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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
