Exhibit 10.31
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 20,
2002, between Smartire Systems Inc., a corporation organized under the laws of
the Province of British Columbia (the "Company") and _______ (the "Investor").
WHEREAS:
A. The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemptions from securities registration afforded
by the provisions of:
(i) Regulation S ("Regulation S"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "Securities Act");
and
(ii) Multilateral Instrument 45-103 adopted by the British Columbia
Securities Commission (the "BCSC").
B. Upon the terms and conditions stated in this Agreement, the Company
desires to issue to the Investor: (i) a redeemable convertible note of the
Company, in the aggregate principal amount of x ($x.00), in the form attached
hereto as Exhibit A (the "Note"), convertible into shares of the Company's
common stock (the "Common Stock") and (ii) x share purchase warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to acquire Common Stock.
C. The shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Note are referred to herein as the "Conversion Shares" and the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "Warrant Shares". The Note, the Warrants,
the Conversion Shares and the Warrant Shares are collectively referred to herein
as the "Securities" and each of them may individually be referred to herein as a
"Security".
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investor hereby agree as
follows:
1. PURCHASE AND SALE OF THE NOTE AND THE WARRANTS
1.1 On the basis of the representations and warranties and subject to the
terms and conditions set forth herein, the Company shall issue and sell
on the Closing Date (as defined below), to the Investor, and the
Investor agrees to purchase from the Company, for an aggregate purchase
price of x ($x.00) (the "Purchase Price") the following:
(a) the Note; and
(b) the Warrants.
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1.2 On the Closing Date, the Investor shall deliver, against delivery of
the Note and the Warrants, the Purchase Price by wiring to Clark,
Wilson, Barristers and Solicitors pursuant to wiring instructions
attached hereto as Exhibit E. The Investor agrees that Xxxxx, Xxxxxx is
authorized to immediately deliver the Purchase Price to the Company.
1.3 On the maturity date of the Note, the Company agrees to deliver the
Conversion Shares, if the Note has been converted into shares of Common
Stock.
1.4 Closing of the issuance and sale of the Note and Warrants pursuant to
this Agreement (the "Closing") shall occur on or before September 20,
2002, or on such other date as may be mutually determined by the
Company and the Investor (the "Closing Date").
2. DOCUMENTS REQUIRED FROM INVESTOR
2.1 The Investor must complete, sign and return to the Company:
(a) an executed copy of this Agreement;
(b) if the Investor is purchasing pursuant to Multilateral
Instrument 45-103, adopted by the BCSC, a British Columbia
Accredited Investor Questionnaire in the form attached as
Exhibit C (the "Questionnaire"); and
(c) if the Investor is an individual and is purchasing pursuant to
Section 74(2)(4) of the Securities Act (British Columbia) (the
"B.C. Act"), a Form 45-903F1 in the form attached as Exhibit
D.
2.2 The Investor shall complete, sign and return to the Company as soon as
possible, on request by the Company, any documents, questionnaires,
notices and undertakings as may be required by any regulatory
authorities and applicable law.
3. INVESTOR'S ACKNOWLEDGEMENTS
3.1 The Investor acknowledges and agrees that:
(a) none of the Securities have been registered under the
Securities Act, under any state securities or "blue sky" laws
of any state of the United States, or under any provincial
securities laws and, unless so registered, may not be offered
or sold in the United States or, directly or indirectly, to
U.S. Persons, as that term is defined in Regulation S under
the Securities Act ("Regulation S"), except in accordance with
the provisions of Regulation S, pursuant to an effective
registration statement under the Securities Act, or pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, and in each
case only in accordance with any applicable state and
provincial securities laws;
(b) the Investor acknowledges that the Company has not undertaken,
and will have no obligation, to register any of the Securities
under the Securities Act;
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(c) the decision to execute this Agreement and acquire the
Securities hereunder has not been based upon any oral or
written representation as to fact or otherwise made by or on
behalf of the Company, and such decision is based entirely
upon a review of information (the receipt of which is hereby
acknowledged) which has been filed by the Company with the SEC
and in compliance, or intended compliance, with applicable
securities legislation (collectively, the "Public Record");
(d) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities;
(e) there is no government or other insurance covering the
Securities;
(f) there are risks associated with an investment in the
Securities, as more fully described in certain information
forming part of the Public Record;
(g) the Investor understands that the Securities are being offered
and sold to the Investor in reliance upon specific exemptions
from the registration requirements of United States federal
and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Investor's compliance with,
the representations, warranties, agreements, acknowledgements
and understandings of the Investor set forth herein and in the
Questionnaire in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the
Securities;
(h) the Investor has not acquired any of the Securities as a
result of, and will not itself engage in, any "directed
selling efforts" (as defined in Regulation S under the
Securities Act) in the United States in respect of any of the
Securities which would include any activities undertaken for
the purpose of, or that could reasonably be expected to have
the effect of, conditioning the market in the United States
for the resale of any of the Conversion Shares or Warrant
Shares; provided, however, that the Investor may sell or
otherwise dispose of any of the Conversion Shares or Warrant
Shares pursuant to registration thereof under the Securities
Act and any applicable state securities laws or under an
exemption from such registration requirements;
(i) the Company has advised the Investor that the Company is
relying on an exemption from the requirements to provide the
Investor with a prospectus and to sell the Securities through
a person registered to sell securities under the B.C. Act and,
as a consequence of acquiring the Securities pursuant to this
exemption, certain protections, rights and remedies provided
by the B.C. Act, including statutory rights of rescission or
damages, will not be available to the Investor;
(j) the Investor and the Investor's advisor(s) have had a
reasonable opportunity to ask questions of and receive answers
from the Company in connection with the distribution of the
Securities hereunder, and to obtain additional information, to
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the extent possessed or obtainable without unreasonable effort
or expense, necessary to verify the accuracy of the
information about the Company;
(k) the books and records of the Company were available upon
reasonable notice for inspection, subject to certain
confidentiality restrictions, by the Investor during
reasonable business hours at its principal place of business,
and all documents, records and books in connection with the
distribution of the Securities hereunder have been made
available for inspection by the Investor, the Investor's
lawyers and/or advisor(s);
(l) the Investor will indemnify and hold harmless the Company and,
where applicable, its directors, officers, employees, agents,
advisors and shareholders, from and against any and all loss,
liability, claim, damage and expense whatsoever (including,
but not limited to, any and all fees, costs and expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any claim, lawsuit, administrative
proceeding or investigation whether commenced or threatened)
arising out of or based upon any representation or warranty of
the Investor contained herein, the Questionnaire or in any
document furnished by the Investor to the Company in
connection herewith being untrue in any material respect or
any breach or failure by the Investor to comply with any
covenant or agreement made by the Investor to the Company in
connection therewith;
(m) in addition to resale restrictions imposed under U.S.
securities laws, there are additional restrictions on the
Investor's ability to resell the Conversion Shares and the
Warrant Shares under the B.C. Act and Multilateral Instrument
45-102 adopted by the BCSC;
(n) the Company will refuse to register any transfer of the
Conversion Shares or the Warrant Shares not made in accordance
with the provisions of Regulation S, 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 each case in accordance with
applicable state and provincial securities laws;
(o) the statutory and regulatory basis for the exemption claimed
for the offer of the Securities, although in technical
compliance with Regulation S, would not be available if the
offering is part of a plan or scheme to evade the registration
provisions of the Securities Act; and
(p) the Investor has been advised to consult the Investor's own
legal, tax and other advisors with respect to the merits and
risks of an investment in the Securities and with respect to
applicable resale restrictions, and it is solely responsible
(and the Company is not in any way responsible) for compliance
with:
(i) any applicable laws of the jurisdiction in which the
Investor is resident in connection with the
distribution of the Securities hereunder, and
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(ii) applicable resale restrictions.
4. MUTUAL ACKNOWLEDGEMENTS
4.1 Although West Sussex Trading, Inc. (the "the Agent") may have
introduced the Investor to the Company, the Investor and the Company
acknowledge and agree with, and for the benefit of, the Agent and the
Company, as applicable (such acknowledgement and agreements to survive
the closing) that:
(a) the Agent and its directors, officers, employees, agents and
representatives have no responsibility or liability of any
nature whatsoever for the accuracy or adequacy of the
information contained in this Agreement or in any publicly
available information concerning the Company or as to whether
all information concerning the Company required to be
disclosed by it or them has generally been disclosed;
(b) the Agent makes no representations or warranties herein with
respect to the Securities, and neither the Agent nor its
directors, officers, employees, agents or representatives
shall have any liability with respect to the sale of the
Securities;
(c) the Agent has not engaged in any independent investigation or
verification with respect to this subscription for the
Securities or any such information; and
(d) the Agent and the Company are entitled to rely on the
representations and warranties and the statements and answers
of the Investor contained in this Agreement and in the
questionnaires and acknowledgements attached as exhibits to
this Agreement, and the Investor will hold harmless each of
the Agent and the Company from any loss or damage it or they
may suffer as a result of the Subscriber's failure to
correctly complete this Agreement or such questionnaires and
acknowledgements.
5. INVESTOR REPRESENTATIONS AND WARRANTIES
5.1 The Investor hereby represents and warrants to and covenants with the
Company (which representations, warranties and covenants shall survive
the Closing) that:
(a) if the Investor is a corporation or other entity, the Investor
has the legal capacity and competence to enter into and
execute this Agreement and to take all actions required
pursuant hereto and the Investor is duly incorporated and
validly subsisting under the laws of its jurisdiction of
incorporation and all necessary approvals by its directors,
shareholders and others have been obtained to authorize
execution and performance of this Agreement on behalf of the
Investor;
(b) if the Investor is a corporation or other entity, the entering
into of this Agreement and the transactions contemplated
hereby do not result in the violation of any of the terms and
provisions of any law applicable to, or the constating
documents of, the Investor or of any agreement, written or
oral, to which the Investor may be a party or by which the
Investor is or may be bound;
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(c) the Investor has duly executed and delivered this Agreement
and it constitutes a valid and binding agreement of the
Investor enforceable against the Investor in accordance with
its terms except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
by equitable principles;
(d) all information contained in the Questionnaire is complete and
accurate and may be relied upon by the Company;
(e) if the Investor is purchasing pursuant to Multilateral
Instrument 45-103, by completing the Questionnaire, the
Investor is representing and warranting that the Investor is
an "Accredited Investor", as the term is defined in
Multilateral Instrument 45-103 adopted by the BCSC;
(f) the Investor is resident in the jurisdiction set out under the
heading "Name and Address of Investor" on the signature page
of this Agreement;
(g) the Investor is not a U.S. Person;
(h) the Investor is not acquiring the Securities for the account
or benefit of, directly or indirectly, any U.S. Person;
(i) the sale of the Securities to the Investor as contemplated in
this Agreement complies with or is exempt from the applicable
securities legislation of the jurisdiction of residence of the
Investor;
(j) the Investor is acquiring the Securities for investment only
and not with a view to resale or distribution and, in
particular, it has no intention to distribute either directly
or indirectly any of the Securities in the United States or to
U.S. Persons;
(k) the Investor is outside the United States when receiving and
executing this Agreement and is acquiring the Securities as
principal for the Investor's own account, for investment
purposes only, and not with a view to, or for, resale,
distribution or fractionalisation thereof, in whole or in
part, and no other person has a direct or indirect beneficial
interest in such Securities;
(l) the Investor acknowledges that the Investor has not acquired
the Securities as a result of, and will not itself engage in,
any "directed selling efforts" (as defined in Regulation S
under the Securities Act) in the United States in respect of
any of the Securities which would include any activities
undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the
United States for the resale of any of the Securities;
provided, however, that the Investor may sell or otherwise
dispose of any of the Securities pursuant to registration of
any of the Securities pursuant to the Securities Act and any
applicable state securities laws or under an exemption from
such registration requirements and as otherwise provided
herein;
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(m) the Investor is purchasing the Securities for the Investor's
own account for investment purposes only and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration
requirements of the Securities Act and/or sales registered
under the Securities Act;
(n) the Investor understands that the Investor must bear the
economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act and
any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the
Company has no present intention of registering the resale of
any such Securities;
(o) the Investor is not an underwriter of, or dealer in, the
shares of Common Stock of the Company, nor is the Investor
participating, pursuant to a contractual agreement or
otherwise, in the distribution of the Securities;
(p) if the Investor is acquiring the Securities as a fiduciary or
agent for one or more investor accounts:
(i) the Investor has sole investment discretion with
respect to each such account and it has full power to
make the foregoing acknowledgements, representations
and agreements on behalf of such account, and
(ii) the investor accounts for which the Investor acts as
a fiduciary or agent satisfy the definition of an
"Accredited Investor", as the term is defined in
Multilateral Instrument 45-103 adopted by the BCSC;
(q) the Investor is not aware of any advertisement of any of the
Securities; and
(r) no person has made to the Investor any written or oral
representations:
(i) that any person will resell or repurchase any of the
Securities;
(ii) that any person will refund the purchase price of any
of the Securities; or
(iii) as to the future price or value of any of the
Securities; or
(iv) that any of the Securities will be listed and posted
for trading on any stock exchange or automated dealer
quotation system or that application has been made to
list and post any of the Securities of the Company on
any stock exchange or automated dealer quotation
system.
5.2 If the Investor is purchasing the Securities pursuant to section
74(2)(4) of the B.C. Act, then the Investor additionally represents,
warrants and covenants to the Company (which representations,
warranties and covenants shall survive closing) that:
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(a) the Investor is purchasing as principal for its own account,
and not for the benefit of any other person or company, a
sufficient number of Securities such that the aggregate
acquisition cost to the Investor is not less than CDN$97,000;
(b) if the Investor is not an individual or a corporation, each
member of the partnership, syndicate or other unincorporated
organization which is the purchaser, or each beneficiary of
the trust which is the purchaser, as the case may be, is an
individual who has an aggregate acquisition cost for the
Securities of not less than CDN$97,000;
(c) neither the Investor nor any party on whose behalf the
Investor is acting has been created, established, formed or
incorporated solely, or is used primarily, to acquire
securities or to permit the purchase of the Securities without
a prospectus in reliance on an exemption from the prospectus
requirements of applicable securities legislation; and
(d) if the Investor is purchasing pursuant to the exemption from
prospectus requirements available under subsection 74(2)(4) of
the B.C. Act and is not purchasing for its own account:
(i) the Investor is:
A. a trust company or an insurer which has received a
business authorization under the Financial
Institutions Act (British Columbia) or is a trust
company or an insurer authorized under the laws of
another province or territory of Canada to carry on
such business in such province or territory, and
the Investor is purchasing the Securities as an
agent or trustee for accounts that are fully
managed by the Investor; or
B. an advisor who manages the investment portfolios of
clients through discretionary authority granted by
one or more clients and the Investor is:
I. registered as an advisor under the B.C. Act
or the laws of another province or territory
of Canada or the Investor is exempt from such
registration and the Investor is purchasing
the Securities as an agent for accounts that
are fully managed by the Investor; or
II. carrying on the business of an advisor
outside of Canada in which case:
i. it was not created solely or primarily
for the purpose of purchasing
Securities of the Company;
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ii. the total asset value of the investment
portfolios it manages on behalf of
clients is not less than
CDN$20,000,000; or
iii. it does not believe and has no
reasonable grounds to believe that any
resident of British Columbia or any
directors, senior officers or other
insiders of the Company or any persons
carrying on investor relations
activities for the Company has a
beneficial interest in any of the
managed accounts for which it is
purchasing, and
(ii) the aggregate acquisition cost for the Securities is not
less than CDN$97,000.
6. BRITISH COLUMBIA RESALE RESTRICTIONS
6.1 The Investor acknowledges that the Securities are subject to resale
restrictions in British Columbia and may not be traded in British
Columbia except as permitted by the B.C. Act and the rules made
thereunder.
6.2 Pursuant to Multilateral Instrument 45-102, as adopted by the BCSC,
effective November 30, 2001, a subsequent trade in the Conversion
Shares or the Warrant Shares will be a distribution subject to the
prospectus and registration requirements of applicable Canadian
securities legislation (including the B.C. Act) unless certain
conditions are met, including the following:
(a) at least twelve months (the "Canadian Hold Period") shall have
elapsed from the date on which the Securities were issued to
the Investor;
(b) during the currency of the Canadian Hold Period, any
certificate representing the Securities is imprinted with a
legend (the "Canadian Legend") stating:
"Unless permitted under securities legislation,
the holder of the securities shall not trade the
securities before [insert the date that is
twelve months and a day after the distribution
date]."
(c) the trade is not a control distribution (as defined in
Multilateral Instrument 45-102);
(d) no unusual effort is made to prepare the market or to create a
demand for the Conversion Shares or the Warrant Shares that
are the subject of the trade;
(e) no extraordinary commission or consideration is paid to a
person or company in respect of the trade; and
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(f) if the selling security holder is an insider or officer of the
Company, the selling security holder has no reasonable grounds
to believe that the Company is in default of securities
legislation.
6.3 By executing and delivering this Agreement, the Investor will have
directed the Company not to include the Canadian Legend on any
certificates representing the Conversion Shares or the Warrant Shares
to be issued to the Investor.
6.4 As a consequence, the Investor will not be able to rely on the resale
provisions of Multilateral Instrument 45-102, and any subsequent trade
in the Conversion Shares or the Warrant Shares during or after the
Canadian Hold Period will be a distribution subject to the prospectus
and registration requirements of Canadian securities legislation, to
the extent that the trade is at that time subject to any such Canadian
securities legislation.
7. LEGENDING OF THE SECURITIES
7.1 The Investor understands that the Note and Warrants and, until such
time as the Conversion Shares and Warrant Shares have been registered
under the Securities Act (including registration pursuant to Rule 416
thereunder) or otherwise may be sold by the Investor under Rule 144,
the certificates for the Conversion Shares and Warrant Shares may bear
a restrictive legend in substantially the following form:
"THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO
ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
ACCORDINGLY NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES
HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES
LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE
UNITED STATES, OR DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED
HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."
7.2 The Investor hereby acknowledges and agrees to the Company making a
notation on its records or giving instructions to the registrar and
transfer agent of the Company in order to implement the restrictions on
transfer set forth and described in this Subscription Agreement.
7.3 The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any of the
Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (a) the sale of such Securities is registered
under the Securities Act (including registration pursuant to Rule 416
thereunder); (b) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration
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under the Securities Act; or (c) such holder provides the Company with
reasonable assurances that such Securities can be sold under Rule 144.
In the event the above legend is removed from any of the Securities and
thereafter the effectiveness of a registration statement covering such
Securities is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to the Investor, the Company may
require that the above legend be placed on any such Securities that
cannot then be sold pursuant to an effective registration statement or
under Rule 144 and the Investor shall cooperate in the replacement of
such legend. Such legend shall thereafter be removed when such Security
may again be sold pursuant to an effective registration statement or
under Rule 144.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
8.1 The Company hereby represents and warrants to and covenants with the
Investor (which representations, warranties and covenants shall survive
closing) that:
(a) the Company is a corporation duly organized and existing in
good standing under the laws of the jurisdiction in which it
is incorporated, and has the requisite corporate power to own
its properties and to carry on its business as now being
conducted;
(b) the Company has the requisite corporate power and authority to
issue and sell the Note and the Warrants in accordance with
the terms hereof, to issue the Conversion Shares upon
conversion of the Note in accordance with the terms thereof
and to issue the Warrant Shares upon exercise of the Warrants
in accordance with the terms thereof;
(c) the execution, delivery and performance of this Agreement, the
Note and the Warrants (the "Transaction Documents") by the
Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without
limitation, the issuance of the Note and the Warrants and the
issuance and reservation for issuance of the Conversion Shares
and Warrant Shares) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of
the Company, its Board of Directors, any or committee of the
Board of Directors is required;
(d) this Agreement constitutes, and, upon execution and delivery
by the Company of the Note and the Warrants, such agreements
will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms
except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
by equitable principles;
(e) the Conversion Shares and Warrant Shares are duly authorized
and reserved for issuance, and, upon conversion of the Note
and exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be
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subject to pre-emptive rights, rights of first refusal or
other similar rights of stockholders of the Company and will
not impose personal liability upon the holder thereof;
(f) the execution, delivery and performance of the Transaction
Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation
for issuance, as applicable, of the Note, the Warrants, the
Conversion Shares and Warrant Shares) will not (i) result in a
violation of the Certificate of Incorporation or By-laws or
(ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any
anti-dilution provisions), acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is
a party; and
(g) neither the Company nor any distributor participating on the
Company's behalf in the transactions contemplated hereby (if
any) nor any person acting for the Company, or any such
distributor, has conducted any "general solicitation," as such
term is defined in Regulation D, with respect to any of the
Securities being offered hereby.
9. COVENANTS
9.1 The parties shall use their best efforts timely to satisfy each of the
conditions described in Section 11 and Section 12 of this Agreement.
9.2 So long as any Investor beneficially owns any of the Securities, the
Company shall timely file all reports required to be filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Company shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
9.3 The Company currently has authorized and reserved for the purpose of
issuance one million (1,000,000) shares of Common Stock to provide for
the full conversion of the Note and issuance of the Conversion Shares
in connection therewith, the payment of interest on the Note and the
issuance of Common Stock in connection therewith, the full exercise of
the Warrants and the issuance of the Warrant Shares in connection
therewith and as otherwise required by the Note, the Warrants and the
Registration Rights Agreement (collectively, the "Issuance
Obligations"). In the event such number of shares becomes insufficient
to satisfy the Issuance Obligations, the Company shall take all
necessary action to authorize and reserve such additional shares of
Common Stock necessary to satisfy the Issuance Obligations.
9.4 If the Company is prohibited by Rule 4350 of the NASD or any successor
or similar rule, or the rules of any other securities exchange or
over-the-counter market on which the Common Stock is then listed or
traded from issuing all of the shares of Common Stock issuable upon
complete conversion of the Note and complete exercise of the Warrants,
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the Company shall call a meeting of its stockholders to be held as
promptly as practicable and in any event no later than 90 days after
the conversion of the Note for the purpose of voting upon and approving
the Transaction Documents, the authorization and issuance of the Note
and the Warrants, and the issuance of the Conversion Shares upon
conversion of or otherwise pursuant to the Note and the Warrant Shares
upon exercise of or otherwise pursuant to the Warrants. The Company
shall, through its Board of Directors, recommend to its stockholders
approval of such matters. The Company shall use its best efforts to
solicit from its stockholders proxies in favour of such matters
sufficient to comply with all relevant legal requirements, including,
without limitation Rule 4350 promulgated by the NASD, and shall vote
such proxies in favour of such matters.
10. TRANSFER AGENT INSTRUCTIONS
10.1 The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Investor or its nominee, for the
Conversion Shares and the Warrant Shares in such amounts as specified
from time to time by the Investor to the Company upon conversion of the
Note or exercise of the Warrants, as applicable. To the extent and
during the periods provided in Section 7.3 of this Agreement, all such
certificates shall bear the restrictive legend specified in Section 7.1
of this Agreement.
10.2 If the Investor provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that the Conversion Shares or the Warrant
Shares to be sold or transferred may be sold or transferred pursuant to
an exemption from registration, or the Investor provides the Company
with reasonable assurances that the Conversion Shares or the Warrant
Shares may be sold under Rule 144, the Company shall permit the
transfer and promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the
Investor.
11. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
11.1 The obligation of the Company hereunder to issue and sell the Note and
Warrants to the Investor hereunder is subject to the satisfaction, at
or before the Closing, of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
(a) the Investor shall have delivered the Purchase Price in
accordance with Section 1 of this Agreement;
(b) the representations and warranties of the Investor shall be
true and correct as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific
date, which representations and warranties shall be true and
correct as of such date), and the Investor shall have
performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be
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performed, satisfied or complied with by the Investor at or
prior to the Closing Date; and
(c) no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits
the consummation of any of the transactions contemplated by
this Agreement.
12. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE
12.1 The obligation of the Investor hereunder to purchase the Note and
Warrants from the Company hereunder is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions,
provided that such conditions are for the Investor's sole benefit and
may be waived by the Investor at any time in the Investor's sole
discretion:
(a) the Company shall have delivered to the Investor a duly
executed Note and Warrants (each in such denominations as the
Investor shall request) in accordance with Section 1 of this
Agreement;
(b) the representations and warranties of the Company shall be
true and correct as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific
date, which representations and warranties shall be true and
correct as of such date) and the Company shall have performed,
satisfied and complied in all material respects with the
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date; and
(c) no statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated
hereby which questions the validity of, challenges or
prohibits the consummation of, any of the transactions
contemplated by this Agreement.
13. GOVERNING LAW
13.1 This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia. The Company irrevocably
consents to the jurisdiction of the courts located in the Province of
British Columbia in any suit or proceeding based on or arising under
this Warrant and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts.
14. MISCELLANEOUS
14.1 The Company acknowledges and agrees that all costs and expenses (to a
maximum of $5,000) incurred by the Investor (including any fees and
disbursements of any special
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counsel retained by the Investor) relating to the purchase of the
Securities shall be borne by the Company.
14.2 All references herein to monetary denominations shall refer to lawful
money of the United States of America.
14.3 This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so
delivering this Agreement. In the event any signature is delivered by
facsimile transmission, the party using such means of delivery shall
cause the manually executed execution page(s) hereof to be physically
delivered to the other party within five (5) days of the execution
hereof, provided that the failure to so deliver any manually executed
execution page shall not affect the validity or enforceability of this
Agreement.
14.4 The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
14.5 If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other
jurisdiction.
14.6 This Agreement and the instruments referenced herein contain the entire
understanding of the Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived other than by an instrument
in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument
in writing signed by the Company and the Investor.
14.7 Any notices required or permitted to be given under the terms of this
Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally, by responsible overnight carrier or
by confirmed facsimile, and shall be effective five (5) days after
being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by responsible overnight carrier or
confirmed facsimile, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Smartire Systems Inc.
Richmond Corporate Centre
#150 - 00000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
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Facsimile: (000) 000-0000
Attn: President
With a copy simultaneously transmitted by like means to:
Xxxxx, Xxxxxx
800 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX
Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxx
If to the Investor:
Each party shall provide notice to the other party of any change in
address.
14.8 This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. Neither the Company nor the
Investor may assign this Agreement or any rights or obligations
hereunder. Notwithstanding the foregoing, the Investor may assign its
rights hereunder to any of its "affiliates," as that term is defined
under the Exchange Act, with the consent of the Company.
14.9 This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
14.10 The Company and the Investor shall have the right to approve before
issuance any press releases, SEC or, to the extent applicable, NASD
filings, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Investor , to make
any press release or SEC or, to the extent applicable, NASD filings
with respect to such transactions as is required by applicable law and
regulations.
-17-
14.11 Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the Investor and the Company have caused this
Agreement to be duly executed as of the date first above written.
SMARTIRE SYSTEMS INC.
By:
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: President
Date: September 20, 2002
EXECUTED by INVESTOR in the presence of: )
)
)
------------------------------------------- )
Signature )
)
------------------------------------------- ) -----------------------------
Print Name ) INVESTOR
)
------------------------------------------- )
Address )
)
------------------------------------------- )
)
------------------------------------------- )
Occupation )
)
EXHIBIT A
SENIOR CONVERTIBLE NOTE
EXHIBIT B
WARRANTS
EXHIBIT C
MULTILATERAL INSTRUMENT 45-103
ACCREDITED INVESTOR QUESTIONNAIRE
The purpose of this Questionnaire is to assure Smartire Systems Inc. (the
"Company") that the undersigned (the "Investor") will meet certain requirements
for the registration and prospectus exemptions provided for under Multilateral
Instrument 45-103 ("MI 45-103"), as adopted by the British Columbia Securities
Commission and the Alberta Securities Commission, in respect of a proposed
private placement of securities by the Company (the "Transaction"). The Company
will rely on the information contained in this Questionnaire for the purposes of
such determination.
The Investor covenants, represents and warrants to the Company that:
1. the Investor has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits
and risks of the Transaction and the Investor is able to bear
the economic risk of loss arising from such Transaction;
2. the Investor satisfies one or more of the categories of
"accredited investor" (as that term is defined in MI 45-103)
indicated below (please check the appropriate box):
[ ] an individual who beneficially owns, or who together
with a spouse beneficially own, financial assets (as
defined in MI 45-103) having an aggregate realizable
value that, before taxes but net of any related
liabilities, exceeds CDN$1,000,000;
[ ] an individual whose net income before taxes exceeded
CDN$200,000 in each of the two more recent years or
whose net income before taxes combined with that of a
spouse exceeded $300,000 in each of those years and
who, in either case, has a reasonable expectation of
exceeding the same net income level in the current
year;
[ ] an individual registered or formerly registered under
the Securities Act (British Columbia), or under
securities legislation in another jurisdiction of
Canada, as a representative of a person or company
registered under the Securities Act (British
Columbia), or under securities legislation in another
jurisdiction of Canada, as an adviser or dealer,
other than a limited market dealer registered under
the Securities Act (Ontario);
[ ] a Canadian financial institution as defined in
National Instrument 14-101, or an authorized foreign
bank listed in Schedule III of the Bank Act (Canada);
-2-
[ ] the Business Development Bank of Canada incorporated
under the Business Development Bank Act (Canada);
[ ] an association under the Cooperative Credit
Associations Act (Canada) located in Canada;
[ ] a subsidiary of any company referred to in any of the
foregoing categories, where the company owns all of
the voting securities of the subsidiary, except the
voting securities required by law to be owned by
directors of that subsidiary;
[ ] a person or company registered under the Securities
Act (British Columbia), or under securities
legislation of another jurisdiction of Canada, as an
adviser or dealer, other than a limited market dealer
registered under the Securities Act (Ontario);
[ ] a pension fund that is regulated by either the Office
of the Superintendent of Financial Institutions
(Canada) or a provincial pension commission or
similar regulatory authority;
[ ] an entity organized in a foreign jurisdiction that is
analogous to any of the entities referred to in any
of the foregoing categories in form and function;
[ ] the government of Canada or a province, or any crown
corporation or agency of the government of Canada or
a province;
[ ] a municipality, public board or commission in Canada;
[ ] a national, federal, state, provincial, territorial
or municipal government of or in any foreign
jurisdiction, or any agency thereof;
[ ] a registered charity under the Income Tax Act
(Canada);
[ ] a corporation, limited partnership, limited liability
partnership, trust or estate, other than a mutual
fund or non-redeemable investment fund, that had net
assets of at least CDN$5,000,000 as reflected on its
most recently prepared financial statements;
[ ] a mutual fund or non-redeemable investment fund that,
in British Columbia, distributes it securities only
to persons or companies that are accredited
investors;
[ ] a mutual fund or non-redeemable investment fund that,
in British Columbia, distributes its securities under
a prospectus for which a receipt has been issued by
the executive director of the British Columbia
Securities Commission; or
-3-
[ ] a person or company in respect of which all of the
owners of interests, direct or indirect, legal or
beneficial, are persons or companies that are
accredited investors.
The Investor acknowledges and agrees that the Investor may be required by the
Company to provide such additional documentation as may be reasonably required
by the Company and its legal counsel in determining the Investor 's eligibility
to acquire the Securities under relevant legislation.
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
September 20, 2002.
------------------------------------
Signature of Purchaser
------------------------------------
Name of Purchaser
------------------------------------
Address of Purchaser
------------------------------------
EXHIBIT D
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 76 of the Securities Act.
BC FORM 45-903F1 (Previously Form 20A(IP))
SECURITIES ACT
ACKNOWLEDGMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Smartire Systems Inc. (the "Issuer") a
Senior Convertible Note with attached Warrants (the "Securities") of
the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I [CIRCLE ONE] have/have not received an offering memorandum describing
the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act, R.S.B.C. 1996, c. 418 (the "Act") would
otherwise require be given to me because the Issuer has
advised me that it is relying on a prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that: [CIRCLE ONE]
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
-2-
(b) my net worth, or my net worth jointly with my spouse at the
date of the agreement of purchase and sale of the security, is
not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or
my annual net income before tax jointly with my spouse is not
less than $125,000, in each of the two most recent calendar
years, and I reasonably expect to have annual net income
before tax of not less than $75,000 or annual net income
before tax jointly with my spouse of not less than $125,000 in
the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director
of the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to
of
----------------------------- -----------------------------
(Name of Registered (Name of Registered
Individual) Individual's Registered
Dealer)
who advised me that they are registered to trade or advise in
the Securities and that the purchase of the Securities is a
suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: [CIRCLE ONE]
(a) of my financial, business or investment experience, OR
(b) I have received advice from
of
----------------------------- -----------------------------
(Name of Registered (Name of Registered
Individual) Individual's Registered
Adviser/Dealer)
who advised me that they are:
(i) registered to advise, or exempted from the
requirement to be registered to advise, in respect of
the Securities, and
-3-
(ii) not an insider of, or in a special relationship with,
the Issuer.
The statements made in this report are true.
DATED _____________________, 2002
------------------------------------
Signature of Purchaser
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Name of Purchaser
------------------------------------
Address of Purchaser
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EXHIBIT E
WIRING INSTRUCTIONS
INSTRUCTIONS FOR WIRING FUNDS TO XXXXX, XXXXXX
U.S. Funds may be wired to our trust account as follows:
Routed through Bank of America NT & SA
New York, New York
ABA No. 000000000
For credit to: CIBC, Toronto, Ontario
Account No. 0000-0-00000
For further credit to:
CANADIAN IMPERIAL BANK OF COMMERCE
000 Xxxxxxx Xxxxxx, Xxxxxxxxx, XX X0X 0X0
Account Name: Xxxxx, Xxxxxx Trust Account
US Trust Account No. 03-39016
Transit No. 10
Bank Code No. 010
NOTE: PLEASE QUOTE THE LAWYER'S NAME OR OUR FILE NUMBER
