Draft: September 25, 1996
FORM OF AGENCY AGREEMENT
RELATING TO THE OFFERING OF
SHARES OF COMMON STOCK
BASIC U.S. REIT, INC.
-, 1996
TABLE OF CONTENTS
1. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Nature of Transaction. . . . . . . . . . . . . . . . . . . . . . . 6
3. Covenants of the Agents. . . . . . . . . . . . . . . . . . . . . . 7
4. Representations, Warranties and Covenants of the Company . . . . . 7
5. Conditions to Purchase Obligation. . . . . . . . . . . . . . . . . 17
6. Additional Documents Upon Filing of Prospectus . . . . . . . . . . 19
7. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination of Purchase Obligation . . . . . . . . . . . . . . . . 21
9. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. Survival of Warranties, Representations, Covenants and Agreements. 25
13. Obligations of Basic Capital Funds . . . . . . . . . . . . . . . . 26
14. General Contract Provisions. . . . . . . . . . . . . . . . . . . . 26
SCHEDULE "A" Details of the Offering
SCHEDULE "B" Outstanding Convertible Securities
SCHEDULE "C" Opinion of the Company's Canadian Counsel
SCHEDULE "D" Opinion of the Company's U.S. Counsel
FORM OF AGENCY AGREEMENT
-, 1996
Basic U.S. REIT, Inc.
[ADDRESS]
ATTENTION: [NAME AND TITLE]
Basic Capital Funds
[ADDRESS]
ATTENTION: [NAME AND TITLE]
Dear Sirs:
Porthmeor Securities Inc., Octagon Capital Canada Corporation and
First Marathon Securities Limited (collectively, the "AGENTS") understand that
Basic U.S. REIT, Inc. (the "COMPANY") desires to issue and sell securities of
the Company having the terms described in Schedule "A" hereto (the "OFFERED
SECURITIES"). The offering of the Offered Securities by the Company is
hereinafter referred to as the "OFFERING". The Agents also understand that
Basic Advisors, Inc. (the "ADVISOR"), a Delaware corporation, will provide day-
to-day management for the Company, including acting as investment and financial
advisor to the Company with respect to real property investments. The Agents
further understand that Basic Capital Funds, an Ontario limited partnership, and
Xxxxxxx Xxxx/Xxxxxxx Inc., a Florida corporation, (collectively, the
"PROMOTERS"), have taken the initiative in organizing the Company and its
affairs for the purposes of the Offering.
It is understood that pursuant to a Purchase and Sale Agreement
between Basic Acquisitions, Inc., a Delaware corporation being an affiliate of
the Company, (the "AFFILIATE") and Chico Crossroads Center, Ltd. and a Purchase
and Sale Agreement between the Affiliate and Xxxxxx Development Limited
Partnership, dated ________, 1996, and ________, 1996, respectively, the Company
proposes to acquire two commercial real estate properties (the "Properties")
contemporaneously with the Offering.
The Agents hereby agree to act as the agents of the Company to use
their commercially reasonable best efforts to offer for sale and sell the
Offered Securities to Purchasers (as hereafter defined), upon and subject to the
terms and conditions contained herein,
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and by its acceptance the Company agrees to the appointment of the Agents, as
the Company's exclusive agents until the Closing Date in respect of the
Offering; provided that the Agents shall be under no obligation to purchase any
of the Offered Securities.
In consideration of the Agents' services to be rendered in connection
with the Offering, including, without limitation, assisting in preparing
documentation relating to the Offered Securities, including the Preliminary
Prospectus and the Final Prospectus (in each case as hereinafter defined),
distributing the Offered Securities directly and through other investment
dealers and brokers, and performing administrative work in connection with the
Offering, the Company agrees to pay the Agency Fee (as hereinafter defined) to
the Agents.
The Company and the Agents acknowledge and agree that if a separate
fee were to have been charged to the Company for the services described above,
which constitute financial services within the meaning of the EXCISE TAX ACT
(Canada), such separate fee would represent more than 50% of the Agency Fee, and
the Company further acknowledges and agrees that the Agents will rely on the
foregoing in not charging GST on the Agency Fee. In the event that Revenue
Canada, Customs, Excise and Taxation determines that GST is exigible on the
Agency Fee, the Company agrees to pay the amount of GST forthwith upon request
of the Agents.
The Company agrees that the Agents will be permitted to appoint, at
the Agents' sole expense, other registered dealers (or other dealers duly
qualified in their respective jurisdictions) as their agents to assist in the
Offering and that the Agents shall pay a fee of six percent (6%) to such other
dealers appointed by it.
This agreement is conditional upon and subject to the additional terms
and conditions set forth below.
1. INTERPRETATION
1.1 Unless expressly provided otherwise, where used in this agreement or
any schedule hereto, the following terms shall have the following meanings,
respectively:
"ADVISOR" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
"ADVISORY AGREEMENT" means the agreement dated - between the Advisor and
the Company whereby the Advisor provides services to the Company as
described in the first paragraph of this agreement;
"AFFILIATE" shall have the meaning ascribed thereto in the second paragraph
of this agreement;
"AGENCY FEE" means the fee payable to the Agents, as specified in Schedule
"A" hereto;
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"AGENTS" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
"APPLICABLE SECURITIES LAWS" means Canadian Securities Laws and U.S.
Securities Laws;
"CANADIAN FINAL PROSPECTUS" means the final prospectus of the Company
qualifying the Offered Securities under Canadian Securities Laws;
"CANADIAN PRELIMINARY PROSPECTUS" means the preliminary prospectus,
prepared in connection with the qualification of the Offered Securities
under Canadian Securities Laws;
"CANADIAN SECURITIES LAWS" means, collectively, the applicable securities
laws of each of the Qualifying Provinces, their respective regulations,
rulings, orders and forms prescribed or made thereunder, the applicable
policy statements issued by the Securities Commissions thereunder and the
securities legislation and policies of each other relevant jurisdiction;
"CLOSING DATE" means the date on which the Offering is to be completed, as
specified in Schedule "A" hereto;
"COMMISSION" means the United States Securities and Exchange Commission;
"COMPANY" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
"COMPANY'S INFORMATION RECORD" means all press releases, material change
reports, financial statements and other documents of the Company which have
been or are publicly disseminated by or as authorized by the Company,
whether or not pursuant to the Applicable Securities Laws;
"EXCHANGE" means a recognized stock exchange in the United States which is
also a "prescribed stock exchange" within the meaning of the INCOME TAX ACT
(Canada);
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder;
"FINAL PROSPECTUS" means the Canadian Final Prospectus and the U.S.
Prospectus;
"HAZARDOUS MATERIAL" has the meaning ascribed thereto in subsection 4.1(at)
hereof;
"INCLUDING" means including without limitation;
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"MATERIAL CHANGE" means a material change for the purposes of the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws means a change in the business, operations or
capital of the Company, that would reasonably be expected to have a
significant effect on the market price or value of any of the Company's
securities and includes a decision to implement such a change made by the
Company's board of directors or by senior management of the Company who
believe that confirmation of the decision by the board of directors is
probable;
"MATERIAL FACT" means a material fact for the purposes of the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws means a fact that significantly affects, or would
reasonably be expected to have a significant effect on, the market price or
value of the Company's securities;
"MISREPRESENTATION" means a misrepresentation for the purposes of the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws means (i) an untrue statement of a material
fact, or (ii) an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in the light
of the circumstances in which it was made;
"NP1" means National Policy Statement No. 1 of the Canadian Securities
Administrators;
"OFFERED SECURITIES" shall have the meaning ascribed thereto in the first
paragraph of this agreement;
"OFFERING" shall have the meaning ascribed thereto in the first paragraph
of this agreement;
"OUTSTANDING CONVERTIBLE SECURITIES" means all options, including without
limitation options granted or agreed to be granted to officers, directors
or employees, and other convertible securities outstanding as at the date
of this agreement, whether issued pursuant to an established plan or
otherwise;
"PERSON" includes any individual, corporation, limited partnership, general
partnership, joint stock company or association, joint venture association,
company, trust, bank, trust company, land trust, investment trust, society
or other entity, organization, syndicate, whether incorporated or not,
trustee, executor or other legal personal representative, and governments
and agencies and political subdivisions thereof;
"PRELIMINARY PROSPECTUS" means the Canadian Preliminary Prospectus and the
U.S. Preliminary Prospectus;
"PROMOTERS" shall have the meaning ascribed thereto in the first paragraph
of this agreement;
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"PROPERTIES" shall have the meaning ascribed thereto in the second
paragraph of this agreement;
"PURCHASERS" means, collectively, each of the purchasers of Offered
Securities arranged by the Agents pursuant to the Offering, including, if
applicable, the Agents;
"QUALIFYING PROVINCES" means each of the provinces of Canada listed in
Schedule "A" hereto;
"REGISTRATION STATEMENT" means the registration statement on Form S-11
(No. 333--) with respect to the Offered Securities (which, at the time it
becomes effective, shall include the U.S. Prospectus) filed with the
Commission for the purpose of registering the Offered Securities for sale
in the United States;
"SECURITIES COMMISSIONS" means, collectively, the securities commissions or
similar regulatory authorities in each of the Qualifying Provinces and the
Commission;
"SELLING GROUP" means, collectively, those registered dealers appointed by
the Agents to assist in the Offering as contemplated in the fifth paragraph
of this agreement;
"SUPPLEMENTARY MATERIAL" means, collectively, any amendment to the
Registration Statement, the Final Prospectus, any amended or supplemental
registration statement, prospectus or ancillary material required to be
filed with any of the Securities Commissions in connection with the
distribution of the Offered Securities;
"SURVIVAL LIMITATION DATE" means the later of: (i) eighteen months from the
Closing Date, and (ii) the latest date under the Applicable Securities Laws
relevant to a Purchaser (non-residents of Canada being deemed to be
resident in the Province of Ontario for such purposes) that a Purchaser may
be entitled to commence an action or exercise a right of rescission with
respect to a misrepresentation contained in the Final Prospectus or, if
applicable, any Supplementary Material; and
"TIME OF CLOSING" means the time on the Closing Date at which the Offering
is to be completed, as specified in Schedule "A" hereto.
"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the rules and regulations thereunder;
"U.S. PRELIMINARY PROSPECTUS" means the prospectus included in the
Registration Statement prior to the effectiveness thereof;
"U.S. PROSPECTUS" means the prospectus included in the Registration
Statement at the time it becomes effective; and
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"U.S. SECURITIES LAWS" means, collectively, the applicable United States
federal and state securities laws, the respective regulations, rulings,
orders and forms prescribed thereunder, the applicable policy statements
issued and the rules promulgated by the Commission and state Securities
Commissions thereunder.
1.2 The division of this agreement into sections, subsections, paragraphs
and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
agreement. Unless something in the subject matter or context is inconsistent
therewith, references herein to sections, subsections, paragraphs and other
subdivisions are to sections, subsections, paragraphs and other subdivisions of
this agreement.
1.3 This agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein and time shall be of the essence hereof.
1.4 Except as otherwise indicated, all amounts expressed herein or to be
determined hereby in terms of money refer to lawful currency of the United
States of America and all payments to be made hereunder shall be made in such
currency.
1.5 The following are the schedules attached to this agreement, which
schedules are deemed to be a part hereof and are hereby incorporated by
reference herein:
Schedule A - Details of the Offering
Schedule B - Details as to Outstanding Convertible
Securities
Schedule C - Opinion of the Company's Canadian Counsel
Schedule D - Opinion of the Company's U.S. Counsel
2. NATURE OF TRANSACTION
2.1 Each Canadian Purchaser shall purchase pursuant to the Final
Prospectus. Each other Purchaser shall purchase in accordance with such
procedures as the Company and the Agents may mutually agree, acting reasonably,
in order to fully comply with the Applicable Securities Laws. The Company
hereby agrees to secure compliance with all securities regulatory requirements
of the Qualifying Provinces on a timely basis in connection with the
distribution of the Offered Securities to Canadian Purchasers. The Agents agree
to assist the Company in all reasonable respects to secure compliance with all
regulatory requirements in connection with the Offering.
3. COVENANTS OF THE AGENTS
3.1 The Agents covenant with the Company that they will (and will use
their reasonable efforts to cause the members of the Selling Group to ensure
that they will): (i) conduct activities in connection with arranging for the
sale and distribution of the Offered Securities in compliance with the
Applicable Securities Laws; (ii) not solicit offers to purchase
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or sell the Offered Securities so as to require registration thereof or filing
of a prospectus with respect thereto under the laws of any jurisdiction (other
than the Qualifying Provinces or the United States) including the United
Kingdom, and not solicit offers to purchase or sell the Offered Securities in
any jurisdiction outside of Canada or the United States where the solicitation
or sale of the Offered Securities would result in any ongoing disclosure
requirements in such jurisdiction, any registration requirements in such
jurisdiction except for the filing of a notice or report of the solicitation or
sale (including, without limitation, forms required to be filed with the United
States Securities and Exchange Commission in connection with private placement
sales), or where the Company may be subject to liability in connection with the
sale of the Offered Securities which is materially more onerous than its
liability under Applicable Securities Laws to which it is subject as at the date
of this agreement;(iii) refrain from making use of any "green sheet" or other
internal marketing document in respect of the Offered Securities without the
approval of the Company and comply with the notice dated July 7, 1989 issued by
the Ontario Securities Commission with respect to the use of "green sheets" and
other marketing material during the waiting period under the SECURITIES ACT
(Ontario); (iv) use all reasonable efforts to complete and to cause the members
of the Selling Group to complete the distribution of the Offered Securities as
soon as practicable and cooperate with the Company in its efforts to market the
Offered Securities; (v) notify the Company when, in its opinion, the Selling
Group has ceased distribution of the Offered Securities and, if required for
regulatory compliance purposes, provide a breakdown of the number of Offered
Securities distributed (A) in each of the Qualifying Provinces and (B) in any
other jurisdictions; (vi) not make any representations or warranties in respect
of the Company or the Offered Securities other than as set forth in the Final
Prospectus and, if applicable, Supplementary Material; and (vii) forthwith upon
the Company obtaining the necessary receipts therefor from each of the
Securities Commissions, deliver one copy of the Final Prospectus and any
Supplementary Material to the prospective Purchasers.
3.2 The Agents agree with the Company that the Agents will sponsor the
Company in its efforts to have its securities accepted for listing and posted
for trading on the Exchange.
3.3 Each of the Agents severally represents to the Company that each is
registered (to sell the Offered Securities) under the Canadian Securities Laws.
Each of the Agents severallly covenants with the Company that such registration
will be in good standing on the Closing Date.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
4.1 The Company hereby represents, warrants and covenants to and with the
Agents and the Purchasers that:
(a) it will use all reasonable efforts to file the Final Prospectus and to
obtain a final receipt document from the each of the Securities
Commissions by not later than -, 1996, and shall have taken all other
steps and proceedings that may be necessary in order to qualify the
Offered Securities for distribution pursuant to the Final Prospectus
in each of the Qualifying Provinces by such date;
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(b) the Company has no subsidiaries, whether through direct or indirect
holding of securities,
(c) the Company (i) has been duly incorporated and is and will at the Time
of Closing be validly existing and in good standing under the laws of
Maryland; (ii) has all requisite corporate power and authority to
carry on its business as now conducted and to own, lease and operate
its properties and assets; and (iii) has all required corporate power
and authority to create, issue and sell the Offered Securities, to
enter into this agreement and to carry out the provisions of this
agreement;
(d) all necessary corporate action has been taken or will have been taken
prior to the Time of Closing by the Company so as to validly issue and
sell the Offered Securities to the Purchasers and upon receipt by the
Company of the purchase price as consideration for the issue of the
Offered Securities, such Offered Securities will be validly issued and
outstanding as fully paid and non-assessable shares of common stock;
(e) the Company is in all material respects conducting its business in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on and is duly licensed,
registered or qualified in all jurisdictions in which it owns, leases
or operates its property or carries on business to enable its business
to be carried on as now conducted and its property and assets to be
owned, leased and operated and all such licences, registrations and
qualifications are and will at the Time of Closing be valid,
subsisting and in good standing, except in respect of matters which do
not and will not result in any material adverse change to the business
or affairs (financial or otherwise) of the Company and except for the
failure to be so qualified or the absence of any such license,
registration or qualification which does not and will not have a
material adverse effect on the assets or properties, business, results
of operations or affairs (financial or otherwise) of the Company;
(f) the Company has not received any notice of proceedings relating to the
revocation or modification of any certificate, authority, permit or
licence which, if the subject of an unfavourable decision, ruling or
finding, would materially or adversely affect the conduct of the
business, operations, financial condition or income (current or
prospective) of the Company;
(g) as of the date hereof, the outstanding capital of the Company is as
set forth in the Registration Statement;
(h) attached as Schedule "B" is a complete list of all Outstanding
Convertible Securities of the Company and, except as set forth in this
agreement or in the Canadian Final Prospectus, no person now has any
agreement or option or right
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or privilege capable of becoming an agreement for the purchase,
subscription or issuance of any issued or unissued shares, securities
or warrants of the Company;
(i) except as set forth in the Canadian Final Prospectus, since its date
of incorporation:
(i) there has not been any material change in the assets,
liabilities or obligations (absolute, accrued, contingent or
otherwise) of the Company that has not been publicly
disclosed;
(ii) there has not been any material change in the capital stock
or long-term debt of the Company that has not been publicly
disclosed;
(iii) there has not been any material change in the business or
affairs (financial or otherwise) or results of the
operations of the Company that has not been publicly
disclosed;
(iv) except as has been publicly disclosed, the Company has
carried on its business in the ordinary course;
(j) the assumptions contained in the notes to the pro forma balance sheet
as of June 30, 1996 and the pro forma statements of income for the
year ended December 31, 1995 and for the six months ended June 30,
1996 of the Company contained in the Final Prospectus under the
heading "PRO FORMA AND SELECTED COMBINED FINANCIAL INFORMATION" are
suitably supported and consistent with the plans of the Company, and
such pro forma balance sheet and statements of income accurately
reflect such assumptions;
(k) the pro forma balance sheet as of June 30, 1996 and the pro forma
statements of income for the year ended December 31, 1995 and for the
six months ended June 30, 1996 of the Company present fairly the
financial condition of the Company based on assumptions for the
periods then ended;
(l) there is no action, proceeding or investigation (whether or not
purportedly by or on behalf of the Company) pending or, to the
knowledge of the Company or any of its directors and officers,
threatened against or affecting the Company, at law or in equity
(whether in any court, arbitration or similar tribunal) or before or
by any federal, provincial, state, municipal or other governmental
department, commission, board or agency, domestic or foreign, which in
any way materially adversely affects or could materially adversely
affect the Company, or the condition (financial or otherwise) of the
Company or which questions the validity of the Offered Securities or
of the issuance of the Offered Securities (and the issuance as fully
paid and non-assessable shares) or any action taken or to be taken by
the Company pursuant to or in connection with this agreement;
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(m) the Company is not in default or in breach in any material respect of,
and the execution and delivery of this agreement by them, the
performance and compliance with the terms of this agreement and the
sale of the Offered Securities by the Company will not result in any
material breach of, or be in conflict with or constitute a material
default under, or create a state of facts which, after notice or lapse
of time, or both, would constitute a default under any term or
provision of the articles, by-laws or resolutions of the Company or
any mortgage, note, indenture, contract, agreement, instrument, lease
or other document to which the Company is a party or by which any of
them is bound or any judgment, decree, order, statute, rule or
regulation applicable to any of them;
(n) the Company will at the Time of Closing be a "reporting issuer" (or
its equivalent), not in default, in each of the Qualifying Provinces
and the Company will use its reasonable best efforts to maintain such
status for a period of at least two years from the Closing Date;
(o) the auditors of the Company who reviewed, as to compilation only, the
pro forma balance sheet and the pro forma statements of income of the
Company and who audited the schedules of net operating income before
amortization of Chico Crossroads Center Ltd. and Miami Gardening
Association, all as contained in the Final Prospectus, are independent
public accountants as required by the Applicable Securities Laws;
(p) the Company has filed all federal, provincial, state, local and
foreign tax returns that are required to be filed or have requested
extensions thereof and have paid all taxes required to be paid by them
and any other assessment, fine or penalty levied against them, to the
extent that any of the foregoing is due and payable, except for any
such assessment, fine or penalty that is being contested in good faith
and in respect of which particulars have been given to the Agents;
(q) there are no outstanding reassessments which have been issued by any
governmental authority relating to any such tax returns of the
Company;
(r) neither the Company nor, to the Company's knowledge, any other party,
is in default in the observance or performance of any term or
obligation to be performed by it under any contract which is material
to it and no event has occurred which with notice or lapse of time or
both would constitute such a default, in any such case which default
or event would have a material adverse effect on the assets or
properties, business, results of operations or affairs (financial or
otherwise) of such entity;
(s) the net proceeds of the Offering will be used in the manner specified
in the Final Prospectus under the heading "USE OF PROCEEDS" and for no
other purpose;
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(t) the Company will use its reasonable best efforts to obtain the
necessary regulatory consents from the Exchange for the sale of the
Offered Securities hereunder, on such conditions as are acceptable to
the Agents and the Company, acting reasonably;
(u) the Company will use its reasonable best efforts to arrange for the
listing and posting for trading on the Exchange of the shares
comprised in the Offered Securities as soon as possible following the
issue thereof;
(v) prior to the filing of the Final Prospectus and any Supplementary
Material, the Company and the Advisor will allow the Agents to
participate fully in the preparation of the Final Prospectus and any
such Supplementary Material and shall allow the Agents to conduct all
due diligence which it may reasonably require to conduct in order to
fulfil its obligations and in order to enable the Agents responsibly
to execute the certificate required to be executed by it at the end of
each of the Final Prospectus and any Supplementary Material;
(w) the Company will deliver from time to time without charge to the
Agents as many copies of the Final Prospectus, the Registration
Statement and any Supplementary Material as it may reasonably request
for the purposes contemplated hereunder and contemplated by the
Applicable Securities Laws and such delivery shall constitute the
consent of the Company to the Agents' use of such documents in
connection with the distribution to the public of the Offered
Securities, subject to the provisions of Applicable Securities Laws
and the provisions of this agreement;
(x) all the information and statements to be contained in the Final
Prospectus and any Supplementary Material shall, at the date of
delivery thereof, constitute full, true and plain disclosure of all
material facts relating to each of the Offering, the Company, on a
consolidated basis, the Advisor, the Promoters and the Offered
Securities (provided that this representation is not intended to
extend to information and statements included in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Agents specifically for use therein);
(y) at the time of the effectiveness of the Registration Statement or the
effectiveness of any post-effective amendment to the Registration
Statement, and at the Closing Date, the Registration Statement and the
U.S. Prospectus and any amendments thereof and supplements thereto
comply or will comply in all material respects with the applicable
provisions of the U.S. Securities Laws and do not or will not contain
an untrue statement of a material fact and does not or will not omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein (A) in the case of the
Registration Statement, not misleading and (B) in the case of the U.S.
Prospectus, in light of the circumstances under which they were made,
not misleading;
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(z) neither the Final Prospectus nor any Supplementary Material will
contain a misrepresentation (provided that this representation is not
intended to extend to information and statements included in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Agents specifically for use therein);
(aa) the Final Prospectus and any Supplementary Material shall contain the
disclosure required by and conform, in all material respects, to all
requirements of Applicable Securities Laws;
(ab) this agreement and all other contracts required in connection with the
issue and distribution of the Offered Securities shall be, at or prior
to the Time of Closing, duly authorized, executed and delivered by the
Company and shall be valid and binding obligations of it enforceable
in accordance with their respective terms subject to:
(i) bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally;
(ii) the qualification that equitable remedies, including without
limitation, specific performance and injunction, may be
granted only in the discretion of a court of competent
jurisdiction; and
(iii) rights of indemnity, contribution and waiver of contribution
being limited under applicable law;
(ac) the attributes of the Offered Securities will conform in all material
respects with the description thereof described or to be described in
the Final Prospectus;
(ad) the forms of the certificates representing the Offered Securities have
been, or will at or prior to the Time of Closing be, duly approved by
the Company and comply with the provisions of the laws of its
jurisdiction of incorporation and the regulations of the Exchange;
(ae) during and prior to primary distribution, the Company and the Advisor
will take or use their reasonable efforts to cause to be taken all
steps and proceedings (including the filing of, and obtaining the
issuance of receipts for, the Final Prospectus) that may be requisite
under the Applicable Securities Laws to qualify the Offered Securities
for sale to the public in the Qualifying Provinces through registrants
registered under the Applicable Securities Laws of the Qualifying
Provinces who have complied with the relevant provisions thereof;
(af) at all times until the primary distribution of the Offered Securities
has been completed, but in any event not later than thirty days
following the Closing Date, the Company will, to the reasonable
satisfaction of counsel to the Agents,
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promptly take or cause to be taken all additional steps and
proceedings that may be requisite from time to time under the
Applicable Securities Laws of the Qualifying Provinces to continue to
so qualify the Offered Securities in the Qualifying Provinces or, in
the event that the Offered Securities have, for any reason, ceased to
so qualify in the Qualifying Provinces, to again so qualify the
Offered Securities;
(ag) other than as disclosed in the Canadian Final Prospectus and other
than the Agents pursuant to this agreement, there is no person acting
or purporting to act at the request of the Company or the Advisor, who
is entitled to any brokerage, agency or other fiscal advisory or
similar fee in connection with the Offering or the other transactions
contemplated herein;
(ah) the Company will promptly notify the Agents in writing if, prior to
termination of the distribution of the Offered Securities, there shall
occur any material change or change in a material fact (in either
case, whether actual, anticipated, contemplated or threatened and
other than a change or change in fact relating solely to the Agents)
or any event or development involving a prospective material change or
a change in a material fact or any other material change in any or all
of the business, affairs, operations, assets (including information or
data relating to the estimated value or book value of assets),
liabilities (contingent or otherwise), capital, ownership, control or
management of the Company, on a consolidated basis, or any other
change which is of such a nature as to result in, or could result in a
misrepresentation in the Preliminary Prospectus, Final Prospectus,
Registration Statement or any Supplementary Material or could render
any of the foregoing not in compliance with any of the Applicable
Securities Laws;
(ai) the Company will promptly notify the Agents in writing with full
particulars of any such actual, anticipated, contemplated, threatened
or prospective change referred to in the preceding paragraph and
shall, to the reasonable satisfaction of the Agents, file promptly
and, in any event, within all applicable time limitation periods with
the Securities Commissions a new or amended Preliminary Prospectus,
Final Prospectus, Registration Statement or Supplementary Material, as
the case may be, or material change report as may be required under
the Applicable Securities Laws and shall comply with all other
applicable filing and other requirements under the Applicable
Securities Laws including any requirements necessary to qualify the
issuance and distribution of the Offered Securities and shall deliver
to the Agents as soon as practicable thereafter its reasonable
requirements of conformed or commercial copies of any such new or
amended Preliminary Prospectus, Final Prospectus, Registration
Statement or Supplementary Material. The Company will not file any
such new or amended disclosure documentation or material change report
without first obtaining the written approval of the form and content
thereof by the Agents, which approval shall not be unreasonably
withheld or delayed;
-14-
(aj) the Company will in good faith discuss with the Agents as promptly as
possible any circumstance or event which is of such a nature that
there is or ought to be consideration given as to whether there may be
a material change or change in a material fact or other change
described in the preceding two paragraphs;
(ak) the Final Prospectus will accurately and completely set forth all
material arrangements, financial or otherwise, between the Company and
the Advisor and between the Company and the Promoters;
(al) except as will be disclosed in the Final Prospectus, there are and
will be no contracts, agreements, or arrangements to which the Company
is a party with any of the shareholders or any director, officer,
former director, officer or shareholder of the Advisor or any of its
associated or affiliated companies or with any other person with which
it does not deal at arm's length (as that term is used for the
purposes of the INCOME TAX ACT (Canada));
(am) the Company will and will cause certain of the directors and officers
to use its best efforts to assist in the marketing and presentation of
the Company to prospective purchasers of Offered Securities, and to
cause its officers and employees to devote the necessary time and
effort in this regard;
(an) all of the real properties of the Company and the buildings
constructed thereon will be at the Time of Closing insured against
such loss from damage by hazards or risks normally insured against,
with reasonable deductibles; such buildings were constructed in
accordance with building permits properly issued therefor, if
required, and in compliance in all material respects with all
applicable building and zoning by-laws; and there are no material
defects in such buildings; there are no outstanding work orders or
deficiency notices relating to such buildings from or required by any
police or fire department, sanitation, health authorities or from any
other federal, state, provincial or municipal authority and there is
no matter under discussion with any such departments or authorities
relating to work orders; such buildings and all chattels required for
the effective operation of such buildings are in good operating
condition and are in a state of good repair and maintenance reasonable
wear and tear excepted;
(ao) all of the real properties of the Company and the buildings
constructed and operations thereon comply in all material respects
with applicable federal, state, provincial and municipal
environmental, health and safety statutes, regulations and permits;
none of such properties, buildings or operations is subject to any
judicial or administrative proceeding alleging any material violation
of any federal, state, provincial or municipal environmental, health
or safety statute or regulation or is subject to any investigation, by
or on behalf of the Company, evaluating whether any remedial action
is needed to respond to a release of any Hazardous Material (as
hereinafter defined) into the environment; neither the Company nor any
tenant in any property in which the Company has a direct or
-15-
indirect interest, has filed any notice under any federal, state,
provincial or municipal law indicating past or present treatment,
storage or disposal of a Hazardous Material or reporting a spill or
release of an Hazardous Material into the environment involving any of
the real properties of the Company other than those which have been
remediated; none of the real properties of the Company has at any time
been used as a waste storage site or waste disposal site or has been
used to operate a waste management business during the time the
Company has owned such properties, and no such use was made of any of
the properties prior to the purchase of such properties by the
Company; the Company does not have a contingent liability of which it
has knowledge or reasonably should have knowledge in connection with
any release of any Hazardous Material on or into the environment from
any of the real properties of the Company or the buildings or
operations thereon; neither the Company nor any tenant in any property
in which the Company has a direct or indirect interest, generates,
transports, treats, stores or disposes of any waste, subject waste,
hazardous waste, deleterious substance, industrial waste (as defined
in applicable federal, state, provincial or municipal legislation) on
any of the real properties of the Company in contravention of
applicable federal, state, provincial or municipal laws or regulations
enacted for the protection of the natural environment or human health;
no underground storage tanks or surface impoundments containing a
petroleum product or Hazardous Material are located on any of the real
properties of the Company in contravention of applicable federal,
state, provincial or municipal laws or regulations enacted for the
protection of the natural environment or human health; and for the
purposes of this subsection 4.1(a-), "HAZARDOUS MATERIAL" means any
contaminant, pollutant, waste, subject waste, hazardous waste,
deleterious substance, industrial waste, toxic matter or any other
substance that when released into the natural environment is likely to
cause, at some immediate or future time, material harm or degradation
to the natural environment or material risk to human health and,
without restricting the generality of the foregoing, includes any
contaminant, pollutant, waste, subject waste, deleterious substance,
industrial waste, toxic matter, hazardous waste or dangerous goods as
defined by applicable federal, state, provincial or municipal laws or
regulations enacted for the protection of the natural environment or
human health;
(ap) - has been duly appointed the registrar and transfer agent for the
Offered Securities at its principal transfer office;
(aq) the minute books of the Company, provided to counsel to the Agents
contain copies of the articles and by-laws of the Company and all
resolutions of the directors and shareholders of the Company;
(ar) during the period commencing on the date hereof and ending on the 90th
day following the Closing Date, without the prior written consent of
the Agents which shall not be unreasonably withheld, the Company will
not issue or announce the
-16-
issuance of any shares of common stock or any other securities which
are convertible into or exchangeable for shares of common stock;
provided, however, that this covenant shall not apply to the Offered
Securities to be distributed by or through the Agents as contemplated
herein and shall not apply to the issuance of shares of common stock
pursuant to stock options granted under the stock option plan referred
to under "MANAGEMENT - Stock Option Plan" in the Final Prospectus;
(as) the Company has prepared and filed with the Commission, in conformity
with the requirements of U.S. Securities Laws, a registration
statement on Form S-11 (No. 333--), including the U.S. Preliminary
Prospectus. The Company has also prepared and proposes to file with
the Commission, in conformity with the requirements of the U.S.
Securities Laws, an amendment to the registration statement, including
the U.S. Prospectus;
(at) there is no document or contract of a character required to be
described in the Registration Statement or to be filed with any
Securities Commission as an exhibit to the Registration Statement or
the Final Prospectus which is not described or filed as required;
(au) the Company is not, and upon consummation of the transactions
contemplated in this agreement will not be, an "investment company" as
such term is defined in the United States Investment Company Act of
1940, as amended;
(av) the Company shall use all reasonable efforts to cause the Registration
Statement to become effective;
(aw) the Company will make generally available (within the meaning of Rule
158 under the U.S. Securities Act) to its shareholders as soon as
reasonably practicable, but not later than 60 days after the end of
its fiscal quarter (140 days if such quarter coincides with the
Company's fiscal year end) in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings
statement covering a period of at least twelve consecutive months
after the effective date of the Registration Statement which shall
satisfy the provisions of Section 11(a) of the 1933 Act;
(ax) if at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time;
(ay) the Company shall furnish to the Agents, without charge, five signed
copies of the Registration Statement as first filed with the
Commission and of each amendment to it, including all exhibits, and
shall furnish to the Agents and each agent designated by the Agents
such number of conformed copies of the Registra
-17-
tion Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request; [NOTE TO DRAFT: BOTH U.S.
COUNSELS TO REVIEW]
(az) the Company will not file any amendment or supplement to the
Registration Statement, whether before or after the time upon which it
becomes effective, or make any amendment or supplement to the
Prospectus of which the Agents shall not previously have been advised
or to which the Agents shall reasonably object; and agrees to prepare
and file with the Commission promptly upon your reasonable request,
any amendment to the Registration Statement or supplement to the
Prospectus which may be required in connection with the distribution
of the Offered Securities by you, and to use its best efforts to cause
the same to become properly effective.
(ba) as of the Closing Date, the Company will have obtained an Owner's
Policy of Title Insurance (or an irrevocable commitment to issue such
a policy) on each of the Properties, in an amount not less that the
cost of acquisition of such Properties, and such title insurance is or
will be in full force and effect subject to customary exceptions;
(bb) as of the Closing Date, and after giving effect to the transaction
described in the Registration Statement, the Company will be organized
and intends to operate in a manner so as to qualify as a real estate
investment trust ("REIT") under Sections 856 through [860] of the
Code, and the Company will elect to be taxed as a REIT under the Code
effective for the fiscal year ended December 31, 1997;
(bc) the Company will file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 of the U.S. Securities Act; and
(bd) except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
5. CONDITIONS TO PURCHASE OBLIGATION
5.1 The following are conditions of the Agents' and Purchasers'
obligations to close the purchase of the Offered Securities from the Company as
contemplated hereby (in respect of which the Agents shall act in good faith in
determining whether such conditions have been fulfilled), which conditions the
Company covenants to exercise its best efforts to have fulfilled at or prior to
the Time of Closing, which conditions may be waived in writing in whole or in
part by the Agents:
(a) the Company will have made and/or obtained the necessary filings,
approvals, consents and acceptances to or from, as the case may be,
the Securities Commissions and the Exchange required to be made or
obtained by the Company in connection with the Offering, on terms
which are acceptable to the Company
-18-
and the Agents, acting reasonably, prior to the Closing Date, it being
understood that the Agents will do all that is reasonably required to
assist the Company to fulfil this condition;
(b) the shares comprised in the Offered Securities will have been accepted
for listing by the Exchange, subject to the usual conditions, and
will, as soon as possible following their issue, be posted for trading
on the Exchange;
(c) the Company's and the Advisor's boards of directors will have
authorized and approved this agreement and such other agreements
pursuant to which the Offered Securities are to be issued, the sale
and issuance of the Offered Securities and all matters relating to the
foregoing;
(d) the Company will deliver a certificate under its corporate seal and
signed on behalf of each of them by the respective chief executive
officer and the chief financial officer or such other senior officers
as may be acceptable to the Agents, acting reasonably, addressed to
the Agents and dated the Closing Date, in form and content
satisfactory to the Agents' counsel, acting reasonably, certifying
that:
(i) no order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been
issued, no order ceasing or suspending trading in any
securities of the Company or prohibiting the sale of the
Offered Securities or any of the Company's issued securities
has been issued and no proceedings for such purpose are
pending or, to the knowledge of such officers, threatened;
(ii) to the knowledge of such officers, there has been no adverse
material change (actual, proposed or prospective, whether
financial or otherwise) in the business, affairs,
operations, assets, liabilities (contingent or otherwise) or
capital of the Company since the date hereof which has not
been generally disclosed;
(iii) since the date hereof, no material change relating to the
Company, except for the Offering, has occurred;
(iv) the pro forma balance sheet as of June 30, 1996 and the pro
forma statements of income for the year ended December 31,
1995 and for the six months ended June 30, 1996 of the
Company present fairly the financial condition of the
Company, on a consolidated basis, for the periods then
ended;
(v) the representations and warranties of the Company contained
in this agreement are true and correct at the Time of
Closing, with the same force and effect as if made by the
Company as at the Time of Closing after giving effect to the
transactions contemplated hereby; and
-19-
(vi) 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 or satisfied at or prior to the
Time of Closing;
(e) the Company will have caused a favourable legal opinion to be
delivered by its Canadian and U.S. counsel, addressed to the Agents
and the Agents' counsel with respect to such matters as the Agents may
reasonably request relating to this transaction, acceptable in all
reasonable respects to the Agents' counsel, including substantially
those matters identified in Schedule "C" (Canadian counsel) and
Schedule "D" (U.S. counsel) hereto. In giving such opinions, counsel
to the Company shall be entitled to rely, to the extent appropriate in
the circumstances, upon local counsel and shall be entitled as to
matters of fact not within their knowledge to rely upon a certificate
of fact from responsible persons in a position to have knowledge of
such facts and their accuracy and such opinions shall be subject to
the customary assumptions, qualifications and exceptions; and
(f) the Company will deliver a certificate of its registrar and transfer
agent as to the issued and outstanding shares of common stock of the
Company.
6. ADDITIONAL DOCUMENTS UPON FILING OF PROSPECTUS
6.1 The Company shall cause to be delivered to the Agents concurrently
with the filing of the Final Prospectus and any Supplementary Material executed
by the Agents a comfort letter dated the date thereof from the auditors of the
Company and addressed to the Agents and to the directors of the Company, in form
and substance satisfactory to the Agents, relating to the verification of the
financial information and accounting data and other numerical data of a
financial nature contained therein and matters involving changes or developments
since the respective dates as of which specified financial information is given
therein, to a date not more than two business days prior to the date of such
letter.
7. CLOSING
7.1 The Offering will be completed at the offices of the Company's counsel
at the Time of Closing or such other place, date or time as may be mutually
agreed to; provided that if the Company has not been able to comply with any of
the covenants or conditions set out herein required to be complied with by the
Time of Closing or such other date and time as may be mutually agreed to and
such covenant or condition has not been waived, the respective obligations of
the parties will terminate without further liability or obligation except for
payment of expenses, indemnity and contribution provided for in this agreement.
7.2 At the Time of Closing, the following shall be delivered to the
Agents:
(a) certificates duly registered as the Agents may direct representing the
Offered Securities;
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(b) the requisite legal opinions and certificates as contemplated in
Section 5.1; and
(c) such further documentation as may be contemplated herein or as counsel
to the Agents or the applicable regulatory authorities may reasonably
require,
against payment of the purchase price for the Offered Securities (net of the
Agency fee) by certified cheque or bank draft or wire transfer on an immediately
available basis (as selected by the Company) payable to the Company. Subject to
Section 11, the Company will, at the Time of Closing and upon such payment of
the purchase price, reimburse the Agents for their estimated expenses as
contemplated herein incurred up to the Closing Date upon the delivery by them to
the Company of one or more invoices therefor, subject to any adjustment when
such actual expenses are finally determined in accordance with Section 11.
The Company understands that, in order for the Agents to obtain
payment from certain of the Purchasers, certificates for certain of the Offered
Securities must be available on the Closing Date in the cities of Vancouver,
Calgary and Toronto. Accordingly, the Company will make all necessary
arrangements to ensure that any such certificates are available to the Agents in
such cities as at the Time of Closing.
7.3 All terms and conditions of this agreement shall be construed as
conditions and any material breach or failure to comply with any such terms and
conditions shall entitle the Agents to terminate their obligations to purchase
the Offered Securities by written notice to that effect given to the Company
prior to the Time of Closing. It is understood that the Agents may waive in
whole or in part, or extend the time for compliance with, any of such terms and
conditions without prejudice to their rights in respect of any such terms and
conditions or any other subsequent breach or non-compliance, provided that to be
binding on the Agents, any such waiver or extension must be in writing.
8. TERMINATION OF PURCHASE OBLIGATION
8.1 Without limiting any of the foregoing provisions of this agreement,
and in addition to any other remedies which may be available to it, the Agents,
on their own behalf and on behalf of the Purchasers, will be entitled, at their
option, to terminate and cancel, without any liability on their part or on the
part of the Purchasers, their obligations and the obligations of the Purchasers
under this agreement or otherwise, to purchase the Offered Securities, by giving
written notice to the Company at any time through to the Time of Closing if:
(a) the Agents are not satisfied, in their sole discretion, with the
result of all or any portion of their due diligence review and
investigations of the Company;
(b) there is, in the sole opinion of the Agents, a material change or
change in material fact or new material fact or an undisclosed
material fact or material change which might be expected to have an
adverse effect on the business, affairs, profitability, or prospects
of the Company on a consolidated basis or on
-21-
the market price or value of the Offered Securities or other
securities of the Company;
(c) the state of the financial markets is such that in the sole opinion of
the Agents it would be unprofitable to offer or continue to offer the
Offered Securities;
(d) there should develop, occur, or come into effect an event of any
nature, including accident, governmental law or regulation, which in
the sole opinion of the Agents adversely affects or may adversely
affect the financial markets or the business, affairs or profitability
or prospects of the Company on a consolidated basis or the market
price of the Offered Securities or any other securities of the
Company;
(e) there is any inquiry, action, suit, proceeding or investigation
(whether formal or informal, and whether instituted, announced or
threatened) in relation to the Company, the Advisor, either of the
Promoters or any of their respective directors, officers or principal
shareholders;
(f) any order to cease trading in the securities of the Company is made by
a Securities Commission; or
(g) any of the Company, the Advisor and the Promoters is in material
breach of any term, condition or covenant of this agreement or any
representation or warranty given by the Company, the Advisor or either
of the Promoters in this agreement is or becomes false,
it being understood and agreed upon that the existence or non-existence of any
such occurrence, situation, event or circumstance is to be determined solely by
the Agents, whose determination shall be final and binding for all parties in
interest.
The Agents shall make reasonable efforts to give notice to the Company
(in writing or by other means) of the occurrence of any of the events referred
to in this section, provided that neither the giving nor the failure to give
such notice shall in any way affect the Agents' entitlement to exercise this
right at any time through to the Time of Closing.
The Agents' rights of termination contained in this section are in
addition to any other rights or remedies it may have in respect of any default,
act or failure to act or non-compliance by the Company in respect of any of the
matters contemplated by this agreement.
8.2 If the obligations of the Agents and the Purchasers are terminated
under this agreement pursuant to the termination rights provided for in
Section 8.1, the Company's liabilities to the Agents shall be limited to the
Company's obligations under the indemnity, contribution and expense provisions
of this agreement.
-22-
9. INDEMNITY
9.1 The Company (the "INDEMNIFYING PARTY") covenants and agrees to
indemnify the Agents and their shareholders, directors, officers, employees and
agents (each being hereinafter referred to as an "INDEMNIFIED PARTY"), against
all losses (other than a loss of profits or other costs of its personnel),
claims, damages, liabilities, costs or expenses caused or incurred by reason of:
(a) any statement, other than a statement relating solely to the Agents,
contained in the Preliminary Prospectus, the Final Prospectus, the
Registration Statement or in any Supplementary Material (collectively,
the "OFFERING DOCUMENTS") which constitutes or is alleged to
constitute a misrepresentation;
(b) any statement, other than a statement relating solely to the Agents,
contained in the Company's Information Record which at the time and in
the light of the circumstances under which it was made, contained or
is alleged to have contained a misrepresentation;
(c) the omission or alleged omission to state in any of the Offering
Documents, in the Company's Information Record or in any certificate
delivered hereunder or pursuant hereto any material fact (other than a
material fact omitted in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Agents)
required to be stated therein or necessary to make any statement
therein (i) in the case of the Registration Statement, not misleading,
and (ii) in the case of the Preliminary Prospectus or the Final
Prospectus not misleading in light of the circumstances under which it
was made;
(d) any order made or inquiry, investigation or proceeding commenced or
threatened by any Securities Commission or other competent authority
based upon any misrepresentation or alleged misrepresentation in any
of the Offering Documents or in the Company's Information Record
(other than a statement included in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
the Agents) which prevents or restricts the trading in the Offered
Securities or the distribution to the public of the Offered
Securities;
(e) the Company not complying with any requirement of any Applicable
Securities Laws in the Qualifying Provinces or regulatory requirements
in Canada or not complying with the requirements under U.S. Securities
Laws; or
(f) any material breach of any representation or warranty of the Company
contained herein or the failure of any of them to comply with any of
its obligations hereunder;
-23-
and will reimburse each Indemnified Party promptly upon demand for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such losses, claims, damages, liabilities or actions in respect thereof, as
incurred.
9.2 The Indemnifying Party waives its right to recover contribution from
the Agents or any other Indemnified Party with respect to any of their
liabilities solely by reason of or arising out of any misrepresentation, other
than a misrepresentation included in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Agents
specifically for use therein, contained in any of the Offering Documents or in
the Company's Information Record.
9.3 If any action or claim shall be asserted against an Indemnified Party
in respect of which indemnity may be sought from the Indemnifying Party pursuant
to the provisions of Section 9.1 or if any potential claim contemplated hereby
shall come to the knowledge of an Indemnified Party, the Indemnified Party shall
promptly notify the Company in writing; but the omission to notify the Company
will not relieve the Indemnifying Party from any liability it may otherwise have
to the Indemnified Party pursuant to Section 9.1. The Indemnifying Party shall
be entitled but not obligated to participate in or assume the defence thereof;
provided, however, that the defence shall be through legal counsel acceptable to
the Indemnified Party, acting reasonably. In addition, the Indemnified Party
shall also have the right to employ separate counsel in any such action and
participate in the defence thereof, and the fees and expenses of such counsel
shall be borne by the Indemnified Party unless:
(a) the employment thereof has been specifically authorized in writing by
the Company;
(b) the Indemnified Party has been advised by counsel that representation
of the Indemnifying Party and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing
interests between them; or
(c) the Indemnifying Party has failed within a reasonable time after
receipt of such written notice to assume the defence of such action or
claim;
provided that the Indemnifying Party shall not be required to assume the fees
and expenses of more than one counsel for the Indemnified Party. No party shall
effect any settlement of any such action or claim or make any admission of
liability without the written consent of the other parties, such consent to be
promptly considered and not to be unreasonably withheld or delayed. The
indemnity hereby provided for shall remain in full force and effect and shall
not be limited to or affected by any other indemnity in respect of any matters
specified herein obtained by the Indemnified Party from any other person.
9.4 The rights of indemnity contained in Section 9.1 shall not accrue to
the benefit of any Indemnified Party if (i) the Agents were provided with a copy
of any amendment or supplement to the Final Prospectus or Registration Statement
which corrects any misrepresentation which is the basis of a claim by a party
against such Indemnified Party and
-24-
which is required under the Applicable Securities Laws in the Qualifying
Provinces to be delivered to such party and (ii) the person asserting the claim
was not provided with a copy of such amendment or supplement by the Agents.
9.5 To the extent that any Indemnified Party is not a party to this
agreement, the Agents shall obtain and hold the right and benefit of the
indemnity provisions of Section 9.1 in trust for and on behalf of such
Indemnified Party.
10. CONTRIBUTION
10.1 In the event that the indemnity provided for above is, for any reason,
illegal or unenforceable as being contrary to public policy or for any other
reason, the Agents and the Indemnifying Parties shall contribute to the
aggregate of all losses, claims, costs, damages, expenses or liabilities
(including any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any action or claim which is
the subject of this section but excluding loss of profits or consequential
damages) of the nature provided for above such that the Agents will be
responsible for that portion represented by the percentage that the portion of
the Agency Fee bears to the gross proceeds realized from the sale of the Offered
Securities, and the Indemnifying Parties will be responsible for the balance,
provided that, in no event, will an Agent be responsible for any amount in
excess of the amount of the Agency Fee actually received by it. In the event
that the Indemnifying Parties may be held to be entitled to contribution from
the Agents under the provisions of any statute or law, the Indemnifying Parties
shall be limited to contribution in an amount not exceeding the lesser of: (i)
the portion of the full amount of losses, claims, costs, damages, expenses and
liabilities, giving rise to such contribution for which the Agents are
responsible, as determined above, and (ii) the amount of the Agency Fee actually
received. Notwithstanding the foregoing, a party guilty of gross negligence,
dishonesty, fraud or fraudulent misrepresentation shall not be entitled to
contribution from the other party. Any party entitled to contribution will,
promptly after receiving notice of commencement of any claim, action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this section, notify such party from whom
contribution may be sought. In no case shall such party from whom contribution
may be sought be liable under this agreement unless such notice has been
provided, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
otherwise than under this section. The right to contribution provided in this
section shall be in addition and not in derogation of any other right to
contribution which the Agents may have by statute or otherwise by law.
11. EXPENSES
11.1 All expenses incurred from time to time in connection with the
Offering including, without limitation, the fees and disbursements of the
Agents' Canadian and U.S. counsel (subject to the limits in the following
paragraph) and the Agents' out-of-pocket expenses (including those incurred in
connection with due diligence) (subject to the limits in the following
paragraph), of or incidental to the sale, issue, distribution and qualification
for distribution of the Offered
-25-
Securities and to all matters in connection with the transactions herein set
forth shall be borne by the Company. The Company covenants and agrees to fully
reimburse the Agents from time to time for all such expenses immediately upon
the receipt of one or more invoices (subject to the limits in the following
paragraph).
Notwithstanding anything to the contrary contained herein, the Company
shall only be responsible for the Agents' out-of-pocket expenses (including
those incurred in connection with their due diligence) and fees of the Agents'
Canadian and U.S. counsel to a maximum of $175,000 Cdn., exclusive of GST
exigible thereon.
11.2 If the Company determines not to proceed with the Offering for any
reason whatsoever, the Company agrees that forthwith after such determination is
made, it shall pay to the Agents, by way of certified cheque or bank draft, the
sum of $50,000 Cdn. plus all of their out of pocket expenses incurred in
accordance with subsection 11.1, which amounts the parties hereby agree
constitute reimbursement of the costs of the Agents' due diligence review and
related expenses incurred by the Agents.
11.3 The Agents acknowledge receipt from Basic Capital Funds, on behalf of
the Company, of a non-refundable advance of $30,000 Cdn. paid to it in
connection with the Offering, and acknowledge that such advance shall be
credited against fees otherwise payable to the Agents in accordance with
Sections 11.1 and 11.2.
12. SURVIVAL OF WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENTS
12.1 All warranties, representations, covenants and agreements of the
Company, the Advisor and the Promoters herein contained or contained in
documents submitted or required to be submitted pursuant to this agreement shall
survive the purchase by the Agents for a period ending on the Survival
Limitation Date and shall continue in full force and effect for the benefit of
the Agents regardless of the closing of the sale of the Offered Securities and
regardless of any investigation which may be carried on by the Agents or on
their behalf. For greater certainty, and without limiting the generality of the
foregoing, the provisions contained in this agreement in any way related to the
indemnification of each Indemnified Party by the Indemnifying Parties, or the
contribution obligations of the Agents or those of the Indemnifying Parties,
shall survive and continue in full force and effect for a period ending on the
Survival Limitation Date.
13. OBLIGATIONS OF BASIC CAPITAL FUNDS
13.1 Should the Offering not be completed, all of the obligations of the
Company provided for herein, including, without limitation, its representations,
warranties, covenants, indemnity obligations and obligations to pay expenses,
shall become the joint and several obligations of the Company and Basic Capital
Funds.
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14. GENERAL CONTRACT PROVISIONS
14.1 Any notice or other communication to be given hereunder shall be in
writing and shall be given by delivery or by telecopier, as follows:
if to the Company:
-
Attention: -
Telecopier Number: -
with a copy to:
-
Attention: -
Telecopier Number: -
if to the Agents:
Porthmeor Securities Inc.
Xxxxx Xxxxx, Xxxxx 0000
Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: -
Telecopier Number: (416) -
Octagon Capital Canada Corporation
-
Attention: -
Telecopier Number: -
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with a copy to:
Messrs. Fogler, Xxxxxxxx
Suite 4400, P. O. Xxx 00
Xxxxx Xxxxx Xxxxx
Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxxx X. Xxxxx
Telecopier Number: (000) 000-0000
or if to Basic Capital Funds:
c/o -
Attention: -
Telecopier Number: -
with a copy to:
-
Attention: -
Telecopier Number: -
and if so given, shall be deemed to have been given and received upon receipt by
the addressee or a responsible officer of the addressee if delivered, or four
hours after being telecopied and receipt confirmed during normal business hours,
as the case may be. Any party may, at any time, give notice in writing to the
others in the manner provided for above of any change of address or telecopier
number.
14.2 This agreement and the other documents herein referred to constitute
the entire agreement between the Agents, the Company and Basic Capital Funds
relating to the subject matter hereof and supersede all prior agreements between
the parties with respect to their
respective rights and obligations in respect of the Offering, including the
engagement letter between the Agents and the Company dated May 13, 1996.
14.3 This agreement may be executed by telecopier and in one or more
counterparts which, together, shall constitute an original copy hereof as of the
date first noted above.
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If this agreement accurately reflects the terms of the transaction
which we are to enter into and if such terms are agreed to by the Company, the
Advisor and the Promoters, please communicate your acceptance by executing where
indicated below and returning by courier one originally executed copy to the
Agents.
Yours very truly,
PORTHMEOR SECURITIES INC. OCTAGON CAPITAL CANADA
CORPORATION
Per: Per:
-------------------------------- --------------------------------
Authorized Signing Officer Authorized Signing Officer
FIRST MARATHON SECURITIES LIMITED
Per:
--------------------------------
Authorized Signing Officer
--------------------------------------
The foregoing accurately reflects the terms of the transaction which
we are to enter into and such terms are agreed to with effect as of the date
provided at the top of the first page of this agreement.
BASIC U.S. REIT, INC. BASIC CAPITAL FUNDS, an Ontario
limited partnership, by its general
partner, BASIC CAPITAL FUNDS, INC.
Per: Per:
----------------------------- -------------------------------
Authorized Signing Officer Authorized Signing Officer
SCHEDULE "A"
DETAILS OF THE OFFERING
THIS IS SCHEDULE "A" TO THE AGENCY AGREEMENT BETWEEN BASIC U.S. REIT,
INC. AND PORTHMEOR SECURITIES INC. AND OCTAGON CAPITAL CANADA
CORPORATION DATED AS OF -, 1996
OFFERING: A maximum of - and a minimum of - shares of
common stock ("SHARES") of the Company at a
price of $- per Share (the "OFFERED
SECURITIES").
AGENCY FEE: Subject to closing, the Agents shall be
entitled to an aggregate fee equal to 7.5% of
the gross proceeds of the Offering, payable
at the Time of Closing. The fees payable to
sub-agents shall be for the account of the
Agents. In the event that any equity
financing is completed by the Company in
whole or in part prior to the first
anniversary of the Closing Date to any
investor specifically identified in writing
by the Agents and specifically introduced by
the Agents to the Company, the Advisor or the
Promoters prior to the Closing Date, the
Agents shall be entitled to receive from the
Company the Agency Fee in respect of such
sales.
CLOSING DATE: The Closing Date shall be -, 1996 subject to
postponement to a date not later than -, 1996
and any subsequent closings prior to -, 1996
which may be agreed to between the Company
and the Agents.
TIME OF CLOSING: The Time of Closing shall be 8:30 a.m.
(Toronto time) on the Closing Date.
QUALIFYING PROVINCES: The Provinces of Ontario, British Columbia and
Alberta and such other provinces
as may be agreed to by the Company and the
Agents.
SCHEDULE "B"
OUTSTANDING CONVERTIBLE SECURITIES
THIS IS SCHEDULE "B" TO THE AGENCY AGREEMENT BETWEEN BASIC U.S. REIT,
INC. AND PORTHMEOR SECURITIES INC. AND OCTAGON CAPITAL CANADA
CORPORATION DATED AS OF -, 1996
OTHER THAN AS DISCLOSED IN THE FINAL PROSPECTUS, THERE ARE NO OUTSTANDING
CONVERTIBLE SECURITIES.
SCHEDULE "C"
OPINION OF THE COMPANY'S CANADIAN COUNSEL
THIS IS SCHEDULE "C" TO THE AGENCY AGREEMENT BETWEEN BASIC U.S. REIT,
INC. AND PORTHMEOR SECURITIES INC. AND OCTAGON CAPITAL CANADA
CORPORATION DATED AS OF -, 1996.
The opinion of the Company's Canadian counsel shall, subject to the usual
qualifications, and assumptions in opinions of this nature, state that:
(a) this agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to:
(i) bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally;
(ii) the qualification that equitable remedies, including without
limitation, specific performance and injunction, may be
granted only in the discretion of a court of competent
jurisdiction; and
(iii) rights of indemnity, contribution and waiver of contribution
being limited under applicable law;
(b) the Offered Securities have been validly created and issued (and in
the case of the shares comprised therein, issued as fully paid and
non-assessable) and have the attributes described in the Final
Prospectus;
(c) subject to the qualifications set out therein, the statements in the
Final Prospectus under the heading "CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS" (or its equivalent) constitute an accurate summary of
the Canadian income tax considerations regarding an investment in, and
the qualified investment status of, the Offered Securities;
(d) the entering into by the Company of this agreement and other
agreements pursuant to which the Offered Securities are to be issued
and the performance of its obligations contemplated hereby and thereby
do not result in the violation of any of the terms or provisions of
the constating documents, or by-laws or resolutions of the Company or,
to the knowledge of the Company's counsel after due enquiry, any
mortgage, note, indenture, contract, agreement, instrument, lease or
other documents to which the Company is a party or by which it is
bound or any judgement, decree, order, statute, rule or regulation
applicable to the Company; and
-C2-
(e) all necessary documents have been filed and all requisite proceedings
have been taken and all other legal requirements have been fulfilled
by the Company as required under the Applicable Securities Laws in
each of the Qualifying Provinces to qualify the Offered Securities for
distribution or distribution to the public, as the case may be, and to
permit the offering and sale of the Offered Securities in each such
province through persons registered in a category permitting them to
distribute or distribute to the public, as the case may be, the
Offered Securities under the Applicable Securities Laws of such
provinces who have complied with any restrictions on such
registration.
SCHEDULE "D"
OPINION OF THE COMPANY'S U.S. COUNSEL
THIS IS SCHEDULE "D" TO THE AGENCY AGREEMENT BETWEEN BASIC U.S. REIT,
INC. AND PORTHMEOR SECURITIES, INC. AND OCTAGON CAPITAL CANADA CORPORATION DATED
AS OF ______________, 1996.
The opinion of the Company's U.S. Counsel shall substantially state
that:
1. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and is qualified to do
business in each jurisdiction in which the conduct of its business requires such
qualification, except where the failure to be so qualified, considering all such
cases in the aggregate, does not involve a material adverse effect on the
condition (financial), business, properties or results of operations of the
Company.
2. The Registration Statement has become effective under the U.S.
Securities Act and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or is pending by the Commission.
3. The Registration Statement, when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and at the Closing date, complied as to form in all
material respects with the requirements of the U.S. Securities Act, it being
understood that no opinion need be expressed as to the financial statements,
schedules, pro forma or other financial or statistical data included therein or
omitted therefrom.
4. The descriptions in the Registration Statement and Prospectus
under the captions "U.S. Federal Income Tax Considerations" and "Certain
Provisions of Maryland Law -- Business Combinations, -- Control Share
Acquisitions" are accurate in all material respects and fairly present the
information required to be shown.
5. To counsel's knowledge, there are no contracts, agreements,
documents or instruments to which the Company is a party or by which the Company
is bound required to be filed as exhibits to the Registration Statement or
described in the Registration Statement that are not so filed or described as
required. Insofar as any statements in the Registration Statement constitute
summaries of any such contract, agreement, document or instrument to which the
Company is a party, such statements fairly summarize in all material respects
the information required to be disclosed by the U.S. Securities Act and the
rules promulgated thereunder with respect to such matters.
6. The Company has all corporate power and authority to enter into
the Agency Agreement, and the Agency Agreement has been duly authorized,
executed and delivered by the Company, and is a valid and binding agreement of
the Company.
7. The execution and delivery of the Agency Agreement and the
consummation of the transactions contemplated therein do not and will not
conflict with or result in a violation of or default under the Articles of
Incorporation or Bylaws of the Company, or under any statute, rule or regulation
applicable to the Company or any permit, order, judgment or decree known to
counsel, or any lease, contract, indenture, mortgage, loan agreement or other
agreement or instrument filed as an exhibit to the Registration Statement the
violation of or default under which would have a material adverse effect upon
the business, condition (financial or otherwise), results of operations or
stockholders' equity of the Company, except such agreements, instruments or
obligations with respect to which valid consents or waivers have been obtained
by the Company.
8. No consent, approval, authorization or order of, or filing with,
any federal or state governmental agency or body is required for the
consummation of the transactions contemplated by the Agency Agreement, or the
issuance and sale of the Offered Shares by the Company, except such as have been
obtained and such as may be required under state securities laws (as to which we
express no opinion), or the rules of the NASD.
9. The Company qualifies to be taxed as a "real estate investment
trust" pursuant to Sections 856 through 859 of the Code, and the Company's
planned method of operation as described in the Registration Statement will
enable it to meet the requirements for qualification and taxation as a "real
estate investment trust" under the Code.
10. Assuming the Company conducts its business and uses the proceeds
from the sale of the Offered Shares as set forth in the Registration Statement,
the Company is not, and upon consummation of the transactions contemplated in
the Agency Agreement will not be required to register as an "investment company"
as such term is defined in the United States Investment Company Act of 1940, as
amended.
11. Such counsel has been advised by the [American Stock Exchange]
that the common shares of the Company, including the Offered Shares, have been
duly authorized for listing by the [American Stock Exchange] upon official
notice of issuance.
12. The information in the Prospectus under the heading "Federal
Income Tax Considerations," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is accurate and
presents fairly in all material respects the information required to be
disclosed therein under the U.S. Securities Act.
13. The offer, issuance and sale of shares of Common Stock of the
Company to Xxxxxx Xxxxxxxx prior to the Closing Date as described in the
Prospectus are exempt from the
-2-
registration requirements of the U.S. Securities Act and applicable state
securities and Blue Sky laws.
14. To counsel's knowledge, there are no legal or governmental
proceedings, pending or threatened, before any court or administrative body or
regulatory agency, to which the Company is a party or to which any of the
properties of the Company is subject that are required to be described in the
Registration Statement that are not so described.
-3-
