EXHIBIT 10.1
AGENCY AGREEMENT
May 11, 2004
EmergenSys Corporation
000 xxxx. Xxxx-Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxx X0X 0X0
ATTENTION: XXXXXX XXXXXXXX, PRESIDENT
Dear Sir:
The undersigned, Desjardins Securities Inc. ("VMD" or the "AGENT") understands
that EmergenSys Corporation (the "COMPANY") proposes, subject to the terms
hereof, to offer for sale to the public 12,500,000 special warrants at a price
of $0.40 per special warrant (the "SPECIAL WARRANTS"), for a total consideration
of $5,000,000.
The Special Warrants will be sold on a private placement basis, subject to the
terms and conditions set out herein and in the Special Warrant Indenture.
Subject to any adjustment contemplated in the Special Warrant Indenture, each
Special Warrant shall be exercisable to acquire, for no additional
consideration, one common share in the capital of the Company (each, a "COMMON
SHARE" and collectively, the "COMMON SHARES") and one Common Share purchase
warrant (individually, a "PURCHASE WARRANT" and collectively, the "PURCHASE
WARRANTS"). Each Purchase Warrant shall entitle the holder thereof to purchase
one Common Share at a price of $0.50 from the Special Warrant Closing Date to
April 30, 2005 and at a price of $0.60 from May 1, 2005 to April 30, 2006. The
Company and each Purchaser shall enter into a Subscription Agreement for the
purchase of Special Warrants.
The Company has requested the Agent to act as sole and exclusive agent of the
Company to solicit offers to purchase the Special Warrants and the Agent has
agreed to act as such on the terms and conditions stated herein.
The Agent also understands that the Company proposes, subject to the terms and
conditions hereof, to issue and sell to the Agent, at the election of the Agent,
additional Special Warrants representing up to 2,500,000 Special Warrants
($1,000,000), to cover over-allotments, if any (the "OVER-ALLOTMENT OPTION").
The Agent may exercise the Over-Allotment Option in whole or in part during a
60-day period following the Special Warrant Closing Date solely for the purposes
of covering over-allotments made by the Agent in connection with the Offering.
The Over-Allotment Option may be exercised only once by the Agent by written
notice from the Agent to the Company setting forth the aggregate number of
Special Warrants to be purchased and the date on which such Special Warrants are
to be delivered, which date shall be as determined by the Agent but shall not be
earlier than the Special Warrant Closing Date and shall be, unless the Agent and
1
the Company otherwise agree in writing, within the period commencing on the
second business day and ending on the tenth business day after the date of such
notice. Upon the furnishing of any such notice, the Agent shall be committed to
purchase and the Company shall be obligated to issue and sell, in accordance
with and subject to the provisions hereof and subject to applicable regulatory
requirements, the number of Special Warrants therein indicated.
The Common Shares and Purchase Warrants issuable by the Company upon the
exercise of the Special Warrants are referred to as the "UNDERLYING SECURITIES".
Each Special Warrant will be automatically exercised at 5:00 p.m. (Montreal
time) (the "EXPIRY TIME") on the earlier of:
(i) the date of the Liquidity Transaction;
(ii) 12 months and one day after the Special Warrant Closing Date (the
"QUALIFICATION DEADLINE")
If any of the foregoing days is not a Business Day, then the action or event
will occur on the first Business Day following such day.
The net proceeds from the Offering (the "ESCROW FUNDS") will be deposited with
and held in trust by Xxxxxx, de Xxxxx (the "ESCROW AGENT") pursuant to an escrow
agreement (the "ESCROW AGREEMENT") to be entered into by the Company and the
Escrow Agent, at or prior to the Closing Time. The Escrow Funds, together with
any interest earned thereon but less any amounts required to be deducted or
withheld by law, will be released in the manner provided under the terms of the
Escrow Agreement.
The Company shall prepare and file, in accordance herewith, a Prospectus in
order to qualify the distribution of the Underlying Securities and the Broker
Warrants in each of the Qualifying Provinces.
The Company hereby agrees to offer for sale to Purchasers resident in the
Qualifying Provinces or in those jurisdictions outside of Canada where the
Special Warrants may be lawfully sold, an aggregate of 15,000,000 Special
Warrants, subject to the terms and conditions hereinafter provided. The Offering
is conducted outside the United States in accordance with Regulation S of the
U.S. Securities Act. The parties acknowledge that the Special Warrants and the
Underlying Securities have not been and will not be registered under the U.S.
Securities Act or under the laws of any state of the United States and may not
be offered or sold, or re-offered or re-sold by the Agent except pursuant to
exemptions from the U.S. Securities Act and the applicable laws of any state of
the United States.
In consideration for the services to be rendered by the Agent in connection with
the Offering pursuant to this Agreement, including assisting in the preparation
of the Prospectus and all other matters in connection with the issue and sale of
the Special Warrants and the issue of the Underlying Securities, the Company
shall pay a fee to the Agent equal to 10% of the aggregate gross proceeds raised
in connection with the Offering (the "AGENT'S COMMISSION") payable in accordance
with the provisions of Section 14, but exclusive of the amounts to be paid to
the Agent pursuant to Section 18. The Company shall also issue to the Agent in
accordance with the provisions of Section 14, a compensation option (the
"COMPENSATION OPTION") to acquire, for no additional consideration, broker
warrants (each, a "BROKER WARRANT" and collectively, the "BROKER WARRANTS")
equal in number to 10% of the Special Warrants issued pursuant to the Offering.
2
Each Broker Warrant shall entitle the holder thereof to purchase one Common
Share at a price of $0.40 per Common Share for a period of two years from the
Special Warrant Closing Date. Each such Common Share shall be accompanied by a
Purchase Warrant.
DEFINITIONS
In this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:
"AFFILIATE" has the meaning ascribed to it in Ontario Securities Commission Rule
45-501 as it is constituted on the date hereof;
"AGREEMENT" means the agreement resulting from the acceptance by the Company of
the offer made by the Agent by this letter, as it may be amended from time to
time;
"AMF" means the Autorite des marches financiers (Quebec);
"BUSINESS DAY" means a day which is not a Saturday, a Sunday or a statutory or
civic holiday in the City of Montreal, Quebec or a day when the principal office
of the Warrant Agent in such city is not generally open to the public for the
transaction of business;
"CANADIAN SECURITIES LAWS" means, collectively, the applicable securities laws
of each of the Qualifying Provinces and the respective regulations and rules
made thereunder together with all applicable published policy statements,
blanket orders and rulings of the Securities Commissions and all discretionary
orders or rulings, if any, of the Securities Commissions made in connection with
the transactions contemplated hereunder;
"CLAIM" has the meaning ascribed to it in subsection 20(1);
"CLOSING TIME" means 10:00 a.m. on the Special Warrant Closing Date or such
other time on the Special Warrant Closing Date as the Company and the Agent may
agree;
"FINAL PROSPECTUS" means the final prospectus of the Company in the English
language approved, signed and certified in accordance with the Canadian
Securities Laws, and the French language version thereof, if required, relating
to the qualification for distribution of the Underlying Securities and the
Broker Warrants under the Canadian Securities Laws through the Agent;
"FINANCIAL INFORMATION" has the meaning ascribed to it in subsection 6(1)(c);
"FINANCIAL STATEMENTS" means the audited consolidated balance sheet of the
Company as at December 31, 2003 and the consolidated statements of operations
and comprehensive loss, stockholders' equity and cash flows for the fiscal year
then ended, together with the report of Ernst & Young LLP thereon and the notes
thereto;
"INCOME TAX ACT" means the Income Tax Act (Canada) and the regulations
thereunder, in each case as amended;
3
"INDEMNIFIED PARTY" and "INDEMNIFIED PARTIES" have the meanings ascribed thereto
in subsection 20(1);
"INTELLECTUAL PROPERTY" means:
(i) all inventions, arts, processes, machines, manufacture, compositions
of matter and improvements, whether or not patentable, patented or
the subject of applications for patents;
(ii) all trade-marks, service marks, trade dress, corporate names,
business names and other trade names and all domain names, whether
or not registered or the subject of registrations or applications
for registrations;
(iii) all confidential information, proprietary information, trade secrets
and know-how;
(iv) all software, computer programs and code of all types, layouts,
interfaces, applications and tools, all databases and database
layouts and other copyright works, including literary and graphic
works, whether or not registered or the subject of copyright
registration or applications for registration;
(v) all industrial designs, whether or not registerable, patented or
registered or the subject of applications for patent or
registration;
(vi) all ideas, plans, developments, specifications, performance data,
quality control information, blueprints, flow sheets, equipment and
parts list, instructions, manuals, records, procedures and all
licenses, agreements and other contracts and commitments relating to
any of the foregoing, and any other intellectual and industrial
property, whether or not registerable or the subject of registration
or applications for registration; and
(vii) all patterns, plans, designs research data, other proprietary
know-how, processes, drawings, technology, inventions, formulae,
specifications, performance data, quality control information,
unpatented blue prints, flow sheets, equipment and parts lists,
instructions, manuals, records and procedures, and all licenses,
agreements and other contracts and commitments relating to any of
the foregoing;
"INTELLECTUAL PROPERTY RIGHTS" means:
(i) all patents, pending patent applications, provisional patent
applications, and rights to file applications for inventions,
including all rights of priority and rights in continuations,
continuations in part, divisions, re-examinations, re-issues and
other derivative applications;
(ii) all common law trade-xxxx rights, trade-xxxx registrations, pending
applications and registration and rights to file applications for
trade-marks, including all rights of priority;
4
(iii) all copyright and copyright registrations, pending applications for
registrations and rights to file applications for property referred
to in the definition of "Intellectual Property", above;
(iv) all design patents, design registrations, pending patent and design
applications and rights to file applications for the designs,
including all rights of priority and rights in continuations,
continuations in part, divisions, re-examinations, re-issues and
other derivative applications; and
(v) all rights in the property referred to in the definition of
"Intellectual Property", above;
"KNOWLEDGE OF THE COMPANY" means the knowledge of the directors and senior
officers of the Company after having made due inquiry;
"LIQUIDITY TRANSACTION", refers to (a) the obtaining of a receipt for the Final
Prospectus in the Qualifying Provinces and (b) the listing of the Common Shares
of the Company on the TSX Venture;
"MISREPRESENTATION", "MATERIAL FACT", "MATERIAL CHANGE", "SUBSIDIARY",
"ASSOCIATE" and "DISTRIBUTION" have the respective meanings ascribed to such
terms in the Securities Act (Ontario);
"MRRS" means the mutual reliance review system procedures provided for under
National Policy 43-201, Mutual Reliance Review System for Prospectuses and
Annual Information Forms of the Securities Commissions;
"NOTICE" has the meaning ascribed to it in Section 24;
"OFFERING" means the offering of 15,000,000 Special Warrants, at $0.40 per
Special Warrant, for an aggregate consideration of $6,000,000;
"PERSON" shall include any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation (with or without
share capital), unincorporated association, trust, trustee, executor,
administrator or other personal representative, regulatory body, agency,
government or governmental agency, authority or entity, in each case howsoever
designated or constituted;
"PRELIMINARY PROSPECTUS" means the preliminary prospectus of the Company in the
English language approved, signed and certified in accordance with the Canadian
Securities Laws, and the French language version thereof, if required, relating
to the qualification for distribution of the Underlying Securities and the
Broker Warrants under the Canadian Securities Laws through the Agent;
"PROSPECTUS" means the Preliminary Prospectus and the Final Prospectus;
"PURCHASE WARRANT AGENT" means Computershare Trust Company of Canada or such
other party who is the purchase warrant agent under the Purchase Warrant
Indenture;
5
"PURCHASE WARRANT INDENTURE" means a warrant indenture to be entered into prior
to the Special Warrant Closing Date between the Company and the Purchase Warrant
Agent providing for the issue of the Purchase Warrants in a form to be agreed
upon between the Company and the Agent;
"PURCHASERS" means the persons, including the Agent, who as purchasers acquire
Special Warrants from the Company by duly completing and executing the
Subscription Agreements and having such Subscription Agreements accepted by the
Company, and the permitted assignees or transferees of such persons from time to
time; "QUALIFYING PROVINCES" means the Provinces of Xxxxxx, Xxxxxxx, Xxxxxxx and
British Columbia;
"REGISTRANTS" has the meaning ascribed to it in subsection 10(3);
"SECURITIES COMMISSIONS" means the securities regulatory authorities in the
Qualifying Provinces;
"SELLING FIRM" and "SELLING FIRMS" have the meanings ascribed to them in
subsection 1(2);
"SPECIAL WARRANT CERTIFICATES" has the meaning ascribed to it in subsection
13(A)(f);
"SPECIAL WARRANT CLOSING" means the completion of the issue and sale by the
Company of the Special Warrants and the purchase by the Purchasers of the
Special Warrants pursuant to the Subscription Agreements and the Escrow
Agreement;
"SPECIAL WARRANT CLOSING DATE" means the date upon which all conditions set
forth in the Escrow Agreement and in section 16 hereof, to be satisfied by the
Company, have been met ;
"SPECIAL WARRANT INDENTURE" means a warrant indenture to be entered into prior
to the Special Warrant Closing Date between the Company and the Warrant Agent
providing for the issue of the Special Warrants in a form to be agreed upon
between the Company and the Agent;
"SUBSCRIPTION AGREEMENTS" means the subscription agreements entered into between
the Company and the Purchasers pursuant to which the Purchasers have subscribed
for Special Warrants and shall include, for greater certainty, all schedules
thereto, the terms of which are incorporated herein by reference;
"SUBSIDIARIES" means collectively EmergenSys Canada Inc. and Scan-R Urgence
Inc.;
"SUPPLEMENTARY MATERIAL" means collectively, any amendment to the Preliminary
Prospectus or the Final Prospectus, any amendment or supplemental prospectus or
any ancillary materials that may be filed by or on behalf of the Company under
the Canadian Securities Laws relating to the distribution of the Underlying
Securities and the Broker Warrants;
"TAXES" has the meaning ascribed to it in subsection 13(A)(x);
6
"TRANSACTION AGREEMENTS" means this Agreement, the Special Warrant Indenture,
the Purchase Warrant Indenture, the Subscription Agreements, the Compensation
Option and the Escrow Agreement;
"TSX VENTURE" means the TSX Venture Exchange;
"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended;
"UNITED STATES" means the United States of America, its territories and
possessions, any state of the United States, and the District of Columbia; and
"WARRANT AGENT" means Computershare Trust Company of Canada or such other party
who is the special warrant agent under the Special Warrant Indenture;
Any reference in this Agreement to a Section, subsection or Schedule shall,
unless otherwise indicated, refer to a section or subsection of or Schedule to
this Agreement. All words and personal pronouns relating thereto shall be read
and construed as the number and gender of the party or parties referred to in
each case require and the verb shall be construed as agreeing with the required
word and/or pronoun. Unless otherwise indicated, all dollar amounts referred to
in this Agreement are in lawful money of Canada.
TERMS AND CONDITIONS
1. SALE ON EXEMPT BASIS.
(1) The Agent shall offer for sale on behalf of the Company the Special
Warrants:
(a) in the Qualifying Provinces in compliance with Canadian
Securities Laws only to such Purchasers and in such manner so
that, pursuant to the provisions of Canadian Securities Laws,
no prospectus or offering memorandum or other similar document
needs to be filed or delivered in connection therewith; and
(b) in such other jurisdictions on a private placement basis in
compliance with all applicable laws of such jurisdiction in
such a manner so that no prospectus, registration statement,
offering memorandum or other similar document needs to be
filed or delivered in connection therewith.
(2) The Agent shall be permitted to appoint additional dealers (each a
"SELLING FIRM" and, collectively "SELLING FIRMS") as its agents in
the Offering and may determine the remuneration payable to such
Selling Firm(s). The Company shall have no obligations to such
Selling Firm(s) for any fees in connection with the Offering. The
Company grants all of the rights and benefits of the Agent under
this Agreement to any Selling Firm duly appointed by the Agent and
appoints such Agent as trustee of such rights and benefits for such
Selling Firm, and such Agent accepts such trust and agrees to hold
such rights and benefits for and on behalf of such Selling Firm. The
Agent shall ensure that any Selling Firm appointed by it pursuant to
7
the provisions contained herein or with whom the Agent has a
contractual relationship with respect to the Offering, if any,
agrees with it in writing to comply with the covenants and
obligations given by the Agent herein.
(3) Subject to compliance by the Company with its obligations hereunder,
and provided that the Agent is satisfied in its sole discretion that
the Preliminary Prospectus, Final Prospectus and any Supplementary
Material contain full, true and plain disclosure of all material
facts relating to the Company and the securities offered by or
referred to in such materials, the Agent shall execute and deliver
to the Company the certificate required (in the reasonable opinion
of Company's counsel) to be executed by it under Canadian Securities
Laws in connection with the Preliminary Prospectus, the Final
Prospectus and any Supplementary Material.
(4) Notwithstanding the foregoing provisions of this Section, the Agent
will not be liable to the Company under this Section with respect to
a default under this Section by Selling Firm.
2. FILINGS.
The Company undertakes to file or cause to be filed all forms or undertakings
required to be filed by the Company or secure all prospectus exemptions which
are required in connection with the Offering so that the distribution of the
Special Warrants may lawfully occur without the necessity of filing a
prospectus, a registration statement, an offering memorandum or similar document
in Canada or the United States (but on terms that will permit the Underlying
Securities to be sold by Purchasers of Special Warrants at any time in the
Qualifying Provinces, subject to Canadian Securities Laws and the terms and
conditions contained herein), and the Agent undertakes to cause Purchasers of
Special Warrants to complete and deliver to the Company any forms required by
Canadian Securities Laws or under other applicable securities laws. All fees
payable in connection with such filings shall be at the sole expense of the
Company.
3. NO OFFERING MEMORANDUM.
Neither the Company nor the Agent shall (i) provide to prospective purchasers
any document or other material that would constitute an offering memorandum
within the meaning of Canadian Securities Laws or applicable securities laws of
the United States or any state or territory thereof or (ii) engage in any form
of general solicitation or general advertising in connection with the offer and
sale of the Special Warrants or the Underlying Securities, including but not
limited to, causing the sale of the Special Warrants or the Underlying
Securities to be advertised in any newspaper, magazine, printed public media,
printed media or similar medium of general and regular paid circulation,
broadcast over radio, television or telecommunications, including electronic
display, or conduct any seminar or meeting relating to any offer and sale of the
Special Warrants or Underlying Securities whose attendees have been invited by
general solicitation or advertising.
8
4. PRELIMINARY PROSPECTUS.
The Company shall, as soon as practicable, prepare and file under applicable
Canadian Securities Laws of each of the Qualifying Provinces and use its
commercially reasonable best efforts to obtain a decision document from the AMF
under the MRRS evidencing that a receipt has been issued for the Preliminary
Prospectus by each of the Securities Commissions.
5. FINAL PROSPECTUS.
The Company shall promptly resolve all comments received from the Securities
Commissions and as soon as practicable after all comments of Securities
Commissions have been satisfied with respect to the Preliminary Prospectus,
prepare and file under applicable Canadian Securities Laws and use its
commercially reasonable best efforts to obtain within 90 days of the Special
Warrant Closing Date a decision document from the AMF under the MRRS evidencing
that a receipt has been issued for the Final Prospectus by each of the
Securities Commissions.
The Preliminary Prospectus and the Final Prospectus will also qualify the
issuance of additional Common Shares to the public in order to ensure that there
is a sufficient number of public shareholders to meet the listing requirements
of the TSX Venture.
6. DELIVERIES AT TIME OF FILING.
(1) The Company shall deliver to the Agent contemporaneously with or
prior to the filing of the Preliminary Prospectus or the Final
Prospectus, as the case may be, with the Securities Commissions:
(a) a copy of the Preliminary Prospectus or Final Prospectus, as
the case may be, signed and certified;
(b) signed copies of any other document required to be filed by
the Company at the time of filing of each of the Preliminary
Prospectus and the Final Prospectus under Canadian Securities
Laws, including a copy of the Form 6 certificates of
authentication in respect of the Final Prospectus signed and
certified as required by the Canadian Securities Laws;
(c) at the time of filing of each of the Preliminary Prospectus
and the Final Prospectus, an opinion of XxXxxxxx Xxxxxxxx
addressed to the Agent, Agent's counsel and the Company, in
form and substance satisfactory to the Agent, acting
reasonably, to the effect that the French language version of
each of the Preliminary Prospectus and Final Prospectus, as
the case may be, except for the financial statements and notes
to such statements and the related auditors' reports contained
in the Preliminary Prospectus and the Final Prospectus
(collectively, the "FINANCIAL INFORMATION") is in all material
respects a complete and accurate translation of the English
language version thereof, and that such English and French
language versions are not susceptible to any materially
different interpretation with respect to any matter contained
therein;
9
(d) at the time of filing of each of the Preliminary Prospectus and the
Final Prospectus, an opinion of Ernst & Young LLP addressed to the
Agent, Agent's counsel and the Company, to the effect that the
Financial Information contained in the Preliminary Prospectus and
the Final Prospectus, as the case may be, is in all material
respects, a complete and proper French translation of the English
language versions thereof;
(e) in the case of the Final Prospectus, a long-form comfort letter
dated the date of the Final Prospectus, in form and substance
satisfactory to the Agent, acting reasonably, addressed to the Agent
and the board of directors of the Company from Ernst & Young LLP,
with respect to the financial and accounting information contained
in the Final Prospectus, which letter shall be based on a review by
the applicable auditors within a cut-off date of not more than two
Business Days prior to the date of the letter, and which letter
shall be in addition to the auditors' consent letters and comfort
letters addressed to the Securities Commissions; and
(f) at the time of filing of the Final Prospectus, the Company shall
cause XxXxxxxx Xxxxxxxx to deliver to the Agent and its counsel a
legal opinion dated and delivered at such time, in form and
substance satisfactory to the Agent and its counsel, acting
reasonably to the effect that:
(i) the statements in the Prospectus under the heading "Canadian
Federal Income Tax Considerations", subject to the
qualifications, assumptions and restrictions set out
thereunder, constitute a fair summary of the principal
Canadian federal income tax considerations pursuant to the
Income Tax Act generally applicable to a person who acquires
Underlying Securities pursuant to the Prospectus and who, for
the purposes of the Income Tax Act, is resident in Canada,
holds the Underlying Securities as capital property and deals
at arm's length with the Company and is not affiliated with
the Company; and
(ii) subject to the qualifications, assumptions and restrictions
set out under "Canadian Federal Income Tax Considerations" in
the Prospectus, the Underlying Securities are qualified
investments for trusts governed by registered retirement
savings plans, registered retirement income funds, registered
education savings plans and deferred profit sharing plans
under the Income Tax Act.
7. SUPPLEMENTARY MATERIAL.
The Company shall also prepare and deliver promptly to the Agent and Agent's
counsel English and French versions of all Supplementary Material signed and
certified as required by the Canadian Securities Laws. Concurrently with the
delivery of any Supplementary Material, the Company shall deliver to the Agent
and Agent's counsel, with respect to such Supplementary Material, opinions and
comfort letters substantially similar to those referred to in subsections
6(1)(c), (d) and (e).
10
8. COMMERCIAL COPIES.
The Company shall cause commercial copies of the Preliminary Prospectus and the
Final Prospectus to be delivered to the Agent without charge in such numbers and
in such cities as the Agent may reasonably request on oral or written
instruction from VMD to the Company or the printer of such documents given on or
about the dates the Preliminary Prospectus and the Final Prospectus are filed in
each of the Qualifying Provinces. Such delivery shall be effected as soon as
practicable after the MRRS decision document has been issued by the AMF in
respect thereof and, in any event, not later than 5:00 p.m. (Montreal time) on
the day following the issuance of the MRRS decision document by the AMF in
respect of the Prospectus. The Company shall similarly cause to be delivered
commercial copies of the Supplementary Material required to be delivered, on
request or otherwise, to the Agent. The commercial copies of the Preliminary
Prospectus, the Final Prospectus and any Supplementary Material shall be
identical in content to the electronically transmitted versions thereof filed
with Canadian securities regulatory authorities pursuant to the System for
Electronic Document Analysis and Retrieval. The Agent shall cause to be
delivered to holders of Special Warrants in the Qualifying Provinces copies of
the Final Prospectus and any required Supplementary Material.
9. REPRESENTATION AS TO PROSPECTUS AND SUPPLEMENTARY MATERIAL.
Delivery of the Preliminary Prospectus, the Final Prospectus and any
Supplementary Material by the Company shall constitute the representation and
warranty of each of the Company to the Agent and to the Purchasers that:
(1) all information and statements (except information and statements
relating solely to the Agent) contained in the Preliminary
Prospectus or the Final Prospectus or any Supplementary Material, as
the case may be, are true and correct in all material respects at
the time of delivery thereof and contain no misrepresentation and
that the Preliminary Prospectus, the Final Prospectus or any
Supplementary Material, as the case may be, constitutes full, true
and plain disclosure of all material facts relating to the Company
and the Underlying Securities;
(2) no material fact or information has been omitted therefrom (except
facts or information relating solely to the Agent) which is required
under the Canadian Securities Laws to be stated in such disclosure
or is necessary to make the statements or information contained in
such disclosure not misleading in light of the circumstances under
which they were made;
(3) the financial statements contained in the Preliminary Prospectus or
the Final Prospectus or any Supplementary Material, as the case may
be, accurately reflect the financial position of the Company as at
the respective dates thereof and no material adverse change in the
financial position of the Company has taken place since December 31,
2003; and
(4) such documents comply with the requirements of the Canadian
Securities Laws.
11
Such deliveries shall also constitute the Company's consent to the Agent's use
of the Preliminary Prospectus, the Final Prospectus and any Supplementary
Material, as the case may be, in connection with the distribution of the
Underlying Securities and the Broker Warrants in compliance with this Agreement
unless otherwise advised in writing.
10. ADDITIONAL COVENANTS OF THE COMPANY.
The Company hereby covenants with the Agent and to the Purchasers that:
(1) the Company shall duly execute and deliver the Special Warrant
Indenture, the Purchase Warrant Indenture, the Escrow Agreement and
the Compensation Option, each in form and substance satisfactory to
the Agent, prior to the Special Warrant Closing Date;
(2) the Company shall at all times prior to the filing of the
Preliminary Prospectus and the Final Prospectus allow the Agent and
its representatives to conduct all due diligence which the Agent may
reasonably require to be conducted in order to fulfil its
obligations as agent under Canadian Securities Laws and in order to
enable the Agent to responsibly execute any certificate required to
be executed by the Agent in connection with a Prospectus or
Supplementary Material under Canadian Securities Laws;
(3) the Company shall employ its best efforts to complete the Liquidity
Transaction on or prior to August 31, 2004. If the Company has not
yet filed the Preliminary Prospectus in the Qualifying Provinces and
a listing application with the TSX Venture, by July 31, 2004, each
Special Warrant exercised will entitle the holder thereof to
increase by 10% the number of Common Shares and Purchase Warrants
represented thereby without payment of any additional consideration;
(4) the Company shall employ its best efforts to acquire 100% of the
share capital of 3720161 Canada Corporation (doing business under
the name Mobilair Integration) within 90 days following the Special
Warrant Closing Date, failing which each Special Warrant exercised
will entitle the holder thereof to increase by 10% the number of
Common Shares and Purchase Warrants represented thereby without
payment of any additional consideration;
(5) the Company will fulfill, or cause to be fulfilled, all legal
requirements to permit the issuance, offering and sale of the
Special Warrants and the Underlying Securities including, without
limitation, compliance with Canadian Securities Laws to enable the
Special Warrants to be offered for sale and sold to purchasers in
the Qualifying Provinces, through investment dealers or brokers
registered under Canadian Securities Laws who have complied with the
relevant provisions of such legislation ("REGISTRANTS") and to
enable the Underlying Securities to be issued upon the exercise of
the Special Warrants (including obtaining the Conversion Order);
12
(6) the Company shall use its commercially reasonable best efforts to
fulfill, at or prior to the Special Warrant Closing Date, each of
the conditions set out in Section 16;
(7) the Company will advise the Agent and each holder of Special
Warrants (at each holder's address appearing in a register to be
established and maintained by the Warrant Agent under the Special
Warrant Indenture), promptly after receiving notice thereof, of the
time when the Prospectus and any Supplementary Material has been
filed and receipts therefor have been obtained and will provide
evidence reasonably satisfactory to the Agent of each such filing
and copies of such receipts;
(8) the Company will advise the Agent, promptly after receiving notice
or obtaining knowledge thereof, of: (i) the issuance by any
Securities Commission of any order suspending or preventing the use
of the Preliminary Prospectus, the Final Prospectus or any
Supplementary Material; (ii) the suspension of the qualification of
the Common Shares, the Purchase Warrants or the Compensation Option
in any of the Qualifying Provinces; (iii) the institution,
threatening or contemplation of any proceeding for any such
purposes; or (iv) any requests made by any Securities Commission for
amending or supplementing the Preliminary Prospectus or the Final
Prospectus or for additional information; and will use its
commercially reasonable efforts to prevent the issuance of any order
referred to in (i) above and, if any such order is issued, to obtain
the withdrawal thereof as quickly as possible;
(9) the Company will keep the Agent fully informed on a timely basis of
all material business and financial developments affecting the
Company, the Subsidiaries and their respective businesses;
(10) the Company shall retain, at its sole expense, if required by the
Agent and subject to the approval of the Agent, acting reasonably,
legal, accounting and tax advisors experienced in transactions
similar to the Offering to work with the Agent to effect the
Offering;
(11) the Company shall file the required notices, reports and
attestations containing the prescribed information within the time
limits prescribed by Canadian Securities Laws.
11. MATERIAL CHANGES DURING DISTRIBUTION.
During the period from the date hereof to the Expiry Time, the Company shall
promptly notify the Agent, or cause the Agent to be notified promptly, in
writing of:
(a) any change (actual, anticipated, contemplated or threatened,
financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise) or capital of
the Company or either Subsidiary;
(b) any material fact that has arisen or has been discovered which
would have been required to have been stated in the
Preliminary Prospectus or the Final Prospectus had the fact
13
arisen or been discovered on, or prior to, the date of the
Preliminary Prospectus or the Final Prospectus, as the case
may be;
(c) any change in any material fact (which for the purposes of
this Agreement shall be deemed to include the disclosure of
any previously undisclosed material fact) in the Preliminary
Prospectus, the Final Prospectus or Supplementary Material, or
the existence of any new material fact; and
(d) any judicial, governmental or regulatory authority requesting
any information, meeting or hearing related to the Offering,
the Company or either Subsidiary or their respective
businesses, which change or new material fact is, or may be,
of such a nature as:
(e) to render the Preliminary Prospectus, the Final Prospectus or
Supplementary Material, as they exist taken together in their
entirety immediately prior to such change or material fact,
misleading or untrue or would result in any of such documents,
as they exist taken together in their entirety immediately
prior to such change or material fact, containing a
misrepresentation;
(f) would result in the Preliminary Prospectus, the Final
Prospectus or any Supplementary Material, as they exist taken
together in their entirety immediately prior to such change or
material fact, not complying with any of the Canadian
Securities Laws; or
(g) would reasonably be expected to have a significant effect on
the market price or value of the Common Shares.
During the period from the date hereof to the Expiry Time, the Company shall
promptly comply with all applicable filing and other requirements under the
Canadian Securities Laws arising as a result of any change, fact, event or
circumstance referred to in this Section and shall prepare and file under all
applicable Canadian Securities Laws, with all possible dispatch, and in any
event within any time limit prescribed under applicable Canadian Securities
Laws, any Supplementary Material as may be required under applicable Canadian
Securities Laws; provided that the Company shall allow the Agent and its counsel
to participate fully in the preparation of any Supplementary Material and to
conduct all due diligence investigations which the Agent may reasonably require
in order to fulfil its obligations as Agent under Canadian Securities Laws and
in order to enable the Agent to execute responsibly any certificate required to
be executed by it in any Supplementary Material and the Agent shall have
approved the form of any Supplementary Material, such approval not to be
unreasonably withheld and to be provided in a timely manner.
The Company shall in good faith discuss with the Agent any fact or change in
circumstances (actual, anticipated, contemplated or threatened, and financial or
otherwise) which is of such a nature that there is reasonable doubt as to
whether notice in writing need be given to the Agent pursuant to this Section
11.
14
The delivery to the Agent of Supplementary Material shall constitute a
representation and warranty to the Agent by the Company with respect to the
Prospectus as amended, modified or superseded by such Supplementary Material and
by any Supplementary Material previously delivered to the Agent as aforesaid, to
the same effect as set forth in Section 9. Such delivery shall also constitute
the consent of the Company to the use of the Prospectus, as amended, modified or
superseded, by the Agent in connection with the distribution of securities
hereunder.
12. CHANGE IN CANADIAN SECURITIES LAWS.
If prior to the Expiry Time, there shall be any change in Canadian Securities
Laws which in the opinion of counsel to the Company or of counsel to the Agent,
acting reasonably, requires the filing of Supplementary Material, the Company
shall, to the satisfaction of its counsel and the Agent's counsel, each acting
reasonably, promptly prepare and file, or cause to be promptly prepared and
filed, such Supplementary Material with the appropriate Securities Commissions
in the Qualifying Provinces where such filing is required.
13. (A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Agent and to the Purchasers
that:
(a) the Company is a company duly incorporated and organized and validly
subsisting under the laws of Delaware and has all requisite power,
capacity and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted and to
enter into and deliver this Agreement and the other Transaction
Agreements to which it is or will become a party and to perform its
obligations hereunder and thereunder;
(b) each Subsidiary has been duly created or incorporated and organized
under the laws of the jurisdiction in which it has been created or
incorporated and has all requisite power, capacity and authority to
own, lease and operate its properties and assets and to carry on its
business as presently conducted, the Company has no subsidiaries
other than the Subsidiaries;
(c) all necessary action has been taken by the Company to authorize the
execution and delivery by the Company of this Agreement, the other
Transaction Agreements, the certificates representing the Special
Warrants (the "SPECIAL WARRANT CERTIFICATES"), the certificates
representing the Common Shares, Purchase Warrants, the Compensation
Option and Broker Warrants and the performance by the Company of its
obligations hereunder and thereunder, including the issuance of the
Special Warrants, the Underlying Securities, the Compensation
Option, the Broker Warrants and the Common Shares which may be
acquired upon the exercise of the Purchase Warrants and the Broker
Warrants; and this Agreement, each of the Transaction Agreements,
the Special Warrant Certificates and the
15
certificates representing the Purchase Warrants, the Compensation
Option and Broker Warrants have been or will be at the Special
Warrant Closing (or will be, upon issuance thereof, in the case of
the certificates representing the Common Shares, the Broker Warrants
and the Purchase Warrants) duly executed and delivered and
constitutes a valid and legally binding obligation of the Company
enforceable against it in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization and other laws of
general application limiting the enforcement of creditors' rights
generally and to the fact that specific performance is an equitable
remedy available only in the discretion of a court);
(d) the Company has all requisite power, capacity and authority to
execute and deliver each of the Preliminary Prospectus and the Final
Prospectus and to file such documents with the Securities
Commissions, and all necessary action has been taken by the Company
to authorize the execution and delivery of the Preliminary
Prospectus and the Final Prospectus and the filing of each of them
with the Securities Commissions (or all such necessary action will
have been taken by the Company prior to the time of the filings of
the Preliminary Prospectus and the Final Prospectus);
(e) the Financial Information when included in the Prospectus:
(i) will be in accordance with the books, records and accounts of
the Company;
(ii) will be true and correct and present fairly the results of
operations and the financial position of the Company on a
consolidated basis for the periods ended on, and as at, the
dates indicated;
(iii) will have been prepared in accordance with Canadian or United
States generally accepted accounting principles consistently
applied; and
(iv) will present fairly all of the assets and liabilities of the
Company on a consolidated basis as at the dates indicated
including all contingent liabilities of the Company on a
consolidated basis as at the dates indicated;
(f) the audited consolidated balance sheet of the Company as at December
31, 2003 and the consolidated statements of operations and
comprehensive loss, stockholders' equity and cash flows for the
fiscal year then ended, together with the report of Ernst & Young
LLP thereon and the notes thereto:
(i) are in accordance with the books, records and accounts of the
Company;
16
(ii) are true and correct and present fairly the results of
operations and the financial position of the Company on a
consolidated basis for the periods ended on, and as at, the
dates indicated therein;
(iii) have been prepared in accordance with Canadian or United
States generally accepted accounting principles consistently
applied; and
(iv) present fairly all of the assets and liabilities of the
Company on a consolidated basis as at the dates indicated
therein including all contingent liabilities of the Company on
a consolidated basis as at the dates indicated;
(g) the Company is authorized to issue 100,000,000 Shares of which
80,000,000 shares are designated as common stock, par value
US$0.0001 per share and 20,000,000 shares are designated preferred
stock, par value US$0.0001 per shares.. As at the date hereof,
30,124,005 Common Shares are issued and outstanding as fully paid
and non-assessable, not including the committed or reserved shares
of common stock to be issued as per the disclosure made in the Form
10-KSB dated April 14, 2004 filed with the United States Securities
and Exchange Commission (the "FORM 10-K") and the 50,000 shares of
common stock to be issued to Gottbetter & Partners LLP;
(h) all the outstanding shares of each Subsidiary have been duly and
validly authorized and issued and are fully paid and non-assessable,
and, to the knowledge of the Company, have not been issued in
violation of or subject to any pre-emptive right arising under the
certificate of incorporation or the law of its jurisdiction of
incorporation, co-sale right, right of first refusal or other
similar right;
(i) Computershare Trust Company of Canada has been duly appointed as
Warrant Agent under the Special Warrant Indenture and the Purchase
Warrant Agent under the Purchase Warrant Indenture;
(j) Xxxxxx, de Xxxxx has been duly appointed as Escrow Agent under the
Escrow Agreement;
(k) Continental Stock Transfer & Trust Company has been duly appointed
as registrar and transfer agent of the Common Shares;
(l) except as has been publicly disclosed by the Company, since December
31, 2003 (i) there has not been any material change or a change in
material fact (actual, threatened or contemplated) in the business,
affairs, operations, business prospects, assets, liabilities or
obligations, contingent or otherwise, or capital of the Company or
either Subsidiary; and (ii) there has been no transaction entered
into by the Company or either Subsidiary, other than those in the
ordinary course of business;
17
(m) other than as disclosed in the Form 10 - K, no person now has any
agreement or option, or right or privilege (whether pre-emptive or
contractual) capable of becoming an agreement or option (including
convertible or exchangeable securities or warrants) for the
purchase, subscription for or issuance of securities of any kind of
the Company or either Subsidiary, other than pursuant to this
Agreement;
(n) the execution and delivery of this Agreement and the other
Transaction Agreements, and the fulfilment of the terms hereof and
thereof by the Company, and the issuance, sale and delivery of the
Special Warrants to be issued and sold by the Company, the issuance
of the Underlying Securities upon exercise of the Special Warrants,
the issuance of the Compensation Option, the issuance of the Broker
Warrants upon the exercise of the Compensation Option and the issue
of Common Shares upon the exercise of the Purchase Warrants and the
Broker Warrants do not and will not:
(i) require the consent, approval, authorization, registration or
qualification of or with, or any filing with, any governmental
authority, stock exchange, Securities Commission or other
regulatory commission or agency or third party, except those
that are required under applicable Canadian Securities Laws or
stock exchange regulations, all of which have been obtained or
made (except for a filing of a notice of exempt distribution
containing the prescribed information in the province of
Quebec, a report on Form 45-501F1 in the province of Ontario
or the Form 45-103F4 or equivalents in other jurisdictions, or
(ii) result in a breach of or default under, and do not and will
not create a state of facts which, after notice or lapse of
time or both, will result in a breach of or default under, and
do not and will not conflict:
I. with any of the provisions of the articles, by-laws
or resolutions of the shareholders, directors or any
committee of directors of the Company or any
indenture, agreement or other instrument to which
the Company is a party or by which it is
contractually bound; or
II. with any statute, rule, regulation or law applicable
to the Company, including, without limitation, the
Canadian Securities Laws or any judgment, order or
decree of any governmental body, agency, commission,
tribunal or court having jurisdiction over the
Company;
(o) other than the proposed acquisition of 3720161 Canada Corporation,
no reorganization, amalgamation, merger, acquisition or disposition
of assets not in the ordinary course of business by the Company or
18
any of its Subsidiaries or other change in the business, operations
or capital of the Company or either Subsidiary is pending;
(p) each of the Company and the Subsidiaries holds all permits, by-laws,
licences, concessions, waivers, exemptions, consents, certificates,
registrations, authorizations, approvals, rights, rights of way and
entitlements and the like which are required from any governmental
authority or any other person required or necessary to conduct its
business and activities as currently conducted and all such permits,
by-laws, licences, waivers, exemptions, consents, certificates,
registrations, authorizations, approvals, rights, rights of way and
entitlements and the like are in full force and effect and in good
standing;
(q) each of the Company and the Subsidiaries has conducted and is
conducting its activities or business in material compliance with
all applicable laws, by-laws, rules and regulations, including but
not limited to those in respect of anti-pollution and environmental
protection, of each jurisdiction in which it carries on or has
carried on business and the Company is not aware of any such
applicable law, by-law, rule or regulation currently in force or
proposed to be brought into force by any governmental authority
which the Company anticipates the Company or a Subsidiary will be
unable to comply with without materially adversely affecting the
Company's or such Subsidiary's business;
(r) each of the Company and the Subsidiaries is duly licensed,
registered or qualified in all jurisdictions in which it owns,
leases or operates its properties 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 licenses,
registrations and qualifications are valid and subsisting and in
good standing;
(s) subject to the rights granted to La Financiere du Quebec by 3720161
Canada Corporation, the Company has good and marketable title to all
of its assets, free and clear of all charges, hypothecs, mortgages,
encumbrances or other liens. No other property rights are necessary
for the conduct of the Company's business in respect of such
material assets. There are no restrictions on the ability of the
Company to use, transfer or otherwise exploit any such property
rights, and to the knowledge of the Company, there is no claim or
basis for a claim that may adversely affect such rights;
(t) there is no claim, action, suit, proceeding or investigation
(whether or not purportedly on behalf of the Company or the
Subsidiaries) pending or, to the knowledge of the Company,
threatened against or affecting the Company or either Subsidiary or
any of their properties, or to which the Company or either
Subsidiary is or may be a party or to which any property of the
19
Company or either Subsidiary is or may be subject, at law or in
equity, or before or by any federal, provincial, municipal or other
governmental department, commission, board or agency, domestic or
foreign, which is, or could reasonably be expected to, individually
or in aggregate, result in a material adverse effect to the Company
or either Subsidiary, or which questions the validity of any action
taken or to be taken by the Company pursuant to or in connection
with this Agreement, or any of the other Transaction Agreements;
(u) no default exists under and no event has occurred which, after
notice or lapse of time or both, or otherwise, would constitute a
default under or breach of, by the Company or either Subsidiary, any
material obligation, agreement, covenant or condition contained in
any contract, indenture, trust deed, mortgage, loan agreement, note,
lease, licence or other agreement or instrument to which the Company
or a Subsidiary is or will be a party or by which either of them or
any of their respective properties may be bound and which would have
a material adverse effect on the Company. Subject to the default of
3720161 Canada Corporation of its obligations under the Loan
Agreement entered into on August 2, 2002 by La Financiere du Quebec
and accepted by 3720161 Canada Corporation on August 8, 2002 (the
"FINANCIERE LOAN") and of its obligations under the related movable
hypothec granted by 3720161 Canada Corporation to La Financiere du
Quebec on August 21, 2002, to the knowledge of the Company, no party
to any contract, indenture, trust deed, mortgage, loan agreement,
note, lease, license or other agreement or instrument which the
Company or a Subsidiary is a party is in material default or breach
of such contract, indenture, trust deed, mortgage, loan agreement,
note, lease, license or other agreement or instrument. No order,
ruling or determination having the effect of suspending the sale or
ceasing the trading of any securities of the Company has been issued
or made by any Securities Commission or stock exchange or any other
regulatory authority and is continuing in effect and no proceedings
for that purpose have been instituted or are pending or, to the best
of the Company's knowledge, contemplated or threatened by any such
authority or under the applicable securities laws in each province
and territory of Canada;
(v) no agreement is currently in force or effect which in any manner
affects the voting or control of any of the securities of the
Company;
(w) none of the Company or the Subsidiaries has committed any act of
bankruptcy or is insolvent, nor have any of them proposed a
compromise or arrangement to its creditors generally, had a petition
for a receiving order in bankruptcy filed against it, made a
voluntary assignment in bankruptcy, taken any proceedings with
respect to a compromise or arrangement, taken any proceedings to
have itself declared bankrupt, wound-up or dissolved, taken any
proceedings to have a receiver appointed over any of its property or
assets, and no proceedings have been instituted or are pending or,
20
to the knowledge of the Company, are contemplated or threatened for
any execution or distress against their respective property or
assets;
(x) other than filing its US tax return for the year ended December 31,
2003, all taxes (including income tax, capital 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 and any penalty and interest payable with respect thereto,
and whether disputed or not, (collectively, "TAXES") due and payable
by the Company and each Subsidiary have been paid. All tax returns,
declarations, remittances and filings that are required to be filed
by the Company and each Subsidiary have been filed in proper and
timely fashion with all appropriate governmental authorities and all
such returns, declarations, remittances and filings are complete and
accurate and no material fact or facts have been omitted therefrom
which would make any of them misleading except where the failure to
file such documents would not constitute an adverse material fact of
the Company and the Subsidiaries or result in an adverse material
change to the Company and the Subsidiaries. To the knowledge of the
Company, no examination of any tax return of the Company or either
Subsidiary is currently in progress and there are no issues or
disputes outstanding with any governmental authority respecting any
Taxes that have been paid, or may be payable, by the Company and
either Subsidiary except where such examinations, issues or disputes
would not constitute an adverse material fact of the Company and the
Subsidiaries or result in an adverse material change to the Company
and the Subsidiaries. The Company and each Subsidiary have withheld
from each payment made to present or former employees, officers and
directors, and to all non-residents of Canada within the meaning of
the Income Tax Act all amounts required to be withheld by applicable
governmental authorities and has remitted such amounts as and when
required to the appropriate governmental bodies. The Company and
each Subsidiary have remitted all Canada Pension Plan contributions,
provincial pension plan contributions, employment insurance premiums
and other Taxes payable in respect of their employees, officers and
directors and have remitted such amounts to the proper governmental
bodies as and when required. The Company and each Subsidiary have
charged, collected and remitted as and when required all Taxes as
required under applicable legislation on any sale, supply or
delivery whatsoever, made by the Company or such Subsidiary;
(y) there are no existing or, to the best knowledge of the Company,
threatened labour disputes with the employees of the Company or of
either Subsidiary, and the Company is not aware of any existing or
imminent labour disturbance by the employees of any of its principal
contractors which would reasonably be expected to materially
adversely affect the Company or either Subsidiary;
21
(z) the Company has full corporate power and authority to issue the
Special Warrants, the Underlying Securities and the Compensation
Option, to issue the Broker Warrants upon the exercise of the
Compensation Option, and to issue the Common Shares upon the
exercise of the Purchase Warrants and the Broker Warrants and, at
the Special Warrant Closing Date:
(i) each of the Special Warrants and the Compensation Option will
be duly and validly created, authorized and issued,
(ii) the Purchase Warrants issuable upon the exercise of the
Special Warrants will be duly and validly created, authorized,
allotted and reserved for issuance upon such exercise and
will, upon exercise of the Special Warrants accordance with
the terms of the Special Warrant Indenture, be validly issued,
(iii) the Common Shares issuable upon the exercise of the Special
Warrants and the Purchase Warrants will be duly and validly
authorized, allotted and reserved for issuance upon such
exercise and will, upon exercise of the Special Warrants in
accordance with the terms of the Special Warrant Indenture or
the Purchase Warrants in accordance with the terms of the
Purchase Warrant Indenture, be validly issued and be fully
paid and non-assessable,
(iv) the Broker Warrants issuable upon the exercise of the
Compensation Option will be duly and validly authorized,
allotted and reserved for issuance upon such exercise and
will, upon exercise of the Compensation Option in accordance
with the terms of the Compensation Option certificates, be
validly issued, and
(v) the Common Shares and Purchase Warrants issuable upon the
exercise of the Broker Warrants will be duly and validly
authorized, allotted and reserved for issuable upon such
exercise and will, upon exercise of the Broker Warrants in
accordance with the terms of the Broker Warrants, be validly
issued and be fully paid and non-assessable;
(aa) the corporate records and minute books of the Company contain
complete and accurate minutes, in all material respects and of all
material decisions, of all meetings and resolutions of the directors
(and any committees thereof) and shareholders of the Company;
(bb) the statements set forth in the information filed by or on behalf of
the Company with the Securities Commissions were true, correct and
complete and did not contain any misrepresentation as of the date of
each document or statement included therein;
22
(cc) except as contemplated in this Agreement, there is no person, firm
or corporation acting for the Company entitled to any brokerage or
finder's fee in connection with this Agreement or any of the
transactions contemplated hereunder;
(dd) all assets of the Company and each Subsidiary are insured against
loss or damage with responsible insurers on a basis consistent with
insurance obtained by reasonably prudent industry participants for
comparable operations, or the Company has solicited bids from
insurance companies to secure such coverage, and such coverage is in
full force and effect and none of the Company or the Subsidiaries
has failed to promptly give any notice or present any material claim
thereunder; and
(ee) in connection with Intellectual Property and Intellectual Property
Rights:
(i) each of the Company and its Subsidiaries is an owner of, or
has the sole and exclusive or non-exclusive right to use
pursuant to a license or sub-license agreement, including
pursuant to the license agreements set out in Schedule 13(ee)
(the "LICENSE AGREEMENTS"), all Intellectual Property and
Intellectual Property Rights required for the operation of
their respective businesses (collectively referred to in this
Agreement as "THE COMPANY'S MATERIAL IP");
(ii) to the knowledge of the Company, none of the Company's
Material IP has been derived, in whole or in part, from the
Intellectual Property or Intellectual Property Rights of any
other person other than Intellectual Property or Intellectual
Property Rights that have been acquired by the Company or its
Subsidiaries or that are the subject of a license or
sub-license in favour of the Company or its Subsidiaries from
another person;
(iii) neither the Company nor its Subsidiaries has granted any
license or other rights to any other person in respect of the
Company's Material IP other than in the ordinary course of the
business and in compliance with its licenses or other
agreements relating to the Company's Material IP;
(iv) to the knowledge of the Company, after due enquiry of and
review with applicable legal counsel, the Company's and its
Subsidiaries' Intellectual Property Rights are valid and
legally enforceable and the Company acknowledges that no
patents have yet been issued relating to the Company's
Material IP. Without limitation, to the knowledge of the
Company, after due enquiry of and review with applicable legal
counsel, no event has occurred during the registration or
filing of, or during any proceeding relating to, the Company's
and its Subsidiaries' Intellectual Property Rights that would
23
make such rights invalid or unenforceable or which materially
adversely affects the right of the Company or its Subsidiaries
to use any of the Company's Material IP;
(v) the Company and its Subsidiaries shall take and continue to take all
commercially reasonable steps to ensure the prompt protection,
prosecution, issuance and maintenance of the Company's and its
Subsidiaries' Intellectual Property Rights and maintain them in full
force and effect;
(vi) to the knowledge of the Company, there is no Intellectual Property
of any person which impairs or prevents the development,
manufacture, marketing, use, sale, lease, license and service of
products of the Company or the Subsidiaries, now existing or under
development by the Company or a Subsidiary, or the use of any
process or know-how owned or licensed by the Company or its
Subsidiaries, or currently under development by the Company or its
Subsidiaries;
(vii) to the knowledge of the Company, none of the development,
manufacture, marketing, use, sale, lease, license, sub-license and
service of the products, processes or know-how of the Company and
its Subsidiaries, now existing or under development by the Company
or its Subsidiaries, infringes or will infringe any existing
Intellectual Property or Intellectual Property Rights of any person.
None of the Company and the Subsidiaries has received any notice,
complaint or claim alleging infringement, anywhere in the world, of
the Intellectual Property or Intellectual Property Rights of any
person resulting from the use of the Company's Material IP by the
Company or its Subsidiaries;
(viii)none of the development, manufacture, marketing, use, sale, lease,
license and service of any of the products, processes or know-how of
the Company or the Subsidiaries, either existing or under
development by the Company or a Subsidiary, violates or, to the
knowledge of the Company, will violate, any contract to which the
Company or such Subsidiary is a party;
(ix) the License Agreements do not conflict with any other agreement,
order or judgment to which the Company or its Subsidiaries are a
party of or by which they are bound, other than the Financiere Loan
and related hypothec;
(x) the Company's Material IP has commercial viability and utility;
(xi) none of the Company's Material IP has been or is being infringed by
an unauthorized third party;
24
(xii) the Company has ensured after proper due diligence that the
licensors who have granted the license rights under the License
Agreements to the Company have not granted any rights to third
parties that may prevent the Company from freely using the license
rights, other than the Financiere Loan and related hypothec;
(xiii)neither a government, a research centre nor a university holds any
rights on the license rights under the License Agreements;
(xiv) the Company has constantly used its best efforts to commercialize
the Company's Material IP;
(xv) the Company's Material IP is and shall continue to be fully insured
for general liability and product liability;
(xvi) the Company has ensured that, other than the Financiere Loan and
related hypothec, the licensors who have granted the license rights
under the License Agreements have full and exclusive ownership of
all Intellectual Property and Intellectual Property Rights covered
under the License Agreements and that such rights are valid;
(xvii)the Company has ensured that the trademarks it may be allowed to
use under the License Agreements are valid and do not infringe any
third parties rights;
(xviii) the Company has ensured that the licensors who have granted the
license rights under the License Agreements shall protect and
enforce the licensed Intellectual Property and Intellectual Property
Rights and that they will hold harmless and indemnify fully the
Company;
(xix) the Company has ensured that the commercial proposal initiated by
Mobilair in March 2003 has not impacted negatively on the license
rights granted under the License Agreements and will not do so in
the future;
(xx) the Company has received no verbal or written notice of default or
early termination notice of any of the License Agreements;
(xxi) all the source code escrow agreements that the Company has entered
into or the undertakings it may have made in regards to any source
code escrow agreement does not allow any third party ownership
rights on the Company's Material IP at any time;
25
(xxii) the Company has ensured that it has reserved the domain names it is
presently using and will continue to do so;
(xxiii) the Company has ensured after proper due diligence that all
creators of the license rights granted to the Company under the
License Agreements have duly waived all their moral rights in favour
of the licensors;
(xxiv) all third party software it may need to freely exploit the
Company's Material IP have been duly obtained by the Company and it
is not in default of any of its obligations toward the third party
software owners;
(xxv) the Company is not in default in any manner under the License
Agreements;
(xxvi) the Company's Material IP has not been pledged, mortgaged or in any
way encumbered, other than pursuant to the Financiere Loan and
related hypothec;
(xxvii) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not
breach, violate or conflict with any instrument or agreement to
which the Company or its Subsidiaries is a party, governing any of
the Company's Material IP and will not cause the forfeiture or
termination, or give rise to a right of forfeiture or termination,
of any of the Company's or its Subsidiaries' Intellectual Property
Rights or in any way impair the right of the Company or its
Subsidiaries to use, sell, license, sub-license or dispose of any of
the Company's Material IP, or bring any action for breach or
infringement of the Company's or its Subsidiaries' Intellectual
Property Rights;
(xxviii) the Company and each Subsidiary has entered into an agreement
with all appropriate employees, consultants and contractors of the
Company or such Subsidiary, pursuant to which the Intellectual
Property developed by them during the term of their relationship
with the Company or such Subsidiary and relating to the business of
the Company or such Subsidiary, is owned solely, and without any
restrictions or obligations whatsoever, by the Company or such
Subsidiary. The Company and each Subsidiary has taken all
commercially reasonable steps (including, without limitation,
entering into confidentiality or non-disclosure agreements with all
appropriate employees, consultants and contractors of the Company or
such Subsidiary, and any other persons with access to or knowledge
of the Company's Material IP) to safeguard and maintain the
confidentiality of the Company's confidential information,
proprietary information, trade secrets and know-how of the Company
and such Subsidiary and the ownership of the Company's Intellectual
Property Rights. To the knowledge of the Company, all confidential
26
information, proprietary information, trade secrets and know-how of
the Company and each Subsidiary and all proprietary technical
information developed by and belonging to the Company or each
Subsidiary which has not been copyrighted or patented has been kept
confidential; and
(xxix) to the knowledge of the Company, no current or former director,
employee, consultant or contractor of the Company or either
Subsidiary is in violation of any term of any confidentiality,
non-disclosure, proprietary rights, intellectual property or other
similar agreement, or any provision of any employment or other
agreement relating to the Company's Material IP between such person
and the Company or such Subsidiary or, in the case of the senior
officers of the Company, between any such officer and any former
employer of such officer.
13. (B) REPRESENTATIONS AND WARRANTIES OF THE AGENT.
The Agent represents and warrants to the Company and acknowledges that the
Company is relying upon such representations and warranties in performing its
obligations hereunder, that at the Special Warrant Closing Date:
(a) in respect of the Offering, the Agent has complied with, or will
comply with, the Canadian Securities Laws and all applicable laws of
the jurisdictions outside Canada in which it has offered Special
Warrants;
(b) the Agent and its representatives have not engaged in or authorized,
and will not engage in or authorize, any form of general
solicitation or general advertising in connection with or in respect
of the Special Warrants or the Underlying Securities in any
newspaper, magazine, printed media of general and regular paid
circulation or any similar medium, printed public media, broadcast
over radio, television or telecommunications, including electronic
display, or conducted any seminar or meeting concerning the offer or
sale of the Special Warrants or the Underlying Securities whose
attendees have been invited by any general solicitation or general
advertising;
(c) the Agent has not and will not solicit offers to purchase or sell
the Special Warrants so as to require the filing of a prospectus
with respect thereto or the provision of a contractual or statutory
right of action or equivalent remedy under the laws of any
jurisdiction, including without limitation, the United States or any
state thereof; and
(d) the Agent will, subject to compliance by the Company with its
obligations hereunder and provided that it shall, as determined by
the Agent in its sole discretion, otherwise be responsible for the
Agent to do so, execute and deliver to the Company any certificate
required to be executed by it under Canadian Securities Laws in
connection with the Preliminary Prospectus, the Final Prospectus and
any Supplementary Material.
27
14. SPECIAL WARRANT CLOSING DELIVERIES.
The purchase and sale of the Special Warrants under the Offering shall be
completed at the Closing Time at the offices of XxXxxxxx Xxxxxxxx in Montreal,
or at such other place as the Agent and the Company may agree upon. At or prior
to the Closing Time, the Company shall duly and validly deliver to the Agent
certificates in definitive form representing Special Warrants registered in the
names of such Purchasers or such other names as the Agent shall have directed,
against payment to the Company of the aggregate subscription price of the
Special Warrants sold, in lawful money of Canada by certified cheques or
banker's drafts payable at par in the City of Montreal against delivery of a
receipt therefor. The Company shall contemporaneously pay the Agent's Commission
to the Agent in lawful money of Canada, by certified cheque or banker's draft
payable in the City of Montreal, against delivery of a receipt therefor and
deliver the Compensation Option to the Agent, or such other person or persons as
shall be designated by the Agent on or prior to the Closing Time, to acquire the
Broker Warrants. Notwithstanding the foregoing, the Agent and the Company may
discharge their payment obligations under this Section 14, and the Company may
discharge its payment obligations under Section 18, by delivery of certified
cheques or bank drafts from the Agent to the Company equal to the aggregate
purchase price for the Special Warrants issued and sold by it less the
applicable Agent's Commission.
15. DELIVERY OF CERTIFICATES TO WARRANT AGENT.
The Company shall, prior to the Special Warrant Closing Date, make all necessary
arrangements for the delivery of definitive certificates representing such
number of the Special Warrants registered in such names as shall be designated
by the Agent at or prior to the Closing Time. The Company shall pay all fees and
expenses payable to the Warrant Agent in connection with the preparation,
delivery, certification and exchange of the Special Warrants in accordance with
the terms and conditions hereof and the fees and expenses payable to the Warrant
Agent in connection with the initial or additional transfers as may be required
for a period of 30 Business Days following the Special Warrant Closing Date in
the course of the distribution of the Special Warrants.
16. SPECIAL WARRANT CLOSING CONDITIONS.
The obligation of the Purchasers to purchase the Special Warrants at the Closing
Time shall be conditional upon the fulfilment at or before the Closing Time of
the following conditions which may be waived in writing in whole or in part by
the Agent on behalf of the Agent and the Purchasers:
(1) each of the Transaction Agreements shall have been executed and delivered
by the parties thereto, all such Transaction Agreements shall be in form
and substance satisfactory to the Agent and each of the parties thereto
shall have performed such of their obligations thereunder which are to be
performed or completed at or prior to the Closing Time to the satisfaction
of the Agent;
28
(2) the Company shall deliver to the Agent, at the Closing Time, a certificate
dated the Special Warrant Closing Date addressed to the Agent and the
Purchasers and signed by the President and Chief Executive Officer of the
Company and the Chief Financial Officer of the Company, on behalf of the
Company, or such other senior officer(s) of the Company as may be
acceptable to the Agent, certifying for and on behalf of the Company and
without personal liability, after having made due enquiries, to the effect
that:
(i) the representations and warranties of the Company contained
herein are true and correct as at the Closing Time, with the
same force and effect as if made on and as at the Closing Time
after giving effect to the transactions contemplated hereby;
(ii) no order, ruling or determination having the effect of
suspending the sale or ceasing the trading of the Special
Warrants or the Underlying Securities, has been issued by any
Securities Commission and is continuing in effect and no
proceedings for that purpose have been instituted or are
pending or, to the knowledge of such officers, contemplated or
threatened by any Securities Commission;
(iii) the Company has complied with all the covenants and satisfied
all the terms and conditions of this Agreement on its part to
be complied with and satisfied at or prior to the Closing
Time; and
(iv) such other matters as the Agent may reasonably request;
(3) the Agent shall have received a certificate dated the Special Warrant
Closing Date signed by the Chief Executive Officer of the Company or any
other senior officer of the Company, as may be acceptable to the Agent, in
form and content satisfactory to the Agent's counsel, acting reasonably,
with respect to:
(a) the articles of incorporation and by-laws of the Company;
(b) the resolutions of the board of directors of the Company relevant to
the issue and sale of the Special Warrants and the Underlying
Securities by the Company, the issuance of the Compensation Option
and the Broker Warrants by the Company to the Agent and the issuance
of the Common Shares issuable upon exercise of the Purchase Warrants
and the Broker Warrants and the authorization of the Transaction
Agreements; and
(c) the incumbency and signatures of signing officers of the Company;
(4) the Company shall deliver to the Agent, at the Closing Time, a certificate
dated the Special Warrant Closing Date addressed to the Agent and the
Purchasers and signed by the President and Chief Executive Officer of the
Company and the Chief Financial Officer of the Company, personally, or
such other senior officer(s) of the Company as may be acceptable to the
Agent, to the effect that the representations and warranties of the
29
Company contained herein are true and correct as at the Closing Time, with
the same force and effect as if made on and as at the Closing Time after
giving effect to the transactions contemplated hereby;
(5) the Subscription Agreements shall have been executed and delivered by the
Company in form and substance satisfactory to the Agent and its counsel,
acting reasonably;
(6) the Agent shall have received a certificate dated the Special Warrant
Closing Date from Continental Stock Transfer & Trust Company in form
satisfactory to the Agent setting out the number of Common Shares issued
and outstanding as at the Special Warrant Closing Date;
(7) the Agent shall have received a favourable legal opinion from the
Company's counsel and where appropriate, local counsel, addressed to the
Agent, Agent's counsel and the Purchasers with respect to such matters as
the Agent may reasonably request relating to the transactions contemplated
hereunder, in form and substance satisfactory to the Agent's counsel,
acting reasonably, including to the effect that:
(i) the Company has been duly created and organized and is validly
existing under the laws of Delaware, and has all requisite
power, capacity and authority to own its properties and
assets, to carry on its business, to enter into this Agreement
and the other Transaction Agreements and perform its
obligations hereunder and thereunder and to issue the Special
Warrants, the Underlying Securities issuable upon the exercise
of the Special Warrants, the Compensation Option, the Broker
Warrants issuable upon the exercise of the Compensation Option
and the Common Shares issuable upon the exercise of the
Purchase Warrants and Broker Warrants;
(ii) all necessary action has been taken by the Company to
authorize each of the Transaction Agreements, the Special
Warrant Certificates and the certificates representing the
Compensation Option, and each of these has been, or will at
the Closing Time be, duly executed and delivered by the
Company and is or shall be, as the case may be, a legal, valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms (subject to applicable
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and to the
discretion of the courts in granting equitable remedies,
including the remedies of specific performance and injunction,
and subject to usual limitations on the enforcement of rights
of indemnity or contribution), and the execution and delivery
of each such agreement or certificate and the performance of
the terms and conditions hereof and thereof by the Company,
and the issuance, sale and delivery, as the case may be, of
30
the Special Warrants, the Underlying Securities, the
Compensation Option, the Broker Warrants and the Common Shares
issuable upon the exercise of the Purchase Warrants and the
Broker Warrants will not result in a breach of, and will not
create a state of facts which, after notice or lapse of time,
or both, will result in a breach of, any applicable laws or
any of the terms, conditions or provisions of the articles or
any by-laws or resolutions of the Company;
(iii) all necessary action has been taken by the Company to
authorize the creation of the Special Warrants, the issue and
sale of the Special Warrants to the Purchasers, the issue of
the Underlying Securities issuable upon exercise of the
Special Warrants, the issue of the Compensation Option to the
Agent, the issue of the Broker Warrants upon the exercise of
the Compensation Option, and the issue of the Common Shares
upon the exercise of the Purchase Warrants and the Broker
Warrants;
(iv) no consent, approval, authorization or order of or filing,
registration or qualification with any court, governmental
agency, commission or body or regulatory authority is required
for the execution and delivery of the Transaction Agreements
or the performance by the Company of its obligations under the
Transaction Agreements or the consummation of the transactions
contemplated therein, except for such as have been made or
obtained;
(v) the Special Warrants have been validly created and issued and
the Purchase Warrants to be issued on the exercise of the
Special Warrants have been validly created and such Purchase
Warrants will be, upon due exercise of the Special Warrants,
validly issued and the Common Shares to be issued on the
exercise of the Special Warrants and the Purchase Warrants
have been set aside and reserved for issuance and such Common
Shares will be, upon due exercise of the Special Warrants or
the Purchase Warrants, as the case may be, issued as fully
paid and non-assessable Common Shares of the Company and the
Special Warrants, the Common Shares and the Purchase Warrants
have the attributes and characteristics contemplated by this
Agreement;
(vi) the Compensation Option has been validly created and issued
and the Broker Warrants to be issued on the exercise of the
Compensation Option have been validly created and such Broker
Warrants will be, upon due exercise of the Compensation
Option, validly issued and the Compensation Option and Broker
Warrants have the attributes and characteristics contemplated
by this Agreement;
31
(vii) the Common Shares and Purchase Warrants to be issued on the
exercise of the Broker Warrants have been set aside and
reserved for issuance and such Common Shares and Purchase
Warrants will be, upon the due exercise of the Broker
Warrants, issued as fully paid and non-assessable Common
Shares and Purchase Warrants of the Company;
(viii)the issuance and sale of the Special Warrants to the
Purchasers has been effected in such a manner as to be exempt,
either by statute or regulation or order, from the prospectus
and registration requirements of the Canadian Securities Laws
subject to the filing of all necessary reports, certificates
or undertakings required to be filed pursuant to the Canadian
Securities Laws;
(ix) the issuance of the Underlying Securities by the Company upon
the exercise of the Special Warrants pursuant to the terms
thereof prior to the issuance of a receipt for a Final
Prospectus in each of the Qualifying Provinces shall be exempt
from the prospectus and registration requirements of the
Canadian Securities Laws;
(x) upon the issuance of a receipt for the Final Prospectus in
each of the Qualifying Provinces prior to the exercise of the
Special Warrants, the Underlying Securities qualified for
distribution by the Final Prospectus will not be subject to
any statutory hold period under the Canadian Securities Laws
and no other documents are required to be filed, proceedings
taken or approvals, permits, consents, orders or
authorizations of regulatory authorities required to be
obtained under Canadian Securities Law in connection with the
first trade of such securities by such party through
Registrants registered under the Canadian Securities Law who
have complied with such applicable laws (unless such trade is
a trade from a "control block" within the meaning ascribed to
that term in applicable Canadian Securities Laws and subject
to the usual qualifications);
(xi) each of the forms of certificate representing the Common
Shares, the Purchase Warrants, the Compensation Option, the
Broker Warrants and the Special Warrants has been duly
approved by the Company;
(xii) as at the Closing Time, as to the authorized and issued
capital of the Company;
(xiii)Computershare Trust Company of Canada has been duly appointed
as Warrant Agent under the Special Warrant Indenture and the
Purchase Warrant Agent under the Purchase Warrant Indenture;
and
32
(xiv) such other matters as the Agent may reasonably request.
In giving the opinions contemplated above, counsel to the Company shall be
entitled to rely, as to matters of fact not within their knowledge, upon a
certificate of fact from responsible persons in a position to have
knowledge of such facts and their accuracy. The Company agrees that the
aforesaid legal opinion, certificate and covenant delivered at the Closing
Time will also be addressed to the Purchasers and that the Agent may
deliver copies thereof to such Purchasers; and
(8) if any Special Warrants are sold in transactions requiring an exemption
from the registration requirements under the U.S. Securities Act, the
Company shall cause a favourable legal opinion of U.S. counsel to be
delivered to the Agent and its counsel to the effect that no registration
of the Special Warrants is required under the U.S. Securities Act, such
opinion to be subject to such qualifications and assumptions as the Agent
and its counsel may agree, acting reasonably.
17. RIGHTS OF TERMINATION.
(1) LITIGATION. If any inquiry, action, suit, investigation or other
proceeding, whether formal or informal, is instituted, announced or
threatened or any order is made by any federal, provincial or other
governmental authority in relation to the Company or either Subsidiary or
any law or regulation is promulgated, changed or announced, which, in the
sole opinion of the Agent, acting reasonably, operates to prevent or
materially restrict the distribution or trading of the Special Warrants,
the Underlying Securities or any other securities of the Company or which
has or may have a material adverse effect on the business, affairs,
operations, assets, liabilities (contingent or otherwise), capital or
control of the Company and the Subsidiaries, taken as a whole, the market
price or value of the Special Warrants, the Common Shares or any other
securities of the Company, the Agent shall be entitled, at its option and
in accordance with Section 17(6), to terminate its obligations under this
Agreement (and the obligations of the Purchasers arranged by it to
purchase Special Warrants) by notice to that effect given to the Company
any time prior to the Closing Time.
(2) DISASTER OUT CLAUSE. In the event that prior to the Closing Time there
should develop, occur or come into effect or existence, any event, action,
state, condition or major financial occurrence of national or
international consequence, acts of hostility or escalation thereof or any
other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, or any law or regulation is enacted or changed which,
in the sole opinion of the Agent, acting reasonably, materially adversely
affects or involves, or could be expected to materially adversely affect,
the financial markets generally or the business, affairs, operations,
assets, liabilities (contingent or otherwise), capital or control of the
Company and the Subsidiaries, taken as a whole, or the market price or
value of the Special Warrants, the Common Shares or any other securities
of the Company, then the Agent shall be entitled at its option, in
accordance with Section 17(6), to terminate its obligations under this
33
Agreement (and the obligations of the Purchasers arranged by it to
purchase Special Warrants) by written notice to that effect given to the
Company prior to the Closing Time.
(3) CHANGE IN MATERIAL FACT. In the event that prior to the Closing Time there
shall occur any material change (actual, anticipated, contemplated or
threatened, financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise), capital or control of the
Company and the Subsidiaries, taken as a whole, or there should be
discovered any previously undisclosed material fact (other than a material
fact related solely to any of the Agent), in each case which, in the
opinion of the Agent, acting reasonably, has or may be expected to have a
material adverse effect on the market price or value of the Special
Warrants, the Underlying Securities or any other securities of the
Company, the Agent shall be entitled, at its option, in accordance with
Section 17(6), to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by it to purchase Special Warrants)
by written notice to that effect given to the Company prior to the Closing
Time.
(4) MARKET OUT CLAUSE. In the event that prior to the Closing Time the state
of the financial markets is such that, in the opinion of the Agent, acting
reasonably, the Special Warrants cannot be marketed profitably, the Agent
shall be entitled, at its option, in accordance with Section 17(6), to
terminate its obligation under this Agreement (and the obligations of the
Purchasers arranged by it to purchase Special Warrants) by written notice
to that effect given to the Company prior to the Closing Time.
(5) NON-COMPLIANCE WITH CONDITIONS. The Company agrees that all conditions in
this Agreement to be fulfilled at or prior to the Closing Time shall be
construed as conditions and complied with so far as the same relate to
acts to be performed or caused to be performed by it, that it will use its
reasonable best efforts to cause such conditions to be complied with, and
any breach or failure by the Company to comply with any of such conditions
shall entitle the Agent to terminate its obligations under this Agreement
(and the obligations of the Purchasers arranged by it to purchase Special
Warrants) by notice to that effect given to the Company at or prior to the
Closing Time, unless otherwise expressly provided in this Agreement. The
Agent may waive, in whole or in part or extend the time for compliance
with, any terms and conditions without prejudice to its rights in respect
of any other of such terms and conditions or any other or subsequent
breach or non-compliance, provided that any such waiver or extension shall
be binding upon the Agent only if the same is in writing and signed by the
Agent.
(6) EXERCISE OF TERMINATION RIGHTS. The rights of termination contained in
subsections 17(1), (2), (3), (4) and (5) may be exercised by the Agent and
are in addition to any other rights or remedies the Agent may have in
respect of any default, act or failure to act or non-compliance by the
Company in respect of any of the matters contemplated by this Agreement or
otherwise. In the event of any such termination, there shall be no further
liability on the part of the Agent to the Company or on the part of the
34
Company to the Agent except in respect of any liability which may have
arisen prior to, or after, such termination under Sections 18, 20 and 21.
18. EXPENSES.
Whether or not the Offering shall be completed, all expenses of or incidental to
the Offering and of or incidental to all matters in connection with the
transactions herein set out shall be borne by the Company, including, without
limitation, expenses in connection with the issuance and sale of the Special
Warrants, listing fees, all private placement fees required under Canadian
Securities Laws, the qualification of the Underlying Securities for distribution
to the public and the qualification of the Broker Warrants for distribution to
the Agent, the fees and expenses of counsel to the Company and all local counsel
selected by the Company (including its United States counsel), the fees and
expenses of the Company's auditors, the fees and expenses of the Warrant Agent
and the Purchase Warrant Agent, all costs incurred in connection with the
preparation, translation and printing of the Preliminary Prospectus, the Final
Prospectus and any Supplementary Material, printing costs for the share
certificates and warrant certificates, all costs and out of pocket expenses
incurred in due diligence including related travel expenses, all costs relating
to roadshows, information meetings and to preparation of audio-visual and other
information meeting materials and the fees and disbursements (including taxes)
of counsel to the Agent.
19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All warranties, representations, covenants and agreements herein contained or
contained in any documents submitted pursuant to this Agreement and in
connection with the transactions herein contemplated shall survive the Special
Warrant Closing and continue in full force and effect for a period of three
years after the Special Warrant Closing Date for the benefit of the Agent and
the Purchasers and shall not be limited or prejudiced by any investigation made
by or on behalf of the Agent in connection with the Offering or the preparation
of the Final Prospectus or otherwise.
20. INDEMNIFICATION BY THE COMPANY.
(1) The Company shall fully indemnify and save harmless the Agent, each
of its subsidiaries and each of its affiliates, shareholders,
directors, officers, employees, agents and advisors (collectively,
the "INDEMNIFIED PARTIES" and individually an "INDEMNIFIED PARTY")
from and against any and all losses (other than loss of profit),
expenses, claims (including shareholder actions, derivative or
otherwise), actions, damages and liabilities, joint or several,
including the aggregate amount paid in reasonable settlement of any
actions, suits, proceedings, investigations or claims and the
reasonable fees and expenses of the Agent's counsel that may be
incurred in investigating and advising with respect to and/or
defending any action, suit, proceeding, investigation or claim that
may be made or threatened against any Indemnified Party or in
enforcing this indemnity (collectively, the "CLAIMS") to which any
Indemnified Party may become subject or otherwise involved, in any
capacity insofar as Claims relate to, are caused by, result from,
arise out of or are based upon, directly or indirectly the
35
engagement and activities of the Agent under this Agreement
including without limitation:
(a) any breach by the Company of its representations, warranties,
covenants or obligations hereunder;
(b) any information or statement (except any information or statement
relating solely to the Agent) contained in any of the Prospectus or
any Supplementary Material or any certificate of the Company
delivered pursuant to this Agreement which at the time and in light
of the circumstances in which it was made contains or is alleged to
contain a misrepresentation;
(c) any omission or alleged omission to state in the Prospectus or any
Supplementary Material or any certificate of the Company delivered
under this Agreement any material fact (except facts relating solely
to the Agent) required to be stated in such document or necessary to
make any statement in such document not misleading in light of the
circumstances under which it was made;
(d) any order made or enquiry, investigation or proceeding commenced or
threatened by any securities commission or other competent authority
based upon any untrue statement or omission or alleged untrue
statement or alleged omission or any misrepresentation or alleged
misrepresentation (except a statement or omission or alleged
statement or omission or a misrepresentation or alleged
misrepresentation relating solely to the Agent) in the Prospectus or
any Supplementary Material, or based upon any failure of the Company
to comply with applicable securities laws (other than any failure or
alleged failure to comply by the Agent) preventing or restricting
the trading in or the sale of the Special Warrants or the Underlying
Securities in any Qualifying Province; or
(e) any non-compliance or alleged non-compliance by the Company with any
applicable securities laws in connection with the transactions
contemplated hereby including non-compliance by the Company with any
statutory requirement to make any document available for inspection.
The Company also agrees to reimburse the Agent for the time spent by its
personnel in connection with any Claim at their normal per diem rates.
(2) Promptly after receiving notice of a Claim or receipt of notice of the
commencement of any investigation which is based, directly or indirectly,
upon any matter in respect of which indemnification may be sought from the
Company, an Indemnified Party will notify the Company in writing of the
particulars thereof, provided that the omission to so notify the Company
shall not relieve the Company of any liability which the Company may have
to any Indemnified Party except and only to the extent that any such delay
in or failure to give notice as herein required materially prejudices the
36
defence of such action, suit, proceeding, claim or investigation or
results in any material increase in the liability which the Company has
under this indemnity.
(3) The Company shall, subject as hereinafter provided, be entitled (but not
required) to assume the defence on behalf of the Indemnified Party of any
suit brought to enforce such claim; provided that the defence shall be
through legal counsel selected by the Company and acceptable to the
Indemnified Party, acting reasonably, and no admission of liability shall
be made by the Company or the Indemnified Party without, in each case, the
prior written consent of all the Indemnified Parties affected and the
Company, in each case such consent not to be unreasonably withheld. An
Indemnified Party shall have the right to employ separate counsel in any
such suit and participate in the defence thereof but the fees and expenses
of such counsel shall be at the expense of the Indemnified Party unless:
(a) the Company fails to assume the defence of such suit on behalf of
the Indemnified Party within 10 Business Days of receiving notice of
such suit;
(b) the employment of such counsel has been authorized by the Company;
or
(c) the named parties to any such suit (including any added or third
parties) include the Indemnified Party and the Company and the
Indemnified Party and the Company shall have been advised in writing
by counsel that there is an actual or potential conflict in the
Company's and the Indemnified Party's respective interests or
additional defences are available to the Indemnified Party, which
makes representation by the same counsel inappropriate;
(in each of cases (a), (b) or (c), the Company shall not have the
right to assume the defence of such suit on behalf of the
Indemnified Party, but the Company shall only be liable to pay the
reasonable fees and disbursements of one firm of separate counsel in
any one jurisdiction for all Indemnified Parties).
(4) The Company hereby acknowledges and agrees that, with respect to Sections
20 and 21, the Agent is contracting on its own behalf and as agent for
their affiliates, shareholders, directors, officers, employees, agents and
advisors and their respective directors, officers, employees and agents
(collectively, the "BENEFICIARIES"). In this regard, the Agent shall act
as trustee for the Beneficiaries of the covenants of the Company under
Sections 20 and 21 with respect to the Beneficiaries and accepts these
trusts and shall hold and enforce such covenants on behalf of the
Beneficiaries.
(5) The rights of indemnity contained in this Section 20 shall not enure to
the benefit of the Agent or any other Indemnified Party if the Company has
complied with the provisions of Sections 6, 8 and 11, as applicable, and
the person asserting any claim contemplated by this Section was not
37
provided with a copy of the Prospectus or Supplementary Material which
corrects any untrue statement or information, misrepresentation or
omission which is the basis of such claim and which is required under the
Canadian Securities Laws to be delivered to such person by the Agent or
members of its banking or selling group (if any).
(6) The Company also agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the
Company or any person asserting claims on behalf of or in right of the
Company for or in connection with the matters provided for herein except
to the extent any losses, expenses, claims, actions, damages or
liabilities incurred by the Company are determined by a court of competent
jurisdiction in a final judgment that has become non-appealable to have
resulted from the gross negligence or willful misconduct of such
Indemnified Party. Neither the Company nor the Agent will, without each of
the other's prior written consent and the consent of each Indemnified
Party, settle, compromise, consent to the entry of any judgement in or
otherwise seek to terminate any action, suit, proceeding, investigation or
claim in respect of which indemnification may be sought hereunder (whether
or not any Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination includes a release of each
Indemnification Party from any liabilities arising out such action, suit,
proceeding, investigation or claim.
21. CONTRIBUTION.
(1) In order to provide for just and equitable contribution in circumstances
in which the indemnity provided in Section 20 would otherwise be available
in accordance with its terms but is, for any reason not solely
attributable to any one or more of the Indemnified Parties, held to be
unavailable to or unenforceable by the Indemnified Parties or enforceable
otherwise than in accordance with its terms, or is insufficient to hold
any Indemnified Party harmless, the Company shall contribute to the amount
paid or payable by the Indemnified Parties as a result of such Claim in
such proportion as is appropriate to reflect not only the relative
benefits received by the Company, on the one hand, and the Indemnified
Party, on the other hand, but also the relative fault of the Company and
the Indemnified Party as well as any relevant equitable considerations;
provided that the Company shall in any event be liable to pay or
contribute to the amount paid or payable by the Indemnified Party under
the Claim any amounts in excess of the aggregate amount of the fees
actually received by the Indemnified Party under this Agreement. However,
no party who has engaged in any fraud, fraudulent misrepresentation or
gross negligence shall be entitled to claim contribution from any person
who has not engaged in such fraud, fraudulent misrepresentation or gross
negligence.
(2) For greater certainty, in the event of unenforceability or unavailability
of the indemnity provided in Section 20, the Company shall not have any
obligation to contribute pursuant to this Section 21 in respect of any
Claim except to the extent the indemnity given by it in Section 20 would
have been applicable to such Claim in accordance with its terms, had such
38
indemnity been found to be enforceable and available to the Indemnified
Parties.
(3) The rights to contribution provided in this Section 21 shall be in
addition to and not in derogation of any other right to contribution which
the Indemnified Parties may have by statute or otherwise at law provided
that subsections (1) and (2) of this Section shall apply, mutatis
mutandis, in respect of such other right.
22. ADVERTISEMENTS.
The Company acknowledges that the Agent shall have the right, at its own
expense, to place such advertisement or advertisements relating to the
completion of the Offering as the Agent may consider desirable or appropriate
and as may be permitted by applicable law. Each of the Company and the Agent
agrees that they will not make or publish any advertisement in any media
whatsoever relating to, or otherwise publicize, the transaction provided for
herein so as to result in any exemption from the prospectus and registration
requirements of applicable securities legislation in any of the provinces of
Canada or of the United States, or of any state, being unavailable in respect of
the Offering to prospective Purchasers.
23. RIGHTS AND BENEFITS IN FAVOUR OF THE PURCHASERS.
The Company appoints the Agent as the trustee for the Purchasers of the rights
and benefits of this Agreement and the Agent agrees to accept such trust and
hold the rights and benefits of this Agreement for and on behalf of such
Purchasers.
24. NOTICES.
Unless herein otherwise expressly provided, any notice, request, direction,
consent, waiver, extension, agreement or other communication (each a "NOTICE")
that is or may be given or may hereunder shall be in writing addressed as
follows:
If to the Company:
EMERGENSYS CORPORATION
000 xxxx. Xxxx-Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxxxx, President
Facsimile: (000) 000-0000
In case of any Notice to the Company, with a copy to:
XXXXXXXX XXXXXXXX
Le Complexe St-Amable
0000, xxx xx Xxxxxx-Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
39
and with a copy to:
GOTTBETTER & PARTNERS LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
If to the Agent at:
XXXXXXXXXX SECURITIES INC.
0 Xxxxx Xxxxx-Xxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
XXXXXX DE XXXXX
1 Place Ville Xxxxx, Suite 4000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
or to such other address as any of the persons may designate by notice given to
the others in accordance with this Section. Each Notice shall be personally
delivered or sent by commercial courier to the addressee or sent by fax to the
addressee and (a) a Notice which is couriered or personally delivered shall, if
delivered before 5:00 p.m. (Montreal time) on a Business Day, be deemed to be
given and received on that day and, in any other case, be deemed to be given and
received on the first Business Day following the day on which it is delivered,
and (b) a Notice which is sent by facsimile transmission shall, if sent on a
Business Day and the machine on which it is sent receives the answer back code
of the party to whom it is sent before 5:00 p.m. (Montreal time), be deemed to
be given and received on that day and, in any other case, be deemed to be given
and received on the first Business Day following the day on which it is sent.
25. ENTIRE AGREEMENT; COUNTERPARTS AND EXECUTION BY FACSIMILE.
This Agreement constitutes the entire agreement between the Company and the
Agent in connection with the Offering and supersedes the letter agreement dated
February 10, 2004 between VMD and the Company and all prior discussions in
connection with the Offering. This Agreement may be executed in one or more
counterparts together constituting one original document which shall be
effective as of the date hereof. The transmission by fax of a copy of the
execution page hereof reflecting the execution of this Agreement by any party
hereto shall be effective to evidence that party's intention to be bound by this
Agreement and that party's agreement to the terms, provisions and conditions
hereof, all without the necessity of having to produce an original copy of such
execution page.
40
26. STANDSTILL.
The Company undertakes that for a period of 12 months from the Special Warrant
Closing Date, it will not, directly or indirectly, without the prior written
consent of VMD, acting reasonably, issue or sell, or offer to sell, grant any
option to purchase or otherwise dispose of, or announce publicly its intention
to do so, any Common Shares or other equity securities or securities convertible
or exchangeable into or exercisable for Common Shares, at a price less than
$0.40 per Common Share, other than (i) pursuant to the Offering, (ii) pursuant
to the exercise of employee stock options granted under the Company's stock
option plan, (iii) pursuant to the exercise of convertible securities, options
or warrants outstanding as at the date hereof, or (iv) as full or partial
consideration for arm's length acquisitions of assets or shares.
27. PRESS RELEASES.
During the period commencing on the date hereof and until completion of the
distribution of the Underlying Securities, the Company will promptly provide to
the Agent drafts of any press releases of the Company for review by the Agent
and the Agent's counsel prior to issuance, provided that any such review will be
completed in a timely manner.
28. TIME OF THE ESSENCE.
Time shall, in all respects, be of the essence hereof.
29. HEADINGS.
The headings contained herein are for convenience only and shall not affect the
meaning or interpretation hereof.
30. SEVERABILITY.
The invalidity or unenforceability of any particular provision of this Agreement
shall not affect or limit the validity or enforceability of the remaining
provisions of this Agreement.
31. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the province of Quebec and the laws of Canada applicable therein. The Agent and
the Company hereby submit to the jurisdiction of the courts of the province of
Quebec.
32. SUCCESSORS AND ASSIGNS.
This Agreement shall enure to the benefit of, and shall be binding upon, the
Agent and the Company and their respective successors and legal representatives;
provided that, except as provided herein or in the Subscription Agreements, this
Agreement shall not be assignable by any party without the written consent of
the others.
41
33. FURTHER ASSURANCES.
Each of the parties hereto shall do, or cause to be done, all such acts and
things and shall execute or cause to be executed, all such documents, agreements
and other instruments as may reasonably be necessary or desirable for the
purpose of carrying out the provisions and intent of this Agreement.
34. EFFECTIVE DATE.
This Agreement is intended to and shall take effect as of the date first set
forth above, notwithstanding its actual date of execution or delivery. If this
letter accurately reflects the terms of the transactions which we are to enter
into and are agreed to by you, please communicate your acceptance by executing
the enclosed copies of this letter where indicated and returning them to Xxxxxxx
Xxxxxx at VMD.
Yours very truly,
DESJARDINS SECURITIES INC.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx
Accepted and agreed to by the undersigned as of the date of this letter first
written above.
EMERGENSYS CORPORATION
By: /s/ Xxxx Xxx Xxxxxxx
-------------------------------------
Xxxx Xxx Xxxxxxx
