EXHIBIT 10.1
Grey Wolf Exploration Inc.
Suite 1500, Sun Life Plaza
144 - 4th Avenue S.W.
Calgary, Alberta T2P 3N4
- - and -
Abraxas Petroleum Corporation
500 N. Loop 1604 East, Suite 100
San Antonio, Texas 78270-1007
USA
Attention: Robert L.G. Watson
Chief Executive Officer
Dear Sirs:
We understand that Grey Wolf Exploration Inc. (the "Corporation")
proposes to issue and sell an aggregate of 17,800,000 Common Shares in the
capital of the Corporation (the "Treasury Shares") pursuant to this Agreement.
We also understand that Abraxas Petroleum Corporation ("Abraxas" or the
"Selling Shareholder") is the beneficial owner of 13,002,360 Common Shares of
the Corporation, being all of the outstanding shares of the Corporation, and
proposes to sell 9,100,000 Common Shares of the Corporation owned by it (the
"Secondary Shares") pursuant to the terms set forth herein.
Based upon the foregoing and subject to the terms and conditions set
forth herein, CIBC World Markets Inc., BMO Nesbitt Burns Inc., GMP Securities
Ltd. and Canaccord Capital Corporation (collectively, the "Underwriters" and
individually, an "Underwriter") hereby severally, and not jointly, in the
respective percentages hereinafter mentioned, offer to purchase all, but not
less than all, of: (i) the Treasury Shares from the Corporation; and (ii) the
Secondary Shares from the Selling Shareholder in each case at a purchase price
of $2.80 per share. By their respective acceptance hereof, the Corporation
agrees to issue and to sell to the Underwriters, at the Closing Time (as
hereinafter defined), all, but not less than all, of the Treasury Shares and the
Selling Shareholder agrees to sell to the Underwriters, at the Closing Time (as
hereinafter defined), all, but not less than all, of the Secondary Shares.
Upon and subject to the terms and conditions contained herein, the
Selling Shareholder hereby grants to the Underwriters an option (the
"Over-Allotment Option") to purchase from the Selling Shareholder, at the
Underwriters' election, up to an additional 3,902,360 Common Shares of the
Corporation (the "Option Shares") to cover over-allotments, if any, and for
market stabilization purposes. The Over-Allotment Option may be exercised in
whole or in part at any one time prior to 5:00 p.m., Calgary time, on that day
which is thirty calendar days after the Closing Date by written notice from the
Lead Underwriter, on the Underwriters' behalf, to the Selling Shareholder (with
a copy to the Corporation), setting forth the aggregate number of Option Shares
to be purchased. If the Over-Allotment Option is exercised, the Option Shares
shall be purchased by the Underwriters severally, and not jointly, in the same
proportion as their respective obligations to purchase the Treasury Shares and
the Secondary Shares as set forth in section 17.1 hereof and the Selling
Shareholder hereby agrees to sell such number of Option Shares to the
Underwriters at the purchase price of $2.80 per Option Share.
To give effect to the foregoing, the Underwriters understand that the
Corporation has filed a preliminary prospectus dated January 14, 2004 (the
"Preliminary Prospectus") and will file, within the time limit in accordance
with the terms set out below the final prospectus (the "Prospectus") and all
related documents with the Securities Commissions in each of the Jurisdictions
in order to qualify for distribution to the public the Offered Shares in each of
the Jurisdictions.
In consideration of the agreement of the Underwriters to purchase the
Treasury Shares and the Secondary Shares and to offer them to the public, and in
consideration of the services rendered and to be rendered by the Underwriters in
connection therewith, each of the Corporation and the Selling Shareholder agrees
to pay to the Underwriters, at the Closing Time, the Underwriting Fee (as
defined below).
Terms and Conditions
The following are the terms and conditions of the agreement among the
Selling Shareholder, the Corporation and the Underwriters:
1. Definitions
1.1 Where used in this Agreement, the following terms shall have the
following meanings:
(a) "affiliate" has the meaning ascribed thereto in the Business
Corporations Act (Alberta);
(b) "business day" means a day which is not a Saturday, a Sunday or a
statutory or civic holiday in the City of Calgary, Alberta;
(c) "Canadian Securities Laws" means, collectively, the applicable
securities laws of each of the Jurisdictions and the respective
regulations, rules, instruments, rulings and orders made
thereunder and the applicable policy statements issued by the
Securities Commissions thereunder;
(d) "Closing Date" means February 28, 2005, or such later date as may
be agreed to in writing by the Corporation and the Selling
Shareholder and the Lead Underwriter but, in any event, such date
shall be no later than March 28, 2005;
(e) "Closing Time" means 6:30 a.m. (Calgary time) on the Closing
Date, or such other time on such date as may be agreed to in
writing by the Corporation, the Selling Shareholder and the Lead
Underwriter;
(f) "Common Shares" means the common shares in the capital of the
Corporation as constituted on the date hereof;
(g) "Corporation" means Grey Wolf Exploration Inc., a corporation
incorporated under the Business Corporations Act (Alberta);
(h) "distribution" means "distribution" or "distribution to the
public" of the Offered Shares, as the case may be, as those terms
are defined in applicable Canadian Securities Laws;
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(i) "Financial Information" means all financial statements of the
Corporation, including: the audited financial statements of the
Corporation for the 390 period ended December 31, 2003, the
unaudited consolidated comparative financial statements of the
Corporation for the nine months ended September 30, 2004 and
2003, the auditor's report and compilation report, the
Corporation's management's discussion and analysis, and all other
financial information, statistical and accounting data included
in the Prospectus or Supplementary Materials;
(j) "Jurisdictions" means each of the provinces and territories of
Canada;
(k) "Lead Underwriter" means CIBC World Markets Inc.;
(l) "Loan Agreement" means the loan agreement dated effective October
28, 2004 by and among the Selling Shareholder and its
subsidiaries as guarantors, the lenders and Guggenheim Corporate
Funding, LLC, as the arranger and administrative agent;
(m) "Material Adverse Effect" means any material adverse effect on
the business, operations or condition (financial or otherwise) of
the Corporation, whether or not arising in the ordinary course of
business;
(n) "material change", "material fact" and "misrepresentation" have
the meanings attributed thereto under applicable Canadian
Securities Laws;
(o) "MRRS" means the mutual reliance review system procedures
provided for under National Policy 43-201 - Mutual Reliance
Review System for Prospectuses and Annual Information Forms among
the Securities Commissions;
(p) "MRRS Decision Document" means a final MRRS decision document for
the Prospectus issued in accordance with MRRS;
(q) "Offered Shares" means the Treasury Shares, the Secondary Shares
and the Option Shares;
(r) "Option Closing Date" has the meaning specified in section 7.2;
(s) "Option Closing Time" means 6:30 a.m. (Calgary time) on the
Option Closing Date, or such other time on the Option Closing
Date as may be agreed to in writing by the Corporation, the
Selling Shareholder and the Lead Underwriter;
(t) "Pledge Agreement" means the pledge and security agreement dated
effective October 28, 2004 by the Selling Shareholder in favour
of Guggenheim Corporate Funding, LLC, as agent for the lenders
party to the Loan Agreement;
(u) "Preliminary Prospectus" means the preliminary long form
prospectus, in the English and the French languages (unless the
context indicates otherwise), of the Corporation dated January
14, 2005, relating to the qualification for distribution of the
Offered Shares as filed with the Securities Commissions,
including such prospectus as amended by any Prospectus Amendment;
(v) "Prospectus" means the final long form prospectus, in the English
and the French languages (unless the context indicates
otherwise), of the Corporation dated February 18, 2005, relating
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to the qualification for distribution of the Offered Shares as
filed with the Securities Commissions, including such prospectus
as amended by any Prospectus Amendment;
(w) "Prospectus Amendment" means the English and French language
versions of any amendment to the Prospectuses required to be
prepared and filed by the Corporation under applicable Canadian
Securities Laws;
(x) "Prospectuses" means the Preliminary Prospectus and the
Prospectus;
(y) "Rule 144A" means Rule 144A promulgated under the U.S. Securities
Act;
(z) "Securities Commissions" means the securities commissions or
similar securities regulatory authorities in each of the
Jurisdictions;
(aa) "Selling Firms" means the Underwriters and other investment
dealers and brokers with which the Underwriters have a
contractual relationship for the distribution of the Offered
Shares;
(bb) "Standard Listing Conditions" means the conditions for listing
and posting for trading on the TSX of the Offered Shares of the
Corporation, subject only to satisfaction of the conditions
imposed by the TSX in its letter to the Corporation dated
February 11, 2005;
(cc) "subsidiary" has the meaning ascribed thereto in the Business
Corporations Act (Alberta);
(dd) "Supplementary Material" means, collectively, any Prospectus
Amendment and any ancillary material, information, evidence,
return, report, application, statement or document that may be
filed with the Securities Commissions by or on behalf of the
Corporation under the Canadian Securities Laws;
(ee) "this Agreement", "hereto", "herein", "hereby", "hereunder",
"hereof" and similar expressions refer to the agreement resulting
from the acceptance by the Corporation and the Selling
Shareholder of this offer and not to any particular paragraph or
other portion of this Agreement;
(ff) "TSX" means the Toronto Stock Exchange;
(gg) "Underwriters" means, collectively, CIBC World Markets Inc., BMO
Nesbitt Burns Inc., GMP Securities Ltd. and Canaccord Capital
Corporation and individually, an "Underwriter";
(hh) "Underwriting Fee" means the fee to be paid to the Underwriters
under this Agreement, such fee equalling 6% of the gross proceeds
realized on the sale of the Offered Shares, or $0.168 per Offered
Share in consideration of the services to be provided by the
Underwriters under this Agreement and payable by the Corporation
and the Selling Shareholder rateably based on the number of
Offered Shares sold by each;
(ii) "United States" means the United States of America, its
territories and possessions, any state of the United States and
the District of Columbia;
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(jj) "U.S. Exchange Act" means the United States Securities Exchange
Act of 1934, as amended;
(kk) "U.S. Securities Act" means the United States Securities Act of
1933, as amended;
(ll) "U.S. Securities Laws" means all of the applicable federal and
state securities laws and regulations of the United States,
including without limitation the U.S. Securities Act, the U.S.
Exchange Act and the respective rules and regulations of the SEC
thereunder; and
(mm) "Wrap" means the information memorandum in respect of the
distribution of the Offered Shares to certain investors in the
United States.
2. Qualification and Offering for Sale
2.1 The Corporation shall forthwith following the execution of this
Underwriting Agreement, file the Prospectus (in the English and French
languages, as appropriate) and other documents required under the
Canadian Securities Laws with the Securities Commissions, shall obtain
a MRRS Decision Document for the Prospectus from the Alberta Securities
Commission on its own behalf and on behalf of the other Securities
Commissions and shall otherwise fulfil all legal requirements to
qualify the Offered Shares for distribution to the public in each of
the Jurisdictions through the Underwriters and Selling Firms (if any)
registered in the applicable Jurisdiction, in any event not later than
February 21, 2005 (or such later date as may be agreed to in writing by
the Underwriters).
2.2 Each of the Corporation and the Selling Shareholder further agrees that
it shall, until the earlier of (i) 90 days after the Closing Date; and
(ii) the date on which the distribution of the Offered Shares is
completed, promptly take or cause to be taken all additional steps and
proceedings that from time to time may be required under the Canadian
Securities Laws to continue to qualify the Offered Shares for
distribution or, in the event that the Offered Shares have, for any
reason, ceased to so qualify, to again qualify the Offered Shares for
distribution.
2.3 Prior to the filing of the Prospectus and Supplementary Materials, and,
during the period of distribution of the Offered Shares prior to the
filing with any Securities Commissions of any Prospectus Amendment, the
Corporation and the Selling Shareholder shall have allowed the
Underwriters and their counsel to participate fully in the preparation
of, and to approve the form of, such documents (including, without
limitation, the Wrap) and shall have allowed the Underwriters to
conduct all due diligence which the Underwriters may require to be
conducted to fulfill their obligations as underwriters, and in order to
enable the Underwriters to responsibly execute any certificate required
by Canadian Securities Laws to be executed by the Underwriters.
2.4 The Corporation shall notify the Underwriters promptly, and confirm the
notice in writing:
(a) of the receipt of any comments from any Securities Commission;
(b) of any request by any of the Securities Commissions to amend or
supplement the Prospectus or for additional information; and
(c) of the issuance by any of the Securities Commissions or any stock
exchange of any order having the effect of ceasing or suspending
the distribution of the Offered Shares or the trading in any
securities of the Corporation (collectively "Suspension Orders"),
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or of the institution or, to the knowledge of the Corporation,
threatening of any proceedings for any such purpose.
2.5 The Corporation shall use every reasonable effort to prevent the
issuance of any Suspension Order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
2.6 The Corporation shall not at any time file or make any amendment to the
Prospectus or any Prospectus Amendment of which the Underwriters shall
not have previously been advised and furnished a copy, or to which the
Underwriters shall have objected, after reasonable notice thereof.
3. Delivery of Prospectus and Related Opinions and Certificates
3.1 The Corporation and the Selling Shareholder shall cause to be delivered
to the Underwriters and the Underwriters' counsel the documents set out
below at the respective times indicated:
(a) on the date hereof, or as soon as they are available, copies of
the Prospectus, signed as required by any of the Canadian
Securities Laws, and a copy of the MRRS Decision Document for the
Prospectus as soon as possible after such document has been
obtained by the Corporation;
(b) as soon as they are available, copies of any Prospectus Amendment
required to be filed under any of the Canadian Securities Laws,
signed as required by the Canadian Securities Laws;
(c) as soon as possible, but in any event prior to or
contemporaneously with the filing of the Prospectus with
securities authorities in the Province of Quebec:
(i) an opinion of the Corporation's counsel in Quebec, addressed
to the Underwriters and dated the date of the Prospectus in
form and substance acceptable to the Underwriters, acting
reasonably, to the effect that the French language version of
such document (except for the Financial Information which is
the subject of the opinions of the Corporation's auditors, as
to which no opinion need be expressed by Quebec counsel) is
in all material respects a complete and proper translation of
the English language version; and
(ii)an opinion of the Corporation's auditors addressed to the
Underwriters and dated the date of the Prospectus or the
Prospectus Amendment, as the case may be, in form and
substance satisfactory to the Underwriters, acting
reasonably, to the effect that the French language version of
the Financial Information set forth therein and as to which
no opinion has been expressed by Quebec counsel is in all
material respects a complete and accurate translation of the
English language version; and
3.2 At the time of delivery of the Prospectus to the Underwriters pursuant
to section 3.1 above the Corporation and the Selling Shareholder shall
cause to be delivered to the Underwriters:
(a) evidence satisfactory to the Underwriters, acting reasonably, of
the approval of the listing and posting for trading on the TSX of
the Offered Shares, subject only to satisfaction by the
Corporation of the Standard Listing Conditions;
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(b) a "long-form" comfort letter dated the date of the Prospectus, in
form and substance satisfactory to the Underwriters, addressed to
the Underwriters and the directors of the Corporation from BDO
Dunwoody LLP, with reference to those matters as the Underwriters
may reasonably request including:
(i) to the effect that, in their opinion, the Financial
Information examined by them complies in all material
respects with all applicable accounting requirements
including, without limitation, Canadian generally accepted
accounting principles and the applicable accounting
requirements of the Canadian Securities Laws of each of the
Jurisdictions and related published rules and regulations;
(ii)verification of the Financial Information contained in the
Prospectus and matters involving changes or developments
since the respective dates as of which specified Financial
Information is given in the Prospectus, to a date not more
than two business days prior to the date of the letter; and
(iii) that the auditors of the Corporation are independent public
accountants as required by the Canadian Securities Laws,
which letter will be in addition to the auditors' report or
compilation report, as applicable, contained in the Prospectus
and any auditors' consent and comfort letters addressed to the
Securities Commissions;
3.3 The Corporation and the Selling Shareholder shall deliver to the
Underwriters, as soon as practicable and in any event not later than
noon (local time) on February 22, 2005 at offices in Calgary,
Vancouver, Toronto and Montreal, the number of commercial copies of the
Prospectus (and the Wrap as may be required), as the Underwriters have
specified to the Corporation on or before the date hereof.
3.4 The Corporation and the Selling Shareholder shall from time to time
deliver to the Underwriters as soon as practicable at the offices in
such Canadian cities designated by the Underwriters the number of
commercial copies of any Prospectus Amendment (and the Wrap as may be
required), which the Underwriters may from time to time reasonably
request.
3.5 Each delivery of the Prospectus or any Prospectus Amendment by the
Corporation and the Selling Shareholder to the Underwriters shall
constitute:
(a) the Corporations' and the Selling Shareholders' representation
and warranty to the Underwriters that, at the respective times of
such delivery:
(i) the information and statements contained in the Prospectus or
any Prospectus Amendment, as the case may be, (except any
information and statements relating solely to the
Underwriters) constitutes full, true and plain disclosure of
all material facts relating to the Offered Shares; and
(ii)the Prospectus or any Prospectus Amendment, as the case may
be, does not contain a misrepresentation.
(b) consent by the Corporation and the Selling Shareholder to the use
by the Underwriters and other Selling Firms (if any) of such
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documents in connection with the distribution of the Offered
Shares for sale in all of the Jurisdictions (and in the United
States as contemplated herein).
3.6 The Corporation and the Selling Shareholder hereby represents, warrants
and covenants to the Underwriters that each document filed or to be
filed with any of the Securities Commissions complied or will comply
when so filed and at the Closing Time in all material respects with
applicable Canadian Securities Laws.
4. Distribution and Certain Obligations of the Underwriters
4.1 The Underwriters shall offer the Offered Shares for sale to the public
directly and through other Selling Firms upon the terms and conditions
set forth in the Prospectus and this Agreement. The Underwriters shall
comply, and shall require each of the other Selling Firms to comply,
with all applicable laws and regulations in each jurisdiction into and
from which they may offer or sell the Offered Shares. The Underwriters
will not solicit offers to purchase or sell the Offered Shares so as to
require registration of the Offered Shares or filing of a prospectus,
registration statement or other notice or document with respect to the
distribution of the Offered Shares under the laws of any jurisdiction
other than the Jurisdictions and the Underwriters will not solicit
offers to purchase or sell the Offered Shares in the United States
except on the basis of the terms and conditions set forth in Schedule
"A" hereto, and will require each other Selling Firm to agree with the
Underwriters not to so solicit or sell.
4.2 The Underwriters shall use their reasonable commercial efforts (taking
into account the respective interests of the Selling Shareholder, the
Corporation and the Underwriters) to complete, and to cause the Selling
Firms to complete, the distribution of the Offered Shares as soon as
possible after the Closing Time.
4.3 The Lead Underwriter shall notify the Corporation and the Selling
Shareholder promptly when, in the Underwriters' opinion, the
distribution of the Offered Shares has been completed and provide the
Corporation and the Selling Shareholder in writing with a breakdown of
the number of Offered Shares distributed in each of the Jurisdictions
where such breakdown is required for the purpose of calculating fees
payable to the Securities Commission in each jurisdiction where Offered
Shares were distributed.
4.4 For the purposes of this section 4, the Underwriters shall be entitled
to assume that the Offered Shares are qualified for distribution in
each of the Jurisdictions unless the Underwriters receive notice to the
contrary from the Corporation or any applicable Securities Commission.
4.5 An Underwriter shall not be liable to the Selling Shareholder or the
Corporation under this section with respect to a default by another
Selling Firm if the Underwriter is not also in default.
5. Material Changes
5.1 During the period from the date hereof to the completion of the
distribution of the Offered Shares, the Selling Shareholder and the
Corporation (other than information or statements relating solely to
the Underwriters), shall promptly notify the Underwriters in writing of
the full particulars of:
(a) any change (actual, contemplated or threatened) in the
properties, business, affairs, operations, assets, liabilities
(contingent or otherwise), capital or ownership of the
Corporation;
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(b) any change in any matter covered by a statement contained in the
Prospectuses or Supplementary Material; or
(c) the occurrence of any other fact or event;
which change, fact or event is, or may be, of such a nature as to
render the Prospectuses or Supplementary Materials misleading or untrue
in any material respect or would result in any of such documents
containing a misrepresentation (as defined in the Securities Act
(Alberta)) or which would result in any of such documents not complying
with the Canadian Securities Laws or which would reasonably be expected
to have a significant effect on the market price or value of any
securities of the Corporation.
The Selling Shareholder or the Corporation, as applicable, shall in
good faith discuss with the Underwriters any change, fact or event
(actual or proposed within its knowledge) which is of such a nature
that there is reasonable doubt whether notice need be given to the
Underwriters pursuant to this section and, in any event, prior to
making any filing referred to in section 5.2.
5.2 The Corporation shall comply with all applicable filings and other
requirements, including subsection 115(1) of the Securities Act
(Alberta) and with the comparable provisions of the other Canadian
Securities Laws, and the Corporation shall prepare and file promptly
any required Prospectus Amendment, or any Supplementary Material which
may be necessary or advisable and will otherwise comply with all legal
requirements necessary to continue to qualify the Offered Shares for
distribution in each of the Jurisdictions for the period of
distribution of the Offered Shares. The Corporation and the Selling
Shareholder shall allow Underwriters and their respective counsel to
participate fully in the preparation of any Prospectus Amendment and
any amendment to any Supplementary Material and shall allow the
Underwriters and their counsel to conduct all due diligence
investigations which the Underwriters may reasonably require in order
to fulfil their obligations as underwriters and in order to enable the
Underwriters responsibly to execute the certificate required to be
executed by them in any Prospectus Amendment.
6. Representations and Warranties
6.1 The Selling Shareholder represents and warrants to the Underwriters and
the Corporation, and acknowledges that the Underwriters and the
Corporation are relying thereon in connection with the purchase by the
Underwriters of the Offered Shares, that:
(a) the Selling Shareholder is duly incorporated and validly existing
under the laws of its jurisdiction of incorporation or formation;
(b) the Selling Shareholder has the corporate power and authority to
enter into and to perform its obligations under this Agreement;
(c) all necessary corporate action has been taken by the Selling
Shareholder to authorize the execution, delivery and performance
of this Agreement and the transactions contemplated hereby and
this Agreement has been duly executed and delivered by the
Selling Shareholder and constitutes a legal, valid and binding
obligation of the Selling Shareholder enforceable against the
Selling Shareholder in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is
considered in a proceeding in equity or law) and as limited by
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the unenforceability under certain circumstances under law or
court decisions of provisions providing for the indemnification
or contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy;
(d) the execution, delivery and performance of this Agreement by the
Selling Shareholder and the sale and delivery at the Closing Time
and the Option Closing Time, as the case may be, of the Secondary
Shares and the Option Shares, as the case may be, assuming the
Selling Shareholder has obtained all necessary consents and
releases from the parties to the Loan Agreement, do not and will
not result in a material breach of, and do not create a state of
facts which, after notice or lapse of time or both, will result
in a material breach or permit acceleration or termination (if
applicable) of and do not and will not materially conflict with
or constitute a material default under:
(i) any term or provision of the articles, by-laws or resolutions
of the Selling Shareholder;
(ii)any of the terms, conditions or provisions of any indenture,
mortgage, note, contract, agreement, instrument, lease or
other document to which the Selling Shareholder is a party or
by which the Selling Shareholder is contractually bound and
which materially affects or may reasonably be expected to
materially affect the business, operations or financial
condition of the Selling Shareholder; or
(iii) any law, statute, rule or regulation applicable to the
Selling Shareholder, or any judgement, order or decree of any
government, governmental, regulatory or administrative
agency, authority, commission or instrumentality or court
having jurisdiction over the Selling Shareholder;
(e) the Secondary Shares and the Option Shares are legally and
beneficially owned by the Selling Shareholder;
(f) at the Closing Time or at the Option Closing Time, as applicable,
assuming the Selling Shareholder has obtained all necessary
consents and releases from the parties to the Loan Agreement, the
Selling Shareholder will have good and marketable title to the
Secondary Shares and Option Shares free and clear of all liens,
charges, security interests and encumbrances of whatever nature
and kind and the Selling Shareholder will have full legal right,
power and authority to sell, assign and transfer the Secondary
Shares and the Option Shares to the Underwriters without any
consent of any person which has not been obtained;
(g) upon delivery of the Secondary Shares and the Option Shares and
payment of the purchase price therefor as herein contemplated,
the Secondary Shares and the Option Shares will be acquired by
the Underwriters at the Closing Time free and clear of all liens,
charges, security interests and encumbrances of whatsoever nature
and kind created or permitted to exist by the Selling
Shareholder;
(h) except to the extent set forth in the Loan Agreement and the
Pledge Agreement, no person, firm or corporation (except the
Underwriters) has any agreement, option, right or privilege
(whether pre-emptive, contractual or otherwise) capable of
becoming an agreement for the purchase from the Selling
Shareholder of any of the Secondary Shares and the Option Shares;
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(i) other than as may be required under Canadian Securities Laws, the
U.S. Securities Laws or any United States state securities or
"blue sky" laws, or as required to be obtained by the
Corporation, no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any
court or governmental authority or agency is necessary or
required for the performance by the Selling Shareholder of its
obligations hereunder, in connection with the offering or sale of
the Secondary Shares and the Option Shares hereunder or the
consummation of the transactions contemplated by this Agreement,
except such as have been obtained;
(j) there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency,
governmental instrumentality or body, domestic or foreign, now
pending or, to the knowledge of the Selling Shareholder
threatened against or affecting the Selling Shareholder, which is
required to be disclosed in the Prospectus and which is not so
disclosed, or which if determined adversely, would reasonably be
expected to materially and adversely affect the consummation of
the transactions contemplated in this Agreement or the
performance by the Selling Shareholder of its obligations
hereunder;
(k) the Selling Shareholder is not prompted to sell the Secondary
Shares and the Option Shares by any information concerning the
Corporation which is required to be but is not set forth in the
Prospectuses and Supplementary Materials; and
(l) other than as permitted by applicable securities laws, the
Selling Shareholder has not distributed and will not distribute
the Prospectuses or any other offering material in connection
with the offering or sale of the Offered Shares.
6.2 The Corporation represents and warrants to the Underwriters and the
Selling Shareholders and acknowledges that the Underwriters and the
Selling Shareholder are relying thereon in connection with the purchase
by the Underwriters of the Offered Shares, that:
(a) the Corporation is duly incorporated and validly existing under
the laws of the Province of Alberta;
(b) the Corporation has the corporate power and authority to carry on
its business as described in the Prospectuses, to own its
property and assets and to enter into and to perform its
obligations under this Agreement;
(c) the authorized capital of the Corporation consists of an
unlimited number of Common Shares, of which 13,002,360 Common
Shares are issued and outstanding as of the date hereof (after
giving effect to the share split);
(d) all of the issued and outstanding shares in the capital of the
Corporation including the Secondary Shares and the Option Shares
have been duly authorized and validly issued and are fully paid
and non-assessable and have been issued in compliance with all
Canadian Securities Laws;
(e) all necessary corporate action has been taken by the Corporation
to validly issue the Treasury Shares to the Underwriters and the
Treasury Shares when issued, will have been validly issued as
fully paid and non-assessable shares;
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(f) all necessary corporate action has been taken by the Corporation
to authorize the execution, delivery and performance of this
Agreement and this Agreement has been duly executed and delivered
by the Corporation and constitutes a legal, valid and binding
obligation of the Corporation enforceable against the Corporation
in accordance with its terms;
(g) the attributes of the Common Shares conform in all material
respects with the description thereof contained in the
Prospectuses;
(h) the Corporation does not have any material subsidiaries and the
Corporation does not own, directly or indirectly, nor has it
agreed to acquire outstanding securities of any other corporation
or options to acquire securities of any other corporation;
(i) except other than as disclosed in the Prospectuses or as could
not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, the Corporation is
conducting its business in compliance with all applicable laws,
rules and regulations of each jurisdiction in which it carries on
business and holds all licenses, registrations and qualifications
in all jurisdictions in which it carries on business necessary to
carry on its business as now conducted;
(j) no person, firm or corporation has any agreement, option, right
or privilege (whether pre-emptive, contractual or otherwise)
capable of becoming an agreement for the purchase, acquisition,
subscription or issuance of any of the unissued shares or other
securities of the Corporation other than pursuant to existing
employee benefit, incentive or stock option plans of the
Corporation and other than as disclosed in the Prospectuses;
(k) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, no default exists in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, loan
agreement, note, lease or other agreement or instrument to which
the Corporation is a party;
(l) the execution, delivery and performance of this Agreement by the
Corporation and the sale and delivery at the Closing Time of the
Offered Shares do not and will not result in a material breach
of, and do not create a state of facts which, after notice or
lapse of time or both, will result in a material breach or permit
acceleration or termination (if applicable) of and do not and
will not conflict with or constitute a default under:
(i) any term or provision of the articles, by-laws or resolutions
of the Corporation;
(ii)any of the terms, conditions or provisions of any indenture,
mortgage, note, contract, agreement, instrument, lease or
other document to which the Corporation is a party or by
which the Corporation is contractually bound other than any
such breaches, conflicts or defaults which could not
reasonably be expected to have a Material Adverse Effect; or
(iii) any law, statute, rule or regulation applicable to the
Corporation, or any judgement, order or decree of any
government, governmental, regulatory or administrative
agency, authority, commission or instrumentality or court
having jurisdiction over the Corporation other than any such
12
breaches, conflicts or defaults which could not reasonably be
expected to have a Material Adverse Effect;
(m) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, there has been no adverse change
(actual, anticipated, contemplated or threatened, whether
financial or otherwise) in the business, affairs, operations,
assets or liabilities (contingent or otherwise) of the
Corporation or the capital of the Corporation since December 31,
2003;
(n) the financial statements incorporated in the Prospectuses and
notes thereto, present fairly in all material respects the
financial position of the Corporation at the dates indicated and
the statements of operations and deficit and cash flows of the
Corporation for the periods specified; and such financial
information has been prepared in accordance with generally
accepted accounting principles in Canada applied on a consistent
basis throughout the periods involved and the selected financial
information and the summary financial information included in the
Prospectuses present fairly in all material respects the
information shown therein and have been compiled on a basis
consistent with that of the financial statements;
(o) the description of the assets and liabilities of the Corporation
set forth in the financial statements fairly presents in all
material respects, in accordance with generally accepted
accounting principles in Canada, the financial position and
condition of the Corporation as at the dates thereof and reflects
all material liabilities (absolute, accrued, contingent or
otherwise) of the Corporation as at the dates thereof;
(p) other than as disclosed in the Prospectus, to the knowledge of
the Corporation, there are no actions, suits, proceedings or
inquiries pending or threatened against or affecting the
Corporation at law or in equity or before or by any governmental
department, commission, board, bureau, agency or instrumentality
which in any way could reasonably be expected to have a Material
Adverse Effect, or which could prevent or restrict the
distribution of the Offered Shares;
(q) other than as disclosed in the Prospectus, since December 31,
2003, the Corporation has not incurred, assumed or suffered any
liability (absolute, accrued, contingent or otherwise) or entered
into any transaction which could reasonably be expected to have a
Material Adverse Effect;
(r) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, the Corporation owns or possesses
adequate and enforceable rights to use all trade marks, trade
mark applications, trade names, service marks, copyrights,
copyright applications, licences, know-how and other similar
rights (collectively, the "Intangibles") necessary for the
conduct of its business as now being conducted and as described
in the Prospectuses and to the knowledge of the Corporation,
exercising reasonable care, the Corporation has not infringed, is
infringing, or has received any notice on infringement of, any
Intangible of any other person;
(s) other than as disclosed in the Prospectuses or as could not
reasonably be expected to have a Material Adverse Effect, at the
Closing Time the Corporation will have good and marketable title
to, or leasehold interests in, all properties and assets, as
13
described in the Prospectuses owned by the Corporation, free and
clear of all liens, charges, encumbrances or restrictions;
(t) to the knowledge of the Corporation, neither any Securities
Commission, the TSX nor any similar regulatory authority has
issued any order which is currently outstanding preventing or
suspending trading in any securities of the Corporation and the
Corporation is not in default of any material requirement of
applicable Canadian Securities Laws;
(u) to the knowledge of the Corporation, none of the directors and
officers of the Corporation is now, or has ever been subject to
an order or ruling of any securities regulatory authority or
stock exchange prohibiting such individual from acting as a
director or officer of a public company or of a company listed on
a particular stock exchange;
(v) the TSX has conditionally approved the listing and posting for
trading on the TSX the Offered Shares, subject only to the
Standard Listing Conditions;
(w) the Corporation is in compliance with all laws respecting
employment and employment practices, terms and conditions of
employment, pay equity and wages, except where such
non-compliance would not result in a Material Adverse Effect, and
has not and is not engaged in any unfair labour practice;
(x) no labour dispute with the employees of the Corporation exists
or, to the knowledge of the Corporation, is imminent, and the
Corporation is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers, customers or contractors, which, in any such case,
could reasonably be expected to have a Material Adverse Effect;
(y) other than as may be required under the Canadian Securities Laws,
or as required to be obtained by the Selling Shareholder, no
filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the
performance by the Corporation of its obligations hereunder, in
connection with the offering or sale of the Offered Shares
hereunder or the consummation of the transactions contemplated by
this Agreement, except such as have been obtained;
(z) except in each case as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect:
(i) the Corporation possesses such permits, certificates,
licences, approvals, consents and other authorizations
(collectively, the "Governmental Licenses") issued by the
appropriate federal, provincial, state, local or foreign
regulatory agencies or bodies necessary to conduct the
business now operated by it;
(ii) the Corporation is in compliance with the terms and
conditions of all such Governmental Licenses;
(iii)all such Governmental Licenses are valid and in full force
and effect; and
(iv) to the knowledge of the Corporation, no revocation or
limitation of any of such Governmental Licenses is pending
or threatened and the Corporation is not in default or
violation of any thereof, and the sale and delivery of the
Offered Shares does not and will not conflict with, or
14
result in a breach of any of the terms or provisions of, or
constitute a default under, any of such Governmental
Licenses;
(aa) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect:
(i) the Corporation is not in violation of any federal,
provincial, state, local, municipal or foreign statute, law,
rule, regulation, ordinance, code, policy or rule of common
law or civil law or any judicial or administrative
interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating
to the pollution or protection of human health, the
environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, waste, toxic
substances, hazardous substances, petroleum or petroleum
products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws");
(ii) the Corporation has all permits, authorizations and
approvals required under any applicable Environmental Laws
and is in compliance with the requirements thereunder;
(iii)to the knowledge of the Corporation, there are no pending
or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigation or
proceedings relating to any Environmental Laws against the
Corporation; and
(iv) to the knowledge of the Corporation, there are no events or
circumstances that might reasonably be expected to form the
basis of any order for clean up or remediation, or an
action, suite or proceeding by any private party or
governmental body or agency, against or affecting the
Corporation relating to Hazardous Material or any
Environmental Laws;
(bb) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, the Corporation has filed all
necessary federal, state, provincial, local and foreign income,
payroll, franchise and other tax returns and have paid all taxes
shown as due thereon or with respect to any of its properties or
any transactions to which they are a party, and there is no tax
deficiency that has been, or is likely to be, asserted against
the Corporation or any of its properties or assets;
(cc) other than as disclosed in the Prospectuses or as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, the Corporation is insured by insurers
of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in
which they engage or propose to engage, and the Corporation has
no reason to believe that it will not be able to renew their
existing insurance coverage as and when such coverage expires or
15
obtain similar coverage from similar insurers as may be necessary
to continue its business at a similar cost to that of their
existing coverage;
(dd) other than as disclosed in the Prospectus, the Corporation does
not owe any money to, nor has the Corporation any present loans
to, or borrowed any monies from, or is otherwise indebted to any
officer, director, employee, shareholder or any person not
dealing at "arms length" (as such term is defined in the Income
Tax Act (Canada)) with the Corporation except for usual employee
reimbursements and compensation paid in the ordinary and normal
course of the business of the Corporation;
(ee) the Corporation maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles in
Canada and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(ff) Olympia Trust Company at its principal office in Calgary, Alberta
has been duly appointed as the transfer agent and registrar for
the Common Shares;
(gg) the corporate records and minute books of the Corporation which
have been made available to the Underwriters and their counsel
for review contain, in all material respects, complete and
accurate minutes of all meetings of the directors and
shareholders of the Corporation held since incorporation, and
signed copies of all resolutions and by-laws duly passed or
confirmed by the directors or shareholders of the Corporation
except where the absence of such minutes or signed copies of
resolutions would not result in a Material Adverse Effect and
share certificate books, register of security holders, registers
of transfers and register of directors and any similar corporate
records of the Corporation are, in all material respects,
complete and accurate; and
(hh) all of the material contracts and agreements of the Corporation
(collectively, "Contracts") have been disclosed to the
Underwriters. Each such Contract is a legal, valid and binding
obligation enforceable against the Corporation in accordance with
its terms except as enforcement thereof 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; and the
Corporation, as applicable is in compliance with the terms of
such Contracts and the Corporation is not a aware of any default
or breach of a material nature under any of such Contracts by any
other party thereto.
7. Closing
7.1 The closing of the purchase and sale of the Treasury Shares and the
Secondary Shares shall be completed at the Closing Time on the Closing
Date at the offices of the Corporation's counsel, Osler, Hoskin &
Harcourt LLP, in Calgary, Alberta or at such other place as the Selling
Shareholder, the Corporation and the Underwriters may agree to in
writing.
16
7.2 The closing of the purchase and sale of any Option Shares shall be
completed at the Closing Time on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date, nor less than three nor more than five
business days after the giving of the notice hereinafter referred to
(provided that if the Option Closing Date is the same as the Closing
Date, such notice may be given not less than two business days prior to
the Option Closing Date), as shall be specified in a written notice
from the Lead Underwriter, on behalf of the Underwriters, to the
Selling Shareholder (with a copy to the Corporation) of the
Underwriters' determination to purchase that number of Option Shares
specified in such notice. The closing of the purchase and sale of any
Option Shares shall be completed at the offices of the Corporation's
counsel, Osler, Hoskin & Harcourt LLP, in Calgary, Alberta or at such
other place as the Selling Shareholder, the Corporation and the
Underwriters may agree to in writing. If the Over-Allotment Option is
exercised, all of the provisions of this Agreement relating to the
purchase by the Underwriters of the Treasury Shares and the Secondary
Shares shall apply mutatis mutandis in relation to the purchase by the
Underwriters of any Option Shares at the Closing Time on the Option
Closing Date.
7.3 At the Closing Time, the Corporation and the Selling Shareholder shall
deliver to the Underwriters a certificate or certificates representing
the Treasury Shares and Secondary Shares against payment of the
purchase price on the Closing Date, payable separately, by wire
transfer to the Corporation and to the Selling Shareholder, or as they
may direct net of the Underwriting Fee against the delivery of a
receipt thereof.
7.4 At the Option Closing Time, subject to the terms and conditions
contained in this Agreement, the Selling Shareholder shall deliver to
the Underwriters a certificate or certificates representing the Option
Shares and those documents reasonably required by the Underwriters
against payment of the purchase price payable by wire transfer on the
Option Closing Date, to the Selling Shareholder or as it may direct,
net of the Underwriting Fee against the delivery of a receipt thereof.
7.5 Certificates for Offered Shares shall be in such denominations and
registered in such names as the Underwriters may request in writing at
least two (2) business days before the applicable Closing Time or
Option Closing Time, as applicable.
8. Closing Conditions
8.1 The obligations of the Underwriters to purchase the Offered Shares are
conditional upon and subject to the Underwriters receiving at the
Closing Time:
(a) a certificate of the Selling Shareholder dated the Closing Date,
addressed to the Underwriters and signed by the Chief Executive
Officer of the Selling Shareholder or such other officer or
director of the Selling Shareholder acceptable to the
Underwriters, acting reasonably, certifying that:
(i) the Selling Shareholder has complied in all material
respects with all the covenants and has satisfied in all
material respects all the terms and conditions of this
Agreement on its part to be complied with and satisfied at
or prior to the Closing Time, other than those which may
have been waived by the Underwriters;
(ii) no order, ruling or determination having the effect of
ceasing the trading or suspending the sale of the Secondary
Shares or Option Shares has been issued by any stock
17
exchange, securities authority or other regulatory
authority in Canada or the United States and is continuing
in effect and no proceedings for such have been instituted
and are continuing or are pending or, to the knowledge of
the Selling Shareholder, contemplated or threatened; and
(iii) the representations and warranties of the Selling
Shareholder contained herein are true and correct in all
material respects as of the Closing Time, with the same
force and effect as if made at such time before giving
effect to the transactions contemplated hereby;
(b) a certificate of the Corporation dated the Closing Date,
addressed to the Underwriters and signed by the Chief Executive
Officer and the Chief Financial Officer of the Corporation or
such other senior officers of the Corporation acceptable to the
Underwriters, acting reasonably, certifying that:
(i) the Corporation has complied in all material respects with
all the covenants and satisfied in all material respects
all the terms and conditions of this Agreement on its part
to be complied with and satisfied at or prior to the
Closing Time, other than those which may have been waived
by the Underwriters;
(ii) no material change relating to the Corporation has occurred
between the date hereof and the Closing Date with respect
to which the requisite material change report has not been
filed and no such disclosure has been made on a
confidential basis that remains subject to confidentiality;
(iii) the representations and warranties of the Corporation
contained herein are true and correct in all material
respects as at the Closing Time, with the same force and
effect as if made at and as of the Closing Time; and
(iv) no order, ruling or determination having the effect of
ceasing the trading or suspending the sale of the Offered
Shares or any other securities of the Corporation has been
issued by any stock exchange, securities authority or other
regulatory authority and is continuing in effect and no
proceedings for such have been instituted and are
continuing or are pending or, to the knowledge of such
officers, contemplated or threatened;
(c) at the Closing Time, the Corporation shall have furnished to the
Underwriters evidence that the Offered Shares have been listed
for trading on the TSX;
(d) an opinion of Cox Smith Matthews Incorporated, United States
counsel to the Selling Shareholder, addressed to the Underwriters
and their counsel and dated the Closing Date, in form and
substance satisfactory to the Underwriters, acting reasonably,
with respect to such matters as the Underwriters may reasonably
request, including that:
(i) the Selling Shareholder is duly incorporated and validly
existing under the laws of the State of Nevada;
(ii) the Selling Shareholder has the corporate power and
authority to execute this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated herein;
18
(iii) all necessary corporate action has been taken by the
Selling Shareholder to authorize the execution of this
Agreement and the performance of its obligations hereunder;
(iv) this Agreement has been duly executed for and on behalf of
the Selling Shareholder and constitutes a valid and legally
binding obligation of the Selling Shareholder;
(v) the execution by the Selling Shareholder of this Agreement,
the performance by the Selling Shareholder of its
obligations hereunder, and the consummation of the
transactions contemplated herein do not conflict with or
result in a violation of:
(A) any provision of the articles or by-laws of the
Selling Shareholder; or
(B) to such counsel's knowledge any existing provision of,
or rule or regulation under, Texas state or United
States federal law, applicable to the Selling
Shareholder (other than the U.S. Securities Laws or
any United States state securities or "blue sky" laws
as to which such counsel need express no opinion), any
judgement, order or decree of any United States
government, governmental, regulatory, or
administrative agency, authority, commission or
instrumentality or court;
(vi) no authorizations, approvals, consents, licenses,
exemptions from or filings with any governmental, judicial
or public bodies or authorities in the United States are
required for the execution of this Agreement by the Selling
Shareholder and the performance by the Selling Shareholder
of its obligations hereunder (except any authorizations,
approvals, consents, licenses, exemptions from or filings
as may be required by the U.S. Securities Laws or any
United States state securities or "blue sky" laws as to
which such counsel need express no opinion);
(vii) the choice of the laws of the Province of Alberta and the
federal laws of Canada to govern this Agreement is a valid
choice of law and such laws other than conflict of law
rules would accordingly be applied by Texas state and the
United States federal courts sitting in Texas if this
Agreement and/or any claim hereunder comes under their
jurisdiction upon proper proof of the relevant provisions
of such laws;
(viii)except as disclosed in the Prospectus, to such counsel's
knowledge, there are no actions, suits, proceedings or
inquiries pending or threatened against or affecting the
Selling Shareholder at law or in equity before or by any
United States governmental department, commission, board,
bureau, agency or instrumentality which affect the
distribution of the Secondary Shares and Options Shares, as
the case may be; and
(ix) no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of,
any U.S. federal court sitting in Texas or Texas state
court or governmental authority or agency of the United
States is necessary or required for the performance by the
Selling Shareholder of its obligations hereunder, in
connection with the offering or sale of the Secondary
Shares and Options Shares, as the case may be, hereunder or
the consummation of the transactions contemplated by this
19
Agreement, except such as have been obtained or such as may
be required under U.S. Securities Laws or state securities
or "blue sky" laws (as to which such counsel need express
no opinion) in connection with the purchase and
distribution of the Secondary Shares and Options Shares, as
the case may be, by the Underwriters in the United States;
(e) an opinion of Osler, Hoskin & Harcourt LLP, Canadian counsel to
the Corporation, addressed to the Underwriters and their counsel
and dated the Closing Date, in form and substance satisfactory to
the Underwriters, acting reasonably, with respect to such matters
as the Underwriters may reasonably request relating to the
distribution of the Offered Shares and the Corporation, including
that:
(i) the Corporation is a corporation existing under the laws of
the Province of Alberta;
(ii) there are no restrictions on the corporate power and
capacity of the Corporation to carry on business as
described in the Prospectus, to own property and assets and
to enter into and to perform its obligations under this
Agreement;
(iii) the authorized capital of the Corporation consists of an
unlimited number of Common Shares of which 30,802,360
Common Shares are validly issued and outstanding as of the
Closing Date;
(iv) all necessary corporate action has been taken by the
Corporation to validly issue the Treasury Shares to the
Underwriters and the Treasury Shares have been validly
issued and are outstanding as fully paid and non-assessable
shares;
(v) all necessary corporate action has been taken by the
Corporation to authorize the execution, delivery and
performance of this Agreement and this Agreement has been
duly executed and delivered by the Corporation and
constitutes a legal, valid and binding obligation of the
Corporation enforceable against the Corporation in
accordance with its terms;
(vi) the attributes of the Offered Shares conform in all
material respects with the description thereof contained in
the Prospectus;
(vii) the Offered Shares sold at the Closing Time are validly
issued and outstanding as fully paid and non-assessable
shares of the Corporation;
(viii)the form of share certificate representing the Common
Shares complies with the requirements of the Business
Corporations Act (Alberta) and has been approved by the
directors of the Corporation and the TSX;
(ix) no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of,
any court or governmental authority or agency in any
Jurisdiction is necessary or required for the performance
by the Corporation of its obligations hereunder, in
connection with the offering or sale of the Offered Shares
hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been
obtained;
(x) all documents have been filed, all proceedings have been
taken and all legal requirements have been fulfilled by the
Corporation and the Selling Shareholder or under applicable
20
laws of the Jurisdictions to qualify the Offered Shares for
sale and distribution to the public in each of the
Jurisdictions through investment dealers and brokers
registered under the applicable laws of each of the
Jurisdictions who have complied with the relevant
provisions of such applicable laws;
(xi) the execution, delivery and performance of this Agreement
by the Corporation and the sale and delivery at the Closing
Time of the Offered Shares do not and will not result in a
material breach of, and do not create a state of facts
which, after notice or lapse of time or both, will result
in a material breach or permit acceleration or termination
(if applicable) of and do not and will not materially
conflict with or constitute a material default under:
(A) any term or provision of the articles, by-laws or
resolutions of the Corporation; or
(B) any law, statute, rule or regulation of Canada or the
Province of Alberta applicable to the Corporation, or
to the knowledge of such counsel, any judgement, order
or decree of any government, governmental, regulatory
or administrative agency, authority, commission or
instrumentality or court having jurisdiction over, the
Corporation; and
(xii) the Offered Shares are qualified investments for a trust
governed by registered retirement savings plans, registered
retirement income funds, registered education savings plans
and deferred profit sharing plans (collectively, "Plans")
under the Income Tax Act (Canada) and the regulations
thereunder, and are not "foreign property" for the purposes
of the tax imposed under Part XI of the Income Tax Act
(Canada) on Plans (other than registered education savings
plans) and certain other tax exempt entities;
(f) an opinion of Osler, Hoskin & Harcourt LLP, special United States
counsel to the Corporation, addressed to the Underwriters and
dated the Closing Date, in form and substance satisfactory to the
Underwriters acting reasonably, as to the sale of the Offered
Shares under Rule 144A in the United States or to U.S. persons
and such other matters as the Underwriters may reasonably request
relating to the distribution of the Offered Shares;
(g) an opinion of Macleod Dixon LLP, Canadian counsel to the
Underwriters, dated the Closing Date, in form and substance
satisfactory to the Underwriters, acting reasonably, with respect
to such matters as the Underwriters may reasonably request
relating to the distribution of the Offered Shares;
(h) an opinion of the Corporation's local counsel in Quebec,
addressed to the Underwriters and dated the Closing Date, that
the Corporation has complied with all laws of the Province of
Quebec relating to the use of the French language in connection
with the documents to be delivered to purchasers of the Offered
Shares in the Province of Quebec;
(i) a comfort letter of the Corporation's auditors, addressed to the
Underwriters and the directors of the Corporation and dated the
Closing Date, in form and substance satisfactory to the
Underwriters, acting reasonably, bringing the information
contained in the comfort letter or letters of such auditors
21
referred to in section 3.2(b) hereof forward to the Closing Time,
which comfort letter shall be based on a review having a cut-off
date not more than two business days prior to the Closing Date;
(j) evidence from the Selling Shareholder as to the consent from
Guggenheim Corporate Funding, LLC, as administrative agent,
and/or the lenders who are parties to the Loan Agreement of the
sale by the Selling Shareholder of the Secondary Shares and the
Option Shares to the Underwriters;
(k) evidence from the Corporation as to the appointment of Olympia
Trust Company as the registrar and transfer agent for the Offered
Shares;
(l) written confirmation from the Corporation's registrar and
transfer agent of the number of Common Shares issued and
outstanding as of the Closing Date; and
(m) such further certificates, opinions of counsel and other
documentation from the Corporation and/or the Selling Shareholder
as the Underwriters may reasonably require, provided however that
the Underwriters shall request such certificate or document
within a reasonable period prior to the Closing Time that is
sufficient for the Corporation and/or the Selling Shareholder to
obtain and deliver such certificate or document.
It is understood that counsel for the Underwriters may rely on the
opinions of counsel for the Selling Shareholder as to matters which
relate specifically to the Selling Shareholder and on the opinions of
counsel for the Corporation as to matters which relate specifically to
the Corporation, and that counsel for the Selling Shareholder, counsel
for the Corporation and counsel for the Underwriters may rely upon the
opinions of local counsel as to all matters not governed by the laws of
the respective jurisdictions in which they are qualified to practice
and may rely, to the extent appropriate in the circumstances, as to
matters of fact on certificates of officers of the Selling Shareholder
and the Corporation, the Corporation's registrar and transfer agent and
of the TSX or public officials.
8.2 The Underwriters' obligations under this Agreement are conditional upon
and subject to the representations and warranties of the Selling
Shareholder and the Corporation contained herein being true and correct
in all material respects as at the Closing Time, with the same force
and effect as if made at the Closing Time before giving effect to the
transactions contemplated hereby, and the Selling Shareholder and the
Corporation having complied in all material respects with all the
covenants and having satisfied in all material respects all the terms
and conditions of this Agreement on its respective part to be complied
with and satisfied at or prior to the Closing Time, other than those
which may have been waived by the Underwriters.
9. Restriction on Further Issues or Sales
9.1 During the period commencing on the date hereof and ending on the day
which is 180 days following the Closing Date, the Corporation or any of
its subsidiaries shall not without the prior written consent of the
Underwriters (which consent shall not be unreasonably withheld):
(a) issue any Common Shares or any securities of the Corporation or
any securities convertible into or exchangeable for any
securities of the Corporation, other than Common Shares pursuant
to this Agreement or any employee benefit, incentive or stock
option plans of the Corporation in existence at the date hereof
including the stock option compensation plan as disclosed in the
Prospectus;
22
(b) agree or become bound to do so; or
(c) publicly announce any intention to do so.
9.2 During the period commencing on the date hereof and ending on the day
which is 180 days following the Closing Date, the Selling Shareholder
shall not without the prior written consent of the Underwriters (which
consent shall not be unreasonably withheld):
(a) sell, offer, contract to sell, pledge, grant any option to
purchase, make any short sale or dispose of any Common Shares
owned or controlled by it, or any securities convertible into or
exchangeable for such Common Shares, other than pursuant to this
Agreement;
(b) agree or become bound to do so; or
(c) publicly announce any intention to do so.
9.3 The Underwriters acknowledge the Secondary Shares and the Option Shares
have been pledged by the Selling Shareholder as security in favour of
Guggenheim Corporate Funding, LLC, as agent for certain arm's length
third party lenders, pursuant to the Pledge Agreement and that such
security obligation shall continue until the Closing Time and the
Option Closing Time, respectively, at which time the Selling
Shareholder is obligated pursuant to the terms of the Loan Agreement to
pay such amount of the net proceeds it receives from the sale of the
Secondary Shares and the Option Shares to Guggenheim Corporate Funding,
LLC, as agent, as required to fully repay its outstanding debt under
the Loan Agreement.
10. Indemnity
10.1 Each of the Corporation and the Selling Shareholder, jointly and
severally, covenants and agrees to protect and indemnify each of the
Underwriters (which term, for the purpose of this section 10, shall be
deemed to include affiliates of the Underwriters which are engaged in
the offering and distribution of the Offered Shares), their respective
directors, officers, employees and agents, and each person who controls
any Underwriter against all losses (other than a loss of profits or
other consequential or punitive damages), claims, actual damages,
liabilities, reasonable costs or reasonable expenses caused or incurred
by reason of:
(a) any information or statement in the Prospectuses or any
Prospectus Amendment (except any information and statements
relating solely to the Underwriters which has been provided by
the Underwriters) being or being alleged to be a
misrepresentation (as such term is defined in the Securities Act
(Alberta) or any misstatement of a material fact;
(b) the omission or alleged omission to state in the Prospectuses or
any certificate of the Corporation delivered hereunder or
pursuant hereto, any material fact (other than a material fact
relating solely to the Underwriters which has been provided by
the Underwriters) required to be stated therein or necessary to
make any statement not misleading;
(c) any order made or inquiry, investigation or proceeding (formal or
informal) commenced or threatened by any officer or official of
any of the Securities Commissions or any other regulatory
authority based upon the circumstances described in clauses (a)
above which operates to prevent or restrict trading in or
distribution of the Offered Shares in any of the Jurisdictions;
23
(d) the breach of any representations, warranties or covenants of the
Corporation contained herein or delivered pursuant hereto; or
(e) the non-compliance or alleged non-compliance by the Corporation
and the Selling Shareholder with any requirement of applicable
Canadian Securities Laws in connection with the transactions
contemplated herein, including, without limitation,
non-compliance with any statutory requirement to make any
document available for inspection.
10.2 If any matter or thing contemplated by section 10.1 shall be asserted
against any person or company referred to in those sections in respect
of which indemnification is or might reasonably be considered to be
provided or if any potential claim contemplated by section 10.1 shall
come to the knowledge of any such person or company, such person or
company (the "Indemnified Party") shall notify the party against whom
such indemnity may be sought (the "Indemnifying Party") as soon as
possible of the nature of such claim and the Indemnifying Party shall
be entitled (but not required) to assume the defense of any suit
brought to enforce such claim; provided, however, that the defense
shall be through legal counsel acceptable to the Indemnified Party,
acting reasonably, and that no admission of liability and no settlement
may be made by the Indemnifying Party or the Indemnified Party without
the prior written consent of the other, such consent not to be
unreasonably withheld. The reasonable fees and disbursements of counsel
retained to assume the defense of any such suit in accordance with the
foregoing shall be paid by the Indemnifying Party.
10.3 With respect to any such claim, the Indemnified Party shall have the
right to retain additional counsel to act on his or its behalf provided
the fees and disbursements of such additional counsel shall be paid by
the Indemnified Party, unless:
(a) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of the additional counsel; or
(b) the named parties to any claim (including any added, third or
impleaded parties) include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised in
writing by his or its counsel that representation of both parties
by the same counsel would be inappropriate due to the actual or
potential differing interests between them;
provided that in no event shall the Indemnifying Party be required to
pay the fees and disbursements of more than one set of counsel for all
the Indemnified Parties.
10.4 The rights of indemnity contained in this section 10 shall not enure to
the benefit of any Indemnified Party if the Corporation has complied
with the provisions of sections 3.3 and 5.2 hereof and the person
asserting any claim with respect to which indemnity is sought under
this section 10 was not provided with a copy of the Prospectus
Amendment, as applicable, at or prior to the written confirmation of
the sale of the Offered Shares and which Prospectus Amendment would
have corrected any untrue statement or information, misrepresentation
or omission which is the basis of such claim and which is required,
under the Canadian Securities Laws, to be delivered to such person by
the Underwriters or other Selling Firms.
10.5 The Corporation hereby waives its rights to recover contribution from
any Indemnified Party with respect to any liability of the Corporation
by reason of or arising out of any untrue statement or information,
misrepresentation or omission contained in the Prospectuses or in any
24
Supplementary Material; provided, however, that such waiver shall not
apply in respect of liability caused or incurred by reason of or
arising out of:
(a) any untrue statement or information, misrepresentation or
omission which is based upon or results from information or
statements relating solely to the Underwriters; or
(b) any failure by the Underwriters or other Selling Firms to provide
to prospective purchasers of the Offered Shares any document
which is required to be provided to such prospective purchasers
and which, in the case of the Prospectuses, the Corporation has
provided to the Underwriters to forward to such prospective
purchasers.
10.6 The rights provided for in this section 10 shall be in addition to and
not in derogation of any other right which the Underwriters may have by
statute or otherwise at law.
11. Contribution
11.1 If for any reason an indemnification provided for in section 10 is
unavailable, in whole or in part, to the Indemnified Party in respect
of any losses, claims, actual damages, liabilities, costs or expenses
referred to in section 10, and subject to the restrictions and
limitations referred to therein, the Indemnifying Party shall
contribute to the amount paid or payable (or, if such indemnity is
unavailable only in respect of a portion of the amount so paid or
payable, such portion of the amount so paid or payable) by such
Indemnified Party as a result of such losses (except for loss of
profits or other consequential and punitive damages arising), claims,
actual damages, liabilities, reasonable costs or reasonable expenses:
(a) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party on the one hand and
the Indemnified Party on the other hand from the distribution of
the Offered Shares; or
(b) if the allocation provided by section 11.1 (a) above is not
permitted by applicable law or if it is otherwise not applicable,
in such proportion as is appropriate to reflect not only the
relative benefits referred to in section 11.1 (a) above but also
the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other hand in connection with the
statement, information, misrepresentation, omission, order,
inquiry, investigation, proceeding or other matter or thing
referred to in section 10 which resulted in such losses, claims,
actual damages, liabilities, costs or expenses, as well as any
other relevant equitable considerations.
11.2 For purposes of this section 11, the relative benefits received by the
Selling Shareholder or the Corporation on the one hand and the
Underwriters on the other hand shall be deemed to be in the same
proportion as the total proceeds from the distribution of the Offered
Shares (net of the fee payable to the Underwriters but before deducting
expenses) received by the Corporation and the Selling Shareholder bears
to the Underwriting Fee received by the Underwriters. In the case of
liability arising out of Prospectuses and any Supplementary Material,
the relative fault of the Corporation or the Selling Shareholder on the
one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the statement, information,
misrepresentation, omission, order, inquiry, investigation, proceeding
or other matter or thing referred to in section 10 which resulted in
such losses, claims, actual damages, liabilities, costs or expenses
relates to information supplied by or steps or actions taken or done by
or on behalf of the Corporation, the Selling Shareholder and the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement,
information, misrepresentation, omission, order, inquiry,
25
investigation, proceeding or other matter or thing referred to in
section 10. The amount paid or payable by an Indemnified Party as a
result of such losses, claims, actual damages, liabilities, costs or
expenses referred to above shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such losses, claims,
actual damages, liabilities, costs or expenses, whether or not
resulting in any such action, suit, proceeding or claim.
11.3 Any liability of the Underwriters under this section 11 shall be
limited to the amount of the Underwriting Fee actually received by the
Underwriters. The right to contribution provided herein shall be in
addition and not in derogation of any other right to contribution which
the Underwriters may have by statute or otherwise by law.
12. Expenses
12.1 Whether or not the transactions herein contemplated shall be completed,
the Corporation and the Selling Shareholder shall pay all expenses of
or incidental to the delivery and sale of the Offered Shares and of or
incidental to all other matters in connection with the transactions
herein set out, including, without limitation, (i) the cost of any
institutional and retail roadshows, (ii) expenses payable in connection
with the qualification of the Offered Shares for sale to the public,
(iii) the reasonable fees and expenses of the Corporation's, the
Selling Shareholder's and the Underwriters' counsel, (iv) all
advertising expenses, (v) all costs incurred in connection with the
preparation, translation, printing and delivery of the Prospectuses and
any Supplementary Material, including commercial copies thereof, and
(vi) the expenses of forming and managing banking and selling groups
and the Underwriters' "out-of-pocket" expenses, including, but not
limited to, all fees, taxes, disbursements, advertising, printing,
courier, telecommunications, data search, travel and other expenses
incurred by the Underwriters and their counsel and agents, together
with related goods and services tax and provincial sales taxes
(collectively (i) through (vi) referred to as the "Expenses"). The
Expenses shall be paid by the Corporation and the Selling Shareholder
in the same proportion as the total proceeds from the Offering received
by each of them bears to such total offering proceeds.
13. Conditions
13.1 All terms and conditions of this Agreement shall be construed as
conditions, and any breach or failure to comply in all material
respects with any such terms and conditions required to be complied
with by the Corporation or the Selling Shareholder shall entitle the
Underwriters, without limitation of any other remedies of the
Underwriters, to terminate their obligations to purchase the Offered
Shares by notice to that effect given to the Corporation and the
Selling Shareholder at or prior to the Closing Time. It is understood
that the Underwriters may waive, in whole or in part, or extend the
time for compliance with, any of such terms and conditions without
prejudice to the rights of the Underwriters in respect of any other of
such terms and conditions or any other or subsequent breach or
non-compliance, provided that to be binding on the Underwriters any
such waiver or extension must be in writing.
14. Termination
14.1 Each Underwriter shall be entitled, at its option, to terminate and
cancel, without any liability on the Underwriter's part, its obligation
to purchase the Offered Shares, if prior to the Closing Time:
(a) there should develop, occur or come into effect or existence any
catastrophe, crisis or accident of national or international
consequence, any law or regulation or any other event, action,
26
state, condition or major financial occurrence of national or
international consequence which, in the opinion of the
Underwriter, acting reasonably, materially and adversely affects
or may materially and adversely affect the financial markets or
the business, operations or affairs of the Corporation and/or
prevents or materially restricts the trading in the Common Shares
or the distribution of Offered Shares or the state of the
Canadian or United States financial markets is such that, in the
sole opinion of the Underwriters, acting reasonably, the Offered
Shares cannot be profitably marketed, by giving the Corporation
and the Selling Shareholder written notice to that effect not
later than the Closing Time;
(b) any order or ruling is issued, any inquiry, investigation or
other proceeding (whether formal or informal) in relation to the
Selling Shareholder or the Corporation is made, threatened or
announced by any officer or official of any stock exchange,
Securities Commission or other regulatory authority, or any law
or regulation is promulgated or changed which, in the opinion of
the Underwriter, acting reasonably, operates to prevent or
restrict trading in or distribution or marketability of the
Offered Shares, by giving the Corporation and the Selling
Shareholder written notice to that effect not later than the
Closing Time; or
(c) there shall occur any change or event such as is contemplated by
section 5.1 hereof which, in the opinion of the Underwriter,
acting reasonably, materially and adversely affects or may
materially and adversely affect the market price, value or
marketability of the Offered Shares, by giving the Corporation
and the Selling Shareholder written notice to that effect not
later than the Closing Time.
14.2 If the obligations of any Underwriter are terminated pursuant to
section 14.1, there shall be no further liability on the part of such
Underwriter or of the Corporation or the Selling Shareholder to the
Underwriter except in respect of any liability, which may have arisen
or may thereafter arise under section 10, 11 or 12.
14.3 The right of the Underwriters to terminate their respective obligations
under this Agreement is in addition to such other remedies as they may
have in respect of any default, act or failure to act of the
Corporation or the Selling Shareholder in respect of any of the matters
contemplated by this Agreement.
15. Survival
15.1 All warranties, representations, covenants and agreements of the
Selling Shareholder, the Corporation and the Underwriters herein
contained or contained in documents submitted pursuant to this
Agreement shall survive the purchase and sale of the Offered Shares and
the termination of this Agreement and shall continue in full force and
effect for the benefit of the Underwriters, the Selling Shareholder or
the Corporation, as the case may be, regardless of any subsequent
disposition of such shares or any investigation by or on behalf of the
Underwriters with respect thereto.
16. Stabilization
16.1 In connection with the distribution of the Offered Shares, the
Underwriters and other Selling Firms may over-allot or effect
transactions, in compliance with applicable Canadian Securities Laws,
which stabilize or maintain the market price of the Common Shares at
27
levels above those which might otherwise prevail in the open market.
Such stabilizing transactions, if any, may be discontinued at any time.
17. Participation
17.1 Subject to the terms and conditions hereof, the obligation of the
Underwriters to purchase the Offered Shares shall be several and not
joint. The percentage of the Treasury Shares, the Secondary Shares and
if the Over-Allotment Option is exercised, the Option Shares, to be
separately purchased and paid for by the Underwriters shall be as
follows:
CIBC World Markets Inc. 50%
BMO Nesbitt Burns Inc. 20%
GMP Securities Ltd. 20%
Canaccord Capital Corporation 10%
----------
100%
If at the Closing Time any of the Underwriters fails to purchase its
applicable percentage of the Treasury Shares and the Secondary Shares,
the other Underwriters shall have the right, but shall not be
obligated, to purchase all, but not less than all, of the Treasury
Shares and the Secondary Shares which would otherwise have been
purchased by the Underwriters which fails to purchase. In the event
that such right is not exercised, each of the Underwriters which is
able and willing to purchase shall be relieved of all obligations to
the Corporation and the Selling Shareholder on submission to the
Corporation and the Selling Shareholder of reasonable evidence of its
ability and willingness to fulfil its obligations hereunder at the
Closing Time. Nothing in this section shall oblige the Corporation and
the Selling Shareholder to sell to any or all of the Underwriters less
than all of the Treasury Shares and the Secondary Shares or shall
relieve any of the Underwriters in default hereunder from liability to
the Corporation and the Selling Shareholder. The provisions of this
section 17.1 shall apply mutatis mutandis to the purchase of any Option
Shares in respect of which the Over-Allotment Option has been
exercised.
18. U.S. Offers
18.1 The Underwriters, severally, but not jointly, make the representations,
warranties and covenants applicable to them in Schedule "A" hereto and,
severally, but not jointly, agree, on behalf of themselves and their
United States affiliates, for the benefit of the Corporation and the
Selling Shareholders, to comply with the U.S. selling restrictions
imposed by the laws of the United States as set forth in Schedule "A"
hereto, which forms part of this Agreement. They also agree to obtain
such an agreement from each member of the Selling Dealer Group (as
defined in Schedule "A" attached). Notwithstanding the foregoing
provisions of this paragraph, an Underwriter will not be liable to the
Corporation or the Selling Shareholder under this paragraph or Schedule
"A; with respect to a violation by another Underwriter or by another
members of the Selling Dealer Group of the provisions of this paragraph
or Schedule "A" if the former Underwriter is not itself also in
violation.
18.2 The Corporation represents, warrants and agrees to and with the
Underwriters and the Selling Shareholders that (i) none of the
Corporation, its affiliates or any person acting on its or their
behalf, (A) has engaged or will engage in any Directed Selling Efforts
(as such term is defined in Regulation S promulgated under the U.S.
Securities Act, hereinafter "Regulation S") or any general solicitation
or general advertising (within the meaning of Regulation D promulgated
under the U.S Securities Act) with respect to the Offered Shares in the
United States, (B) has made or will make any offer or sale of any
Offered Shares in the United States except through the Underwriters in
28
accordance with this Agreement and Schedule "A" hereto, or (C) has
offered or sold or will offer or sell any securities in a manner, or
have taken or will take any other action, that would cause the
exemptions from registration provided by Rule 144A or Regulation S to
become unavailable for offers and sales of the Offered Shares or that
would constitute a violation of Regulation M under the U.S. Exchange
Act; (ii) it is, and immediately prior to any sale of Offered Shares
pursuant to this Agreement will be, a "foreign issuer" within the
meaning of Regulation S that reasonably believes that there is no
"substantial U.S. market interest" (as such terms is defined under
Regulation S) in the Common Shares; (iii) it is not, and immediately
prior to any sale of Offered Shares pursuant to this Agreement will not
be, an open-ended investment company, unit investment trust or
face-amount certificate company that is or is required to be registered
under section 8 of the U.S. Investment Company Act of 1940, as amended;
(iv) the Offered Shares are not, and immediately prior to any sale of
offered Shares pursuant to this Agreement will not be (A) part of a
class listed on a national securities exchange registered under section
6 of the U.S. Exchange Act, (B) part of a class quoted in a U.S.
automated inter-dealer quotation system within the meaning of Rule
144A, or (C) convertible or exchangeable at an effective conversion
premium or effective exercise premium (calculated as specified in
paragraphs (a)(6) and (a)(7) of Rule 144A) of less than 10% for
securities so listed or quoted; and (v) for so long as any of the
Offered Shares are outstanding and are "restricted securities" within
the meaning of Rule 144(a)(3) of the U.S. Securities Act, it shall
either: (A) furnish to the United States Securities and Exchange
Commission (the "SEC") all information required to be furnished in
accordance with Rule 12g3-2(b) under the U.S. Exchange Act; (B) file
reports and other information with the SEC under section 13 or 15(d) of
the U.S. Exchange Act; or (C) if it is not exempt from reporting
pursuant to Rule 12g3-2(b) nor subject to section 13 or 15(d) of the
U.S. Exchange Act, then furnish to any holder of Offered Shares and any
prospective purchaser of Offered Shares designated by such holder, upon
the request of such holder, the information required to be delivered
pursuant to Rule 144(d)(4) under the U.S. Securities Act.
18.3 The Selling Shareholder represents, warrants and agrees to and with the
Underwriters and the Corporation that the Selling Shareholder, its
affiliates or any person acting on their behalf, has not: (i) engaged
or will not engage in any Directed Selling Efforts or any general
solicitation or general advertising in the United States with respect
to the Offered Shares or any other securities of the Corporation; (ii)
made nor will make any offer or sale of any Offered Shares or any other
securities of the Corporation in the United States except through the
Underwriters in accordance with this Agreement and Schedule "A" hereto;
and (iii) offered or sold or will offer or sell any securities in a
manner, or has taken or will take any other action, that would cause
the exemptions from registration provided by Rule 144A or Regulation S
to become unavailable for offers and sales of the Offered Shares or
that would constitute a violation of Regulation M under the U.S.
Exchange Act.
19. Lead Underwriter
19.1 The Corporation shall be entitled to and shall act on any notice,
waiver, extension or communication given by or on behalf of the
Underwriters by the Lead Underwriter, which shall represent the
Underwriters and which have the authority to bind the Underwriters in
respect of all matters hereunder, except in respect of any notice of
termination given pursuant to section 14, which notice may be given by
any Underwriter, and any settlement under section 10 or 11.
29
20. Notices
20.1 Any notice or other communication to be given hereunder shall be
addressed as follows:
if to the Selling Shareholder:
Abraxas Petroleum Corporation
500 N. Loop 1604 East, Suite 100
San Antonio, Texas 78232
USA
P.O. Box 701007 San Antonio, Texas 78270-1007
USA
Facsimile: 210-490-8816
Attention: Robert L.G. Watson, President
with copies to:
Cox Smith Matthews Incorporated
112 E. Pecan Street, Suite 1800
San Antonio, Texas 78205-1521
USA
Facsimile: (210) 226-8395
Attention: Steven R. Jacobs
if to the Corporation:
Grey Wolf Exploration Inc.
Suite 1500, Sun Life Plaza
144 - 4th Avenue S.W.
Calgary, Alberta T2P 3N4
Facsimile: 403-262-1949
Attention: Robert L.G. Watson, Chief Executive Officer
with copies to:
Osler, Hoskin & Harcourt LLP
1900, 333 - 7th Avenue S.W.
Calgary Alberta T2P 2Z1
Facsimile: 403-260-7024
Attention: Mark R. Smith
30
if to the Underwriters, each of:
CIBC World Markets Inc.
9th Floor, Bankers Hall East
855 - 2nd Street S.W.
Calgary, Alberta T2P 4J7
Facsimile: 403-260-0524
Attention: Brenda A. Mason, Managing Director
with a copy to: Robert J. Richardson
Vice President Legal, CIBC World Markets
Facsimile: 416-304-4573
BMO Nesbitt Burns Inc.
2200, 333 - 7th Avenue S.W.
Calgary, Alberta T2P 2Z1
Facsimile: 403-515-1525
Attention: Shane C. Fildes, Executive Managing Director
GMP Securities Ltd.
1600, 500 - 4th Avenue S.W.
Calgary, Alberta T2P 2V6
Facsimile: 403-543-3589
Attention: Matt Sobolewski, Vice President, Investment
Banking
Canaccord Capital Corporation
Suite 400, 409 - 8th Avenue S.W.
Calgary, Alberta T2P 1E3
Facsimile: 403-508-3866
Attention: Richard A. Grafton, President
with copies to:
Macleod Dixon LLP
3700, 400 - 3rd Avenue S.W.
Calgary, Alberta T2P 4H2
Facsimile: 403-264-5973
Attention: Kevin E. Johnson
Any such notice or other communication shall be in writing, and unless delivered
personally to a responsible officer of the addressee, shall be given by courier
service or telecopy, and shall be deemed to have been received, if given by
telecopy, on the day of sending (or the next business day following the sending
if the sending is after 4:00 p.m. (Calgary time) or if the day of sending is not
a business day) and, if given by courier service, on the next business day
following the sending thereof.
31
21. Agent for Service
By the execution and delivery of this Agreement, the Selling Shareholder (i)
acknowledges that it has, by separate written instrument, irrevocably designated
and appointed Osler, Hoskin & Harcourt LLP (or any successor) (together with any
successor, the "Agent for Service"), as their authorized agent upon which
process may be served in any suit or proceeding arising out of or relating to
this Agreement or the Offered Shares, that may be instituted in any court in
Canada, or brought under the Canadian Securities Laws, and acknowledges that the
Agent for Service has accepted such designation, and (ii) agrees that service of
process upon the Agent for Service (or any successor) and written notice of said
service to the Selling Shareholder shall be deemed in every respect effective
service of process upon the Selling Shareholder in any such suit or proceeding.
The Selling Shareholder further agrees to take any and all action, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of the Agent for Service
in full force and effect so long as any of the Offered Shares shall be
outstanding.
22. Miscellaneous
22.1 The Corporation hereby consents to the sale of the Offered Shares by
the Selling Shareholder pursuant to this Agreement.
22.2 If any provision of this Agreement is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
impair the validity of any other provision of this Agreement and such
void or unenforceable provision shall be severed from this Agreement.
22.3 This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Alberta and the federal laws of Canada
applicable therein. Each of the Corporation and the Selling Shareholder
irrevocably attorns to the non-exclusive jurisdiction of the courts of
the Province of Alberta with respect to all matters arising out of this
Agreement and the transactions contemplated herein.
22.4 Time shall be of the essence hereof.
22.5 This Agreement may be executed in any number of counterparts or
facsimiles, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and
the same agreement.
22.6 All dollar amounts referred to in this Agreement are in Canadian funds,
unless otherwise specified.
22.7 It is understood that this agreement shall supersede any written
agreement between the Corporation, the Selling Shareholder and the
Underwriters in respect of the distribution of the Offered Shares.
32
If the foregoing is in accordance with your understanding and is agreed to by
you, please communicate your acceptance by executing this letter where indicated
below and returning same to the Underwriters.
Yours very truly,
CIBC WORLD MARKETS INC. BMO NESBITT BURNS INC.
By: By:
--------------------------- -------------------------------
Brenda A. Mason Shane C. Fildes
Managing Director Executive Managing Director
GMP SECURITIES LTD. CANACCORD CAPITAL CORPORATION
By: By:
------------------------------- -----------------------------
Matt Sobolewski Richard A. Grafton
Vice President, Investment Banking President
The foregoing is hereby accepted by us.
DATED this ____ day of ______________, 2005
GREY WOLF EXPLORATION INC.
By:_______________________________
Robert L.G. Watson
Chief Executive Officer
ABRAXAS PETROLEUM CORPORATION
By:________________________________
Robert L.G. Watson
President
33
SCHEDULE "A"
U.S. SELLING RESTRICTIONS
Capitalized terms used but not defined in this Schedule "A" shall have
the meaning ascribed thereto in the underwriting agreement (the
"Underwriting Agreement") to which this Schedule "A" is attached.
1. For the purpose of this Schedule "A", the following terms shall have
the meanings indicated:
(a) "Final U.S. Private Placement Memorandum" means the final U.S.
private placement memorandum to which a copy of the Prospectus is
attached;
(b) "Foreign Issuer" means a foreign issuer as that term is defined
in Regulation S. Without limiting the foregoing, but for greater
clarity in this Schedule "A", it means any issuer that is (a) the
government of any country, or of any political subdivision of a
country, other than the United States; or (b) a corporation or
other organization incorporated under the laws of any country
other than the United States, except an issuer meeting the
following conditions: (I) more than 50 percent of the outstanding
voting securities of such issuer are directly or indirectly owned
of record by residents of the United States; and (2) any of the
following: (i) the majority of the executive officers or
directors are United States citizens or residents, (ii) more than
50 percent of the assets of the issuer are located in the United
States, or (iii) the business of the issuer is administered
principally in the United States;
(c) "Preliminary U.S. Private Placement Memorandum" means the
preliminary U.S. private placement memorandum to which a copy of
the Preliminary Prospectus is attached;
(d) "Qualified Institutional Buyer" means a "qualified institutional
buyer" as defined in Rule 144A.
(e) "Regulation S" means Regulation S promulgated under the U.S.
Securities Act;
(f) "Selling Dealer Group" means dealers or brokers other than the
Underwriters and their U.S. affiliates who participate in the
offer and sale of Offered Shares pursuant to the Underwriting
Agreement; and
(g) "Substantial U.S. Market Interest" means "substantial U.S. market
interest" as that term is defined in Regulation S.
2. Each Underwriter, each of their respective U.S. affiliates and each
member of the Selling Dealer Group acknowledges and agrees that the
Offered Shares have not been and will not be registered under the U.S.
Securities Act, and have not been and will not be offered or sold
within the United States or for the account or benefit of, a person in
the United States, except pursuant to the exemption from the
registration requirements of the U.S. Securities Act provided by Rule
144A. Each Underwriter represents, warrants and agrees that it, its
U.S. affiliates and each member of the Selling Dealer Group have
offered and sold and will offer and sell the Offered Shares only in
accordance with Rule 903 of Regulation S or in accordance with the
restrictions set forth in paragraphs 3 and 4 of this Schedule "A" and
Rule 144A. Accordingly, no Underwriter, U.S. affiliate or Selling
Dealer Group member, or person acting on any of their behalf, has
engaged or will engage in any Directed Selling Efforts (as such term is
defined in Regulation S) in the United States with respect to the
Offered Shares.
3. Each Underwriter represents, warrants and covenants to the Corporation
and the Selling Shareholder that, in connection with all offers and
sales of the Offered Shares in the United States or for the account of,
a person in the United States:
(a) it has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered
Shares, except (i) with its affiliates, (ii) with members of the
Selling Dealer Group in accordance with this paragraph 2 or (iii)
otherwise with the prior written consent of the Corporation and
it shall require each member of the Selling Dealer Group to
agree, for the benefit of the Corporation and the Selling
Shareholder, to comply with, and shall use its best efforts to
ensure that each member of the Selling Dealer Group comply with,
the same provisions of this Schedule "A" as apply to such
Underwriter as if such provisions applied to such member of the
Selling Dealer Group;
(b) its U.S. affiliate is duly registered as a broker or dealer under
Section 15(b) of the U.S. Exchange Act and under the laws of each
U.S. state in which offers and sales of Offered Shares have been
or will be made (unless exempted from such state registration
requirements) and is a member of, and in good standing with, the
National Association of Securities Dealers, Inc. on the date
hereof and of each offer or sale of Offered Shares in the United
States;
(c) all offers and sales of the Offered Shares in the United States
have been and will be effected by its U.S. affiliate in
accordance with all applicable U.S. federal and state
broker-dealer requirements;
(d) its U.S. affiliate is a Qualified Institutional Buyer;
(e) each offeree will be provided with a Preliminary U.S. Private
Placement Memorandum and the Final U.S. Private Placement
Memorandum and no other written material will be used in
connection with the offer and sale of the Offered Shares in the
United States;
(f) neither it nor its representatives nor its U.S. affiliate have
used, and none of such persons will use, any form of general
solicitation or general advertising (within the meaning of
Regulation D of the U.S. Securities Act) in connection with the
offer or sale of the Offered Shares in the United States;
(g) it will solicit, and will cause its U.S. affiliate to solicit,
offers for the Offered Shares in the United States only from, and
will offer the Offered Shares only to, persons it reasonably
believes to be Qualified Institutional Buyers in accordance with
Rule 144A. It also agrees that it will solicit offers for the
Offered Shares only from, and will offer the Offered Shares only
to, persons that in purchasing such Offered Shares will be deemed
to have made the representations, warranties and agreements
contained in the Final U.S. Private Placement Memorandum;
(h) it will inform, and cause its U.S. affiliate to inform, all
purchasers of the Offered Shares in the United States that the
Offered Shares have not been and will not be registered under the
U.S. Securities Act and are being sold to them without
registration under the U.S. Securities Act in reliance on Rule
144A;
(i) at least one Business Day prior to the Closing Date and any
Additional Closing Date, it shall cause its U.S. affiliate to
provide the Corporation and the Corporation's transfer agent and
registrar with a list of all purchasers of the Offered Shares in
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the United States; and
(j) each offeree in the United States shall be provided with a
Preliminary U.S. Private Placement Memorandum and a Final U.S.
Private Placement Memorandum, which shall be in form and
substance satisfactory to the Corporation and shall set forth the
following:
"The securities offered hereby have not been and will not be
registered under the U.S. Securities Act and may not be offered
or sold within the United States except that securities may be
offered or sold to Qualified Institutional Buyers pursuant to
Rule 144A."
"Each U.S. purchaser hereof will, by its purchase of such
securities, be deemed to have represented and agreed for the
benefit of the Corporation and the Selling Shareholder as
follows:
(i) it is aware that the securities have not been and will not
be registered under the U.S. Securities Act and the sale
contemplated hereby is being made. in reliance on Rule 144A
to Qualified Institutional Buyers;
(ii) it is a Qualified Institutional Buyer as defined in Rule
144A under the US. Securities Act and it is acquiring the
securities for its awn account or for the account of a
Qualified Institutional buyer with respect to which
exercises sole investment discretion;
(iii) it understands that if it decides to offer, sell or
otherwise transfer such securities, such securities may be
offered, sold or otherwise transferred only (A) to the
Corporation, (B) outside the United States in accordance
with Rule 904 of Regulation S or (C) inside the United
States in accordance with (1) Rule 144A to a person who,
the seller reasonably believes is a Qualified Institutional
Buyer that is purchasing for its own account or for the
account of a Qualified Institutional Buyer to whom notice
is given that the offer, sale or transfer is being made in
reliance on Rule 144A or (2) the exemption from
registration under the 1933 Act provided by Rule 144, if
available; and
(iv) it understands that all securities sold in the United
States as part of this offering will bear a legend to the
following effect:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT). THE HOLDER HEREOF, BY PURCHASING
SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (i) TO THE CORPORATION, (ii) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, OR (iii) INSIDE THE UNTIED STATES
IN ACCORDANCE WITH (A) RULE 144A UNDER THE SECURITIES ACT
OR (B) RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES
N CANADA. A NEW CERTIFICATE BEARING NO LEGEND, DELIVERY OF
WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
OLYMPIA TRUST COMPANY, AS REGISTRAR AND TRANSFER AGENT, OR
SUCH OTHER. ORGANIZATION OR ENTITY PERFORMING SUCH FUNCTION
FOR THE CORPORATION (THE "TRANSFER AGENT") UPON DELIVERY OF
3
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO THE TRANSFER AGENT AND THE CORPORATION, TO
THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED
HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 REGULATION
S UNDER THE SECURITIES ACT;
provided, that, if any such securities are being sold under
clause (ii) above, the legend may be removed by providing a
declaration to o, as registrar and transfer agent for the
securities, or such other organization or entity performing
such function for the Corporation (the "Transfer Agent') to
the following effect (or as the Corporation may from time
to time prescribe):
The undersigned (i) acknowledges that the sale of the
securities of Grey Wolf Exploration Inc. to which this
declaration relates is being made in reliance on Rule
944 of Regulation S ("Regulation S") under the United
States Securities Act of 1933, as amended (the
"Securities Act") and (ii) certifies that: (A) it is
not an affiliate of Grey Wolf Exploration Inc. (as
defined in Rule 405 under the Securities Act), the
offer of the securities was not made to a person in the
United States and either (1) at the time the buy order
was originated, the buyer was outside the United
States, or the seller and any person acting on its
behalf reasonably believe that the buyer was outside
the United States, or (2) the transaction was executed
on or through the facilities of the Toronto Stock
Exchange, and neither the seller nor any person acting
on its behalf knows that the transaction has been
prearranged with a buyer in the United States, (B)
neither the seller nor any affiliate of the seller nor
any person acting on any of their behalf has engaged or
will engage in any "directed selling efforts" (as such
term is defined in Regulation S) in the United States
in connection with the offer and sale of the
securities, (C) the sale is bona fide and not for the
purpose of "washing off' the resale restrictions
imposed because the securities are "restricted
securities" (as that term is defined in Rule 144(a)(3)
under the Securities Act), (D) the seller does not
intend to replace the securities sold in reliance on
Rule 904 of Regulation 8, with o unrestricted
securities, and (E) the contemplated sale is not a
transaction, or part of a series of transactions which,
although in technical compliance with Regulation S, is
part of a plan or scheme to evade the registration
provisions of the Securities Act;
provided, further, that, if any such securities are being
sold under clause (iii)(B) above, the legend may be removed
by delivery to the Transfer Agent of an opinion of counsel,
of recognized standing reasonably satisfactory to the
Corporation, to the effect that such legend is no longer
required under applicable requirements of the 1933 Act."
(k) any offer, sale or solicitation of an offer to buy Offered Shares
that has been made or will be made in the United States was or
will be made only to Qualified Institutional Buyers in
4
transactions that are exempt from registration under applicable
state securities laws; and
(l) each offeree was provided with a copy of the Prospectus, together
with a Final U.S. Private Placement Memorandum and no other
written material, other than a Preliminary Prospectus, together
with a Preliminary U.S. Private Placement Memorandum was used in
connection with the offer or sale of the Offered Shares in the
United States;
4. At the Closing Time and any Additional Closing Time, each Underwriter,
together with its U.S. affiliate, will provide a certificate,
substantially in the form of Exhibit I to this Schedule "A", relating
to the manner of the offer and sale of the Offered Shares in the United
States; provided, however, than an Underwriter is not required to
provide such certificate if neither it nor its U.S. affiliate has made
any offers or sales of the Offered Shares in the United States, in
which case such Underwriter shall be deemed to represent and warrant to
the Corporation as of the Closing Time or the Additional Closing Time,
as applicable, that all offers and sales made by it of the Offered
Shares were made in compliance with Rule 903 of Regulation S.
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EXHIBIT I
UNDERWRITERS' CERTIFICATE
In connection with the private placement of common shares (the "Offered
Shares") of Grey Wolf Exploration Inc. (the "Corporation") with one or more U.S.
institutional investors (the "U.S. Purchasers"), the undersigned, one of the
several underwriters (the "Underwriters") referred to in the Underwriting
Agreement, dated as of February 18, 2005, among the Corporation, the
Underwriters and Abraxas Petroleum Corporation, (the "Underwriting Agreement"),
and its U.S. affiliate who has signed below in its capacity as placement agent
in the United States for such Underwriter (the "U.S. Placement Agent"), do
hereby certify that:
(a) the U.S. Placement Agent is on the date hereof, and was on the
date of each offer or sale of the Offered Shares in the United
States, duly registered as a broker or dealer under Section 15(b)
of the U.S. Exchange Act and under the laws of each U.S. state in
which offers and sales of the Offered Shares have been or will be
made (unless exempted from such state registration requirements)
and is and was a member of, and in good standing with, the
National Association of Securities Dealers, Inc. on the date
hereof and on such dates;
(b) all offers and sales of the Offered Shares in the United States
have been effected by the U.S. Placement Agent in accordance with
all applicable U.S. federal and state broker-dealer requirements
and U.S. state securities law requirements;
(c) each offeree was provided with a copy of the Prospectus, together
with a Final U.S. Private Placement Memorandum and no other
written material, other than a Preliminary Prospectus, together
with a Preliminary U.S. Private Placement Memorandum was used in
connection with the offer or sale of the Offered Shares in the
United States;
(d) immediately prior to transmitting any of such materials to such
offerees, we had reasonable grounds to believe and did believe
that each offeree was a Qualified Institutional Buyer as defined
in Rule 144A under the U.S. Securities Act, and, on the date
hereof, we continue to believe that each U.S. Purchaser is a
Qualified Institutional Buyer as defined in Rule 144A under the
U.S. Securities Act;
(e) neither we nor our representatives have utilized, and neither we
nor our representatives will utilize, any form of general
solicitation or general advertising (within the meaning of
Regulation D under the U.S. Securities Act); and
(f) we have conducted the offer and sale of the Offered Shares in
accordance with the Underwriting Agreement, Rule 144A and
Regulation S. Terms used in this certificate have the meanings
given to them in the Underwriting Agreement unless otherwise
defined herein.
Dated: ________________________, 2005
CIBC WORLD MARKETS INC. CIBC WORLD MARKETS CORP.
By: By:
---------------------------- ----------------------------------
Name: Name:
Title: Title: