EXHIBIT 2.1
AGENCY AGREEMENT AMONG PATCH INTERNATONAL INC.,
CANACCORD CAPITAL CORPORATION AND WELLINGTON
WEST CAPITAL MARKETS INC. DATED FEBRUARY 27, 2007
AGENCY AGREEMENT
THIS AGREEMENT dated for reference February 27, 2007 is made
AMONG
PATCH INTERNATIONAL INC., Xxxxx 000, 000 - 0xx Xxxxxx,
X.X., Xxxxxxx, Xxxxxxx, X0X 0X0 Fax: (000) 000-0000
(the "Issuer");
AND
CANACCORD CAPITAL CORPORATION, TransCanada Tower,
Suite 2200 - 000 0xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx,
X0X 0X0 Fax: (000) 000-0000
("Canaccord");
AND
WELLINGTON WEST CAPITAL MARKETS INC., Xxxxx 000,
000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0
Fax: (000) 000-0000
("Wellington");
(Canaccord and Wellington are collectively referred to as the "Agents").
WHEREAS:
A. The Issuer wishes to privately place with purchasers up to 16,666,667
Non-Flow-Through Special Warrants at a price of US$1.50 per Non-Flow-Through
Special Warrant and up to 7,575,758 Flow-Through Special Warrants at a price of
US$1.65 per Flow-Through Special Warrant.
B. The Issuer wishes to appoint the Agents to distribute the Special
Warrants, and the Agents are willing to accept such appointment on the terms and
conditions of this Agreement;
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
In this Agreement and the Recitals hereto:
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(a) "Additional Shares" means the previously unissued Common
Shares which will be issued pursuant to the terms of the Bonus
Warrants if certain conditions set forth herein are not met by
the Issuer prior to the Filing Deadline;
(b) "Agents' Fee" means the fee which is set out in this Agreement
and which is payable by the Issuer to the Agents in
consideration of the services performed by the Agents under
this Agreement;
(c) "Agents' Warrants" means the share purchase warrants of the
Issuer which will be issued as part of the Agents' Fee and
which have the terms provided in this Agreement and the
certificates representing such share purchase warrants;
(d) "Agents' Warrant Shares" means the previously unissued Common
Shares, which will be issued upon the exercise of the Agents'
Warrants;
(e) "Applicable Legislation" means collectively the applicable
securities laws of the Selling Provinces and the United States
and the respective regulations and rules made and forms
prescribed thereunder, the U.S. Securities Act, the U.S.
Exchange Act and all administrative policy statements,
instruments, blanket orders and rulings, notices and
administrative directions issued by the Commissions and the
SEC;
(f) "Bonus Warrants" means the non-transferable share purchase
warrants of the Issuer which will be issued as part of the
Units and which have the terms provided in this Agreement and
the certificates representing such share purchase warrants;
(g) "Closing Day" means a day on which Special Warrants are issued
to the Purchasers, each day being agreed to by the Issuer and
the Agents;
(h) "Commissions" means the securities commission or equivalent
regulatory authority in the Selling Provinces;
(i) "Common Share" means a share of common stock, US $0.001 par
value in the capital of the Issuer;
(j) "Damages Shares" means the previously unissued Common Shares,
which will be issued by the Issuer pursuant to the terms of
the Bonus Warrants if certain conditions set forth herein are
not met by the Issuer prior to the Effectiveness Deadline;
(k) "Disclosure Record" means the documents filed or disseminated
by the Issuer pursuant to the requirements of the Applicable
Legislation including the Issuer's annual reports, financial
statements, annual information forms, information circulars,
material change reports, technical reports, and press
releases;
(l) "Effectiveness Deadline" means the day which is 210 days from
the Final Closing Day;
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(m) "Exchange" means the Over the Counter Bulletin Board;
(n) "Exemptions" means the exemptions from the prospectus
requirements of the Applicable Legislation in the Selling
Provinces;
(o) "Farm-out Agreements" means the farm out agreements of the
Issuer relating to its Dover Oil Sands Project and Firebag Oil
Sands Project;
(p) "Filing Deadline" means the day which is 60 days from the
Final Closing Day;
(q) "Final Closing Day" means the last Closing Day as agreed to by
the Issuer and the Agents;
(r) "First Closing Day" means the first Closing Day in the Private
Placement;
(s) "Flow-Through Special Warrants" means the flow-through special
warrants to be offered by the Issuer pursuant to this
Agreement having the terms provided in this Agreement and
which have or will have the features required by the
definition of "flow-through share" as defined in the ITA;
(t) "Flow-Through Special Warrant Subscription Agreement" means
the Subscription Agreement used to subscribe for Flow-Through
Special Warrants and includes all the schedules thereto;
(u) "ITA" means the INCOME TAX ACT (Canada), together with all the
regulations and rules made and promulgated thereunder, all as
amended from time to time;
(v) "Material Change" has the meaning defined in the SECURITIES
ACT (Alberta);
(w) "Material Fact" has the meaning defined in the SECURITIES ACT
(Alberta);
(x) "Non-Flow-Through Special Warrants" means the non-flow-through
special warrants to be offered by the Issuer pursuant to this
Agreement and having terms provided in this Agreement;
(y) "Non-Flow-Through Special Warrant Subscription Agreement"
means the Subscription Agreement used to subscribe for
Non-Flow-Through Special Warrants and includes all the
schedules thereto;
(z) "Private Placement" means the offering of the Special Warrants
on the terms and conditions of this Agreement;
(aa) "Purchasers" means the purchasers of Special Warrants pursuant
to the Private Placement;
(bb) "Qualification Date" means the day on which the Agents receive
confirmation from the Issuer or its counsel that the
Corporation has increased its authorized number of Common
Shares, to not less than 200,000,000 such shares as
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evidenced by a Certificate of Amendment for Nevada Profit
Corporations filed with the Secretary of State of Nevada which
has come into effect;
(cc) "Qualifying Expenditures" has the meaning ascribed to such
term in the Flow-Through Special Warrant Subscription
Agreement;
(dd) "Registration Rights" means the registration rights set forth
in Sections 7, 8, 9 and 10 of the Non-Flow-Through Special
Warrant Subscription Agreement and Sections 8, 9, 10 and 11 of
the Flow-Through Special Warrant Subscription Agreement;
(ee) "Registration Statement" means the registration statement on
Form SB-2 or such other form as may be available to the Issuer
to be filed with the SEC and which is to be declared effective
in connection with the registration of the Underlying Shares,
the Agents' Warrant Shares, the Additional Shares and the
Damages Shares;
(ff) "Regulation D" means Regulation D promulgated under the U.S.
Securities Act;
(gg) "Regulation S" means Regulation S promulgated under the under
the U.S. Securities Act;
(hh) "Regulatory Authorities" means the Commissions and the SEC;
(ii) "SEC" means the United States Securities and Exchange
Commission and any successor federal agency having similar
powers;
(jj) "Securities" means Non-Flow-Through Special Warrants, the
Flow-Through Special Warrants, the Underlying Shares, the
Bonus Warrants, the Additional Shares, the Damages Shares, the
Agents' Warrants and the Agents' Warrant Shares;
(kk) "Selling Provinces" means British Columbia, Alberta,
Saskatchewan and Ontario and such other jurisdictions of
Canada that the Corporation and the Agents may mutually agree;
(ll) "Special Warrants" means the Non-Flow-Through Special Warrants
and the Flow-Through Special Warrants;
(mm) "Subscription Agreements" means collectively the
Non-Flow-Through Special Warrant Subscription Agreement and
the Flow-Through Special Warrant Subscription Agreement;
(nn) "TSX" means the Toronto Stock Exchange;
(oo) "TSX-V" means the TSX Venture Exchange;
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(pp) "Underlying Shares" means the previously unissued Common
Shares to be issued on the exercise or deemed exercise of the
Special Warrants in accordance with the terms of this
Agreement and the Subscription Agreements;
(qq) "Units" means the units of the Issuer to be issued upon the
exercise or deemed exercise of the Non-Flow-Through Special
Warrants, such units having the terms provided in this
Agreement;
(rr) "United States" means United States as defined in Regulation
S;
(ss) "U.S. Exchange Act" means the United States SECURITIES
EXCHANGE ACT OF 1934, as amended, and the rules and
regulations promulgated thereunder
(tt) "U.S. Person" means U.S. person as defined in Regulation S;
and
(uu) "U.S. Securities Act" means the United States SECURITIES ACT
OF 1933, as amended, and the rules and regulations promulgated
thereunder.
2. APPOINTMENT OF THE AGENTS
2.1 The Issuer hereby appoints the Agents as its exclusive agent and the
Agents accept the appointment and agree to act as the exclusive agent of the
Issuer to use their commercially reasonable efforts to find and introduce to the
Issuer potential purchasers to purchase, by way of Private Placement, under the
Exemptions, up to 16,666,667 Non-Flow-Through Special Warrants at a price of
US$1.50 per Non-Flow-Through Special Warrant and up to 7,575,758 Flow-Through
Special Warrants at a price of US$1.65 per Flow-Through Special Warrant for
aggregate gross proceeds of a maximum of US$25,000,000.
2.2 The rights and obligations of the Agents under this Agreement,
including but not limited to the right and obligation to introduce Purchasers to
the Issuer and the entitlement to the Agents' Fee, will be several (as
distinguished from joint) rights and obligations for each Agent.
2.3 Except as otherwise specifically provided in this Agreement, the rights
and obligations of the Agents will be divided in the proportions in which the
Agents participate in the Private Placement.
2.4 The Agents will participate in the Private Placement as follows, unless
otherwise agreed to between the Agents:
Canaccord 75.0%
Wellington 25.0%
3. SPECIAL WARRANTS
3.1 The Special Warrants will be issued and registered in the names of the
Purchasers or their nominees.
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3.2 Each Non-Flow-Through Special Warrant will entitle the holder to
acquire one Unit without further payment, on the exercise or deemed exercise of
the Non-Flow-Through Special Warrant.
3.3 Each Unit will consist of one Underlying Share and one Bonus Warrant.
3.4 Each Flow-Through Special Warrant will entitle the holder to acquire
one Underlying Share without further payment, on the exercise or deemed exercise
of the Flow-Through Special Warrant
3.5 Each Special Warrant may be exercised by the holder in whole or in part
at any time after the Closing Day on which the Special Warrant was issued and
until the Qualification Date. All unexercised Special Warrants will be deemed to
be exercised on the Qualification Date.
3.6 Upon exercise or deemed exercise, the Special Warrants will
automatically be cancelled and will have no further force and effect.
3.7 The certificates representing the Special Warrants will, among other
things, include provisions for the appropriate adjustment in the class, number
and price of the Underlying Shares issued upon exercise of the Special Warrants
upon the occurrence of certain events, including any subdivision, consolidation
or reclassification of the Issuer's Common Shares, the payment of stock
dividends and the amalgamation of the Issuer.
4. COVENANTS OF THE ISSUER
4.1 The Issuer covenants with the Agents that:
(a) it will, as soon as possible, and in any event, no later than
60 days from the Final Closing Day, obtain all required
director and shareholder approval required to increase its
authorized capital to not less than 200,000,000 Common Shares;
(b) it will, as soon as possible, and in any event, no later than
60 days from the Final Closing Day, file a certificate of
amendment to amend the Issuer's Articles of Incorporation to
increase its authorized capital to not less than 200,000,000
Common Shares;
(c) it will, as soon as possible, file all required information
statements, submissions and filings required to be filed with
the SEC under the U.S. Exchange Act, including, but not
limited to, an amendment to the Form 8-K filed on December 26,
2006, and such other reports as may be required to be filed or
submitted in connection with the transactions contemplated in
this Agreement and the Subscription Agreements;
(d) it will, as soon as possible, amend its bylaws to include such
amendments as may be required to qualify the Common Shares for
listing on the TSX or TSX-V;
(e) it will, as soon as possible, but in any event not later than
the Filing Deadline:
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(i) file the Registration Statement with the SEC;
(ii) file with the Alberta Securities Commission (or such
other commission as determined by the Issuer) a
prospectus or reporting issuer application for the
purpose of having the Issuer deemed to be "reporting
issuer" under the securities laws of Alberta (or such
other provinces as the Agents may agree with the
Issuer); and
(iii) file with either the TSX or TSX-V an application to
list the Issuer's Common Shares and to qualify any
"restricted securities" (as defined in Rule 144) of the
Issuer to trade on a restricted basis until the
Registration Statement is declared effective by the
SEC;
(f) it will use its best efforts:
(i) to cause the Registration Statement to be declared
effective by the SEC as soon as possible, but in any
event not later than the earlier of the Effectiveness
Deadline and (b) the fifth trading day following the
date on which the Issuer is notified by the SEC that
the Registration Statement will not be reviewed or is
no longer subject to further review and comments;
(ii) to cause the Common Shares to be listed on the TSX or
TSX-V as soon as possible, but in any event not later
than Effectiveness Deadline; and
(iii) to become a "reporting issuer" in the province of
Alberta (or such other provinces as determined by the
Issuer) as soon as possible, but in any event not later
than the Effectiveness Deadline;
(g) if the Registration Statement is not declared effective by the
SEC on or before the Effectiveness Deadline, the Issuer will
continue to use its best efforts to have the Registration
Statement declared effective as soon as possible;
(h) if the Common Shares are not listed on the TSX or TSX-V on or
before the Effectiveness Deadline, the Issuer will continue to
use its best efforts to have its Common Shares listed on the
TSX or TSX-V as soon as possible; and
(i) if the Issuer is not designated a "reporting issuer" in the
province of Alberta (or such other provinces as determined by
the Issuer), on or before the Effectiveness Deadline, the
Issuer will continue to use its best efforts to be designated
a reporting issuer as soon as possible.
4.2 The Issuer covenants with the Agents that it will keep the Agents
informed of the status of the Issuer's efforts to comply with the covenants of
the Issuer set forth in this Section 4, including providing to the Agents
correspondence to and from the regulatory authorities and copies of filing
materials with the SEC, the Commissions, and the TSX or TSX-V as the Agents may
reasonably request.
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4.3 The Issuer will give notice to the Agents, within 2 business days of
the date the Issuer satisfies its obligations under Subsections 4.1(e) and/or
4.1(f) herein. Such notice to the Agents will include satisfactory evidence from
the applicable regulatory authorities that such conditions have been satisfied.
5. BONUS WARRANTS
5.1 The Bonus Warrants will be represented by certificates registered in
the names of the Purchasers or their nominees.
5.2 The Bonus Warrants will have the following terms:
(a) if any one of the conditions set forth in Subsection 4.1(e)
are not met on or before the Filing Deadline, the Issuer will
issue Additional Shares to each holder of Bonus Warrants equal
to 0.02 Additional Share for each Bonus Warrant for each month
or partial month any of the conditions set forth in Subsection
4.1(e) remain outstanding;
(b) if any one of the conditions set forth in Subsection 4.1(f)
are not met on or before the Effectiveness Deadline, the
Issuer will issue Damages Shares to each holder of Bonus
Warrants equal to 0.1 Damages Share for each Bonus Warrant;
(c) notwithstanding the provisions above, the maximum number of
Additional Shares and Damages Shares that will be issued by
the Issuer under a Bonus Warrant will be in aggregate 0.1
Additional Shares and Damages Shares;
(d) if the Issuer has not increased its authorized capital to not
less than 200,000,000 Common Shares pursuant to Subsection
4.1(a) and 4.1(b) prior to the date that the Issuer must issue
Additional Shares or Damages Shares in accordance with the
provisions of the Bonus Warrant, the Issuer will issue such
Additional Shares or Damages Shares immediately after such
increase in authorized capital has been effected.
5.3 The certificates representing the Bonus Warrants will, among other
things, include provisions for the appropriate adjustment in the class, number
and price of the Additional Shares or Damages Shares issued upon exercise of the
Bonus Warrants upon the occurrence of certain events, including any subdivision,
consolidation or reclassification of the Issuer's Common Shares, the payment of
stock dividends and the amalgamation of the Issuer.
5.4 The issue of the Bonus Warrants will not restrict or prevent the Issuer
from obtaining any other financing, or from issuing additional securities or
rights, during the period within which Additional Shares or Damages Shares may
be issued.
6. AGENTS' FEE
6.1 In consideration of the services performed by the Agents under this
Agreement, the Issuer agrees to pay to the Agents on each Closing Day an Agents'
Fee consisting of
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(a) a cash payment equal to 6.0% of the gross proceeds received by
the Issuer from the sale of the Special Warrants on such
Closing Day which will be paid in lawful U.S. currency; and
(b) that number of Agents' Warrants which is equal to 6.0% of the
number of Special Warrants sold on such Closing Day.
6.2 The right to purchase an Agents' Warrant Share under an Agents' Warrant
may be exercised at any time until the close of business on the day which is the
later of:
(a) one year from the First Closing Day; and
(b) six months from the date the Securities are free from trading
restrictions in the United States and Canada, up to a maximum
of 24 months from the First Closing Day.
6.3 One Agents' Warrant will entitle the holder, on exercise, to purchase
one Agents' Warrant Share at a price of $1.50 per Agents' Warrant Share.
6.4 The certificates representing the Agents' Warrants will, among other
things, include provisions for the appropriate adjustment in the class, number
and price of the Agents' Warrant Shares issued upon exercise of the Agents'
Warrants upon the occurrence of certain events, including any subdivision,
consolidation or reclassification of the Common Shares, the payment of stock
dividends and the amalgamation of the Issuer.
6.5 The issue of the Agents' Warrants will not restrict or prevent the
Issuer from obtaining any other financing, or from issuing additional securities
or rights, during the period within which the Agents' Warrants may be exercised.
7. OFFERING RESTRICTIONS
7.1 The Agents covenant and agree that they will only solicit subscriptions
for the Special Warrants and sell the Special Warrants in accordance with the
terms and conditions of this Agreement and in compliance with the Applicable
Legislation to persons who represent themselves as being:
(a) a resident in one of the Selling Provinces who meets the
requirement of one of the Exemptions;
(b) in accordance with Schedule "A" if such person is a U.S.
Person, in the United States or purchasing for the benefit or
account of a U.S. Person or person in the United States; or
(c) a resident of a jurisdiction outside of Canada and the United
States for whom an Exemption is available for the sale of
Special Warrants to such person and for whom the Issuer will
not be required to prepare any documents, make any filings, or
take any further steps and procedures to permit the issue and
sale of the Special
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Warrants to such Purchaser to be made in compliance with the
laws of the jurisdiction in which the Purchaser is resident.
7.2 The Agents covenant and agree with the Issuer that it will:
(a) conduct all activities in connection with the Private
Placement and the sale of the Special Warrants in compliance
with this Agreement and all Applicable Legislation; and
(b) not advertise the proposed offering or sale of the Special
Warrants in printed public media, radio, television or
telecommunications, including electronic display.
7.3 No selling or promotional expenses will be paid or incurred in
connection with the Private Placement, except for professional services or for
services performed by a registered dealer.
8. SALES INTO THE UNITED STATES AND QUALIFYING UNDER REGULATION S
It is understood and agreed that the Securities have not been registered under
the U.S. Securities Act or the securities laws of any State in the United States
and that the Issuer and the Agents agree that any offer or sale of Special
Warrants by the Issuer and the Agent, will be made (a) in "offshore
transactions" (as defined in Regulation S) outside the United States pursuant to
the exclusion from the registration requirements available under Rule 903 of
Regulation S; and (b) in the United States in accordance with the terms and
conditions set out in Schedule "A" to this Agreement, and that the Special
Warrants will be offered by the Agents for sale by the Issuer directly to
purchasers in the United States or purchasing as, or for the benefit or account
of, U.S. Persons or persons in the United States, pursuant to Section 4(2)
and/or Rule 506 of Regulation D under the U.S. Securities Act. Each party to
this Agreement hereby makes the representations, warranties, covenants and
agreements attributed to it in Schedule "A" to this Agreement.
9. SUBSCRIPTIONS
The Agents will obtain from each Purchaser introduced by the Agents, and deliver
to the Issuer, on or before each Closing a duly completed and signed
Subscription Agreements in the form consented to by the Issuer and the Agents
and executed by the Purchaser.
10. FILINGS WITH THE REGULATORY AUTHORITIES
10.1 Within 10 days of each Closing Day of the Private Placement, the Issuer
will:
(a) file with the Commissions any report required to be filed by
the Applicable Legislation in connection with the Private
Placement, in the required form; and
(b) provide the Agents' solicitor with copies of the report or
reports.
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11. CLOSINGS
11.1 In this Section:
(a) "Certificates" means the certificates representing the Special
Warrants sold and the Agents' Warrants to be issued, on a
Closing Day in the names and denominations reasonably
requested by the Agents or the Purchasers, as the case may be;
and
(b) "Proceeds" means the gross proceeds of the sale of Special
Warrants on a Closing Day, less:
(i) any portion of the Agents' Fee which is payable in
cash;
(ii) a retainer for the reasonable expenses of the Agents in
connection with the Private Placement and the filing of
the Registration Statement; and
(iii) any amount paid directly to the Issuer by Purchasers in
connection with the Private Placement.
11.2 The Issuer and Agents agree that the completion of this Private
Placement may take place over multiple Closing Days, with the Final Closing Day
to take place on or before March 15, 2007 unless otherwise agreed to in writing
by the Issuer and the Agents.
11.3 The Issuer will, on each Closing Day, issue and deliver the
Certificates to the Agents, or at the Agents' request, to the Purchasers,
against payment of the Proceeds.
11.4 If the Issuer has satisfied all of its material obligations under this
Agreement, the Agents will, on each Closing Day, pay the Proceeds to the Issuer
against delivery of the Certificates.
11.5 The Issuer will endorse the Certificates and the certificates
representing the Underlying Shares, the Bonus Warrants, the Additional Shares
and the Damages Shares with the following legends, as required by Applicable
Legislation:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH U.S.
SECURITIES LAWS"
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT
IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT
DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A
REPORTING ISSUER IN ANY PROVINCE OR TERRITORY"
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11.6 The Issuer will endorse the certificates representing the Agent's
Warrants and the Bonus Warrants with the following additional legends, as
required by Applicable Legislation:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS. THIS
WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES (AS DEFINED
IN REGULATION S UNDER THE U.S. SECURITIES ACT) UNLESS THE
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE, AND THE CORPORATION RECEIVES
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT
TO SUCH EFFECT."
12. CONDITIONS OF CLOSINGS
12.1 The obligations of the Agents on each Closing Day will be conditional
upon the following:
(a) on each Closing Day, the Issuer will have delivered to the
Agents and their solicitor a favourable opinion of the
Issuer's solicitor dated as of the date of such Closing, in a
form acceptable to the Agents and their solicitors, acting
reasonably, as to all legal matters reasonably requested by
the Agents relating to the business of the Issuer, corporate
good standing and authority, compliance with Applicable
Legislation, securities law exemptions and the creation,
issuance and sale of the Securities;
(b) on each Closing Day, the Issuer will have delivered to the
Agents and their solicitor such certificates of its officers
and other documents relating to the Private Placement or the
affairs of the Issuer as the Agents or their solicitors may
reasonably request;
(c) each representation and warranty of the Issuer which is
contained in this Agreement continues to be true, and the
Issuer has performed or complied with all of its covenants,
agreements and obligations under this Agreement;
(d) the Agents have completed due diligence on the Issuer, its
business, management and properties, including verification of
the Issuer's title and/or interest in material properties, to
the satisfaction of the Agents;
(e) the Issuer having provided the Agents with the form of
shareholder resolution authorizing the increase in the
Issuer's authorized capital and the form of Schedule 14C
Information Statement related to the increase in the
authorized capital, such forms being acceptable to the Agents,
acting reasonably;
(f) the entering into a lock up agreement by the management,
directors and Bounty Developments Ltd. whereby such persons
agree not to trade or otherwise deal with their securities in
the Issuer until the Securities are free from resale
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restrictions in the United States and Canada and the increase
in authorized capital has been effected;
(g) the Issuer shall not have received notice from any applicable
regulatory authority that it is in default of any material
Applicable Legislation;
(h) no order ceasing or suspending trading in the securities of
the Issuer nor prohibiting the sale of such securities has
been issued to the Issuer or its directors, officers or
promoters and, to the best of the knowledge of the Issuer, no
investigations or proceedings for such purposes are pending or
threatened; and
(i) no material adverse effect shall have occurred to the Issuer,
its business or its properties;
12.2 On each Closing Day and the obligations of the Issuer and the Agents to
complete the issue and sale of the Special Warrants are subject to:
(a) receipt of all required regulatory approval for or acceptance
of the Private Placement; and
(b) the removal or partial revocation of any cease trading order
or trading suspension made by any competent authority to the
extent necessary to complete the Private Placement.
13. TERMINATION
13.1 The Agents may terminate their obligations under this Agreement by
notice in writing to the Issuer at any time before the Final Closing Day if:
(a) an adverse Material Change, or an adverse change in a Material
Fact relating to any of the Securities, occurs or is announced
by the Issuer;
(b) there is an event, accident, governmental law or regulation or
other occurrence of any nature which, in the opinion of either
Agent, seriously affects or will seriously affect the
financial markets, or the business of the Issuer or its
subsidiaries or the ability of the Agents to perform their
obligations under this Agreement, or a Purchaser's decision to
purchase the Special Warrants;
(c) following a consideration of the history, business, products,
property or affairs of the Issuer or its principals and
promoters, or of the state of the financial markets in
general, or the state of the market for the Issuer's
securities in particular, the Agents determine, in their sole
discretion, that it is not in the interest of the Purchasers
to complete the purchase and sale of the Special Warrants;
(d) the Securities cannot, in the opinion of either Agent, be
marketed due to the state of the financial markets, or the
market for the Common Shares in particular;
-14-
(e) an enquiry or investigation (whether formal or informal) in
relation to the Issuer, or the Issuer's directors, officers or
promoters, is commenced or threatened by an officer or
official of any competent authority;
(f) any order to cease, halt or suspend trading (including an
order prohibiting communications with persons in order to
obtain expressions of interest) in the securities of the
Issuer prohibiting or restricting the Private Placement is
made by a competent regulatory authority and that order is
still in effect;
(g) the Issuer is in breach of any material term of this
Agreement; or
(h) either Agent determines that any of the representations or
warranties made by the Issuer in this Agreement is false or
has become false.
14. WARRANTIES, REPRESENTATIONS AND ADDITIONAL COVENANTS
14.1 The Issuer warrants and represents to and covenants with the Agents
that:
(a) the Issuer has the following material subsidiaries: Patch
Energy Inc., 1289307 Alberta Ltd., Damascus Energy Inc., and
Patch Oilsands Ltd. (collectively, the "Subsidiaries") and
apart from the Subsidiaries and Patch Oilsands Limited
Partnership, the Issuer has no investment or proposed
investment in any other entity that would be material to the
business or affairs of the Issuer;
(b) the Issuer and its Subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under the
laws of the jurisdiction in which they are incorporated,
continued or amalgamated;
(c) the Common Shares are quoted on the NASD Over the Counter
Bulletin Board and the Issuer is not in default of any
requirement of its obligations of the policies, rules and
bylaws of such quotation system;
(d) the Issuer and its Subsidiaries are duly registered and
licenced to carry on business in the jurisdictions in which
they carry on business or own property where so required by
the laws of that jurisdiction and are not otherwise precluded
from carrying on business or owning property in such
jurisdictions by any other commitment, agreement or document;
(e) the Issuer has full corporate power and authority to carry on
its business as now carried on by it and to undertake the
Private Placement and this Agreement has been, or will be by
the First Closing Day, duly authorized by all necessary
corporate action on the part of the Issuer;
(f) the Subsidiaries have full corporate power and authority to
carry on its business as now carried on by them;
(g) this Agreement and the Subscription Agreements entered into
with Purchasers will constitute valid and binding obligations
of the Issuer in accordance with their
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terms and will be enforceable against the Issuer in accordance
with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting the rights of creditors
generally and except as limited by the application of
equitable principles when equitable remedies are sought, and
by the fact that rights to indemnity, contribution and waiver,
and the ability to sever unenforceable terms, may be limited
by applicable law;
(h) all of the material transactions of the Issuer have been
promptly and properly recorded or filed in its books or
records and its minute books or records contain all records of
the meetings and proceedings of its directors, shareholders,
and other committees, if any, since inception;
(i) as of the date hereof, the authorized capital of the Issuer
consists of 25,000,000 Common Shares, of which 20,241,774
Common Shares are issued and outstanding as fully paid and
non-assessable and 1,000,000 shares of preferred stock, of
which one share of Class A Preferred Voting Stock entitling
the holder to 9,426,489 votes is issued and outstanding and
one share of Class B Preferred Voting Stock entitling the
holder to 500,000 votes was issued and outstanding and no
person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming such
a right, agreement or option, for the issue or allotment of
any unissued shares in the capital of the Issuer or its
Subsidiaries or any other security convertible into or
exchangeable for any such shares, or to require the Issuer or
its Subsidiaries to purchase, redeem or otherwise acquire any
of the issued and outstanding shares in its capital other than
the Issuer's outstanding obligations to issue 9,926,489 Common
Shares upon conversion of 9,926,489 shares of Series A
Preferred Stock of Patch Energy Inc and 2,850,000 stock
options exercisable into 2,850,000 Common Shares at an
exercise price of US$1.20;
(j) at each Closing Day, all necessary corporate action will have
been taken by the Issuer to allot and authorize the issuance
of the Special Warrants and the Agents' Warrants as fully paid
and non-assessable, and upon the amendment to increase the
Issuer's authorized capital to consist of 200,000,000 or more
shares of common stock, all necessary corporate action will
have been taken by the Issuer to allot and authorize the
issuance of the Common Shares, the Bonus Warrants, the
Additional Shares, the Damages Shares, the Agents' Warrants
and the Agents' Warrant Shares, and upon such issuance, such
securities shall be validly issued, fully paid and
non-assessable securities of the Issuer;
(k) the Issuer is not aware of any reason that would prevent the
Issuer from complying with its covenants in this Agreement;
(l) Except for the proposed sale of certain assets of the Issuer
to Great Northern Oilsands Inc. as evidenced by a letter
agreement dated January 16, 2007, the Issuer is the legal and
beneficial owner of and has good and marketable title to the
properties, business and assets or the interests in the
properties, business or assets
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referred to in the Disclosure Record, all agreements by which
the Issuer holds an interest in a material property, business
or assets are in good standing according to their terms and
the properties are in good standing under the applicable laws
of the jurisdictions in which they are situated and to the
best of the Issuer's knowledge, all filings and work
commitments required to maintain the properties in good
standing have been properly recorded and filed in a timely
manner with the appropriate regulatory body and there are no
material mortgages, liens, charges, encumbrances or any other
interests in or on such properties other than as disclosed in
the Disclosure Record;
(m) the Farm-Out Agreements are valid and binding obligations of
the Issuer in accordance with their terms and will be
enforceable against the Issuer in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or affecting the rights of creditors generally and except
as limited by the application of equitable principles when
equitable remedies are sought, and by the fact that rights to
indemnity, contribution and waiver, and the ability to sever
unenforceable terms, may be limited by applicable law;
(n) the Farm-Out Agreements are in good standing and the Issuer is
not in default of any terms contained therein, nor is the
Issuer aware of any default of any other party to the terms of
the Farm-Out Agreements;
(o) all financial, marketing, sales and operational information
provided to the Agents do not contain any misrepresentations
(as such term is defined in the Applicable Legislation);
(p) as of their respective filing dates, each of the documents
referred in the Disclosure Record are as of the date thereof,
in compliance in all material respects with applicable
securities laws, instruments and policies and do not, at the
date thereof, 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, in light of the
circumstances under which they were made, not misleading and
such documents at the date thereof collectively constitute
full, true and plain disclosure of all material facts relating
to the Issuer and do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein, in light of the circumstances under which they
were made, not misleading as of the date thereof. There is no
fact known to the Issuer which the Issuer has not publicly
disclosed with materially adversely affects, or so far as the
Issuer can now reasonably foresee, will materially adversely
affect the assets, liabilities (contingent or otherwise)
affairs, business, prospects, operations or condition
(financial or otherwise) of the Issuer or the ability of the
Issuer to perform its obligations under the Agency Agreement
and the Subscription Agreements or which would otherwise be
material to any Purchaser intending to make an equity
investment in the Issuer.
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(q) the Subscription Agreements and all other written or oral
representations made by the Issuer to a Purchaser or potential
Purchaser in connection with the Private Placement will be
accurate in all material respects and will omit no fact, the
omission of which will make such representations misleading or
incorrect;
(r) the Issuer is a "reporting issuer" under section 13(a) or
15(d) of the U.S. Exchange Act and is not in default in any
material respects of any of the requirements of the U.S.
Exchange Act ;
(s) as of their respective filing dates, each report, schedule,
registration statement and proxy filed by the Issuer with the
SEC (each, an "SEC REPORT" and collectively, the "SEC
REPORTS") (and if any SEC Report filed prior to the date of
this Agreement was amended or superseded by a filing prior to
the date of this Agreement, then also on the date of filing of
such amendment or superseding filing), (i) where required,
were prepared in all material respects in accordance with the
requirements of the U.S. Securities Act, or the U.S. Exchange
Act , as the case may be, and the rules and regulations
promulgated under such Acts applicable to such SEC Reports,
(ii) did not contain any untrue statements of a material fact
and did not omit to state a material fact necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading and (iii) are all the
forms, reports and documents required to be filed by the
Corporation with the SEC since the Issuer commenced filing
reports with the SEC, except for an amendment to the report on
Form 8-K filed December 26, 2006. The Issuer's Subsidiaries
are not required to file any reports or other documents with
the SEC.
(t) each set of audited consolidated financial statements and
unaudited interim financial statements of the Issuer
(including any notes thereto) included in the SEC Reports (i)
complies as to form in all material respects with the
published rules and regulations of the SEC with respect
thereto, and (ii) has been prepared in accordance with United
States generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present, in all material respects,
the financial position of the Issuer as of the dates thereof
and the results of its operations and cash flows for the
periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments
which were not or are not expected to be material in amount.
To the Issuer's knowledge, no events or other factual matters
exist which would require the Issuer to file any amendments or
modifications to any SEC Reports which have not yet been filed
with the SEC but which are required to be filed with the SEC
pursuant to the U.S. Securities Act or the U.S. Exchange Act,
except for an amendment to the report on Form 8-K filed
December 26, 2006;
(u) each SEC Report containing financial statements that has been
filed with or submitted to the SEC since July 31, 2002, was
accompanied by the certifications required to be filed or
submitted by the Issuer's chief executive officer and chief
financial officer pursuant to the Xxxxxxxx-Xxxxx Act of 2002
(the "SARBANES-
-00-
XXXXX XXX"); at the time of filing or submission of each such
certification, such certification was true and accurate and
complied with the Xxxxxxxx-Xxxxx Act and the rules and
regulations promulgated thereunder; such certifications
contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and
neither the Issuer nor any of its officers has received notice
from any governmental entity questioning or challenging the
accuracy, completeness, form or manner of filing or submission
of such certification;
(v) the Issuer has complied and will comply fully with the
requirements of all applicable corporate and securities laws
and administrative policies and directions, including, without
limitation, the Applicable Legislation in relation to the
issue and trading of its securities and in all matters
relating to the Private Placement;
(w) to the best of the Issuer's knowledge, the Issuer and the
Subsidiaries are in compliance with all applicable laws,
regulations and statutes (including all environmental laws and
regulations) in the jurisdictions in which they carry on
business and which may materially affect the Issuer, have not
received a notice of non-compliance, nor know of, nor have
reasonable grounds to know of, any facts that could give rise
to a notice of non-compliance with any such laws, regulations
and statutes, and are not aware of any pending change or
contemplated change to any applicable law or regulation or
governmental position that would materially affect the
business of the Issuer or the business or legal environment
under which the Issuer operates;
(x) the Issuer and its Subsidiaries have not received any notice
that the Issuer or the Subsidiaries is potentially responsible
for a clean-up site or corrective action under any applicable
laws, statutes, ordinances, by-laws, regulations, or any
orders, directions or decisions rendered by any government,
ministry, department or administrative regulatory agency
relating to the protection of the environment, occupational
health and safety or otherwise relating to dealing with
pollutants, contaminants, chemicals, industrial toxic or
hazardous waste or substances;
(y) the Issuer and its Subsidiaries have all material licences,
permits, approvals, consents, certificates, registrations and
other authorizations (collectively the "Permits") under all
applicable laws and regulations necessary for the operation of
the businesses carried on or proposed to be commenced by the
Issuer and each Permit is valid, subsisting and in good
standing and neither the Issuer nor any Subsidiaries is in
material default or breach of any Permit, and to the best of
the knowledge of the Issuer, no proceeding is pending or
threatened to revoke or limit any Permit;
(z) although it does not warrant title, the Issuer does not have
reason to believe the Issuer does not have title to or the
right to produce and sell its petroleum, natural gas and
related hydrocarbons (for the purpose of this clause, the
foregoing are referred to as the "Interest"), subject always
to the terms of applicable
-19-
agreements, laws, regulations, orders and directives, and does
represent and warrant that other than liens arising in the
ordinary course of business;
(i) the Issuer has not alienated or encumbered the Interest
or any part or portion thereof;
(ii) the Issuer has not committed and is not aware of there
having been committed any act or omission whereby the
Interest or any part or portion thereof may be
cancelled or terminated; and
(iii) the Interest is now free and clear of all liens,
conversion rights and other claims of third parties,
created by, through or under the Issuer or of which the
Issuer has knowledge;
(aa) the Issuer believes that the study/report (the "Report") of
XxXxxxxx and XxXxxxxxxx Canada Limited ("XxXxxxxx") dated as
of December 31,2006, which evaluated the Issuer's interests in
its oil and gas properties earned under the Farm-Out
Agreements, reasonably presents the aggregate quantity and
pre-tax present worth values of the oil and natural gas
reserves of the Issuer as at the effective date of the Report
based upon information available at the time and upon the
assumptions as to commodity prices and costs contained
therein, and the Issuer does not believe the Report presently
overstates the aggregate quantity and pre-tax present worth
values of such reserves;
(bb) the Issuer has made available to XxXxxxxx, prior to the
issuance of the XxXxxxxx Report relating to the Issuer's
reserves attributable to all of the major properties of the
Issuer earned under the Farm-Out Agreements, for the purpose
of preparing the XxXxxxxx Report, all information requested by
XxXxxxxx which information does not and will not contain any
material misrepresentation. The Issuer has no knowledge of a
material adverse change in any reserves information provided
to XxXxxxxx since the date that such information was so
provided;
(cc) except as disclosed to the Agents, to the Issuer's knowledge,
information and belief, none of the directors or officers of
the Issuer is or has been ever been subject to prior
regulatory, criminal or bankruptcy proceedings in Canada or
elsewhere;
(dd) all operations on the properties of the Issuer and its
Subsidiaries have been conducted and are currently conducted
in all material respects in accordance with good engineering
practices and all applicable material workers' compensation,
and health, safety and workplace laws, regulations and
policies;
(ee) there is not currently, and will not be until the Final
Closing Day, any Material Change or change in any Material
Fact relating to the Issuer which has not been or will not be
fully disclosed to the public;
-20-
(ff) with respect to each premises which is material to the Issuer
and its Subsidiaries and which the Issuer and its Subsidiaries
occupy, the Issuer and its Subsidiaries have the right to
occupy and use such premises;
(gg) the issue and sale of the Securities by the Issuer and the
Agents does not and will not conflict with, and does not and
will not result in a breach of, or constitute a default under
(A) any statute, rule or regulation applicable to the Issuer
including, without limitation, the Applicable Legislation; (B)
the constating documents, by-laws or resolutions of the Issuer
which are in effect at the date hereof, assuming the increase
in authorized capital to not less than 200,000,000 Common
Shares; (C) any agreement, debt instrument, mortgage, note,
indenture, instrument, lease or other document to which the
Issuer is a party or by which it is bound; or (D) any
judgment, decree or order binding the Issuer or the property
or assets of the Issuer;
(hh) neither the Issuer nor any of its Subsidiaries is a party to
any actions, suits or proceedings which could materially
affect its business or financial condition, and to the best of
the Issuer's knowledge no such actions, suits or proceedings
are contemplated or have been threatened;
(ii) there are no judgments against the Issuer or any of its
Subsidiaries which are unsatisfied, nor are there any consent
decrees or injunctions to which the Issuer or any of its
subsidiaries, if any, is subject;
(jj) no order ceasing, halting or suspending trading in securities
of the Issuer nor prohibiting the sale of such securities has
been issued to and is outstanding against the Issuer or its
directors, officers or promoters or against any other
companies that have common directors, officers or promoters
and no investigations or proceedings for such purposes are
pending or threatened;
(kk) the Issuer and its Subsidiaries have filed all federal,
provincial, local and foreign tax returns which are required
to be filed, or have requested extensions thereof, and have
paid all taxes required to be paid by them and any other
assessment, fine or penalty levied against them, or any
amounts due and payable to any governmental authority, to the
extent that any of the foregoing is due and payable;
(ll) the Issuer and its Subsidiaries have established on their
books and records reserves which are adequate for the payment
of all taxes not yet due and payable and there are no liens
for taxes on the assets of the Issuer or its Subsidiaries,
except for taxes not yet due, and there are no audits of any
of the tax returns of the Issuer or its Subsidiaries, which
are known by the Issuer's management to be pending, and there
are no claims which have been or to the best of the Issuer's
knowledge, may be asserted relating to any such tax returns
which, if determined adversely, would result in the assertion
by any governmental agency of any deficiency which would have
a material adverse effect on the properties, business or
assets of the Issuer or its Subsidiaries;
-21-
(mm) all material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan
premiums, accured wages, salaries and commissions, employee
benefit plan payments have been reflected in the books and
records of the Issuer;
(nn) the Issuer is, and at all material times will remain, a
"principal-business corporation" as defined in subsection
66(15) of the ITA;
(oo) each Flow-Through Special Warrant will qualify as a
"flow-through share" as defined in subsection 66(15) of the
ITA and in particular will not be a prescribed share as
defined in section 6202.1 of the regulations promulgated under
the ITA;
(pp) if the Issuer amalgamates with any one or more companies, any
share issued to or held by Purchasers as a replacement for a
Flow-Through Special Warrant as a result of such amalgamation
will qualify by virtue of subsection 87(4.4) of the ITA as a
"flow-through share" as described in subsection 66(15) of the
ITA and in particular will not be a prescribed share as
defined in section 6202.1 of the regulations to the ITA;
(qq) the Issuer and any corporations associated with the Issuer for
the purposes of subparagraph 66(12.602)(c)(ii) of the ITA
("Associated Companies") have not and will not enter into any
flow-through share agreements which will, in the aggregate,
require the Issuer together with any Associated Companies to,
in any calendar year, incur "Canadian development expense" as
described in paragraphs (a) or (b) of the definition thereof
in subsection 66.2(5) of the ITA, for the purposes of
renunciation pursuant to subsection 66(12.601) of the ITA, in
excess of the limit prescribed in paragraph 66(12.602)(c) of
the ITA (which prescribed limit is currently $1,000,000);
(rr) as of the date hereof, the Issuer's "taxable capital amount"
as described in paragraph 66(12.601)(a.1) and in subsections
66(12.6011) and 66(12.6012) of the ITA, the purposes of
renunciation pursuant to subsection 66(12.601) of the ITA, is
not more than $15,000,000 and will not be more than
$15,000,000 at the times when the Purchaser pays for
Flow-Through Special Warrants;
(ss) the Issuer has the full corporate right, power and authority
to incur and renounce to the Purchasers of Flow-Through
Special Warrants, Qualifying Expenditures in an amount equal
to the proceeds derived from the sale of the Flow-Through
Special Warrants;
(tt) the Issuer will incur expenses which are Qualifying
Expenditures in an amount which equals the aggregate proceeds
derived from the sale to the Purchasers of Flow-Through
Special Warrants and otherwise comply with its obligations and
covenants, all as set forth in the Flow-Through Special
Warrant Subscription Agreement;
(uu) the Issuer will keep proper books, records, and accounts of
all Qualifying Expenditures and all transactions affecting the
subscription amounts set forth in
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the Flow-Through Special Warrant Subscription Agreement and
the Qualifying Expenditures;
(vv) should a dispute arise between a Purchaser of Flow-Through
Special Warrants and the CRA, the Issuer will allow a
Purchaser to inspect, upon reasonable request in writing made
by such Purchaser to the Issuer and at the sole expense of
such Purchaser information, records and books in the
possession of the Issuer relating to the proper classification
of expenses as Qualifying Expenditures incurred, as such
expenses may pertain to such Purchaser; provided that the
Issuer shall not be required to provide information to a
Purchaser under this paragraph where it would result in breach
of laws, regulations or rules applicable to the Issuer;
(ww) the Issuer owns or possesses adequate rights to use all
material patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and
other intellectual property necessary for the business of the
Issuer now conducted and proposed to be conducted, without any
conflict with or infringement of the rights of others;
(xx) the Issuer has received no communication alleging that the
Issuer has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity;
(yy) the Issuer does not have any loans or other indebtedness
outstanding which has been made to any of its shareholders,
officers, directors or employees, past or present, or any
person not dealing at "arm's length" (as such term is used in
the INCOME TAX ACT (Canada));
(zz) the Issuer shall not take any action which would be reasonably
expected to result in the delisting or suspension of its
Common Shares on or from the Exchange or on or from any stock
exchange, market or trading or quotation facility on which its
Common Shares are listed or quoted and the Issuer shall
comply, in all material respects, with the rules and
regulations thereof;
(aaa) other than the Agents, no person, firm or corporation acting
or purporting to act at the request of the Issuer is entitled
to any brokerage, agency or finder's fee in connection with
the transactions described herein;
(bbb) the Issuer has and will have filed as of the First Closing
Day, all documents that are required to be filed under the
continuous disclosure provisions of the Applicable
Legislation, including annual and interim financial
information and annual reports, press releases disclosing
Material Changes and material change reports; and
(ccc) the warranties and representations in this Section are true
and correct and will remain so as of each Closing Day.
-23-
14.2 Each Agent warrants and represents to the Issuer that:
(a) it is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated;
(b) it is an investment dealer registered under the Applicable
Legislation in the Selling Provinces; and
(c) it will sell the Special Warrants in compliance with the
Applicable Legislation.
15. CONSENT TO ISSUE SECURITIES
15.1 The Issuer covenants with the Agents that it will not issue or announce
any intention to issue any Common Shares or securities convertible into Common
Shares or any other equity or securities convertible into equity without the
prior written consent of Canaccord, such consent not to be unreasonably
withheld, during the period commencing on the First Closing Day and ending 90
days after the Final Closing Day other than:
(a) the issuance of Common Shares pursuant to the exercise of
outstanding stock options as of the date herein;
(b) the issuance of Common Shares pursuant to the exercise of
outstanding share purchase warrants or outstanding
exchangeable shares as of the date herein; and
(c) the granting of stock options during such period provided that
such options do not exceed in the aggregate 10% of the issued
and outstanding Common Shares of the Issuer at the time of
grant.
16. EXPENSES OF AGENT
16.1 The Issuer will pay all of the expenses of the Private Placement and
associated with the Registration Statement, listing application with the TSX or
TSX-V and application to become a "reporting issuer" in a Canadian province, and
all the expenses reasonably incurred by the Agents in connection thereto
including, without limitation, the reasonable fees and expenses of the Canadian
and U.S. solicitors for the Agents.
16.2 The Issuer will pay the expenses referred to in the previous Subsection
even if the transactions contemplated by this Agreement are not completed or
this Agreement is terminated, unless the failure of acceptance or completion or
the termination is the result of a breach of this Agreement by the Agents.
16.3 The Agents may, from time to time, render accounts for their expenses
to the Issuer for payment on or before the dates set out in the accounts.
16.4 The Issuer authorizes the Agents to deduct their reasonable and
anticipated expenses from the proceeds of the offering of the Non-Flow-Through
Special Warrants and any advance payments made by the Issuer, including expenses
for which an account has not yet been rendered.
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17. INDEMNITY
17.1 The Issuer and their affiliated companies, as the case may be,
(collectively, the "Indemnitor") hereby agrees to indemnify and hold the Agents,
and their affiliates, and each of their directors, officers, employees and
agents (hereinafter referred to as the "Personnel") harmless from and against
any and all expenses, losses (other than loss of profits), fees, claims, actions
(including shareholder actions, derivative actions or otherwise), damages,
obligations, or liabilities, whether joint or several, and the reasonable fees
and expenses of their counsel, that may be incurred in advising with respect to
and/or defending any actual or threatened claims, actions, suits, investigations
or proceedings to which the Agents and/or their Personnel may become subject or
otherwise involved in any capacity under any statute or common law, or otherwise
insofar as such expenses, losses, claims, damages, liabilities or actions arise
out of or are based, directly or indirectly, upon the performance of
professional services rendered to the Indemnitor by the Agents and their
Personnel hereunder, or otherwise in connection with the matters referred to in
this Agreement (including the aggregate amount paid in reasonable settlement of
any such actions, suits, investigations, proceedings or claims that may be made
against the Agents and/or their Personnel, provided that the Indemnitor has
agreed to such settlement), provided, however, that this indemnity shall not
apply to the extent that a court of competent jurisdiction in a final judgment
that has become non-appealable shall determine that:
(a) the Agents and/or their Personnel have been grossly negligent
or have committed wilful misconduct or any fraudulent act in
the course of such performance; and
(b) the expenses, losses, claims, damages or liabilities, as to
which indemnification is claimed, were directly caused by the
gross negligence, wilful misconduct or fraud referred to in
17.1(a).
17.2 Without limiting the generality of the foregoing, this indemnity shall
apply to all expenses (including legal expenses), losses, claims and liabilities
that the Agents may incur as a result of any action or litigation that may be
threatened or brought against the Agents.
17.3 If for any reason (other than the occurrence of any of the events
itemized in 17.1(a) and 17.1(b) above), the foregoing indemnification is
unavailable to the Agents or any Personnel or insufficient to hold the Agents or
any Personnel harmless, then the Indemnitor shall contribute to the amount paid
or payable by the Agents or any Personnel as a result of such expense, loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the Indemnitor on the one hand and the
Agents or any Personnel on the other hand but also the relative fault of the
Indemnitor and the Agents or any Personnel, as well as any relevant equitable
considerations; provided that the Indemnitor shall in any event contribute to
the amount paid or payable by the Agents or any Personnel as a result of such
expense, loss, claim, damage or liability and any excess of such amount over the
amount of the fees received by the Agents hereunder.
17.4 The Indemnitor agrees that in case any legal proceeding shall be
brought against the Indemnitor and/or the Agents by any governmental commission
or regulatory authority or any stock exchange or other entity having regulatory
authority, either domestic or foreign, or shall investigate the Indemnitor
and/or the Agents, and/or any Personnel of the Agents shall be
-25-
required to testify in connection therewith or shall be required to respond to
procedures designed to discover information regarding, in connection with, or by
reason of the performance of professional services rendered to the Indemnitor by
the Agents, the Agents shall have the right to employ their own counsel in
connection therewith provided the Agents act reasonably in selecting such
counsel, and the reasonable fees and expenses of such counsel as well as the
reasonable costs (including an amount to reimburse the Agents for time spent by
the Agents' Personnel in connection therewith) and out-of-pocket expenses
incurred by their Personnel in connection therewith shall be paid by the
Indemnitor as they occur.
17.5 Promptly after receipt of notice of the commencement of any legal
proceeding against the Agents or any of the Agents' Personnel or after receipt
of notice of the commencement or any investigation, which is based, directly or
indirectly, upon any matter in respect of which indemnification may be sought
from the Indemnitor, the Agents will notify the Indemnitor in writing of the
commencement thereof and, throughout the course thereof, will provide copies of
all relevant documentation to the Indemnitor, will keep the Indemnitor advised
of the progress thereof and will discuss with the Indemnitor all significant
actions proposed. However, the failure by the Agents to notify the Indemnitor
will not relieve the Indemnitor of its obligations to indemnify the Agents
and/or any Personnel. The Indemnitor shall, on behalf of itself and the Agents
and/or any Personnel, as applicable, be entitled to (but not required) to assume
the defence of any suit brought to enforce such legal proceeding; provided,
however, that the defence shall be conducted through legal counsel acceptable to
the Agents and/or any Personnel, as applicable, acting reasonably, that no
settlement of any such legal proceeding may be made by the Indemnitor without
the prior written consent of the Agents and/or any Personnel, as applicable, and
none of the Agents and/or any Personnel, as applicable, shall be liable for any
settlement of any such legal proceeding unless it has consented in writing to
such settlement, such consent not to be unreasonably withheld. The Agents and
their Personnel shall have the right to appoint its or their own separate
counsel at the Indemnitor's cost provided the Agents acts reasonably in
selecting such counsel.
17.6 The indemnity and contribution obligations of the Indemnitor shall be
in addition to any liability which the Indemnitor may otherwise have, shall
extend upon the same terms and conditions to the Personnel of the Agents and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Indemnitor, the Agents and any of the
Personnel of the Agents. The foregoing provisions shall survive the completion
of professional services rendered under this Agreement or any termination of
this Agreement.
18. ASSIGNMENT AND SELLING GROUP PARTICIPATION
18.1 The Agents will not assign this Agreement or any of their rights under
this Agreement or, with respect to the Securities, enter into any agreement in
the nature of an option or a sub-option unless and until, for each intended
transaction, the Agents have obtained the consent of the Issuer, and any
required notice has been given to and accepted by the Regulatory Authorities.
18.2 The Agents may offer selling group participation in the normal course
of the brokerage business to selling groups of other licensed dealers, brokers
and investments dealers, who may or who may not be offered part of the Agents'
Fee. In connection with sales made by such selling
-26-
group members, the Issuer has no obligation to pay any additional commission or
fees other than the Agent's Fee set out above.
19. NOTICE
19.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by facsimile transmission or mailed by prepaid post and
addressed to the party to which notice is to be given at the address indicated
above, or at another address designated by the party in writing.
19.2 If notice is sent by facsimile transmission or is delivered, it will be
deemed to have been given at the time of transmission or delivery.
19.3 If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
19.4 If there is an interruption in normal mail service due to strike,
labour unrest or other cause at or prior to the time a notice is mailed the
notice will be sent by facsimile transmission or will be delivered.
20. CURRENCY
Unless stated otherwise, all references to "$" and currency herein are
references to U.S. dollars.
21. TIME
Time is of the essence of this Agreement and will be calculated in accordance
with the provisions of the INTERPRETATION ACT (Alberta).
22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, covenants and indemnities of the Issuer and the
Agents contained in this Agreement will survive the Final Closing Day.
23. LANGUAGE
This Agreement is to be read with all changes in gender or number as required by
the context.
24. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors and permitted assigns.
25. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
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26. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and supersedes any other
previous agreement between the parties with respect to the Private Placement and
there are no other terms, conditions, representations or warranties whether
express, implied, oral or written by the Issuer or the Agents.
27. COUNTERPARTS
This Agreement may be executed in two or more counterparts and may be delivered
by facsimile transmission, each of which will be deemed to be an original and
all of which will constitute one agreement, effective as of the reference date
given above.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
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28. LAW
This Agreement is governed by the law of Alberta, and the parties hereto
irrevocably attorn and submit to the jurisdiction of the courts of Alberta with
respect to any dispute related to this Agreement.
This document was executed and delivered as of the date given above:
PATCH INTERNATIONAL INC.
Per:
------------------------------------
Authorized Signatory
Per:
------------------------------------
Authorized Signatory
) CANACCORD CAPITAL CORPORATION
)
) Per:
) ------------------------------------
) Authorized Signatory
)
c/s ) Per:
) ------------------------------------
) Authorized Signatory
)
) I/We have the authority to bind the
) corporation
-29-
) WELLINGTON WEST CAPITAL MARKETS INC.
)
) Per:
) ------------------------------------
) Authorized Signatory
)
c/s ) Per:
) ------------------------------------
) Authorized Signatory
)
) I/We have the authority to bind the
) corporation
-00-
XXXXXXXX "X"
XXXXXX XXXXXX SECURITIES LAW COMPLIANCE
As used in this SCHEDULE "A", capitalized terms used herein and not defined
herein shall have the meaning ascribed thereto in the Agency Agreement to which
this Schedule is annexed and the following terms shall have the meanings
indicated:
(a) "DIRECTED SELLING EFFORTS" means directed selling efforts as
that term is defined in Regulation S. Without limiting the
foregoing, but for greater clarity in this Schedule, it means,
subject to the exclusions from the definition of directed
selling efforts contained in Regulation S, any activity
undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the
United States for any of the Offered Securities and includes
the placement of any advertisement in a publication with a
general circulation in the United States that refers to the
offering of the Offered Securities;
(b) "DISTRIBUTION COMPLIANCE PERIOD" means distribution compliance
period as that term is defined in Regulation S. Without
limiting the foregoing, but for greater clarity in this
Schedule, it means, the period commencing upon the later of
(i) when the Offered Securities are first offered to persons
other than the Agents and members of its selling group in
reliance on Regulation S or (ii) the date of closing of the
Private Placement and ending one-year from such date except
that all offers and sales by the Agents or any member of its
selling group of the Offered Securities shall be deemed to
occur during the Distribution Compliance Period;
(c) "DOMESTIC ISSUER" as defined in Regulation S, meaning any
issuer other than a "foreign government" or "foreign private
issuer" as such terms are defined in Rule 405 promulgated
pursuant to the U.S. Securities Act;
(d) "GENERAL SOLICITATION" OR "GENERAL ADVERTISING" means "GENERAL
SOLICITATION" or "GENERAL ADVERTISING", respectively, as used
in Rule 502(c) under the U.S. Securities Act, including
advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting
whose attendees had been invited by general solicitation or
general advertising or in other any manner involving a public
offering within the meaning of Section 4(2) of the U.S.
Securities Act;
(e) "OFF SHORE TRANSACTION" means "off shore transaction" as
defined in Regulation S;
(f) "OFFERED SECURITIES" means the Special Warrants offered in the
Private Placement;
(g) "RULE 144" means Rule 144 adopted by the SEC under the U.S.
Securities Act;
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(h) "U.S. ACCREDITED INVESTOR" means a person satisfying one or
more of the criteria for "accredited investors" specified in
Rule 501(a) of Regulation D; and
(i) "U.S. PURCHASER" means with respect to any subscriber of
Offered Securities (i) any U.S. person, (ii) any person
purchasing securities on behalf of any U.S. Person or any
person in the United States, (c) any person that receives or
received an offer of the securities while in the United
States, or (d) any person that is in the United States at the
time the purchaser's buy order was made or the Subscription
Agreement was executed or delivered.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENT
Each of the Agents, separately and not jointly or severally, acknowledges that
the Offered Securities have not been and will not be registered under the U.S.
Securities Act and may be offered and sold only in transactions exempt from or
not subject to the registration requirements of the U.S. Securities Act.
Accordingly, each of the Agents, separately and not jointly or severally,
represents, warrants and covenants to the Issuer that:
1. It has not offered or sold, and will not offer or sell, any Offered
Securities except (a) within the United States as provided in paragraphs 2
through 12 below (the "Regulation D Offering") or (b) outside the United States
to non-U.S. Purchasers in Offshore Transactions and in accordance with
paragraphs 12 through 15 below. Accordingly, neither the Agent, its affiliates
nor any persons acting on its behalf, has made or will make (except as permitted
in paragraphs 2 through 11 below) (i) any offer to sell or any solicitation of
an offer to buy, any Offered Securities to any U.S. Person or any person in the
United States, (ii) any sale of Offered Securities to any purchaser unless, at
the time the buy order was or will have been originated, the purchaser was
outside the United States, or the Agent, affiliate or person acting on behalf of
either reasonably believed that such purchaser was outside the United States, or
(iii) any Directed Selling Efforts in the United States with respect to the
Offered Securities.
2. It has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities, except with its
affiliates, any selling group members or with the prior written consent of the
Issuer. It shall require each selling group member to agree, for the benefit of
the Issuer, to comply with, and shall use its best efforts to ensure that each
selling group member complies with, the same provisions of this Schedule as
apply to the Agent as if such provisions applied to such selling group member.
3. All offers and sales of Offered Securities in the United States shall
be made through a U.S. registered broker-dealer that is a selling group member
in compliance with all applicable U.S. broker-dealer requirements. Each of the
Agent and the U.S. registered broker-dealer that is a selling group member is an
U.S. Accredited Investor.
4. Offers and sales of Offered Securities in the United States shall not
be made (i) by any form of General Solicitation or General Advertising or (ii)
in any manner involving a public offering within the meaning of Section 4(2) of
the U.S. Securities Act.
5. Any offer, sale or solicitation of an offer to buy Offered Securities
that has been made or will be made in the United States was or will be made only
to U.S. Accredited Investors
-32-
in transactions that are exempt, from registration under the U.S. Securities Act
and applicable state securities laws.
6. If acting through a U.S. registered broker-dealer that is a selling
group member, it may offer the Offered Securities in the United States only to
offerees with respect to which the Agent or such U.S. registered broker dealer
has a pre-existing relationship and has reasonable grounds to believe are U.S.
Accredited Investors.
7. At least one business day prior to the Closing Time, the Agent will
provide the Issuer with a list of all purchasers of the Offered Securities in
the United States.
8. It will inform, and cause the U.S. registered broker-dealer that is a
selling group member to inform, all purchasers of the Offered Securities in the
United States that the Offered Securities have not been and will not be
registered under the U.S. Securities Act and are being sold to them pursuant to
a transaction exempt from registration under the U.S. Securities Act.
9. It agrees that at the Closing Time, it, together with the U.S.
registered broker-dealer acting on its behalf as a member of the selling group
selling Offered Securities in the United States, will provide a certificate,
substantially in the form of Annex I to this Schedule A, relating to the manner
of the offer and sale of the Offered Securities in the United States.
10. Prior to any sale of Offered Securities in the United States, each
U.S. Purchaser will execute a Subscription Agreement.
11. At the closing, it together with the U.S. registered broker-dealer that
is a member of the selling group, will provide a certificate, substantially in
the form of Annex I to this Schedule A, relating to the manner of the offer and
sale of the Offered Securities.
12. Each Purchaser shall represent, warrant and agree in writing that it
understands and acknowledges that upon the original issuance of the Offered
Securities and any underlying Securities, and until such time as is no longer
required under applicable requirements of the U.S. Securities Act or applicable
state laws, all certificates representing such securities, and all certificates
issued in exchange therefor or in substitution thereof, shall bear, on the face
of such certificates the restrictive legends set forth in Sections 11.5 and
11.6, as applicable, of the Agency Agreement.
13. It agrees and each member of the selling group shall agree that (i)
all offers and sales of any of the Offered Securities by the Agent or any member
of the selling group prior to the expiration of the Distribution Compliance
Period (other than pursuant to the Regulation D Offering) shall only be made in
accordance with Sections 903 and 904 of Regulation S; pursuant to registration
of the Securities under the U.S. Securities Act; or pursuant to an available
exemption from the registration requirements of the U.S. Securities Act and (ii)
not to engage in hedging transactions with regard to the Securities unless in
compliance with the U.S. Securities Act.
14. The offering materials and documents (other than press releases) used
by the Agent and each member of the selling group in connection with the offer
and sale of the Offered Securities prior to the expiration of the Distribution
Compliance Period will consist solely of
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Subscription Agreements which shall state that the Offered Securities have not
been registered under the U.S. Securities Act and that Securities may not be
offered or sold in the United States or to U.S. Persons, as defined in
Regulation S (other than other distributors, as defined in Regulation S) unless
the Securities have been registered under the U.S. Securities Act, or an
exemption from the registration requirements of the U.S. Securities Act is
available. Such subscription agreements also shall state that hedging
transactions involving the Securities may not be conducted unless in compliance
with the U.S. Securities Act.
15. If it or any member of the selling group shall sell any of the
Securities to a distributor (as defined in Regulation S), a dealer (as defined
in Section 2(a)(12) of the U.S. Securities Act) or a person receiving a selling
concession, fee or other remuneration prior to the expiration of the
Distribution Compliance Period, it shall send a confirmation or other notice to
the purchase stating that the purchaser is subject to the same restrictions on
offers and sales that apply to members of the selling group.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER
The Issuer represents, warrants, covenants and agrees that:
1. The Issuer is a Domestic Issuer.
2. The Issuer is not an open-end investment company, closed-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States Investment
Company Act of 1940, as amended.
3. Except with respect to offers and sales to U.S. Accredited Investors
within the United States in reliance upon any exemption from registration
neither the Issuer nor any of its affiliates, nor any person acting on its or
their behalf, has made or will make: (A) any offer to sell, or any solicitation
of an offer to buy, any Offered Securities to any U.S. Person or any person in
the United States, or (B) any sale of Offered Securities to any purchaser
unless, at the time the buy order was or will have been originated, the
purchaser is (i) not a U.S. Purchaser; (ii) outside the United States, and (iii)
the Issuer, its affiliate or the person acting on their its or behalf reasonably
believes that such purchaser was outside the United States.
4. During the period in which the Offered Securities are offered for
sale, neither the Issuer nor any of its affiliates, nor any person acting on its
or their behalf (i) has made or will make any Directed Selling Efforts in the
United States, or (ii) has engaged in or will engage in any form of General
Solicitation or General Advertising with respect to offers or sales of the
Offered Securities in the United States.
5. It has not entered into and will not enter into any contractual
arrangement with respect to the Distribution of the Offered Securities other
than the Agency Agreement.
6. Any offer, sale of the Offered Securities or solicitation of an offer
to buy Offered Securities by the Issuer in the United States or to U.S.
Purchasers shall be made solely to U.S. Accredited Investors in transactions
that are exempt from registration under the U.S. Securities Act and applicable
state securities laws.
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7. The Issuer will cause all purchasers of the Offered Securities in the
United States to be informed, by use of the Subscription Agreements, that the
Offered Securities have not been and will not be registered under the U.S.
Securities Act and are being sold to them pursuant to a transaction exempt from
registration under the U.S. Securities Act.
8. The offering materials and documents (other than press releases) used
by the Issuer and its affiliates and persons acting on its and their behalf in
connection with the offer and sale of the Offered Securities prior to the
expiration of the Distribution Compliance Period will consist solely of
Subscription Agreements which shall state that the Securities have not been
registered under the U.S. Securities Act and that Securities may not be offered
or sold in the United States or to U.S. Persons, as defined in Regulation S
(other than to members of the Agent's selling group) unless the Securities have
been registered under the U.S. Securities Act, or an exemption from the
registration requirements of the U.S. Securities Act is available. Such
Subscription Agreements shall state that hedging transactions involving the
Securities may not be conducted unless in compliance with the U.S. Securities
Act.
9. All offers and sales of any of the Securities by the Issuer, its
affiliates or anyone acting on its or their behalf prior to the expiration of
the Distribution Compliance Period (other than pursuant to the Regulation D
Offering) shall not be made to in the United States or to a U.S. Person or for
the account or benefit of a U.S. Person (other than a member of the selling
group) and only to a person that certifies that it is not a U.S. Person or is
not acquiring the securities for the account of a U.S. Person or is a U.S.
Person who purchased securities in a transaction that did not require
registration under the U.S. Securities Act. All offers and sales of any of the
Offered Securities by the Issuer, its affiliates or anyone acting on its or
their behalf prior to the expiration of the Distribution Compliance Period
(other than pursuant to the Regulation D Offering) shall only be made to a
purchaser of the securities who agrees (i) to resell such securities only in
accordance with Regulation S; pursuant to registration of the Securities under
the U.S. Securities Act; or pursuant to an available exemption from the
registration requirements of the U.S. Securities Act and (ii) not to engage in
hedging transactions with regard to the Securities unless in compliance with the
U.S. Securities Act.
10. The Offered Securities and the Securities shall all contain a legend of
the type specified by Section 11.5 and Section 11.6, as applicable, of the
Agency Agreement.
11. The Issuer shall refuse to register and shall cause any registrar or
transfer agent for its securities and the trustee with respect to the Securities
to refuse to register any transfer of the Offered Securities or any Securities
not made in compliance with Regulation S promulgated by the SEC pursuant to the
U.S. Securities Act, pursuant to a registration under the U.S. Securities Act,
or pursuant to an available exemption from registration under the U.S.
Securities Act.
12. Other than warrants resulting from Offered Securities sold pursuant to
the Regulation D Offering, the Issuer shall implement procedures to insure that
the Bonus Warrants may not be exercised within the United States and that the
securities issued upon exercise of such warrants may not be delivered within the
United States, other than in offerings deemed to meet the definition of
"offshore transaction" pursuant to Section 902(h) of Regulation S, unless
registered under the U.S. Securities Act or an exemption from such registration
is available.
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13. Except with respect to the offer and sale of Offered Securities, the
Corporation has not, during the six month period prior to the date hereof, sold,
offered for sale or solicited any offer to buy any securities thereof in the
United States or to, or for the account or benefit of, a U.S. Person in a manner
that would be integrated with the offer and sale of the Offered Securities and
would cause the exemption from registration set forth in Regulation D to become
unavailable with respect to the offer and sale of the Offered Securities.
14. Neither the Issuer nor any of the predecessors or affiliates thereof
has been subject to any order, judgment or decree of any court of competent
jurisdiction temporarily, preliminarily or permanently enjoining such person for
failure to comply with Rule 503 of Regulation D concerning the filing of a
notice of sales on Form D.
15. Within 15 days after the first sale of Offered Securities to a U.S.
Purchaser, the Issuer will prepare and file with the United States Securities
and Exchange Commission a notice on Form D and all other notices required to be
filed with any regulatory authority in the United States.
ANNEX I TO SCHEDULE "A"
AGENT'S CERTIFICATE
In consideration with the private placement of the Offered Securities (the
"OFFERED SECURITIES") of Patch International Inc. (the "CORPORATION") pursuant
to the Agency Agreement dated February 27, 2007 (the "AGENCY AGREEMENT") between
the Corporation and Canaccord Capital Corporation and Wellington West Capital
Markets Inc., each of the undersigned, on its own behalf, does hereby certify as
follows:
(a) * [insert name of U.S. Affiliate] is a duly registered broker
or dealer with the United States Securities and Exchange
Commission (the "SEC") and the National Association of
Securities Dealers, Inc. ("NASD") and is a member of, is in
good standing with the NASD and the SEC on the date hereof;
(b) immediately prior to offering Offered Securities to such
offerees, we had reasonable grounds to believe and did believe
that each offeree was an "accredited investor" (as defined in
Rule 501(a) of Regulation D (an " ACCREDITED INVESTOR") under
the U.S. Securities Act of 1933, as amended (the "U.S.
SECURITIES ACT")) and, on the date hereof, we continue to
believe that each U.S. person purchasing Offered Securities
through or from us is an Accredited Investor;
(c) no form of general solicitation or general advertising (as
those terms are used in Regulation D under the U.S. Securities
Act) was used by us, including advertisements, articles,
notices or other communications published in any newspaper,
magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees had been
invited by general solicitation or general advertising, in
connection with the offer or sale of the Offered Securities in
the United States or to U.S. persons;
(i) all offers and sales of Offered Securities in the United
States have been effected in accordance with all applicable
U.S. broker dealer requirements;
(ii) all offers and sales of the Offered Securities in the United
States were made to U.S. Accredited Investors by the U.S.
Agent;
(iii) no written material was used in connection with the offer or
sale of the Offered Securities in the United States other than
the Subscription Agreements for the Offered Securities and the
schedules and annexes thereto;
(d) the offering of the Offered Securities in the United States
has been conducted by us in accordance with the Agency
Agreement; and
(e) prior to any sale of Offered Securities in the United States,
we caused each U.S. purchaser to execute a Subscription
Agreement which includes a term sheet and contains
representations, warranties and agreements substantially
similar to Subscription Agreements approved by the Corporation
and the Agents thereof.
-2-
Terms used in this certificate have the meanings given to them in the Agency
Agreement unless defined herein.
DATED THIS DAY OF FEBRUARY, 2007.
CANACCORD CAPITAL CORPORATION
Per:
--------------------------------------
Title
Per:
--------------------------------------
Title
-3-
WELLINGTON WEST CAPITAL MARKETS INC.
Per:
--------------------------------------
Title
Per:
--------------------------------------
Title
*[US AFFLIATE]
Per:
--------------------------------------
Title
Per:
--------------------------------------
Title
-4-
*[US AFFLIATE]
Per:
--------------------------------------
Title
Per:
--------------------------------------
Title
