GROOME XXXXXXX.XXX INC.
AGENCY AGREEMENT
April 10, 2000
Xxxxxx.xx, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xx. Xxxxx Xxxxxx
Dear Sirs/Mesdames:
Groome Xxxxxxx.xxx Inc. (the "Agent") understands that Xxxxxx.xx, Inc.
(the "Corporation") desires to issue and sell special warrants of the
Corporation (the "Special Warrants"). Each Special Warrant will entitle
the holder thereof to receive upon exercise or deemed exercise thereof,
without additional payment, subject to adjustment, one unit (a "Unit")
each Unit consisting of one common share of the Corporation
(collectively, the "Common Shares") and one-half of one common share
purchase warrant of the Corporation (collectively, the "Warrants") as
more particularly described in Schedule "A" attached hereto. The
offering of the Offered Securities (as defined below) by the Corporation
is hereinafter referred to as the "Offering".
In this Agreement, the term "Offered Securities" shall mean,
collectively, the Special Warrants and, where applicable, the Unit
Shares (as herein defined) issuable upon the exercise of the Special
Warrants, the Warrants (as herein defined) and the Common Shares of the
Corporation issuable upon exercise of the Warrants (the "Warrant
Shares").
The Agent hereby agrees to act as the agent of the Corporation to use
its commercially reasonable best efforts to offer for sale and obtain
subscriptions for the Special Warrants from Purchasers (as hereinafter
defined), upon and subject to the terms and conditions contained herein,
and by its acceptance hereof the Corporation agrees to the appointment
of the Agent, as the Corporation's exclusive agent in respect of the
Offering in Canada; provided that the Agent shall be under no obligation
to purchase any of the Special Warrants.
In consideration of the services to be rendered by the Agent in
connection with the Offering, the Corporation agrees to pay the Agency
Fee (as hereinafter defined) to the Agent.
Subject to the terms hereof, the Corporation agrees that the Agent will
be permitted to appoint other registered dealers (or other dealers duly
qualified in their respective jurisdictions) as its agents to assist in
the Offering and that the Agent may determine the remuneration payable
to such other dealers appointed by it, however in no case should such
remuneration exceed that payable to the Agent hereunder. In the event
the remuneration payable to a sub-agent is paid directly by the
Corporation, the amount so paid shall be deducted from the amount
otherwise payable to the Agent. No person shall be appointed a sub-
agent in Canada unless such person has either agreed in writing to be
bound by the terms of this Agreement or the Sub-Agent has entered into
an agreement with the Agent providing for substantially the same
obligations and covenants of the sub-agent as is contained herein in
respect of the Agent.
This offer is conditional upon and subject to the additional terms and
conditions set forth below.
The form of agreement between the Corporation and each purchaser
providing for the subscription by each purchaser of Special Warrants
(the "Subscription Agreement") is attached hereto as Schedule "E".
The Special Warrants shall be issued pursuant to the provisions of a
Special Warrant Agreement (the "Special Warrant Agreement") to be
entered into between the Corporation and the Trustee. The terms and
conditions of the Special Warrant Agreement shall be consistent with the
terms and conditions herein contained and shall be satisfactory to the
Agent and their counsel, acting reasonably.
Exercise of Special Warrants
The Special Warrants may, subject to the provisions hereof, be exercised
by the holder thereof by surrendering the Special Warrants to Pacific
Corporate Trust Company (the "Trustee") at any time after the Time of
Closing (as hereinafter defined) and on or before 4:30 p.m. (Toronto
time) on the earlier of (the "Time of Expiry"): (i) the fifth (5th)
Business Day (as hereinafter defined) after the Qualification Date; and
(ii) and the date which is twelve (12) months following the Closing
Date. Any Special Warrants not exercised prior to the Time of Expiry
shall be deemed to be exercised by the holders thereof immediately prior
to such time without any further action on the part of such holders.
Conversion Rate Increase
In the event that the Qualification Date does not occur on or before
5:00 p.m. (Toronto time) on the date which is 150 days after the Closing
Date (the "Qualification Deadline"), provided that if such day is not a
Business Day, then the next following Business Day, or such later date
as may be approved in writing (with notification to the Trustee) by the
Agent in its sole and absolute discretion not less than five (5)
Business Days prior to the end of the Qualification Deadline, each
Special Warrant shall thereafter automatically entitle the holder to
receive, without further payment, one Unit comprising 1.1 Common Shares
and 0.55 of a Warrant, in lieu of 1 Common Share and 0.50 of a Warrant
(the "Conversion Rate Increase").
1. Interpretation
1.1 Unless expressly provided otherwise, where used in this Agreement
or any schedule hereto, the following terms shall have the following
meanings, respectively:
"Agency Fee", "Agent's Compensation Options", "Agent's Warrants" and
"Fiscal Advisory Fee" have the meanings ascribed thereto respectively in
section 4 of this Agreement;
"Agent" shall have the meaning ascribed thereto in the first paragraph
of this Agreement;
"Applicable Securities Laws" means, collectively, the applicable
securities laws of the Qualifying Provinces, the respective regulations,
rules, rulings and orders made thereunder, the applicable policy
statements issued by the Securities Commissions and the securities
legislation and policies of each other relevant jurisdiction in Canada
(collectively the "Canadian Securities Laws") and the U.S. Securities
Laws;
"Business Day" means any day other than a Saturday, Sunday or statutory
or municipal holiday in the City of Toronto, Ontario;
"Closing Date" means the date on which the Offering, as specified in
Schedule "A" hereto is completed which includes the Offering in the
United States and which date shall be signed off in writing as between
the Agent and the Corporation;
"Common Share" or "Common Shares" means the current issued and
outstanding common shares in the capital of the Corporation, the common
shares issuable upon the exercise of the Special Warrants and the
Agent's Compensation Options, as the context requires;
"Corporation" means Xxxxxx.xx, Inc.;
"Disclosure Documents" means all of the documents of the Corporation
which have been filed with the Securities Commissions, the SEC or the
Exchange during the period commencing one year prior to the date hereof
and ending immediately prior to the Time of Closing;
"Distribution" means the proposed issuance of Unit Shares and Warrants
to the holders of Special Warrants on the exercise or deemed exercise of
the Special Warrants;
"Effective Registration" means the registration of the resale of the
Unit Shares and the Common Shares issuable upon exercise of the Warrants
pursuant to a Registration Statement which has been filed in compliance
with the 1933 Act and pursuant to Rule 415 under the 1933 Act, or any
successor rule providing for offering securities on a continuing basis,
and the declaration or ordering of the effectiveness of such
Registration Statement by the SEC and all applicable state regulatory
authorities;
"Exchange" means the Over-the-Counter Bulletin Board in the United
States;
"Final Prospectus" means the (final) prospectus of the Corporation
qualifying the Underlying Securities, as qualified herein with respect
to the Agent's Compensation Options;
"including" means including without limitation;
"Intellectual Property" means all trademarks, tradenames, patents,
copyrights, service marks, including all pending applications with
respect to any of the foregoing, all industrial designs and all other
industrial or intellectual property owned or used by the Corporation
under license, in the conduct of its business;
"knowledge", "to the knowledge of", "to the best of the knowledge"
means, in respect of any representation or warranty given by the
Corporation, to the knowledge, information and belief of the Corporation
after having made all reasonable and necessary reviews of its books and
records and inquiries of all appropriate persons with respect to the
subject matter of such representation or warranty;
"material" means material in relation to the Corporation;
"material change" means a material change as defined under the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws of a jurisdiction means a change in the
business, operations or capital of the Corporation that would reasonably
be expected to have a significant effect on the market price or value of
any of the Corporation's securities and includes a decision to implement
such a change made by the Corporation's board of directors or by senior
management of the Corporation who believe that confirmation of the
decision by the board of directors is probable;
"material fact" means a material fact as defined under the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws of a jurisdiction means a fact that significantly
affects, or would reasonably be expected to have a significant effect
on. the market price or value of any of the Corporation's securities;
"misrepresentation" means a misrepresentation as defined under the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws of a jurisdiction means (i) an untrue
statement of a material fact, or (ii) an omission to state a material
fact that is required to be stated or that is necessary to make a
statement not misleading in the light of the circumstances in which it
was made;
"Offered Securities" shall have the meaning ascribed thereto in the
second paragraph of this Agreement;
"Offering" shall have the meaning ascribed thereto in the first
paragraph of this Agreement;
"Offering Documents" means, collectively, the Preliminary Prospectus,
the Final Prospectus, any Supplementary Material and the Registration
Statement;
"Outstanding Convertible Securities" means all options, (including
options granted or proposed to be granted to officers, directors or
employees), warrants, other rights to acquire securities and other
convertible securities outstanding as at the date of this Agreement,
whether issued pursuant to an established plan or otherwise, particulars
of which are set out in Schedule "B" hereto;
"person" includes any individual, corporation, limited partnership,
general partnership, joint stock company or association, joint venture
association, company, trust, bank, trust company, land trust, investment
trust, society or other entity, organization, syndicate whether
incorporated or not, trustee, estate trustee, executor or other legal or
personal representative, and governments and agencies and political
subdivisions thereof;
"Preliminary Prospectus" means the preliminary prospectus of the
Corporation relating to the distribution of (i) the Unit Shares and
Warrants issuable on the exercise of the Special Warrants in the
Qualifying Provinces, and (ii) to the extent permitted by the Ontario
Securities Commission, the Agent's Compensation Options;
"President's List means the list of subscribers for Special Warrants in
the Qualifying Provinces or other jurisdictions in Canada, and the
United States as identified by the Corporation in writing to the Agent;
"Private Placement Exemptions" means the prospectus and registration
exemptions pursuant to the Applicable Securities Laws, pursuant to which
the Special Warrants are to be issued in the Qualifying Provinces and in
the United States, as more specifically set out in Schedule "A" hereto;
"Prospectus" means a prospectus, including any amendments made thereto,
which upon issuance of a receipt by each of the Securities Commission
for the final prospectus will qualify the Distribution;
"Purchasers" means, collectively, each of the purchasers of Special
Warrants pursuant to the Offering (including, if applicable, the Agent
if it is purchasing Special Warrants);
"Qualification Date" means the date which is the later of the date on
which all of the Securities Commissions have issued a receipt for the
final Prospectus and the date of an Effective Registration;
"Qualifying Provinces" means the provinces of Alberta, British Columbia,
Ontario and Quebec;
"Registration Statement" means a registration statement of the
Corporation under the 1933 Act covering the resale of the Unit Shares
and the Warrant Shares;
"Regulation S" means Regulation S under the 1933 Act;
"SEC" means the United States Securities and Exchange Commission;
"Securities Commissions" means, collectively, the securities commissions
or similar regulatory authorities in each of the Qualifying Provinces;
"Selling Group" means, collectively, those registered dealers appointed
by the Agent to assist in the Offering as contemplated in the fifth
paragraph of this Agreement;
"Significant Interest Companies" means those companies in which the
Corporation holds 20% or more of the outstanding voting securities;
"Special Warrant Agreement" means the special warrant agreement to be
entered into between the Corporation and the Trustee, in such form and
containing such terms as approved by the Corporation and its counsel and
the Agent and its counsel;
"Special Warrants" shall have the meaning ascribed thereto in the first
paragraph of this Agreement;
"Subscription Agreements" means, collectively, the subscription
agreements entered into between, inter alia, the Purchasers and the
Corporation in respect of the Offering, the form of which is attached
hereto in blank as Schedule "E";
"Subsidiary" has the meaning as ascribed to such term in the Business
Corporations Act (Ontario);
"Supplementary Material" means, collectively, any amendment to the Final
Prospectus, any amended or supplemental prospectus or ancillary material
required to be filed with any of the Securities Commissions in
connection with the distribution of the Underlying Securities;
"Survival Limitation Date" means the later of: (i) the second
anniversary of the Closing Date; and (ii) the latest date under the
Applicable Securities Laws relevant to a Purchaser (non-residents of
Canada being deemed to be resident in the Province of Ontario for such
purposes) that a Purchaser may be entitled to commence an action or
exercise a right of rescission, with respect to a misrepresentation
contained in the Final Prospectus or, if applicable, any Supplementary
Material;
"Time of Closing" means the time on the Closing Date at which the
Offering is to be completed, as specified in Schedule "A" attached
hereto;
"Trustee" means Pacific Corporate Trust Company;
"Underlying Securities" means the Agent's Compensation Options issuable
upon the exercise of the Agent's Warrants and the Unit Shares and
Warrants issuable upon the exercise of the Special Warrants and the
Warrant Shares issuable upon the exercise of the Warrants, the
particulars of which are set out in Schedule "A" attached hereto;
"Unit" has the meaning ascribed thereto in the first paragraph of this
Agreement;
"Unit Shares" means the Common Shares issued by the Corporation on the
exercise of the Special Warrants and on the exercise of the Agent's
Compensation Options.
"U.S. Person" shall have the meaning ascribed to such term in Regulation
S under the 1933 Act;
"U.S. Securities Laws" means, collectively, all applicable federal and
state securities laws in the United States, including all "Blue Sky"
laws, and all regulations and forms prescribed thereunder, together with
all applicable published policy statements, releases and rulings of the
SEC and any applicable state securities regulatory authorities;
"Warrants" means the whole Common Share purchase warrants to be issued
by the Corporation on the exercise of the Special Warrants and on the
exercise of the Agent's Compensation Options, the particulars of which
are set out in Schedule "A" attached hereto;
"Warrant Shares" means the Common Shares issuable upon exercise of the
Warrants, the particulars of which are set out in Schedule "A" hereto;
and
"1933 Act" means the United States Securities Act of 1933, as amended.
1.2 The division of this Agreement into sections, subsections,
paragraphs and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement. Unless something in the subject matter
or context is inconsistent therewith, references herein to sections,
subsections, paragraphs and other subdivisions are to sections,
subsections, paragraphs and other subdivisions of this Agreement.
1.3 This Agreement shall be governed by and construed exclusively in
accordance with the laws of the Province of Ontario and the federal laws
of Canada applicable therein, and the parties irrevocably agree to
attorn to and submit to the jurisdiction of the courts of Ontario with
respect to any dispute related to this Agreement;
1.4 Unless otherwise stated herein, all amounts expressed herein in
terms of money refer to lawful currency of the United States and all
payments to be made hereunder shall be made in such currency.
1.5 For the purposes of this Agreement, where the Canadian dollar
equivalent is being paid for an amount denoted in U.S. dollars, the
exchange rate applicable with respect to the payment in the Canadian
dollar equivalent shall be the noon buying rate in the City of New York
for cable transfers in Canadian dollars as certified for custom purposes
by the Federal Reserve Bank of New York on the day which is the Business
Day immediately preceding the date of such payment is being made in
Canadian equivalent dollars.
1.6 The following are the schedules attached to this Agreement, which
schedules (including the representations, warranties and covenants set
out therein) are deemed to be a part hereof and are hereby incorporated
by reference herein:
Schedule "A" - Details of the Offering
Schedule "B" - Outstanding Convertible Securities
Schedule "C" - Material Changes ("Disclosure Schedule")
Schedule "D" - List of Subsidiaries
Schedule "E" - Form of Subscription Agreement
1.7 Unless the context otherwise requires, references herein to the
"Offering" shall be deemed to a reference to the Offering in Canada and
references herein to the "Purchasers" shall be deemed to be references
to Purchasers in the Qualifying Provinces or other jurisdictions in
Canada where the Special Warrants are sold.
2. Nature of Transaction
2.1 Each Purchaser resident in the Qualifying Provinces or resident in
the United States and each U.S. Person shall purchase Special Warrants
under one or more Private Placement Exemptions so that the purchases of
such Special Warrants will be exempt from the prospectus and
registration requirements of the Applicable Securities Laws. Each other
Purchaser shall purchase in accordance with such procedures as the
Corporation and the Agent may mutually agree, acting reasonably, in
order to fully comply with the Applicable Securities Laws. It is
expressly understood and agreed that other than the identification of a
duly registered U.S. broker for the purposes set forth in Section 4.1
hereof, the Agent shall not perform any services or have any duties with
respect to subscriptions from United States residents or U.S. Persons.
The Corporation hereby agrees to use all reasonable efforts to secure
compliance with all securities regulatory requirements on a timely basis
in connection with the distribution of the Special Warrants to the
Purchasers, including, without limitation, by filing within the periods
stipulated under Applicable Securities Laws, and at the Corporation's
expense, all private placement forms required to be filed by the
Corporation and the Purchasers, respectively, in connection with the
Offering and paying all filing fees required to be paid in connection
therewith so that the distribution of the Special Warrants may lawfully
occur without the necessity of filing a prospectus or any similar
document under the Applicable Securities Laws, including, an offering
memorandum as defined in Rule 14-501 of the Ontario Securities
Commission or in or in subsection 1(m.2) of the Securities Act
(Alberta). The Agent agrees to assist the Corporation in all reasonable
respects to secure compliance with all regulatory requirements in the
Qualifying Provinces in connection with the Offering. The Agent will
notify the Corporation with respect to the identity of each Purchaser as
soon as practicable and with a view to leaving sufficient time to allow
the Corporation to secure compliance with all relevant regulatory
requirements under Applicable Securities Laws relating to the sale of
the Special Warrants.
3. Covenants and Representations of the Agent
3.1 The Agent covenants with the Corporation that it will (and will
use its reasonable efforts to cause the members of the Selling Group to
ensure that they will): (i) conduct its activities in connection with
arranging for the sale of the Special Warrants and in distributing the
Underlying Securities in compliance with the Canadian Securities Laws;
(ii) not deliver to any prospective Purchaser any document or material
without the consent of the Corporation; (iii) not solicit offers to
purchase or sell the Special Warrants so as to require registration
thereof or filing of a prospectus with respect thereto under the laws of
any jurisdiction including, without limitation, the United States of
America or any state thereof and not solicit offers to purchase or sell
the Special Warrants in any jurisdiction outside of Canada where the
solicitation or sale of the Special Warrants would result in any ongoing
disclosure requirements in such jurisdiction, any registration
requirements in such jurisdiction except for the filing of a notice or
report of the solicitation or sale, or where the Corporation may be
subject to liability in connection with the sale of the Special Warrants
which is materially more onerous than its liability under the Applicable
Securities Laws to which it would be subject after the completion of the
Private Placement; (iv) obtain from each Purchaser an executed
Subscription Agreement in the form attached hereto as Schedule "E",
together with all documentation as may be necessary in connection with
subscriptions for Special Warrants; (v) upon the Corporation obtaining
the necessary receipts therefor from the Securities Commissions in the
Qualifying Provinces, deliver one copy of the Final Prospectus (together
with any Supplementary Material required to be provided to the
Purchasers) to each of the Purchasers within the time period required by
Applicable Securities Laws; (vi) refrain from advertising the Offering
in printed public media, radio, television or telecommunications,
including electronic display, and not make use of any green sheet or
other internal marketing document without the consent of the
Corporation; (vii) not make any representations or warranties with
respect to the Corporation, the Special Warrants or the Underlying
Securities, other than as set forth in the Preliminary Prospectus, the
Final Prospectus, any Supplementary Material, any Subscription
Agreement, this Agreement or in publicly available information filed by
the Corporation; (viii) not solicit offers from a U.S. Person; and (ix)
provided that they are otherwise satisfied, in their sole discretion,
that it is responsible for them to do so, execute and deliver to the
Corporation any certificate required to be executed by them under
Canadian Securities Laws in connection with the Preliminary Prospectus,
the Final Prospectus and any Supplementary Material.
4. Agent's Compensation
4.1 In consideration of the Agent's services to be rendered to the
Corporation in connection herewith, including, without limitation,
soliciting offers to purchase the Special Warrants, acting as financial
advisor to the Corporation in respect of the sale of the Special
Warrants, preparation of relevant documentation including assisting the
Corporation in connection with the preparation of the Offering
Documents, performing administrative work in connection with such
matters, and all other services arising out of this Agreement, the
Corporation agrees, subject to and upon the terms and conditions set out
herein, to pay or cause to be paid to the Agent at the Time of Closing a
fee equal to 8% of the amount of the aggregate gross proceeds from the
sale of Special Warrants to Purchasers pursuant to the Offering in
Canada and to grant to the Agent non-assignable warrants (the "Agent's
Warrants") to acquire, without payment of additional consideration,
compensation options (the "Agent's Compensation Options"). The Agent's
Compensation Options will entitle the Agent to purchase at $4.50 (U.S.)
per Unit, at any time on or prior to 4:30 p.m. (Toronto time) 12 months
following the Closing Date, a number of Units equal to 10% of the number
of Special Warrants sold under the Offering in the aggregate, including
any portion of the Offering sold in the United States notwithstanding
that the Agent has not conducted any activity in furtherance of
soliciting offers in the United States other than the identification of
a duly registered U.S. broker to be retained by the Corporation to
provide administrative services in the United States, and
notwithstanding that any of such sales are made to persons on the
President's List. The Agent's Warrants may be exercised into non-
assignable Agent's Compensation Options during the period commencing at
the Time of Closing on the Closing Date, and ending at the earlier of
4:30 p.m. (Toronto time) on the fifth (5th) Business Day following the
Qualification Date and 12 months following the Closing Date. The
Corporation shall use its commercial best efforts to qualify the Agent's
Compensation Options issuable upon exercise of the Agent's Warrants
under the Final Prospectus and to register the resale of the Unit Shares
and the Warrant Shares underlying the Agent's Compensation Options under
the U.S. Securities Laws for a period of not less than 3 years following
the Closing Date. The parties confirm that in the event the Agent
appoints other registered dealers ("Sub-Agents") to assist in the
Offering, then such Sub-Agents shall be entitled to receive Agent's
Warrants as part of their compensation whether directly registered in
such Sub-Agents' names or assigned by the Agent to such Sub-Agent, on
the same basis as the Agent is entitled to receive Agent's Warrants
provided that the maximum number of Agent's Warrants, issued by the
Corporation shall not exceed 10% of the Special Warrants sold under the
Offering.
4.2 In connection with proceeds received from subscriptions by those
persons identified on the President's List, the Agent shall be entitled,
notwithstanding Section 4.1, but subject to the limitation hereinafter
set forth, to an Agent's Fee equal to 4% of the amount of the aggregate
gross proceeds, not to exceed U.S. $8,000,000, from the sale of the
Special Warrants to Purchasers identified on the President's List. To
the extent the proceeds received from subscriptions by those persons
identified on the President's List exceed $8,000,000, then the Agent,
notwithstanding anything to the contrary contained in Section 4.2 or
Section 4.3 shall be entitled to a fee of 8% of the proceeds so received
in excess of $8,000,000.
4.3 With respect to the purchase of Special Warrants by U.S. Persons
who are identified in writing to be on the President's List and
notwithstanding that the Agent has not carried on any sales activities
with respect thereto, the Agent shall be entitled to a fiscal advisory
fee equal to 4% of the amount of the aggregate gross proceeds received
by such person from the sale of the Special Warrants. The Corporation
acknowledges and agrees that the only purchases in the United States of
Special Warrants shall be by U.S. Persons who are identified in writing
to be on the President's List.
4.4 The fees payable to the Agent pursuant to Sections 4.1, 4.2 and
4.3 are herein collectively referred to as the "Agent's Fee".
4.5 The Corporation and the Agent acknowledge and agree that if a
separate fee were to have been charged to the Corporation for the
services described above pertaining to the distribution of the Special
Warrants, such separate fee would represent more than 50% of the Agent's
Fee, and the Agent further acknowledges and agrees that the Agent will
rely on the foregoing in not charging G.S.T. on such fees. Should it be
determined by Revenue Canada, Customs, Taxation and Excise that G.S.T.
should have been charged and is otherwise exigible on all or any part of
the Agent's Fee, the Corporation shall pay forthwith to the Agent on
demand an amount equal to the G.S.T. determined to be exigible.
4.6 The maximum amount that the Corporation shall be entitled to
identify and denote as being on the President's List, in the aggregate,
shall not exceed U.S. $8,000,000.
5. Representations, Warranties and Covenants of the Corporation
5.1 The Corporation hereby represents, warrants and covenants to and
with the Agent and the Purchasers that:
(a) it will as soon as practicable after the Closing Date and, in any
event, within applicable time periods under the Applicable Securities
Laws, file such documents as may be required under the Applicable
Securities Laws relating to the private placement of the Special
Warrants which, without limiting the generality of the foregoing, shall
include a Form 45-501F1 as prescribed by Rule 45-501 of the Ontario
Securities Commission and the equivalent provisions thereto in the other
Qualifying Provinces, and pay all filing fees required to be paid in
connection therewith;
(b) it will use its commercial best efforts to cause the Prospectus
(and any other documents required to be filed therewith) to be prepared
and filed, and receipts obtained therefor, in each of the Qualifying
Provinces in accordance with the Canadian Securities Laws as soon as
practicable, and in any event within 150 days, following the Closing
Date, which Prospectus shall be, in form and substance, satisfactory to
the Corporation and the Agent, each acting reasonably and to take all
other steps and proceedings that may be reasonably necessary in order to
qualify the Unit Shares and Warrants issuable upon exercise of the
Special Warrants for distribution to the public in each of the
Qualifying Provinces and to qualify the Agent's Compensation Options for
distribution by the Agent in the Province of Ontario to the extent
permitted by the Ontario Securities Commission;
(c) during the period commencing with the date hereof and ending on
the first Business Day which is 150 days after the Closing Date, not
issue, or agree or commit to issue, any Common Shares or securities
convertible into or exchangeable for Common Shares without the prior
consent in writing of the Agent, such consent not to be unreasonably
withheld, save and except such Common Shares or securities convertible
into or exchangeable for Common Shares issued in connection with and in
satisfaction of indebtedness owing by the Corporation to its creditors
including pursuant to a private placement of promissory notes provided
that the number of Common Shares issued in satisfaction of such
indebtedness shall not exceed [U.S. $1,250,000] and save and except for
any Common Shares issued in connection with the transaction identified
in a letter of understanding dated August 31, 1999 between E-Xxxx Direct
Inc. and X.X. Xxxxxxx & Associates Inc. The Agent agrees that this
covenant shall not apply to the disposition of Common Shares or
securities convertible into or exchangeable for Common Shares pursuant
to options or other rights to acquire Common Shares existing on the date
hereof which have been granted by the Corporation or which may from time
to time during such 150 day period be granted to its directors,
officers, employees, independent contractors or consultants;
(d) the Corporation will assure that any offers and sales of Special
Warrants in the United States or to U.S. Persons are exempt from
registration and qualification under U.S. Securities Laws.
(e) it will use its commercial best efforts to ensure that the resale
of the Unit Shares issuable upon the exercise of the Special Warrants
and the Agent's Compensation Options and the Warrant Shares issuable
pursuant to the exercise of the Warrants will be registered under all
applicable U.S. Securities Laws during a period commencing not later
than 150 days following the Closing Date and ending not earlier than
three years from the Closing Date and that the same shall be listed and
posted for trading on the Exchange upon their issue;
(f) the National Association of Securities Dealers has cleared the
Corporation for quotation of its Common Shares on the Exchange and that
it will use its commercial best efforts to list the Unit Shares,
Warrants Shares and all other outstanding shares of its common stock on
the NASDAQ National Market or if the Corporation does not meet the
listing requirements of the NASDAQ National Market, on the NASDAQ
SmallCap Market, as soon as possible following the Closing Date but in
the event not later than 90 days following the Closing Date and shall
thereafter maintain such listing in good standing;
(g) it will promptly comply with all filing and other requirements
under Applicable Securities Laws in connection with the Offering,
including, if required, the filing of amendments to the Final Prospectus
in each of the Qualifying Provinces;
(h) the Corporation does not have any Subsidiaries or Significant
Interest Companies other than as set forth in Schedule "D";
(i) Schedule "D" is a complete list of each Subsidiary and the
particulars of the types and percentages of securities in each
Subsidiary; the Corporation holds all such securities free and clear of
all mortgages, liens, charges, pledges, security, interests,
encumbrances, claims and demands whatsoever except as otherwise
disclosed in such schedule;
(j) the Corporation (i) is duly existing under the Revised Statutes of
Nevada, Chapter 78, pertaining to Private Corporations (as therein
defined) (the "Act") and is and will at the Time of Closing be validly
existing and in good standing under the laws of the State of Nevada;
(ii) has all requisite corporate power and authority to carry on its
business as now conducted and to own, lease and operate its properties
and assets and is duly qualified or licensed and in good standing in
each jurisdiction where it carries on business or where the location of
its assets requires it to be so licensed or qualified; and (iii) has all
required corporate power and authority to create, issue and sell the
Offered Securities, to create and issue the Underlying Securities, to
enter into this Agreement, and the Subscription Agreements and to carry
out the provisions of each of such agreements;
(k) each Subsidiary has been duly incorporated or amalgamated, as
applicable, and duly organized and is and will at the Time of Closing:
(i) be validly existing and in good standing laws of its jurisdiction of
incorporation or amalgamation, as the case may be; (ii) have all
requisite corporate power and authority to carry on its business as now
conducted and to own, lease and operate its properties and assets;
(l) the Corporation, and each Subsidiary, is in all material respects
conducting its business in compliance with all applicable laws, rules
and regulations of each jurisdiction in which its business is carried on
and is duly licensed, registered or qualified in all jurisdictions in
which it owns, leases or operates its property or carries on business to
enable its business to be carried on as now conducted and its property
and assets to be owned, leased and operated and all such licences,
registrations and qualifications are and will at the Time of Closing be
valid, subsisting and in good standing, except in respect of matters
which do not and will not result in any material adverse change to the
business, business prospects or condition (financial or otherwise) of
the Corporation or any Subsidiary and except for the failure to be so
qualified or the absence of any such licence, registration or
qualification which does not and will not have a material adverse effect
on the assets or properties, business, results of operations, prospects
or condition (financial or otherwise) of the Corporation or any
Subsidiary;
(m) the authorized capital of the Corporation consists of 70,000,000
Common Shares with a par value of $0.001 per share and 10,000,000
preferred shares with a par value of $0.001 per share and, as at the
date hereof, the issued and outstanding capital of the Corporation
consists solely of [22,048,293] Common Shares;
(n) except as disclosed in the Disclosure Documents, or in Schedule
"B" hereto, the Corporation does not have any Outstanding Convertible
Securities and, except under this Agreement and as otherwise disclosed
in Schedule "B", no person now has any agreement or option or right or
privilege capable of becoming an agreement for the purchase,
subscription or issuance of any unissued shares, securities or warrants
of the Corporation;
(o) the Corporation and each Subsidiary possesses all material
certificates, authority, permits or licences issued by the appropriate
federal, state, provincial or municipal regulatory agencies or bodies
necessary to conduct the business now owned or operated by it, and the
Corporation has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority, permit or
licence which, if the subject of an unfavourable decision, ruling or
finding, would materially and adversely affect the conduct of the
business, operations, financial condition or income of the Corporation;
(p) except as otherwise disclosed in the Disclosure Documents or in
Schedule "C" annexed hereto, or otherwise disclosed to the Agent in
writing, since the date of the audited financial statements for the
fiscal period ended December 31, 1999, including the notes to the said
financial statements:
(i) there has not been any material change in the assets, liabilities
or obligations (absolute, accrued, contingent or otherwise) of the
Corporation that has not been publicly disclosed in the manner required
by the Applicable Securities Laws;
(ii) there has not been any material change in the capital stock or
long-term debt of the Corporation that has not been publicly disclosed
in the manner required by the Applicable Securities Laws;
(iii) there has not been any material change in the business, business
prospects, condition (financial or otherwise) or results of the
operations of the Corporation, on a consolidated basis, that has not
been publicly disclosed in the manner required by the Applicable
Securities Laws; and
(iv) except as has been publicly disclosed in the manner required by
the Applicable Securities Laws since its last fiscal year end, the
Corporation and each Subsidiary has carried on its business in the
ordinary course;
(q) the audited consolidated financial statements of the Corporation
for the fiscal period ended December 31, 1999, and any unaudited
financial statements of the Corporation for any subsequent period prior
to the Closing Date, have been prepared in accordance with American
generally accepted accounting principles consistently applied and
present fairly the financial condition and results of operations and
changes in cash flow of the Corporation (including the assets and
liabilities whether absolute or contingent or otherwise), on a
consolidated basis for the periods then ended;
(r) there is no action, proceeding or investigation (whether or not
purportedly by or on behalf of the Corporation or any Subsidiary)
pending or, to the knowledge of the Corporation, threatened against or
affecting the Corporation or any Subsidiary, at law or in equity
(whether in any court, arbitration or similar tribunal) or before or by
any federal, provincial, state, municipal or other governmental
department, commission, board or agency, domestic or foreign, which in
any way materially adversely affects, or which if determined adversely
to the Corporation may materially adversely affect, the Corporation or
the condition (financial or otherwise) of the Corporation on a
consolidated basis, or which questions the validity of the Offered
Securities, the Underlying Securities or of the issuance thereof as
fully paid and non-assessable securities or any action taken or to be
taken by the Corporation pursuant to or in connection with this
Agreement. There are no judgments, awards, orders, decrees or
executions outstanding against the Corporation or any Subsidiary or its
business or any of its property or assets resulting in an aggregate
monetary obligation in excess of $5,000;
(s) the execution and delivery of this Agreement, the Subscription
Agreements, the Special Warrant Agreement and the certificates
representing the Special Warrants and the Agent's Warrants by the
Corporation, the performance and compliance with the terms of this
Agreement, the Subscription Agreements, the Special Warrant Agreement,
the sale of the Offered Securities and the issuance of the Underlying
Securities by the Corporation, will not result in any material breach
of, or be in conflict with or constitute a default under, or create a
state of facts which, after notice or lapse of time, or both, would
constitute a default under any term or provision of the constating
documents, by-laws or resolutions of the Corporation or any mortgage,
note, indenture, contract, agreement, instrument, lease or other
document to which the Corporation is a party or by which it is bound or
any judgment, decree, order, statute, rule or regulation applicable to
the Corporation;
(t) the Corporation is and will at the Time of Closing be a "reporting
company" with a class of equity securities registered pursuant to
Section 12(g) of the United States Securities Exchange Act of 1934, as
amended (the "1934 Act"); the Corporation and its Subsidiaries are not
in violation of any Applicable Securities Laws and the Corporation will
use its best efforts to maintain such status for a period of at least
twelve (12) months from the expiry of the Warrants. In particular,
without limiting the foregoing, the Corporation has at all times
complied with its obligations to make timely disclosure of all material
changes relating to it pursuant to the 1934 Act, and its reports
pursuant to the 1934 Act, taken as a whole, do not contain a material
misstatement or omission;
(u) the Common Shares are listed and quoted for trading on the
Exchange, the Corporation is not in default or breach of any of the
rules, policies and by-laws of the Exchange, no order ceasing or
suspending trading in any securities of the Corporation or prohibiting
the sale of the Offered Securities, the issuance of the Underlying
Securities or the trading of any of the Corporation's issued securities
has been issued and no proceedings for such purpose are pending or, to
the knowledge of the Corporation, threatened;
(v) the auditors of the Corporation who audited the financial
statements of the Corporation most recently delivered to the
securityholders of the Corporation and who delivered their report with
respect thereto are independent public accountants as required by the
Applicable Securities Laws;
(w) there has never been any reportable disagreement (within the
meaning of National Policy Statement No. 31 of the Canadian Securities
Administrators) with the present or any former auditor of the
Corporation to the knowledge of the Corporation's current management,
there has never been a disagreement or resignation of the Corporation's
auditors which was a required subject of disclosure pursuant to the 1934
Act, the 1933 Act or any rule or regulation adopted thereunder;
(x) the Corporation, and each Subsidiary has established on its books
and records reserves that are adequate for the payment of all taxes not
yet due and payable and there are no liens for taxes on the assets of
the Corporation and, to the knowledge of the Corporation, there are no
audits pending of the tax returns of the Corporation or any Subsidiary
(whether federal, state, provincial, local or foreign) and there are no
claims which have been or may be asserted relating to any such tax
returns, which audits and claims, if determined adversely, would result
in the assertion by any governmental agency of any deficiency that would
have a material adverse effect on the assets or properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Corporation and each Subsidiary taken as a whole;
(y) all taxes (including income tax, capital tax, goods and services
tax, sales tax, payroll taxes, employer health tax, workers'
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 each Subsidiary have
been paid. All tax returns, declarations, remittances and filings
required to be filed by the Corporation and each Subsidiary have been
filed with all appropriate governmental authorities and all such
returns, declarations, remittances and filings are complete and
accurate. No domestic or foreign taxation authority has asserted or, to
the Corporation's knowledge, threatened to assert any assessment, claim
or liability for taxes due or to become due in connection with any
review or examination of the tax returns of the Corporation (including,
without limitation, any predecessor companies) filed for any year which
would have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition (financial or
otherwise) of the Corporation taken as a whole;
(z) neither the Corporation nor any Subsidiary, nor to the
Corporation's knowledge, any other party, is in default in the
observance or performance of any term or obligation to be performed by
it under any material contract, joint venture agreement, license or
other instrument and no event has occurred which with notice or lapse
of time or both would constitute such a default, in any such case, which
default or event would have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition
(financial or otherwise) of the Corporation on a consolidated basis;
(aa) prior to the filing of the Preliminary Prospectus and thereafter
and prior to the filing of the Final Prospectus and any Supplementary
Material, the Corporation will allow the Agent to participate fully in
the preparation of the Preliminary Prospectus, the Final Prospectus and
any such Supplementary Material and shall allow the Agent to conduct all
due diligence which it may reasonably require to conduct in order to
fulfil its obligations and in order to enable it responsibly to execute
the certificate required to be executed by it at the end of each of the
Preliminary Prospectus, the Final Prospectus and any Supplementary
Material;
(bb) the Corporation will deliver from time to time without charge to
the Agent as many copies of the Preliminary Prospectus, the Final
Prospectus, any Supplementary Material as it may reasonably request for
the purposes contemplated hereunder and contemplated by the Applicable
Securities Laws in the Qualifying Provinces and such delivery shall
constitute the consent of the Corporation to the Agent's use of such
documents in connection with the distribution to the public of the
Underlying Securities, subject to the provisions of the Applicable
Securities Laws in the Qualifying Provinces and the provisions of this
Agreement. The deliveries to be made pursuant to this subsection shall
constitute the Corporation's representation and warranty that, at the
time of delivery thereof, all information and statements (except
information and statements relating solely to the Agent) contained in
the Preliminary Prospectus, the Final Prospectus and the Supplementary
Material: (i) were true and correct in all material respects; (ii)
contained no misrepresentation; and (iii) when read together constituted
full, true and plain disclosure of all material facts relating to the
Special Warrants, the Agent's Warrants and the Underlying Securities.
Such delivery shall also constitute the Corporation's consent to the
Agent's use of the Preliminary Prospectus, Final Prospectus and
Supplementary Material in the Qualifying Provinces in compliance with
the provisions of this Agreement and all Applicable Securities Laws;
(cc) all the information and statements to be contained in the
Preliminary Prospectus, Final Prospectus, any Supplementary Material and
the Registration Statement shall, at the date of delivery thereof,
constitute full, true and plain disclosure of all material facts
relating to each of the Offering, the Corporation, the Offered
Securities and the Underlying Securities (provided that this
representation is not intended to extend to information and statements
relating to the Agent included in reliance upon and in conformity with
information furnished to the Corporation by or on behalf of the Agent
specifically for use therein) and shall otherwise contain the disclosure
required by and conform, in all material respects, to the requirements
of the applicable provisions of all Applicable Securities Laws;
(dd) none of the Preliminary Prospectus, the Final Prospectus, any
Supplementary Material or the Registration Statement will contain a
misrepresentation (provided that this representation is not intended to
extend to information and statements relating to the Agent included in
reliance upon and in conformity with information furnished to the
Corporation by or on behalf of the Agent specifically for use therein);
(ee) all necessary corporate action has been taken or will have been
taken prior to the Time of Closing by the Corporation so as to validly
issue and sell the Special Warrants to the Purchasers and upon receipt
by the Corporation of the purchase price as consideration for the issue
of the Special Warrants, such Special Warrants will be validly issued
and outstanding;
(ff) this Agreement, the Special Warrant Agreement, the Subscription
Agreements, the Special Warrants, the Warrants, the Agent's Warrants,
the Agent's Compensation Options, and all other contracts and
instruments required in connection with the issue and distribution of
the Offered Securities shall be, on or prior to the Closing Date, duly
authorized, executed and delivered by the Corporation and shall be valid
and binding obligations of the Corporation enforceable in accordance
with their respective terms, subject to any applicable bankruptcy,
reorganization, winding-up, insolvency, moratorium or other laws of
general application, the unavailability of any equitable remedies, and
that the enforcement of any rights against the Corporation under this
Agreement with respect to indemnity or contribution may be limited by
applicable law and may or may not be ordered by a court on grounds of
public policy;
(gg) the attributes of the Underlying Securities will conform in all
material respects with the description thereof described or to be
described in the Final Prospectus and in the Registration Statement;
(hh) the forms of the certificates representing the Special Warrants,
the Common Shares, the Warrants, the Agent's Warrants and the Agent's
Compensation Options have been duly approved by the Corporation and
comply with the provisions of the laws of its jurisdiction of
incorporation, the regulations of the Exchange and the Applicable
Securities Laws;
(ii) all necessary corporate action has been taken by the Corporation
to authorize the creation of the Special Warrants, the issue and sale of
the Special Warrants, the issue of the Underlying Securities upon the
exercise of the Special Warrants, the creation and issue of the Agent's
Warrants, the issue of the Agent's Compensation Options upon exercise of
the Agent's Warrants and the issue of the Underlying Securities upon the
exercise of the Agent's Compensation Options;
(jj) the Unit Shares and Warrant Shares issuable upon the exercise of
the Special Warrants, the Warrants and the Agent's Compensation Options
have been duly reserved and allotted for issuance and the Corporation
has irrevocably reserved for issuance and will at all times keep
available free from pre-emptive and other rights, out of its authorized
and unissued capital stock, such number of Common Shares so as to fully
satisfy the exercise of all Special Warrants, Warrants and Agent's
Compensation Options including any adjustments as a result of the
Conversion Rate Increase;
(kk) save as otherwise provided herein, other than the Agent, there is
no person acting or to the Corporation's knowledge, purporting to act at
the request of the Corporation, who is entitled to any brokerage, agency
or other fiscal advisory or similar fee in connection with the
transactions contemplated herein;
(ll) the Corporation will promptly notify the Agent in writing if there
shall occur any material change or change in a material fact (in either
case, whether actual, anticipated, contemplated or threatened and other
than a change or change in fact relating solely to the Agent) or any
event or development involving a prospective material change or a change
in a material fact or any other change in any or all of the business,
affairs, operations, assets (including information or data relating to
the estimated value or book value of assets), liabilities (contingent or
otherwise), capital, ownership, control, management or prospects of the
Corporation, on a consolidated basis, or any other change which is of
such a nature as to result in, or could result in a misrepresentation in
the Preliminary Prospectus, Final Prospectus or any Supplementary
Material or could render any of the foregoing not in compliance with any
of the Applicable Securities Laws;
(mm) the Corporation will promptly notify the Agent in writing with
full particulars of any such actual, anticipated, threatened or
prospective change referred to in paragraph (ll) above and the
Corporation shall, to the reasonable satisfaction of the Agent, file
promptly and, in any event, within all applicable time limitation
periods with the applicable regulatory authorities a new or amended
Preliminary Prospectus, Final Prospectus or Supplementary Material, as
the case may be, or material change report as may be required under the
Applicable Securities Laws and shall comply with all other applicable
filing and other requirements under the Applicable Securities Laws
including, without limitation, any requirements necessary to qualify the
issuance and distribution of the Common Shares and Warrants issuable
upon the exercise of the Special Warrants and, to the extent permitted
by the Ontario Securities Commission, the Agent's Compensation Options,
and shall deliver to the Agent as soon as practicable thereafter its
reasonable requirements of conformed or commercial copies of any such
new of amended Preliminary Prospectus, Final Prospectus or Supplementary
Material. The Corporation will not file any such new or amended
disclosure documentation or material change report without first
obtaining the written approval of the form and content thereof by the
Agent, which approval shall not be unreasonably withheld or delayed,
provided that the Corporation will not be required to file a
registration statement or otherwise register or qualify the Underlying
Securities for distribution outside Canada;
(nn) all of the Disclosure Documents and other materials filed by or on
behalf of the Corporation with the Securities Commissions, the SEC, and
the Exchange were true and correct in all material respects as of the
date of such filing, and, to the extent required, provided full, true
and plain disclosure of all material facts relevant to the Corporation
and did not contain a misrepresentation;
(oo) the Corporation has not withheld, and will not withhold, from the
Agent any material facts relating to the Corporation, the Subsidiaries
or to the Offering, including, without limiting the generality of the
foregoing, any material facts relating to any current or past business
operations of the Corporation and any Subsidiary, and the Corporation
has not, by omission, failed to advise the Agent or its counsel of any
such material fact;
(pp) there is not, in the constituting documents or the by-laws of the
Corporation or in any agreement, mortgage, note, debenture, indenture or
other instrument or document to which the Corporation is 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;
(qq) the minute books of the Corporation and each Subsidiary provided
to counsel to the Agent contain copies of all constituting documents and
all resolutions of their directors and security holders;
(rr) the Corporation is not aware of any licensing or environmental
legislation, regulation, by-law or lawful requirement presently in force
or proposed to be brought into force which the Corporation anticipates
that it or any of its Subsidiaries will be unable to comply with without
materially adversely affecting its financial condition, results of
operations, business or prospects of each jurisdiction in which its
business is carried on;
(ss) the Corporation and each Subsidiary has conducted and is
conducting its business in compliance, in all material respects, with
all applicable licensing and environmental protection legislation,
regulations or by-laws or other similar laws, bylaws, rules and
regulations or other lawful requirements of each jurisdiction in which
its business is carried on and holds all material licences,
certificates, registrations, permits, consents or qualifications
required in order to enable its business to be carried on as now
conducted or as proposed to be conducted, and all such licences,
certificates, registrations, permits, consents and qualifications are
valid and subsisting and in good standing and none of such licenses,
registrations or qualifications contains any burdensome term, provision,
condition or limitation which has or is likely to have any material
adverse effect on its business as now conducted and neither the
Corporation nor any Subsidiary has received any notice of proceedings
relating to the invocation of any such license, registration, permit or
qualification which, if subject to an unfavorable decision, ruling or
finding would materially adversely affect the business, operations,
financial condition or income of the Corporation on a consolidated
basis;
(tt) no notice has been received by the Corporation or any Subsidiary
in respect of any infringement or misappropriation by the Corporation or
any Subsidiary or by any of their respective officers, directors,
employees, consultants or agents of any industrial or intellectual
property rights of any person and the Corporation's and each
Subsidiary's use of its Intellectual Property does not infringe upon, or
constitute any misappropriation of, any industrial or intellectual
property rights of any person. To the Corporation's knowledge, there
is, and has not been, no infringement or other violation of any of the
rights of the Corporation in and to the Intellectual Property;
(uu) all agreements between Xx-Xxxx Resource Corp. and the Corporation,
including without limiting the generality of the foregoing, the
agreement made August 1997 between Heilongjiang Geological and Mining
Technology Development Corp. have been terminated and the Corporation
has no liability or obligations to Xx-Xxxx Resource Corp. or any other
Person under any such agreements, whether absolute or contingent or
otherwise;
(vv) except as disclosed in the Disclosure Schedule to the knowledge of
the Corporation and the officers and directors of the Corporation, (i)
neither the Corporation nor any Subsidiary nor any of their respective
properties has ever been or is now in any material respect in violation
of any applicable environmental laws or orders; (ii) neither the
Corporation nor any such Subsidiary, nor any third party has prior to
the date hereof ever used, generated, manufactured, stored or disposed
of on, under or about such properties or transported to or from such
properties any Hazardous Substances; (iii) no facts, past or present
events or conditions interfere with or prevent continued material
compliance by the Corporation or any of such Subsidiary which, or give
rise to any material present or potential legal, common law or statutory
liability of the Corporation or any of such Subsidiary under, any
applicable environmental law or order; (iv) there is no pending civil or
criminal litigation, notice of violation or administrative proceeding
involving the Corporation or any such Subsidiary and relating in any way
to any environmental law or order for the purposes of this
representation and warranty "Environmental Law and Order" shall mean any
domestic or foreign, federal, provincial, state or local statute, law,
ordinance, rule, regulation, guideline, decree or requirement of any
governmental, regulatory or administrative body, agency or authority or
any court or tribunal of judicial authority or any public, private or
industry regulatory authority, whether international, national, United
States, Canadian, provincial, state or local, pertaining to the
protection of the environment for human health including, without
limitation, all requirements relating to the manufacturer, processing
distribution, used, treatment, storage, disposal, transport or handling
of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials, or waste, whether solid, liquid or
gaseous in nature. For the purpose of this representation and warranty
"Hazardous Substance" means any substance which is defined as a
Hazardous Substance under any environmental law or order or that is
toxic, explosive, corrosive, flammable, radio active, carcinogenic or
otherwise hazardous and is regulated by any governmental authority or
agency;
(ww) the Corporation and each Subsidiary owns all of its property and
assets reflected in the audited consolidated financial statements, and
the notes thereto, for the year ended December 31, 1999 and all other
property and assets used by it in connection with its business with good
and marketable title thereto, including without limitation its
Intellectual Property, free and clear of all encumbrances, liens,
charges, hypothecs, pledges, mortgages, title retention agreements,
security interests of any nature, adverse claim, except as disclosed in
Schedule "C" and save and except as to the property and assets which are
subject to a license or other similar agreement in favour of the
Corporation as disclosed in Schedule "C"; and
(xx) the Corporation will, during the period of distribution of the
Offered Securities and the Underlying Securities, maintain the Trustee
as the transfer agent and registrar in respect of the Warrants and the
Common Shares in the City of Vancouver, and such other cities of Canada
as may be required under Applicable Securities Laws.
6. Conditions to Purchase Obligation
6.1 The following are conditions of the Purchasers' obligations to
close the purchase of the Special Warrants from the Corporation as
contemplated hereby, which conditions the Corporation covenants to
exercise its reasonable best efforts to have fulfilled at or prior to
the Closing Date, which conditions may be waived in writing in whole or
in part by the Agent on its own behalf and on behalf of the Purchasers:
(a) the Corporation shall have made and/or obtained the necessary
filings, approvals, consents and acceptances to or from, as the case may
be, the Securities Commissions, the SEC and the Exchange, if any,
required to be made or obtained by the Corporation in connection with
the Offering, on terms which are acceptable to the Corporation and the
Agent, acting reasonably, prior to the Closing Date;
(b) the Common Shares and the Warrant Shares (including the Common
Shares and Warrant Shares issuable upon the exercise of the Agent's
Compensation Options) issued in connection with the Offering shall have
been accepted for listing and posting by the Exchange, subject to the
usual conditions and payment of the applicable additional listing fee to
the Exchange;
(c) the Corporation's board of directors shall have authorized and
approved this Agreement, the Subscription Agreements, Special Warrant
Agreement, the respective forms of the Special Warrants, Warrants and
Agent's Warrants, the Agent's Compensation Options and all other
agreements and instruments prepared in connection with the Offering, the
sale of the Offered Securities, the issuance of the Underlying
Securities and all matters relating to the foregoing;
(d) as at the Closing Date, the Corporation will deliver a certificate
addressed to the Agent and to the Purchasers, signed by its Chief
Executive Officer certifying that:
(i) there has been no adverse material change (actual, proposed or
prospective, whether financial or otherwise) in the business, affairs,
operations, assets, liabilities (contingent or otherwise) or capital of
the Corporation on a consolidated basis, since December 31, 1999 (the
"Effective Date") which has not been generally disclosed;
(ii) since the Effective Date, no material change relating to the
Corporation, on a consolidated basis, except for the Offering, has
occurred with respect to which the requisite material change statement
or report has not been filed and no such disclosure has been made on a
confidential basis;
(iii) the representations and warranties of the Corporation contained in
this Agreement are true and correct at the Time of Closing, with the
same force and effect as if made by the Corporation as at the Time of
Closing after giving effect to the transactions contemplated hereby;
(iv) the Corporation has complied with all the covenants and satisfied
all the terms and conditions of this Agreement on its part to be
complied with or satisfied at or prior to the Time of Closing;
(v) no order, ruling or determination having the effect of suspending
the sale or ceasing the trading of the securities of the Corporation
(including the Special Warrants, Agent's Warrants and the Underlying
Securities) has been issued or made by any stock exchange, securities
commission or other regulatory authority and is continuing in effect and
no proceedings for that purpose have been instituted or are pending or
to the knowledge of the Corporation, contemplated or threatened by any
stock exchange, securities commission or other regulatory authority;
(vi) there are no actions, suits, proceedings or inquiries, formal or
informal pending or threatened against or affecting the Corporation, at
law or in equity, before or by any federal, provincial, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality in Canada, the United States or elsewhere which may, in
any way, materially and adversely affect the Corporation;
(vii) no failure or default on the part of the Corporation exists under
any Applicable Law or any under license, permit or other instrument
granted or issued to the Corporation or under any contract, license,
agreement or other instrument to which the Corporation is a party or by
which the Corporation is bound, which may, in any way, materially and
adversely affect the Corporation and the execution, delivery and
performance of this Agreement and the allotment, issue and sale of the
Special Warrant, Agent's Warrants and Underlying Securities will not
result in such default;
(viii) the charter documents, including any articles of amendment
and by-laws of the Corporation and each Subsidiary attached to the
certificate are full, true and correct copies and are in full force and
effect; and
(ix) such other matters as the Agent or its legal counsel may
reasonably request.
(e) the Corporation will have caused a favorable legal opinion to be
delivered by its Canadian and United States counsel, addressed to the
Agent and the Purchasers with respect to such matters as the Agent may
reasonably request relating to this transaction, acceptable in all
reasonable respects to the Agent's counsel. In giving such opinion,
counsel to the Corporation shall be entitled to rely, to the extent
appropriate in the circumstances, upon local counsel and shall be
entitled as to matters of fact not within their knowledge to rely upon a
certificate of fact from responsible persons in a position to have
knowledge of such facts and their accuracy including a certificate of
the Corporation's registrar and transfer agent as to the outstanding
securities of the Corporation. The Corporation agrees that the
aforesaid legal opinions will be addressed to the Agent and the
Purchasers and that the Agent may deliver copies thereof to such
persons;
(f) the Corporation shall have caused, on or before the Closing Date,
the Agent's nominee to the board of directors of the Corporation to have
been duly appointed to the board of directors of the Corporation;
(g) each of the Corporation's senior officers, including, the
Corporation's chief executive officer, chief financial officer and
"Insiders" of the Corporation (within the meaning of the Applicable
Securities Laws of Ontario) who own or control at least 5% of the issued
and outstanding Common Shares shall have entered into an agreement with
the Corporation and the Agent, providing that they will not, without the
prior written consent of the Agent, from the date hereof, until the date
which is the earlier of 150 days following the Closing Date and the date
both a receipt for a Final Prospectus has been issued by each of the
Securities Commissions in the Qualifying Provinces and an Effective
Registration has been filed (the "Restricted Period") sell, assign,
transfer or otherwise dispose of any of their securities of the
Corporation. The Agent agrees that this contractual restriction shall
apply to only 3,000,000 of the total number of Common Shares held by Xx-
Xxxx Resources Corp. The Agent further agrees that this contractual
restriction shall not apply to incentive stock options existing on the
date hereof which have been granted by the Corporation or the
disposition of Common Shares acquired on the exercise of such incentive
stock options and shall also be subject to the usual exemptions
regarding the release of shares subject to an escrow including,
pertaining to a takeover-bid made to all shareholders;
(h) the delivery by the Corporation of such other certificates,
statutory declarations, agreements or materials, in form and substance
satisfactory to the Agent and its legal counsel as the Agent and its
legal counsel may reasonably request; and
(i) the Corporation shall have complied with and fulfilled all of the
terms, covenants and conditions of this Agreement on its part to be
complied with or fulfilled up to the Time of Closing.
7. Additional Documents Upon Filing of Prospectus.
7.1 The Corporation shall cause to be delivered to the Agent as
required by Applicable Securities Laws, concurrently with the filing of
the Preliminary Prospectus, Final Prospectus, or any Supplementary
Material executed by the Agent, a comfort letter dated the date thereof
from the auditors of the Corporation and addressed to the Agent and to
the directors of the Corporation relating to:
(a) the verification of the financial information and accounting data
and other numerical data of a financial nature contained therein and
matters involving changes or developments since the respective dates as
of which specified financial information is given therein, to a date not
more than two business days prior to the date of such letter; and
(b) the period beyond the most recent year end of the Corporation for
which an audited financial statement appears therein to a date not more
than two business days prior to the date of such letter.
8. Closing.
8.1 The Offering, inclusive of the sales to and subscription by
persons resident in the United States and by U.S. Persons, will be
completed at the offices of the Corporation's counsel at the Time of
Closing or such other place, date or time as may be mutually agreed to;
provided that if the Corporation has not been able to comply with any of
the covenants or conditions set out herein required to be complied with
by the Time of Closing or such other date and time as may be mutually
agreed to, the respective obligations of the parties will terminate
without further liability or obligation except for payment of expenses,
indemnity and contribution provided for in this Agreement.
8.2 At the Time of Closing, the Corporation shall deliver to the Agent
on behalf of the Purchaser:
(a) certificates duly registered as the Agent may in writing direct
representing the Special Warrants, and the Agent's Warrants;
(b) the requisite legal opinions and certificates as contemplated
above; and
(c) such further documentation as may be contemplated herein or as
counsel to the Agent or the applicable regulatory authorities may
reasonably require, against payment of the purchase price for the
Special Warrants (net of the Fee and Legal Costs as defined below) and
subject to Section 8.3 below, by certified cheque or bank draft payable
to, or to the order of, the Corporation, and delivery of the
Subscription Agreements and other documentation required to be provided
by or on behalf of the Purchasers or the Agent pursuant to this
Agreement.
The Corporation covenants and agrees, upon receipt of such funds to
forthwith make payment of the Agency Fee payable pursuant to Section 4.1
hereof and all fees, expenses, costs and disbursements payable to the
Agent pursuant to Section 10 hereof (collectively the "Fee") payable to
the Agent hereunder and the fees (inclusive of all disbursements and
goods and services tax) of the Agent's legal counsel incurred in respect
of the Offering (the "Legal Costs"). Alternatively, in full
satisfaction of the Agent's obligations in respect to payment of the
gross proceeds of the sale of the Special Warrants and the Corporation's
obligation in respect of the Fee, the Agent may deliver a certified
cheque in the amount of such gross proceeds, less the Fee and less the
Legal Costs (which Legal Costs shall include the reasonable anticipated
Legal Costs in respect of the preparation and filing of the Preliminary
Prospectus, the Final Prospectus, the Registration Statement and all
related matters provided such Legal Costs, inclusive of all
disbursements, goods and services tax, local counsel fees and
disbursements shall not exceed Cdn. $200,000) against delivery of the
Corporation's receipt for the gross proceeds of the sale of the Special
Warrants inclusive of the sale of the Special Warrants in the United
States or to U.S. Persons.
8.3 The Corporation acknowledges and agrees that 15% of the gross
proceeds received from Purchasers in Canada (the "Escrow Proceeds")
shall be maintained in escrow by Pacific Corporate Trust Company or such
other escrow agent as may be mutually agreed to between the Corporation
and the Agent (the "Escrow Agent") pursuant to the terms of an escrow
agreement. The escrow agreement shall provide that the Escrow Proceeds
shall be maintained in escrow by the Escrow Agent until the earlier of
the date of each of the receipts for the final prospectus has been
issued by the Commissions in the Qualifying Provinces and an Effective
Registration has been filed or 12 months following the Closing Date.
9. Termination of Purchase Obligation - the Agent.
9.1 Without limiting any of the foregoing provisions of this
Agreement, and in addition to any other remedies which may be available
to it, the Agent (on its own behalf and on behalf of the Purchasers)
shall be entitled, at its option, to terminate and cancel, without any
liability on its part (or on the part of the Purchasers), its
obligations (and the obligations of the Purchasers) under this Agreement
to purchase the Special Warrants, by giving written notice to the
Corporation at any time through to the Time of Closing on the Closing
Date if:
(a) any order (other than an order based solely upon the activities or
alleged activities of the Agent) to cease or suspend trading in any
securities of the Corporation is made by any stock exchange, Securities
Commission or other regulatory authority, which has not been rescinded,
revoked or withdrawn;
(b) any order or ruling is issued, any inquiry, investigation or other
proceeding (whether formal or informal) in relation to the Corporation
or directors or officers thereof is made, threatened or announced by any
officer or official of any stock exchange, SEC, Securities Commissions
or any other federal, state or provincial regulatory authority (other
than an order based solely upon the activities or alleged activities of
the Agent) or any law or regulation is promulgated or changed which, in
the reasonable opinion of the Agent, operates to prevent or restrict
trading in the Common Shares of the Corporation or distribution of the
Offered Securities or, if, in the opinion of the Agent, the announcement
or commencement thereof adversely affects or could reasonably be
expected to affect adversely the offering or continued offering of the
Special Warrants as herein contemplated;
(c) there should develop, occur or come into effect any incident of
national or international consequence, any law, regulation or inquiry or
any other event, action or occurrence of any nature whatsoever which, in
the reasonable opinion of the Agent, materially and adversely effects or
may materially and adversely effect the business of the Corporation;
(d) there should occur any material change or change in a material
fact which, in the reasonable opinion of the Agent would be reasonably
expected to have a material adverse effect on the market price or value
of the Offered Securities or could reasonably be expected to result in
the Purchaser's of a material number of Special Warrants exercising
their right under Applicable Securities Laws to withdraw from or rescind
the purchase thereof or xxx for damages in respect thereof;
(e) the state of the financial markets in Canada is such that in the
reasonable opinion of the Agent, the Offered Securities cannot be
profitably marketed or sold; or
(f) the Corporation shall be in breach of, or default under or non-
compliance with any representation, warranty, term of condition of this
Agreement.
The occurrence or non-occurrence of any of the foregoing events or
circumstances to be determined in the sole discretion of the Agent,
acting reasonably.
The Agent shall make reasonable efforts to give notice to the
Corporation (in writing or by other means) of the occurrence of any of
the events or circumstances referred to in this section, provided that
neither the giving nor the failure to give such notice shall in any way
affect the Agent's entitlement to exercise this right at any time
through to the Time of Closing.
The Agent's rights of termination contained in this section are in
addition to any other rights or remedies it 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.
9.2 If the obligations of the Agent and the Purchasers are terminated
under this Agreement pursuant to the termination rights provided for in
Section 9.1, the Corporation's liabilities to the Agent shall be limited
to the Corporation's obligations under Sections 10, 12 and 12 which
obligations shall remain in full force and effect in accordance with
their respective terms.
10. Expenses and Work Fee.
10.1 Whether or not the Offering is completed, the Corporation agrees
to pay all reasonable costs, fees and expenses incurred by the Agent
from time to time in connection with the Offering or incidental to the
performance of its obligation hereunder, including, without limitation:
(a) all expenses incidental to the sale, issue or distribution of the
Special Warrants, the qualification of the Underlying Securities and the
other transactions herein set forth;
(b) all costs incurred in connection with the preparation of documents
or certificates relating to the Offering, including the Preliminary
Prospectus, the Final Prospectus and the Registration Statement; and
(c) all expenses and fees incurred by the Agent including all Legal
Costs and all other fees and expenses incurred by the Agent or on its
behalf in relation to the due performance of its obligations hereunder,
including any expenses or reimbursement for expenses paid to a sub-agent
by the Agent. The Agent acknowledges that it has received the amount of
$15,000 as an advance against such expenses of which $10,000 shall be
applied against its legal costs. To the extent that goods and services
tax or provincial sales tax is exigible upon any of the foregoing fees
or expenses, the Corporation shall be responsible for payment therefor.
11. Indemnity.
11.1 The Corporation covenants and agrees to indemnify the Agent and
its directors, officers, employees and agents (each being hereinafter
referred to as an "Indemnified Party"), against, and to reimburse the
Agent promptly upon demand for any legal or other expenses reasonably
incurred by the Agent in connection with investigating or defending, all
losses (other than a loss of profits), claims, damages, liabilities,
costs or expenses (collectively, a "Claim") which an Indemnified Party
may suffer or incur, caused or incurred in connection with this Offering
by reason of or in any way relating to directly or indirectly:
(a) any statement, other than a statement relating solely to the
Agent, contained in any of the Offering Documents which constitutes a
misrepresentation;
(b) any statement, other than a statement relating solely to the Agent
and provided by or on behalf of the Agent, contained in the Disclosure
Documents which at the time and in the light of the circumstances under
which it was made, contained a misrepresentation;
(c) the omission to state in any of the Offering Documents, in the
Disclosure Documents or any certificate of the Corporation delivered
hereunder or pursuant hereto any material fact (other than a material
fact omitted in reliance upon and in conformity with information
furnished to the Corporation by or on behalf of the Agent) required to
be stated therein or necessary to make any statement therein not
misleading in light of the circumstances under which it was made;
(d) any order made or inquiry, investigation or proceeding commenced
or threatened by any Securities Commission or other competent authority
based upon any misrepresentation or alleged misrepresentation in any of
the Offering Documents or the Disclosure Documents (other than a
statement included in reliance upon and in conformity with information
furnished to the Corporation by or on behalf of the Agent specifically
for use therein) which prevents or restricts the trading in the Offered
Securities or the distribution or distribution to the public, as the
case may be, of the Offered Securities, in any of the Qualifying
Provinces;
(e) the Corporation not complying with any requirement of any
Applicable Securities Laws or regulatory in connection with the
transactions herein provided; or
(f) any breach of any representation or warranty of the Corporation
contained herein or the failure of the Corporation to comply with any of
its obligations hereunder.
11.2 If any Claim shall be asserted against an Indemnified Party in
respect of which indemnity may be sought from the Corporation pursuant
to the provisions of Section 11.1 or if any potential Claim contemplated
hereby shall come to the knowledge of an Indemnified Party, the
Indemnified Party shall promptly notify the Corporation in writing; but
the omission to so notify the Corporation will not relieve the
Corporation from any liability it may otherwise have to the Indemnified
Party pursuant to Section 11.1. The Corporation shall be entitled but
not obligated to participate in or assume the defense 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 reasonable fees
and expenses of such counsel shall be borne by the Indemnified Party
unless:
(a) the employment thereof has been specifically authorized in writing
by the Corporation;
(b) the Indemnified Party has been advised by counsel 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
(c) the Corporation has failed within a reasonable time after receipt
of such written notice to assume the defense of such action or claim;
provided that in no event shall the Corporation be required to assume
the fees and expenses of more than one counsel for all Indemnified
Parties. Neither party shall effect any settlement of any such Claim or
make any admission of liability without the written consent of the other
party, such consent to be promptly considered and not to be unreasonably
withheld. 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 herein obtained by the
Indemnified Party from any other person.
11.3 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 the
indemnity provisions of Section 11.1 in trust for and on behalf of such
Indemnified Party.
11.4 The rights of indemnity contained in this Section 11 in respect of
a Claim based on a misrepresentation or omission or alleged
misrepresentation or omission in either the Preliminary Prospectus,
Final Prospectus or any Supplementary Material shall not apply if the
Corporation has complied with Section 5(ll) hereof and the person or
company asserting such Claim was not provided with a copy of the
Preliminary Prospectus, Final Prospectus or any Supplementary Material
(which is required under the Applicable Securities Laws to be delivered
to such person or company by the Agent) which corrects such
misrepresentation or omission or alleged misrepresentation or omission
which is the basis of such Claim.
The Corporation hereby waives its rights 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 Final Prospectus or in any Supplementary Material;
provided, however, that such waiver shall not apply in respect of
liability caused or incurred by reason of:
(a) or arising out of any misrepresentation which is based upon or
results from a statement or information relating solely to or provided
by the Agent contained in such document; or
(b) any failure by the Agent or members of their banking or selling
group (if any) to provide prospective purchasers of the Special Warrants
any document which the Corporation is required to provide to such
prospective purchasers and which it has provided to the Agent to forward
to such prospective purchasers.
The Corporation hereby agrees to take all necessary and reasonable steps
to ensure that no default judgment or other default proceedings are
brought against an Indemnified Party in any jurisdiction in respect of
any Claim and, where required for that purpose, will consent to or
submit to the jurisdiction of any court and defend any Claim on behalf
of any Indemnified Party in any such jurisdiction, provided that nothing
herein shall limit the Corporation's right or ability to contest, at its
expense, on behalf of an Indemnified Party the appropriate jurisdiction
or forum for the determination of any such Claim so long as default
judgment or other default proceedings are not in the interim brought by
an party making such Claim.
12. Contribution.
12.1 In the event that the indemnity provided for in Section 11 is, for
any reason, illegal, unenforceable or otherwise unavailable, in whole or
in part, as being contrary to public policy or for any other reason, the
Agent and the Corporation shall contribute to the aggregate of all
losses, claims, costs, damages, expenses or liabilities (including any
legal or other expenses reasonably incurred by the Indemnified Party in
connection with investigating or defending any Claim which is the
subject of this section but excluding loss of profits or consequential
damages) of the nature provided for above such that the Agent shall be
responsible for that portion represented by the percentage that the
Agency Fee payable by the Corporation to the Agent bears to the gross
proceeds from the sale of the Special Warrants and the Corporation shall
be responsible for the balance, provided that, in no event, shall the
Agent be responsible for any amount in excess of the amount of the
Agency Fee actually received by it. In the event that the Corporation
may be held to be entitled to contribution from the Agent under the
provisions of any statute or law, the Corporation shall, in respect of
the Agent, be limited to contribution in an amount not exceeding the
lesser of: (i) the portion of the full amount of losses, claims' costs,
damages, expenses and liabilities, giving rise to such contribution for
which the Agent is responsible, as determined above, and (ii) the amount
of the Agency Fee actually received by the Agent. Notwithstanding the
foregoing, a party guilty of fraud, fraudulent misrepresentation, or
gross negligence, shall not be entitled to contribution from the other
party. Any party entitled to contribution will, promptly after receiving
notice of commencement of any claim, action, suit or proceeding against
such party in respect of which a claim for contribution may be made
against the other party under this section, notify such party from whom
contribution may be sought. In no case shall such party from whom
contribution may be sought be liable under this Agreement unless such
notice has been provided but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any
other obligation it may have otherwise than under this section. The
right to contribution provided in this section shall be in addition and
not in derogation of any other right to contribution which the Agent or
the Corporation may have by statute or otherwise by law.
12.2 If any of the provisions of Section 12.1 is determined to be void,
voidable or unenforceable, in whole or in part, such determination shall
not affect or impair or be deemed to affect or impair the validity of
any other provision of this Agreement and such void, voidable or
unenforceable provision shall be severable from this Agreement.
13. The Special Warrants.
13.1 The Corporation agrees that the Special Warrant Agreement shall
provide that in the event a receipt for the Final Prospectus is not
issued therefor by the Securities Commission in the Qualifying Provinces
or an Effective Registration is not filed on or before the Qualification
Deadline, then:
(a) the Corporation shall immediately deliver written notice to all
holders of Special Warrants and the Agent advising them of such event or
events; and
(b) each holder of a Special Warrant will be entitled to receive, upon
exercise and for no additional consideration, a Unit (comprising of 1.1
Common Shares and 0.55 of a Warrant in lieu of 1.0 Common Shares and
0.50 Warrant).
For greater certainty, the Corporation acknowledges that the foregoing
adjustment shall not derogate from the obligation of the Corporation to
continue to use its commercial best efforts to prepare and file the
Final Prospectus and obtain a final receipt of the Securities Commission
in the Qualifying Province in respect of the Final Prospectus and to
file an Effective Registration on or before the Time of Expiry.
14. Survival of Warranties, Representations, Covenants and Agreements.
14.1 All warranties, representations, covenants and agreements of the
Corporation and the Agent herein contained, or contained in documents
submitted or required to be submitted pursuant to this Agreement, shall
survive the purchase by the Purchasers of the Offered Securities and
shall continue in full force and effect for the benefit of the
Purchasers for a period ending on the Survival Limitation Date.
Notwithstanding the foregoing, the provisions contained in this
Agreement in any way related to the indemnification of the Agent by the
Corporation, or the contribution obligations of the Agent or those of
the Corporation, shall survive and continue in full force and effect,
until liability to the Indemnified Parties arising out of the
transactions contemplated by this Agreement has been extinguished by
operation of law.
15. Appointment as Fiscal Agent.
15.1 The Corporation appoints and retains the Agent as exclusive agent
and fiscal advisor in Canada for a term of two (2) years from the
Closing Date, and grants to the Agent a right of first refusal to
participate and manage any subsequent Canadian financing, merger,
acquisition, sale or takeover for a period of three (3) years from the
Closing Date (excluding any non broker dealer transaction), contingent
upon the successful completion of the Offering.
16. General Contract Provisions.
16.1 Any notice or other communication to be given hereunder shall be
in writing and shall be given by delivery or by telecopier, as follows:
if to the Corporation:
c/o Xxxxxx.xx Enterprises Group
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxx, C.E.O.
Fax: (000) 000-0000
with a copy to:
Maitland & Company
000-000 Xxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
or if to the Agent:
Groome Xxxxxxx.xxx Inc.
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Fraser Xxxxxx
Xxxxx 0000
0 Xxxxx Xxxxxxxx Xxxxx
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx Rapuch
Fax: (000) 000-0000
and if so given, shall be deemed to have been given and received upon
receipt by the addressee or a responsible officer of the addressee if
delivered, or four hours after being telecopied and receipt confirmed
during normal business hours at the location of the recipient, as the
case may be. Any party may, at any time, give notice in writing to the
others in the manner provided for above of any change of address or
telecopier number.
16.2 This Agreement and the other documents herein referred to
(including the Subscription Agreements) constitute the entire agreement
between the Agent and the Corporation relating to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether written or oral, between the Agent and the
Corporation with respect to their respective rights and obligations in
respect of the Offering, including the Letter Agreement dated January
28, 2000.
16.3 This Agreement may be executed by telecopier and in one or more
counterparts which, together, shall constitute an original copy hereof
as of the date first noted above.
17. Successors.
17.1 This Agreement shall enure to the benefit of, be binding upon, the
Corporation and the Agent and their respective successors (including
successors by reason of amalgamation, merger, business combination or
arrangement) and legal representatives and nothing expressed or
mentioned in this Agreement is intended and shall be construed to give
any other person any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be
and being for the sole and exclusive benefit of such persons and for the
benefit of no other person.
If this Agreement accurately reflects the terms of the transaction which
we are to enter into and if such terms are agreed to by the Corporation,
please communicate your acceptance by executing where indicated below
and returning one originally executed copy to the Agent.
Yours very truly,
GROOME XXXXXXX.XXX INC.
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, President
The foregoing accurately reflects the terms of the transaction which we
are to enter into and such terms are agreed to with effect as of the
date first above written.
XXXXXX.XX, INC.
By: /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, Chief Executive Officer
SCHEDULE "A"
DETAILS OF THE OFFERING
This is Schedule "A" to the Agency Agreement between Xxxxxx.xx, Inc. and
Groome Xxxxxxx.xxx Inc. made as of
TERM SHEET
Xxxxxx.xx, Inc.
Up to US$25,000,000
Private Placement Offering of Special Warrants
Issuer:
Xxxxxx.xx, Inc. (the "Company")
Agent:
Groome Xxxxxxx.xxx Inc. (the "Agent")
Sub-Agent:
XxxxxxXx.xxx Securities Corp. (Delaware)
Offering:
The Company will issue up to 5,555,555 Special Warrants at
a price of US$4.50 per Special Warrant pursuant to a best-
efforts offering by the Agent in Canada (the "Canadian
Offering"). Of the 5,555,555 Special Warrants, a maximum
of 1,777,777 Special Warrants will be made available to
subscribers on the President's List identified by the
Company (the "President's List"). Some or all of the
Subscribers on the President's List may be resident in the
U.S. The only U.S. residents who will be subscribing for
Special Warrants will be persons on the President's List
in the United States as identified by the Company. To the
extent that Special Warrants are sold to subscribers in
the United States, the number of Special Warrants
available for sale under the Canadian Offering will be
correspondingly reduced. The Sub-Agent shall be
responsible for carrying out all administrative functions
with respect to subscriptions obtained or received from
persons in the United States as identified by the Company
(the "U.S. Offering"). Each Special Warrant will entitle
the holder to receive, for no additional consideration,
one Common Share and one half of one Common Share Purchase
Warrant. Each whole Common Share Purchase Warrant will
entitle the holder to purchase one Common Share at a price
of US$10.00 for a period of 24 months from the date of
closing of this offering.
In connection with the Canadian Offering and the U.S.
Offering, the Company will agree to use its best efforts
to prepare and file, within 150 days following the date on
which the Special Warrants are issued, a final prospectus
(the "Prospectus") with the securities regulatory
authorities in each Canadian jurisdiction in which the
Special Warrants are sold (the "Qualifying Provinces") and
to obtain receipts therefor qualifying the distribution of
the Common Shares, Common Share Purchase Warrants and the
Common Shares issuable on exercise of the Common Share
Purchase Warrants (the "Underlying Securities") and to
file an effective registration statement providing for the
registration of the resale of the Common Shares issuable
on the exercise of the Special Warrants and the Common
Shares issuable upon the exercise of the Common Share
Purchase Warrants with the United States Securities and
Exchange Commission and state regulatory authorities as
applicable (an "Effective Registration"). To the extent
that Special Warrants are sold in the United States, the
Company will make filings with federal and state
securities regulatory authorities necessary and
appropriate to secure exemptions from registration or
qualification of such sale of the Special Warrants. The
Company is under no obligation to accept a subscription
for Special Warrants.
Amount:
Up to US$25,000,000 aggregate amount
Special Warrants:
The Special Warrants will be issued pursuant to a Special
Warrant Agreement, which will provide that the Special
Warrants will expire on the earlier of (i) the 5th
business day after the later of the day on which a receipt
for the final Prospectus has been issued by the last of
the securities commissions in each of the Qualifying
Provinces and the date of an Effective Registration, or
(ii) the first anniversary of the date on which the
Special Warrants are issued (the "Expiry Time").
The net proceeds from the sale of the Special Warrants
will be received by the Company at the closing of the
Special Warrant transaction (expected to occur on or about
April 25, 2000) subject to any required approvals from
applicable authorities. If either an Effective
Registration or a receipt for the final Prospectus is not
received from the last of the securities commissions in
each of the Qualifying Provinces by 5:00 p.m. (Toronto
time) on the date which is 150 days following the issue of
the Special Warrants, then from and after such date, each
Special Warrant will entitle the holder thereof to
acquire, without payment of additional consideration, 1.1
Common Shares and 0.55 Common Share Purchase Warrants on
the exercise or deemed exercise of the Special Warrant.
Any Special Warrants not exercised prior to the Expiry
Time will be deemed to have been exercised immediately
prior to the Expiry Time without any further action on the
part of the holder or the Company.
Resale Restrictions:
The Common Shares will be subject to statutory resale
restrictions in Canada if the Special Warrants are
exercised prior to the issuance of a receipt for a final
Prospectus. In addition, the Special Warrants are subject
to resale restrictions.
Shares Outstanding:
Pre-financing Basic 22, 048,293
Minimum Subscription Canadian Offering:
$150,000 for subscribers resident in or subject to the
laws of Ontario and Quebec and $97,000 for subscribers
resident in or subject to the laws of Alberta and British
Columbia, or such other jurisdictions as may be agreed to
by the Company and the Agent.
Use of Proceeds:
The Company intends to use the proceeds of the offering,
after deducting expenses and fees, to fund operating
deficits, research and development, joint venture
agreements, acquisitions and working capital.
Dividend:
The Company has never paid dividends and does not intend
to pay dividends on its Common Shares in the foreseeable
future. The Company's current intention is to reinvest
earnings to finance long-term growth.
Commission:
At the Closing of the Special Warrant transaction, the
Agent shall be paid
(i) save as otherwise set forth below, a cash commission of
8.0% of the capital raised in respect of the Canadian
Offering and a 4% fiscal advisory fee with respect to the
capital raised in respect of the U.S. Offering provided
that any fees paid by the Company, to an agent in
connection with the U.S. Offering shall correspondingly
reduce the fiscal advisory fee payable to the Agent. The
Agent shall receive a cash commission of 4% (as opposed to
8%) in respect of capital raised from persons identified
in writing by the Issuer on the 'President's List; and
(ii) Compensation Options equal to 10% of the units issued
pursuant to the Offering, inclusive of the U.S. Offering.
Conditions Precedent to Closing:
The closing of the Special Warrant transaction will be
contingent upon customary closing conditions, including
without limitation, the execution of an agency agreement
acceptable to Agent and the completion of due diligence
activities by or on behalf of Agent.
Date of Closing:
April 25, 2000 or such other date as agreed by the Company
and the Agent.
Note: These terms do not constitute any form of binding contract but
rather are solely for the purpose of outlining those financial terms
pursuant to which a definitive agreement may ultimately be entered into.
The terms of any investment are contingent upon completion of due
diligence to the satisfaction of Groome Xxxxxxx.xxx Inc. The investment
is also contingent upon, among other things, legal, technical, patent
and market assessments, product review and negotiation of satisfactory
closing documents, including without limitation the form of Special
Warrant and an Agency Agreement containing covenants, representations
and warranties.
