ADMINISTRATION AND SERVICES AGREEMENT
This Agreement dated the 10th day of April, 2000.
Between:
XXXXXX.XX, INC.
(hereinafter called the "Corporation")
Of The First Part
- and -
GROOME XXXXXXX.XXX INC.
(hereinafter called the "Groome")
Of The Second Part
- and -
XXXXXXXX.XXX SECURITIES CORP. (DELAWARE)
(hereinafter called "InvestIn")
Of The Third Part
WHEREAS:
(a) Groome has agreed to enter into an Agency Agreement with
Xxxxxx.xx, Inc. (the "Corporation") on the terms and conditions as
contained in the Agency Agreement to be dated effective April 10, 2000;
(b) pursuant to the terms of the Agency Agreement, Groome is entitled
to a fiscal advisory fee with respect to the Offering conducted in the
United States, it being acknowledged that these services consist of
identifying dealers registered in the United States to provide the
services herein described;
(c) the Corporation, as issuer of the Special Warrants, has identified
those U.S. Persons who are accredited investors within the meaning of
Rule 501(a) under the United States Securities Act of 1933, as amended
(the "1933 Act");
NOW THEREFORE, this Agreement witnesseth that in consideration of the
mutual covenants and agreements contained herein and other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged by the parties hereto), the parties hereto covenant and
agree as follows:
1. All capitalized terms contained herein shall, unless otherwise herein
defined, have the same meaning as ascribed to such terms in Schedule "A"
annexed hereto.
2. The Corporation hereby retains InvestIn to provide administrative
and related services, including: (a) delivery of the Corporation's Rule
506 Confidential Private Placement Memorandum (the "Confidential
Memorandum") to U.S. Persons designated in writing by the Corporation
and who have requested the same from InvestIn; reviewing subscription
agreements to ensure the proper completion and execution of subscription
agreements; (b) delivery of subscription funds to the Corporation; (c)
delivery of the certificates representing the Special Warrants upon
completion of the Offering with respect to orders which have been
obtained from U.S. Persons; and (d) keeping the Corporation informed on
reasonable basis of its activities in connection with the Offering,
including providing notice to the Corporation at least 24 hours in
advance of delivering any documents to U.S. Persons.
The parties hereto acknowledge and agree that, in conducting its duties
hereunder, InvestIn is acting solely as an agent and shall be under no
obligation to purchase any of the Special Warrants.
3. In connection with InvestIn's retainer, InvestIn represents and
warrants to the Corporation and acknowledges and agrees that the
Corporation is relying on such representations and warranties in
connection with the appointment of InvestIn hereunder as follows:
(a) it is a corporation duly organized, validly existing and in good
standing in the State of Delaware, United States of America;
(b) it is duly qualified and registered as a broker-dealer with the
United States Securities and Exchange Commission (the "Commission"), and
it is a member of the NASD and has all requisite regulatory and
statutory authority to carry out its functions and duties hereunder;
(c) in carrying on its activities on behalf of the Corporation in
respect of the Offering, it will:
(i) use reasonable due diligence to ensure that subscriptions are
obtained only from U.S. Persons who are "accredited investors" with the
meaning of Rule 501(a) under the 1933 Act and will otherwise comply with
U.S. Securities Laws;
(ii) except as herein provided, not deliver to any prospective
Purchaser any documents or materials, other than the Confidential
Memorandum without the consent of the Corporation;
(iii) not solicit offers to purchase the Special Warrants and shall not
engage in any activity with regard to potential subscriptions other than
as provided in Section 2 hereof;
(iv) obtain from each Purchaser a duly completed and executed
subscription agreement for Special Warrants in the form to be provided
by the Corporation, together with all documentation and subscription
funds as may be necessary in connection with the subscription for
Special Warrants;
(v) refrain from advertising the Offering in printed public media,
radio, television or telecommunications, including electronic display
and otherwise not engage in any form of general solicitation, and not
make use of any green sheet or internal marketing document;
(vi) not make any representations or warranties with respect to the
Corporation, the Special Warrants or the Underlying Securities other
than as set forth in the Confidential Memorandum as prepared by the
Corporation;
(vii) deliver the proceeds and documentation pertaining to be accepted
subscriptions in accordance with the written instructions of the
Corporation; and
(viii) maintain complete and accurate records of all funds which it
has received from Purchasers of Special Warrants.
The representations and warranties of InvestIn shall survive the Closing
until the Survival Limitation Date.
4. In consideration of the services to be provided by InvestIn for
the Corporation hereunder, Groome agrees to pay, subject to receipt of
its Fiscal Advisory Fees pursuant to the Agency Agreement, at the Time
of Closing or as soon as practical thereafter, a fee ("InvestIn's Fee")
equal to1% of the amount of aggregate proceeds obtained from
subscriptions under Section 2 above. InvestIn shall be entitled to be
reimbursed for its reasonable costs and expenses (the "Expenses") in
carrying out its duties hereunder not to exceed, however, U.S. $2,000.
The expenses shall be paid by and shall be the responsibility of the
Corporation.
5. In the event that the terms of the Offering are amended, modified
or otherwise changed by agreement between Groome and the Corporation,
Groome shall notify InvestIn in writing of such amendment, modification
or change and InvestIn shall be immediately bound thereby.
6. In the event that the Canadian Offering is terminated for any
reason pursuant to either the Corporation's or Xxxxxx'x rights under the
Agency Agreement then this Agreement shall be likewise be deemed to be
terminated, provided, that the obligation of InvestIn contained in
Section 7 hereof shall survive in accordance with its terms. In the
event that the agreement is terminated InvestIn shall, unless otherwise
required by Applicable U.S. Securities Laws, return all subscription
funds and subscription agreements to the respective subscribers
forthwith.
7. InvestIn covenants and agrees to indemnify the Corporation and its
directors, officers, employees and agents (each being hereinafter
referred to an Indemnified Party) against, and to reimburse the
Corporation promptly upon any demand, for any legal or other expenses
reasonably incurred by the Corporation in connection with investigating
or defending all losses (other than loss of profits) claims, damages,
liabilities, costs or expenses (collectively a "Claim") which an
Indemnified Party may suffer or incur, caused or incurred in connection
with the Offering by reason of or in any way relating to directly or
indirectly any breach of any representation or warranty of InvestIn
contained herein or the failure of InvestIn to comply with its
obligations hereunder.
8. The Corporation agrees to indemnify InvestIn against any claim
brought by a third party against InvestIn as a result of any fraudulent
act of the Corporation or as a result of the Corporation's negligence.
9. Any notice of other communication to be given hereunder shall be
in writing and shall be given by delivery or by telecopier as follows:
if to the Corporation
c/o 000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
if to InvestIn:
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx
00000 X.X.X.
Attention: Xxxxxxxx Xxxxxx
Facsimile: (000) 000-0000
if to Groome:
Groome Xxxxxxx.xxx Inc.
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
and if so given, shall be deemed to have been and received upon receipt
by the addressee or responsible officer of the addressee if delivered or
four hours after being telecopied and receipt confirmed during normal
business hours at the location of the recipient, 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.
10. InvestIn shall ensure that all subscription funds received from
Purchasers on closing of the Offering be delivered and paid to the
Corporation, in trust.
11. This Agreement shall enure to the benefit of, be binding upon, the
parties and their respective successors (including successors by reason
of amalgamation, merger, business combination or arrangement) and legal
representatives and nothing expressed or mentioned in this Agreement is
intended and 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 herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other
person.
12. This Agreement may be executed by telecopier and in one or more
counterparts which, together, shall constitute an original copy hereof
as of the date first noted above. This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof.
13. This Agreement shall be governed by and wholly construed and each
of the parties' obligations shall be governed by the laws of the
Province of Ontario. The courts of the Province of Ontario shall have
exclusive and original jurisdiction in any action or proceeding brought
under this Agreement or for the purpose of enforcing this Agreement or
any provision of it and the parties irrevocably attorn to the
jurisdiction of the courts of the Province of Ontario provided that
nothing in this Agreement shall prevent the Corporation from commencing
or maintaining an action or proceeding in such other jurisdiction as it
may be advised for the purpose of enforcing its rights under this
Agreement.
14. If any provision of this Agreement or the application of the
provision to any circumstances shall be held to be invalid or
unenforceable, then the remaining provisions of this Agreement or the
application of them to other circumstances shall not be affected by the
invalidity or unenforceability and shall be valid and enforceable to the
fullest extent permitted by law.
15. If, any time or from time to time during or after the termination
of this Agreement, any dispute, difference or questions (the "Dispute")
arises between or among any of the parties, or any other persons
interested in this Agreement, touching or concerning the construction,
meaning or effect of this Agreement, or any provision in it, or the
rights or obligations of the parties, or any other persons under this
Agreement or otherwise, with respect to any provision of this Agreement,
the dispute shall be submitted to and settled by arbitration and the
decision of the arbitrator, appointed in the manner set out below, to
deal with the dispute shall be accepted by all parties to the dispute
and shall be final and binding upon the parties to the dispute. The
arbitration shall be conducted by a single arbitrator agreed upon by the
parties to the dispute. If, within five days after notice of the
dispute has been given by one party to the other or others, the parties
cannot agree on a single arbitrator, the arbitration shall be conducted
by a single arbitrator appointed by a judge of the Ontario Superior
Court on the application of any party with notice to the other or
others. The arbitration shall be conducted in accordance with the
provisions of the Arbitrations Xxx, 0000, (Ontario), its amending or
successor legislation in force at the time of such dispute, difference
or question. The decision or the arbitrator shall be final and binding
on all of the parties to the dispute and on the Corporation and there
shall be no appeal from the decision.
16. The parties hereto acknowledge that Groome is a party hereto for
the limited purposes set forth in Section 4 hereof.
XXXXXXXX.XXX SECURITIES CORP. (DELAWARE)
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx, President
XXXXXX.XX, INC.
By: /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, Chief Executive Officer
GROOME XXXXXXX.XXX INC.
Per: /s/ Xxxxxx Page
Xxxxxx Page, Vice President
SCHEDULE "A"
Unless expressly provided otherwise, where used in this Agreement or any
schedule hereto, the following terms shall have the following meanings,
respectively:
"Applicable U.S. Securities Laws" means, collectively, all applicable
federal and state securities laws in the United States including all
"Blue Sky" laws, the United States Securities Act of 1933, as amended
from time to time or any successor statute, and the United States
Securities Exchange Act of 1934, as amended from time to time, or any
successor statute, and the rules, regulations and orders of the
Commission and the various state regulatory authorities promulgated or
issued thereunder, including, without limitation, the securities laws,
regulations, rules, rulings and orders of the United States Securities
and Exchange Commission and the various state regulatory authorities
applicable to broker dealers;
"Business Day" means any day other than a Saturday, Sunday or statutory
or municipal holiday in the City of Xxxxxxx, Xxxxxxx, Xxxxxx;
"Closing Date" means the date on which the Offering is to be completed,
being April 25, 2000 or such earlier or later date as Groome and the
Corporation may agree;
"Common Share" or "Common Shares" means the current issued and
outstanding common shares in the capital of the Corporation, the common
shares issuable upon the exercise of the Special Warrants and Xxxxxx'x
Compensation Options, as the context requires;
"Corporation" means Xxxxxx.xx, Inc.;
"Exchange" means the Over-the-Counter Bulletin Board in the United
States;
"including" means including without limitation;
"NASD" means the National Association of Securities Dealers, Inc.;
"Offering" means the Canadian Offering and U.S. Offering of Special
Warrants as detailed in the Term Sheet as annexed as Schedule "B" to
this Agreement.
"person" includes any individual, corporation, limited partnership,
general partnership, joint stock company or association, joint venture
association, company, trust, bank, trust company, land trust, investment
trust, society or other entity, organization, syndicate whether
incorporated or not, trustee, estate trustee, executor or other legal or
personal representative, and governments and agencies and political
subdivisions thereof;
"President's List" means in respect of this Agreement, those U.S.
Persons identified by the Corporation as being on the specified list of
subscribers by the Corporation and who are accredited investors within
the meaning of Rule 501(a) under the 1933 Act.
"Purchasers" means, collectively, each of the purchasers of Special
Warrants pursuant to the Offering;
"Special Warrants" means the Special Warrants of the Corporation;
"Survival Limitation Date" means the later of: (i) the second
anniversary of the Closing Date; and (ii) the latest date under the
Applicable Securities Laws relevant to a Purchaser (non-residents of
Canada being deemed to be resident in the Province of Ontario for such
purposes) that a Purchaser may be entitled to commence an action or
exercise a right of rescission, with respect to a misrepresentation
contained in the Final Prospectus or, if applicable, any Supplementary
Material;
"Term Sheet" means the Term Sheet annexed as Schedule "B" to this
Agreement;
"Time of Closing" means the time on the Closing Date at which the
Offering is to be completed; and
"U.S. Person" has the meaning ascribed to such term in Regulation S to
the 1933 Act.
SCHEDULE "B"
[REVISED]
TERM SHEET
Xxxxxx.xx, Inc.
Up to US$25,000,000
Private Placement Offering of Special Warrants
Issuer:
Xxxxxx.xx, Inc. (the "Company")
Agent:
Groome Xxxxxxx.xxx Inc. (the "Agent")
Sub-Agent:
XxxxxxXX.xxx Securities Corp. (Delaware)
Offering:
The Company will issue up to 5,555,555 Special Warrants at
a price of US$4.50 per Special Warrant pursuant to a best-
efforts offering by the Agent in Canada (the "Canadian
Offering"). Of the 5,555,555 Special Warrants, a maximum
of 1,777,777 Special Warrants will be made available to
subscribers on the President's List identified by the
Company (the "President's List"). Some or all of the
Subscribers on the President's List may be resident in the
U.S. The only U.S. residents who will be subscribing for
Special Warrants will be persons on the President's List
in the United States as identified by the Company. To the
extent that Special Warrants are sold to subscribers in
the United States, the number of Special Warrants
available for sale under the Canadian Offering will be
correspondingly reduced. The Sub-Agent shall be
responsible for carrying out all administrative functions
with respect to subscriptions obtained or received from
persons in the United States as identified by the Company
(the "U.S. Offering"). Each Special Warrant will entitle
the holder to receive, for no additional consideration,
one Common Share and one half of one Common Share Purchase
Warrant. Each whole Common Share Purchase Warrant will
entitle the holder to purchase one Common Share at a price
of US$10.00 for a period of 24 months from the date of
closing of this offering.
In connection with the Canadian Offering and the U.S.
Offering, the Company will agree to use its best efforts
to prepare and file, within 150 days following the date on
which the Special Warrants are issued, a final prospectus
(the "Prospectus") with the securities regulatory
authorities in each Canadian jurisdiction in which the
Special Warrants are sold (the "Qualifying Provinces") and
to obtain receipts therefor qualifying the distribution of
the Common Shares, Common Share Purchase Warrants and the
Common Shares issuable on exercise of the Common Share
Purchase Warrants (the "Underlying Securities") and to
file an effective registration statement providing for the
registration of the resale of the Common Shares issuable
on the exercise of the Special Warrants and the Common
Shares issuable upon the exercise of the Common Share
Purchase Warrants with the United States Securities and
Exchange Commission and state regulatory authorities as
applicable (an "Effective Registration"). To the extent
that Special Warrants are sold in the United States, the
Company will make filings with federal and state
securities regulatory authorities necessary and
appropriate to secure exemptions from registration or
qualification of such sale of the Special Warrants. The
Company is under no obligation to accept a subscription
for Special Warrants.
Amount:
Up to US$25,000,000 aggregate amount
Special Warrants:
The Special Warrants will be issued pursuant to a Special
Warrant Agreement, which will provide that the Special
Warrants will expire on the earlier of (i) the 5th
business day after the later of the day on which a receipt
for the final Prospectus has been issued by the last of
the securities commissions in each of the Qualifying
Provinces and the date of an Effective Registration, or
(ii) the first anniversary of the date on which the
Special Warrants are issued (the "Expiry Time").
The net proceeds from the sale of the Special Warrants
will be received by the Company at the closing of the
Special Warrant transaction (expected to occur on or about
April 25, 2000) subject to any required approvals from
applicable authorities. If either an Effective
Registration or a receipt for the final Prospectus is not
received from the last of the securities commissions in
each of the Qualifying Provinces by 5:00 p.m. (Toronto
time) on the date which is 150 days following the issue of
the Special Warrants, then from and after such date, each
Special Warrant will entitle the holder thereof to
acquire, without payment of additional consideration, 1.1
Common Shares and 0.55 Common Share Purchase Warrants on
the exercise or deemed exercise of the Special Warrant.
Any Special Warrants not exercised prior to the Expiry
Time will be deemed to have been exercised immediately
prior to the Expiry Time without any further action on the
part of the holder or the Company.
Resale Restrictions:
The Common Shares will be subject to statutory resale
restrictions in Canada if the Special Warrants are
exercised prior to the issuance of a receipt for a final
Prospectus. In addition, the Special Warrants are subject
to resale restrictions.
Shares Outstanding:
Pre-financing Basic 22, 048,293
Minimum Subscription Canadian Offering:
$150,000 for subscribers resident in or subject to the
laws of Ontario and Quebec and $97,000 for subscribers
resident in or subject to the laws of Alberta and British
Columbia, or such other jurisdictions as may be agreed to
by the Company and the Agent.
Use of Proceeds:
The Company intends to use the proceeds of the offering,
after deducting expenses and fees, to fund operating
deficits, research and development, joint venture
agreements, acquisitions and working capital.
Dividend:
The Company has never paid dividends and does not intend
to pay dividends on its Common Shares in the foreseeable
future. The Company's current intention is to reinvest
earnings to finance long-term growth.
Commission:
At the Closing of the Special Warrant transaction, the
Agent shall be paid
(iii) save as otherwise set forth below, a cash commission of
8.0% of the capital raised in respect of the Canadian
Offering and a 4% fiscal advisory fee with respect to the
capital raised in respect of the U.S. Offering provided
that any fees paid by the Company, to an agent in
connection with the U.S. Offering shall correspondingly
reduce the fiscal advisory fee payable to the Agent. The
Agent shall receive a cash commission of 4% (as opposed to
8%) in respect of capital raised from persons identified
in writing by the Issuer on the 'President's List; and
(iv) Compensation Options equal to 10% of the units issued
pursuant to the Offering, inclusive of the U.S. Offering.
Conditions
Precedent to Closing:
The closing of the Special Warrant transaction will be
contingent upon customary closing conditions, including
without limitation, the execution of an agency agreement
acceptable to Agent and the completion of due diligence
activities by or on behalf of Agent.
Date of Closing:
April 25, 2000 or such other date as agreed by the Company
and the Agent.
Note: These terms do not constitute any form of binding contract but
rather are solely for the purpose of outlining those financial terms
pursuant to which a definitive agreement may ultimately be entered into.
The terms of any investment are contingent upon completion of due
diligence to the satisfaction of Groome Xxxxxxx.xxx Inc. The investment
is also contingent upon, among other things, legal, technical, patent
and market assessments, product review and negotiation of satisfactory
closing documents, including without limitation the form of Special
Warrant and an Agency Agreement containing covenants, representations
and warranties.
