Exhibit 4.7
A completed and originally executed copy of, and the other documents required to
be delivered with, this subscription and renunciation agreement must be
delivered, by no later than 1:00 p.m. (Toronto time) on November 21, 2002, to
Dundee Securities Corporation at Xxxxx 000, 00 Xxxxx Xxxxxx West, Toronto,
Ontario M5H 3R3, Attention: Xx. X. Xxxxx (Tel: (000) 000-0000, Fax (416)
000-0000).
AS DUNDEE SECURITIES CORPORATION, ONE OF THE AGENTS, THE DIRECTORS, OFFICERS,
EMPLOYEES AND AFFILIATES THEREOF, AND THE ASSOCIATES OF EACH OF THEM, OWN OR
CONTROL, AS OF NOVEMBER 20, 2002, IN AGGREGATE, COMMON SHARES OF THE CORPORATION
REPRESENTING APPROXIMATELY 7.8% OF THE PRESENTLY OUTSTANDING COMMON SHARES OF
THE CORPORATION, THE CORPORATION IS A "CONNECTED ISSUER" OF DUNDEE SECURITIES
CORPORATION FOR PURPOSES OF APPLICABLE SECURITIES LEGISLATION. SEE "FEE TO
AGENTS AND CONFLICT OF INTEREST - CONFLICT OF INTEREST. "
SUBSCRIPTION AND RENUNCIATION AGREEMENT
TO: Purchasers of Flow-Through Common Shares of Apollo Gold Corporation
Dear Sirs:
RE: SALE OF FLOW-THROUGH COMMON SHARES
---------------------------------------
This subscription and renunciation agreement is to confirm your agreement to
purchase from Apollo Gold Corporation (the "Corporation"), subject to the terms
and conditions set forth herein, that number of "flow-through" common shares of
the Corporation at the price of $3.00 per "flow-through" common share (the
"Purchase Price") set out above your name on the execution page hereof (the
"Purchased Securities"). A term sheet with respect to the offering of the
Purchased Securities is attached hereto as schedule A. The Corporation and the
undersigned agree that the Purchased Securities will be "flow-through shares" as
defined in subsection 66(15) of the Income Tax Act (Canada) and, accordingly,
the Corporation agrees to:
(a) incur Resource Expenses (as hereinafter defined) which qualify as a
Flow-Through Mining Expenditure (as hereinafter defined) in an amount
equal to the Commitment Amount (as hereinafter defined) during the
period from and after the Closing Date to and including December 31,
2003; and
(b) renounce Resource Expenses which qualify as a Flow-Through Mining
Expenditure equal to the Commitment Amount to the undersigned with an
effective date no later than December 31, 2002.
There is no minimum amount required to be raised by the sale of the Purchased
Securities and the proceeds of the Purchased Securities will be immediately
available to the Corporation.
1. DEFINITIONS AND TAXATION ACT (QUEBEC)
-------------------------------------
(a) Definitions: In this subscription and renunciation agreement, unless
-----------
the context otherwise requires:
(i) "Agency Agreement" means the agency agreement dated as of the
Closing Date between the Corporation and the Agents;
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(ii) "Agents" means Dundee Securities Corporation and BMO Xxxxxxx
Xxxxx Inc. collectively;
(iii) "Business Day" means a day on which Canadian chartered banks are
open for the transaction of regular business in the City of
Toronto, Ontario;
(iv) "Canadian Exploration Expense" or "CEE" means an expense incurred
in 2002 or 2003 of the nature referred to in paragraph (f) of the
definition of Canadian exploration expense in subsection 66.1(6)
of the Tax Act, other than amounts which are prescribed to be
"Canadian exploration and development overhead expense" for the
purposes of the Tax Act or the cost of acquiring or obtaining the
use of seismic data described in paragraph 66(12.6)(b.1) of the
Tax Act or any expenses for prepaid services or rent that do not
qualify as outlays and expenses for the period as described in
the definition "expense" in paragraph 66(15) of the Tax Act;
(v) "Closing" means the closing of the purchase and sale of the
Purchased Securities;
(vi) "Closing Date" means November 21, 2002 or such other date as the
Corporation and the Agents may mutually agree upon in writing;
(vii) "Commitment Amount" means the amount paid by the Subscriber for
the Purchased Securities;
(viii) "Common Shares" means the common shares of the Corporation as
constituted on the date hereof;
(ix) "Corporation" means Apollo Gold Corporation, a corporation
amalgamated under the Business Corporations Act (Ontario);
(x) "Dollar" or "$" means a dollar of lawful money of Canada;
(xi) "Flow-Through Mining Expenditure" means an expense which is a
"flow-through mining expenditure" as defined in subsection 127(9)
of the Tax Act;
(xii) "Flow-Through Shares" means flow-through shares as defined in
subsection 66(15) of the Tax Act;
(xiii) "Information" means all information regarding the Corporation
that is, or becomes, publicly available, together with all
information prepared by the Corporation and provided to the
Agents or to potential purchasers of the Purchased Securities, if
any, and includes but is not limited to, all press releases and
material change reports of the Corporation;
(xiv) "Person" means an individual, a firm, a corporation, a
syndicate, a partnership, a trust, an association, an
unincorporated organization, a joint venture, an investment club,
a government or an agency or political subdivision thereof and
every other form of legal or business entity of whatsoever nature
or kind;
(xv) "Prescribed Forms" means the forms prescribed from time to time
under subsection 66(12.7) of the Tax Act and under the applicable
provision of the
-3-
Taxation Act (Quebec) as described in paragraph 1(b) hereof filed
or to be filed by the Corporation within the prescribed times
renouncing to the Subscriber the Resource Expenses incurred
pursuant to this Subscription Agreement and all parts or copies
of such forms required by Revenue Canada and under the Taxation
Act (Quebec) as described in paragraph 1(b) hereof to be
delivered to the Subscriber;
(xvi) "Prescribed Relationship" means a relationship between the
Corporation and the Subscriber where the Subscriber and the
Corporation are related or otherwise do not deal at arm's length
for purposes of the Tax Act;
(xvii) "Purchase Price" means $3.00 per Purchased Security;
(xviii) "Purchased Securities" means the up to 1,500,000 Common Shares
which are Flow-Through Shares offered for sale by the Agents;
(xix) "Reporting Provinces" means the Provinces of British Columbia,
Alberta, Manitoba and Ontario collectively;
(xx) "Resource Expense" means an expense which is CEE which qualifies
as a Flow-Through Mining Expenditure which is incurred on or
after the Closing Date and on or before the Termination Date
which may be renounced by the Corporation pursuant to subsection
66(12.6) of the Tax Act with an effective date not later than
December 31, 2002 and in respect of which, but for the
renunciation, the Corporation would be entitled to a deduction
from income for income tax purposes;
(xxi) "Revenue Canada" means the Canada Customs and Revenue Agency;
(xxii) "Stock Exchange" means The Toronto Stock Exchange;
(xxiii) "Subscriber" means the Person purchasing the Purchased
Securities and whose name appears on the execution page hereof;
(xxiv) "Subscription Agreement" means this subscription and
renunciation agreement as the same may be amended, supplemented
or restated from time to time;
(xxv) "Subsidiaries" means Apollo Gold, Inc., Apollo Gold Exploration
Inc., Montana Tunnels Mining, Inc. and Florida Canyon Mining,
Inc. collectively;
(xxvi) "Tax Act" means the Income Tax Act (Canada), as amended,
reenacted or replaced from time to time; and
(xxvii) "Termination Date" means December 31, 2003.
(b) Taxation Act(Quebec): Any reference to a word or term defined in the
---------------------
Tax Act shall include, for purposes of Quebec income taxation, a
reference to the equivalent word or term, if any, defined in the
Taxation Act (Quebec) as such act may be amended, reenacted or
replaced from time to time. Any reference to the Tax Act or a
provision thereof shall include, for purposes of Quebec income
taxation, a reference to the Taxation Act (Quebec) or the equivalent
provision thereof as such act may be amended, re-enacted or replaced
from time to time. Any reference to a filing or similar requirement
imposed under the Tax Act shall include, for purposes of Quebec income
taxation, a reference to the equivalent filing or similar requirement,
where applicable, under the Taxation Act (Quebec) as the Tax Act may
be amended, re-enacted or
-4-
replaced from time to time; provided that, if no filing or similar
requirement is provided under the Taxation Act (Quebec), a copy of any
material filed under such act shall be filed with the Ministere du
Revenue Quebec.
2. CONDITIONS OF PURCHASE
------------------------
In connection with your purchase of the Purchased Securities, the following
documents are attached hereto which you are requested to complete and sign, as
required, and return together with an executed copy of this Subscription
Agreement as soon as possible and in any event no later than 1:00 p.m. (Toronto
time) on November 21, 2002:
(a) schedule B, a private placement questionnaire and undertaking in the
form required by the Stock Exchange;
(b) schedule C, with respect to registration and delivery instructions;
and
(c) if you are a resident of, or are otherwise subject to the securities
laws of, the Province of Ontario, schedule D, being your Ontario
"accredited investor" certification.
The obligation of the Corporation to sell the Purchased Securities to you is
subject to, among other things, the conditions that:
(a) you execute and return all documents required by applicable securities
legislation and the Stock Exchange for delivery on your behalf,
including the forms set out in schedules B to D attached hereto, as
applicable, to the Corporation as the sale of the Purchased Securities
by the Corporation to you will not be qualified by a prospectus; and
(b) all necessary regulatory approvals being obtained prior to the Closing
Date.
By returning this Subscription Agreement you consent to the filing by the
Corporation of all documents required by applicable securities legislation and
the Stock Exchange.
You agree to comply with all applicable securities laws and with the policies of
the Stock Exchange concerning the purchase of, the holding of, and the resale
restrictions applicable to, the Purchased Securities.
You acknowledge that the Corporation has the right to close the subscription
books at any time without notice and to accept or reject any subscription in its
sole discretion.
3. THE CLOSING
------------
Delivery and payment for the Purchased Securities will be completed at the
closing of the purchase and sale of the Purchased Securities at the offices of
Fogler, Xxxxxxxx LLP at 2:00 p.m., Toronto time, on the Closing Date. If, at
the Closing, the terms and conditions contained in the Agency Agreement have
been complied with to the satisfaction of the Agents or waived by the Agents,
the Agents will deliver to the Corporation all completed subscription
agreements, including this Subscription Agreement, and deliver to
-5-
the Corporation the aggregate subscription proceeds against delivery by the
Corporation of certificates representing the Purchased Securities and such other
documentation as may be requested by the Agents.
A certificate representing the Purchased Securities will be available for
delivery to you against payment to the Agent through which you subscribed for
the Purchased Securities of the amount of the Purchase Price for the Purchased
Securities in freely transferable Canadian funds. Such payment is to be made by
bank draft, certified cheque or other form of immediately available funds
payable in favour of the Agent through which you subscribed for the Purchased
Securities or such other Person as such Agent shall advise you. If you do not
choose to attend on the Closing Date to receive the certificate representing the
Purchased Securities, you hereby irrevocably appoint any one of the Agents to
act as your agent for the purpose of acting as your representative at the
Closing and to execute in your name and on your behalf all closing receipts and
documents required, completing or correcting any errors or omissions in any form
or document provided by you, approving any opinion, certificate or other
document addressed to you, waiving, in whole or in part, any representation,
warranty, covenant or condition for your benefit and contained in the Agency
Agreement or in this Subscription Agreement, exercising any right of termination
contained in the Agency Agreement and accepting delivery of the certificate
representing the Purchased Securities on the Closing Date.
4. PROSPECTUS EXEMPTIONS
----------------------
The sale of the Purchased Securities by the Corporation to you is conditional
upon such sale being exempt from the requirements as to the filing of a
prospectus and as to the preparation of an offering memorandum contained in any
statute, regulation, instrument, rule or policy applicable to the sale of the
Purchased Securities or upon the issue of such orders, consents or approvals as
may be required to permit such sale without the requirement of filing a
prospectus or delivering an offering memorandum.
You acknowledge and agree that you:
(a) have been independently advised as to, or are aware of, the
restrictions with respect to trading in, and the restricted period or
hold period applicable to, the Purchased Securities imposed by
securities legislation in the jurisdiction in which you reside or to
which you are subject and by the Stock Exchange, that a suitable
legend or legends will be placed on the certificate representing the
Purchased Securities to reflect the applicable restricted and hold
period to which the Purchased Securities are subject and you are
hereby advised that such securities can not be traded through the
facilities of the Stock Exchange since the certificate representing
such securities is not freely transferable and consequently is not
"good delivery" in settlement of transactions on the Stock Exchange
and that the Stock Exchange will deem you to be responsible for any
loss incurred on a sale made by you in such securities;
(b) have not received or been provided with a prospectus, offering
memorandum or similar document and that your decision to enter into
this Subscription Agreement and to purchase the Purchased Securities
from the Corporation has not been based upon any verbal or written
representation as to fact or otherwise made by or on behalf of the
Corporation or either of the Agents and that your decision is based
entirely upon publicly available information concerning the
Corporation; and
(c) as a consequence of the exempt sale,
(i) you are restricted from using most civil remedies available under
applicable securities legislation,
-6-
(ii) you may not receive information that would otherwise be required
to be given under applicable securities legislation; and
(iii) the Corporation is relieved from certain obligations that would
otherwise apply under applicable securities legislation.
You further acknowledge and agree that the Agents assume no responsibility or
liability of any nature whatsoever for the accuracy or adequacy of any such
publicly available information or as to whether all information concerning the
Corporation required to be disclosed by it has been generally disclosed.
By your acceptance of this Subscription Agreement, you represent and warrant to
the Agents and to the Corporation (which representations and warranties shall
survive the Closing) that:
(a) You are resident in the jurisdiction set out under the heading
"Address" below your signature set forth on the execution page of this
Subscription Agreement and you were not offered the Purchased
Securities, and did not execute or deliver this Subscription
Agreement, in the United States.
(b) If you are not an individual (i) you have the legal capacity to
authorize, execute and deliver this Subscription Agreement, and (ii)
the individual signing this Subscription Agreement has been duly
authorized to execute and deliver this Subscription Agreement.
(c) None of the funds you are using to purchase the Purchased Securities
are to your knowledge proceeds obtained or derived directly or
indirectly as a result of illegal activities.
(d) You are at arm's-length, within the meaning of applicable securities
legislation, the Tax Act and the policies of the Stock Exchange, with
the Corporation.
(e) You are not a "promoter" of the Corporation within the meaning of
applicable securities legislation.
(f) You are capable of assessing the proposed investment in the Purchased
Securities as a result of your financial or investment experience or
as a result of advice received from a registered person other than the
Corporation or an affiliate thereof and you are able to bear the
economic loss of your investment in the Purchased Securities.
(g) You are not a U.S. Person (as that term is defined in Rule 902 of
Regulation S under the Securities Act of 1933 (United States), as
amended) and are not and will not be purchasing Purchased Securities
for the account or benefit of any U.S. Person.
(h) The Purchased Securities to be issued hereunder are not being
purchased with knowledge of any material fact about the Corporation
that has not been generally disclosed.
(i) You acknowledge that no agency, governmental authority, securities
commission or similar regulatory body, stock exchange or other entity
has reviewed, passed on or made any finding or determination as to the
merit for investment of the Purchased Securities nor have any such
agencies or governmental authorities made any recommendation or
endorsement with respect to the Purchased Securities.
-7-
(j) This Subscription Agreement has been duly executed and delivered and,
when accepted by the Corporation, will constitute your legal, valid
and binding obligation enforceable against you in accordance with the
terms hereof.
(k) You are purchasing the Purchased Securities as principal and you are
an "accredited investor" within the meaning of Rule 45-501 of the
Ontario Securities Commission and have concurrently executed and
delivered a certificate in the form attached as schedule E hereto.
(l) The provisions of paragraphs (a) to (k) of this section 4 will be true
and correct both as of the date of execution of this Subscription
Agreement and as of the Closing Date.
5. LEGENDS:
-------
You acknowledge that the certificate representing the Purchased Securities will
bear the following legends:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL NOT TRADE THESE SECURITIES BEFORE [the
date that is four months and one day after the Closing Date will be inserted]."
and
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE, HOWEVER, THE SAID SECURITIES CAN NOT BE TRADED THROUGH THE FACILITIES
OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT 'GOOD DELIVERY' IN SETTLEMENT OF
TRANSACTIONS ON THE TORONTO STOCK EXCHANGE";
provided that subsequent to the date which four months and one day after the
Closing Date the certificate representing the Purchased Securities may be
exchanged for a certificate bearing no such legends.
6. REPRESENTATIONS AND WARRANTIES
--------------------------------
The Corporation hereby represents and warrants to the Subscriber as follows and
acknowledges and confirms that the Subscriber is relying upon such
representations and warranties in entering into this Subscription Agreement and
completing the transactions contemplated:
(a) Incorporation and Organization: The Corporation and each Subsidiary
--------------------------------
has been incorporated and organized and is a valid and subsisting
corporation under the laws of its jurisdiction of incorporation and
has all requisite corporate power and authority to carry on its
business as now conducted or proposed to be conducted and to own or
lease and operate the property and assets thereof and the Corporation
has all requisite corporate power and authority to enter into, execute
and deliver this Subscription and to carry out the obligations thereof
hereunder.
(b) Extra-provincial Registration: The Corporation and each Subsidiary is
------------------------------
licensed, registered or qualified as an extra-provincial or foreign
corporation in all jurisdictions where the character of the property
or assets thereof owned or leased or the nature of the activities
conducted by it make licensing, registration or qualification
necessary and is
-8-
carrying on the business thereof in compliance with all applicable
laws, rules and regulations of each such jurisdiction.
(c) Authorized Capital: The Corporation is authorized to issue, among
-------------------
other things, an unlimited number of Common Shares, of which, as of
the date hereof, 33,554,128 Common Shares are issued and outstanding
as fully paid and non-assessable shares.
(d) Listing: The Common Shares are, and at the time of issue of the
-------
Purchased Securities will be, listed on the Stock Exchange and the
Purchased Securities will, at the time of issue of the Purchased
Securities, be conditionally approved for listing on the Stock
Exchange. The Corporation has not issued, or agreed to issue, any
Common Shares or any securities exchangeable or exercisable for, or
convertible into, Common Shares at an effective price per Common Share
which is less than the Purchase Price during the 60 day period
immediately preceding the date hereof.
(e) Certain Security Law Matters: The Common Shares are listed only on the
-----------------------------
Stock Exchange, the Corporation is a reporting issuer or the
equivalent only in the Reporting Provinces and is not in default of
any requirement of the securities legislation of any of such provinces
and the Common Shares are not registered under the Securities Exchange
Act of 1934 (United States), as amended.
(f) Qualifying Issuer and Resale of Securities: The Corporation is and
----------------------------------------------
will be on the Closing Date a "qualifying issuer" within the meaning
of Multilateral Instrument 45-102 of the Canadian Securities
Administrators. The Purchased Securities will not be subject to a
restricted period or statutory hold period under the securities laws
of the Province of British Columbia, Alberta or Ontario or to any
resale restrictions under the policies of the Stock Exchange which
extends beyond four months and one day after the Closing Date.
(g) Rights to Acquire Securities: No Person has any agreement, option,
-------------------------------
right or privilege (whether pre-emptive, contractual or otherwise)
capable of becoming an agreement for the purchase, acquisition,
subscription for or issue of any of the unissued shares or other
securities of the Corporation, except for an aggregate of 16,179,662
Common Shares reserved for issue pursuant to outstanding options,
warrants, share incentive plans, convertible, exercisable and
exchangeable securities and other rights to acquire Common Shares.
(h) No Pre-emptive Rights: The issue of the Purchased Securities will not
----------------------
be subject to any pre-emptive right or other contractual right to
purchase securities granted by the Corporation or to which the
Corporation is subject.
(i) Purchased Securities: The execution of this Subscription Agreement and
--------------------
the issue by the Corporation to the Subscriber of the Purchased
Securities will be exempt from the registration and prospectus
requirements of applicable securities legislation. The Purchased
Securities will not aggregate more than 10% of the outstanding Common
Shares on the Closing Date assuming the issue of the Purchased
Securities.
(j) Subsidiaries: The Subsidiaries are the only material subsidiaries of
------------
the Corporation. If there are any subsidiaries of the Corporation
other than the Subsidiaries, such subsidiaries do not have any assets
or liabilities that are material to the Corporation, are not party to
any agreements that are material to the Corporation or material to the
business of the
-9-
Corporation and no material revenues of the Corporation are booked
through such subsidiaries.
(k) Capital of Subsidiaries: All of the outstanding shares of Apollo Gold,
-----------------------
Inc. are issued and outstanding as fully paid and non-assessable
shares and are legally and beneficially owned by the Corporation and
all of the outstanding shares of Apollo Gold Exploration Inc., Montana
Tunnels Mining, Inc. and Florida Canyon Mining, Inc. are issued and
outstanding as fully paid and non-assessable shares and are legally
owned by Apollo Gold, Inc. and, in each case, no Person has any
agreement, option, right or privilege (whether pre-emptive,
contractual or otherwise) capable of becoming an agreement for the
purchase, acquisition, subscription for or issue of any of the
unissued shares or other securities of any of the Subsidiaries or for
the purchase or acquisition of any of the outstanding shares or other
securities of any of the Subsidiaries.
(l) Issue of Purchased Securities: All necessary corporate action has been
-----------------------------
taken to authorize the issue and sale of, and the delivery of
certificates representing, the Purchased Securities and, upon payment
of the requisite consideration therefor, the Purchased Securities will
be validly issued as fully paid and non-assessable shares.
(m) Consents, Approvals and Conflicts: None of the offering and sale of
------------------------------------
the Purchased Securities, the execution and delivery of this
Subscription Agreement, the compliance by the Corporation with the
provisions of this Subscription Agreement or the consummation of the
transactions contemplated herein including, without limitation, the
incurring of Resource Expenses and the issue of the Purchased
Securities to the Subscriber for the consideration and upon the terms
and conditions as set forth herein, do or will (i) require the
consent, approval, or authorization, order or agreement of, or
registration or qualification with, any governmental agency, body or
authority, court, stock exchange, securities regulatory authority or
other Person, except (A) such as have been obtained, or (B) such as
may be required under applicable securities laws, instruments, rules
and policies and the policies of the Stock Exchange and will be
obtained by the Closing Date, or (ii) to the best of the knowledge of
the Corporation, conflict with or result in any breach or violation of
any of the provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Corporation or any Subsidiary is a party or by
which any of them or any of the properties or assets thereof is bound,
or (iii) conflict with or result in any breach or violation of any of
the provisions of, or constitute a default under, the articles or
by-laws of the Corporation or any Subsidiary or any resolution passed
by the directors (or any committee thereof) or shareholders of the
Corporation or any Subsidiary, or any statute or any judgment, decree,
order, rule, policy or regulation of any court, governmental
authority, any arbitrator, stock exchange or securities regulatory
authority applicable to the Corporation or any Subsidiary or any of
the properties or assets thereof which could have a material adverse
effect on the condition (financial or otherwise), business, properties
or results of operations of the Corporation or any Subsidiary.
(n) Authority and Authorization: The Corporation has full corporate power
----------------------------
and authority to enter into this Subscription Agreement and to do all
acts and things and execute and deliver all documents as are required
hereunder to be done, observed, performed or executed and delivered by
it in accordance with the terms hereof and the Corporation has taken
all necessary corporate action to authorize the creation, execution,
delivery and performance of this Subscription Agreement and to observe
and perform the provisions
-10-
of this Subscription Agreement in accordance with the provisions
hereof including, without limitation, the incurring of Resource
Expenses.
(o) Validity and Enforceability: This Subscription Agreement has been
-----------------------------
authorized, executed and delivered by the Corporation and constitutes
a valid and legally binding obligation of the Corporation enforceable
against the Corporation in accordance with its terms.
(p) Public Disclosure: Each of the documents which contains any of the
------------------
Information is, as of the date thereof, in compliance in all material
respects with applicable securities laws, instruments and policies and
did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading and such documents collectively
constitute full, true and plain disclosure of all material facts
relating to the Corporation and do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, as of the
date hereof. There is no fact known to the Corporation which the
Corporation has not publicly disclosed which materially adversely
affects, or so far as the Corporation can now reasonably foresee, will
materially adversely affect, the assets, liabilities (contingent or
otherwise), affairs, business, prospects, operations or condition
(financial or otherwise) of the Corporation or the ability of the
Corporation to perform its obligations under this Subscription
Agreement or which would otherwise be material to any Person intending
to make an equity investment in the Corporation.
(q) Timely Disclosure: The Corporation is in compliance with all timely
------------------
disclosure obligations under applicable securities laws, instruments,
rules and policies and, without limiting the generality of the
foregoing, there has not occurred any material adverse change,
financial or otherwise, in the assets, liabilities (contingent or
otherwise), business, condition (financial or otherwise), capital or
prospects of the Corporation or any Subsidiary which has not been
publicly disclosed and none of the documents filed by or on behalf of
the Corporation pursuant to applicable securities laws, instruments,
rules or policies contain a misrepresentation (as such term is defined
in the Securities Act (Ontario)) at the date of the filing thereof.
(r) No Cease Trade Order: No order preventing, ceasing or suspending
-----------------------
trading in any securities of the Corporation or prohibiting the issue
and sale of securities by the Corporation has been issued and no
proceedings for either of such purposes have been instituted or, to
the best of the knowledge of the Corporation, are pending,
contemplated or threatened.
(s) Financial Statements: The audited consolidated financial statements of
--------------------
the Corporation for the year ended December 31, 2001 together with the
auditors' report thereon and the notes thereto, and the unaudited
interim consolidated financial statements of the Corporation for the
period ended June 30, 2002 and the notes thereto, have been prepared
in accordance with Canadian generally accepted accounting principles
applied on a basis consistent with prior periods (except as disclosed
in such financial statements), are substantially correct in every
particular and present fairly the financial condition and position of
the Corporation on a consolidated basis as at the dates thereof and
such financial statements contain no direct or implied statement of a
material fact which is untrue on the date of such financial statements
and do not omit to state any material fact which is required by
Canadian generally accepted accounting principles or by applicable
-11-
law to be stated or reflected therein or which is necessary to make
the statements contained therein not misleading.
(t) Changes in Financial Position: Since June 30, 2002, none of:
------------------------------
(i) the Corporation or any Subsidiary has paid or declared any
dividend or incurred any material capital expenditure or made any
commitment therefore;
(ii) the Corporation or any Subsidiary has incurred any obligation or
liability, direct or indirect, contingent or otherwise, except in
the ordinary course of business and which is not, and which in
the aggregate are not, material; and
(iii) the Corporation or any Subsidiary has entered into any material
transaction;
except in each case as disclosed in the Information.
(u) No Contemplated Changes: Except as disclosed in the Information, none
------------------------
of the Corporation or any Subsidiary has approved, is contemplating,
has entered into any agreement in respect of, or has any knowledge of:
(i) the purchase of any property or assets or any interest therein or
the sale, transfer or other disposition of any property or assets
or any interest therein currently owned, directly or indirectly,
by the Corporation or any Subsidiary whether by asset sale,
transfer of shares or otherwise;
(ii) the change of control (by sale or transfer of shares or sale of
all or substantially all of the property and assets of the
Corporation or any Subsidiary or otherwise) of the Corporation or
any Subsidiary; or
(iii) a proposed or planned disposition of shares by any shareholder
who owns, directly or indirectly, 10% or more of the outstanding
shares of the Corporation or any Subsidiary.
(v) Insurance: The assets of the Corporation and of each Subsidiary and
---------
the business and operations thereof are insured against loss or damage
with responsible insurers on a basis consistent with insurance
obtained by reasonably prudent participants in comparable businesses
in comparable circumstances, such coverage is in full force and effect
and the Corporation and each Subsidiary has not failed to promptly
give any notice or present any material claim thereunder.
(w) Taxes and Tax Returns: The Corporation and each Subsidiary has filed
-----------------------
in a timely manner all necessary tax returns and notices and has paid
all applicable taxes of whatsoever nature for all tax years prior to
the date hereof to the extent that such taxes have become due or have
been alleged to be due and none of the Corporation or any Subsidiary
is aware of any tax deficiencies or interest or penalties accrued or
accruing, or alleged to be accrued or accruing, thereon where, in any
of the above cases, it might reasonably be expected to result in any
material adverse change in the condition (financial or otherwise), or
in the earnings, business affairs or business prospects of the
Corporation or any Subsidiary and there are no agreements, waivers or
other arrangements providing for an extension of time with respect to
the filing of any tax return by any of them or the payment of any
material tax, governmental charge, penalty,
-12-
interest or fine against any of them, there are no material actions,
suits, proceedings, investigations or claims now threatened or pending
against the Corporation or any Subsidiary which could result in a
material liability in respect of taxes, charges or levies of any
governmental authority, penalties, interest, fines, assessments or
reassessments or any matters under discussion with any governmental
authority relating to taxes, governmental charges, penalties,
interest, fines, assessments or reassessments asserted by any such
authority and the Corporation and each Subsidiary has withheld (where
applicable) from each payment to each of the present and former
officers, directors and employees thereof the amount of all taxes and
other amounts, including, but not limited to, income tax and other
deductions, required to be withheld therefrom, and has paid the same
or will pay the same when due to the proper tax or other receiving
authority within the time required under applicable tax legislation.
(x) Compliance with Laws, Licenses and Permits: The Corporation and each
--------------------------------------------
Subsidiary has conducted and is conducting the business thereof in
compliance in all material respects with all applicable laws, rules,
regulations, tariffs, orders and directives of each jurisdiction in
which it carries on business and possesses all material approvals,
consents, certificates, registrations, authorizations, permits and
licenses issued by the appropriate provincial, state, municipal,
federal or other regulatory agency or body necessary to carry on the
business currently carried on, or contemplated to be carried on, by
it, is in compliance in all material respects with the terms and
conditions of all such approvals, consents, certificates,
authorizations, permits and licenses and with all laws, regulations,
tariffs, rules, orders and directives material to the operations, and
none of the Corporation or any Subsidiary has received any notice of
the modification, revocation or cancellation of, any intention to
modify, revoke or cancel or any proceeding relating to the
modification, revocation or cancellation of any such approval,
consent, certificate, authorization, permit or license which, singly
or in the aggregate, if the subject of an unfavourable decision,
order, ruling or finding, would materially and adversely affect the
conduct of the business or operations of, or the assets, liabilities
(contingent or otherwise), condition (financial or otherwise) or
prospects of, the Corporation or any Subsidiary.
(y) Agreements and Actions: Neither the Corporation nor any Subsidiary is
-----------------------
in violation of any term of the articles or by-laws or any constating
document thereof. Neither the Corporation nor any Subsidiary is in
violation of any term or provision of any agreement, indenture or
other instrument applicable to it which would, or could, result in any
material adverse effect on the business, condition (financial or
otherwise), affairs or operations of the Corporation or any
Subsidiary, neither the Corporation nor any Subsidiary is in default
in the payment of any obligation owed which is now due and there is no
action, suit, proceeding or investigation commenced, pending or, to
the knowledge of the Corporation after due inquiry, threatened which,
either in any case or in the aggregate, might result in any material
adverse effect on the business, condition (financial or otherwise),
affairs, prospects or operations of the Corporation or any Subsidiary
or in any of the material properties or assets thereof or in any
material liability on the part of the Corporation or any Subsidiary or
which places, or could place, in question the validity or
enforceability of this Subscription Agreement or any document or
instrument delivered, or to be delivered, by the Corporation pursuant
hereto.
(z) Owner of Property: The Corporation and the Subsidiaries are the
-------------------
absolute legal and beneficial owner of, and have good and marketable
title to, all of the material property or assets thereof as described
in the Information, free of all mortgages, liens, charges,
-13-
pledges, security interests, encumbrances, claims or demands
whatsoever, other than those described in the Information, and no
other property rights are necessary for the conduct of the business of
the Corporation or any Subsidiary as currently conducted or
contemplated to be conducted, none of the Corporation or any
Subsidiary knows of any claim or the basis for any claim that might or
could adversely affect the right thereof to use, transfer or otherwise
exploit such property rights and, except as disclosed in the
Information, none of the Corporation or any Subsidiary has any
responsibility or obligation to pay any commission, royalty, licence
fee or similar payment to any Person with respect to the property
rights thereof.
(aa) Mineral Rights: The Corporation and the Subsidiaries hold either
---------------
freehold title, mining leases, mining claims or other conventional
property or proprietary interests or rights, recognized in the
jurisdiction in which each property is located, in respect of the ore
bodies and minerals located in properties in which the Corporation and
the Subsidiaries conduct business or propose to conduct business under
valid, subsisting and enforceable title documents or other recognized
and enforceable agreements or instruments, sufficient to permit the
Corporation or applicable Subsidiary to explore the minerals relating
thereto, the Corporation and the Subsidiaries have all necessary
surface rights, access rights and other necessary rights and interests
relating to the properties on which the Corporation and the
Subsidiaries conduct business or propose to conduct business granting
the Corporation or applicable Subsidiary the right and ability to
explore for minerals, ore and metals for development purposes as are
appropriate in view of the rights and interest therein of the
Corporation or applicable Subsidiary, with only such exceptions as do
not materially interfere with the use made by the Corporation or
applicable Subsidiary of the rights or interests so held and each of
the proprietary interests or rights and each of the documents,
agreements and instruments and obligations relating thereto referred
to above is currently in good standing in the name of the Corporation
or a Subsidiary.
(bb) Property Agreements: Any and all of the agreements and other documents
-------------------
and instruments pursuant to which the Corporation or any Subsidiary
holds the property and assets thereof are valid and subsisting
agreements, documents or instruments in full force and effect,
enforceable in accordance with the terms thereof, none of the
Corporation or any Subsidiary is in default of any of the material
provisions of any such agreements, documents or instruments nor has
any such default been alleged, and such properties and assets are in
good standing under the applicable statutes and regulations of the
jurisdictions in which they are situated, all leases, licences and
claims pursuant to which the Corporation or any Subsidiary derive the
interests thereof in such property and assets are in good standing and
there has been no material default under any such lease, licence or
claim and all taxes required to be paid with respect to such
properties and assets to the date hereof have been paid.
(cc) No Defaults: None of the Corporation or any Subsidiary is in default
------------
of any material term, covenant or condition under or in respect of any
judgment, order, agreement or instrument to which it is a party or to
which it or any of the property or assets thereof are or may be
subject, and no event has occurred and is continuing, and no
circumstance exists which has not been waived, which constitutes a
default in respect of any commitment, agreement, document or other
instrument to which the Corporation or any Subsidiary is a party or by
which it is otherwise bound entitling any other party thereto to
accelerate the maturity of any amount owing thereunder which could
have a material
-14-
adverse effect upon the condition (financial or otherwise), property,
assets, operations or business of the Corporation or any Subsidiary.
(dd) Compliance with Employment Laws: Except as disclosed in the
----------------------------------
Information, the Corporation and each Subsidiary is in compliance with
all laws and regulations respecting employment and employment
practices, terms and conditions of employment, pay equity and wages,
except where such non-compliance would not constitute an adverse
material fact concerning the Corporation or any Subsidiary or result
in an adverse material change to the Corporation or any Subsidiary,
and has not and is not engaged in any unfair labour practice, there is
no labour strike, dispute, slowdown, stoppage, complaint or grievance
pending or, to the best of the knowledge of the Corporation after due
inquiry, threatened against the Corporation or any Subsidiary, no
union representation question exists respecting the employees of the
Corporation or any Subsidiary and no collective bargaining agreement
is in place or currently being negotiated by the Corporation or any
Subsidiary, neither the Corporation nor any Subsidiary has received
any notice of any unresolved matter and there are no outstanding
orders under the Employment Standards Act (Ontario), the Human Rights
Code (Ontario), the Occupational Health and Safety Act (Ontario) or
the Workers' Compensation Act (Ontario) or any other similar
legislation in any jurisdiction in which the Corporation or any
Subsidiary carries on business, no employee has any agreement as to
the length of notice required to terminate his or her employment with
the Corporation or any Subsidiary in excess of twelve months or
equivalent compensation and all benefit or pension plans of the
Corporation or any Subsidiary are funded in accordance with applicable
laws and no past service funding liability exist thereunder.
(ee) Environmental Compliance: Except as disclosed in the Information, the
-------------------------
Corporation and the Subsidiaries:
(i) and the property, assets and operations thereof comply in all
material respects with all applicable Environmental Laws (which
term means and includes, without limitation, any and all
applicable international, federal, provincial, state, municipal
or local laws, statutes, regulations, treaties, orders,
judgments, decrees, ordinances, official directives and all
authorizations relating to the environment, occupational health
and safety, or any Environmental Activity (which term means and
includes, without limitation, any past, present or future
activity, event or circumstance in respect of a Contaminant
(which term means and includes, without limitation, any
pollutants, dangerous substances, liquid wastes, hazardous
wastes, hazardous materials, hazardous substances or contaminants
or any other matter including any of the foregoing, as defined or
described as such pursuant to any Environmental Law), including,
without limitation, the storage, use, holding, collection,
purchase, accumulation, assessment, generation, manufacture,
construction, processing, treatment, stabilization, disposition,
handling or transportation thereof, or the release, escape,
leaching, dispersal or migration thereof into the natural
environment, including the movement through or in the air, soil,
surface water or groundwater));
(ii) do not have any knowledge of, and have not received any notice
of, any material claim, judicial or administrative proceeding,
pending or threatened against, or which may affect, either the
Corporation or any Subsidiary or any of the property, assets or
operations thereof, relating to, or alleging any violation of any
Environmental Laws, the Corporation is not aware of any facts
which could give
-15-
rise to any such claim or judicial or administrative proceeding
and neither the Corporation nor any Subsidiary nor any of the
property, assets or operations thereof is the subject of any
investigation, evaluation, audit or review by any Governmental
Authority (which term means and includes, without limitation, any
national, federal government, province, state, municipality or
other political subdivision of any of the foregoing, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any
corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing) to
determine whether any violation of any Environmental Laws has
occurred or is occurring or whether any remedial action is needed
in connection with a release of any Contaminant into the
environment, except for compliance investigations conducted in
the normal course by any Governmental Authority;
(iii) have not given or filed any notice under any federal, state,
provincial or local law with respect to any Environmental
Activity, the Corporation and the Subsidiaries do not have any
liability (whether contingent or otherwise) in connection with
any Environmental Activity and the Corporation is not aware of
any notice being given under any federal, state, provincial or
local law or of any liability (whether contingent or otherwise)
with respect to any Environmental Activity relating to or
affecting the Corporation or any Subsidiary or the property,
assets, business or operations thereof;
(iv) do not store any hazardous or toxic waste or substance on the
property thereof and have not disposed of any hazardous or toxic
waste, in each case in a manner contrary to any Environmental
Laws, and there are no Contaminants on any of the premises at
which the Corporation or any Subsidiary carries on business, in
each case other than in compliance with Environmental Laws; and
(v) are not subject to any contingent or other liability relating to
the restoration or rehabilitation of land, water or any other
part of the environment or non-compliance with Environmental Law.
(ff) No Litigation: There are no actions, suits, proceedings, inquiries or
--------------
investigations existing, pending or, to the knowledge of the
Corporation after due inquiry, threatened against or adversely
affecting the Corporation or any Subsidiary or to which any of the
property or assets thereof is subject, at law or equity, or before or
by any court, federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which may in any way materially
adversely affect the condition (financial or otherwise), property,
assets, operations or business of the Corporation or any Subsidiary or
the ability of any of them to perform the obligations thereof and none
of the Corporation or any Subsidiary is subject to any judgment,
order, writ, injunction, decree, award, rule, policy or regulation of
any Governmental Authority, which, either separately or in the
aggregate, may result in a material adverse effect on the condition
(financial or otherwise), property, assets, operations or business of
the Corporation or any Subsidiary or the ability of the Corporation to
perform its obligations pursuant hereto.
(gg) Flow-Through Shares: Upon issue, the Purchased Securities will be
--------------------
"flow-through shares" as defined in subsection 66(15) of the Tax Act
and are not and will not be prescribed shares within the meaning of
section 6202.1 of the regulations to the Tax Act
-16-
and the applicable provisions of the Taxation Act (Qu bec). To the
best of its knowledge, the Corporation does not have a Prescribed
Relationship with the Subscriber and, if the Subscriber is a
partnership, any partner or limited partner of the partnership.
(hh) Principal-Business Corporation: The Corporation is a
-------------------------------
"principal-business corporation" as defined in subsection 66(15) of
the Tax Act.
(ii) Commitment Amount: The Corporation has no reason to believe that it
------------------
will be unable to incur, on or after the Closing Date and on or before
the Termination Date or that it will be unable to renounce to the
Subscriber effective on or before December 31, 2002, Resource Expenses
in an aggregate amount equal to the Commitment Amount and the
Corporation has no reason to expect any reduction of such amount by
virtue of subsection 66(12.73) of the Tax Act.
(jj) Agency Agreement: The representations and warranties made by the
-----------------
Corporation to the Agents in the Agency Agreement are true and correct
in all material respects as of the Closing Date (save and except as
waived by the Agents) and the Subscriber is entitled to rely thereon.
7. COVENANTS
---------
The Corporation hereby covenants and agrees with the Subscriber as follows:
(a) Reporting Issuer: The Corporation shall maintain its status as a
-----------------
"reporting issuer" not in default of any requirement of applicable
securities legislation in the Reporting Provinces for a period of at
least 12 months from the Closing Date.
(b) Corporate Status: For a period of a least 24 months from the Closing
-----------------
Date, the Corporation shall use its commercially reasonable best
efforts to remain a corporation validly subsisting under the laws of
its jurisdiction of incorporation, licensed, registered or qualified
as an extra-provincial or foreign corporation in all jurisdictions
where the character of its properties owned or leased or the nature of
the activities conducted by it make such licensing, registration or
qualification necessary and shall carry on its business in the
ordinary course and in compliance in all material respects with all
applicable laws, rules and regulations of each such jurisdiction.
(c) Listing on Stock Exchanges: The Corporation shall use its commercially
--------------------------
reasonable best efforts to maintain the listing on the Stock Exchange
of the class of shares of which the Purchased Securities form a part
for a period of at least 24 months from the Closing Date. The
Corporation shall obtain from the Stock Exchange not later than the
Closing Date, approval to issue the Purchased Securities. Except for
Common Shares issued upon the exchange, exercise or conversion of
securities outstanding on the date hereof, the Corporation shall not
issue, or agree to issue, any Common Shares or any securities
exchangeable for, or convertible into, Common Shares at an effective
price per Common Share which is less than the Purchase Price until the
end of 2002.
(d) Securities Filings: Forthwith after the Closing the Corporation shall
-------------------
file such forms and documents as may be required under the securities
laws of the Province of Ontario relating to the offering of the
Purchased Securities which, without limiting the generality of the
foregoing, shall include a Form 45-501F1 as prescribed by the
Securities Act
-17-
(Ontario) and a Form 45-102F2 as prescribed by Multilateral Instrument
45-102 of the Canadian Securities Administrators.
(e) Outstanding Common Shares: The Corporation shall not do or omit to do
--------------------------
any thing or take any action if the result of such act or omission
could reasonably be expected to be that the ownership of Common Shares
by the Subscriber would exceed 10% of the number of then outstanding
Common Shares, assuming the issue of the Purchased Securities.
(f) Information: The Corporation shall provide, forthwith upon the request
-----------
of the Subscriber, such publicly-available information as the
Subscriber requires concerning the mineral exploration program
pursuant to which the Corporation has incurred or will incur Resource
Expenses and the business affairs of the Corporation.
(g) Further Information: The Corporation shall provide such information as
-------------------
the Subscriber may reasonably request to enable the Subscriber to
comply with the terms and conditions of any exemptive order or ruling
obtained by the Subscriber from any applicable regulatory authority.
(h) Accounting Records: The Corporation shall keep proper and complete
-------------------
books, records and accounts in accordance with generally accepted
accounting principles showing true and accurate records of all
Resource Expenses and charges and make such books, records and
accounts available for inspection and audit by or on behalf of the
Subscriber.
(i) Filing Selling Instruments: The Corporation shall file with Revenue
----------------------------
Canada and, if applicable, with the appropriate authorities in the
Province of Qu bec within the time prescribed by subsection 66(12.68)
of the Tax Act and the applicable provisions of the Taxation Act (Qu
bec) the forms prescribed for the purposes of such legislation
together with a copy of this Subscription Agreement and any "selling
instrument" contemplated by such legislation or by this Subscription
Agreement and shall forthwith following such filings provide to the
Subscriber a copy of such forms certified by two officers of the
Corporation.
(j) Principal Business Corporation: The Corporation shall maintain its
--------------------------------
status as a "principal business corporation" as defined in subsection
66(15) of the Tax Act until such time as all of the Resource Expenses
required to be renounced under this Subscription Agreement are validly
renounced pursuant to the Tax Act.
(k) Performance of Acts: The Corporation shall perform and carry out all
---------------------
of the acts and things to be completed by it as provided in this
Subscription Agreement.
(l) Incurring and Renouncing of CEE: The Corporation hereby agrees to
-----------------------------------
incur Resource Expenses in an amount equal to the Commitment Amount on
or before the Termination Date in accordance with this Subscription
Agreement and agrees to renounce to the Subscriber, with an effective
date no later than December 31, 2002, pursuant to subsection 66(12.6)
of the Tax Act, and, in respect of Resource Expenses incurred by the
Corporation in 2003, pursuant to subsection 66(12.66) of the Tax Act,
Resource Expenses in an amount equal to the Commitment Amount. For
greater certainty, the Corporation may renounce to the Subscriber,
with an effective date no later than December 31, 2002, either (i)
Resource Expenses deemed to be incurred by it in 2002 pursuant to a
renunciation to the Corporation by a corporation related to it, for
-18-
purposes of the Tax Act, of Resource Expenses incurred by that
corporation in 2002 if the renunciation by that corporation to the
Corporation is pursuant to subsection 66(12.6) of the Tax Act and has
an effective date in 2002, or (ii) Resource Expenses deemed to be
incurred by it in 2003 pursuant to a renunciation to the Corporation
by a corporation related to it, for the purposes of the Tax Act, of
Resource Expenses incurred by that corporation in 2003 if the
renunciation by that corporation to the Corporation is pursuant to
subsection 66(12.6) of the Tax Act and has an effective date in 2003.
(m) Investment Tax Credit: Notwithstanding any other provision hereof, the
---------------------
Corporation hereby agrees that the Commitment Amount will be incurred
on CEE that qualifies as a Flow-Through Mining Expenditure.
(n) Renunciation: The Corporation shall deliver to the Subscriber, on or
------------
before March 1, 2003, the relevant Prescribed Forms, fully completed
and executed, renouncing to the Subscriber Resource Expenses in an
amount equal to the Commitment Amount with an effective date of no
later than December 31, 2002, such delivery constituting the
authorization of the Corporation to the Subscriber to file such
Prescribed Forms with the relevant taxation authorities.
(o) Priority: The Corporation shall incur and renounce Resource Expenses
--------
pursuant to this Subscription Agreement and all other agreements with
other Persons providing for the issue of Purchased Securities entered
into by the Corporation on the Closing Date (collectively the "Other
Agreements") pro rata by number of Purchased Securities issued or to
be issued pursuant thereto before incurring and renouncing Resource
Expenses pursuant to any other agreement which the Corporation has
entered into or shall enter into with any Person with respect to the
issue of Flow-Through Shares. The Corporation shall not, without the
prior written consent of the Agents (which consent may be withheld in
the sole discretion of the Agents) (i) enter into any other agreement
which would prevent or restrict its ability to renounce Resource
Expenses to the Subscriber in the amount of the Commitment Amount, or
(ii) enter into any agreement in 2002 with any Person which provides
for the issue of Flow-Through Shares or securities exchangeable or
exercisable for, or convertible into, Flow-Through Shares at an
effective price per Flow-Through Share which is less than the Purchase
Price. If the Corporation is required under the Tax Act to reduce
Resource Expenses previously renounced to the Subscriber, the
reduction shall be made pro rata by number of Purchased Securities
issued or to be issued pursuant to this Subscription Agreement to the
reduction made under the Other Agreements but the Corporation shall
not reduce Resource Expenses renounced to the Subscriber under this
Subscription Agreement until it has first reduced to the extent
possible all CEE renounced to Persons other than the Subscriber and
the subscribers under the Other Agreements.
(p) Resource Expenses: The Resource Expenses to be renounced by the
------------------
Corporation to the Subscriber:
(i) will constitute CEE on the effective date of the renunciation and
will qualify as a Flow-Through Mining Expenditure;
(ii) will not include expenses that are "Canadian exploration and
development overhead expenses" (as defined in the Regulations to
the Tax Act for purposes of paragraph 66(12.6)(b) of the Tax Act)
of the Corporation or amounts which constitute specified expenses
for seismic data described in paragraph
-19-
66(12.6)(b.1) of the Tax Act or any expenses for prepaid services
or rent that do not qualify as outlays and expenses for the
period as described in the definition of "expense" in paragraph
66(15) of the Tax Act;
(iii) will not include any amount that has previously been renounced
by the Corporation to the Subscriber or to any other Person;
(iv) would be deductible by the Corporation in computing its income
for the purposes of Part I of the Tax Act but for the
renunciation to the Subscriber; and
(v) will not be subject to any reduction under subsection 66(12.73)
of the Tax Act.
(q) Reduction in Resource Expense: The Corporation shall not reduce the
--------------------------------
amount renounced to the Subscriber pursuant to subsection 66(12.6) of
the Tax Act.
(r) Valid Renunciation: The Corporation shall not be subject to the
-------------------
provisions of subsection 66(12.67) of the Tax Act in a manner which
impairs its ability to renounce Resource Expense to the Subscriber in
an amount equal to the Commitment Amount.
(s) Applications for Prescribed Grants: If the Corporation receives, or
-------------------------------------
becomes entitled to receive, any government assistance which is
described in paragraph (a) of the definition of "excluded obligation"
in subsection 6202.1(5) of the regulations made under the Tax Act and
the receipt or entitlement to receive such government assistance has
or will have the effect of reducing the amount of CEE validly
renounced to the Subscriber hereunder to less than the Commitment
Amount, the Corporation shall remit to the Subscriber the benefit of
all amounts received or receivable in respect of such government
assistance to the extent of such reduction.
(t) Use of Commitment Amount: The Corporation shall use the Commitment
---------------------------
Amount for the development of the Corporation's projects in Canada and
shall deliver to the Subscriber, on or before March 1, 2003, a list of
the provinces, territories or other jurisdictions in Canada where the
Corporation has incurred, or intends to incur, Resource Expenses
together with the amount incurred in each such province, territory or
jurisdiction.
8. INDEMNIFICATION
---------------
(a) Indemnification: The Corporation hereby indemnifies and holds harmless
---------------
the Subscriber, each of the partners thereof if the Subscriber is a
partnership or limited partnership, the general partner thereof if the
Subscriber is a partnership or a limited partnership, any affiliates
of any of the foregoing and the directors, officers, employees,
shareholders and agents of any of the foregoing from time to time (for
purposes of this paragraph each an "Indemnified Person") from and
against all losses, claims, damages, liabilities, actions or demands
including, without limiting the generality of the foregoing, amounts
paid in any settlement approved by the Corporation of any action,
suit, proceeding or claim but excluding lost profits and consequential
damages, to which each Indemnified Person may become subject insofar
as such losses, claims, damages, liabilities, actions or demands arise
out of or are based upon, directly or indirectly, any breach of a
representation, warranty, covenant or obligation of the Corporation
contained in this Subscription Agreement or any certificate or other
document delivered by the Corporation in connection herewith, and will
reimburse such Indemnified Person for any legal or other
-20-
expenses reasonably incurred by such Indemnified Person in connection
with investigating or defending any such loss, claim, damage,
liability, action or demand. For greater certainty, the foregoing
shall not apply to any loss sustained by an Indemnified Person by
reason of the holding, ownership or disposition of the Purchased
Securities or to any failure of an Indemnified Person to derive
earnings or make a profit from any of the Purchased Securities.
(b) Failure to Renounce: If the Corporation does not incur and renounce to
-------------------
the Subscriber, effective on or before December 31, 2002, Resource
Expenses equal to the Commitment Amount, the Corporation shall
indemnify and hold harmless the Subscriber and each of the partners
thereof if the Subscriber is a partnership or a limited partnership
(for the purposes of this paragraph each an "Indemnified Person") as
to, and pay in settlement thereof to the Indemnified Person on or
before the twentieth Business Day following the Termination Date, an
amount equal to the amount of any tax (within the meaning of
subparagraph 6202.1(5)(b) of the regulation to the Tax Act) payable
under the Tax Act (and under any corresponding provincial legislation)
by any Indemnified Person as a consequence of such failure. In the
event that Revenue Canada (or any similar provincial tax authority)
reduces the amount renounced by the Corporation to the Subscriber
pursuant to subsection 66(12.73) of the Tax Act (or any corresponding
provincial legislation), the Corporation shall indemnify and hold
harmless each Indemnified Person as to, and pay in settlement thereof
to the Indemnified Person, an amount equal to the amount of any tax
(within the meaning of subparagraph 6202.1(5)(b) of the regulation to
the Tax Act) payable under the Tax Act (and under any corresponding
provincial legislation) by the Indemnified Person as a consequence of
such reduction.
(c) Indemnities Held in Trust: To the extent that any Person entitled to
---------------------------
be indemnified hereunder is not a party to this Subscription
Agreement, the Subscriber shall obtain and hold the rights and
benefits of this Subscription Agreement in trust for, and on behalf
of, such Person and such Person shall be entitled to enforce the
provisions of this section notwithstanding that such Person is not a
party to this Subscription Agreement.
9. FEE TO AGENTS AND CONFLICT OF INTEREST
--------------------------------------
(a) Fee: The Subscriber hereby acknowledges that the Agents are offering
---
the Purchased Securities on a private placement basis and, in
connection therewith, the Corporation and the Agents have entered into
the Agency Agreement pursuant to which the Agents will receive 93,750
Common Shares from the Corporation. No other fee or commission is
payable by the Corporation in connection with the sale of the
Purchased Securities.
(b) Conflict of Interest: As Dundee Securities Corporation, one of the
----------------------
Agents, the directors, officers, employees and affiliates thereof, and
the associates of each of them (collectively the "Professional
Group"), own or control, as of November 20, 2002, in aggregate, Common
Shares representing approximately 7.8% of the presently outstanding
Common Shares, the Corporation is a "connected issuer" of Dundee
Securities Corporation for purposes of applicable securities
legislation. The decision to proceed with the offering of the
Purchased Securities was made by the Corporation which approached
Dundee Securities Corporation and requested that Dundee Securities
Corporation and BMO Xxxxxxx Xxxxx Inc. act as agents in connection
with the offering of the Purchased Securities. The Agents agreed to
act as agents for the Corporation in connection with the offering of
the Purchased Securities and participated in the determination of the
terms of the offering of the Purchased Securities. CMP 2002 Resource
Limited Partnership, the
-21-
general partner of which is an affiliate of Dundee Securities
Corporation, will purchase all of the Purchased Securities. Following
the completion of the offering of the Purchased Securities, the
Professional Group will own or control, in aggregate, Common Shares
representing approximately 11.84% of the then outstanding Common
Shares and, assuming the exercise of all rights to acquire Common
Shares owned or controlled by such affiliates, the Professional Group
would then own or control, in aggregate, Common Shares representing
approximately 13.38% of the then outstanding Common Shares. One
director and officer of certain affiliates of Dundee Securities
Corporation is a director of the Corporation and two other directors
of the Corporation are nominees of a Person, the investment portfolio
of which is managed by an affiliate of Dundee Securities Corporation.
The proceeds of the Purchased Securities will not be applied for the
benefit of Dundee Securities Corporation or any affiliate thereof
except to the extent that they receive a pro rata benefit as a holder
of securities of the Corporation.
(c) Acknowledgement: The Subscriber acknowledges that the Agents have been
---------------
appointed by the Corporation to act as agent of the Corporation to
offer the Purchased Securities on a private placement basis and
acknowledges that the Agents assume no responsibility or liability of
any nature whatsoever for the accuracy or adequacy of the information
regarding the Corporation which is publicly available, that the Agents
have not engaged in or conducted an independent investigation with
respect to the Corporation and that the Agents and the representatives
and agents thereof are not liable for any information given or
statement made to the Subscriber by the Corporation in connection with
the Corporation or the transaction contemplated by this Subscription
Agreement and the Subscriber hereby releases the Agents and the
representatives and agents thereof from any claim that may arise in
respect of this Subscription Agreement or the transaction contemplated
hereby.
10. GENERAL
-------
(a) Headings: The division of this Subscription Agreement into articles
--------
and sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation
of this Subscription Agreement. The terms "this Subscription
Agreement," "hereof," "hereunder", "herein" and similar expressions
refer to this Subscription Agreement and not to any particular
article, section or other portion hereof and include any agreement
supplemental thereto and any exhibits attached hereto. Unless
something in the subject matter or context is inconsistent therewith,
reference herein to articles, sections and paragraphs are to articles,
sections, subsections and paragraphs of this Subscription Agreement.
(b) Number and Gender: Words importing the singular number only shall
-------------------
include the plural and vice versa, words importing the masculine
gender shall include the feminine gender and neuter and vice versa.
(c) Severability: If one or more of the provisions contained in this
------------
Subscription Agreement shall be invalid, illegal or unenforceable in
any respect under any applicable law, the validity, legality or
enforceability of the remaining provisions hereof shall not be
affected or impaired thereby. Each of the provisions of this
Subscription Agreement is hereby declared to be separate and distinct.
(d) Notices: All notices or other communications to be given hereunder
-------
shall be delivered by hand or by telecopier, and if delivered by hand,
shall be deemed to have been given on
-22-
the date of delivery or, if sent by telecopier, on the date of
transmission if sent before 5:00 p.m. and such day is a Business Day
or, if not, on the first Business Day following the date of
transmission.
Notices to the Corporation shall be addressed to:
Apollo Gold Corporation
x/x Xxxxxx, Xxxxxxxx XXX
Xxxxx Xxxxx Xxxxx
Xxxxx 0000
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxx
Facsimile: 416-941-8852
Notices to the Subscriber shall be addressed to the address of the
Subscriber set out on the execution page hereof.
Either the Corporation or the Subscriber may change its address for
service aforesaid by notice in writing to the other party hereto
specifying its new address for service hereunder.
(e) Further Assurances: Each party hereto shall from time to time at the
-------------------
request of the other party hereto do such further acts and execute and
deliver such further instruments, deeds and documents as shall be
reasonably required in order to fully perform and carry out the
provisions of this Subscription Agreement. The parties hereto agree to
acts honestly and in good faith in the performance of their respective
obligations hereunder.
(f) Successors and Assigns: Except as otherwise provided, this
------------------------
Subscription Agreement shall enure to the benefit of and shall be
binding upon the parties hereto and their respective successors and
permitted assigns.
(g) Entire Agreement: The terms of this Subscription Agreement express and
----------------
constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and no implied term or liability
of any kind is created or shall arise by reason of anything in this
Subscription Agreement.
(h) Time of Essence: Time is of the essence of this Subscription
-----------------
Agreement.
(i) Amendments: The provisions of this Subscription Agreement may only be
----------
amended with the written consent of all of the parties hereto.
(j) Survival: Notwithstanding any other provision of this Subscription
--------
Agreement, the representations, warranties, covenants and indemnities
of or by the Corporation contained herein or in any certificate,
document or instrument delivered pursuant hereto shall survive the
completion of the transactions contemplated by this Subscription
Agreement.
(k) Language: The parties hereto acknowledge and confirm that they have
--------
requested that this Subscription Agreement as well as all notices and
other documents contemplated hereby
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be drawn up in the English language. Les parties aux presentes
reconnaissent et confirment qu'elles ont convenu que la presente
convention ainsi que tous xxx xxxx et documents qui s'y rattachent
soient rediges dans la langue anglaise.
(l) Governing Law: This agreement shall be governed by and construed in
--------------
accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein and the parties hereto irrevocably attorn to
the jurisdiction of the courts of the Province of Ontario.
(m) Counterparts: This Subscription Agreement may be executed in two or
------------
more counterparts which when taken together shall constitute one and
the same agreement. Delivery of counterparts may be effected by
facsimile transmission thereof.
(n) Facsimile Copies: The Corporation and the Agents shall be entitled to
-----------------
rely on a facsimile copy of an executed subscription and renunciation
agreement and acceptance by the Corporation of such facsimile
subscription shall be legally effective to create a valid and binding
agreement between the Subscriber and the Corporation in accordance
with the terms thereof.
If the foregoing is in accordance with your understanding, please sign and
return this Subscription Agreement together with the other required documents
signifying your agreement to purchase the Purchased Securities. You hereby
authorize the Agent through which you subscribed for the Purchased Securities to
deliver a copy of this Subscription Agreement on your behalf to the Corporation.
TO: APOLLO GOLD CORPORATION
AND TO: DUNDEE SECURITIES CORPORATION
AND TO: BMO XXXXXXX XXXXX INC.
The undersigned hereby accepts the foregoing and agrees to be bound by the terms
set forth herein and, without limitation, agrees that you may rely upon the
covenants, representations and warranties of the undersigned contained herein.
DATED as of this 21 day of November, 2002.
---------
Number of Purchased Securities to be purchased
at $3.00 each:
--------------------------------
Aggregate Purchase Price: $
--------------------------------
Name (full legal name of purchaser) and
Address of Purchaser:
--------------------------------
--------------------------------
--------------------------------
(address, including postal code)
--------------------------------
(telephone number)
--------------------------------
(facsimile number)
By:
--------------------------------
(Signature)
--------------------------------
(please print name)
--------------------------------
(official capacity)
--------------------------------
(social insurance number or
federal corporate/business
account number)
--------------------------------
(federal tax shelter
identification number)
--------------------------------
(Quebec tax shelter
identification number, if
applicable)
-2-
If you are signing as agent for a principal, and you are not a trust company or
portfolio manager signing as a trustee or as agent for a fully-managed account,
please complete the following:
---------------------------------
(name of beneficial purchaser)
---------------------------------
(address of beneficial purchaser)
---------------------------------
---------------------------------
The above-mentioned subscription is hereby accepted by Apollo Gold Corporation.
DATED as of this 21st day of November, 2002.
----------
APOLLO GOLD CORPORATION
By: /s/
------------------------------
Authorized Signing Officer
SCHEDULE A
TERM SHEET
APOLLO GOLD CORPORATION
PRIVATE PLACEMENT OF FLOW-THROUGH COMMON SHARES
Issuer: Apollo Gold Corporation (the "Corporation").
Private placement of flow-through common shares of the Corporation, on a
Issue: best-efforts agency basis.
Issue Price: 3.00 per flow-through common share.
Offering Size: $ 4,500,000.
Use of Proceeds: The gross proceeds of the flow-through common shares of the Corporation
shall be used for the development of the projects of the Corporation in Canada
and other projects approved by the Agents. The gross proceeds of the flow-
through common shares of the Corporation shall be used for qualifying
Canadian Exploration Expenses which qualify as a flow-through mining
expenditure for purposes of the Income Tax Act (Canada).
Listing: The common shares of the Corporation are listed on The Toronto Stock
Exchange under the symbol APG.
Closing Date: On or about November 22, 2002, or such other date as is agreed to between the
Corporation and the Agents (the "Closing Date").
Conditions: Execution and delivery of standard documentation including an agency
agreement and subscription agreements containing normal representations and
warranties, covenants, indemnities and other provisions, delivery of standard
closing documents and legal opinions for a transaction of the nature of the
offering and compliance with all applicable legal and regulatory requirements.
Agents: Dundee Securities Corporation (50%)
BMO Xxxxxxx Xxxxx Inc. (50%)
Agent s' Compensation: The Corporation shall issue to the Agents as compensation for the Offering
93,750 common shares of the Corporation.
Expenses The Corporation will pay all reasonable expenses and fees incurred in
connection with the offering including the reasonable fees and expenses
incurred by the Agents' counsel and all reasonable out-of-pocket costs and
expenses incurred by the Agents, plus applicable taxes. Such amounts shall be
payable by the Corporation whether or not the offering or any part thereof is
completed.
Minimum Subscription: A minimum of $30,000 for "accredited investors" in British Columbia, Alberta
or Ontario.
-2-
Reporting Issuer and The Corporation is a reporting issuer under the securities legislation of the
Resale: Provinces of British Columbia, Alberta, Manitoba and Ontario. The
Corporation is a "qualifying issuer" under Multilateral Instrument 45-102 of
the Canadian Securities Administrators and, accordingly, the flow-through
common shares of the Corporation will not be subject to any restricted period
or statutory hold period which extends beyond four months and one day after
the Closing Date.
