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EXHIBIT 2.1
AGENCY AGREEMENT AMONG PATCH INTERNATONAL INC.,
CANACCORD CAPITAL CORPORATION AND WELLINGTON
WEST CAPITAL MARKETS INC. DATED FEBRUARY 27, 2007
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AGENCY AGREEMENT
THIS AGREEMENT dated for reference February 27, 2007 is made
AMONG
PATCH INTERNATIONAL INC., Suite 310, 441 - 5th Avenue,
S.W., Calgary, Alberta, T2P 3E6 Fax: (403) 441-4390
(the "Issuer");
AND
CANACCORD CAPITAL CORPORATION, TransCanada Tower,
Suite 2200 - 450 1st Street S.W., Calgary, Alberta,
T2P 5P8 Fax: (403) 508-3866
("Canaccord");
AND
WELLINGTON WEST CAPITAL MARKETS INC., Suite 700,
145 King Street West, Toronto, Ontario, M5H 1J8
Fax: (416) 642-1910
("Wellington");
(Canaccord and Wellington are collectively referred to as the
"Agents").
WHEREAS:
A. The Issuer wishes to privately place with purchasers up to
16,666,667
Non-Flow-Through Special Warrants at a price of US$1.50 per
Non-Flow-Through
Special Warrant and up to 7,575,758 Flow-Through Special
Warrants at a price of
US$1.65 per Flow-Through Special Warrant.
B. The Issuer wishes to appoint the Agents to distribute the
Special
Warrants, and the Agents are willing to accept such appointment
on the terms and
conditions of this Agreement;
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
In this Agreement and the Recitals hereto:
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(a) "Additional Shares" means the previously unissued Common
Shares which will be issued pursuant to the terms of the
Bonus
Warrants if certain conditions set forth herein are not met
by
the Issuer prior to the Filing Deadline;
(b) "Agents' Fee" means the fee which is set out in this
Agreement
and which is payable by the Issuer to the Agents in
consideration of the services performed by the Agents under
this Agreement;
(c) "Agents' Warrants" means the share purchase warrants of
the
Issuer which will be issued as part of the Agents' Fee and
which have the terms provided in this Agreement and the
certificates representing such share purchase warrants;
(d) "Agents' Warrant Shares" means the previously unissued
Common
Shares, which will be issued upon the exercise of the
Agents'
Warrants;
(e) "Applicable Legislation" means collectively the
applicable
securities laws of the Selling Provinces and the United
States
and the respective regulations and rules made and forms
prescribed thereunder, the U.S. Securities Act, the U.S.
Exchange Act and all administrative policy statements,
instruments, blanket orders and rulings, notices and
administrative directions issued by the Commissions and the
SEC;
(f) "Bonus Warrants" means the non-transferable share
purchase
warrants of the Issuer which will be issued as part of the
Units and which have the terms provided in this Agreement
and
the certificates representing such share purchase warrants;
(g) "Closing Day" means a day on which Special Warrants are
issued
to the Purchasers, each day being agreed to by the Issuer
and
the Agents;
(h) "Commissions" means the securities commission or
equivalent
regulatory authority in the Selling Provinces;
(i) "Common Share" means a share of common stock, US $0.001
par
value in the capital of the Issuer;
(j) "Damages Shares" means the previously unissued Common
Shares,
which will be issued by the Issuer pursuant to the terms of
the Bonus Warrants if certain conditions set forth herein
are
not met by the Issuer prior to the Effectiveness Deadline;
(k) "Disclosure Record" means the documents filed or
disseminated
by the Issuer pursuant to the requirements of the Applicable
Legislation including the Issuer's annual reports, financial
statements, annual information forms, information circulars,
material change reports, technical reports, and press
releases;
(l) "Effectiveness Deadline" means the day which is 210 days
from
the Final Closing Day;
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(m) "Exchange" means the Over the Counter Bulletin Board;
(n) "Exemptions" means the exemptions from the prospectus
requirements of the Applicable Legislation in the Selling
Provinces;
(o) "Farm-out Agreements" means the farm out agreements of
the
Issuer relating to its Dover Oil Sands Project and Firebag
Oil
Sands Project;
(p) "Filing Deadline" means the day which is 60 days from
the
Final Closing Day;
(q) "Final Closing Day" means the last Closing Day as agreed to
by
the Issuer and the Agents;
(r) "First Closing Day" means the first Closing Day in the
Private
Placement;
(s) "Flow-Through Special Warrants" means the flow-through
special
warrants to be offered by the Issuer pursuant to this
Agreement having the terms provided in this Agreement and
which have or will have the features required by the
definition of "flow-through share" as defined in the ITA;
(t) "Flow-Through Special Warrant Subscription Agreement"
means
the Subscription Agreement used to subscribe for
Flow-Through
Special Warrants and includes all the schedules thereto;
(u) "ITA" means the INCOME TAX ACT (Canada), together with all
the
regulations and rules made and promulgated thereunder, all
as
amended from time to time;
(v) "Material Change" has the meaning defined in the
SECURITIES
ACT (Alberta);
(w) "Material Fact" has the meaning defined in the SECURITIES
ACT
(Alberta);
(x) "Non-Flow-Through Special Warrants" means the
non-flow-through
special warrants to be offered by the Issuer pursuant to
this
Agreement and having terms provided in this Agreement;
(y) "Non-Flow-Through Special Warrant Subscription
Agreement"
means the Subscription Agreement used to subscribe for
Non-Flow-Through Special Warrants and includes all the
schedules thereto;
(z) "Private Placement" means the offering of the Special
Warrants
on the terms and conditions of this Agreement;
(aa) "Purchasers" means the purchasers of Special Warrants
pursuant
to the Private Placement;
(bb) "Qualification Date" means the day on which the Agents
receive
confirmation from the Issuer or its counsel that the
Corporation has increased its authorized number of Common
Shares, to not less than 200,000,000 such shares as
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evidenced by a Certificate of Amendment for Nevada Profit
Corporations filed with the Secretary of State of Nevada
which
has come into effect;
(cc) "Qualifying Expenditures" has the meaning ascribed to
such
term in the Flow-Through Special Warrant Subscription
Agreement;
(dd) "Registration Rights" means the registration rights set
forth
in Sections 7, 8, 9 and 10 of the Non-Flow-Through Special
Warrant Subscription Agreement and Sections 8, 9, 10 and 11
of
the Flow-Through Special Warrant Subscription Agreement;
(ee) "Registration Statement" means the registration statement
on
Form SB-2 or such other form as may be available to the
Issuer
to be filed with the SEC and which is to be declared
effective
in connection with the registration of the Underlying
Shares,
the Agents' Warrant Shares, the Additional Shares and the
Damages Shares;
(ff) "Regulation D" means Regulation D promulgated under the
U.S.
Securities Act;
(gg) "Regulation S" means Regulation S promulgated under the
under
the U.S. Securities Act;
(hh) "Regulatory Authorities" means the Commissions and the
SEC;
(ii) "SEC" means the United States Securities and Exchange
Commission and any successor federal agency having similar
powers;
(jj) "Securities" means Non-Flow-Through Special Warrants,
the
Flow-Through Special Warrants, the Underlying Shares, the
Bonus Warrants, the Additional Shares, the Damages Shares,
the
Agents' Warrants and the Agents' Warrant Shares;
(kk) "Selling Provinces" means British Columbia, Alberta,
Saskatchewan and Ontario and such other jurisdictions of
Canada that the Corporation and the Agents may mutually
agree;
(ll) "Special Warrants" means the Non-Flow-Through Special
Warrants
and the Flow-Through Special Warrants;
(mm) "Subscription Agreements" means collectively the
Non-Flow-Through Special Warrant Subscription Agreement and
the Flow-Through Special Warrant Subscription Agreement;
(nn) "TSX" means the Toronto Stock Exchange;
(oo) "TSX-V" means the TSX Venture Exchange;
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(pp) "Underlying Shares" means the previously unissued
Common
Shares to be issued on the exercise or deemed exercise of
the
Special Warrants in accordance with the terms of this
Agreement and the Subscription Agreements;
(qq) "Units" means the units of the Issuer to be issued upon
the
exercise or deemed exercise of the Non-Flow-Through Special
Warrants, such units having the terms provided in this
Agreement;
(rr) "United States" means United States as defined in
Regulation
S;
(ss) "U.S. Exchange Act" means the United States SECURITIES
EXCHANGE ACT OF 1934, as amended, and the rules and
regulations promulgated thereunder
(tt) "U.S. Person" means U.S. person as defined in Regulation
S;
and
(uu) "U.S. Securities Act" means the United States SECURITIES
ACT
OF 1933, as amended, and the rules and regulations
promulgated
thereunder.
2. APPOINTMENT OF THE AGENTS
2.1 The Issuer hereby appoints the Agents as its exclusive agent
and the
Agents accept the appointment and agree to act as the exclusive
agent of the
Issuer to use their commercially reasonable efforts to find and
introduce to the
Issuer potential purchasers to purchase, by way of Private
Placement, under the
Exemptions, up to 16,666,667 Non-Flow-Through Special Warrants
at a price of
US$1.50 per Non-Flow-Through Special Warrant and up to 7,575,758
Flow-Through
Special Warrants at a price of US$1.65 per Flow-Through Special
Warrant for
aggregate gross proceeds of a maximum of US$25,000,000.
2.2 The rights and obligations of the Agents under this
Agreement,
including but not limited to the right and obligation to
introduce Purchasers to
the Issuer and the entitlement to the Agents' Fee, will be
several (as
distinguished from joint) rights and obligations for each
Agent.
2.3 Except as otherwise specifically provided in this Agreement,
the rights
and obligations of the Agents will be divided in the proportions
in which the
Agents participate in the Private Placement.
2.4 The Agents will participate in the Private Placement as
follows, unless
otherwise agreed to between the Agents:
Canaccord 75.0%
Wellington 25.0%
3. SPECIAL WARRANTS
3.1 The Special Warrants will be issued and registered in the
names of the
Purchasers or their nominees.
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3.2 Each Non-Flow-Through Special Warrant will entitle the
holder to
acquire one Unit without further payment, on the exercise or
deemed exercise of
the Non-Flow-Through Special Warrant.
3.3 Each Unit will consist of one Underlying Share and one Bonus
Warrant.
3.4 Each Flow-Through Special Warrant will entitle the holder to
acquire
one Underlying Share without further payment, on the exercise or
deemed exercise
of the Flow-Through Special Warrant
3.5 Each Special Warrant may be exercised by the holder in whole
or in part
at any time after the Closing Day on which the Special Warrant
was issued and
until the Qualification Date. All unexercised Special Warrants
will be deemed to
be exercised on the Qualification Date.
3.6 Upon exercise or deemed exercise, the Special Warrants
will
automatically be cancelled and will have no further force and
effect.
3.7 The certificates representing the Special Warrants will,
among other
things, include provisions for the appropriate adjustment in the
class, number
and price of the Underlying Shares issued upon exercise of the
Special Warrants
upon the occurrence of certain events, including any
subdivision, consolidation
or reclassification of the Issuer's Common Shares, the payment
of stock
dividends and the amalgamation of the Issuer.
4. COVENANTS OF THE ISSUER
4.1 The Issuer covenants with the Agents that:
(a) it will, as soon as possible, and in any event, no later
than
60 days from the Final Closing Day, obtain all required
director and shareholder approval required to increase its
authorized capital to not less than 200,000,000 Common
Shares;
(b) it will, as soon as possible, and in any event, no later
than
60 days from the Final Closing Day, file a certificate of
amendment to amend the Issuer's Articles of Incorporation to
increase its authorized capital to not less than 200,000,000
Common Shares;
(c) it will, as soon as possible, file all required
information
statements, submissions and filings required to be filed
with
the SEC under the U.S. Exchange Act, including, but not
limited to, an amendment to the Form 8-K filed on December
26,
2006, and such other reports as may be required to be filed
or
submitted in connection with the transactions contemplated
in
this Agreement and the Subscription Agreements;
(d) it will, as soon as possible, amend its bylaws to include
such
amendments as may be required to qualify the Common Shares
for
listing on the TSX or TSX-V;
(e) it will, as soon as possible, but in any event not later
than
the Filing Deadline:
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(i) file the Registration Statement with the SEC;
(ii) file with the Alberta Securities Commission (or such
other commission as determined by the Issuer) a
prospectus or reporting issuer application for the
purpose of having the Issuer deemed to be "reporting
issuer" under the securities laws of Alberta (or such
other provinces as the Agents may agree with the
Issuer); and
(iii) file with either the TSX or TSX-V an application to
list the Issuer's Common Shares and to qualify any
"restricted securities" (as defined in Rule 144) of the
Issuer to trade on a restricted basis until the
Registration Statement is declared effective by the
SEC;
(f) it will use its best efforts:
(i) to cause the Registration Statement to be declared
effective by the SEC as soon as possible, but in any
event not later than the earlier of the Effectiveness
Deadline and (b) the fifth trading day following the
date on which the Issuer is notified by the SEC that
the Registration Statement will not be reviewed or is
no longer subject to further review and comments;
(ii) to cause the Common Shares to be listed on the TSX or
TSX-V as soon as possible, but in any event not later
than Effectiveness Deadline; and
(iii) to become a "reporting issuer" in the province of
Alberta (or such other provinces as determined by the
Issuer) as soon as possible, but in any event not later
than the Effectiveness Deadline;
(g) if the Registration Statement is not declared effective by
the
SEC on or before the Effectiveness Deadline, the Issuer will
continue to use its best efforts to have the Registration
Statement declared effective as soon as possible;
(h) if the Common Shares are not listed on the TSX or TSX-V on
or
before the Effectiveness Deadline, the Issuer will continue
to
use its best efforts to have its Common Shares listed on the
TSX or TSX-V as soon as possible; and
(i) if the Issuer is not designated a "reporting issuer" in
the
province of Alberta (or such other provinces as determined
by
the Issuer), on or before the Effectiveness Deadline, the
Issuer will continue to use its best efforts to be
designated
a reporting issuer as soon as possible.
4.2 The Issuer covenants with the Agents that it will keep the
Agents
informed of the status of the Issuer's efforts to comply with
the covenants of
the Issuer set forth in this Section 4, including providing to
the Agents
correspondence to and from the regulatory authorities and copies
of filing
materials with the SEC, the Commissions, and the TSX or TSX-V as
the Agents may
reasonably request.
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4.3 The Issuer will give notice to the Agents, within 2 business
days of
the date the Issuer satisfies its obligations under Subsections
4.1(e) and/or
4.1(f) herein. Such notice to the Agents will include
satisfactory evidence from
the applicable regulatory authorities that such conditions have
been satisfied.
5. BONUS WARRANTS
5.1 The Bonus Warrants will be represented by certificates
registered in
the names of the Purchasers or their nominees.
5.2 The Bonus Warrants will have the following terms:
(a) if any one of the conditions set forth in Subsection
4.1(e)
are not met on or before the Filing Deadline, the Issuer
will
issue Additional Shares to each holder of Bonus Warrants
equal
to 0.02 Additional Share for each Bonus Warrant for each
month
or partial month any of the conditions set forth in
Subsection
4.1(e) remain outstanding;
(b) if any one of the conditions set forth in Subsection
4.1(f)
are not met on or before the Effectiveness Deadline, the
Issuer will issue Damages Shares to each holder of Bonus
Warrants equal to 0.1 Damages Share for each Bonus Warrant;
(c) notwithstanding the provisions above, the maximum number
of
Additional Shares and Damages Shares that will be issued by
the Issuer under a Bonus Warrant will be in aggregate 0.1
Additional Shares and Damages Shares;
(d) if the Issuer has not increased its authorized capital to
not
less than 200,000,000 Common Shares pursuant to Subsection
4.1(a) and 4.1(b) prior to the date that the Issuer must
issue
Additional Shares or Damages Shares in accordance with the
provisions of the Bonus Warrant, the Issuer will issue such
Additional Shares or Damages Shares immediately after such
increase in authorized capital has been effected.
5.3 The certificates representing the Bonus Warrants will, among
other
things, include provisions for the appropriate adjustment in the
class, number
and price of the Additional Shares or Damages Shares issued upon
exercise of the
Bonus Warrants upon the occurrence of certain events, including
any subdivision,
consolidation or reclassification of the Issuer's Common Shares,
the payment of
stock dividends and the amalgamation of the Issuer.
5.4 The issue of the Bonus Warrants will not restrict or prevent
the Issuer
from obtaining any other financing, or from issuing additional
securities or
rights, during the period within which Additional Shares or
Damages Shares may
be issued.
6. AGENTS' FEE
6.1 In consideration of the services performed by the Agents
under this
Agreement, the Issuer agrees to pay to the Agents on each
Closing Day an Agents'
Fee consisting of
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(a) a cash payment equal to 6.0% of the gross proceeds received
by
the Issuer from the sale of the Special Warrants on such
Closing Day which will be paid in lawful U.S. currency; and
(b) that number of Agents' Warrants which is equal to 6.0% of
the
number of Special Warrants sold on such Closing Day.
6.2 The right to purchase an Agents' Warrant Share under an
Agents' Warrant
may be exercised at any time until the close of business on the
day which is the
later of:
(a) one year from the First Closing Day; and
(b) six months from the date the Securities are free from
trading
restrictions in the United States and Canada, up to a
maximum
of 24 months from the First Closing Day.
6.3 One Agents' Warrant will entitle the holder, on exercise, to
purchase
one Agents' Warrant Share at a price of $1.50 per Agents'
Warrant Share.
6.4 The certificates representing the Agents' Warrants will,
among other
things, include provisions for the appropriate adjustment in the
class, number
and price of the Agents' Warrant Shares issued upon exercise of
the Agents'
Warrants upon the occurrence of certain events, including any
subdivision,
consolidation or reclassification of the Common Shares, the
payment of stock
dividends and the amalgamation of the Issuer.
6.5 The issue of the Agents' Warrants will not restrict or
prevent the
Issuer from obtaining any other financing, or from issuing
additional securities
or rights, during the period within which the Agents' Warrants
may be exercised.
7. OFFERING RESTRICTIONS
7.1 The Agents covenant and agree that they will only solicit
subscriptions
for the Special Warrants and sell the Special Warrants in
accordance with the
terms and conditions of this Agreement and in compliance with
the Applicable
Legislation to persons who represent themselves as being:
(a) a resident in one of the Selling Provinces who meets the
requirement of one of the Exemptions;
(b) in accordance with Schedule "A" if such person is a U.S.
Person, in the United States or purchasing for the benefit
or
account of a U.S. Person or person in the United States; or
(c) a resident of a jurisdiction outside of Canada and the
United
States for whom an Exemption is available for the sale of
Special Warrants to such person and for whom the Issuer will
not be required to prepare any documents, make any filings,
or
take any further steps and procedures to permit the issue
and
sale of the Special
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Warrants to such Purchaser to be made in compliance with the
laws of the jurisdiction in which the Purchaser is resident.
7.2 The Agents covenant and agree with the Issuer that it
will:
(a) conduct all activities in connection with the Private
Placement and the sale of the Special Warrants in compliance
with this Agreement and all Applicable Legislation; and
(b) not advertise the proposed offering or sale of the
Special
Warrants in printed public media, radio, television or
telecommunications, including electronic display.
7.3 No selling or promotional expenses will be paid or incurred
in
connection with the Private Placement, except for professional
services or for
services performed by a registered dealer.
8. SALES INTO THE UNITED STATES AND QUALIFYING UNDER REGULATION
S
It is understood and agreed that the Securities have not been
registered under
the U.S. Securities Act or the securities laws of any State in
the United States
and that the Issuer and the Agents agree that any offer or sale
of Special
Warrants by the Issuer and the Agent, will be made (a) in
"offshore
transactions" (as defined in Regulation S) outside the United
States pursuant to
the exclusion from the registration requirements available under
Rule 903 of
Regulation S; and (b) in the United States in accordance with
the terms and
conditions set out in Schedule "A" to this Agreement, and that
the Special
Warrants will be offered by the Agents for sale by the Issuer
directly to
purchasers in the United States or purchasing as, or for the
benefit or account
of, U.S. Persons or persons in the United States, pursuant to
Section 4(2)
and/or Rule 506 of Regulation D under the U.S. Securities Act.
Each party to
this Agreement hereby makes the representations, warranties,
covenants and
agreements attributed to it in Schedule "A" to this
Agreement.
9. SUBSCRIPTIONS
The Agents will obtain from each Purchaser introduced by the
Agents, and deliver
to the Issuer, on or before each Closing a duly completed and
signed
Subscription Agreements in the form consented to by the Issuer
and the Agents
and executed by the Purchaser.
10. FILINGS WITH THE REGULATORY AUTHORITIES
10.1 Within 10 days of each Closing Day of the Private
Placement, the Issuer
will:
(a) file with the Commissions any report required to be filed
by
the Applicable Legislation in connection with the Private
Placement, in the required form; and
(b) provide the Agents' solicitor with copies of the report
or
reports.
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11. CLOSINGS
11.1 In this Section:
(a) "Certificates" means the certificates representing the
Special
Warrants sold and the Agents' Warrants to be issued, on a
Closing Day in the names and denominations reasonably
requested by the Agents or the Purchasers, as the case may
be;
and
(b) "Proceeds" means the gross proceeds of the sale of
Special
Warrants on a Closing Day, less:
(i) any portion of the Agents' Fee which is payable in
cash;
(ii) a retainer for the reasonable expenses of the Agents in
connection with the Private Placement and the filing of
the Registration Statement; and
(iii) any amount paid directly to the Issuer by Purchasers
in
connection with the Private Placement.
11.2 The Issuer and Agents agree that the completion of this
Private
Placement may take place over multiple Closing Days, with the
Final Closing Day
to take place on or before March 15, 2007 unless otherwise
agreed to in writing
by the Issuer and the Agents.
11.3 The Issuer will, on each Closing Day, issue and deliver
the
Certificates to the Agents, or at the Agents' request, to the
Purchasers,
against payment of the Proceeds.
11.4 If the Issuer has satisfied all of its material obligations
under this
Agreement, the Agents will, on each Closing Day, pay the
Proceeds to the Issuer
against delivery of the Certificates.
11.5 The Issuer will endorse the Certificates and the
certificates
representing the Underlying Shares, the Bonus Warrants, the
Additional Shares
and the Damages Shares with the following legends, as required
by Applicable
Legislation:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES
REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH U.S.
SECURITIES LAWS"
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER
OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE
THAT
IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT
DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A
REPORTING ISSUER IN ANY PROVINCE OR TERRITORY"
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11.6 The Issuer will endorse the certificates representing the
Agent's
Warrants and the Bonus Warrants with the following additional
legends, as
required by Applicable Legislation:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON THE
EXERCISE
OF THIS WARRANT HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS. THIS
WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES (AS
DEFINED
IN REGULATION S UNDER THE U.S. SECURITIES ACT) UNLESS THE
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE, AND THE CORPORATION RECEIVES
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
IT
TO SUCH EFFECT."
12. CONDITIONS OF CLOSINGS
12.1 The obligations of the Agents on each Closing Day will be
conditional
upon the following:
(a) on each Closing Day, the Issuer will have delivered to
the
Agents and their solicitor a favourable opinion of the
Issuer's solicitor dated as of the date of such Closing, in
a
form acceptable to the Agents and their solicitors, acting
reasonably, as to all legal matters reasonably requested by
the Agents relating to the business of the Issuer, corporate
good standing and authority, compliance with Applicable
Legislation, securities law exemptions and the creation,
issuance and sale of the Securities;
(b) on each Closing Day, the Issuer will have delivered to
the
Agents and their solicitor such certificates of its officers
and other documents relating to the Private Placement or the
affairs of the Issuer as the Agents or their solicitors may
reasonably request;
(c) each representation and warranty of the Issuer which is
contained in this Agreement continues to be true, and the
Issuer has performed or complied with all of its covenants,
agreements and obligations under this Agreement;
(d) the Agents have completed due diligence on the Issuer,
its
business, management and properties, including verification
of
the Issuer's title and/or interest in material properties,
to
the satisfaction of the Agents;
(e) the Issuer having provided the Agents with the form of
shareholder resolution authorizing the increase in the
Issuer's authorized capital and the form of Schedule 14C
Information Statement related to the increase in the
authorized capital, such forms being acceptable to the
Agents,
acting reasonably;
(f) the entering into a lock up agreement by the management,
directors and Bounty Developments Ltd. whereby such persons
agree not to trade or otherwise deal with their securities
in
the Issuer until the Securities are free from resale
<PAGE>
-13-
restrictions in the United States and Canada and the
increase
in authorized capital has been effected;
(g) the Issuer shall not have received notice from any
applicable
regulatory authority that it is in default of any material
Applicable Legislation;
(h) no order ceasing or suspending trading in the securities
of
the Issuer nor prohibiting the sale of such securities has
been issued to the Issuer or its directors, officers or
promoters and, to the best of the knowledge of the Issuer,
no
investigations or proceedings for such purposes are pending
or
threatened; and
(i) no material adverse effect shall have occurred to the
Issuer,
its business or its properties;
12.2 On each Closing Day and the obligations of the Issuer and
the Agents to
complete the issue and sale of the Special Warrants are subject
to:
(a) receipt of all required regulatory approval for or
acceptance
of the Private Placement; and
(b) the removal or partial revocation of any cease trading
order
or trading suspension made by any competent authority to the
extent necessary to complete the Private Placement.
13. TERMINATION
13.1 The Agents may terminate their obligations under this
Agreement by
notice in writing to the Issuer at any time before the Final
Closing Day if:
(a) an adverse Material Change, or an adverse change in a
Material
Fact relating to any of the Securities, occurs or is
announced
by the Issuer;
(b) there is an event, accident, governmental law or regulation
or
other occurrence of any nature which, in the opinion of
either
Agent, seriously affects or will seriously affect the
financial markets, or the business of the Issuer or its
subsidiaries or the ability of the Agents to perform their
obligations under this Agreement, or a Purchaser's decision
to
purchase the Special Warrants;
(c) following a consideration of the history, business,
products,
property or affairs of the Issuer or its principals and
promoters, or of the state of the financial markets in
general, or the state of the market for the Issuer's
securities in particular, the Agents determine, in their
sole
discretion, that it is not in the interest of the Purchasers
to complete the purchase and sale of the Special Warrants;
(d) the Securities cannot, in the opinion of either Agent,
be
marketed due to the state of the financial markets, or the
market for the Common Shares in particular;
<PAGE>
-14-
(e) an enquiry or investigation (whether formal or informal)
in
relation to the Issuer, or the Issuer's directors, officers
or
promoters, is commenced or threatened by an officer or
official of any competent authority;
(f) any order to cease, halt or suspend trading (including
an
order prohibiting communications with persons in order to
obtain expressions of interest) in the securities of the
Issuer prohibiting or restricting the Private Placement is
made by a competent regulatory authority and that order is
still in effect;
(g) the Issuer is in breach of any material term of this
Agreement; or
(h) either Agent determines that any of the representations
or
warranties made by the Issuer in this Agreement is false or
has become false.
14. WARRANTIES, REPRESENTATIONS AND ADDITIONAL COVENANTS
14.1 The Issuer warrants and represents to and covenants with
the Agents
that:
(a) the Issuer has the following material subsidiaries:
Patch
Energy Inc., 1289307 Alberta Ltd., Damascus Energy Inc., and
Patch Oilsands Ltd. (collectively, the "Subsidiaries") and
apart from the Subsidiaries and Patch Oilsands Limited
Partnership, the Issuer has no investment or proposed
investment in any other entity that would be material to the
business or affairs of the Issuer;
(b) the Issuer and its Subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under
the
laws of the jurisdiction in which they are incorporated,
continued or amalgamated;
(c) the Common Shares are quoted on the NASD Over the
Counter
Bulletin Board and the Issuer is not in default of any
requirement of its obligations of the policies, rules and
bylaws of such quotation system;
(d) the Issuer and its Subsidiaries are duly registered and
licenced to carry on business in the jurisdictions in which
they carry on business or own property where so required by
the laws of that jurisdiction and are not otherwise
precluded
from carrying on business or owning property in such
jurisdictions by any other commitment, agreement or
document;
(e) the Issuer has full corporate power and authority to carry
on
its business as now carried on by it and to undertake the
Private Placement and this Agreement has been, or will be by
the First Closing Day, duly authorized by all necessary
corporate action on the part of the Issuer;
(f) the Subsidiaries have full corporate power and authority
to
carry on its business as now carried on by them;
(g) this Agreement and the Subscription Agreements entered
into
with Purchasers will constitute valid and binding
obligations
of the Issuer in accordance with their
<PAGE>
-15-
terms and will be enforceable against the Issuer in
accordance
with their terms, except as enforcement thereof may be
limited
by bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting the rights of creditors
generally and except as limited by the application of
equitable principles when equitable remedies are sought, and
by the fact that rights to indemnity, contribution and
waiver,
and the ability to sever unenforceable terms, may be limited
by applicable law;
(h) all of the material transactions of the Issuer have been
promptly and properly recorded or filed in its books or
records and its minute books or records contain all records
of
the meetings and proceedings of its directors, shareholders,
and other committees, if any, since inception;
(i) as of the date hereof, the authorized capital of the
Issuer
consists of 25,000,000 Common Shares, of which 20,241,774
Common Shares are issued and outstanding as fully paid and
non-assessable and 1,000,000 shares of preferred stock, of
which one share of Class A Preferred Voting Stock entitling
the holder to 9,426,489 votes is issued and outstanding and
one share of Class B Preferred Voting Stock entitling the
holder to 500,000 votes was issued and outstanding and no
person has any right, agreement or option, present or
future,
contingent or absolute, or any right capable of becoming
such
a right, agreement or option, for the issue or allotment of
any unissued shares in the capital of the Issuer or its
Subsidiaries or any other security convertible into or
exchangeable for any such shares, or to require the Issuer
or
its Subsidiaries to purchase, redeem or otherwise acquire
any
of the issued and outstanding shares in its capital other
than
the Issuer's outstanding obligations to issue 9,926,489
Common
Shares upon conversion of 9,926,489 shares of Series A
Preferred Stock of Patch Energy Inc and 2,850,000 stock
options exercisable into 2,850,000 Common Shares at an
exercise price of US$1.20;
(j) at each Closing Day, all necessary corporate action will
have
been taken by the Issuer to allot and authorize the issuance
of the Special Warrants and the Agents' Warrants as fully
paid
and non-assessable, and upon the amendment to increase the
Issuer's authorized capital to consist of 200,000,000 or
more
shares of common stock, all necessary corporate action will
have been taken by the Issuer to allot and authorize the
issuance of the Common Shares, the Bonus Warrants, the
Additional Shares, the Damages Shares, the Agents' Warrants
and the Agents' Warrant Shares, and upon such issuance, such
securities shall be validly issued, fully paid and
non-assessable securities of the Issuer;
(k) the Issuer is not aware of any reason that would prevent
the
Issuer from complying with its covenants in this Agreement;
(l) Except for the proposed sale of certain assets of the
Issuer
to Great Northern Oilsands Inc. as evidenced by a letter
agreement dated January 16, 2007, the Issuer is the legal
and
beneficial owner of and has good and marketable title to the
properties, business and assets or the interests in the
properties, business or assets
<PAGE>
-16-
referred to in the Disclosure Record, all agreements by
which
the Issuer holds an interest in a material property,
business
or assets are in good standing ac
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