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EXHIBIT 10.2
PLACEMENT AGENT AGREEMENT
December 8, 2004
Sanders Morris Harris Inc.
600 Travis, Suite 3100
Houston, Texas 77002
Dear Sirs:
1. Introductory. BPI Industries, Inc., a British Columbia
corporation
(the "Company"), proposes to offer, issue, and sell to investors
("Purchasers")
up to 5,600,000 units ("Units"), each unit consisting of two
shares of Common
Stock, without par value (the "Common Stock"), of the Company
and a warrant to
purchase one share of the Company's authorized but unissued
Common Stock
("Investor Warrants" and together with the Common Stock, the
"Offered
Securities")), at a purchase price of US$2.50 per Unit (the
"Offering") all upon
the terms and conditions set forth in the Memorandum (as
hereinafter defined);
provided that the Company shall have the option to increase the
Offering by an
additional 400,000 Units to a total of 6,000,000 Units. The
Investor Warrants
will have an initial exercise price of US$1.50 per share, or
such other price as
may agreed upon by the Company and you, and will be exercisable
for a period of
two years following the Closing Date (as hereinafter defined),
provided, that at
such time as the Company is no longer listed on the TSX Venture
Exchange as a
Tier 2 Issuer, and resale in the United States by the Purchasers
of the shares
underlying the Investor Warrants is covered by a registration
statement in
effect with the Securities and Exchange Commission (the
"Commission"), the
expiration date shall be extended to be two years from the date
such
registration statement is declared effective.
2. Representations and Warranties of the Company. The
Company
represents, warrants, and agrees that:
(a) The Private Placement Memorandum dated December 8, 2004,
with
respect to the sale of the Units together with the exhibits
thereto, the
documents incorporated by reference therein, and any supplements
thereto
(collectively, the "Memorandum"), copies of which have
heretofore been
delivered to you, have been carefully prepared by the Company
in
conformity with the requirements of Rule 506 of Regulation D
("Regulation
D") of the rules and regulations (the "Rules and Regulations")
of the
Commission under the Securities Act of 1933, as amended (the
"Act").
(b) At the date of the Memorandum, it did not include 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 in
light of
the circumstances under which they were made not misleading and
at all
times subsequent thereto up to and including each Closing Date
(as
hereinafter defined): (i) neither the Memorandum nor any
amendment or
supplement thereto includes or will include any untrue statement
of a
material fact or omit to state any material fact necessary to
make the
statements therein in light of the circumstances under which
they were
made not misleading, and (ii) neither the Memorandum nor any
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supplemental sales material supplied or approved in writing by
an officer of the
Company (when read in conjunction with the Memorandum, whether
designated only
for broker-dealer use or otherwise) includes any untrue
statement of a material
fact or omits to state a material fact necessary to make the
statements therein
in the light of the circumstances under which they were made not
misleading;
provided, however, that the foregoing representations,
warranties, and
agreements shall not apply to information contained in or
omitted from the
Memorandum or any such amendment or supplement or supplemental
sales material in
reliance upon, and in conformity with, information furnished to
the Company by
you, specifically for use in the preparation thereof.
(c) All reports and statements required to be filed by the
Company with
the British Columbia Securities Commission (the "BCSC") and the
TSX Venture
Exchange (the "TSX-V") under applicable Canadian securities
legislation (the
"Canadian Laws"), and the rules and regulations thereunder, due
at or prior to
the date of this Agreement have been made. Such filings,
together with all
documents incorporated by reference therein, are referred to as
"Canadian
Documents." The Canadian Documents are on file with and can be
obtained through
www.sedar.com. Each Canadian Document, as amended, conformed in
all material
respects to the requirements of the Canadian Laws and the rules
and regulations
thereunder, and no Canadian Document, as amended, at the time
each such document
was filed, included any untrue statement of a material fact or
omitted to state
any material fact required to be stated therein or necessary to
make the
statements therein, in light of the circumstances under which
they were made,
not misleading, under the standards required by the Canadian
Laws.
(d) At July 31, 2004, the Company would have had, on the pro
forma basis
indicated in the Memorandum, a capitalization as set forth
therein. The audited
financial statements, together with the related notes, of the
Company at July
31, 2004 and 2003, and for the years then ended, included in the
Company's
filing with the TSX-V for the year ended July 31, 2004
(collectively, the
"Company Financial Statements"), respectively, fairly present in
all material
respects, on the basis stated therein and on the date thereof,
the financial
position of the Company at the respective dates therein
specified and its
results of operations and cash flows for the periods then ended
(subject to, in
the case of the unaudited financial statements, normal audit
adjustments). To
the knowledge of the Company, such statements and related notes
have been
prepared in accordance with generally accepted accounting
principles in Canada
applied on a consistent basis except as expressly noted therein
(provided that
the unaudited financial statements lack footnotes and other
presentation items).
The selected historical and pro forma information set forth in
the Memorandum
under the caption "Summary Financial Data" is accurately
presented in all
material respects and prepared on a basis consistent with the
audited and
unaudited historical consolidated financial statements of the
Company
incorporated by reference in the Memorandum from which it has
been derived. The
assumptions used in preparation of the pro forma financial
information are, in
the opinion of management of the Company, reasonable.
(e) Except as disclosed on Schedule 2(e) or as set forth in
the
Memorandum, subsequent to July 31, 2004, the Company has not
incurred any
material liabilities or obligations, direct or contingent,
except in the
ordinary course of business and except for
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liabilities or obligations reflected or reserved against on the
Company's
balance sheet dated July 31, 2004, and there has not been any
material adverse
change, or to the actual knowledge of the Company, any
development involving a
prospective material adverse change, in the condition (financial
or otherwise),
business, or results of operations of the Company or any change
in the capital
or material increase in the long-term debt of the Company, nor
has the Company
declared, paid, or made any dividend or distribution of any kind
on its capital
stock.
(f) All action required to be taken by the Company necessary for
the
authorization of this Agreement and the Related Agreements (as
hereinafter
defined), the performance of all obligations of the Company
hereunder and
thereunder at the Closing (as hereinafter defined), and as a
condition to the
due and proper authorization, issuance, sale, and delivery of
the Offered
Securities to Purchasers in accordance with the terms of this
Agreement has
been, or prior to the initial Closing Date, will have been
taken; and upon the
payment of the consideration for the Offered Securities
specified herein, the
Offered Securities will be duly and validly issued, fully paid,
and
non-assessable with no personal liability attaching solely by
reason of the
ownership thereof and free and clear of all liens imposed by or
through the
Company. Upon payment of the consideration for the Warrant
Shares specified in
the Investor Warrants, the Warrant Shares
(g) The Company is a corporation duly organized, validly
existing, and in
good standing under the laws of British Columbia and has all
requisite right,
power, and authority to own or lease its properties, to conduct
its business as
described in the Memorandum and the Canadian Documents, and to
execute, deliver,
and perform this Agreement, the Subscription Agreements between
the Company and
the Purchasers of the Units in the form attached as Exhibit A
hereto (the
"Subscription Agreements"), the Registration Rights Agreement in
the form
attached as Exhibit B hereto (the "Registration Rights
Agreement" and together
with the Subscription Agreements, the "Related Agreements"), to
issue and sell
the Units and the Offered Securities, and to carry out the
provisions of this
Agreement and the Related Agreements and to carry on its
business as presently
conducted. The Company is duly qualified to do business and in
good standing as
a foreign corporation in all other jurisdictions in which its
ownership or
leasing of properties, or the conduct of its business requires
or may require
such qualification except where the failure to be so qualified
would not have a
material adverse effect on the Company. To the knowledge of the
Company, the
Company has complied in all material respects with all material
laws, rules,
regulations, applicable to the Company's business, operations,
properties,
assets, products, and services, and the Company is in possession
of and
operating in compliance with all material permits, licenses, and
other
authorization, required to conduct its business as currently
conducted.
(h) The authorized capital stock of the Company consists of
100,000,000
shares of Common Stock, without par value per share, of which
30,161,003 shares
were issued and outstanding as of November 9, 2004. Except as
contemplated by
this Agreement or the Related Agreements, or as described in the
Canadian
Documents, the Memorandum, or on Schedule 2(h), (i) there is no
commitment by
the Company to issue any shares of capital stock, subscriptions,
warrants,
options, convertible securities, or other similar rights to
purchase or receive
Company securities or to distribute to the
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holders of any of its equity securities any evidence of
indebtedness, cash, or
other assets, (ii) the Company is under no obligation
(contingent or otherwise)
to purchase, redeem, or otherwise acquire any of its equity or
debt securities
or any interest therein, and (iii) to the Company's knowledge
there are no
voting trusts or similar agreements, shareholders' agreements,
pledge
agreements, buy-sell agreements, rights of first refusal,
preemptive rights, or
proxies relating to any securities of the Company. Except as set
forth in the
Canadian Documents, the Memorandum, or filings with the BCSC or
the TSX-V made
by third parties, and to the knowledge of the Company, no person
holds of record
or beneficially, 5% or more of the outstanding shares of the
capital stock of
the Company.
(i) Except as disclosed in the Canadian Documents or as
described on
Schedule 2(i), there is no material pending or, to the knowledge
of the Company,
threatened (i) action, suit, claim, proceeding, or investigation
against the
Company, at law or in equity, or before or by any Federal,
state, municipal, or
other governmental department, commission, board, bureau, agency
or
instrumentality, domestic or foreign (each, a "Governmental
Body"), (ii)
arbitration proceeding against the Company, (iii) governmental
inquiry against
the Company, or (iv) any action or suit by or on behalf of the
Company pending
or threatened against others.
(j) The Company is not in violation of its certificate of
incorporation or
bylaws, or in default, or with the giving of notice or lapse of
time or both,
would be in default, in the performance of any material
obligation, agreement,
or condition contained in any lease, license, material contract,
indenture, or
loan agreement or in any bond, debenture, note, or any other
evidence of
indebtedness, except for such defaults as would not have a
material adverse
effect on the Company. The execution, delivery, and performance
of this
Agreement, the Related Agreements, and the Escrow Agreement (as
hereinafter
defined), the incurrence of the obligations herein, the
issuance, sale, and
delivery of the Offered Securities , and the consummation of the
transactions
contemplated herein, have been duly authorized by all requisite
corporate action
on the part of the Company and (i) do not and will not conflict
with the
Company's certificate of incorporation or bylaws, (ii) do not
and will not, with
or without the passage of time or the giving of notice, result
in the breach of,
or constitute a default, cause the acceleration of performance,
or require any
consent under, or result in the creation of any lien, charge or
encumbrance upon
any property assets of the Company pursuant to, any material
loan agreement,
mortgage, deed of trust, indenture, or other instrument or
agreement to which
the Company is a party or by which the Company or its properties
are bound,
except such consents as have been obtained as of the date hereof
or to the
extent that the same have been, or prior to the initial Closing
Date will be,
waived or cured, or (iii) do not and will not result in the
violation of any
law, statute, order, rule, administrative regulation, or decree
of any court, or
governmental agency or body having jurisdiction over the Company
or its
properties.
(k) Except as disclosed in the Canadian Documents, as set forth
in the
Related Agreements or as described on Schedule 2(k), there are
no pre-emptive
rights or other rights to subscribe for or to purchase, or any
restriction upon
the voting or transfer of, shares of Common Stock pursuant to
the Company's
certificate of incorporation, bylaws, or any agreement or other
instrument to
which the Company is a party. Except as
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disclosed on Schedule 2(k), the issuance of the Shares is not
(and the issuance
of Warrant Shares will not be) subject to any preemptive right
of any
shareholder of the Company or to any right of first refusal or
other right in
favor of any person.
(l) This Agreement has been duly and validly executed and
delivered by or
on behalf of the Company and constitutes a legal, valid, and
binding obligation
of the Company enforceable in accordance with its terms, except
to the extent
that its enforceability is limited by (i) applicable bankruptcy,
insolvency,
reorganization, moratorium, or other laws of general application
relating to or
affecting the enforcement of creditors' rights generally and
(ii) laws relating
to the availability of specific performance, injunctive relief,
or other
equitable remedies and except as enforceability of the indemnity
and
contribution provisions contained in Section 7 hereof may be
limited by
applicable law or principles of public policy.
(m) The escrow agreement (the "Escrow Agreement") among the
Company, you,
and Sterling Bank (the "Escrow Agent") has been duly and validly
executed and
delivered by or on behalf of the Company and constitutes a
legal, valid, and
binding obligation of the Company enforceable in accordance with
its terms,
except as such enforceability may be limited by (i) applicable
bankruptcy,
insolvency, reorganization, moratorium, or other laws of general
application
relating to or affecting enforcement of creditors' rights
generally and (ii)
laws relating to the availability of specific performance,
injunctive relief, or
other equitable remedies.
(n) No consent, approval, authorization, or order of any court
or
governmental authority or agency is required for the
consummation by the Company
of the transactions contemplated by this Agreement, except such
as may be
required by the National Association of Securities Dealers, Inc.
("NASD"), the
Act, the Rules and Regulations or state securities or Blue Sky
laws, the TSX-V,
or the BCSC.
(o) Except as would not have a material adverse effect on the
business,
assets, results of operation, or condition of the Company, the
Company has
filed, or caused to be filed, on a timely basis, all tax returns
(including
payroll, unemployment, and other taxes related to its employees
and independent
contractors) required to be filed with any Governmental Body and
has paid or
caused to be paid all taxes, levies, assessments, tariffs,
duties or other fees
imposed, assessed, or collected by any Governmental Body that
may have become
due and payable pursuant to those tax returns or otherwise
except taxes being
disputed by the Company in good faith. Except as disclosed on
Schedule 2(o), no
deficiency assessment with respect to or proposed adjustment of
any of the
Company's Federal, state, provincial, municipal, or local tax
returns has
occurred or is threatened. There has been no tax lien imposed by
any
Governmental Body outstanding against the Company's assets or
properties, except
the lien for current taxes not yet due. The charges, accruals,
and reserves on
the books of the Company with respect to taxes for all fiscal
periods are
adequate, in the opinion of the Company, and the Company does
not know of any
actual or proposed tax assessment for any fiscal period or of
any basis therefor
against which adequate reserves have not been set up. Except as
disclosed on
Schedule 2(o), the Company has not been advised that any Federal
income tax
return of the Company has been, or will be, examined or audited
by the Internal
Revenue Service.
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(p) The Common Stock is registered under the BCSC and is quoted
with the
symbol "BPR" on the TSX-V.
(q) The Company has not during the past six months offered or
sold any
security by or for the Company that is of the same or a similar
class as the
Offered Securities , other than offers of securities made solely
to accredited
investors or otherwise under an employee benefit plan as defined
in Rule 405
under the Act, securities issued in connection with
acquisitions, or other
securities that will not invalidate the exemption from
registration relied on to
offer and sell the Units under the Memorandum.
(r) Neither the Company nor any of its affiliates is or has been
subject
to any order, judgment, or decree of any court of competent
jurisdiction
temporarily, preliminarily, or permanently enjoining such person
for failure to
comply with Rule 503 under Regulation D.
(s) Other than the execution, delivery, and performance by the
Company and
you of this Agreement and the Related Agreements, the offer and
sale of the
Units require no consent of, action by or in respect of, or
filing with, any
person or Governmental Body other than those consents that have
been obtained
and filings that have been made pursuant to applicable state
securities laws and
post-sale filings pursuant to applicable state and federal
securities laws and
Canadian Laws, which you and the Company undertake to file
within the applicable
time period.
(t) The Company maintains a system of internal accounting
controls
sufficient to provide reasonable assurance that (i) transactions
are executed in
accordance with management's general or specific authorizations,
(ii)
transactions are recorded as necessary to permit preparation of
financial
statements in conformity with generally accepted accounting
principles and to
maintain asset accountability, (iii) access to assets is
permitted only in
accordance with management's general or specific authorization,
and (iv) the
recorded accountability for assets is compared with the existing
assets at
reasonable intervals and appropriate action is taken with
respect to any
differences. The Company has established disclosure controls and
procedures for
the Company and designed such disclosure controls and procedures
to ensure that
material information relating to the Company, including its
Subsidiaries, is
made known to the certifying officers by others within those
entities,
particularly during the period in which the Company's quarterly
and annual
filings with the TSX-V on Form 51-901F. The Company's certifying
officers
concluded that as of the end of the period covered by the Form
51-901F for the
Company's most recently ended fiscal year (such date, the
"Evaluation Date"),
the Company's disclosure controls and procedures were effective
to provide
reasonable assurance that information that the Company is
required to disclose
in reports that it files or submits under Canadian Laws is
recorded, processed,
summarized and reported within the time periods specified in the
Canadian Laws.
Since the Evaluation Date, there have been no significant
changes in the
Company's internal controls or, to the Company's knowledge, in
other factors
that could significantly affect the Company's internal
controls.
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3. Representations and Warranties of Sanders Morris Harris Inc.
You
represent and warrant to, and agree with, the Company that:
(a) You are duly organized and are validly existing and in
good
standing as a corporation under the laws of the jurisdiction of
your
incorporation, with power and authority (corporate and other) to
perform
its obligations under this Agreement, the Subscription
Agreements, and the
Escrow Agreement;
(b) You are a broker-dealer registered and in good standing
under
the Exchange Act and under the securities or Blue Sky laws of
each state
in which the Units are being offered or sold by you, and you are
a member
in good standing of the NASD; you are in possession of and
operating in
compliance with all authorizations, licenses, permits,
consents,
certificates, and orders required for the performance of your
duties under
this Agreement and the Escrow Agreement, and your performance of
your
duties hereunder and thereunder will be in compliance with all
applicable
laws, including state securities and Blue Sky laws.
(c) There are no legal or governmental proceedings pending to
which
you are a party or of which any of your properties is the
subject or, to
your knowledge, threatened, which, if determined adversely to
you, would
individually or in the aggregate materially and adversely affect
your
ability to perform your obligations under this Agreement or the
Escrow
Agreement.
(d) No consent, approval, authorization or order of any court
or
governmental authority or agency is required for the performance
by you of
your obligations under this Agreement, except such as may be
required by
the NASD or under Regulation D or state securities or Blue Sky
laws which
you and the Company undertake to file within the applicable time
period.
(e) This Agreement has been duly and validly executed and
delivered
by or on behalf of you and constitutes a legal, valid, and
binding
obligation of you enforceable in accordance with its terms,
except to the
extent that its enforceability is limited by (i) applicable
bankruptcy,
insolvency, reorganization, moratorium, or other laws of
general
application relating to or affecting the enforcement of
creditors' rights
generally, and (ii) laws relating to the availability of
specific
performance, injunctive relief, or other equitable remedies and
except as
enforceability of the indemnity and contribution provisions
contained in
Section 7 hereof may be limited by applicable law or principles
of public
policy.
(f) The Escrow Agreement among the Company, you, and the
Escrow
Agent has been duly and validly executed and delivered by or on
behalf of
you and constitutes a legal, valid, and binding obligation of
you
enforceable in accordance with its terms, except as such
enforceability
may be limited by (i) applicable bankruptcy, insolvency,
reorganization,
moratorium, or other laws of general application relating to or
affecting
enforcement of creditors' rights generally and (ii) laws
relating to the
availability of specific performance, injunctive relief, or
other
equitable remedies.
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4. Offering and Sale of the Units. (a) On the basis of the
representations, warranties, and covenants herein contained, but
subject to the
terms and upon the conditions herein set forth, you are hereby
appointed the
exclusive placement agent of the Company during the term herein
specified (the
"Offering Period") for the purpose of finding Purchasers for the
Units on a
best-efforts basis for the account of the Company at the
Offering Price through
a private offering to an unlimited number of "accredited
investors" (as such
term is defined in Rule 501 of Regulation D)("Accredited
Investors") pursuant to
and in accordance with the Act. Subject to the performance by
the Company of all
its obligations to be performed hereunder, and to the
completeness and accuracy
of all the representations and warranties contained herein, you
hereby accept
such agency and agree on the terms and conditions herein set
forth to use your
best efforts during the Offering Period to find Purchasers for
the Units at the
Offering Price. Your agency hereunder, which is terminable as
provided in
Section 11 hereof, shall terminate at 11:59 p.m., Houston, Texas
time, on
December 31, 2004; provided that such termination date (the
"Termination Date")
may be extended by mutual written agreement of the parties until
January 30,
2005.
(b) Each Purchaser desiring to purchase Units will be required
to: (i)
complete, execute, and deliver to you an executed copy of (A) a
Subscription
Agreement and (B) an Investor Questionnaire, in the form
attached as Exhibit C
hereto, and (ii) deliver to you payment for such subscription in
the form
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