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November 30, 2004
CONFIDENTIAL
Hydrogenics Corporation
5985 McLaughlin Road
Mississauga, Ontario
Canada
L5R 1B8
Attention: Gary Brandt, Chief Financial Officer
Dear Sirs:
We understand that Hydrogenics Corporation (the "Company" or "you") intends to make an offer in Canada (the "Offer") for all of the issued and outstanding common shares (the "Shares") of Stuart Energy Systems Corporation (the "Target"), pursuant to an offer to purchase, offering circular, letter of acceptance and transmittal and notice of guaranteed delivery (which together with any other documents used in connection with the Offer are collectively referred to as the "Offering Documents").
You have requested that CIBC World Markets Inc. ("CIBC World Markets") act on your behalf as dealer manager to obtain acceptances of the Offer by the holders of Shares. By your acceptance of this letter (the "Agreement") you hereby appoint us on an exclusive basis and we agree to act as your dealer manager in connection with the Offer in Canada.
CIBC World Markets agrees to form and manage a group consisting of members of the Investment Dealers' Association of Canada, including CIBC World Markets (the "Soliciting Dealer Group"), for the purpose of soliciting acceptances of the Offer from holders of Shares in Canada. As dealer manager of the Soliciting Dealer Group, CIBC World Markets will cause the members thereof to perform those services in connection with the Offer as are customarily performed by securities firms in connection with take-over bids and offers of like nature, including, but not limited to, using the reasonable efforts of the members to solicit the tender of Shares pursuant to the Offer.
This Agreement is subject to the terms and conditions set out below.
- 1.
- Preparation of Offering Documents. You will complete the preparation of the necessary documents for the Offer including, without limitation, the Offering Documents and French language versions thereof for use in Quebec, and fulfill all legal requirements to enable the Offer to be made to the holders of Shares in accordance with the provisions of all applicable securities legislation (collectively, the "Securities Legislation"). The Offer and the Offering Materials, as defined below, will be in form and substance satisfactory to us and to your counsel.
- 2.
- Delivery of Offering Documents. You will cause a copy of the Offering Documents to be mailed to each holder of record of Shares as at the date of the Offer. You will, without charge, provide us with a duplicate list showing the names and addresses of the holders of Shares to whom the Offering Documents were mailed. In addition, you will, without charge and in such number and at such locations as we may specify, for our purpose and for the purposes of the Soliciting Dealer Group, provide us with such number of copies of the Offering Documents and other documents and materials filed or to be filed in connection with the Offer pursuant to the Securities Legislation or otherwise with any federal, provincial, state or local governmental or regulatory authority (collectively, the "Offering Materials") as we may reasonably request. You hereby authorize us and the Soliciting Dealer Group to use the Offering Documents in connection with the Offer and our activities hereunder. All expenses incurred in connection with making the Offer, including costs of printing and mailing the Offering Documents, will be paid by you.
- 3.
- Accuracy of Documents. You represent and warrant to us that, as at the respective dates that the Offering Documents and Offering Materials are mailed to holders of Shares and filed with any regulatory authority, as the case may be, the Offering Documents and the Offering Materials as they may be amended or supplemented from time to time and any notice of change or notice of variation in respect thereof, comply and will comply with the Securities Legislation, and do not and will not contain any untrue, inaccurate or misleading statement of a material fact or omit to state any material fact required to be stated therein or that is necessary to make the statements made therein not misleading in light of the circumstances in which they were made.
- 4.
- Material Changes. You agree that if, during the term of the Offer, there occurs any material change or event, actual or contemplated, or you discover any fact or information, which you believe is material or would require the making of any amendment, supplement or revision to the Offering Documents or the Offering Materials under the Securities Legislation (an "Amendment"), you will (i) notify us in writing of the full particulars thereof, (ii) prepare, file and distribute such Amendment in the manner permitted or required pursuant to all applicable Securities Legislation or pursuant to any order obtained by you from the relevant authorities and/or courts in that regard, and (iii) provide us with such numbers of copies of the Amendment as we may reasonably request.
- 5.
- Notice of Change to Offer. You will notify us promptly (i) if you withdraw, rescind or terminate the Offer, and (ii) if any regulatory authority or any court requests an Amendment, issues any comments or orders concerning the Offer or requests additional information regarding the Offering Documents or the Offering Materials.
- 6.
- Agent for Offer. You will appoint CIBC Mellon Trust Company as depository and paying agent (the "Agent") in connection with the Offer and you will supply the Agent with the necessary funds required to effect payment for Shares under the Offer and the solicitation fees referred to in paragraph 10 below. In addition, you will instruct the Agent to provide our designated employees on a daily basis with such information as we may reasonably request as to the Shares deposited and the names of the holders of such deposited Shares. The fees of such agent will be for your account.
- 7.
- Fees. In connection with the Offer you will pay us a fee of $50,000 for managing the Soliciting Dealer Group, payable upon execution of this Agreement by you.
- 8.
- Counsel to CIBC World Markets. With your prior consent, we will be entitled to retain counsel of our choice, experienced in these types of matters and reasonably acceptable to you, to assist us in the discharge of our duties hereunder, the full cost of which shall be payable by you upon presentation of invoices which include reasonable particulars of the services provided to us.
- 9.
- Expenses and Taxes. You will reimburse us for all reasonable out-of-pocket expenses incurred by us in connection with our engagement hereunder, including, but not limited to, advertising, printing, copying, courier, telecommunications, travel, any other expenses and the fees and disbursements of experts retained by us, together with related Goods and Services Tax ("GST") and provincial sales taxes. Such reimbursements will be payable upon a request for payment thereof by us whether or the Offer is successfully completed. All or part of the amounts payable under this Agreement may be subject to GST or provincial sales tax. Where such taxes are applicable, an additional amount equal to the amount of such taxes owing will be payable by you.
- 10.
- Solicitation Fee. You will pay a solicitation fee of $0.02 per Share purchased under the Offer to any member of the Soliciting Dealer Group (including us) whose name appears in the appropriate place on the Letter of Acceptance and Transmittal bearing a Canadian address in connection with any Shares so purchased, provided that the solicitation fee in respect of any single beneficial owner of Shares shall not be less than $100 or more than $1,500 per broker or dealer whose name appears in the appropriate place on the Letter of Acceptance and Transmittal subject to a minimum of 5,000 shares per holder. Where Shares deposited and registered in a single name are beneficially owned by
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more than one person, the $100 minimum and $1,500 maximum amounts shall be applied separately in respect of each beneficial owner. The solicitation fee payable in respect of any Shares tendered or deposited under the Offer not identified with a particular member of the Soliciting Dealer Group shall be payable to us as dealer manager. The solicitation fee shall be payable by you within 20 days of the date of payment for Shares taken up under the Offer. You may require any such member of the Soliciting Dealer Group to furnish evidence satisfactory to you of such beneficial ownership before payment of such fee. We will have the discretion to waive or determine any such fee in the event of any dispute over any matter relating thereto.
- 11.
- Use of CIBC World Markets' Advice. You acknowledge and agree that all written and oral opinions, advice, analysis and materials provided by CIBC World Markets in connection with our engagement hereunder are intended solely for your benefit and for your internal use only in considering the proposed transaction and you covenant and agree that no such opinion, advice or material shall be used for any other purpose whatsoever or reproduced, disseminated, quoted from or referred to in whole or in part at any time, in any manner or for any purpose, without our prior written consent in each specific instance.
Any advice or opinions given by CIBC World Markets hereunder will be made subject to and will be based upon such assumptions, limitations, qualifications and reservations as we, in our sole judgment, deem necessary or prudent in the circumstances.
CIBC World Markets expressly disclaims any liability or responsibility by reason of any unauthorized use, publication, distribution of or reference to any oral or written opinions or advice or materials provided by us or any unauthorized reference to CIBC World Markets or this engagement.
- 12.
- Indemnity. You agree to indemnify and save harmless CIBC World Markets, its affiliates and their respective directors, officers, employees, partners, agents, advisors and shareholders in accordance with Schedule A hereto, which Schedule forms part of this Agreement and the consideration for which is the entering into of this Agreement. Such indemnity (the "Indemnity") shall be in addition to, and not in substitution of, any liability which you or any other person may have to CIBC World Markets or other persons indemnified pursuant to the Indemnity apart from such Indemnity. The Indemnity shall apply to all services contemplated herein, including, without limitation, any "Additional Services" contemplated by paragraph 13 hereof.
- 13.
- Additional Services. If we are requested to perform services in addition to those described above, the terms and conditions relating to such services will be outlined in a separate letter of agreement and the fees for such services will be in addition to fees payable hereunder, will be negotiated separately and in good faith and will be consistent with fees paid to North American investment bankers for similar services.
- 14.
- Term. This Agreement may be terminated by either you or us upon written notice, provided that it shall terminate upon the completion of the Offer. Your obligations pursuant to paragraphs 9, 10, 11, 12, 15, 16, and 17 shall survive the completion of our engagement hereunder, the termination or purported termination of this Agreement, or the termination, expiry or withdrawal of the Offer.
- 15.
- Our Liability. We shall not be subject to any liability to you for any act or omission on the part of any broker or dealer, other than ourselves, or any bank, trust company or information agent, or any other person, and in soliciting or obtaining tenders of Shares, no broker, dealer, bank, trust company or information agent shall be deemed to be acting as our agent and we shall not be deemed to be their agent.
- 16.
- Advertisements. You agree, if so requested by us, to include a reference to us and our role in any press release or other public communication issued by you with respect to the Offer. If any transaction is successfully completed, and provided CIBC World Markets is not in breach of any material provision hereof, we shall be permitted to publish, at our own expense, such advertisements or
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announcements relating to the services provided hereunder in such newspaper or other publications as we consider appropriate.
- 17.
- Successors and Assigns. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns provided that no party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.
- 18.
- Governing Law. This Agreement is made pursuant to and shall be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. You and we hereby submit to the non-exclusive jurisdiction of the courts of the Province of Ontario.
- 19.
- Acknowledgement of CIBC World Markets' Activities. CIBC World Markets is wholly-owned by Canadian Imperial Bank of Commerce which, together with its affiliates (collectively, "CIBC"), is a full-service financial institution that conducts a full range of investment banking, merchant banking, corporate banking and securities brokerage activities. CIBC provides loans, structured products, investment banking and financial advisory services to governments, corporations and institutions. In addition, CIBC has an active proprietary trading book that trades securities on behalf of CIBC that are issued in a wide range of public companies. In the ordinary course of its activities and subject always to compliance with applicable securities laws, CIBC may hold long or short positions, may trade or otherwise effect transactions for its own account or for the account of CIBC's clients, in debt or equity securities or related derivative securities of the Company, any acquiror of the Company or any other company that may be involved the transaction to which this engagement relates.
- 20.
- Notices. Any notice or other communication required or permitted to be given under this Agreement will be in writing and will be delivered to:
(a) in the case of the Company: | Hydrogenics Corporation 5985 McLaughlin Road Mississauga, Ontario Canada L5R 1B8 | |
Attention: Gary Brandt Facsimile No. (905) 361-3626 | ||
(b) in the case of CIBC World Markets: | CIBC World Markets Inc. BCE Place, 161 Bay Street Canada Trust Tower, 6th Floor Attention: James Osler Facsimile No. 416 594-7225 | |
with a copy to: | Robert J. Richardson, VP — Legal Facsimile No. (416) 304-4573 |
The parties may change their respective addresses for notices by notice given in the manner set out above. Any notice or other communication will be in writing, and unless delivered personally to the addressee or to a responsible officer of the addressee, as applicable, will be given by telecopy and will be deemed to have been given when (i) in the case of a notice delivered personally to a responsible officer of the addressee, when so delivered; and (ii) in the case of a notice delivered or given by telecopy, on the first business day following the day on which it is sent.
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If the foregoing is in accordance with your understanding, please indicate your agreement to the above terms and conditions by signing the enclosed copy of this Agreement and returning the same to us.
Yours very truly,
CIBC WORLD MARKETS INC.
*By: | /s/ JAMES OSLER Managing Director |
The foregoing is in accordance with our understanding and is agreed by us as of the date first written above.
HYDROGENICS CORPORATION
*By: | /s/ JONATHAN LUNDY Name: Jonathan Lundy Title: Vice President, General Counsel and Corporate Secretary |
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In consideration for CIBC World Markets Inc. ("CIBC World Markets") accepting the engagement (the "Engagement") pursuant to the engagement letter (the "Agreement") to which this Schedule A is attached, the Company (as defined in the Agreement) agrees to indemnify and save harmless CIBC World Markets, its affiliates and their respective directors, officers, employees, partners, agents, advisors and shareholders (collectively, the "Indemnified Parties" and individually, an "Indemnified Party") from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind (excluding loss of profits), including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, disbursements and taxes of their counsel in connection with any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the "Claims") to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly, the Engagement whether performed before or after the Company's execution of the Agreement and to reimburse each Indemnified Party forthwith, upon demand, for any legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim.
In the event and to the extent that a court of competent jurisdiction in a final judgement that has become non-appealable determines that an Indemnified Party was grossly negligent or guilty of wilful misconduct in connection with a Claim in respect of which the Company has advanced funds to the Indemnified Party pursuant to this indemnity, such Indemnified Party shall reimburse such funds to the Company and thereafter this indemnity shall not apply to such Indemnified Party in respect of such Claim. The Company agrees to waive any right the Company might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy or security or claim payment from any other person before claiming under this indemnity.
In case any action, suit, proceeding or claim is brought against an Indemnified Party or an Indemnified Party has received notice of the commencement of any investigation in respect of which indemnity may be sought against the Company, the Indemnified Party will give the Company prompt written notice of any such action, suit, proceeding, claim or investigation of which the Indemnified Party has knowledge and the Company will undertake the investigation and defence thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Parties affected and the payment of all expenses. Failure by the Indemnified Party to so notify shall not relieve the Company of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in forfeiture by the Company of substantive rights or defences.
No admission of liability and no settlement, compromise or termination of any action, suit, proceeding, claim, or investigation shall be made without the Company's consent and the consent of the Indemnified Parties affected, such consents not to be unreasonably withheld. Notwithstanding that the Company will undertake the investigation and defence of any Claim, an Indemnified Party will have the right to employ separate counsel with respect to any Claim and participate in the defence thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:
- (a)
- employment of such counsel has been authorized in writing by the Company;
- (b)
- the Company has not assumed the defence of the action within a reasonable period of time after receiving notice of the claim;
- (c)
- the named parties to any such claim include both the Company and the Indemnified Party and the Indemnified Party shall have been advised by counsel to the Indemnified Party that there may be a conflict of interest between the Company and the Indemnified Party; or
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- (d)
- there are one or more defences available to the Indemnified Party which are different from or in addition to those available to the Company;
in which case such fees and expenses of such counsel to the Indemnified Party will be for the Company's account. The rights accorded to the Indemnified Parties hereunder shall be in addition to any rights an Indemnified Party may have at common law or otherwise.
If for any reason the foregoing indemnification is unavailable (other than in accordance with the terms hereof) to the Indemnified Parties (or any of them) or is insufficient to hold them harmless, the Company will contribute to the amount paid or payable by the Indemnified Parties as a result of such Claims in such proportion as is appropriate to reflect not only the relative benefits received by the Company or the Company's shareholders on the one hand and the Indemnified Parties on the other, but also the relative fault of the parties and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Company will in any event contribute to the amount paid or payable by the Indemnified Parties as a result of such Claim any amount in excess of the fees actually received by the Indemnified Parties hereunder.
The Company hereby constitutes CIBC World Markets as trustee for each of the other Indemnified Parties of the Company's covenants under this indemnity with respect to such persons and CIBC World Markets agrees to accept such trust and to hold and enforce such covenants on behalf of such persons.
The Company also agrees that no Indemnified Party shall have any liability (either direct or indirect, in contract or tort or otherwise) to the Company or any person asserting claims on the Company's behalf or in right for or in connection with the Engagement, except to the extent that any losses, expenses, claims, actions, damages or liabilities incurred by the Company are determined by a court of competent jurisdiction in a final judgement that has become non-appealable to have resulted from the gross negligence or wilful misconduct of such Indemnified Party.
The Company agrees to reimburse CIBC World Markets monthly for the time spent by CIBC World Markets' personnel in connection with any Claim at their normal per diem rates. The Company also agrees that if any action, suit, proceeding or claim shall be brought against, or an investigation commenced in respect of the Company or the Company and CIBC World Markets and personnel of CIBC World Markets shall be required to testify, participate or respond in respect of or in connection with the Engagement, CIBC World Markets shall have the right to employ its own counsel in connection therewith and the Company will reimburse CIBC World Markets monthly for the time spent by its personnel in connection therewith at their normal per diem rates together with such disbursements and reasonable out-of-pocket expenses as may be incurred, including fees and disbursements of CIBC World Markets' counsel.
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SCHEDULE A INDEMNITY