November 12, 2003
STRICTLY PRIVATE & CONFIDENTIAL
ActiveCore Technologies Inc.
2275 Lakeshore Blvd. West
Suite 401
Toronto, Ontario
M8V 3Y3
Attention: Brian J. MacDonald
Chairman and Chief Executive Officer
Dear Brian:
Panfin Equity Corp. ("Panfin" or the "Agent") would be pleased to act as agent
on a "best efforts" basis, on behalf of ActiveCore Technologies Inc. (the
"Company") in a proposed offering of the Company's common shares (the "Common
Shares").
The sale will be by way of a private placement offering to purchasers (the
"Purchasers") pursuant to exemptions from the prospectus and registration
requirements of applicable securities laws of Canada, and other jurisdictions
outside of North America upon the terms contemplated herein (the "Offering").
The purpose of this Agreement (as defined herein) is to set out our mutual
understanding of the terms of our engagement by the Company.
1. The terms of our agreement will be governed by this letter agreement (the
"Agreement") unless otherwise replaced at the Agent's election by a formal
agency agreement (the "Agency Agreement") to be entered into by the Company
and the Agent. The Agency Agreement will be negotiated in good faith
between the Company and the Agent and shall contain the usual
representations and warranties to be given by the Company and the Agent,
covenants to provide the usual form of legal opinions, as well as the usual
termination events, indemnities, contribution provisions, "market out"
provisions, "material change out" provisions, "disaster out" provisions and
other relevant terms as are mutually agreed to by the Company and the
Agent. The parties agree that the Agent may not exercise the "market out"
provisions and "disaster out" provisions after the Offering Closing Date
(as defined herein), however the Agent shall be entitled to exercise the
"material adverse change" provisions at any time prior to the Escrow
Release Date. Unless otherwise agreed to by the Company and the Agent, the
Offering will be a private placement of the Common Shares by way of a term
sheet attached as Schedule "B" hereto. The time frame of the Offering will
be established through negotiation in the context of the Agent's assessment
of the market with closing scheduled for November 28, 2003, or such date as
mutually agreed (the "Offering Closing Date").
2. The Offering size is expected to be U.S.$7,000,000 or such other amount as
may be mutually agreed by the Company and the Agent, subject to receipt of
any regulatory approval.
3. The Offering price will be U.S.$0.14 per Common Share, or such other amount
as may be mutually agreed to by the Company and the Agent, subject to
receipt of any regulatory approval.
4. The proceeds of the Offering shall comprise partial consideration for the
purchase of 5,000,000 shares (the "GDI Shares") of General Diagnostics Inc.
("GDI") at a price of $2.00 per share, representing 23% of the issued and
outstanding shares of GDI on a fully diluted basis to be completed by
February 27, 2004 for a purchase price of U.S$10,000,000 in accordance with
a share subscription agreement. Accordingly, the proceeds of the Offering
(i.e., $7,000,000), shall be held in escrow by Goodman and Carr LLP,
counsel to the Agent, or such other registered Canadian trust company as is
agreed to by the parties from time to time acting reasonably (the "Escrow
Agent") subject to (the "Escrow Release Conditions"):
the Company's registration statement for 50,000,000 Common Shares to be issued
to the Purchasers pursuant to the Offering being declared effective and the
delivery of such unrestricted registered shares (i.e., freely tradable) to
Goodman and Carr LLP or the Escrow Agent on behalf of the Purchasers;
no material adverse change in the business of the Company (which includes GDI
given the material nature of the acquisition to the Company); and
completion of all matters necessary to purchase the GDI Shares by the Company in
accordance with the terms set forth herein, subject to any material modification
of terms being approved by the Agent, save and except for the release from
escrow of the proceeds of the Offering.
In the event that the Company has not satisfied the Escrow Release
Conditions on or before February 27, 2004, subject to the unilateral right
of the Agent to extend such period until March 31, 2004 (the "Escrow
Release Date"), the parties hereby acknowledge and irrevocably direct the
Escrow Agent to return the proceeds of the Offering to the Agent without
set-off or deduction and the contemplated Offering shall be terminated.
5. The Common Shares issued pursuant to the Offering shall be placed with the
Escrow Agent pursuant to the terms of an escrow agreement (the "Escrow
Agreement") to be entered into between the Company and the Agent which will
provide for the release and/or sale of the Common Shares as follows:
(i) the Escrow Agent shall be directed to retain a licensed broker to
be selected by the Agent to effect the sale of up to 4% of the
aggregate number of Common Shares issued in each one week period
until such time as the cumulative proceeds of sale from the
Common Shares equals U.S.$8,500,000 (the "Sales Threshold"). The
proceeds of sale shall be forthwith distributed on a weekly basis
to the Purchasers in accordance with their proportionate
holdings; and
(ii) upon the Sales Threshold being achieved, no further sales of the
Common Shares shall occur for the subsequent four month period
(subject to the Company consummating a Business Combination (as
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defined below) whereupon the Common Shares shall be immediately
released to the holders in accordance with their proportionate
holdings), following which the Escrow Agent shall distribute the
remaining Common Shares to the Purchasers in accordance with
their proportionate holdings.
For purposes herein, "Business Combination" means the entering into any
merger, amalgamation, plan of arrangement, business combination, or any
other transaction resulting in the sale of all or substantially all of the
assets of the Company, where the shareholders of the Company prior to the
transaction do not own a majority of the outstanding voting shares of the
surviving corporation.
The Escrow Agreement is for the benefit of the Company and Purchasers and
accordingly, all costs associated with the establishment and maintenance of
such arrangement shall be incurred by the Agent.
6. The issuance of the Common Shares and the acceptance of the subscriptions
and the terms of the Agency Agreement shall be subject to approval by the
Board of Directors of the Company.
7. The Company will make available on a timely basis to the Agent all
corporate, business and operating records, and financial information, which
the Agent reasonably requests in connection with the performance of its
services hereunder and notify the Agent of any adverse change, or
development that may lead to a material adverse change in the business,
properties, operations or financial condition or prospects of the Company,
during the term of this agreement. In addition, the Company will provide
access to key officers, in order to permit a complete due diligence
investigation of the business and affairs of the Company. All such records
and information will be kept confidential and used by the Agent only in
connection with the Offering.
8. Except as set forth below, the Company will not register with the
Securities and Exchange Commission (the "SEC") nor announce the
registration with the SEC of any of its common shares or other securities
for a period of one hundred and eighty (180) days following the date of
execution of this Agreement. This condition shall not apply to the issuance
of registered shares pursuant to an acquisition by the Company or one of
its affiliates or the issuance of securities to employees and consultants
under existing option arrangements, including the Company's stock option
plans and to holders of existing convertible or exchangeable securities of
the Company or for additional financing unrelated to GDI, or other existing
agreements of the Company, as disclosed to the Agent at such time as the
Agency Agreement is executed. The Agent expressly consents to the
registration of up to 30,000,000 common shares to be issued to Cornell
Capital Corporation in connection with a $10 million equity line of credit.
Nothing stated herein shall restrict the Company from issuing unregistered
securities of the Company that are subject to a hold period of at least 12
months from the date of issuance thereof. In addition, the Company's
executive officers and directors will enter into agreements on terms and
conditions satisfactory to the Agent in which they will covenant and agree
that they will not, for a period of one hundred of eighty (180) days
following the date of execution of this Agreement, directly or indirectly,
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offer, sell, contract to sell, lend, swap, or enter into any other
agreement to transfer the economic consequences of, or otherwise dispose of
or deal with, or publicly announce any intention to offer, sell, contract
to sell, grant or sell any option to purchase, hypothecate, pledge,
transfer, assign, purchase any option or contract to sell, lend, swap or
enter into any agreement to transfer the economic consequences of, or
otherwise dispose of or deal with, whether through the facilities of a
stock exchange, by private placement or otherwise, any securities of the
Company held by them, directly or indirectly, without first obtaining the
written consent of the Agent, which consent will not be unreasonably
withheld or delayed, or upon the occurrence of a take-over bid or similar
transaction involving a change of control of the Company.
9. Subject to the terms of the escrow release on the Escrow Release Date of
the Offering, the Company will pay the Agent a commission ("Commission")
equal to 4% of the gross proceeds of the Offering, payable in cash upon
closing of the Offering. In addition, at the Escrow Release Date of the
Offering, the Company shall issue compensation shares (the "Compensation
Shares") to the Agent as follows:
that number of freely tradable Common Shares as is equal to 5.6% of the
aggregate number of Common Shares issued pursuant to the Offering (i.e.,
2,800,000 Common Shares based on a proposed $7,000,000 of capital being raised
at U.S.$0.14 per share); and
that number of restricted Common Shares as is equal to 6.47% of the aggregate
number of Common Shares being issued pursuant to the Offering (i.e., 3,235,714
Common Shares based on a proposed U.S.$7,000,000 of capital being raised at
U.S.$0.14 per share). Such shares shall contain a contractual legend restricting
their resale for a period of twelve (12) months from the date of issuance
thereof.
The Company represents and warrants that no other commissions of any kind
is being paid by the Company in connection with the Offering.
The Agent may at its option invite other investment dealers into the
syndicate at no additional cost to the Company if the dealer is acceptable
to the Company, such approval not to be unreasonably withheld.
10. Within thirty (30) days of the Escrow Release Date as indicated in
paragraphs 1 to 4 inclusive, to be extended at the option of the Agent for
up to an additional period of sixty (60) days to obtain all necessary
regulatory approval, the Agent will use its reasonable best efforts to
complete a further private placement, to non-U.S. residents and to
investors outside of the U.S., for proceeds of up to U.S.$5,000,000 (the
"Additional Offering") at such price and terms to be negotiated by the
parties, acting reasonably. In connection with the Additional Offering, the
Company upon successful closing of this Additional Offering, will pay the
Agent a further commission (the "Additional Commission") equal to 8.0% of
the gross proceeds of the Additional Offering payable in cash upon closing
of the Additional Offering. In addition, at the closing of the Additional
Offering, the Company shall issue such number of compensation shares (the
"Additional Compensation Shares") as is equal to 8.0% of the number of
Common Shares issued pursuant to the Additional Offering. Such "Additional
Offering" Compensation Shares shall contain a contractual legend
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restricting their resale for a period of twelve (12) months from the date
of issuance thereof.
The Company represents and warrants that no other Commission of any kind is
being paid by the company in Connection with the Additional Offering.
11. The Company will make all necessary filings with, and take all necessary
actions required by, applicable regulatory authorities under the applicable
securities legislation of Canada and the U.S. with respect to the Offering.
12. Provided the Offering is completed in accordance with the terms set forth
in Sections 1 to 4 herein, the Company will be responsible at the Escrow
Release Date for all reasonable costs and expenses of the Agent in
connection with the Offering including the reasonable fees and
disbursements of counsel including counsel to the Agent, trust company
fees, transfer agents fees, filing fees, listing fees, the costs and
expenses of any securities or other filings required to be made in
connection with the Offering and out-of-pocket expenses including all the
Agent travel expenses in connection with the due diligence and marketing
meetings. These fees are not to exceed U.S.$100,000 (excluding GST and
disbursements). For greater certainty, if the Agent is successful in
raising the full proceeds of the Offering within the time period specified
in Section 1 hereof and either (i) the Agent terminates the Offering as a
result of the Company's inability to satisfy the Escrow Release Conditions
prior to the dates specified in Section 4 or (ii) the Company terminates
the Offering for whatever reason, then the Company shall be responsible for
the fees indicated in this Section.
13. As collateral for the Company's payment obligations set forth in Section 12
hereof, Brian J. MacDonald ("MacDonald"), Peter Hamilton ("Hamilton") and
Kevin Birch ("Birch"), each of whom are insiders of the Company, hereby
agree to pledge an aggregate of 3,000,000 Common Shares of the Company and
deliver certificates representing these shares duly endorsed for transfer
(the "Escrow Shares"), within five (5) business days from the execution of
this Agreement, to Kirkpatrick & Lockhart LLP in escrow in accordance with
the terms of an escrow agreement to be dated as of the date hereof (the
"Escrow Agreement") between the parties. The Escrow Agreement will provide,
among other things, that if the Company does not pay the fees and expenses
set forth in Section 12 hereof in accordance with this agreement the Agent
shall be entitled to realize upon the Escrow Shares and sell the Escrow
Shares at any time and from time to time in order to pay such fees and
expenses, on not less than three (3) business days advance written notice
("Realization Notice") sent to MacDonald, Hamilton and Birch's attention at
the principal office of the Company as set forth herein. MacDonald,
Hamilton and Birch shall have the right, exercisable at any time prior to
the third (3rd) business day following receipt of a Realization Notice to
redeem from escrow such number of Escrow Shares currently held by the
Escrow Agent upon delivery of a certified cheque or wire transfer to the
Agent in the amount of $0.03333 for each Escrow Share to be redeemed from
escrow. Each of the parties agree to negotiate in good faith and enter into
the Escrow Agreement contemporaneously with the execution of this
Agreement.
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14. The Company agrees to indemnify and save the Agent harmless in accordance
with Schedule "A" included herein by reference and forming part of this
Agreement.
15. If, after notification that the full proceeds of the Offering have been
raised by the Agent within the timeframe indicated in accordance with
Section 1 and the Company does not proceed with the Offering for whatever
reason or the Agent does not complete the Offering due to the Company
failing to satisfy the Escrow Release Conditions and, in the event the
Company enters into an Alternative Transaction with GDI within three (3)
months of the signing of this agreement, then the Company shall pay to the
Agent a fee equal to the Agent's cash and share commission contemplated in
Section 9 (based on the full amount of the Offering), together with all of
the Agent's expenses and disbursements as described in Section 12. An
"Alternative Transaction" means any issuance of securities of the Company
(other than issuances of securities permitted in Section 8 above) or the
entering into of an agreement to complete a business transaction involving
GDI and the Company or any of its subsidiaries, including without
limitation, a merger, amalgamation, arrangement, reorganization, joint
venture, or the entering into of an agreement to complete a sale of all or
substantially all assets of the Company, or an exchange of assets of the
Company with another company related GDI, or the entering into of any
agreement to complete a similar transaction that would (except as outlined
above) involve an increase of 5% or more of the Company's outstanding
Common Shares calculated on a fully-diluted basis for the purposes of
completing a transaction with GDI.
16. The Agent may terminate this letter agreement by notice in writing to the
Company at any time if: (i) there is in the sole opinion of the Agent a
material adverse change or a change in material fact or a new material fact
shall arise which would be reasonably expected to have a material adverse
effect on the business, affairs or profitability of the Company or on the
market price or value of the Common Shares or other securities of the
Company; (ii) the state of the financial markets is such that in the sole
opinion of the Agent it would be unprofitable to offer or continue to offer
the Common Shares for sale; (iii) there should develop, occur or come into
effect any event of any nature, including without limitation, accident,
governmental law or regulation, which in the sole opinion of the Agent
adversely affects or may adversely affect the financial markets or the
business, affairs or profitability of the Company or on the market price or
value of the Common Shares or other securities of the Company; (iv) there
is an enquiry or investigation (whether formal or informal) in relation to
the Company or any one of the Company's directors or officers; (v) any
order to cease trading in the securities of the Company is made by a
competent securities regulatory authority; (vi) the Company is in breach of
a term, condition, or covenant of this letter agreement or of the Agency
Agreement or any representation or warranty given by the Company in the
Agency Agreement is or becomes false; or (vii) the Agent, in its sole
opinion is not satisfied with its due diligence investigations. This
Agreement shall automatically terminate if the Offering has not been
completed by March 31, 2004.
17. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
6
18. If one or more provisions contained herein shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
letter agreement, but this agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained
therein.
19. This Agreement may be delivered by facsimile and may be signed in one or
more counterparts, each of which so executed shall constitute an original
and all of which together shall constitute one and the same agreement.
20. It is understood that this Agreement is not an agency agreement but is
evidence of the understanding between us related to the Offering, provided
that Sections 12, 13, 14, 15 and Schedule "A" shall be binding and remain
in full force and effect. The pricing and the Agent's ability to
successfully market the Offering will be contingent upon several factors
including market conditions at the time of the Offering and the completion
of satisfactory due diligence by the Agent or its representatives.
If you are in agreement with the foregoing, please so indicate by signing and
returning to us the enclosed copy of this letter.
Yours very truly,
PANFIN EQUITY CORP.
Per:
--------------------------------------------
Gordon Berger
President
Agreed and accepted this ______ day of November, 2003
ACTIVECORE TECHNOLOGIES INC.
Per:
--------------------------------------------
Brian J. MacDonald
Chairman and Chief Executive Officer
The provisions of Section 13 hereof are agreed and accepted by each of the
parties below as of this ____ day of November, 2003.
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SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
)
- --------------------------------- -------------------------------------
WITNESS BRIAN J. MACDONALD
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
)
- --------------------------------- -------------------------------------
WITNESS PETER HAMILTON
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
)
- --------------------------------- -------------------------------------
WITNESS KEVIN BIRCH
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SCHEDULE "A"
ActiveCore Technologies Inc. (the "Indemnitor") hereby agrees to indemnify and
hold the Panfin Equity Corp. and/or any of its affiliates and subsidiaries
(collectively, the "Agent") and each and every one of the directors, officers,
employees, consultants and shareholders of the Agent (hereinafter referred to as
the "Personnel") harmless from and against any and all expenses, losses, claims,
actions, damages or liabilities, joint or several (including the aggregate
amount paid in settlement of any actions, suits, proceedings or claims and the
fees and expenses of their counsel that may be incurred in advising with respect
to and/or defending any claim that may be made against the Agent) to which the
Agent and/or any Personnel may become subject or otherwise involved in any
capacity under any statute or common law or otherwise insofar as such expenses,
losses, claims, damages, liabilities or actions arise out of or are based,
directly or indirectly, upon the performance of professional services rendered
to the Indemnitor by the Agent and any Personnel hereunder or otherwise in
connection with the matters referred to in the attached letter agreement,
provided, however, that this indemnity shall not apply to the extent that a
court of competent jurisdiction in a final judgment that has become
non-appealable shall determine that:
(i) the Agent or any Personnel has been negligent or dishonest or has
committed any fraudulent act or engaged in wilful misconduct in the
course of such performance or has breached any material provision of
this Agreement; and
(ii) the expenses, losses, claims, damages or liabilities, as to which
indemnification is claimed were caused by the negligence, dishonesty,
fraud, wilful misconduct or material breach of Agreement referred to
in (i).
The Indemnitor hereby agrees to waive any right it may have of first requiring
the Agent and/or any Personnel to proceed against or enforce any other right,
power, remedy, security or claim payment from any other person before claiming
under this indemnity, provided however that the Agent will assign and perform
all duties required for the indemnitor to act on its behalf to proceed against
or enforce any other right, power, remedy, security or claim payment from any
other person.
If for any reason (other than the occurrence of any of the events itemized in
(i) and (ii) above), the foregoing indemnification is unavailable to the Agent
and/or any Personnel or insufficient to hold any of them harmless, then the
Indemnitor shall contribute to the amount paid or payable by the Agent and/or
any Personnel as a result of such expense, loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the Indemnitor on the one hand and the Agent on the other hand, but
also the relative fault of the Indemnitor and the Agent, as well as any other
relevant equitable considerations; provided that the Indemnitor shall in any
event contribute to the amount paid or payable by the Agent as a result of such
expense, loss, claim, damage or liability any excess of such amount over the
amount of the consideration received by the Agent pursuant to the attached
letter agreement.
The Indemnitor agrees that in case (i) any legal proceeding shall be brought
against the Indemnitor and/or the Agent or any Personnel by any governmental
commission or regulatory authority or any stock exchange; or (ii) an entity
having regulatory authority, either domestic or foreign, shall investigate the
9
Indemnitor and/or the Agent, and any Personnel shall be required to testify in
connection therewith or shall be required to respond to procedures designed to
discover information regarding, in connection with, or by reason of the
performance of professional services rendered to the Indemnitor by the Agent,
the Agent shall have the right to employ its own counsel in connection
therewith, and the reasonable fees and expenses of such counsel as well as the
reasonable costs (including an amount to reimburse the Agent for time spent by
Personnel in connection therewith on a per diem basis based on normal consulting
fees) and out-of-pocket expenses incurred by Personnel in connection therewith
shall be paid by the Indemnitor as they occur.
Promptly, and in any event within seven (7) days following receipt of notice of
the commencement of any legal proceeding against the Agent or any Personnel or
after receipt of notice of the commencement of any investigation which is based,
directly or indirectly, upon any matter in respect of which indemnification may
be sought from the Indemnitor, the Agent will notify the Indemnitor in writing
of the commencement thereof and the Indemnitor shall undertake the investigation
and defence thereof on behalf of the Agent and/or any Personnel, as applicable,
including the prompt employment of counsel reasonably acceptable to the Agent or
the applicable Personnel affected and the payment of all reasonable expenses.
Failure by the Agent to so notify the Indemnitor shall not relieve the
Indemnitor of its obligation of indemnification hereunder unless (and only to
the extent that) such failure results in a forfeiture by the Indemnitor or
material impairment of its substantive rights or defences. The Indemnitor shall,
throughout the course of any investigation as contemplated herein, provide
copies of all relevant documentation to the Agent, will keep the Agent advised
of the progress thereof and will discuss with the Agent all significant actions
proposed and vice-versa.
No admission of liability and no settlement of any action shall be made without
the prior written consent of the Indemnitor and the Agent or the Personnel
affected, such consent not to be unreasonably withheld or delayed.
Notwithstanding that the Indemnitor shall undertake the investigation and
defence of any action, the Agent or the Personnel affected shall have the right
to employ separate counsel in any such action and participate in the defence
thereof, but the fees and expenses of such counsel will be at the expense of the
Agent or the Personnel affected unless (a) employment of such counsel has been
authorized by the Indemnitor; (b) the Indemnitor shall not have assumed the
defence of the action within a reasonable period of time after receiving notice
of the action; (c) the named parties to any such action include both the
Indemnitor and the Agent or any Personnel and the Agent or the affected
Personnel shall have been advised by counsel that there may be a conflict of
interest between the Indemnitor and the Agent or the affected Personnel, as the
case may be; or (d) there are one or more legal defences available to the Agent
or the affected Personnel which are different from or in addition to those
available to the Indemnitor.
The indemnity and contribution obligations of the Indemnitor shall be in
addition to any liability which the Indemnitor may otherwise have, shall extend
upon the same terms and conditions to the Agent and the Personnel and shall be
binding upon and enure to the benefit of any successors, assigns, heirs and
personal representatives of the Indemnitor, the Agent and any Personnel. The
Indemnitor constitutes the Agent as trustee for the other indemnified parties as
contemplated herein of the covenants of the Indemnitor under this Schedule "A"
and the Agent hereby agrees to accept such trust and to hold and enforce such
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covenants on behalf of such persons. The foregoing provisions shall survive the
completion of professional services rendered under the letter to which this is
attached or any termination of the authorization given by the letter to which
this is attached.
Agreed and accepted this day of November, 2003.
ACTIVECORE TECHNOLOGIES INC.
Per:
--------------------------------------------
Brian J. MacDonald
Chairman and Chief Executive Officer
PANFIN EQUITY CORP.
Per:
--------------------------------------------
Gordon Berger
President
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SCHEDULE "B"
ACTIVECORE TECHNOLOGIES INC.
TERM SHEET
PRIVATE PLACEMENT
ISSUER: ActiveCore Technologies Inc. (the "Company")
LISTING: "TALL" on the U.S. over-the-counter market
OFFERED SECURITIES: Up to 50,000,000 common shares of the Company
(the "Common Shares")
OFFERING SIZE: U.S. $7,000,000, subject to regulatory approval
OFFERING PRICE: U.S. $0.14 per Common Share
RESALE RESTRICTIONS: Common Shares shall be unrestricted and
registered on the Escrow Release Date.
LOCK-UP: For the executive officers and directors of the
Company, 180 days following the Escrow Release
Date
USE OF PROCEEDS: To comprise partial consideration for purchase
of 23% of the issued and outstanding shares of
Genetic Diagnostics Inc. ("GDI").
ESCROW OF PROCEEDS: The proceeds of the Offering (i.e., $7,000,000),
shall be held in escrow by Goodman and Carr LLP,
counsel to the Agent, or such other registered
trust company as is agreed to by the parties from
time to time acting reasonably (the "Escrow
Agent") subject to (the "Escrow Release
Conditions"):
(i) the Company's registration statement for
50,000,000 Common Shares to be issued to
the purchasers pursuant to the Offering
being declared effective (i.e., freely
tradable) and the delivery of such
registered shares to Goodman and Carr LLP
or the Escrow Agent on behalf of the
Purchasers;
(ii) no material adverse change in the business
of the Company (which includes GDI given
the material nature of this acquisition to
the Company); and
(iii) completion of all matters necessary to
purchase the GDI Shares by the Company in
accordance with the terms set forth herein,
save and except for the release from escrow
of the proceeds of the Offering.
In the event that the Company has not satisfied
the Escrow Release Conditions on or before
February 27, 2004, subject to the unilateral
right of the Agent to extend such period until
March 31, 2004 (the "Escrow Release Date"), the
parties hereby acknowledge and irrevocably direct
the Escrow Agent to return the proceeds of the
Offering to the Agent and the contemplated
Offering shall be terminated.
CONTRACTUAL RESALE RESTRICTIONS: The Common Shares issued pursuant to the Offering
shall be placed with the Escrow Agent pursuant to
the terms of an escrow agreement (the "Escrow
Agreement") to be entered into between the
Company and the Agent which will provide for the
release and/or sale of the Common Shares as
follows:
(i) the Escrow Agent shall be directed to
retain a licensed broker to be selected by
the Agent to effect the sale of up to 4% of
the aggregate number of Common Shares
issued in each one week period until such
time as the cumulative proceeds of sale
from the Common Shares equals
U.S.$8,500,000 (the "Sales Threshold"). The
proceeds of sale shall be forthwith
distributed on a weekly basis to the
Purchasers in accordance with their
proportionate holdings; and
(ii) upon the Sales Threshold being achieved, no
further sales of the Common Shares shall
occur for the subsequent four month period
(subject to the Company consummating a
Business Combination (as defined below)
whereupon the Common Shares shall be
immediately released to the holders in
accordance with their proportionate
holdings), following which the Escrow Agent
shall distribute the remaining Common
Shares to the Purchasers in accordance with
their proportionate holdings.
For purposes herein, "Business Combination" means
the entering into any merger, amalgamation, plan
of arrangement, business combination, or any
other transaction resulting in the sale of all or
substantially all of the assets of the Company,
where the shareholders of the Company prior to
the transaction do not own a majority of the
outstanding voting shares of the surviving
corporation.
MINIMUM SUBSCRIPTION: Ontario No minimum,
(by "accredited investors"): pursuant to OSC
Rule 45-501
Outside North America: No minimum
COMPENSATION: A commission of 4.0% of the gross proceeds raised
is payable in cash at closing. In addition, at
the closing of the Offering, the Company shall
issue to the Agent compensation shares as
follows: (i) that number of unrestricted
registered Common Shares as is equal to 5.6% of
the Offered Securities; and (ii) that number of
restricted Common Shares as is equal to 6.47% of
the Offered Securities, with such restricted
Common Shares containing a contractual legend
preventing their resale for a period of twelve
(12) months from the date of issuance thereof.
CLOSING DATE: On November 28, 2003 or such date as mutually
agreed
ADDITIONAL OFFERING: Up to U.S.$5,000,000 to non-U.S. residents and
investors outside the United States at such price
and terms as to be negotiated by the parties,
acting reasonably. In connection with the
Additional Offering, the Company will pay the
Agent a further commission equal to 8.0% of the
gross proceeds of the Additional Offering payable
in cash at closing and issue such number of
compensation shares as is equal to 8.0% of the
number of Common Shares issued pursuant to the
Additional Offering, such shares to contain a
contractual legend restricting their resale for a
period of twelve (12) months from the date of
issuance thereof.
AGENT: Panfin Equity Corp.