EXHIBIT 10.3
AGENCY AGREEMENT
November 23, 2001
Infowave Software, Inc.
0000 Xxxxxxxx Xxxxxxx,
Xxxxx 000
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxxx Xxxxxx, Chief Financial Officer
Dear Sir:
Canaccord Capital Corporation (the "Agent") understands that Infowave
Software, Inc. (the "Corporation") proposes to offer for sale in the Qualifying
Provinces (as hereinafter defined) and to "accredited investors" in the United
States (as hereinafter defined) by way of private placement (the "Offering") up
to US$5,000,000 of special warrants of the Corporation (each, a "Special
Warrant" and collectively, the "Special Warrants") at a price (the "Offer
Price") being the lower of: (a) Cdn$0.69; and (b) eighty-five percent (85%) of
the weighted average trading price of the Corporation's common shares (each, a
"Common Share" and collectively, the "Common Shares") on The Toronto Stock
Exchange (the "TSE") for the five (5) trading days preceding the Closing Date
(as hereinafter defined) per Special Warrant. The Agent also understands that
Commonwealth Associates LLP ("Commonwealth") has agreed to act as agent on
behalf of the Corporation in connection with a concurrent offering to
"accredited investors" in the United States of a minimum of US$5,000,000 of
Special Warrants and a maximum of US$10,000,000 (which may be increased by the
amount not sold by the Agent under this Offering) of special warrants on the
same terms as the Special Warrants at the Offer Price (the "Commonwealth
Offering").
Each Special Warrant shall entitle the holder thereof, upon exercise and
without payment of any additional consideration, to be issued one unit (each, a
"Unit" and collectively, the "Units") comprised of one Common Share and, subject
to the usual adjustment provisions, one-half of one Common Share purchase
warrant (each, a "Purchase Warrant" and collectively, the "Purchase Warrant") at
any time prior to 4:00 p.m. (Vancouver time) (the "Expiry Time") on the earlier
of (the "Expiry Date"): (a) the third business day following the date on which a
receipt has been issued by the last of the securities regulatory authorities in
the Qualifying Provinces (as hereinafter defined), where Special Warrants are
sold, for a final prospectus (the "Prospectus") qualifying the issue of the
Units underlying the Special Warrants (the "Prospectus Qualification"); and (b)
the date which is 12 months following the Closing Date (as hereinafter defined).
Each whole Purchase Warrant shall entitle the holder thereof to purchase
one Common Share at a price equal to one hundred and thirty percent (130%) of
the Offer Price until the date (the "Purchase Warrant Expiration Date"), which
is the earlier of: (a) three years from the Closing Date; and (b) 30 days after
the Corporation gives written
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notice (the "Notice") that the closing trading price for the Common Shares on
the TSE had equalled or exceeded at least Cdn.$9.00 for a period of 20
consecutive trading days ending within five (5) days of the delivery of the
Notice, provided the Common Shares are at the time trading on the TSE, the New
York Stock Exchange, the American Stock Exchange, the Nasdaq SmallCap market or
Nasdaq National market and the Common Shares underlying the Purchase Warrants
are not subject to any lock-up provisions imposed by the Corporation or the
Agent. The Purchase Warrants shall also provide for a method of "cashless
exercise", which shall allow the holder to exchange a Purchase Warrant, in whole
or in part, for that number of Common Shares (rounded to the next highest
integer) equal to (a) the number of Common Shares specified by the holder
thereof (the "Total Number") less (b) the number of Common Shares equal to the
quotient obtained by dividing (x) the product of the Total Number and the
existing exercise price of the Purchase Warrants by (y) the current market value
of a Common Share. This formula shall apply only when the prevailing market
price is higher than the exercise price of the Purchase Warrants and results in
the Corporation issuing fewer Common Shares while the holder of Purchase
Warrants obtains the same economic value. The Corporation shall use reasonable
commercial efforts to take all steps and proceedings necessary to file a
preliminary prospectus (the "Preliminary Prospectus") in the Qualifying
Provinces as soon as practicable after the Closing Date. In addition, the
Corporation shall use its reasonable commercial efforts to file and obtain
receipts for the Prospectus, in a form acceptable to the Agent, in each of the
Qualifying Provinces as soon as possible but not later than the Qualification
Deadline (as hereinafter defined).
The Special Warrants and the Units are being offered in the United States
in accordance with Section 4(2) of the 1933 Act and Rule 506 of Regulation D and
outside the United States in accordance with Regulation S.
The Corporation upon and subject to the terms and conditions contained
herein, hereby appoints the Agent as its exclusive Canadian agent and the Agent
hereby accepts the appointment and agrees to act as Canadian agent, to use its
commercially reasonable efforts to solicit, on a best efforts basis, offers to
purchase up to US$5,000,000 of Special Warrants. The Agent may form and manage a
group of Canadian investment dealers to offer the Special Warrants for sale on
such terms as the Agent may determine, and the term "Dealers" as used herein
means the Agent together with any such other Canadian investment dealers. It is
understood and agreed that no Dealer is under any obligation to purchase any
Special Warrants, although any Dealer may subscribe for and purchase Special
Warrants if it so desires.
Thirty percent (30%) of the proceeds from the Offering shall be placed in
escrow at Closing with the Computershare Trust Company of Canada (the "Trust
Agent") and such proceeds, plus interest accrued thereon, shall be held by the
Trust Agent and shall be released to the Corporation at the Expiry Time on the
Expiry Date.
In addition, the Corporation, upon and subject to the terms and conditions
contained herein, hereby appoints the Agent as fiscal agent (the "Fiscal Agent")
of the
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Corporation and the Agent hereby agrees to act as Fiscal Agent in connection
with the preparation and filing of the Preliminary Prospectus and the Prospectus
together with any Prospectus Amendment required to be filed in consideration for
which, the Fiscal Agent shall receive a cash fee of US$100,000 (the "Fiscal
Advisor Fee"), plus applicable taxes, payable on the Closing Date out of the
working capital of the Corporation. In addition, the Agent shall receive on the
Closing Date a special broker's option (the "Fiscal Advisor Option") exercisable
into, for no additional consideration, Fiscal Advisor Warrants to acquire that
number of units (each a "Fiscal Advisor Unit" and collectively, the "Fiscal
Advisor Units") equal to one and one-half percent (1.5%) of the number of
Special Warrants sold pursuant to the Offering, on the same terms as the
Broker's Options as set forth below. Each Fiscal Advisor Unit shall be comprised
of one Common Share and one half of one Common Share purchase warrant (each a
"Fiscal Advisor Purchase Warrant" and collectively, the "Fiscal Advisor Purchase
Warrants"). Each whole Fiscal Advisor Purchase Warrant shall entitle the holder
thereof to purchase one Common Share at a price equal to one hundred and thirty
percent (130%) of the Offer Price until the date which is three years from the
Closing Date. Any Fiscal Advisor Fee paid or Fiscal Advisor Warrants issuable
shall be credited against any Agency Fee (as hereinafter defined) paid or
Broker's Option issuable under Section 2.1 hereof.
As additional consideration for services rendered, the Agent shall be
entitled to receive at Closing:
(i) a fee for services rendered in connection with the Offering equal to
seven percent (7%) of the aggregate gross proceeds of the Offering;
and
(ii) the Broker's Option (as hereinafter defined) exercisable into, for no
additional consideration, the Compensation Warrants to acquire that
number of Units equal to seven and one-half percent (7.5%) of the
number of Special Warrants sold pursuant to the Offering. Each
Compensation Warrant shall entitle the holder thereof to acquire one
Compensation Unit (as defined in Section 2.2 below) at a price per
Compensation Unit equal to the Offer Price divided by 0.85 for a
period of 36 months (or 24 months if otherwise required by law or
applicable securities regulatory authorities or the TSE) following the
Closing Date.
The issuance of the Compensation Warrants and the Fiscal Advisor Warrants
shall be qualified pursuant to the Prospectus qualifying the securities
underlying the Special Warrants to the maximum extent permitted by law or the
rules and policies of any applicable regulatory authority (provided that if the
total number of Compensation Warrants and Fiscal Advisor Warrants are to be so
limited, they shall be limited on a pro rata basis between Commonwealth and the
Agent, provided that in no event shall the Agent have less than 2/3rds of its
Fiscal Advisor Warrants qualified under the Prospectus). Notwithstanding the
foregoing, the Agent shall be entitled, at a minimum, to the Agency Fee as set
forth in Section 2.1 hereof and the Broker's Option as set forth in Section 2.2
hereof.
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The Agent shall not offer or sell the Fiscal Advisor Option or the Broker's
Option or any securities issued directly or indirectly upon exercise thereof in
the United States to a U.S. Person without registration under the 1933 Act and
applicable state securities laws unless an exemption from registration is
available.
All actions to be undertaken in the United States in connection with the
matters contemplated herein, shall be undertaken by the Agent through its
affiliate Canaccord Capital Corporation (USA) Inc.
DEFINITIONS
In addition to the terms defined above, in this Agreement:
"accredited investor" means an accredited investor as defined in Rule 501(a) of
Regulation D;
"affiliate", "distribution", "material change", "material fact",
"misrepresentation", and "subsidiary" means, with respect to circumstances to
which the Canadian Securities Laws of a particular jurisdiction apply, an
affiliate, distribution, material change, material fact, misrepresentation and
subsidiary defined under the Canadian Securities Laws of such Province and, if
not so defined, an affiliate, distribution, material change, material fact,
misrepresentation and subsidiary as defined in the Securities Act (British
Columbia);
"Agency Fee" means a cash fee equal to seven percent (7%) of the gross proceeds
realized by the Corporation from the sale of Special Warrants, payable to the
Agent pursuant to Section 2.1;
"Agreements" means this Agreement, the Subscription Agreements, the Purchase
Warrant Indenture and the Special Warrant Indenture, and the agreements and/or
certificates representing the Special Warrants, the Purchase Warrants, the
Broker's Option, the Compensation Warrants, the Fiscal Advisor Option and the
Fiscal Advisor Warrants, as the case may be;
"Broker's Option" has the meaning given to it in Section 2.2;
"Broker Unit Shares" has the meaning given to it in Section 2.2;
"Broker Warrants" has the meaning given to it in Section 2.2;
"Broker Warrant Certificate" has the meaning given to it in Section 2.2;
"Business Day" means a day which is not a Saturday, a Sunday or a statutory or
civic holiday in the Province of British Columbia;
"Closing" means the completion of the issue and sale by the Corporation and the
purchase by the Purchasers of Subject Securities as contemplated in this
Agreement;
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"Closing Date" in respect of the issue, purchase and sale of the Subject
Securities, means the date of the initial Closing, as the Agent and the
Corporation may agree, and the date of any subsequent Closings, as the Agent and
the Corporation may agree, and, in the event of any subsequent Closings, all
provisions of this Agreement shall apply mutatis mutandis. However, for purposes
of the expiry date of any securities issued pursuant to this Agreement, the
Closing Date shall be the date of the initial Closing;
"Closing Time" means 8:30 a.m. (Toronto time) on the Closing Date or such other
time as the Corporation and the Agent may agree;
"Compensation Options" has the meaning given to it in Section 2.2;
"Fiscal Agent" means Canaccord Capital Corporation;
"Fiscal Advisor Warrants" has the meaning given to it in Section 2.3;
"Fiscal Advisor Fee" means a cash fee equal to US$100,000 plus applicable taxes
payable to the Fiscal Agent;
"Foreign Issuer" means a foreign issuer as defined in Regulation S;
"Information Record" means any statement, other than a statement relating solely
to or provided by the Agent, contained in any press release, material change
report, financial statement or other document of the Corporation which has been
or is publicly disseminated pursuant to any Securities Laws or U.S. securities
laws prior to the Closing Time;
"Intellectual Property" means, collectively, all intellectual property rights of
whatsoever nature, kind or description including: (i) all trade-marks, service
marks, trade-xxxx and service xxxx registrations, trade-xxxx and service xxxx
applications, trade names and any other trade-xxxx and service xxxx rights; (ii)
all copyrights and applications therefor, including all computer software and
rights related thereto; (iii) all inventions, patents, patent applications and
patent rights (including any patents issuing on such applications or rights);
(iv) all trade secrets and proprietary and confidential information; (v) all
industrial designs and registrations thereof and applications therefor; (vi) all
renewals, modifications, developments and extensions of any of the items listed
in clauses (i) through (vi) above; and (vii)all patterns, plans, designs,
research data, other proprietary know-how, processes, drawings, technology,
inventions, formulae, specifications, performance data, quality control
information, unpatented blue prints, flow sheets, equipment and parts lists,
instructions, manuals, records and procedures, and all licenses, agreements and
other contracts and commitments relating to any of the foregoing;
"Notice" has the meaning given to it in Section 21;
"Prospectus Amendment" means any amendment to the Preliminary Prospectus and the
Prospectus;
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"Prospectus Qualification" means the filing of the Prospectus in the Qualifying
Provinces and the obtaining of receipts therefor from the Securities Commissions
prior to the Qualification Deadline;
"Purchase Warrant Agent" means Computershare Trust Company of Canada, as warrant
agent of the Purchase Warrants, pursuant to the Purchase Warrant Indenture; and
"Purchase Warrant Indenture" means the Purchase Warrant indenture dated the
Closing Date, to be entered into between the Corporation and the Purchase
Warrant Agent;
"Purchasers" means all purchasers of Special Warrants offered for sale or sold
as contemplated herein;
"Qualification Deadline" means the 90th day following the Closing Date;
"Qualifying Provinces" means the provinces of Ontario, British Columbia and
Alberta and elsewhere in Canada where agreed between the Agent;
"Regulation D" means Regulation D adopted by the SEC under the 1933 Act;
"Regulation M" means Regulation M adopted by the SEC under the 1934 Act;
"Regulation S" means Regulation S adopted by the SEC under the 1933 Act;
"SEC" means the United States Securities and Exchange Commission;
"Securities Commissions" means the securities commissions or other securities
regulatory authorities in the Qualifying Provinces;
"Selling Jurisdictions" means the Qualifying Provinces and the United States;
"Securities Law" means all applicable securities laws in each of the Qualifying
Provinces and the respective regulations and rules under such laws together with
applicable published policy statements, notices, blanket orders and rulings of
the securities regulatory authorities in the Qualifying Provinces and all
applicable federal and state securities laws of the United States;
"Special Warrant Agent" means Computershare Trust Company of Canada, as warrant
agent of the Special Warrants pursuant to the Special Warrant Indenture;
"Special Warrant Indenture" means the Special Warrant indenture dated the
Closing Date, to be entered into between the Corporation and the Special Warrant
Agent;
"Subject Securities" means the Special Warrants;
"Subscription Agreement" means a subscription agreement executed by a Purchaser
in the form agreed upon between the Agent and the Corporation;
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"Subsidiary" means Infowave USA Inc.;
"Supplementary Materials" means all amended or supplemental statements or other
documents required to be filed by the Corporation under the laws or the
Securities Law of the Qualifying Provinces and of any Prospectus Amendment or
other document required to be filed under Section 7 of this Agreement; all in a
form and substance satisfactory to the Agent and its counsel;
"Transaction Documents" means this Agreement, the Purchase Warrant Indenture and
the Special Warrant Indenture, and the respective certificates for the Broker's
Option, the Fiscal Advisor Option, the Compensation Warrant and the Fiscal
Advisor Warrant;
"Transfer Agent" means Computershare Trust Company of Canada, as registrar and
transfer agent of the common shares of the Corporation;
"TSE" means The Toronto Stock Exchange;
"Underlying Securities" means the Common Shares and Purchase Warrants underlying
the Special Warrants; the Compensation Warrants underlying the Broker's Option;
the Fiscal Advisor Warrants underlying the Fiscal Advisor Option; and the Common
Shares and Compensation Purchase Warrants (as defined in Section 2.2 below)
underlying the Compensation Warrants and Fiscal Advisor Purchase Warrants
underlying the Fiscal Advisor Warrants; and the Common Shares underlying the
Purchase Warrants, Compensation Purchase Warrants and the Fiscal Advisor
Purchase Warrants;
"United States" means the United States of America, its territories and
possessions, any state of the United States, and the District of Columbia;
"U.S. Person" means any person as defined in Rule 902(k) of Regulation S;
"Year-End Statements" has the meaning given to it in Section 7.1(q);
"1933 Act" means the United States Securities Act of 1933, as amended; and
"1934 Act" means the United States Securities Exchange Act of 1934, as amended.
TERMS AND CONDITIONS
1. Sale on an Exempt Basis
1.1 The Agent shall offer for sale and sell the Special Warrants:
(i) only in the Qualifying Provinces, the United States and other
foreign jurisdictions which have been agreed to between the
Corporation and the Agent, acting reasonably, in compliance with
all applicable Securities Laws and the applicable securities laws
of such other jurisdictions; and
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(ii) only to such Purchasers and in such manner so that, pursuant to
the provisions of applicable Securities Laws or the securities
laws of such other jurisdictions, no prospectus or offering
memorandum need be filed or delivered in connection therewith and
no continuous disclosure obligations arise on behalf of the
Corporation.
1.2 The Corporation undertakes to file or cause to be filed all forms or
undertakings required to be filed by the Corporation in connection
with the purchase and sale of the Special Warrants, so that the
placement of the Special Warrants may lawfully occur without the
necessity of filing a prospectus or an offering memorandum in the
United States or Qualifying Provinces (but on terms that shall permit
the Common Shares and Purchase Warrants acquired by the Purchasers in
the Qualifying Provinces to be sold by such Purchasers at any time in
the Qualifying Provinces subject to applicable Securities Laws and the
Agent shall use commercially reasonable efforts to cause Purchasers to
complete any forms required by applicable Securities Laws ). All such
filings shall be made by the Corporation on behalf of the party
legally responsible to file the same and all fees payable in
connection with such filings shall be at the sole expense of the
Corporation.
1.3 Neither the Corporation nor the Agent shall (i) provide to prospective
purchasers any document or other material that would constitute an
offering memorandum within the meaning of applicable Securities Laws
other than the federal and state securities laws of the United States;
or (ii) cause the sale of the Special Warrants to be advertised in
printed media of general and regular paid circulation, radio,
television, the Internet or any other form of electronic media or
otherwise.
2. Agency Fee
2.1 The Corporation agrees to pay to the Agent at the Closing Time the
Agency Fee in consideration of the services to be rendered by the
Agent in connection with the Offering, which services shall include:
(a) endeavoring to arrange for Purchasers for the Subject Securities;
(b) assisting in the preparation of the form of subscription
agreements to be entered into by the Purchasers of the Special
Warrants;
(c) assisting in the preparation of the Purchase Warrant Indenture
and the Special Warrant Indenture; and
(d) otherwise advising the Corporation with respect to the Offering.
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2.2 In addition to the Agency Fee, the Corporation shall issue to the
Agent at the Closing Time: (a) special broker's options (the "Broker's
Option") exercisable into, for no additional consideration,
compensation warrants (the "Compensation Warrants") entitling the
Agent to acquire, in the aggregate, that number of units (the
"Compensation Units") equal to seven and one-half percent (7.5%) of
the number of Special Warrants sold by the Agent pursuant to the
Offering. Each Compensation Warrant shall entitle the holder thereof
to acquire one Compensation Unit at a price per Unit equal to the
Offer Price divided by 0.85 for a period of 36 months following the
Closing Date. Each Compensation Unit shall be comp warrant (each a
"Compensation Purchase Warrant" and collectively, the "Compensation
Purchase Warrants"). Each whole Compensation Purchase Warrant shall
entitle the holder thereof to purchase one Common Share at a price
equal to one hundred and thirty percent (130%) of the Offer Price
until the date which is 36 months from the Closing Date The issuance
of the Compensation Warrants and the Fiscal Advisor Warrants (as
defined in Section 2.3 below) shall be qualified pursuant to the
Prospectus qualifying the securities underlying the Special Warrants
to the maximum extent permitted by the applicable Securities Laws of
any applicable Qualifying Province (provided that if the total number
of Compensation Warrants and Fiscal Advisor Warrants (as defined in
Section 2.3 below) which may be qualified is to be so limited, it
shall be limited on a pro rata basis with any similar limitation
applicable to Commonwealth, provided that in no event shall the Agent
have less and two thirds (2/3) of its Fiscal Advisor Warrants
qualified under the Prospectus). Notwithstanding the foregoing, the
Agent shall be entitled, at a minimum, to the Agency Fee as set forth
in Section 2.1 and the Broker's Option as set forth in this Section
2.2.
2.3 The Corporation shall pay to the Fiscal Agent the Fiscal Advisor Fee
at the Closing Time. In addition, the Fiscal Agent shall receive on
the Closing Date a special broker's option (the "Fiscal Advisor
Option") exercisable into, for no additional consideration,
compensation warrants (the "Fiscal Advisor Warrants") to acquire that
number of units (the "Fiscal Advisor Units") equal to one and one-half
percent (1.5%) of the number of Special Warrants sold pursuant to the
Offering, on the same terms of the Broker's Options as set forth in
Section 2.2. Any Fiscal Advisor Fees paid, or Fiscal Advisor Warrants
issuable under this Section 2.3 shall be credited against any Agency
Fee paid under Section 2.1 or Broker's Option issuable under Section
2.2.
2.4 Whether or not the Offering is completed, the Corporation shall pay
all fees, disbursements, expenses and any applicable taxes thereon in
connection with or incidental to the Offering including, without
limitation, the reasonable out-of-pocket expenses of the Agent and the
reasonable fees and expenses of counsel for the Agent.
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3. Prospectus
3.1 The Corporation shall as soon as practicable following the Closing
Date, use its reasonable commercial efforts to prepare and file in the
Qualifying Provinces the Preliminary Prospectus qualifying the
distribution of the Common Shares and Purchase Warrants issuable upon
exercise of the Special Warrants and, to the maximum extent permitted
by law and, in accordance with Section 2.2 hereof, the Compensation
Warrants issuable upon exercise of the Broker's Option and the Fiscal
Advisor Warrants issuable upon exercise of the Fiscal Advisor Option
and the underlying securities thereof. The Corporation shall use its
reasonable commercial efforts to obtain a receipt for such Preliminary
Prospectus promptly following such filing.
3.2 The Corporation shall deliver draft copies of all documents to the
Agent and its counsel sufficiently in advance of any filing so as to
allow the Agent and its counsel to review such documents and provide
comments. The Agent shall be under no obligation to sign the
certificate page of the Preliminary Prospectus, Prospectus, Prospectus
Amendment or any Supplementary Material unless it is satisfied, in its
sole discretion, that the applicable Securities Laws has been complied
with.
3.3 The Corporation shall use its reasonable commercial efforts to:
(i) resolve and satisfy all comments and deficiencies raised by the
Securities Commissions in the Qualifying Provinces in respect of
the Preliminary Prospectus;
(ii) as soon as possible thereafter, but not later than the
Qualification Deadline prepare and file and obtain a receipt for
the Prospectus qualifying the distribution of the Common Shares
and Purchase Warrants issuable upon exercise of the Special
Warrants and, to the maximum extent permitted by applicable
Securities Law other than the state and federal securities laws
of the United States, the Compensation Warrants issuable upon
exercise of the Broker's Option and the Fiscal Advisor Warrants
issuable upon exercise of the Fiscal Advisor's Option and the
underlying securities thereof; and
(iii)fulfill and comply with, to the satisfaction of the Agent's
counsel, acting reasonably, all applicable Securities Law to be
fulfilled or complied with by the Corporation to enable the
Common Shares and Purchase Warrants issuable upon exercise of the
Special Warrants to be lawfully distributed to the public in the
Qualifying Provinces. The Corporation shall use its reasonable
commercial
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efforts to ensure that such requirements (including the issuance
of the final receipt by each of the Securities Commissions) shall
be fulfilled on or before the Qualification Deadline.
4. Delivery of Prospectus and Related Documents
4.1 The Corporation shall deliver or cause to be delivered to the Agent
and the Agent's counsel the documents set out below at the respective
times indicated:
(a) prior to the filing of the Prospectus with the Securities
Commissions, signed copies of the Prospectus in form and
substance satisfactory to the Agent at the addresses specified in
Section 21 and, without charge to the Agent, on the second
Business Day following as many commercial copies of the
Prospectus (together with any documents incorporated by
reference), as the case may be, in such cities in the Selling
Jurisdictions as the Agent may reasonably request; and
(b) signed copies of any other documents required to be filed by the
Corporation under the laws of the Qualifying Provinces in
compliance with Securities Law applicable therein; and
(c) at the time of delivery to the Agent of the Prospectus, a comfort
letter from KPMG LLP, dated the date of the Prospectus and
addressed to the board of directors of the Corporation and the
Agent, in form and substance satisfactory to the Agent, acting
reasonably, relating to the verification of the financial and
accounting information in respect of the Corporation and other
numerical data contained in the Prospectus which comfort letter
shall be based on a review by KPMG LLP having a cut-off date of
not more than two Business Days prior to the date of such letter
and shall be in addition to any comfort letters which must be
filed with Securities Commissions pursuant to applicable Canadian
Securities Laws.
5. Delivery Constitutes Representation and Consent
5.1 Delivery of the Preliminary Prospectus, the Prospectus, any Prospectus
Amendment or any Supplemental Material shall constitute a
representation and warranty by the Corporation to the Agent that at
the time of delivery:
(a) all information and statements (except information and statements
relating solely to or provided by the Agent) contained therein
are true in all respects at the time of delivery thereof and
contain no misrepresentation and constitute full, true and plain
disclosure of
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all material facts relating to the Corporation and the Subject
Securities, the Broker's Option, the Fiscal Advisor Option and
the Underlying Securities;
(b) no material fact or information has been omitted from such
document which is required to be stated therein or is necessary
to make the statements or information contained therein not
misleading in light of the circumstances in which they were made;
and
(c) such document complies with the requirements of the Securities
Laws other than the state and federal securities laws of the
United States.
5.2 Such deliveries shall also constitute the consent and authorization of
the Corporation to the use by the Agent of the Preliminary Prospectus,
the Prospectus, any Prospectus Amendment, and any Supplemental
Material in connection with the distribution of the securities
contemplated in this Agreement to be in compliance with this
Agreement.
6. Representations and Covenants of the Agent
6.1 The Agent shall:
(a) comply with all applicable Securities Laws in connection with the
Offering and the Prospectus Qualification;
(b) not offer or sell Special Warrants so as to require registration
thereof, filing of a prospectus with respect thereto or require
the Corporation to become subject to ongoing reporting
requirements under the laws of any jurisdiction other than that
of the Qualifying Provinces or those to which the Corporation is
already subject or as otherwise agreed with the Corporation; and
(c) as soon as practicable upon the Corporation obtaining the
necessary receipts for the Prospectus relating to the Prospectus
Qualification from the Securities Commissions in each of the
Qualifying Provinces, deliver one copy of the Prospectus
(together with any Prospectus Amendment required to be provided)
to each Purchaser of the Special Warrants.
6.2 The Agent hereby represents and warrants that:
(a) the Special Warrants, Units, Purchase Warrants, Fiscal Advisor
Purchase Warrants and Compensation Purchase Warrants and all of
the underlying Common Shares issuable upon exercise of such
securities (the "Securities") have not been and will not be
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registered with the SEC under the 1933 Act and that the Special
Warrants are being offered and sold in reliance upon an exemption
from registration provided by Regulation S in the case of offers
and sales outside the United States, and in the case of offers
and sales by the Agent or any selected dealer of the Agent in the
United States, by the exemption from registration provided by
Rule 506 of Regulation D;
(b) the Agent, any selected dealer of the Agent, if applicable, or
any of their respective affiliates (A) have not engaged or will
not engage in any "Directed Selling Efforts" within the meaning
of Regulation S with respect to the Securities, (B) other than
offers and sales in accordance with Section 6.2(e), have not made
or will not make (x) any offer to sell or solicitation of an
offer to buy any of the Securities to any person or (y) any sale
of the Securities to any person unless (1) the offer is not made
to any person in the United States, (2) the seller of such
Securities and any person acting on its behalf reasonably
believes that at the time such person placed the order to
purchase Securities such person was outside the United States and
(3) such sale is otherwise in compliance with the applicable
requirements of Regulation S, (C) have not taken or will not take
any action which would constitute a violation of Regulation M, or
(D) have not solicited or will not solicit offers for, or have
not made or will not make offers to sell, the Securities by means
of any form of general solicitation or general advertising (as
those terms are used in Regulation D) or in any manner involving
a public offering within the meaning of the 1933 Act;
(c) all offers and sales of the Securities in the United States have
been and will be made in compliance with all applicable United
States federal and state laws with respect to the registration
and conduct of securities brokers and dealers;
(d) the Agent has caused or will promptly cause each selected dealer
of the Agent to acknowledge in writing its awareness of and
agreement to be bound by and shall use its best efforts to ensure
that each selected dealer complies with the representations and
warranties contained in this Agreement in connection with all
offers and sale of the Securities;
(e) the Securities have been and shall be offered and sold by the
Agent and selected dealers in the United States only in
compliance with all applicable state securities ("blue sky") laws
of the United States and in a transaction exempt from
registration requirements of the 1933 Act, pursuant to Rule 506
of Regulation D, to persons that
-14-
are "accredited investors" within the meaning of Rule 501(a) of
Regulation D; and
(f) the Agent has not entered, and will not enter, into any
contractual arrangement without the prior written consent of the
Company with respect to the placement of the Securities, except
(i) with its affiliates; or (ii) with selected dealers in
accordance with the certificate attached hereto as Schedule "C".
7. Material Change During Distribution
7.1 Commencing on the date hereof and until the completion of distribution
of the Common Shares, the Corporation shall promptly notify the Agent
in writing of:
(a) any change (actual, anticipated, contemplated or threatened,
financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise), capital or control
of the Corporation or its Subsidiary that would be material to
the Corporation and its Subsidiary taken as a whole, and
(b) any change in any material fact or any misstatement of any
material fact contained in the Preliminary Prospectus, the
Prospectus or any Prospectus Amendment, or the existence of any
new material fact not disclosed in the Preliminary Prospectus,
the Prospectus or any Prospectus Amendment,
which change, misstatement or new material fact is, or may be, of
such a nature as to render the Preliminary Prospectus, the
Prospectus or any Prospectus Amendment misleading or untrue or
would result in a misrepresentation therein or would result in
the Preliminary Prospectus, the Prospectus or any Prospectus
Amendment not complying with any Securities Laws other than the
state and federal securities laws of the United States, as the
case may be, or which change, misstatement or new material fact
would reasonably be expected to have an adverse effect on the
market price or value of the common shares of the Corporation.
7.2 The Corporation shall promptly, and in any event within any applicable
time limitation, comply, to the satisfaction of the Agent, with all
applicable filings and other requirements under the Securities Laws
and the rules and by-laws of the TSE and, if applicable, United States
securities laws as a result of such change, misstatement or new
material fact referred to in Section 7.1, provided that the
Corporation shall not file any Prospectus Amendment or other document
relating to the Subject Securities without first obtaining the
approval of the Agent, after consultation with the Agent with respect
to the form and content thereof, which approval shall not be
unreasonably withheld or delayed. The
-15-
Corporation shall in good faith discuss with the Agent any such fact,
misstatement or new material fact (actual, contemplated or threatened,
financial or otherwise) which is of such a nature that there is
reasonable doubt whether written notice need be given under this
paragraph. The Corporation shall allow the Agent to conduct all "due
diligence" investigations which, in the reasonable opinion of the
Agent, are required in order to responsibly execute any certificate
required to be executed by the Agent in any Prospectus Amendment. The
Corporation shall promptly deliver or cause to be delivered to the
Agent and the Agent's counsel a copy of each Prospectus Amendment,
signed as required by applicable Securities Laws by all parties other
than the Agent, as well as opinions and letters with respect to each
such Prospectus Amendment to the same effect as those referred to in
Section 4 and dated the date of such Prospectus Amendment.
7.3 The delivery to the Agent of a Prospectus Amendment shall constitute a
representation and warranty to the Agent by the Corporation with
respect to the Preliminary Prospectus or the Prospectus, as the case
may be, as amended, modified or superceded by such Prospectus
Amendment and by each Prospectus Amendment previously delivered to the
Agent as aforesaid, to the same effect as set forth in Sections 4 and
5. Such delivery shall also constitute the consent and authorization
of the Corporation to the use of the Preliminary Prospectus, or the
Prospectus, as the case may be, as so amended, by the Agent in
connection with the distribution of the Common Shares and the Purchase
Warrants underlying the Special Warrants, the Compensation Purchase
Warrants underlying the Broker's Options and the Fiscal Advisor
Warrants underlying the Fiscal Advisor Option in the Selling
Jurisdictions.
7.4 The Corporation shall deliver or cause to be delivered to the Agent,
as soon as possible, without charge, as many commercial copies of any
Prospectus Amendment in such cities in the Selling Jurisdictions as
the Agent may request.
8. Representations and Warranties of the Corporation
8.1 The Corporation represents and warrants to the Agent and each of the
Purchasers, and acknowledges that each of the Purchasers is relying
upon such representations and warranties, that:
(a) each of the Corporation and its Subsidiary is a corporation duly
incorporated and organized and validly existing under the laws of
its jurisdiction of incorporation, is duly qualified to carry on
its business and is in good standing in each jurisdiction in
which the conduct of its business or the ownership, leasing or
operation of its property and assets requires such qualification,
and has all requisite corporate power and authority to carry on
its business, to own,
-16-
lease and operate its property and assets and to execute, deliver
and perform its obligations under this Agreement;
(b) the Corporation, either directly or indirectly, beneficially owns
all of the issued and outstanding shares of the Subsidiary free
and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances, claims or demands of any kind whatsoever
(except for security granted to Xxxxxx Xxxx or the
Toronto-Dominion Bank), all of such shares have been duly
authorized and validly issued and are outstanding as fully paid
and non-assessable shares and no person has any right, agreement
or option, present or future, contingent or absolute, of any
right capable of becoming a right, agreement or option, for the
purchase from the Corporation of any interest in any of such
shares or for the issue or allotment of any unissued shares in
the capital of the Subsidiary or any other security convertible
into or exchangeable for any such shares;
(c) each of the Corporation and the Subsidiary, holds all material
licences, certificates, registrations, permits, consents or
qualifications required by the appropriate state, provincial,
municipal or federal regulatory agencies or bodies necessary in
order to enable its business to be carried on as now conducted
and all such licences, certificates, registrations, permits,
consents and qualifications are valid and subsisting and in good
standing and do not contain any unusual burdensome provision,
condition or limitation which has a material adverse effect on
the operation of the business of the Corporation or the
Subsidiary, taken as a whole, as now conducted or as presently
proposed to be conducted and the Corporation has not received any
notice of proceedings relating to the revocation or modification
of any such licenses, certificates, registrations, permits,
consents, or qualifications which, if the subject of an
unfavourable decision, ruling or finding would adversely affect
the conduct of the business, operations, financial condition or
income or future prospects of the Corporation and the Subsidiary
(taken as a whole);
(d) no reorganization, amalgamation, merger, acquisition or
disposition of assets not in the ordinary course of business by
the Corporation or other change in the business, operations or
capital of the Corporation (other than the transactions
contemplated herein) is pending which could reasonably be
expected to have a material adverse effect on the market price or
value of the Common Shares;
-17-
(e) the Corporation has full corporate power and authority to
undertake the Offering, the Prospectus Qualification and all
other transactions contemplated herein;
(f) the Transaction Documents have been or shall be duly authorized
and have been, or shall be, executed and delivered by the
Corporation, as applicable, and constitute, or shall constitute
upon execution and delivery, legal, valid and binding obligations
of the Corporation enforceable against the Corporation in
accordance with their terms subject to bankruptcy, insolvency and
other laws affecting the rights of creditors generally, the
qualification that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction and that rights
to indemnity and waiver of contribution may be limited by
applicable law;
(g) the authorized capital of the Corporation consists of 200,000,000
Common Shares of which 23,411,003 Common Shares are validly
issued and outstanding as fully paid and non-assessable as at
November 23, 2001, and no person or other entity has any
agreement, option, right or privilege (whether pre-emptive or
contractual) capable of becoming an agreement for or the right to
purchase any of the issued or unissued securities of the
Corporation except as disclosed in Schedule A;
(h) the Corporation is not in default under or in breach of, and the
execution, delivery, performance of and compliance by the
Corporation with the terms of the Transaction Documents and, the
issuance, sale and delivery of the Subject Securities and the
Underlying Securities shall not result in a breach of, and shall
not create a state of facts which, after notice or lapse of time
or both, shall result in a breach of, and shall not conflict with
(i) any of the terms, conditions or provisions of the constating
documents or by-laws of the Corporation (or its Subsidiary), (ii)
any material indenture, agreement (written or oral), contract
lease or other instrument to which the Corporation (or its
Subsidiary) is a party or by which the Corporation (or its
Subsidiary) is or shall be contractually bound as of the Closing
Time, (iii) any law, statute, rule or regulation applicable to
the Corporation (or its Subsidiary), and (iv) any judgment,
decree or order binding the Corporation (or its Subsidiary) or
the property or assets of the Corporation (or its Subsidiary);
(i) no legal or governmental proceedings (including in respect of any
class action) are pending or, to the knowledge of the
Corporation, are threatened to which the Corporation and/or its
Subsidiary is a party or to which the property of the Corporation
and/or its
-18-
Subsidiary is subject that would result individually or in the
aggregate in any adverse material change in the operations,
business or condition of the Corporation and its Subsidiary,
taken as a whole;
(j) except as described in Schedule B, there are no actions, suits or
proceedings pending or affecting or, to the knowledge of the
Corporation, threatened against the Corporation in any court or
before or by any federal, provincial, municipal or other
governmental department, commission, board or agency, domestic or
foreign, the outcome of which would have a material adverse
effect on the business, assets, operations or condition
(financial or otherwise) of the Corporation or which affects or
may affect the distribution of the Subject Securities or the
Underlying Securities and the Corporation is not aware of any
existing ground on which any such action, suit or proceeding
might be commenced with any reasonable likelihood of success;
(k) each of the Corporation and its Subsidiary has good title to all
of its assets and undertakings (for the purpose of this clause,
the foregoing is referred to as the "Interest") and its Interest
is free and clear of adverse claims, except for security granted
to Xxxxxx Xxxx or the Toronto-Dominion Bank and for those arising
in the ordinary course of business;
(l) the proceeds received from the Offering shall be used
substantially in the manner that shall be disclosed in the
Preliminary Prospectus, the Prospectus and any Prospectus
Amendment;
(m) Computershare Trust Company of Canada, at its principal offices
in the City of Vancouver and the City of Toronto is the duly
appointed Transfer Agent of the Common Shares and Computershare
Trust Company of Canada shall at the Closing Time be the duly
appointed Purchase Warrant Agent of the Purchase Warrants
pursuant to the Purchase Warrant Indenture and as Special Warrant
Agent of the Special Warrants pursuant to the Special Warrant
Indenture;
(n) the audited annual financial statements of the Corporation as at
and for the year ended December 31, 2000 contained in the
Corporation's annual report for the year ended December 31, 2000:
(i) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with
those of preceding fiscal periods;
-19-
(ii) representfully, fairly and correctly the assets, liabilities
and financial condition of the Corporation as at December
31, 2000 and the results of its operations and the changes
in its financial position for the year then ended;
(iii)are in accordance with the books and records of the
Corporation; and
(iv) contain and reflect all necessary adjustments for the fair
presentation of the results of operations and the financial
condition of the business of the Corporation for the period
covered thereby;
(o) the unaudited consolidated interim financial statements of the
Corporation and its Subsidiary as at and for the nine months
ended September 30, 2001:
(i) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with
those of preceding periods;
(ii) represent fully, fairly and correctly the consolidated
assets, liabilities and financial condition of the
Corporation as at September 30, 2001 and the consolidated
results of its operations and the changes in its financial
position for the period then ended;
(iii)are in accordance with the books and records of the
Corporation; and
(iv) contain and reflect all necessary adjustments for the fair
presentation of the results of operations and the financial
condition of the business of the Corporation for the period
covered thereby,
and there has not been any material adverse change in the
financial position of the Corporation, or its business,
assets, liabilities or undertaking (absolute, accrued,
contingent or otherwise) since September 30, 2001 other than
as publicly disclosed;
(p) KPMG LLP, the auditors of the Corporation, are independent public
accountants as required under Securities Law other than the state
and federal securities laws of the United States and there has
not been any disagreement (within the meaning of National Policy
Statement No. 31) with the present or former auditors of the
Corporation other than as disclosed in the Information Record;
-20-
(q) there are no outstanding issues or disagreements with the
auditors of the Corporation in connection with the financial
statements of the Corporation for the year ended December 31,
2000 (the "Year-End Statements") or any fact or issue that would
or could lead to a disagreement with the auditors;
(r) to the knowledge of the Corporation, there are no facts or issues
relating to the Corporation that would require the auditors to
provide a qualified report in connection with the Year-End
Statements;
(s) the Corporation does not intend to have any write downs or any
write-offs with respect to any of the Corporation's assets for
the year ended December 31, 2001;
(t) the Corporation is not aware of any liability for which a reserve
has not been previously made;
(u) since September 30, 2001, (i) there has not been any material
change or a change in a material fact in the business, affairs,
financial position, operations, business prospects, undertakings,
assets, liabilities or obligations, contingent or otherwise or
capital of the Corporation, and (ii) there has been no
transaction entered into by the Corporation, other than those in
the ordinary course of business or those that have been publicly
disclosed;
(v) the Corporation is a "reporting issuer" in the Qualifying
Provinces and is not in default under Securities Laws in the
Qualifying Provinces. In particular, without limiting the
foregoing, the Corporation is in compliance with its obligations
to make timely disclosure of all material changes relating to it
and since September 30, 2001 no such disclosure has been made on
a confidential basis and there is no material change relating to
the Corporation which has occurred and with respect to which the
requisite material change report has not been filed;
(w) no portion of the Information Record contained a
misrepresentation as at its date of public dissemination;
(x) the Special Warrants, Broker's Option, Fiscal Advisor Option or
any Underlying Securities of the Corporation do not constitute
"foreign property" within the meaning of the Income Tax Act
(Canada), or any amendments thereto publicly announced by the
Minister of Finance prior to that time;
(y) the Corporation is a Foreign Issuer and reasonably believes that
there is no substantial U.S. market interest (as defined in
-21-
Regulation S) in the Securities, and neither the Corporation nor
any of its affiliates or any person acting on its or their behalf
has engaged or will engage in 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 the
Securities and shall include, without limitation, the placement
of any advertisement in a publication with a general circulation
in the United States that refers to the placement of the Special
Warrants ("Directed Selling Efforts" within the meaning of
Regulation S). The Corporation is not, and agrees to use its best
efforts not to become at any time prior to the expiration of
three years after the Closing Date, an "investment company" as
defined in the United States Investment Company Act of 1940, as
amended. Neither the Corporation nor any of its affiliates has
taken or will take any action which would cause the exemptions
afforded by Regulation S or Regulation D to be unavailable for
the offer and sale of the Securities pursuant to this Agreement
or which would constitute a violation of Regulation M. Neither
the Corporation, its affiliates nor any person acting on its
behalf has (i) within the last six months offered or sold any
Common Shares or any securities convertible into or exchangeable
for Common Shares by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
1933 Act or in a transaction which violated the registration
requirements of the 1933 Act, or (ii) offered or will offer to
sell the Securities by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D)
or in any manner involving a public offering within the meaning
of the 1933 Act;
(z) the offer, offer for sale, and sale of the Special Warrants and
Units and the Common Shares issuable upon the exercise of the
Purchase Warrants have not been registered under 1933 Act. The
Special Warrants and Units are to be offered, offered for sale
and sold in reliance upon the exemptions from the registration
requirements of Section 5 of the 1933 Act. The Company will use
its best efforts to conduct the Offering in compliance with the
requirements of Regulation D, and the Company will file all
appropriate notice of offering with the SEC;
(aa) assuming (i) the accuracy of the information provided by the
respective Subscribers in the Subscription Agreement and related
documents, and (ii) that the Agent has complied in all material
respects with the provisions of Regulation D and this Agreement,
the offer and sale of the Special Warrants and the Units pursuant
to the terms of this Agreement are exempt from registration
requirements of the 1933 Act and the rules and regulations
-22-
promulgated thereunder. The Company is not disqualified from the
exemption under Regulation D by virtue of the disqualifications
contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder;
(bb) neither the Corporation nor its Subsidiary is in default in the
observance or performance of any term or obligation to be
performed by it under any contract entered into and no event has
occurred which with notice or lapse of time or both would
directly or indirectly constitute such a default, in any such
case which default or event would have a material adverse effect
on its assets or properties, business, results of operations,
prospects or condition (financial or otherwise);
(cc) the outstanding Common Shares of the Corporation are listed and
posted for trading on the TSE and the TSE has conditionally
approved the listing of the Common Shares issuable upon exercise
of the Special Warrants, Purchase Warrants, Compensation Warrants
and Fiscal Advisor Warrants, subject to satisfaction of customary
conditions;
(dd) other than the Agent, there is no person acting or purporting to
act at the request of the Corporation, who is entitled to any
brokerage or fee in connection with the sale of the Subject
Securities;
(ee) the books and records of the Corporation made available to the
Agent, or their counsel, in connection with their due diligence
investigations for the periods from their respective dates of
creation, incorporation to the date of examination thereof are
the original books and records of the Corporation and contain
copies of all proceedings (or certified copies thereof) of the
shareholders, the board of directors and all committees of the
board of directors of such entities and there have been no other
meetings, resolutions or proceedings of the shareholders, board
of directors or any committee of the board of directors to the
date of review of such records and books not reflected in such
books and other records;
(ff) the Special Warrants, Broker's Option and Fiscal Advisor Option
shall be duly and validly authorized and created, and shall be
duly and validly issued as fully paid and non-assessable
securities of the Corporation, at the Closing Time; the Purchase
Warrants, the Compensation Purchase Warrants and the Fiscal
Advisor Purchase Warrants shall be duly and validly authorized at
the Closing Time and shall be duly and validly created and issued
as fully paid and non-assessable securities of the Corporation
upon the exercise of the Special Warrants in accordance with its
terms; the Compensation Warrants and Fiscal Advisor Warrants
issuable
-23-
upon the exercise of the Broker's Option and Fiscal Advisor
Option, respectively, have been duly and validly authorized and
upon their issuance in accordance with their terms; the Common
Shares shall be duly and validly authorized and created and shall
be duly and validly issued as fully paid and non-assessable
securities of the Corporation upon the exercise of the Special
Warrants, Purchase Warrants, Compensation Warrants, Compensation
Purchase Warrants, Fiscal Advisor Warrants and the Fiscal Advisor
Purchase Warrants;
(gg) the Corporation is the absolute owner or has the sole and
exclusive right to use, or is the licensee, sub-licensee or
franchisee, as the case may be, of all Intellectual Property used
by the Corporation and which is material to the Corporation in
the operation of its business without making any payment to any
person or granting any rights to any person in exchange therefor,
other than in accordance with the terms of any such license,
sub-license or franchise arrangement. No event has occurred
during the registration or filing of, or during any other
proceeding relating to such Intellectual Property owned by the
Corporation that would make invalid or unenforceable, or negate
the right to issuance or use of any of such Intellectual Property
owned by the Corporation. Except as otherwise disclosed to the
Agent, there is no Intellectual Property of any person which, to
the knowledge of the Corporation, impairs or prevents, in any
material respect, the development, manufacture, use, sale, lease,
license and service of products, now existing or under
development by the Corporation;
(hh) the execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated
thereby shall not breach, violate or conflict with any instrument
or agreement governing any of the Intellectual Property used by
the Corporation in the operation of its business, and shall not
cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any of such Intellectual Property or
in any way impair the right of the Corporation to use, sell,
license or dispose of or to bring any action for the infringement
of any of such Intellectual Property or portion thereof;
(ii) all appropriate employees of, and consultants to, the Corporation
have entered into agreements with the Corporation pursuant to
which all Intellectual Property developed by them in the course
of their relationships with the Corporation belong solely,
without any restrictions or obligations whatsoever, to the
Corporation. The Corporation has taken all reasonable and
practical steps (including, without limitation, entering into
confidentiality and non-disclosure
-24-
agreements with all appropriate employees of the Corporation or
consultants, third party developers or any other persons with
access to or knowledge of the Corporation's Intellectual
Property) sufficient to safeguard and maintain the secrecy and
confidentiality of, and proprietary rights in, all of the
Corporation's material Intellectual Property;
(jj) except as otherwise disclosed to the Agent, none of the
development, manufacture, marketing, license, sale or use of any
product currently sold by the Corporation or its Subsidiaries or
currently under development violates, in any material respect,
any contract to which the Corporation or its Subsidiaries is a
party or knowingly infringes, in any material respect, any
Intellectual Property of any person. Without limiting the
generality of this paragraph (jj) hereof, except as disclosed to
the Agent, there are no pending and, to the knowledge of the
Corporation, no threatened, proceedings, litigation or other
adverse claims affecting, or with respect to, any part of the
material Intellectual Property used by the Corporation in the
operation of its business and, to the knowledge of the
Corporation, no person is infringing upon such material
Intellectual Property of the Corporation;
(kk) except for temporary trading halts pending announcements, no
order ceasing or suspending trading in securities of the
Corporation or prohibiting the sale of securities by the
Corporation has been issued and, to the knowledge of the
Corporation, no proceedings for this purpose have been
instituted, are pending, contemplated or threatened;
(ll) since September 30, 2001 the Corporation has not, directly or
indirectly, declared or paid any dividend or declared or made any
other distribution on any of its common shares or other
securities or, directly or indirectly, redeemed, purchased or
otherwise acquired any of its common shares or other securities
or agreed to do any of the foregoing;
(mm) there is not in the constating documents of the Corporation or in
any agreement, mortgage, note, debenture, indenture or other
instrument or document to which the Corporation is a party, any
restriction upon or impediment to the declaration or payment of
dividends by the directors of the Corporation or the payment of
dividends by the Corporation to the holders of its common shares;
(nn) except for Xxxxxx Xxxx, the Corporation does not owe any money
to, nor has the Corporation any present loans to, or borrowed any
monies from, or is otherwise indebted to any officer, director,
employee, shareholder or any person not dealing "arm's length"
(as
-25-
such term is defined in the Income Tax Act (Canada)) with the
Corporation;
(oo) the Corporation is in compliance with all laws respecting
employment and employment practices, terms and conditions of
employment, pay equity and wages;
(pp) the Corporation is not a party to any contract with any labour
union or employee association or made commitments to or conducted
negotiations with any labour union or employee association with
respect to any future agreement and to the knowledge of the
Corporation there are no current attempts to organize or
establish any labour union or employee association, nor is there
any certification of any such union with regard to a bargaining
unit;
(qq) the assets of the Corporation and its Subsidiary and their
business and operations are insured against loss or damage with
responsible insurers on a basis consistent with insurance
obtained by reasonably prudent participants in comparable
businesses, and such coverage is in full force and effect, and
the Corporation has not failed to promptly give any notice or
present any claim thereunder;
(rr) the Corporation is not aware of any legislation, or proposed
legislation which it anticipates shall adversely affect the
business, affairs, operations, assets, liabilities (contingent or
otherwise) or prospects of the Corporation and the Subsidiary,
taken as a whole;
(ss) all taxes (including income tax, capital tax, payroll taxes,
employer health tax, worker's compensation payments, custom and
land transfer taxes), duties, royalties, levies, imposts,
assessments, deductions, charges or withholdings and all
liabilities with respect thereto including any penalty and
interest payable with respect thereto (collectively, "Taxes") due
and payable by the Corporation and the Subsidiaries have been
paid. All tax returns, declarations, remittances and filings
required to be filed by the Corporation and the Subsidiaries have
been filed with all appropriate governmental authorities and all
such returns, declarations, remittances and filings are complete
and accurate and no material fact or facts have been omitted
therefrom which would make any of them misleading. No examination
of any tax return of the Corporation or any of the Subsidiaries
is currently in progress and there are no issues or disputes
outstanding with any governmental authority respecting any taxes
that have been paid, or may be payable, by the Corporation or any
of the Subsidiaries, in any case
(tt) no person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming a right,
-26-
agreement or option, for the purchase from the Corporation of any
interest in any common shares or any other security convertible
into or exchangeable for any such shares, except as set forth in
Schedule "A" hereto, or to require the Corporation to purchase,
redeem or otherwise acquire any of the issued and outstanding
securities of the Corporation;
(uu) the Corporation has conducted and is conducting its business in
compliance in all material respects, with all applicable laws,
statutes, by-laws, rules and regulations of each jurisdiction in
which its business is carried on and holds all material licenses,
registrations, permits, consents or qualifications required in
order to enable its business to be carried on as now conducted,
and all such licenses, registrations, permits, consents and
qualifications are valid and subsisting and in good standing in
all respects;
(vv) the Corporation has not: committed an act of bankruptcy nor is it
insolvent, proposed a compromise or arrangement to its creditors
generally, had a petition for a receiving order in bankruptcy
filed against it, made a voluntary assignment in bankruptcy,
taken any proceedings with respect to a compromise or
arrangement, taken any proceedings to have itself declared
bankrupt, wound-up or dissolved, taken any proceedings to have a
receiver appointed to any of its property or had any execution or
distress become enforceable or become levied upon any of its
properties;
(ww) the Corporation's equipment is adequate and sufficient for the
conduct of its business as presently conducted;
(xx) the books and records of the Corporation are true and complete in
all material respects;
(yy) to the knowledge of the Corporation, none of the directors,
officers or principal shareholders of the Corporation (or such
shareholders' respective principals) is or has ever been subject
to any prior regulatory, criminal or bankruptcy proceeding in
Canada or elsewhere;
(zz) except for Xxxxxx Xxxx, the Corporation does not owe any money
to, nor has the Corporation any present loans to, or borrowed any
monies from, or is otherwise indebted to any officer, director,
employee, shareholder or any person not dealing at "arm's length"
(as such term is defined in the Income Tax Act (Canada)) with the
Corporation except for usual employee reimbursements and
compensation paid in the ordinary and normal course of the
business of the Corporation;
-27-
(aaa)except for Xxxxxx Xxxx, the Corporation is not a party to any
material contract, agreement or understanding with any officer,
director, employee, shareholder or any other person not dealing
at arm's length with the Corporation;
(bbb)no officer of the Corporation and no entity which is an
affiliate or associate or any one or more of the foregoing owns,
directly or indirectly, any interest (except for shares
representing less than 5% of the outstanding shares of any class
or series of any publicly traded company), or is an officer,
director, employee or consultant of, any person which is, or is
engaged in, a business competitive with the Corporation;
(ccc)to the knowledge of the Corporation, after due enquiry, no
present or former officer, director, employee or shareholder of
the Corporation has any cause of action, or other claim
whatsoever, against, or owes any amount to, the Corporation in
connection with the Corporation except for any claims in the
ordinary and normal course of the business of the Corporation
such as for accrued vacation pay and accrued benefits under any
employee plans;
(ddd)all material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan premiums,
accrued wages, salaries and commissions and employee benefit plan
payments have been reflected in the books and records of the
Corporation;
(eee)there have not been and there are not currently any material
disagreements or other difficulties with any of the Corporation's
employees, or former employees, which is adversely affecting or
could reasonably adversely affect, in a material manner, the
carrying on of the Corporation's business; and
(fff)the Corporation has not received notice nor is it otherwise
aware that its business relationship with any of its principal
customers, suppliers and project and/or joint venture partners
and/or participants shall terminate in the next twelve (12)
months other than pursuant to the terms of the respective
agreements between the parties.
9. Covenants of the Corporation
9.1 The Corporation hereby covenants to and with the Agent and each of the
Purchasers that:
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(a) it shall prior to the Prospectus Qualification, obtain all
necessary regulatory consents from the TSE to the Offering on
such terms and conditions as are mutually acceptable to the Agent
and the Corporation, acting reasonably;
(b) it shall prior to the Closing, use reasonable commercial efforts
to arrange for the conditional listing for trading of the Common
Shares issuable upon exercise of the Special Warrants, the
Purchase Warrants, the Compensation Warrants, the Compensation
Purchase Warrants, the Fiscal Advisor Warrants and the Fiscal
Advisor Purchase Warrants on the TSE, subject to the usual
conditions. The Corporation further covenants and agrees to use
reasonable commercial efforts to cause such approval to be
obtained prior to the Closing Date;
(c) it shall use reasonable commercial efforts to maintain the
listing of the Common Shares on the TSE, or on such other stock
exchange or quotation system acceptable to the Agent and its
status as reporting issuer in good standing and its equivalent
under the securities legislation of the Qualifying Provinces for
the period of 36 months from the date of the Prospectus
Qualification;
(d) it shall take all steps necessary to authorize the execution and
delivery of the Agreements and to duly and punctually perform all
obligations to be performed by it under the Agreements;
(e) it shall at all times allow the Agent and its representatives to
conduct all due diligence which the Agent may reasonably require
to be conducted in order to fulfill its obligations as
"underwriter" under Securities Law other than the state and
federal securities laws of the United States and in order to
enable the Agent to responsibly execute any certificate required
to be executed in connection with a Prospectus, and it shall be a
condition precedent to the Agent's execution of any certificate
in any Prospectus that the Agent and its counsel be satisfied,
acting reasonably, as to the form and content of such Prospectus;
(f) the Common Shares shall, upon issuance, be duly issued as
fully-paid and non-assessable shares in the capital of the
Corporation, and shall have attributes corresponding in all
material respects to the description therefore set forth in the
Agreements, as the case may be;
(g) it shall appoint and maintain the due appointment of
Computershare Trust Company of Canada, or any successor trustee
which may be appointed in accordance with the Special Warrant
-29-
Indenture and Purchase Warrant Indenture, as Special Warrant
trustee and Purchase Warrant trustee, respectively;
(h) without the written approval of the Agent, it shall not issue,
agree to issue or announce the issuance of any Common Shares or
any securities convertible into or exchangeable, directly or
indirectly, for or exercisable to acquire Common Shares or other
equity securities of the Corporation, other than in connection
with the exercise of convertible securities outstanding as of the
date hereof, for a period commencing on the date hereof and
ending on the date that is the earlier of 120 days following the
Closing Date or 30 days following the Prospectus Qualification
(the "Restrictive Period") without the prior written agreement of
the Agent, such agreement not to be unreasonably withheld, the
Closing Date, other than: (a) as part of the Commonwealth
Offering; (b) the issuance of options which may be granted to
consultants, directors, officers and employees pursuant to
existing stock option plans; (c) Common Shares to be issued to
satisfy consultant, employee or director stock options or
instruments; (d) the issuance of warrants which have been
publicly disclosed but not issued pending receipt of regulatory
approval; (e) Common Shares to be issued to satisfy existing
warrants and those warrants which have been publicly disclosed
but not issued pending receipt of regulatory approval; (f) the
issuance of any securities contemplated as part of the Offering;
(g) the issuance of any securities in connection with an
acquisition of any company, business or other entity or the
licence of any technology; (h) the issuance of any securities in
connection with an amalgamation, merger, arrangement or sale of
the Corporation; or (i) the issuance of any securities in
connection with a takeover bid defence by the Corporation;
(i) it shall ensure that at the Closing, the Common Shares, Special
Warrants, Purchase Warrants, Broker's Option, Compensation
Warrants, Compensation Purchase Warrants, Fiscal Advisor Option,
Fiscal Advisor Warrants and Fiscal Advisor Purchase Warrants do
not constitute "foreign property" within the meaning of the
Income Tax Act (Canada) or any amendments thereto publicly
announced by the Minister of Finance from time to time;
(j) it shall use the net proceeds of the Offering for purposes that
shall be set forth in the Prospectus or any Prospectus Amendment;
(k) it shall deliver a copy of the Preliminary Prospectus and the
Prospectus (and any Prospectus Amendment thereto) to all holders
of Special Warrants and ensure compliance with the requirements
of applicable securities legislation in respect of the offering
for sale
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and sale of the Special Warrants, the distribution of the
securities underlying the Special Warrants and the issue and
distribution of the Broker's Option and the Fiscal Advisor
Warrants and the Common Shares and Compensation Purchase Warrants
underlying the Compensation Warrants and the Common Shares and
Fiscal Advisor Purchase Warrants underlying the Fiscal Advisor
Warrants, respectively, and, without limitation to the foregoing,
the completion and filing of the Preliminary Prospectus and the
Prospectus;
(l) it shall enter into the Purchase Warrant Indenture and Special
Warrant Indenture with the Purchase Warrant Agent and Special
Warrant Agent, respectively, in a form satisfactory to the Agent,
by the Closing Time;
(m) prior to the Closing Time, it shall have created the Special
Warrants, the Broker's Option, the Fiscal Advisor Option;
authorized for issuance: the Purchase Warrants issuable upon the
exercise of the Special Warrants; the Compensation Warrants
issuable upon exercise of the Broker's Option; the Fiscal Advisor
Warrants issuable upon the exercise of the Fiscal Advisor Option,
the Compensation Purchase Warrants issuable upon exercise of the
Compensation Warrants and the Fiscal Advisor Purchase Warrants
issuable upon exercise of the Fiscal Advisor Warrants; and
reserved and allotted for issuance the Common Shares issuable
upon exercise of the Special Warrants, Compensation Warrants,
Compensation Purchase Warrants, Fiscal Advisor Warrants, Fiscal
Advisor Purchase Warrants and Purchase Warrants, as the case may
be, and obtained all necessary approvals in connection with the
creation and issuance of the Special Warrants, Broker's Option
and Fiscal Advisor Option and the Underlying Securities, as
applicable, so that the Special Warrants, Broker's Option and
Fiscal Advisor Option and the Underlying Securities shall be
issued as fully-paid and non-assessable securities of the
Corporation;
(n) it shall complete all filings as may be necessary or desirable or
as may be requested by the Agent, acting reasonably, in
connection with the Offering; and
(o) any press release relating to the Offering shall be drafted in
accordance with the requirements suggested by U.S. counsel to the
Company for the purpose of ensuring compliance with Rule 135c
under the 1933 Act.
-31-
10. Due Diligence
10.1 The Agent shall have the right to conduct due diligence, inquiries and
investigations on all matters it considers necessary or desirable
prior to the filing of the Preliminary Prospectus, the Prospectus and
any Prospectus Amendment, and the Corporation shall facilitate the
Agent's ability to do so. The completion of the Offering, and the
Agent's approval of the Preliminary Prospectus, the Prospectus and any
Prospectus Amendment, shall be conditional upon the Agent being
completely satisfied with the results of such due diligence, inquiries
and investigations and receipt of all opinions, certificates
(including, without limitation, as to representations and warranties
relating to the Corporation and the Offering), comfort letters (of
auditors and otherwise) and other documents as the Agent, or its
counsel, may consider necessary or desirable, in all such cases,
acting reasonably.
11. Closing
11.1 The Closing shall occur at the Closing Time at the offices of Xxxxxxx
Xxxxx & Xxxxxxxxx LLP, 2100 - 00 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
X0X 0X0, or at such other place as the Corporation and the Agent may
agree to in writing. At the Closing Time, the Corporation shall
deliver to the Agent:
(a) certificates representing the Subject Securities registered in
such manner as the Agent shall direct not less than 24 hours
prior to Closing;
(b) a direction to deduct the Agency Fee and Fiscal Advisor Fee and
expenses as set forth in Section 2 hereof, from the proceeds of
the sale of the Subject Securities purchased by the Agent
hereunder at the Closing Time, which the Corporation agrees to
pay to the Agent for its services in connection with the issuance
and sale of the Special Warrants from the gross purchase price
for the Special Warrants owing to the Corporation by the Agent;
and
(c) such further documentation as may be contemplated herein.
12. Closing Conditions
12.1 The Agent's obligations under this agreement and each Purchaser's
obligation to purchase the Subject Securities at the Closing Time,
shall be conditional upon the fulfillment of the following conditions,
which conditions are for the sole benefit of the Agent and may be
waived in writing in whole or in part by the Agent in its sole
discretion:
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(a) prior to the Closing Date, the Corporation shall have made and/or
obtained the necessary filings, approvals, consents and
acceptances required to be made or obtained by the Corporation
under Securities Law other than the state and federal securities
laws of the United States (including the receipt of all approvals
from the TSE) in connection with the offering of the Subject
Securities and the Underlying Securities on terms which are
acceptable to the Corporation and the Agent, acting reasonably;
(b) all authorizations and approvals shall have been obtained by the
Corporation, for the execution, delivery and performance by such
parties of the Transaction Documents and for the issuance of the
Subject Securities, the Broker's Option and the Fiscal Advisor
Option and the Underlying Securities; including shareholder
approval, all authorizations and approvals shall have been
obtained by the Corporation for the execution, delivery and
performance by the Corporation of the Transaction Documents;
(c) the Corporation shall deliver to the Agent, at the Closing Time,
a separate certificate dated the Closing Date addressed to the
Agent and signed by the President and the Chief Financial Officer
of the Corporation or any two other senior officers of the
Corporation acceptable to the Agent, acting reasonably,
certifying for and on behalf of the Corporation to the effect
that:
(i) the Corporation has complied with all the covenants and
satisfied all the terms and conditions of this Agreement to
be complied with and satisfied at or prior to the Closing
Time;
(ii) the representations and warranties of the Corporation
contained herein are true and correct as at the Closing
Time, with the same force and effect as if made on and as at
the Closing Time;
(iii)no order, ruling or determination having the effect of
ceasing the trading of the Common Shares of the Corporation
or the Subject Securities, the Broker's Option, the Fiscal
Advisor Option or Underlying Securities, or suspending the
sale thereof, has been issued and no proceedings for such
purpose have been instituted or are pending or, to the
knowledge of such officers, contemplated or threatened;
(iv) the Commonwealth Offering shall have been completed for a
minimum of US$5 million;
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(v) no failure or default on the part of the Corporation or the
Subsidiary exists under any law or regulation applicable to
them or under any licence, permit or other instrument
granted or issued to them or under any contract, agreement
or other instrument to which they are a party or by which
they are bound, which may in any way materially adversely
affect the Corporation or the Subsidiary taken as a whole or
the execution, delivery and performance of the Transaction
Documents or the allotment, issue and sale, as applicable,
of the Subject Securities, Broker's Option and Fiscal
Advisor Option or the Underlying Securities shall not result
in any such default;
(vi) the Corporation has complied with all terms, covenants and
conditions of this Agreement on the Corporation's part to be
complied with up to the Closing Time; and
(vii)such other matters as the Agent or its counsel may
reasonably require,
and all such matters shall in fact be true and correct as at
the Closing Time;
(d) all actions required to be taken by the Corporation including the
passing of all requisite resolutions and all requisite filings
with governmental authorities, shall have occurred at or prior to
the Closing Time so as validly to authorize the execution and
delivery of the Transaction Documents and the performance of the
transactions contemplated hereby;
(e) the Corporation shall have delivered to the Agent executed copies
of the Purchase Warrant Indenture and Special Warrant Indenture,
in form and substance satisfactory to the Agent and its counsel,
acting reasonably;
(f) the Corporation shall have caused a favourable legal opinion to
be delivered by its counsel addressed to the Agent in a form and
substance satisfactory to the Agent, acting reasonably, with
respect to such matters as the Agent may reasonably request,
including as to matters relating to corporate matters and the
distribution of the Subject Securities, Broker's Option, Fiscal
Advisor Option and Underlying Securities. In giving such
opinions, counsel to the Corporation shall be entitled to rely,
to the extent appropriate in the circumstances, upon opinions of
local counsel acceptable to the Agent, acting reasonably, and
shall be entitled to rely to the extent appropriate in the
circumstances as to the matters of fact upon a certificate of an
officer of the Corporation;
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(g) the Corporation shall deliver to the Agent, at the Closing Time,
a separate certificate dated the Closing Date addressed to the
Agent and signed by the Chief Financial Officer of the
Corporation or any other senior officer of the Corporation
acceptable to the Agent, acting reasonably, certifying for and on
behalf of the Corporation its constating documents, including all
resolutions of the board of directors relating to the
transactions contemplated hereunder and the incumbency and
specimen signatures of signing officers;
(h) the Agent shall deliver to the Corporation and its counsel an
executed certificate dated as of the Closing Date in the form
attached as Schedule "C";
(i) the Agent shall have received all such other documentation in
form and substance satisfactory to the Agent, acting reasonably,
as the Agent may reasonably request;
(j) Computershare Trust Company of Canada has been duly appointed as
Special Warrant Trustee under the Special Warrant Indenture and
the Purchase Warrant Trustee under the Purchase Warrant
Indenture; and
(k) such other matters as the Agent or its counsel may reasonably
require.
13. Termination
13.1 The Agent may at any time terminate this Agreement by providing notice
in writing to the Corporation at any time if:
(a) there is, in the sole opinion of the Agent, a material change or
a change in a material fact or a new material fact shall arise,
not previously disclosed to the public, which would be expected
to have an adverse effect on the business, affairs or
profitability of the Corporation or in the market price or value
of the common shares of the Corporation;
(b) there should develop, occur or come into effect any event of any
nature, including without limitation, accident, governmental law
or regulation, which in the sole opinion of the Agent adversely
affects or may adversely affect the financial markets or the
business, affairs or profitability of the Corporation;
(c) the state of the financial markets is such that, in the sole
opinion of the Agent, the Subject Securities cannot be profitably
marketed or sold;
-35-
(d) except as previously disclosed to the public, there is an inquiry
or investigation (whether formal or informal) in relation to the
Corporation, or any one of the Corporation's directors, officers
or principal shareholders or the Corporation;
(e) any order to cease trade in the securities of the Corporation is
made by a competent securities regulatory authority; or
(f) the Corporation is in breach of a term, condition or covenant of
this Agreement or any representation or warranty given by the
Corporation is or becomes false.
13.2 All terms and conditions of this Agreement shall be construed as
conditions, and any breach or failure by the Corporation to comply
with any of such terms and conditions shall entitle the Agent to
terminate its obligations under this Agreement by notice to that
effect given to the Corporation at or prior to the Closing Time. The
Agent may waive, in whole or in part, or extend the time for
compliance with, any of such terms and conditions without prejudice to
its rights in respect of any other of such terms and conditions or any
other or subsequent breach or non-compliance; provided, however, that
to be binding on the Agent any such waiver or extension must be in
writing and signed by the Agent.
13.3 The rights of termination contained in this Section 13 may be
exercised by the Agent and are in addition to any other rights or
remedies the Agent may have in respect of any default, act or failure
to act or non-compliance by the Corporation in respect of any of the
matters contemplated by this Agreement. In the event of any
termination, there shall be no further liability on the part of the
Agent to the Corporation or on the part of the Corporation to the
Agent, except in respect of any liability which may have arisen or may
thereafter arise under paragraphs 14 and 15.
14. Indemnity
14.1 The Corporation covenants and agrees to indemnify and hold harmless
the Agent, the affiliates and their respective directors, officers,
employees, partners, agents and shareholders (each an "Indemnified
Party") to the full extent lawful, from and to the full extent lawful,
from and against any and all losses, claims, actions, damages,
liabilities, costs, actions or expenses, joint or several, (including
the aggregate amount paid in reasonable settlement of any actions,
suits, proceedings, investigations or claims, and the reasonable fees
and expenses of their counsel that may be incurred in advising with
respect to and/or defending any actions, suits, proceedings,
investigations or claims that may be made or threatened against any
Indemnified Party but not including any amount for lost profits)
caused or incurred by reason of:
-36-
(a) any statement or information contained in the Preliminary
Prospectus, the Prospectus or any Prospectus Amendment that may
be filed on behalf of the Corporation under Securities Law other
than the state and federal securities laws of the United States
or any other document or material filed or delivered pursuant
hereto (other than any statement or information relating solely
to or provided by the Agent) containing or being alleged to
contain a misrepresentation or being or being alleged to be
untrue, false or misleading in the light of the circumstances
under which it was made;
(b) any statement (other than a statement relating solely to or
provided by the Agent) contained in the Information Record which
at the time and in the light of the circumstances under which it
was made, contained or is alleged to have contained a
misrepresentation or being or being alleged to be untrue, false
or misleading;
(c) any order made or inquiry, investigation or proceeding (formal or
informal) commenced or threatened by any officer or official of
any securities regulatory authority or by any competent authority
based upon the circumstances described in clause 13.1 above which
operates to prevent or restrict trading in or distribution of the
Subject Securities, the Broker's Option, the Fiscal Advisor
Option and the Underlying Securities in any of the Qualifying
Provinces (except in so far as it relates to a restriction on the
number of Compensation Warrants or Fiscal Advisor Warrants which
may be qualified under the Prospectus);
(d) the breach of any representations, warranties or covenants by the
Corporation contained in the Transaction Documents, delivered
pursuant hereto;
(e) the Corporation not complying with any requirement of Securities
Law in connection with the transactions contemplated by the
Transaction Documents; or
(f) otherwise caused by, resulting from, arisen out of or based upon,
directly or indirectly, the performance of professional services
rendered by an Indemnified Party, pursuant to this Agreement,
provided that this indemnity may not be relied upon by any
Indemnified Party in respect of any losses which result from any
negligence, bad faith, willful misconduct or fraud by any
Indemnified Party.
14.2 If any action or claim shall be asserted against an Indemnified Party
in respect of which indemnity may be sought from the Corporation
pursuant
-37-
to the provisions hereof, or if any potential claim contemplated by
this Section 14.2 shall come to the knowledge of an Indemnified Party,
the Indemnified Party shall promptly notify the Corporation in writing
of the nature of such action or claim (provided that any failure to so
notify shall not affect the Corporation's liability under this
paragraph unless such delay has prejudiced the defence to such claim).
The Corporation shall be entitled, at its own expense, but not obliged
to participate in or assume the defence thereof, provided, however
that the defence shall be through legal counsel acceptable to the
Indemnified Party, acting reasonably. In addition, the Indemnified
Party shall also have the right to employ separate counsel in any such
action and participate in the defence thereof, and the fees and
expenses of such counsel shall be borne by the Indemnified Party,
unless (i) the employment thereof has been specifically authorized in
writing by the Corporation; (ii) the Indemnified Party has been
advised by counsel acceptable to the Corporation, acting reasonably,
that representation of the Corporation and the Indemnified Party by
the same counsel would be inappropriate due to actual or potential
differing interests between them; or (iii) the Corporation has failed
within a reasonable time after receipt of such written notice to
assume the defence of such action or claim. It is understood and
agreed that the Corporation shall not, in connection with any suit in
the same jurisdiction, be liable for the legal fees and expenses of
more than one separate legal firm to represent the Indemnified
Parties. Neither party shall effect any settlement of any such action
or claim or of any action, proceeding or investigation or make any
admission of liability without the written consent of the other party,
such consent not to be unreasonably withheld or delayed. The indemnity
hereby provided for shall remain in full force and effect and shall
not be limited to or affected by any other indemnity in respect of any
matters specified in this section obtained by the Indemnified Party
from any other person.
14.3 If for any reason (other than determinations as to any of the
following events: a court of competent jurisdiction in a final
judgment that has become non-appealable shall determine that such
expenses, losses, claims, actions, damages or liabilities (except for
loss of profits in connection with the sale of the Subject Securities)
to which the Indemnified Party may be subject were primarily caused by
the negligence, bad faith or willful misconduct of the Indemnified
Party), the foregoing indemnification is unavailable to the Agent or
any other Indemnified Party or insufficient to hold the Agent or any
other Indemnified Party, harmless, the Corporation shall contribute to
the amount paid or payable by the Agent or the other Indemnified Party
as a result of such expense, loss, claim, action, damage or liability
in such proportion as is appropriate to reflect not only the relative
benefits received by the Corporation on the one hand and the Agent or
any other Indemnified Party on the other hand but also the relative
fault of the Corporation, the Agent or any other Indemnified Party
-38-
as well as any relevant equitable considerations; provided that the
Corporation shall in any event contribute any amount paid or payable
by the Agent or any other Indemnified Party as a result of such
expense, loss, claim, action, damage or liability which exceeds in the
aggregate the amount of the fees received by the Agent under this
Agreement.
14.4 The Corporation hereby agrees that, in respect of any matter for which
indemnity may be sought against the Corporation, in case any
proceeding shall be brought against the Corporation and/or the Agent
or any other Indemnified Party by any governmental commission or
regulatory authority or any stock exchange or other entity having
regulatory authority, either domestic or foreign, or any such
authority shall investigate the Corporation and/or the Agent or any
other Indemnified Party and the Agent or such other Indemnified Party
shall be 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 this Agreement, the
engagement of the Agent thereunder, or the performance of professional
services rendered to the Corporation by the Agent thereunder, the
Agent or such other Indemnified Party shall have the right to employ
its own counsel in connection therewith, and the reasonable fees and
expenses of such counsel as well as the reasonable costs (including
any amount to reimburse the Agent for time spent by its, or any of its
affiliates, directors, officers, employees, partners or agents
(collectively, "Personnel") in connection therewith, and out-of-pocket
expenses incurred by its Personnel in connection therewith shall be
paid by the Corporation as they occur.
14.5 Promptly after receiving notice of an action, suit, proceeding or
claim against the Agent or any other Indemnified Party or receipt of
notice of the commencement of any investigation which is based,
directly or indirectly, upon any matter in respect of which
indemnification may be sought from the Corporation and the Agent shall
notify the Corporation in writing of the particulars thereof, shall
provide copies of all relevant documentation to the Corporation and,
unless the Corporation participates in the defense thereof as
contemplated herein, shall keep the Corporation advised of the
progress thereof and shall discuss all significant actions proposed.
The omission so to notify the Corporation shall not relieve the
Corporation of any liability which the Corporation may have to the
Agent or any other Indemnified Party except only to the extent that
any such delay in or failure to give notice as herein required
prejudices the defense of such action, suit, proceeding, claim or
investigation or results in any material increase in the liability
which the Corporation would otherwise have under this indemnity had
the Agent not delayed in or failed to give the notice required
hereunder.
-39-
14.6 The indemnity and contribution obligations of the Corporation
hereunder shall be in addition to any liability which the Corporation
may otherwise have, shall extend upon the same terms and conditions to
the Indemnified Parties, shall be binding upon and inure to the
benefit of any successors, permitted assigns, heirs and personal
representatives of the Corporation and the Agent and any other
Indemnified Party. The foregoing provisions shall survive the
completion of professional services rendered under this agreement or
any termination of such services pursuant to the terms of this
Agreement.
14.7 To the extent that any Indemnified Party is not a party to this
Agreement the Agent shall obtain and hold the right and benefit of
this section in trust for and on behalf of such Indemnified Party.
14.8 The Corporation hereby waives its right to recover contribution from
the Agent with respect to any liability of the Corporation by reason
of or arising out of any misrepresentation contained in the
Preliminary Prospectus, the Prospectus or in any Prospectus Amendment;
provided, however, that such waiver shall not apply in respect of
liability caused or incurred by reason of or arising out of any
misrepresentation which is based upon or results from information
relating solely to or provided by the Agent contained in such
document.
14.9 The Corporation hereby consents to personal jurisdiction and service
and venue in any court in which any claim which is subject to
indemnification hereunder is brought against the Agent or any
Indemnified Party and to the assignment of the benefit of this section
to any Indemnified Party for the purpose of enforcement provided that
nothing herein shall limit the Corporation's right or ability to
contest the appropriate jurisdiction or forum for the determination of
any such claims.
15. Expenses
15.1 Whether or not the Offering is completed, all expenses of or
incidental to the Offering, including without limitation, the
preparation and filing of the Preliminary Prospectus, the Prospectus,
or any Prospectus Amendment, listing fees, filing fees, printing
expenses, costs relating to the preparation of video productions, the
cost of any road shows and the Agent's reasonable out-of-pocket
expenses (including the reasonable fees and disbursements of the
Agent's counsel), shall be borne by the Corporation and payable at the
Closing Time.
16. Severability
16.1 If any provision of this Agreement is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
-40-
impair the validity of any other provision of this Agreement and such
void or unenforceable provision shall be severable from this
Agreement.
17. Survival of Indemnities, Representations and Warranties
17.1 All representations, warranties, covenants and agreements of the
Corporation herein contained or contained in documents submitted
pursuant to this agreement and in connection with the transactions
contemplated herein shall survive the purchase and sale of the Subject
Securities and the termination of this Agreement and shall continue in
full force and effect for the benefit of the Agent and each of the
Purchasers, regardless of any subsequent disposition of the Subject
Securities or any investigation by or on behalf of the Agent or any of
the Purchasers with respect thereto for a period of two (2) years
following the date hereof.
18. Time of the Essence
18.1 Time shall be of the essence of this Agreement.
19. Governing Law
19.1 This Agreement shall be governed and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada
applicable therein and shall be treated in all respects as a British
Columbia contract. Each party hereby irrevocably submits to the
exclusive jurisdiction of the courts of British Columbia with respect
to any matter arising hereunder or related hereto.
20. Funds
20.1 All funds referred to in this Agreement shall be in Canadian dollars.
21. Notice
21.1 Unless otherwise expressly provided in this Agreement, any notice or
other communication to be given under this Agreement (a "Notice")
shall be in writing addressed as follows:
if to the Corporation:
Infowave Software, Inc.
0000 Xxxxxxxx Xxxxxxx,
Xxxxx 000
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Mr. Xxxx Xxxxxx, Chief Financial Officer
Telecopier Number: (000) 000-0000
-41-
with a copy to:
Blake, Xxxxxxx & Xxxxxxx LLP
Barristers & Solicitors
Suite 2600, Three Bentall Centre
P. O. Xxx 00000
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
Attention: Xx. Xxxxx Xxxxxxx
Telecopier Number: (000) 000-0000
or if to the Agent:
Canaccord Capital Corporation
0000-000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX
X0X 0X0
Attention: Mr. Xxxxx Xxxxx
Telecopier Number: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxxxx LLP
Barristers & Solicitors
Scotia Plaza
00 Xxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxxxx Xxxxxxx
Telecopier Number: (000) 000-0000,
or to such other address as any of the parties may designate by Notice
given to the others.
Each Notice shall be personally delivered to the addressee or sent by
fax to the addressee and (i) a Notice which is personally delivered
shall, if delivered on a Business Day, be deemed to be given and
received on that day and, in any other case, be deemed to be given and
received on the first Business Day following the day on which it is
delivered; and (ii) a Notice which is sent by fax shall be deemed to
be given and received on the first Business Day following the day on
which it is sent.
-42-
22. Counterparts and Facsimiles
22.1 This Agreement may be executed by any one or more of the parties to
this Agreement in any number of counterparts and may be delivered by
facsimile, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same
instrument.
23. Successors and Assigns
23.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors (including any successor by
reason of amalgamation or statutory arrangement) and permitted assigns
and upon the heirs, executors, legal representatives, successors and
permitted assigns of the Agent. Neither party shall assign any of its
rights or obligations hereunder without the consent of the other party
hereto.
24. Entire Agreement
24.1 This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof and cancels and supercedes any
prior understandings and agreements between the parties hereto with
respect thereto, including the engagement letter between the parties
dated July 30, 2001. There are no representations, warranties, terms,
conditions, undertakings or collateral agreements, expressed, implied
or statutory, between the parties other than as expressly set forth in
this Agreement.
If the above is in accordance with your understanding, please sign and
return to the Agent a copy of this Agreement, whereupon this Agreement and your
acceptance shall constitute a binding Agreement between the Corporation and the
Agent.
CANACCORD CAPITAL CORPORATION
Per: --------------------------------------------
Xxxxx Xxxxx
The above offer is hereby accepted and agreed to as of the date first above
written.
INFOWAVE SOFTWARE, INC.
Per: --------------------------------------------
Xxxx Xxxxxx
SCHEDULE A
OUTSTANDING OPTIONS, RIGHTS, WARRANTS OR OBLIGATIONS
Share Capital Structure as at November 23, 2001
Common Shares
-------------
Authorized: 200,000,000
Issued & Outstanding: 23,411,003
Free-Trading 23,411,003
Warrants Price Expiry
-------- ----- ------
Agents' Warrants 46,200 $32.50 04/13/02
Unit Warrants 1,136,364 $7.15 08/22/02
Agents' Warrants 113,636 $5.50 02/13/02
Agents' Warrants 56,818 $7.15 02/13/02
Xxxx Warrants 3,510,455 $1.10 07/24/04
------------------------------------------------------------------------
Total Warrants Outstanding 4,863,473
Stock Options
-------------
Outstanding: 6,610,289
Combined Securities
-------------------
Fully Diluted: 34,884,765
--------------
SCHEDULE B
LITIGATION MATTERS
The Corporation has received a letter on behalf of Geoworks Corporation
("Geoworks") asserting that it holds a patent on certain aspects of technology
which are part of the Wireless Access Protocol ("WAP") standard. Certain of the
Corporation's products use or operate in conjunction with WAP-compliant
technology. After an internal investigation based upon the description provided
by Geoworks of its purportedly patented technology, the Corporation believes
that its products do not include implementation of the Geoworks technology.
The Corporation has received a letter from Glenayre Electronics, Inc.
("Glenayre") informing Infwoave that Glenayre may require indemnity under
certain agreements the Corporation has with Glenayre. The Corporation has
developed and supplied technology to Glenayre. After an internal investigation
based upon the description provided by Glenayre in relation to its possible need
for indemnity, the Corporation believes that the technology the Corporation
developed and supplied to Glenayre does not infringe the intellectual property
rights of any third party and therefore, that the Corporation does not need to
indemnify Glenayre.
Form of Placement Agent Certificate
Canaccord Capital Corporation (the "Placement Agent") hereby
represents and warrants to Infowave Software, Inc. (the "Company") that in
connection with the private placement of the Company's securities pursuant to
the Agency Agreement dated November 23, 2001 between the Placement Agent and the
Company (the "Agreement") as follows (all capitalized terms not otherwise
defined herein having the meanings set forth in the Agreement):
1. the Placement Agent acknowledges that the Special Warrants, Units,
Purchase Warrants and all of the underlying Common Shares issuable upon exercise
of such securities (the "Securities") have not been and will not be registered
with the SEC under the 1933 Act and that the Special Warrants are being offered
and sold in reliance upon an exemption from registration provided by Regulation
S in the case of offers and sales outside the United States, and in the case of
offers and sales by the Placement Agent or by selected dealers in the United
States, by the exemption from registration provided by Rule 506 of Regulation D;
2. the Placement Agent, or any selected dealer, if applicable, or any of
their respective affiliates (A) have not engaged or will not engage in any
Directed Selling Efforts within the meaning of Regulation S with respect to the
Securities, (B) other than offers and sale made in accordance with Paragraph 5,
have not made or will not make (x) any offer to sell or solicitation of an offer
to buy any of the Securities to any person or (y) any sale of the Securities to
any person unless (1) the offer is not made to any person in the United States,
(2) the seller of such Securities and any person acting on its behalf reasonably
believes that at the time such person placed the order to purchase Securities
such person was outside the United States and (3) such sale is otherwise in
compliance with the applicable requirements of Regulation S, (C) have not taken
or will not take any action which would constitute a violation of Regulation M,
or (D) have not solicited or will not solicit offers for, or have not made or
will not make offers to sell, the Securities by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the 0000 Xxx) or in any manner involving a public offering within the
meaning of the 1933 Act;
3. all offers and sales of the Securities in the United States have been
and will be made in compliance with all applicable United States federal and
state laws with respect to the registration and conduct of securities brokers
and dealers;
4. the Placement Agent has caused or will promptly cause each selected
dealer of the Placement Agent to acknowledge in writing its awareness of and
agreement to be bound by and shall use their best efforts to ensure that each
selected dealer complies with the representations and warranties contained in
this Certificate in connection with all offers and sale of the Securities;
5. the Securities have been and shall be offered and sold by the Placement
Agent and its selected dealers in the United States only in compliance with all
applicable state securities ("blue sky") laws of the United States and in a
transaction exempt from the registration requirements of the 1933 Act, pursuant
to Rule 506 of Regulation D, to persons that are "accredited investors" within
the meaning of Rule 501(a) of Regulation D; and
6. the Placement Agent has not entered, and will not enter, into any
contractual arrangement without the prior written consent of the Company with
respect to the placement of the Securities, except (i) with their affiliates or
(ii) with its selected dealers in accordance with this Certificate.
CANACCORD CAPITAL CORPORATION
By: ----------------------------------
Its: ----------------------------------
CANACCORD CAPITAL CORPORATION (USA), INC., the Placement Agent's selected
dealer for placement of the Securities with persons in the United States of
America, hereby agrees to be bound by and to use its best efforts to comply with
the representations and warranties contained in this Certificate in connection
with its offer and sale of the Securities.
CANACCORD CAPITAL CORPORATION (USA), INC.
By: ----------------------------------
Its: ----------------------------------
