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UNDERWRITING AGREEMENT
April 15, 1996
Granges Inc.
Suite 3000
370 17th Street
Denver, Colorado
80202
Dear Sirs:
We, ScotiaMcLeod Inc. ("SMI"), First Marathon Securities Limited,
Yorkton Securities Inc. and Goepel Shields & Partners Inc. (collectively, the
"Underwriters"), understand that Granges Inc. (the "Company") proposes to
create, issue and sell a total of up to 9,700,000 special warrants (the
"Special Warrants") of the Company having the attributes and characteristics
specified herein.
Upon and subject to the terms and conditions set forth herein, the
Underwriters hereby severally offer to purchase from the Company, as more
particularly described in paragraph 11.1 hereof, and by its acceptance hereof
the Company hereby agrees to issue and sell to the Underwriters, 7,690,000 of
the Special Warrants (the "Initial Special Warrants") at a price of $2.60 per
Special Warrant for an aggregate purchase price of $19,994,000. By its
acceptance hereof, the Company also hereby grants to the Underwriters an
irrevocable option (the "Option"), exercisable in whole or in part by notice
given by SMI (on behalf of the Underwriters) to the Company in the manner
provided for in paragraph 11.2 hereof at any time prior to the Closing Date (as
defined below), to purchase from the Company up to an additional 2,010,000 of
the Special Warrants (the "Additional Special Warrants") at the same price as,
and upon and subject to the same terms and conditions as relate to the purchase
of, the Initial Special Warrants, provided that the Option will not be
exercisable unless the Company has obtained the consents referred to in
subparagraph 8.1(a) hereof. In this offer, the "Special Warrants" means the
Initial Special Warrants and any Additional Special Warrants in respect of
which the Option is exercised.
The Company agrees that the Underwriters will be permitted to appoint
other registered dealers (or other dealers duly qualified in their respective
jurisdictions) as their agents to assist in the private placement contemplated
hereby and that the Underwriters may determine the remuneration payable, from
the commission payable to the Underwriters hereunder, to such other dealers
appointed by them.
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In consideration of the Underwriters' agreement to purchase the
Special Warrants and the Underwriters' services in effecting the distribution
of the Special Warrants on a private placement basis, the Company agrees to pay
to the Underwriters, at the time and in the manner specified in paragraph 6.3
hereof, a fee (the "Commission") out of the general funds of the Company equal
to 5% of the aggregate purchase price received on the issue and sale of the
Special Warrants.
This offer and all of the Underwriters' obligations hereunder are
subject to the additional terms and conditions set forth below.
1. DEFINITIONS
In this Agreement, unless the context otherwise requires:
(a) "business day" means a day which is not a Saturday, a Sunday or a
statutory holiday in the Provinces of British Columbia or Ontario;
(b) "Closing" means the completion of the issue and sale by the Company
and the purchase by the Purchasers of the Special Warrants pursuant to
this Agreement;
(c) "Closing Date" means April 25, 1996 or such other date as the Company
and the Underwriters may agree;
(d) "Closing Time" means 7:30 a.m. (Vancouver time) on the Closing Date or
such other time on the Closing Date as the Company and the
Underwriters may agree;
(e) "Common Shares" means common shares without par value in the capital
of the Company as constituted on the date hereof;
(f) "Company's Auditors" means Coopers & Lybrand;
(g) "Company's Counsel" means Ladner Downs;
(h) "Exemptions" has the meaning attributed thereto in paragraph 3.1
hereof;
(i) "Expiry Time" means 4:30 p.m. (Vancouver time) on the fifth business
day after the earlier of (i) Qualification Date and (ii) the
Qualification Deadline;
(j) "Final Prospectus" means a final prospectus or final short form
prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(k) "Form 10-K" means the annual report on Form 10-K of the Company dated
March 28, 1996 excluding the exhibits thereto;
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(l) "Form 20A" means Form 20A(IP) under the Securities Act (British
Columbia);
(m) "material change", "material fact" and "misrepresentation" have the
respective meanings attributed thereto in any of the Securities Laws;
(n) "Material Subsidiaries" means Hycroft Resources & Development, Inc.,
Hycroft Lewis Mine, Inc. and Zamora Gold Corp.;
(o) "offering memorandum" means an offering memorandum as such term is
defined in subsection 32(1) of the Regulation to the Securities Act
(Ontario) or in other applicable securities legislation;
(p) "Preliminary Prospectus" means a preliminary prospectus or preliminary
short form prospectus of the Company relating to the distribution of
the Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(q) "Prospectuses" means the Preliminary Prospectus and the Final
Prospectus;
(r) "Purchasers" has the meaning attributed thereto in paragraph 3.1
hereof;
(s) "Qualification Date" means the day on which a receipt is issued for
the Final Prospectus by the last of the Securities Commissions to
issue a receipt for the Final Prospectus;
(t) "Qualification Deadline" means the day that is 90 days after the
Closing Date or such later date as the Underwriters may determine in a
written notice given to the Company and the Trustee provided that the
Underwriters have obtained the written consent thereto of each of the
Purchasers who purchased Special Warrants at the Closing and have not
resold their Special Warrants;
(u) "Qualifying Jurisdictions" means the Provinces of British Columbia and
Ontario and such other provinces of Canada which are designated by the
Underwriters by written notice given to the Company not less than two
business days prior to the Closing Date;
(v) "Questionnaire and Undertaking" means a private placement
questionnaire and undertaking in the form required by the TSE;
(w) "Securities Commissions" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
(x) "Securities Laws" means, collectively, the applicable securities laws
of each of the Qualifying Jurisdictions and the respective rules and
regulations made and forms prescribed thereunder together with all
applicable published policy statements, notices,
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blanket orders and rulings of the Securities Commissions (including
national policy statements of the Canadian Securities Administrators);
(y) "Special Warrant Indenture" has the meaning attributed thereto in
paragraph 2.1 hereof;
(z) "Stock Exchanges" means the TSE and the American Stock Exchange;
(aa) "Subscription Agreement" means, with respect to each Purchaser who is
not a U.S. Person, a subscription agreement substantially in the form
attached as Schedule D hereto or, with respect to each Purchaser who
is a U.S. Person, a purchase agreement substantially in the form
attached as Schedule E hereto;
(ab) "subsidiary" has the meaning attributed thereto in the Securities Act
(British Columbia) and, in the case of the Company, includes Zamora
Gold Corp.;
(ac) "Supplementary Material" has the meaning attributed thereto in
paragraph 8.1(f) hereof;
(ad) "Term Sheet" means the term sheet attached as Schedule C hereto;
(ae) "this Agreement" means the agreement formed by the acceptance by the
Company of the offer made by the Underwriters in this letter;
(af) "Trustee" means Montreal Trust Company of Canada, or such other
nationally recognized Canadian trust company which is acceptable to
the Underwriters, as trustee under the Special Warrant Indenture or
the Warrant Indenture, as the case may be;
(ag) "TSE" means The Toronto Stock Exchange;
(ah) "Underlying Securities" means the Common Shares and Warrants from time
to time issuable upon the exercise or deemed exercise of the Special
Warrants;
(ai) "Underwriters' Counsel" means McCarthy Tetrault;
(aj) "U.S. Person" has the meaning attributed thereto in Schedule A hereto;
(ak) "Warrants" means the common share purchase warrants of the Company
having the attributes and characteristics specified in paragraph 2.4
hereof;
(al) "Warrant Indenture" has the meaning attributed thereto in paragraph
2.4 hereof; and
(am) "Warrant Shares" means the Common Shares from time to time issuable
upon the exercise of the Warrants.
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2. TERMS OF SPECIAL WARRANTS AND WARRANTS
2.1 The Special Warrants shall be issued under and governed by a special
warrant indenture (the "Special Warrant Indenture") to be dated as of the
Closing Date and made between the Company and the Trustee as trustee
thereunder.
2.2 The Special Warrant Indenture shall contain covenants of the Company
substantially to the effect that:
(a) the Company will, as expeditiously as reasonably practicable, prepare
and file, under the applicable Securities Laws, the Preliminary
Prospectus and other related documents and obtain receipts for the
Preliminary Prospectus from the Securities Commissions;
(b) the Company will use its reasonable best efforts to resolve as
expeditiously as reasonably practicable any comments with respect to
the Preliminary Prospectus made by any of the Securities Commissions;
(c) the Company will, as expeditiously as reasonably practicable after any
comments referred to in subparagraph (b) above are resolved, prepare
and file, under the applicable Securities Laws, the Final Prospectus
and other related documents and will use its reasonable best efforts
to obtain, as expeditiously as reasonably practicable thereafter,
receipts for the Final Prospectus from the Securities Commissions and
will take all other steps and proceedings that may be necessary in
order to qualify, under the applicable Securities Laws, the Underlying
Securities for distribution in each of the Qualifying Jurisdictions
through investment dealers and brokers registered as required under,
and who comply with the relevant provisions of, the applicable
Securities Laws; and
(d) the Company will use its reasonable best efforts to ensure that the
Qualification Date occurs on or before the Qualification Deadline,
provided that if the Qualification Date has not occurred on or before
the Qualification Deadline, the Company will use its reasonable best
efforts to cause the Qualification Date to occur prior to the Expiry
Time.
2.3 The Special Warrant Indenture shall contain provisions substantially
to the effect that:
(a) each Special Warrant will entitle the holder thereof, upon the
exercise or deemed exercise thereof and without payment of any
additional consideration, to be issued one Common Share and one-half
of one Warrant, subject to adjustment as provided in the Special
Warrant Indenture;
(b) each holder of Special Warrants will be entitled to exercise his
Special Warrants during the period commencing on the Closing Date and
ending at the Expiry Time;
(c) if the Qualification Date has not occurred on or before the
Qualification Deadline, each holder of Special Warrants will be
entitled, during the period commencing on the first business day after
the Qualification Deadline and ending at the Expiry Time, to surrender
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his Special Warrants to the Trustee for cancellation and receive
repayment of the original issue price of $2.60 per Special Warrant
plus such holder's proportionate share of the interest earned by the
Trustee on the funds deposited in escrow referred to in paragraph 6.4
below from the Closing Date to and including the day immediately
preceding the date of payment;
(d) any Special Warrant not exercised (unless surrendered as provided in
subparagraph (c) above) prior to the Expiry Time will be deemed to
have been exercised immediately prior to the Expiry Time (without any
further action on the part of the holder thereof or the Company)
whether or not the Qualification Date has occurred and subject to
applicable securities laws; and
(e) upon the occurrence of the Qualification Date or if the Qualification
Date has not occurred on or before the Qualification Deadline, the
Company will, in either case, forthwith, and in any event not later
than the second business day thereafter, give written notice thereof
to the Trustee and the Trustee will forthwith give written notice
thereof to the holders of Special Warrants.
2.4 The Warrants shall be issued under and governed by a warrant indenture
(the "Warrant Indenture") to be dated as of the Closing Date and made between
the Company and the Trustee as trustee thereunder. The Warrant Indenture shall
contain provisions substantially to the effect that each Warrant will entitle
the holder thereof, during the period commencing on the date of its issue and
ending at 4:30 p.m. (Vancouver time) on October 31, 1997, to purchase one
Common Share from the Company at a price of $3.00, subject to adjustment as
provided in the Warrant Indenture.
2.5 The provisions of the Special Warrant Indenture and the Warrant
Indenture and the attributes and characteristics of the Special Warrants and
the Warrants respectively provided for therein shall be substantially as
described herein, with such changes thereto as the Underwriters and the Company
may agree to, and otherwise the Special Warrant Indenture and the Warrant
Indenture shall be in such form and contain such terms and provisions
(including customary anti-dilution provisions) as are satisfactory to the
Company and the Underwriters, acting reasonably.
3. NATURE OF TRANSACTION
3.1 The Company understands that although this offer is presented by the
Underwriters as purchasers, the Underwriters will endeavour prior to the
Closing to arrange for substituted purchasers of the Special Warrants or to
resell the Special Warrants, as principals directly or through their United
States broker-dealer private placement agents, to ultimate purchasers. The
Underwriters covenant and agree with the Company that the sale of the Special
Warrants to such purchasers will be effected in a manner exempt from any
prospectus or offering memorandum filing or delivery requirements of all
securities laws and policies applicable in the various jurisdictions in which
the Special Warrants are offered for sale and sold, without the necessity of
obtaining any order or ruling of any securities regulatory authority.
Accordingly, the Underwriters covenant and agree that each such substituted
purchaser shall purchase Special
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Warrants from the Company and each such ultimate purchaser shall purchase
Special Warrants from the Underwriters directly or through their United States
broker-dealer private placement agents, in each case, insofar as the laws of
the Province of British Columbia are concerned, under prospectus filing
exemptions contained in paragraphs 55(2)(1), (3) or (4) of the Securities Act
(British Columbia) and, insofar as the laws of other provinces of Canada are
concerned, under similar exemptions, if available, provided for in the
applicable securities legislation of such provinces (the "Exemptions"). The
Underwriters will notify the Company with respect to the identity and
jurisdiction of residence of each such purchaser as soon as practicable (and in
any event not later than the second business day prior to the Closing Date) and
with a view to affording sufficient time to allow the Company to secure
compliance with all applicable regulatory requirements of the provinces of
Canada in connection with the sale of the Special Warrants to such purchasers
under the Exemptions. Unless the context otherwise requires, any reference
herein to the "Purchasers" shall be taken to be a reference to the Underwriters
and to any such substituted and ultimate purchasers, provided that nothing in
this paragraph 3.1 shall affect the obligations of the Underwriters, subject to
the terms and conditions hereof, to purchase all of the Special Warrants not
purchased at the Closing by a substituted purchaser or ultimate purchaser.
3.2 The Company shall at its expense comply with all applicable regulatory
requirements (other than any requirement to prepare and file or deliver an
offering memorandum) of the Provinces of British Columbia and Ontario (and of
such other provinces of Canada in which any of the Purchasers are resident as
identified by the Underwriters to the Company not later than the second
business day prior to the Closing Date) in connection with the sale of the
Special Warrants to the Purchasers under the Exemptions, including the filing
of any required reports (without, if and to the extent permitted, the
disclosure therein of the names and addresses of the Purchasers) and the
payment of applicable fees relating thereto, and, notwithstanding paragraph 3.1
hereof, the Company shall use its reasonable best efforts to also comply with
the regulatory requirements (other than any requirement to prepare and file or
deliver an offering memorandum) of any provinces of Canada (in addition to
British Columbia and Ontario (and any provinces so identified by the
Underwriters)) applicable to the sale of the Special Warrants to the Purchasers
under the Exemptions.
3.3 The Underwriters shall conduct their activities (and shall require any
agent appointed as contemplated on page 1 hereof to agree with the
Underwriters, for the benefit of the Company, to conduct its activities) in
connection with the distribution of the Special Warrants in compliance with all
applicable laws and regulatory requirements and, without limiting the
foregoing, the Underwriters, severally and not jointly, represent and agree
(and shall require any such agent to agree with the Underwriters for the
benefit of the Company) that:
(a) all solicitation, offering and other selling efforts carried out by
the Underwriters in connection with the distribution of the Special
Warrants have been and will be made, and all purchases of Special
Warrants will be made, in accordance with the provisions of the
Exemptions in a manner such that no prospectus, registration statement
or offering memorandum need be prepared and filed or delivered by the
Company in connection therewith;
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(b) no advertising of the Special Warrants has been or will be made by the
Underwriters in any media whatsoever (except as may be permitted by
subsection 134(3) of the Rules of the British Columbia Securities
Commission and other than by way of "tombstone" announcement appearing
as a matter of record only after the Closing);
(c) no delivery has been or will be made by the Underwriters to any
prospective purchaser or Purchaser of any document which, individually
or together with any other document, would constitute an offering
memorandum; and
(d) no solicitation, offering or other selling efforts with respect to the
distribution of the Special Warrants have been or will be made, except
as set forth in Schedule A hereto, by the Underwriters or their United
States broker-dealer private placement agents in the United States or
to any U.S. Person and all sales of the Special Warrants in the United
States or to any U.S. Person will be made in accordance with the
provisions of Schedule A;
provided that, for greater certainty, the Company acknowledges that the Term
Sheet, the Form 10-K, copies of annual reports, quarterly reports, information
circulars, material change reports and news releases issued by the Company and
generally available research reports, memoranda and other materials concerning
the Company prepared by others do not, individually or collectively, constitute
an offering memorandum.
3.4 The Underwriters shall obtain from each Purchaser a properly completed
and duly executed Subscription Agreement and Questionnaire and Undertaking and
(if such Purchaser is an individual) Form 20A in accordance with the provisions
of this Agreement. In order to facilitate organization for the Closing, the
Underwriters will use their reasonable best efforts to provide copies of such
documents to the Company's Counsel not less than 24 hours prior to the Closing
Time, provided that no provision of such documents shall constitute a delivery
thereof for purposes of paragraph 6.2 hereof.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
4.1 The Company represents and warrants to the Underwriters and the
Purchasers, and acknowledges that the Purchasers will be relying upon such
representations and warranties in purchasing the Special Warrants, that:
(a) the Company and each of the Material Subsidiaries has been duly
incorporated or amalgamated and organized and is validly existing and
in good standing under the laws of its jurisdiction of incorporation,
is duly qualified to carry on its business as it is presently carried
on and is duly qualified and authorized to carry on business and is in
good standing as a foreign corporation in each jurisdiction in which
the character of its properties or the nature of its business makes
such qualification or authorization necessary and has all requisite
power and authority to carry on its business as it is now carried and
to own, lease and operate its properties and assets, and, in the case
of the Company, to execute and deliver this Agreement, the
Subscription Agreements, the
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Special Warrant Indenture and the Warrant Indenture, to consummate the
transactions contemplated hereby and thereby and to duly observe and
perform all of its covenants and obligations herein and therein set
forth;
(b) to the best of the knowledge of the Company, the Company and each of
the Material Subsidiaries has conducted and is conducting its business
in compliance in all material respects with all applicable licensing,
resource mining and extraction and environmental protection
legislation, rules, regulations and bylaws and other similar
legislation and all other laws, rules, regulations and other lawful
requirements of any governmental or regulatory bodies which are
applicable to the Company and the Material Subsidiaries, and the
Company is not aware of any legislation, regulation, rule or lawful
requirements presently in force or proposed to be brought into force
which the Company anticipates the Company or any of the Material
Subsidiaries will be unable to comply with without materially
adversely affecting the financial condition, results of operations,
business or prospects of the Company and its subsidiaries, taken as a
whole;
(c) the Company and the Material Subsidiaries hold the direct and indirect
interests in the mineral resource properties and the rights to revenue
generated therefrom as described in the Form 10-K, such interests are
held upon the terms and conditions and are subject to the security
interests referred to in the Form 10-K, and, to the best of the
knowledge of the Company, such mineral resource properties are being
maintained, explored, developed and operated in all material respects
in accordance with all applicable legislation, rules, regulations,
bylaws and other lawful requirements and contractual requirements, and
there are no royalty or similar payments to be made in connection with
such mineral resources properties other than such payments as are
described in the Form 10-K;
(d) the Company has no subsidiaries which are carrying on active business
or which hold material assets or have any material liabilities other
than the Material Subsidiaries, the Company legally and beneficially
owns, directly or indirectly, the issued and outstanding shares in the
capital of each of the Material Subsidiaries in each case as described
in the Form 10- K, subject to no security interests except as
described in the Form 10-K, all of such shares have been duly
authorized and validly issued and are outstanding as fully paid and
non-assessable shares and no person has any right, agreement or
option, present or future, contingent or absolute, or any right
capable of becoming a right, agreement or option, for the purchase
from the Company or any of the Material Subsidiaries of any interest
in any of such shares or for the issue or allotment of any unissued
shares in the capital of any Material Subsidiary or any other security
convertible into or exchangeable or exercisable for any such shares;
(e) the Company is a reporting issuer for the purposes of and is not in
default of any of the requirements relating thereto under the
securities legislation of the Provinces of British Columbia and
Ontario;
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(f) the Form 10-K and any material change reports and press releases of
the Company issued since March 28, 1996, at their respective dates,
were true, correct and accurate in all material respects, contained no
misrepresentation and were prepared in accordance with and complied
with all securities laws, regulations, rules and policy statements
applicable thereto;
(g) the audited consolidated balance sheets of the Company as at December
31, 1995 and 1994 and the audited statements of earnings, retained
earnings (deficit) and changes in cash resources of the Company for
each of the years in the three year period ended December 31, 1995,
including the notes and any schedules thereto, all as set forth in the
Form 10-K, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
covered thereby (after giving retroactive effect to any accounting
changes described in the notes thereto) and accurately and fairly
present the assets, liabilities (contingent or otherwise) and
financial condition and position and the revenue, earnings, results of
operations and changes in financial position of the Company as at such
dates and during the periods covered thereby;
(h) the authorized capital of the Company consists of 750,000,000 Common
Shares, of which 46,181,661 are issued and outstanding on the date
hereof as fully paid and non-assessable shares, and 750,000,000
preferred shares without par value, none of which are issued or
outstanding on the date hereof, and such Common Shares are listed and
posted for trading on the Stock Exchanges, and, except with respect to
options currently outstanding to directors and employees of the
Company to purchase up to 1,177,500 Common Shares from the Company on
the terms set forth in the Form 10-K and up to 2,047,938 Common Shares
which may be issued by the Company to L.B. Mining Company in
connection with the acquisition by the Company of the Guariche
property in Venezuela pursuant to an agreement (the "Option
Agreement") to be entered into between the Company and L.B. Mining
Company, plus that number of Common Shares which is equal to the
quotient of US $5,000,000 divided by the closing price of the Common
Shares on the TSE on the date of the Option Agreement which thereafter
may be issued to L.B. Mining Company under the terms of such
acquisition, no person has any right, agreement or option, present or
future, contingent or absolute, or any right capable of becoming a
right, agreement or option, for the issue or allotment of any unissued
shares in the capital of the Company or any other security convertible
into or exchangeable or exercisable for any such shares or to require
the Company to purchase, redeem or otherwise acquire any of the issued
and outstanding Common Shares;
(i) neither the Company nor any of its subsidiaries is in breach or
violation of or default under (and no event has occurred and is
continuing which with the giving of notice or lapse of time or both
would constitute an event of default under), and neither the execution
and delivery by the Company of this Agreement, the Subscription
Agreements, the Special Warrant Indenture or the Warrant Indenture,
nor the consummation of the transactions contemplated hereby or
thereby nor the due observance and performance by the Company of any
of its covenants or obligations contained herein or therein conflicts
or will conflict with, results or will result in a breach or violation
of, or constitutes or
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will constitute a default (or any event which with the giving of
notice or lapse of time or both would constitute an event of default)
under, any of the terms or provisions of the constating documents of
the Company or any of its subsidiaries or of any resolutions of the
directors or shareholders of the Company or any of its subsidiaries,
or of any of the terms or provisions of any agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of
their respective properties or assets are subject or of any judgment,
decree, order, law, rule or regulation by which the Company or any of
its subsidiaries is bound or to which any of their respective
properties or assets are subject, the effect of any of which breaches,
violations, conflicts or defaults, singularly or in the aggregate,
might materially adversely affect the financial condition, results of
operations, business or prospects of the Company and its subsidiaries,
taken as a whole, or would impair the ability of the Company to
consummate the transactions contemplated hereby or to duly observe and
perform any of its covenants or obligations contained herein or in the
Subscription Agreements, the Special Warrant Indenture or the Warrant
Indenture;
(j) no litigation, administrative proceeding, arbitration or other
proceeding before or of any court, tribunal, arbitrator or regulatory
or other governmental body or dispute with any regulatory or other
governmental body is presently in process, pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries, which, if determined adversely to the Company or any
such subsidiary, might have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company
and its subsidiaries, taken as a whole, or which would impair the
ability of the Company to consummate the transactions contemplated
hereby or to duly observe and perform any of its covenants or
obligations contained herein or in the Subscription Agreements, the
Special Warrant Indenture or the Warrant Indenture;
(k) there has not occurred any adverse material change and there exists no
adverse material fact, financial or otherwise, in the assets
(including information or data relating to the estimated or book value
of assets), liabilities (contingent or otherwise), business, affairs,
ownership, management, operations, financial condition, capital or
prospects of the Company and its subsidiaries, taken as a whole, since
December 31, 1995 which has not been generally disclosed by way of
appropriate filings (on a non-confidential basis) with applicable
securities regulatory authorities; and
(l) since December 31, 1995, except as described in the Form 10-K or as
has been generally disclosed by way of appropriate filings (on a
non-confidential basis) with applicable securities regulatory
authorities:
(i) there has not been any material change in the assets,
liabilities (contingent or otherwise), business, operations,
financial condition or prospects of the Company and its
subsidiaries, taken as a whole;
(ii) there has not been any material change in the capital or
indebtedness of the Company or of any of the Material
Subsidiaries and neither the Company nor any
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of the Material Subsidiaries has received or been informed that
it will receive any demand for repayment of any such
indebtedness;
(iii) there has not been any adverse material change in the
financial position of the Company and its subsidiaries on a
consolidated basis, and there has not been and there is
currently not contemplated any material revaluation of any
assets or any write down or write up (except in the ordinary
course of business and consistent with past practice) of the
value of any inventory of the Company or of any of the
Material Subsidiaries or any cancellation of any debt or
waiver or release of any rights or claims owed to or held by
the Company or any of the Material Subsidiaries (except for
cancellations, waivers and releases in the ordinary course of
business which in the aggregate are not material) or any
material increase in the age of outstanding accounts
receivable, the allowance for doubtful accounts or the bad
debt losses of the Company or of any of the Material
Subsidiaries;
(iv) there has not been any termination or amendment of, or any
failure in any material respect to perform any obligations
under, any material contract, lease or agreement to which the
Company or any of the Material Subsidiaries is a party or by
which the Company or any of the Material Subsidiaries is
bound; and
(v) the Company and each of the Material Subsidiaries has carried
on its business and operated and maintained its assets in the
ordinary course of business and consistent with past practice,
has not entered into and does not currently contemplate
entering into any material transaction not in the ordinary
course of business and has not made any material capital
expenditures or commitments for material capital expenditures.
5. CONDITIONS TO PURCHASE OBLIGATIONS
5.1 The following are conditions to the obligations of the Underwriters
and the Purchasers to complete the transactions contemplated hereby, which
conditions the Company covenants to satisfy or fulfil at or prior to the
Closing Time and which conditions may be waived in writing in whole or in part
by the Underwriters on behalf of the Purchasers:
(a) all actions required to be taken by or on behalf of the Company,
including the passing of all requisite resolutions of directors of the
Company, shall have been taken so as to validly create, issue and sell
the Special Warrants, the Underlying Securities and the Warrant
Shares;
(b) the Company shall have made all necessary filings and obtained all
necessary approvals, consents and acceptances of appropriate
regulatory authorities (including the Stock Exchanges) required to be
made or obtained prior to the Closing Time in order to permit the
Company to issue and sell the Special Warrants to the Purchasers as
contemplated hereby, subject only to such conditions as may be
required by the Stock Exchanges and are satisfactory to the
Underwriters;
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13
(c) the Common Shares issuable upon exercise of the Special Warrants and
the Warrants shall have been conditionally accepted for listing on the
TSE, subject to the filing of usual documentation and payment of fees;
(d) the Special Warrant Indenture and the Warrant Indenture shall each
have been entered into by and be in effect between the Company and the
Trustee;
(e) the Company shall have duly accepted, unless it would be unlawful to
do so, each Subscription Agreement submitted to it by the Underwriters
in accordance with this Agreement;
(f) the Company shall have caused a favourable legal opinion, addressed to
the Underwriters, the Purchasers and the Underwriters' Counsel and
dated the Closing Date, and in form and content reasonably acceptable
to the Underwriters and the Underwriters' Counsel, to be delivered to
the Underwriters by the Company's Counsel with respect to such matters
as the Underwriters may reasonably request, including, without
limiting the generality of the foregoing, the matters set forth in
Schedule B hereto;
(g) the Underwriters shall have received a favourable legal opinion,
addressed to the Underwriters and the Purchasers and dated the Closing
Date, from the Underwriters' Counsel with respect to such matters as
the Underwriters may reasonably request, including, without limiting
the generality of the foregoing, the matters set forth in Schedule B
hereto (except clauses 12 and 18 thereof);
(h) if the Underwriters provide a certificate in the form of Exhibit I to
Schedule A hereto, the Company shall have caused a favourable legal
opinion, addressed to the Underwriters and dated the Closing Date, and
in form and content reasonably acceptable to the Underwriters and the
Underwriters' Counsel, to be delivered to the Underwriters by the
Company's United States counsel with respect to such matters of United
States federal securities laws as the Underwriters may reasonably
request;
(i) the Company shall have delivered to the Underwriters a certificate
signed on behalf of the Company by the President and Chief Executive
Officer and the Vice President Finance and Chief Financial Officer of
the Company, or by such other officers of the Company as are
acceptable to the Underwriters, addressed to the Underwriters and the
Purchasers and dated the Closing Date, and in a form reasonably
satisfactory to the Underwriters and the Underwriters' Counsel,
certifying that, to the best of the knowledge, information and belief
of such officers, having made due inquiry:
(i) no order ceasing or suspending trading in any securities of
the Company or prohibiting the sale of the Special Warrants or
the issuance of the Underlying Securities is in effect (except
for any such order based upon the activities or alleged
activities of the Underwriters and not of the Company) and, to
the knowledge of such officers, no proceedings for such
purpose are pending or threatened;
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14
(ii) the representations and warranties of the Company contained in
paragraph 4.1 hereof are true, correct and accurate in all
material respects and contain no misrepresentation as of the
Closing Time as if such representations and warranties had
been made at and as of the Closing Time;
(iii) the Company has in all material respects complied with all of
the covenants and satisfied all of the terms and conditions of
this Agreement on its part to be complied with or satisfied at
or prior to the Closing Time; and
(iv) the Company is a reporting issuer for the purposes of the
securities legislation of the Provinces of British Columbia
and Ontario and there is no material change in the affairs of
the Company which presently requires disclosure under
subsection 67(1) of the Securities Act (British Columbia) and
no such disclosure has been made on a confidential basis; and
(j) the representations and warranties of the Company contained in
paragraph 4.1 hereof, and the statements in any officer's certificate
of the Company delivered pursuant hereto or in connection herewith,
shall be, and the Underwriters shall be reasonably satisfied (based on
their due diligence investigations and examinations) that such
representations, warranties and statements are, true, correct and
accurate in all material respects and contain no misrepresentation as
of the Closing Time as if such representations, warranties and
statements had been made at and as of the Closing Time.
5.2 The Company agrees that copies of the legal opinions and certificates
referred to in paragraph 5.1 hereof addressed to the Purchasers and delivered
to the Underwriters at the Closing may also be delivered to any persons to whom
the Underwriters resell any of the Special Warrants within 30 days after the
Closing Date. The Underwriters shall utilize their reasonable best efforts to
deliver to the Company an original Questionnaire and Undertaking and, if
applicable, Form 20A in respect of any such person not later than five business
days after the date any of the Special Warrants are resold to such person.
6. CLOSING
6.1 The closing of the transactions contemplated hereby shall be completed
at the offices of the Company's Counsel in Vancouver at the Closing Time.
6.2 At the Closing, the Underwriters shall deliver or cause to be
delivered to the Trustee a certified cheque or bank draft made payable to the
Trustee on the Closing Date in an amount equal to the aggregate purchase price
for the Special Warrants and the Underwriters shall also deliver to the Company
properly completed and duly executed original or facsimile copies of the
Subscription Agreements and Questionnaires and Undertakings and, to the extent
applicable, Form 20As relating to the Special Warrants, and the Company shall
deliver or cause to be delivered to or upon the direction of the Underwriters
one Special Warrant certificate evidencing all of the Special Warrants
registered in the name of SMI (or its nominee) on behalf of the Purchasers and
the Company shall also deliver or cause to be delivered to the Underwriters the
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15
requisite certificates, opinions and other documents as contemplated hereby.
The Underwriters shall deliver to the Company at the Closing an original
Questionnaire and Undertaking in respect of any Special Warrants purchased by
them and the Underwriters shall utilize their reasonable best efforts to
deliver to the Company an original Questionnaire and Undertaking and, if
applicable, Form 20A in respect of each Purchaser not later than five business
days after the Closing Date.
6.3 At the Closing, upon payment of the amount referred to in paragraph
6.2 hereof to the Trustee, the Company shall deliver or cause to be delivered
to the Underwriters a certified cheque or bank draft made payable to SMI, on
behalf of the Underwriters, in an amount equal to the Commission payable to the
Underwriters hereunder.
6.4 The Special Warrant Indenture shall contain provisions to the effect
that the amount referred to in paragraph 6.2 hereof paid to the Trustee will be
deposited with and held in escrow by the Trustee and invested by it in
accordance with the terms of the Special Warrant Indenture and that such
deposited funds and interest earned thereon (i) if the Qualification Date
occurs on or before the Qualification Deadline, will be released from escrow
and paid by the Trustee to the Company as soon as practicable after the Company
delivers a written certificate to the Trustee to the effect that the
Qualification Date has so occurred or (ii) if the Qualification Date has not
occurred on or before the Qualification Deadline, will initially be applied by
the Trustee to repay to any holder of Special Warrants, who exercises the right
referred to in subparagraph 2.3(c) to surrender his Special Warrants for
cancellation, the original issue price of such Special Warrants together with
such holder's proportionate share of such interest and, after all amounts due
to holders of Special Warrants who exercise such right have been paid or
provided for, the remaining balance of such deposited funds and interest earned
thereon will be released from escrow and paid by the Trustee to the Company.
6.5 The Company will at the Closing Time make all necessary arrangements
for the exchange of the Special Warrant certificate referred to in paragraph
6.2 hereof, at the principal offices of the Trustee in Vancouver and Toronto,
for Special Warrant certificates in such denominations and registered in such
names as shall be designated by the Underwriters by written direction to the
Trustee not less than 24 hours prior to the Closing Time. All such exchanges
shall be made without cost to the Underwriters. It is understood and agreed
that no charge will be made by the Trustee (other than to the Company) in
respect of any transfer, exchange or registration of any of the Special
Warrants if carried out within a period of 30 days following the Closing Date.
7. TERMINATION RIGHTS
7.1 Each of the Underwriters shall be entitled, at its option, to
terminate and cancel, without any liability on the Underwriters' part, its
obligations under this Agreement, and on behalf of the Purchasers arranged for
by the Underwriters, to terminate and cancel, without any liability on the
Purchasers' part, their respective obligations to purchase the Special
Warrants, by giving written notice to the Company:
(a) at any time prior to the Closing Time, if at any time prior to the
Closing:
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16
(i) there shall have occurred any adverse material change or
adverse material fact in relation to the Company or a
development that could result in an adverse material change or
adverse material fact in relation to the Company; or
(ii) there shall have occurred any change in the applicable laws or
regulations of Canada or any province thereof or the United
States or any state thereof, or any inquiry, investigation or
other proceeding is made or any order is issued under or
pursuant to any statute of Canada or any province thereof or
of the United States or any state thereof or under or pursuant
to the rules of any stock exchange, or any such change,
inquiry, investigation or other proceeding or order is
announced, commenced or threatened, in relation to the Company
or any of its securities (except for any inquiry,
investigation or other proceeding or order based upon
activities of the Underwriters and not upon activities of the
Company);
which, in the opinion of the Underwriters, acting reasonably, operates
or would operate to prevent or restrict trading in or the distribution
of the Special Warrants or the Underlying Securities or adversely
affects or might reasonably be expected to adversely affect the
ability of the Company and its subsidiaries to carry on business or
the investment quality or marketability of the Special Warrants or the
Underlying Securities;
(iii) there should develop, occur or come into effect or existence
any event, action, state, condition or major financial
occurrence of national or international consequence or any law
or regulation, which, in the opinion of the Underwriters,
acting reasonably, seriously adversely affects, or involves,
or will seriously adversely affect or involve, the financial
markets or the business, operations or affairs of the Company
and its subsidiaries, taken as a whole; or
(iv) a cease trading order is made by any Securities Commission or
other competent authority by reason of the fault of the
Company or its directors, officers or agents and such cease
trading order is not rescinded within 48 hours; or
(b) at any time prior to the third business day before the Closing Date,
if the Underwriters are not reasonably satisfied with the results of
any due diligence investigations and examinations with respect to the
Company and its subsidiaries conducted by or on behalf of the
Underwriters.
7.2 The rights of termination contained in paragraph 7.1 hereof may be
exercised by any of the Underwriters and are in addition to any other rights or
remedies the Underwriters or the Purchasers may have in respect of any default,
act or failure to act or non- compliance by the Company in respect of any of
the matters contemplated by this Agreement.
7.3 If the obligations of the Underwriters and the Purchasers hereunder
are terminated pursuant to paragraph 7.1 hereof, the respective obligations of
the parties hereunder will terminate and none of the Underwriters, the
Purchasers or (subject to the rights or remedies
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17
referred to in paragraph 7.2 hereof) the Company will have any liability to the
other, except that the Company's obligations under paragraphs 9.1 and 10.1 to
10.5 shall survive and continue.
8. ADDITIONAL COVENANTS
8.1 The Company covenants with the Underwriters as follows:
(a) the Company will use its reasonable best efforts to obtain written
consents, in the form required by the TSE, of holders of in excess of
50% of the outstanding Common Shares to the issue of the Additional
Special Warrants;
(b) the Company will comply with the covenants referred to in paragraph
2.2 hereof and, with respect to the filing of the Prospectuses as
contemplated therein, will fulfil all legal requirements required to
be fulfilled by the Company in connection therewith, which
requirements shall include the execution (as required by the
applicable Securities Laws) and filing of each of the Prospectuses in
each of the Qualifying Jurisdictions, in each case in form and
substance reasonably satisfactory to the Underwriters as evidenced by
their execution thereof;
(c) prior to the filing of each of the Prospectuses, the Company will
allow the Underwriters to conduct all due diligence investigations and
examinations which the Underwriters may require in order to fulfil
their obligations as a statutory underwriter and in order to enable
the Underwriters responsibly to execute the certificates required to
be executed by the Underwriters in such documents;
(d) the Company will deliver or cause to be delivered to the Underwriters:
(i) at the time of execution of each of the Prospectuses by the
Underwriters:
(A) the Prospectus (in the English and, if Quebec is a
Qualifying Jurisdiction, French languages) to be
executed, duly executed by officers and directors of
the Company in the form required by the Securities
Laws; and
(B) if Quebec is a Qualifying Jurisdiction:
(1) an opinion of the Company's Quebec counsel,
addressed to the Underwriters and the
Underwriters' Counsel and dated the date of
the Prospectus to be executed, to the effect
that the signed version of such Prospectus
(including any information or documents
incorporated by reference therein) in the
French language (other than financial
information in such Prospectus specified in
such opinion (the "Financial Information"))
is in all material respects a complete and
proper translation of the signed version of
such Prospectus in the English language and
that such versions are not
- 17 -
18
susceptible of any materially different
interpretation with respect to any material
matter contained therein; and
(2) an opinion of the Company's Auditors,
addressed to the Underwriters and the
Underwriters' counsel and dated the date of
the Prospectus to be executed, to the effect
that the Financial Information contained in
the version of such Prospectus in the French
language is in all material respects a
complete and proper translation of the
Financial Information contained in the
version of such Prospectus in the English
language; and
(ii) at the time of execution of the Final Prospectus by the
Underwriters:
(A) a comfort letter of the Company's Auditors, addressed
to the Underwriters and the directors of the Company
and dated the date of the Final Prospectus, and in
form and substance satisfactory to the Underwriters,
relating to the verification of the financial
information and accounting data contained or
incorporated by reference in the Final Prospectus and
matters involving changes or developments thereto
since the respective dates as of which specified
financial information is given in the Final
Prospectus to a date not more than three business
days prior to the date of such letter; and
(B) if the legal opinion referred to in subparagraph
5.1(f) hereof delivered at the Closing included an
opinion with respect to any of the statutes referred
to in paragraph 17 of Schedule B hereto, a legal
opinion, addressed to the Underwriters and the
Company and dated the date of the Final Prospectus,
and in form and content reasonably acceptable to the
Underwriters and the Underwriters' Counsel, of the
Company's Counsel to the effect that the Underlying
Securities, if issued on the date of the Final
Prospectus, would be eligible investments, without
resort to any applicable "basket" provisions, or
would not be precluded as investments under such
statutes;
(e) the Company will deliver or cause to be delivered to the Underwriters
duly executed copies of any Supplementary Material required to be
filed by the Company in accordance with subparagraph (f) below and,
from the date hereof until the completion of the distribution of the
Underlying Securities, copies of all letters, submissions and any
other materials filed by or on behalf of the Company with any of the
Securities Commissions, the Stock Exchanges or the United States
Securities and Exchange Commission. Opinions as to translation
similar to those required by clause (i)(B) of subparagraph (d) above
shall be delivered to the Underwriters, addressed to the Underwriters
and the Underwriters' counsel, with respect to any amendment to the
version of either of the Prospectuses or other relevant document in
the French language at the time the same is presented to the
Underwriters for execution or, if such execution is not required, at
or prior to the time the same is filed with the Quebec Securities
Commission, and if any
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19
financial or accounting information is contained in any such
Supplementary Material, a comfort letter similar to that required by
clause (ii)(A) of subparagraph (d) above shall be delivered to the
Underwriters, addressed to the Underwriters and the directors of the
Company, at the time the same is presented to the Underwriters for
execution;
(f) from and after the date hereof until the completion of the
distribution of the Underlying Securities, the Company will promptly
notify the Underwriters (which notification will be confirmed in
writing if reasonably requested) of any material change or any change
in a material fact in either case whether actual, anticipated,
contemplated or threatened, or any event or development involving a
prospective material change, in any or all of the business, affairs,
ownership, management, operations, assets (including information or
data relating to the estimated or book value of assets), liabilities
(contingent or otherwise), financial condition, capital or prospects
of the Company and its subsidiaries, taken as a whole, or of any
change which is of such a nature as to result in, or could result in,
a misrepresentation in either of the Prospectuses or any Supplementary
Material. The Company will promptly, and in any event within any
applicable time limitation, comply with all filing and other
requirements under the Securities Laws, and with the rules of the
Stock Exchanges, applicable to the Company as a result of any such
change, event or development, provided that the Company shall not file
any amendment to either of the Prospectuses or any other material
supplementary to or to become incorporated by reference into the
Prospectuses (all such amendments and material being herein called the
"Supplementary Material") without first obtaining from the
Underwriters their approval as to the form and content thereof, such
approval not to be unreasonably withheld. In addition to the
foregoing, the Company will in good faith discuss with the
Underwriters any event or change in circumstances which is of such a
nature that there is or ought to be consideration given by the Company
as to whether notice in writing of such event or change need be given
to the Underwriters pursuant to this subparagraph;
(g) the Company will from time to time, without charge to the
Underwriters, deliver to the Underwriters as many copies of each of
the Prospectuses (and in the event of any amendment to either of the
Prospectuses, copies of such amendment) as the Underwriters may
reasonably request for the purposes contemplated hereunder, provided
that, in the case of the Preliminary Prospectus and any amendment
thereto, such copies need not be in commercial form unless the
Underwriters own any of the Special Warrants, and such delivery shall
constitute the consent of the Company to the use of such documents by
the Underwriters in connection with the distribution of the Underlying
Securities, subject to compliance by the Underwriters with the
applicable provisions of the Securities Laws; and
(h) the delivery by the Company to the Underwriters of each of the
Prospectuses and any Supplementary Material shall constitute the
Company's representation and warranty to the Underwriters that all
material information and statements (except information and statements
relating solely to the Underwriters) contained or incorporated by
reference in such documents, at the respective dates of initial
delivery thereof, were prepared in
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20
accordance with and comply with all applicable Securities Laws and are
true, correct and accurate in all material respects, and that such
documents, at such dates, contain no misrepresentation and constitute
full, true and plain disclosure of all material facts relating to the
Company and to the Underlying Securities as required by the Securities
Laws.
8.2 The Underwriters covenant with the Company as follows:
(a) subject to paragraph 8.1 hereof and provided that, if the Prospectuses
qualify the distribution of securities to L.B. Mining Company, the
Underwriters have received an indemnity from the Company and a waiver
from L.B. Mining Company satisfactory to the Underwriters acting
reasonably, the Underwriters will, upon the request of the Company,
execute each of the Prospectuses and any Supplementary Material (in
the English and, if Quebec is a Qualifying Jurisdiction, French
languages) presented to the Underwriters for execution and will,
acting in good faith, use their reasonable best efforts to do all
things within the control of the Underwriters as may be necessary to
assist the Company in obtaining any requisite regulatory approvals in
connection with the preparation and filing of such documents and in
meeting its obligation to obtain receipts for the Final Prospectus on
or before the Qualification Deadline;
(b) the Underwriters will not make use of any "green sheet" or other
marketing material in connection with the distribution of the
Underlying Securities without obtaining the prior consent of the
Company;
(c) the Underwriters will use all reasonable efforts to complete the
distribution of the Underlying Securities as soon as practicable after
the Qualification Date and will, upon the request of the Company,
deliver copies of the Final Prospectus to holders of the Special
Warrants and assist the Company in facilitating the exercise of the
Special Warrants and the issuance of the Underlying Securities to the
holders thereof; and
(d) the Underwriters will give prompt written notice to the Company when,
in the Underwriters' opinion, the distribution of the Underlying
Securities has been completed and will provide a breakdown of the
Underlying Securities distributed in each of the Qualifying
Jurisdictions where such breakdown is required for the purpose of
calculating fees payable to the Securities Commissions.
8.3 The Company covenants with the Underwriters and the Purchasers as
follows:
(a) the Company will apply the proceeds from the sale of the Special
Warrants, when released to the Company by the Trustee under the
provisions of the Special Warrant Indenture, substantially in the
manner set forth under "Use of Proceeds" in the Final Prospectus;
(b) the Company will maintain its status as a reporting issuer not in
default under the Securities Laws of the Qualifying Jurisdictions and
will maintain the listing of the
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21
Common Shares on The Toronto Stock Exchange until 12 months after the
expiry of the Warrants;
(c) from the date hereof until 90 days after the Closing Date, the Company
shall, not without the prior written consent of the Underwriters (such
consent not to be unreasonably withheld), directly or indirectly,
allot, issue, offer, sell or grant any option or other right to
purchase, or agree, become bound or announce any intention to allot,
issue, offer, sell or grant any option or other right to purchase, any
Common Shares (or any securities convertible into or exchangeable or
exercisable for Common Shares) other than as contemplated hereby or in
connection with director, officer or employee stock options or
employee stock purchase plans or the issue of Common Shares upon the
exercise of special warrants to be issued to L.B. Mining Company; and
(d) in the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise of his Special Warrants is or
becomes entitled under applicable Securities Laws to the remedy of
rescission by reason of the Final Prospectus or any amendment thereto
containing a misrepresentation, such holder shall be entitled to
rescission not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder, and shall
be entitled in connection with such rescission to a full refund of all
consideration paid to the Company on the acquisition of such Special
Warrants. In the event that such holder is a permitted assignee of
the interest of the original Purchaser of such Special Warrants, such
permitted assignee shall be entitled to exercise the rights of
rescission and refund granted hereunder as if such permitted assignee
was such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special Warrants
under section 114 of the Securities Act (British Columbia), section
130 of the Securities Act (Ontario) or a corresponding provision of
other securities legislation or otherwise at law.
9. PAYMENT OF EXPENSES
9.1 Whether or not the transactions herein contemplated shall be
completed, the Company shall pay or cause to be paid all expenses of or
incidental to the issuance and sale of the Special Warrants and the
distribution of the Underlying Securities and all other matters in connection
with the transactions contemplated hereby, including, without limitation, the
reasonable out-of-pocket expenses from time to time incurred by or on behalf of
the Underwriters (including the reasonable fees and disbursements of the
Underwriters' Counsel to a maximum of $35,000).
10. INDEMNITY
10.1 The Company shall indemnify and save the Underwriters and each of the
Underwriters' directors, officers, employees and agents (collectively, the
"Indemnified Persons"), harmless against and from all liabilities, claims,
demands, losses (other than losses of profit in connection with the
distribution of the Special Warrants), costs, damages and expenses to which any
of the Indemnified Persons may be subject or which any of the Indemnified
Persons may suffer or
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incur, whether under the provisions of any statute or otherwise, in any way
caused by, or arising directly or indirectly from or in consequence of:
(a) any misrepresentation or alleged misrepresentation (except a
misrepresentation relating solely to the Underwriters) contained in
either of the Prospectuses, any Supplementary Material or any document
filed on or before the Qualification Date with any of the Securities
Commissions or any other securities regulatory authority or contained
in this Agreement or any certificate or other document delivered by or
on behalf of the Company to the Underwriters or the Purchasers
hereunder (collectively, the "Disclosure Documents");
(b) any prohibition or restriction of trading in the securities of the
Company or any prohibition or restriction affecting the distribution
of the Special Warrants or the distribution of the Underlying
Securities upon exercise of the Special Warrants imposed by any of the
Securities Commissions or any other competent authority if such
prohibition or restriction is based on any misrepresentation or
alleged misrepresentation (except a misrepresentation relating solely
to the Underwriters) in the Disclosure Documents;
(c) any order made or any inquiry, investigation (whether formal or
informal) or other proceeding commenced or threatened by any of the
Securities Commissions or any other competent authority relating to
the Company or any of its directors or officers or relating to or
affecting the distribution of the Special Warrants or the distribution
of Underlying Securities upon exercise of the Special Warrants other
than any such order, enquiry, investigation or other proceeding based
solely upon the activities or alleged activities of the Underwriters;
or
(d) any breach of, default under or non-compliance by the Company with any
representation, warranty, covenant, term or condition of this
Agreement or of any agreement or instrument relating to the
transactions contemplated hereby or with any requirement of applicable
legislation of Canada or the United States or of any of the Qualifying
Jurisdictions.
10.2 If any claim contemplated by paragraph 10.1 hereof shall be asserted
against any of the Indemnified Persons in respect of which indemnification is
or might reasonably be considered to be provided for in such paragraph, such
Indemnified Person shall notify the Company as soon as possible of the nature
of such claim (provided that any failure to so notify shall not affect the
Company's liability hereunder) and the Company shall be entitled (but not
required) to assume the defence of any suit brought to enforce such claim,
provided however, that the defence shall be through legal counsel selected by
the Company and reasonably acceptable to the Indemnified Person and that no
settlement may be made by the Company or the Indemnified Person without the
prior written consent of the other, such consent not to be unreasonably
withheld. The Indemnified Person shall have the right to retain its own
counsel in any proceeding relating to a claim contemplated by paragraph 10.1
hereof if:
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(a) the Indemnified Person has been advised by counsel that there may be
legal defences available to the Indemnified Person which are different
from or additional to defences available to the Company (in which case
the Company shall not have the right to assume the defence of such
proceedings on the Indemnified Person's behalf);
(b) the Company shall not have taken the defence of such proceedings and
employed counsel within ten days after notice of commencement of such
proceedings; or
(c) the employment of such counsel has been authorized by the Company in
connection with the defence of such proceedings;
and, in any such event, the reasonable fees and expenses of such Indemnified
Person's counsel shall be paid by the Company.
10.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Agreement is
due in accordance with its terms but is, for any reason, held by a court to be
unavailable from the Company, each of the Company and the Indemnified Person
seeking indemnification shall contribute to the aggregate liabilities, claims,
demands, losses (other than losses of profit in connection with the
distribution of the Special Warrants), costs, damages and expenses (including
legal or other expenses reasonably incurred in connection with investigation or
defence of the same) to which they may be subject or which they may suffer or
incur:
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and by the Indemnified Person
seeking indemnity on the other hand, from the sale of the Special
Warrants; or
(b) if the allocation provided by subparagraph (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in subparagraph (a) above but
also to reflect the relative fault of the Indemnified Person seeking
indemnity, on the one hand, and the Company, on the other hand, in
connection with the statements or omissions or other matters which
resulted in such liabilities, claims, demands, losses, costs, damages
or expenses as well as any other relevant equitable considerations.
The relevant benefits received by the Company, on the one hand, and the
Underwriters on the other hand shall be deemed to be in the same proportion
that the total proceeds of the sale of the Special Warrants received by the
Company (net of the Commission but before deducting expenses) bear to the
Commission received by the Underwriters. In the case of liability arising out
of the Preliminary Prospectus or the Final Prospectus, the relative fault of
the Company, on the one hand, and of the Underwriters, on the other hand, shall
be determined by reference, among other things, to whether the untrue or
alleged untrue statement or omission or other matter relates to information
supplied or which ought to have been supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, omission or other matter.
The Company
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agrees that it would not be just and equitable if contributions pursuant to
this Agreement were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The rights to contribution provided in this paragraph 10.3
shall be in addition to, and without prejudice to, any other right to
contribution which the Indemnified Persons may have.
10.4 The Company will not make any claim for, and hereby irrevocably waives
any right by statute or common law to, contribution against the Underwriters or
any of the other Indemnified Persons with respect to any matter in respect of
which the Company has agreed to indemnify the Indemnified Persons hereunder.
10.5 The rights to indemnity and contribution herein provided shall be in
addition to and not in derogation of any other right to indemnity or
contribution which any Indemnified Person may have by statute or otherwise at
law. It is the intention of the Company to constitute the Underwriters
trustees for their respective directors, officers, employees and agents of the
covenants of the Company under paragraphs 10.1 to 10.4 hereof with respect to
such persons and the Underwriters agree to accept such trust and to hold and
enforce such covenants on behalf of such persons.
11. MISCELLANEOUS
11.1 The obligations of the Underwriters to purchase the Special Warrants
shall be several and not joint in that:
(a) each Underwriter shall severally be obligated to purchase only the
percentage of the aggregate number of Special Warrants set opposite
its name as follows:
ScotiaMcLeod Inc. 38%
First Marathon Securities Limited 28.5%
Yorkton Securities Inc. 28.5%
Goepel Shields & Partners Inc. 5%
(b) if any Underwriter for whatever reason defaults in its obligation to
take up and pay for its respective percentage of the Special Warrants,
any or all of the other Underwriters may, at their option, take up and
pay for all the Special Warrants themselves or, with the consent of
the Company, together with any other underwriter.
An Underwriter which stands ready to purchase its percentage (as stipulated in
(a) above) of the aggregate number of Special Warrants required to be purchased
by the Underwriters under this Agreement (before giving effect to the sale of
Special Warrants to any Purchasers) will have no liability to the Company if
any of the other Underwriters defaults in its obligation to take up and pay for
its percentage of such Special Warrants. Nothing in this paragraph 11.1 shall
oblige the Company to sell hereunder less than all the Special Warrants or
shall relieve from responsibility to the Company hereunder any Underwriter
which shall have so defaulted in its obligation to purchase its applicable
percentage of the Special Warrants hereunder.
- 24 -
25
11.2 Any notice to be given hereunder shall be in writing and shall be
given by telex or facsimile (if receipt of any such facsimile notice is
confirmed) or by personal delivery to an officer of the party to whom notice is
given and shall, in the case of notice to the Company, be addressed and sent
to:
Granges Inc.
Suite 3000
370 Seventeenth Street
Denver, Colorado
80202 U.S.A.
Attention: Michael B. Richings
President and Chief Executive Officer
Facsimile No.: (303) 629-2499
and in the case of notice to the Underwriters, be addressed and sent to:
ScotiaMcLeod Inc.
Suite 1100 - 609 Granville Street
P.O. Box 10342
Vancouver, British Columbia
V7Y 1H6
Attention: John A. Macdonald
Facsimile No.: (604) 661-7496
First Marathon Securities Limited
Commerce Place
Suite 2200 - 400 Burrard Street
Vancouver, B.C.
V6C 3A8
Attention: Keith Peck
Facsimile No.: (604) 682-2132
Yorkton Securities Inc.
10th Floor, 4 Bentall Centre
1055 Dunsmuir Street
P.O. Box 49333
Vancouver, B.C.
V7X 1L4
- 25 -
26
Attention: Gordon Keep
Facsimile No.: (604) 640-0512
Goepel Shields & Partners Inc.
P.O. Box 10111
Suite 1100 - Pacific Centre
701 West Georgia Street
Vancouver, B.C.
V7Y 1C6
Attention: Ross Cory
Facsimile No.: (604) 684-0475
and any such notice given in accordance with the foregoing will be deemed to
have been received on the date of telex or facsimile transmission or the date
of delivery, as the case may be. The Company and the Underwriters may change
their respective addresses for notice by notice given in the manner aforesaid.
Any acceptance, agreement, order, notice, direction, receipt or other action to
be made, taken or given by the Underwriters hereunder (other than pursuant to
paragraphs 7.1 to 7.3, 10.1 to 10.5 and 11.4 hereof) may be made, taken or
given by SMI on behalf of all of the Underwriters.
11.3 The Company represents and warrants to the Underwriters that no fees
or commissions are or will be payable by the Company to any person (other than
the Underwriters) in connection with the issue and sale of the Special Warrants
or the transactions contemplated hereby and the Company agrees to indemnify and
hold harmless the Underwriters against any claims, demands and losses in
respect of any such fees or commissions.
11.4 All terms and conditions of this Agreement shall be construed as
conditions, and any material breach or failure to comply with any such terms or
conditions shall entitle each of the Underwriters, without limitation of any
other remedies of the Underwriters, to terminate such Underwriter's and any
Purchaser's obligations to purchase the Special Warrants by giving written
notice to that effect to the Company prior to the Closing Time notwithstanding
any act taken by the Underwriters including, without limitation, any act of the
Underwriters related to the offering or continued offering of the Special
Warrants and the Underwriters shall only be considered to have waived or be
estopped from relying upon any of their rights hereunder if such waiver or
estoppel is in writing and specifically waives or estops such exercise of
reliance.
11.5 The representations, warranties, covenants, obligations and agreements
of the Company contained herein or delivered pursuant hereto shall survive the
purchase by the Underwriters and the Purchasers of the Special Warrants and
shall continue in full force and effect notwithstanding any subsequent exercise
or disposition by the Underwriters or the Purchasers of the Special Warrants or
Underlying Securities, and the Underwriters and the Purchasers shall be
entitled to rely on the representations and warranties of the Company contained
herein or delivered
- 26 -
27
pursuant hereto notwithstanding any investigation which the Underwriters or the
Purchasers may undertake or which may be undertaken on the their behalf,
provided that after the Qualification Date the rights of the Purchasers (other
than the Underwriters) with respect to such representations and warranties
shall merge with the rights of such Purchasers granted under subparagraph
8.3(d) hereof.
11.6 The Schedules hereto are incorporated into and form part of this
Agreement and any reference herein to "this Agreement" and to the words
"herein", "hereof", "hereunder" and other words of similar import refer to this
Agreement, including the Schedules hereto, as a whole.
11.7 This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein.
11.8 Time shall be of the essence hereof.
11.9 This Agreement shall be effective as of and from April 10, 1996
notwithstanding the actual date or dates this letter was signed and delivered
by the Underwriters and accepted by the Company.
11.10 This Agreement may be executed in any number of counterparts, each of
which when delivered, either in original or facsimile form, shall be deemed to
be an original and all of which together shall constitute one and the same
document.
If the foregoing is in accordance with your understanding and agreed
to by you, please signify your acceptance on the accompanying counterparts of
this letter and return the same to us whereupon this letter as so accepted will
constitute an agreement between the Company and the Underwriters in accordance
with the foregoing and will supersede in its entirety the letter agreement
dated April 10, 1996 between the Company and the Underwriters.
Yours very truly,
SCOTIAMCLEOD INC.
By: /s/ John A. MacDonald
-------------------------------------
FIRST MARATHON SECURITIES LIMITED
By: /s/ Keith L. Peck
-------------------------------------
- 27 -
28
YORKTON SECURITIES INC.
By: /s/ Gordon B. Keep
-------------------------------------
GOEPEL SHIELDS & PARTNERS INC.
By: /s/ K. Ross Cory
-------------------------------------
The foregoing is accepted and agreed to April 25, 1996.
GRANGES INC.
By: /s/ N. A. Larson
-------------------------------------
- 28 -
29
SCHEDULE A
UNITED STATES SALES
For the purpose of this Schedule A:
(i) "Placement Agent" means ScotiaMcLeod (USA) Inc. as, or any
other U.S. broker-dealer who acts as, private placement agent
for the Underwriters for purposes of offering and selling the
Special Warrants in the United States;
(ii) "Regulation D" means Regulation D adopted by the SEC pursuant
to the U.S. Securities Act;
(iii) "Regulation S" means Regulation S adopted by the SEC pursuant
to the U.S. Securities Act;
(iv) "SEC" means the United States Securities and Exchange
Commission;
(v) "Securities" means the Special Warrants, the Underlying
Securities and the Warrant Shares;
(vi) "U.S. Person" has the meaning given to such term in Regulation
S;
(vii) "U.S. Purchase Agreement" means the form of Subscription
Agreement to be entered into with the Purchasers of Special
Warrants who are U.S. Persons; and
(viii) "U.S. Securities Act"means the United States Securities Act
of 1933, as amended.
(a) The Company represents, warrants, covenants and agrees to and with the
Underwriters that:
(i) the Company is a "foreign issuer" with no "substantial U.S.
market interest" with respect to the Securities as such terms
are defined in Regulation S.
(ii) none of the Company, its affiliates (as defined in the U.S.
Securities Act) or any person acting on its or their behalf
has engaged or will engage in any directed selling efforts in
the United States within the meaning of Regulation S or has
engaged or will engage in any form of general solicitation or
general advertising (as such terms are used in Regulation D)
with respect to the Securities.
(b) Each of the Underwriters severally, and not jointly, represents,
warrants and covenants to the Company that, in connection with all offers and
sales of the Special Warrants in the United States:
(i) it acknowledges that the Securities have not been and will not
be registered under the U.S. Securities Act and may not be
offered or sold within the United States or to, or for the
account or benefit of, U.S. Persons, except in accordance with
Regulation S or pursuant to an exemption from the registration
requirements of the U.S. Securities Act; it has not offered or
sold, and will not offer or sell, any of the Special Warrants
constituting a part of its allotment within the United States
or to, or for the account or benefit of, U.S. Persons, except
in accordance with Regulation S or as provided in section (d)
below; accordingly, none of it, its affiliates or any person
acting on its or their behalf (including any Placement Agent)
has engaged or will engage in any directed selling efforts in
the United States with respect to the Special Warrants; terms
used in this clause have the meanings given to them by
Regulation S.
(ii) it has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Special
Warrants, except with its affiliates, any Placement Agent or
any banking
30
or selling group members or with the prior written consent of
the Company not to be unreasonably withheld, provided,
however, that nothing in this clause shall in any way
restrict offers and sales outside the United States.
(c) The Underwriters shall require each member of any banking or selling
group formed by the Underwriters to agree, for the benefit of the Company, to
comply with, and the Underwriters shall use their respective best efforts to
ensure that each such member complies with, the provisions of clauses (b)(i)
and (ii) above as if such provisions applied to such member.
(d) Each of the Underwriters agrees severally, and not jointly, with the
Company that:
(i) all offers and sales of the Special Warrants in the United
States will be effected through one or more Placement Agents,
in accordance with all applicable U.S. broker-dealer
requirements.
(ii) with respect to any offers and sales of the Special Warrants
in the United States, each Underwriter will cause each
Placement Agent to solicit offers for the Special Warrants
only from, and offer the Special Warrants only to, persons who
it reasonable believes to be institutional "accredited
investors" (as such term is defined in Rule 501(a)(1), (2),
(3) or (7) under the U.S. Securities Act) and will also cause
each Placement Agent to solicit offers for the Special
Warrants only from, and offer the Special Warrants only to,
persons that in purchasing such Special Warrants enter into a
U.S. Purchase Agreement and thereby represent and agree as
provided in clauses (iv)(1) through (9) below (to the extent
such representations are applicable to the Purchaser
concerned).
(iii) each Underwriter will not, either directly or indirectly or
through any Placement Agent, solicit offers for, or offer to
sell, the Special Warrants in the United States by means of
any form of general solicitation or general advertising (as
those terms are used in Regulation D) or in any manner
involving a "public offering" within the meaning of Section
4(2) of the U.S. Securities Act.
(iv) the U.S. Purchase Agreement to be entered into with each
Purchaser of Special Warrants who is a U.S. Person, prior to
any sale of Securities, shall contain representations,
warranties and covenants to the Company of such Purchaser as
follows:
(1) It is authorized to consummate the purchase of the
Securities.
(2) It is aware that the Securities have not been and
will not be registered under the U.S. Securities Act
or the securities laws of any state and the sale
contemplated thereby is being made in reliance on a
private placement exemption to Institutional
Accredited Investors (as defined below) and pursuant
to exemptions from the registration requirements of
applicable state securities laws.
(3) It is an institutional "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the
U.S. Securities Act ("Institutional Accredited
Investors") and it is acquiring such Special Warrants
and the related other Securities for its own account
for an aggregate purchase price of at least U.S
$250,000 or for the account of one or more
Institutional Accredited Investors with respect to
which it exercises sole investment discretion (where
each such account is purchasing Special Warrants for
such an aggregate purchase price), and not with a
view to any resale, distribution or other disposition
of such Securities in violation of the United States
federal or state securities laws.
- 2 -
31
(4) It acknowledges that it has not purchased such
Special Warrants as a result of any general
solicitation or general advertising, including
advertisements, articles, notices or other
communications published in any newspaper, magazine
or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees
have been invited by any general solicitation or
general advertising.
(5) It has received a copy of the Form 10-K, for its
information only, together with a U.S. covering
memorandum, and has had access to such additional
information, if any, concerning the Company as it has
considered necessary in connection with its decision
to invest in such Special Warrants.
(6) It has such knowledge and experience in business
matters as to be capable of evaluating the merits and
risks of its investment in such Special Warrants and
is able to bear the economic risks of such
investment.
(7) It understands and agrees that if it decides to
offer, sell or otherwise transfer such Special
Warrants or the related other Securities, such
Special Warrants and other Securities may be offered,
sold or otherwise transferred only (A) to the
Company, (B) outside the United States in accordance
with Rule 904 of Regulation S under the U.S.
Securities Act and in compliance with applicable
local laws and regulations, or (C) inside the United
States (i) if (x) the sale is to an Institutional
Accredited Investor and is of a number of such
Special Warrants or other Securities having an
aggregate market value at the time of such sale of
not less than U.S. $250,000, (y) a purchaser's letter
containing representations, warranties and covenants
similar to those contained in this clause (iv)
(except such purchaser's letter need not contain the
representation set forth in subclause (5) above),
satisfactory to the Placement Agent and the Company,
is executed by the purchaser and delivered to the
Placement Agent and the Company prior to the sale and
(z) all offers or solicitations in connection with
the sale are arranged and conducted solely by the
Placement Agent or the Company, (ii) in accordance
with the exemption from registration under the U.S.
Securities Act provided by Rule 144 thereunder, if
available, or (iii) if the sale is a transaction that
does not require registration under the U.S.
Securities Act or any applicable United States state
laws and regulations governing the offer and sale of
securities, and it has therefore furnished to the
Placement Agent and the Company an opinion of counsel
of recognized standing reasonably satisfactory to the
Placement Agent and the Company.
(8) It understands and acknowledges that upon the
original issuance thereof, and until such time as the
same is no longer required under applicable
requirements of the U.S. Securities Act or
applicable state laws, the certificates representing
such Special Warrants, and all certificates issued in
exchange therefor or in substitution thereof,
including certificates representing the related
Securities, shall bear the following legend:
- 3 -
32
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN
ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES
ACT, IF AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN
A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF
CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE
OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT;"
provided, that if any such Special Warrants or other
Securities, as the case may be, are being sold under
subclause (7)(B) above, such legend may be removed by
providing a declaration to Montreal Trust Company of
Canada as registrar and transfer agent, in the
following form (or in such form as the Company may
prescribe from time to time):
"The undersigned (A) acknowledges that the sale of
the securities, represented by certificate numbers
_______________, to which this declaration relates is
being made in reliance on Rule 904 of Regulation S
under the United States Securities Act of 1933, as
amended (the "Securities Act") and (B) certifies that
(1) it is not an "affiliate" of Granges Inc. (as
defined in Rule 405 under the Securities Act), (2)
the offer of such securities was not made to a person
in the United States and either (a) at the time the
buy order was originated, the buyer was outside the
United States, or the seller and any person acting on
its behalf reasonably believed that the buyer was
outside the United States or (b) the transaction was
executed on or through the facilities of The Toronto
Stock Exchange and neither the seller nor any person
acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States
and (3) neither the seller nor any person acting on
its behalf engaged in any directed selling efforts in
connection with the offer and sale of such
securities. Terms used herein have the meanings
given to them by Regulation S."
and provided further, that if any such Special
Warrants or other Securities, as the case may be, are
being sold under subclause 7(C)(ii) above, such
legend may be removed by delivery to Montreal Trust
- 4 -
33
Company of Canada of an opinion of counsel, of
recognized standing reasonably satisfactory to the
Company, to the effect that such legend is no longer
required under the applicable requirements of the U.S.
Securities Act or state securities laws.
(9) It consents to the Company making a notation on its
records or giving instructions to any transfer agent
or trustee of the Securities in order to implement
the restrictions on transfer set forth and described
herein.
(v) each offeree will be provided with a copy of the Form 10-K,
together with a U.S. covering memorandum.
(vi) each Underwriter shall cause each Placement Agent to agree,
for the benefit of the Company, to the same provisions as are
contained in this Schedule A.
(vii) at the Closing Time, each Underwriter, together with each
Placement Agent selling Special Warrants in the United States,
will provide a certificate, substantially in the form of
Exhibit I hereto, relating to the manner of the offer and sale
of the Special Warrants in the United States.
- 5 -
34
EXHIBIT I
UNDERWRITER'S CERTIFICATE
Gentlemen:
In connection with the private placement in the United States
of special warrants (the "Special Warrants") exercisable for common shares and
common share purchase warrants of Granges Inc. (the "Company") with U.S.
institutional investors (the "U.S. Private Placees") pursuant to U.S. Purchase
Agreements between such U.S. Private Placees and ScotiaMcLeod (USA) Inc. (the
"Placement Agent"), the undersigned, ScotiaMcLeod Inc., First Marathon
Securities Limited, Yorkton Securities Inc. and Goepel Shields & Partners Inc.,
as the underwriters (the "Underwriters") referred to in the Underwriting
Agreement (the "Underwriting Agreement") dated April 15, 1996 among the Company
and the Underwriters, and the Placement Agent, do hereby certify, that:
(i) the Placement Agent is a duly registered broker or
dealer with the United States Securities and Exchange Commission and is a
member of, and in good standing with, the National Association of Securities
Dealers, Inc. on the date hereof;
(ii) each U.S. Private Placee was provided with a copy of
the U.S. Purchase Agreement, the Company's Form 10-K and a U.S. covering
memorandum relating to the Special Warrants;
(iii) immediately prior to our transmitting the U.S.
Purchase Agreement to such U.S. Private Placees, we had reasonable grounds to
believe and did believe that each U.S. Private Placee was an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
U.S. Securities Act of 1933) and, on the date hereof, we continue to believe
that each U.S. Private Placee is an institutional "accredited investor";
(iv) no form of general solicitation or general
advertising was used by us, including advertisements, articles, notices or
other communications published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting whose attendees
had been invited by general solicitation or general advertising, in connection
with the offer or sale of the Special Warrants in the United States; and
(v) the offering of the Special Warrants in the United
States has been conducted in accordance with the Underwriting Agreement; and
(vi) all offers and sales of the Special Warrants in the
United States were made to a maximum of 50 institutional "accredited
investors".
Terms in this certificate have the meanings given to them in
the Underwriting Agreement.
Dated April 25, 1996.
SCOTIAMCLEOD INC. FIRST MARATHON SECURITIES LIMITED
By: By:
--------------------------------- -------------------------------
YORKTON SECURITIES INC. GOEPEL SHIELDS & PARTNERS INC.
By: By:
--------------------------------- -------------------------------
SCOTIAMCLEOD (USA) INC.
By:
---------------------------------
35
SCHEDULE B
SUMMARY OF LEGAL OPINIONS
The opinions of the Company's Counsel and the Underwriters'
Counsel shall be substantially to the following effect:
1. The Company is a company duly amalgamated and validly existing
under the laws of the Province of British Columbia and is in good standing in
the office of the Registrar of Companies for British Columbia with respect to
the filing of annual reports.
2. Each Material Subsidiary is a corporation duly incorporated
and validly existing as a corporation and is in good standing under the laws of
its jurisdiction of incorporation.
3. According to the register of shareholders of each Material
Subsidiary (other than Zamora Gold Corp.), the Company or a wholly-owned
subsidiary of the Company is the registered holder of all of the issued and
outstanding shares of such Material Subsidiary. According to the register of
shareholders of Zamora Gold Corp., the Company or a wholly-owned subsidiary of
the Company is the registered holder of 8,000,000 of the 19,601,637 issued and
outstanding shares of Zamora Gold Corp.
4. Each of the Company and the Material Subsidiaries has the
necessary corporate power and capacity to carry on the business which it
carries on and to own, lease and operate its properties and assets.
5. The Company has the necessary corporate power and capacity to
enter into this Agreement, the Subscription Agreements, the Special Warrant
Indenture and the Warrant Indenture (collectively, the "Documents") and to
observe and perform its covenants and obligations hereunder and thereunder, to
create, issue and sell the Special Warrants, to issue the Common Shares and
create and issue the Warrants issuable upon the exercise or deemed exercise of
the Special Warrants and to issue the Warrant Shares issuable upon the exercise
of the Warrants.
6. The authorized capital of the Company consists of 750,000,000
Common Shares, of which (based on certificates of the transfer agent and
registrar for the Common Shares and of a senior officer of the Company) were
issued and outstanding at the close of business on the day prior to the Closing
Date as fully paid and non-assessable shares, and 750,000,000 preferred shares
without par value, none of which (based on a certificate of a senior officer of
the Company) are issued and outstanding on the Closing Date.
7. The Documents have each been duly authorized, executed and
delivered by the Company and are each a legal, valid and binding obligation of,
and each is enforceable in accordance with its terms against, the Company,
subject to the usual qualifications with respect to bankruptcy, insolvency and
other similar laws of general application relating to creditors' rights and
equitable remedies and, with respect to this Agreement, subject to the usual
exceptions with respect to rights of indemnity and waiver of contributions.
8. The forms of certificates evidencing the Special Warrants and
the Warrants have each been duly approved by the Company and comply with all
requirements of the Special Warrant Indenture and the Warrant Indenture,
respectively.
9. The attributes and characteristics of the Special Warrants and
the Warrants conform in all material respects with the descriptions thereof in
this Agreement and the Subscription Agreements.
10. The Special Warrants have been duly authorized and created by
the Company and validly issued in accordance with the provisions of the Special
Warrant Indenture and the certificates evidencing the Special Warrants have
been duly executed and delivered by the Company, and, in the case of the single
such certificate
- 1 -
36
evidencing all of the Special Warrants delivered to SMI today, duly certified
and delivered by the Trustee, in accordance with such provisions and constitute
valid and legally binding direct obligations of the Company enforceable against
the Company, subject to the usual qualifications referred to in clause 7 above,
entitling the holders thereof to the benefits of the Special Warrant Indenture.
11. The Warrants issuable upon the exercise or deemed exercise of
the Special Warrants have been duly authorized and created by the Company for
issuance upon the exercise or deemed exercise of the Special Warrants and such
Warrants, when issued pursuant to the Special Warrant Indenture and the Warrant
Indenture upon the exercise or deemed exercise of the Special Warrants in
accordance with the terms thereof, will be validly issued in accordance with
the provisions of the Warrant Indenture, and the certificates evidencing such
Warrants, when duly executed and delivered by the Company and duly certified
and delivered by the Trustee in accordance with such provisions, will
constitute valid and binding direct obligations of the Company enforceable
against the Company, subject to the usual qualifications referred to in clause
7 above, entitling the holders thereof to the benefits of the Warrant
Indenture. The Common Shares issuable upon the exercise or deemed exercise of
the Special Warrants and the Warrant Shares issuable upon the exercise of the
Warrants have been duly authorized and allotted for issuance upon the exercise
or deemed exercise of the Special Warrants or upon the exercise of the
Warrants, as the case may be, and such Common Shares and Warrant Shares, when
issued pursuant to the Special Warrant Indenture upon the exercise or deemed
exercise of the Special Warrants in accordance with the terms thereof or issued
pursuant to the Warrant Indenture upon the exercise of the Warrants in
accordance with the terms thereof, will be validly issued and outstanding as
fully paid and non-assessable shares in the capital of the Company.
12. Neither the execution and delivery by the Company of any of
the Documents, or the fulfilment of or compliance with the terms of any of them
by the Company, nor the sale of the Special Warrants to the Purchasers as
contemplated in this Agreement and the Subscription Agreements, or the issue of
Common Shares and Warrants upon the exercise or deemed exercise of the Special
Warrants in accordance with the terms thereof or of Warrant Shares upon the
exercise of the Warrants in accordance with the terms thereof, conflicts or
will conflict with or results or will result in a breach of or a default under
any of the provisions of the Memorandum or Articles of the Company or of any
resolutions of the directors or shareholders of the Company or, so far as the
Company's Counsel is aware (subject to the usual qualifications and limitations
with respect to the knowledge of the Company's Counsel), of any material
license or permit issued to the Company or any Material Subsidiary or any
essential term of any agreement or instrument to which the Company or any
Material Subsidiary is a party or by which the Company or any Material
Subsidiary is bound or to which any of its properties or assets are subject.
13. Based on the representations and warranties of the Purchasers
contained in the Subscription Agreements, the sale of the Special Warrants by
the Company to the Purchasers in accordance with the terms of this Agreement
and the Subscription Agreements is exempt from the prospectus requirements of
the securities laws of the Provinces of British Columbia and Ontario and of
such other provinces of Canada as may be relevant on the basis of the
Exemptions and no prospectus, offering memorandum or other document is required
to be filed, no proceeding is required to be taken and no approval, permit,
consent, or authorization is required to be obtained by the Company under such
securities laws in connection with such sale except for the filing by the
Company, within prescribed time periods, of required reports of such sale and
the payment by the Company of applicable fees relating thereto.
14. The issue by the Company of the Common Shares and Warrants
issuable upon the exercise or deemed exercise of the Special Warrants, when
issued pursuant to the Special Warrant Indenture upon the exercise or deemed
exercise of the Special Warrants in accordance with the terms thereof, and the
issue by the Company of the Warrant Shares issuable upon the exercise of the
Warrants, when issued pursuant to the Warrant Indenture upon the exercise of
the Warrants in accordance with the terms thereof, in either case if such issue
upon the exercise or deemed exercise of the Special Warrants occurs before the
Qualification Date, will be exempt from the registration and prospectus
requirements of the securities laws of the Provinces of British Columbia and
Ontario and of such other provinces of Canada as may be relevant and, subject
to compliance by the Underwriters with paragraph 3.3 of the Underwriting
Agreement, no prospectus, offering memorandum or other document will be
required to be filed, no proceeding will be required to be taken and no
approval, permit, consent or authorization will be required to be obtained by
the Company under such securities laws in connection with any such issue,
subject to the usual provisos with respect to the absence of any orders
restricting trades in such Common Shares,
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37
Warrants and Warrant Shares and that no commission or other remuneration is
paid or given to others in respect of such issue except for administrative,
ministerial or professional services or for services performed by a registered
dealer or broker.
15. Upon the delivery of the Final Prospectus to the Purchasers or
to any subsequent holders of the Special Warrants in connection with the
exercise or deemed exercise of such Special Warrants in accordance with the
terms thereof on or after the Qualification Date, the Common Shares and
Warrants issuable upon the exercise or deemed exercise of such Special Warrants
in accordance with the terms thereof and the Warrant Shares issuable upon the
exercise of such Warrants in accordance with the terms thereof will not be
subject to any statutory hold period under the securities laws of the Provinces
of British Columbia and Ontario and of such other provinces of Canada as may be
relevant and no prospectus, offering memorandum or other document will be
required to be filed, no proceeding will be required to be taken and no
approval, permit, consent or authorization will be required to be obtained by
the holders of such Common Shares, Warrants or Warrant Shares under such
securities laws in connection with the resale of such Common Shares, Warrants
or Warrant Shares by such holders in such provinces through a registered dealer
or broker, subject to the usual provisos with respect to the absence of any
orders restricting trades in such Common Shares, Warrants or Warrant Shares and
the requirements for the filing of reports by, and certain general restrictions
relating to, any such holders who are insiders of or persons in a special
relationship with the Company or who own 10% or more of the outstanding Common
Shares and that such resale does not constitute a distribution from the
holdings of a "control person" and, in the case of the resale of such Warrant
Shares, no unusual effort is made to prepare the market or create a demand for
such Warrant Shares, no extraordinary commission of consideration is paid in
respect of such resale and the Company is a reporting issuer under the
securities laws of the Province of Ontario at the time of such resale.
16. All documents required to be filed and proceedings required to
be taken by the Company before the Closing Date have been filed and taken in
order for the Common Shares issuable upon the exercise or deemed exercise of
the Special Warrants and the Warrant Shares issuable upon the exercise of the
Warrants to be listed and posted for trading on the TSE upon the issuance
thereof pursuant to the Special Warrant Indenture or the Warrant Indenture, as
the case may be.
17. The Common Shares and Warrants issuable upon the exercise or
deemed exercise of the Special Warrants, if issued on the Closing Date, would
be eligible investments, without resort to "basket" provisions permitting
otherwise ineligible investments up to specified limits, or would not be
precluded as investments, in each case subject to general investment provisions
and in certain cases subject to prudent investment requirements and additional
requirements relating to investment or lending policies or goals, for
Purchasers whose investments are governed by the Insurance Companies Act
(Canada), the Trust and Loan Companies Act (Canada), the Pension Benefits
Standards Act, 1985 (Canada), the Loan and Trust Corporations Act (Ontario),
the Pension Benefits Act (Ontario), the Pension Benefits Standards Act (British
Columbia), the Financial Institutions Act (British Columbia) and other similar
statutes, subject to the usual qualifications with respect thereto (provided
that this opinion need not be delivered in respect of any statute which is not
applicable to any of the Purchasers).
18. The Special Warrants and the Underlying Securities do not
constitute "foreign property" under Part XI of the Income Tax Act (Canada) (the
"Tax Act") and, if the current proposed amendments to the Tax Act announced by
the Minister of Finance (as proposed to be modified) become enacted, will not
constitute "foreign property" under such amendments.
In giving such opinions, (i) the Company's Counsel and the Underwriters'
Counsel may rely, to the extent appropriate in the circumstances, (A) as to
matters of fact on certificates of the Company's Auditors and certificates of
the Company duly executed on its behalf by any senior officer of the Company
and (B) on opinions of local counsel acceptable to the Underwriters' Counsel
with respect to matters of law of jurisdictions other than British Columbia and
(ii) the Underwriters' Counsel may rely on the opinion of the Company's Counsel
with respect to matters which relate specifically to the Company.
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SCHEDULE C
TERM SHEET
GRANGES INC.
OFFERING OF SPECIAL WARRANTS
Issuer: Granges Inc. ("Granges").
Issue: Special warrants ("Special Warrants") offering issued
pursuant to private placement prospectus exemptions. Each
Special Warrant is exchangeable into one common share and
one-half common share purchase warrant ("Warrant").
Warrant: Exercisable at $3.00 until October 31, 1997.
Amount: $19,994,000 million with a greenshoe option, exercisable
prior to the Closing Date, to increase to $25,220,000
million.
Price: $2.60 per Unit.
Closing Date: April 25, 1996 (the "Closing Date").
Transaction Structure: Private placement of Special Warrants in Canada, Europe
and the United States under applicable exemptions from
prospectus and registration requirements. The Special
Warrants are to be issued under a special warrant
indenture to be approved by the Underwriters.
Prospectus Filings: Granges will use its best efforts to file a prospectus as
soon as practicable after the Closing Date in all
provinces of Canada designated by the Underwriters
qualifying the issue of Shares and Warrants on exercise of
the Special Warrants and to obtain final receipts therefor
within 90 days or such later date as is stipulated by the
Underwriters (the "Qualification Deadline"). Even if
final prospectus receipts are not obtained by the
Qualification Deadline, Granges will continue to use its
reasonable best efforts to clear the prospectus as soon as
practicable.
Retraction: If a prospectus has not been filed by the Qualification
Deadline Special Warrant holders will be entitled to
retract their Special Warrant for the full price plus
interest.
Escrow Provision: 100% of the net proceeds of the Issue will be held in
escrow and released on exercise or deemed exercise of the
Special Warrants prior to the Qualification Deadline or to
Special Warrant holders exercising their retraction right
thereafter.
39
Foreign Property: Granges will provide an opinion of its counsel at Closing
confirming that its Special Warrants, Common Shares and
Warrants will not constitute foreign property pursuant to
certain amendments to the Income Tax Act (Canada).
Syndication: ScotiaMcLeod Inc., First Marathon Securities Limited,
Yorkton Securities Inc. and Goepel Shields & Partners Inc.
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SCHEDULE D
SUBSCRIPTION AGREEMENT
A COMPLETED AND ORIGINALLY EXECUTED COPY OF THIS SUBSCRIPTION AGREEMENT AND THE
ATTACHED PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING AND (IF THE PURCHASER
IS AN INDIVIDUAL) THE ATTACHED FORM 20A (1P) MUST BE DELIVERED BY NO LATER THAN
12:00 NOON ON APRIL 22, 1996 TO SCOTIAMCLEOD INC., ON BEHALF OF THE
UNDERWRITERS, AT EITHER OF THE FOLLOWING ADDRESSES:
ScotiaMcLeod Inc. ScotiaMcLeod Inc.
36th Floor 10th Floor
40 King Street West 609 Granville Street
Scotia Plaza Vancouver, B.C.
Toronto, Ontario V7Y 1H6
M5H 3Y2
Attention: David Nesbitt Attention: John A. Macdonald
Tel:(416) 863-7216 Tel:(604) 661-7481
Fax:(416) 862-3037 Fax:(604) 661-7496
- --------------------------------------------------------------------------------
TO: GRANGES INC.
AND TO: SCOTIAMCLEOD INC.
FIRST MARATHON SECURITIES LIMITED
YORKTON SECURITIES INC.
GOEPEL SHIELDS & PARTNERS INC.
1. SUBSCRIPTION. The undersigned (the "Purchaser") hereby
tenders to Granges Inc. (the "Company") this subscription offer which, upon
acceptance by the Company, will constitute an agreement (the "Subscription
Agreement") of the Purchaser to subscribe for, take up, purchase and pay for,
and, on the part of the Company, to issue and sell to the Purchaser, the number
of Special Warrants of the Company set out on page 11 hereof (the "Purchaser's
Special Warrants") at the price (the "Purchase Price") of $2.60 per Special
Warrant, all on the terms and subject to the conditions set forth in this
Subscription Agreement.
2. UNDERWRITTEN PRIVATE PLACEMENT. The Purchaser acknowledges
that the Purchaser's Special Warrants will be issued in connection with the
creation, issue and sale of an aggregate of 7,690,000 Special Warrants of the
Company for an aggregate subscription price of $19,994,000 to be sold by the
Company by private placement pursuant to an agreement (the "Underwriting
Agreement") dated as of April 15, 1996 among the Company and ScotiaMcLeod Inc.
("SMI"), First Marathon Securities Limited, Yorkton Securities Inc. and Goepel
Shields & Partners Inc. (collectively the "Underwriters") and that the
definitive terms and conditions of the Special Warrants will be set forth in
the Special Warrant Indenture referred to in paragraph 4 below. The
Underwriters have an option (the "Option") excerciseable prior to the Closing
Date (defined below) to increase the number of Special Warrants to be issued by
the Company by up to an additional 2,010,000 Special Warrants for a total
subscription price of $25,220,000.
41
3. CERTAIN DEFINITIONS. As used in this Subscription Agreement,
unless the context otherwise requires:
(a) "BUSINESS DAY" means a day which is not a Saturday, a Sunday
or a statutory holiday in the Provinces of British Columbia or
Ontario;
(b) "CLOSING" means the completion of the issue and sale by the
Company and the purchase by the Purchasers (including the Purchaser)
of the Special Warrants pursuant to the Underwriting Agreement and the
Subscription Agreements (including this Subscription Agreement);
(c) "CLOSING DATE" means April 25, 1996 or such other date as the
Company and the Underwriters may agree pursuant to the Underwriting
Agreement;
(d) "CLOSING TIME" means 7:30 a.m. (Vancouver time) on the Closing
Date or such other time on the Closing Date as the Company and the
Underwriters may agree pursuant to the Underwriting Agreement;
(e) "COMMON SHARES" means common shares without par value in the
capital of the Company;
(f) "EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the fifth
business day after the earlier of (i) the Qualification Date and (ii)
the Qualification Deadline;
(g) "FINAL PROSPECTUS" means a final prospectus or final short
form prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(h) "PRELIMINARY PROSPECTUS" means a preliminary prospectus or
preliminary short form prospectus of the Company relating to the
distribution of the Underlying Securities and, unless the context
otherwise requires, includes any amendment or supplement thereto, any
information or documents incorporated by reference therein and any
French language version thereof;
(i) "PROSPECTUSES" means the Preliminary Prospectus and the Final
Prospectus;
(j) "PURCHASERS" means the Underwriters, as the initially
committed Purchasers, and the Substitute Purchasers, if any;
(k) "QUALIFICATION DATE" means the day on which a receipt is
issued for the Final Prospectus by the last of the Securities
Commissions to issue a receipt for the Final Prospectus;
(l) "QUALIFICATION DEADLINE" means the day that is 90 days after
the Closing Date or such later date as the Underwriters may determine
in a written notice given to the Company and the Trustee provided that
the Underwriters have obtained the written consent thereto of each of
the Substitute Purchasers who purchased Special Warrants at the
Closing and have not resold their Special Warrants;
(m) "QUALIFYING JURISDICTIONS" means the Provinces of British
Columbia and Ontario and such other provinces of Canada which are
designated by the Underwriters by written notice given to the Company
not less than two business days prior to the Closing Date;
(n) "SECURITIES COMMISSIONS" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
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42
(o) "SPECIAL WARRANTS" means the 7,690,000 special warrants of the
Company (and if the Option is exercised by the Underwriters, up to an
additional 2,010,000 special warrants of the Company) to be created
and issued pursuant to the Special Warrant Indenture and to be sold by
the Company pursuant to the Underwriting Agreement;
(p) "SPECIAL WARRANT INDENTURE" has the meaning attributed thereto
in paragraph 4 hereof;
(q) "SUBSCRIPTION AGREEMENTS" means the subscription agreements or
purchase agreements to be entered into among the Substitute Purchasers
of Special Warrants, the Company and the Underwriters (and, in the
case of purchase agreements, the United States private placement agent
of the Underwriters) in respect of the purchase and sale of the
Special Warrants;
(r) "SUBSTITUTE PURCHASERS" means purchasers of any Special
Warrants who, at the Closing, purchase such Special Warrants in the
place and stead of the Underwriters or purchase such Special Warrants
from the Underwriters through their United States private placement
agent;
(s) "TRUSTEE" means Montreal Trust Company of Canada, as trustee
under the Special Warrant Indenture or the Warrant Indenture, as the
case may be;
(t) "UNDERLYING SECURITIES" means the Common Shares and Warrants
from time to time issuable upon the exercise or deemed exercise of the
Special Warrants;
(u) "WARRANTS" means the common share purchase warrants of the
Company having the attributes and characteristics specified in
paragraph 4 hereof;
(v) "WARRANT INDENTURE" has the meaning attributed thereto in
paragraph 4 hereof; and
(w) "WARRANT SHARES" means the Common Shares from time to time
issuable upon the exercise of the Warrants.
4. SPECIAL WARRANTS. The Purchaser understands and acknowledges
that the Special Warrants and the Warrants will be issued under and governed by
a special warrant indenture (the "Special Warrant Indenture") and a warrant
indenture (the "Warrant Indenture"), respectively, each to be dated as of the
Closing Date and made between the Company and the Trustee, as trustee
thereunder, and to contain provisions to the following effect:
(a) RIGHT TO COMMON SHARES AND WARRANTS. Each Special Warrant
will entitle the holder thereof, upon the exercise or deemed exercise
thereof and without payment of any additional consideration, to be
issued one Common Share and one-half of one Warrant, subject to
adjustment as provided in the Special Warrant Indenture.
(b) WARRANTS. Each Warrant will entitle the holder thereof,
during the period commencing on the date of its issue and ending 4:30
p.m. (Vancouver time) on October 31, 1997, to purchase one Common
Share from the Company at a price of $3.00, subject to adjustment as
provided in the Warrant Indenture.
(c) EXERCISE. Each holder of Special Warrants will be entitled to
exercise his Special Warrants during the period commencing on the
Closing Date and ending at the Expiry Time.
(d) RETRACTION. If the Qualification Date has not occurred on or
before the Qualification Deadline, each holder of Special Warrants
will be entitled, during the period commencing on the first business
day after the Qualification Deadline and ending at the Expiry Time, to
surrender his Special Warrants to the Trustee for cancellation and
receive repayment of the original issue price of $2.60 per Special
Warrant plus
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43
such holder's proportionate share of the interest earned by the
Trustee on the funds deposited in escrow referred to in paragraph 8
below from the Closing Date to and including the day immediately
preceding the date of payment.
(e) DEEMED EXERCISE. Any Special Warrant not exercised (unless
surrendered as provided in clause (d) above) prior to the Expiry Time
will be deemed to have been exercised immediately prior to the Expiry
Time (without any further action on the part of the holder thereof or
the Company) whether or not the Qualification Date has occurred and
subject to applicable securities laws.
(f) NOTICES. Upon the occurrence of the Qualification Date or if
the Qualification Date has not occurred on or before the Qualification
Deadline, the Company will, in either case, forthwith, and in any
event not later than the second business day thereafter, give written
notice thereof to the Trustee and the Trustee will forthwith give
written notice thereof to the holders of Special Warrants.
(g) OTHER PROVISIONS. The provisions of the Special Warrant
Indenture and the Warrant Indenture and the attributes and
characteristics of the Special Warrants and the Warrants respectively
provided for therein shall be substantially as described herein, with
such changes thereto as the Underwriters and the Company may agree to,
and otherwise the Special Warrant Indenture and the Warrant Indenture
shall be in such form and contain such terms and provisions (including
customary anti-dilution provisions) as are satisfactory to the Company
and the Underwriters, acting reasonably.
5. CLOSING OF PURCHASE. The Purchaser acknowledges and agrees
that the Closing shall be completed at the place and in the manner set forth in
the Underwriting Agreement at the Closing Time. The Purchaser hereby
irrevocably appoints and authorizes SMI on behalf of the Underwriters to act as
its agent to represent it at the Closing for the purpose of all closing
matters, including the execution and completion of all documents as required or
deemed necessary and the approval of all opinions, certificates and other
documents addressed to the Purchaser, and for the purpose of all deliveries of
documents and payment of funds and the Purchaser hereby authorizes the
Underwriters to extend such time periods (except the Qualification Deadline)
and modify or waive such conditions as may be contemplated herein or in the
Underwriting Agreement as the Underwriters, in their absolute discretion, may
deem appropriate. The Purchaser hereby irrevocable authorizes SMI to correct
manifest errors or omissions in the information provided by the Purchaser in
this Subscription Agreement, the Private Placement Questionnaire and
Undertaking (attached as Exhibit I hereto) and (if the Purchaser is an
individual) the Form 20A (1P) (attached as Exhibit II hereto). The Purchaser
will take up, purchase and pay for the Purchaser's Special Warrants at the
Closing upon acceptance of this offer by the Company and the satisfaction by
the Company, or waiver by the Underwriters, of the conditions referred to in
paragraph 6 below.
6. CONDITIONS OF CLOSING. The obligations of the Purchaser to
complete the purchase of the Purchaser's Special Warrants as contemplated
hereby shall be conditional upon the fulfilment at or before the Closing Time
of each of the conditions of the Closing set forth in the Underwriting
Agreement except those conditions that are waived by the Underwriters.
7. PAYMENT AND DELIVERY. Prior to 3:00 p.m. on April 24, 1996,
the Purchaser will deliver to SMI, at either of its addresses set forth on page
1 hereof (or to such other person or at such other address as SMI may direct by
notice to the Purchaser), a certified cheque or bank draft made payable on or
before the Closing Date to or to the order of "ScotiaMcLeod Inc." in an amount
equal to the total Purchase Price for the Purchaser's Special Warrants as set
forth on page 11 hereof (the "Subscription Funds") or will make such other
arrangements for the payment of the Subscription Funds as may be acceptable to
SMI. The Purchaser acknowledges and agrees that this offer, the Subscription
Funds and any other documents delivered in connection herewith will be held by
SMI until such time as the conditions referred to in paragraph 6 above are
satisfied by the Company or waived by the Underwriters. Upon such satisfaction
or waiver, at the Closing SMI will, on behalf of the Purchaser, deliver this
offer and any other documents required to be delivered in connection herewith
to the Company and will pay to the
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44
Company the Subscription Funds and, subject to paragraph 9 below, the Company
will thereupon issue and sell the Purchaser's Special Warrants to the Purchaser
and cause to be issued and delivered to or upon the direction of SMI, for
delivery to the Purchaser in accordance with its "Delivery Instructions" on
page 11 hereof, a definitive certificate representing the Purchaser's Special
Warrants registered in the name of the Purchaser (or in such other name or
names as are set forth under "Registration Instructions" on page 11 hereof).
The Purchaser acknowledges and agrees with and for the benefit of the
Underwriters that, in the event that the Purchaser fails to make payment of the
Subscription Funds to SMI in the manner and by the time stipulated above and
the Underwriters in their discretion elect to pay the Subscription Funds on
behalf of the Purchaser to the Company at the Closing, such payment will
constitute a loan made by SMI, on behalf of the Underwriters, to the Purchaser
and, in such event, the Purchaser agrees to repay such loan to SMI by
delivering to SMI (or to such other person as SMI may direct by notice to the
Purchaser), on the Closing Date, a certified cheque or bank draft made payable
on the Closing Date to or to the order of "ScotiaMcLeod Inc." in an amount
equal the Subscription Funds or by making such other arrangements for the
payment of the Subscription Funds as may be acceptable to SMI, against delivery
to the Purchaser in accordance with its "Delivery Instructions" on page 11
hereof of the certificate representing the Purchaser's Special Warrants
referred to above. In the event that this offer is not accepted by the Company
or the conditions referred to in paragraph 6 above are not satisfied by the
Company, or waived by the Underwriters, within the time therein provided, this
offer, the Subscription Funds (if paid to SMI) and any other documents
delivered in connection herewith will be returned to the Purchaser at the
address under "Name and Address of Purchaser" set forth on page 11 hereof.
8. DEPOSIT OF GROSS PROCEEDS IN ESCROW. The Purchaser
acknowledges that the aggregate subscription price for the Special Warrants to
be paid to the Company at the Closing will be deposited with the Trustee at the
Closing to be held in escrow and invested by the Trustee in accordance with the
terms of the Special Warrant Indenture and that the Special Warrant Indenture
will contain provisions to the effect that such deposited funds and interest
earned thereon (i) if the Qualification Date occurs on or before the
Qualification Deadline, will be released from escrow and paid by the Trustee to
the Company as soon as practicable after the Company delivers a written
certificate to the Trustee to the effect that the Qualification Date has so
occurred or (ii) if the Qualification Date has not occurred on or before the
Qualification Deadline, will initially be applied by the Trustee to repay to
any holder of Special Warrants, who exercises the right referred to in clause
(d) of paragraph 4 above to surrender his Special Warrants for cancellation,
the original issue price of such Special Warrants together with such holder's
proportionate share of such interest and, after all amounts due to holders of
Special Warrants who exercise such right have been paid or provided for, the
remaining balance of such deposited funds and interest thereon will be released
from escrow and paid by the Trustee to the Company.
9. ACCEPTANCE OR REJECTION. The Company will have the right to
accept this offer at any time at or prior to the Closing Time, but will only be
entitled to reject this offer if, at the Closing Time, each of the conditions
referred to in paragraph 6 above shall have been satisfied by the Company, or
waived by the Underwriters, and the Underwriters shall have failed to comply
with their obligation under the Underwriting Agreement to purchase all of the
Special Warrants which are subject to the Underwriting Agreement and which are
not purchased at the Closing by the Purchaser or by other Substitute
Purchasers, or if it would be unlawful for the Company to accept this offer.
Notwithstanding the foregoing, the Purchaser acknowledges and agrees that the
acceptance of this offer will be conditional upon the sale of the Purchaser's
Special Warrants to the Purchaser being exempt from any prospectus or offering
memorandum requirements of all applicable securities laws.
10. INFORMATION AND DOCUMENTS. The Purchaser will, as soon as
practicable and in any event by no later than noon on April 22, 1996, deliver
or arrange to have delivered to SMI, at either of its addresses set forth on
page 1 hereof (or to such other person or at such other address as SMI may
direct by notice to the Purchaser), completed and originally executed copies of
the Private Placement Questionnaire and Undertaking (attached as Exhibit I
hereto) and, if the Purchaser is an individual, the Form 20A(IP) (attached as
Exhibit II hereto) and will, promptly upon request by the Company or the
Underwriters, provide the Company or the Underwriters with such information and
execute and deliver to the Company or the Underwriters such additional
undertakings, questionnaires and other documents as the Company or the
Underwriters may request and as may be required in
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45
connection with the issue and sale of the Special Warrants and the filing of
the Prospectuses. The Purchaser acknowledges and agrees that such
undertakings, questionnaires and other documents, when executed and delivered
by the Purchaser, will form part of and will be incorporated into this
Subscription Agreement with the same effect as if each constituted a
representation and warranty or covenant of the Purchaser hereunder in favour of
the Company and the Underwriters. The Purchaser consents to the filing of such
documents as may be required to be filed with any stock exchange or securities
regulatory authority in connection with the transactions contemplated hereby.
The Purchaser acknowledges and agrees that the Underwriters or the Company or
both may be required to provide to applicable securities regulatory authorities
or to The Toronto Stock Exchange a list setting forth the identities of the
beneficial purchasers of the Special Warrants (on a confidential basis except
in the Province of British Columbia). Notwithstanding that the Purchaser may
be purchasing Special Warrants as an agent on behalf of an undisclosed
principal, the Purchaser agrees to provide, on request, particulars as to the
identity of such undisclosed principal as may be required by the Underwriters
or the Company or both in order to comply with the foregoing.
11. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser
represents and warrants to the Company and the Underwriters, as representations
and warranties that are true as of the date of this offer and will be true as
of the date of this Subscription Agreement and as of the Closing Date, that:
(a) AUTHORIZATION AND EFFECTIVENESS. If the Purchaser is a
corporation, the Purchaser is a valid and subsisting corporation, has
the necessary corporate capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect
thereof, or, if the Purchaser is an individual or a partnership,
syndicate or other form of unincorporated organization, the Purchaser
has the necessary legal capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has obtained all necessary approvals in respect thereof,
and, in either case, upon acceptance by the Company, this offer
constitutes a legal, valid and binding contract of the Purchaser
enforceable against the Purchaser in accordance with its terms.
(b) RESIDENCE. The Purchaser is a resident of the jurisdiction
referred to under "Name and Address of Purchaser" on page 11 hereof
and is not (and is not purchasing the Purchaser's Special Warrants for
the account of) a U.S. person (as such term is defined in Regulation S
under the United States Securities Act of 1933, as amended).
(c) PURCHASING AS PRINCIPAL. Except to the extent contemplated in
clauses (e) and (f)(iii) below, the Purchaser is purchasing the
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) as principal (as defined in applicable securities
legislation) for its own account, and not for the benefit of any other
person.
(d) PURCHASING FOR INVESTMENT ONLY. The Purchaser is purchasing
the Purchaser's Special Warrants (and the Underlying Securities in
respect thereof) for investment only and not with a view to resale or
distribution.
(e) PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase
by the Purchaser of the Purchaser's Special Warrants as agent or
trustee for any principal whose identity is disclosed or undisclosed
or identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, except
to the extent contemplated clause (f)(iii) below, is purchasing its
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) as principal for its own account, and not for the benefit of
any other person, for investment only and not with a view to resale or
distribution, and the Purchaser has due and proper authority to act as
agent or trustee for and on behalf of such beneficial purchaser in
connection with the transactions contemplated hereby.
- 6 -
46
(f) PURCHASER HAS BENEFIT OF PRIVATE PLACEMENT EXEMPTIONS. The
Purchaser, and in the case of the purchase by the Purchaser of the
Purchaser's Special Warrants as agent or trustee for any principal
whose identity is disclosed or undisclosed or identified by account
number only, each beneficial purchaser of the Purchaser's Special
Warrants for whom the Purchaser is acting:
(i) is purchasing as principal a sufficient number of
Special Warrants so that the aggregate acquisition costs of
the Purchaser or beneficial purchaser will not be less than
the amount indicated below as required under the applicable
statute of the province of Canada in which the Purchaser or
beneficial purchaser is resident:
Minimum Amount Applicable
Province of Residence of Purchase Exemption Section*
--------------------- -------------- ------------------
British Columbia $97,000 55(2)(1), (3) or (4)
Alberta $97,000 107(1)(a), (c) or (d)
Saskatchewan $150,000 81(1)(a), (c) or (d)
Manitoba $97,000 19(1)(c) and 19(3)
Ontario $150,000 72(1)(a), (c) or (d)
Quebec $150,000 51 or 43, 44 and 45
New Brunswick N/A 7(c)
Nova Scotia $150,000 77(1)(a), (c) or (d)
Prince Edward Island $97,000 13(1)(a), (c) or (d)
Newfoundland $97,000 73(1)(a), (c) or (d)
* Refers to exemption provisions applicable to
clauses (i), (ii) or (iii)
(ii) has status as an exempt purchaser or the equivalent
under the securities legislation applicable to it, which
status has the effect of eliminating any requirement for a
prospectus in respect of the sale of Special Warrants to the
Purchaser or beneficial purchaser and the issue of Underlying
Securities upon the exercise or deemed exercise of such
Special Warrants; or
(iii) is purchasing as agent or trustee pursuant to a
statutory exemption or an exemption order permitting such
purchase, which may include the circumstances described in
section 55(1)(b) of the Securities Act (British Columbia) or
the equivalent provision in the securities legislation of
other provinces.
(g) CORPORATION OR UNINCORPORATED ORGANIZATION. If the Purchaser,
or any beneficial purchaser referred to in clause (e) above, is a
corporation or a partnership, syndicate or other form of
unincorporated organization, the Purchaser or such beneficial
purchaser was not incorporated or created solely or is not used
primarily to permit purchases without a prospectus under section
72(1)(d) of the Securities Act (Ontario) or similar prospectus
exemptions available under other securities legislation and, if the
Purchaser or such beneficial purchaser is a partnership, syndicate or
other form of unincorporated organization (other than a pension plan
or group of pension plans under common management resident in Ontario)
the aggregate acquisition cost to each member thereof of its
proportionate interest in the Purchaser's Special Warrants is not less
than $150,000 (or, if such beneficial purchaser is a resident of
British Columbia, Alberta, Manitoba, Prince Edward Island or
Newfoundland, $97,000).
(h) ABSENCE OF OFFERING MEMORANDUM. The offering and sale of the
Purchaser's Special Warrants to the Purchaser were not, so far as the
Purchaser is aware, made through an advertisement of the Special
Warrants in printed media of general and regular paid circulation,
radio or television or any other form of advertisement or as part of a
general solicitation and, except for this Subscription Agreement, the
only documents, if any, delivered or otherwise furnished to the
Purchaser in connection with such offering and
- 7 -
47
sale were the Term Sheet (attached as Exhibit III hereto) and annual
or interim reports and other documents the contents of which are
prescribed by statute or regulation and generally available research
reports, memoranda and other materials concerning the Company prepared
by others, which documents the Purchaser acknowledges do not,
individually or collectively, constitute an offering memorandum or
similar document (including an offering memorandum as such term is
defined in section 32(1) of the Regulation to the Securities Act
(Ontario)) and have not been independently verified by the
Underwriters. The Purchaser acknowledges and agrees that the Company
and the Underwriters take no responsibility for the accuracy or
completeness of the information contained in any such research
reports, memoranda or other materials concerning the Company.
(i) NO UNDISCLOSED INFORMATION. The Purchaser's Special Warrants
are not being purchased by the Purchaser as a result of any material
information concerning the Company that has not been publicly
disclosed and the Purchaser's decision to tender this offer and
acquire the Purchaser's Special Warrants has not been made as a result
of any verbal or written representation as to fact or otherwise made
by or on behalf of the Company, the Underwriters or any other person
and is based entirely upon currently available public information
concerning the Company.
(j) INVESTMENT SUITABILITY. The Purchaser, and any beneficial
purchaser referred to in clause (e) above, has such knowledge and
experience in financial and business affairs as to be capable of
evaluating the merits and risks of the investment hereunder in the
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) and is able to bear the economic risk of loss of such
investment.
(k) MANITOBA RESIDENTS. If the Purchaser is a resident of
Manitoba, and if the Purchaser is not an individual and is a
corportion, partnership, unincorporated association, organization or
syndicate, a trustee, an executor, an administrator or other legal
personal representative, the Purchaser is purchasing the Purchaser's
Special Warrants for investment only and not with a view to resale or
distribution and will not resell or otherwise transfer or dispose of
the Purchaser's Special Warrants except in accordance with the
provisions of applicable securities legislation and regulations.
(1) OWNERSHIP OF COMMON SHARES. The Purchaser, together with any
of the Purchaser's affiliates or associates or any other person with
whom the Purchaser is acting jointly or in concert, after giving
effect to the exercise of any Special Warrants (and the Warrants
issuable thereunder) being purchased by the Purchaser and such
persons, will not beneficially own more than 9,236,332 Common Shares.
12. NO INVESTIGATION BY UNDERWRITERS. The Purchaser acknowledges
and agrees that the Underwriters assume no responsibility or liability of any
nature whatsoever for the accuracy or adequacy of any publicly available
information concerning the Company or as to whether all information concerning
the Company required to be disclosed by it has been generally disclosed. The
Purchaser further acknowledges and agrees that the Underwriters have not
engaged in or conducted any independent investigation with respect to the
Company or any such information.
13. RESALE RESTRICTIONS. The Purchaser understands and
acknowledges that the Purchaser's Special Warrants (and, if the Purchaser's
Special Warrants are exercised or deemed to be exercised before the
Qualification Date, the Underlying Securities issued upon such exercise or
deemed exercise and the Warrant Shares issuable upon the exercise of the
Warrants) will be subject to certain resale restrictions under applicable
securities laws and the Private Placement Questionnaire and Undertaking
(attached as Exhibit I hereto), and the Purchaser agrees to comply with such
restrictions. The Purchaser also acknowledges and understands that it should
consult its own legal advisors with respect to applicable resale restrictions
and that it is solely responsible (and that the Company and the Underwriters
are not in any manner responsible) for complying with such restrictions.
14. NO REVOCATION. The Purchaser agrees that this offer is made
for valuable consideration and may not be withdrawn, cancelled, terminated or
revoked by the Purchaser.
- 8 -
48
15. INDEMNITY. The Purchaser agrees to indemnify and hold
harmless the Company and the Underwriters and their respective directors,
officers, employees, agents, advisors and shareholders from and against any and
all loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all fees, costs and expenses whatsoever reasonably incurred
in investigating, preparing or defending against any claim, law suit,
administrative proceeding or investigation whether commenced or threatened)
arising out of or based upon any representation or warranty of the Purchaser
contained herein or in any document furnished by the Purchaser to the Company
or the Underwriters in connection herewith being untrue in any material respect
or any breach or failure by the Purchaser to comply with any covenant or
agreement made by the Purchaser herein or in any document furnished by the
Purchaser to the Company or the Underwriters in connection herewith.
16. MODIFICATION. Subject to paragraph 5 above, neither this
Subscription Agreement nor any provision hereof shall be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
17. BENEFIT OF CERTAIN REPRESENTATIONS. By its acceptance of this
offer, the Company covenants, agrees and confirms that the Purchaser will have
the benefit of all of the representations, warranties, covenants and conditions
provided to or for the benefit of the Purchasers by the Company under the
Underwriting Agreement.
18. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its acceptance
of this offer, the Company agrees to provide a right of rescission as
hereinafter set forth, which right shall be exercisable by the Purchaser and
any subsequent holders from time to time of the Purchaser's Special Warrants:
In the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise or deemed exercise of
his Special Warrants is or becomes entitled under applicable
securities legislation to the remedy of rescission by reason
of the Final Prospectus or any amendment thereto containing a
misrepresentation, such holder shall be entitled to rescission
not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder,
and shall be entitled in connection with such rescission to a
full refund of all consideration paid to the Company on the
acquisition of such Special Warrants. In the event such
holder is a permitted assignee of the interest of the original
Purchaser of such Special Warrants, such permitted assignee
shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were
such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special
Warrants under section 114 of the Securities Act (British
Columbia), section 130 of the Securities Act (Ontario) or a
corresponding provision of other securities legislation or
otherwise at law.
19. WAIVER OF RIGHTS OF WITHDRAWAL. The Purchaser expressly
waives and releases the Company and the Underwriters from all rights of
withdrawal to which it might otherwise be entitled pursuant to section 66(3) of
the Securities Act (British Columbia), section 71(2) of the Securities Act
(Ontario) or a corresponding provision of other securities legislation.
20. ASSIGNMENT. This Subscription Agreement and any interest
herein or any of the rights arising hereunder may be assigned only together
with a transfer of the Special Warrants purchased hereunder and in accordance
with applicable securities laws and the rules of any stock exchanges on which
the Common Shares are listed, and provided that the assignment is made and the
assignee resides either outside Canada or in one of the Qualifying
Jurisdictions and the assignee agrees to be bound by the terms and conditions
of this Subscription Agreement by completing and executing the Transfer Form
attached to the certificate representing the Special Warrants and delivering it
to the Company or the Trustee.
- 9 -
49
21. MISCELLANEOUS. The agreement resulting from the acceptance of
this offer by the Company contains the whole agreement between the Company, the
Underwriters and the Purchaser in respect of the subject matters hereof and
there are no warranties, representations, terms, conditions or collateral
agreements, express, implied or statutory, other than as expressly provided for
herein and in any amendments hereto. All representations, warranties,
agreements and covenants made or deemed to be made by the Purchaser herein will
survive the execution and delivery, and acceptance, of this offer and the
Closing. Time shall be of the essence of this Subscription Agreement. This
Subscription Agreement and the rights and obligations of the parties hereunder
will be governed by and construed according to the laws of the Province of
British Columbia. This Subscription Agreement may be executed in any number of
counterparts, each of which when delivered, either in original or facsimile
form, shall be deemed to be an original and all of which together shall
constitute one and the same document.
22. RELIANCE ON FACSIMILE. The Company and the Underwriters shall
be entitled to rely on delivery of a facsimile copy of this Subscription
Agreement, and acceptance by the Company of a facsimile copy of this
Subscription Agreement shall create a legal, valid and binding agreement
between the Purchaser and the Company in accordance with the terms hereof.
23. LANGUAGE. The Purchaser acknowledges its consent and request
and the parties hereto agree that all documents evidencing or relating in any
way to its purchase of Special Warrants be drawn up in the English language
only. Nous reconnaissons par les presentes avoir consenti et demande que tous
les documents faisant foi ou se rapportant de quelque maniere a notre achat
soient rediges en anglais seulement.
IN WITNESS WHEREOF the undersigned executes and agrees to be
bound by this Subscription Agreement by executing the Signature Page and
Registration and Delivery Instructions attached as page 11 hereto on the date
therein indicated.
NOTE: PURCHASER MUST EXECUTE AND COMPLETE ATTACHED SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
A C C E P T A N C E
The foregoing is acknowledged, accepted and agreed to this
____ day of April, 1996.
GRANGES INC.
Per:
--------------------------------------
Title:
SCOTIAMCLEOD INC. on behalf of the
Underwriters
Per:
--------------------------------------
- 10 -
50
SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
(PURCHASER TO COMPLETE)
ISSUER: Granges Inc. ISSUE: Special Warrants exchangeable for Common
Shares and Warrants.
NUMBER OF SPECIAL WARRANTS:
-------------------
TOTAL PURCHASE PRICE: $
------------------
SIGNATURE OF PURCHASER: Dated April ____, 1996
-------------------------
Name of Purchaser
Per:
---------------------
Title:
NAME AND ADDRESS OF PURCHASER:
Name: Address:
-------------------------- ---------------------------
(Street Address)
-------------------------- ---------------------------
(City and Province or Country)
---------------------------
(Postal Code)
REGISTRATION INSTRUCTIONS: If other than in the name of the Purchaser:
Name: Address:
-------------------------- ---------------------------
(Street Address)
-------------------------- ---------------------------
(City and Province or Country)
---------------------------
(Postal Code)
DELIVERY INSTRUCTIONS: If other than to the Purchaser at its address above:
Name: Address:
-------------------------- ---------------------------
(Street Address)
Contact Name:
------------------ ---------------------------
(City and Province or Country)
Telephone No.:
------------------ ---------------------------
(Postal Code)
NAME OF PORTFOLIO ADVISOR (MONEY MANAGER):
-------------------------------
GOVERNING "ELIGIBILITY FOR INVESTMENT" STATUTE:
--------------------------
THE TOTAL PURCHASE PRICE (IN THE AMOUNT SPECIFIED ABOVE) MUST BE PAID TO
SCOTIAMCLEOD INC. BY CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON OR BEFORE
THE CLOSING DATE TO OR TO THE ORDER OF "SCOTIAMCLEOD INC.". THE CERTIFIED
CHEQUE OR BANK DRAFT MUST BE DELIVERED TO SCOTIAMCLEOD INC. PRIOR TO 3:00 P.M.
ON APRIL 24, 1996.
- 11 -
51
EXHIBIT I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities
GRANGES INC.
(b) Number and Class of Securities to be Purchased
_______________ Special Warrants
(c) Purchase Price
$2.60 per Special Warrant
2. DETAILS OF PURCHASER
(a) Name of Purchaser
---------------------------------------------------------------
(b) Address
---------------------------------------------------------------
---------------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
52
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c)
above) an insider of the Issuer for the purposes of the
Ontario Securities Act (before giving effect to this private
placement)? If so, state the capacity in which the Purchaser
(or person named in response to 2(c)) qualifies as an insider.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give
details.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in
the securities of the Issuer (other than debt securities which
are not convertible into equity securities), directly or
indirectly, within the 60 days preceding the date hereof.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
- 2 -
53
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for the period that
ends on the earlier of:
(a) six months from the date of the closing of the transaction
herein or for such period as is prescribed by applicable
securities legislation, whichever is longer, and
(b) the date that a receipt for a final prospectus relating to the
said securities or securities derived therefrom has been
issued by the Ontario Securities Commission,
without the prior consent of The Toronto Stock Exchange and any other
regulatory body having jurisdiction.
Dated at ____________________, this _____ day of April, 1996.
-------------------------------------------
(Name of Purchaser - please print)
-------------------------------------------
(Authorized Signature)
-------------------------------------------
(Official Capacity - please print)
-------------------------------------------
(please print here name of individual whose
signature appears above, if different from
name of Purchaser printed above)
- 3 -
54
EXHIBIT II
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Granges Inc. (the "Issuer")
_____________ Special Warrants (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I (CIRCLE ONE) have/have not received an offering memorandum
describing the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that: (CIRCLE ONE)
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the
date of the agreement of purchase and sale of the security, is
not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or
my annual net income before tax jointly with my spouse is not
less than $125,000, in each of the two most recent calendar
years, and I reasonably expect to have annual net income
before tax of not less than $75,000 or annual net income
before tax jointly with my spouse of not less than $125,000 in
the current calendar year, OR
55
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director
of the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a
person (NAME OF REGISTERED PERSON: (THE "REGISTERED PERSON))
who has advised me that the Registered Person is registered to
trade or advise in the Securities and that the purchase of the
Securities is a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d),1
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: (CIRCLE ONE)
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person (NAME OF ADVISER:
_________________ (THE "ADVISER")) who has advised me that the
Adviser is:
(i) registered to advise, or exempted from the
requirement to be registered to advise, in respect of
the Securities, and
(ii) not an insider of, or in a special relationship
with, the Issuer.
The statements made in this report are true.
DATED April _______, 1996.
-------------------------------------------
Signature of Purchaser
-------------------------------------------
Name of Purchaser
-------------------------------------------
-------------------------------------------
Address of Purchaser
- 2 -
56
SCHEDULE E
PURCHASE AGREEMENT
A COMPLETED AND ORIGINALLY EXECUTED COPY OF THIS PURCHASE AGREEMENT, THE
ATTACHED PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING AND (IF THE PURCHASER
IS AN INDIVIDUAL) THE ATTACHED FORM 20A (IP) MUST BE DELIVERED BY NO LATER THAN
12:00 NOON ON APRIL 22, 1996 TO SCOTIAMCLEOD (USA) INC., AS PLACEMENT AGENT ON
BEHALF OF THE UNDERWRITERS, AT THE FOLLOWING ADDRESS:
ScotiaMcLeod (USA) Inc.
1 Liberty Plaza
25th Floor
165 Broadway
New York, NY
10006
Attention: Stacey Siegel
Tel: (212) 225-6604
Fax: (212) 225-6615
- --------------------------------------------------------------------------------
TO: SCOTIAMCLEOD (USA) INC.
AS PLACEMENT AGENT ON BEHALF OF THE UNDERWRITERS
AND TO: SCOTIAMCLEOD INC.
FIRST MARATHON SECURITIES LIMITED
YORKTON SECURITIES INC.
GOEPEL SHIELDS & PARTNERS INC.
AND TO: GRANGES INC.
1. PURCHASE. The undersigned (the "Purchaser") hereby tenders to
ScotiaMcLeod (USA) Inc., as private placement agent (the "Placement Agent") for
ScotiaMcLeod Inc. ("SMI"), First Marathon Securities Limited, Yorkton
Securities Inc. and Goepel Shields & Partners Inc. ("collectively, the
"Underwriters"), this offer to purchase which, upon acceptance by the Placement
Agent on behalf of the Underwriters, will constitute an agreement (the
"Purchase Agreement") of the Purchaser to take up, purchase and pay for, and,
on the part of the Placement Agent on behalf of the Underwriters, to transfer
and sell to the Purchaser, the number of Special Warrants of Granges Inc. (the
"Company") set out on page 12 hereof (the "Purchaser's Special Warrants") at
the price (the "Purchase Price") of Cdn. $2.60 per Special Warrant, all on the
terms and subject to the conditions set forth in this Purchase Agreement.
2. UNDERWRITTEN PRIVATE PLACEMENT. The Purchaser acknowledges
that the Purchaser's Special Warrants will be issued in connection with the
creation, issue and sale of an aggregate of 7,690,000 Special Warrants of the
Company for an aggregate subscription price of Cdn. $19,994,000 to be sold by
the Company by private placement pursuant to an agreement (the "Underwriting
Agreement") dated as of April 15, 1996 among the Company and the Underwriters
and that the definitive terms and conditions of the Special Warrants will be
set forth in the Special Warrant Indenture referred to in paragraph 4 below.
The Underwriters have an option (the "Option") exerciseable prior to the
Closing Date (defined below) to increase the number of Special Warrants to be
issued by the Company by up to an additional 2,010,000 Special Warrants for a
total subscription price of Cdn. $25,220,000.
57
3. CERTAIN DEFINITIONS. As used in this Purchase Agreement,
unless the context otherwise requires:
(a) "BUSINESS DAY" means a day which is not a Saturday, a Sunday
or a statutory holiday in the Provinces of British Columbia or
Ontario;
(b) "CLOSING" means the completion of the issue and sale by the
Company and the purchase by the Purchasers (including the Purchaser)
of the Special Warrants pursuant to the Underwriting Agreement and the
Subscription Agreements (including this Purchase Agreement);
(c) "CLOSING DATE" means April 25, 1996 or such other date as the
Company and the Underwriters may agree pursuant to the Underwriting
Agreement;
(d) "CLOSING TIME" means 7:30 a.m. (Vancouver time) on the Closing
Date or such other time on the Closing Date as the Company and the
Underwriters may agree pursuant to the Underwriting Agreement;
(e) "COMMON SHARES" means common shares without par value in the
capital of the Company;
(f) "EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the fifth
business day after the earlier of (i) the Qualification Date and (ii)
the Qualification Deadline;
(g) "FINAL PROSPECTUS" means a final prospectus or final short
form prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(h) "PRELIMINARY PROSPECTUS" means a preliminary prospectus or
preliminary short form prospectus of the Company relating to the
distribution of the Underlying Securities and, unless the context
otherwise requires, includes any amendment or supplement thereto, any
information or documents incorporated by reference therein and any
French language version thereof;
(i) "PROSPECTUSES" means the Preliminary Prospectus and the Final
Prospectus;
(j) "PURCHASERS" means the Underwriters, as the initially
committed Purchasers, and the Substitute Purchasers, if any;
(k) "QUALIFICATION DATE" means the day on which a receipt is
issued for the Final Prospectus by the last of the Securities
Commissions to issue a receipt for the Final Prospectus;
(l) "QUALIFICATION DEADLINE" means the day that is 90 days after
the Closing Date or such later date as the Underwriters may determine
in a written notice given to the Company and the Trustee provided that
the Underwriters have obtained the written consent thereto of each of
the Substitute Purchasers who purchased Special Warrants at the
Closing and have not resold their Special Warrants;
(m) "QUALIFYING JURISDICTIONS" means the Provinces of British
Columbia and Ontario and such other provinces of Canada which are
designated by the Underwriters by written notice given to the Company
not less than two business days prior to the Closing Date;
(n) "REGULATION D" means Regulation D adopted by the SEC pursuant
to the U.S. Securities Act;
(o) "REGULATION S" means Regulation S adopted by the SEC pursuant
to the U.S. Securities Act;
- 2 -
58
(p) "SEC" means the United States Securities and Exchange
Commission;
(q) "SECURITIES" means the Special Warrants, the Underlying
Securities and the Warrant Shares;
(r) "SECURITIES COMMISSIONS" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
(s) "SPECIAL WARRANTS" means the 7,690,000 special warrants of the
Company (and if the Option is exercised by the Underwriters, up to an
additional 2,010,000 special warrants of the Company) to be created
and issued pursuant to the Special Warrant Indenture and to be sold by
the Company pursuant to the Underwriting Agreement;
(t) "SPECIAL WARRANT INDENTURE" has the meaning attributed thereto
in paragraph 4 hereof;
(u) "SUBSCRIPTION AGREEMENTS" means the subscription agreements or
purchase agreements to be entered into among the Substitute Purchasers
of Special Warrants, the Company and the Underwriters (and, in the
case of purchase agreements, the Placement Agent) in respect of the
purchase and sale of the Special Warrants;
(v) "SUBSTITUTE PURCHASERS" means purchasers of any Special
Warrants who, at the Closing, purchase such Special Warrants in the
place and stead of the Underwriters or purchase such Special Warrants
from the Underwriters through the Placement Agent;
(w) "TRUSTEE" means Montreal Trust Company of Canada, as trustee
under the Special Warrant Indenture or the Warrant Indenture, as the
case may be;
(x) "UNDERLYING SECURITIES" means the Common Shares and Warrants
from time to time issuable upon the exercise or deemed exercise of the
Special Warrants;
(y) "U.S. PERSON" has the meaning given to such term in Regulation
S;
(z) "U.S. SECURITIES ACT" means the United States Securities Act
of 1933, as amended;
(aa) "WARRANTS" means the common share purchase warrants of the
Company having the attributes and characteristics specified in
paragraph 4 hereof;
(ab) "WARRANT INDENTURE" has the meaning attributed thereto in
paragraph 4 hereof; and
(ac) "WARRANT SHARES" means the Common Shares from time to time
issuable upon the exercise of the Warrants.
4. SPECIAL WARRANTS. The Purchaser understands and acknowledges
that the Special Warrants and the Warrants will be issued under and governed by
a special warrant indenture (the "Special Warrant Indenture") and a warrant
indenture (the "Warrant Indenture"), respectively, each to be dated as of the
Closing Date and made between the Company and the Trustee, as trustee
thereunder, and to contain provisions to the following effect:
(a) RIGHT TO COMMON SHARES AND WARRANTS. Each Special Warrant
will entitle the holder thereof, upon the exercise or deemed exercise
thereof and without payment of any additional consideration, to be
issued one Common Share and one-half of one Warrant, subject to
adjustment as provided in the Special Warrant Indenture.
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(b) WARRANTS. Each Warrant will entitle the holder thereof,
during the period commencing on the date of its issue and ending 4:30
p.m. (Vancouver time) on October 31, 1997, to purchase one Common
Share from the Company at a price of Cdn. $3.00, subject to
adjustment as provided in the Warrant Indenture.
(c) EXERCISE. Each holder of Special Warrants will be entitled to
exercise his Special Warrants during the period commencing on the
Closing Date and ending at the Expiry Time.
(d) RETRACTION. If the Qualification Date has not occurred on or
before the Qualification Deadline, each holder of Special Warrants
will be entitled, during the period commencing on the first business
day after the Qualification Deadline and ending at the Expiry Time, to
surrender his Special Warrants to the Trustee for cancellation and
receive repayment of the original issue price of Cdn. $2.60 per
Special Warrant plus such holder's proportionate share of the interest
earned by the Trustee on the funds deposited in escrow referred to in
paragraph 8 below from the Closing Date to and including the day
immediately preceding the date of payment.
(e) DEEMED EXERCISE. Any Special Warrant not exercised (unless
surrendered as provided in clause (d) above) prior to the Expiry Time
will be deemed to have been exercised immediately prior to the Expiry
Time (without any further action on the part of the holder thereof or
the Company) whether or not the Qualification Date has occurred and
subject to applicable securities laws.
(f) NOTICES. Upon the occurrence of the Qualification Date or if
the Qualification Date has not occurred on or before the Qualification
Deadline, the Company will, in either case, forthwith, and in any
event not later than the second business day thereafter, give written
notice thereof to the Trustee and the Trustee will forthwith give
written notice thereof to the holders of Special Warrants.
(g) OTHER PROVISIONS. The provisions of the Special Warrant
Indenture and the Warrant Indenture and the attributes and
characteristics of the Special Warrants and the Warrants respectively
provided for therein shall be substantially as described herein, with
such changes thereto as the Underwriters and the Company may agree to,
and otherwise the Special Warrant Indenture and the Warrant Indenture
shall be in such form and contain such terms and provisions (including
customary anti-dilution provisions) as are satisfactory to the Company
and the Underwriters, acting reasonably.
5. CLOSING OF PURCHASE. The Purchaser acknowledges and agrees
that the Closing shall be completed at the place and in the manner set forth in
the Underwriting Agreement at the Closing Time. The Purchaser hereby
irrevocably appoints and authorizes SMI on behalf of the Underwriters to act as
its agent to represent it at the Closing for the purpose of all closing
matters, including the execution and completion of all documents as required or
deemed necessary and the approval of all opinions, certificates and other
documents addressed to the Purchaser, and for the purpose of all deliveries of
documents and payment of funds and the Purchaser hereby authorizes the
Underwriters to extend such time periods (except the Qualification Deadline)
and modify or waive such conditions as may be contemplated herein or in the
Underwriting Agreement as the Underwriters, in their absolute discretion, may
deem appropriate. The Purchaser hereby irrevocably authorizes SMI to correct
manifest errors or omissions in the information provided by the Purchaser in
this Purchase Agreement, the Private Placement Questionnaire and Undertaking
(attached as Exhibit I hereto) and (if the Purchaser is an individual) the Form
20A (IP) (attached as Exhibit II hereto). The Purchaser will take up, purchase
and pay for the Purchaser's Special Warrants at the Closing upon acceptance of
this offer by the Placement Agent on behalf of the Underwriters and the
satisfaction by the Company, or waiver by the Underwriters, of the conditions
referred to in paragraph 6 below.
6. CONDITIONS OF CLOSING. The obligations of the Purchaser to
complete the purchase of the Purchaser's Special Warrants as contemplated
hereby shall be conditional upon the fulfilment at or before the Closing Time
of each of the conditions of the Closing set forth in the Underwriting
Agreement except those conditions that are waived by the Underwriters.
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7. PAYMENT AND DELIVERY. Prior to 3:00 p.m. on April 24, 1996,
the Purchaser will deliver to the Placement Agent, at its address set forth on
page 1 hereof (or to such other person or at such other address as the
Placement Agent may direct by notice to the Purchaser), a certified cheque or
bank draft made payable on or before the Closing Date to or to the order of
"ScotiaMcLeod (USA) Inc." in an amount equal to the total Purchase Price for
the Purchaser's Special Warrants as set forth on page 12 hereof (the
"Subscription Funds") or will make such other arrangements for the payment of
the Subscription Funds as may be acceptable to the Placement Agent. The
Purchaser acknowledges and agrees that this offer, the Subscription Funds and
any other documents delivered in connection herewith will be delivered to and
held by SMI until such time as the conditions referred to in paragraph 6 above
are satisfied by the Company or waived by the Underwriters. Upon such
satisfaction or waiver, at the Closing SMI will, on behalf of the Purchaser,
deliver this offer and any other documents required to be delivered in
connection herewith to the Placement Agent and will pay to the Placement Agent
the Subscription Funds and, subject to paragraph 9 below, the Placement Agent,
on behalf of the Underwriters, will thereupon transfer and sell the Purchaser's
Special Warrants to the Purchaser and cause to be issued and delivered to the
Purchaser, in accordance with its "Delivery Instructions" on page 12 hereof, a
definitive certificate representing the Purchaser's Special Warrants registered
in the name of the Purchaser (or in such other name or names as are set forth
under "Registration Instructions" on page 12 hereof). In the event that this
offer is not accepted by the Placement Agent or the conditions referred to in
paragraph 6 above are not satisfied by the Company, or waived by the
Underwriters, within the time therein provided, this offer, the Subscription
Funds and any other documents delivered in connection herewith will be returned
to the Purchaser at the address under "Name and Address of Purchaser" set forth
on page 12 hereof.
8. DEPOSIT OF GROSS PROCEEDS IN ESCROW. The Purchaser
acknowledges that the aggregate subscription price for the Special Warrants to
be paid to the Company at the Closing will be deposited with the Trustee at the
Closing to be held in escrow and invested by the Trustee in accordance with the
terms of the Special Warrant Indenture and that the Special Warrant Indenture
will contain provisions to the effect that such deposited funds and interest
earned thereon (i) if the Qualification Date occurs on or before the
Qualification Deadline, will be released from escrow and paid by the Trustee to
the Company as soon as practicable after the Company delivers a written
certificate to the Trustee to the effect that the Qualification Date has so
occurred or (ii) if the Qualification Date has not occurred on or before the
Qualification Deadline, will initially be applied by the Trustee to repay to
any holder of Special Warrants, who exercises the right referred to in clause
(d) of paragraph 4 above to surrender his Special Warrants for cancellation,
the original issue price of such Special Warrants together with such holder's
proportionate share of such interest and, after all amounts due to holders of
Special Warrants who exercise such right have been paid or provided for, the
remaining balance of such deposited funds and interest thereon will be released
from escrow and paid by the Trustee to the Company.
9. ACCEPTANCE OR REJECTION. The Placement Agent, on behalf of
the Underwriters, will have the right to accept this offer at any time at or
prior to the Closing Time, but will only be entitled to reject this offer if,
at the Closing Time, the Purchaser's Special Warrants shall not have been
issued and sold by the Company and purchased by the Underwriters or if it would
be unlawful for the Placement Agent to accept this offer. Notwithstanding the
foregoing, the Purchaser acknowledges and agrees that the acceptance of this
offer will be conditional upon the sale of the Purchaser's Special Warrants to
the Purchaser being exempt from any registration, prospectus or offering
memorandum requirements of all applicable securities laws.
10. INFORMATION AND DOCUMENTS. The Purchaser will, as soon as
practicable and in any event by no later than noon on April 22, 1996, deliver
or arrange to have delivered to the Placement Agent, at its address set forth
on page 1 hereof (or to such other person or at such other address as the
Placement Agent may direct by notice to the Purchaser), completed and
originally executed copies of the Private Placement Questionnaire and
undertaking (attached as Exhibit I hereto) and, if the Purchaser is an
individual, the Form 20A(IP) (attached as Exhibit II hereto) and will, promptly
upon request by the Company, the Placement Agent or the Underwriters, provide
the Company, the Placement Agent or the Underwriters with such information and
execute and deliver to the Company, the Placement Agent or the Underwriters
such additional undertakings, questionnaires and other documents as the
Company, the Placement Agent or the Underwriters may request and as may be
required in
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connection with the issue and sale of the Special Warrants and the filing of
the Prospectuses. The Purchaser acknowledges and agrees that such
undertakings, questionnaires and other documents, when executed and delivered
by the Purchaser, will form part of and will be incorporated into this
Purchase Agreement with the same effect as if each constituted a
representation and warranty or covenant of the Purchaser hereunder in favour
of the Company, the Placement Agent and the Underwriters. The Purchaser
consents to the filing of such documents as may be required to be filed with
any stock exchange or securities regulatory authority in connection with the
transactions contemplated hereby. The Purchaser acknowledges and agrees that
the Underwriters or the Company or both may be required to provide to
applicable securities regulatory authorities or to The Toronto Stock Exchange
a list setting forth the identities of the beneficial purchasers of the
Special Warrants (on a confidential basis except in the Province of British
Columbia). Notwithstanding that the Purchaser may be purchasing Special
Warrants as an agent on behalf of an undisclosed principal, the Purchaser
agrees to provide, on request, particulars as to the identity of such
undisclosed principal as may be required by the Underwriters or the Company or
both in order to comply with the foregoing.
11. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser
represents and warrants to the Company, the Placement Agent and the
Underwriters, as representations and warranties that are true as of the date of
this offer and will be true as of the date of this Purchase Agreement and as of
the Closing Date, and the Purchaser agrees with each of such persons, that:
(a) AUTHORIZATION AND EFFECTIVENESS. If the Purchaser is a
corporation, the Purchaser is a valid and subsisting corporation, has
the necessary corporate capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect
thereof, or, if the Purchaser is an individual or a partnership,
syndicate or other form of unincorporated organization, the Purchaser
has the necessary legal capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has obtained all necessary approvals in respect thereof,
and, in either case, upon acceptance by the Placement Agent, this
offer constitutes a legal, valid and binding contract of the Purchaser
enforceable against the Purchaser in accordance with its terms.
(b) RESIDENCE. The Purchaser is a U.S. Person and is a resident
of the jurisdiction referred to under "Name and Address of Purchaser"
on page 12 hereof and is not (and is not purchasing the Purchaser's
Special Warrants for the account of) a Canadian resident.
(c) PURCHASING AS PRINCIPAL. Except to the extent contemplated in
clause (e) below, the Purchaser is purchasing the Purchaser's Special
Warrants (and the Underlying Securities in respect thereof) as
principal (as defined in applicable securities legislation) for its
own account, and not for the benefit of any other person.
(d) PURCHASING FOR INVESTMENT ONLY. The Purchaser is purchasing
the Purchaser's Special Warrants (and the Underlying Securities in
respect thereof) for investment only and not with a view to resale or
distribution.
(e) PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase
by the Purchaser of the Purchaser's Special Warrants as agent or
trustee for any principal whose identity is disclosed or undisclosed
or identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, is
purchasing its Purchaser's Special Warrants (and the Underlying
Securities in respect thereof) as principal for its own account, and
not for the benefit of any other person, for investment only and not
with a view to resale or distribution, and the Purchaser has due and
proper authority to act as agent or trustee for and on behalf of such
beneficial purchaser in connection with the transactions contemplated
hereby.
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62
(f) PURCHASER HAS BENEFIT OF CANADIAN PRIVATE PLACEMENT
EXEMPTIONS. The Purchaser, and in the case of the purchase by the
Purchaser of the Purchaser's Special Warrants as agent or trustee for
any principal whose identity is disclosed or undisclosed or
identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, is
purchasing as principal a sufficient number of Special Warrants so
that the aggregate acquisition costs of the Purchaser or beneficial
purchaser will not be less than Cdn. $97,000.
(g) U.S. PRIVATE PLACEMENT EXEMPTION. The Purchaser is aware that
the Securities have not been and will not be registered under the U.S.
Securities Act or the securities laws of any state and the sale
contemplated thereby is being made in reliance on a private placement
exemption to Institutional Accredited Investors (as defined below) and
pursuant to exemptions from the registration requirements of
applicable state securities laws.
(h) INSTITUTIONAL ACCREDITED INVESTOR. The Purchaser is an
institutional "accredited investor" as defined in Rule 501(a)(1), (2),
(3) or (7) under the U.S. Securities Act ("Institutional Accredited
Investor") and it is acquiring the Purchaser's Special Warrants and
the related other Securities for its own account for an aggregate
purchase price of at least U.S $250,000 or for the account of one or
more Institutional Accredited Investors with respect to which it
exercises sole investment discretion (where each such account is
purchasing Special Warrants for such an aggregate purchase price), and
not with a view to any resale, distribution or other disposition of
such Securities in violation of the United States federal or state
securities laws.
(i) NO GENERAL SOLICITATION OR ADVERTISING. The Purchaser
acknowledges that it has not purchased the Purchaser's Special
Warrants as a result of any general solicitation or general
advertising, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media
or broadcast over radio or television, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(j) INFORMATION AVAILABILITY. The Purchaser has received a copy of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, for its information only, together with a U.S.
covering memorandum, and has had access to such additional
information, if any, concerning the Company as it has considered
necessary in connection with its decision to invest in the Purchaser's
Special Warrants.
(k) INVESTMENT SUITABILITY. The Purchaser has such knowledge and
experience in business matters as to be capable of evaluating the
merits and risks of its investment in the Purchaser's Special Warrants
and is able to bear the economic risks of such investment.
(l) RESALE. The Purchaser understands and agrees that if it
decides to offer, sell or otherwise transfer the Purchaser's Special
Warrants or the related other Securities, such Special Warrants and
other Securities may be offered, sold or otherwise transferred only
(A) to the Company, (B) outside the United States in accordance with
Rule 904 of Regulation S under the U.S. Securities Act and in
compliance with applicable local laws and regulations, or (C) inside
the United States (i) if (x) the sale is to an Institutional
Accredited Investor and is of a number of such Special Warrants or
other Securities having an aggregate market value at the time of such
sale of not less than U.S. $250,000, (y) a purchaser's letter
containing representations, warranties and covenants similar to those
contained in clauses (g) through (n) of this paragraph 11 (except such
purchaser's letter need not contain the representation set forth in
clause (j) above), satisfactory to the Placement Agent and the
Company, is executed by the purchaser and delivered to the Placement
Agent and the Company prior to the sale and (z) all offers or
solicitations in connection with the sale are arranged and conducted
solely by the Placement Agent or the Company, (ii) in accordance with
the exemption from registration under the U.S. Securities Act provided
by Rule 144 thereunder, if available, or (iii) if the sale is a
transaction that does not require registration under the U.S.
Securities Act or any applicable United States state laws and
regulations governing the offer and sale of securities, and it has
therefore furnished
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to the Placement Agent and the Company an opinion of counsel of
recognized standing reasonably satisfactory to the Placement Agent
and the Company.
(m) LEGEND. The Purchaser understands and acknowledges that upon
the original issuance thereof, and until such time as the same is no
longer required under applicable requirements of the U.S. Securities
Act or applicable state laws, the certificates representing the
Purchaser's Special Warrants, and all certificates issued in exchange
therefor or in substitution thereof, including certificates
representing the related Securities, shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN
ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES
ACT, IF AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN
A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF
CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE
OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT;"
provided, that if any such Special Warrants or other Securities, as
the case may be, are being sold under subclause (l)(B) above, such
legend may be removed by providing a declaration to Montreal Trust
Company of Canada as registrar and transfer agent, in the following
form (or in such form as the Company may prescribe from time to time):
"The undersigned (A) acknowledges that the sale of the securities,
represented by certificate numbers ____________, to which this
declaration relates is being made in reliance on Rule 904 of
Regulation S under the United States Securities Act of 1933, as
amended (the "Securities Act") and (B) certifies that (1) it is not an
"affiliate" of Granges Inc. (as defined in Rule 405 under the
Securities Act), (2) the offer of such securities was not made to a
person in the United States and either (a) at the time the buy order
was originated, the buyer was outside the United States, or the seller
and any person acting on its behalf reasonably believed that the buyer
was outside the United States or (b) the transaction was executed on
or through the facilities of The Toronto Stock Exchange and neither
the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States and
(3) neither the seller nor any person acting on its behalf engaged in
any directed selling efforts in connection with the offer and sale of
such securities. Terms used herein have the meanings given to them by
Regulation S."
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and provided further, that if any such Special Warrants or other
Securities, as the case may be, are being sold under subclause
11(l)(C)(ii) above, such legend may be removed by delivery to Montreal
Trust Company of Canada of an opinion of counsel, of recognized
standing reasonably satisfactory to the Company, to the effect that
such legend is no longer required under the applicable requirements
of the U.S. Securities Act or state securities laws.
(n) TRANSFER RESTRICTIONS. The Purchaser consents to the Company
making a notation on its records or giving instructions to any
transfer agent or trustee of the Securities in order to implement the
restrictions on transfer set forth and described herein.
(o) ABSENCE OF OFFERING MEMORANDUM. The offering and sale of the
Purchaser's Special Warrants to the Purchaser were not, so far as the
Purchaser is aware, made through an advertisement of the Special
Warrants in printed media of general and regular paid circulation,
radio or television or any other form of advertisement or as part of a
general solicitation and, except for this Purchase Agreement, the only
documents, if any, delivered or otherwise furnished to the Purchaser
in connection with such offering and sale were the Term Sheet
(attached as Exhibit III hereto) and annual or interim reports and
other documents the contents of which are prescribed by statute or
regulation and generally available research reports, memoranda and
other materials concerning the Company prepared by others, which
documents the Purchaser acknowledges do not, individually or
collectively, constitute an offering memorandum or similar document
(including an offering memorandum as such term is defined in section
32(1) of the Regulation to the Securities Act (Ontario)) and have not
been independently verified by the Placement Agent or the
Underwriters. The Purchaser acknowledges and agrees that the Company,
the Placement Agent and the Underwriters take no responsibility for
the accuracy or completeness of the information contained in any such
research reports, memoranda or other materials concerning the Company.
(p) NO UNDISCLOSED INFORMATION. The Purchaser's Special Warrants
are not being purchased by the Purchaser as a result of any material
information concerning the Company that has not been publicly
disclosed and the Purchaser's decision to tender this offer and
acquire the Purchaser's Special Warrants has not been made as a result
of any verbal or written representation as to fact or otherwise made
by or on behalf of the Company, the Placement Agent, the Underwriters
or any other person and is based entirely upon currently available
public information concerning the Company.
(q) OWNERSHIP OF COMMON SHARES. The Purchaser, together with any
of the Purchaser's affiliates or associates or any other person with
whom the Purchaser is acting jointly or in concert, after giving
effect to the exercise of any Special Warrants (and the Warrants
issuable thereunder) being purchased by the Purchaser and such
persons, will not beneficially own more than 9,236,332 Common Shares.
12. NO INVESTIGATION BY UNDERWRITERS. The Purchaser acknowledges
and agrees that neither the Placement Agent nor the Underwriters assume any
responsibility or liability of any nature whatsoever for the accuracy or
adequacy of any publicly available information concerning the Company or as to
whether all information concerning the Company required to be disclosed by it
has been generally disclosed. The Purchaser further acknowledges and agrees
that neither the Placement Agent nor the Underwriters have engaged in or
conducted any independent investigation with respect to the Company or any such
information.
13. ADDITIONAL RESALE RESTRICTIONS. The Purchaser understands and
acknowledges that the Purchaser's Special Warrants (and, if the Purchaser's
Special Warrants are exercised or deemed to be exercised before the
Qualification Date, the Underlying Securities issued upon such exercise or
deemed exercise and the Warrant Shares issuable upon the exercise of the
Warrants) will be subject to certain resale restrictions under applicable
Canadian securities laws and the Private Placement Questionnaire and
Undertaking (attached as Exhibit I hereto) and the Purchaser agrees to comply
with such restrictions. The Purchaser also acknowledges and understands that
it should consult its own legal advisors with respect to applicable resale
restrictions and that it is
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solely responsible (and that the Company, the Placement Agent and the
Underwriters are not in any manner responsible) for complying with such
restrictions.
14. NO REVOCATION. The Purchaser agrees that this offer is made
for valuable consideration and may not be withdrawn, cancelled, terminated or
revoked by the Purchaser.
15. INDEMNITY. The Purchaser agrees to indemnify and hold
harmless the Company, the Underwriters and the Placement Agent and their
respective directors, officers, employees, agents, advisors and shareholders
from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all fees, costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any claim, law suit, administrative proceeding or investigation whether
commenced or threatened) arising out of or based upon any representation or
warranty of the Purchaser contained herein or in any document furnished by the
Purchaser to the Company, the Underwriters or the Placement Agent in connection
herewith being untrue in any material respect or any breach or failure by the
Purchaser to comply with any covenant or agreement made by the Purchaser herein
or in any document furnished by the Purchaser to the Company, the Underwriters
or the Placement Agent in connection herewith.
16. MODIFICATION. Subject to paragraph 5 above, neither this
Purchase Agreement nor any provision hereof shall be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
17. BENEFIT OF CERTAIN REPRESENTATIONS. By its acknowledgement of
this offer, the Company covenants, agrees and confirms that the Purchaser will
have the benefit of all of the representations, warranties, covenants and
conditions provided to or for the benefit of the Purchasers by the Company
under the Underwriting Agreement.
18. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its
acknowledgement of this offer, the Company agrees to provide a right of
rescission as hereinafter set forth, which right shall be exercisable by the
Purchaser and any subsequent holders from time to time of the Purchaser's
Special Warrants:
In the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise or deemed exercise of
his Special Warrants is or becomes entitled under applicable
securities legislation to the remedy of rescission by reason
of the Final Prospectus or any amendment thereto containing a
misrepresentation, such holder shall be entitled to rescission
not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder,
and shall be entitled in connection with such rescission to a
full refund of all consideration paid to the Company on the
acquisition of such Special Warrants. In the event such
holder is a permitted assignee of the interest of the original
Purchaser of such Special Warrants, such permitted assignee
shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were
such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special
Warrants under section 114 of the Securities Act (British
Columbia), section 130 of the Securities Act (Ontario) or a
corresponding provision of other securities legislation or
otherwise at law.
19. WAIVER OF RIGHTS OF WITHDRAWAL. The Purchaser expressly
waives and releases the Company, the Placement Agent and the Underwriters from
all rights of withdrawal to which it might otherwise be entitled pursuant to
section 66(3) of the Securities Act (British Columbia), section 71(2) of the
Securities Act (Ontario) or a corresponding provision of other securities
legislation.
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66
20. ASSIGNMENT. This Purchase Agreement and any interest herein
or any of the rights arising hereunder may be assigned only together with a
transfer of the Special Warrants purchased hereunder and in accordance with
applicable securities laws and the rules of any stock exchanges on which the
Common Shares are listed, and provided that the assignment is made and the
assignee resides either outside Canada or in one of the Qualifying
Jurisdictions and the assignee agrees to be bound by the terms and conditions
of this Purchase Agreement by completing and executing the Transfer Form
attached to the certificate representing the Special Warrants and delivering
it to the Company or the Trustee.
21. MISCELLANEOUS. The agreement resulting from the acceptance of
this offer by the Placement Agent on behalf of the Underwriters contains the
whole agreement between the Placement Agent, the Company, the Underwriters and
the Purchaser in respect of the subject matters hereof and there are no
warranties, representations, terms, conditions or collateral agreements,
express, implied or statutory, other than as expressly provided for herein and
in any amendments hereto. All representations, warranties, agreements and
covenants made or deemed to be made by the Purchaser herein will survive the
execution and delivery, and acceptance, of this offer and the Closing. Time
shall be of the essence of this Purchase Agreement. This Purchase Agreement
and the rights and obligations of the parties hereunder will be governed by and
construed according to the laws of the Province of British Columbia. This
Purchase Agreement may be executed in any number of counterparts, each of which
when delivered, either in original or facsimile form, shall be deemed to be an
original and all of which together shall constitute one and the same document.
22. RELIANCE ON FACSIMILE. The Placement Agent, the Company and
the Underwriters shall be entitled to rely on delivery of a facsimile copy of
this Purchase Agreement, and acceptance by the Placement Agent of a facsimile
copy of this Purchase Agreement shall create a legal, valid and binding
agreement between the Purchaser and the Placement Agent in accordance with the
terms hereof.
IN WITNESS WHEREOF the undersigned executes and agrees to be
bound by this Purchase Agreement by executing the Signature Page and
Registration and Delivery Instructions attached as page 12 hereto on the date
therein indicated.
NOTE: PURCHASER MUST EXECUTE AND COMPLETE ATTACHED SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
A C C E P T A N C E
The foregoing is acknowledged, accepted and agreed to
this ____ day of April, 1996.
SCOTIAMCLEOD (USA) INC., as Placement Agent
on behalf of the Underwriters
Per:
---------------------------------------
SCOTIAMCLEOD INC. on behalf of the
Underwriters
Per:
---------------------------------------
GRANGES INC.
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67
Per:
---------------------------------------
Title:
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68
SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
(PURCHASER TO COMPLETE)
ISSUER: Granges Inc. ISSUE: Special Warrants exchangeable for Common
Shares and Warrants.
NUMBER OF SPECIAL WARRANTS:
-------------------------
TOTAL PURCHASE PRICE: Cdn. $
-------------------
SIGNATURE OF PURCHASER:
------------------------- Dated April ___, 1996
Name of Purchaser
Per:
---------------------
Title:
NAME AND ADDRESS OF PURCHASER:
Name: Address:
---------------------------- -----------------------------
(Street Address)
---------------------------- -----------------------------
(City and State)
-----------------------------
(Zip Code)
REGISTRATION INSTRUCTIONS: If other than in the name of the Purchaser:
Name: Address:
---------------------------- -----------------------------
(Street Address)
---------------------------- -----------------------------
(City and State)
-----------------------------
(Zip Code)
DELIVERY INSTRUCTIONS: If other than to the Purchaser at its address above:
Name: Address:
---------------------------- -----------------------------
(Street Address)
Contact Name:
-------------------- -----------------------------
(City and State)
Telephone No.:
------------------- -----------------------------
(Zip Code)
NAME OF PORTFOLIO ADVISOR (MONEY MANAGER):
--------------------------
THE TOTAL PURCHASE PRICE (IN THE AMOUNT SPECIFIED ABOVE) MUST BE PAID TO
SCOTIAMCLEOD (USA) INC. BY CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON OR
BEFORE THE CLOSING DATE TO OR TO THE ORDER OF "SCOTIAMCLEOD (USA) INC.". THE
CERTIFIED CHEQUE OR BANK DRAFT MUST BE DELIVERED TO SCOTIAMCLEOD (USA) INC.
PRIOR TO 3:00 P.M. ON APRIL 24, 1996.
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EXHIBIT I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities
GRANGES INC.
(b) Number and Class of Securities to be Purchased
_______________ Special Warrants
(c) Purchase Price
Cdn. $2.60 per Special Warrant
2. DETAILS OF PURCHASER
(a) Name of Purchaser
---------------------------------------------------------------
(b) Address
---------------------------------------------------------------
---------------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
70
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c)
above) an insider of the Issuer for the purposes of the
Ontario Securities Act (before giving effect to this private
placement)? If so, state the capacity in which the Purchaser
(or person named in response to 2(c)) qualifies as an insider.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give
details.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in
the securities of the Issuer (other than debt securities which
are not convertible into equity securities), directly or
indirectly, within the 60 days preceding the date hereof.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
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71
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for the period that
ends on the earlier of:
(a) six months from the date of the closing of the transaction
herein or for such period as is prescribed by applicable
securities legislation, whichever is longer, and
(b) the date that a receipt for a final prospectus relating to the
said securities or securities derived therefrom has been
issued by the Ontario Securities Commission,
without the prior consent of The Toronto Stock Exchange and any other
regulatory body having jurisdiction.
Dated at ____________________, this _____ day of April, 1996.
----------------------------------------
(Name of Purchaser - please print)
----------------------------------------
(Authorized Signature)
----------------------------------------
(Official Capacity - please print)
----------------------------------------
(please print here name of individual
whose signature appears above, if
different from name of Purchaser
printed above)
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72
EXHIBIT II
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Granges Inc. (the "Issuer")
____________ Special Warrants (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I (CIRCLE ONE) have/have not received an offering memorandum
describing the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that: (CIRCLE ONE)
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the
date of the agreement of purchase and sale of the security, is
not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or
my annual net income before tax jointly with my spouse is not
less than $125,000, in each of the two most recent calendar
years, and I reasonably expect to have annual net income
before tax of not less than $75,000 or annual
73
net income before tax jointly with my spouse of not less than
$125,000 in the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director
of the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a
person (NAME OF REGISTERED PERSON: (THE "REGISTERED PERSON))
who has advised me that the Registered Person is registered to
trade or advise in the Securities and that the purchase of the
Securities is a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d),1
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: (CIRCLE ONE)
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person (NAME OF ADVISER:
_________________ (THE "ADVISER")) who has advised me that the
Adviser is:
(i) registered to advise, or exempted from the
requirement to be registered to advise, in respect of
the Securities, and
(ii) not an insider of, or in a special relationship
with, the Issuer.
The statements made in this report are true.
DATED April _______, 1996.
----------------------------------------
Signature of Purchaser
----------------------------------------
Name of Purchaser
----------------------------------------
----------------------------------------
Address of Purchaser
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