AGENCY AGREEMENT
October 16, 2000
VoiceIQ Inc.
240 Riviera Dr.
Markham, Ontario
L3R 5M1
ATTENTION: MR. TERRY GRAHAM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Dear Sirs/Mesdames:
RE: OFFERING OF UP TO 3,000,000 COMMON SHARES OF VOICEIQ INC.
We, Thomson Kernaghan & Co. Limited and Haywood Securities Inc.
(collectively, the "AGENTS"), understand that VoiceIQ Inc. (the "CORPORATION")
desires to issue and sell up to 3,000,000 Common Shares of the Corporation (the
"OFFERED SHARES"), on the terms and conditions described herein.
Upon and subject to the terms and conditions set forth herein, the
Corporation hereby appoints the Agents and the Agents agrees to act, as the sole
and exclusive Agents of the Corporation, to effect the sale of the Offered
Shares (as such term is defined below) on a best efforts basis. It is understood
and agreed that the Agents shall act as Agents only and is under no obligation
to purchase any of the Offered Shares, although the Agents may subscribe for and
purchase Offered Shares if it so desires.
This offer is conditional upon and subject to the additional terms and
conditions attached hereto.
TABLE OF CONTENTS
Section 1 Interpretation.......................................................................1
Section 2 Purchase and Sale of Common Shares and Public Offering...............................3
Section 3 Appointment of Sub-Agent.............................................................4
Section 4 Covenants of the Agents..............................................................4
Section 5 Treasury Commission..................................................................4
Section 6 Public Offering......................................................................5
Section 7 Subscription Payments................................................................5
Section 8 Deliveries on Filing.................................................................5
Section 9 Covenants of the Corporation.........................................................6
Section 10 Representations as to Prospectus and Supplementary Material.........................9
Section 11 Representations and Warranties of the Corporation...................................9
Section 12 Conditions.........................................................................16
Section 13 Termination........................................................................21
Section 14 Indemnity..........................................................................22
Section 15 Contribution.......................................................................24
Section 16 Expenses...........................................................................26
Section 17 Closing............................................................................26
Section 18 Restrictions on Further Issues or Sales by the Corporation.........................27
Section 19 Notice.............................................................................27
Section 20 Interpretation.....................................................................29
(i)
-1-
SECTION 1 INTERPRETATION.
As used in this Agreement, unless there is something in the subject
matter or context inconsistent therewith:
"AGENTS" has the meaning given to it in the first paragraph above;
"AGENTS' MATTERS" has the meaning given to it in Section 10;
"AGREEMENT", "HEREIN", "HERETO", "HEREUNDER", "HEREOF", "HEREBY" and
similar expressions mean or refer to this agreement and the expression
"SECTION" or "PARAGRAPH" followed by a number or letter mean and refer
to the specified section or paragraph of this agreement;
"BUSINESS DAY" means a day that is not a Saturday, Sunday or any
statutory or municipal holiday in Toronto, Ontario;
"CANADIAN SECURITIES LAWS" means, collectively, the applicable
securities laws in each of the Qualifying Provinces and the respective
regulations, rules, rulings and orders made thereunder and the
applicable policy statements issued by the Regulatory Authorities;
"CLAIMS" has the meaning given to it in Section 14;
"CLOSING DATE" has the meaning given to it in Section 17;
"CLOSING TIME" has the meaning given to it in Section 17;
"COMMON SHARES" means common shares in the capital of the Corporation;
"COMPENSATION OPTIONS" means the compensation options qualified by the
Prospectus and issuable to the Agents which entitle the holders thereof
collectively to acquire such number of Common Shares equal to 10% of
the Offered Shares at the Offer Price;
"COMPENSATION SHARES" means, the Common Shares issuable on the exercise
of the Compensation Options;
"CORPORATION" has the meaning given to it in the first paragraph above;
"DISTRIBUTION" means "DISTRIBUTION" or "DISTRIBUTION TO THE PUBLIC" as
those terms are defined under Canadian Securities Laws;
"EXCHANGE" means the Canadian Venture Exchange;
"EXPENSES" has the meaning given to it in Section 16;
"FINANCIAL INFORMATION" means:
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(i) the section entitled "Selected Financial Information"
and the notes thereto in the Prospectus;
(ii) the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of
Operations" in the Prospectus;
(iii) the section entitled "Consolidated Capitalization"
and the notes thereto in the Prospectus;
(iv) the financial statements of International Neural
Machines Inc. and the notes thereto and the report of
the auditors thereon in the Prospectus; and
(v) the financial statements of VoiceIQ Inc. and the
notes thereto and the report of the auditors thereon
in the Prospectus.
"INM" means International Neural Machines Inc.;
"LOSSES" has the meaning given to it in Section 14;
"MATERIAL CHANGE", "MATERIAL FACT" and "MISREPRESENTATION" have their
respective meanings under Canadian Securities Laws;
"OFFER PRICE" has the meaning given to it in Section 2(1) or, when used
in connection with the exercise price of any Compensation Option, shall
mean $3.46;
"OFFERED SHARES" has the meaning given to it in the cover page of this
Agreement;
"OFFERING" means the offering of Offered Shares and Compensation
Options contemplated by the Prospectus;
"OFFERING PERIOD" means the period commencing on the date the receipt
for the Prospectus is issued by the last of the Regulatory Authorities
and ending on the Closing Date;
"PERSON" includes any individual, corporation, body corporate,
partnership, limited partnership trustee, unincorporated organization
or other entity and any government agency or instrumentality, and words
importing persons have a similar meaning;
"PRELIMINARY PROSPECTUS" means the amended and restated preliminary
prospectus of the Corporation dated September 13, 2000;
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"PRINCIPALS" means, collectively, Terry Graham, Kenneth G. Murton and
Larry A. Beard and "PRINCIPAL" means any one of the foregoing;
"PROSPECTUS" means the (final) prospectus of the Corporation to be
dated on or about October 16, 2000;
"PURCHASERS" means the persons who as purchasers acquire Offered
Shares, and any permitted assignees or transferees of such persons from
time to time;
"QUALIFYING PROVINCES" means, collectively, the provinces of British
Columbia, Alberta and Ontario;
"REGULATORY AUTHORITIES" means, collectively, the securities
commissions and similar regulatory authorities in the Qualifying
Provinces;
"SELLING GROUP" means members of any selling group, consisting of
registered dealers, formed by the Agents in connection with the
distribution of the Offered Shares;
"SUPPLEMENTARY MATERIAL" means, collectively, an amendment to the
Preliminary Prospectus or the Prospectus, any amended or supplemental
prospectus or any ancillary material, information, evidence, return,
report, application, statement or document which may be filed by or on
behalf of the Corporation or the Principals under Canadian Securities
Laws;
"TO THE BEST OF THE CORPORATION'S KNOWLEDGE" means the knowledge of the
Principals after making due enquiry; and
"TREASURY COMMISSION" has the meaning given to it in Section 5.
All capitalized terms used and not otherwise defined herein shall have
the meanings specified in the Prospectus. Words importing the singular number
only shall include the plural and vice versa, and words importing the use of any
gender shall include all genders.
SECTION 2 PURCHASE AND SALE OF COMMON SHARES AND PUBLIC OFFERING.
(1) Subject to the terms and conditions of this Agreement, the Agents
shall, during the Offering Period, solicit offers to purchase from
Purchasers, both directly and at their sole discretion through
sub-Agents lawfully authorized to sell the Offered Shares in the
Qualifying Provinces and the Corporation shall create, issue and sell
to the Purchasers, on Closing, 3,000,000 Common Shares at a price
(subject to Section 5 hereof) of $3.00 per Common Share (the "OFFER
PRICE").
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SECTION 3 APPOINTMENT OF SUB-AGENT.
The Agents shall be entitled, in connection with the sale of the
Offered Shares, to retain as sub-Agent a Selling Group and, if the Agents
retains such sub-Agent, the Agents may pay them such commissions as the Agents
in its sole discretion sees fit, provided that any such commission shall be for
the account of the Agents.
SECTION 4 COVENANTS OF THE AGENTS.
(1) The Agents covenant that the Offered Shares will be offered for sale to
the public only in the Qualifying Provinces or in those jurisdictions
outside of Canada where they may lawfully be offered for sale and only
at a price not exceeding the offering price per share set out on the
cover page of the Prospectus. The Agents shall cause a similar
undertaking to be contained in any agreement entered into by the
members of the Selling Group established in connection with the
distribution of the Offered Shares.
(2) The Agents shall, and shall require the Selling Group to agree to (a)
distribute the Offered Shares in a manner which complies with and
observes all applicable laws and regulations in each jurisdiction into
and from which they may offer to sell the Offered Shares or distribute
the Prospectus and any Supplementary Material in connection with the
distribution of the Offered Shares, and (b) deliver the Prospectus or
any Supplementary Material to any person in any jurisdiction other than
in the Qualifying Provinces only in a manner which will not require the
Corporation to comply with the registration, prospectus, filing or
other similar requirements under applicable securities laws of such
other jurisdictions.
(3) The Agents shall be entitled to assume that the Offered Shares and the
Compensation Options are qualified for distribution in the Qualifying
Provinces when the receipt for the Prospectus is issued by the
Regulatory Authorities in each of the Qualifying Provinces.
SECTION 5 TREASURY COMMISSION.
In consideration of the services rendered and to be rendered by the
Agents in connection with this transaction, including, without limitation: (i)
assisting in the preparation of the Preliminary Prospectus and the Prospectus,
together with any Supplementary Material and any similar document in order to
qualify the Offered Shares for distribution to the public in the Qualifying
Provinces; (ii) forming a Selling Group to facilitate the distribution of the
Offered Shares; (iii) distributing the Offered Shares both directly and through
such Selling Group; and (iv) performing administrative work in connection with
the distribution of the Offered Shares; the Corporation agrees to pay to the
Agents, as Thomson Kenaghan & Co. Limited shall direct, a commission equal to 8%
of the aggregate gross proceeds realized by the Corporation from the sale of the
Offered Shares (being $0.24 for each Offered Share
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sold) (the "TREASURY COMMISSION"). The Treasury Commission shall be exclusive of
the amounts to be paid to the Agents pursuant to Section 16 below.
SECTION 6 PUBLIC OFFERING.
The Corporation covenants and agrees with the Agents to execute or
procure the execution of all documents and to use its best efforts to take or
cause to be taken all steps as may be necessary or desirable to fulfill to the
satisfaction of Stikeman Elliott, counsel for the Agents, and Blake, Cassels &
Graydon LLP, counsel for the Corporation, acting reasonably, all legal
requirements (i) to qualify the Offered Shares for distribution in the
Qualifying Provinces through the Agents and the Selling Group, and (ii) to
qualify the Compensation Options for distribution to the public in the
Qualifying Provinces, each in accordance with the Canadian Securities Laws.
SECTION 7 SUBSCRIPTION PAYMENTS.
Subscription payments, if any, received by the Agents prior to the
Closing Date shall be deposited by the Agents in a segregated account. If, for
any reason, closing does not occur on the Closing Date (as such date may be
changed from time to time in accordance with Section 17) such subscription
payments, if any, shall be returned to subscribers without interest or
deduction.
SECTION 8 DELIVERIES ON FILING.
(1) Concurrently with the execution of this Agreement, the Corporation
shall cause to be delivered to the Agents without charge:
(a) the Prospectus in the English language and any documentation
supplemental thereto required to be filed under the applicable
laws of each of the Qualifying Provinces, in each case in form
and substance satisfactory to the Agents and approved, signed
and certified as required by Canadian Securities Laws;
(b) a copy of any other document required to be filed by the
Corporation under the laws of each of the Qualifying Provinces
in compliance with Canadian Securities Laws;
(c) a long-form comfort letter from the Corporation's auditors,
Grant Thornton LLP, in form and substance satisfactory to the
Agents, addressed to the Agents and the board of directors of
the Corporation and dated the date of the Prospectus,
verifying the financial and accounting information and other
numerical information contained in the Prospectus and matters
involving changes or developments thereto, and procedures in
that regard, since the respective dates as of which specified
financial, accounting or numerical information is given in the
Prospectus to a date not more than two Business Days prior to
the date of such letter, which letter shall be in addition to
the auditors' report contained in the
6
Prospectus and the auditors' comfort letter addressed to the
appropriate Regulatory Authorities; and
(d) a long-form comfort letter from INM's auditors, Ernst & Young
LLP, in form and substance satisfactory to the Agents,
addressed to the Agents and the board of directors of INM and
dated the date of the Prospectus, verifying the financial and
accounting information and other numerical information
contained in the Prospectus and matters involving changes or
developments thereto, and procedures in that regard, since the
respective dates as of which specified financial, accounting
or numerical information is given in the Prospectus to a date
not more than two Business Days prior to the date of such
letter, which letter shall be in addition to the auditors'
report contained in the Prospectus and the auditors' comfort
letter addressed to the appropriate Regulatory Authorities.
(2) COMMERCIAL COPIES. The Corporation shall cause commercial copies of the
Prospectus in the English language to be delivered to the Agents
without charge in such numbers and at such locations as the Agents may
reasonably request by oral instructions to the printer of the
Prospectus given on or about the date hereof. Such delivery shall be
effected as soon as possible and in any event no later than 2 Business
Days after the receipt therefor is issued by the last of the Regulatory
Authorities.
(3) SUPPLEMENTARY MATERIAL. Subject to Section 9, the Corporation shall
forthwith prepare any Supplementary Material required to be filed by
the Corporation under the Canadian Securities Laws. Such Supplementary
Material shall be in form and substance satisfactory to the Agents and
a copy thereof (approved, signed and certified as required by the
Canadian Securities Laws) shall be promptly delivered to the Agents.
Concurrently with the delivery thereof, the Corporation shall deliver
to the Agents documents similar to those referred to in Sections
8(1)(c) and 8(1)(d), as applicable, with respect to such Supplementary
Material, and, where applicable, the Corporation shall cause commercial
copies of such Supplementary Material in the English language to be
delivered to the Agents without charge in such numbers and in such
cities as the Agents may reasonably request by oral instructions to the
printer of such Supplementary Material. Such delivery shall be effected
as soon as possible.
SECTION 9 COVENANTS OF THE CORPORATION.
(1) MATERIAL CHANGE DURING DISTRIBUTION. From the date hereof to and until
the completion of the Offering Period, the Corporation shall promptly
notify the Agents in writing with full particulars of:
(a) any material change (actual, anticipated, contemplated or
threatened) in the condition (financial or otherwise),
business, affairs, operations, results
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of operations, capital, prospects, assets, liabilities or
obligations (absolute, accrued, contingent or otherwise) of
the Corporation or to its knowledge INM;
(b) any change (actual, anticipated, contemplated or threatened)
in any material fact contained in the Prospectus or any
Supplementary Material which change is or may be of such a
nature as to render any statement in the Prospectus or
Supplementary Material misleading or untrue or result in a
misrepresentation therein;
(c) any change in applicable laws, including, without limitation,
the Income Tax Act (Canada) or the regulations,
interpretations and policies thereunder, materially affecting
or which may materially affect the business or property of the
Corporation or to its knowledge INM or the Offered Shares or
the distribution thereof, which change is or may be of such a
nature as to render any statement in the Prospectus or any
Supplementary Material misleading or untrue or result in a
misrepresentation therein or which would otherwise require an
amendment to the Prospectus or the Supplementary Material
under Canadian Securities Laws; and
(d) any material fact which becomes know which, pursuant to
Canadian Securities Laws, would have been required to be
stated in the Prospectus or Supplementary Material had the
fact been known at or prior to the date of the Prospectus or
Supplementary Material.
The Corporation shall promptly, and in any event within any
applicable time limitation, comply with all applicable filing and other
requirements under Canadian Securities Laws and with the requirements
of the Exchange as a result of any such change, provided that the
Corporation shall not file any Supplementary Material or other
documents without first obtaining from the Agents its approval after
consulting with the Agents with respect to the form and content
thereof. The Corporation shall in good faith discuss with the Agents
any change in circumstances (actual, anticipated, contemplated or
threatened, financial or otherwise) which is of such a nature that
there may be a reasonable question as to whether notice need be given
to the Agents pursuant to this Section 9(1) and, in the event that the
Agents in their sole discretion determine, acting reasonably, that it
is necessary, the Corporation will be required to file Supplementary
Material pursuant to Section 8(3).
(2) RECEIPTS. The Corporation shall advise the Agents, promptly after
receiving notice thereof, of the time when the Prospectus, or any
Supplementary Material, has been filed and receipts therefor have been
obtained, and provide evidence satisfactory to the Agents of each such
filing and issuance of receipts.
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(3) REGULATORY ACTION. The Corporation shall advise the Agents, promptly
after receiving notice or obtaining knowledge thereof, of: (i) the
issuance by any Regulatory Authority or the Exchange of any order
suspending or preventing the use of the Preliminary Prospectus or any
order preventing or suspending the use of the Prospectus or any
Supplementary Material; (ii) the imposition of any cease trading or
similar order affecting the Offered Shares or the Compensation Options
in any jurisdiction; (iii) the institution, threatening or
contemplation of any proceeding for any such purpose; or (iv) any
request made by any Regulatory Authority or the Exchange to amend or
supplement the Preliminary Prospectus, the Prospectus or any
Supplementary Material. The Corporation shall use its best efforts to
prevent the issuance of any order issued under clauses (i) or (ii)
above, or, if any such order is issued, use its best efforts to obtain
its withdrawal as quickly as possible.
(4) LISTING. The Corporation shall use its best efforts to diligently
satisfy all conditions required by the Exchange in order to ensure that
the Offered Shares and the Compensation Shares are listed and posted
for trading on the Exchange commencing on the Closing Date.
(5) DUE DILIGENCE. The Corporation shall allow the Agents to conduct such
due diligence in respect of the Corporation and INM as the Agents deems
appropriate, provided that the Agents shall be limited to reasonable
access during normal business hours and upon reasonable notice.
(6) DECLARATION OF DIVIDENDS. The Corporation will not declare or pay any
dividend or make any other distribution of its assets, or redeem,
purchase or otherwise acquire any of its shares, or prepay any debt not
due, or commit to do any of the foregoing, prior to the Expiry Date.
(7) USE OF PROCEEDS. The net proceeds to the Corporation from the sale of
the Offered Shares will be applied as indicated under "Use of Proceeds"
in the Prospectus. This provision will survive beyond the Closing Date.
(8) PRINCIPALS. The Corporation shall cause each Principal to agree, at
Closing, that such Principal shall not, during the 90-day period
following the Closing Date, sell, transfer, assign or otherwise dispose
of all or any portion of or any beneficial interest in the outstanding
shares of the Corporation owned by such Principal on the date of this
Agreement (including any shares issuable pursuant to options held by
such Principal on the date hereof) without the prior written consent of
the Agents. The Principals shall, however, be permitted to pledge such
shares to an arms' length financial institution for the purpose of
giving collateral for a bona fide debt made in good faith.
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SECTION 10 REPRESENTATIONS AS TO PROSPECTUS AND SUPPLEMENTARY MATERIAL.
The delivery to the Agents of the Preliminary Prospectus, the
Prospectus and any Supplementary Material shall constitute the Corporation's
representation and warranty to the Agents that, at the time of such delivery,
the information and statements contained therein (except information and
statements provided by and relating solely to the Agents, hereinafter referred
to as the "AGENTS' MATTERS") are true and correct in all material respects and
contain no misrepresentations and no untrue, false or misleading statements of a
material fact, that no material facts or information have been omitted therefrom
which are required to be stated therein or are necessary to make any statement
or information contained therein not false or misleading in light of the
circumstances in which it was made, that the information and statements
contained therein (except the Agents' Matters) constitute full, true and plain
disclosure of all material facts relating to the Corporation, INM, the
Compensation Options and the Offered Shares, and that the Preliminary
Prospectus, the Prospectus and any Supplementary Material comply in all material
respects with Canadian Securities Laws. Such delivery shall also constitute the
Corporation's consent to the use of the Preliminary Prospectus, the Prospectus
and any Supplementary Material by the Agents and the Selling Group for the
purpose of offering and selling in the Qualifying Provinces the Offered Shares.
SECTION 11 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
(1) The Corporation makes the following representations and warranties to
the Agents and acknowledges that the Agents are relying upon them in
entering into this Agreement:
(a) STATUS. Each of the Corporation and INM is a corporation
incorporated and validly existing under the laws of Ontario
and has all requisite corporate power and authority to own,
lease and operate its properties and assets, to conduct its
business as now conducted or proposed to be conducted by it,
and to carry out the provisions of this Agreement;
(b) BUSINESS. Each of the Corporation and INM has conducted and is
conducting its business in compliance in all material respects
with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on and holds all
licenses, registrations and qualifications in all
jurisdictions in which it carries on business or owns, leases
or operates its properties and assets to enable its business
to be carried on as now conducted and its properties and
assets to be owned, leased and operated, and all such
licenses, registrations and qualifications are valid and
existing and in good standing and none of the same contains
any burdensome term, provision, condition or limitation which
has or would reasonably be expected to have a material adverse
effect on the operation of its business as now conducted or
proposed to be conducted;
10
and the Corporation is not aware of any laws, rules or
regulations or of the terms of any such licences,
registrations or qualifications presently in force or proposed
to be brought into force by any governmental or regulatory
authority with which the Corporation anticipates that it or
INM will be unable to comply without materially adversely
affecting its business;
(c) REPORTING ISSUER. The Corporation is a reporting issuer, or
the equivalent thereof, in good standing in the provinces of
Ontario, British Columbia and Alberta, is in compliance with
the by-laws, rules and regulations of the Exchange and no
material change relating to the Corporation has occurred with
respect to which the requisite material change report has not
been filed under the Securities Laws of such provinces and no
such disclosure has been made on a confidential basis;
(d) DISCLOSURE. All press releases, material change reports and
other documents filed by or on behalf of the Corporation with
the securities regulatory authorities in the provinces of
Ontario, British Columbia and Alberta or the Exchange during
the last two years were true and correct in all material
respects and collectively provide disclosure of all material
facts relating to the Corporation in accordance with
Securities Laws and each such document did not contain any
misrepresentation as at the respective dates of such filings;
(e) SHARE CAPITAL. The authorized capital of the Corporation
consists of an unlimited number of preference shares and an
unlimited number of Common Shares of which, as of the date
hereof, 13,145,896 Common Shares (and no more, without giving
effect to the Offering) are issued and outstanding as fully
paid and non-assessable. The authorized capital of the
Corporation immediately prior to the Closing Date will consist
of an unlimited number of Common Shares of which 13,145,896
Common Shares (subject to adjustments for any additional
shares which may be issued pursuant to outstanding options,
warrants and convertible securities disclosed in the
Prospectus) will be issued and outstanding as fully paid and
non-assessable;
(f) SHARE CAPITAL - INM. The authorized capital of INM consists of
an unlimited number of special shares and an unlimited number
of common shares of which, as of the date hereof, 20,000
common shares (and no more) are issued and outstanding as
fully paid and non-assessable. The authorized capital of INM
immediately prior to the Closing Date will consist of an
unlimited number of common shares of which 20,000 common
shares (and no more) will be issued and outstanding as fully
paid and non-assessable;
11
(g) VALIDLY ISSUED. The Offered Shares have been authorized for
issuance and, when payment is received for such shares, such
shares will be validly issued as fully paid and non-assessable
shares in the capital of the Corporation;
(h) COMPENSATION SHARES. At the Closing the Compensation Shares
will be duly and validly allotted and reserved for issuance
upon the exercise of the Compensation Options;
(i) EXCHANGE APPROVAL. The Offered Shares and the Compensation
Shares are conditionally listed and will, at the Closing Date,
be listed and posted for trading on the Exchange;
(j) OPTIONS ETC. Except, in each case, as disclosed in the
Prospectus, no person has any agreement or option or right or
privilege (whether pre-emptive or contractual) capable of
becoming an agreement for the purchase, acquisition,
subscription for or issuance by each of the Corporation and
INM of any of the unissued shares in their respective capital;
(k) MINUTE BOOKS. The corporate records and minute books of the
Corporation and INM which have been made available to the
Agents and their counsel for review contain, in all material
respects, complete and accurate minutes of all meetings of the
directors and shareholders of the Corporation and INM, held
since incorporation, and original signed copies of all
resolutions and by-laws duly passed or confirmed by the
directors or shareholders of the Corporation and INM, other
than at a meeting. The share certificate books, register of
security holders, register of transfers and register of
directors and any similar corporate records of the Corporation
and INM are in all material respects, complete and accurate;
(l) EFFECT ON OTHER AGREEMENTS. The execution and delivery of this
Agreement and the Escrow Agreement and the performance of the
obligations hereunder (including, without limitation the
issuance, sale and delivery of the Offered Shares at the
Closing Time) and thereunder does not and will not result in a
breach of and will not create a state of facts that, after
notice or lapse of time or both, will result in a breach of,
and do not and will not conflict with (i) any statute, rule or
regulation applicable to the Corporation; or (ii) any
mortgage, note, indenture, contract, agreement, instrument,
lease or other document to which the Corporation is a party or
by which it is bound; or (iii) any judgment, decree or order
binding the Corporation or its property or assets;
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(m) EFFECT ON CONSTATING DOCUMENTS ETC. The execution and delivery
of this Agreement by the Corporation and the performance by
the Corporation of any of its obligations hereunder
(including, without limitation the issuance, sale (where
applicable) and delivery of the Offered Shares and the
Compensation Options at the Closing Time) and thereunder does
not and will not result in a breach of and will not create a
state of facts that, after notice or lapse of time or both,
will result in a breach of, and do not and will not conflict
with any of the terms, conditions or provisions of the
constating documents or by-laws of the Corporation or INM, or
any resolution passed or consented to by the directors or
shareholders of the Corporation or INM respectively;
(n) GOVERNMENTAL APPROVAL. No consent, approval, permit,
authorization, order or filing of or with any Regulatory
Authority or any court or governmental agency or body of
Canada, any Qualifying Province or any other jurisdiction is
required by the Corporation for the execution and delivery of
and the performance by the Corporation of its obligations
under this Agreement, except as such consents, approvals and
filings are required under Canadian Securities Laws and the
by-laws, rules and regulations of the Exchange which will be
obtained prior to Closing Time;
(o) SALE OF PROPERTY. Other than as disclosed in the Prospectus,
the Corporation has not approved, is not contemplating, has
not entered into any agreement in respect of, and has no
knowledge of:
(i) the purchase of any property or any interest therein
or the sale, transfer or other disposition of any
property or any interest therein currently owned,
directly or indirectly, by the Corporation whether by
asset sale, transfer of shares, or otherwise;
(ii) the change of control (by sale or transfer of shares
or sale of all or substantially all of the assets of
the Corporation or otherwise) of the Corporation, or
(iii) a proposed or planned disposition of shares by any
shareholder who owns, directly or indirectly, 5% or
more of the issued and outstanding shares of the
Corporation.
(p) SALE OF PROPERTY. Other than as disclosed in the Prospectus,
INM has not approved, is not contemplating, has not entered
into any agreement in respect of, and the Corporation has no
knowledge of:
(i) the purchase of any property or any interest therein
or the sale, transfer or other disposition of any
property or any interest therein
13
currently owned, directly or indirectly, by INM
whether by asset sale, transfer of shares, or
otherwise;
(ii) the change of control (by sale or transfer of shares
or sale of all or substantially all of the assets of
INM or otherwise) of INM, or
(iii) a proposed or planned disposition of shares by any
shareholder who owns, directly or indirectly, 5% or
more of the issued and outstanding shares of INM.
(q) REAL PROPERTY. The real property (and the buildings
constructed thereon) in which the Corporation has a direct or
indirect interest whether leasehold or fee simple or otherwise
(the "REAL PROPERTY") is insured against all loss from damage
by hazards or risks normally insured against, with reasonable
deductibles, to the best of the Corporation's knowledge, such
buildings were constructed in accordance with building permits
properly issued therefor and in compliance with all applicable
building and zoning by-laws, and, to the best of the
Corporation's knowledge, there are no material defects in such
buildings, there are no outstanding work orders or deficiency
notices relating to such buildings from or required by any
police or fire department, sanitation or health authority or
from any federal, provincial or municipal authority or, to the
best of the Corporation's knowledge, any matters under
discussion with any such departments or authorities relating
to work orders, and, such buildings and all chattels required
for the effective operation of such buildings are in good
operating condition and are in a state of good repair and
maintenance;
(r) INTEREST OF INSIDERS. To the best of the knowledge of the
Corporation, none of the directors or officers of the
Corporation or any associate or affiliate of any of the
foregoing had, has or intends to have any material interest,
direct or indirect, in the transactions contemplated by this
agreement or in any proposed material transaction with the
Corporation which, as the case may be, materially affects, is
material to or will materially affect the Corporation;
(s) CORPORATE AUTHORIZATION. All necessary corporate action has
been taken the Corporation to (i) authorize the execution,
delivery and performance of this Agreement; (ii) issue, sell
(as the case may be) and deliver the Offered Shares and the
Compensation Options in accordance with the provisions of this
Agreement; and (iii) carry out all of the terms and provisions
hereof;
14
(t) VALID AND BINDING AGREEMENT. This Agreement has been duly
authorized by all necessary corporate action on the part of
the Corporation, has been duly executed and delivered by the
Corporation and constitutes a legal, valid and binding
obligation of the Corporation enforceable against it in
accordance with its terms, subject only to the effect of any
applicable bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws of
general application affecting the enforcement of creditors'
rights, the effect of general principles of equity and the
qualification that rights of indemnity and contribution and
waiver of contribution may be limited by applicable law;
(u) COMPLIANCE WITH LAWS. The Prospectus, together with any
Supplementary Material, provides or will provide full, true
and plain disclosure of all material facts relating to the
Corporation and INM, to the Offered Shares and the
Compensation Options as required by the Canadian Securities
Laws and the Prospectus together with any Supplementary
Materials does not and will not contain any misrepresentation,
provided that the foregoing representation, warranty and
covenant of the Corporation shall not apply to the Agents'
Matters;
(v) LEGAL PROCEEDINGS. There are no actions, suits, proceedings,
investigations or inquiries pending or, to the knowledge of
the Corporation or its directors or officers, threatened
against or affecting the Corporation or INM at law or in
equity or before or by any court, arbitrator or tribunal or
any federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, in Canada or elsewhere, which could in any
way materially and adversely affect the condition or prospects
(financial or otherwise) of the Corporation or INM or the
validity of the issuance of the Offered Shares, and there is
no order or investigation of or by any such authority which in
any manner questions the validity of any licences, permits,
consents, approvals or other authorizations which are material
and which are necessary for the Corporation or INM to carry on
its business as now conducted or proposed to be conducted;
(w) ABSENCE OF CHANGES. Except as described in the Prospectus and
any Supplementary Material, there has not been:
(i) any material change (actual, anticipated,
contemplated or threatened) in the condition
(financial or otherwise), business, affairs,
operations, results of operations, capital,
prospects, assets, liabilities or obligations
(absolute, accrued, contingent or
15
otherwise) of the Corporation or INM since the end of
the period covered by the Financial Information; or
(ii) any transaction entered into by the Corporation or
INM, other than those in the ordinary course of
business, which is material to the Corporation or
non-arm's length.
(x) NO AGENT. There is no person acting or purporting to act for
the Corporation entitled to any brokerage or finder's fee in
connection with this Agreement or any of the transactions
contemplated hereunder except as disclosed in the Prospectus;
(y) TRANSFER AGENT. Montreal Trust Company of Canada at its
principal offices in Calgary has been duly appointed as the
transfer agent and registrar of the Common Shares of the
Corporation;
(z) TAXES. The Corporation and, to the best of the Corporation's
knowledge, INM has duly and on a timely basis filed all tax
returns required to be filed by it, has paid all taxes due and
payable by it and has paid all assessments and re-assessments
and all other taxes, government charges, penalties, interest
and other fines due and payable by it and which are claimed by
any governmental authority to be due and owing, and adequate
provision has been made for taxes payable for any period for
which tax returns are not yet required to be filed; there are
no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax return
or payment of any tax, governmental charge or deficiency by
the Corporation or, to the best of the Corporation's
knowledge, INM; and there are no matters under discussion by
the Corporation or, to the best of the Corporation's
knowledge, INM with any governmental authority relating to
taxes, charges or assessments asserted by any such authority;
(aa) NO BREACH OF CONTRACTS. The Corporation, and to the knowledge
of the Corporation INM, is not and will not be at Closing
Time: (a) in breach or violation of any of the terms or
provisions of, or default under (whether after notice or lapse
of time or both), any material indenture, mortgage, deed of
trust, loan agreement or other agreement (written or oral) or
instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject, which
breach, violation or default or the consequences thereof
would, alone or in the aggregate, result in adverse material
change to the Corporation or INM; or (b) in violation of the
provisions of its articles, by-laws or resolutions or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or any
of its properties or any judgment, decree
16
or order binding the Corporation or INM or its property or
assets, which violation or the consequences thereof would,
alone or in the aggregate, result in an adverse material
change to the Corporation or INM;
(bb) FINANCIAL STATEMENTS. The financial statements and the notes
thereto included in the Prospectus relating to INM and the
Corporation indicate fairly the financial position of each
such company as of the dates specified thereon and the results
of operation for the period specified thereon and such
financial statements have been prepared in conformity with
Canadian generally accepted accounting principles applied on a
consistent basis (except to the extent noted therein);
(cc) SHAREHOLDERS AGREEMENTS. To the best of the Corporation's
knowledge, except as described in the Prospectus, there is no
agreement between or amongst the shareholders or the
Corporation or any of them governing the business, affairs,
capital, and/or management of the Corporation or the transfer
of any shares of the Corporation that will not be terminated
in connection with the closing;
(dd) INTELLECTUAL PROPERTY. Each of the Corporation, and to the
knowledge of the Corporation INM, owns or possesses adequate
and enforceable rights to use all trademarks, trademark
applications, trade names, copyrights, copyright applications,
patents, licenses, know-how and other similar rights and
proprietary knowledge (collectively, the "INTELLECTUAL
PROPERTY") necessary for the conduct of their respective
businesses. None of the Corporation and INM have received any
notice of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property; and
(ee) EMPLOYEE MATTERS. None of the Corporation and INM is subject
to any labour dispute nor, to the knowledge of the
Corporation, is any such dispute threatened, which dispute
would have a material adverse affect on the assets or
properties, business, results of operation, prospects or
condition (financial or otherwise) of the Corporation or INM.
SECTION 12 CONDITIONS.
(1) The inaccuracy of any of the representations and warranties of the
Corporation herein contained, the non-fulfillment of or non-compliance
with the covenants of the Corporation herein contained or any breach or
failure to comply with any of the conditions set out below shall
entitle the Agents, in their sole discretion, to terminate their
obligations under this Agreement, and to terminate, on behalf of
subscribers, their obligations to purchase Offered Shares, by written
notice to that effect given by the Agents to the Corporation at or
prior to the Closing Date. At the Closing Time:
17
(a) the Agents shall have received a certificate in form and
substance satisfactory to the Agents addressed to the Agents
and the Agents' counsel dated the Closing Date signed by each
of the Chief Executive Officer and the Chief Financial Officer
or such other officers of the Corporation acceptable to the
Agents, certifying for and on behalf of the Corporation, to
the best of the knowledge, information and belief of the
persons so signing, after having made due enquiry, that:
(i) after having carefully examined the Prospectus and,
since the respective dates as of which information is
given in the Prospectus, the Corporation has not (A)
incurred any material liabilities (absolute, accrued,
contingent or otherwise); or (B) entered into any
transaction not in the ordinary course of business or
non-arm's length; and (C) there has been no material
change in the assets, financial position, business or
results of operations of the Corporation; and (D) to
the best of their knowledge and information, there
has occurred no event and exists no state of facts
that, under the Canadian Securities Laws and the
terms of this Agreement, is required to be set forth
in an amendment to the Prospectus that has not been
so set forth;
(ii) the representations and warranties of the Corporation
contained in this Agreement are true and correct as
of the Closing Time with the same effect as though
such representations and warranties had been made at
and as of such time;
(iii) the Corporation has complied with and satisfied in
all material respects all of the terms, covenants and
conditions of this Agreement on the Corporation's
part to be complied with at or prior to the Closing
Time;
(iv) no order, ruling or determination having the effect
of ceasing the trading or suspending the sale of the
Offered Shares or any other securities of the
Corporation has been issued and no proceedings for
such purpose have been instituted or are pending or,
to the knowledge of each such officers, contemplated
or threatened; and
(v) such other matters as the Agents may reasonably
request;
(b) The Agents shall have received a favourable legal opinion from
Blake, Cassels & Graydon LLP, counsel to the Corporation
addressed to the Agents and their counsel dated the Closing
Date and in form and substance satisfactory to the Agents and
their counsel with respect to such matters as the Agents may
reasonably request relating to the distribution
18
of the Offered Shares and the Compensation Options, including
but not limited to that:
(i) each of the Corporation and INM is a corporation
validly existing under the laws of jurisdiction of
incorporation;
(ii) each of the Corporation and INM has all requisite
corporate power and authority to carry on its
business as now conducted, lease and operate its
property and assets and to, in the case of the
Corporation, execute, deliver and perform its
obligations under this Agreement, and to issue the
Offered Shares and the Compensation Options as
contemplated herein;
(iii) no consent, approval, permit, authorization or order
of any court, governmental authority or stock
exchange is required by the Corporation for the
execution and delivery of and the performance by the
Corporation of its obligations under this Agreement,
including, without limitation, the offering and
issuance of the Offered Shares and the Compensation
Options;
(iv) the authorized capital of the Corporation consists of
an unlimited number of Common Shares and an unlimited
number of preference shares of which, immediately
prior to the Closing Time, 13,145,896 Common Shares
(and no more) are validly issued and outstanding as
fully paid and non-assessable;
(v) the authorized capital of INM consists of an
unlimited number of common shares and an unlimited
number of special shares of which, immediately prior
to the Closing Time, 20,000 common shares (and no
more) are validly issued and outstanding as fully
paid and non-assessable;
(vi) the execution and delivery of this Agreement by the
Corporation and the performance by the Corporation of
any of its obligations hereunder (including, without
limitation the issuance, sale and delivery of the
Offered Shares at the Closing Time and the issuance
and delivery of the Compensation Options) and
thereunder does not and will not result in a breach
of and will not create a state of facts that, after
notice or lapse of time or both, will result in a
breach of, and do not and will not conflict with: (i)
any statute, rule or regulation applicable to the
Corporation; or (ii) any of the terms, conditions or
provisions of the constating documents or by-laws of
the Corporation, or any resolution passed or
consented to by the directors or shareholders of the
Corporation;
19
(vii) this Agreement has been duly authorized by all
necessary corporate action on the part of the
Corporation, has been duly executed and delivered by
the Corporation and constitutes a legal, valid and
binding obligation of the Corporation enforceable
against it in accordance with its terms, subject only
to the effect of any applicable bankruptcy,
insolvency, liquidation, reorganization,
reconstruction and other similar laws of general
application affecting the enforcement of creditors'
rights, the effect of general principles of equity
and the qualification that rights of indemnity and
contribution and waiver of contribution may be
limited by applicable law;
(viii) all necessary corporate action has been taken by the
Corporation to authorize the execution and delivery
of each of the Preliminary Prospectus, the Prospectus
and any Supplementary Material and the filing thereof
with the Regulatory Authorities in each of the
Qualifying Provinces;
(ix) all necessary corporate action has been taken by the
Corporation to authorize the issuance of the Offered
Shares and the Offered Shares will, when issued, be
outstanding as fully paid and non-assessable shares;
(x) the attributes of the Offered Shares and the
Compensation Options are consistent in all material
respects with the descriptions in the Prospectus;
(xi) all necessary documents have been filed, proceedings
taken and approvals, consents, authorizations and
permits obtained from the Regulatory Authorities in
each of the Qualifying Provinces to qualify the
Offered Shares for sale to the public in each of the
Qualifying Provinces through registrants registered
under the applicable legislation in such Qualifying
Provinces who have complied with the relevant
provisions of applicable laws;
(xii) the Offered Shares and the Compensation Shares have
been conditionally listed for trading on the
Exchange;
(xiii) the Compensation Shares to be issued upon the
exercise of the Compensation Options have been
allotted and reserved for issuance to the holders of
the Compensation Options, and such Compensation
Shares will, when issued upon exercise of the
Compensation Options in accordance with the terms of
the
20
Compensation Options, be validly issued and, fully
paid and non-assessable shares;
(xiv) the Corporation is a reporting issuer and not in
default in the Provinces of Ontario, British Columbia
and Alberta;
(xv) the form and terms of the share certificate
representing the Corporation's Common Shares have
been approved and adopted by the directors of the
Corporation and comply with applicable law and
Exchange requirements relating thereto;
(xvi) Montreal Trust Company of Canada at its principal
office in Calgary, Alberta has been duly appointed
the transfer agent and registrar for the Common
Shares of the Corporation;
(xvii) as to all other legal matters as may reasonably be
requested by counsel to the Agents relating to
distribution of the Offered Shares and the
Compensation Options; and
(xviii) in providing such opinion, such counsel may rely on
the opinions of local counsel acceptable to counsel
to the Agents, as to qualifications for distribution
of the Offered Shares and the Compensation Options
and as to other matters governed by the laws of other
jurisdictions other than the jurisdictions in which
they are qualified to practise and, may rely, to the
extent appropriate in the circumstances, as to
matters of fact on certificates of public officials
and of the auditors and the officers of the
Corporation;
(c) The Agents shall have received a certificate in form and
substance satisfactory to the Agents addressed to the Agents
and the Agents' counsel dated the Closing Date signed by two
directors or officers of INM certifying that to the best of
their knowledge, the disclosure with respect to INM included
in the Prospectus is correct in all material respects;
(2) The Agents and their counsel shall have received long-form comfort
letters dated the date of Closing Date from the corporation's auditors,
Grant Thornton LLP and from INM's auditors, Ernst & Young LLP,
addressed to the Agents and the board of directors of the Corporation
and INM respectively, in form and substance satisfactory to the Agents,
which shall confirm in all material respects, as of the Closing Date
(or for matters involving changes or developments, and procedures in
that regard, since the respective dates as of which the financial and
accounting information and other numerical information is given in the
Prospectus, as of a date not more than two Business Days prior to the
Closing Date), the conclusions and findings of such firm with respect
to the financial and accounting numerical
21
information and the other matters covered by its letter referred to in
Section 8(1)(c) and Section 8(1)(d) respectively and any similar
letters by such firms pursuant to Section 8(3);
(3) The Corporation shall have made or caused to be made the necessary
filings with, and shall have obtained or caused to be obtained the
necessary approvals and consents of, the Exchange and the Regulatory
Authorities required to be made or obtained by the Corporation prior to
the Closing Date as herein contemplated;
(4) The Agents shall have received a certificate of good standing or the
equivalent regarding the corporate status for each of the Corporation
and INM from their respective jurisdiction of incorporation; and
(5) Such other certificates, statutory declarations, agreements, opinions,
comfort letters and materials, in form and substance satisfactory to
the Agents, as the Agents may reasonably request, including, without
limitation such as may be required as a basis for the opinions referred
to Section 12(1)(b), shall have been delivered.
SECTION 13 TERMINATION.
(1) In addition to any other remedies which may be available to the Agents
in respect of any default, act or failure to act or non-compliance with
the terms of this Agreement, any Agent shall have the right at its
option to terminate its obligations under this Agreement by notice in
writing delivered to the Corporation at or prior to the Closing Date
if, at any time prior to or on the Closing Date:
(a) the Agent is not satisfied, in its sole discretion, with the
due diligence review conducted by it;
(b) any inquiry, investigation or other proceeding (whether formal
or informal) is commenced, threatened or announced in relation
to the Corporation or INM or any of the Corporation's or INM's
directors or officers or any order is issued under or pursuant
to any statute of Canada or of any province or territory, or
by any official of the Exchange, or otherwise, or there is any
change of law, or the interpretation or administration
thereof, which, in the reasonable opinion of the Agent,
operates to prevent or restrict the trading in the Offered
Shares or the distribution or distribution to the public of
the Offered Shares in the Qualifying Provinces or any of them
or in other jurisdictions or which in the opinion of the Agent
adversely affects the marketability of the Offered Shares;
22
(c) at the Closing Time, the Offered Shares or the Compensation
Shares are not listed on the Exchange;
(d) there should occur or come into effect any event, condition or
circumstance which constitutes a material change in the
business, affairs or condition of the Corporation, financial
or otherwise, or a circumstance contemplated by Section 9(1),
which, in the Agent's opinion, would be reasonably expected to
have an adverse affect on the market price or value of the
Offered Shares;
(e) there should develop, occur or come into effect any occurrence
of national or international consequence or any action,
government law or regulation, inquiry or other occurrence of
any nature whatsoever which, in the opinion of the Agent,
seriously affects or will seriously affect financial markets
or the business, operations, assets or undertakings of the
Corporation; or
(f) the state of the financial markets becomes such that the
Offered Shares cannot, in the opinion of the Agent, be
profitably marketed.
The rights of termination contained in this Section 13 are in addition
to any other rights or remedies the Agents or any one of them may have in
respect of any default, act or failure to act or non-compliance by the
Corporation in respect of any of the matters contemplated by this Agreement or
otherwise.
(2) In the event of such termination by the Agents, there shall be no
further liability of the Corporation to the Agents except as expressly
otherwise provided in this Agreement and except in respect of any
liability which may have arisen or may thereafter arise pursuant to
Section 4, Section 5 or Section 6, which liabilities shall survive any
such termination.
SECTION 14 INDEMNITY.
(1) The Corporation agrees to protect, indemnify and hold harmless the
Agents and its partners, directors, officers, agents, employees,
affiliates, shareholders and representatives and any members of the
Selling Group (collectively, the "INDEMNIFIED PARTIES" and,
individually, an "INDEMNIFIED PARTY") from and against any and all
claims, actions, suits and proceedings (collectively, the "CLAIMS"),
and any and all damages, liabilities, expenses and losses (other than
loss of profits) of whatsoever nature or kind (collectively "LOSSES")
incurred in consequence and flowing out of any such claim, action, suit
or proceeding, including any expenses incurred by an Indemnified Party
in the course of any investigation of the Corporation, to which an
Indemnified Party may become subject or otherwise involved which are
caused by or arise directly or indirectly by reason of:
23
(a) any breach of or default under any representation, warranty,
covenant or agreement of the Corporation in this Agreement or
any other document to be delivered pursuant hereto or thereto;
(b) any misrepresentation or alleged misrepresentation contained
in the Preliminary Prospectus or the Prospectus or in any
Supplementary Material (other than relating solely to Agents'
Matters);
(c) any order made or any inquiry, investigation or proceeding
commenced or threatened by any securities regulatory or other
authority, including without limitation any stock exchange,
based upon any misrepresentation or alleged misrepresentation
in the Preliminary Prospectus or the Prospectus or in any
Supplementary Material (other than relating solely to Agents'
Matters) which prevents or restricts the trading in the
Offered Shares or the distribution or the distribution to the
public, as the case may be, of the Offered Shares, the Units
or the Compensation Options in any Qualifying Province; or
(d) the Corporation's failure to comply with any requirement of
applicable Canadian Securities Laws, other securities laws or
the by-laws, rules and regulations of the Exchange;
provided, however, that this indemnity shall not apply in the event and
to the extent that a court of competent jurisdiction in a final
judgment that has become non-appealable shall determine that the
Indemnified Party was guilty of fraudulent misrepresentation or gross
negligence and that the Claims or Losses in respect of which
indemnification is claimed were caused solely by such conduct.
(2) If any claim contemplated by this Section 14 shall be asserted against
any Indemnified Party, or if any potential claim contemplated by this
Section 14 shall come to the knowledge of any Indemnified Party, the
Indemnified Party concerned shall notify the Corporation as soon as
possible of the nature of such claim (provided that any failure to so
notify shall not affect the Corporation's liability under this Section
14) and the Corporation shall, subject as hereinafter provided, be
entitled (but not required) to assume the defence on behalf of the
Indemnified Party of any suit brought to enforce such claim and/or the
contestation of such claim. Any such defence or contestation shall be
through legal counsel acceptable to the Indemnified Party, acting
reasonably, and no admission of liability or settlement shall be made
by the Corporation or the Indemnified Party without, in each case, the
prior written consent of all such Indemnified Parties and the
Corporation, such consent not to be unreasonably withheld. An
Indemnified Party shall have the right to employ separate counsel in
any such suit or claim and to participate in the defence or
contestation thereof
24
but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless:
(a) the Corporation fails to assume the defence of such suit on
behalf of the Indemnified Party within fifteen (15) Business
Days of receiving notice of such suit;
(b) the employment of such counsel has been authorized by the
Corporation; or
(c) the named parties to any such suit include both the
Indemnified Party and the Corporation and the Indemnified
Party shall have been advised by counsel that there may be one
or more legal defences available to the Indemnified Party
which are different from or in addition to those available to
the Corporation or there are other circumstances which may
reasonably be considered to give rise to a conflict of
interest;
(in each of which cases (a), (b) and (c), the Corporation shall not
have the right to assume the defence of such suit on behalf of the
Indemnified Party, but shall be liable to pay the reasonable fees and
expenses of counsel for the Indemnified Party) provided that in no
event shall the Corporation be required to pay the fees and expenses of
more than one set of counsel in respect of all Indemnified Parties in
each applicable jurisdiction.
(3) The provisions of this Section 14 shall be in addition to any liability
which the Corporation may otherwise have, shall extend upon the same
terms and conditions to all and any partners, directors, officers,
agents, employees, affiliates, shareholders and representatives of the
Agents, shall be binding upon, and shall enure to the benefit of, any
heirs, successors, assigns, executors, administrators and personal
legal representatives of the Corporation, the Agents and such other
persons.
(4) The Agents hereby acknowledge that they will act as trustee for its
respective partners, directors, officers, agents, employees,
affiliates, shareholders and representatives of the covenants of the
Corporation under this Section 14 with respect to such persons.
(5) The rights of indemnification provided in this Section 14 shall be in
addition to and not in derogation of any right to indemnification which
the Agents may have by statute or otherwise at law.
SECTION 15 CONTRIBUTION.
(1) If for any reason the indemnification provided for in Section 14 is
unavailable, in whole or in part, to an Indemnified Party in respect of
any Claims or Losses
25
incurred in consequence or flowing out of any such Claim and subject to
the restriction and limitations referred to in Section 14, the
Corporation shall contribute to the amount paid or payable (or, if such
indemnity is unavailable only in respect of a portion of the amount so
paid or payable, such portion of the amount so paid or payable) by such
Indemnified Party as a result of such Claims or Losses incurred in
consequence or flowing out of any such Claim:
(a) in such proportion as is appropriate to reflect the relative
benefits received by the Corporation on the one hand and the
Agents on the other hand from the distribution of the Offered
Shares; or
(b) if the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred
to in clause (a) above but also the relative fault of the
Corporation on the one hand and the Agents on the other hand
in connection with the statement, information,
misrepresentation, omission, order, inquiry, investigation,
proceeding or other matter referred to in Section 14 that
resulted in such Claims or Losses incurred in consequence and
flowing out of any such Claim, as well as any other relevant
equitable considerations.
(2) The relative benefits received by the Corporation on the one hand and
the Agents on the other hand shall be deemed to be in the same
proportion as the total proceeds from the distribution of the Offered
Shares (net of the fee payable to the Agents but before deducting
expenses) received by the Corporation is to the fee received by the
Agents, in each case as set forth in the table on the face page of the
Prospectus. The relative fault of the Corporation on the one hand and
the Agents on the other hand shall be determined by reference to, among
other things, whether the statement, misrepresentation, omission,
order, inquiry, investigation, proceeding or other matter or thing
referred to in Section 14 that resulted in such Claims or Losses
incurred in consequence or flowing out of any such Claim relates to
information supplied by or steps or actions taken or done by or on
behalf of the Agents and the relative intent, knowledge, access to
information and opportunity to correct or prevent such statement,
misrepresentation, omission, order, inquiry, investigation, proceeding
or other matter or thing referred to in Section 14. The amount paid or
payable by an Indemnified Party as a result of such Claims or Losses
incurred in consequence or flowing out of any such Claim referred to
above shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such Claims or Losses incurred in consequence or flowing
out of any such Claim, whether or not resulting in any such claim,
action, suit or proceeding.
26
(3) The rights of contribution provided in this Section 15 shall be in
addition to and not in derogation of any right to contribution which
the Agents may have by statute or otherwise at law.
SECTION 16 EXPENSES.
Whether or not the closing of the purchase and sale of the Offered
Shares occurs and subject as hereinafter provided, all costs and expenses (the
"EXPENSES") of or incidental thereto shall be borne by the Corporation,
including, without limitation all costs and expenses incurred in connection with
the preparation, translation, filing, printing and delivery of the Preliminary
Prospectus and the Prospectus, and any Supplementary Material, the printing and
distribution of commercial copies of each thereof, the preparation and printing
of definitive certificates representing the Offered Shares, all fees and
expenses related to the marketing of the Offered Shares, including, without
limitation, all out of pocket expenses of the Agents, all costs relating to the
"roadshows" and all print media campaigns, travel and lodging, data processing
and communication charges, courier service, fees relating to the listing of the
Offered Shares on the Exchange and the fees and disbursements of legal counsel
and consultants to, and other advisors (including, without limitation, public
relations advisors) to the Corporation including, goods and services tax on any
of the foregoing. The Corporation shall also be responsible for the fees of
legal counsel of the Agents up to a maximum of $45,000 (excluding reasonable
disbursements and goods and services tax in connection with the distribution of
the Offered Shares). This provision shall survive any termination of this
Agreement.
SECTION 17 CLOSING.
(1) Subject to the terms and conditions hereof, the closing of the purchase
and sale of the Offered Shares will occur at 8:30 a.m. (Toronto time)
on October 18, 2000 or such other date not later than October 31, 2000
as the Corporation and the Agents may agree (the "CLOSING TIME" and the
"CLOSING DATE", respectively) at the offices of Blake Cassels &
Graydon, Commerce Court West, 2300-199 Bay Street, P.O.
Box 25, Toronto, Ontario, M5L 1A9.
(2) At the Closing Time, the Corporation will be required to satisfy those
conditions specified in Section 12 and shall deliver to the Agents:
(a) definitive certificates representing the Offered Shares in
such names and denominations as the Agents shall have advised
the Corporation in writing at least one Business Day prior to
Closing;
(b) a certified cheque or bank draft payable to the Agents
representing the Treasury Commission; and
(c) such further documentation as may be contemplated herein or as
the Agents may reasonably require.
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(3) At the Closing Time, the Agents, shall deliver to the Corporation a
certified cheque or bank draft payable to the Corporation representing
payment in full of the aggregate subscription price of the Offered
Shares to be issued on the Closing Date. Upon the mutual agreement of
the Corporation and the Agents, the Agents may deliver certified
cheques or bank drafts payable to the Corporation representing the net
aggregate subscription price of the Offered Shares less the Treasury
Commission and which may include some or all of the expenses of the
Agents and, in such event, the Corporation shall have no obligation to
deliver certified cheques or bank drafts representing the Treasury
Commission as provided in Section 17(2)(b).
SECTION 18 RESTRICTIONS ON FURTHER ISSUES OR SALES BY THE CORPORATION.
(1) During the period commencing on the date hereof and ending on the
earlier of the completion of the Offering and the day that is 180 days
following the Closing Date, the Corporation agrees not, directly or
indirectly, without the prior written consent of the Thomson Kernaghan
& Co. Limited (which consent shall not be unreasonably withheld), to
issue or sell any securities or financial instruments convertible or
exchangeable into Common Shares, other than (i) for the purposes of
granting stock options, to directors, officers and employees and
existing shareholders of the Corporation (up to a maximum of 15% of the
Common Shares outstanding prior to the Closing Date); or (ii) to
satisfy existing instruments issued as of the date hereof.
(2) Thomson Kernaghan & Co. Ltd. ("THOMSON KERNAGHAN") shall have a right
of first refusal to act as the lead agent in connection with any
subsequent Canadian financings contemplated by the Corporation for a
period of one year from the date hereof, subject to the Corporation and
Thomson Kernaghan, both acting reasonably, agreeing to the terms and
conditions thereof. In addition, Thomson Kernaghan shall have a right
of first refusal to act as the exclusive financial advisor (should a
financial advisor be hired) with regard to any merger and/or
acquisition assignment that the Corporation may enter into, on terms
that are mutually acceptable, for a period of one year from the date
hereof. This Section 18(2) shall survive the termination hereof and
shall remain in full force and effect for the benefit of Thomson
Kernaghan.
SECTION 19 NOTICE.
(1) Any notice or other communication to be given hereunder shall, in the
case of notice:
(a) to the Corporation, be addressed to
VoiceIQ Inc.
240 Riviera Dr.
28
Markham, Ontario
L3R 5M1
Attention: Mr. Terry Graham
Chairman and Chief Executive Officer
Fax No.: (905) 948-8276
with a copy to:
Blake Cassels & Graydon LLP
Commerce Court West
2300-199 Bay Street
P.O. Box 25 Stn.
Toronto, Ontario
M5L 1A9
Attention: Mr. Bob Bondy
Fax No.: (416) 963-2653
(b) in the case of notice to the Agents, be addressed to
Thomson Kernaghan & Co. Limited
365 Bay Street
Toronto, Ontario
M5H 2V2
Attention: Mr. Lionel Conacher
Fax No.: (416) 367-8055
with a copy to:
Stikeman Elliott
Barristers & Solicitors
5300 Commerce Court West
199 Bay Street
Toronto, Ontario
M5L 1B9
Attention: Mr. Jay Kellerman
Fax No.: (416) 947-0866
Any such notice or other communication shall be personally delivered or
given by courier service or telecopy, and shall be effective upon
receipt thereof.
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SECTION 20 INTERPRETATION.
(1) Notwithstanding anything to the contrary contained in this Agreement,
all terms and conditions of this Agreement to be performed or satisfied
by the Corporation shall be construed as conditions, and any breach or
failure to comply with any such terms or conditions shall entitle the
Agents, without limitation of any other remedies of the Agents, to
terminate the Agents' obligations hereunder, and to terminate, on
behalf of subscribers, their obligations to purchase Offered Shares, by
giving written notice to that effect to the Corporation at or prior to
the closing of the purchase and sale. It is understood that the Agents
may, subject to compliance with applicable Canadian Securities Laws,
waive, in whole or in part, or extend the time for compliance with, any
such terms and conditions, without prejudice to the Agents' rights in
respect of any other such terms and conditions or any other or
subsequent breach or non-compliance, provided that to be binding on the
Agents, any such waiver or extension must be in writing.
(2) The representations and warranties of the Corporation contained herein
or delivered pursuant hereto and the obligations and liabilities of the
Corporation contained herein or delivered pursuant hereto shall survive
the sale by the Corporation of the Offered Shares and the distribution
of the Compensation Options and shall continue thereafter in full force
and effect unaffected by any subsequent disposition of the Offered
Shares, the Compensation Shares, or the Compensation Options and the
Agents shall be entitled to rely on the representations and warranties
the Corporation contained herein or delivered pursuant hereto,
notwithstanding any investigation which the Agents may undertake or may
have undertaken or which may be or have been undertaken on their
behalf.
(3) Time shall be of the essence hereof.
(4) All amounts expressed herein in terms of money refer to lawful currency
of Canada and all payments to be made hereunder shall be made in such
currency.
(5) This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and such counterparts
together shall constitute one and the same instrument.
(6) The headings contained herein are for convenience only and shall not
affect the meaning or interpretation hereof. The division of this
Agreement into Sections is for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
(7) Where the context so requires, words importing the singular number
include the plural and vice versa, and words importing gender shall
include the masculine, feminine and neuter genders.
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(8) The invalidity or unenforceability of any particular provision or
provisions of this Agreement shall not affect or limit the validity or
enforceability of the remaining provisions of this Agreement.
(9) This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable
therein.
(10) The terms and provisions of this Agreement shall be binding upon and
enure to the benefit of the Corporation and the Agents and their
respective successors and permitted assigns; provided that, except as
herein provided, this Agreement shall not be assignable by any party
without the prior written consent of the other (except that the Agents
may assign their rights in connection with any bona fide sale of a
business or corporate reorganization).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized signing officers, as of the date
first above written.
THOMSON KERNAGHAN AND CO. LIMITED
By:
-------------------------------------
Authorized Signing Officer
VOICEIQ INC.
(Formerly BCB VOICE SYSTEMS INC.)
By:
-------------------------------------
Authorized Signing Officer
HAYWOOD SECURITIES INC.
By:
-------------------------------------
Authorized Signing Officer