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions contained in this Agreement, this Agreement and all conditions
and provisions of this Agreement being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that the covenants and indemnities of the Corporation set out under the headings
"Indemnity" and "Contribution" shall also be for the benefit of the
Underwriters' Personnel.
18. COUNTERPART PROVISION
This Agreement may be executed in any number of counterparts, each of which when
delivered shall be deemed to be an original and all of which together shall
constitute one and the same document.
19. ENTIRE AGREEMENT
The provisions herein contained constitute the entire agreement between the
parties relating to the Offering and supersede all previous communications,
representations, understandings and agreements between the parties with respect
to the subject matter hereof whether verbal or written.
- 30 -
20. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the Province of British Columbia and the federal laws of Canada applicable
therein.
21. SURVIVAL OF WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENTS
All warranties, representations, covenants, indemnities and agreements of the
Corporation herein contained or contained in documents submitted or required to
be submitted pursuant to this Agreement shall survive the purchase by the
Purchasers of the Offered Shares and shall continue in full force and effect for
the benefit of the Underwriters.
22. LANGUAGE
The parties hereto confirm their express wish that this agreement and all
documents and agreements directly or indirectly relating thereto be drawn up in
the English language.
Les parties reconnaissent leur volonte express que la presente ainsi que tous
les documents et contrats s'y rattachant directement ou indirectment soient
rediges en anglais.
23. FACSIMILE
The Corporation and the Underwriters shall be entitled to rely on delivery by
facsimile of an executed copy of this Agreement and acceptance by the
Corporation and the Underwriters of that delivery shall be legally effective to
create a valid and binding agreement between the Corporation and the
Underwriters in accordance with the terms of this Agreement.
- 31 -
24. ACCEPTANCE
If this letter accurately reflects the terms of the transaction which we are to
enter into and if such terms are agreed to by the Corporation, please
communicate acceptance by executing where indicated below and returning a signed
copy of this Agreement to Sprott.
Yours very truly,
SPROTT SECURITIES INC.
Per:
/s/ W. Xxxxxxx Xxxxxxx
-----------------------------------
W. Xxxxxxx Xxxxxxx
XXXXXXX XXXXX LTD.
Per: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
XXXXXXXXX XXXXXXXX & PARTNERS
Per: /s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx
- 32 -
The foregoing accurately reflects the terms of the transaction which we are to
enter into and such terms are agreed to with effect as of the date provided at
the top of the first page of this Agreement.
SPECTRUM SIGNAL PROCESSINGINC.
Per:
/s/ Xxxxxx X. XxXxxxxxx
-----------------------------------
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