EXHIBIT 1.1
UNDERWRITING AGREEMENT
December , 2005
Gryphon Gold Corporation
Suite 810, 1130 West Pender Street
Vancouver, BC V6E 4A4
Attention: Albert Matter
Dear Sirs/Mesdames:
We understand that, subject to the terms and conditions stated herein,
Gryphon Gold Corporation, a corporation incorporated under the laws of Nevada
(the "COMPANY"), proposes to complete its initial public offering by issuing and
selling to a syndicate of underwriters comprised of Desjardins Securities Inc.,
CIBC World Markets Inc., Bolder Investment Partners Ltd. and Orion Securities
Inc. (the "UNDERWRITERS"), for whom Desjardins Securities Inc. is acting as
representative (the "REPRESENTATIVE"), 6,000,000 units of the Company (the
"OFFERED UNITS") at a price of $0.85 per Offered Unit to raise $5,100,000 (the
"OFFERING"). Each Offered Unit will consist of one share of its common stock,
par value U.S.$0.001 (the "COMMON STOCK") and one Class A warrant (the
"WARRANTS"). Each Warrant will entitle the holder to purchase one share of
Common Stock at a price of $1.15 until the date that is 12 months following the
Closing Date (as hereinafter defined).
At the option of the Underwriters, the Company also proposes, subject
to the terms and conditions stated herein, to grant to the Underwriters an
option (the "OVER-ALLOTMENT OPTION") to purchase up to 900,000 additional units
to cover over-allotments (the "ADDITIONAL UNITS"). The Over-Allotment Option
shall be exercisable, in whole or in part, at any time, and from time to time,
during the period of 30 days following the Closing (as defined below) on written
notice by the Representative, on behalf of the Underwriters, to the Company not
later than two Business Days prior to the contemplated Over-Allotment Option
Closing Date, specifying the number of Additional Units to be purchased and the
date for delivery of the purchase for the Additional Units. Pursuant to such
notice, the Underwriters shall purchase and the Company shall sell the number of
Additional Units indicated in such notice, in accordance with the provisions of
Sections 2 and 4 hereof. The Additional Units shall have attributes identical to
the Offered Units.
In consideration of the services provided by the Underwriters and
agreement of the Underwriters to purchase the Offered Units and, if applicable,
Additional Units, and to offer such securities to the public pursuant to the
Prospectuses, the Company agrees to pay to the Underwriters, at the Closing Time
(as defined below), the Underwriting Fee (as defined in section 3) and to issue
to the Underwriters the Underwriters' Option as set forth in Section 3 hereof.
For purposes of this Agreement, the "Transaction Securities" means the
Offered Units, the Over-Allotment Option, the Additional Units, the Common Stock
and Warrants constituting the Offered Units and the Additional Units, the
Underwriters' Option and the Underlying Shares. The Offered Units and the
Additional Units are referred to herein as the "Purchased Securities".
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The use of the neuter in this Agreement shall include the feminine and
masculine wherever appropriate. Certain terms used herein are defined in Section
25 hereof.
1. REPRESENTATIONS, WARRANTIES AND COVENANTS
(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below:
(a) A registration statement on Form SB-2 (No.
333-127635) with respect to the Transaction
Securities has (i) been prepared by the Company in
conformity with the requirements of the United States
Securities Act of 1933, as amended (the "SECURITIES
ACT"), and the rules and regulations (the "RULES AND
REGULATIONS") of the Commission thereunder, (ii) been
filed with the Commission under the Securities Act
and (iii) was declared effective by the Commission.
Copies of such registration statement and the
amendment thereto have been delivered by the Company
to the Underwriters. As used in this Agreement,
"Registration Statement" means such registration
statement, as amended at the Effective Time,
including all information contained in the Final U.S.
Prospectus filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations and deemed to be
a part of the Registration Statement as of the
Effective Time pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of
any Preliminary U.S. Prospectus.
(b) The Company has prepared and filed with the BCSC, as
principal regulator under MRRS, and the other
securities regulatory authorities in each of the
Canadian Qualifying Jurisdictions, a preliminary long
form prospectus in the English language relating to
the issue of the Offered Units, the Over-Allotment
Option and the Underwriters' Options in accordance
with BC Policy 41-601 (the "PRELIMINARY PROSPECTUS"),
as amended by an amended and restated preliminary
long form prospectus dated October 5, 2005 and a
second amended and restated preliminary long form
prospectus dated November 30, 2005 (the "AMENDED
PRELIMINARY PROSPECTUS"). The Preliminary Prospectus
and the Amended Preliminary Prospectus were each
filed with the securities regulatory authorities in
each of the Canadian Qualifying Jurisdiction pursuant
to National Instrument 43-201. The Company has
obtained a preliminary MRRS decision document issued
by the BCSC, in its capacity as principal regulator
under the MRRS, evidencing preliminary receipts of
each of the Canadian Qualifying Jurisdictions have
been issued for the Preliminary Prospectus and the
Amended Preliminary Prospectus (collectively, the
"PRELIMINARY CANADIAN PROSPECTUS"). Copies of such
Preliminary Prospectus and Amended Preliminary
Prospectus have been delivered by the Company to the
Underwriters.
(c) When the Registration Statement became or becomes
effective, upon the filing or delivery to the
Underwriters of the Final U.S. Prospectus, as of
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the date hereof, and at the Closing Date, the
Registration Statement (and any post-effective
amendment thereto) and the Final U.S. Prospectus (as
amended or as supplemented if the Company shall have
filed with the Commission any amendment or supplement
to the Registration Statement or the Final U.S.
Prospectus) Rules and Regulations, complied and will
comply in all material respects with the Securities
Act and the Rules and Regulations, and did not and
will not contain any untrue statement of a material
fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein (in the light of the circumstances under
which they were made, in the case of the Final U.S.
Prospectus) not misleading, each Preliminary U.S.
Prospectus, as of the date filed with the Commission,
did not include any untrue statement of a material
fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein, in the light of the circumstances under
which they were made, not misleading; except that no
representation or warranty is made in this Section
with respect to statements or omissions made in
reliance upon and in conformity with written
information furnished to the Company with respect to
the Underwriters by any one of the Underwriters
expressly for inclusion in any Preliminary U.S.
Prospectus, the Registration Statement, or the Final
U.S. Prospectus, or any amendment or supplement
thereto. The Company has not distributed and will not
distribute prior to completion of the Underwriters'
distribution of the Purchased Securities any written
offering material in connection with the offering and
sale of the Purchased Units, other than the
Registration Statement, the Preliminary Canadian
Prospectus, the Preliminary U.S. Prospectus and the
Prospectuses.
(d) On the date of filing of the Canadian Prospectus with
the Canadian Securities Commissions (i) all
information and statements (except information and
statements relating solely to the Underwriters),
contained therein will be true and correct in all
material respects and contain no misrepresentation
and constitute full, true and plain disclosure of all
material facts relating to the Company and the
Transaction Securities; (ii) no material fact or
information has been omitted from the Canadian
Prospectus (except facts or information relating
solely to the Underwriters) which is required to be
stated therein or is necessary to make the
information contained in the Canadian Prospectus not
misleading in light of the circumstances under which
it was made; and (iii) the Canadian Prospectus will
comply in all material respects with the requirements
of the Canadian Securities Laws.
(e) Each of the Company and Borealis is, and will be at
the Closing Date, a duly organized, validly
subsisting Company established under the laws of the
State of Nevada, is in good standing in its
jurisdiction of incorporation, duly licensed or
qualified as a foreign corporation for transaction of
business and in good standing under the laws of each
other jurisdiction in which their respective
ownership or lease of property or the conduct of
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their respective businesses requires such license or
qualification, except where the failure to be so
qualified or in good standing or have such power or
authority would not, individually or in the
aggregate, have a Material Adverse Effect and has all
requisite power and authority to own, lease and
operate its properties and assets as set out in the
Registration Statement and the Prospectuses and
conduct its activities as contemplated thereby.
(f) No order, ruling or determination having the effect
of ceasing, suspending or restricting trading in any
securities of the Company or the issue of the
Transaction Securities has been issued and, to the
best of the knowledge of the Company, no such
proceedings, investigations or inquiries are pending
or threatened.
(g) The Company has all requisite corporate power and
authority, and on or before the Closing Date will
have taken all actions required, to: (i) enter into
this Agreement; (ii) grant the Over-Allotment Option
and the Underwriters' Option in accordance with the
provisions of this Agreement; (iii) issue, sell and
deliver the Transaction Securities in accordance with
the provisions of this Agreement; and (iv) to carry
out all the terms and provisions hereof.
(h) The Company is authorized to issue 150,000,000 shares
of its Common Stock, par value $0.001, and 15,000,000
shares of preferred stock, par value $0.001, of
which, as of the date hereof, 27,722,370 shares of
Common Stock are validly issued and outstanding,
fully paid and nonassessable and no shares of
preferred stock are issued and outstanding. Other
than as disclosed in or contemplated by the
Registration Statement or the Prospectuses, the
Company's common stock is not subject to any
pre-emptive or similar rights. The Company has an
authorized, issued and outstanding capitalization as
set forth in the Registration Statement and the
Prospectuses as of the dates referred to therein.
Except as set forth in the Registration Statement and
Prospectuses, no options, warrants or other rights to
purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange
any securities for, shares of common stock or
ownership interest in the Company are outstanding.
Such authorized capital stock conforms to the
description thereof set forth in the Registration
Statement and the Prospectuses. The description of
the securities of the Company in the Registration
Statement and the Prospectuses is, and at the Closing
Date will be, complete and accurate in all material
respects.
(i) The Stock Option Plan and all of the terms and
obligations thereunder, comply with, and following
the completion of the Offering, will comply with and
all applicable Canadian Securities Laws and U.S.
securities laws and policies and rules of the TSX.
(j) The Common Stock has been conditionally approved for
listing on the TSX, subject only to compliance with
the requirements set out in the
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TSX's conditional approval letter dated October 3,
2005, a copy of which has been provided to the
Underwriters; the certificates for the Transaction
Securities have been duly approved and adopted by the
Company and are in valid and sufficient form and
comply with the requirements of the TSX.
(k) The terms and conditions of the Offering comply in
all material respects with Canadian Securities Laws
and the Securities Act and the Rules and Regulations,
except to the extent that exemptions therefrom have
been obtained from the Canadian Commissions or the
Commission, as applicable.
(l) There is no contract or other document of a character
required to be described in the Registration
Statement or Prospectuses, or to be filed as an
exhibit thereto, which is not described or filed as
required to comply with Canadian Securities Laws, the
Securities Act and the Rules and Regulations, as
applicable.
(m) This Agreement has been and, on the Closing Date the
Warrant Indenture will be, duly executed and
delivered by the Company and constitutes (and will
constitute on the Closing Date in the case of the
Warrant Indenture) a legal, valid and binding
obligation of the Company enforceable against it in
accordance with its terms, except as enforcement
thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and other laws relating to
or affecting the rights of creditors generally, (ii)
the application of equitable principles when
equitable remedies are sought and by the fact that
rights to indemnity, contribution and waiver, (iii)
the ability to sever unenforceable terms, may be
limited by applicable law and (iv) limitations on
enforceability of any indemnification or contribution
provision under United States federal and state
securities laws and Canadian Securities Laws.
(n) The Company is not and, after giving effect to the
offering and sale of the Purchased Securities and the
application of the proceeds thereof as described in
the Registration Statement and Prospectuses, will not
be an "investment company" as defined in the
Investment Company Act of 1940, as amended and the
rules and regulations of the Commission promulgated
thereunder.
(o) The Company has no subsidiaries other than Borealis.
All the outstanding shares of common stock or other
equity interests of Borealis have been duly and
validly authorized and issued and are fully paid and
non-assessable, set forth in the Prospectus, free and
clear of any perfected security interest or any other
security interests, claims, liens or encumbrances,
except as set forth in or contemplated in the
Registration Statement and the Prospectuses.
(p) The Transaction Securities and the securities
comprised therein have been duly authorized by the
Company and, when issued and delivered and, in
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the case of the Purchased Securities, paid for as
provided herein, will be validly issued, fully paid
and nonassessable and will conform to the
descriptions thereof in the Registration Statement
and Prospectuses; and the issuance of such
Transaction Securities is not subject to any
preemptive or similar rights. The Warrants have been
duly authorized by the Company and, when issued and
delivered and paid for as provided herein, will be
validly issued, fully paid and nonassessable and will
conform to the descriptions thereof in the
Registration Statement and Prospectuses; and the
issuance the Warrants is not subject to any
preemptive or similar rights. The Underlying Shares
have been duly authorized and reserved for issuance
pursuant to the terms of the Warrant Indenture and
the Underwriters' Options, and, in the case of the
Warrants, when issued and delivered by the Company
upon valid exercise of the Warrants and payment of
the exercise price in accordance with the terms of
the Warrant Indenture and, in the case of the
Underwriters' Option, upon exercise of the
Underwriters' Option and payment of the option price
therefor, will be duly and validly issued, fully
paid, and nonassessable and will not be subject to
preemptive or similar rights.
(q) Other than as may be required by, and as have or will
have been obtained prior to Closing under Canadian
Securities Laws, the Securities Act and the Rules and
Regulations, no consent, approval, authorization,
order, registration or qualification of or with any
court or Governmental Authority or other third party,
except those which have been or will be, prior to the
Closing Time, obtained, is required for the issue,
sale and delivery of the Transaction Securities as
contemplated in this Agreement or the consummation by
the Company of the transactions contemplated in this
Agreement.
(r) Each of the Material Contracts to which the Company
or Borealis is a party have been (or will be at the
Closing Time) duly executed and delivered by the
Company or Borealis, as the case may be, and
constitute (or will constitute when executed) legal,
valid and binding obligations of the Company or
Borealis, as the case may be, enforceable against
them in accordance with their 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.
(s) With the exception of the Material Contracts, the
Company is not a party to any material contract and
the Company's property is not subject to any material
contract. Other than as disclosed in the Registration
Statement and Prospectuses or as disclosed in writing
to the Underwriters, the Company has not entered into
nor has any present intention to enter into any
agreement to acquire any securities in any other
corporation or entity
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or to acquire or lease any other business operation
which are material to the business and operations of
the Company and Borealis, taken as a whole. Other
than as disclosed in the Registration Statement and
Prospectuses or as disclosed in writing to the
Underwriters, the Company has not entered into nor
has any present intention to enter into any
agreement, including any joint-venture, take-over,
amalgamation or merger, with any other corporation or
entity that would have effect of altering or diluting
its share capital.
(t) The execution, delivery, performance and compliance
of or with the terms of this Agreement, the Warrant
Indenture, the Underwriters' Option and the other
Material Contracts to which they are a party, and the
issue, sale and delivery of the Transaction
Securities by the Company does not and will not
result in any such breach, violation or default,
under (i) any of the Material Contracts; (ii) any
indenture, mortgage, deed of trust, loan agreement or
other agreement (written or oral) or instrument to
which it is a party or by which it is bound or to
which any of its property or assets is subject where
such breach, violation or default could have a
Material Adverse Effect on the Company; (iii) its
articles of incorporation, as amended, and by-laws;
or (iv) any statute or any order, rule or regulation
of any court or Governmental Authority or body having
jurisdiction over it or any of its properties; other
than as disclosed in the Registration Statement and
the Prospectuses, neither the Company nor Borealis
have entered into any transaction or agreement, not
in the ordinary course of business, that is material
to the Company and Borealis, taken as a whole or
incurred any liability or obligation, direct or
contingent, not in the ordinary course of business,
that is material to the Company nor Borealis taken as
a whole; and neither the Company nor Borealis has
sustained any material loss or interference with its
business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or
from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or
governmental or regulatory authority.
(u) Except as disclosed in the Registration Statement or
the Prospectuses, no holders of securities of the
Company have rights to the registration of such
securities under the Registration Statement or the
Prospectuses which have not been satisfied or waived.
(v) There has not been any reportable event (within the
meaning of National Instrument 51-102 of the Canadian
Securities Administrators) or reportable
disagreements with the auditors or former auditors of
the Company. The Company has no reason to believe
that its accountants, in their performance of work
for the Company, are in violation of the auditor
independent requirements of the Sarbanes Oxley Act.
(w) Ernst & Young LLP, who have audited certain financial
statements of the Company, are independent public
accountants (the "ACCOUNTANTS") with respect to the
Company as required by the Securities Act and
Canadian
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Securities Laws. The financial statements and the
related notes included in the Registration Statement
and the Prospectuses present fairly, in all material
respects, the financial condition of the Company as
of the dates thereof and the consolidated results of
its operations and cash flows at the dates and for
the periods covered thereby in conformity with United
States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the
periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes
thereto or (ii) in the case of unaudited interim
financial statements, to the extent that they may not
include footnotes or may be condensed or summary
statements). No other consolidated financial
statements or schedules of the Company or any other
entity are required by the Securities Act or the
Rules and Regulations to be included in the
Registration Statement or the Final U.S. Prospectus
or by Canadian Securities Laws to be included in the
Final Canadian Prospectus. The consolidated financial
statements of the Company and the related notes and
schedules included in the Registration Statement and
the Prospectuses have been prepared in conformity
with the requirements of the Securities Act and
Canadian Securities Laws and present fairly the
information shown therein.
(x) Except as otherwise described in the Canadian
Prospectus and U.S. Final Prospectus, there are no,
and neither the Company nor Borealis has received
notice of any, legal or governmental actions,
proceedings or investigations in existence to which
the Company or Borealis is a party or to which the
property of the Company or Borealis is subject or, to
the best of the knowledge of the Company,
contemplated or threatened, at law or in equity or
before or by any federal, state, provincial,
municipal or other governmental department,
commission, board or agency, domestic or foreign,
which (i) could have a Material Adverse Effect on the
Company or Borealis, or (ii) questions the validity
of the issuance, sale or delivery of the Transaction
Securities or the validity of any action taken or to
be taken by the Company pursuant to or in connection
with this Agreement, the Warrant Indenture or any of
the Material Contracts; or (iii) restricts or
purports to restrict or require qualifications for,
the Company or Borealis conducting their business or
activities, except such qualifications that have been
satisfied. To the best of the knowledge of the
Company, (i) there are no current or pending legal,
governmental or regulatory investigations, actions,
suits or proceedings that are required under Canadian
Securities Laws to be described in the Canadian
Prospectus or under the Securities Act to be
described in the Final U.S. Prospectus that are not
so described and there are no conditions that would
provide the basis for same; and (ii) there are no
contracts or other documents that are required under
the Securities Act to be filed as exhibits to the
Registration Statement that have not been so filed.
(y) Each of the Company and Borealis owns or leases all
such properties and equipment, and have such
personnel in place as are necessary to the
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conduct of its operations as presently conducted,
except for any such properties, equipment or
personnel that the failure to own, lease or retain
would not reasonably be expected to have a Material
Adverse Effect, and except as set forth in or
contemplated in the Registration Statement and the
Prospectuses (exclusive of any supplement thereto).
(z) Other than as disclosed in the Registration Statement
and the Prospectuses, since March 31, 2005:
(A) there has been no material change (actual,
anticipated, proposed or prospective,
whether financial or otherwise) in the
business, affairs, operations, assets,
liabilities (contingent or otherwise)
prospects, financial position, capital or
control of the Company or Borealis, taken as
a whole;
(B) the Company and Borealis have carried on
their respective businesses in the ordinary
course and there has been no transaction
entered into by the Company or Borealis
which is material to the Company and
Borealis, taken as a whole, other than those
in the ordinary course of business;
(C) the Company and Borealis have not incurred
or surrendered any right of material value;
and
(D) there has been no material change in the
capital or long term debt of the Company or
Borealis, taken as a whole, and
(aa) other than as disclosed in the Registration Statement
and the Prospectuses:
(A) the Company and Borealis are not liable for
the debts, liabilities or other obligations
of any third party whether by way of
guarantee or indemnity or other contingent
or indirect obligation; and
(B) all indebtedness of the Company and Borealis
is being paid in the ordinary course of
business.
(bb) The Company has not directly or indirectly declared
or paid any dividend or declared or made any other
distribution on any of its securities of any class,
or directly or indirectly, redeemed, purchased or
otherwise acquired any of its securities, or agreed
to do any of the foregoing.
(cc) Neither the Company nor Borealis is a party to any
agreement restricting the Company or Borealis from
engaging in any line of business which the Company or
Borealis currently engages or proposes to engage in
or
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competing with any other person in any business in
which the Company or Borealis currently engaged or
proposes to engage in.
(dd) Neither the Company nor Borealis is in breach or
violation, or in default (whether after notice lapse
of time or both) of any provision of (i) its charter
or bylaws, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement or instrument to which
it is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree of any Governmental
Authority having jurisdiction over the Company or
Borealis or any of its properties, as applicable,
except, in the case of clauses (i) or (iii) above,
for violations or defaults as would not reasonably be
expected to have a Material Adverse Effect, and
except as set forth in or contemplated in the
Registration Statement and the Prospectuses
(exclusive of any supplement thereto). To the best of
the knowledge of the Company, no other party to any
of such Material Contracts is in arrears in respect
of the performance or satisfaction of the terms and
conditions on its part to be performed or satisfied
under any of such Material Contracts, no waiver or
indulgence has been granted by any of the parties
thereto and no party to any of such Material
Contracts has repudiated any provision thereof.
(ee) There are no transfer taxes or other similar fees or
charges under the laws of Canada or any political
subdivision thereof, U.S. federal law or the laws of
any state, or any political subdivision thereof,
required to be paid in connection with the execution
and delivery of this Agreement or the issuance by the
Company or issue, sale or delivery by the Company of
the Transaction Securities.
(ff) Each of the Company and Borealis has duly and on a
timely basis filed all Tax Returns required to be
filed by it, has paid all Taxes due and payable by it
and has paid all assessments and re-assessments and
all other Taxes, governmental charges, penalties,
interest and other fines due and payable by it and
which are claimed by any governmental authority to be
due and owing, and adequate provision has been made
for Taxes payable for any completed fiscal period for
which Tax Returns are not yet required to be filed;
there are no agreements, waivers or other
arrangements providing for an extension of time with
respect to the filing of any Tax Return or payment of
any Tax, governmental charge or deficiency by the
Company or Borealis, other than the Tax Returns in
respect of the year ended March 31, 2005, for which
the Company and Borealis have received an extension
to file such Tax Returns by December 15, 2005; there
are no actions, suits or proceedings threatened or
pending against the Company or Borealis in respect of
Taxes, governmental charges or assessments and there
are no matters under discussion with any governmental
authority relating to Taxes, governmental charges or
assessments asserted by any such authority.
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(gg) No labor problem or dispute with the employees of the
Company or Borealis exists or, to the knowledge of
the Company, is threatened or imminent, including any
plans or discussions on the part of any employees to
commence unionization or collective bargaining
efforts, and the Company is not aware of any existing
or imminent labor disturbance by the employees of any
of its or Borealis' principal suppliers, contractors
or customers, that could reasonably be expected to
have a Material Adverse Effect, except as set forth
in or contemplated in the Registration Statement or
the Prospectuses (exclusive of any supplement
thereto). The Company is in material compliance with
all laws respecting employment and employment
practices, terms and conditions of employment, pay
equity, workers injury compensation and wages, except
where non-compliance would not have a Material
Adverse Effect on the assets or properties, business,
results of operations, prospects or condition
(financial or otherwise) of the Company and Borealis,
taken as a whole, and has not engaged in any unfair
labour practice.
(hh) The Company and Borealis have implemented or have
plans to implement upon the commencement of
operations on the Property all required and standard
safety training and education for its employees,
consultants, and as the situation may require,
visitors on-site at the Property.
(ii) The Company and Borealis are insured by insurers of
recognized financial responsibility against such
losses and risks and in such amounts as, to the
Company's knowledge, are usually insured by persons
operating similar businesses at similar stage of
development; neither the Company nor Borealis has
received any notice that its policies of insurance
and fidelity or surety bonds insuring the Company or
Borealis or their respective businesses, assets,
employees, officers and directors are not in full
force and effect; the Company and Borealis are in
compliance with the terms of such policies and
instruments in all material respects; and the Company
has not received notice of any claim by the Company
or Borealis under any such policy or instrument as to
which any insurance company is denying liability or
defending under a reservation of rights clause; and
neither the Company nor Borealis has been refused any
insurance coverage sought or applied for; and neither
the Company nor Borealis has any reason to believe
that: (i) it will not be able to renew its existing
insurance coverage as and when such coverage expires,
(ii) such existing insurance coverage is not adequate
for the Property and the operations occurring
thereon, (iii) it will not be able to obtain similar
coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a
Material Adverse Effect or (iv) it will not be able
to acquire the necessary supplementary insurance
coverage as the development of the Property advances
and more comprehensive insurance coverage is
required, except as set forth in or contemplated in
the Registration Statement or Prospectuses (exclusive
of any supplement thereto).
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(jj) Borealis is not currently prohibited, directly or
indirectly, from paying any dividends to the Company,
from making any other distribution on its securities,
from repaying to the Company any loans or advances to
it from the Company.
(kk) Except as set forth in or otherwise contemplated by
the Registration Statement or the Prospectuses, the
Company and Borealis possess or have obtained all
licenses, certificates, permits and other
authorizations issued by, and have made all
declarations and filings with, the appropriate
federal, state, local or foreign governmental or
regulatory authorities that are necessary for the
ownership or lease of their respective properties or
the conduct of their respective businesses currently
conducted by them as contemplated to be conducted by,
in each case as described in the Registration
Statement and the Prospectuses (the "PERMITS"),
except where the failure to possess, obtain or make
the same would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect; and except as disclosed in or contemplated by
the Registration Statement or the Prospectuses,
neither the Company nor Borealis have received
written notice of any proceeding relating to
revocation or modification of any such Permit or has
any reason to believe that such Permit will not be
renewed in the ordinary course, except where the
failure to obtain any such renewal would not,
individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(ll) The Company and Borealis have in place all necessary
access and right of way rights to all roads and
thoroughfares leading to and from the Property, and
such roads and thoroughfares are fit for the purpose
of delivering materials and equipment to the Property
and the removal all mineralized material.
(mm) The Company and Borealis maintain systems 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 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. The Company has established and
maintains "disclosure controls and procedures" (as
defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act); the Company's "disclosure controls and
procedures" are reasonably designed to ensure that
all information (both financial and non-financial)
required to be disclosed by the Company in the
reports to be filed or submitted under the Exchange
Act is recorded, processed, summarized and reported
within the time periods specified in the Exchange Act
and that all such information is accumulated and
communicated to the Company's management as
- 13 -
appropriate to allow timely decisions regarding
required disclosure and to make the certifications of
the Chief Executive Officer and the Chief Financial
Officer of the Company required under the Exchange
Act with respect to such reports.
(nn) Except as disclosed in the Registration Statement and
the Prospectuses, the Company is not aware of: (i)
any significant deficiency or material weakness in
the design or operation of the Company's internal
control over financial reporting which is reasonably
likely to adversely affect the Company's ability to
record, process, summarize, and report financial
information, or (ii) any fraud, whether or not
material, that involves management or other employees
who have a significant role in the Company's internal
control over financial reporting occurred during or
since the Company's most recent fiscal quarter that
materially affected, or is reasonably likely to
materially affect, the Company's internal control
over financial reporting.
(oo) The Company has not taken, directly or indirectly,
any action designed to or that would constitute or
that might reasonably be expected to cause or result
in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or
resale of the Purchased Securities or otherwise.
(pp) Except as set forth in or otherwise contemplated by
the Registration Statement or the Prospectuses, the
Company and Borealis have been and are in compliance
with all applicable federal, state, municipal and
local laws, statutes, ordinances, by-laws,
regulations, orders, directives and decisions (the
"ENVIRONMENTAL LAWS") rendered by any ministry,
department or administrative or regulatory agency
("ENVIRONMENTAL AUTHORITY") relating to the
protection of human health and safety, the
environment or pollutants, contaminants, chemicals,
or industrial, toxic or hazardous wastes or
substances regulated under either the Comprehensive
Environmental Response, Compensation and Liability
Act, 42 U.S.C. s.9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. s.6901 et
seq. or the Nevada Revised Statutes ("HAZARDOUS
SUBSTANCES"), and no condition exists or event has
occurred which, with or without notice or the passage
of time or both, would constitute a violation of or
give rise to liability under any applicable
Environment Laws, other than any failure to comply or
violation which has not and will not have a Material
Adverse Effect on the Company, and except as set
forth in or otherwise contemplated by the
Registration Statement or the Prospectuses, there are
no environmental audits, evaluations, assessments or
studies relating to the Company or Borealis.
(qq) Except as disclosed in the Prospectuses, the Company
and Borealis have obtained all material licenses,
permits, approvals, consents, certificates,
registrations and other authorizations (the
"ENVIRONMENTAL PERMITS") required for the operation,
or any part thereof, of its business as currently
- 14 -
conducted and as contemplated to be conducted in the
Prospectuses. Each Environmental Permit is valid,
subsisting and in good standing and the Company is
not in default or breach of any Environmental Permit
and no proceeding is pending or threatened to revoke,
amend or limit any Environmental Permits.
(rr) To the best of the knowledge of the Company, the
Company is reasonably satisfied that all previous
owners, lessors or operators of the Property complied
with the Environmental Laws, except as set forth in
or contemplated in the Registration Statement or
Prospectuses.
(ss) The Company has taken reasonable steps in order to
authenticate and validate the accuracy of all data
and information in its possession that was relied
upon in the preparation of the Technical Report,
regardless of whether such data and information was
generated and produced by the Company or by previous
owner, lessor or operator of the Property.
(tt) The Company has not received notice of any, and to
the best of the knowledge of the Company, there is no
reasonable factual basis for, any adverse land claims
from any native group, or similar cultural group,
claiming any interest in the Property or any
mineralized material contained therein.
(uu) The royalty payments required under the Borealis
Lease are the only such royalty payments the Company
or Borealis are subject to, and all royalties payable
under the terms of the Borealis Lease are in good
standing.
(vv) To the best of the knowledge of the Company based on
written records provided to the Company, there has
been no seismic activity, mine cave-ins, avalanche,
land or rock slides, flooding or other events that
have impacted the Property and which had a Material
Adverse Effect on the Property within the past
fifteen years, except as set forth in or contemplated
in the Registration Statement and the Prospectuses.
(ww) Neither the Company nor Borealis has used or
permitted to be used any of its assets or facilities,
whether owned, leased, occupied, controlled or
licensed or which it owned, leased, occupied,
controlled or licensed at any prior time within the
applicable statue of limitations to generate,
manufacture, process, distribute, use, treat, store,
dispose of, transport or handle any Hazardous
Substance in such a manner as to give rise to a
liability reasonably expected to have a Material
Adverse Effect except in compliance with the
applicable Environmental Permits and all applicable
Environmental Laws.
(xx) Neither the Company nor Borealis has received any
notice of, or been prosecuted for, an offence
alleging violation of or non-compliance with any
Environmental Law, nor has it settled any allegation
of violation or non-compliance short of prosecution,
other than any such non-compliance
- 15 -
which did not have a material adverse effect on the
Company. The Company is not aware of any orders of
Environmental Authorities relating to environmental
matters requiring any work, repairs, construction or
capital expenditures to be made with respect to the
business or any property, facilities or assets
(whether currently owned, leased, occupied,
controlled or licensed or owned, leased, occupied,
controlled or licensed at any time prior to the date
hereof) of the Company or any of the Subsidiaries.
(yy) Except in compliance with the Environmental Permits
and all Environmental Laws, neither the Company nor
Borealis has caused, allowed or permitted, or has any
knowledge of, the release of any Hazardous Substance
into the environment, in any manner whatsoever, or
the presence of any Hazardous Substance on, under,
around or from any of its properties, facilities or
other assets (whether owned, leased, occupied,
controlled or licensed), or any property, facility or
other asset which it owned, controlled, occupied,
licensed or leased at any time prior to the date
hereof within the applicable statute of limitations,
or any such release or presence on or from a
property, facility or other asset owned, leased,
occupied, managed, controlled or licensed by third
parties but with respect to which the Company or
Borealis is or may reasonably be alleged to have
liability in such an amount as to have a Material
Adverse Effect. All Hazardous Substances used in
whole or in part by the Company or Borealis or
resulting from their respective businesses have been
disposed of, treated or stored in compliance with all
applicable Environmental Permits and all applicable
Environmental Laws.
(zz) Neither the Company nor Borealis has received any
notice from any Environmental Authority that its
business or the operation of any of its properties,
facilities or other assets is in violation of any
Environmental Law or any Environmental Permit or that
it is responsible (or potentially responsible) for
the clean up of any Hazardous Substances at, on or
beneath any of its property, facilities or other
assets (whether currently owned, leased, occupied,
managed, controlled or licensed, or owned, leased,
occupied, managed, controlled or licensed at any time
prior to the date hereof), or at, on or beneath any
other land or in connection with any waste or
contamination migration to or from any of the
Company's or any of the Subsidiaries' properties,
facilities or other assets.
(aaa) Neither the Company nor Borealis is the subject of
any international, foreign, federal, provincial,
municipal or private action, suit, litigation,
arbitration proceeding, governmental proceeding,
investigation or claim involving a demand for damages
or other potential liability with respect to
violations of Environmental Laws or Environmental
Permits.
(bbb) Each material employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
that is maintained, administered or contributed to by
the
- 16 -
Company or any of its affiliates for employees or
former employees of the Company and Borealis has been
maintained in material compliance with its terms and
the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to
ERISA and the Internal Revenue Code of 1986, as
amended (the "CODE"); no prohibited transaction,
within the meaning of Section 406 of ERISA or Section
4975 of the Code, has occurred which would result in
a material liability to the Company with respect to
any such plan excluding transactions effected
pursuant to a statutory or administrative exemption;
and for each such plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of
ERISA, no "accumulated funding deficiency" as defined
in Section 412 of the Code has been incurred, whether
or not waived, and the fair market value of the
assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeds
the present value of all benefits accrued under such
plan determined using reasonable actuarial
assumptions.
(ccc) There is and has been no failure on the part of the
Company and any of the Company's directors or
officers, in their capacities as such, to comply with
any applicable provision of the Sarbanes Oxley Act of
2002 and the rules and regulations promulgated in
connection therewith (the "Sarbanes Oxley Act")
applicable to the Company on the date hereof.
(ddd) Neither the Company nor Borealis nor, to the
knowledge of the Company, any director, officer,
agent, employee or affiliate of the Company or
Borealis has taken any action, directly or
indirectly, that would violate the FCPA, including,
without limitation, making use of the mails or any
means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment,
promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or
authorization of the giving of anything of value to
any foreign official. (as such term is defined in the
FCPA) or any non-U.S. political party or official
thereof or any candidate for non- U.S. political
office, in contravention of the FCPA and the Company,
Borealis and, to the knowledge of the Company, its
affiliates have conducted their businesses in
compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure,
and which are reasonably expected to continue to
ensure, continued compliance therewith.
(eee) The operations of the Company and Borealis are and
have been conducted at all times in compliance with
applicable financial record keeping and reporting
requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions to which the
Company or Borealis are subject, the rules and
regulations thereunder and any related or similar
rules, regulations or guidelines, issued,
administered or enforced by any governmental agency
(collectively, the "MONEY LAUNDERING LAWS") and no
action, suit or proceeding by or before any court or
governmental agency, authority or body or any
arbitrator involving the Company or Borealis with
respect to
- 17 -
the Money Laundering Laws is pending or, to the best
knowledge of the Company, threatened.
(fff) There are no transactions, arrangements and other
relationships between and/or among the Company,
and/or, to the knowledge of the Company, any of its
affiliates and any unconsolidated entity, including,
but not limited to, any structural finance, special
purpose or limited purpose entity (each, an "OFF
BALANCE SHEET TRANSACTION") that could reasonably be
expected to affect materially the Company's liquidity
or the availability of or requirements for its
capital resources, including those Off Balance Sheet
Transactions described in the Commission's Statement
about Management's Discussion and Analysis of
Financial Conditions and Results of Operations
(Release Nos. 33-8056; 34-45321; FR-61), required to
be described in the Final U.S. Prospectus which have
not been described as required.
(ggg) Neither the Company nor Borealis have at anytime
since the Company's incorporation (i) used any
corporate funds for any unlawful contribution to any
candidate for public office; or (ii) made any payment
to any federal or state government officer or
official or other person charged with similar public
duties, other than payments required or permitted by
the laws of the United States or any jurisdiction
thereof.
(hhh) The Company and Borealis own, possess, license or
have other rights to use, on reasonable terms, all
material patents, patent applications, trademark and
service marks, trademark and service mark
registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and
other intellectual property (collectively, the
"Intellectual Property") necessary for the conduct of
the Company's business and Borealis' business as now
conducted or as proposed in the Prospectus to be
conducted, except as set forth in or contemplated in
the Registration Statement and the Prospectuses
(exclusive of any supplement thereto) and except
where such failure would not have a Material Adverse
Effect on the Company or Borealis.
(iii) Except as disclosed in the Registration Statement and
the Prospectuses, the Company: (i) does not have any
material lending or other relationship with any bank
or lending affiliate of any of the Underwriters; and
(ii) does not intend to use any of the proceeds from
the sale of the Purchased Securities hereunder to
repay any outstanding debt owed to any affiliate of
any of the Underwriters.
(jjj) Neither the Company nor Borealis nor any of its or
their properties or assets has any immunity from the
jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior
to judgment, attachment in aid of execution or
otherwise) under the laws of Canada.
- 18 -
(kkk) Computershare Trust Company Inc., at its principal
offices in Golden, Colorado and its principal
transfer office in Toronto, Ontario has been, or will
prior to the Closing be, duly appointed as the
registrar and transfer agent for the Common Stock.
(lll) The Company will apply the net proceeds from the
Offering in accordance with the description set forth
in the Registration Statement or the Prospectuses
under the heading "Use of Proceeds".
(mmm) Except as provided herein, there is no person, firm
or corporation acting or purporting to act for the
Company entitled to any brokerage or finder's fee in
connection with this Agreement or any of the
transactions contemplated hereunder, and in the event
any person, firm or corporation acting or purporting
to act for the Company becomes entitled at law to any
fee from the Underwriters, the Company covenants to
indemnify and hold harmless the Underwriters with
respect thereto and with respect to all costs
reasonably incurred in the defence thereof.
Any certificate signed by any officer of the Company and
delivered to the Representative or counsel for the
Underwriters in connection with the offering and sale of the
Purchased Securities shall be deemed a representation and
warranty by the Company, as to all matters covered thereby, to
each Underwriter.
(ii) Each Underwriter, severally, but not jointly or jointly and
severally, represents and warrants to, and agrees with, the
Company that:
(a) Such Underwriter will not distribute the Purchased
Securities in jurisdictions other than the Canadian
Qualifying Jurisdictions pursuant to the Prospectuses
and the Registration Statement, as applicable, or
such other jurisdictions as have been expressly
agreed to by the Company and the Underwriters.
(b) Such Underwriter and each of its affiliates and any
Selling Firm utilized by any of them shall, in each
case, solicit and offer the Offered Units and the
Additional Units for sale only in compliance with all
applicable securities laws.
(c) Such Underwriter and each such affiliate and/or
Selling Firm as aforesaid, will not, in connection
with the offering of the Securities, make any
representation or warranty with respect to the
Purchased Securities, except pursuant to the
Prospectuses.
(d) Such Underwriter has good and sufficient right and
authority to enter into this Agreement and complete
the transactions to be completed by it under this
Agreement on the terms and conditions set forth
herein.
(e) Such Underwriter and each such affiliate and/or
Selling Firm as aforesaid is or will be duly
qualified, registered and in good standing under
- 19 -
applicable securities laws in those jurisdictions in
which it, or its affiliates and/or Selling Firm as
aforesaid, will act as underwriter of the Company in
connection with the offering of Purchased Securities
as to permit it to lawfully fulfill its obligations
under this Agreement.
(f) Each Selling Firm utilized by any such Underwriter
that previously offered Offered Units in the United
States was, at the time of such offer, registered as
a broker-dealer with the Commission, and to the
extent registration is required, is registered with
the appropriate governmental agency in each state in
which it offers and sells Offered Units and is a
member of the National Association of Securities
Dealers, Inc.
(g) No sales of Offered Units will be made in the United
States, and offers in the United States were made
exclusively to Qualified Institutional Buyers.
(h) Such Underwriter knows of no person who rendered any
services in connection with the introduction of the
Company to such Underwriter. No person acting by,
through or under the Underwriter will be entitled to
receive from the Underwriter or the company any
finder's fee or similar payments, except the Selling
Firms and as otherwise described in the Prospectuses.
(i) Such Underwriter and each of its affiliates or
Selling Firm utilized by any of them shall comply
with the prospectus delivery and other requirements
under all applicable Canadian Securities Laws, the
Securities Act and the Rules and Regulations in
connection with the offer and sale of the Offered
Units.
(j) Such Underwriter will complete the distribution of
the Offered Units and any Additional Units as soon as
is reasonably possible and upon completion of such
distribution, will provide a report of the
distribution by jurisdiction.
The representations and warranties and covenants of the Underwriters
contained in section (ii) above shall be true and correct as of the Closing Date
with the same force and effect as if then made by the Underwriters as of that
date.
2. PURCHASE AND SALE
(i) Subject to the terms and conditions and in reliance upon the
representations, warranties and covenants herein set forth,
the Company agrees to sell to each Underwriter, and each
Underwriter agrees, severally, but not jointly or jointly and
severally, to purchase from the Company, at a purchase price
of $0.85 per Offered Unit, the amount of the Offered Units set
forth opposite such Underwriter's name in Schedule I hereto.
The Company acknowledges and agrees that the Underwriters, or
some of them, on or before Closing, may elect to reallocate
the amounts set forth in Schedule I provided the Offered Units
continue to aggregate to 6,000,000.
- 20 -
(ii) Subject to the terms and conditions and in reliance upon the
representations, warranties and covenants herein set forth,
the Company hereby grants to the Underwriters the
Over-Allotment Option to purchase, severally, but not jointly
or jointly and severally, the Additional Units at the same
purchase price per share as the Underwriters shall pay for the
Offered Units. The Over-Allotment Option may be exercised only
to cover over-allotments in the sale of the Offered Units by
the Underwriters. The Over-Allotment Option may be exercised
in whole or in part at any time on or before the 30th day
after Closing upon written notice by the Representative to the
Company setting forth the number of Additional Units as to
which the several Underwriters are exercising the
Over-Allotment Option and the settlement date, which
settlement date shall be a Business Day (i) no earlier than
two Business Days after such notice has been given (and, in
any event, no earlier than the Closing Date) and (ii) no later
than seven Business Days after such notice has been given. The
maximum number of Additional Units to be sold by the Company
is 900,000. The number of Additional Units to be purchased by
each Underwriter shall be the same percentage of the total
number of the Offered Units to be purchased by the several
Underwriters as such Underwriter is purchasing of the Offered
Units, subject to such adjustments as the Underwriters shall
agree to make with respect to fractional securities.
3. UNDERWRITING FEE, UNDERWRITING OPTION AND CONSULTING FEE
(i) In return for the Underwriters' services including but not
limited to distributing the Units in the Jurisdictions, the
Company will pay to the Underwriters a fee (the "UNDERWRITING
FEE") equal to 8% of the total gross proceeds sold by the
Company pursuant to the Offering, including sales of the
Additional Units;
(ii) As further consideration for their services hereunder, the
Company will issue to or at the direction of the Underwriters
on the Closing Date options (the "UNDERWRITERS' OPTION")
substantially in a form acceptable to the Underwriters and the
Company, both acting reasonably, entitling the holders to
purchase, in the aggregate, such number of Common Shares as is
equal to ten percent (10%) of the number of Purchased
Securities sold under the Offering, exercisable at the
Offering Price for a period of 12 months following the Closing
Date. The Underwriters' Option, and the resale of the Shares
acquired upon exercise of the Underwriters' Option will be
registered under the Registration Statement and the
Underwriters' Option will be qualified under the Prospectuses;
and
(iii) As compensation for corporate finance advice provided to the
Company by Desjardins, the Company shall pay to Desjardins a
consulting fee of $175,000, which fee shall be payable on the
same basis as the reimbursement of expenses provided in
Section 8 of this Agreement.
4. DELIVERY AND PAYMENT
(i) Delivery of and payment for the Purchased Securities and the
Additional Securities (if the Over-Allotment Option shall have
been exercised on or before the third Business Day prior to
the Closing Date) shall be made at 8:00 a.m.,
- 21 -
Toronto time, on , 2005, or at such time on such later
date not more than three Business Days after the foregoing
date as the Representative shall designate, which date and
time may be postponed by agreement among the Representative
and the Company or as provided in Section 10 hereof (such date
and time of delivery and payment for the Purchased Securities
being herein called the "Closing Date" and the "Closing Time",
respectively). Delivery of the Purchased Securities shall be
made to the Representative for the respective accounts of the
several Underwriters against payment by the Underwriters
through the Representative of the respective aggregate
purchase prices of the Purchased Securities being sold by the
Company, net of the Underwriting Fee and net of amounts
payable to the Underwriters' legal counsel (the "Legal Fees")
and out-of-pocket expenses of the Underwriters incurred in
connection with the offering and sale of the Purchased
Securities (the "Out-of-Pocket Expenses") (which expenses
shall be borne by the Company), to or upon the order of the
Company by wire transfer payable in immediately available
funds to the accounts specified by the Company. Certificates
for the Offered Units and the Additional Units, if any, shall
be delivered in accordance with the registration instructions
provided by the Representative at least 48 hours prior to
Closing Time.
(ii) The purchase and sale of the Offered Units shall be completed
at the offices of Lang Michener LLP, in the City of Toronto at
the Closing Time;
(iii) The delivery of the Purchased Securities and Additional
Securities (to the extent the Over-Allotment Option shall have
been exercised) shall be made to the Underwriters at the
Closing Time in the form of one definitive certificate
representing the aggregate Common Stock and one certificate
representing the aggregate number of Warrants, in each case
comprising the Purchased Units to be issued hereunder
registered in the name of CDS & Co. (or as it may direct)
against payment to the Company of the purchase price therefor,
provided that the Representative may direct the Company 48
hours prior to the Closing Time to issue certificates
representing the common stock and Warrants purchased by the
U.S. Purchasers in the name(s) of their designees against the
purchase price therefor and the number of shares of Common
Stock and Warrants represented by such certificates shall be
deducted from the number of shares of Common Stock and
Warrants represented by the certificate registered in the name
of CDS & Co.;
(iv) If the Over-Allotment Option is exercised after the third
Business Day prior to the Closing Date, the Company will
deliver the Additional Units (at the expense of the Company)
to the Representative, at 8:00 a.m., Toronto time, on the date
specified by the Representative and the Company (which shall
be within three Business Days after exercise of said option)
for the respective accounts of the several Underwriters,
against payment by the several Underwriters through the
Representative of the purchase price thereof, net of the
Underwriting Fee and net of the Legal Fees and Out-of-Pocket
Expenses incurred in connection with the exercise of the
Over-Allotment Option, to or upon the order of the Company by
wire transfer payable in immediately available funds to the
account(s) specified by the Company. If settlement for the
Additional Units occurs after the Closing Date, the Company
will deliver to the Representative on the settlement date for
- 22 -
the Additional Units, and the obligation of the Underwriters
to purchase the Additional Units shall be conditioned upon
receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and
letters delivered on the Closing Date pursuant to Section 7
hereof, including
(a) At the Over-Allotment Option Closing Time, the
Company shall deliver a certificate in form
satisfactory to the Underwriters certifying that the
representations and warranties contained in this
Agreement are true and correct on and as of the
Over-Allotment Option Closing Time with the same
force and effect as if such representations and
warranties had been made on and as of such date and
all covenants of the Company contained herein to be
fulfilled, satisfied or complied with at or prior to
the Over-Allotment Option Closing Time have been
fulfilled, satisfied or complied with; and
(b) On the Over-Allotment Option Closing Date, the
Company shall deliver to Desjardins on behalf of the
Underwriters one or more definitive certificates
registered in the name of CDS & Co. (or as it may
direct) representing the Common Stock and Warrants in
respect of which the Over-Allotment Option has been
exercised.
(v) In the event the Company shall subdivide, consolidate or
otherwise change its Common Stock or Warrants prior to the
Over-Allotment Option Closing Time, the number of Additional
Units into which the Over-Allotment Option is exercisable
shall be similarly subdivided, consolidated or changed such
that the Underwriters would be entitled to receive the
equivalent of the number and type of securities that they
would have otherwise been entitled to receive had they
exercised the Over-Allotment Option prior to such subdivision,
consolidation or change. The subscription price per Unit shall
be adjusted accordingly and notice shall be given to the
Representative, on behalf of the Underwriters, of such
adjustment. In the event that the Representative, on behalf of
the Underwriters, shall disagree with the foregoing
adjustment, such adjustment shall be determined conclusively
by the Company's auditors at the Company's expense.
(vi) The closing of the purchase and sale of the Additional Units
shall be completed at the offices of Lang Michener LLP, in the
City of Toronto at the Over-Allotment Option Closing Time.
5. OFFERING BY UNDERWRITERS
It is understood that the several Underwriters propose to offer the
Offered Units for sale to the public as set forth in the Prospectuses and in
compliance with applicable Canadian Securities Laws and U.S. Securities Laws.
6. AGREEMENTS
(i) The Company agrees with the several Underwriters that:
- 23 -
(a) Prior to the filing of the Registration Statement,
the Canadian Prospectus and any Supplementary
Materials (as defined below in section 6(1)(e)), the
Company shall allow the Underwriters to participate
fully in the preparation of the Registration
Statement, the Canadian Prospectus and such
Supplementary Materials, respectively, and shall
allow the Underwriters to conduct all due diligence
investigations which the Underwriters may reasonably
require in order to fulfill their obligations as
underwriters and in order to enable the Underwriters
to responsibly execute the certificate required to be
executed by the Underwriters in the Canadian
Prospectus and any Supplementary Materials. During
the period commencing on the date hereof and ending
on the completion of the Distribution of the
Transaction Securities hereunder, the Company shall
also co-operate in all respects with the Underwriters
to allow and assist the Underwriters to participate
in the preparation of any Supplementary Materials and
shall allow the Underwriters to conduct all due
diligence investigations which, in the opinion of the
Underwriters, are required to be undertaken,
including so as to enable the Underwriters to
responsibly execute any certificate related to such
Supplementary Materials.
(b) The Company shall deliver to the Underwriters and
their counsel contemporaneously, as nearly as
practicable, with the execution and delivery of this
Agreement: (i) a copy of the Canadian Preliminary
Prospectus in the English language signed and
certified as required by the Canadian Securities Laws
in each of the Canadian Qualifying Jurisdictions;
(ii) a copy of all such documents and certificates
that were filed with the Canadian Preliminary
Prospectus under Canadian Securities Laws; and (iii)
a letter from the TSX advising the Company that
approval of the conditional listing of the Common
Stock has been granted by the TSX, subject to the
satisfaction of certain conditions set out therein.
(c) The Company shall deliver to the Underwriters and
their counsel contemporaneously, as nearly as
practicable, with the filing of the Canadian Final
Prospectus with the British Columbia Securities
Commission: (i) a copy of the Canadian Final
Prospectus in each of the French and the English
language signed and certified as required by the
Canadian Securities Laws in each of the Canadian
Qualifying Jurisdictions; and (ii) a copy of all such
documents and certificates that were filed with the
Canadian Final Prospectus under Canadian Securities
Laws. The deliveries set forth in (i) shall also
constitute the Company's consent to the Underwriters'
use of the Canadian Final Prospectus for the
Distribution of the Transaction Securities in the
Canadian Qualifying Jurisdictions in compliance with
the provisions of this Agreement.
(d) The Company will use its best efforts to cause the
Registration Statement, if not effective at the
Execution Time, and any amendment thereof, to become
effective as soon as possible thereafter.
- 24 -
(e) The Company will notify the Underwriters and their
counsel promptly, and confirm the notice in writing,
when any amendment to the Registration Statement has
been filed with the Commission or has become
effective, and when the Canadian Final Prospectus, or
any amended Canadian Prospectus, U.S. Prospectus or
any supplement thereto (collectively, "Supplementary
Material") shall have been filed, in which case the
Company shall deliver to the Underwriters all signed
and certified copies of such Supplementary Material
in the English language along with all documents
similar to those referred to in Section 6(i)(b) and
Section 6(i)(c) and such other documents as the
Underwriters may reasonably request. Prior to the
termination of the offering of the Transaction
Securities and the Distribution, the Company will not
file any amendment of the Registration Statement or
supplement to the U.S. Prospectus or any Rule 462(b)
Registration Statement or the U.S. Prospectus or any
amendment to the Canadian Prospectus unless a copy
thereof shall first have been submitted to the
Underwriters and their counsel within a reasonable
period of time prior to the filing thereof and the
Underwriters shall not have reasonably objected
thereto in good faith. The Company shall in good
faith discuss with the Underwriters and their counsel
any fact or change in circumstances (actual,
anticipated, contemplated, proposed or threatened,
financial or otherwise) which is of such a nature
that there is reasonable doubt whether written notice
need be given under this Section. Subject to the
foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or
filing of the Final U.S. Prospectus is otherwise
required under Rule 424(b), the Company will cause
the Final U.S. Prospectus, properly completed, and
any supplement thereto to be filed in a form approved
by the Representative with the Commission pursuant to
the applicable paragraph of Rule 424(b) within the
time period prescribed and will provide evidence
reasonably satisfactory to the Representative of such
timely filing. The Company will promptly advise the
Representative in writing: (1) when the Registration
Statement, if not effective at the Execution Time,
shall have become effective, (2) when the Final U.S.
Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant
to Rule 424(b) (or Rule 430A(a)(3), if applicable) or
when any Rule 462(b) Registration Statement shall
have been filed with the Commission, (3) when, prior
to termination of the offering of the Transaction
Securities and the Distribution, any amendment to the
Registration Statement or the Canadian Preliminary
Prospectus, the Canadian Final Prospectus or any
Supplementary Material shall have been filed or
become effective, (4) of any request by the
Commission or its staff for any amendment of the
Registration Statement, or any Rule 462(b)
Registration Statement, or for any supplement to the
U.S. Prospectus or for any additional information, or
any request by any Canadian Securities Commission
that the Company make any amendment to the Canadian
Preliminary Prospectus, the Canadian Final
Prospectus, any Supplementary Material or that the
Company provide any additional information in respect
of the offering of
- 25 -
the Transaction Securities, (5) of the issuance by
the Commission or any Canadian Securities Commission
of any stop order suspending the effectiveness of the
Registration Statement or the Canadian Final
Prospectus or any Supplementary Material or the
initiation or threatening of any proceeding for that
purpose or the receipt by the Company of any
communication from any Canadian Securities
Commission, the TSX or any other Governmental
Authority relating to the Canadian Preliminary
Prospectus, the Canadian Final Prospectus or any
Supplementary Material or the Distribution of the
Transaction Securities, and (6) of the receipt by the
Company of any notification with respect to the
suspension of the qualification of the Transaction
Securities for sale in any jurisdiction or the
institution or threatening of any proceeding for such
purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the
suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.
(f) If, at any time when a prospectus relating to the
Transaction Securities is required to be delivered
under the Securities Act or Canadian Securities Laws,
any event occurs as a result of which the Final U.S.
Prospectus or the Final Canadian Prospectus as then
amended or supplemented would include any untrue
statement of a material fact or omit to state any
material fact necessary to make the statements
therein in the light of the circumstances under which
they were made not misleading, or if it shall be
necessary to amend the Registration Statement or
amend or supplement the Final U.S. Prospectus or the
Final Canadian Prospectus to comply with the
applicable requirements of the Securities Act and
Canadian Securities Laws, the Company promptly will:
(1) notify the Representative in writing of any such
event, (2) prepare and file with the Commission and
the Canadian Securities Commissions, subject to the
second sentence of paragraph (i)(d) of this Section
6, an amendment or supplement which will correct such
statement or omission or effect such compliance, and
(3) supply any amended or supplemented Prospectuses
to the Underwriters in such quantities and at such
places as the Underwriters may reasonably request.
(g) Once the Company becomes a reporting issuer (as
defined under applicable securities laws), it will
use reasonable commercial efforts to maintain such
reporting issuer status at all times, and not be in
default in any material respect of the applicable
requirements of the Canadian Securities Laws and the
federal securities laws of the United States during
the Distribution Period.
(h) The Company will use reasonable commercial efforts to
maintain the Registration Statement continuously
effective under the 1933 Act at all times during the
Distribution Period.
- 26 -
(i) The Company will use reasonable commercial efforts to
maintain the listing of the Common Stock on the TSX
upon the listing of the Common Shares on the TSX
during the Distribution Period.
(j) Commencing on the date hereof and until the later of:
(1) the completion of the Distribution, or (2) the
time at which the Securities Act and Canadian
Securities Laws no longer require a prospectus
relating to the Transaction Securities to be
delivered, the Company shall promptly notify the
Underwriters in writing of:
(A) any change (actual, anticipated,
contemplated, proposed or threatened,
financial or otherwise) in the business,
affairs, operations, assets, properties,
prospects, liabilities (contingent or
otherwise), capital, earnings of financial
condition of the Company or Borealis;
(B) a change in any material fact or matter
covered by a statement contained in the
Prospectuses or any Prospectus Amendment
which change is, or may be, of such a nature
as to render any statement in the
Prospectuses or any Supplementary Material
misleading or untrue or which would result
in a misrepresentation in the Prospectuses
or any Supplementary Material;
(C) the discovery of any new material fact that
would have been required to be disclosed in
the Prospectuses or any Supplementary
Material had it been discovered prior to the
date thereof; or
(D) any change in Canadian Securities Laws or
the Securities Act;
which is, or may be, of such a nature as to render
the Prospectus or any Supplementary Material
misleading or untrue in whole or in part or would
result in a misrepresentation (as such term is
defined under Canadian Securities Laws) therein or
would result in the Registration Statement, the
Prospectuses or any Supplementary Material not
complying with any Canadian Securities Laws or the
Securities Act, or which change, misstatement or new
material fact would reasonably be expected to have a
significant effect on the market price or value of
the Securities, or any other reason it is necessary,
in the reasonable judgment of counsel to the Company,
at any time to amend or supplement the Prospectuses
in order to comply with Canadian Securities Laws or
the Securities Act.
(k) During the period commencing on the date hereof and
ending on the completion of the Distribution of the
Transaction Securities hereunder, the Company will
promptly inform the Underwriters of the full
particulars of:
(A) any request of the Commission or any
Canadian Securities Commission for any
amendment to the Registration Statement, the
Preliminary U.S. Prospectus, the Final U.S.
Prospectus, the
- 27 -
Canadian Preliminary Prospectus, the
Canadian Final Prospectus, or any
Supplementary Material, or for any
additional information in connection with
the offering and sale of the Transaction
Securities;
(B) the issuance by the Commission, any Canadian
Securities Commission, the TSX or any other
Governmental Authority of any order to cease
or suspend trading of any securities of the
Company or of the institution or threat of
institution of any proceedings for that
purpose; and
(C) any notice or other correspondence received
by any of them from any Governmental
Authority requesting information, meeting or
hearing or commencing or threatening any
investigation into any of them or their
business that would have a material adverse
effect on the condition of the Company or
the completion of the offering and sale of
the Transaction Securities.
(l) Until the date on which the Distribution of the
Transaction Securities is completed, the Company will
promptly (and in any event within any applicable time
limitation) comply with all legal requirements under
the Securities Act, Canadian Securities Laws, and the
rules and by-laws governing the TSX required as a
result of any event described in Section 6(i)(j) or
(k) in order to continue to qualify the Distribution
of the Transaction Securities in each of the Canadian
Qualifying Jurisdictions and the offering of the
Transaction Securities in the United States pursuant
to this Agreement, including the prospectus amendment
provisions of the Canadian Securities Laws, and will
prepare and file to the satisfaction of the
Underwriters any Supplementary Material which, in the
opinion of the Underwriters, may be necessary or
advisable. In addition to the provisions of Section
6(i)(j) or (k) above, the Company will, in good
faith, discuss with the Underwriters any change,
event or fact contemplated in Section 6(i)(j) or (k)
which is of such a nature that there may be
reasonable doubt as to whether notice should be given
to the Underwriters under Section 6(i)(j) or (k) and
will consult with the Underwriters with respect to
the form and content of any Supplementary Material
proposed to be filed by the Company, it being
understood and agreed that no such Supplementary
Material will be filed with the Commission or any
Canadian Securities Commission prior to the review
and approval by the Underwriters and their counsel.
The Company shall also cooperate in all respects with
the Underwriters to allow and assist the Underwriters
to participate in the preparation of any
Supplementary Material and to conduct all due
diligence investigations which the Underwriters deem
appropriate in order to fulfill their obligations as
underwriters and to enable the Underwriters to
responsibly execute any certificate related to such
Supplementary Material required to be executed by
them. The Company will deliver to the Underwriters,
without charge, such number of copies of such
Supplementary Material as the Underwriters may
reasonably request.
- 28 -
(m) As soon as practicable, the Company will make
generally available to its security holders and to
the Representative an earnings statement or
statements of the Company and its Subsidiaries which
will satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act.
(n) The Company will promptly furnish to the
Representative and counsel for the Underwriters
signed copies of the Registration Statement
(including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement
(without exhibits thereto) and, so long as delivery
of a prospectus by an Underwriter or dealer may be
required by the Securities Act, as many copies of the
Preliminary U.S. Prospectus and the Final U.S.
Prospectus and any supplement thereto as the
Representative may reasonably request. The Company
shall cause commercial copies of the Preliminary U.S.
Prospectus and the Final U.S. Prospectus, and of the
Preliminary Canadian Prospectus and the Final
Canadian Prospectus, to be delivered to the
Underwriters, without charge, in such numbers and in
such places as the Underwriters may reasonably
request by oral or written instructions to the
printer of the Prospectuses. The Company will use its
reasonable best efforts to effect such delivery as
soon as possible and not later than 12:00 p.m.,
Toronto time, on the first Business Day immediately
following the date of receipt of the MRRS decision
documents with respect to each of the Preliminary
Canadian Prospectus and the Final Canadian
Prospectus. The Company will use its reasonable best
efforts to effect the delivery of commercial copies
of any Supplementary Material required to be
delivered, on request to the Underwriters or to any
purchaser of Transaction Securities. The commercial
copies of the Prospectuses and any Supplementary
Material shall be identical in content to the
electronically transmitted versions thereof filed
with Canadian Securities Commissions pursuant to the
System for Electronic Document Analysis and Retrieval
(SEDAR) established pursuant to National Instrument
13-101 of the Canadian Securities Commissions in the
case of the Final Canadian Prospectus and applicable
Supplementary Material and the electronically
transmitted version filed on the Commission's EDGAR
system for the Final U.S. Prospectus and applicable
Supplementary Material.
(o) The Company will arrange for the qualification of the
Transaction Securities for offer and sale under the
laws of such jurisdictions as the Representative may
designate, and will maintain such qualifications in
effect so long as required for the Distribution of
the Transaction Securities; provided that in no event
shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so
qualified or to take any action that would subject it
to service of process in suits, other than those
arising out of the offering or sale of the
Transaction Securities or taxation, in any
jurisdiction where it is not now so subject.
- 29 -
(p) For a period of 120 days after the date of this
Agreement, the Company will not, without the prior
written consent of the Representative, agree to
issue, issue, offer, sell, contract to sell, re-sell,
pledge, or otherwise dispose of (or enter into any
transaction which is designed to, or might reasonably
be expected to, result in the disposition (whether by
actual disposition or effective economic disposition
due to cash settlement or otherwise) by the Company
or any affiliate of the Company or any person in
privity with the Company or any affiliate of the
Company), directly or indirectly, including the
filing (or participation in the filing) of a
registration statement with the Commission in respect
of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the
Exchange Act or similar transaction, any shares of
Common Stock or other shares in the capital of the
Company or any securities convertible into, or
exercisable, or exchangeable for, shares of Common
Stock or other shares in the capital of the Company;
or publicly announce an intention to effect any such
transaction, provided, however, that the Company may
(i) issue and sell shares of Common Stock pursuant to
any employee stock option plan (and may issue options
thereunder), share ownership plan or dividend
reinvestment plan of the Company in effect at the
Execution Time; (ii) and the Company may issue shares
of Common Stock upon the conversion of securities or
the exercise of warrants outstanding at the Execution
Time and disclosed in the Prospectus; and (iii)
Shares of Common Stock held in escrow as of the
Execution Time may be released from such escrow in
accordance with their escrow terms.
(q) Except where such non-compliance would not have a
Material Adverse Effect, the Company will comply with
all applicable securities and other applicable laws,
rules and regulations, including, without limitation,
the Sarbanes Oxley Act and the FCPA and equivalent
legislation under the laws of Canada or any province
thereof, and use its best efforts, including the
adoption of a code of ethics or other policy, to
require the Company's directors and officers, in
their capacities as such, to comply with such laws,
rules and regulations, including, without limitation,
the provisions of the Sarbanes Oxley Act, and the
FCPA equivalent legislation under the laws of Canada
or any province thereof.
(r) The Company will not take, directly or indirectly,
any action designed to or that would constitute or
that might reasonably be expected to cause or result
in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or
resale of the Transaction Securities.
(s) The Company will not issue any press release or
public announcement, where such press release or
public announcement relates to the transactions
contemplated herein or any financial, regulatory or
material business matters, between the date hereof
and the Closing Date without first consulting with
the Representative.
- 30 -
(t) At the time of execution of this Agreement, the
Underwriters shall have received from Ernst & Young
LLP a letter or letters, in form and substance
satisfactory to the Underwriters, addressed to the
Underwriters and dated the date hereof (i) confirming
that they are independent public accountants within
the meaning of the Securities Act and are in
compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission and the Public
Company Accountant Oversight Board (ii) stating, as
of the date hereof (or, with respect to matters
involving changes or developments since the
respective dates as of which specified financial
information is given in the Final U.S. Prospectus, as
of a date not more than five days prior to the date
hereof), the conclusions and findings of such firm
with respect to the financial information and other
matters ordinarily covered by accountants' "comfort
letters" to Underwriters in connection with
registered public offerings;
(u) The Company will use reasonable efforts to cause
shareholders holding no less than 95% of the
Company's issued and outstanding Common Stock to
furnish to the Underwriters, prior to the date
hereof, a letter or letters, in the form attached
hereto as Exhibit A and as described in the
Prospectuses under the heading "Lock-Up Agreements".
(v) During the period until the later of three years from
the Closing Date and the end of the Distribution
Period, the Company will furnish to the
Representative, as soon as they are available, copies
of all reports or other communications (financial or
other) furnished to holders of Common Stock or
Warrants, other than any such reports or
communications filed with the Commission pursuant to
the Commission's EDGAR system or with the Canadian
Securities Commissions under SEDAR.
(w) Prior to filing with the Commission any reports
pursuant to Rule 463 of the Rules and Regulations, to
furnish a copy thereof to the counsel for the
Underwriters and receive and consider its comments
thereon, and to deliver promptly to the Underwriters
a signed copy of each report filed by it with the
Commission.
(x) During the Distribution Period, the Company shall
promptly, and in any event within any applicable
statutory time limitation, comply, to the reasonable
satisfaction of the Underwriters, with all applicable
filings and other requirements under the Canadian
Securities Laws and the Securities Act as a result of
any material fact or change referred to in Section
6(j) above.
(y) The Company will use the net proceeds from the sale
of the Purchased Securities in the manner described
in the Registration Statement and the Prospectuses.
- 31 -
7. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS
The obligations of the Underwriters on the Closing Date to purchase the
Offered Units and the Additional Units, as the case may be, shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time, the Closing Date and any settlement
date pursuant to Section 4 hereof, to the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of their respective obligations hereunder and to the
following additional conditions:
(i) The Company shall have obtained a final MRRS decision document
issued by the British Columbia Securities Commission, in its
capacity as principal regulator under MRRS.
(ii) The Final U.S. Prospectus shall have been timely filed with
the Commission, and the Canadian Final Prospectus shall have
been timely filed with the Canadian Securities Commissions,
all in accordance with Section 6; no stop order suspending the
effectiveness of the Registration Statement or Canadian Final
Prospectus or any part thereof or the qualification or
registration of the Transaction Securities, or any of them
shall have been issued and no proceeding for that purpose
shall have initiated or threatened by the Commission, Canadian
Securities Commissions or TSX; and any request of the
Commission, Canadian Securities Commissions or TSX for
inclusion of additional information in the Registration
Statement or the Final U.S. Prospectus or Final Canadian
Prospectus or otherwise shall have been complied with to the
reasonable satisfaction of the Underwriters.
(iii) If the Registration Statement has not become effective prior
to the Execution Time, unless the Representative and the
Company, both acting reasonably, agree in writing to a later
time, the Registration Statement will become effective not
later than 9:30 a.m. on the Business Day following the day on
which the public offering price was determined, if such
determination occurred after 3:00 p.m. Toronto time on such
date; if filing of the U.S. Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the U.S.
Prospectus, and any such supplement, will be filed in the
manner and within the time period required by Rule 424(b).
(iv) Lang Michener LLP shall have furnished to the Underwriters a
legal opinion dated the Closing Date, in form and substance
satisfactory to counsel to the Underwriters, acting
reasonably, as to the laws of Canada and the Canadian
Qualifying Jurisdictions, which counsel in turn may rely upon
the opinions of local counsel where they deem such reliance
proper as to the laws other than those of Canada and of
Ontario and British Columbia and as to matters of fact, on
certificates of the auditors of the Company, public officials
and officers of the Company and correspondence between public
officials and stock exchange officials with respect to matters
set forth in Exhibit B hereto;
(v) [INTENTIONALLY DELETED.]
- 32 -
(vi) Dorsey & Whitney LLP shall have furnished to the Underwriters
their written opinion, as counsel to the Company, addressed to
the Underwriters and dated such Closing Date, in form and
substance reasonably satisfactory to the Underwriters, as to
United States federal securities laws, which counsel in turn
may rely upon opinions of local counsel where they deem such
reliance proper, substantially covering such matters as are
listed in Exhibit C hereto;
(vii) Parr Waddoups Brown Gee & Loveless shall have furnished to the
Underwriters their written opinion, as counsel to the Company,
addressed to the Underwriters and dated such Closing Date, in
form and substance reasonably satisfactory to the
Underwriters, substantially covering such matters as are
listed in Exhibit D hereto, together with an updated title
report in respect of the Borealis Property;
(viii) Snell & Wilmer LLP shall have furnished to the Underwriters
their written opinion, as counsel to the Company, addressed to
the Underwriters and dated such Closing Date, in form and
substance reasonably satisfactory to the Underwriters,
substantially covering such matters as are listed in Exhibit E
hereto;
(ix) The Underwriters shall have received at the Closing Time a
legal opinion dated the Closing Date, addressed to the
Underwriters from counsel to the Underwriters, Goodmans, with
respect to certain Canadian legal matters in Section 7(iv),
provided that counsel to the Underwriters shall be entitled to
rely on the opinions of local counsel as to matters governed
by the laws of jurisdictions other than the laws of British
Columbia and Ontario and as to matters of fact, on
certificates of the auditors of the Company, public officials
and officers of the Company, and provided further that counsel
to the Underwriters shall be entitled to rely upon the opinion
of counsel to the Company;
(x) At the Execution Time, the Underwriters shall have received
from Ernst & Young LLP a letter or letters, in form and
substance satisfactory to the Underwriters, addressed to the
Underwriters and dated the date hereof (i) confirming that
they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission and (ii)
stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates
as of which specified financial information is given in the
Final U.S. Prospectus, as of a date not more than five days
prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters"
to underwriters in connection with registered public
offerings.
(xi) With respect to the letter or letters of Ernst & Young LLP
referred to in the preceding paragraph and delivered to the
Underwriters at the Execution Time (the "INITIAL LETTERS"),
the Company shall have furnished to the Underwriters a letter
(the "BRING-DOWN LETTER") of such accountants, addressed to
the Underwriters and dated the Closing Date (i) confirming
that they are independent public accountants within the
meaning of the Securities Act and are in compliance with
- 33 -
the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the
Commission and the Public Company Accountant Oversight Board,
(ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments
since the respective dates as of which specified financial
information is given in the Final U.S. Prospectus, as of a
date not more than two business days prior to the date of the
bring-down letter), the conclusions and findings of such firm
with respect to the financial information and other matters
covered by the initial letters and (iii) confirming in all
material respects the conclusions and findings set forth in
the initial letters;
(xii) The Underwriters shall have received at the Closing Time
certificates dated the Closing Date, addressed to the
Underwriters and counsel to the Underwriters and signed by or
on behalf of the Company and Borealis with respect to the
articles of incorporation and by-laws of the Company and
Borealis, all resolutions of the directors of the Company
relating to this Agreement, the Warrant Indenture and the
Underwriters' Option, the incumbency and specimen signatures
of signing officers of the Company and with respect to such
other matters as the Underwriters may reasonably request;
(xiii) The Underwriters shall have received at the Closing Time a
certificate or certificates dated the Closing Date, addressed
to the Underwriters and counsel to the Underwriters signed by
the Chief Executive Officer and by the Chief Financial Officer
of the Company, certifying, after having made due enquiry and
after having carefully examined the Prospectuses and any
Prospectus Amendments, that:
(a) since the respective dates as of which information is
given in the Prospectuses as amended by any
Prospectus Amendment (A) there has been no material
adverse change (actual, anticipated, contemplated,
proposed or threatened, whether financial or
otherwise) in the business, financial condition,
affairs, operations, assets, liabilities or
obligations (contingent or otherwise) or capital of
the Company and (B) no transaction has been entered
into by the Company which is material to the Company,
other than as disclosed in the Prospectuses or the
Prospectus Amendments, as the case may be;
(b) in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectuses did not
include any untrue statement of a material fact and
did not omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective
Date no event has occurred which should have been set
forth in a supplement or amendment to the
Registration Statement or the Prospectuses which has
not been so set forth;
(c) the Company has complied with and satisfied the
covenants, terms and conditions of this Agreement on
its part to be complied with and satisfied up to the
Closing Time; and
- 34 -
(d) the representations and warranties of the Company
contained in this Agreement are true and correct as
of the Closing Date with the same force and effect as
if made at and as of the Closing Time after giving
effect to the transactions contemplated by this
Agreement;
(e) no stop order suspending the effectiveness of the
Registration Statement has been issued and no
proceedings for that purpose have been instituted or,
to the Company's knowledge, threatened;
(f) no order, ruling or determination having the effect
of suspending the sale or ceasing the trading of the
Securities or any other securities of the Company has
been issued or made by any Governmental Authority and
is continuing in effect and no proceedings for that
purpose have been instituted or are pending or, to
the knowledge of the Company threatened by any
Governmental Authority;
(g) since March 31, 2005, there has been no material
adverse change in the condition (financial or
otherwise), prospects, earnings, business or
properties of the Company and its Subsidiaries, taken
as a whole, whether or not arising from transactions
in the ordinary course of business, except as set
forth in or contemplated in the Registration
Statement or the Prospectuses (exclusive of any
supplement thereto); and
(h) such other matters as the Underwriters may reasonably
request
and each of the statements in such certificate shall be true
in fact and the Underwriters shall have no knowledge to the
contrary.
(xiv) Neither the Company nor Borealis shall have sustained since
the date of the latest audited financial statements included
in the Prospectuses (A) any loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectuses or (B)
since such date, there shall not have been any change in the
capital stock or long-term debt of the Company or Borealis or
any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the
Company and Borealis, otherwise than as set forth or
contemplated in the Prospectuses, the effect of which, in any
such case described in clause (A) or (B), is, in the judgment
of the Underwriters, so material and adverse as to make it
impracticable or inadvisable to proceed with the public
offering or the delivery of the Offered Units and Additional
Units being delivered on such Closing Date on the terms and in
the manner contemplated in the Prospectuses;
(xv) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i)
trading in securities generally on the TSX, the New York Stock
Exchange or the American Stock Exchange or in the
over-the-
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counter market shall have been suspended or materially limited
or the settlement of such trading generally shall have been
materially disrupted or minimum prices shall have been
established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state
authorities, (iii) the United States or Canada shall have
become engaged in hostilities (other than those existing prior
to the execution and delivery of this Agreement), there shall
have been an escalation in hostilities (including hostilities
existing prior to the execution and delivery of this
Agreement) involving the United States or Canada or there
shall have been a declaration of a national emergency or war
by the United States or Canada or (iv) there shall have
occurred such a material adverse change in general economic,
political or financial conditions (or the effect of
international conditions on the financial markets in the
United States or Canada shall be such), including, without
limitation, as a result of terrorist activities after the date
hereof, or any other calamity or crisis as to make it, in the
judgment of the Underwriters, impracticable or inadvisable to
proceed with the public offering or delivery of the Offered
Units and Additional Units being delivered on such Closing
Date on the terms and in the manner contemplated in the
Prospectuses;
(xvi) The Underwriter, shall not have discovered and disclosed to
the Company on or prior to such Closing Date that the
Registration Statement, the Final U.S. Prospectus or the Final
Canadian Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact which, in the
reasonable opinion of Goodmans, counsel for the Underwriters,
is material or omits to state a fact which, in the reasonable
opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein
not misleading;
(xvii) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Registration Statement
(exclusive of any amendment thereof), the U.S. Prospectus
(exclusive of any supplement thereto) and the Canadian
Prospectus, any change in or affecting the condition
(financial or otherwise), prospects, earnings, business or
properties of the Company and Borealis, whether or not arising
from transactions in the ordinary course of business, except
as set forth in or contemplated in the U.S. Prospectus
(exclusive of any supplement thereto) and the Canadian
Prospectus, and the Underwriters shall not have become aware
of any undisclosed material adverse information relating to
the Company and its Subsidiaries, or other adverse material
development, the effect of which, is, in the sole judgment of
the Underwriters, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or
delivery of the Purchased Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof),
the Prospectus (exclusive of any supplement thereto and the
Canadian Prospectus).
(xviii) The Underwriters shall have received on or prior to the
Closing Date an executed letter or letters, in the form
attached hereto as Exhibit A and as described in the
Prospectuses under the heading "Lock-Up Agreements", from
shareholders
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holding no less than 95% of the Company's issued and
outstanding Common Stock.
(xix) The Common Stock comprising the Transaction Securities shall
be listed and posted for trading on the TSX at the opening of
trading on the Closing Date.
(xx) The Underwriters shall have received on or prior to the
Closing Date such other certificates, statutory declarations,
agreements or materials that are customary in public
offerings, in form and substance reasonably satisfactory to
the Underwriters and their counsel, and such other
information, as the Underwriters and their counsel may
reasonably request.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Underwriters and counsel
for the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be cancelled at, or at any time prior to, the Closing Date by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 7 shall be
delivered at the office of Lang Michener LLP, BCE Place, Suite 2500, 181 Bay
Street, Toronto, Ontario M5J 2T7, counsel for the Company, on the Closing Date.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES
Whether or not the transactions contemplated by this Agreement shall be
completed, all expenses of the Company and of the Underwriters of or incidental
to the transactions contemplated by this Agreement and the proposed issue of
Transaction Securities contemplated herein including the issue, sale and
delivery of the Purchased Securities and all expenses of or incidental to all
other matters in connection with the transactions set out in this Agreement
shall be the responsibility of and shall be borne directly by the Company,
including, without limitation: (i) the preparation, printing or reproduction and
filing with the Commission of the Registration Statement (including financial
statements and exhibits thereto), the Preliminary U.S. Prospectus, the Final
U.S. Prospectus, and each amendment or supplement to any of them; (ii) the
preparation, printing or reproduction and filing with the Canadian Securities
Commission of the Preliminary Canadian Prospectus and the Final Canadian
Prospectus, including any materials or certificates filed therewith, and each
amendment or supplement to any of them; (iii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, each Preliminary U.S.
Prospectus, the Final U.S. Prospectus, the Preliminary Canadian Prospectus, the
Final Canadian Prospectus and all amendments or supplements to any of them, as
may, in each case, be reasonably requested for use in connection with the
offering and sale of the Purchased Securities and the issue of the other
Transaction Securities; (iv) the preparation, printing, authentication, issuance
and delivery of certificates for the Transaction Securities, including any stamp
or transfer taxes in connection with the original issuance and sale of the
Transaction Securities; (v) the printing (or reproduction) and delivery of this
Agreement, any blue sky memorandum and all other agreements or documents printed
(or reproduced) and delivered in connection with the
- 37 -
offering and sale of the Transaction Securities; (vi) the registration of the
Securities under the Exchange Act and the listing of the Transaction Securities
on the TSX; (vii) any registration or qualification of the Securities for offer
and sale under the securities or blue sky laws of the several states (including
filing fees and the reasonable fees and expenses of counsel for the Underwriters
relating to such registration and qualification); (viii) any filings required to
be made with the National Association of Securities Dealers, Inc. (including
filing fees and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (ix) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Purchased Securities; (x) the fees and expenses of
the Company's accountants and the fees and expenses of counsel (including local
and special counsel) for the Company; (xi) the fees of legal counsel to the
Underwriters (plus taxes and disbursements); (xii) the reasonable fees and
expenses relating to the marketing of the Securities (including, without
limitation, "road shows", marketing meetings, marketing documentation and
investor meetings); (xiii) all reasonable out-of-pocket expenses of the
Underwriters (including Underwriters' travel expenses in connection with due
diligence, marketing meetings and "road shows"); and (xiv) all other costs and
expenses incident to the performance by the Company of their obligations
hereunder, including any advertising, printing, courier, telecommunications,
data searches, travel, entertainment, any other expenses and the fees and
disbursements of experts retained by us; and (xv) all related Goods & Services
Tax ("GST") and applicable provincial taxes. Such reimbursements will be payable
upon a request for payment thereof by us whether or not the proposed transaction
or any other transaction contemplated by this Agreement is contemplated. All or
part of the amounts payable under this Agreement may be subject to GST or
applicable provincial tax.
9. INDEMNIFICATION AND CONTRIBUTION
(i) The Company agrees to indemnify and hold harmless each of the
Underwriters and each of their respective subsidiaries and
each of their respective directors, officers, employees,
partners, agents and each of their respective directors,
officers, employees, agents, each other person, if any,
controlling each Underwriter or any of their respective
subsidiaries, and each shareholder of each Underwriter, from
and against any and all losses (other than loss of profits),
expenses, claims (including shareholder actions, derivative or
otherwise), actions, damages and liabilities, joint or
several, including the aggregate amount paid in reasonable
settlement of any actions, suits, proceedings, investigations
or claims and the reasonable fees and expenses of their
counsel that may be incurred in advising with respect to
and/or defending any action, suit, proceeding, investigation
or claim that may be made or threatened against any
indemnified party under this section 9(i) or in enforcing this
indemnity to which any indemnified party may become subject or
otherwise involved, in any capacity insofar as the Claims
relate to, are caused by, result from, arise out of or are
based upon, directly or indirectly:
(a) any information or statement (except any information
or statement relating solely to the Underwriters or
provided by the Underwriters) contained in the
Registration Statement or any registration statement
subsequent prepared and filed with the Commission in
connection with the offer, sale or resale of any of
the Transaction Securities, Preliminary Canadian
- 38 -
Prospectus, the Preliminary U.S. Prospectus, the
Prospectuses or any Prospectus Amendment or in any
certificate or other document or material filed or
delivered by or on behalf of the Company contains or
is alleged to contain a misrepresentation;
(b) any omission or alleged omission to state in the
Registration Statement or any registration statement
subsequent prepared and filed with the Commission in
connection with the offer, sale or resale of any of
the Transaction Securities, the Preliminary Canadian
Prospectus, Preliminary US Prospectus, the
Prospectuses or any Prospectus Amendment or any
certificate or other document or material filed or
delivered by or on behalf of the Company, any fact
(except facts relating solely to the Underwriters),
required to be stated in such document or necessary
to make any statement in such document not misleading
in light of the circumstances under which it was
made;
(c) any order made or enquiry, investigation or
proceeding commenced or threatened by any securities
regulatory authority or any other competent authority
based upon any untrue statement or omission or
alleged untrue statement or alleged omission or any
misrepresentation or alleged misrepresentation
(except a statement, alleged omission or alleged
misrepresentation or alleged statement, omission or
misrepresentation relating solely to the
Underwriters) in the Registration Statement or any
registration statement subsequent prepared and filed
with the Commission in connection with the offer,
sale or resale of any of the Transaction Securities,
the Preliminary Canadian Prospectus, Preliminary US
Prospectus, the Prospectuses or any Prospectus
Amendment or in any other document or material filed
or delivered by or on behalf of the Company
preventing or restricting the trading in or the sale
or Distribution of the Offered Units in any of the
Jurisdictions;
(d) the breach by the Company of any representation or
warranty set forth herein or in any certificate or
other document to be delivered pursuant to this
Agreement or the failure of the Company to comply
with any of their obligations hereunder or
thereunder; or
(e) the non-compliance or alleged non-compliance by the
Company with any of the Canadian Securities Laws or
the Securities Act in connection with the
transactions contemplated herein.
(ii) Each Underwriter severally and not jointly, nor jointly and
severally, agrees to indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which
the Company may become subject, under the Securities Act or
otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement,
any Preliminary Canadian Prospectus, the Preliminary
- 39 -
U.S. Prospectus, the Prospectuses, or any amendment or
supplement thereto (including any term sheet within the
meaning of Rule 434 of the Rules and Regulations), or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in the Preliminary Canadian
Prospectus, the Preliminary U.S. Prospectus, the Prospectuses,
or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company
by, or on behalf of such Underwriter through the
Representative, specifically for inclusion therein, and will
reimburse the Company for any reasonable legal or other
reasonable expenses reasonably incurred by the Company in
connection with investigating or defending against any such
loss, claim, damage, liability or action.
(iii) If any claim contemplated by Section 9(i) or Section 9(ii)
(collectively, "CLAIMS") is asserted against any indemnified
party in respect of which indemnification is or might
reasonably be considered to be provided under such sections,
the indemnified party will notify the indemnifying party as
soon as possible of the nature of such Claim, but the omission
to so notify as soon as possible the indemnifying party will
not relieve the indemnifying party from any liability which it
may have to any indemnified party under this Section 9, except
to the extent that such omission or delay prejudices their
ability to contest such Claim or results in any material
increase in the indemnification liability which the
indemnifying party has with respect to such Claim, and the
indemnifying party shall be entitled (but not required) to
participate in or assume the defence of any suit or the
conduct of any proceeding brought to enforce such Claim;
provided, however, that the defence shall be conducted through
legal counsel acceptable to the indemnified party, acting
reasonably, and provided that no admission of liability in
respect of any such Claim may be made by or on behalf of an
indemnified party or an indemnifying party without the prior
written consent of all parties hereto.
(iv) With respect to any indemnified party under section 9(i) who
is not a party to this Agreement, it is the intention of the
Company to constitute the Underwriters as trustees for such
indemnified party of the rights and benefits of this Section
and the Underwriters agree to accept such trust and to hold
the rights and benefits of this Section in trust for and on
behalf of such indemnified party.
(v) In any such Claim referred to in this Section 9, the
indemnified party shall have the right to retain other counsel
to act on his, her or its behalf and participate in the
defence of such Claim, but the fees and expenses of such
counsel shall be at the expense of the indemnified party
unless: (i) the indemnifying party does not assume the defence
of the Claim within a reasonable period of time of being
notified of such Claim; (ii) the indemnifying party and the
indemnified party shall have mutually agreed to the retention
of the other counsel and the manner in which the costs of such
counsel are to be shared; or (iii) the named parties to any
such Claim (including any added, third or impleaded party)
include both the
- 40 -
indemnified party on the one hand and the indemnifying party
on the other hand, and in the written opinion of counsel to
the indemnified party, acting reasonably, the representation
of both parties by the same counsel would be inappropriate due
to the actual or potential conflicting interests between them
or additional defences are available to an indemnified party,
in each of which cases the indemnifying party shall not have
the right to assume the defence of such suit on behalf of the
indemnified party but shall be liable to pay the reasonable
fees and expenses of counsel for the indemnified party. In no
event shall an indemnifying party be required to pay the
reasonable fees and expenses of more than one counsel in any
one jurisdiction for all of the Indemnified Parties in respect
of any particular Claim or related set of Claims.
(vi) Neither the indemnifying party nor any indemnified party will,
without each of the other's prior written consent, settle,
compromise, consent to the entry of any judgment in or
otherwise seek to terminate any action, suit, proceeding,
investigation or claim in respect of which indemnification may
be sought hereunder (whether or not any indemnified party is a
party thereto) unless such settlement, compromise, consent or
termination includes a release of each indemnified party from
any liabilities arising out of such action, suit, proceeding,
investigation or claim.
(vii) The rights of indemnity contained in this Section 9 shall
cease to apply in respect of an indemnified party if and to
the extent that a court of competent jurisdiction in a final
judgment that has become non-appealable shall have determined
that such losses, expenses, claims, actions, damages or
liabilities to which the indemnified party may be subject were
caused by the negligence or wilful misconduct of such
indemnified party.
(viii) In the event that the indemnity provided in subsections (i) or
(ii) of this Section 9 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, the
Company, and the Underwriters, severally and not jointly,
agree to contribute to the aggregate loses, claims, damages
and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively, "LOSSES") to which the Company and one or more
of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the
Company and by the Underwriters from the offering of the
Purchased Securities; provided, however, that in no case shall
any Underwriter (except as may be provided in any agreement
among underwriters relating to the offering of such
Securities) be responsible for any amount in excess of the
Underwriting Fee applicable to the Purchased Securities
purchased by such Underwriter hereunder. If the allocation
provided by the immediately preceding sentence is unavailable
for any reason, the Company and the Underwriters, severally
and not jointly, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of the Underwriters
in connection with the statements or omissions which resulted
in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the offering
and sale of the Securities (before deducting expenses)
- 41 -
received by them, and benefits received by the Underwriters
shall be deemed to be equal to the Underwriting Fee. Relative
fault shall be determined by reference to, among other things,
whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information provided by the Company
or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The
Company and the Underwriters agree that it would not be just
and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not
take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph
(viii), no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Securities Act
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of
this Section 9, each person who controls an Underwriter within
the meaning of either the Securities Act or the Exchange Act
and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within
the meaning of either the Securities Act or the Exchange Act,
each officer of the Company who shall have signed the
Registration Statement and Prospectuses and each director of
the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and
conditions of this paragraph (viii).
(ix) The rights to contribution provided in this Section shall be
in addition to and not in derogation of any other right to
contribution which the Company and the Underwriters may have
by statute or otherwise at law.
10. DEFAULT BY AN UNDERWRITER
(i) If any one or more Underwriters shall fail to purchase and pay
for any of the Offered Units or Additional Units agreed to be
purchased by such Underwriter or Underwriters hereunder and
such failure to purchase shall constitute a default in the
performance of its or their obligations under this Agreement,
the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of
the Purchased Securities, and if such nondefaulting
Underwriters do not purchase all of the Purchased Securities,
this Agreement will terminate without liability to any
nondefaulting Underwriter or the Company.
(ii) In the event of a default by any Underwriter as set forth in
this Section 10, the Closing Date shall be postponed for such
period, not exceeding five Business Days, as the
Representative shall determine in order that the required
changes in the Registration Statement and the Prospectuses or
in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any
defaulting Underwriter of its liability, if any, to the
Company, and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
- 42 -
11. TERMINATION
(i) Each Underwriter is entitled to terminate its obligation to
purchase the Purchased Securities by written notice to that
effect given to the Company at or prior to the Closing Time
if:
(a) any inquiry, action, suit, investigation or other
proceeding (whether formal or informal) is
instituted, announced or threatened or any order is
made by any Governmental Authority (other than an
inquiry, action, suit, investigation or proceeding or
order based solely upon the activities of the
Underwriters), or there is any change of any Laws, or
interpretation or administration thereof, which, in
the opinion of any of the Underwriters, operates to
prevent or restrict the distribution of the
Securities in any of the Canadian Qualifying
Jurisdictions or would prevent or restrict trading in
the Securities of the Company or would reasonably be
expected to have a significant adverse effect on the
market price or value of the Securities;
(b) any order to cease or suspend trading in any
securities of the Company, or prohibiting or
restricting the distribution of the Offered Units and
Additional Units is made, announced or threatened, or
proceedings are commenced, announced or threatened
for the making of any such order, by any securities
commission or similar regulatory authority, or by any
other competent authority, and has not been
rescinded, revoked or withdrawn;
(c) there occurs or is discovered any material change,
any other change, event or fact contemplated by
Section 6(i)(j) which, in the reasonable opinion of
that Underwriter, could be expected to result in the
purchasers of a material number of Purchased
Securities exercising their right under securities
Laws to withdraw from or rescind their purchase
thereof or sue for damages in respect thereof or
which could reasonably be expected to have a
significant adverse effect on the market price or
value of the Purchased Securities or any of them;
(d) the state of the financial markets is such that in
the reasonable opinion of that Underwriter, the
Purchased Securities cannot be profitably marketed;
(e) there should develop, occur or come into effect or
existence any event, action, state, condition or
occurrence of national or international consequence,
acts of hostilities or escalation thereof or other
calamity or crisis or any change or development
involving a prospective change in national or
international political, financial or economic
conditions or any action, law, regulation, inquiry or
other occurrence of any nature which, in the opinion
of such Underwriter, materially adversely affects or
may materially adversely affect the Canadian and U.S.
financial markets generally or the business,
operations or affairs of the Company and Borealis,
taken as a whole, or the market price or value of the
Purchased Securities;
- 43 -
(f) there is announced any change or proposed change in
the income tax laws of the United States or Canada or
the interpretation or administration thereof and such
change would, in the reasonable opinion of an
Underwriter, acting in good faith and after
consultation with the Company, be expected to have a
significant adverse effect on the marketability of
the Purchased Securities; or
(g) the Underwriters are advised that the TSX will not
approve the listing of the Common Stock.
(ii) In addition to the foregoing, this Agreement shall be subject
to termination in the absolute discretion of the
Representative, by notice given to the Company prior to the
Closing Date, if at any time prior to such time: (i) (x)
trading in the shares of Common Stock shall have been
suspended by the Commission, any of the Canadian Securities
Commissions or the TSX, or (y) the TSX shall have been
suspended or limited or minimum prices shall have been
established on the TSX, (ii) a banking moratorium shall have
been declared either by Federal, or Nevada State or Canadian
authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities, declaration by the United States
or Canada of a national emergency or war, or other calamity or
crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Representative,
impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Registration
Statement and the Prospectuses (exclusive of any supplement
thereto).
(iii) If this Agreement is properly terminated by any of the
Underwriters pursuant to Section 11 of this Agreement, there
will be no further liability hereunder on the part of that
Underwriter or of the Company to that Underwriter, except in
respect of any liability that may have arisen or may later
arise under Section 9 and Section 10 of this Agreement. The
right of the Underwriters or any of them to terminate their
respective obligations under this Agreement or to terminate
this Agreement is in addition to all other rights and remedies
as they may have in respect of any default, act or failure to
act of any of the Company in respect of any of the matters
contemplated by this Agreement. A notice of termination given
by one Underwriter under this Section 11(i) will not be
binding upon the other Underwriters.
12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE
The respective agreements, representations, warranties, indemnities and
other statements of the Company or its officers, and of the several Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
or the Company or any of the officers, directors, employees, agents or
controlling persons referred to in Section 9 hereof, and will survive delivery
of and payment for the Securities for a period of five years from the Closing
Date. The provisions of Sections 8 and 9 hereof shall survive the termination or
cancellation of this Agreement.
- 44 -
13. NOTICES
Unless otherwise expressly provided in this Agreement, any notice or
other communication to be given under this Agreement (a "NOTICE") shall be in
writing addressed as follows:
If to the Company addressed and sent to:
Gryphon Gold Corporation
Suite 810
1130 West Pender Street
Vancouver, B.C., V6E 4A4
Attention: Chief Financial Officer
Facsimile: (604) 608-3262
with a copy to:
Lang Michener LLP
BCE Place
Suite 2500, 181 Bay Street
Toronto, Ontario M5J 2T7
Attention: Philippe Tardif
Facsimile: (416) 365-1719
Dorsey & Whitney LLP
1420 Fifth Avenue, Suite 3400
Seattle, Washington 98101
Attention: Kenneth Sam
Facsimile: (206) 903-8820
to the Underwriters at:
Desjardins Securities Inc.
145 King Street West
Toronto, Ontario
M5H 1J8
Attention: Stephen Altmann
Facsimile:
Goodmans
355 Burrard Street, Suite 1900
Vancouver, British Columbia, Canada
V6C 2G8
- 45 -
Attention: Paul Goldman
Facsimile: (604) 682-7131
or to such other address as any of the persons may designate by Notice
given to the others.
Each Notice shall be personally delivered or sent by commercial courier
to the addressee or sent by fax to the addressee and (i) a Notice which is
couriered or personally delivered shall, if delivered on a Business Day, be
deemed to be given and received on that day and, in any other case, be deemed to
be given and received on the first Business Day following the day on which it is
delivered; and (ii) a Notice which is sent by fax shall be deemed to be given
and received on the first Business Day following the day on which it is sent.
14. SUCCESSORS
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the officers, directors,
employees, agents and controlling persons referred to in Section 9 hereof, and
no other person will have any right or obligation hereunder.
15. APPLICABLE LAW
This Agreement will be governed by and construed in accordance with the
laws of British Columbia and the laws of Canada applicable therein.
16. ATTORNMENT
Each of the Company and each Underwriter hereby agrees:
(i) that any action or proceeding relating to this Agreement may
(but need not) be brought in any court of competent
jurisdiction in the Province of British Columbia, and for that
purpose now irrevocably and unconditionally attorns and
submits to the jurisdiction of such British Columbia court;
(ii) that it irrevocably waives any right to, and will not, oppose
any such British Columbia action or proceeding on any
jurisdictional basis, including forum non convenience; and
it will not oppose the enforcement against it in any other jurisdiction of any
judgment or order duly obtained from a British Columbia court as contemplated
hereunder.
17. PRESS RELEASES AND ADVERTISEMENTS
From and after the date hereof, the Company shall provide the
Representative with a copy of all press releases and advertisements to be issued
by the Company concerning the Offering prior to the issuance thereof, and shall
give the Representative a reasonable opportunity to provide comments on any such
press release or advertisement.
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18. AUTHORITY OF THE REPRESENTATIVE
The Representative is hereby authorized by the other Underwriters to
act on their behalf and the Company shall be entitled to and shall act on any
Notice given hereunder or agreement entered into by or on behalf of the
Underwriters by the Representative, who represents and warrants that it has
irrevocable authority to bind the Underwriters, except in respect of any waiver
of any material condition of Closing pursuant to Section 7, or any admission of
liability or settlement of any Claim under Section 9, which admission or
settlement shall be given by each of the Underwriters, any notice of termination
pursuant to Section 11(i), which notice may be given by any of the Underwriters
and any amendment or supplement to this Agreement, which must be executed by all
of the Underwriters. To the extent practicable, the Representative agrees to use
commercially reasonable efforts to consult with the other Underwriters
concerning any material matters which may arise hereunder before it binds the
Underwriters with respect to any such matters.
19. COUNTERPARTS AND FACSIMILE SIGNATURES
This Agreement may be signed in one or more counterparts, each of which
shall constitute an original and all of which together shall constitute one and
the same agreement. The transmission by facsimile of a copy of the execution
page hereof reflecting the execution of this Agreement by any party hereto shall
be effective to evidence that party's intention to be bound by this Agreement
and that party's agreement to the terms, provisions and conditions hereof, all
without the necessity of having to produce an original copy of such execution
page.
20. HEADINGS
The section headings used herein are for convenience only and shall not
affect the construction hereof.
21. SEVERABILITY
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 severable from this Agreement.
22. FUNDS
All funds referred to in this Agreement shall be in Canadian dollars
unless otherwise expressly indicated.
23. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
24. ENTIRE AGREEMENT
This Agreement and those provisions of the engagement letter agreement
dated March 9, 2005 among the Company and the Representative that by their terms
survive the execution of this Agreement constitute the entire agreement between
the parties hereto with respect to the
- 47 -
subject matter hereof, provided however that to the extent any such provisions
are inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall govern.
25. DEFINITIONS
The terms which follow, when used in this Agreement, shall have the
meanings indicated.
"Additional Units" has the meaning given to it in the second paragraph of this
Agreement.
"Agreement" means this agreement as it may be amended, modified or supplemented
from time to time in accordance with its terms.
"Amended Preliminary Prospectus" has the meaning given to it in Section 1(i)(b).
"BCSC" means the British Columbia Securities Commission.
"Borealis" means Borealis Mining Company.
"Borealis Lease" means the lease dated January 24, 1997, referenced in the
Prospectuses and Registration Statement.
"Borealis Property" has the meaning attributed to this term in the Registration
Statement and Prospectuses.
"Business Day" shall mean any day other than a Saturday, a Sunday or a legal
holiday or a day on which banking institutions or trust companies are authorized
or obligated by law to close in Toronto, Ontario.
"Canadian Prospectus" means, collectively, the Preliminary Canadian Prospectus
and the Final Canadian Prospectus. "Canadian Qualifying Jurisdictions" means
each of British Columbia, Alberta, Manitoba and Ontario, Canada.
"Canadian Securities Commissions" means, collectively, the securities
commissions or other securities regulatory authorities in each of the Canadian
Qualifying Jurisdictions.
"Canadian Securities Laws" means all applicable securities laws in each of the
Canadian Qualifying Jurisdictions emanating from Governmental Authorities,
including the respective rules and regulations made thereunder together with
applicable published national and local instruments, policy statements, notices,
blanket rulings and orders of the Canadian Securities Commissions, all
discretionary rulings and orders applicable to the Company, if any, of the
Canadian Securities Commissions and all rules, by-laws and regulations governing
the TSX, all as the same are in effect at the date hereof and as amended,
supplemented or replaced from time to time during the period of Distribution.
"Claim" has the meaning given to it in Section 9.
-48 -
"Closing" means the completion of the issue and sale by the Company of the
Offered Units pursuant to this Agreement.
"Closing Date" means , 2005 or such other date as the Company and the
Underwriters may agree upon in writing.
"Closing Time" means a.m. (Toronto time) on the Closing Date or such other
time on the Closing Date as the Company and the Underwriters may agree.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" has the meaning given to it in the first paragraph of this
Agreement.
"Distribution" means "distribution" or "distribution to the public" of the
Transaction Securities as those terms are defined in Canadian Securities Laws.
"Distribution Period" means the period commencing on the date hereof and ending
on the date of the completion of the Distribution of the Offered Units and
Additional Units in Canada and ending on the earlier of the expiry date of the
Warrants or the date the last Warrant has been exercised in the United States.
"Effective Date" means the date of the Effective Time.
"Effective Time" means the date and the time as of which the Registration
Statement, or the most recent post-effective amendment thereto, if any, was
declared effective by the Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Execution Time" shall mean the date and time that this Agreement is executed
and delivered by the parties hereto.
"FCPA" means Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder.
"Final Canadian Prospectus" means the (final) prospectus of the Company dated
, 2005 (in both the English and French languages unless the context
indicates otherwise), filed in each of the Qualifying Provinces in accordance
with Canadian Securities Laws.
"Final U.S. Prospectus" means the (final) prospectus of the Company dated
, 2005 filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations.
"Financial Information" has the meaning given to it in Section 6(i)(b).
"Governmental Authority" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or public
department, court, tribunal, arbitral body, bureau or agency, domestic or
foreign, (b) any subdivision, agent, commission, board, or authority of any of
the foregoing, or (c) any quasi- governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the foregoing, and
- 49 -
any stock exchange or self-regulatory authority and, for greater certainty,
includes the Canadian Securities Commissions, the TSX and Market Regulation
Services Inc.
"indemnified party" and "indemnified parties" have the meanings given to such
expressions in Section 9.
"Intellectual Property" has the meaning given to it in Section 1(i)(ddd).
"Jurisdiction" means each of the Qualifying Canadian Jurisdictions and the
United States.
"Laws" means applicable securities laws and all other statutes, regulations,
statutory rules, orders, by-laws, codes, ordinances, decrees, the terms and
conditions of any grant of approval, permission, authority or license, or any
judgment, order, decision, ruling, award, policy or guideline, of any
Governmental Authority, and the terms applicable with respect to such Laws and
in the context that refers to one or more persons, means that such Laws apply to
such person or persons or its or their business, undertaking, property or
securities and emanate from a Governmental Authority, having jurisdiction over
the person or persons or its or their business, undertaking, property or
securities.
"Legal Fees" has the meaning given to it in Section 4.
"Material Adverse Effect" means, with respect to any person or entity, a
material adverse effect on the business, affairs, property, liabilities
(contingent or otherwise), operating results, capital or prospects of such
person or entity.
"Material Contracts" means each of the agreements referred to in the Final
Canadian Prospectus under the heading "Material Contracts" which have been
executed on or before such date as the context may require.
"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.
"MRRS Decision Document" has the meaning given to it in Section 6.
"Notice" has the meaning given to it in Section 14.
"Offered Units" has the meaning given to it in the first paragraph of this
Agreement.
"Offering" has the meaning given to it in the first paragraph of this Agreement.
"Out of Pocket Expenses" has the meaning given to it in Section 4.
"Over-Allotment Option" has the meaning given to it in the first paragraph of
this Agreement.
"Over-Allotment Option Closing Date" means the date, which shall be a Business
Day, as set out in the Over-Allotment Option Notice or such other date as the
Company and the Underwriters may agree upon in writing.
-50 -
"Over-Allotment Option Closing Time" means a.m. (Toronto time) on the Over
Allotment Option Closing Date or such other time as the Company and the
Underwriters may agree upon.
"Over-Allotment Option Expiry Date" means the date which is 30 days following
the Closing Date.
"Over-Allotment Option Notice" has the meaning given to it in Section 4.
"Permits" has the meaning given to it in Section 1(i)(j).
"Preliminary Canadian Prospectus" means the preliminary prospectus of the
Company dated August 17, 2005 filed in each of the Canadian Qualifying
Jurisdictions in accordance with Canadian Securities Laws.
"Preliminary U.S. Prospectus" means each prospectus included in the Registration
Statement, or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by the Company with
the consent of the Underwriters pursuant to Rule 424(a) of the Rules and
Regulations.
"Prospectus Amendment" means any amendment or supplement to the Final Canadian
Prospectus (in both the English and French languages unless the context
indicates otherwise) and/or any amendment or supplement to the Final U.S.
Prospectus.
"Prospectuses" means the Final Canadian Prospectus and the Final U.S.
Prospectus.
"Purchased Securities" has the meaning given to it in paragraph 4 of this
Agreement.
"Qualified Institutional Buyers" means a qualified institutional buyer as that
term is defined in Rule 144A of the Securities Act.
"Registration Statement" has the meaning given to it in Section 1(i)(a) of this
Agreement.
"Rules and Regulations" has the meaning given to it in Section 1(i)(a).
"Securities Act" has the meaning given to it in Section 1(i)(a).
"Selling Firms" means such investment dealers and brokers through which the
Underwriters may sell Securities to the public under the terms of this
Agreement.
"Shareholders" means holders of Common Stock.
"Stock Option Plan" means the Gryphon Gold Corporation 2004 Stock Incentive
Plan.
"Tax Act" means the Income Tax Act (Canada).
"Taxes" includes all forms of taxation (including, without limitation, any net
income or gains, minimum, gross income, gross receipts, sales, use, ad valorem,
value-added, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, capital stock, occupation, property,
custom, environmental or windfall tax or duty), together with interest,
- 51 -
penalties and additions imposed with respect to the foregoing, imposed by any
local, municipal, state, provincial, Federal or other government, governmental
entity or political subdivision, whether of Canada, the United States or other
country or political unit.
"Tax Return" means all returns, declarations, statements, reports, schedules,
forms and information returns, whether original or amended, relating to Taxes.
"to the best of the knowledge of" means (unless otherwise expressly stated) a
statement to the best of the declarant's knowledge after due inquiry.
"Transaction Documents" means this Agreement and the Warrant Indenture and the
other Material Contracts.
"Transaction Securities" has the meaning given to it in the fourth paragraph of
this Agreement.
"TSX" means the Toronto Stock Exchange.
"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Warrants and Underwriters' Option.
"Underwriters" has the meaning given to it in the first paragraph of this
Agreement.
"Underwriters' Option" has the meaning given to it in paragraph 3(ii) of this
Agreement.
"Units" has the meaning given to it in the first paragraph of this Agreement.
"U.S. Prospectus" means, collectively, the Preliminary U.S. Prospectus and the
Final U.S. Prospectus.
"Warrants" has the meaning given to it in the first paragraph of this Agreement.
"Warrant Indenture" means a Warrant Indenture to be dated as of the Closing Date
between the Company and Computershare establishing the Warrants.
If the foregoing is in accordance with your understanding and is agreed
to by you, please signify your acceptance by executing the enclosed copies of
this letter where indicated below and returning them to the Representative upon
which this letter as so accepted shall constitute an Agreement among us.
Yours very truly,
DESJARDINS SECURITIES INC.
By:
----------------------------------------
Name:
CIBC WORLD MARKETS INC.
By:
-----------------------------------------
Name:
- 52 -
BOLDER INVESTMENT PARTNERS LTD.
By:
-----------------------------------------
Name:
ORION SECURITIES INC.
By:
-----------------------------------------
Name:
The foregoing offer is accepted and agreed to as of the date first above
written.
GRYPHON GOLD CORPORATION
By:
-----------------------------------------
Name:
By:
-----------------------------------------
Name:
SCHEDULE I
<Table>
<Caption>
NUMBER OF UNDERWRITTEN
UNDERWRITERS SECURITIES TO BE PURCHASED
------------- --------------------------
Desjardins Securities Inc.
CIBC World Markets Inc.
Bolder Investment Partners Ltd.
Orion Securities Inc.
---------------------------
TOTAL
</Table>
EXHIBIT A
LOCK-UP AGREEMENTS
- 55 -
Gryphon Gold Corporation
Public Offering of Units
August , 2005
Desjardins Securities Inc.
Suite 2750, 145 King Street West
Toronto, ON
M5H 1J8
RE: LOCK-UP AGREEMENT
Ladies and Gentlemen:
This letter of agreement ("Lock-up Agreement") is being delivered to
you in connection with the Investor Rights Agreement, as amended, and an agency
agreement (the "Agency Agreement") entered into between Gryphon Gold
Corporation, a corporation organized under the laws of the State of Nevada (the
"Company") and Desjardins Securities Inc. ("Desjardins") relating to an initial
public offering (the "Offering") of units in the capital of the Company
consisting of shares of common stock (the "Common Stock").
In consideration of the Offering and the consents required thereunder,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the undersigned agrees that during the period beginning from the
date hereof and continuing for eighteen (18) months following the completion of
the Offering (the "Lock-up Period"), the undersigned, unless otherwise advised
in writing by Desjardins, will not offer, sell, contract to sell, pledge or
otherwise dispose of or enter into any transaction which is designed to, or
might reasonably be expected to, result in a direct or indirect disposition of
Common Stock (collectively, the "Securities Transactions"), except as set forth
below:
(i) during each Quarter (as defined below) within the Lock-up
Period, the undersigned may conduct Securities Transactions on
up to the greater of 5,000 shares of Common Stock or 20% of
the amount of Common Stock held by the undersigned as
calculated from the Common Stock holdings of the undersigned
on the date the Lock-up Period commences; plus
(ii) following the first Quarter, any shares of Common Stock that,
although eligible, were not subject to Securities Transactions
during the prior Quarter or successive Quarters will become
eligible to participate in Securities Transactions.
For the purposes of this Lock-up Agreement, "Quarter" means a
sequential three month period, with the first Quarter commencing on the date of
completion of the Offering and ending three months thereafter, and the
subsequent Quarters following thereafter.
This Lock-up Agreement shall terminate and be of no further force or
effect upon either the Company or Desjardins notifying the other in writing that
they are abandoning the Offering or if the Agency Agreement is terminated prior
to the Closing Date.
Yours very truly,
SIGNATURE OF SHAREHOLDER
Name and address of shareholder:
- 56 -
Gryphon Gold Corporation
Public Offering of Units
September , 2005
DESJARDINS SECURITIES INC. GRYPHON GOLD CORPORATION
SUITE 2750, 145 KING STREET WEST SUITE 810, 1130 WEST PENDER STREET
TORONTO, ON VANCOUVER, B.C.
M5H 1J8 V6E 4A4
RE: LOCK-UP AGREEMENT
Directors and Officers of Gryphon Gold Corporation:
In consideration of the Offering and the consents required thereunder,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the undersigned agrees that during the period beginning from the
date hereof and following the completion of the Offering (the "Lock-up Period"),
the undersigned, unless otherwise advised in writing by Desjardins, will not
offer, sell, contract to sell, pledge or otherwise dispose of or enter into any
transaction which is designed to, or might reasonably be expected to, result in
a direct or indirect disposition of Common Stock (collectively, the "Securities
Transactions"), except as set forth below:
(i) Six (6) months following completion of the Offering during
each Quarter (as defined below) within the Lock-up Period, the
undersigned may conduct Securities Transactions on up to 20%
of the amount of Common Stock held by the undersigned as
calculated from the Common Stock holdings of the undersigned
on the date the Lock-up Period commences; plus
ii) Starting at the beginning of the third Quarter following the
Offering, any shares of Common Stock that, although eligible,
were not subject to Securities Transactions during the prior
Quarter or successive Quarters will become eligible to
participate in Securities Transactions.
For the purposes of this Lock-up Agreement, "Quarter" means a
sequential three month period, with the first Quarter commencing on the date of
completion of the Offering and ending three months thereafter, and the
subsequent Quarters following thereafter.
This Lock-up Agreement shall terminate and be of no further force or
effect upon either the Company or Desjardins notifying the other in writing that
they are abandoning the Offering or if the Agency Agreement is terminated prior
to the Closing Date.
Yours very truly,
Name:
SIGNATURE OF SHAREHOLDER
EXHIBIT B
CANADIAN COUNSEL OPINION
1) the Common Stock comprising the Transaction Securities has been
conditionally approved for listing on the TSX, subject only to the
requirements set out in the TSX conditional approval letter dated
October 3, 2005 and the certificates for the Transaction Securities
comply with the requirements of the TSX;
2) the Common Stock and the Warrants are qualified investments under the
Income Tax Act (Canada) and the regulations thereunder (the "Tax Act")
for trusts governed by registered retirement savings plans, registered
retirement income funds, deferred profit sharing plans and registered
education savings plans;
3) this Agreement constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and except as limited by the application of
equitable remedies when equitable remedies are sought; provided,
however, that no opinion need be expressed on the enforceability of the
indemnity and contribution provisions herein;
4) A decision document has been obtained for the Prospectus from the
British Columbia Securities Commission, as principal regulator,
evidencing that receipts have been issued by each of the regulatory
authorities (the "Qualifying Authorities") of the Provinces of Canada
(the "Qualifying Provinces") for the Prospectus and all necessary
documents have been filed, all necessary proceedings have been taken
and all necessary authorizations, approvals, permits, consents and
orders have been obtained under the securities laws of the Qualifying
Provinces to permit the Common Stock and Warrants comprising the
Offered Units and Additional Units to be offered, sold and delivered in
the Qualifying Provinces by or through persons registered under such
laws and for the Over-allotment Option and the Compensation Option to
be granted to the Underwriters, and no other authorization, approval,
permit or license of any government, governmental instrumentality or
court of any Qualifying Province or of Canada is required in connection
with the issue and sale of the Transaction Securities in the manner
contemplated by the Underwriting Agreement and in the Canadian
Prospectus.
5) The issue, sale and delivery by the Company of the Underlying Shares is
exempt from the prospectus and registration requirements of the
securities laws of the Qualifying Provinces.
6) The first trade of the Underlying Shares following their issue, sale
and delivery by the Company is not subject to the prospectus
requirements of the securities laws of the Qualifying Provinces
provided that:
(a) in respect of a trade of Underlying Shares to which the
securities laws of the Provinces of Ontario, British Columbia,
Alberta and Manitoba apply (i) the trade
- 58 -
is not a "control distribution" (as such term is used in
Multilateral Instrument 45-102 - Resale of Securities,
hereinafter "MI 45-102"), and (ii) the Company is a "reporting
issuer" (as such term is defined in MI 45-102) at the time of
the trade;
7) to the best of their knowledge, but without independent inquiry, there
is no action or other litigation pending or threatened against the
Company or Borealis which is material to the Offering, other than as
described in the Prospectus;
8) The Company is duly registered or licensed to carry on business under
the laws of British Columbia, except to the extent that the failure to
do so would not have a material adverse effect on the Company or
Borealis taken as a whole.
9) that the summary under the heading "Canadian Federal Income Tax
Considerations" in the Prospectus is a summary of the principal
Canadian federal income tax considerations generally applicable to the
acquisition, holding and disposition of Units by a Unitholder who
acquires Units pursuant to the Prospectus, subject to the
qualifications, assumptions, limitations and understandings set out in
such summary; and
10) such other matters as the Underwriters may reasonably request.
EXHIBIT C
FORM OF OPINION OF DORSEY & WHITNEY LLP
1) No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required
for the execution, delivery and performance of the Underwriting
Agreement or consummation of the transactions contemplated by the
Underwriting Agreement, the Registration Statement and the Final U.S.
Prospectus, except for (1) such as have been made or obtained under the
Securities Act and (2) such as are required by the NASD.
2) The Registration Statement and the Final U.S. Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included or
incorporated by reference therein, as to which no opinion need be
rendered) comply in all material respects with the form of requirements
of the Securities Act, the Exchange Act and the Rules and Regulations.
3) The statements under the captions "United States Federal Income Tax
Consequences to Non-United States Holders" and "Plan of Distribution"
in the Final U.S. Prospectus and Items 24 and 25 of Part II of the
Registration Statement, insofar as such statements constitute a summary
of the legal matters, documents or proceedings referred to therein,
accurately and fairly present the information called for with respect
to such legal matters, documents and proceedings.
4) The Company is not and, after giving effect to the offering and sale of
the Offered Units and Additional Units and the application of the
proceeds thereof as described in the Registration Statement and the
Final U.S. Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
5) The Registration Statement is effective under the Securities Act, and,
to the best of such counsel's knowledge after due inquiry, no stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued and no proceedings
therefor have been initiated or threatened by the Commission and all
filings required by Rule 424(b) and Rule 430A under the Securities Act
have been made.
6) To the best of such counsel's knowledge after due inquiry, no contract
or agreement is required to be filed as an exhibit to the Registration
Statement that is not so filed.
7) Neither the Company nor Borealis has violated any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the
rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
8) Such other matters as the Underwriters may reasonably request.
In addition, such counsel shall also state that that although such counsel
cannot guarantee the accuracy or completeness of the statements contained in the
Registration Statement and the
- 60 -
Prospectuses, on the basis of conferences with officers and other
representatives of the Company, Nevada counsel for the Company, Canadian counsel
for the Company, representatives of the independent accountants for the Company,
Canadian counsel for the Underwriters, United States counsel for the
Underwriters and representatives of the Underwriters at which the contents of
the Registration Statement and the Prospectuses and related matters were
discussed and although such counsel has not independently verified, and (except
as to those matters and to the extent set forth in the opinion in paragraphs
numbered in our accompanying opinion addressed to the Underwriters) is not
passing upon and does not assume any responsibility for, the factual accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectuses, on the basis of such participation, no facts
have come to such counsel's attention which has caused them to believe that (i)
at the time it became effective and as of the time the Underwriting Agreement
was entered into, the Registration Statement (other than (A) the financial
statements and other financial data, (B) the information derived from the
reports of Alan C. Noble, P.E. and Qingping Deng, each a Qualified Person, in
reliance on the authority of such evaluator as an "expert" within the meaning of
the Securities Act, included or incorporated by reference in the Registration
Statement, as to which such counsel expresses no belief, and (C) disclosure
related to title, claim royalty, permitting and environmental matters related to
the Borealis Property, included in the Prospectuses under the headings
"Description and Development of the Business - History and Background of the
Company," "Borealis Property - Borealis Property Description and Location,"
"Borealis Property - Royalty Obligations," "United States Mining Laws," and
"Permitting", as to which such counsel expresses no belief), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; or (ii) as of the
date of the Prospectuses, the Prospectuses (other than (A) the financial
statements and other financial data, (B) the information derived from the
reports of Alan C. Noble, P.E. and Qingping Deng, each a Qualified Person, in
reliance on the authority of such evaluator as an "expert" within the meaning of
the Securities Act, included or incorporated by reference in the Registration
Statement, as to which such counsel expresses no belief, and (C) disclosure
related to title, claim royalty, permitting and environmental matters related to
the Borealis Property, included in the Prospectuses under the headings
["Description and Development of the Business - History and Background of the
Company," "Borealis Property - Borealis Property Description and Location,"
"Borealis Property - Royalty Obligations," "United States Mining Laws," and
"Permitting"], as to which such counsel expresses no belief) included an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
In addition, such counsel shall state that it understands that Parr Waddoups
Brown Gee & Loveless has today delivered its opinion addressed to the
Underwriters regarding disclosure related to title, claim royalty, permitting
and environmental matters related to the Borealis Property, included in the
Prospectuses under the headings "Description and Development of the Business -
History and Background of the Company," "Borealis Property - Borealis Property
Description and Location," "Borealis Property - Royalty Obligations," "United
States Mining Laws," and "Permitting".
EXHIBIT D
FORM OF OPINION OF PARR WADDOUPS BROWN GEE & LOVELESS
Such opinion shall state that although such counsel cannot guarantee
the accuracy or completeness of the statements contained in the Registration
Statement and the Prospectuses, on the basis of conferences with officers and
other representatives of the Company, Canadian counsel for the Company,
representatives of the independent accountants for the Company, Canadian counsel
for the Underwriters, United States counsel for the Underwriters and
representatives of the Underwriters at which the contents of the Registration
Statement and the Prospectuses and related matters were discussed and although
such counsel has not independently verified, and is not passing upon and does
not assume any responsibility for, the factual accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectuses, on the basis of such participation, no facts are known to such
counsel that have caused them to believe that, at the time the Registration
Statement and Prospectuses became effective and as of the time the Underwriting
Agreement was entered into, the disclosure included in the Registration
Statement and the Prospectuses related to title, claim royalty, permitting and
environmental matters related to the Borealis Property, included in the
Prospectuses under the headings "Description and Development of the Business -
History and Background of the Company," "Borealis Property - Borealis Property
Description and Location," "Borealis Property - Royalty Obligations," "United
States Mining Laws," and "Permitting" contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. WHENEVER THIS OPINION REFERS TO MATTERS
WITHIN OUR "KNOWLEDGE", MATTERS WITHIN OUR "ACTUAL KNOWLEDGE", MATTERS "KNOWN"
TO US, OR WORDS OF SIMILAR IMPORT, SUCH REFERENCE IS LIMITED TO FACTS WITHIN THE
ACTUAL KNOWLEDGE OF ATTORNEYS OF THIS FIRM WHO HAVE PROVIDED LEGAL SERVICES TO
THE COMPANY IN CONNECTION WITH THE REGISTRATION STATEMENT AND PROSPECTUSES. WE
HAVE MADE NO OTHER INQUIRY OR INVESTIGATION AS TO FACTUAL MATTERS, AND NO
INFERENCE AS TO OUR KNOWLEDGE THEREOF SHALL BE DRAWN FROM THE FACT OF OUR
REPRESENTATION OF ANY PARTY OR OTHERWISE.
- 62 -
EXHIBIT E
FORM OF OPINION OF SNELL & WILMER LLP
1. Each of the Company and Borealis is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
2. The Company has the full corporate power and corporate authority
to:
(i) own and operate its properties and assets, as described in the
Registration Statement and the Prospectuses; and
(ii) carry out its business as such business is currently being
conducted, as described in the Registration Statement and the Prospectuses.
3. Each of the Company and Borealis is duly licensed or qualified to do
business and is in good standing as a foreign corporation in all U.S.
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such license or
qualification necessary, except where the failure to be licensed or qualified
would not have a material and adverse effect on the business, properties,
condition (financial or otherwise) or results of operations of the Company and
Borealis taken as a whole
4. The authorized and outstanding capital stock of the Company is as
set forth under the Registration Statement and the Prospectuses in the column
entitled "Actual as at , 2005" under the caption "Consolidated
Capitalization" except for issuances after , 2005, if any, pursuant to the
Underwriting Agreement or pursuant to reservations, agreements, employee benefit
plans or the exercise of convertible securities, options or warrants, referred
to in the Prospectuses. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully-paid and
non-assessable.
5. The shares of Common Stock comprising the Offered Units and the
Additional Units have been duly and validly authorized to be issued as
fully-paid and non-assessable shares of Common Stock upon receipt by the Company
of full payment thereof in accordance with the terms of the Underwriting
Agreement.
6. The Warrants, the Additional Warrants and the Underwriters' Option
have been duly created and validly authorized, and the shares of Common Stock to
be issued pursuant to the exercise in whole or in part thereof have been duly
and validly authorized and reserved for issuance as fully-paid and
non-assessable shares of Common Stock upon receipt by the Company of full
payment thereof in accordance with the terms of the Underwriting Agreement.
7. None of the Offered Units, the Additional Units, the Underwriters'
Option, or the Common Stock, Warrants or Additional Warrants comprising the
Offered Units, the Additional Units or the Underwriters' Option have been
created or will be issued in violation of, or subject to any preemptive rights,
under the Company's Articles of Incorporation or amendments thereto, Bylaws or
amendments thereto, or under Nevada corporate law, or agreements described in
the Registration Statement or the Prospectuses or, to our knowledge, will the
issuance thereof create
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similar rights that entitle, or will entitle, any person to acquire Offered
Units, Additional Units or shares of Common Stock from the Company.
8. All outstanding shares of capital stock of Borealis are owned by the
Company and have been duly authorized and validly issued, and are fully-paid and
non-assessable and free and clear of any claims, liens, charges or encumbrances,
except as created by documents , set out in a schedule to be attached
to this opinion.
9. The Common Stock, the Offered Units, the Additional Units, the
Warrants, the Additional Warrants and the underlying shares of Common Stock to
be issued upon the exercise of the Warrants and Additional Warrants, materially
conform to the descriptions thereof contained in the Registration Statement and
the Prospectuses.
10. The Company has full corporate power and corporate authority to
execute and deliver the Registration Statement, the Prospectuses, the
Underwriting Agreement, the Offered Units, the Additional Units and the
Underwriters' Option and to perform its obligations under the Registration
Statement, the Prospectuses, the Underwriting Agreement and under the Offered
Units, the Additional Units and the Underwriters' Option.
11. Each of the Underwriting Agreement, the Warrant Indenture, the
Warrants and the Underwriters' Option has been duly authorized, executed and
delivered by Company.
12. The execution and delivery of the Underwriting Agreement, the
Warrant Indenture and the Underwriters' Option by the Company, the compliance by
the Company with all of the terms thereof to be complied with by it and the
consummation of the transactions contemplated by the Underwriting Agreement by
the Company do not contravene any provision of applicable United States Federal
law, Nevada law or the Articles of Incorporation or Bylaws of the Company or
Borealis, and to our knowledge, will not result in the creation or imposition of
any lien, charge or encumbrance upon any of the assets of the Company or
Borealis pursuant to the terms and provisions of, result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any party a right to terminate any of its obligations under, or result
in the acceleration of any obligation under, any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note agreement
or other evidence of indebtedness, lease, contract or other agreement or
instrument to be listed on a schedule to be attached to this opinion, or affect,
or violate or conflict with (i) any judgment, ruling, decree or order of which
we have knowledge or (ii) any United States Federal law, Nevada statute, rule or
regulation of any court or other governmental agency or body, applicable to the
business or properties of the Company or Borealis, which breach, violation, or
conflict would have a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations of the Company and
Borealis taken as a whole.
13. No consent, approval, authorization, registration, qualification,
license, permit or order of, or any filing or declaration with, any court,
regulatory or governmental agency or body is required to be obtained or made by
the Company or Borealis for the consummation by the Company or Borealis of the
transactions on either of their parts contemplated under the Underwriting
Agreement, the Registration Statement and the Prospectuses, except such as have
been obtained or made under the Securities Act or the Rules and Regulations
thereunder and such as may be required under foreign or
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state securities or Blue Sky laws, as to which foreign or state securities or
Blue Sky laws we do not render any opinion, or the bylaws or rules of the
National Association of Securities Dealers (the "NASD").
14. The statements under the caption "Description of Securities" in the
Prospectuses and Items 24 and 25 of Part II of the Registration Statement,
insofar as such statements constitute a summary of the legal matters, documents
or proceedings referred to therein, accurately and fairly present in all
material respects the information called for with respect to such legal matters,
documents and proceedings.
15. The specimen certificate evidencing the Company's Common Stock
filed or incorporated by reference as an exhibit to the Registration Statement
has been duly authorized by the Company and is in due and proper form under
Nevada law.
16. To our knowledge, there is no legal or governmental proceeding
pending or threatened to which the Company or Borealis is a party or to which
any of their respective properties is subject that is required to be described
in the Prospectuses but is not so described, other than any such proceeding in
which a determination adverse to the Company or Borealis would not, individually
or in the aggregate, have a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations of the Company and
Borealis taken as a whole.
17. Computershare Trust Company Inc., at its principal offices in the
city of Toronto, Ontario and Golden, Colorado has been duly appointed as the
registrar and transfer agent for the Common Stock and the Warrants.
18. Such other matters as the Underwriters may reasonably request.