AGENCY AGREEMENT
AGENCY
AGREEMENT
Effective
August 23,
0000
Xxx
Xxxx Xxxxxxxxxxxxx, Inc.
0000
Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxxx
Dear
Sirs:
Re: Issue
and Sale of Convertible Debentures
X.
X.
Xxxxxx & Company Ltd. (the “Agent”)
understands that Red Mile Entertainment Inc. (the “Corporation”)
proposes to issue and sell a minimum of US$5 million and a maximum of up to
US$10 million principal amount senior secured convertible debentures (the
"Convertible
Debentures")
of the
Corporation (the “Offering”).
Each
Convertible Debenture will have a subscription price of US$1,000 and will be
issued pursuant to the terms of an indenture (the "Indenture")
to be
entered into between the Corporation and Corporate Stock Transfer (the
"Trustee") to
be
dated as of the Closing Date (as hereinafter defined). The Agent further
understands that the sale of the Convertible Debentures is to be effected in
reliance upon exemptions from the prospectus and registration requirements
of
the securities laws of the provinces of British Columbia, Alberta, Saskatchewan,
Manitoba and Ontario and certain international jurisdictions (the
"Selling
Jurisdictions").
Upon
and
subject to the terms and conditions hereof, the Agent agrees to act as, and
the
Corporation appoints the Agent as, the sole and exclusive agent of the
Corporation to offer for sale on the Closing Date on a private placement basis
the Convertible Debentures in the Selling Jurisdictions and to use its best
efforts to secure subscriptions therefor, provided that the Agent shall be
under
no obligation to purchase any of such Convertible Debentures as principal.
The
Agent shall be entitled in connection with the offering and sale of the
Convertible Debentures to retain as sub-agents other registered securities
dealers and may receive (for delivery to the Corporation at the Closing Time)
subscriptions for Convertible Debentures from other registered securities
dealers. The fee payable to such sub-agents shall be for the account of the
Agent.
In
consideration for its services hereunder, the Agent shall be entitled to the
commission and expenses provided for in sections 8 and 9, which shall be payable
or issued, as the case may be, at the Closing Time. For greater certainty,
except as provided for in sections 8
and
9,
the
services provided by the Agent in connection herewith will not be subject to
Goods and Services Tax provided for in the Excise
Tax Act
(Canada)
and taxable supplies will be incidental to the exempt financial services
provided.
-2-
The
following are the terms and conditions of this Agreement:
| 1. |
Definitions:
|
In
this
Agreement:
| (a) |
“Agent”
means X. X. Xxxxxx & Company
Ltd.;
|
| (b) |
“Agent's
counsel”
means Xxxxxx Blaikie LLP, or such other legal counsel as the Agent,
with
the consent of the Corporation, acting reasonably, may
appoint;
|
| (c) |
“Agreement”
means this agency agreement dated effective
August 23,
2006 between the Agent and the
Corporation;
|
| (d) |
“Applicable
Securities Laws”
includes, collectively, all securities laws, rules, regulations,
notices,
policies and similar instruments applicable to the Corporation and
to the
distribution of securities in accordance with this
Agreement;
|
| (e) |
“associates”
has the meaning ascribed thereto in the Securities
Act
(Alberta);
|
| (f) |
“business
day”
means a day which is not Saturday, Sunday or a legal holiday in the
City
of Calgary;
|
| (g) |
“Canadian
Selling Jurisdictions”
means the provinces of British Columbia, Alberta, Saskatchewan, Manitoba
and Ontario;
|
| (h) |
“Closing
Date”
means October
19,
2006 or such other date or dates as the Agent and the Corporation
may
agree in writing;
|
| (i) |
“Closing
Time”
means 11:00
a.m. (Calgary time), or such other time on the Closing Date as the
Agent
and the Corporation may agree in
writing;
|
| (j) |
“Common
Shares”
means common shares in the capital of the
Corporation;
|
| (k) |
"Convertible
Debentures"
means the senior secured convertible debentures of the Corporation
issued
in accordance with the terms of the
Indenture;
|
| (l) |
“Copyrights”
shall mean all copyrights, and all right, title and interest in all
copyrights, copyright registrations and applications for copyright
registration, certificates of copyright and copyrightable subject
matter
throughout the world, all right, title and interest in related
applications and registrations throughout the world, and all moral
rights;
|
| (m) |
“Corporation”
means Red Mile Entertainment Inc., a body corporate incorporated
pursuant
to the laws of Delaware;
|
| (n) |
“Corporation
Intellectual Property Rights”
shall mean all Intellectual Property Rights and Corporation Technology
used or proposed to be used in, or necessary to, the business of
the
Corporation as currently conducted or as currently reasonably contemplated
by the Corporation, whether owned or controlled, licenced, or otherwise
held by or for the benefit of the
Corporation;
|
-3-
| (o) |
“Corporation
Technology”
shall mean all Technology used or proposed to be used in, or necessary
to,
the business of the Corporation as currently conducted or as currently
contemplated by the Corporation, whether owned or controlled, licenced
or
otherwise held by or for the benefit of the Corporation.
|
| (p) |
“Corporation's
counsel”
means Xxxxxx
and Xxxxx LLP,
or such other legal counsel as the Corporation, with the consent
of the
Agent, acting reasonably, may
appoint;
|
| (q) |
“Debenture
Trustee”
means Olympia Trust Company at its Calgary office located at Xxxxx
0000,
000 - 0xx
Xxxxxx XX, Xxxxxxx, XX, X0X 0X0;
|
| (r) |
“Documents”
means (i) all documents and other information filed by or on behalf
of the Corporation in compliance with or intended compliance with
Applicable Securities Laws or mailed to the securityholders of the
Corporation; and (ii) Form SB-2;
|
| (s) |
“Due
Diligence Sessions”
has the meaning set forth in subsection 2(c);
|
| (t) |
“Financial
Statements”
means the financial statements of the Corporation provided by the
Corporation to the Agent and set out in the Form SB-2 and Form 10-QSB,
including:
|
| (i) |
the
audited consolidated balance sheet of the Corporation and its subsidiaries
as of March 31, 2006 and 2005, and the related consolidated statements
of
operations, stockholders’ deficit, and cash flows for the year ended March
31, 2006 and for the period from December 21, 2004 through March
31, 2005;
and
|
| (ii) |
the
unaudited consolidated financial statements of the Corporation for
period
ended June 30, 2006;
|
| (u) |
“Form
SB-2”
means the Form SB-2 of the Corporation filed with the United States
Securities and Exchange Commission and becoming effective on August
11,
2006
|
| (v) |
“Form
10-QSB”
means the quarterly report filed with the United States Securities
and
Exchange Commission for the quarterly period ended June 30,
2006;
|
| (w) |
“Indemnified
Persons”
means each of: (i) the Agent; (ii) agents of the Agent;
(iii) affiliates of the Agent; and (iv) the directors, officers,
shareholders, partners and employees of the Agent, agents of the
Agent and
affiliates of the Agent;
|
| (x) |
"Indenture"
shall have the meaning ascribed thereto in the first paragraph of
this
Agreement;
|
| (y) |
“Intellectual
Property Rights”
means (i) any trademarks, trade xxxx registrations, trade xxxx
applications, trade dress and logos, trade names, domain names, business
names, corporate names, website names and world wide web addresses,
business names, brand names, service marks, computer software, computer
programs, Copyrights, including any performing, author or moral rights,
designs, integrated circuit topographies, inventions, Patents, franchises,
formulae, processes, know-how, Technology and related goodwill, (ii)
any
applications, registrations, issued Patents, continuations in part,
divisional applications or analogous rights or licence rights therefor,
(iii) proprietary and non-public business information, including
inventions (whether patentable or not), invention disclosures,
improvements, discoveries, trade secrets, know-how, methods, processes,
schematics and any documentation relating thereto, and (iv) other
intellectual or industrial
property;
|
-4-
| (z) |
“Offering”
means the offering of a minimum of US$5,000,000 and a maximum of
US$10,000,000 principal amount Convertible Debentures;
|
| (aa) |
“Patents”
shall mean all patent rights and all right, title and interest in
and to
all letters patent or equivalent rights and applications including
any
reissue, extension, division, continuation, or continuation in part
applications throughout the world and any patents issuing with respect
to
such applications.
|
| (bb) |
“Person”
means a natural person, partnership, limited liability partnership,
corporation, joint stock company, trust, unincorporated association,
joint
venture or other entity;
|
| (cc) |
“Securities
Commissions”
means the securities commissions and regulatory authorities in each
of the
Selling Jurisdictions and the United States Securities and Exchange
Commission and regulatory authorities in the individual states of
the
United States;
|
| (dd) |
"Selling
Jurisdictions"
shall have the meaning ascribed thereto in the first paragraph of
this
Agreement;
|
| (ee) |
"Series
A Preferred Shares"
means Series A Preferred Shares in the capital of the
Corporation;
|
| (ff) |
"Series
B Preferred Shares"
means Series B Preferred Shares in the capital of the
Corporation;
|
| (gg) |
"Series
C Preferred Shares"
means Series C Preferred Shares in the capital of the
Corporation;
|
| (hh) |
“Subscriber”
means any person who subscribes for Convertible Debentures and whose
Subscription Agreement is accepted by the Corporation, and “Subscribers”
means, collectively, all such
persons;
|
| (ii) |
“Subscription
Agreement”
means a subscription agreement to be entered into between the Corporation
and Subscribers including any amendments or addendums
thereto;
|
| (jj) |
“Subscription
Proceeds”
means the aggregate gross proceeds received in respect of the sale
of
Convertible Debentures pursuant to the
Offering;
|
| (kk) |
“Subsidiary”
means a subsidiary of the Corporation within the meaning of the
Business
Corporations Act (Alberta)
and “Subsidiaries”
means all of them;
|
-5-
| (ll) |
“Technology”
shall mean any algorithms, computer software (in source code and
object
code form), documentation, data and data bases, inventions and discoveries
(whether or not patented or patentable), ideas, concepts, techniques,
know-how, processes, methods, applications, know-how, content, technical
information, engineering, production and other designs, drawings,
schematics, specifications, formulas and all other technology or
information existing anywhere in the world;
|
| (mm) |
“Third
Party Intellectual Property Rights”
shall mean the Intellectual Property Rights and Technology of Persons
other than the Corporation that are used in or necessary to the business
of the Corporation as presently conducted or as contemplated to be
conducted;
|
| (nn) |
"Underlying
Securities"
means the Common Shares underlying the Convertible Debentures;
|
In
this
agreement, “misrepresentation”,
“material
change”
and
“material
fact”
shall
have the meanings ascribed thereto under the Applicable Securities Laws of
the
Province of Alberta; “distribution”
means
“distribution”
or
“distribution
to the public”,
as the
case may be, as defined under the Applicable Securities Laws of the Province
of
Alberta; and “distribute”
has
a
corresponding meaning.
In
this
agreement, “to
the best of the knowledge, information and belief of”
or
“to
the best of its knowledge, information and belief”
means,
unless otherwise expressly stated, a statement of the declarant's knowledge
of
the facts or circumstances to which such phrase related, after having made
due
and applicable inquiries and investigations in connection with such facts and
circumstances; and “to
the best of the knowledge, information and belief of the
Corporation”
or
“to
the best of the Corporation's knowledge, information and
belief”
means,
unless otherwise expressly stated, a statement as to the best knowledge of
each
of the directors and senior officers of the Corporation about the facts or
circumstances to which such phrase related, after having made due and applicable
inquiries and investigations in connection with such facts and
circumstances.
| 2. |
Corporation's
Covenants as to Creation and
Qualification
|
The
Corporation covenants and agrees:
| (a) |
that
the Convertible Debentures will be duly and validly created, authorized
and issued pursuant to the terms of the Indenture and the Subscription
Agreements and that the Underlying Securities, if and when issued
upon the
conversion of the Convertible Debentures, will be duly and validly
issued
as fully paid and non-assessable Common Shares of the
Corporation;
|
| (b) |
that
the Corporation will: (i) duly, punctually and faithfully perform all
the obligations to be performed by it hereunder and under the Subscription
Agreements; and (ii) as soon as reasonably possible, and in any event
by the Closing Date, execute or procure the execution of all documents
and
use its best efforts to take or cause to be taken all steps as may
be
necessary or desirable to fulfill, to the satisfaction of Agent's
counsel
and Corporation's counsel, all legal requirements to enable the
Convertible Debentures to be offered for sale and sold on a private
placement basis in the Selling Jurisdictions through the Agent by
way of
the exemptions under Applicable Securities Laws of the Selling
Jurisdictions as contemplated hereby;
and
|
-6-
| (c) |
that,
prior to the Closing Time, the Corporation shall allow the Agent
the
opportunity to conduct required due diligence, including, without
limiting
the generality of the foregoing, due diligence in relation to the
operations and affairs of the Corporation and provide and cause to
be
provided to the Agent and the Agent's counsel reasonable access to
the
properties, senior management personnel, and corporate, financial,
property and other records of the Corporation for the purposes of
conducting such due diligence reviews. Without limiting the scope
of the
due diligence inquiries the Agent may conduct, the Corporation shall
make
available its directors and senior management and auditors to answer
any
questions which the Agent may have and to participate in one or more
due
diligence sessions to be held prior to Closing (collectively, the
“Due
Diligence Sessions”).
|
| 3. |
Corporation's
Covenants as to Changes
|
The
Corporation covenants and agrees that:
| (a) |
during
the period commencing with the date hereof and ending on the Closing
Date,
the Corporation will promptly inform the Agent of the full particulars
of
(i) any material change, (actual, anticipated or threatened) in the
assets, liabilities (absolute, accrued, contingent or otherwise),
business, operations, capital or condition (financial or otherwise)
of the
Corporation; and (ii) the occurrence of a material fact or event
which, in any such case is, or may be, of such a nature to render
any
previous disclosure to the Agent untrue, false or misleading in any
material respect; provided that if there is any reasonable doubt
as to
whether a material change, occurrence or event of the nature referred
to
in this subsection has occurred, the Corporation shall promptly inform
the
Agent of the full particulars of the occurrence giving rise to the
uncertainty and shall consult with the Agent as to whether the occurrence
is of such nature;
|
| (b) |
during
the period commencing with the date hereof and ending sixty days
after the
Closing Date, the Corporation will promptly inform the Agent of the
full
particulars of: (i) any material request or inquiry of any Securities
Commission for any information relating to the Offering, the distribution
of the Common Shares, or the Corporation (or any of its directors
or
officers); (ii) the issuance by any Securities Commission or other
securities commissions or similar regulatory authority or by any
other
competent authority of any order to cease or suspend trading or issuance
of any securities of the Corporation or of the institution or threat
of
institution of any proceedings for that purpose and (iii) the receipt
by
the Corporation of any communication from any Securities Commission
or any
other securities commission, securities regulatory authority, stock
exchange or other regulatory authority relating to the Offering;
and
|
| (c) |
during
the period commencing on the date hereof and ending on the Closing
Date,
the Corporation will promptly provide to the Agent, for review by
the
Agent and the Agent's counsel, prior to filing, delivery or issuance:
(i) any proposed document to be delivered to the shareholders of the
Corporation; and (ii) any press release relating to the Corporation
or the Offering.
|
-7-
| 4. |
Corporation's
Other Covenants
|
The
Corporation covenants and agrees:
| (a) |
as
to the following with respect to registration of securities of the
Corporation:
|
| (i) |
Corporation
Registration.
At any time following twelve months from the Closing Date, the Subscribers
shall be entitled to "piggyback" registration rights on all registrations
of the Corporation or on any demand registrations of any other investor
subject to the right, however, of the Corporation and its underwriters
to
reduce the number of shares proposed to be registered pro rata in
view of
market conditions, and subject to complete cutback in the case of
the
Corporation’s initial public offering. If the Subscribers are so limited,
however, no party shall sell shares in such registration other than
the
Corporation or the Subscriber, if any, invoking the demand registration.
In the event that the Corporation exercises its rights to convert
the
Debentures into Common Shares, no shareholder of the Corporation
shall be
granted registration rights pari passu with or senior to those rights
granted to the Subscribers holding such Common Shares without the
consent
of the holders of 50% such Common
Shares.
|
| (ii) |
Expenses.
The Corporation shall bear registration expenses (exclusive of
underwriting discounts and commissions) of all such demands, piggybacks
and registrations on Form S-3 (including the expense of a single
counsel
to the selling shareholders, which counsel shall also be counsel
to the
Corporation unless there is a conflict of interest with respect to
the
representation of any selling shareholder or the underwriters otherwise
object).
|
| (iii) |
Transfer
of Rights.
The registration rights may be transferred to (i) any partner or
retired
partner of any holder that is a partnership, (ii) any family member
or
trust for the benefit of any individual holder, or (iii) any transferee
who acquires at least 100,000 Underlying Securities, provided the
Corporation is given written notice
thereof.
|
| (iv) |
Termination
of Rights:
The obligation of the Corporation under Section 4 shall not apply
to any
shares of the Corporation that are eligible for immediate resale
pursuant
to Rule 144(k) under the 1933 Act or are otherwise eligible for resale
pursuant to Rule 144(k) within a period of three
months.
|
| (b) |
that
the Corporation shall make an application in the Province of Alberta
for
exemptive relief from the requirements of Applicable Securities Laws
of
the Canadian Selling Jurisdictions that the first trade by Canadian
Subscribers in Convertible Debentures and
Underlying Securities be exempt from the prospectus and registration
requirements of the applicable Canadian Securities legislation and
that,
in the event such exemptive relief is not granted, the Corporation
shall
be required to file a prospectus or otherwise file any relevant
application to become a reporting issuer in the Province of Alberta
concurrently with or promptly following the completion of the
Corporation's initial public offering in the United States, and in
any
event within eight months of the date of the Closing Date, and to
maintain
its reporting issuer status in the Province of Alberta for a period
of two
years thereafter; and
|
-8-
| (c) |
that
the Corporation shall, prior to Closing, enter into acceptable agreements
with each officer and employee of the Corporation governing non-disclosure
of proprietary information and assignment of inventions to the
Corporation;
and
|
| (d) |
For
a period from acceptance of this offer until 90 days following the
Closing
Date, the Corporation may not offer, or announce the offering of,
make or
announce any agreement to issue, sell or exchange debt instruments,
Common
Shares or securities convertible or exchangeable into Common Shares
(other
than grants of employee stock options to directors, officers, employees
or
consultants of the Corporation, that have been disclosed to the Agent
prior to Closing Date and the issuance of Common Shares on the exercise
of
existing stock options), without the prior written consent of the
Agent,
such consent not to be unreasonably withheld.
|
The
Agent
agrees that the restriction set forth in this Section 4(d) shall not apply
to:
(i) the planned additional financing on substantially the terms disclosed in
writing to the Agent with Xxxxxxxx Curhan Ford and Company that may begin
immediately after the Closing Date or other such time as the Corporation may
see
fit, including the preparation and filing of any applicable forms necessary
to
register its Common Shares in connection with such additional financing with
the
Securities and Exchange Commission; (ii) the proposed acquisition of IR Gurus;
and (iii) the proposed acquisition of Evolved Games.
| 5. |
Agent's
Covenants
|
The
Agent
covenants and agrees with the Corporation that it will:
| (a) |
conduct
activities in connection with this Agreement and the proposed offer
and
sale of the Convertible Debentures in compliance with all Applicable
Securities Laws in the Selling Jurisdictions and the rules of the
Investment Dealers Association of
Canada;
|
| (b) |
not
solicit subscriptions for Convertible Debentures, trade in Convertible
Debentures or otherwise do any act in furtherance of a trade of
Convertible Debentures outside of the Selling Jurisdictions, except
in
compliance with the applicable laws thereof in accordance with the
terms
and conditions of this Agreement, and obtaining the prior written
consent
of the Corporation, not to be unreasonably withheld; and provided
such
actions do not obligate the Corporation to take any action to qualify
or
register any of its securities or any trade in any of its securities
obligate the Corporation to establish or maintain any office or director
in such jurisdiction, or subject the Corporation to any reporting
or other
requirement in such jurisdiction.
|
| (c) |
obtain
from each Subscriber an executed Subscription Agreement, including
all
applicable schedules and all applicable undertakings, questionnaires
and
other forms required under Applicable Securities Laws and supplied
to the
Agent by the Corporation for completion in connection with the
distribution of the Convertible Debentures;
|
-9-
| (d) |
not
advertise the proposed offering or sale of the Convertible Debentures
in
printed media of general and regular paid circulation, radio or television
and not to make available for prospective purchasers of Convertible
Debentures any document or material which would constitute or require
the
Corporation to prepare an offering memorandum or prospectus as defined
under Applicable Securities Laws;
and
|
| (e) |
file
or cause to be filed the financing statements contemplated in Section
6.7
of the Indenture in respect of all Debentures issued pursuant hereto
and
provide a copy thereof to the
Corporation.
|
| 6. |
Representations
and Warranties of the
Corporation
|
The
Corporation represents and warrants to the Agent, and acknowledges that the
Agent is relying upon such representations and warranties, that:
| (a) |
the
Corporation and each of its Subsidiaries has been duly incorporated
and is
valid and subsisting under the laws of its jurisdiction of incorporation
and has all requisite corporate authority and power to carry on its
business, as now conducted and as presently proposed to be conducted
by
it, and to own, lease and operate its assets and
properties;
|
| (b) |
the
Corporation and each of its Subsidiaries is qualified to carry on
business
and is validly existing under the laws of each jurisdiction in which
it
carries on a material portion of its
business;
|
| (c) |
other
than 2WG Media, Inc. and
Red Mile Entertainment, Pty, the
Corporation has no Subsidiaries and the Corporation is not affiliated
with
nor is it a holding corporation of any other body
corporate;
|
| (d) |
the
Corporation owns all of the outstanding securities of 2WG Media,
Inc. and
Red Mile Entertainment, Pty, and Red Mile Entertainment, Pty does
not
carry on any active business;
|
| (e) |
the
Corporation and each of its Subsidiaries has conducted and is conducting
its business in compliance in all material respects with all applicable
laws, rules and regulations and, in particular, all applicable licensing
and environmental legislation, regulations or by-laws or other lawful
requirements of any governmental or regulatory bodies applicable
to it in
each jurisdiction in which it carries on business, and the Corporation
and
each of its Subsidiaries holds all material licences, registrations
and
qualifications in all jurisdictions in which it carries on its business
which are necessary or desirable to carry on the business as now
conducted
and as presently proposed to be conducted, and all such licenses,
registrations or qualifications are valid and existing and in good
standing and none of such licenses, registrations or qualifications
contains any burdensome term, provision, condition or limitation
which has
or is likely to have any material adverse effect on the business
of the
Corporation and its Subsidiaries (taken as a whole) as now conducted
or as
proposed to be conducted;
|
-10-
| (f) |
the
Corporation has full corporate power and authority to enter into
this
Agreement , the Indenture and the Subscription Agreements and to
perform
its obligations set out herein and therein (including, without limitation,
to cause the issuance of the Convertible Debentures and the Underlying
Securities), and this Agreement has been, and the Subscription Agreements
and the Indenture will on the Closing Date be, duly authorized, executed
and delivered by the Corporation and this Agreement is, and the
Subscription Agreements and the Indenture will on the Closing Date
be,
legal, valid and binding obligations of the Corporation, enforceable
against the Corporation in accordance with their respective terms
subject
to applicable bankruptcy, insolvency, moratorium, reorganization
and other
laws and equitable principles affecting creditors' rights generally,
the
statutory and equitable powers of the courts in Canada and the United
States to stay proceedings before them and the execution of judgments
and
the fact that specific performance and injunctive relief are equitable
remedies which may be ordered by a court in its discretion and,
accordingly, may not be available as a remedy in an action to enforce
a
covenant and subject to the fact that the rights to indemnity,
contribution and waiver set forth herein may be limited by applicable
laws
or the public policy underlying such
laws;
|
| (g) |
the
Underlying Securities have been reserved and allotted for issuance
and
when issued upon the conversion of the Convertible Debentures will
be
validly issued, fully paid and non-assessable Common
Shares;
|
| (h) |
the
definitive forms of certificates representing the Convertible Debentures
and the Common Shares are in due and proper form under the laws governing
the Corporation;
|
| (i) |
the
authorized capital of the Corporation consists solely of 100,000,000
Common Shares and 15,000,000 Preferred Shares of which, as at the
Closing
Date (prior to the issuance of Shares on the Closing Date), 25,436,506
Common Shares, No Series A Preferred Shares, 2,536,000 Series B Preferred
Shares and 1,298,860
Series C Preferred Shares are issued and outstanding, which shares
are
validly issued, fully paid and non-assessable;
|
| (j) |
neither
the Corporation nor its Subsidiaries is a party to or bound by any
agreement of guarantee, indemnification (other than an indemnification
of
directors and officers in accordance with the by-laws of the Corporation
or its Subsidiaries and applicable laws, indemnities in favour of
the
Agent pursuant to this Agreement, indemnities in favour of purchasers
of
assets in purchase and sale agreements and indemnities and guarantees
in
favour of the bankers of the Corporation) or any other like commitment
of
the obligations, liabilities (contingent or otherwise) of indebtedness
of
any other person;
|
| (k) |
other
than this Agreement, the Subscription Agreements, the Indenture and
the
agreements set forth in Schedule 6(k)
hereto, there are no material contracts or agreements which have
or which
might have or create any material obligation to the Corporation or
from
which they derive or could derive any material benefit or which are
required by the Corporation to carry on its business as now conducted
by
it or as is now proposed to be carried on by it. For the purposes
of this
representation and warranty, contracts shall be deemed to give rise
to a
material obligation where such contract provides for expenditures
by the
Corporation for an aggregate of more than $100,000 during any 12
month
period;
|
-11-
| (l) |
other
than accrued and unpaid bonuses in the amount of US$165,999, the
Corporation has no loans or other indebtedness outstanding which
have been
made to or from any of its shareholders, officers, directors or employees
or any other person not dealing at arm's length with the
Corporation;
|
| (m) |
except
for transactions contemplated herein and except as otherwise disclosed
in
writing to the Agent prior to the date hereof, the Corporation has
not
entered into any transaction which is or may reasonably be expected
to be
material to the Corporation and which is not in the ordinary course
of
business;
|
| (n) |
the
Corporation is not in default or breach of, and the execution and
delivery
of, and the performance of and compliance with the terms of, this
Agreement and the Subscription Agreements by the Corporation or any
of the
transactions contemplated hereby or thereby, does not and will not
result
in any breach of, or constitute a default under, and does not and
will not
create a state of facts which, after notice or lapse of time or both,
would result in a breach of or constitute a default under, any term
or
provision of the articles, by-laws or resolutions of shareholders
or
directors of the Corporation, or any indenture, mortgage, note, contract,
agreement (written or oral), instrument, lease or other document
to which
the Corporation is a party or by which it is bound, or any judgment,
decree, order, statute, rule or regulation applicable to the Corporation,
which default or breach might reasonably be expected to materially
adversely affect the business, operations, capital or condition (financial
or otherwise) of the Corporation, or its
assets;
|
| (o) |
the
Agent has been provided with true and correct copies of the constating
documents of the Corporation and minutes of all meetings and all
the
resolutions of the directors, shareholders and committees of the
Corporation;
|
| (p) |
there
has not been any material adverse change in the consolidated capital,
assets, liabilities (absolute, accrued, contingent or otherwise)
of the
Corporation from the position set forth in the Financial Statements
(other
than as has been disclosed in writing to the Agent prior to the date
hereof or as set out herein);
|
| (q) |
the
books of account and other records of the Corporation, whether of
a
financial or accounting nature or otherwise, have been maintained
in all
material respects in accordance with prudent business
practices;
|
| (r) |
there
has not been any material adverse change in the business, operations,
capital or condition (financial or otherwise) or results of the operations
of the Corporation since the date of the Financial Statements and
since
that date there have been no material facts, transactions, events
or
occurrences which, to the knowledge of the Corporation could materially
adversely affect the consolidated capital, assets, liabilities (absolute,
accrued, contingent or otherwise), business, operations or condition
(financial or otherwise) or results of the operations of the Corporation
which have not been disclosed in writing to the Agent prior to the
date
hereof;
|
| (s) |
the
Financial Statements fairly present, in all material respects and
in
accordance with generally accepted accounting principles in the United
States consistently applied, the financial position and condition
of the
Corporation as at the dates thereof and reflect all liabilities (absolute,
accrued, contingent or otherwise) of the Corporation as at the dates
thereof;
|
-12-
| (t) |
to
the knowledge of the Corporation, after due inquiry, there have not
occurred any material spills, emissions or pollution on any property
of
the Corporation or for which the Corporation may be responsible,
nor is
the Corporation the subject of any outstanding stop orders, control
orders, clean-up orders or reclamation orders under applicable
environmental laws and regulations;
|
| (u) |
to
the best of the knowledge of the Corporation, no other party is in
default
in the observance or performance of any term or obligation to be
performed
by it under any contract to which the Corporation is a party or by
which
they are bound which is material to the business of the Corporation,
no
event has occurred which with notice or lapse of time or both would
directly or indirectly constitute such a default, in any such case
which
default or event would reasonably be expected to have a material
adverse
effect on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Corporation;
|
| (v) |
there
are no judgments against the Corporation which are unsatisfied, nor
are
there any consent decrees or injunctions to which the Corporation
is
subject;
|
| (w) |
the
information and statements set forth in the Documents as at the date
hereof, as they relate to the Corporation, are true, correct, and
complete
and did not contain any misrepresentation as of the respective dates
of
such information or statements, and, except as has been disclosed
to the
Agent, no material change (as defined in Applicable Securities Laws
of the
Alberta) has occurred in relation to such information and statements
since
the respective dates of such information and
statements;
|
| (x) |
other
than the securities issued or to be issued pursuant to the Offering,
no
person, firm, corporation or other entity holds any securities convertible
or exchangeable into shares of the Corporation or now has any agreement,
warrant, option, right or privilege (whether contractual or pre-emptive)
being or capable of becoming an agreement, warrant, option or right
for
the purchase or other acquisition of any unissued share, securities
(including convertible securities) or warrants of the Corporation
except
for warrants and options to purchase an aggregate of not more than
14,753,122
Common Shares and except for 3,834,860
Common Shares issuable on the conversion of Series B Preferred Shares
and
Series C Preferred Shares;
|
| (y) |
the
Corporation has duly and on a timely basis filed all tax returns
required
to be filed by it, has paid all taxes due and payable by it and has
paid
all assessments and re-assessments and all other taxes, governmental
charges, penalties, interest and other fines due and payable by it
and
which are claimed by any governmental authority to be due and owing
and
adequate provision has been made for taxes payable for any completed
fiscal period for which tax returns are not yet required and there
are no
agreements, waivers, or other arrangements providing for an extension
of
time with respect to the filing of any tax return or payment of any
tax,
governmental charge or deficiency by the Corporation and, to the
best of
the Corporation's knowledge, information and belief, after due inquiry,
there are no actions, suits, proceedings, investigations or claims
threatened or pending against the Corporation in respect of taxes,
governmental charges or assessments or any matters under discussion
with
any governmental authority relating to taxes, governmental charges
or
assessments asserted by any such
authority;
|
-13-
| (z) |
except
as disclosed in the Financial Statements (i) the Corporation has no
outstanding liabilities in excess of $10,000 other than those set
forth in
Schedule 6(z),
and (ii) there are no actions, suits, proceedings or inquiries in
existence or, to the Corporation's knowledge, after due inquiry,
pending
or threatened against or affecting the Corporation at law or in equity
or
before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality which in any way materially adversely affects, or
could
reasonably be expected in any way to materially adversely affect,
the
business, operations, capital or condition (financial or otherwise)
of the
Corporation, or any of its assets or which affects or may affect
the
distribution of the Convertible Debentures or Underlying Securities
and
the Corporation is not aware of any existing ground on which such
action,
suit, proceeding or inquiry might be commenced with any reasonable
likelihood of success;
|
| (aa) |
other
than the Agent, there is no person, firm or corporation acting or
purporting to act for the Corporation entitled to any brokerage or
finder's fee or other fee or commission in connection with the Offering,
this Agreement or any of the transactions contemplated
hereby;
|
| (bb) |
no
Securities Commission or any other securities commission or similar
regulatory authority has issued any order which is currently outstanding
ceasing, halting, suspending or preventing other trading in any securities
of the Corporation, no such proceeding is, to the knowledge of the
Corporation, pending, contemplated or threatened, the Corporation
is not
in default of any requirement of Applicable Securities Laws and the
Corporation is entitled to avail itself of the applicable prospectus
exemptions available under the Applicable Securities Laws in respect
of
the trades in its securities to Subscribers as contemplated by this
Agreement;
|
| (cc) |
the
Corporation is not a “reporting issuer” in Canada and no securities of the
Corporation are listed on any stock
exchange;
|
| (dd) |
the
Debenture Trustee, at its principal offices in the City of Calgary,
has
been appointed Debenture Trustee for the Convertible
Debentures;
|
| (ee) |
to
the knowledge of the Corporation, other than has been disclosed to
the
Agent, no insider of the Corporation has any present intention to
sell any
securities of the Corporation;
|
| (ff) |
except
as have been provided to the Agent as at the date hereof, the Corporation
is not a party to any contracts of employment which may not be terminated
on one month's notice or which provide for payments occurring on
a change
of control of the Corporation;
|
| (gg) |
other
than leases of the Corporation with respect to its office premises,
the
Corporation does not own or lease nor has it agreed to acquire or
lease,
any interest in real property;
|
| (hh) |
to
the knowledge of the Corporation, no officer, director or securityholder
of the Corporation is subject to any limitations or restrictions
on their
activities or investments, including any non-competition provisions,
that
would in any way restrict or limit their involvement with the Corporation
or the business and affairs of the
Corporation;
|
-14-
| (ii) |
all
filings by the Corporation pursuant to which the Corporation has
received
or is entitled to receive government incentives, have been made in
accordance, in all material respects, with all applicable legislation
and
contain no misrepresentations of material fact or omit to state any
material fact which could cause any amount previously paid to the
Corporation or previously accrued on the accounts thereof to be recovered
or disallowed;
|
| (jj) |
the
written responses given by the Corporation and the directors, officers
or
employees of the Corporation to the questions circulated to the
Corporation or asked at the Due Diligence Sessions shall be true
and
correct in all material respects as at the time such responses are
given
and at the Closing Time and such responses taken as a whole shall
not omit
any fact or information necessary to make any of the responses not
misleading in light of the circumstances in which those responses
where
given;
|
| (kk) |
to
its knowledge, neither the Corporation nor any of its shareholders
is a
party to any unanimous shareholders agreement, pooling agreement,
voting
trust or other similar type of arrangements in respect of outstanding
securities of the Corporation;
|
| (ll) |
the
representations and warranties made by the Corporation in the Subscription
Agreements are, or will at the Closing Date be, true and correct
as of the
date at which they are made;
|
| (mm) |
the
Corporation either exclusively owns or has the valid right to use
all
Corporation Intellectual Property Rights, Corporation Technology
and all
Third Party Intellectual Property Rights (and, to the knowledge of
the
Corporation, no third party, including any past or present employee
or
contractor of the Corporation, owns or has any ownership interest
in any
Corporation Intellectual Property Rights or Corporation Technology
that
are not Third Party Intellectual Property Rights of the
Corporation);
|
| (nn) |
to
the best knowledge of the Corporation, neither the Corporation
Intellectual Property Rights nor the conduct of the business of the
Corporation as presently conducted or reasonably currently contemplated
to
be conducted uses or discloses in an unauthorized manner, infringes,
or
constitutes a misappropriation of any Intellectual Property Right
or
Technology of any Person;
|
| (oo) |
none
of the Corporation Intellectual Property Rights or Corporation Technology
are the subject of any interference, re-examination, cancellation,
or
opposition proceeding, or any currently pending or to the knowledge
of the
Corporation threatened, suit, action, or proceeding arising out of
an
alleged right of any Person with respect to any Intellectual Property
Right or Technology;
|
| (pp) |
the
Corporation Intellectual Property Rights are in full force and effect
and
have not been used or enforced or failed to be used or enforced in
a
manner that would result in the abandonment, cancellation or
unenforceability of any of the Corporation Intellectual Property
Rights.
All registrations and filings necessary to preserve the rights of
the
Corporation in and to the Corporation Intellectual Property Rights
have
been made;
|
-15-
| (qq) |
the
Corporation has not received any oral, written, or other communication
that the Corporation is using or disclosing in an unauthorized manner,
infringing, or misappropriating the alleged right of any Person with
respect to any Intellectual Property Right, other than as set forth
in
Schedule 6(qq);
|
| (rr) |
other
than as set forth in Schedule 6(qq),
to the knowledge of the Corporation, there is
no:
|
| (i) |
claim
of adverse ownership or invalidity or other opposition to or conflict
with
any of the Corporation Intellectual Property Rights or Corporation
Technology nor of any pending or threatened suit, proceeding, claim,
demand, action or investigation of any nature or kind against the
Corporation relating to the Corporation Intellectual Property Rights
or
Corporation Technology; or
|
| (ii) |
claim
that any products manufactured, produced, used or sold by the Corporation
or any process, method, packaging, advertising, or material that
the
Corporation employs in the manufacture, marketing, or sale of any
such
product, or the use of any of the Corporation Intellectual Property
Rights
or Corporation Technology breaches, violates, infringes or interferes
with
any rights of any Person or requires payment for the use of any
Intellectual Property Right, know-how or Technology of another
Person;
|
| (ss) |
other
than as set forth in Schedule 6(ss),
none of the Corporation Intellectual Property Rights or Corporation
Technology are subject to any proceeding that restricts in any manner
the
use, transfer or licensing thereof by the Corporation or that may
affect
the validity, use or enforceability of the Corporation Intellectual
Property Rights or Corporation Technology; provided that nothing
herein
applies to the prosecution (except for any interference or opposition
proceeding) of any Corporation Intellectual Property Rights in the
U.S.
Patent and Trademark Office or any other government office;
and
|
| (tt) |
the
Corporation has maintained and continues to maintain a system to
safeguard
and maintain the secrecy and confidentiality of and its proprietary
rights
in all of the material Corporation Intellectual Property Rights and
Corporation Technology not otherwise protected by patents, patent
applications, or copyright or trademark law. Without limitation on
the
generality of the foregoing, (i) any disclosures to third parties of
trade secrets that are material to the operation of the Corporation’s
business have been pursuant to executed written confidentiality
agreements, (ii) the Corporation has obtained confidentiality and
inventions assignment agreements, in one or more forms, that have
protections and conditions, from all of the past and present employees
and
independent contractors of the Corporation involved in the creation
or
development of the Corporation Intellectual Property Rights and
Corporation Technology that are material to the operation of the
business
of the Corporation, (iii) to the knowledge of the Corporation, there
has been no breach or violation of any secrecy or confidentiality
commitments of any person in respect of any material confidential
information of the Corporation, and (iv) the measures taken by the
Corporation to protect the proprietary and non-public aspects of
the
Corporation’s processes and methodology are reasonably designed to
adequately prevent third parties from using any such aspects of such
products, without the approval of the Corporation. No Person who
has
performed services related to the Corporation business has any right,
title or interest in any Corporation Intellectual Property Rights
or
Corporation Technology.
|
-16-
| 7. |
Conditions
|
The
obligations of the Agent hereunder shall be conditional upon the Agent
receiving, and the Agent shall have the right on the Closing Date or on each
Closing Date if there is more than one closing, on behalf of Subscribers to
withdraw all Subscription Agreements delivered and not previously withdrawn,
unless the Agent receives, on or prior to the Closing Date:
| (a) |
a
legal opinion of the Corporation's counsel addressed to the Agent,
the
Agent's counsel and the Subscribers in form and substance reasonably
satisfactory to the Agent, with respect to such matters as the Agent
may
reasonably request relating to the offering, issuance and sale of
the
Convertible Debentures, including, without limitation, that as at
the
Closing Date:
|
| (i) |
the
Corporation is valid and subsisting under the laws of its jurisdiction
of
incorporation and has all requisite corporate power and authority
to carry
on its business as now conducted by it and to own its assets and
is
qualified to carry on business under the laws of each jurisdiction
in
which it carries on a material portion of its
business;
|
| (ii) |
the
Corporation has full corporate power and authority to enter into
this
Agreement, the Indenture, the Security Agreement and the Subscription
Agreements and to perform its obligations set out herein and therein,
and
this Agreement has been and the Security Agreement, the Subscription
Agreements and the Indenture will, on the Closing Date, be duly
authorized, executed and delivered by the Corporation and constitute
legal, valid and binding obligations of the Corporation enforceable
against the Corporation in accordance with their respective terms,
subject
to applicable bankruptcy, insolvency, moratorium, reorganization
and other
laws and equitable principles affecting creditors' rights generally,
the
statutory and equitable powers of the courts in Canada or the United
States to stay proceedings before them and the execution of judgments
and
the fact that specific performance and injunctive relief are equitable
remedies which may be ordered by a court in its discretion and,
accordingly, may not be available as a remedy in an action to enforce
a
covenant and subject to the fact that the rights to indemnity,
contribution and waiver set forth herein may be limited by applicable
laws
or the public policy underlying such
laws;
|
| (iii) |
the
execution and delivery of this Agreement, the Indenture, the Security
Agreement and the Subscription Agreements and the fulfillment of
the terms
hereof or thereof by the Corporation and the performance of and compliance
with the terms of this Agreement, the Indenture, the Security Agreement
and the Subscription Agreements by the Corporation do not and will
not
result in a breach of, or constitute a default under, and do not
and will
not create a state of facts which, after notice or lapse of time
or both,
will result in a breach of or constitute a default
under:
|
-17-
| A. |
any
applicable laws of the States of New York or Delaware or the federal
laws
of the United States applicable
therein;
|
| B. |
any
term or provision of the articles, by-laws or resolutions of the
directors
or shareholders of the Corporation;
|
| C. |
of
which the Corporation's counsel is aware, any of the terms or provisions
of any mortgage, note, indenture, contract, agreement (written or
oral),
instrument, lease or other document to which the Corporation is a
party or
by which it is bound on the Closing Date;
or
|
| D. |
of
which Corporation’s counsel is aware, any judgment, decree or order
applicable to the Corporation,
|
which
default or breach might reasonably be expected to materially adversely affect
the business, operations, capital or condition (financial or otherwise) of
the
Corporation or its properties or assets.
| (iv) |
the
form and terms of the certificates representing the Convertible Debentures
have been approved and adopted by the board of directors of the
Corporation and conform with applicable law and the constating documents
of the Corporation;
|
| (v) |
the
Common Shares to be issued on conversion of the Convertible Debentures
have been reserved and allotted for issuance and, when issued upon
conversion of the Convertible Debentures will be validly issued,
fully
paid and non-assessable Common Shares of the
Corporation;
|
| (vi) |
all
Applicable Securities Laws of the Selling Jurisdictions and the United
States of America in connection with the creation, offering, issuance
and
sale of the Convertible Debentures and Underlying Securities have
been
complied with by the Corporation and no registration under the
United
States Securities Act of 1933,
as amended (the “U.S.
Securities Act”),
is required for the offer and sale of the Convertible Debentures
and the
issuance of the Underlying Securities upon conversion of the Convertible
Debentures, assuming distribution by the Corporation in compliance
with
the relevant provisions of such Applicable Securities
Laws;
|
| (vii) |
The
Security Agreement creates a valid security interest in the Collateral
in
favor of the Debenture Trustee for the benefit of the Debentureholders
to
secure the Obligations (as such term is defined in the Security
Agreement). Under Article 9 of the Uniform Commercial Code as enacted
in
the State of New York (the “UCC-NY”),
while a debtor is “located” in a jurisdiction, the local law of that
jurisdiction governs perfection of a security interest granted by
such
debtor which can be perfected by the filing of a Uniform Commercial
Code
financing statement. Under the UCC-NY, the Corporation is “located” in the
State of Delaware and the Uniform Commercial Code in effect in the
State
of Delaware (the “UCC-DE”)
governs perfection of a security interest granted by such Company
which
can be perfected by the filing of a Uniform Commercial Code financing
statement
in the office of the Secretary of State of the State of Delaware.
The
Financing Statement is sufficient in form to perfect a security interest
of the Debenture Trustee in the Collateral, to the extent a security
interest in such Collateral may be perfected under the UCC-DE by
filing a
financing statement with the Secretary of State of Delaware. Upon
proper
filing of the Financing Statement with the Secretary of State of
Delaware,
the Debenture Trustee will have a perfected security interest in
the
Collateral to the extent that a security interest can be perfected
therein
by the filing of a financing statement with the Secretary of State
of
Delaware.
|
-18-
| (viii) |
The
choice of Alberta law to govern this Agreement, the Indenture and
the
Subscription Agreements and the choice of New York law to govern
the
Security Agreement are valid choices of law under the laws of the
States
of Delaware and New York and the Province of Alberta and will accordingly
be applied by courts in such
jurisdictions.
|
| (ix) |
The
State of New York has enacted the Uniform Foreign Country Money Judgments
Recognition Act, which appears in the Consolidated Laws of New York
at
Sections 5301 to 5309. Under those Sections, a judgment of a foreign
state
granting or denying recovery of a sum of money, other than a judgment
for
(a) taxes, or (b) a fine or other penalty, or (c) in matrimonial
or family
matters, is conclusive between the parties to the extent that it
grants or
denies recovery of a sum of money, and the foreign judgment is enforceable
in the same manner as the judgment of another state which is entitled
to
full faith and credit but is not conclusive under certain circumstances
listed in the statute. In particular, we note that Section 5305(a)(3)
of
Consolidated Laws of New York provides that a foreign judgment shall
not
be refused recognition for lack of personal jurisdiction if the defendant
prior to the commencement of the proceedings had agreed to submit
to the
jurisdiction of the foreign court with respect to the subject matter
involved. We also note that the Corporation has agreed to the submission
to the jurisdiction of the courts of Alberta under this Agreement,
the
Indenture and the Subscription Agreements.
We are aware of no statutory or judicial authority under New York
law that
would suggest that the Corporation’s submission to the jurisdiction of the
courts of Alberta under such documents would not be given effect
in New
York.
|
and
additionally relating to:
| (i) |
the
distribution of the Underlying Securities issuable on conversion
of the
Convertible Debentures;
|
| (ii) |
the
first trade in the Convertible Debentures and the Common Shares issuable
on conversion of the Convertible Debentures;
and
|
| (iii) |
the
authorized and issued capital of the
Corporation;
|
and
as to
all other legal matters, in any way connected with the Offering and issuance,
sale and delivery of the Convertible Debentures as the Agent may reasonably
request.
-19-
It
is
understood that the Corporation's counsel may rely on the opinions of local
counsel acceptable to it as to matters governed by the laws of jurisdictions
other than the jurisdiction of residence of such counsel and on certificates
of
officers of the Corporation and public officials as to relevant matters of
fact.
| (b) |
a
certificate of the Corporation dated the Closing Date, addressed
to the
Agent and signed on the Corporation's behalf by its President or
such
other officer or director of the Corporation satisfactory to the
Agent,
acting reasonably, certifying that:
|
| (i) |
the
Corporation has complied with and satisfied in all material respects
all
covenants and conditions of this Agreement on its part to be complied
with
or satisfied at or prior to the Closing Time except to the extent
same
have been waived by the Agent;
|
| (ii) |
the
representations and warranties of the Corporation set forth in this
Agreement and, where applicable, in the Subscription Agreements are
true
and correct in all material respects at the Closing Time, as if made
at
such time;
|
| (iii) |
no
event of a nature referred to in subsection 12(b)(i),
(iii), (vi) or (ix) has occurred since the date of this Agreement
or to
the knowledge of such officer is pending, contemplated or
threatened;
|
| (iv) |
the
Corporation has made and/or obtained, at or prior to the Closing
Time, all
necessary filings, approvals, consents and acceptances under Applicable
Securities Laws, and under any applicable agreement or document to
which
the Corporation is a party or by which it is bound in respect of
the
execution and delivery of this Agreement and the offering and sale of the
Convertible Debentures and the consummation of the transactions
contemplated hereby; and
|
| (v) |
no
order suspending the sale or ceasing the trading of securities of
the
Corporation has been issued and no proceedings for that purpose have
been
instituted or are pending or to the knowledge of such officer are
threatened under Applicable Securities
Laws;
|
| (c) |
definitive
certificates for the Convertible Debentures subscribed for pursuant
to the
Offering, registered in such name or names as the Agent shall notify
the
Corporation in writing not less than 24 hours prior to the Closing
Time, provided such certificates registered in such names may, subject
to
receipt by the Corporation, be delivered in advance of the Closing
Date to
the Agent or such other parties in such locations as the Agent may
direct
and the Agent and the Corporation may agree
upon;
|
| (d) |
executed
copies of the Subscription Agreements in form and substance reasonably
satisfactory to the Agent and the Agent's
counsel;
|
| (e) |
payment
of all commissions payable by the Corporation to the Agent pursuant
to
section 8 and all expenses payable by the Corporation pursuant to
section 9, provided that such payment may be made by deducting such
fees and expenses from the gross proceeds of the Offering in accordance
with Section 10(b); and
|
-20-
| (f) |
such
other matters as may be reasonably requested by the
Agent.
|
The
foregoing conditions are for the sole benefit of the Agent and may be waived
in
whole or in part by the Agent at any time and without limitation, and the Agent
shall have the right, if any of the foregoing conditions are not met, on behalf
of potential Subscribers, to withdraw all Subscription Agreements delivered
and
not previously accepted by the Corporation or withdrawn or rescinded by such
persons. If any of the foregoing conditions are not met on or before the Closing
Date, the Agent may terminate its obligations under this Agreement without
prejudice to any other remedies it may have.
| 8. |
Agent’s
Commission
|
On
the
Closing Date,
the
Corporation agrees to pay to the Agent a commission equal to 6.0% of the gross
proceeds raised from the sale of the Convertible Debentures.
| 9. |
Expenses
|
Whether
or not the transactions contemplated herein shall be completed, the Corporation
agrees to pay all reasonable costs and expenses of or incidental to the
Offering, including, without limitation, all reasonable costs and expenses
related to the preparation, filing and reproduction of documents and the
out-of-pocket expenses of the Agent including the reasonable fees, disbursements
and expenses incurred by the Agent's counsel (to a maximum of US$50,000)
relating to the transactions contemplated herein.
| 10. |
Closing
|
The
issue
and sale of the Convertible Debentures shall be completed at the Closing Time
at
the offices of the Corporation's counsel or at such other place as the
Corporation and the Agent may agree. Subject to the conditions set forth in
section 7,
the
Agent, on the Closing Date, shall deliver to the Corporation:
| (a) |
all
executed Subscription Agreements;
and
|
| (b) |
via
wire transfer, United States funds in an amount equal to the aggregate
gross subscription price of all subscriptions delivered to and accepted
by
the Corporation less the fees and expenses set forth in sections
8 and 9
hereof,
|
against
delivery by the Corporation to the Agent of the certificates, opinions and
documents set forth in section 7
hereof.
The
Corporation may not reject any properly completed Subscription Agreement, unless
(i) the issuance of Convertible Debentures would breach Applicable Securities
Laws or (ii) the aggregate of the number of Convertible Debentures subscribed
for pursuant to all Subscription Agreements tendered by the Agent exceeds
$10,000,000.
| 11. |
Waiver
|
The
Agent
may waive in whole or in part any breach of, default under or non-compliance
with any representation, warranty, covenant, term or condition hereof, or extend
the time for compliance therewith, without prejudice to any of its rights in
respect of any other representation, warranty, covenant, term or condition
hereof or any other breach of, default under or non-compliance with any other
representation, warranty, covenant, term or condition hereof, provided that
any
such waiver or extension shall be binding on the Agent only if the same is
in
writing.
-21-
| 12. |
Termination
Events
|
| (a) |
All
representations, warranties, covenants, terms and conditions of this
Agreement shall be construed as conditions, and any material breach
or
failure to comply with any such representation, warranty, covenant,
term
or condition shall entitle the Agent to terminate its obligation
to
distribute the Convertible Debentures by written notice to that effect
given to the Corporation prior to the Closing Date.
|
| (b) |
In
addition to any other remedies which may be available to the Agent,
the
Agent shall be entitled, at its option, to terminate and cancel its
obligations under this Agreement if, prior to the Closing Time on
the
Closing Date:
|
| (i) |
any
inquiry, investigation (whether formal or informal) or other proceeding
is
announced or commenced by any Securities Commission or similar regulatory
authority, or any order is issued in relation to the Corporation,
any of
its affiliates, or any of its directors or officers or any of the
Corporation's securities or any order is issued under or pursuant
to any
statute of Canada or the United States or of any of the provinces
of
Canada or states of the United States, or any other applicable law
or
regulatory authority (unless based on the activities or alleged activities
of the Agent or its sub-agents); or
|
| (ii) |
there
is any change of law, regulation or policy or the interpretation
or
administration thereof, which, in the reasonable opinion of the Agent,
prevents or restricts trading in or the distribution of the Convertible
Debentures or Common Shares or has or would be expected to have a
material
adverse effect on the market price or value of or the investment
quality
or marketability of the Convertible Debentures or Common Shares;
or
|
| (iii) |
there
shall occur an event, fact or circumstance, (actual, contemplated
or
threatened), which constitutes a material change or any change in
a
material fact or a development that could result in a material change
or
change in a material fact in respect of the business, operations,
capital,
condition (financial or otherwise), properties, assets, liabilities,
obligations or affairs of the Corporation which, in the reasonable
opinion
of the Agent, could reasonably be expected to prevent or restrict
trading
in or the distribution of the Convertible Debentures or Common Shares
or
has or would reasonably be expected to have a material adverse effect
on
the market price or value of or the investment quality or marketability
of
the Common Shares or Convertible Debentures;
or
|
| (iv) |
the
state of the financial markets or the market for video games or any
aspects thereof including federal, provincial or state tax laws applying
thereto become such that in the opinion of the Agent (A) the
Convertible Debentures or Common Shares cannot be profitably marketed;
or
(B) the advantages or risk of investing in the Convertible Debentures
or Common Shares has been materially adversely altered;
or
|
-22-
| (v) |
there
should develop, occur or come into effect or existence any event,
action,
state, condition or major financial occurrence of national or
international consequence, acts of hostility or escalation thereof
or any
other calamity or crisis or any change or development involving a
prospective change in national or international political, financial
or
economic conditions, or any law or regulation (including federal,
provincial or state taxation laws) is enacted or changed which, in
the
sole opinion of the Agent, acting reasonably, materially adversely
affects, or involves, or could reasonably be expected to materially
adversely affect or involve, the financial markets generally or the
business, operations, affairs, assets, liabilities (contingent or
otherwise), capital or control of the Corporation or the market price
or
value of the Convertible Debentures or Common Shares;
or
|
| (vi) |
the
Corporation shall be in breach of, default under or non-compliance
with
any material representation, warranty, term or condition of this
Agreement
or the Subscription Agreements; or
|
| (vii) |
the
Agent discovers any facts or matters with respect to the Corporation
or
the insiders of the Corporation pursuant to the Agent's due diligence
review or otherwise that are not satisfactory to the Agent, acting
reasonably; or
|
| (viii) |
the
Agent shall determine that the responses provided by the Corporation
at
the Due Diligence Sessions contained information which would have,
in the
sole opinion of the Agent, acting reasonably, a material adverse
effect on
the market price or value of the Common Shares or Convertible Debentures;
or
|
| (ix) |
any
order to cease or suspend trading in any securities of the Corporation,
or
prohibiting or restricting the distribution of the Common Shares
or
Convertible Debentures is made, or proceedings are announced or commenced
for the making of, any such order, by any Securities Commission,
any other
securities commissions or similar regulatory authority, and has not
been
rescinded, revoked or withdrawn within two business
days;
|
in
any of
which cases the Agent shall be entitled, at its option, to terminate and cancel
its obligations to the Corporation under this Agreement and the obligations
of
any purchaser under any Subscription Agreement by written notice to that effect
given to the Corporation prior to the Closing. In the event of any such
termination, the Corporation's liabilities to the Agent shall be at an end
except for any liability of the Corporation provided for in this Agreement
which
by its terms survives termination.
| (c) |
The
Agent may exercise any or all of the rights provided for in section
7 or
subsections 12(a) or 12(b) notwithstanding any material change, change,
event or state of facts and notwithstanding any act or thing taken
or done
by the Agent or any inaction by the Agent, whether before or after
the
occurrence of any material change, including, without limitation,
any act
of the Agent related to the Offering or continued offering of the
Convertible Debentures for sale other than any unlawful act relating
solely to the Agent and the Agent shall only be considered to have
waived
or be estopped from expressing or relying upon any of their rights
under
or pursuant to section 7 or subsections 12(a) or 12(b) if such waiver
or
estoppel is in writing and specifically waives or estops such exercise
or
reliance.
|
-23-
| (d) |
Any
termination pursuant to the terms of this Agreement shall be effected
by
notice in writing delivered by the Agent to the Corporation; provided
that
no termination shall discharge or otherwise affect any obligation
of the
Corporation under section 9 and sections 14 through 23. The rights
of the
Agent to terminate its obligations hereunder are in addition to,
and
without prejudice to, any other remedies it may
have.
|
| 13. |
Survival
|
All
representations, warranties, terms and conditions herein or contained in
certificates or documents submitted pursuant to or in connection with the
transactions contemplated herein shall not merge on the completion of the
transactions contemplated hereby or the termination of this Agreement, but
shall
survive and continue in full force and effect for the benefit of the Agent
and
the Subscribers for a period of two years from the Closing Date regardless
of
any investigation by or on behalf of the Agent with respect
thereto.
| 14. |
Indemnity
|
| (a) |
The
Corporation shall indemnify and save each of the Indemnified Persons
harmless from and against any and all losses (other than loss of
profits
or commissions), claims, damages, liabilities, demands, expenses
(including reasonable fees and disbursements of counsel) or costs
(collectively “Claims”) which any of the Indemnified Persons may suffer or
incur, whether under the provisions of any statute or otherwise,
in any
way caused by, or arising directly or indirectly from or in consequence
of:
|
| (i) |
any
information or statement contained in the Subscription Agreements
or the
Documents which is or is alleged to be untrue or misleading or which
omits
or is alleged to omit to provide any information or state any fact
the
omission of which makes or is alleged to make the statement untrue
or
misleading in light of the circumstances in which it was made;
or
|
| (ii) |
any
misrepresentation or alleged misrepresentation contained in the
Subscription Agreements or the Documents, except a misrepresentation
which
is based upon information relating to the Agent and furnished by
the Agent
or Agent’s counsel expressly for inclusion in such documents;
or
|
| (iii) |
any
order, inquiry or investigation of the type referred to in
subsection 12(b)(i); or
|
| (iv) |
any
prohibition or restriction in trading in the securities of the Corporation
or any prohibition or restriction affecting the distribution of the
Offered Shares imposed by any competent authority if such prohibition
or
restriction is based on any misrepresentation or alleged misrepresentation
of a kind referred to in subsection 14(a)(ii);
or
|
-24-
| (v) |
any
misrepresentation or alleged misrepresentation contained in any of
the
responses to the Agent by the Corporation or any directors, officers
or
employees of the Corporation in the Due Diligence Sessions;
or
|
| (vi) |
any
breach of, default under or non-compliance by the Corporation with
any
representation, warranty, term or condition of this Agreement or
any
requirement of Applicable Securities
Laws.
|
| (b) |
The
rights of indemnity contained in this section 14 shall not apply
to any
Claim to the extent that a court of competent jurisdiction in a final
judgment from which no appeal can be made or regulatory authority
in a
final ruling from which no appeal can be made shall determine that
such
Claim resulted from the gross negligence, fraud or wilful misconduct
of
the person claiming indemnity.
|
| (c) |
The
Corporation hereby waives its rights to recover contribution from
the
Agent and any Indemnified Persons with respect to any liability of
the
Corporation by reason of or arising out of any misrepresentation
contained
in any of the documents referred to in subsection 14(a) provided,
however,
that such waiver shall not apply to misrepresentations relating solely
to
the Agent contained in any of the documents referred to in subsection
14(a) and furnished to the Corporation by the Agent expressly for
inclusion in such document or to any Claim to the extent that a court
of
competent jurisdiction in a final judgment from which no appeal can
be
made or regulatory authority in a final ruling from which no appeal
can be
made shall determine that such Claim resulted from the gross negligence,
fraud or willful misconduct of the person claiming
indemnity.
|
| (d) |
The
Corporation agrees that in case any legal proceedings or investigation
shall be brought against or initiated against the Corporation by
any
governmental commission, regulatory authority, exchange, court or
other
authority and an Indemnified Person or other representative of the
Agent
shall be required to testify or respond to procedures designed to
discover
information regarding, in connection with or relating to the performance
of professional services rendered to the Corporation by the Agent,
the
Corporation shall be responsible to pay the Agent the reasonable
costs
(including an amount to reimburse the Indemnified Person for the
reasonable time spent by its personnel in connection therewith on
a per
diem basis and all reasonable out of pocket expenses) in connection
therewith.
|
| (e) |
Promptly
after receipt of notice of the commencement or threatened commencement
of
any legal proceeding of the type described or referred to above against
an
Indemnified Person, such Indemnified Person shall notify the Corporation
in writing of the commencement thereof and, throughout the course
thereof,
shall provide copies of all relevant documentation to the Corporation,
will keep the Corporation advised of the progress thereof and will
discuss
with the Corporation all significant actions proposed. The omission
so to
notify the Corporation shall not relieve the Corporation of any liability
which the Corporation may have to the Indemnified Person provided
that any
such delay in or failure to give notice as herein required does not
materially prejudice the defence of the legal proceedings or investigation
and does not result in any material increase in the liability which
the
Corporation would otherwise have under this indemnity had the Indemnified
Person not so delayed in or failed to give the notice herein
required.
|
-25-
| (f) |
The
Corporation shall have the right to assume the carriage of the defence
of
any such legal proceeding or investigation on behalf of the Indemnified
Person unless:
|
| (i) |
the
Indemnified Person has been advised in writing by its counsel that
by so
doing there is a substantial risk of a conflict of interest between
the
position of the Indemnified Person and the Corporation's position
as to
the conduct of the defence thereof;
or
|
| (ii) |
the
Corporation has failed to undertake a defence of such legal proceeding
or
investigation or appoint counsel reasonably acceptable to the Indemnified
Person within ten days from the date that notice of the action has
been
first received by the Corporation.
|
The
reasonable fees and expenses of counsel for the Indemnified Person in either
of
the circumstances described in subsection 14(f)(i) or subsection 14(f)(ii)
above
shall be for the account of and shall be paid by the Corporation; it being
understood, however, that the Corporation shall not, in connection with any
one
such action or separate but substantially similar or related actions in the
same
jurisdiction arising out of the same general allegations or circumstances,
be
liable for the reasonable fees and expenses of more than one separate law firm
(in addition to any local counsel) for all such Indemnified Persons. Neither
the
Corporation nor the Indemnified Person may effect settlement of the action
without the other's prior written consent.
| (g) |
It
is the intention of the Corporation to constitute the Agent as trustee
for
the Indemnified Persons for the purposes of this section 15 and the
Agent
agrees to accept such trust and to hold and enforce such covenants
on
behalf of such persons.
|
| (h) |
No
admission of liability and no settlement of any proceeding shall
be made
without the consent of the Indemnified Persons affected, such consent
not
to be unreasonably withheld.
|
| 15. |
Right
of Contribution
|
In
order
to provide for just and equitable contribution in circumstances in which the
indemnification provided for in this Agreement is due in accordance with its
terms but is (in whole or in part), for any reason, held by a court to be
unavailable from the Corporation on grounds of policy or otherwise, each of
the
Corporation and the party or parties seeking indemnification shall contribute
to
the aggregate liabilities, claims, demands, losses (other than losses of profit
in connection with the distribution of the Offered Shares), costs, damages
and
expenses (or claims, actions, suits or proceedings in respect thereof) to which
they may be subject or which they may suffer or incur:
| (a) |
in
such proportion as is appropriate to reflect the relative benefit
received
by the Corporation on the one hand and by the Agent on the other
hand from
the offering of the Offered Shares;
or
|
| (b) |
if
the allocation provided by subsection 15(a) above is not permitted
by
applicable law, in such proportion as is appropriate to reflect not
only
the relative benefits referred to in subsection 15(a) above but also
to
reflect the relative fault of the party or parties seeking indemnity,
on
the one hand, and the parties from whom indemnity is sought, on the
other
hand, in connection with the statement, omission, misrepresentation
or
alleged misrepresentation, order, inquiry, investigation or other
matter
or thing which resulted in such Claims, as well as any other relevant
equitable considerations.
|
-26-
The
relative benefits received by the Corporation, on the one hand, and the Agent,
on the other hand, shall be deemed to be in the same proportion that the total
proceeds of the Offering received by the Corporation (net of fees but before
deducting expenses) bear to the commission and fees received by the
Agent.
The
amount paid or payable by an Indemnified Person as a result of Claims referred
to above shall, without limitation, include any legal or other expenses
reasonably incurred by the Indemnified Person in connection with investigating
or defending such Claims, whether or not resulting in any action, suit,
proceeding or claim.
The
Corporation agrees that it would not be just and equitable if contributions
pursuant to this Agreement were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding sections. The rights
to
contribution provided in this section 15 shall be in addition to, and without
prejudice to, any other right to contribution which the Agent may
have.
Any
liability of the Agent under this section 15 shall be limited to the amounts
payable to the Agent pursuant to sections 8 and 9 hereof.
| 16. |
Notices
|
Any
notice or other communication to be given hereunder shall, in the case of notice
to be given to the Corporation, be addressed to:
0000
Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Attention: Xx.
Xxxxxxx X. Xxxxxxxx
Facsimile
No.: (000)
000-0000
with
a
copy to:
Xxxx
Xxxxxx, Esq.
Xxxxxx
& Xxxxx LLP
Mission
Bay Office Plaza
00000
Xxxxx Xxxx 0, Xxxxx 000
Xxxx
Xxxxx, XX 00000
Tel:
(000) 000-0000
Fax: (000)
000-0000
-27-
and
in
the case of notice to be given to the Agent, addressed to:
X.
X.
Xxxxxx & Company Ltd.
Xxxxx
0000, 000-0xx Xxxxxx X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: J.
Xxxxx
Xxxxxxx
Facsimile
No.: (000)
000-0000
with
a
copy to:
Xxxxxx
Blaikie LLP
Barristers
and Solicitors
0000,
000-0xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxx
X.
Xxxxxxx
Facsimile No.: (000)
000-0000
or
to
such other address as the party may designate by notice given to the others.
Each communication shall be personally delivered to the addressee or sent by
facsimile transmission to the addressee, and:
| (a) |
a
communication which is personally delivered shall, if delivered before
4:30 p.m. (local time) on a business day, be deemed to be given and
received on that day and, in any other case be deemed to be given
and
received on the first business day following the day on which it
is
delivered; and
|
| (b) |
a
communication which is sent by facsimile transmission shall, if sent
on a
business day before 4:30 p.m. (local time), be deemed to be given
and
received on that day and, in any other case be deemed to be given
and
received on the first business day following the day on which it
is
sent.
|
| 17. |
Trust
|
The
Corporation hereby constitutes the Agent as trustee for the Subscribers in
respect of the benefit to the representations, warranties and covenants of
the
Corporation set forth in this Agreement and the Subscription
Agreements.
| 18. |
Severance
|
If
one or
more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.
| 19. |
Governing
Law
|
This
Agreement shall be governed by and construed in accordance with the laws of
the
Province of Alberta and the laws of Canada applicable therein. Each of the
parties hereto irrevocably attorns to the exclusive jurisdiction of the courts
of the Province of Alberta.
-28-
| 20. |
Time
of the Essence
|
Time
shall be of the essence of this Agreement.
| 21. |
Currency
|
In
this
Agreement, references to dollars, "$" or "USD $" are to United States dollars
.
| 22. |
Counterpart
Execution
|
This
Agreement may be executed in one or more counterparts each of which so executed
shall constitute an original and all of which together shall constitute one
and
the same agreement. The parties hereto shall be entitled to rely on delivery
of
a facsimile copy of this executed agreement and such facsimile copy shall be
legally effective to create a valid and binding agreement.
| 23. |
Entire
Agreement
|
It
is
understood that the terms and conditions of this Agreement supersede any
previous verbal or written agreement between the Agent and the Corporation
with
respect to the issuance of Convertible Debentures by the
Corporation.
| 24. |
United
States Securities Law
Considerations
|
| (a) |
The
Corporation represents, warrants, covenants and agrees to and with
the
Agent that:
|
| (i) |
it
is not required to register as an “investment company” pursuant to the
provisions of the United States Investment Company Act of 1940, as
amended;
|
| (ii) |
for
so long as any of the Convertible Debentures or Underlying Securities
are
outstanding and are “restricted securities” within the meaning of Rule
144(a)(3) under the U.S. Securities Act, it shall either file reports
and
other information with the SEC under Section 13 or 15(d) of the United
States Securities Exchange Act of 1934, as amended, or provide to
any
holder of Convertible Debentures or Underlying Securities and any
prospective purchaser of Convertible Debentures or Underlying Securities
designated by such holder, upon the request of such holder, the
information required to be provided by paragraph (d)(4) of Rule 144A
under
the U.S. Securities Act;
|
| (iii) |
none
of it, its affiliates or any person acting on its or their behalf
has
engaged or will engage in any Directed Selling Efforts with respect
to the
Convertible Debentures or Underlying Securities;
and
|
| (iv) |
it
shall refuse to register any transfer of the Convertible Debentures
and
Underlying Securities not made in accordance with the provisions
of
Regulation S under the U.S. Securities Act, pursuant to registration
under
the U.S. Securities Act, or pursuant to an exemption from the registration
requirements of the U.S. Securities
Act.
|
-29-
| (b) |
The
Agent represents, covenants and agrees to and with the Corporation
that:
|
| (i) |
it
acknowledges that the Convertible Debentures and Underlying Securities
have not been and will not be registered under the U.S. Securities
Act and
may not be offered or sold within the United States. It has not offered
or
sold, and will not offer or sell, any of the Convertible Debentures
in the
United States, and has offered and sold Convertible Debentures and
Underlying Securities outside the United States only pursuant to
Rule 903
of Regulation S under the U.S. Securities
Act;
|
| (ii) |
it
has not entered and will not enter into any contractual arrangement
with
respect to the distribution of the Convertible Debentures, except
with its
“affiliates”( as such term is defined in Rule 405 under the U.S.
Securities Act) or with the prior written consent of the
Corporation;
|
| (iii) |
none
of it, its affiliates or any person acting on its or their behalf
has
engaged or will engage in any Directed Selling Efforts with respect
to the
Convertible Debentures or Underlying
Securities;
|
| (iv) |
it
acknowledges that certificates representing the Convertible Debentures
and
Underlying Securities will bear a legend to the effect that the
Convertible Debentures and Underlying Securities have not been registered
under the U.S. Securities Act, that transfer of the Convertible Debentures
and Underlying Securities is prohibited except in accordance with
Regulation S under the U.S. Securities Act, pursuant to registration
under
the U.S. Securities Act, or pursuant to an available exemption from
the
registration requirements of the U.S. Securities Act; and that hedging
transactions involving the Convertible Debentures and Underlying
Securities may not be conducted unless in compliance with the U.S.
Securities Act;
|
| (v) |
until
one year following the closing date of the offering of the Convertible
Debentures, if the Agent sells Convertible Debentures or Underlying
Securities to a distributor, a dealer (as defined in Section 2(a)(12)
of
the U.S. Securities Act), or a person receiving a selling concession,
fee
or other remuneration, the Agent shall send a confirmation or other
notice
to the purchaser stating that the purchaser is subject to the same
restrictions on offers and sales that apply to the
Agent;
|
| (vi) |
until
one year following the closing date of the offering of the Convertible
Debentures, all offers and sales of the Convertible Debentures and
Underlying Securities by the Agent shall be made only in accordance
with
the provisions of Regulation S under the U.S. Securities Act, pursuant
to
registration under the U.S. Securities Act, or pursuant to an available
exemption from the registration requirements of the U.S. Securities
Act;
and
|
| (vii) |
until
one year following the closing date of the offering of the Convertible
Debentures, the Agent will not engage in hedging transactions with
regard
to the Convertible Debentures or Underlying Securities, unless in
compliance with the U.S. Securities
Act.
|
| (c) |
Each
of the Corporation and the Agent represent, covenant and agree
that:
|
-30-
| (i) |
no
offers of Convertible Debentures were made or will be made to a person
in
the United States or to, or for the account or benefit of, a “U.S. person”
(as such term is defined in Regulation S under the U.S. Securities
Act),
and at the time the buy order for the Convertible Debentures was
originated and the subscription agreement for the Convertible Debentures
was executed, the buyer was outside the United States, or the seller
and
any person acting on its behalf reasonably believe that the buyer
was
outside the United States;
|
| (ii) |
no
offers or sales of Convertible Debentures or Underlying Securities
by the
Corporation or the Agent, if made prior to the expiration of a one-year
distribution compliance period, shall be made to a U.S. person or
for the
account or benefit of a U.S. person (other than a “distributor” (as such
term is defined in Regulation S under the U.S. Securities Act));
and
|
| (iii) |
until
one year following the closing date of the offering of the Convertible
Debentures, (i) each purchaser of Convertible Debentures from the
Corporation or the Agent (other than a distributor) shall certify
that it
is not a U.S. person and is not acquiring the Convertible Debentures
or
Underlying Securities for the account or benefit of any U.S. person
or is
a U.S. person who purchased securities in a transaction that did
not
require registration under the Act; (ii) each such purchaser shall
agree
to resell Convertible Debentures and Underlying Securities only in
accordance with the provisions of Regulation S under the U.S. Securities
Act, pursuant to registration under the U.S. Securities Act, or pursuant
to an available exemption from the registration requirements of the
U.S.
Securities Act; and (iii) such purchaser shall agree not to engage
in
hedging transactions with regard to the Convertible Debentures or
Underlying Securities unless such hedging is complies with the U.S.
Securities Act.
|
[Remainder
of page intentionally left blank]
-31-
If
the
foregoing is in accordance with your understanding and is agreed to by you,
please confirm your acceptance by signing the enclosed copies of this letter
at
the place indicated and by returning the same to the Agent's
counsel.
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RED
MILE ENTERTAINMENT, INC.
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|
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Per:
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/s/
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Xxxxxxx
X. Xxxxxxxx
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X.
X. XXXXXX & COMPANY LTD.
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Per:
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/s/
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J.
Xxxxx Xxxxxxx
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Schedule
6(k) - Material Contracts
| 1. |
Agreement
with MTVN for a license to the intellectual property known as Jackass
for
video games on various hardware platforms.
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| 2. |
Agreement
with Fleshwound Films for a license to the intellectual property
known as
Crusty Demons of dirt for video games on various hardware
platforms.
|
| 3. |
Limited
use license from Disney interactive for a license to the intellectual
property known as Disney’s Aladdin for use on a P.C. based video game
(Disney’s Aladdin Chess
Adventures).
|
| 4. |
License
from IR Gurus for a license to the intellectual property known as
“Heroes
Of The Pacific” on the Sony PS2, Microsoft Xbox and
PC’s.
|
| 5. |
License
from Prodigy Design Ltd. for a license to the intellectual property
known
as “GripShift” on the Sony PSP.
|
| 6. |
Development
Agreement with Prodigy Design Ltd. For the development of the video
game
known as “Jackass” on the Sony PS2 and
PSP.
|
| 7. |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Heroes Of The Pacific” on the Sony
PSP.
|
| 8. |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Heroes Over Europe” on the Sony PS3 and Microsoft Xbox
360.
|
| 9. |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Equestriad” on the Sony PS2 and
P.C’s.
|
| 10. |
Development
agreement with Climax Action Limited for development of a video game
known
as “Crusty Demons” for the Sony PS2 and Microsoft
Xbox.
|
| 11. |
Licensing
Agreement with Sony Online Entertainment for the worldwide publishing
rights to GripShift on the Sony
PSP.
|
| 12. |
Co-publishing
Agreement with Codemasters for the European publishing rights to
Heroes Of
The Pacific on the Sony PS2, , Microsoft Xbox and
PC’s.
|
| 13. |
Publishing
Agreement with Ubisoft for the North American publishing rights to
Heroes
Of The Pacific on the Sony PS2,, Microsoft Xbox and
PC’s.
|
| 14. |
Publishing
Agreement with Strategy First Corp. for the worldwide publishing
rights to
Disney’s Aladdin Chess Adventures.
|
| 15. |
Co-publishing
Agreement with Evolved Games for the North American publishing rights
to
the Crusty Demons video game.
|
| 16. |
Co-publishing
Agreement with Xxxx Media GmbH for the European publishing rights
to the
Crusty Demons video game.
|
| 17. |
Letter
of Intent with the other owners of IR Gurus for the option to purchase
their ownership position in IR
Gurus.
|
| 18. |
License
Agreement with Marshmallowville Media, L.L.C. for a license to the
intellectual properties known as Marshmallow Shooter or Xxxxxx Blaster’s
M-Force for video games on various hardware
platforms.
|
| 19. |
Memorandum
of Understanding with Xxxxx Xxxxxx Inc., Ground Zero Productions,
Inc. and
Union Entertainment, LLC for a lceinse to the intellectual property
known
as “Sin City” or Xxxxx Xxxxxx’x Sin City for video games on various
hardware platforms.
|
Schedule
6(z) - Material Liabilities
Liabilities
greater than $10,000 as of September
28,
0000
Xxx
Xxxx
|
Xxxxxx
& Eilen
|
18,027.43
|
Legal
xxxx
|
|
Xxxxxxx
& Xxxxxxxxx
|
10,695.00
|
Legal
printer
|
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Bank
of America
|
10,743.44
|
Visa
xxxx
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2WG
Media, Inc.
|
Cenega
Publishing
|
100,000.00
|
Development
milestone due
|
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Zomax
Inc
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45,920.00
|
Inventory
|
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Lixivian
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83,659.79
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Inventory
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Schedule
6(pp) - Summary of Communications regarding Intellectual Property
claims
On
September 9, 2005, Vivendi Universal Games, Inc. (VUG) notified the Company
that
they believed the trademark “Heroes of the Pacific” infringed on a trademark of
theirs “Aces of the Pacific”.
After
thorough review of our intellectual property counsel, they informed us the
VUG
game was published in 1992 and appeared to be last used in 1997 or 1998 by
VUG
was long out of commercial use. Our council responded that their xxxx appeared
to be abandoned. There were two subsequent letterS from VUG (the last in
December 2005) where they disagreed with our assessment and tried to start
a
dialog toward our ceasing to use the xxxx or settlement (that is, pay them
some
sort of royalty). We last responded on December 13, 2005 telling them that
we
found their claim baseless and were not interested in negotiating with them.
They never responded to this last letter and we believe they have dropped the
issue. We believe that there is no significant liability to VUG regarding this
issue.
2. In
February 2006, we were contacted by phone and later by email by Equity
management, Inc. on behalf of Lockheed Xxxxxx Corporation. In the 1940’s
Lockheed manufactured an aircraft known as the P-38J Lightning. They still
have
a trademark for model planes. Our counsel did not think this xxxx was strong
or
would carryover to video games. We told Equity verbally that we did not believe
the claim was valid and have not heard from them since. We believe that there
is
no significant liability to Lockheed Xxxxxx regarding this issue.
Schedule
6(rr) - Restrictions on Intellectual Property Rights
The
software code for the following games (either completed or under development)
is
subject to a license which is fully transferable to purchasers of the business.
It is also transferable to others, but only with prior approval of developer,
such approval not to be unreasonably withheld.
| · |
Development
agreement with Climax Action Limited for development of a video game
known
as “Crusty Demons” for the Sony PS2 and Microsoft
Xbox.
|
| · |
Development
Agreement with Prodigy Design Ltd. For the development of the video
game
known as “Jackass” on the Sony PS2 and
PSP.
|
The
software code and license for the intellectual property included within the
game
for the following games (either completed or under development) is subject
to a
license which is fully transferable to purchasers of the business. It is also
transferable to others, but only with prior approval of developer, such approval
not to be unreasonably withheld.
| · |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Heroes Of The Pacific” on the Sony PS2, Microsoft Xbox and
PC’s.
|
| · |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Heroes Of The Pacific” on the Sony
PSP.
|
| · |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Heroes Over Europe” on the Sony PS3 and Microsoft Xbox
360.
|
| · |
Development
and Licensing Agreement with Prodigy Design Ltd. for the development
of a
game known as “GripShift” on the Sony
PSP.
|
| · |
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as “Equestriad” on the Sony PS2 and
P.C’s.
|
The
Publishing and Development Agreement with Buena Vista Games is only transferable
to a controlled or controlling entity. The Company may request a transfer to
a
different entity, but approval is at Disney’s sole discretion and they may
charge a transfer fee of up to $25,000.
The
license for Crusty Demons is only transferable as part of the direct or indirect
merger, consolidation, corporate restructuring or sale or transfer of all or
substantially all of our assets or a controlling interest of 51% or more of
the
voting securities of the company.
The
MTVN
Merchandising and License Agreement is transferable as part of the direct or
indirect merger, consolidation, corporate restructuring or sale or transfer
of
all or substantially all of our assets or a controlling interest of 51% or
more
of the voting securities of the company, so long as this entity is not a
“Restricted Entity”. A Restricted Entity means a competitor to MTVN or an entity
that’s capitalization and funding sources are less than those of Red Mile or the
combined resources, post-merger will be less than Red Mile’s at the time of
merger. Other assignments, however, including a pledge, require MTVN’s
consent.
Licensing
agreement with Marshmallowville Media, L.L.C. for a license to the intellectual
properties known as Marshmallow Shooter or Xxxxxx Blaster’s M-Force has no
limitations.
The
following agreements are exclusive licenses, which allows our licensee to sell
a
game in a specific territory and which therefore precludes the Company from
directly selling or licensing that game in that territory.
| · |
Licensing
Agreement with Sony Online Entertainment for the worldwide publishing
rights to GripShift on the Sony
PSP.
|
| · |
Co-publishing
Agreement with Codemasters for the European publishing rights to
Heroes Of
The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
| · |
Publishing
Agreement with Ubisoft for the North American publishing rights to
Heroes
Of The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
| · |
Publishing
Agreement with Strategy First Corp. for the worldwide publishing
rights to
Disney’s Aladdin Chess Adventures.
|
| · |
Co-publishing
Agreement with Evolved Games for the North American publishing rights
to
the Crusty Demons video game.
|
| · |
Co-publishing
Agreement with Xxxx Media GmbH for the European publishing rights
to
Crusty Demons.
|
