Exhibit 4.29
AGENCY AGREEMENT
March 23, 2004
Spectrum Signal Processing Inc.
One Spectrum Court
200 - 0000 Xxxxxxxxxx Xxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
ATTENTION: XXXXXX XXXXXXXXXX, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear Sirs/Mesdames:
Reference is made to a letter agreement dated January 12, 2004 (the "LETTER
AGREEMENT") between Spectrum Signal Processing Inc. (the "CORPORATION") and GMP
Securities Ltd. ("GMP"). The Corporation hereby appoints GMP and Xxxxxx Merchant
Group Inc. (collectively, the "AGENTS"), and the Agents hereby agrees to act, as
exclusive agents on a best efforts agency basis to raise gross proceeds of up to
$2,986,470 for the Corporation through the sale of up to 2,212,200 units
("UNITS") at a price of $1.35 per Unit. Each Unit shall consist of one common
share in the capital of the Corporation (an "OFFERED SHARE") and one-half of one
Common Share purchase warrant. Each whole warrant (an "OFFERED WARRANT") shall
be issued pursuant to and subject to the terms of a warrant indenture (the
"WARRANT INDENTURE") dated the date hereof between the Corporation and
Computershare Trust Company of Canada. Each Offered Warrant is exercisable at
any time until that date which is 18 months following the Closing Date (as
defined herein) for one Common Share (an "OFFERED WARRANT SHARE") at an exercise
price of $1.50 per share. The offering of the Units by the Corporation is
hereinafter referred to as the "OFFERING". It is understood that the sale of
Units will take place only in the Provinces of British Columbia, Alberta, Quebec
and Ontario (the "OFFERING JURISDICTIONS"); and (ii) in the United States, in
each case in accordance with the provisions of this Agreement. It is hereby
agreed and understood that the Agents shall act as agents only and shall not at
any time be obligated to purchase or arrange for the purchase of any Units but
may subscribe for and purchase Units if the Agents so chooses.
1. Interpretation
(a) Unless expressly provided otherwise, where used in this Agreement or
any schedule hereto, the following terms shall have the following
meanings, respectively:
"AGENTS" shall have the meaning ascribed thereto in the first paragraph of this
Agreement;
"AGENTS' PERSONNEL" has the meaning ascribed thereto in Section 11 of this
Agreement;
"AGENCY FEE" shall have the meaning ascribed thereto in subsection 3(a) of this
Agreement;
"AGREEMENT" means this agreement resulting from the acceptance of the offer made
by the Corporation;
"APPLICABLE SECURITIES LAWS" means, collectively, the applicable securities laws
of the Offering Jurisdictions and the United States, the regulations, rules,
rulings and orders made thereunder, the applicable published policy statements
issued by the Securities Commissions and the United States Securities and
Exchange Commission thereunder and the securities legislation and published
policies of each other jurisdiction in Canada the securities laws of which are
applicable to the sale of the Units 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, 2002;
"BUSINESS DAY" shall mean any day except Saturday, Sunday or a statutory or
civic holiday in Toronto, Ontario or Vancouver, British Columbia;
"CLOSING" means the closing on the Closing Date of the transaction of purchase
and sale in respect of the Units pursuant to this Agreement;
"CLOSING DATE" means March 23, 2004, or such other date as the Agents and the
Corporation may agree;
"COMMON SHARES" means the common shares in the capital of the Corporation;
"COMPENSATION WARRANTS" shall have the meaning ascribed thereto in subsection 3
of this Agreement;
"DISCLOSURE DOCUMENTS" means all documents that have been disclosed by the
Corporation to the public and filed since December 31, 2002 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 Units;
"HAZARDOUS SUBSTANCES" shall have the meaning ascribed thereto in subsection
5(jj) of this Agreement;
"INDEMNIFIED PARTY" shall have the meaning ascribed thereto in Section 11 of
this Agreement;
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"INTELLECTUAL PROPERTY" shall have the meaning ascribed thereto in subsection
5(ll) of this Agreement;
"KNOWLEDGE" or "AWARE" or similar words in respect of any facts or circumstances
by the Corporation means only those facts or circumstances of which the
President or the Chief Financial Officer of the Corporation has actual knowledge
or is actually aware on or before the Closing Date;
"LEASED PREMISES" shall have the meaning ascribed thereto in subsection 5(dd) 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 an Offering 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;
"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 an Offering 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 an Offering 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 Small Cap Market;
"OFFERED WARRANT SHARES" means the Common Shares issuable upon the due exercise
of the Offered Warrants; and
"OFFERED WARRANTS" has 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" shall have the meaning ascribed thereto in the first
paragraph of this Agreement;
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"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 the prospectus exemptions pursuant to which
the Units are to be issued in the Offering Jurisdiction as more specifically set
out in the Subscription Agreements;
"PURCHASERS" means, collectively, those persons or companies who are purchasing
the Units as contemplated herein;
"SECURITIES COMMISSIONS" means the applicable securities regulatory authorities
in the Offering Jurisdictions;
"SUBSCRIPTION AGREEMENTS" means, collectively, the subscription agreements in
the form agreed to by the Agents and the Corporation to be entered into between
the Purchasers and the Corporation pursuant to which the Purchasers agree to
subscribe for and purchase Units as herein contemplated and shall include, for
greater certainty, all schedules thereto;
"SUBSIDIARIES" means collectively, Spectrum Signal Processing (USA), Inc. and
Spectrum Signal Processing (UK) Ltd. and "SUBSIDIARY" means any one of them;
"TIME OF CLOSING" means 8:00 a.m. (Vancouver time) on the Closing Date or such
other time on the Closing Date as the Corporation and the Agents may agree;
"UNITED STATES" means the United States of America, as defined in Regulation S
under the U.S. Securities Act;
"UNITS" shall have the meaning ascribed thereto in the first paragraph of this
Agreement;
"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended; and
"WARRANT INDENTURE" has the meaning ascribed thereto in the first paragraph of
this Agreement.
(a) 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.
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(b) 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.
(c) 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" - List of Options, Warrants and Convertible Securities
Schedule "B" - Form of Compensation Warrant Certificate
Schedule "C" - United States Offers and Sales
2. Nature of Transaction
(a) Each Purchaser shall purchase Units under a Private Placement
Exemption. The Agents shall offer the Units for sale on behalf
of the Corporation in the Offering Jurisdictions in compliance
with Applicable Securities Laws. 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 Units so that the
distribution of such securities may lawfully occur without the
necessity of filing a prospectus in Canada or comparable
document elsewhere. The Agents shall arrange for Purchasers of
the Units in the United States through Xxxxxxxxx XxXxxxxx
Corp. (the "U.S. AFFILIATE") pursuant to exemptions from the
registration requirements of the U.S. Securities Act and
applicable state securities laws, all such sales to be carried
out and completed in accordance with Schedule "C" attached
hereto.
(b) The certificates representing the Offered Shares and Offered
Warrants delivered at Closing shall contain the following
legend:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES REPRESENTED HEREBY SHALL NOT TRADE THE SECURITIES BEFORE
JULY 24, 2004."
(d) The certificates representing the Offered Shares delivered at
Closing shall also contain the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE
TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CAN NOT BE TRADED
THROUGH THE FACILITIES OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY
TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES
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IS NOT 'GOOD DELIVERY' IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO
STOCK EXCHANGE.
THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE
UNTIL 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND
CLOSING DATE, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S
UNDER THE 1933 ACT. TERMS USED HEREIN HAVE THE MEANINGS GIVEN TO THEM
IN REGULATION S."
(e) Each of the Corporation and the Agents (on their own behalf or
on behalf of the U.S. Affiliate) agree that the
representations, warranties and covenants contained in
Schedule "C" to this Agreement entitled "United States Offers
and Sales" are incorporated by reference in and shall form
part of this Agreement with respect to offers and sales of
Units in the United States.
3. AGENTS' COMPENSATION
(a) In consideration for the performance of its obligations
hereunder, the Corporation shall, subject to the provisions of
this Agreement, pay to the Agents an aggregate fee (the
"AGENCY FEE") equal to: (i) 7.5% of the Gross Proceeds on
sales of Units to Purchasers other than Ventures West 7
Limited Partnership, Ventures West 7 U.S. Limited Partnership,
directors, officers and employees of the Corporation; and (ii)
3.75% of the Gross Proceeds on sales of Units to Ventures West
7 Limited Partnership, Ventures West 7 U.S. Limited
Partnership, directors, officers and employees of the
Corporation.
(b) The Agents may retain one or more registered securities
brokers or investment dealers to act as selling agents
(individually, each a "SELLING AGENT" and collectively, the
"SELLING AGENTS") in connection with the sale of the Units
provided that (i) the compensation payable to such Selling
Agents shall be the sole responsibility of the Agents; (ii)
retaining such Selling Agents, and their sale of the Units, is
permitted by and in compliance with Applicable Securities
Laws; (iii) such Selling Agents agree to be bound by, and the
Agents shall be responsible for ensuring that the Selling
Agents abide by, the restrictions applicable to Agents
hereunder as if the Selling Agents were Agents hereunder.
(c) In addition to the Agency Fee, as additional consideration for
the performance of their obligations hereunder, the
Corporation shall issue to the Agents at the Time of Closing
on the Closing Date, non-assignable and non-transferable
compensation warrants (the "COMPENSATION WARRANTS"),
substantially in the form set out in Schedule "B" hereto,
entitling the Agents to acquire, in the aggregate, a number of
Units equal to 4.5% of the aggregate number of Units sold
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hereunder exercisable by the Agents at a price of $1.50 per
Unit for a period of one year following the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF THE AGENTS
Each of the Agents hereby certifies that it is an "accredited investor" as
defined under Applicable Securities Laws by virtue of being a company registered
under the Securities Act (Ontario) as an adviser or dealer (other than a limited
market dealer) and is acquiring the Compensation Warrants as principal for its
own account and not for the benefit of any other person.
Each of the Agents represents and warrants to the Corporation that it is a
corporation duly incorporated, organized and subsisting under the laws of the
jurisdiction in which it was incorporated, with good and sufficient power,
authority and right to enter into and deliver this Agreement and to complete the
transactions to be completed by the Agents contemplated hereby.
It is understood and agreed that for the purpose of the opinions to be delivered
pursuant to subparagraph 7(e) of this Agreement, counsel to the Corporation will
rely on inter alia, the accuracy and truth of the representations, warranties
and covenants set forth in this paragraph 4.
5. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to and with the Agents (on the
Agents' own behalf and on behalf of each of the Purchasers) and acknowledges
that each of them is relying upon such representations and warranties in acting
as agents, in the case of the Agents, and in purchasing the Units, in the case
of the Purchasers, that as at the date hereof:
(a) the Corporation and each of the Subsidiaries has been duly
incorporated or amalgamated and is existing under the laws of
its jurisdiction of incorporation or amalgamation 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
Units, to enter into this Agreement, the Subscription
Agreements, the Warrant Indenture, the Compensation Warrants
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,
14,751,724 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 the
Subsidiaries; the Corporation beneficially owns, directly or
indirectly, 100% of the issued and outstanding shares in the
capital of each of the Subsidiaries free
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and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances, claims or demands of any kind
whatsoever; to 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 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) to the knowledge of the Corporation, no order ceasing or
suspending trading in any securities of the Corporation or
prohibiting the sale of the Units 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;
(e) to the knowledge of the Corporation, other than as disclosed
in the Disclosure Documents, 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 the
Subsidiaries;
(f) other than as disclosed in the Disclosure Documents, the
Corporation has not declared or paid any dividends or declared
or made any other payments or distributions on or in respect
of any of its shares and has not, directly or indirectly,
redeemed, purchased or otherwise acquired any of its shares or
agreed to do so or otherwise effected any return of capital
with respect to such shares;
(g) except as set forth in Schedule "A" 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, and on the Closing Date will be, a
"qualifying issuer" within the meaning of Multilateral
Instrument 45-102 Resale of Securities ("MI 45-102") and is a
reporting issuer under the applicable securities laws in each
of Ontario, British Columbia and Alberta and will at the Time
of Closing be a reporting issuer under the applicable laws of
the Province of Quebec; 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 Commission in each of
Ontario, British Columbia and Alberta. In particular, without
limiting the foregoing, the Corporation is in compliance at
the date hereof with its obligations under Applicable
Securities Laws to make timely disclosure of all material
changes relating to it and, since December 31, 2002 (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
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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 report 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 quoted for trading on Nasdaq and to its knowledge no order
ceasing or suspending trading in any securities of the
Corporation or prohibiting the sale of the Units has been
issued and no proceedings for such purpose are pending or, to
the knowledge of the Corporation, threatened;
(j) the definitive form of certificate representing the Offered
Shares complies with the requirements of the Company Act
(British Columbia) and of the Exchange;
(k) to the knowledge of the Corporation, each of the Corporation
and the 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 the 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 the Subsidiaries (on a consolidated
basis) or on the corporate 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 the 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 Corporation's most recent annual
information form filed on SEDAR, all agreements under which
the Corporation or the 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 the 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 the Subsidiaries, and contained no misrepresentations;
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(m) none of the Corporation or the 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 the Subsidiaries
(on a consolidated basis);
(n) the Corporation is not in default or 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 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 Applicable Securities Laws and to the knowledge of
the Corporation there has never been any reportable
disagreement (within the meaning of National Policy Statement
No. 31 of the Canadian Securities Administrators) with the
present auditor or, to the knowledge of the Corporation, any
former auditor of the Corporation;
(p) each of the Corporation and the 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 the
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 the 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 the
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 the 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
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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 the Subsidiaries (on a
consolidated basis);
(r) no domestic or foreign taxation authority has asserted or, to
the Corporation's knowledge, threatened to assert any
assessment, claim or liability for taxes due or to become due
in connection with any review or examination of the tax
returns of the Corporation or any of the 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 the Subsidiaries;
(s) neither the Corporation nor, to the Corporation's knowledge,
any other party to a Material Agreement is in material default
in the observance or performance of any term or obligation to
be performed by it under any such Material Agreement and, to
the Corporation's knowledge, 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 the 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 to be filed by the Time of Closing in
connection with the sale of the Units;
(u) upon completion of all of the transactions contemplated in
this Agreement the Units 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, the
Warrant Indenture, the Compensation Warrants and the
Subscription Agreements and the performance of the
transactions contemplated thereunder, the offering and sale of
the Units 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, or create a
state of facts which, after notice or lapse of time
or both, would result in a breach of or default
under, or conflict with:
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(iii) 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 the Subsidiaries or any
Material Agreement ; or
(iv) any statute, rule, regulation or law applicable to
the Corporation, or any of the 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 the Subsidiaries; or
(v) 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 the
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 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, 2002 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;
(x) other than the Agents, there is no person acting or, to the
knowledge of the Corporation, 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;
(y) the minute books and records of the Corporation made available
to counsel for the Agents in connection with its due diligence
investigation of the Corporation for the periods from the date
of amalgamation or incorporation, as the case may be, to the
date of examination thereof respectively, are all of the
minute books and records of the Corporation and contain copies
of all proceedings (or certified copies thereof) of the
shareholders and the board 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 or board 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
Agents;
(z) there is not, in the constating documents of the Corporation
or in any Material Agreement, 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, however
such restrictions or impediments may exist under applicable
law;
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(aa) 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;
(bb) the Audited Financial Statements and the unaudited interim
consolidated financial statements of the Corporation for the
nine-month period ended September 30, 2003:
(i) have been prepared in accordance with Canadian
generally accepted accounting principles;
(ii) present fully, fairly and correctly, in all material
respects, the assets, liabilities and financial
condition of the Corporation as at December 31, 2002
and as at September 30, 2003, respectively, and the
results of each of their operations and the changes
in each of their financial positions for the relevant
period then ended; and
(iii) contain and reflect adequate provision or allowance
for all reasonably anticipated liabilities, expenses
and losses of the Corporation;
(cc) except as disclosed in the Disclosure Documents, since
December 31, 2002 (i) 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; (ii)
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; and (iii)
there has not been any material adverse change in the affairs,
business, prospects, liabilities, assets, operations or
condition of the business, financial or otherwise of the
Corporation or any of the Subsidiaries;
(dd) with respect to each premises which is material to the
Corporation on a consolidated basis and which the Corporation
or any of the Subsidiaries occupies as tenant (the "LEASED
PREMISES"), the Corporation or such Subsidiary occupies the
Leased Premises and has the right to occupy and use the Leased
Premises and each of the leases pursuant to which the
Corporation and/or the Subsidiaries occupies the Leased
Premises is in good standing and in full force and effect ;
(ee) to the knowledge of the Corporation, 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;
(ff) the Corporation and each of the Subsidiaries has procured and
maintains adequate insurance against all insurable risks which
are material to the Corporation and the Subsidiaries (taken as
a whole);
13
(gg) the Corporation is not in default with respect to any material
provisions contained in any material insurance policies and
has not failed to give any notice or pay any premium or
present any material claim under any such insurance policy and
has no reason to believe that any of its material insurance
policies will not be renewed by the insurer;
(hh) except as previously disclosed in the Disclosure Documents or
to the Agents, there are no actions, suits, proceedings or
inquiries pending or to the knowledge of the Corporation,
threatened against or affecting the Corporation or any of the
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
the Subsidiaries or their properties or assets or which
affects or may affect the distribution of the Units and none
of the actions, suits, proceedings or inquiries so disclosed
is expected to materially adversely affect, the business,
operations or condition (financial or otherwise) of the
Corporation and the 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 the
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 the Subsidiaries;
(jj) except in material compliance with applicable legislation, to
its knowledge, 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 material compliance with applicable legislation, to
its knowledge, none of the Corporation nor any Subsidiary has
caused or permitted the release 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 or any Subsidiary 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;
14
(ll) each of the Corporation and the 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. Other than as disclosed in the Disclosure Documents,
no royalty or other fee is required to be paid by the
Corporation or the Subsidiaries to any other person in respect
of the use of any of the Intellectual Property. To the
knowledge of the Corporation, no employee of the Corporation
or the Subsidiaries is in violation of any term of any
non-disclosure, proprietary rights or similar agreement
between such employee and the Corporation or the Subsidiaries
or between such employee and any former employer. To the
knowledge of the Corporation, all technical information
developed by and belonging to the Corporation and/or the
Subsidiaries which has not been copyrighted or patented has
been kept confidential;
(mm) to the knowledge of the Corporation there are no material
restrictions on the ability of the Corporation or the
Subsidiaries to use and exploit all rights in the Intellectual
Property required in the ordinary course of the Corporation's
or the Subsidiaries' business. None of the rights of the
Corporation or the Subsidiaries in the Intellectual Property
will be impaired or affected in any way by the transactions
contemplated by this agreement. To the knowledge of the
Corporation, the conduct of the business of the Corporation
and the Subsidiaries and the use of the Intellectual Property
does not infringe, and each of the Corporation and the
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 the Subsidiaries has
no notice of any infringements of the Intellectual Property or
material claims against the Intellectual Property by any third
party; and
(nn) the data processing systems used by the Corporation adequately
meet the data processing needs of the business and operations
of the Corporation as presently conducted. The Corporation has
taken appropriate action by instruction, agreement or
otherwise with its employees or other persons permitted access
to system application programs and data files used in the data
processing systems to protect against unauthorized access,
use, copying, modification, theft and destruction of such
programs and files. The data processing and data storage
facilities of the Corporation are adequate and properly
protected.
15
6. Covenants of the Corporation
The Corporation hereby covenants to and with the Agents (on its own behalf and
on behalf of the Purchasers) that:
(a) the Corporation will duly execute and deliver the Subscription
Agreements, the Warrant Indenture and the Compensation
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;
(b) the Corporation will use its commercially reasonable best
efforts to maintain its status as a reporting issuer not in
default in each of Ontario, British Columbia, Alberta and
Quebec for a period of 36 months from the Closing Date;
(c) the Corporation will use its commercially reasonable best
efforts to maintain the listing of the Common Shares on the
Exchange to the date which is two years following the Closing
Date and to ensure that the Offered Shares and the Offered
Warrant Shares will be listed and posted for trading on the
Exchange upon their issue subject to satisfaction with the
continued listing requirements of the Exchange;
(d) other than as contemplated herein, the Corporation will not,
directly or indirectly, without the prior written consent of
GMP, 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 Offered Warrant
Shares pursuant to the exercise of any Offered Warrants; (iii)
the issuance of Compensation Warrant Shares pursuant to the
exercise of any Compensation Warrants; (iv) the issuance of
Broker Warrant Shares pursuant to the exercise of any Broker
Warrants; (v) the grant of stock options in the normal course
pursuant to the Corporation's stock option plan; or (vi) the
issuance to its landlord of up to 200,000 Common Shares and up
to 200,000 warrants to acquire Common Shares;
(e) in the event any person acting for the Corporation establishes
a claim from the Agents for any brokerage or agency fee in
connection with the transactions contemplated herein, the
Corporation shall indemnify and hold harmless the Agents with
respect thereto and with respect to all costs reasonably
incurred in the defence thereof provided that such claim is
not a result of the actions of the Agents;
(f) until the Time of Closing, at the request of the Agents, which
request shall not be unreasonably denied, the Corporation will
give to the Agents, the Agents' counsel and other authorized
representatives of the Agents, full access during normal
business hours to all locations where the business of the
Corporation is carried on
16
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 Agents in
confidence with all information concerning the affairs of the
business of the Corporation as the Agents may reasonably
request; and
(h) the Corporation shall, as soon as practicable, use its
commercially reasonable best efforts to receive all necessary
consents to the transactions contemplated herein.
7. Conditions to Closing
The following are conditions to the closing of the transactions involving the
issuance and sale of the Units 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 Agents:
(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
Units to the Purchasers prior to the Time of Closing on the
Closing Date as herein contemplated, it being understood that
the Agents shall do all that is reasonably required to assist
the Corporation to fulfil this condition;
(b) the Corporation will be a "qualifying issuer" in the Offering
Jurisdictions within the meaning of MI 45-102 at the Time of
Closing;
(c) 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, the creation and
issuance of the Offered Warrants and the Compensation
Warrants, the allotment, issuance and delivery of the Offered
Warrant Shares issuable upon the due exercise of the Offered
Warrants, the allotment, issuance and delivery of the
Compensation Warrant Shares issuable upon the due exercise of
the Compensation Warrants, the creation and issuance of the
Broker Warrants issuable upon the due exercise of the
Compensation Warrants, the allotment, issuance and delivery of
the Broker Warrant Shares issuable upon the due exercise of
the Broker Warrants, and all matters relating thereto;
(d) the Corporation shall have accepted one or more Subscription
Agreements with the Purchasers;
(e) the Agents 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
17
on certificates of Computershare Trust Company of Canada, the
registrar and transfer agent for the Offered Shares, as to the
issued capital of the Corporation; (ii) as to matters of fact
not independently established, on certificates of the
Corporation's auditor(s), and (iii) on the representations and
warranties of the Agents set out herein, which opinion shall,
as appropriate, include the following opinions:
(i) the Corporation is a body corporate amalgamated under
the laws of British Columbia and has not been
discontinued or dissolved, 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, the
Subscription Agreements, the Warrant Indenture and
the Compensation Warrants;
(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 Units;
(iv) the execution and delivery of this Agreement, the
Warrant Indenture, the Subscription Agreements and
the Compensation Warrants 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 comprising the Units will have
been and the Offered Warrant Shares, Compensation
Warrant Shares and Broker Warrant Shares issuable
upon the due exercise of the Offered Warrants, the
Compensation Warrants and the Broker Warrants,
respectively, 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 Units in the Offering Jurisdictions and the
issuance of the Compensation Warrants, other than
applicable reports of trade and a report on Form
45-102F2 pursuant to MI 45-102 with the applicable
securities regulatory authorities in each of the
Offering Jurisdictions;
(vii) the first trade of the Offered Shares, the Offered
Warrants, the Offered Warrant Shares, the
Compensation Warrants, the Compensation Warrant
Shares, the Broker Warrants or the Broker Warrant
Shares, other than a trade that is otherwise exempted
by the Securities Laws, will be subject to the
prospectus and registration requirements of the
Securities Laws unless:
18
(A) the Corporation is and has been a "reporting
issuer" in one of the Offering Jurisdictions
for at least four months (determined in
accordance with section 2.9 of the
Multilateral Instrument) immediately
preceding such trade;
(B) at least four months have elapsed from the
distribution date of the Units or the
Compensation Warrants, as applicable;
(C) such trade is not a "control distribution"
as defined in the Multilateral Instrument;
(D) no unusual effort is made to prepare the
market or to create a demand for such
securities;
(E) no extraordinary commission or other
consideration is paid in respect of the
trade;
(F) certificates representing the Offered
Shares, the Offered Warrants, the Offered
Warrant Shares (if issued on or before that
date which is four months from the Closing
Date), the Compensation Warrants, the
Compensation Warrant Shares (if issued on or
before that date which is four months from
the Closing Date), the Broker Warrants (if
issued on or before that date which is four
months from the Closing Date), and the
Broker Warrant Shares (if issued on or
before that date which is four months from
the Closing Date), were issued with a legend
stating the prescribed restricted period in
accordance with section 2.5 of the
Multilateral Instrument; and
(G) if the selling security holder is an insider
or officer of the Corporation, the selling
security holder has no reasonable grounds to
believe that the Corporation is in default
of any applicable securities legislation.
(viii) the execution and delivery of this Agreement, the
Warrant Indenture, the Subscription Agreements, the
Compensation Warrants 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 Common Shares comprising the
Offered Shares, the Offered Warrant Shares,
19
the Compensation Warrant Shares and the Broker
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 Agents.
(f) the Agents shall have received an Incumbency Certificate dated
the Closing Date including specimen signatures of the
President, the Chief Financial Officer and any other officer
of the Corporation signing this Agreement or any document
delivered hereunder;
(g) the Agents shall have received a certificate, dated the
Closing Date, of the President and the Chief Financial Officer
of the Corporation (or such other officer or officers of the
Corporation acceptable to the Agents, acting reasonably),
addressed to the Agents and their counsel to the effect that,
to the 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;
(iii) the articles and by-laws 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; and
(v) since the date of the Letter Agreement, other than as
disclosed in the Disclosure Documents, there has been
no material adverse change in the business, affairs,
operations, assets, liabilities or capital of the
Corporation and the Subsidiaries taken as a whole.
(h) the Offered Shares and the Offered 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;
20
(i) the Agents shall have conducted all due diligence inquiries
and investigations to its satisfaction, acting reasonably;
(j) the Agents shall have received a certificate, issued under
applicable provisions of the securities laws of Ontario,
British Columbia and Alberta stating that the Corporation is
not in default under the Applicable Securities Laws of
Ontario;
(k) the Agents shall have received evidence that the Corporation
has been deemed a reporting issuer in the Province of Quebec;
(l) [INTENTIONALLY DELETED]; and
(m) if any of the Purchasers is subject to the U.S. Securities
Act, the Agent shall have received an opinion from U.S.
counsel for the Corporation, dated as of the Closing Date, in
form and substance satisfactory to the Agent, acting
reasonably, to the effect that registration of the Units and
the underlying securities will not be required under the U.S.
Securities Act.
It is understood that the Agents 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 the foregoing terms and conditions or any
other or subsequent breach or non-compliance, provided that to be binding on the
Agents 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 Agents may deliver copies thereof to the Purchasers.
8. Termination of Obligations
If at any time before the Time of Closing on the Closing Date:
(a) there shall have occurred any material adverse change (actual,
intended, anticipated or threatened) in or affecting the
business, affairs, operations, prospects, assets, liabilities,
capital or control of the Corporation or the Subsidiaries,
taken as a whole, which, in the opinion of either of the
Agents, 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;
(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
21
inquiry, investigation or other proceeding based upon
activities of the Agents and not upon activities of the
Corporation) which, in the opinion of either of the Agents,
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;
(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 opinion of either of the Agents, 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 the 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;
(e) any enquiry, investigation or proceeding (whether formal or
informal) in relation to the Corporation, any of its assets or
undertaking, or any of the Corporation's directors or
officers, or in relation, directly or indirectly, to the
Offering is commenced or threatened by any regulatory
authority or other body having jurisdiction, whether inside or
outside of Canada, and whether in connection with a
"securities offence" or any other offence of whatsoever
nature, or any charge is laid pursuant thereto, which
materially adversely affects or may reasonably be expected to
so affect the business or prospects of the Corporation or the
marketability of the Units, unless such order, enquiry,
investigation or proceeding is solely attributable to the
actions of the Agents; or
(f) 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 Agents contained in this Agreement may be terminated by
the Agents in their sole discretion.
Any termination pursuant to the foregoing provisions shall be effected by notice
in writing delivered by the Agents 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 10, 11
and 12 hereof shall survive. The right of the Agents to terminate this Agreement
shall be exercised by them in their 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 Agents under this Agreement. The rights of the
Agents to terminate its obligations hereunder are in addition to, and without
prejudice to, any other remedies they may have.
22
9. CLOSING
The sale of Units (the "CLOSING") will be completed at the offices of XxXxxxxx
Xxxxxxxx LLP, Vancouver, British Columbia, or such other place or places as may
be agreed upon by the Corporation and the Agents, 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 Agents, failing which, the
respective obligations of the parties will terminate without further liability
or obligation except as set out under sections 10, 11 and 12 hereof.
At the Time of Closing, the Corporation shall deliver to the Agents:
(a) certificates, duly registered as the Agents may direct,
representing the Offered Shares and Offered Warrants purchased
other than to Ventures West 7 Limited Partnership, Ventures
West 7 U.S. Limited Partnership and directors, employees and
officers of the Corporation to whom Units were sold;
(b) certificates, duly registered as the Agents may direct,
representing the Compensation Warrants;
(c) the requisite legal opinions and certificates as contemplated
in Section 8 hereof;
(d) a direction addressed to the Agents directing the Agents to
pay the Gross Proceeds less the Agency Fees and expenses; and
(e) such further documentation as may be contemplated herein,
against payment of the purchase price for the Units by certified cheque or bank
draft to the Corporation 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 the Agents, at its option,
in addition to and not in lieu of any other remedies the Agents has in respect
thereof, to terminate and cancel their 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 Agents 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 Agents any such waiver or extension must be in writing and signed by the
Agents.
10. 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 Units, the listing of
the Offered Shares, the Offered Warrant Shares, the
23
Compensation Warrant Shares, and the Broker Warrant Shares on the Exchange, the
cost of printing the certificates representing the Offered Shares, the Offered
Warrants, the Offered Warrant Shares, the Compensation Warrants, the
Compensation Warrant Shares, the Broker Warrants and the Broker Warrant 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. The
Corporation shall also pay the Agents' counsel with regard to its reasonable
fees, disbursements and taxes thereon, including G.S.T. All fees and expenses of
the Agents (such fees not to exceed $40,000 excluding disbursements and G.S.T.)
shall be payable by the Corporation upon the closing of the Offering or upon the
Corporation receiving an invoice from the Agents and shall be payable by the
Corporation whether or not the Offering is completed.
11. Indemnity
The Corporation covenants and agrees to indemnify and save harmless each of the
Agents and their respective directors, officers, employees, shareholders and
Agents (collectively, the "AGENTS' 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 statement (other than a statement contained in and
included in reliance upon and in conformity with written
information furnished to the Corporation by the Agents
relating to the Agents specifically for use therein) in any
document delivered by or on behalf of the Corporation to the
Agents pursuant to this Agreement, which at the time and in
the light of the circumstances under which it was made
contains or is alleged to contain a misrepresentation;
(b) the omission or alleged omission to state in any certificate
of the Corporation or of any officers of the Corporation
delivered hereunder or pursuant hereto any material fact
(other than a material fact omitted in reliance upon and in
conformity with written information furnished to the
Corporation by the Agents relating to the Agents specifically
for use therein) required to be stated therein where such
omission or alleged omission constitutes or is alleged to
constitute a misrepresentation;
(c) 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 failure or alleged failure to comply with
Applicable Securities Laws (other than any failure or alleged
failure to comply by the Agents) preventing and restricting
the trading in or the sale of the Common Shares in the
provinces of Canada;
(d) 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
24
(e) 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.
The Corporation shall not, without the prior written consent of the Agents,
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 Agents or any Agents' Personnel are a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Agents and each Agents' 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 acting
reasonably.
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
Agents shall obtain and hold the right and benefit of the indemnity provisions
hereunder in trust for and on behalf of such Indemnified Party.
The indemnity provided for in this Agreement shall not apply to the extent that
a court of competent jurisdiction in a final judgment that has become
non-appealable shall determine that: (i) the Agents or the Agents' Personnel
have been negligent or dishonest or have committed any fraudulent act in the
course of the performance of their duties or have breached any of their legal
obligations; and (ii) the expenses, losses, claims, damages or liabilities, as
to which indemnification is claimed, were directly caused by the negligence,
dishonesty or fraud referred in clause (i) of this paragraph.
25
12. 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, the
Agents 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 the Agents shall be responsible for that portion
represented by the percentage that the Agency Fee paid by the Corporation to the
Agents bears to the Gross Proceeds realized from the sale of the Units and the
Corporation shall be responsible for the balance, whether or not it has been
sued, provided that, in no event, shall the Agents be responsible for any amount
in excess of the amount of the Agency Fee actually received by it. In the event
that the Corporation may be held to be entitled to contribution from the Agents
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 the Agents are responsible, as determined
above, and (ii) the amount of the Agency Fee actually received by the Agents.
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 Agents or the Corporation may have by statute or otherwise by law.
13. AGENTS' OBLIGATIONS
The Agents' obligations under this Agreement shall be several and not joint, and
the Agents' respective obligations and rights and benefits hereunder shall be as
to the following percentages:
GMP Securities Ltd. - 90%
Xxxxxx Merchant Group Inc. - 10%
14. Notice
Any notice or other communication to be given by delivery or by telecopier
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: Xx.
Xxxxxx Xxxxxxxxxx, President and Chief Executive Officer, Telecopier No. (604)
421-1764, and in the case of notice to the Agents:
26
GMP Securities Ltd.
000 Xxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
and
Xxxxxx Merchant Group Inc.
0000 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxx, XX
X0X 0X0
Attention: Xxxxxxx Xxxxxx
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. Time of the Essence
Time shall be of the essence of this Agreement and every part hereof.
16. 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 Agents 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 Agents'
Personnel.
27
17. 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.
17. 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 including,
but not limited to, the Letter Agreement, with respect to the subject matter
hereof whether verbal or written.
18. 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.
19. 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 Units and shall continue in full force and effect for the
benefit of the Agents and the Purchasers for a period of two (2) years from the
Closing Date, regardless of any investigation which the Agents or the Purchasers
may carry on or which may be carried on behalf of the Agents or the Purchasers,
provided that no proceeding to which the Limitations Xxx 0000 (Ontario) applies,
shall be commenced in respect of any claim arising under or in connection with
this Agreement after the last date on which such proceeding may be commenced
pursuant to such Act.
20. 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 convention ainsi
que tous les documents et contrats s'y rattachant directement ou indirectement
soient rediges en anglais.
28
21. Facsimile
The Corporation and the Agents shall be entitled to rely on delivery by
facsimile of an executed copy of this Agreement and acceptance by the
Corporation and the Agents of that delivery shall be legally effective to create
a valid and binding agreement between the Corporation and the Agents in
accordance with the terms of this Agreement.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
29
22. 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 the Agents.
Yours very truly,
GMP SECURITIES LTD.
Per: /s/ Xxxxxx Kiguel
---------------------------------------------
XXXXXX MERCHANT GROUP INC.
Per: /s/ Xxxxxxx Xxxxxx
---------------------------------------------
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 PROCESSING INC.
Per: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------------------
Xxxxxx Xxxxxxxxxx
President and Chief Executive Officer
30
SCHEDULE "A"
OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
Total number of stock options granted and currently held
by staff, directors and consultants as at March 23, 2004 3,741,307
SCHEDULE "B"
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
REPRESENTED HEREBY SHALL NOT TRADE THE SECURITIES BEFORE JULY 24, 2004.
THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933 (THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (i) AS PART OF
THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40 DAYS AFTER THE LATER
OF THE COMMENCEMENT OF THE OFFERING AND CLOSING DATE, EXCEPT IN EITHER CASE IN
ACCORDANCE WITH REGULATION S UNDER THE 1933 ACT. TERMS USED HEREIN HAVE THE
MEANINGS GIVEN TO THEM IN REGULATION S.
THE BROKER'S WARRANTS EVIDENCED HEREBY ARE EXERCISABLE ON OR BEFORE 5:00 P.M.
(TORONTO TIME) ON MARCH 23, 2005, AFTER WHICH TIME THE BROKER'S WARRANTS
EVIDENCED HEREBY SHALL BE DEEMED TO BE VOID AND OF NO FURTHER FORCE OR EFFECT.
COMPENSATION WARRANTS TO PURCHASE UP TO - UNITS OF
SPECTRUM SIGNAL PROCESSING INC.
(EXISTING UNDER THE LAWS OF BRITISH COLUMBIA)
VOID AFTER
MARCH 23, 2005
THIS CERTIFIES that, for value received, - (the "HOLDER"), is the
registered holder of - compensation warrants (the "COMPENSATION WARRANTS") each
of which entitle the holder, subject to the terms and conditions set forth in
this Compensation Warrant Certificate, to purchase from Spectrum Signal
Processing Inc. (the "Corporation"), one unit (a "UNIT"), at any time until 5:00
p.m. (Toronto time) on March 23, 2005, at which time this Compensation Warrant
shall become wholly void and the unexercised portion of the subscription right
represented hereby will expire and terminate (the "TIME OF EXPIRY") on payment
of $1.50 per unit (the "EXERCISE PRICE"). Each Unit shall consist of one common
share in the capital of the Corporation (a "COMPENSATION WARRANT SHARE") and
one-half of one Common Share purchase warrant. Each whole warrant (a "BROKER
WARRANT") is exercisable at any time until that date which is 18 months
following the date hereof for one common share in the capital of the Corporation
(a "BROKER WARRANT SHARE") at an exercise price of $1.50 per share. The number
of Compensation Warrant Shares which the Holder is entitled to acquire upon
exercise of the Compensation Warrants and the Exercise Price are subject to
adjustment as hereinafter provided.
1. EXERCISE OF COMPENSATION WARRANTS
(a) Election to Purchase. The rights evidenced by this certificate
may be exercised by the Holder in whole or in part and in
accordance with the provisions hereof by delivery of an
Election to Purchase in substantially the form attached hereto
as Schedule 1, properly completed and executed, together with
payment by certified cheque or bank draft of the Exercise
Price for the number of Units specified in the Election to
Purchase at the office of the Corporation at One Spectrum
Court, 200 - 0000 Xxxxxxxxxx Xxx, Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0, or such other address in Canada as may be notified in
writing by the Corporation (the "Corporation Office"). The
election to purchase must be executed outside the United
States. In the event that the rights evidenced by this
certificate are exercised in part, the Corporation shall,
contemporaneously with the issuance of the Units issuable on
the exercise of the Compensation Warrants so exercised, issue
to the Holder a Compensation Warrant Certificate on identical
terms in respect of that number of Units in respect of which
the Holder has not exercised the rights evidenced by this
certificate.
(b) Exercise. The Corporation shall, within three business days
after receiving a duly executed Election to Purchase and the
Exercise Price for the number of Units specified in the
Election to Purchase (the "EXERCISE DATE"), issue that number
of Units specified in the Election to Purchase.
(c) Certificates. As promptly as practicable after the Exercise
Date, the Corporation shall issue and deliver to the Holder,
registered in such name or names as the Holder may direct or
if no such direction has been given, in the name of the
Holder, a certificate or certificates for the number of
Compensation Warrant Shares and Broker Warrants specified in
the Election to Purchase. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the close
of business on the Exercise Date, and at such time the rights
of the Holder with respect to the number of Compensation
Warrants which have been exercised as such shall cease, and
the person or persons in whose name or names any certificate
or certificates for Compensation Warrant Shares and Broker
Warrants shall then be issuable upon such exercise shall be
deemed to have become the holder or holders of record of the
Compensation Warrant Shares and Broker Warrants represented
thereby.
(d) Fractional Units. No fractional Units shall be issued upon
exercise of this Compensation Warrant and the Agent will not
be entitled to any cash payment or compensation in lieu of a
fractional Unit.
(e) Corporate Changes.
(i) Subject to paragraph 1(e)(ii) hereof, if, after March
23, 2004 and prior to the Time of Expiry, the
Corporation shall be a party to any reorganization,
merger, dissolution or sale of all or substantially
all of its assets, whether or not the Corporation is
the surviving entity, the Compensation Warrants
evidenced by this certificate shall be adjusted so
that the holder hereof
2
shall be entitled to acquire the same number and type
of securities to which the holder of that number of
Compensation Warrant Shares of the Corporation
subject to the unexercised Compensation Warrants
would have been entitled by reason of such
reorganization, merger, dissolution or sale of all or
substantially all of its assets (the "EVENT"), and
the Exercise Price shall be adjusted to be the amount
determined by multiplying the Exercise Price in
effect immediately prior to the Event by the number
of Compensation Warrant Shares subject to the
unexercised Compensation Warrants immediately prior
to the Event, and dividing the product thereof by the
number of securities to which the holder of that
number of Compensation Warrant Shares subject to the
unexercised Compensation Warrants would have been
entitled to by reason of such Event.
(ii) If the Corporation is unable to deliver securities to
the Holder pursuant to the proper exercise of a
Compensation Warrant, the Corporation may satisfy
such obligations to the Holder hereunder by paying to
the Holder in cash the difference between the
Exercise Price of all unexercised Compensation
Warrants granted hereunder and the Fair Market Value
of the securities to which the Holder would be
entitled to upon exercise of all unexercised
Compensation Warrants. Adjustments under this
subparagraph (e) or (subject to subparagraph (o)) any
determinations as to the Fair Market Value of any
securities shall be made by the board of directors of
the Corporation, or any committee thereof
specifically designated by the board of directors to
be responsible therefor, and any reasonable
determination made by such board or committee thereof
shall be binding and conclusive, subject only to any
disputes being resolved by the Corporation's
auditors, whose determination shall be binding and
conclusive.
(f) Subdivision or Consolidation of Common Shares.
(i) In the event that, after March 23, 2004 and prior to
the Time of Expiry, the Corporation shall subdivide
its outstanding common shares ("COMMON SHARES") into
a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the
outstanding Common Shares shall be consolidated into
a smaller number of shares, the Exercise Price in
effect immediately prior to such consolidation shall
be proportionately increased.
(ii) Upon each adjustment of the Exercise Price as
provided herein, the Holder shall thereafter be
entitled to acquire, at the Exercise Price resulting
from such adjustment, the number of Compensation
Warrant Shares (calculated to the nearest tenth of a
Compensation Warrant Share) obtained by multiplying
the Exercise Price in effect immediately prior to
such adjustment by the number of Compensation Warrant
Shares which may be
3
acquired hereunder immediately prior to such
adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(g) Change or Reclassification of Common Shares. In the event
that, after March 23, 2004 and prior to the Time of Expiry,
the Corporation shall change or reclassify its outstanding
Common Shares into a different class of securities, the rights
evidenced by the Compensation Warrants shall be adjusted as
follows so as to apply to the successor class of securities:
(i) the number of the successor class of securities which
the Holder shall be entitled to acquire as part of
the Units shall be that number of the successor class
of securities which a holder of that number of
Compensation Warrant Shares subject to the
unexercised Compensation Warrants immediately prior
to the change or reclassification would have been
entitled to by reason of such change or
reclassification; and
(ii) the Exercise Price shall be determined by multiplying
the Exercise Price in effect immediately prior to the
change or reclassification by the number of
Compensation Warrant Shares subject to the
unexercised Compensation Warrants immediately prior
to the change or reclassification, and dividing the
product thereof by the number of shares determined in
paragraph 1(g)(i) hereof.
(h) Offering to Shareholders. If and whenever at any time after
March 23, 2004 and prior to the Time of Expiry, the
Corporation shall fix a record date or if a date of
entitlement to receive is otherwise established (any such date
being hereinafter referred to in this subsection 1(h) as the
"record date") for the issuance of rights, options or warrants
to all or substantially all the holders of the outstanding
Common Shares entitling them, for a period expiring not more
than 45 days after such record date, to subscribe for or
purchase Common Shares or securities convertible into or
exchangeable for Common Shares at a price per share or, as the
case may be, having a conversion or exchange price per share
less than 95% of the Fair Market Value (as hereinafter
defined) on such record date, the Exercise Price shall be
adjusted immediately after such record date so that it shall
equal the price determined by multiplying the Exercise Price
in effect on such record date by a fraction, of which the
numerator shall be the total number of Common Shares
outstanding on such record date plus a number equal to the
number arrived at by dividing the aggregate subscription or
purchase price of the total number of additional Common Shares
offered for subscription or purchase or, as the case may be,
the aggregate conversion or exchange price of the convertible
or exchangeable securities so offered by such Fair Market
Value, and of which the denominator shall be the total number
of Common Shares outstanding on such record date plus the
total number of additional Common Shares so offered (or into
which the convertible or exchangeable securities so offered
are convertible or exchangeable); Common Shares owned by or
held for the account of the Corporation or any subsidiary of
the Corporation shall be deemed not to be
4
outstanding for the purpose of any such computation; such
adjustment shall be made successively whenever such a record
date is fixed; to the extent that any rights or warrants are
not so issued or any such rights or warrants are not exercised
prior to the expiration thereof, the Exercise Price shall then
be readjusted to the Exercise Price which would then be in
effect if such record date had not been fixed or to the
Exercise Price which would then be in effect based upon the
number of Common Shares or conversion or exchange rights
contained in convertible or exchangeable securities actually
issued upon the exercise of such rights or warrants, as the
case may be. In any case in which this section requires that
an adjustment be made to the Exercise Price, no such
adjustment shall be made if the Holder of the outstanding
Compensation Warrants receives the rights, options or warrants
referred to in this section in such kind and number as the
Holder would have received if the Holder had been a holder of
Common Shares on the applicable record date by virtue of the
Holder's outstanding Compensation Warrants having then been
exercised into Compensation Warrant Shares at the Exercise
Price in effect on the applicable record date or effective
date, as the case may be. Any such issuance of share, rights,
options, or warrants will be subject to regulatory approval.
(i) Carry Over of Adjustments. No adjustment of the Exercise Price
shall be made if the amount of such adjustment shall be less
than 1% of the Exercise Price in effect immediately prior to
the event giving rise to the adjustment, provided, however,
that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least 1% of the Exercise Price.
(j) Notice of Adjustment. Upon any adjustment of the number of
Compensation Warrant Shares and upon any adjustment of the
Exercise Price, then and in each such case the Corporation
shall give written notice thereof to the Holder, which notice
shall state the Exercise Price and the number of Compensation
Warrant Shares and Broker Warrants or other securities subject
to the unexercised Compensation Warrants resulting from such
adjustment, and shall set forth in reasonable detail the
method of calculation and the facts upon which such
calculation is based. Upon the request of the Holder there
shall be transmitted promptly to the Holder a statement of the
firm of independent chartered accountants retained to audit
the financial statements of the Corporation to the effect that
such firm concurs in the Corporation's calculation of the
change.
(k) Other Notices. In case at any time after March 23, 2004 and
prior to the Time of Expiry:
(i) the Corporation shall declare any dividend upon its
Common Shares payable in Common Shares;
5
(ii) the Corporation shall offer for subscription pro rata
to the holders of its Common Shares any additional
shares of any class or other rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the
Corporation, or consolidation, amalgamation or merger
of the Corporation with, or sale of all or
substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Corporation,
then, in any one or more of such cases, the Corporation shall give to
the Holder (A) at least 10 days' prior written notice of the date on
which a record date shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger,
amalgamation, sale, dissolution, liquidation or winding-up and (B) in
the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, at least 10 days'
prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (A) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Shares shall be entitled
thereto, and such notice in accordance with the foregoing clause (B)
shall also specify the date on which the holders of Common Shares shall
be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation or
winding-up, as the case may be.
(l) Shares to be Reserved. The Corporation will at all times keep
available, and reserve if necessary under Canadian law, out of
its authorized Common Shares, solely for the purpose of issue
upon the exercise of the Compensation Warrants, (i) such
number of Compensation Warrant Shares as shall then be
issuable upon the exercise of the Compensation Warrants, and
(ii) such number of Broker Warrant Shares issuable upon the
due exercise of the Broker Warrants issuable upon the due
exercise of the Compensation Warrants. The Corporation
covenants and agrees that the Compensation Warrant Shares and
the Broker Warrant Shares which shall be so issuable upon
being duly exercised will, upon issuance, be duly authorized
and issued as fully paid and non-assessable. The Corporation
will take all such actions as may be necessary to ensure that
all such Compensation Warrant and Broker Warrant Shares may be
so issued without violation of any applicable requirements of
any exchange upon which the Common Shares may be listed or in
respect of which the Common Shares are qualified for unlisted
trading privileges. The Corporation will take all such actions
are within its power to ensure that all such Compensation
Warrant Shares and the Broker Warrant Shares may be so issued
without violation of any applicable law.
(m) Issue Tax. The issuance of certificates for Compensation
Warrant Shares and Broker Warrants upon the exercise of
Compensation Warrants shall be made
6
without charge to the Holder for any issuance tax in respect
thereto, provided that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a
name other than that of the Holder.
(n) Listing. The Corporation will, at its expense and as
expeditiously as possible, use its reasonable commercial
efforts to cause all Compensation Warrant Shares and Broker
Warrant Shares issuable upon the exercise of the Compensation
Warrants and the Broker Warrants, respectively, to be duly
listed on the Toronto Stock Exchange and/or any other stock
exchange upon which the Common Shares may be then listed prior
to the issuance of such shares.
(o) Fair Market Value. For the purposes of any computation
hereunder, the "Fair Market Value" at any date shall be the
weighted average sale price per share for the Common Shares of
the Corporation for the 20 consecutive trading days
immediately before such date on the most senior stock exchange
in Canada on which the Common Shares may then be listed and on
which there is the greatest volume of trading of the Common
Shares for such 20 day period, or, if the shares or any other
security in respect of which a determination of Fair Market
Value is being made are not listed on any stock exchange, the
Fair Market Value shall be determined by the directors, which
determination shall be conclusive. The weighted average price
shall be determined by dividing the aggregate sale price of
all such shares sold on the said exchange during the said 20
consecutive trading days by the total number of such shares so
sold.
2. REPLACEMENT.
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of this Compensation Warrant Certificate and,
if requested by the Corporation, upon delivery of a bond of indemnity
satisfactory to the Corporation (or, in the case of mutilation, upon surrender
of this Compensation Warrant Certificate), the Corporation will issue to the
Holder a replacement certificate (containing the same terms and conditions as
this Compensation Warrant Certificate).
3. EXPIRY DATE.
The Compensation Warrants shall expire and all rights to purchase Units
hereunder shall cease and become null and void at 5:00 p.m. (Toronto time) on
March 23, 2005.
4. COVENANT.
So long as any Compensation Warrants remain outstanding the Corporation
covenants that it shall use its commercially reasonable best efforts to maintain
its status as a reporting issuer not in default in the Offering Jurisdictions.
7
5. DEFINED TERMS.
All capitalized terms used herein and not otherwise defined shall have
the meaning ascribed thereto in the agency agreement dated as of March 23, 2004
among the Corporation, GMP Securities Ltd. and Xxxxxx Merchant Group Inc.
6. GOVERNING LAW
The laws of the Province of British Columbia and the laws of Canada
applicable therein shall govern the Compensation Warrants.
7. SUCCESSORS
This Compensation Warrant Certificate shall enure to the benefit of the
Holder and its successors or assigns and shall be binding on the Corporation and
its respective successors.
8. GENERAL
This Compensation Warrant is non-assignable and non-transferable.
By acceptance hereof, the Agent hereby represents and warrants to the
Corporation that the Agent is acquiring this Compensation Warrant as principal
for its own account and not for the benefit of any other person.
All amounts of money referred to in this Compensation Warrant
Certificate are expressed in lawful money of Canada.
8
IN WITNESS WHEREOF the Corporation has caused this Compensation Warrant
Certificate to be signed by a duly authorized officers.
DATED as of March 23rd, 2004.
SPECTRUM SIGNAL PROCESSING INC.
Per:
-----------------------------------
Authorized Signing Officer
9
SCHEDULE "1"
ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise the number of
Compensation Warrants of Spectrum Signal Processing Inc. set out below for the
number of Units (or other property or securities subject thereto) as set forth
below:
(a) Number of Compensation Warrants to be Exercised: ____________
(b) Number of Units to be Acquired: ____________
(c) Exercise Price per Unit: $____________
(d) Aggregate Purchase Price [(b) multiplied by (c)] $____________
and hereby tenders a certified cheque, bank draft or cash for such aggregate
purchase price, and directs such Units to be registered and a certificate
therefor to be issued as directed below.
DATED this ______ day of ____________, 200__ .
[NAME OF HOLDER]
Per:
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Name of Registered Holder:
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Address of Registered Holder:
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SCHEDULE "C"
UNITED STATES OFFERS AND SALES
As used in this Schedule C, capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the agency agreement
to which this Schedule is annexed and the following terms shall have the
meanings indicated:
(a) "DIRECTED SELLING EFFORTS" means directed selling efforts as
that term is defined in Regulation S. Without limiting the
foregoing, but for greater clarity in this Schedule, 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 any of the Units, Offered Shares or Offered
Warrants, 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 Units, Offered Shares or
Offered Warrants;
(b) "DISTRIBUTION COMPLIANCE PERIOD" means the 40 day period that
begins on the later of (i) the date the Units are first
offered to persons other than distributors in reliance on
Regulation S or (ii) the Closing Date; provided that, all
offers and sales by a distributor of an unsold allotment or
subscription shall be deemed to be made during the
Distribution Compliance Period;
(c) "ACCREDITED INVESTOR" means an accredited investor as that
term is defined in Rule 501(a) of Regulation D;
(d) "REGULATION D" means Regulation D adopted by the SEC under the
1933 Act;
(e) "REGULATION S" means Regulation S adopted by the SEC under the
1933 Act;
(f) "SEC" means the United States Securities and Exchange
Commission;
(g) "SUBSTANTIAL U.S. MARKET INTEREST" means substantial U.S.
market interest as that term is defined in Regulation S;
(h) "1933 ACT" means the United States Securities Act of 1933, as
amended;
(i) "U.S. EXCHANGE ACT" means the United States Securities
Exchange Act of 1934, as amended;
(j) "U.S. PERSON" means a U.S. person as that term is defined in
Regulation S; and
(k) "UNITED STATES" means the United States of America, its
territories and possessions, any state of the United States,
and the District of Columbia.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENTS
Each Agent acknowledges that the Units, Offered Shares and Offered Warrants have
not been and will not be registered under the 1933 Act and may be offered and
sold only in transactions exempt from or not subject to the registration
requirements of the 1933 Act. Accordingly, each Agent represents, warrants and
covenants to the Corporation that:
1. It has not offered and sold, and will not offer and sell, any Units,
Offered Shares or Offered Warrants except (a) in an offshore
transaction in accordance with Rule 903 of Regulation S or (b) within
the United States as provided in paragraphs 2 through 8 below.
Accordingly, neither the Agent, its affiliates nor any persons acting
on its or their behalf, has made or will make (except as permitted in
paragraphs 2 through 8 below):
(a) any offer to sell or any solicitation of an offer to buy, any
Units, Offered Shares or Offered Warrants to any person within
the United States, any U.S. person, or for the account or
benefit of any U.S. person or person within the United States;
(b) any sale of Units, Offered Shares or Offered Warrants to any
purchaser unless such purchaser is not a U.S. person and is
not purchasing for the account or benefit of any U.S. person
and, at the time the buy order was or will have been
originated, the purchaser was outside the United States, or
such Agent, affiliate or person acting on behalf of either
reasonably believed that such purchaser was outside the United
States; or
(c) any Directed Selling Efforts in the United States with respect
to the Units, Offered Shares or Offered Warrants. It agrees
that, at or prior to confirmation of the sale of the Units,
Offered Shares or Offered Warrants, it will have sent to each
distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Units, Offered Shares
or Offered Warrants from it during the Distribution Compliance
Period a confirmation or notice to substantially the following
effect:
"THE SECURITIES COVERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE
"1933 ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS (i) AS PART OF THEIR
DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40
DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE
OFFERING AND CLOSING DATE, EXCEPT IN EITHER CASE IN
ACCORDANCE WITH REGULATION S UNDER THE 1933 ACT.
TERMS USED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN
REGULATION S."
In addition, prior to the expiration of the Distribution
Compliance Period, all subsequent offers and sales of the
Units, Offered Shares or Offered Warrants by
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such Agent shall be made only in accordance with the provision
of Rule 903 or 904 of Regulation S; pursuant to a registration
of the Units, Offered Shares or Offered Warrants under the
1933 Act; or pursuant to an available exemption from the
registration requirements of the 1933 Act.
Such Agent agrees to obtain substantially identical
undertakings from each member of any banking and selling group
formed in connection with the distribution of the Units,
Offered Shares or Offered Warrants contemplated hereby and to
comply with the offering restriction requirements of
Regulation S.
2. It has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Units, Offered Shares or
Offered Warrants, except with its affiliates, any selling group members
or with the prior written consent of the Corporation. It shall require
each selling group member to agree, for the benefit of the Corporation,
to comply with, and shall use its best efforts to ensure that each
selling group member complies with, the same provisions of this
Schedule as apply to such Agent as if such provisions applied to such
selling group member.
3. All offers and sales of Units, Offered Shares or Offered Warrants in
the United States shall be made through the Agent's U.S. registered
broker-dealer affiliate in compliance with all applicable U.S.
broker-dealer requirements.
4. Offers and sales of Units, Offered Shares or Offered Warrants in the
United States shall not be made (i) by any form of general solicitation
or general advertising (as those terms are used in Regulation D)
including advertisements, articles, notices or other communications
published in any newspaper, magazine, or similar media or broadcast
over radio or television, or any seminar or meeting whose attendees had
been invited by general solicitation or general advertising or (ii) in
any manner involving a public offering within the meaning of Section
4(2) of the 1933 Act.
5. Any offer, sale and solicitation of an offer to buy Units, Offered
Shares or Offered Warrants that has been made or will be made in the
United States was or will be made to Accredited Investors that are
exempt, or in transactions that are exempt, from registration under
applicable state securities laws.
6. The Agent, acting through its U.S. broker-dealer affiliate, may offer
the Units, Offered Shares or Offered Warrants in the United States only
to offerees with respect to which such Agent has a preexisting
relationship and has reasonable grounds to believe are Accredited
Investors.
7. Prior to completion of any sale of Units, Offered Shares and Offered
Warrants in the United States, each U.S. purchaser thereof will be
required to execute a Purchaser's Letter in the form attached as a
Schedule to the Subscription Agreement entered into by each U.S.
purchaser and the Corporation.
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8. At least one business day prior to the Closing Date, it will provide
the transfer agent with a list of all purchasers of the Units, Offered
Shares and Offered Warrants in the United States.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION
The Corporation represents, warrants, covenants and agrees that:
1. The Corporation is a "foreign issuer" within the meaning of Regulation
S.
2. The Corporation is not, and as a result of the sale of Units, Offered
Shares or Offered Warrants contemplated hereby will not be, an
"investment company" as defined in the United States Investment Company
Act of 1940, as amended.
3. Except with respect to offers and sales to Accredited Investors within
the United States in reliance upon an exemption from registration under
Section 4(2) of the 1933 Act, neither the Corporation nor any of its
affiliates, nor any person acting on its or their behalf, has made or
will make: (A) any offer to sell, or any solicitation of an offer to
buy, any Units, Offered Shares or Offered Warrants to a person in the
United States; or (B) any sale of Units, Offered Shares or Offered
Warrants unless, at the time the buy order was or will have been
originated, the purchaser is (i) outside the United States or (ii) the
Corporation, its affiliates, and any person acting on their behalf
reasonably believe that the purchaser is outside the United States.
4. During the period in which the Units, Offered Shares and Offered
Warrants are offered for sale, neither it nor any of its affiliates, or
any person acting on their behalf (i) has made or will make any
Directed Selling Efforts in the United States, or (ii) has engaged in
or will engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D) with respect to
the offers or sales of the Units, Offered Shares and Offered Warrants
in the United States, including advertisements, articles, notices or
other communications published in any newspaper, magazine or similar
media, or broadcast over radio, or television, or any seminar or
meeting whose attendees have been invited by general solicitation or
general advertising.
5. Except with respect to the offer and sale of the Units, Offered Shares
and Offered Warrants offered hereby, the Corporation has not, for a
period of six months prior to the date hereof sold, offered for sale or
solicited any offer to buy any of its securities in the United States.
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