EXHIBIT 3.1
UNDERWRITING AGREEMENT
May 3, 2006
Gold Reserve Inc.
926 West Sprague Avenue
Suite 200
Spokane, Washington 99201
U.S.A.
Attention: Mr. Douglas Belanger, President
Dear Sirs:
Sprott Securities Inc. ("Sprott") and RBC Dominion Securities Inc. ("RBC" and,
together with Sprott, the "Underwriters" and each individually an "Underwriter")
understands that Gold Reserve Inc. (the "Corporation") proposes to issue and
sell 3,335,000 Class A common shares of the Corporation (the "Underwritten
Shares"). The Underwriters further understand that the Corporation has prepared
and filed a preliminary short form prospectus, a registration statement and all
necessary documents relating thereto and will take all additional necessary
steps to qualify the Offered Shares (as defined below) for distribution in each
of the Qualifying Provinces (as defined below) and in the United States.
Upon and subject to the terms and conditions contained herein, the Underwriters
hereby severally offer to purchase from the Corporation in the respective
percentages set forth in Section 18 hereof and the Corporation hereby agrees to
issue and sell to the Underwriters all but not less than all of the Underwritten
Shares at the purchaser price of $9.00 per Underwritten Share, which will
constitute an aggregate purchase price of $30,015,000 payable to the Corporation
in respect of the Underwritten Shares.
The Corporation hereby grants to the Underwriters (in accordance with the
percentages set forth in Section 18 hereof) an option (the "Over Allotment
Option") to purchase severally and not jointly and offer for sale to the public
pursuant hereto up to 500,250 additional Common Shares in the capital of the
Corporation at the same price per share as the Underwritten Shares (the
"Additional Shares" and together with the Underwritten Shares, the "Offered
Shares") upon the terms and conditions set forth herein. The Over Allotment
Option shall be exercisable, in whole or in part, not less than 48 hours prior
to the Over-Allotment Option Closing Date by notice in writing to the
Corporation delivered by Sprott (on behalf of the Underwriters), at any time up
until 5:00 p.m. (Toronto time) on the day which is 30 days following the Closing
Date. The Additional Shares shall have attributes identical to the Underwritten
Shares.
In consideration of the agreement of the Underwriters to purchase the
Underwritten Shares and to offer them to the public pursuant to the Prospectuses
and the Registration Statement (as hereinafter defined), the Corporation agrees
to pay to the Underwriters, at the Time of Closing (as hereinafter defined), a
fee equal to 5.0% of the aggregate purchase price for the Offered Shares or
$0.45 per Offered Share.
All actions to be undertaken by the Underwriters in connection with the offering
or sale of the Offered Shares in the United States, shall be undertaken through
their respective U.S. Dealers.
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Terms and Conditions
The following are additional terms and conditions of this Agreement between the
Corporation and the Underwriters:
1. (a) Definitions. Where used in this Agreement or in any amendment hereto, the
following terms shall have the following meanings, respectively:
"1933 Act" and "Rules" mean the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder;
"1934 Act" means the United States Securities Exchange Act of 1934, as amended;
"affiliate", "distribution", "material change", "material fact",
"misrepresentation", and "subsidiary" when used in connection with the Canadian
Preliminary Prospectus, Canadian Final Prospectus or any Prospectus Amendment
thereto shall have the respective meanings given to them under the Canadian
Securities Laws, when used in connection with the Registration Statement, the
U.S. Preliminary Prospectus, the U.S. Final Prospectus, the Amended Preliminary
Prospectus, any Prospectus Amendment thereto, the Disclosure Package or any
Issuer Free Writing Prospectus shall have the respective meanings (to the extent
applicable) under the U.S. Securities Laws including judicial and administrative
interpretations thereof, and in all other contexts shall have the respective
meanings given to them under Canadian Securities Laws;
"Agreement" means the agreement resulting from the acceptance by the Corporation
of the offer made by the Underwriters pursuant to this letter;
"AMEX" means the American Stock Exchange;
"Amended Preliminary Prospectuses" means together (i) the amended Canadian
Preliminary Prospectus to be dated May 3, 2006, signed and certified in
accordance with the Securities Laws, relating to the qualification for
distribution of the Offered Shares under the Securities Laws in all the
Qualifying Provinces through the Underwriters, including all of the Documents
Incorporated By Reference reflecting the terms of this Agreement (also referred
to as the "Canadian Amended Preliminary Prospectus") and (ii) the amended U.S.
Preliminary Prospectus, to be dated May 3, 2006, included in the Registration
Statement and relating to the offering of Offered Shares in the United States
reflecting the terms of this Agreement (also referred to as the "U.S. Amended
Preliminary Prospectus");
"Applicable Securities Laws" means the Canadian Securities Laws and the U.S.
Securities Laws;
"Applicable Time" shall mean the date and time immediately prior to the
Effective Date;
"Brisas Project" means the Brisas gold-copper project of the Corporation located
in the Kilometer 88 mining district of Bolivar State in southeast Venezuela;
"business day" means a day which is not a Saturday, a Sunday or a day on which
chartered banks are not open for business in Toronto, Ontario or New York City
and a day on which the office of the SEC in Washington D.C. is open for
business;
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"Canadian Preliminary Prospectus" means the preliminary short form prospectus of
the Corporation in the English language dated May 2, 2006, signed and certified
in accordance with the Securities Laws, relating to the qualification for
distribution of the Offered Shares under the Securities Laws in all the
Qualifying Provinces through the Underwriters, including all of the Documents
Incorporated by Reference;
"Canadian Prospectus" or "Canadian Final Prospectus" means the (final) short
form prospectus of the Corporation in the English language to be approved,
signed and certified in accordance with the Securities Laws, and relating to the
qualification for distribution of the Offered Shares under the Securities Laws
in all the Qualifying Provinces through the Underwriters, including all of the
Documents Incorporated By Reference;
"Canadian Securities Laws" means all applicable securities laws in each of the
Qualifying Provinces and the respective regulations and rules under such laws
together with applicable published policy statements of the Canadian Securities
Regulators in the Qualifying Provinces;
"Canadian Securities Regulators" means the applicable securities commission or
regulatory authority in each of the Qualifying Provinces;
"Closing Date" means May 15, 2006 or such earlier or later date as may be agreed
to in writing by the Corporation and the Underwriters each acting reasonably but
in any event no later than May 30, 2006;
"Common Shares" means the Class A common shares in the capital of the
Corporation;
"Disclosure Package" shall mean (i) the U.S. Amended Preliminary Prospectus or
such subsequent U.S. Prospectus Amendments filed prior to the Effective Date,
(ii) the Issuer Free Writing Prospectuses, if any, identified in Schedule D
hereto, and (iii) any other Free Writing Prospectus that the parties hereto
shall hereafter expressly agree in writing to treat as part of the Disclosure
Package.
"Documents Incorporated by Reference" means the documents specified in Schedule
"A", together with such additional documents expressly incorporated by reference
into the applicable prospectus and the Registration Statement subsequent to the
date hereof, determined at any time as of the date of the statement or
representation made up to and including the Effective Date;
"Effective Date" shall mean each date and time that the Registration Statement
and any post-effective amendment or amendments became or become effective;
"Feasibility Study" means the feasibility study relating to the Brisas Project
dated January 2005 prepared by Aker Kvaerner ASA, and any updates thereto;
"Final Prospectuses" or "Prospectuses" means, collectively, the Canadian
Final Prospectus and the U.S. Final Prospectus;
"Financial Information" means the Corporation's financial statements included in
the Documents Incorporated by Reference or included in the Registration
Statement under the heading "Auditors' Report with Respect to Supplementary
Information", together with any auditors' report thereon and the notes thereto;
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"Free Writing Prospectus" shall mean a free writing prospectus, as defined in
Rule 405 under the U.S. Securities Act;
"Historical Financial Statements" means audited consolidated comparative
financial statements of the Corporation as at December 31, 2005 and December 31,
2004, and for each of the fiscal years ended December 31, 2005 and December 31,
2004 and the related notes thereto, each prepared in accordance with Canadian
generally accepted accounting principles, and reconciliations thereof to United
States generally accepted accounting principles, together with the auditors'
reports thereon, in each case as included or incorporated by reference in the
Prospectuses or the Registration Statement; including under the heading
"Auditors' Report with Respect to Supplementary Information";
"Issuer Free Writing Prospectus" shall mean an issuer free writing prospectus,
as defined in Rule 433 under the 1933 Act; provided, however, if such Issuer
Free Writing Prospectus is made by any Underwriter or other third party, such
Underwriter or other third party has obtained the prior written consent of the
Corporation with regard to such issuer free writing prospectus;
"Material Adverse Effect" means a material adverse effect on the assets or
properties, business, results of operations, or condition (financial or
otherwise) of the Corporation and its Subsidiaries (on a consolidated basis) or
on the power or authority of the Corporation to perform its obligations under
this Agreement;
"Mutual Reliance Procedures" means the mutual reliance review system procedures
provided for under National Policy 43-201 - Mutual Reliance Review System for
Prospectuses and Annual Information Forms of the Canadian Securities
Administrators;
"NASD" means the National Association of Securities Dealers, Inc.;
"National Instrument 44-101" means National Instrument 44-101 adopted by the
Canadian Securities Administrators;
"National Policy 43-201" means National Policy 43-201 adopted by the Canadian
Securities Regulators;
"Offering Documents" has the meaning ascribed thereto in Subsection 6(a)(ii);
"OSC" means the Ontario Securities Commission;
"PAH Report" means the technical report entitled "NI 43-101 Technical Report,
Gold and Copper Project, Brisas Project" dated February 24, 2005 prepared by
Pincock Allen & Holt for the Corporation, as amended or updated;
"POP System" means the short form prospectus distribution rules established by
National Instrument 44-101 of the Canadian Securities Administrators;
"Preliminary Prospectuses" means, collectively, the Canadian Preliminary
Prospectus and the U.S. Preliminary Prospectus;
"Prospectus Amendments" means any amendment to any of the Preliminary
Prospectuses, including the Amended Preliminary Prospectuses, or the Final
Prospectuses (also referred to as the "Canadian Prospectus Amendment" or "U.S.
Prospectus Amendment" as applicable);
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"Qualifying Provinces" means, collectively, each of the provinces of Canada
other than the Province of Quebec;
"Registration Statement" means the registration statement on Form F-10,
including the U.S. Preliminary Prospectus and the U.S. Final Prospectus, as the
case may be, as amended at the Effective Date;
"SEC" means the United States Securities and Exchange Commission;
"Securities Laws" means, collectively, the applicable securities laws of each of
the Qualifying Provinces and the respective regulations and rules made
thereunder together with all applicable published policy statements, blanket
orders and rulings of the Canadian Securities Regulators and all discretionary
orders or rulings, if any, of the Canadian Securities Regulators made in
connection with the transactions contemplated hereunder;
"Standard Listing Conditions" has the meaning ascribed thereto in Subsection
5(a)(v);
"Subsequent Disclosure Documents" means any financial statements, management
information circulars, annual information forms, material change reports or
other documents issued by the Corporation after the date of this Agreement that
are required to be incorporated by reference in the Prospectuses and
Registration Statement;
"Subsidiaries" means, collectively, the subsidiaries of the Corporation set out
in Schedule "B" to this Agreement;
"Supplementary Material" means, collectively, any amendment to the Canadian
Preliminary Prospectus or Canadian Prospectus, any amendment or supplemental
prospectus or ancillary materials that may be filed by or on behalf of the
Corporation under the Securities Laws relating to the distribution of the
Offered Shares thereunder;
"Time of Closing" means 8:00 a.m. (Toronto time) on the Closing Date, or such
other time on the Closing Date as may be agreed to by the Corporation and the
Underwriters;
"to the best of the Corporation's knowledge" means the actual knowledge of the
senior officers of the Corporation;
"Transfer Agent" means Computershare Trust Company of Canada, the registrar and
transfer agent in respect of the Common Shares;
"TSX" means the Toronto Stock Exchange;
"United States" means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia; and
"U.S. Dealers" means the U.S. broker-dealer affiliates of the Underwriters,
registered as such with the SEC under Section 15 of the 1934 Act, who are
members of the NASD;
"U.S. Final Prospectus" means the Canadian Final Prospectus (with such deletions
therefrom and additions thereto as are permitted or required by Form F-10 and
the applicable rules and regulations of the SEC) included in the Registration
Statement at the Effective Date (including the Documents Incorporated
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by Reference therein not otherwise superceded or modified thereby) relating to
the offering of Offered Shares in the United States, except that if the U.S.
Final Prospectus first furnished to the U.S. Dealers after the Effective Date
for use in connection with the offering of the Underwritten Shares in the United
States differs from the prospectus included in the Registration Statement at the
Effective Date, the term "U.S. Final Prospectus" shall refer to the final
prospectus first furnished to the U.S. Dealers for such use (including the
Documents Incorporated by Reference therein not otherwise superceded or modified
thereby);
"U.S. Preliminary Prospectus" means the Canadian Preliminary Prospectus (with
such deletions therefrom and additions thereto as are permitted or required by
Form F-10 and the applicable rules and regulations of the SEC), included in the
Registration Statement before the Effective Date (including the Documents
Incorporated by Reference therein not otherwise superceded or modified thereby)
relating to the offering of Offered Shares in the United States; and
"U.S. Securities Laws" means all applicable securities legislation in the United
States, including without limitation the 1933 Act and 1934 Act, and the rules
and regulations promulgated thereunder, including judicial and administrative
interpretations thereof.
(b) Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectuses and Registration Statement.
(c) Any reference in this Agreement to a paragraph or subparagraph shall
refer to a paragraph or subparagraph of this Agreement.
(d) All words and personal pronouns relating thereto shall be read and
construed as the number and gender of the party or parties referred to
in each case require and the verb shall be construed as agreeing with
the required word and/or pronoun.
(e) Any reference in this Agreement to $ or to dollars shall refer to the
lawful currency of Canada, unless otherwise specified.
2. Attributes of the Offered Shares. The Offered Shares to be issued and sold
by the Corporation hereunder shall be duly and validly created and issued by the
Corporation and, when issued and sold by the Corporation, such Offered Shares
shall have the rights, privileges, restrictions and conditions that conform in
all material respects to the rights, privileges, restrictions and conditions set
forth in the Preliminary Prospectuses, the Amended Preliminary Prospectuses, any
subsequent Prospectus Amendment, the Prospectuses and the Registration
Statement, subject to such modifications or changes (if any) prior to the
Closing Date as may be agreed to in writing by the Corporation and the
Underwriters.
3. Filing of Prospectus.
(a) The Corporation represents and warrants to, and covenants and agrees
with, the Underwriters that:
(i) the Corporation has filed the Canadian Preliminary Prospectus in
each of the Qualifying Provinces pursuant to National Policy
43-201 and has obtained an MRRS decision document evidencing
receipts by each of the Canadian Securities Regulators for the
Canadian Preliminary Prospectus;
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(ii) the Corporation shall fulfill or cause to be fulfilled to the
reasonable satisfaction of the Underwriters' counsel all relevant
provisions of Canadian Securities Laws that are required to be
fulfilled by the Corporation to permit the distribution of the
Offered Shares in each of the Qualifying Provinces, by or through
the Underwriters who shall comply with the relevant provisions of
Canadian Securities Laws;
(iii) following execution of this Agreement, the Corporation shall file
the Canadian Amended Preliminary Prospectus in each of the
Qualifying Provinces pursuant to National Policy 43-201;
(iv) forthwith after any comments with respect to the Canadian
Preliminary Prospectus or the Canadian Amended Preliminary
Prospectus have been received from the Canadian Securities
Regulators but not later than May 8, 2006 (or such later date as
may be agreed to in writing by the Corporation and the
Underwriters but in any event not later than May 12, 2006), the
Corporation shall have used its best efforts to have prepared,
filed and obtained a decision document from the OSC under the
Mutual Reliance Procedures evidencing that a receipt has been
issued for the Canadian Prospectus by each of the Canadian
Securities Regulators or otherwise fulfilled all legal
requirements to enable the Offered Shares to be offered and sold
to the public in Canada through the Underwriters or any other
investment dealer or broker registered to transact such business
in the applicable Qualifying Province;
(v) prior to the filing of the Amended Preliminary Prospectuses and
thereafter, and prior to the completion of the distribution of the
Offered Shares, the Corporation shall have allowed the
Underwriters to participate fully in the preparation of such
document and shall have allowed the Underwriters to conduct all
due diligence investigations which they may reasonably require in
order to fulfil their obligations as underwriters and in order to
enable them to execute the certificate required to be executed by
them in such document; and
(vi) the Corporation: (i) has prepared and filed with the SEC the
Registration Statement, which does and will comply in all material
respects with the applicable requirements of the 1933 Act and the
rules thereunder, including the U.S. Preliminary Prospectus and a
written appointment of agent for services of process upon the
Corporation on Form F-X (the "Form F-X"); (ii) as soon as
practicable after the filing of the Canadian Amended Preliminary
Prospectus with the OSC and, in any event, on the date on which
the Canadian Amended Preliminary Prospectus is filed with the OSC,
will file an amendment to such Registration Statement including
the U.S. Amended Preliminary Prospectus, which will comply in all
material respects with the applicable requirements of the 1933 Act
and the rules thereunder; (iii) as soon as practicable after the
filing of any further Prospectus Amendment with the OSC and, in
any event, on the date on which the Prospectus Amendment is filed
with the OSC, will file an amendment to such Registration
Statement including the U.S. Prospectus Amendment, which will
comply in all material respects with the applicable requirements
of the 1933 Act and the rules thereunder; and (iv) as soon as
practicable after the filing of the Canadian Final Prospectus with
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the OSC and, in any event, on the date on which the Canadian Final
Prospectus is filed with the OSC, will file an amendment to such
Registration Statement including the U.S. Final Prospectus and
take all actions as may be necessary or desirable to cause the
Registration Statement to become effective under the 1933 Act and
shall have fulfilled and complied with, to the reasonable
satisfaction of the Underwriters, the U.S. Securities Laws
required to be fulfilled or complied with by the Corporation to
enable the Offered Shares to be lawfully distributed to the public
in the United States.
4. Distribution and Certain Obligations of Underwriters.
(a) The Underwriters shall, and shall require any investment dealer or
broker (other than the Underwriters) with which the Underwriters have a
contractual relationship in respect of the distribution of the Offered
Shares (each, a "Selling Firm") to agree to, comply with the Securities
Laws in connection with the distribution hereof and shall offer the
Offered Shares for sale to the public directly and through Selling Firms
upon the terms and conditions set out in the Prospectuses, Registration
Statement and this Agreement. The Underwriters shall, and shall require
any Selling Firm to offer for sale to the public and sell the Offered
Shares only in those jurisdictions where they may be lawfully offered
for sale or sold. The Underwriters shall: (i) use all reasonable efforts
to complete and cause each Selling Firm to complete the distribution of
the Offered Shares as soon as reasonably practicable; and (ii) promptly
notify the Corporation when, in their opinion, the Underwriters and the
Selling Firms have ceased distribution of the Offered Shares and provide
a breakdown of the number of Offered Shares distributed in each of the
Qualifying Provinces where such breakdown is required for the purpose of
calculating fees payable to the Canadian Securities Regulators.
(b) The Underwriters shall, and shall require any Selling Firm to agree to,
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 applicable Prospectus and will not, directly or indirectly, offer,
sell or deliver any Offered Shares or deliver the applicable Prospectus
or any Supplementary Material to any person in any jurisdiction other
than in the Qualifying Provinces except in a manner which will not
require the Corporation to comply with the registration, prospectus,
filing, continuous disclosure or other similar requirements under the
applicable securities laws of such other jurisdictions or pay any
additional governmental filing fees which relate to such other
jurisdictions. Subject to the foregoing, the Underwriters and any
Selling Firm shall be entitled to offer and sell the Offered Shares in
Europe in accordance with any applicable securities and other laws in
the jurisdictions in which the Underwriters and/or Selling Firms offer
the Offered Shares. Any offer or sale of the Offered Shares in the
United States will be made only by U.S. Dealers.
(c) For the purposes of this Section 4, the Underwriters shall be entitled
to assume that the Offered Shares are qualified for distribution in any
Qualifying Province where a receipt or similar document for the Canadian
Final Prospectus shall have been obtained from the applicable Securities
Commission (including a decision document for the Canadian Final
Prospectus issued under the Mutual Reliance Procedures) unless otherwise
notified in writing.
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(d) For purposes of this Section 4, the Underwriters shall be entitled to
assume that the Offered Shares are available for sale in the United
States when the Registration Statement has gone effective unless
otherwise notified in writing.
5. Deliveries on Filing and Related Matters.
(a) The Corporation shall deliver to each of the Underwriters:
(i) at the Time of Closing, copies of the Registration Statement, the
Prospectuses, the Amended Preliminary Prospectuses, any other
Prospectus Amendments and the Prospectuses, signed and certified
by the Corporation as required by the Applicable Securities Laws,
if applicable;
(ii) at the Time of Closing, a copy of any Issuer Free Writing
Prospectuses or Supplementary Material required to be filed by the
Corporation in compliance with Applicable Securities Laws;
(iii) concurrently with the filing of the Canadian Final Prospectus with
the Canadian Securities Regulators, a long-form comfort letter
dated the date of the Canadian Final Prospectus, in form and
substance satisfactory to the Underwriters, acting reasonably,
addressed to the Underwriters and the directors of the Corporation
from the auditors of the Corporation, PricewaterhouseCoopers LLP,
which has been prepared in accordance with SAS 72 and SAS 100, and
contains statements and information of the type ordinarily
included in accountants' "comfort letters" to U.S. underwriters
with respect to the financial statements and certain financial
information contained in the U.S. Prospectus and the Canadian
Prospectus with respect to financial and accounting information
relating to the Corporation contained in the Prospectuses and
Registration Statement, which letter shall be based on a review by
PricewaterhouseCoopers LLP within a cut-off date of not more than
two business days prior to the date of the letter, and which
letter shall be in addition to the auditors' consent letter and/or
comfort letter addressed to the Canadian Securities Regulators in
the Qualifying Provinces; and
(iv) prior to the filing of the Canadian Final Prospectus with the
Canadian Securities Regulators or the final Amendment to the
Registration Statement with the SEC, copies of correspondence from
the TSX and AMEX indicating that the Offered Shares have been
approved for listing on the TSX and AMEX or otherwise subject only
to satisfaction by the Corporation of such post-closing conditions
imposed by the TSX and AMEX (the "Standard Listing Conditions").
(b) Supplementary Material
The Corporation shall also prepare and deliver promptly to the
Underwriters signed copies of all Supplementary Material. Concurrently with the
delivery of any Supplementary Material or the incorporation by reference in the
Prospectus of any Subsequent Disclosure Document, the Corporation shall deliver
to the Underwriters, with respect to such Supplementary Material or Subsequent
Disclosure Document, and comfort letters substantially similar to those referred
to in Section 5(a)(iii) to the extent that such Supplementary Material contains
any Financial Information.
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(c) Representations as to Prospectus and Supplementary Material
Delivery of the Preliminary Prospectuses, the Amended Preliminary Prospectuses,
any other Prospectus Amendments, the Prospectuses, and Issuer Free Writing
Prospectuses and any Supplementary Material by the Corporation shall constitute
the representation and warranty of the Corporation to the Underwriters that:
(i) all information and statements (except information and statements
furnished to the Corporation by the Underwriters relating solely
to the Underwriters) contained and incorporated by reference in
the Canadian Preliminary Prospectus, the Canadian Amended
Preliminary Prospectus or the Canadian Prospectus or any
Supplementary Material, as the case may be, at the respective
dates of filing thereof (A) true and correct, in all material
respects, and contain no misrepresentation and, on the respective
dates of delivery thereof, the Canadian Preliminary Prospectus,
the Canadian Amended Preliminary Prospectus, the Canadian
Prospectus or any Supplementary Material constitute full, true and
plain disclosure of all material facts relating to the Corporation
and the Offered Shares and (B) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which
they were made;
(ii) no known material fact or information has been omitted therefrom
(except facts or information furnished to the Corporation by the
Underwriters relating solely to the Underwriters) which is
required to be stated in such disclosure or is necessary to make
the statements or information contained in such disclosure not
misleading in light of the circumstances under which they were
made;
(iii) except information furnished to the Corporation by the
Underwriters relating solely to the Underwriters, such documents
comply in all material respects with the requirements of the
Securities Laws;
(iv) as at their respective dates, the Canadian Preliminary Prospectus
does, and the Canadian Amended Preliminary Prospectus, any other
Canadian Prospectus Amendment, and the Canadian Final Prospectus
will, comply in all material respects with the Canadian Securities
Laws and, at the time of delivery of the Offered Shares to the
Underwriters, the Canadian Final Prospectus, as amended by a
Prospectus Amendment, if any, will comply in all material respects
with the Canadian Securities Laws;
(v) (i) the U.S. Preliminary Prospectus conforms and the U.S. Final
Prospectus will conform to the Canadian Preliminary Prospectus and
Canadian Final Prospectus, respectively, except for such deletions
therefrom and additions thereto as are permitted or required by
Form F-10 and the Rules; (ii) the Registration Statement as
amended, does not and, on the Effective Date, will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) the U.S. Preliminary
Prospectus and the Corporation's Form F-X comply, and the U.S.
Amended Preliminary Prospectus, any other U.S. Prospectus
Amendment, U.S. Final Prospectus, any Issuer Free Writing
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Prospectuses and the Registration Statement, as amended, will
comply, in all material respects with the 1933 Act and the Rules
on the date of filing; (iv) the U.S. Preliminary Prospectus as of
the date of filing does not, and the Disclosure Package as of the
Applicable Time and U.S. Final Prospectus as of the date of filing
and as of the Closing Date will not, contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading on the date of filing;
and (v) the Canadian Preliminary Prospectus contains, and the
Canadian Amended Preliminary Prospectus, any subsequent Canadian
Prospectus Amendment and the Canadian Final Prospectus and any
Supplementary Material will contain, full, true and plain
disclosure of all material facts required to be stated therein
relating to the Corporation, the operations of the Corporation,
and the Offered Shares, and the Canadian Preliminary Prospectus as
of the date of its filing will, and the Canadian Amended
Preliminary Prospectus as of the Applicable Time and the Canadian
Final Prospectus as of the date of filing and as of the Closing
Date contain no untrue statement of a material fact and will not
omit to state a material fact that is necessary to make any
statement therein not misleading in light of the circumstances in
which it was made; provided, however, that this representation and
warranty shall not apply to statements or omissions made in
reliance upon and in conformity with information relating to the
Underwriters furnished in writing to the Corporation by the
Underwriters expressly for use in the Preliminary Prospectuses,
the Disclosure Package, the Final Prospectuses or the Registration
Statement; and
(vi) each Issuer Free Writing Prospectus does not include any
information that conflicts with the information contained in the
Registration Statement or the Canadian Preliminary Prospectus or
Canadian Prospectus, including any Document Incorporated by
Reference therein deemed to be a part thereof that has not been
superseded or modified. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus
based upon and in conformity with written information furnished to
the Corporation by any Underwriter specifically for use therein.
Such deliveries shall also constitute the Corporation's consent to the
Underwriters' use of the Preliminary Prospectuses, the Amended Preliminary
Prospectuses, any other Prospectus Amendments, the Disclosure Package, the
Prospectuses and any Supplementary Material in connection with the distribution
of the Offered Shares in compliance with this Agreement unless otherwise advised
in writing.
(d) Commercial Copies
(i) The Corporation has caused an electronic copy of the Preliminary
Prospectuses, and will cause an electronic copy of the Amended
Preliminary Prospectuses, any other Prospectus Amendments, the
Disclosure Package, the Prospectuses, the Issuer Free Writing
Prospectuses and any Supplementary Material to be delivered to the
Underwriters without charge after the Underwriters have been
advised that the Corporation has complied with the Applicable
Securities Laws in the Qualifying Provinces and the United States
in accordance with Section 3. The Corporation shall cause
commercial copies of the Amended Preliminary Prospectuses and the
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Prospectuses to be delivered to the Underwriters without charge
(including in circumstances where any delivery requirement may be
satisfied pursuant to Rule 172 under the 1933 Act), in such
numbers and in such cities in the Qualifying Provinces and in the
United States as the Underwriters may reasonably request by oral
instructions to the Corporation of the Preliminary Prospectuses,
the amended Preliminary Prospectuses and the Prospectuses and each
Issuer Free Writing Prospectus given forthwith after the
Underwriters have been advised that the Corporation has complied
with the Securities Laws in the Qualifying Provinces and in the
United States pursuant to Section 3. Such delivery shall be
effected as soon as possible and, in any event, on or before a
date which is one business day after compliance with applicable
Securities Laws in the Qualifying Provinces and in the United
States pursuant to Section 3 with respect to the Preliminary
Prospectuses, the amended Preliminary Prospectuses and the
Prospectuses, and on or before a date which is one business day
after the issuance of the MRRS decision document or accept for
filing, as the case may be, of any Supplementary Material.
(ii) The Corporation shall cause to be provided to the Underwriters,
without charge, such number of copies of any Documents
Incorporated By Reference in the Preliminary Prospectuses, the
Amended Preliminary Prospectuses, the Prospectuses, any other
Prospectus Supplements or any Supplementary Material the
Underwriters may reasonably request for use in connection with the
distribution of the Offered Shares.
(e) Press Releases
During the period commencing on the date hereof and until completion of
distribution of the Offered Shares, (i) the Corporation will promptly provide to
Underwriters drafts of any press releases of the Corporation for review by
Underwriters and the Underwriters' counsel prior to issuance, and (ii) the
Underwriters will promptly provide to the Corporation drafts of any press
releases of the Underwriters regarding the Corporation for review by the
Corporation and the Corporation's counsel prior to issuance. All press releases
shall comply with Applicable Securities Laws.
6. Material Change.
(a) The Corporation shall promptly inform the Underwriters (and if requested
by the Underwriters, confirm such notification in writing) during the
period prior to the Underwriters notifying the Corporation of the
completion of the distribution of the Offered Shares in accordance with
Section 4(a) hereof of the full particulars of:
(i) any material change in the assets, liabilities (contingent or
otherwise), business, affairs, operations or capital of the
Corporation and the Subsidiaries taken together as a whole; or
(ii) any change in any material fact contained in the Preliminary
Prospectuses, the Amended Preliminary Prospectuses, the
Prospectuses, the Registration Statement or any Supplementary
Material (collectively, the "Offering Documents") or whether any
event or state of facts has occurred after the date hereof, which,
in any case, is, or may be, of such a nature as to render any of
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the Offering Documents untrue or misleading in any material
respect or to result in any misrepresentation in any of the
Offering Documents, or which would result in the Prospectuses, the
Registration Statement or any Supplementary Material not complying
(to the extent that such compliance is required) with Applicable
the Securities Laws of any Qualifying Province or the United
States.
(b) The Corporation will comply with Section 57 of the Securities Act
(Ontario) and with the comparable provisions of the other Securities
Laws, and the Corporation will prepare and file promptly any
Supplementary Material which may be necessary and will otherwise comply
with all legal requirements necessary to continue to qualify the Offered
Shares for distribution in each of the Qualifying Provinces.
(c) In addition to the provisions of Subsections 6(a) and 6(b) hereof, the
Corporation shall in good faith discuss with the Underwriters any
change, event or fact contemplated in Subsections 6(a) and 6(b) which is
of such a nature that there is or could be reasonable doubt as to
whether notice should be given to the Underwriters under Subsection 6(a)
hereof and shall consult with the Underwriters with respect to the form
and content of any amendment proposed to be filed by the Corporation, it
being understood and agreed that no such amendment shall be filed with
any Securities Commission prior to the review thereof by the
Underwriters and their counsel, acting reasonably.
7. Regulatory Approvals. Prior to the filing of the Canadian Final Prospectus
with the Canadian Securities Regulators, the Corporation shall file or cause to
be filed with the TSX and AMEX all necessary documents and shall take or cause
to be taken all necessary steps to ensure that the Corporation has obtained all
necessary approvals for the Offered Shares to be conditionally listed on the TSX
and AMEX subject only to the Standard Listing Conditions.
8. Representations and Warranties of the Corporation. For purposes of Section
8, "Preliminary Prospectuses" shall mean "Amended Preliminary Prospectuses." The
Corporation represents and warrants to the Underwriters and acknowledges that
each of them is relying upon such representations and warranties in purchasing
the Offered Shares that:
(a) the Corporation and each of the Subsidiaries is an entity constituted
and validly existing under the laws of the jurisdiction in which it was
incorporated, amalgamated or continued, as the case may be. No
proceedings have been instituted or, to the knowledge of the
Corporation, are pending for the dissolution or liquidation of the
Corporation or any of the Subsidiaries;
(b) each of the Corporation and the Subsidiaries has the requisite corporate
power, authority and capacity to own, lease, or own and lease and to
operate its property and assets including all material licenses or other
similar rights necessary to carry on the business customarily carried on
by it, except as described in the Preliminary Prospectuses and the
Registration Statement, and the Corporation has all requisite power and
authority to enter into this Agreement and to carry out its obligations
thereunder;
(c) attached hereto as Schedule "B" is a list of the Subsidiaries, the
particulars of the jurisdiction of subsistence and percentage of the
voting and equity interest in such Subsidiaries held by the Corporation.
Each of the Subsidiaries has been duly incorporated or organized in its
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respective jurisdiction and is and will be at the Time of Closing
up-to-date in all of such Subsidiary's filings and in good standing
under the laws of such jurisdiction as the case may be. Such
Subsidiaries' issued and outstanding securities have been duly
authorized and validly issued and are outstanding as fully paid shares
and no person has any right, agreement or option, present or future,
contingent or absolute, or any right or privilege capable of becoming a
right, agreement or option, for the purchase from the Corporation of any
interest in any of such securities or for the issue or allotment of any
unissued shares in the capital of any such Subsidiary or any other
security convertible into or exchangeable for any such securities. The
Subsidiaries are the only subsidiaries which are material to the
Corporation and its operations and no Subsidiary is currently
prohibited, directly or indirectly, from paying any dividends to the
Corporation, from making any other distribution on such Subsidiary's
capital stock, from repaying to the Corporation any loans or advances to
such Subsidiary from the Corporation or from transferring any of such
Subsidiary's property or assets to the Corporation or any other
subsidiary of the Corporation;
(d) each of the Corporation and the Subsidiaries has conducted and is
conducting its business in material compliance with all applicable laws,
rules and regulations of each jurisdiction in which its business is
carried on and, to its knowledge, is licensed, registered or qualified
in all jurisdictions in which it owns, leases or operates its property
or carries on business to enable its business to be carried on as now
conducted and its property and assets to be owned, leased and operated
and all such licenses, registrations and qualifications are and will be
at the Time of Closing valid, subsisting and in good standing, except in
each case in respect of matters which do not and will not result in any
material adverse change to the business or condition (financial or
otherwise) of the Corporation and its Subsidiaries (on a consolidated
basis), and except for the absence of any such license, registration or
qualification which does not and will not have a Material Adverse
Effect;
(e) neither the Corporation nor any of the Subsidiaries has received any
notice of proceedings relating to the revocation or modifications of any
material mining or exploration authorities, permits or licenses
previously granted to the Corporation, nor have any of them received
notice of the revocation or cancellation of, or any intention to revoke
or cancel, any mining claims, groups of claims, exploration rights,
concessions or leases with respect to any of the resource properties
described in the Preliminary Prospectuses and the Registration Statement
where such proceedings, revocations, modifications, or cancellations,
would have a material adverse effect on the Corporation and the
Subsidiaries, taken as a whole;
(f) except as otherwise disclosed in the Preliminary Prospectuses and
Registration Statement, the Corporation and the Subsidiaries are the
absolute legal and beneficial owner of, and have good and marketable
title to, all of the material property or assets thereof as described in
the Preliminary Prospectuses and the Registration Statement, and no
other property rights are necessary for the conduct of the business of
the Corporation or any Subsidiary as currently conducted except with
does not and will not have a Material Adverse Effect. None of the
Corporation or the Subsidiaries knows of any claim or the basis for any
claim that might or could adversely affect the right thereof to use,
transfer or otherwise exploit such property rights and, except as
disclosed in the Preliminary Prospectuses and the Registration
Statement, none of the Corporation or the Subsidiaries has any
responsibility or obligation to pay any material commission, royalty,
- 15 -
licence fee or similar payment to any person with respect to the
property rights thereof
(g) the Corporation and the Subsidiaries hold either freehold title, mining
leases, mining concessions, mining claims or participating interests or
other conventional property or proprietary interests or rights,
recognized in the jurisdiction in which a particular property is
located, in respect of the ore bodies and minerals located in properties
in which the Corporation and the Subsidiaries have an interest as
described in the Preliminary Prospectuses and the Registration Statement
under valid, subsisting and enforceable title documents or other
recognized and enforceable agreements or instruments, sufficient to
permit the Corporation or applicable Subsidiary to explore the minerals
relating thereto. All property, leases or claims in which the
Corporation or any Subsidiary has an interest or right have been validly
located and recorded in accordance with all applicable laws and are
valid and subsisting where the failure to be so would have a material
adverse effect on the Corporation and Subsidiaries, taken as a whole.
The Corporation and the Subsidiaries have all necessary surface rights,
access rights and other necessary rights and interests relating to the
properties in which the Corporation and the Subsidiaries have an
interest as described in the Preliminary Prospectuses and the
Registration Statement granting the Corporation or applicable Subsidiary
the right and ability to explore for minerals, ore and metals for
development purposes as are appropriate in view of the rights and
interest therein of the Corporation or applicable Subsidiary, with only
such exceptions as do not interfere with the use made by the Corporation
or applicable Subsidiary of the rights or interest so held, and each of
the proprietary interests or rights and each of the documents,
agreements and instruments and obligations relating thereto referred to
above is currently in good standing in the name of the Corporation or a
Subsidiary where the failure to be so would have a material adverse
effect on the Corporation and its Subsidiaries, taken as a whole;
(h) the Corporation has made available to the respective authors thereof
prior to the issuance of the PAH Report and the Feasibility Study, for
the purpose of preparing the PAH Report and the Feasibility Study, as
applicable, all information requested, and to the knowledge and belief
of the Corporation, no such information contains any material
misrepresentation. The Corporation does not have any knowledge of a
material adverse change in any production, cost, price, reserves or
other relevant information provided since the dates that such
information was so provided;
(i) to the best of Corporation's knowledge, each of the PAH Report and the
Feasibility Study accurately and completely sets forth all material
facts relating to the properties that are subject thereto. Since the
date of preparation of the PAH Report and the Feasibility Study there
has been no change, to the best of the Corporation's knowledge, that
would disaffirm or change any aspect of the PAH Report or the
Feasibility Study in any material respect;
(j) the Corporation maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (1) transactions are
executed in accordance with management's general or specific
authorization, and (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with Canadian
- 16 -
generally accepted accounting principles and to maintain accountability
for assets and the Corporation is not aware of any material weakness in
its internal controls over financial reporting;
(k) except as otherwise described in the Preliminary Prospectuses and
Registration Statement, there is no action, proceeding or investigation
(whether or not purportedly on behalf of the Corporation or any of the
Subsidiaries) pending or, to the best of the Corporation's knowledge,
threatened against the Corporation or any of the Subsidiaries at law or
in equity, or before or by any federal, provincial, municipal or other
governmental department, commission, board or agency, regulatory
authority, domestic or foreign, which is, or could reasonably be
expected to, result in any material change in the business or in the
condition (financial or otherwise) of the Corporation and the
Subsidiaries, or their properties or assets (taken as a whole), or which
questions the validity of any action taken or to be taken by the
Corporation pursuant to or in connection with this Agreement;
(l) the Historical Financial Statements:
(i) have been prepared in accordance with Canadian generally accepted
accounting principles applied on a basis consistent with those of
preceding fiscal periods;
(ii) present fairly and correctly, in all material respects, the
assets, liabilities and financial condition of the Corporation as
at the dates thereof and the results of its operations and the
changes in its cash flows for the periods then ended;
(iii) have been reconciled to generally accepted accounting principles
in the United States of America ("U.S. GAAP") in accordance with
Item 18 of Form 20-F under the 1934 Act to the extent required by
the 1933 Act and the Rules for use of Form F-10; and
(iv) comply with the requirements of Canadian Securities Laws and the
1933 Act and Rules and the 1934 Act and the rules and regulations
promulgated thereunder;
(m) the auditors of the Corporation who audited the financial statements of
the Corporation most recently delivered to the security holders of the
Corporation are independent public accountants as required by the 1933
Act and the Rules and the Sarbanes-Oxley Act of 2002 and are independent
public accountants as required by the Canadian Securities Laws and there
has never been any reportable disagreement or event (within the meaning
of National Instrument 51-102) with the present or any former auditors
of the Corporation;
(n) to the best of the Corporation's knowledge, none of the directors or
senior officers of the Corporation, any known holder of more than 10% of
any class of securities of the Corporation or any known associate or
affiliate of any of the foregoing has any interest, directly or
indirectly, in any transaction contemplated by this Agreement except as
otherwise described in the Preliminary Prospectuses and the Registration
Statement;
(o) the Corporation and the Subsidiaries have filed all federal, provincial,
state, local and foreign tax returns that are required to be filed or
have requested extensions thereof (except in the case in which the
failure to do so would not have a material adverse affect on the
- 17 -
Corporation and the Subsidiaries, taken as a whole) and have paid all
taxes required to be paid and any other assessment, fine or penalty
levied against the Corporation or any of the Subsidiaries, to the extent
that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith;
(p) no domestic or foreign taxation authority has asserted or to, to the
best of the Corporation's knowledge, threatened to assert any
assessment, claim or liability for taxes due or to become due in
connection with any review or examination of the tax returns of the
Corporation or any of the Subsidiaries (including, without limitation,
any predecessor companies) filed for any year which would have a
material adverse effect on the Corporation and the Subsidiaries, taken
as a whole;
(q) the Corporation and the Subsidiaries own or possess the right to use all
material patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Preliminary
Prospectuses and Registration Statement as being owned by them or any of
them or necessary for the conduct of their respective businesses, and
the Corporation is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Corporation and the
Subsidiaries with respect to the foregoing. To the best of the
Corporation's knowledge, the Corporation's business, including that of
its Subsidiaries, as now conducted does not, and as currently proposed
to be conducted will not, infringe or conflict with in any material
respect patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses or other intellectual property or franchise
right of any person. No claim has been made against the Corporation
alleging the infringement by the Corporation of any patent, trademark,
service mark, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person;
(r) the Corporation is a reporting issuer not in default under the
Securities Laws of each Qualifying Province and is subject to the
reporting requirements of the 1934 Act and is current in its filings;
where applicable, the Corporation is in compliance with its timely
disclosure obligations under the Applicable Securities Laws in all of
the Qualifying Provinces and the United States and under the rules of
the TSX and AMEX and, without limiting the generality of the following,
there has not occurred any material adverse change in the business,
affairs, operations, assets, liabilities (contingent or otherwise) or
capital of the Corporation and the Subsidiaries (taken as a whole) which
has not been publicly disclosed; the Corporation has not filed any
confidential material change reports since the date of such statements
which remain confidential at the date hereof;
(s) the documents to be incorporated or deemed to be incorporated by
reference in the Registration Statement and the U.S. Prospectus, at the
time they were or hereafter are filed with the SEC, complied or will
comply, as applicable, in all material respects with the requirements of
the 1934 Act, and the rules and regulations of the SEC thereunder (the
"1934 Act Regulations");
(t) to the best of the Corporation's knowledge, no agreement is in force or
effect which in any manner affects the voting or control of any of the
securities of the Corporation or any of the Subsidiaries (other than as
reflected in the Schedule 13D filed with the SEC on May 12, 2005 by
Strongbow Capital, Ltd., et al, and any and all amendments thereto);
- 18 -
(u) the authorized capital of the Corporation consists of an unlimited
number of Common Shares, Class B common shares and preferred shares
issuable in series, of which, as at April 28, 2006, 35,324,977 Common
Shares and 1,085,099 Class B common shares and no preferred shares were
issued and outstanding as fully paid and non-assessable shares; except
as disclosed in Schedule "C" hereto, no person, firm or corporation, as
of the date hereof has any agreement or option, or right or privilege
(whether pre-emptive or contractual) capable of becoming an agreement or
option, for the purchase from the Corporation of any unissued shares of
the Corporation or any other security convertible or exchangeable for
shares of the Corporation, except as otherwise described in the
Preliminary Prospectuses and Registration Statement;
(v) the execution and delivery of this Agreement and the performance of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action of the Corporation and this Agreement has
been duly executed and delivered by the Corporation and constitutes a
valid and binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, provided that enforcement
thereof may be limited by laws affecting creditors' rights generally,
that specific performance and other equitable remedies may only be
granted in the discretion of a court of competent jurisdiction and that
the proviso relating to indemnity, contribution and waiver of
contribution may be unenforceable;
(w) the execution and delivery of this Agreement, the fulfilment of the
terms hereof by the Corporation and the issuance, sale and delivery of
the Offered Shares to be issued and sold by the Corporation at the Time
of Closing do not and will not:
(i) require the consent, approval, authorization, filing, registration
or qualification of or with any governmental authority, stock
exchange, Securities Commission or other third party, except such
as have been obtained or such as may be required (and shall be
obtained prior to the Time of Closing) under applicable Securities
Laws or stock exchange regulations; or
(ii) result in a breach of or default under, and do not and will not
create a state of facts which, after notice or lapse of time or
both, will result in a breach of or default under, and do not and
will not conflict with:
(A) any of the terms, conditions or provisions of the articles,
by-laws or resolutions of the shareholders, directors or any
committee of directors of the Corporation or any of its
Subsidiaries or any material indenture, agreement or
instrument to which the Corporation or any of its
Subsidiaries is a party or by which it or they are
contractually bound;
(B) any statute, rule, regulation or law applicable to the
Corporation or any of its Subsidiaries, including, without
limitation, the Securities Laws, or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Corporation or its Subsidiaries; or
(C) any mortgage, note, indenture, contract, agreement, lease or
other document to which the Corporation is a party or by
which it is bound;
- 19 -
(x) the Offered Shares to be issued and sold as hereinbefore described have
been, or prior to the Time of Closing will be, duly authorized for
issuance, and, upon payment of the issue price for the Offered Shares
and when certificates for such Offered Shares to be sold at Time of
Closing are countersigned by the Transfer Agent, such Offered Shares
will be validly issued and fully paid and non-assessable and all
statements made in the Preliminary Prospectuses and Registration
Statement describing the Offered Shares will be accurate in all material
respects;
(y) except as otherwise described in the Preliminary Prospectuses and
Registration Statement, none of the Corporation nor the Subsidiaries is
in violation of its constating documents, no default exists under and no
event has occurred which, after notice or lapse of time or both, or
otherwise, would constitute a default under or breach of by the
Corporation, its Subsidiaries or any other person, any material
obligation, agreement, covenant or condition contained in any contract,
indenture, trust, deed, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Corporation or any of the
Subsidiaries is a party or by which any of them or any of their
respective properties may be bound where such default or event would
have a material adverse effect on the Corporation and the Subsidiaries,
taken as a whole;
(z) no order, ruling or determination having the effect of suspending the
sale or ceasing the trading of the Offered Shares, the Common Shares or
any other security of the Corporation has been issued or made by any
Securities Commission or stock exchange or any other regulatory
authority and is continuing in effect and no proceedings for that
purpose have been instituted or are pending or, to the best of the
Corporation's knowledge, contemplated or threatened by any such
authority or under any Applicable Securities Laws;
(aa) except as provided herein, there is no person, firm or corporation
acting for the Corporation entitled to any brokerage or finders fee in
connection with this Agreement or any of the transactions contemplated
hereunder;
(bb) the Corporation is eligible to file a short form prospectus in each of
the Qualifying Provinces pursuant to the POP System and on the date of
and upon filing of the Prospectus there will be no documents required to
be filed under the Securities Laws in connection with the offering of
the Offered Shares that will not have been filed as required;
(cc) the Corporation meets the general eligibility requirements for use of
Form F-10 under the 1933 Act;
(dd) the minute books and records of the Corporation and the Subsidiaries
made available to counsel for the Underwriters in connection with their
due diligence investigations of each of the Corporation and the
Subsidiaries for the periods from their respective dates of
incorporation to the date of examination thereof are all of the minute
books and records of the Corporation and the Subsidiaries respectively
and contain copies of all material proceedings (or certified copies
thereof) of the shareholders, the boards of directors and all committees
of the boards of directors of the Corporation and the Subsidiaries to
the date of review of such corporate records and minute books and there
- 20 -
have been no other meetings, resolutions or proceedings of the
shareholders, board of directors or any committees of the boards of
directors of the Corporation and any of the Subsidiaries to the date of
review of such corporate records and minute books not reflected in such
minute books and other records, other than those which have been
disclosed to the Underwriters or which are not material in the context
of the Corporation and the Subsidiaries, on a consolidated basis;
(ee) with respect to each of the premises which is material to the
Corporation on a consolidated basis and which the Corporation or any of
the Subsidiaries occupies as tenant (the "Leased Premises"), the
Corporation or such Subsidiary occupies the Leased Premises and has the
exclusive right to occupy and use the Leased Premises and each of the
leases pursuant to which the Corporation and/or the Subsidiaries
occupies the Leased Premises is in good standing and in full force and
effect;
(ff) there has not been in the last two years and there is not currently any
labour disruption or conflict which could reasonably be expected to
materially adversely affect the carrying on of the Corporation's or the
Subsidiaries' business, considered as a whole;
(gg) the Corporation and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they engage,
and the Corporation and the Subsidiaries have no reason to believe that
they will not be able to renew their existing insurance coverage as and
when such coverage expires or obtain similar coverage from similar
insurers as may be necessary to continue their business at a similar
cost to that of their existing coverage;
(hh) except as disclosed in the Preliminary Prospectuses and the Registration
Statement, the Corporation and the Subsidiaries:
(i) and the property, assets and operations thereof comply in all
material respects with all applicable "Environmental Laws" (which
term means and includes, without limitation, any and all
applicable international, federal, provincial, state, municipal or
local laws, statutes, regulations, treaties, orders, judgments,
decrees, ordinances, official directives and all authorizations
relating to the environment, occupational health and safety) or
any "Environmental Activity" (which term means and includes,
without limitation, any past, present or future activity, event or
circumstance) in respect of a "Contaminant" (which term means and
includes, without limitation, any pollutants, dangerous
substances, liquid wastes. hazardous wastes, hazardous materials,
hazardous substances or contaminants or any other matter including
any of the foregoing, as defined or described as such pursuant to
any Environmental Law), including, without limitation, the
storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing,
treatment, stabilization, disposition, handling or transportation
thereof or the release, escape, leaching, dispersal or migration
thereof into the natural environment, including the movement
through or in the air, soil, surface water or groundwater;
(ii) do not have any knowledge of and have not received any notice of
any material claim, judicial or administrative proceeding, pending
or threatened against, or which may affect, either the Corporation
or any Subsidiary or any of the property, assets or operations
thereof relating to, or alleging any violation of any
- 21 -
Environmental Laws, the Corporation is not aware of any facts
which could give rise to any such claim or judicial or
administrative proceeding and neither the Corporation nor any
Subsidiary nor any of the property, assets or operations thereof
is the subject of any investigation, evaluation, audit or review
by any "Governmental Authority" (which term means and includes,
without limitation, any national, federal government, province,
state, municipality or other political subdivision of any of the
foregoing, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government and any corporation or other entity owned or controlled
(through stock or capital ownership or otherwise) by any of the
foregoing) to determine whether any violation of any Environmental
Laws has occurred or is occurring or whether any remedial action
is needed in connection with a release of any Contaminant into the
environment, except for compliance investigations conducted in the
normal course by any Governmental Authority;
(iii) have not given or filed any notice under any federal, state,
provincial or local law with respect to any Environmental
Activity, the Corporation and the Subsidiaries do not have any
liability (whether contingent or otherwise) in connection with any
Environmental Activity and the Corporation is not aware of any
notice being given under any federal, state, provincial or local
law or of any liability (whether contingent or otherwise) with
respect to any Environmental Activity relating to or affecting the
Corporation or any Subsidiary or the property, assets, business or
operations thereof
(iv) do not store any hazardous or toxic waste or substance on the
property thereof and have not disposed of any hazardous or toxic
waste, in each case in a manner contrary to any Environmental
Laws, and there are no Contaminants on any of the premises at
which the Corporation or any Subsidiary carries on business, in
each case other than in compliance with Environmental Laws; and
(v) to the best of the Corporation's knowledge, are not subject to any
contingent or other liability relating to the restoration or
rehabilitation of land, water or any other part of the environment
(except for those derived from normal exploration activities) or
non-compliance with Environmental Law;
(ii) other than as disclosed in the Preliminary Prospectuses and the
Registration Statement, the Corporation has not made any loans to or
guaranteed the obligations of any person other than the Subsidiaries;
(jj) other than as set out in the Preliminary Prospectuses and the
Registration Statement, to the knowledge of the Corporation, none of the
directors, officers or employees of the Corporation or any associate or
affiliate of any of the foregoing had or has any material interest,
direct or indirect, in any material transaction or any proposed material
transaction with the Corporation or its Subsidiaries which, as the case
may be, materially affects, is material to or will materially affect the
Corporation or its Subsidiaries, on a consolidated basis;
- 22 -
(kk) the Corporation intends to use the net proceeds of the Offering in the
manner specified in the Preliminary Prospectuses and Registration
Statement under the caption "Use of Proceeds";
(ll) the Corporation is not, and after giving effect to the offering and sale
of the Offered Shares and the application of the proceeds thereof as
described in the Preliminary Prospectuses, will not be an "investment
company" as such term is defined in the U.S. Investment Company Act of
1940, as amended;
(mm) each of the Corporation and its Subsidiaries that is incorporated under
the laws of any state in the United States, whose principal place of
business is within the United States or that employs employees resident
in the United States is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA");
(nn) (i) at the time of filing the Registration Statement with the SEC and
(ii) as of the Applicable Time (with such date being used as the
determination date for purposes of this clause (ii)), the Corporation
was not and is not an Ineligible Issuer (as defined in Rule 405 under
the 1933 Act), without taking account of any determination by the
Commission pursuant to Rule 405 that it is not necessary that the
Corporation be considered an Ineligible Issuer;
(oo) the Corporation is, and following the completion of the transactions
contemplated by this Agreement and assuming the use of proceeds as
described in the Disclosure Package and the Prospectuses, will be a
"foreign private issuer" as defined in Rule 3b-4 under the 1934 Act;
(pp) no holders of securities of the Corporation have rights to the
registration or qualification of such securities under the Registration
Statement or Canadian Prospectus;
(qq) the Corporation has not taken, directly or indirectly, any action
designed to or that would constitute or that might reasonably be
expected to cause or result in, under the 1934 Act, the Canadian
Securities Laws or otherwise, stabilization or manipulation of the price
of any security of the Corporation to facilitate the sale or resale of
the Offered Shares;
(rr) neither the Corporation nor any of its Subsidiaries nor, to the
knowledge of the Corporation, any director, officer, agent, employee or
affiliate of the Corporation or any of its Subsidiaries is aware of or
has taken any action, directly or indirectly, that would result in a
violation by such Persons of the FCPA, including, without limitation,
making use of the mails or any means or instrumentality of interstate
commerce corruptly in furtherance of an offer, payment, promise to pay
or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to
any "foreign official" (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA and the Corporation, its
Subsidiaries and, to the knowledge of the Corporation, its affiliates
have conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure, and
which are reasonably expected to continue to ensure continued compliance
- 23 -
therewith. "FCPA" means Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder;
(ss) the Corporation and its Subsidiaries maintain "disclosure controls and
procedures" (as such term is defined in Rule 13a-15(e) under the 1934
Act), such disclosure controls and procedures are effective, and there
is and has been no failure on the part of the Corporation and any of the
Corporation's directors or officers, in their capacity as such, to
comply in any material respect with any material provision of the
Sarbanes-Oxley Act of 2002 to the extent applicable to the Corporation
as a "foreign private issuer" as defined in Rule 3b-4 under the 1934
Act; and
(tt) the Transfer Agent, at its principal office in Toronto, Ontario, has
been duly appointed as the registrar and transfer agent in respect of
the Common Shares.
9. Covenants.
(a) The Corporation covenants and agrees with the Underwriters that the
Corporation will advise the Underwriters, promptly after receiving
notice thereof of (i) the time when the amended Preliminary
Prospectuses, the Prospectuses, the Issuer Free Writing Prospectuses,
the Registration Statement and any Supplementary Material has been
filed, (ii) the effectiveness of the Registration Statement, (iii) when
any post effective amendment to the Registration Statement shall have
been filed with the SEC or shall have become effective and (iv) receipts
for the Canadian Preliminary Prospectus or the Canadian Prospectus
therefor have been obtained (v) of the receipt of any comments from the
Canadian Securities Regulators or the SEC, (vi) of any request by the
Canadian Securities Regulators to amend or supplement the Canadian
Preliminary Prospectus or the Canadian Prospectus or for additional
information or of any request by the SEC to amend the Registration
Statement or to amend or supplement the U.S. Prospectus or for
additional information, (vii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Offered
Shares for offering or sale in any jurisdiction, or of the institution
or, to the knowledge of the Corporation, threatening of any proceedings
for any such purpose, and (viii) of the issuance by the Canadian
Securities Regulators or any stock exchange of any order having the
effect of ceasing or suspending the distribution of the Securities or
the trading in the securities of the Corporation, or of the institution
or, to the knowledge of the Corporation, threatening of any proceedings
for any such purpose. The Corporation will use every reasonable effort
to prevent the issuance of any such stop order or of any order
preventing or suspending such use or such order ceasing or suspending
the distribution of the Offered Shares or the trading in the securities
of the Corporation and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time. and will provide evidence
reasonably satisfactory to the Underwriters of each such filing and
copies of such receipts;
(b) Subject to the Corporation's board of directors' exercise of its
fiduciary duty to consider a transaction that might result in the
Corporation ceasing to be a public company, the Corporation covenants
and agrees with the Underwriters that the Corporation will use its
reasonable best efforts (i) to maintain its status as a "reporting
issuer" (or the equivalent thereof) not in default of the requirements
of the Securities Laws of each of the Qualifying Provinces for a period
- 24 -
of one year following the Closing Date and (ii) for a period of one year
following the Closing Date file all documents required to be filed by
the Corporation with the SEC pursuant to the 1934 Act within the time
periods required by the 1934 Act and the rules and regulations of the
SEC thereunder;
(c) Subject to the Corporation's board of directors' exercise of its
fiduciary duty to consider a transaction that might result in the
Corporation ceasing to be a public company, the Corporation covenants
and agrees with the Underwriters that the Corporation will use its
reasonable best efforts to maintain the listing of the Common Shares on
the TSX and AMEX or such other recognized stock exchange or quotation
system as the Underwriters may approve, acting reasonably, to the date
that is two years following the Closing Date so long as the Corporation
meets the minimum listing requirements of the TSX, AMEX or such other
exchange or quotation system;
(d) The Corporation will timely file such reports pursuant to the 1934 Act
as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement (which need
not be audited but shall be in reasonable detail) for the purposes of,
and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act and the regulations thereunder;
(e) The Corporation will use its reasonable best efforts, in cooperation
with the Underwriters, to qualify the Offered Shares for offering and
sale under the applicable securities laws of such states and other
jurisdictions as the Underwriters may designate and to maintain such
qualifications in effect for a period of not less than one year from the
effective date of the Registration Statement; provided, however, that
the Corporation shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer
in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject;
(f) The Corporation covenants and agrees with the Underwriters that the
Corporation will not take, directly or indirectly, any action designed
to or that would constitute or that might reasonably be expected to
cause or result in, under the 1934 Act, the Canadian Securities Laws or
otherwise, stabilization or manipulation of the price of any security of
the Corporation to facilitate the sale or resale of the Offered Shares;
(g) The Corporation covenants and agrees with the Underwriters that the
Corporation that, unless it obtains the prior written consent of each
Underwriter, and each Underwriter, severally and not jointly, covenants
and agrees with the Corporation that, unless it has obtained or will
obtain, as the case may be, the prior written consent of the
Corporation, it has not made and will not make any offer relating to the
Offered Shares that would constitute an "issuer free writing prospectus"
as defined under Rule 433 under the 1933 Act, or that would otherwise
constitute a Free Writing Prospectus required to be filed by the
Corporation with the SEC or retained by the Corporation under Rule 433
under the 1933 Act; provided that the prior written consent of the
parties hereto shall be deemed to have been given in respect of the Free
Writing Prospectuses included in Schedule D hereto. Any such Free
Writing Prospectus consented to by the Underwriters or the Corporation
is hereinafter referred to as a "Permitted Free Writing Prospectus." The
Corporation agrees that (x) it has treated and will treat, as the case
may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
- 25 -
Prospectus and (y) it has complied and will comply, as the case may be,
with the requirements of Rules 164 and 433 under the 1933 Act applicable
to any Permitted Free Writing Prospectus, including in respect of timely
filing with the SEC, legending and record keeping;
(h) Each Underwriter, severally and not jointly, covenants and agrees with
the Corporation that:
(i) without the prior written consent of the Corporation, it has not
distributed and will not distribute any Free Writing Prospectus in
a manner reasonably designed to lead to its broad unrestricted
dissemination;
(ii) without the prior written consent of the Corporation, it has not
used and will not use any Free Writing Prospectus that contains
the final terms of the Offered Shares unless such terms have
previously been or will be included in a Free Writing Prospectus
filed with the SEC;
(iii) it will, pursuant to reasonable procedures developed in good
faith, retain copies of, and comply with any legending
requirements applicable to, each Free Writing Prospectus used or
referred to by it, in accordance with the 1933 Act;
(iv) it is not subject to any pending proceeding under Section 8A of
the 1933 Act with respect to the offering of the Offered Shares
(and will promptly notify the Corporation if any such proceeding
against it is initiated during the delivery period for any
offering documents); and
(v) without the prior written consent of the Corporation, it has not
prepared or conducted, or participated in, or will prepare or
conduct, or participate in, the preparation or conduct of any
"road show" relating to the Offered Shares that did not originate
live, in real-time to a live audience or the preparation or
provision of any communication used in connection with such road
show that is a graphic or other written communication that is
provided separately, for example by graphic means in a file
designed to be copied or downloaded separately.
10. Conditions of Closing. The obligation of the Underwriters to purchase the
Offered Shares shall be subject to the following:
(a) The Canadian Final Prospectus shall have been timely filed with the
Canadian Securities Regulators and a Mutual Reliance Review System
Decision Document shall have been obtained in respect thereof and the
Registration Statement shall have become effective; and at the Time of
Closing no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the SEC, no order having the effect
of ceasing or suspending the distribution of the Offered Shares or the
trading in the securities of the Corporation or any other securities of
the Corporation shall have been issued or proceedings therefor initiated
or threatened by any securities commission, securities regulatory
authority or stock exchange in Canada or the United States, and any
request on the part of the Canadian Securities Regulators or the SEC for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters;
- 26 -
(b) the Corporation shall cause its Yukon counsel, in respect of the laws of
the Yukon, and Fasken Martineau DuMoulin LLP in respect of the laws of
the Provinces of British Columbia, Alberta and Ontario, to deliver to
the Underwriters and their counsel a legal opinion dated and delivered
the Closing Date, in form and substance satisfactory to the Underwriters
and their counsel, acting reasonably, with respect to the following
matters:
(i) the Corporation is a "reporting issuer", or its equivalent, in
each of the Qualifying Provinces and it is not listed as in
default of any requirement of the Securities Laws in any of the
Qualifying Provinces;
(ii) the Corporation is a corporation existing under the laws of the
Yukon Territory and has all requisite corporate power to carry on
its business as now conducted and to own, lease and operate its
property and assets;
(iii) the authorized capital of the Corporation;
(iv) the Corporation has all necessary corporate power and capacity:
(i) to execute and deliver this Agreement and perform its
obligations under this Agreement; and (ii) to create, issue and
sell the Offered Shares;
(v) all necessary corporate action has been taken by the Corporation
to authorize the execution and delivery of each of the Preliminary
Prospectus, the amended Preliminary Prospectus and the Prospectus
and the filing thereof with the Canadian Securities Regulators;
(vi) upon the payment therefor, the Underwritten Shares will have been
validly issued as fully paid and non-assessable, and upon exercise
of the Over-Allotment Option and payment therefor, the Additional
Shares will have been validly issued as fully paid and
nonassessable;
(vii) all necessary corporate action has been taken by the Corporation
to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder and this Agreement has
been 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 to bankruptcy,
insolvency and other laws affecting the rights of creditors
generally and subject to such other standard assumptions and
qualifications including the qualifications that equitable
remedies may be granted in the discretion of a court of competent
jurisdiction and that enforcement of rights to indemnity,
contribution and waiver of contribution set out in this Agreement
may be limited by applicable law;
(viii) the rights, privileges, restrictions and conditions attaching to
the Common Shares are accurately summarized in all material
respects in the Prospectuses and Registration Statement;
(ix) all necessary documents have been filed, all requisite proceedings
have been taken and all approvals, permits and consents of the
appropriate regulatory authority in each of the Qualifying
-27 -
Provinces to qualify the distribution or distribution to the
public of the Offered Shares in each of the Qualifying Provinces
through persons who are registered under applicable legislation
and who have complied with the relevant provisions of such
applicable legislation;
(x) subject only to the Standard Listing Conditions, the Offered
Shares have been conditionally listed on the TSX;
(xi) the execution and delivery of this Agreement, the fulfilment of
the terms hereof by the Corporation and the issuance, sale and
delivery of the Offered Shares to be issued and sold by the
Corporation at the Time of Closing do not and will not result in a
breach of or default under and do not and will not conflict with
any of the terms, conditions or provisions of the articles or
by-laws of the Corporation;
(xii) Computershare Trust Company of Canada has been duly appointed the
transfer agent and registrar for the Common Shares;
(xiii) the Offered Shares will, on the Closing Date, be qualified
investments under the Income Tax Act (Canada) for trusts governed
by registered retirement savings plans, registered retirement
income funds, deferred profit sharing plans and registered
education savings plans;
(xiv) the statements set forth in the Canadian Final Prospectus under
the caption "Canadian Federal Income Tax Considerations", insofar
as they purport to describe the provisions of the laws referred to
therein, are fair summaries of the matters discussed therein;
(xv) To the knowledge of such counsel, there are no persons with
registration rights or other similar rights to have any securities
qualified for distribution under Canadian Securities Laws;
(xvi) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or
governmental authority or agency in Canada is necessary or
required to be made or obtained by the Corporation in connection
with the due authorization, execution and delivery of this
Agreement or for the offering, sale or delivery of the Offered
Shares;
(xvii) To the knowledge of such counsel, there is not pending or
threatened any action, suit, proceeding, inquiry, or
investigation, to which the Corporation is a party, or to which
the property of the Corporation is subject, before or brought by
any court or governmental agency or body, domestic or foreign,
which might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets of the Corporation or
the consummation of the transactions contemplated in this
Agreement or the performance by the Corporation of its obligations
thereunder;
(xviii) The Canadian Prospectus (excluding the financial statements and
other financial data included or incorporated therein or omitted
therefrom, as to which such counsel need not express any opinion)
complies as to form in all material respects to the requirements
of Canadian Securities Laws; and
- 28 -
(xix) The documents incorporated by reference in the Canadian Prospectus
as amended or supplemented (other than the financial statements
and other financial data included or incorporated or deemed to be
incorporated therein, as to which such counsel need not express
any opinion), when they were filed with the Canadian Securities
Regulators, complied as to form in all material respects to the
formal requirements of the securities laws, rules and regulations
of the Province of Ontario as interpreted and applied by the
Canadian Securities Regulators and of the Qualifying Provinces as
interpreted and applied by the relevant Canadian Securities
Regulators under published policy statements,
In connection with such opinion, counsel to the Corporation may
rely on the opinions of local counsel in the Qualifying Provinces
acceptable to counsel to the Underwriters, acting reasonably, as
to the qualification for distribution of the Offered Shares or
opinions may be given directly by local counsel of the Corporation
with respect to those items and as to other matters governed by
the laws of jurisdictions other than the province 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
officers of the Corporation and others. In addition to rendering
the opinions set forth above, such counsel shall also include a
statement to the effect that such counsel has participated in the
preparation of the Disclosure Package (except that the reference
to "U.S. Amended Preliminary Prospectus" and "U.S. Prospectus
Amendment" in the definition of "Disclosure Package" herein shall
be replaced with "Canadian Amended Preliminary Prospectus" and
"Canadian Prospectus Amendment," as amended or supplemented at the
Applicable Time, for the purpose of such counsel's opinion), and
the Canadian Prospectus and in conferences with officers and other
representatives of the Corporation, U.S. counsel for the
Corporation, representatives of the independent accountants for
the Corporation, counsel for the Underwriters and representatives
of the Underwriters at which the contents of the Disclosure
Package and the Canadian Final Prospectus and related matters were
discussed and although such counsel has not independently
verified, and (except as to those matters and to the extent set
forth in the opinions referred to in subsections (xiv) of this
Section 10(b)) is not passing upon and does not assume any
responsibility for, the factual accuracy, completeness or fairness
of the statements contained in the Disclosure Package and Canadian
Prospectus, on the basis of such participation, no facts have come
to such counsel's attention which have caused such counsel to
believe that (i) the Disclosure Package, when taken as a whole, as
of the Applicable Time, contained any untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or (ii) as
of the date of the Canadian Prospectus and as of the Closing Date,
the Canadian Prospectus contains any untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances in which they are made, not misleading (in each
case, other than the financial statements and other financial and
statistical information, and the information derived from the
reports of or attributed to persons named in the Canadian
Prospectus under the heading "Interest of Experts", included or
incorporated by reference therein, as to which such counsel need
express no belief).
(c) the Corporation shall cause its U.S. counsel, Baker & McKenzie, together
with Baker & McKenzie, Caracas, Venezuela, to deliver to the
- 29 -
Underwriters and their counsel a legal opinion dated and delivered the
Closing Date, in form and substance satisfactory to the Underwriters and
their counsel, acting reasonably, with respect to the following matters:
(i) the Offered Shares are approved for listing subject to notice of
issuance on the American Stock Exchange;
(ii) to the knowledge of such counsel, there is no franchise, contract
or other document of a character required to be filed as an
exhibit to the Registration Statement which is not filed as
required;
(iii) the statements included or incorporated by reference in the
Amended Preliminary Prospectuses and Final Prospectuses under the
heading "Certain United States Federal Income Tax Considerations"
and "Risk Factors - The Company determined that it is a "passive
foreign investment company"..." insofar as such statements
summarize legal matters discussed therein, are accurate and fair
summaries of such legal matters in all material respects;
(iv) the Registration Statement has become effective under the 1933 Act
and the Form F-X was filed with the Commission prior to the
effectiveness of the Registration Statement; the filing of the
U.S. Final Prospectus and any amendments thereto, has been made in
the manner and within the time periods required by Form F-10 and
the applicable rules and regulations of the SEC; to the knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement and no proceedings for that purpose have
been instituted or threatened by the SEC, and the Registration
Statement and the U.S. Final Prospectus (other than the financial
statements and other financial and statistical information and the
information derived from the reports of or attributed to persons
named in the U.S. Preliminary Prospectus and the U.S. Final
Prospectus under the heading "Interests of Experts" included or
incorporated by reference therein as to which such counsel need
express no opinion) as of the Effective Date and the Form F-X
appeared on its face to comply as to form in all material respects
with the applicable requirements of the Act and the rules
thereunder;
(v) the Corporation is not and, after giving effect to the offering
and sale of the Offered Shares and the application of the proceeds
thereof as described in the U.S. Final Prospectus, will not be an
"investment company" as defined in the Investment Company Act of
1940, as amended;
(vi) no approval or authorization, or filing with any governmental
authority of the U.S. is required for transactions contemplated by
the Agreement in connection with the sale of the Offered Shares
such as have been obtained or made under the 1933 Act, except for
such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of
the Offered Shares by the Underwriters in the manner contemplated
in this Agreement and in the U.S. Amended Preliminary Prospectus
and the U.S. Final Prospectus and such other approvals (specified
in such opinion) as have been obtained;
(vii) neither the issue and sale of the Offered Shares, nor the
transactions contemplated by the Agreement in connection with the
- 30 -
sale of the Offered Shares will result in a breach or violation
of, or imposition of any lien, charge or encumbrance upon any
property or assets of the Corporation or its subsidiaries pursuant
to, any U.S. federal, Texas or Venezuelan statute, law, rule,
regulation, judgment, order or decree applicable to the
Corporation or its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Corporation or its
Subsidiaries or any of its or their properties; and
(viii) to the knowledge of such counsel, no holders of securities of the
Corporation have rights to the registration of such securities
under the Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than
the Federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Corporation and public officials.
In addition to rendering the opinions set forth above, such
counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration
Statement, the Disclosure Package and the U.S. Final Prospectus
and in conferences and telephone conversations with officers and
other representatives of the Corporation, Canadian counsel for the
Corporation, representatives of the independent accountants for
the Corporation, counsel for the Underwriters and representatives
of the Underwriters during which the contents of the Registration
Statement, the Disclosure Package and U.S. Final Prospectus were
discussed and although such counsel has not independently
verified, and (except as to those matters and to the extent set
forth in the opinions referred to in subsection (iii) of this
Section 10(c)) is not passing upon and does not assume any
responsibility for, the factual accuracy, completeness or fairness
of the statements contained in the Registration Statement, the
Disclosure Package and U.S. Final Prospectus, on the basis of such
participation, there is not reason for such counsel to believe
that (i) on the Effective Date, the Registration Statement
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) the Disclosure
Package, when taken as a whole, as of the Applicable Time,
contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, or (iii) as of the date of the U.S. Final
Prospectus and as of the Closing Date, the U.S. Final Prospectus
included an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading (in each case, other than the financial statements
and other financial and statistical information, and the
information derived from the reports of or attributed to persons
named in the U.S. Preliminary Prospectus and the U.S. Final
Prospectus under the heading "Interest of Experts", included or
incorporated by reference therein, as to which such counsel need
express no opinion).
(d) the Underwriters shall have received favourable legal opinions addressed
to the Underwriters and legal counsel to the Underwriters in form and
- 31 -
substance satisfactory to the Underwriters, acting reasonably, dated as
of the Closing Date from Barbados counsel to the Corporation, with
respect to Gold Reserve de Barbados Ltd.;
(e) the Underwriters shall have received favourable legal opinions addressed
to the Underwriters and legal counsel to the Underwriters in form and
substance satisfactory to the Underwriters, acting reasonably, dated as
of the Closing Date from Montana counsel to the Corporation, with
respect to Gold Reserve Corp.; (f) the Underwriters shall have received
favourable legal opinions addressed to the Underwriters in form and
substance satisfactory to the Underwriters, acting reasonably, dated as
of the Closing Date from Baker & McKenzie, Caracas, Venezuelan counsel
to the Corporation, addressed to the Underwriters, legal counsel to the
Underwriters and the Purchasers with respect to Gold Reserve de
Venezuela, C.A. and Compania Aurifera Brisas del Cuyuni, CA. and with
respect to title to the mineral concessions in Bolivar State, Venezuela,
known as the Brisas Property similar in nature to the opinion dated
November 3, 2004 delivered in connection with the last public offering
by the Corporation;
(g) the Underwriters shall have received at the Time of Closing a legal
opinion dated the Closing Date from the Underwriters' Canadian counsel,
Heenan Blaikie LLP, with respect to matters related to the transactions
contemplated hereby reasonably requested by the Underwriters. In
providing such opinion Heenan Blaikie LLP shall be entitled to rely on
the opinions of local counsel as to matters governed by the laws of
jurisdictions other than the laws of Canada and Province of Ontario
respectively, and as to matters of fact, on certificates of the
Corporation's registrar and transfer agents, auditors, public and stock
exchange officials and officers of the Corporation. Heenan Blaikie LLP
shall also be entitled to rely upon the opinion of counsel to the
Corporation described in subparagraph 10(b);
(h) the Underwriters shall have received at the Time of Closing a legal
opinion dated the Closing Date from the Underwriters' U.S. counsel,
Dorsey & Whitney LLP in form and substance satisfactory to the
Underwriters, acting reasonably, with respect to such matters related to
the transactions contemplated hereby reasonably requested by the
Underwriters, including, without limitation, a negative assurance
letter;
(i) the Underwriters shall have received a certificate dated the Closing
Date, signed by the President and Chief Executive Officer of the
Corporation or any other senior officer of the Corporation as may be
acceptable to the Underwriters, in form and content satisfactory to the
Underwriters' counsel, acting reasonably, with respect to:
(i) the articles and by-laws of the Corporation;
(ii) the resolutions of the Corporation's board of directors relevant
to the issue and sale of the Offered Shares to be issued and sold
by the Corporation and the authorization of the other agreements
and transactions contemplated herein; and
(iii) the incumbency and signatures of signing officers of the
Corporation;
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(j) the Corporation shall cause its auditors, PricewaterhouseCoopers LLP, to
deliver to the Underwriters a comfort letter, dated the Closing Date, in
form and substance satisfactory to the Underwriters, acting reasonably,
bringing forward to a date not more than two business days prior to the
Closing Date the information contained in the comfort letter referred to
in Subsection 5(a)(iii) hereof;
(k) the Corporation shall deliver to the Underwriters, at the Time of
Closing, certificates dated the Closing Date addressed to the
Underwriters and signed by the President and Chief Executive Officer of
the Corporation and the Chief Financial Officer of the Corporation, or
such other senior officer(s) of the Corporation as may be acceptable to
the Underwriters, certifying for and on behalf of the Corporation and
without personal liability, after having made due enquiries, to the
effect that:
(i) the Corporation has complied in all respects with all the
covenants and satisfied all the terms and conditions of this
Agreement on its part to be complied with and satisfied at or
prior to the Time of Closing;
(ii) the representations and warranties of the Corporation contained
herein, including without limitation those representations in
Section 5(c), are true and correct in all respects as at the Time
of Closing, with the same force and effect as if made on and as at
the Time of Closing after giving effect to the transactions
contemplated hereby (for purposes of this certificate, references
to Preliminary Prospectuses in the representations and warranties
in Section 8 shall be deemed to be references to the Disclosure
Package and Final Prospectuses);
(iii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are pending or, to the knowledge of the
Corporation, are contemplated by the SEC;
(iv) decision documents have been issued by the Canadian Securities
Regulators in the Qualifying Provinces for the Canadian Final
Prospectus and no order, ruling or determination having the effect
of ceasing the trading or suspending the sale of the Common Shares
or the Offered Shares to be issued and sold by the Corporation has
been issued and no proceedings for such purpose have been
instituted or are pending or, to the knowledge of such officers,
contemplated or threatened; and
(v) since the respective dates as of which information is given in the
Prospectuses (A) there has been no material change (actual,
anticipated, contemplated or threatened, whether financial or
otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the
Corporation and the Subsidiaries on a consolidated basis, and (B)
no transaction has been entered into by any of the Corporation or
the Subsidiaries which is material to the Corporation on a
consolidated basis, other than as disclosed in the Prospectuses;
(l) the Underwriters shall have received copies of correspondence indicating
that the Corporation has obtained all necessary approvals for the
Offered Shares to be conditionally listed on the TSX and AMEX, subject
only to the Standard Listing Conditions;
- 33 -
(m) the NASD shall have confirmed that it has not raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements; and
(n) the Underwriters shall have received from the directors and senior
officers of the Corporation, written undertakings in favour of the
Underwriters agreeing not to sell, transfer, assign or otherwise dispose
of any securities of the Corporation owned directly or indirectly, by
such directors or officers for a period of 90 days following the Closing
Date without the prior consent of the Underwriters, which shall not be
unreasonably withheld.
11. Closing. The closing of the purchase and sale of the Offered Shares shall
be completed at the Time of Closing at the offices of Fasken Martineau DuMoulin
LLP, Toronto, Ontario, or at such other place as the Corporation and the
Underwriters may agree in writing. At the Time of Closing, the Corporation shall
deliver to the Underwriters:
(a) (i) one definitive certificate representing in the aggregate the total
number of the Offered Shares, registered in the name of "Sprott
Securities Inc.", or in such other name or names as shall be designated
in writing by Sprott on behalf of the Underwriters not less than 48
hours prior to the Time of Closing. The Corporation shall make all
necessary arrangements for the exchange of such definitive certificates,
on the date of delivery, at the principal office of the Transfer Agent
in the City of Toronto for certificates representing the Offered Shares
in such amounts and registered in such names as shall be designated by
Sprott in writing on behalf of the Underwriters not less than 48 hours
prior to the Time of Closing. The Corporation shall pay all fees and
expenses payable to or incurred by the Transfer Agent in connection with
the preparation, delivery, certification and exchange of the definitive
share certificate contemplated by this Subsection 11(a) and the fees and
expenses payable to or incurred by the Transfer Agent in connection with
such additional transfers required in the course of the distribution of
the Offered Shares; and
(b) one or more cheques or wire transfers to "Sprott Securities Inc." (or as
Sprott may otherwise direct), on behalf of the Underwriters,
representing the fees payable by the Corporation to the Underwriters as
provided in the fourth paragraph of this Agreement and the expenses of
the Underwriters payable pursuant to Section 15 hereof,
against payment by the Underwriters to the Corporation of the purchase price for
the Offered Shares being issued and sold by them hereunder by wire transfer
(provided that the Underwriters may make payment by a net cheque or wire
transfer delivered by Sprott payable to the Corporation representing the gross
proceeds of the Offering less the fees payable by the Corporation to the
Underwriters and any expenses (pursuant to section 15) of the Underwriters in
which case the Corporation shall not be required to deliver the Underwriters the
cheque referred to in Subsection 11(b)).
Any notice of the exercise of the Over Allotment Option (the "Over-Allotment
Option Notice") to purchase Additional Shares, in whole or in part, shall be
given by Sprott on behalf of the Underwriters to the Corporation in the manner
set forth in Section 19 hereof and shall specify the number of Additional Shares
to be purchased by the Underwriters under the Over Allotment Option and the
closing date for the issuance of the Additional Shares (the "Over-Allotment
Option Closing Date") and time of closing. The Over-Allotment Option Closing
Date, which may be the same as the Closing Date but shall in no event be earlier
than the Closing Date, shall be not less than two nor more than five business
- 34 -
days after providing the Over-Allotment Option Notice, as shall be specified in
the Over-Allotment Option Notice.
If any Additional Shares are purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional Common Shares as Sprott may determine) that
bears the same proportion to the total number of Additional Shares as the
percentages of the aggregate amount of Offered Shares to be purchased at the
Time of Closing set out in Section 18 opposite the name of such Underwriter.
In the event the Over Allotment Option is exercised in accordance with its
terms, the Corporation shall deliver to the Underwriters at the closing time
specified in the Over-Allotment Option Notice:
(i) the documents, opinions, certificates and other agreements and materials
required under Sections 10(a), (b), (c), (d), (i), (j) and (k), in each
case dated the Over-Allotment Option Closing Date (other than
certificates of status which may be dated within 5 days prior to the
Over-Allotment Option Closing Date), together with such further
documentation as may be contemplated herein or as the Underwriters may
reasonably require; and
(ii) such other items set forth in Section 11 herein.
12. Restrictions on Further Issues or Sales. During the period commencing the
date hereof and ending on the day which is 90 days following the Closing Date,
the Corporation shall not, directly or indirectly, without the prior written
consent of the Underwriters, such consent not to be unreasonably withheld,
issue, or announce any offer, sale or other issuance, of any Common Shares or
any securities convertible into or exchangeable for Common Shares other than
pursuant to:
(a) the grant or exercise of stock options and other similar issuances
pursuant to the share incentive plan of the Corporation and other share
compensation arrangements;
(b) outstanding warrants or other convertible securities and any rights
which have been granted or issued, subject to any necessary regulatory
approval;
(c) obligations in respect of existing mineral property agreements; and
(d) the issuance of securities in connection with a bona fide arm's length
acquisition of a business or asset whether by way of purchase of shares
or assets, merger, plan of arrangement, amalgamation or otherwise which
does not exceed 10% of the basic shares outstanding of the Corporation
immediately following the completion of the Offering.
13. Indemnification by the Corporation.
(a) The Corporation (the "Indemnifying Party" with respect to
indemnification under Section 13(a)) shall fully indemnify and save
harmless each of the Underwriters and their respective affiliates, their
respective directors, officers, employees and agents, which shall
include without limitation, the U.S. Dealers (collectively, the
"Indemnified Parties" and individually an "Indemnified Party" with
respect to indemnification under Section 13(a)) from and against all
losses (other than losses of profit), claims, actions, damages,
liabilities, costs and expenses, (including the reasonable fees and
expenses of the Underwriters' counsel that may be incurred in advising
- 35 -
with respect to or defending such claim), in any way caused by or
arising directly or indirectly from or in consequence of:
(i) any information or statement (except information and statements
furnished to the Corporation by the Underwriters relating solely
to the Underwriters) contained in the Registration Statement,
Preliminary Prospectuses, the amended Preliminary Prospectuses,
the Prospectuses or any Issuer Free Writing Prospectus, including
any Documents Incorporated by Reference, filed in connection with
the sale of the Offered Shares pursuant to the Offering or any
certificate of the Corporation delivered under the Agreement which
at the time and in light of the circumstances in which it was made
contains or is alleged to contain a misrepresentation;
(ii) any omission or alleged omission to state in the Registration
Statement, the Preliminary Prospectuses, the amended Preliminary
Prospectuses, the Prospectuses or any Issuer Free Writing
Prospectus, including any Documents Incorporated by Reference, or
any certificate of the Corporation delivered under the Agreement
any fact (except any omission or alleged omission made in reliance
upon and in conformity with written information furnished to the
Corporation by the Underwriters expressly for use in the
Prospectuses or the Registration Statement relating solely to the
Underwriters) required to be stated in such document or necessary
to make any statement in such document not misleading in light of
the circumstances under which it was made;
(iii) any order made or enquiry, investigation or proceeding commenced
or threatened by any securities commission or other competent
authority based upon any untrue statement or omission or alleged
untrue statement or alleged omission or any misrepresentation or
alleged misrepresentation (except a statement or omission or
alleged statement or omission or a misrepresentation or alleged
misrepresentation made in reliance upon and in conformity with
written information furnished to the Corporation by the
Underwriters expressly for use in the Prospectuses or the
Registration Statement) in the Registration Statement, the
Preliminary Prospectuses, the amended Preliminary Prospectuses,
the Prospectuses or any Issuer Free Writing Prospectus, including
any Documents Incorporated by Reference, or based upon any failure
to comply with Applicable Securities Laws (other than any failure
or alleged failure to comply by the Underwriters) preventing or
materially restricting the trading in or the sale of the Offered
Shares in any Qualifying Province of in the United States;
(iv) the non-compliance or alleged non-compliance by the Corporation
with any requirements of the Applicable Securities Laws or other
applicable securities laws, regulations or rules including the
Corporation's non-compliance with any statutory requirement to
make any document available for inspection; or
(v) any breach of any representation, warranty, or covenant of the
Corporation in this Agreement.
(b) Each Underwriter and U.S. Dealer (collectively, the "Indemnifying
Parties" and individually the "Indemnifying Party" with respect to
- 36 -
indemnification under Section 13(b)), severally and not jointly, agrees
to fully indemnify and save harmless the Corporation, each of its
directors, each of its officers who signs the Registration Statement,
and each person who controls the Corporation within the meaning of
either the 1933 Act or the 1934 Act (collectively, the "Indemnified
Parties" and individually an "Indemnified Party" with respect to
indemnification under Section 13(b)), to the same extent as the
foregoing indemnity in Section 13(a) to each Underwriter, but only with
reference to written information furnished to the Corporation relating
solely to such Underwriter, by or on behalf of such Underwriter
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability
which any Underwriter may otherwise have. With respect to Section 13(b),
references to Underwriters shall be deemed to include references to U.S.
Dealers.
(c) If any claim contemplated by this Section 13 shall be asserted against
any of the Indemnified Parties, or if any potential claim contemplated
by this Section 13 shall come to the knowledge of any of the Indemnified
Parties, the Indemnified Party concerned shall notify in writing the
Indemnifying Party as soon as possible of the nature of such claim
(provided that any failure to so notify in respect of any potential
claim shall affect the liability of the Indemnifying Party under this
Section 13 only to the extent that the Indemnifying Party is materially
prejudiced by such failure). The Indemnifying Party 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; provided, however, that the defence shall be through
legal counsel selected by the Indemnifying Party and acceptable to the
Indemnified Party, acting reasonably and no admission of liability shall
be made by the Indemnifying Party or the Indemnified Party without, in
each case, the prior written consent of all the Indemnified Parties
affected and the Indemnifying Party, in each case such consent not to be
unreasonably withheld. An Indemnified Party shall have the right to
employ separate counsel in any such suit and participate in the defence
thereof but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party unless:
(i) the Indemnifying Party fails to assume the defence of such suit on
behalf of the Indemnified Party within twenty days of receiving
notice of such suit;
(ii) the employment of such counsel has been authorized by the
Indemnifying Party; or
(iii) the named parties to any such suit (including any added or third
parties) include the Indemnified Party and the Indemnifying Party
and the Indemnified Party and the Indemnifying Party shall have
been advised in writing by counsel that representation of the
Indemnified Party by counsel for the Indemnifying Party is
inappropriate as a result of the potential or actual conflicting
interests of those represented;
(in each of cases (i), (ii) or (iii), the Indemnifying Party shall not
have the right to assume the defence of such suit on behalf of the
Indemnified Party, but the Indemnifying Party shall only be liable to
pay the reasonable fees and disbursements of one firm of separate
counsel for all Indemnified Parties. In no event shall the Indemnifying
- 37 -
Party be required to pay the fees and disbursements of more than one set
of counsel for all Indemnity Parties in respect of any particular claim
or set of claims). The Indemnifying Party will not, without the prior
written consent of the Indemnity Parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each Indemnity Party from all liability arising
out of such claim, action, suit or proceeding.
(d) The Corporation hereby acknowledges and agrees that, with respect to
Sections 13 and 14 hereof, the Underwriters are contracting on their own
behalf and as agents for their affiliates, directors, officers,
employees and agents and their respective directors, officers, employees
and agents (collectively, the "Beneficiaries"). In this regard, each of
the Underwriters shall act as trustee for the Beneficiaries of the
covenants of the Corporation under Sections 13 and 14 hereof with
respect to the Beneficiaries and accepts these trusts and shall hold and
enforce such covenants on behalf of the Beneficiaries.
14. Contribution.
(a) In order to provide for just and equitable contribution in circumstances
in which the indemnity provided in Section 13 hereof would otherwise be
available in accordance with its terms but is, for any reason, held to
be unavailable to or unenforceable by the Indemnified Parties or
enforceable otherwise than in accordance with its terms, the
Underwriters and the Corporation shall contribute to the aggregate of
all claims, damages, liabilities, costs and expenses and all losses
(other than losses of profits) of the nature contemplated in Section 13
hereof and suffered or incurred by the Indemnified Parties in such
proportions so that the Underwriters shall be responsible for the
portion represented by the percentage that the total Underwriters' fee
payable to the Underwriters bears to the aggregate purchase price of the
Offered Shares, as determined pursuant to the provisions hereof, and the
Corporation shall, subject to paragraph (b) of this Section, be
responsible for the balance. The Underwriters shall not in any event be
liable to contribute, in the aggregate, any amount in excess of such
total fee or any portion thereof actually received. However, no party
who has engaged in any fraud, fraudulent misrepresentation or gross
negligence shall be entitled to claim contribution from any person who
has not engaged in such fraud, fraudulent misrepresentation or gross
negligence.
(b) For greater certainty, the Indemnifying Party shall not have any
obligation to contribute pursuant to this Section 14 in respect of any
claim except to the extent the indemnity given by it in Section 13
hereof would have been applicable to such claim in accordance with its
terms, had such indemnity been found to be enforceable and available to
the Indemnified Parties.
(c) The rights to contribution provided in this Section 14 shall be in
addition to and not in derogation of any other right to contribution
which the Indemnified Parties may have by statute or otherwise at law
provided that paragraphs (a) and (b) of this Section 14 shall apply,
mutatis mutandis, in respect of such other right.
- 38 -
(d) If an Indemnified Party has reason to believe that a claim for
contribution may arise, the Indemnified Party shall give the
Indemnifying Party notice thereof in writing as soon as reasonably
practicable, but failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of any obligation which it may have to
the Indemnified Party under this Section 14 provided that the
Indemnifying Party is not prejudiced by such failure, and the right of
the Indemnifying Party to assume the defence of such Indemnified Party
shall apply as set out in Section 13 hereof, mutatis mutandis.
15. Expenses. Whether or not the purchase and sale of the Offered Shares shall
be completed, all expenses of or incidental to the creation, issuance and
delivery of the Offered Shares and of or incidental to all matters in connection
with the transactions herein set out shall be borne by the Corporation
including, without limitation:
(a) all expenses of or incidental to the creation, issue, sale or
distribution of the Offered Shares and the filing of the Registration
Statement, the Preliminary Prospectuses, the Amended Preliminary
Prospectuses, any other Prospectus Amendments, the Prospectuses, any
Supplementary Material and any Issuer Free Writing Prospectuses and the
reasonable out-of-pocket expenses of the Underwriters and the reasonable
fees of the Underwriters' counsel; provided that in connection with the
Underwriters' legal fees, the Corporation shall be solely responsible
for paying the first $100,000 in fees (including disbursements and
applicable taxes) and any fees, disbursements and applicable taxes in
excess of $100,000 shall be shared equally between the Corporation, on
the one hand, and the Underwriters, on the other hand subject to a
maximum total reimbursement by the Corporation of $150,000;
(b) all expenses of or incidental to any filings required to be made with
the NASD (including filing fees and the reasonable fees and expenses of
counsel for the Underwriters relating to such filings);
(c) the reasonable fees and expenses of the auditors, counsel to the
Corporation and all local counsel (including GST and other applicable
taxes on all of the foregoing) and the transfer agent for the Common
Shares; and
(d) all costs incurred in connection with the preparation, filing and
printing of the Registration Statement, the Preliminary Prospectuses,
the Amended Preliminary Prospectuses, any other Prospectus Amendments,
the Prospectuses, any Issuer Free Writing Prospectuses and any
Supplementary Material and the share certificates contemplated
hereunder.
16. All Terms to be Conditions. The Corporation agrees that the conditions
contained in this Agreement will be complied with insofar as the same relate to
acts to be performed or caused to be performed by the Corporation and that it
will use its commercially reasonable efforts to cause all such conditions to be
complied with. Any breach or failure to comply with any of the conditions set
out in this Agreement shall entitle the Underwriters to terminate their
obligation to purchase the Offered Shares, by written notice to that effect
given to the Corporation at or prior to the Time of Closing. It is understood
that the Underwriters may waive, in whole or in part, or extend the time for
compliance with, any terms and conditions in this Agreement without prejudice to
the rights of the Underwriters in respect of any such terms and conditions or
any other or subsequent breach or non-compliance, provided that to be binding on
the Underwriters any such waiver or extension must be in writing.
- 39 -
17. Termination by Underwriters in Certain Events.
(a) Each Underwriter shall also be entitled to terminate its obligation to
purchase the Offered Shares by written notice to that effect given to
the Corporation at or prior to the Time of Closing if:
(i) material change - there shall be any material change in the
affairs of the Corporation, or change in any material fact or
there should be discovered any previously undisclosed material
fact or material change required to be disclosed in the
Registration Statement, the Amended Preliminary Prospectuses, any
other Prospectus Amendments, the Prospectuses, any Issuer Free
Writing Prospectus or Supplementary Material or there should occur
a change (other than a change related solely to the Underwriters)
in a material fact contained in the Registration Statement, the
Amended Preliminary Prospectuses, any other Prospectus Amendments,
the Prospectuses, any Issuer Free Writing Prospectus or
Supplementary Material, in each case which, in the reasonable
opinion of the Underwriters (or any of them), has or would be
expected to have a significant adverse effect on the market price
or value of the Common Shares; or
(ii) disaster out - (A) any inquiry, action, suit, investigation or
other proceeding (whether formal or informal) is commenced,
announced or threatened or any order made by any federal,
provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality including,
without limitation, the TSX, the AMEX or any securities regulatory
authority or any law or regulation is enacted or changed which in
the opinion of the Underwriters (or any of them), acting
reasonably, operates to prevent or restrict the trading of the
Common Shares or materially and adversely affects or will
materially and adversely affect the market price or value of the
Common Shares; or (B) if 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 reasonable opinion of the
Underwriters (or any one of them) seriously adversely affects, or
involves, or will, or could reasonably be expected to, seriously
adversely affect, or involve, the financial markets or the
business, operations or affairs of the Corporation and its
Subsidiaries taken as a whole.
(b) If this Agreement is terminated by any of the Underwriters pursuant to
Subsection 17(a), there shall be no further liability on the part of
such Underwriter or of the Corporation to such Underwriter, except in
respect of any liability which may have arisen or may thereafter arise
under Sections 13, 14 and 15.
(c) The right of the Underwriters or either of them to terminate their
respective obligations under this Agreement is in addition to such other
remedies as they may have in respect of any default, act or failure to
act of the Corporation in respect of any of the matters contemplated by
this Agreement. A notice of termination given by one Underwriter under
this Section 17 shall not be binding upon the other Underwriter.
18. Obligations of the Underwriters to be Several. Subject to the terms and
conditions hereof, the obligation of the Underwriters to purchase the Offered
- 40 -
Shares shall be several and not joint. The percentage of the Offered Shares to
be severally purchased and paid for by each of the Underwriters shall be as
follows:
Sprott Securities Inc. - 50%
RBC Dominion Securities Inc. - 50%
If an Underwriter (a "Refusing Underwriter") shall not complete the purchase and
sale of the Offered Shares which such Underwriter has agreed to purchase
hereunder for any reason whatsoever, the other Underwriter (the "Continuing
Underwriter") shall be obligated severally to take up and pay for any and all
Offered Shares (whether Underwritten Shares or Additional Shares) which the
Refusing Underwriter agreed but failed to purchase; provided, however, that in
the event that the aggregate amount of Offered Shares which the Refusing
Underwriter agreed but failed to purchase shall exceed 10% of the aggregate
amount of Offered Shares, the Continuing Underwriter shall be entitled, at its
option, to purchase all but not less than all of the Offered Shares which would
otherwise have been purchased by such Refusing Underwriter. If the Continuing
Underwriter does not elect to purchase the balance of the Offered Shares
pursuant to the foregoing:
(a) the Continuing Underwriter shall not be obliged to purchase any of the
Offered Shares that any Refusing Underwriter is obligated to purchase;
and
(b) the Corporation shall not be obliged to sell less than all of the
Offered Shares,
and the Corporation shall be entitled to terminate its obligations under this
Agreement arising from their acceptance of this offer, in which event there
shall be no further liability on the part of the Corporation or the Continuing
Underwriter, except pursuant to the provisions of Sections 13, 14 and 15.
Nothing in this Section 18 shall relieve from liability to the Corporation any
Refusing Underwriter.
19. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered to,
in the case of the Corporation, to:
Gold Reserve Inc.
926 West Sprague Avenue
Suite 200
Spokane, Washington 99201
U.S.A.
Attention: Douglas Belanger, President
Facsimile No.: (509) 623-1634
with copies of any such notice to:
Fasken Martineau DuMoulin LLP
4200 TD Bank Tower
Toronto Dominion Centre
Toronto, Ontario
M5K 1N6
- 41 -
Attention: Charles Higgins and Georges Dube
Facsimile No.: (416) 364-7813
and:
Baker & McKenzie LLP
Pennzoil Place, South Tower
711 Louisiana, Suite 3400
Houston, Texas 77002
Attention: Jonathan B. Newton
Facsimile No.: (713) 427-5099
in the case of Sprott Securities Inc. to:
Sprott Securities Inc.
Royal Bank Plaza
P.O. Box 63 South Tower, Suite 2750 Toronto, ON M5J 2J2
Attention: Darren Wallace
Facsimile No.: (416) 943-6496
in the case of RBC Dominion Securities Inc.
RBC Dominion Securities Inc.
Royal Bank Plaza, South Tower
200 Bay Street
Toronto, ON M5J 2W7
Attention: Gary A. Sugar
Facsimile No.: (416) 842-7527
with a copy of any such notice to:
Heenan Blaikie LLP
Royal Bank Plaza, South Tower
200 Bay Street
Toronto, ON M5J 2J4
Attention: Kevin Rooney
Facsimile No.: (416) 360-8425
and
- 42 -
Dorsey & Whitney LLP
1420 Fifth Avenue, Suite 3400
Seattle, WA 98101
Attention: Kimberley Anderson
Facsimile No.: (206) 903-8820
The Corporation and the Underwriters may change their respective addresses for
notices by notice given in the manner aforesaid. Any such notice or other
communication shall be in writing, and unless delivered personally to the
addressee or to a responsible officer of the addressee, as applicable, shall be
given by telecopy and shall be deemed to have been given when: (i) in the case
of a notice delivered personally to a responsible officer of the addressee, when
so delivered; and (ii) in the case of a notice delivered or given by telecopy on
the first business day following the day on which it is sent.
20. Miscellaneous.
(a) Except with respect to Sections 13, 14, 17 and 18, all transactions and
notices on behalf of the Underwriters hereunder or contemplated hereby
may be carried out or given on behalf of the Underwriters by Sprott and
Sprott shall in good faith discuss with RBC the nature of any such
transactions and notices prior to giving effect thereto or the delivery
thereof, as the case may be.
(b) This Agreement shall enure to the benefit of, and shall be binding upon,
the Underwriters and the Corporation and their respective successors and
legal representatives. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect or limit the
validity or unenforceability of the remaining provisions of this
Agreement.
(c) This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Ontario and the federal laws of Canada
applicable therein.
(d) Time shall he of the essence hereof and, following any waiver or
indulgence by any party, time shall again be of the essence hereof.
(e) The words, "hereunder", "hereof' and similar phrases mean and refer to
the Agreement formed as a result of the acceptance by the Corporation of
this offer by the Underwriters to purchase the Offered Shares.
(f) All representations, warranties, covenants and agreements of the
Corporation and the Underwriters herein contained or contained in
documents submitted pursuant to this Agreement and in connection with
the transaction of purchase and sale herein contemplated shall survive
the purchase and sale of the Offered Shares and the termination of this
Agreement for a period of three years and shall continue in full force
and effect for the benefit of the Underwriters or the Corporation, as
the case may be, for a period of three years regardless of any
subsequent disposition of the Offered Shares or any investigation by or
on behalf of the Underwriters with respect thereto. The Underwriters and
the Corporation shall be entitled to rely on the representations and
warranties of the Corporation or the Underwriters, as the case may be,
contained herein or delivered pursuant hereto notwithstanding any
- 43 -
investigation which the Underwriters or the Corporation may undertake or
which may be undertaken on the Underwriters' behalf.
(g) Each of the parties hereto shall be entitled to rely on delivery of a
facsimile copy of this Agreement and acceptance by each such party of
any such facsimile copy shall be legally effective to create a valid and
binding agreement between the parties hereto in accordance with the
terms hereof.
(h) This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.
(i) It is understood that the terms and conditions of this Agreement
supersede any previous verbal or written agreement between the
Underwriters and the Corporation with respect to this offering.
[INTENTIONALLY LEFT BLANK]
- 44 -
If the foregoing accurately reflects the terms of the transactions which we are
to enter into and are agreed to by you, please communicate your acceptance by
executing the enclosed copies of this agreement where indicated and returning
them to us.
Yours very truly
SPROTT SECURITIES INC.
By: /s/ Peter Grosskopf
-----------------------------------------------
Authorized Signing Officer
RBC DOMINION SECURITIES INC.
By: /s/ Gary A. Sugar
-------------------------------------------------
Authorized Signing Officer
Accepted and agreed to by the undersigned as of the date of this letter first
written above.
GOLD RESERVE INC.
By: /s/ A. Douglas Belanger
A. Douglas Belanger
President
- 45 -
SCHEDULE "A"
(a) annual information form of the Corporation in the form of Form 20-F for
the year ended December 31, 2005;
(b) audited annual consolidated comparative financial statements of the
Corporation for the year ended December 31, 2005 and the auditors'
report thereon, together with management's discussion and analysis for
the year ended December 31, 2005;
(c) management information circular dated April 14, 2005 prepared in
connection with the Corporation's annual and special meeting of
shareholders held on June 2, 2005;
(d) management information circular dated January 31, 2006 prepared in
connection with the Corporation's special meeting of shareholders held
on March 22, 2006; and
(e) the summary, being pages 1.1 to 1.13 inclusive, of NI 43-101 Technical
Report Gold and Copper Project Brisas Project dated February 24, 2005
as prepared by Pincock, Allen & Holt.
- 46 -
SCHEDULE "B"
SUBSIDIARIES OF THE CORPORATION
- ----------------------------------------------- ------------------------------------ ---------------------------------
Subsidiary Jurisdiction Ownership Interest
- ----------------------------------------------- ------------------------------------ ---------------------------------
Gold Reserve Corporation Montana 100%
- ----------------------------------------------- ------------------------------------ ---------------------------------
Gold Reserve de Venezuela, C.A. Venezuela 100%
- ----------------------------------------------- ------------------------------------ ---------------------------------
Gold Reserve de Barbados Ltd. Barbados 100%
- ----------------------------------------------- ------------------------------------ ---------------------------------
Companion Aurifera Brisas del Cuyoni, C.A. Venezuela 100%
- ----------------------------------------------- ------------------------------------ ---------------------------------
SCHEDULE "C"
OUTSTANDING CONVERTIBLE SECURITIES
Equity Units (Class B Shares) 1,085,099
Warrants to purchase Common Shares 2,680,500
Options to purchase Common Shares 562,058
As of April 28, 2006
- 48 -
SCHEDULE "D"
SCHEDULE OF FREE WRITING PROSPECTUSES INCLUDED IN THE
DISCLOSURE PACKAGE
Preliminary term sheet dated May 2, 2006