Exhibit 10.23
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of September 21, 2005, by and between BPI Industries Inc, a British Columbia
corporation (the "Company"), and each of the purchasers set forth on the
signature page hereof (the "Investors").
1. Authorization of Issuance and Sale of Shares. Subject to the terms
and conditions of this Agreement and the Private Placement Memorandum dated
September 21, 2005 (the "Private Placement Memorandum"), the Company has
authorized the offer and sale by the Company of up to 18,000,000 shares (the
"Shares") of its common stock, no par value per share (the "Common Stock") (the
"Offering").
2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company hereby agrees to sell to the Investors, and
each Investor agrees to purchase from the Company, the number of Shares of
Common Stock set forth immediately next to its name on the signature page hereto
at the aggregate purchase price set forth immediately next to such Investor's
name on the signature page hereto (the "Purchase Price").
3. Payment and Delivery. Payment for the Shares purchased by each
Investor shall be made by such Investor to the Company in federal or other funds
immediately available in New York City against delivery to such Investor of such
Shares (such payment and delivery hereinafter referred to as the "Closing") at
9:00 a.m., New York City time, on September 23, 2005, or at such other time on
the same or such other date, not later than September 30, 2005, as shall be
agreed in writing by the Company and KeyBanc Capital Markets, a division of
McDonald Investments Inc. ("KeyBanc"), and Xxxxxxx Xxxxxx Xxxxxx, Inc.
("Xxxxxxx"), in their capacity as agents of the Company in connection with the
sale of the Shares contemplated hereby (each a "Co-Placement Agent" and
collectively, the "Co-Placement Agents"). The time and date of such delivery and
payment are hereinafter referred to as the "Closing Date." Payment by each
Investor for such Shares shall be made through an escrow agent on terms and
instructions set forth in an Escrow Agreement dated as of September 14, 2005,
among the Company, KeyBanc and Associated Bank, N.A., as escrow agent.
Certificates for the Shares purchased by each Investor shall be
registered in the name of such Investor or if so indicated on the signature page
hereto, in the name of a nominee designated by such Investor. The certificates
evidencing the Shares purchased by each Investor shall be delivered to such
Investor on the Closing Date, with any transfer taxes payable in connection with
the transfer of such Shares to such Investor duly paid by or on behalf of the
Company, against payment of the Purchase Price therefor.
4. Conditions to the Company's Obligations. The Company's obligation
to issue and sell the Shares to each Investor is subject to the following
conditions:
(a) receipt by the Company of federal or other immediately
available funds in the full amount of the Purchase Price for the
Shares to be sold to each Investor hereunder; and
1
(b) the representations and warranties of each Investor contained
in this Agreement being true and correct in all material respects on
and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing
Date, and the fulfillment in all material respects of those
undertakings of each Investor to be fulfilled prior to the Closing
Date.
5. Conditions to the Investor's Obligations. The obligation of each
Investor to purchase and pay for Shares on the Closing Date is subject to the
following conditions, any one or more of which may be waived in writing at any
time by such Investor:
(a) delivery to such Investor on the Closing Date of an opinion
of Xxxxxxxx Xxxx LLP, counsel to the Company, dated the Closing Date,
substantially in the form set forth in Exhibit A hereto;
(b) delivery to such Investor on the Closing Date of an opinion
of Anfield Xxxxx Xxxxxxx & Durno, special Canadian counsel to the
Company, dated the Closing Date, substantially in the form set forth
in Exhibit B hereto;
(c) the representations and warranties of the Company contained
in this Agreement being true and correct in all material respects on
and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing
Date (except with respect to representations and warranties that are
made as of a specific date or period, which shall continue to be true
and correct in all material respects as of the respective dates and
for the respective periods covered);
(d) absence of any order, writ, injunction, judgment or decree
that could negatively affect the validity of this Agreement or the
right of the Company to enter into this Agreement or to consummate the
transactions contemplated hereby; and
(e) receipt by such Investor on the Closing Date of a
certificate, dated the Closing Date and signed by the Chief Executive
Officer and Chief Financial Officer of the Company, to the effect that
the conditions set forth in clauses (c) and (d) of this Section 5 have
been fulfilled.
6. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to, and covenants with, the Investor that as of
the date of this Agreement and as of the Closing Date:
(a) The Company's Amendment No. 2 to Registration Statement on
Form S-1/A filed with the Securities and Exchange Commission (the
"Commission") on September 2, 2005 (the "Amended S-1 Registration
Statement") does not as of the date hereof contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Amended S-1 Registration Statement complied when filed
as to form in all material respects
2
with the Securities Act of 1933, as amended (the "Securities Act") and
the applicable rules and regulations of the Commission thereunder (the
"Securities Act Regulations").
(b) The Company has filed with the British Columbia Securities
Commission and the TSX Venture Exchange all documents required to be
filed pursuant to the British Columbia Securities Act (the "BCSA") and
the TSX Venture Exchange rules and trading policies, during the 12
months preceding the date of this Agreement. All such documents
complied when filed in all material respects with the BCSA, the
applicable rules and regulations of the British Columbia Securities
Commission and the TSX Venture Exchange rules and trading policies.
(c) The Private Placement Memorandum and the written presentation
to Investors made by the Company's management, taken as a whole and
each as amended to the date hereof, do not as of the date hereof
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(d) The Company is eligible to register the resale of the Shares
in a secondary offering on a registration statement on Form S-1 under
the Securities Act. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the Province of British Columbia, Canada, with corporate power and
authority to own or lease its properties and conduct its business as
currently conducted and as described in the Private Placement
Memorandum. Each of the subsidiaries listed on Exhibit 21.1 to the
Amended S-1 Registration Statement (collectively, the "Subsidiaries")
has been duly organized and is validly existing as a corporation or
other entity in good standing under the laws of the jurisdiction of
its organization, with the power and authority to own or lease its
properties and conduct its business as currently conducted and as
described in the Private Placement Memorandum. The Subsidiaries are
the only entities in which the Company owns, directly or indirectly, a
majority of the outstanding voting securities. The Company and the
Subsidiaries are duly qualified to transact business and are in good
standing in all jurisdictions in which the conduct of their respective
businesses or the ownership or leasing of their property requires such
qualification, except in such jurisdictions where the failure to be so
qualified or to be in good standing would not have a Material Adverse
Effect. For purposes of this Agreement, the term "Material Adverse
Effect" means a material adverse effect on (i) the condition
(financial or otherwise), properties, assets, liabilities, rights,
operations, earnings, business, management or prospects of the Company
and the Subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, (ii) the transactions
contemplated by this Agreement or (iii) the authority or the ability
of the Company to perform its obligations under this Agreement.
3
(e) The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are wholly owned by the Company or another
Subsidiary free and clear of all liens, encumbrances, equities and
claims. There are no outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued shares
of capital stock or other equity interest in any of the Subsidiaries,
or any contract, commitment, agreement, understanding or arrangement
of any kind, in each case to which the Company or any Subsidiary is a
party and providing for the issuance or sale of any capital stock of
that Subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options.
(f) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal, and binding
obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally, and subject to general principles of equity. The
Company has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
(g) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation
of or in default under its charter documents ("Charter") or bylaws or
under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it is bound or to which
any of its properties or assets are subject, and which violation or
default has had or is reasonably likely to have a Material Adverse
Effect. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein, including
without limitation the issuance and sale of the Shares, and the
fulfillment of the terms of this Agreement will not (a) violate (i)
any statute, rule or regulation of governmental agency or authority
applicable to the Company or any of the Subsidiaries, or (ii) any
order applicable to the Company or any of the Subsidiaries (or any of
properties or assets of the Company or any Subsidiary) of any court or
of any regulatory body or administrative agency or other governmental
body, except where any such violation would not have a Material
Adverse Effect, (b) conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any contract,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries is bound or to which any of the
Company's or any Subsidiary's properties or assets are subject, except
where any such conflict, breach or default would not have a Material
Adverse Effect, or (c) conflict with any provisions of the Charter or
bylaws of the Company.
(h) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of the Agreement and the consummation of the
transactions herein
4
contemplated (except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Shares, and by federal and state securities laws with respect
to the Company's obligations under Sections 8 and 9 of this Agreement)
has been obtained or made and is in full force and effect.
(i) The capitalization of the Company is as set forth under
"Capitalization" in the Private Placement Memorandum as of the date
set forth therein. The Company has not issued any capital stock since
January 13, 2005, except for issuances of Common Stock upon the
exercise of (i) outstanding warrants and (ii) stock options granted
under any benefit plan identified in the Private Placement Memorandum.
The outstanding shares of Common Stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable,
the Shares have been duly authorized and when issued and paid for as
contemplated in the Agreement will be validly issued, fully paid and
non-assessable. Except (i) as identified in the Private Placement
Memorandum, (ii) as specifically disclosed in Schedule I hereto and
(ii) for stock options granted under benefit plans identified in the
Private Placement Memorandum, there are no outstanding warrants or
options to acquire, or instruments convertible into or exchangeable
for, any unissued shares of capital stock or other equity interest in
the Company, or any contract, commitment, agreement, understanding or
arrangement of any kind, in either case to which the Company is a
party and providing for the issuance or sale of any capital stock of
the Company, any such convertible or exchangeable securities or any
such rights, warrants or options.
(j) Except (i) as identified in the Private Placement Memorandum,
(ii) as specifically disclosed in Schedule II of this Agreement and
(iii) as provided in this Agreement, no preemptive right, co-sale
right, registration right, right of first refusal or other similar
right exists with respect to the issuance and sale of the Shares, the
registration for resale of the Shares or any other transactions
contemplated by the Agreement. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party.
(k) The form of certificates for the Shares conforms to the
requirements of the laws of British Columbia.
(l) There are no legal, governmental or regulatory actions,
suits, claims or proceedings pending to which the Company or any of
the Subsidiaries is a party or of which any property of the Company or
any of the Subsidiaries is the subject, which, if determined adversely
to the Company or any of the Subsidiaries, might individually or in
the aggregate reasonably be expected to have a Material Adverse
Effect; to the Company's knowledge, no such action, suit, claim or
proceeding is threatened or contemplated by governmental or regulatory
authorities or threatened by others.
5
(m) The Company and each Subsidiary (i) are in compliance in all
material respects with any and all applicable foreign, federal, state
and local laws, orders, rules, regulations, directives, decrees and
judgements relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (the "Environmental Laws"); (ii) have received all
permits, licenses, certifications, franchises, clearances or other
approvals required of it under applicable Environmental Laws, to
conduct its business to date as described in the Private Placement
Memorandum; and (iii) are in compliance in all material respects with
all terms and conditions of any such permit, license certification,
franchise, clearance or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses,
certifications, franchises, clearances or other approvals or failure
to comply with the terms and conditions of such permits, licenses,
certifications, franchises, clearances or approvals would not,
individually or in the aggregate, have a Material Adverse Effect. The
Company is not presently subject to any costs or liabilities
associated with Environmental Laws (including, without limitation, any
capital or operating expenditures required for clean-up and any
potential liabilities to third parties) that would, individually or in
the aggregate, have a Material Adverse Effect. To the Company's
knowledge, there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or
any Subsidiary. To the Company's knowledge, there are no events or
circumstances that would reasonably be expected to form the basis of
an order for clean-up or remediation, or an action, suit or proceeding
by any private party or governmental body or agency, against or
affecting the Company or any Subsidiary, or any of its predecessors in
interest, relating to hazardous materials or any Environmental Laws.
To the Company's knowledge, no property that is or has been owned,
leased or occupied by the Company or any Subsidiary has been
designated as a Superfund Site pursuant to the Comprehensive
Environmental Response, Compensation of Liability Act of 1980, as
amended ("CERCLA"), or otherwise designated as a contaminated site
under applicable state or local law under circumstances that would be
reasonably likely to have a Material Adverse Effect, and neither the
Company nor any Subsidiary has been named as a "potentially
responsible party" under CERCLA.
(n) The Company and the Subsidiaries have good and marketable
title to all property described in the Private Placement Memorandum as
owned by them, free from mortgages, pledges, liens, security
interests, claims, restrictions, encumbrances and defects of any kind,
except as (i) are described in the Private Placement Memorandum, (ii)
would not, individually or in the aggregate, materially affect the
value of such property or materially interfere with the use made or to
be made of such property by them, or (iii) would not, individually or
in the aggregate, reasonably be likely to have a Material Adverse
Effect. All of the leases, subleases and options to acquire leases
material to the business of the Company and the Subsidiaries, and
under which the Company or any of its Subsidiaries holds properties
described in the Private Placement Memorandum,
6
including, without limitation, all coal bed methane producing
properties of the Company and the Subsidiaries and all assets and
facilities used by the Company and the Subsidiaries in the production
and marketing of coal bed methane, are in full force and effect, and
neither the Company nor any Subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or such Subsidiary to the continued possession
of the leased or subleased property under any such lease or sublease,
except in each case as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect.
(o) The Company and each of the Subsidiaries possess all material
licenses, certifications, permits, franchises, approvals, consents,
clearances and other authorizations ("Permits") issued by appropriate
federal, state or local governmental authorities as are necessary to
conduct their respective businesses as currently conducted and to own,
lease and operate their respective properties in the manner described
in the Private Placement Memorandum, provided that the Company has
obtained drilling Permits only for the xxxxx that it has to date
actually drilled and except where the failure to have any such Permit
would not have a Material Adverse Effect. There is no claim,
proceeding or controversy, pending or, to the knowledge of the
Company, threatened, involving the status of or sanctions under any of
the Permits. The Company and each of the Subsidiaries have fulfilled
and performed all of their material obligations with respect to the
Permits, and no event has occurred that allows, or after notice or
lapse of time would allow, the revocation, termination, modification
or other impairment of the rights of the Company or any of the
Subsidiaries under any such Permit.
(p) The Company and each of the Subsidiaries owns, licenses or
otherwise has rights in all United States and foreign patents,
trademarks, service marks, tradenames, copyrights, trade secrets and
other proprietary rights necessary for the conduct of their respective
businesses as currently carried on and as proposed to be carried on as
described in the Private Placement Memorandum (collectively, and
together with any applications or registrations for the foregoing, the
"Intellectual Property"). Except as specifically described in the
Private Placement Memorandum, neither the Company nor the Subsidiaries
has received any notice or is otherwise aware of any infringement of
or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of the Subsidiaries, except any
infringement, conflict, facts or circumstances which would not have a
Material Adverse Effect.
(q) Neither the Company nor any of the Subsidiaries is in
violation of any law, administrative regulation, ordinance or order of
any court or governmental agency, arbitration panel or authority
applicable to the Company or that Subsidiary, as the case may be,
which violation, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect.
7
(r) The information set forth in the Private Placement Memorandum
relating to coal bed methane reserves, coal bed methane xxxxx and any
other coal bed methane related information has been prepared by the
Company or its independent reservoir engineer in accordance with
methods generally applied in the U.S. oil and gas industry and
conforms, in all material respects, to the requirements of the
Securities Act and the Securities Act Regulations.
(s) The participation, joint development, joint operating,
farm-out and other agreements relating to rights of the Company and
its Subsidiaries with respect to the ownership, lease or operation of
coal bed methane properties or the exploration for development of, or
production of coal bed methane reserves thereon, constitute valid and
binding agreements of the Company and its Subsidiaries that are
parties thereto and, to the knowledge of the Company, of the other
parties thereto, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable
principles.
(t) The consolidated financial statements of the Company,
together with related notes set forth in the Private Placement
Memorandum, present fairly the consolidated financial position and the
results of operations and cash flows of the Company, at the indicated
dates and for the indicated periods. Such financial statements and
related notes and schedules have been prepared in accordance with
accounting principles generally accepted in the United States
("GAAP"), consistently applied throughout the periods involved, except
as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The selected
financial data included in the Private Placement Memorandum present
fairly the information shown therein and such data have been compiled
on a basis consistent with the financial statements presented therein
and the books and records of the Company and the Subsidiaries.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances (i) regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles and (ii) that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (D) access to
assets is permitted only in accordance with management's general or
specific authorization; and (E) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) Except as described in the Private Placement Memorandum,
since April 30, 2005 there has not been any material adverse change,
financial or otherwise, with respect to the Company or any of the
Subsidiaries that has had or is reasonably likely to have a Material
Adverse Effect, whether or not occurring in the ordinary course of
business, and there has not been any material transaction
8
entered into by the Company or any of the Subsidiaries, other than
transactions in the ordinary course of business and changes and
transactions described in the Private Placement Memorandum. The
Company and the Subsidiaries have no material contingent obligations
that are not disclosed in the Private Placement Memorandum.
(w) The Company's Common Stock is listed on the TSX Venture
Exchange and is authorized for trading on the TSX Venture Exchange.
The Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the listing of or
disqualify such shares of Common Stock from listing on the TSX Venture
Exchange. The issuance of the Shares does not require shareholder
approval, including, without limitation, pursuant to the rules of the
listing on the TSX Venture Exchange. At no time has the Common Stock
been quoted, listed or admitted to trading on the NASDAQ National
Market, the NASDAQ SmallCap Market or any registered United States
securities exchange. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance
with the qualifications for listing of its common stock on the TSX
Venture Exchange; provided that the Company may delist from the TSX
Venture Exchange at such time as the Common Stock is listed on a U.S.
market or exchange. Upon effectiveness of the Amended S-1 Registration
Statement, the Company will use its commercially reasonable best
efforts to cause the Common Stock to be listed or quoted on the NASDAQ
National Market, the NASDAQ Small Cap Market or any registered United
States national securities exchange.
(x) The Company will file with the Commission a notice of the
sale of Shares pursuant to this Agreement on Form D within the time
prescribed for the filing of such notice under Regulation D of the
Securities Act. The Company will also file with the applicable
Canadian securities regulatory bodies and the TSX Venture Exchange the
documents necessary to comply with the applicable Canadian securities
laws and the rules and policies of the TSX Venture Exchange.
(y) Neither the Company nor, to the Company's knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate
the sale or resale of the Shares.
(z) The contracts listed as exhibits to the Amended S-1
Registration Statement, other than those contracts that are
substantially performed or expired by their terms, are in full force
and effect on the date hereof, and none of the Company, the
Subsidiaries and, to the Company's knowledge, any other party, is in
breach of or default under any such contract. Except as disclosed in
the Private Placement Memorandum or as would not have a Material
Adverse Effect, neither the Company nor any of the Subsidiaries has
sent or received any notice indicating the termination of or intention
to terminate any such contract, and no
9
such termination has been threatened by the Company, any Subsidiary,
or, to the Company's knowledge, any other party.
(aa) The Company and the Subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be
filed and have paid all taxes indicated by said returns and all
assessments received by any of them to the extent that such taxes have
become due and are not being contested in good faith and for which an
adequate reserve for accrual has been established in accordance with
GAAP. All tax liabilities have been adequately provided for in the
financial statements of the Company in accordance with GAAP, and the
Company does not know of any actual or proposed additional material
tax assessments.
(bb) Neither the Company nor any of the Subsidiaries is, or
intends to conduct its business in a manner in which it would become,
an "investment company" as defined in Section 3(a) of the Investment
Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder.
(cc) The Company and the Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for similarly sized
companies engaged in similar industries. All policies of insurance
insuring the Company or any Subsidiary or any of their respective
businesses, assets, employees, officers or directors are in full force
and effect, and the Company and the Subsidiaries are in compliance
with the terms of such policies in all material respects. There are no
claims by the Company or any Subsidiary under any such policy or
instrument as to which an insurance company is denying liability or
defending under a reservation of rights clause.
(dd) None of the Company, its employees or directors or, to the
knowledge of the Company, any other affiliate, as defined in Rule
501(b) of Regulation D under the Securities Act (an "Affiliate"), of
the Company has, directly or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be
integrated with the Offering in a manner that would require the
registration under the Securities Act of the sale of the Shares
pursuant to this Agreement, and the Company will not, directly or
through any agent, sell, offer for sale, solicit offers to buy or
otherwise negotiate in respect of, any security (as defined in the
Securities Act) which would be integrated with the Offering in a
manner that would require the registration under the Securities Act of
the sale of the Shares pursuant to this Agreement.
(ee) None of the Company, its employees or directors or, to the
knowledge of the Company, any other Affiliate of the Company has,
directly or through any agent, offered, solicited offers to buy or
sold Shares in the Offering by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act, and the
10
Company will not, directly or through any agent, engage in any of the
actions described in this paragraph (ee) in connection with the
Offering.
(ff) The Company is in substantial compliance with the effective
provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are
currently applicable to the Company. The Company intends to comply in
all material respects with all of the other provisions of the
Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated
thereunder, that may in the future become applicable to the Company,
to the extent such provisions are then in effect.
(gg) Other than the fees to be paid by the Company to the
Co-Placement Agents, the Company has not incurred any liability for
any finder's or broker's fee, or agent's commission in connection with
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(hh) None of the Company, any Subsidiary or, to the knowledge of
the Company, any agent or other person acting on behalf of the Company
or any Subsidiary, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) that is in
violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1997, as amended.
(ii) The information contained in the Private Placement
Memorandum regarding the Company's expectations, plans and intentions,
and any other information that constitutes "forward-looking"
information within the meaning of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), were
made by the Company on a reasonable basis and reflected the Company's
good faith belief or estimate of the matters described therein, in
each case as of the date of the Private Placement Memorandum
containing such information.
(jj) All disclosure concerning the Company contained in this
Agreement, including the Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading. None of the Company, its employees or
directors or, to the Company's knowledge, any other Person acting on
its behalf has provided any of the Investors or their agents or
counsel with any information that constitutes or might constitute
material, nonpublic information, except information that will be
promptly disclosed after the Closing Date through any Regulation
FD-compliant method pursuant to
11
paragraph (kk) below. The Company understands that each of the
Investors may rely on the foregoing representations in effecting
transactions in securities of the Company.
(kk) The Company agrees, as soon as practicable but in no event
later than 9:30 a.m., New York City time, on the Closing Date, to
issue a press release in compliance with Rule 135c under the
Securities Act, describing the material terms of the transactions
contemplated by this Agreement. Such press release shall be subject to
prior review by counsel to the Co-Placement Agents. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Investor, or include the name of any Investor in any filing with the
Commission or any regulatory agency without the prior written consent
of such Investor, except to the extent such disclosure is required by
law or the regulations of any quotation system or exchange on which
securities of the Company are listed. The Company agrees that, after
the issuance of such press release, none of the Company's
communications to any Investor will include material, nonpublic
information, unless otherwise agreed by the Company and such Investor
in accordance with law.
(ll) The Company agrees not to, directly or indirectly, sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or
grant any right with respect to any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for, shares
of Common Stock until the date on which the Registration Statement (as
defined below in Section 8(a)) is declared effective by the
Commission, except for (i) grants of options to purchase Common Stock
under stock option plans of the Company or pursuant to existing
agreements with other persons, (ii) the issuance of shares of Common
Stock upon the exercise of stock options issued under such stock
option plans and agreements, and (iii) the issuance of shares of
Common Stock upon the exercise of currently outstanding warrants. The
Company will use reasonable efforts to cause each of its directors and
executive officers to enter into similar agreements with the
Co-Placement Agents; provided that any such agreements shall permit
the Company's directors and executive officers to sell, dispose of,
loan, pledge, hypothecate or otherwise transfer shares of Common Stock
to the extent necessary to pay the exercise price for, and all taxes
incurred in connection with, the exercise of any options or warrants
that would otherwise expire during such restricted period.
7. Representations, Warranties and Covenants of the Investor. Each
Investor severally, and not jointly, represents and warrants to, and covenants
with, the Company that:
(a) The Investor is a "qualified institutional buyer" as defined
in Rule 144A under the Securities Act and an "accredited investor" as
defined in Regulation D, unless it is only an "accredited investor" as
defined in Regulation D and listed on Schedule III hereto, and, as
provided under Rule 502(b)(2)(v) under the Securities Act, has
requested, received, reviewed and considered all information it deems
relevant in making an informed decision to purchase Shares. The
Investor is experienced in evaluating companies such as the Company,
and
12
has such business and financial experience as is required to give it
the capacity to utilize the information received, to evaluate the
risks involved in purchasing Shares, and to protect its own interests
in connection with the purchase of Shares and is able to bear the
risks of an investment in Shares.
(b) The Investor understands that the Shares are "restricted
securities" and have not been registered under the Securities Act and
is acquiring the number of Shares set forth on the signature page
hereto in the ordinary course of its business and for its own account
with no present intention of distributing any Shares, or any
arrangement or understanding with any other persons regarding the
distribution of such Shares, or otherwise. The representation and
warranty in the previous sentence shall not limit the Investor's right
to indemnification under Section 10, other than with respect to any
claim arising out of a breach of this representation and warranty.
(c) The Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares,
except in compliance with the Securities Act, applicable state and
other securities laws and the respective rules and regulations
promulgated thereunder.
(d) Other than the transaction contemplated hereunder, the
Investor has not directly or indirectly, nor has any person acting on
behalf of or pursuant to any understanding with such Investor,
executed any disposition, including Short Sales (but not including the
location and/or reservation of borrowable shares of Common Stock), in
the securities of the Company during the period commencing from the
time that such Investor first received a term sheet from the Company
or any other person setting forth the material terms of the
transactions contemplated hereunder until the date hereof ("Discussion
Time"). Notwithstanding the foregoing, in the case of an Investor that
is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Investor's assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Investor's assets, the representation set forth above shall only
apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Shares
covered by this Agreement. Other than to other persons party to this
Agreement, such Investor has maintained the confidentiality of all
disclosures made to it in connection with the transaction contemplated
hereby (including the existence and terms of the transaction
contemplated hereby).
(e) Each Investor severally and not jointly with the other
Investors covenants that neither it nor any affiliates acting on its
behalf or pursuant to any understanding with it will execute any Short
Sales during the period after the Discussion Time and ending at the
time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 6(kk) above. Each Investor,
severally and not jointly with the other Investors, covenants that
13
until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company as described in Section 6(kk) above,
such Investor will maintain the confidentiality of all disclosures
made to it in connection with this transaction (including the
existence and terms of this transaction). Each Investor understands
and acknowledges, severally and not jointly with any other Investor,
that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to
the time at which the Registration Statement is declared effective by
the Commission is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section 5 under Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation
Finance. Notwithstanding the foregoing, no Investor makes any
representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly
announced as described in Section 6(kk). Notwithstanding the
foregoing, in the case of an Investor that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate
portions of such Investor's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Investor's assets, the
covenant set forth above shall only apply with respect to the portion
of assets managed by the portfolio manager that made the investment
decision to purchase the Shares covered by this Agreement.
(f) The Investor will have, on or prior to the Closing Date,
furnished to the Company a fully completed (i) Investor Questionnaire
substantially in the form attached hereto as Exhibit C, for use in
preparation of the Registration Statement, and (ii) Form 1 as attached
hereto as Exhibit D, if such Investor has not in the year prior to the
Closing Date completed and filed Form 1 with the TSX Venture Exchange,
and all of the information contained therein will be true and correct
in all material respects as of such date and as of the Closing Date.
(g) The Investor has, in connection with its decision to purchase
the number of Shares set forth on the signature page hereto, (i)
relied only upon the Private Placement Memorandum, the representations
and warranties of the Company contained in this Agreement and any
other information received from the Company pursuant to Section 7(a),
and (ii) has not relied on any information or advice furnished by or
on behalf of the Co-Placement Agents or any other person.
(h) The Investor acknowledges that the certificates evidencing
the Shares will be imprinted with a legend in substantially the
following form (and a stop-transfer order may be placed against
transfer of the certificates for the Shares):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
14
(THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY
NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AND IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES
LAWS."
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS
SECURITY MUST NOT TRADE THE SECURITY BEFORE [THAT DAY THAT IS 4 MONTHS
AFTER CLOSING]"
"WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND
COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE
TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT
OF A CANADIAN RESIDENT UNTIL [THAT DAY THAT IS 4 MONTHS AFTER
CLOSING]."
The Investor further acknowledges that, upon receipt of a Suspension
Notice (as defined below in Section 9(c)), the Investor will refrain
from selling any Shares pursuant to the Registration Statement until
the Investor receives from the Company copies of a supplemented or
amended Prospectus prepared and filed by the Company with the
Commission, or until it is advised in writing by the Company that the
current Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus.
(i) The Investor further represents and warrants to, and
covenants with, the Company that (i) if an entity, the Investor is
duly organized and in good standing in the jurisdiction of its
organization, (ii) the Investor has full legal, corporate or other
right, power, authority and capacity to enter into this Agreement and
to consummate the transactions contemplated hereby and has taken all
necessary action to authorize the execution, delivery and performance
of this Agreement, and (iii) this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding
agreement of, the Investor, enforceable against the Investor in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally, and subject to general
principles of equity.
(j) The Investor shall not disclose to any other person (other
than to its directors, officers, employees, agents, advisors or
representatives to the extent necessary or advisable in connection
with the investment decision to purchase Shares hereunder) any
information concerning this Agreement or the placement of
15
Shares under this Agreement or any nonpublic information disclosed to
the Investor by or on behalf of the Company in connection with the
offer and sale of Shares under this Agreement, until the Company shall
have made a public announcement of such information.
(k) The Investor understands that nothing in this Agreement, or
any other materials presented to the Investor in connection with the
purchase and sale of Shares constitutes legal, tax, accounting or
investment advice. The Investor has consulted such legal, tax,
accounting and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of
Shares.
(l) The Investor represents that: (i) based on the closing price
of the Company's Common Stock on the Closing Date, the Investor,
together with its ultimate parent entity and all entities controlled
by the same ultimate parent as the Investor (such entities, including
the Investor, hereinafter collectively referred to as the "Investor
Affiliates," except that the term Investor Affiliates will not include
investment companies registered with the Commission under the
Investment Company act of 1940), will not hold in excess of $53.1
million of the Company's outstanding voting securities as a result of
the sale and purchase of Shares pursuant to this Agreement, and (ii)
all voting securities of the Company that the Investor Affiliates will
hold, directly or indirectly, at the Closing Date (after giving effect
to the sale and purchase of Shares pursuant to this Agreement), will
be held solely for the purpose of passive investment such that these
securities will be held by the Investor Affiliates with no intention
on the part of any of them to participate in the formulation,
determination or direction of the basic business decisions of the
Company. The Investor Affiliates are relying on the exemption
available to them as passive investors under Section 7A(c)(9) of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
regulations promulgated thereunder (including 16 C.F.R. Sec. 802.9) in
their determination that the sale and purchase of Shares pursuant to
this Agreement does not require them to submit any Xxxx-Xxxxx-Xxxxxx
Notification and Report Form.
(m) The Investor represents that it will deliver a prospectus
upon any resale of Shares whenever such delivery is required by law.
(n) The Investor acknowledges that the Company and its counsel
are entitled to rely on the representations made above.
(o) The Investor, if not a resident of British Columbia,
certifies that it is not resident in British Columbia and acknowledges
that: (i) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Shares; (ii) there is no
government or other insurance covering the Shares; (iii) there are
risks associated with the purchase of the Shares; (iv) there are
restrictions on the Investor's ability to resell the Shares, and it is
the responsibility of the Investor to find out what those restrictions
are and to comply with them before selling such securities; and (v)
the Company has advised the Investor that
16
the Company is relying on an exemption from the requirements to
provide the Investor with a prospectus and to sell securities through
a person registered to sell securities under the Securities Act
(British Columbia) and, as a consequence of acquiring securities
pursuant to this exemption, certain protections, rights and remedies
provided by the Securities Act (British Columbia), including statutory
rights of rescission or damages, will not be available to the
Investor.
(p) The Investor, on its own behalf and on behalf of any other
person for whom it is contracting hereunder, acknowledges and consents
to the release by the Company of certain information regarding the
Investor's subscription, including the Investor's name, address,
telephone number and registration instructions, the number of Shares
purchased, the number of securities of the Company held, the status of
the Investor as an insider, as a "Pro Group" member or as otherwise
represented herein, and, if applicable, information regarding
beneficial ownership of or the principal of the Investor, in
compliance with securities regulatory policies to regulatory
authorities (including the TSX Venture Exchange) in reporting
jurisdictions or to other authorities as required by law and to the
transfer agent of the Company for the purpose of arranging for the
preparation of the certificates representing the Shares issuable in
connection with this Agreement; provided that the Company may not
disclose any information regarding the Investor's subscription without
the prior written consent of the Investor where such disclosure would
be in the Company's discretion and not required by the applicable
securities regulatory policies. The purpose of the collection of the
information is to ensure the Company and its advisors will be able to
issue Shares to the Investor in compliance with applicable Canadian
securities laws and the instructions of the Investor and to obtain the
information required to be provided in documents required to be filed
with the TSX Venture Exchange and with securities regulatory
authorities under applicable securities laws and other authorities as
required by law. In addition, the Investor acknowledges and consents
to the collection, use and disclosure of all such personal information
by the TSX Venture Exchange and other regulatory authorities in
accordance with their requirements, including the provision to third
party service providers, from time to time. The contact information
for the officer of the Company who can answer questions about the
collection of information by the Company is as follows:
Xxxxxx Xxxxxx
00000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
8. Registration. The Company shall:
(a) prepare and file with the Commission, not later than 60
calendar days after the Closing Date or, if earlier, 10 calendar days
after its existing Form S-1 registration statement is declared
effective by the Commission (the applicable
17
date being the "Filing Deadline Date"), a registration statement on
Form S-1 (the "Registration Statement") to enable the resale of Shares
by the Investors from time to time under the Securities Act;
(b) use its commercially reasonable best efforts, subject to
receipt of information from the Investors set forth in Exhibit C, to
cause the Registration Statement to be declared effective under the
Securities Act as soon as practicable but in no event later than the
date (the "Effectiveness Deadline Date") that is 90 calendar days
after the Closing Date; provided that if the Commission elects to
review the Registration Statement, the Effectiveness Deadline Date
shall be the date that is 150 calendar days after the Closing Date. If
the Registration Statement has not been declared effective by the
Commission on or before the Effectiveness Deadline Date, then the
Company shall, on the first day after the Effectiveness Deadline Date,
pay the Investor an amount equal to 0.5% of the Purchase Price of the
Shares purchased by the Investor pursuant to this Agreement, and an
additional 0.25% of the Purchase Price of the Shares purchased by the
Investor, each thirtieth day after the Effectiveness Deadline Date, up
to a maximum of 1.25% of such Purchase Price until the Registration
Statement is declared effective by the Commission. The Investors may
make a claim for additional damages as a remedy for the Company's
failure to comply with the timelines set forth in this Section (b),
but acknowledgement of such right in this Agreement shall not
constitute an admission by the Company that any such damages exist or
may exist. Nothing contained in the preceding sentence shall be read
to limit the ability of the Investors to seek specific performance of
this Agreement.
(c) Upon effectiveness of the Registration Statement the Company
will use its commercially reasonable best efforts to cause the Shares
to be listed on the NASDAQ National Market, the NASDAQ Small Cap
Market, or any registered United States national securities exchange.
In the event that the Shares cannot be listed on the NASDAQ National
Market, the NASDAQ Small Cap Market, or any United States national
securities exchange, the Company shall use its commercially reasonable
best efforts to list the Shares on the TSX Venture Exchange as soon as
practicable.
(d) during the period from the date on which the Registration
Statement is declared effective until the earlier of (i) such time as
all Investors may immediately sell all of the Shares purchased under
this Agreement under Rule 144(b) (without giving effect to the volume
limitations of Rule 144(e)) and (ii) such time as all Investors have
sold all of the Shares that the Investors purchased under this
Agreement (such period, the "Effectiveness Period"), the Company
shall: (A) use its commercially reasonable best efforts to prepare and
file with the Commission such amendments and supplements to the
Registration Statement as may be necessary or appropriate to keep such
Registration Statement current and continuously effective; (B) cause
the Prospectus used in connection with such Registration Statement to
be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and (C) use its
18
commercially reasonable best efforts to comply with the provisions of
the Securities Act applicable to it with respect to the disposition of
all securities covered by such Registration Statement during the
Effectiveness Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement, as so amended, or such Prospectus, as so supplemented;
(e) as soon as practicable, but in any event within two business
days, give notice to each Investor when any Prospectus, Prospectus
supplement, or the Registration Statement or any post-effective
amendment to the Registration Statement has been filed with the
Commission and, with respect to a Registration Statement or any
post-effective amendment, when the same has been declared effective;
(f) furnish to each Investor such number of copies of the
Registration Statement, Prospectuses (including Prospectus
supplements) and preliminary versions of the Prospectus filed with the
Commission ("Preliminary Prospectuses") in conformity with the
requirements of the Securities Act, and such other documents as such
Investor may reasonably request, in order to facilitate the public
sale or other disposition of all or any of the Shares by such
Investor; provided, however, that unless waived by the Company in
writing, the obligation of the Company to deliver copies of
Prospectuses or Preliminary Prospectuses to any Investor shall be
subject to the receipt by the Company of reasonable assurances from
such Investor that such Investor will comply with the applicable
provisions of the Securities Act and of such other securities or Blue
Sky laws as may be applicable in connection with any use of such
Prospectuses or Preliminary Prospectuses;
(g) file documents required of the Company for normal blue sky
clearance in all states requiring blue sky clearance; provided that
the Company will not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Agreement or
(ii) take any action that would subject it to general service of
process in suits or to taxation in any such jurisdiction where it is
not then so subject;
(h) if NASDR Rule 2710 requires any broker-dealer to make a
filing prior to executing a sale of Shares by an Investor, make an
Issuer Filing with the NASDR, Inc. Corporate Financing Department
pursuant to NASDR Rule 2710(b)(10)(A)(i) and respond within five
trading days to any comments received from NASDR in connection
therewith, and pay the filing fee required in connection therewith;
(i) advise the Investors at the earliest possible moment after
the Company shall receive notice or obtain knowledge of (i) the
issuance of any stop order by the Commission delaying or suspending
the effectiveness of the Registration Statement or (ii) suspension of
the qualification (or exemption from
19
qualification) of any of the Shares for sale in any jurisdiction in
which they have been qualified for sale, or, in each case, the
initiation of any proceeding for that purpose; and promptly use its
commercially reasonable best efforts to prevent the issuance of any
stop order or suspension or obtain its withdrawal at the earliest
possible moment if such stop order should be issued or suspension
levied; and
(j) bear all fees and expenses (other than fees and expenses of
each Investor's legal counsel or other advisers, and underwriting
discounts, brokerage fees and commissions, if any) incurred in
connection with the performance by the Company of its obligations
under paragraphs (a) through (g) and the registration of Shares
pursuant to the Registration Statement, whether or not the
Registration Statement is declared effective.
(k) Notwithstanding anything set forth in this Section 8 or
Section 9, the aggregate amount of payments to any Investor under the
provisions of Section 8(b) and 9(d) of this Agreement shall not exceed
13% of the Purchase Price paid by the Investor.
9. Transfer of Shares after Registration; Suspension.
(a) Each Investor agrees that it will not effect any disposition
of the Shares, or its right to purchase Shares, that would constitute
a sale within the meaning of the Securities Act except as contemplated
in the Registration Statement referred to in Section 8(a) of this
Agreement and as described below, in accordance with Section 16 of
this Agreement or as otherwise permitted by law, and that it will
promptly notify the Company of any change in any such information
until such time as such Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement
effective.
(b) Except in the event that paragraph (c) below applies, the
Company shall:
(i) if it deems necessary, prepare and file from time to
time with the Commission one or more post-effective amendments to
the Registration Statement or supplements to the related
Prospectus so that such Registration Statement will not contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and so that, as thereafter
delivered to purchasers of the Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
and
(ii) as soon as practicable provide to each Investor copies
of any documents filed pursuant to the preceding Section 9(b)(i).
(c) Subject to paragraph (d) below, in the event of:
20
(i) any request by the Commission or any other federal or
state governmental authority during the Effectiveness Period for
amendments or supplements to the Registration Statement or
related Prospectus or for additional information;
(ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose;
(iii) the receipt by the Company of any notification with
respect to the suspension of the qualification (or exemption from
qualification) of any of the Shares for sale in any jurisdiction
in which they have been qualified for sale or the initiation of
any proceeding for such purpose; or
(iv) any event or circumstance which necessitates the making
of any changes in the Registration Statement or Prospectus so
that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and that
in the case of the Prospectus, it will not contain any untrue
statement of a material fact or any omission to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
the Company shall promptly deliver a certificate in writing to each
Investor (the "Suspension Notice") to the effect of the foregoing and,
upon receipt of such Suspension Notice, such Investor will refrain
from selling any Shares pursuant to the Registration Statement (a
"Suspension") until such Investor receives from the Company copies of
a supplemented or amended Prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the
current Prospectus may be used. In the event of any Suspension, the
Company will use its commercially reasonable best efforts to cause the
use of the Prospectus so suspended to be resumed as soon as
practicable after delivery of a Suspension Notice to the Investor, and
the Company shall as soon as practicable provide each Investor with
copies of any supplemented or amended Prospectus or, as the case may
be, advise each Investor in writing that the current Prospectus may be
used.
(d) Notwithstanding the foregoing paragraphs of this Section 9,
the Company shall use its commercially reasonable best efforts to
ensure that each Investor shall not be prohibited from selling Shares
under the Registration Statement as a result of Suspensions within 45
days after the Registration Statement is first declared effective or
on more than two occasions of not more than 45 days in the aggregate
in any 12-month period; and provided further that if the number of
days during which Investor is subject to a Suspension in any 12 month
period exceeds 90 days (consecutive or nonconsecutive) then on the
91st
21
day of a Suspension, the Company shall pay the Investor an amount
equal to 0.5% of the Purchase Price of the Shares purchased by the
Investor pursuant to this Agreement, and an additional 0.25% of the
Purchase Price of the shares purchased by the Investor, each thirtieth
day after the 91st day of a Suspension, up to a maximum of 1.25% of
such Purchase Price, until the expiration of the Suspension.
(e) In addition, subject to compliance with applicable law, the
Company shall use its commercially reasonable best efforts to ensure
that the Company's transfer agent expeditiously effects all sales of
Shares under the Registration Statement that the Investor may have
from time to time, including the prompt removal of any restrictive
legends.
10. Indemnity and Contribution.
(a) For purposes of this Section 10:
(i) the term "Selling Stockholder" shall include the
Investor and each person, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act; and
(ii) the term "Registration Statement" shall include any
final Prospectus, exhibit, supplement or amendment included in or
relating to the Registration Statement (or deemed to be a part
thereof);
(b) The Company agrees:
(i) to indemnify and hold harmless each Selling Stockholder
against any losses, claims, damages or liabilities to which such
Selling Stockholder may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (A) any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement, (B) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
Prospectus or amendment or supplement thereto, in the light of
the circumstances under which they were made) not misleading, (C)
any inaccuracy in the representations and warranties of the
Company contained in this Agreement or the failure of the Company
to perform its obligations hereunder or (D) any failure by the
Company to fulfill any undertaking included in the Registration
Statement; provided, however, that the Company shall not be
liable in any such case to the extent that such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement in reliance upon and
in conformity with written information furnished to the Company
by or on behalf of such Selling Stockholder specifically for use
22
in preparation of the Registration Statement or the failure of
such Selling Stockholder to comply with its covenants and
agreements contained in Xxxxxxx 0, 0 xx 00 xxxxxx.
(xx) to reimburse each Selling Stockholder upon demand for
any legal or other out-of-pocket expenses reasonably incurred by
such Selling Stockholder in connection with investigating or
defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such
Selling Stockholder is a party to any action or proceeding. In
the event that it is finally judicially determined that a Selling
Stockholder was not entitled to receive payments for legal and
other expenses pursuant to this subparagraph, such Selling
Stockholder will promptly return all sums that had been advanced
pursuant hereto.
(c) Each Investor agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, against any losses,
claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (i) any failure by such Investor to comply
with the covenants and agreements contained in Section 7, 9 or 15,
(ii) any inaccuracy in the representations and warranties of the
Investor contained in this Agreement, or (iii) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and will reimburse any legal or
other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability,
action or proceeding; provided, however, that each Investor will be
liable, in the case of clause (iii) above, to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration
Statement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Investor specifically
for use in preparation of the Registration Statement. The maximum
obligation of an Investor to indemnify under this Section 10 shall be
limited to the net amount of the proceeds received by such Investor
from the sale of Shares pursuant to the Registration Statement to
which the loss, claim, damage or liability relates.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to this Section 10, such person
(the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in
writing. No indemnification provided for in Section
23
10(b) or (c) shall be available to any party who shall fail to give
notice as provided in this subsection if the party to whom notice was
not given was unaware of the proceeding to which such notice would
have related and was materially prejudiced by the failure to give such
notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability that it or they may
have to the indemnified party for contribution or otherwise than on
account of the provisions of Section 10(b) or (c). In case any such
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30
days of presentation) the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have
failed to assume the defense and employ counsel acceptable to the
indemnified party within a reasonable period of time after notice of
commencement of the action.
It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more
than one separate firm for all such indemnified parties. Such firm
shall be designated in writing by a Selling Stockholder in the case of
parties indemnified pursuant to Section 10(b) and by the Company in
the case of parties indemnified pursuant to Section 10(c). The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the
prior written consent of the indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding of which indemnification may be sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(e) If the indemnification provided for in this Section 10 is
unavailable or insufficient to hold harmless an indemnified party
under subsection (b) or (c) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party
24
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one
hand and the Selling Stockholder on the other hand in connection with
the statements or omissions or other matters that resulted in such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement or
omission, whether the untrue statement or omission relates to
information supplied by the Company on the one hand or a Selling
Stockholder on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and each Investor agree that
it would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro rata allocation (even if all
Selling Stockholders were treated as one entity for such purpose) or
by any other method of allocation that does not take into account the
equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (e), no Investor shall be required to contribute any amount
in excess of the amount by which the net amount of the proceeds
received by such Investor from the sale of Shares pursuant to the
Registration Statement to which the losses, claims, damages or
liabilities relate exceeds the amount of any damages that such
Investor has otherwise been required to pay by reason of the
statements or omissions or other matters that resulted in such losses,
claims, damages or liabilities. No person guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Each Investor's
obligation under this subsection to contribute shall be in proportion
to its sale of Shares to which such loss relates and shall not be
joint with any other Selling Shareholder.
(f) In any proceeding relating to the Registration Statement,
each party against whom contribution may be sought under this Section
10 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and
agrees that any other contributing party may join him or it as an
additional defendant in any such proceeding in which such other
contributing party is a party.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 10 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and
25
contribution agreements contained in this Section 10 and the
representations and warranties of the Company and each Investor set
forth in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of
any Selling Stockholder, the Company, its directors or officers or any
persons controlling the Company, (ii) the sale of any Shares
hereunder, and (iii) any termination of this Agreement.
(h) The remedies provided for in this Section 10 are not
exclusive and shall not limit any rights or remedies that may
otherwise be available to any indemnified party at law or equity.
11. Termination of Conditions and Obligations. The conditions
precedent imposed by Sections 7, 8 and 9 upon the transferability of Shares
shall cease and terminate as to any particular number of Shares (and the legend
on such Shares will be removed by the Company) at such time (i) solely with
respect to Shares, as such Shares have been effectively registered under the
Securities Act, (ii) upon the termination on the restrictions on the sales of
such Shares under Rule 144(k), or (iii) at such time as an opinion of counsel
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act. The
Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent within one trading day after the date on which the Registration
Statement under which the Shares may be sold is declared effective by the
Commission (the "Effective Date") to the effect that a registration statement
with respect to such Shares has become effective under the Securities Act and
that such Shares may be transferred without restriction under the Securities
Act. Following the Effective Date or at such earlier time as a legend is no
longer required for certain Shares, the Company will no later than two trading
days following the delivery by an Investor to the Company or the Company's
transfer agent of a legended certificate representing such Shares deliver or
cause to be delivered to such Investor a certificate representing such Shares
that is free from all restrictive and other legends.
12. Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned or issuable to an Investor, the
Company will furnish (or to the extent such information is available
electronically through the Company's filings with the Commission, the Company
will make available through its Internet website) to such Investor as soon as
practicable after it is available (but in the case of the Company's Annual
Report to Stockholders, within 90 days of each fiscal year of the Company), one
copy of:
(a) its Annual Report to Shareholders (which Annual Report shall
contain financial statements audited in accordance with generally
accepted auditing standards by an independent registered accounting
firm with respect to the Company within the meaning of the Securities
Act and the applicable rules and regulations thereunder adopted by the
Commission and the United States Public Company Accounting Oversight
Board) and, if not included in substance in the Annual Report to
Shareholders, its Annual Report on Form 10-K (the foregoing, in each
case, excluding exhibits); and
26
(b) upon the reasonable request of the Investor, all exhibits
excluded by the parenthetical to subparagraph (a) of this Section 12,
if such exhibits are not publicly available, as filed with the
Commission.
13. Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under this Agreement are several and not joint with
the obligations of any other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under this
Agreement. The decision of each Investor to purchase Shares under this Agreement
has been made by such Investor independently of any other Investor and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or
any of its Subsidiaries that may have been made or given by any other Investor
or by any agent or employee of any other Investor, other than with respect to
investment advisors who provide discretionary investment services to more than
one Investor, and no Investor or any of its agents or employees shall have any
liability to any other Investor (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
in this Agreement, and no action taken by any Investor pursuant hereto, shall be
deemed to constitute the Investors as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by this Agreement. Each Investor acknowledges
that no other Investor has acted as agent for such Investor in connection with
making its investment hereunder and that no other Investor will be acting as
agent of such Investor in connection with monitoring its investment hereunder.
Each Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other Investor to be joined as an additional
party in any proceeding for such purpose.
14. Co-Placement Agents and Other Fees. The Investor acknowledges that
the Company is obligated to (a) pay fees to KeyBanc and Xxxxxxx, in each case in
their capacity as Co-Placement Agent, based on contractual obligations relating
to the sale of the Shares to the Investors. The Company shall indemnify and hold
harmless each Investor from and against all fees, commissions or other payments
owing by the Company to KeyBanc, Xxxxxxx or any other person or firm acting on
behalf of the Company in connection with the transactions contemplated by this
Agreement.
15. Brokers. Each Investor acknowledges that there are no fees,
commissions or other payments owing to any broker, finder or intermediary acting
on behalf of such Investor in connection with the transactions contemplated by
this Agreement.
16. Rule 144. (a) The Company covenants that, if at any time before
the end of the Effectiveness Period the Company is not subject to the reporting
requirements of the Exchange Act, it will cooperate with each Investor and take
such further reasonable action as the Investor may reasonably request in writing
(including, without limitation, making such reasonable representations as such
Investor may reasonably request), all to the extent required from time to time
to enable such Investor to sell Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act (or any successor rule) and customarily taken in
connection with sales pursuant to
27
such exemptions. Upon the written request of an Investor, the Company shall
deliver to such Investor a written statement as to whether it has complied with
such reporting requirements, unless such a statement has been included in the
Company's most recent report filed pursuant to Section 13 or Section 15(d) of
Exchange Act. Notwithstanding the foregoing, nothing in this Section 16 shall be
deemed to require the Company to register any of its securities (other than the
Common Stock) under any section of the Exchange Act.
(b) The Company shall comply with the requirements set forth in
the instructions to Form S-1 in order to allow the Company to be
eligible to file registration statements on Form S-1, and following
the effectiveness of the Amended S-1 Registration Statement, shall
file all reports required to be filed by it under the Exchange Act.
17. Liquidated Damages. Nothing shall preclude any Investor from
pursuing or obtaining, at any time, specific performance or other equitable
relief with respect to this Agreement.
18. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (a) when made, if made by hand delivery,
(b) upon confirmation, if made by telecopier, (c) one (1) business day after
being deposited with such courier, if made by overnight courier or (d) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(a) if to an Investor, at its address on the signature page
hereto;
(b) if to the Company, to:
BPI Industries Inc.
00000 Xxxxxxxxxx Xx.
Xxxxx 000
Xxxxx, XX 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxx LLP
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
or to such other address as such person may have furnished to the other persons
identified in this Section 18 in writing in accordance herewith.
28
19. Modification; Amendment. The provisions of this Agreement may not
be amended, modified or supplemented unless pursuant to an instrument in writing
signed by the Company and each Investor.
20. Assignment. The rights and obligations of each Investor under this
Agreement shall be automatically assigned by such Investor to any transferee of
all or any portion of such Investor's Shares in any private transfer of such
Shares; provided, however, that within two business days prior to the transfer,
(a) such Investor provides the Company notice of the transfer, including the
name and address of the transferee and the number of Shares transferred; and (b)
that such transferee agrees in writing to be bound by the terms of this
Agreement. Upon any transfer permitted by this Section 20, the Company shall be
obligated to such transferee to perform all of its covenants under this
Agreement as if such transferee were the Investor.
21. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
22. Severability. If any term provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
23. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Ohio, without giving
effect to the principles of conflicts of law.
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
25. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
with respect to the subject matter contained herein. Except as provided in this
Agreement, there are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to such matters.
This Agreement supersedes all prior agreements and undertakings among the
parties with respect to such matters. No party hereto shall have any rights,
duties or obligations other than those specifically set forth in this Agreement.
[SIGNATURE PAGE FOLLOWS]
29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
By: /s/***
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
----------------------------------------
----------------------------------------
Number of Shares:
----------------------
Aggregate Purchase Price:
--------------
Tax Identification Number:
-------------
Contact Name:
--------------------------
Telephone:
-----------------------------
Name in which the Shares should be
registered (if different):
-------------
Relationship between the Investor and
the person or entity in whose name the
Shares should be registered (if
different):
----------------------------
*** Signature page signed by each of the Investors.
Agreed to and Accepted by:
BPI Industries Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer and
General Counsel
