EXHIBIT 10.18
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Agency Agreement
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This Agreement is dated for reference July 22, 1999.
BETWEEN
THE NEPTUNE SOCIETY, INC. of 000 X.X. 0xx Xxxxxx, Xxxxx #000, Xxxx
Xxxxx, Xxxxxxx, 00000
(the "Company")
AND
STANDARD SECURITIES CAPITAL CORPORATION, 00 Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxx X0X 0X0
(the "Agent")
WHEREAS:
A. The Company wishes to privately sell 1,166,666 common shares at $6.00 USD
per share;
B. The Company intends to file with the United States Securities and Exchange
Commission a Form S-1 registration statement to register the resale of the
Common Shares; and
C. The Company wishes to appoint the Agent to distribute the 1,166,666 common
shares and the Agent is willing to accept the appointment on the terms and
conditions of this Agreement.
THE PARTIES to this Agreement therefore agree:
DEFINITIONS
1. In this Agreement:
(a) "1933 Act" means the United States Securities Act of 1933, as amended;
(b) "Closing Dates" means each of the First Closing Date, the Second
Closing Date and the Final Closing Date;
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(c) "Common Shares" means the 1,166,666 common shares in the capital of
the Company to be offered and sold in the Private Placement;
(d) "Directed Selling Efforts" means "Directed selling efforts" as defined
in Rule 902(c) of Regulation S of the 1933 Act;
(e) "Effective Date" means the first day that the Registration Statement
becomes effective to register the resale of the Common Shares;
(f) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended;
(g) "Final Closing Date" means January 31, 2000 or such other date as the
Company and the Agent may agree;
(h) "First Closing Date" means August 6, 1999 or such other date as the
Company and the Agent may agree;
(i) "First Tranche" means a 666,666 of the Common Shares to be purchased
by the Subscribers and issued by the Company on the First Closing
Date;
(j) "Initial Filing Date" means the date which is 60 days from the date of
the Final Closing Date;
(k) "Issue Price" means $6.00 USD per Common Share;
(l) "Private Placement" means the sale of the Common Shares on the terms
and conditions of this Agreement;
(m) "Registration Statement" means a Form S-1 under the 1933 Act;
(n) "Regulation S" means Regulation S adopted by the SEC under the 1933
Act;
(o) "Reset Price" means the average closing bid price of the Company's
common shares during the period from the 1st to the 90th day following
the Effective Date but in any event will not be less than $3.00 USD
per common share;
(p) "Reset Share" means the common shares of the Company that may be
issuable pursuant to the formula as set out in paragraph 13 of this
Agreement;
(q) "Restricted Period" means the one year period commencing on the
Closing Date;
(r) "SEC" means the United States Securities and Exchange Commission;
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(s) "Second Closing Date" means October 31, 1999 or such other date as the
Company and the Agent may agree;
(t) "Second Tranche" means 166,667 of the Common Shares to be purchased by
the Subscribers and issued by the Company on the Second Closing Date;
(u) "Securities" means the Common Shares and the Reset Shares, if any;
(v) "Share Certificates" means the certificates of the Company
representing the Common Shares to be issued on each of the Closing
Dates in the names and denominations reasonably requested by the Agent
or the Subscribers;
(w) "Subscribers" means the purchasers of the Common Shares in the Private
Placement;
(x) "Subscription Agreement" means the agreement to be duly completed and
signed by the Purchasers in connection with the sale of the Common
Shares;
(y) "Third Tranche" means 333,333 of the Common Shares to be purchased by
the Subscribers and issued by the Company on the Final Closing Date;
and,
(z) "United States" means the United States of America, its territories
and possessions, any State of the United States, and the District of
Columbia; and,
(aa) "U.S. Person" means "U.S. Person" as that term is defined in Rule
902(o) of Regulation S of the 1933 Act.
APPOINTMENT OF AGENT
2. The Company appoints the Agent as its exclusive agent and the Agent accepts
the appointment and agrees to act as the exclusive agent of the Company to
use its best efforts to find and introduce to the Company potential
investors to purchase the Common Shares at a purchase price of $6.00 USD
per common share.
3. The Company will reserve or set aside sufficient shares in its treasury to
issue the Common Share and Reset Shares, if any.
AGENT'S FEE
4. The Company shall pay to the Agent a fee of 10% of the gross proceeds of
the Private Placement payable by the Company to the Agent as follows:
(a) USD $500,000.00 on the Second Closing Date; and,
(b) USD $200,000.00 on the Final Closing Date.
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OFFERING RESTRICTIONS
5. The Company represents and warrants to, and covenants and agrees with, the
Agent as follows:
(a) Neither the Company nor any of its affiliates, nor any person acting
on their behalf, has made or will make:
i. any offer to sell, or any solicitation of an offer to buy any
Securities to a U.S. Person or a person in the United States, or
ii. any sale of Securities unless, at the time the buy order was or
will have been originated, the purchase was outside the United
States or the Company, its affiliates, and any person acting on
its or their behalf reasonably believed that the purchaser was
outside the United States;
(b) During the period in which the Securities are offered for sale,
neither the Company nor any of its affiliates, nor any person acting
on its or their behalf has made or will make any Directed Selling
Efforts in the United States, or has taken or will take any action
that would cause the exemptions afforded by Regulation S to be
unavailable for offers and sales of the Securities;
(c) The Company undertakes and agrees that it will refuse to register any
transfer of any Securities offered and sold pursuant to this Agreement
in reliance upon Regulation S unless such Securities are transferred
in accordance with the provisions of Regulation S, pursuant to
registration under the 1933 Act or pursuant to an available exemption
for the registration under the 1933 Act;
(d) Neither the Company nor any of its predecessors or affiliates has been
subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminary or permanently enjoining such
person for failure to comply with Rule 503 of Regulation D concerning
the filing of a notice of sales on Form D;
(e) Neither the Company, any of its affiliates nor any person acting on
its or their behalf have engaged or will engage in any form of general
solicitation or general advertising (as the terms are used in
Regulation D under the 0000 Xxx) with respect to offers or sales of
the Securities in the United States, including advertisements,
articles, notices or other communications published in any newspaper,
magazine or similar media, or broadcast over radio or television, or
any seminar or meeting whose attendees have been invited by general
solicitation or general advertising;
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(f) The Company is not an "investment company" within the meaning of the
United States Investment Company Act of 1940; and
(g) Except with respect to the offer and sale of the Securities offered
hereby, the Company has not, since January 1, 1999, sold, offered for
sale or solicited an offer to buy any of its securities in the United
States or to a U. S Person in a transaction which, if integrated with
this offering of Securities, would result in a violation of this
registration requirement of applicable U.S. securities laws.
6. The Agent represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) The Agent acknowledges that the Securities have not been registered
under the 1933 Act and that such securities are being offered and sold
outside the United States in reliance upon Rule 903 of Regulation S or
in reliance upon an exemption from registration provided under Rule
506 or Regulation D under the 1933 Act;
(b) Neither the Agent nor any of its affiliates nor any person acting on
the Agent's behalf or on behalf of any of their affiliates has made or
will make:
i. any offer to sell or any solicitation of an offer to buy, any
Securities to any U.S. Person or person in the United States, or
any sale of Securities to any purchaser unless, at the time the
buy order was or will have been originated, the purchaser was
outside the United States, or such Agent, affiliate or person
acting on behalf of either reasonably believed that such
purchaser was outside the United States;
ii. any Directed Selling Efforts in the United States with respect to
the Securities; or,
iii. any offer to sell or any solicitation of an offer to buy, by any
form of general solicitation or general advertising (as those
terms are used in Regulation D under the 0000 Xxx) or in any
manner involving a public offering within the meaning of Section
4(2) of the 1933 Act, any of the Securities;
(c) At or prior to confirmation of sale of the Securities, the Agent will
send to each distributor (as defined in Regulation S) , dealer or
person receiving a selling concession, fee or other remuneration that
purchases Securities during the Restricted Period a confirmation or
notice to substantially the following effect:
"The Securities have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of
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a U.S. persons (i) as part of their distribution at any time or
(ii) otherwise until one year after the later of the commencement
of the offering and the closing date, except in either case in
accordance with Regulation S (or Rule 144A, if available) under
the Securities Act. Terms used herein have the meaning given to
them in Regulation S."
(d) The Agent agrees that neither it nor any of its affiliates will engage
in any hedging transactions with respect to the Securities during the
Restricted Period.
7. The Company and the Agent agree that the Common Shares offered will be
issued in three tranches with the First Tranche to be issued on the First
Closing Date, the Second Tranche to be issued on the Second Closing Date;
and the Third Tranche to be issued on the Final Closing Date.
REGISTRATION PROVISION
8. The Company shall use its best efforts to file on or before the Initial
Filing Date, a Registration Statement with the SEC to register the resale
of the Common Shares without restriction, except that, the selling
shareholders must provide a buyer with the prospectus contained within the
Registration Statement.
9. The Company shall use its best efforts to cause the Registration Statement
to be effective as soon as possible from the Initial Filing Date, but in
any event within 120 days for the Initial Filing Date.
10. The Company shall provide the Subscribers a copy or copies of the
prospectus, as reasonably requested, or to the Agent on behalf of the
Subscribers, at the sole expense of the Company
11. The Company shall file amendments to the Registration Statement with the
SEC that may be required from time to time to maintain the effectiveness of
the Registration Statement from the Effective Date to and including January
31, 2001 or such earlier date when the Company receives written notice from
the Agent that all of the Common Shares have been sold.
RESALE RESTRICTIONS
12. The Agent further acknowledges and agrees that the Securities may also be
subject to resale restrictions in jurisdictions outside of the United State
and Canada of which the Company makes no representations or promises to
qualify the Common Shares and/or the Reset Shares, if any, for sale or
resale in or from such jurisdictions.
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13. The Agent acknowledges and agrees that the Share Certificates and the
certificates representing the Reset Shares, if any, will bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"), AND MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904
OF REGULATION S UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN
COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS, OR (D) WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY, PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
RESET RIGHTS
14. The Issue Price will be subject to reset which may result in the Company
issuing additional shares to the Subscribers according to the following
formula:
1,166,666 Common Shares x [(Issue Price x 125%) - Reset Price] = Total Reset Shares
-------------------------------------------------------------
Reset Price
15. If the Total Reset Shares as calculated using the formula above is
negative, it shall be deemed to be zero.
16. The Company will issue the Reset Shares, if any, to the Agent on or before
the 120th day following the Effective Date be delivery of share
certificates of the Company in the name and denominations reasonably
specified by the Agent in writing to the Company. Such notice must be
received by the Company on or before the 100th day following the Effective
Date.
CLOSING AND CLOSING DOCUMENTS
17. The Closing will take place at 1:00 p.m. (Toronto time) on each of the
Closing Dates.
18. If the Company has satisfied all of its obligations under this Agreement,
the Agent will, on the Closing, pay the Proceeds to the Company against
delivery of the Share Certificates.
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENT
19. The Agent covenants with the Company that it will:
(a) not solicit offers to purchase or sell the Common Shares so as to
require registration thereof or filing of a prospectus with respect
thereto under, or as to knowingly breach in any material respect, the
laws of any jurisdiction including, without limitation, the United
States of America, or any state there of, Canada or the United
Kingdom, and not solicit offers to purchase or sell the Common Shares
in any jurisdiction outside of the USA where the solicitation or sale
of the Common Shares would result in any ongoing disclosure
requirements in such jurisdiction, or any registration requirements in
such jurisdiction, except for the filing of a notice or report of
solicitation or sale, or where the Company may be subject to liability
in connection with the sale of the Common Shares which is materially
more onerous than its liability under the 1933 Act;
(b) obtain from each Purchaser an executed Subscription Agreement in a
form reasonably acceptable to the Company and to the Agent relating to
the transaction herein contemplated, together with all documentation
as may be necessary in connection with the subscription for the Common
Shares; and
(c) refrain from advertising the Offering in printed media of general and
regular paid circulation, radio or television.
20. The Agent represents and warrants to the Company that:
(a) it is a valid and subsisting entity under the laws of the Province of
Ontario;
(b) it is a securities dealer registered under the Ontario Securities Act;
and
(c) it will only effect sales under the offering to persons outside the
United States of America and outside of Canada, and in jurisdiction
where the Securities may be lawfully offered and sold.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
21. The Company hereby represents, warrants and covenants to and with the Agent
that:
(a) the Company and each of the subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under the laws of
the jurisdictions in which they are incorporated , continued or
amalgamated;
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(b) the Company and each of the subsidiaries is conducting its business in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on and, except for
Neptune Management Corp's funeral establishment licenses and Heritage
Alternatives Inc. crematory license which are pending transfer from
their previous owners by the State of California, the Company and each
of the subsidiaries 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 valid and
subsisting and in good standing, except in respect of matters which do
not and will not result in any material adverse change to the
business, business prospects or condition (financial or otherwise) of
the Company and its Subsidiaries, taken as a whole;
(c) the Company legally and beneficially owns, directly or indirectly, all
of the issued and outstanding shares in the capital of each of its
subsidiaries and in each case, except for the pledge of the shares of
Neptune Management Corp., Heritage Alternatives Inc. and Neptune
Pre-need Plan Inc. under the terms and condition of a Purchase
Agreement dated for reference March 26, 1999, such shares are free and
clear of all mortgages, liens, charges, pledges, security interest,
encumbrances, claims or demand of any kind whatsoever. All of such
shares have been duly authorized and validly issued and are
outstanding as fully paid and non-assessable shares and no person has
any right, agreement or option, present or future, contingent or
absolute or any right capable of becoming a right, agreement or
option, for the purchase from the Company or any of its subsidiaries
an interest in any such shares or for the issue or allotment of any
unissued shares in the capital of any of its subsidiaries or any other
security convertible into or exchangeable or excisable for any such
shares;
(d) the authorized capital of the Company is 50,000,000 common shares and
the issued capital of the Company is 12,000,000 common shares, and
except for options to purchase commons shares currently outstanding to
employees of the Company and its subsidiaries, no person has any
right, agreement or option, present or future, contingent or absolute
or any right capable of becoming a rights, agreement or option, for
the issue or allotment of any unissued shares in the capital of the
Company or any other security convertible into or exchangeable or
exercisable for any such shares or to require the Company to purchase,
redeem or otherwise acquire any of the issued and outstanding common
shares;
(e) there has not been any material change in the assets, liabilities or
obligations (absolute, accrued, contingent or otherwise) of the
Company or any of the subsidiaries that has not been publicly
disclosed;
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(f) there has not been any material change in the capital stock or
long-term debt of the Company or any of the subsidiaries that has not
been publicly disclosed;
(g) there has not been any material change in the business, business
prospects, condition (financial or otherwise) or results of the
operations of the Company or any of the subsidiaries that has not been
publicly disclosed;
(h) the Company and each of the subsidiaries have carried on business in
the ordinary course;
(i) the audited combined financial statements for the year ended December
31, 1998 and the unaudited financial statement for any subsequent
period in respect of which such statements have been delivered by the
Company to its security holders prior to the Closing Date present
fairly the financial condition of the Company and its subsidiaries for
the period then ended;
(j) the Company has complied and will come fully with the requirements of
all applicable corporate and securities laws, including without
limitation, the 1933 Act in relation to the issue and trading of its
securities and in all matters relating to the Private Placement;
(k) neither the Company nor any of its subsidiaries is in breach or
violation of or default under (and no event has occurred and is
continuing which with the giving of notice or lapse of time or both
would constitute an event of default under), and neither the execution
and delivery by the Company of this Agreement or the Subscription
Agreements, nor the consummation of the transactions contemplated
hereby or thereby nor the due observance and performance by the
Company of its covenants or in breach or violation of, or constitutes
or will constitute a default (or any event which with the giving of
notice or lapse of time or both would constitute an event of default)
under, any of the terms or provisions of the constating documents
resolutions of the directors or shareholders of the Company or any of
its subsidiaries, or any of the terms or provisions of any agreement
or instrument of which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of their respective properties or assets are subject, the
effect of any of which breaches, violations, conflicts or defaults,
singularly or in the aggregate, might materially adversely affect the
financial condition, results of operations, business or prospects of
the Company and its subsidiaries, taken as a whole, or would impair
the ability of the Company to consummate the transactions contemplated
hereby or to duly observe and perform any of its covenants or
obligations contained herein or in the Subscription Agreements;
(l) except as disclosed in Schedule "A" to this Agreement, the Company nor
its subsidiaries is a party to any actions, suits or proceedings which
could materially
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affect its business or financial condition, and no such actions, suits
or proceeding have been threatened or, to the best of the knowledge of
the Company are contemplated;
(l) this Agreement has been authorized by all necessary corporate action
on the part of the Company; and
(m) the Company shall deliver to the Agent and the Subscriber on the first
Closing Date a legal opinion in a form satisfactory to the Agent and
the Company.
EXPENSES OF AGENT
22. The Company will pay all of the expenses of the Private Placement and the
Registration Statement and all the expenses reasonably incurred by the
Agent in connection with the Private Placement and the Registration
Statement including, without limitation, the fees and expenses of the
solicitors for the Agent.
23. The Agent, may from time to time, render accounts for its expenses incurred
in connection with the Private Placement to the Company for payment on or
before the dates set out in such accounts.
24. The Company authorizes the Agent to deduct its reasonable expenses in
connection with the Private Placement from the proceeds of the Private
Placement, including expenses for which an account has not yet been
rendered.
INDEMNITY
25. The Company will indemnify the Agent, its affiliates and its officers,
directors, employees and agents and save them harmless against all losses,
claims, damages, or liabilities:
(a) existing (or alleged to exist) by reason of an untrue statement
contained in the Registration Statement, Subscription Agreement or
other written or oral representation made by the Company to an
investor or potential investor in connection with the Private
Placement or by reason of the omission to state any fact necessary to
make the statement not misleading (except for information and
statement referring solely to the Agent);
(b) arising directly or indirectly out of any order made by any regulatory
authority based upon an allegation that any such untrue statement or
omission exists (except information and statement referring solely to
the Agent), that trading in or distribution of the Securities is to
cease;
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(c) resulting from the Company's failure to obtain the requisite
regulatory approval to the Private Placement or to the Registration
Statement;
(d) resulting form the breach by the Company of any of the terms of this
Agreement;
(e) resulting from any representation or warranty made by the Company
herein not being true or ceasing to be true;
(f) if the Company fails to issue and deliver the certificates for the
Securities in the form and denominations satisfactory to the agent at
the time and place required by the Agent with the result that the
completion of a sale of the Common Shares does not take place; or
(g) if, following the completion of a sale of any of the Securities, a
determination is made by any competent authority setting aside the
sale, unless that determination arises out an act or omission of the
Agent.
26. If any action or claim is brought against the Agent in respect of which
indemnity may be sought from the Company pursuant to this Agreement, the
Agent will promptly notify the Company in writing.
27. The Company will assume the defence of the action or claim, including the
employment of counsel and the payment of all expenses.
28. The Agent will have the right to employ separate counsel, and the Company
will pay the fees and expenses of such counsel.
NOTICE
29. Any notice under this Agreement will be given in writing and must be
delivered, sent by telex, telegram or telecopier or mailed by prepaid post
and addressed to the party to which notice is to be given at the address
indicated above, or an another address designated by either party in
writing.
30. If notice is sent by telex, telegram or telecopier or is delivered, it will
be deemed to have been given at the time of transmission or delivery.
31. If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
TIME
32. Time is of the essence of this Agreement.
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SURVIVAL OF REPRESENTATIONS AND WARRANTIES
33. The representations, warranties, covenants of the Company contained n this
Agreement will survive the closing of the purchase and sale of the
Securities.
ENUREMENT
34. This Agreement enures to the benefit of and is binding on the parties to
this Agreement and their successors and permitted assigns.
HEADINGS
35. The headings in this Agreement are for convenience or reference only and do
not affect the interpretation of this Agreement.
COUNTERPARTS
36. This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original and all of which will constitute one
agreement, effective as of the reference dated given above.
GOVERNING LAW
37. This Agreement shall be construed with, and the rights of the parties shall
be governed by, the laws of the Province of Ontario, and each of the
parties irrevocably attorns to the jurisdictions of the court of Ontario.
This document was executed and delivered as of the date given above.
THE NEPTUNE SOCIETY, INC.
Per: /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx Xxxx, President and Director
STANDARD SECURITIES CAPITAL CORPORATION
Per: /s/ [Illegible]
-------------------------------------------
Authorized Signatory
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Schedule A
Agency Agreement between The Neptune Society, Inc. and
Standard Securities Capital Corp. dated for reference July 22, 1999
Listing of Actions, Suits or Proceedings
Actions/Claims
Case No. BC201045 Filed November 19, 1998 between Xxxxx Vogtpowell and Xxxxx
Xxxxxxxx v. Neptune-Los Angeles, Ltd., Neptune-San Xxxxx Ltd., Heritage
Alternatives, Ltd. Xxxxxxx Xxxxxxxxx
Case No. BC202774 File December 22, 1998 between Neptune Society of Orange
County, Neptune Society of Fresno, Neptune Society of Central California v.
Neptune Management Corporation, A California Corporation; Neptune Society of Los
Angeles, Ltd., A California Ltd. Partnership, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxx
Case No. 233025-R4 File January 23, 1997 between The People of the State of
California v. Neptune Society of Los Angeles, Ltd., Neptune Society of Los
Angeles, San Xxxxx, Neptune Society of Los Angeles, Burbank, Neptune Society of
Santa Xxxxxxx, Heritage Crematorium, Heritage Alternatives, Inc. and Does 1
through 10 inclusive
Pending Actions/Claims
Neptune Society of Los Angeles - Xxxxxx Xxxx claimant, Xxxxxxx Xxxx decedent,
DOD June 15, 1999, Insurer: Evanston Insurance
