AGENCY AGREEMENT
July 6, 1998
CVF Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx
X.X.X. 00000
Attention: Xx. Xxxxxxx Xxxxxx
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear Sirs:
RE: PROPOSED INITIAL PUBLIC OFFERING
Xxxx, Xxxxxx & Co. Limited (the "Agent") understands that CVF Corporation
(the "Corporation") plans to proceed with an initial public offering (the
"Public Offering") of a minimum of 874,430 and a maximum of 2,874,430 common
shares (the "Shares") from the treasury of the Corporation to raise aggregate
proceeds of a minimum of $6,995,440 and a maximum of $22,995,440. In addition,
the Agent understands that Xxxxxx Xxxxxxxx and C.A. Xxxxxxx Enterprises Inc.
(collectively, the "Selling Shareholders") propose to offer (the "Secondary
Offering") an aggregate of 125,570 common shares (the "Secondary Shares") to
raise aggregate proceeds to the Selling Shareholders of $1,004,560. Subject to
the provisions of this Agreement, the Agent is hereby appointed as sole and
exclusive agent for and on behalf of the Corporation and the Selling
Shareholders in connection with the Public Offering and the Secondary Offering.
The completion of the Public Offering and the Secondary Offering are subject to
the provisions of this Agreement and the receipt of all necessary regulatory and
stock exchange approvals which the Corporation agrees to use its best efforts to
obtain.
Subject to the terms and conditions set forth below, the Agent hereby
agrees to solicit, on a best efforts basis, offers to purchase a minimum of
874,430 and a maximum of 2,874,430 Shares for an aggregate purchase price
payable to the Corporation of a minimum of $6,995,440 and a maximum of
$22,995,440 and 125,570 common shares from the Selling Shareholders for an
aggregate purchase price payable to the Selling Shareholders of $1,004,560.
The Shares and the Secondary Shares are collectively referred to as the
"Offered Shares" The Shares shall have an issue and sale price equal to
$8.00 per share and the Secondary Shares shall have a sale price of $8.00 per
share. It is understood and agreed that subject to the provisions contained
herein, the Agent is under no obligation to purchase any Offered Shares
although it may subscribe for and purchase Offered Shares if it so desires.
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To that end, the Agent understands that the Corporation has filed under
the applicable securities laws of each of the provinces of Canada other than
Quebec (collectively, the "Qualifying Jurisdictions") a preliminary
prospectus dated April 29, 1998 (the "Canadian Preliminary Prospectus") and
will file, without delay, a final prospectus (the "Canadian Prospectus") in
order to qualify the Offered Shares and the Subject Securities (as
hereinafter defined) for distribution to the public in the Qualifying
Jurisdictions. The Corporation has also prepared and filed with the
Securities and Exchange Commission (the "SEC") a registration statement on
Form SB-2 (File No. 333-51757) with respect to the Offered Shares and the
Over-Allotment Shares (as hereinafter defined) in conformity in all material
respects with the UNITED STATES SECURITIES ACT OF 1933, as amended (the "1933
Act") and the rules and regulations of the SEC under the 1933 Act (the "Rules
and Regulations") and has filed with the SEC such amendments thereof as may
have been required to the date of this Agreement.
As used in this Agreement, "Registration Statement" shall mean such
registration statement on Form SB-2 filed with the SEC at the time such
registration statement becomes effective, including the exhibits thereto and
the documents incorporated by reference therein and, in the event any
post-effective amendment thereto becomes effective prior to the Closing Date
(as hereinafter defined), shall also mean such registration statement as so
amended; "U.S. Prospectus" shall mean the prospectus in the form included in
the Registration Statement, including the documents incorporated by reference
therein; "U.S. Preliminary Prospectus" shall mean the prospectus subject to
completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the SEC, and as such
prospectus may have been amended from time to time prior to the date of the
U.S. Prospectus; "Preliminary Prospectuses" shall mean (i) the Canadian
Preliminary Prospectus and (ii) the U.S. Preliminary Prospectus; and
"Prospectuses" shall mean (i) the Canadian Prospectus and (ii) the U.S.
Prospectus.
The terms and conditions of the Public Offering and Secondary Offering are
as follows:
TERMS AND CONDITIONS
1. OVER-ALLOTMENT OPTION - The Corporation agrees to grant to the Agent a
non-assignable option (the "Over-Allotment Option") to purchase up to 15% of
the total number of common shares sold pursuant to the Public Offering (the
"Over-Allotment Shares"), from the Corporation, exercisable in whole or in
part at any time on or before 5:00 p.m. (Toronto time) on the 60th day
following the Closing Date (as hereinafter defined) provided that an
aggregate of 3,000,000 Offered Shares have been sold on the Closing Date, at
a price of $8.00 per Over-Allotment Share purchased. The Agent will be paid
a commission (the "Over-Allotment Commission") equal to 7% of the purchase
price for each Over-Allotment Share. The Agent will notify the Corporation
in writing, no later than the close of business on the following day which is
not a Saturday, Sunday, or a statutory holiday in the City of Toronto (a
"Business Day"), as to the
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Agent's over-allotment position at the close of business two Business Days
after the Closing Date. The Agent may exercise the Over-Allotment Option in
whole or in part during the currency thereof by delivering written notice to
the Corporation (the "Over-Allotment Notice"), specifying the number of
Over-Allotment Shares which the Agent wishes to purchase. If the Agent
exercises the Over-Allotment Option as aforesaid, the Agent shall, on the
date (the "Over-Allotment Closing") that is not less than two Business Days
and not more than five Business Days after the day of the Over-Allotment
Notice, pay to the Corporation the aggregate purchase price for the
Over-Allotment Shares subscribed for by certified cheque or bank draft
against delivery to the Agent of a certificate in definitive form,
representing the Over-Allotment Shares subscribed for, registered in
accordance with the direction of the Agent and against payment by the
Corporation to the Agent of the Over-Allotment Commission by certified cheque
or bank draft. The applicable terms, conditions and provisions of this
Agreement shall apply mutatis mutandis to the Over-Allotment Closing and the
Over-Allotment Shares. In the event the Corporation shall subdivide,
consolidate or otherwise change its common shares during the currency of the
Over-Allotment Option, the common shares issuable upon the exercise of the
Over-Allotment Option shall similarly be subdivided, consolidated or changed
such that the Agent receives the same number and type of securities that they
would have otherwise received had they exercised in full such options prior
to such subdivision, reclassification or change. The exercise price shall be
adjusted accordingly and notice shall be given to the Agent of such
adjustment. In the event of any dispute as to the required adjustment to the
exercise price, such adjustment shall be determined conclusively by the
auditors of the Corporation.
2. CANADIAN PROSPECTUS AND REGISTRATION STATEMENT - The Corporation shall,
no later than July 14, 1998, have prepared and filed (and obtained a receipt)
under the applicable securities laws of the Qualifying Jurisdictions, the
Canadian Prospectus and shall have taken, to the reasonable satisfaction
of the Agent and its counsel, all other steps and proceedings as are
necessary in order to qualify the Offered Shares, the Over-Allotment Shares,
and to the extent allowable and as disclosed in the Canadian Prospectus, the
Compensation Option (as hereinafter defined), (the "Offered Shares", the
"Over-Allotment Shares", and the "Compensation Option" hereinafter
collectively referred to as the "Subject Securities") for distribution (or
distribution to the public, as the case may be) in the Qualifying
Jurisdictions, subject to any conditions to be fulfilled by the Agent itself
including delivery of the Canadian Prospectus to the persons entitled
thereto. The Corporation shall also prepare and file with the SEC a
Registration Statement with respect to the Offered Shares and the
Over-Allotment Shares in conformity in all material respects with the 1933
Act and the Rules and Regulations and will file with the SEC such amendments
thereof as may be required. The Registration Statement shall have been
declared effective by the SEC on or prior to the Closing Date.
3. THE PUBLIC OFFERING - The Corporation agrees to pay to the Agent a
commission equal to 7% of the aggregate gross proceeds on the sale of the
Shares (the "Commission") provided that such sale occurs, in consideration of
the services to
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be rendered by the Agent in connection with the Public Offering, which
services shall include:
(i) acting as agent of the Corporation to solicit, on a best efforts
basis, offers to purchase the Shares in the Qualifying
Jurisdictions and in such other jurisdictions outside of the
United States as may be agreed by the Corporation and the Agent;
(ii) assisting in the preparation of the Canadian Prospectus, the
Canadian Preliminary Prospectus and any documents supplemental
thereto or any amending or supplementary prospectus or other
supplementary documents or any similar document (collectively,
the "Supplementary Material") required to be filed under the
applicable securities laws of the Qualifying Jurisdictions (the
"Canadian Securities Laws"); and
(iii) advising the Corporation with respect to the Public
Offering.
The Commission shall be paid in full by the Corporation on the Closing
Date, providing such closing occurs.
As additional consideration for the Agent agreeing to act as agent
in connection with the Public Offering, the Corporation will issue to the
Agent on the Closing Date, a non-assignable option (the "Compensation
Option") in the form of Schedule "A" hereto, to purchase 10% of the total
number of Shares sold pursuant to the Public Offering at a price of $8.00 per
Share, such option to be exercisable commencing on the Closing Date, provided
the Public Offering occurs, and for a period of 18 months from the date on
which a receipt is issued for the Canadian Prospectus by the securities
regulatory authorities in each of the Qualifying Jurisdictions; it being
understood by the Agent that the Compensation Option and the common shares
underlying the Compensation Option are not being registered under the 1933
Act and will be restricted securities within the meaning of Rule 144 under
the 1933 Act.
The Corporation agrees that the Agent will be permitted to appoint other
registered dealers (or other dealers duly qualified in their respective
jurisdictions) as its sub-agents to assist in the Public Offering and that
the Agent may determine the remuneration payable by the Agent to such other
dealers appointed by it, such remuneration to be paid solely by the Agent.
The Corporation and the Agent agree that the Corporation shall be
permitted to appoint other registered dealers (or other dealers qualified in
their respective jurisdictions) who are not part of the selling group formed
by the Agent as of the date hereof, as new member of the selling group (the
"New Members"). The Corporation and the Agent further agree that New Members
brought in by the Corporation shall be entitled to 90% of the Commission
payable and 90% of the
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Compensation Options issuable by the Corporation in respect of the Shares
sold by such New Members under the Canadian Prospectus.
Without limitation to the other representations, covenants and
warranties herein, the Agent covenants, represents and warrants to the
Corporation that: (i) it will comply with Canadian Securities Laws; (ii) it
did not offer the Offered Shares nor solicit purchasers for the Offered
Shares until the Canadian Preliminary Prospectus was filed in the Qualifying
Jurisdictions and a receipt obtained therefor and it has not and will not
offer or sell Offered Shares in the United States or in any jurisdiction
other than the (A) Qualifying Jurisdictions and (B) such other jurisdictions
as may be agreed to by the Corporation and the Agent; (iii) it is duly
qualified to solicit or procure subscriptions in the Qualifying
Jurisdictions; (iv) it will not, in connection with the Public Offering, make
any representation with respect to the Corporation, or the Subject Securities
except with respect to the terms contemplated by this Agreement, the Canadian
Prospectus or any Supplementary Material (as hereinafter defined) except as
shall be expressly authorized in writing by the Corporation, as the case may
be; (v) it will not, in connection with the Public Offering, provide any
written materials to any potential purchasers of the Offered Shares other
than the Canadian Preliminary Prospectus, the Canadian Prospectus or any
Supplementary Material and as otherwise permitted pursuant to applicable
Canadian securities legislation; and (vi) upon the Corporation obtaining the
necessary final receipt therefor from the securities regulatory authorities
in the Qualifying Jurisdictions, it will forthwith upon receipt of copies of
the Canadian Prospectus deliver one copy of the Canadian Prospectus to
persons who are to acquire Offered Shares pursuant to the Public Offering and
the Secondary Offering.
4. REPRESENTATIONS OF THE CORPORATION - The Corporation represents and
warrants to the Agent and acknowledges that the Agent is relying upon such
representations and warranties, as follows:
(a) each of the Corporation and the Holdings (as hereinafter defined)
has been duly incorporated and organized and is validly existing
under the laws of the jurisdiction of its incorporation, is
current and up-to-date with all material filings required to be
made by it under the corporate laws of its jurisdiction of
incorporation and has all requisite corporate authority and power
to carry on its business, as now conducted and as presently
proposed to be conducted by it, and to own, lease and operate its
property and assets;
(b) the only companies in which the Corporation has an interest (the
"Holdings"), are as set out in Schedule "B" hereto, and the
Corporation, either directly or indirectly, beneficially owns
that number of issued and outstanding shares of each such
Holding, as is set out in Schedule "B" hereto, free and clear of
all mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands of any kind whatsoever, all of
such shares have been duly authorized and validly issued and are
outstanding as fully paid
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and non-assessable shares and no person has any right,
agreement or option, present or future, contingent or
absolute, of any right capable of becoming a right, agreement
or option, for the purchase from the Corporation of any
interest in any of such shares and except as described in the
Registration Statement and Prospectuses for the issue or
allotment of any unissued shares in the capital of the
Holdings or any other security convertible into or
exchangeable for any such shares;
(c) each of the Corporation and the Holdings is duly qualified to
carry on business under the laws of each jurisdiction in which it
carries on its business and is in good standing in each
jurisdiction in which it carries on a material portion of its
business or operates, owns or leases any material property or
assets;
(d) the Corporation has full corporate power and authority to issue
the Shares, the Over-Allotment Shares, the Compensation Option
and the Over-Allotment Option (the Compensation Option and the
Over-Allotment Option hereinafter collectively referred to as the
"Options" and the common shares issuable pursuant to the Options
hereinafter collectively referred to as the "Optioned
Securities") as at the Closing Date; the Shares will be duly and
validly authorized, allotted and reserved for issuance and upon
payment therefor such Shares will be issued as fully paid and
non-assessable shares; the Secondary Shares are issued and
outstanding as fully paid and non-assessable shares; the Options
have been duly and validly created and as at the Closing Date
will be issued; the Optioned Securities will be duly and validly
authorized, allotted and reserved for issuance and the issuance
of any of the Optioned Securities upon payment of the exercise
price therefor in accordance with their respective terms on the
exercise thereof will be issued as fully paid and non-assessable;
(e) the Corporation is not in default or breach of, and the execution
and delivery of, and the performance of and compliance with the
terms of this Agreement, the Compensation Option and the other
material agreements to which the Corporation is a party or by
which it is bound, by the Corporation does not and will not
result in any breach of, or constitute a default under, and does
not and will not create a state of facts which, after notice or
lapse of time or both, would result in a breach of or constitute
a default under, any term or provision of the articles, by-laws
or resolutions of the shareholders or directors of the
Corporation or any committee thereof or any indenture, contract,
agreement (written or oral), instrument, lease or other document,
including without limitation the contracts to which the
Corporation is a party or by which it is bound
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or any judgment, decree, order, statute, rule or regulation
applicable to the Corporation which default or breach might
reasonably be expected to materially adversely affect, on a
consolidated basis, the business, operations, capital or
condition (financial or otherwise) of the Corporation or its
assets or properties;
(f) the Corporation has full corporate power and authority to enter
into this Agreement and to perform its obligations set out herein
and the Corporation has all corporate power and authority to
enter into the Compensation Option and to perform its obligations
therein and this Agreement has and the Compensation Option will,
on the Closing Date, be duly authorized, executed and delivered
by the Corporation, and this Agreement is, and the Compensation
Option will, on the Closing Date, be legal, valid and binding
obligations of the Corporation enforceable against the
Corporation in accordance with their respective terms except that
(i) the enforcement thereof may be limited by bankruptcy,
insolvency and other laws affecting the enforcement of creditors'
rights generally; (ii) equitable remedies including, without
limitation, specific performance and injunction may be granted
only in the discretion of a court; and (iii) rights of indemnity,
contribution and waiver of contribution may be limited under
applicable law;
(g) there has not been any material adverse change in the assets,
liabilities or obligations (absolute, accrued, contingent or
otherwise) of the Corporation from the position set forth in the
Corporation's consolidated financial statements for the year
ended December 31, 1997 (the "Financial Statements") and there
has not been any material adverse change in the business,
operations or condition (financial or otherwise) or results of
the operations of the Corporation for the year ended December 31,
1997, that is not disclosed in the Financial Statements; and
since the dates of the Financial Statements there have been no
material facts, transactions, events or occurrences which could
materially adversely affect the business, operations, capital or
condition (financial or otherwise) of the Corporation or its
assets or properties, on a consolidated basis.
(h) the financial statements of the Corporation and notes thereto
contained in Registration Statement and the Prospectuses, present
fairly, in all material respects the consolidated financial
position of the Corporation as at the dates indicated and the
results of its operations and changes in its financial
position for the periods specified and such financial
statements have been prepared in conformity with United States
generally accepted accounting
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principles applied, except as otherwise stated therein, on a
consistent basis;
(i) Ernst & Young and Xxxxxxx Xxxxx Xxxxxxx & Co. P.C., who are
reporting upon the audited financial statements of the
Corporation included in the Registration Statement and the
Prospectuses, are, and during the periods covered by their
reports were, auditors of the Corporation and are independent
auditors as required by the 1933 Act and the Rules and
Regulations and Canadian Securities Laws;
(j) there are no actions, suits, proceedings or inquiries pending or,
to the knowledge of the Corporation, threatened against or
affecting the Corporation at law or in equity or before or by any
federal, provincial, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
which in any way materially adversely affects, or may in any way
materially adversely affect, the business, operations or
condition (financial or otherwise) of the Corporation, or any of
its assets or properties or which affects or may affect the
distribution of any of the Subject Securities;
(k) the authorized capital of the Corporation consists of 50,000,000
common shares , US$0.001 par value, and 500,000 preferred shares,
US$0.001 par value, of which at the date hereof 5,793,198 common
shares and 25,000 preferred shares are issued and outstanding as
fully paid and non-assessable;
(l) except as described in the Prospectuses, there is no warrant,
option, right or privilege capable of becoming an agreement for
the purchase, subscription or issuance of any unissued securities
of the Corporation;
(m) except for matters which would not have a material adverse
effect on the Corporation or the Holdings, the Corporation is
not aware of a claim of any infringement or breach by the
Corporation or the Holdings of any industrial, copyright or
other intellectual property rights of any other person, nor
has either the Corporation or the Holdings in which the
Corporation holds more than a 20% equity interest
(collectively, the "Subsidiaries") or, to the best of the
knowledge of the Corporation, the Holdings in which the
Corporation holds a 20% equity interest or less (collectively,
the "Investees") received any notice nor is the Corporation
otherwise aware that the use of the business names,
trademarks, service marks and industrial, copyright or other
intellectual property of either the Corporation or the
Holdings infringes upon or breaches
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any industrial, copyright or other intellectual property
rights of any other person and the Corporation has no
knowledge of any infringement or violation of any of its or
the Holding's rights in such intellectual, copyright and other
industrial property and is not aware of any state of facts
which casts doubt on the validity or enforceability of any of
such intellectual, copyright or other industrial property
rights;
(n) each of the Corporation and the Subsidiaries and, to the best
of the knowledge of the Corporation, the Investees own or
possess adequate enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, trade
secrets, processes or formulations (including software) used
or proposed to be used in the conduct of each of their
respective businesses;
(o) to the best of the knowledge of the Corporation, the conduct of
the business of each of the Corporation and the Holdings does not
infringe upon the trademarks, trade names, service marks or
copyrights, trade secrets, know-how, designs or other proprietary
rights or technology, domestic or foreign, of any other person,
firm or corporation;
(p) other than the Agent, and its agents, there is no person, firm or
corporation acting or purporting to act at the request of the
Corporation, who is entitled to any brokerage or finder's fee in
connection with the Public Offering or the Secondary Offering and
in the event that any person, firm or corporation acting or
purporting to act for the Corporation establishes a claim for any
fee from the Agent in connection with the Public Offering or the
Secondary Offering, the Corporation covenants to indemnify and
hold harmless the Agent with respect thereto and with respect to
all costs reasonably incurred in defence thereof;
(q) each of the Corporation and the Subsidiaries and, to the best of
the knowledge of the Corporation, the Investees has conducted and
is conducting its business in material compliance with all
applicable laws, by-laws, rules and regulations of each
jurisdiction in which a material portion of its business is
carried on and holds all material licences, registrations,
permits, consents or qualifications required in order to enable
its business to be carried on as now conducted and all such
licences, registrations, permits, consents and qualifications are
valid and subsisting and in good standing and the Corporation has
not received any notice of proceedings relating to the revocation
or modification of any such license, registration, permit,
consent or qualification which, if the subject of an unfavourable
decision, ruling or finding, would materially and
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adversely affect the conduct of the business, operations, capital
condition (financial or otherwise) of the Corporation, on a
consolidated basis;
(r) the Corporation has filed in a timely manner each document or
report required to be filed by it pursuant to its continuous
reporting obligations in the United States under the SECURITIES
EXCHANGE ACT OF 1934, as amended (the "1934 Act") and each such
document or report together with any amendments thereto, at the
time it was filed conformed, as applicable, in all material
respects, to all requirements and none of such documents or
reports contained an untrue statement of any material fact or
omitted to state any material fact required to be stated therein
or necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading;
(s) there is not in the constating documents or by-laws of the
Corporation any pre-emptive right or other similar right
entitling a holder of securities from acquiring additional
securities or, any restriction upon or impediment to the issuance
of shares or other securities or to the declaration or payment of
dividends by the directors of the Corporation or the payment of
dividends by the Corporation to the holders of its common shares;
(t) the completion of the Public Offering does not require any
consent, approval, authorization or order of any court or
government agency or body, other than (i) the obtaining of a
receipt in respect of the Canadian Prospectus from the securities
regulatory authorities in each of the Qualifying Jurisdictions,
(ii) requirements under the 1933 Act, the 1934 Act and any
applicable U.S. state securities or "Blue Sky" laws
(collectively, "U.S. Securities Laws") which will be satisfied on
or prior to the Closing Date, and (iii) those which have been
obtained as of the date hereof;
(u) the net proceeds derived from the issue and sale of the Shares
pursuant to the Public Offering will be used in the manner
specified in the Prospectuses and for no other purpose;
(v) the minute books of each of the Corporation and the Subsidiaries
provided to counsel to the Agent contain copies of all constating
documents and all resolutions of its directors and
securityholders and all shareholder or voting arrangement
agreements;
(w) each of the Corporation and the Subsidiaries, and to the best
of the knowledge of the Corporation, the Investees has filed all
necessary tax returns and notices and, to the best of the
knowledge of the Corporation, has paid all applicable taxes of
whatever nature for all
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tax years to the date hereof to the extent such taxes have
become due or have been alleged to be due and none of the
Corporation, the Subsidiaries and, to the best of the knowledge
of the Corporation, the Investees is aware of any tax
deficiencies or interest or penalties accrued or accruing, or
alleged to be accrued or accruing, thereon with respect to itself
where, in any of the above cases it might reasonably be expected
to result in any material adverse change in the business,
operations, capital or condition (financial or otherwise) of the
Corporation, on a consolidated basis;
(x) insofar as Canadian Securities Laws are concerned, the Canadian
Prospectus is true and correct, contains no misrepresentation and
constitutes full, true and plain disclosure of all material facts
relating to the Corporation and the Subject Securities and no
material fact or information has been omitted therefrom; and
(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 and the
Over-Allotment Closing, if any, the Registration Statement and
the U.S. Prospectus and any amendments thereof and supplements
thereto will comply in all material respects with the applicable
provisions of the 1933 Act and the Rules and Regulations and will
not contain an untrue statement of a material fact and will not
omit to state any material fact required to be stated therein or
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to statements or omissions made in reliance upon and in
conformity with information relating solely to or provided by the
Agent;
(z) the Corporation is not a party to or otherwise bound by any
material contract (within the meaning of Canadian Securities
Laws) other than the Agency Agreement;
(aa) the Corporation is not and as a result of the sale of the Offered
Shares contemplated hereby will not be, an "investment company" as defined
in the United States INVESTMENT COMPANY ACT OF 1940, as amended;
(bb) the Corporation meets the general eligibility requirements for
use of Form SB-2 under the 1933 Act;
(cc) the Registration Statement will become effective prior to the
Closing Date; no stop order suspending the effectiveness of the
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Registration Statement will be in effect at the Closing Date, and
no proceedings for such purpose are pending before or, to the
Corporation's knowledge, threatened by the SEC;
(dd) the U.S. Prospectus conforms and will conform to the Canadian
Prospectus except for such deletions therefrom and additions
thereto as are permitted or required by Form SB-2 and the
applicable Rules and Regulations;
(ee) the Corporation has not made and will not make any offer or sale
of or solicitation of an offer to buy the Offered Shares in the United
States or to a U.S. Person (as defined in Regulation S under the 1933
Act); and
(ff) all of the issued and outstanding common shares of the
Corporation are listed and posted for trading on the American Stock
Exchange.
5. COVENANTS OF THE CORPORATION - The Corporation hereby covenants to and with
the Agent that it will:
(a) use its best efforts to resolve as soon as reasonably practicable
any regulatory deficiencies in respect of the Canadian
Preliminary Prospectus on a basis mutually and reasonably
acceptable to the Agent and the Corporation and, as soon as
reasonably practicable after such deficiencies have been resolved
or satisfied, prepare, file and use its best efforts to obtain
receipts under Canadian Securities Laws for the Canadian
Prospectus and take all other steps and proceedings that may be
necessary in order to qualify the Subject Securities for
distribution in the Qualifying Jurisdictions as soon as possible
after such regulatory deficiencies have been resolved and, in no
event later than 5:00 p.m. (Toronto time) on July 14, 1998;
(b) use its best efforts to have the Registration Statement declared
effective on or prior to the Closing Date;
(c) prior to the filing of the Canadian Preliminary Prospectus and
thereafter and prior to the filing of the Canadian Prospectus and
any Supplementary Material, permit the Agent and its counsel to
participate fully in the preparation of such documents and allow
the Agent and its counsel to conduct all due diligence which the
Agent may reasonably require to be conducted in order to fulfill
its obligations under Canadian Securities Laws and in order to
enable
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the Agent responsibly to execute any certificate required
to be executed by the Agent in connection with the Canadian
Preliminary Prospectus, the Canadian Prospectus or any
Supplementary Material;
(d) deliver in Toronto, within three (3) Business Days of the issue
of a receipt for the Canadian Preliminary Prospectus and the
Canadian Prospectus, as the case may be, and within three (3)
Business Days of execution of any Supplementary Material without
charge to the Agent as many copies of the Canadian Preliminary
Prospectus, the Canadian Prospectus and any Supplementary
Material as the Agent may reasonably request for the purposes
contemplated hereunder and contemplated by the applicable
securities legislation, and such delivery shall constitute: (i)
the consent of the Corporation to the use of such documents in
connection with the distribution of the Subject Securities
subject to the provisions of the Canadian Securities Laws; and
(ii) the Corporation's representation and warranty to the Agent
that, for the purposes of Canadian Securities Laws, at the time
of delivery, the information and statements contained therein
(except information and statements relating solely to or provided
by the Agent) contain no untrue statement of material fact, and
constitute full, true and plain disclosure of all material facts
relating to the Public Offering, the Corporation, and the Subject
Securities;
(e) cause to be delivered to the Agent concurrently with the filing
of the Canadian Prospectus and any Supplementary Material,
comfort letters of the auditors of the Corporation in each case
dated the date of the Canadian Prospectus or the Supplementary
Material to which such letter relates (as the case may be)
addressed to the Agent and to the directors of the Corporation,
in form and substance satisfactory to the Agent, relating to the
financial statements to be included in the Canadian Prospectus
and any Supplementary Material and verifying in accordance with
the Canadian Institute of Chartered Accountants Handbook the
financial information, accounting data and other numerical data
contained in the Canadian Prospectus or any Supplementary
Material and matters involving changes or developments since the
respective dates as of which specified financial information is
given in the Canadian Prospectus or the Supplementary Material to
a date not more than two (2) Business Days prior to the date of
such letter;
(f) subject to the terms of this Agreement, the Corporation will duly
and punctually perform all the obligations to be performed by it
hereunder and under the Compensation Option;
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(g) ensure that at the respective times of filing of the Canadian
Preliminary Prospectus, the Canadian Prospectus and any
Supplementary Material and thereafter during the distribution of
the Subject Securities, that the Canadian Preliminary Prospectus,
the Canadian Prospectus and any Supplementary Material will fully
comply, in all material respects, with the requirements of
Canadian Securities Laws;
(h) during the period commencing with the date hereof and ending on
the conclusion of the distribution of the Offered Shares or, if
3,000,000 Offered Shares are sold pursuant to the Public Offering
and the Secondary Offering, on the conclusion of the distribution
of the Over-Allotment Shares, the Corporation will give the Agent
prompt written notice of:
(i) any material change (actual, proposed, anticipated or
threatened) in or affecting the business, affairs,
operations, assets, liabilities (contingent or
otherwise), capital or control of the Corporation;
(ii) any material change in or misrepresentation of a
material fact contained or referred to in the
Registration Statement, the Preliminary Prospectuses,
the Prospectuses or any Supplementary Material; and
(iii) the occurrence of a material fact, which (A) insofar as
the 1933 Act is concerned, makes any statement of a
material fact made in the Registration Statement or the
U.S. Prospectus (as then amended or supplemented) untrue
or which requires the making of any additions to or
changes in the Registration Statement or the U.S.
Prospectus (as then amended or supplemented) in order to
state a material fact required by the 1933 Act or the
Rules and Regulations to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not
misleading, and (B) insofar as Canadian Securities Laws
are concerned, is or may be, of such a nature as to:
result in a misrepresentation in the Canadian
Preliminary Prospectus, the Canadian Prospectus or any
Supplementary Material; or result in the Canadian
Preliminary Prospectus, the Canadian Prospectus or any
Supplementary Material not complying with Canadian
Securities Laws;
-15-
provided that if the Corporation is uncertain as to whether a material
change, occurrence or event of the nature referred to in this subparagraph
has occurred, the Corporation shall promptly inform the Agent of the full
particulars of the occurrence giving rise to the uncertainty and shall
consult with the Agent as to whether the occurrence is of such nature;
In this Agreement, insofar as Canadian Securities Laws are concerned, the
terms "material change", "material fact", "misrepresentation" and
"distribution" have the meanings ascribed thereto in the SECURITIES ACT
(Ontario);
(i) during the period commencing with the date hereof and ending on
the conclusion of the distribution of the Offered Shares or, if
3,000,000 Offered Shares are sold pursuant to the Public Offering
and the Secondary Offering, on the conclusion of distribution of
the Over-Allotment Shares, the Corporation will promptly inform
the Agent of:
(i) any request of any Canadian or U.S. securities commission or
similar regulatory authority for any amendment to the
Registration Statement, the Preliminary Prospectuses, the
Prospectuses or for any additional information;
(ii) the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement;
(iii) the issuance by any Canadian or U.S. securities
commission or similar regulatory authority, or by any other
competent authority of any order to cease or suspend trading
of any securities of the Corporation or of the institution
or threat of institution of any proceedings for that
purpose; and
(vi) the receipt by the Corporation of any communication from any
Canadian or U.S. securities commission or similar regulatory
authority or any other competent authority relating to the
Registration Statement, the Preliminary Prospectuses, the
Prospectuses or the distribution of the Subject Securities;
and
(j) prepare and file promptly any amendment to the Registration
Statement and the Prospectuses which in the reasonable opinion
of the Agent and the Corporation may be necessary or advisable in
order to comply with applicable Canadian and U.S. securities laws
(to be effected, if necessary, by the filing with the SEC of a
post-effective amendment to the Registration Statement); and
-16-
(k) if at any time the SEC shall issue or propose to enter any stop
order suspending the effectiveness of the Registration Statement,
the Corporation will use its best efforts to prevent the issuance
of any such order and, if issued, to obtain the withdrawal of
such order at the earliest possible time.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING SHAREHOLDERS
Each of the Selling Shareholders hereby severally represents, warrants and
covenants as follows to the Agent and acknowledges that the Agent is relying
upon such representations, warranties and covenants in connection with its
execution and delivery of this Agreement:
(a) the Selling Shareholder is or will be at the Time of Closing (as
hereinafter defined) the beneficial owner of and has or will have
at the Time of Closing valid and marketable title to the
Secondary Shares to be sold by such Selling Shareholder, free and
clear of any lien, claim, security interest or other encumbrance,
including, without limitation, any restrictions on transfer or
resale restrictions under Canadian securities legislation, except
such restrictions as shall have been satisfied by the Time of
Closing;
(b) the Selling Shareholder has or will have at the Time of Closing
full legal right, power and authorization, and any approval
required by law, to sell, assign, transfer and deliver the
Secondary Shares to be sold by Time of Closing and upon delivery
of and payment for such shares, the purchaser of such shares will
acquire valid and marketable title to such shares free and clear
of any lien, claim, security interest, or other encumbrance;
(c) this Agreement has been duly authorized, executed and delivered
by the Selling Shareholder and constitutes a valid and binding
obligation of the Selling Shareholder enforceable against the
Selling Shareholder in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting the rights of creditors generally and except as limited
by the application of equitable principles when equitable
remedies are sought, and by the fact that rights to indemnity,
contribution and waiver, and the ability to sever unenforceable
terms, may be limited by applicable law;
(d) the execution and delivery of this Agreement by the Selling
Shareholder, the sale of the Secondary Shares to be sold by such
Selling Shareholder and the consummation of the transactions
contemplated in this Agreement does not and will not conflict
with
-17-
or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, (whether after
notice or lapse of time or both) any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which
the Selling Shareholder is a party or by which the Selling
Shareholder is or may be bound or to which any of the Selling
Shareholder's property or assets is subject, which breach or
violation or the consequences thereof would, alone or in the
aggregate, be material, nor does or will such action conflict
with or violate any statute, law, rule, regulation, ruling,
judgment, injunction, order or decree applicable to the Selling
Shareholder or to any property or assets of the Selling
Shareholder.
(e) other than as may be required under U.S. Securities Laws,
Canadian Securities Laws and the rules and by-laws of the
American Stock Exchange and The Toronto Stock Exchange, no
consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or
body is required for the sale of the Secondary Shares to be
sold by the Selling Shareholder or the consummation of the
transactions contemplated in this Agreement;
and
(f) the Selling Shareholder will do or perform all things within the
control of the Selling Shareholder (i) reasonably required to be
done or performed by the Selling Shareholder prior to the Time of
Closing to satisfy all conditions precedent to the delivery of
the Secondary Shares to be sold by such Selling Shareholder; and
(ii) necessary to give effect to the sale by the Selling
Shareholder of the Secondary Shares to be sold by the Selling
Shareholder as contemplated by this Agreement and the
Prospectuses.
7. CONDITIONS OF CLOSING - The purchase and sale of the Offered Shares and the
Closing (as hereinafter defined) shall be subject to the following conditions,
which conditions shall be satisfied on or prior to the Closing Date:
(a) the Agent shall have received and the Corporation shall have
accepted subscriptions for the Offered Shares for aggregate gross
proceeds of a minimum of $8,000,000;
(b) a receipt for the Canadian Prospectus shall have been issued on
or before July 14, 1998 in the Qualifying Jurisdictions;
(c) the Corporation shall take, or cause to be taken, all steps and
proceedings that may be requisite under Canadian Securities Laws
to qualify the Subject Securities for distribution (or
distribution to the public, as the case may be) in the Qualifying
Jurisdictions
-18-
through registrants registered under Canadian Securities Laws who
have complied with the relevant provisions of the Canadian
Securities Laws;
(d) the Registration Statement shall have been declared effective by
the SEC and no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof
shall have been issued and no proceeding for that purpose shall
have been instituted or, to the knowledge of the Corporation,
threatened by the SEC; and all requests for information on the
part of the SEC shall have been complied with;
(e) the Agent having received a certificate of the Corporation dated
the Closing Date signed by each of the President and Chief
Executive Officer and the Chief Financial Officer of the
Corporation or by such other officers acceptable to the Agent
certifying as to certain matters reasonably requested by the
Agent including certification that:
(i) the Corporation has complied, in all material respects, with
all covenants and satisfied all terms and conditions of this
Agreement on its part to be complied with and satisfied up
to the Time of Closing;
(ii) all of the representations and warranties contained in this
Agreement are true and correct as of the Time of Closing
with the same force and effect as if made at and as of the
Time of Closing;
(iii)since the date hereof, there has been no material adverse
change (actual, proposed or prospective, whether financial
or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the
Corporation, the Subsidiaries and, to the best of the
knowledge of the Corporation, the Investees;
(iv) no order, ruling or determination having the effect of
ceasing or suspending trading in any securities of the
Corporation (including the Subject Securities) has been
issued and no proceedings for such purposes are pending, or,
to the knowledge of such officers, contemplated or
threatened; and
(v) no stop order suspending effectiveness of the Registration
Statement or any post-effective amendment thereof has been
issued and no proceedings therefor have been initiated or to
the knowledge of such officers, threatened by the SEC;
-19-
(f) the Agent having received from each of the Selling Shareholders
at the Time of Closing a certificate dated the Closing Date and
executed and delivered by such Selling Shareholder, certifying
that the representations and warranties of the Selling
Shareholder contained in this Agreement are true and correct as
of the Time of Closing with the same effect as if made at the
Time of Closing;
(g) the Agent, having received at the Closing, a favourable opinion
of Meighen, Demers, counsel to the Corporation addressed to the
Agent, and counsel to the Agent, acceptable in all reasonable
respects to counsel to the Agent to the effect that:
(i) the Corporation is a corporation validly existing under the
laws of the jurisdiction of its incorporation;
(ii) the Corporation has all requisite corporate capacity, power
and authority to carry on its business as now conducted by
it, to own its assets and to execute and deliver this
Agreement and the Compensation Option and to perform all
transactions contemplated thereby;
(iii) the authorized and issued capital of the Corporation shall
be as set forth under the representations and warranties of
the Corporation in Section 4 hereof, each of which issued
shares shall have been duly and validly created, authorized
and issued and are issued as fully paid and non-assessable
shares;
(iv) immediately prior to the Time of Closing and before giving
effect to the sale of the Secondary Shares, the Selling
Shareholders are the registered holders of at least 125,570
common shares of the Corporation;
(v) each of this Agreement and the Compensation Option has been
or will be duly authorized, executed and delivered by the
Corporation, as the case may be, and constitutes or will
constitute a legal, valid and binding obligation of the
Corporation enforceable in accordance with its terms
(subject to the usual qualifications);
(vi) all necessary corporate action has been taken by the
Corporation to authorize the issuance of the Shares on the
terms and conditions of this Agreement and the Corporation
having received payment in full of the purchase price
-20-
therefor such shares have been validly issued and are
outstanding as fully paid and non-assessable shares;
(vii) the Optioned Securities have been reserved for issuance
and such shares will, when issued, upon payment of the
exercise price therefor and upon the exercise of the
Compensation Option and the Over-Allotment Option in
accordance with the respective terms thereof, be validly
issued as fully paid and non-assessable shares;
(viii) the Corporation is not in default or breach of, and the
execution and delivery of, and the performance of and
compliance with the terms of this Agreement, each of the
Options and the other material agreements to which the
Corporation is a party or by which it is bound, by the
Corporation does not and will not result in any breach of,
or constitute a default under, and does not and will not
create a state of facts which, after notice or lapse of time
or both, would result in a breach of or constitute a default
under, any term or provision of the articles, by-laws or
resolutions of the shareholders or directors of the
Corporation or any committee thereof or, to the knowledge of
such counsel, any indenture, contract, agreement (written or
oral), instrument, lease or other document, including
without limitation the contracts to which the Corporation is
a party or by which it is bound or any judgment, decree,
order, statute, rule or regulation applicable to the
Corporation which default or breach might reasonably be
expected to materially adversely affect, on a consolidated
basis, the business, operations, capital or condition
(financial or otherwise) of the Corporation or its assets or
properties;
(ix) the form of common share certificate has been approved and
adopted by the directors of the Corporation and conforms
with all applicable corporate legislation, the requirements
of the American Stock Exchange and The Toronto Stock
Exchange;
(x) a registrar and transfer agent duly authorized to carry on
such business in the Qualifying Jurisdictions has been duly
appointed by the Corporation as the registrar and transfer
agent in respect of the common shares of the Corporation;
and
(xi) all necessary documents have been filed and proceedings
taken under Canadian Securities Laws to qualify the Offered
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Shares for distribution to the public in the Qualifying
Jurisdictions through registrants registered under Canadian
Securities Laws who comply with the relevant provisions of
such laws and with respect to such other securities as
counsel for the Agent and the Corporation shall agree,
acting reasonably.
(xii) the common shares of the Corporation will, once listed on a
prescribed stock exchange, constitute qualified investments
under THE INCOME TAX ACT (Canada) for trusts governed by
registered retirement savings plans, registered retirement
income funds and deferred profit sharing plans
(collectively, "Tax Deferred Plans"), however, the common
shares will be "foreign property" to such Tax Deferred Plans
and will be subject to the foreign property limits set out
in Part XI of the INCOME TAX ACt (Canada);
In giving the opinions contemplated above, counsel to the Corporation
shall be entitled to rely, where appropriate, upon such opinions of
local counsel that counsel to the Corporation opines to the Agent are
in form and substance satisfactory to counsel to the Corporation and
that the Agent is entitled to rely on, and shall be entitled, as to
matters of fact, a certificate of fact of the Corporation signed by
officers in a position to have knowledge of such facts and their
accuracy and certificates of such public officials and other persons
as are necessary or desirable;
(h) the Agent shall have received from Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP, U.S. securities counsel for the Corporation, an
opinion with respect to the effectiveness and compliance as to
form of the Registration Statement and consents, approvals or
filings required in connection with the transactions
contemplated by this Agreement;
(i) the Agent having received at Closing favourable legal opinions of
the Subsidiaries' counsel addressed to the Agent and counsel to
the Agent, acceptable in all reasonable respects to counsel to
the Agent, to the effect that:
(i) each of the Subsidiaries is a corporation validly existing
under the laws of its jurisdiction of incorporation and is
qualified to carry on business and own its assets under the
laws of each jurisdiction in which it carries on business
and owns its assets;
(ii) each of the Subsidiaries has all requisite corporate
capacity, power and authority to carry on its business as is
now conducted by it and to own its assets; and
-22-
(iii) the Corporation is the registered holder of all of the
issued and outstanding shares in the capital of the
Subsidiaries, as set out in Schedule "B", hereto.
(j) the Subject Securities shall have been approved for listing on
the Toronto Stock Exchange and the Offered Shares and the
Over-Allotment Shares shall have been approved for listing on the
American Stock Exchange.
(k) the Corporation shall have performed each of the covenants
referred to in Section 5 hereof to be performed by it at or prior
to the Time of Closing.
8. CLOSING - The purchase and sale of the Shares (the "Closing") shall be
completed at the offices of counsel to the Corporation, Meighen, Demers, Suite
1100, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx at 8:00 a.m. (Toronto time) (the
"Time of Closing") on or before July 14, 1998 (the "Closing Date"), or such
later date not later than July 31, 1998 as the parties may agree.
At the Time of Closing, the Corporation shall deliver to the Agent:
(a) certificates representing the Offered Shares duly registered as
the Agent shall have directed, not less than 48 hours prior to
the Time of Closing;
(b) the requisite legal opinions and certificates as contemplated in
Section 6 hereof;
(c) the Compensation Option; and
(d) such further documentation as may be contemplated herein or as
counsel to the Agent or the applicable regulatory authorities may
reasonably require;
against payment of the aggregate purchase price for the Shares by certified
cheques or bank drafts payable to the Corporation in trust or as directed by
the Corporation and payment of the purchase price of the Secondary Shares by
certified cheques or bank drafts payable to the Secondary Shareholders or as
directed by the Secondary Shareholders.
9. EXPENSES - The Corporation will pay all expenses and fees incurred in
connection with the Public Offering, including without limitation, the
reasonable fees and expenses, and applicable GST, incurred by the Agent and of
Agent's counsel; all expenses of or incidental to the creation, issue or
distribution and qualification of the Subject Securities, the fees and expenses
of the Corporation's counsel, and all costs
-23-
incurred in connection with the preparation of documentation and certificates
relating to the Public Offering including registrar and transfer agent fees,
legal fees, filing fees, local counsel fees, share certificate fees, listing
fees and printing costs. Fees and expenses incurred by the Agent or on its
behalf including fees and expenses of the Agent's counsel shall be payable by
the Corporation immediately upon receiving an invoice therefor from the Agent
and shall be payable by the Corporation whether or not the Public Offering or
any part thereof is completed, subject to the limitations set forth above. The
Agent shall be entitled to deduct such fees and expenses, together with the
Commission, as contemplated herein, from the proceeds available to the
Corporation from the Public Offering, on a net cheque basis.
10. RESTRICTION ON FURTHER EQUITY ISSUES - Provided that an aggregate of
3,000,000 Offered Shares are sold pursuant to the Public Offering and the
Secondary Offering, for a period of 120 days following the Closing Date, the
Corporation shall not, without the prior written consent of the Agent, which
consent shall not be unreasonably withheld, issue, sell or otherwise dispose of
or announce the issuance, sale or disposition of any of its common shares or
other securities, provided that the Corporation may:
(i) issue its common shares issuable upon the exercise of outstanding
convertible securities as described in the Registration Statement
and the Prospectuses;
(ii) issue its common shares issuable upon the exercise of additional
stock options that the Corporation may grant from time to time to
directors, officers, employees and other service provides; and
(iii) in one or more transactions, issue its common shares (or
securities convertible into or exchangeable for such common
shares) in connection with any merger, consolidation or
amalgamation with, or any acquisition of assets or securities
(through any tender or exchange offer, presently negotiated or
otherwise) of any person or persons.
11. INDEMNITIES - The Corporation hereby covenants and agrees to protect,
indemnify and hold harmless the Agent and its directors, officers and employees
and agents (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") from and against all expenses, losses (except for loss of
profits), claims, costs, damages or liabilities which they may suffer or incur
caused by or arising directly or indirectly by reason of:
(i) any information or statement (except any information or statement
relating solely to the Agent) contained in the Registration
Statement, the Preliminary Prospectuses, the Prospectuses or any
Supplementary Material being or being alleged to be a
misrepresentation;
-24-
(ii) the Corporation not complying with any requirement of any
Canadian or U.S. securities laws or regulatory requirements of
the Qualifying Jurisdictions or the United States in connection
with any part of the Public Offering or the Secondary Offering;
(iii) the Selling Shareholders not complying with any requirement of
any Canadian or U.S. securities laws or regulatory requirements
of the Qualifying Jurisdictions or the United States in
connection with any part of the Secondary Offerings;
(iv) the omission to state in the Registration Statement, the
Preliminary Prospectuses, the Prospectuses or any Supplementary
Material a material fact required to be stated therein or
necessary to make the statements contained therein not misleading
in light of the circumstances under which they were made (except
the omission to state a material fact relating solely to the
Agent);
(v) any order made or any inquiry, investigation or proceeding
commenced or threatened by any regulatory authority based upon an
allegation that any untrue statement or alleged omission or any
misrepresentation or alleged misrepresentation in the
Registration Statement, the Preliminary Prospectuses, the
Prospectuses or any Supplementary Material exists (except
information and statements relating solely to the Agent) which
prevents or restricts the trading in or distribution of the
Subject Securities;
(vi) the material breach, inaccuracy or non-performance of or by any
of the Corporation or the Selling Shareholders of any
representation, warranty or covenant of the Corporation or the
Selling Shareholders contained in this agreement.
If any action or claim shall be asserted against an Indemnified Party in
respect of which indemnity may be sought from the Corporation pursuant to the
provisions hereof, or if any potential claim contemplated by this Section shall
come to the knowledge of an Indemnified Party, the Indemnified Party shall
promptly notify the Corporation in writing of the nature of such action or claim
(provided that any failure to so notify shall not affect the Corporation's
liability under this Section unless such delay has prejudiced the defence to
such action or claim). The Corporation shall be entitled but not obliged to
participate in or assume the defence thereof, provided, however that the defence
shall be through legal counsel acceptable to the Indemnified Party, acting
reasonably. In addition, the Indemnified Party shall also have the right to
employ separate counsel in any such action and participate in the defence
thereof, and the fees and expense of such counsel shall be borne by the
Indemnified Party unless: (i) the employment thereof has been specifically
authorized in writing by the Corporation; (ii) the Indemnified Party has been
advised by counsel acceptable to the Corporation,
-25-
acting reasonably, that representation of the Corporation and the Indemnified
Party by the same counsel would be inappropriate due to actual or potential
differing interests between them; or (iii) the Corporation has failed within a
reasonable time after receipt of such written notice to assume the defence of
such action or claim. It is understood and agreed that the Corporation shall
not, in connection with any suit in the same jurisdiction, be liable for the
legal fees and expenses of more than one separate legal firm to represent the
Indemnified Parties. Neither party shall effect any settlement of any such
action or claim or make any admission of liability without the written consent
of the other parties, such consent not to be unreasonably withheld or delayed.
The indemnity hereby provided for shall remain in full force and effect and
shall not be limited to or affected by any other indemnity in respect of any
matters specified in this Section obtained by the Indemnified Party from any
other person.
To the extent that any Indemnified Party is not a party to this Agreement
the Agent shall obtain and hold the right and benefit of this Section in trust
for and on behalf of such Indemnified Party.
The rights of indemnity contained in this Section 11 shall not apply to any
Indemnified Party if the Corporation has complied with Section 5 and the person
asserting any claim contemplated by this Section 11 was not provided with a copy
of any amendment or other document which corrects any misrepresentation or
alleged misrepresentation which in the case of any such claim was required,
under applicable securities laws, to be delivered to such person by the Agent
and provided further that by the delivery of such amendment or document such
person would have no grounds for such claim.
12. CONTRIBUTION - In the event that, for any reason, the indemnity provided
for in Section 11 hereof is illegal or unenforceable, the Agent and the
Corporation shall contribute to the aggregate of all losses, claims, costs,
damages, expenses or liabilities (except loss of profits) of the nature provided
for in Section 11 hereof such that the Agent shall be responsible for that
portion represented by the percentage that the aggregate Commission payable to
the Agent hereunder bears to the gross proceeds from the Public Offering and the
Corporation shall be responsible for the balance. Notwithstanding the
foregoing, a person guilty of fraudulent misrepresentation shall not be entitled
to contribution from any 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 another party or parties under this Section 12, notify such
party or parties from whom contribution may be sought. In no case shall such
party from whom contribution may be sought be liable hereunder unless such
notice shall have 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 Corporation or the Agent may have
by statute or otherwise by law.
-26-
13. TERMINATION RIGHTS - The Agent shall be entitled, at its option, to
terminate all of its obligations under this Agreement, and the obligations of
any person from whom the Agent has solicited an order to purchase any securities
of the Corporation, by notice to that effect delivered to the Corporation if
there shall have occurred or occur;
(i) any material adverse change, financial or otherwise, (actual,
proposed or prospective, whether factual or otherwise) in the
business, affairs, operations, assets, liabilities (contingent or
otherwise), prospects or capital of the Corporation; or
(ii) a material change or change in a material fact or new material
fact such as is contemplated in subsection 5(h) hereof;
which, in the opinion of the Agent, would be expected to have an
adverse effect on the business of the Corporation, market price or
value of the Subject Securities,
(iii) the state of the financial markets is such that in the opinion
of the Agent it would be unprofitable to offer or market or
continue to offer or market the Offered Shares for sale
pursuant to the Public Offering and the Secondary Offering;
(iv) there should develop, occur or come into effect any occurrence of
national or international consequence or any action, law or
regulation, inquiry or other occurrence of any nature whatsoever
which, in the opinion of the Agent seriously affects or will
seriously affect the business of the Corporation;
(v) the Corporation is in breach of any material term of this
Agreement;
(vi) any order to cease trading in the securities of the Corporation
is made by a competent securities regulatory authority and such
order is still in effect at the Closing Date;
(vii) any representation or warranty made by any of the Corporation
or the Selling Shareholders in this Agreement is or becomes
false in any material way, as determined by the Agent in its
discretion acting reasonably, prior to the Closing Date; or
(viii) any inquiry or investigation (whether formal or informal) in
relation to the Corporation or the Corporation's directors or
officers is commenced, threatened by any officer or official of
the SEC or any of the securities commissions in Canada or by any
officer or official of any other regulatory authority that is not
settled by the Closing Date.
-27-
If the Agent terminates this Agreement pursuant to the occurrence of an
event in clause (ii) above such notice shall be delivered to the Corporation
within two (2) Business Days of the date of the Agent being advised in writing
of such event. If the Agent terminates this Agreement pursuant to this Section
13 there shall be no further liability on the part of the Agent or of the
Corporation to the Agent, except in respect of any liability which may have
arisen or may thereafter arise under Sections 9, 11 or 12 hereof.
The right of the Agent to terminate its obligations under this Agreement is
in addition to such other remedies as it may have or has in respect of any
default, act or failure to act of the Corporation or the Selling Shareholders in
respect of any of the matters contemplated by this Agreement. The Agent may
waive, in whole or in part, or extend the time for compliance with, any term and
conditions without prejudice to its rights in respect of any other terms and
conditions or any other or subsequent breach or non-compliance provided,
however, that any waiver or extension must be in writing and signed by the Agent
in order to be binding upon it.
14. NOTICES - Any notice under this Agreement shall be given in writing and
either delivered, telecopied or mailed by prepaid registered post to the party
to receive such notice at the address or telecopy numbers indicated below:
to the Corporation or the Selling Shareholders:
CVF Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx
X.X. 00000
Attention: Xx. Xxxxxxx Xxxxxx, President and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx
Xxxxx 0000, Xxx 00
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xx. X.X. Xxxxx
Fax: (000) 000-0000
to the Agent or any Indemnified Party or any registered dealer
appointed by the Agent pursuant to Section 2 hereof:
-00-
Xxxx, Xxxxxx & Co. Limited
Xxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xx. Xxxx X. XxXxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxxxx
Scotia Plaza, Suite 2100
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xx. Xxxxx Xxxxxxx
Fax: (000) 000-0000
or such other address or telecopy number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; if such notice is telecopied (with receipt
confirmed), it shall be effective on the Business Day following the date such
notice is telecopied; if such notice is sent by mail, it shall be effective four
(4) Business Days following the date of mailing, excluding all days when normal
mail service is interrupted.
15. ALTERNATIVE TRANSACTION - Should the Corporation enter into an
Alternative Transaction prior to the Closing Date, the Corporation shall pay
to the Agent a fee equal to $25,000.00. An "Alternative Transaction" means
an issuance of securities of the Corporation in excess of 5% of the total
value or number of securities currently outstanding or a business transaction
involving the Corporation including, without limitation, a merger,
amalgamation, reverse take-over, arrangement, reorganization, joint venture,
sale of all or substantially all assets, exchange of assets or any similar
transaction other than issuances of securities pursuant to or in connection
with the transaction or transactions referred to herein.
16. SURVIVAL - All representations, warranties, and agreements of the
Corporation and the Selling Shareholders contained herein or contained in any
document submitted pursuant to this Agreement or in connection with the Public
Offering and the Secondary Offering shall survive the sale of the Offered Shares
and the issuance of the Optioned Securities and shall continue in full force and
effect unaffected by any subsequent disposition of the Subject Securities, for a
period of three years from the Closing Date.
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17. ASSIGNMENT - The Agent may not assign this Agreement or any rights
hereunder without the prior written consent of the Corporation.
18. ENTIRE AGREEMENT - The provisions herein contained constitute the entire
agreement between the parties hereto and supersede all previous communications,
representations, understandings and agreements between the parties with respect
to the subject matter hereof, whether verbal or written, including without
limitation the engagement letter between the Corporation and the Agent dated and
accepted by the Corporation on November 2, 1997, as amended.
19. COUNTERPARTS - The execution of this Agreement may be executed in any
number of counterparts all of which when taken together shall be deemed to be
one and the same document and not withstanding their actual date of execution
shall be deemed to be dated as of the date first above written.
20. TIME OF THE ESSENCE - Time shall be of the essence of this agreement.
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21. GENERAL - The Agreement shall be governed by and interpreted 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 non-exclusive
jurisdiction of the courts of the Province of Ontario. Time shall be of the
essence hereof.
If the above is in accordance with your understanding, please sign and
return to the Agent a copy of this letter, whereupon this letter and your
acceptance shall constitute a binding agreement among the Corporation, the
Selling Shareholders, and the Agent.
XXXX, XXXXXX & CO. LIMITED
Per: ___________________________________
The above offer is hereby accepted and agreed to as of the date first above
written.
CVF CORPORATION
Per: ___________________________________
C.A. XXXXXXX ENTERPRISES INC.
Per: ___________________________________
------------------------- -----------------------------------
Witness Xxxxxx Xxxxxxxx