Exhibit 1.1
AGENCY AGREEMENT
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iQ Power Technology Inc., is a Canadian corporation (the "Company") with
its principal executive offices located at Suite 708-A, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇. The Company's principal subsidiary
is iQ Battery Research & Development GmbH ("iQ Battery").
The Company proposes to offer for sale on a "best effort basis" a minimum
of 3,000,000 and a maximum of 5,500,000 Common Shares (collectively the
"Shares," each a "Share"). The Shares are being offered at a subscription price
of US$1.00 per Share (the "Offering Price") to the public (the "Offering"). The
Offering includes the Syndicated Offering defined below.
The Offering is described in a Prospectus dated ____________,1999, which
Prospectus is part of a Registration Statement on Form SB-1 (File Number
333-68649) filed with the Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "1933 Act") on December 10, 1998(as
amended from time to time, the "Registration Statement"). Such Prospectus may be
amended or supplemented from time to time as contemplated by this Agreement. As
utilized herein, the term Prospectus shall mean the Prospectus as it may be
amended or supplemented from time to time.
The Offering will be made on a best-efforts basis to the general public as
described in the Prospectus. While the Company shall have the right to reject
individual subscriptions in the Offering in its discretion, the Company shall
also reject individual subscriptions at the request of the Agent based upon
valid legal or regulatory criteria.
The Shares will be offered and sold to the general public by you as the
Agent and, the Selling Group referred to in Section 1 of this Agreement, upon
receipt of NASD Approval. In addition, the Shares will be offered and sold
directly by the Company. It is presently contemplated that, if the Shares are to
be offered by the Selling Group in the United States, you, as Agent (as
hereinafter defined), will apply to the National Association of Securities
Dealers, Inc. ("NASD"), for approval of the terms of your compensation, as
described herein ("NASD Approval"). It is understood that, if the Shares are to
be offered by the Selling Group in the United States, your participation in the
Offering will not commence unless and until you are in receipt of NASD Approval.
All capitalized terms not otherwise defined herein shall have the same
meanings as those ascribed to such terms in the Prospectus.
SECTION 1. Appointment of IPO Capital Corp. as Agent: Compensation to the Agent.
(a) Subject to the terms and conditions herein set forth, the Company
hereby appoints IPO Capital Corp. ("Agent" or "you"), as its sole agent to
consult with and advise the Company and to solicit subscriptions for (other than
subscriptions sold directly by the Company) Shares on behalf of the Company, in
connection with the Company's offering of the Shares in the Offering. On the
basis of the representations, warranties, covenants and agreements set forth
herein, Agent accepts such appointment and agrees to consult with and advise the
Company and to use its best efforts to solicit subscriptions for Shares in
accordance with this Agreement; provided, however, that Agent shall not be
obligated to sell any minimum number of Shares or to take any action not in
accordance with all applicable laws, regulations, decisions or orders. The
appointment of Agent hereunder shall terminate upon (a) the sale of the maximum
number of Shares in the Offering, (b) the Withdrawal
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Date (as hereinafter defined), or (c) termination by Agent in accordance with
Section 13 hereof. In addition, Agent may, in its sole discretion, offer selling
group participation in the normal course of the brokerage business to selling
groups of other licensed dealers, brokers and investment dealers who may or may
not be offered part of the commissions hereunder and may form a syndicate of
NASD member firms (such syndicate herein collectively called "Selling Group" or
"Selected Dealers"), to participate in the solicitation of offers in the United
States to buy the Shares under a Selected Dealers Agreement ("Syndicated
Offering"). The Agent will transmit to the Company executed Subscription
Agreements substantially in the form attached hereto as Exhibit "A" on each
Closing Date for the Offering. The Offering is subject to a minimum subscription
(the "Minimum Subscription") of 3,000,000 Shares. All funds received by the
Agent for subscription will be held in trust by the Agent until the Minimum
Subscription has been attained. Notwithstanding any other term of this
Agreement, all subscription funds received by the Agent will be returned to the
subscribers if the Minimum Subscription is not attained by April 10, 1999.
(b) In addition to the reimbursement of the expenses specified in Sections
7, 8 and 9 hereof, assuming the consummation of the Offering, the Company will
pay to the Agent, the following compensation for its services hereunder:
(i) in the case of sales of Shares by the Agent and Selling Group, the
Company shall pay to the Agent ten percent (10%) of the aggregate dollar amount
of the Shares sold by members of the Selling Group (which may include Agent);
(ii) to issue to the Agent options entitling the Agent to purchase that
number of previously unissued shares of the Company as is equal to ten percent
(10%) of the number of Shares sold under the Offering for a period of two years
from the effective date of the Registration Statement, which right may be
exercised at any time up to the close of business two years from the effective
date of the Registration Statement. The exercise price for such options shall be
the Offering Price of the Shares during the first year and 150% of the Offering
Price of the Shares during the second year of the term of the options. The terms
of the options will include, among other things, provisions for the appropriate
adjustment in the class, number and price of the shares to be issued under the
Agent's options upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the shares, the payment of
stock dividends or the amalgamation of the Company; and
(iii) to pay the Agent a corporate finance fee (the "Corporate Finance
Fee") in the amount of US$50,000, payable, at the Agent's discretion, either in
cash or in Shares of the Company at a deemed price equal to the Offering Price
per Share, or any combination thereof.
(c) If the Offering is (A) terminated by the Company after the Prospectus
is first distributed and no shares are issued hereunder; (B) not consummated by
April 10, 1999; or (C) if this Agreement is terminated by the Agent in
accordance with Section 13(a)(i), (ii) or (iii)hereof, Agent shall not be
entitled to the compensation set forth in subsection(b)(i) or (ii) above, but
shall be entitled to receive reimbursement for expenses specified in Sections 7,
8 and 9 hereof.
(d) The fees specified in subsection (b) of this Section 1 shall be payable
in immediately available funds on each Closing Date for the Offering.
(e) The Company agrees to reimburse the Agent for its out-of-pocket costs
and expenses, in the amounts specified in Section 7 hereof, and for all costs
and expenses specified in Sections 8 and 9 hereof, promptly upon receiving
invoices for such costs and expenses. Such costs and expenses shall be paid
whether the Offering is consummated or not as further described in Section 7.
(f) The Company acknowledges that it has retained the Agent in connection
with the Offering and that, in such capacity, only personnel employed by the
Agent and such other personnel as are assigned for the specific purposes
contemplated by this Agreement to be performed by the Agent will be involved in
providing the services described herein.
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SECTION 2. Closing: Release of Funds and Delivery of Certification.
If all conditions precedent to the consummation of the Offering are
satisfied, the Company agrees to issue with respect to Shares sold in the
Offering as of the first Closing Date and thereafter until the sale of the
maximum number of Shares and to release for delivery or deliver certificates for
the Shares on each Closing Date (each such date being a "Certificate Delivery
Date") against payment thereof to the Company by release of funds from the
Agent. No funds shall be released to the Company or withdrawn until the
conditions specified in Section 10 hereof shall have been complied with to the
reasonable satisfaction of the Agent and its counsel. Such release, withdrawal
and payment shall be made at the Closing Date, at 10:00 a.m., EST, on a business
day and at a place selected by the Agent, which date and place are acceptable to
the Company on at least two business days prior notice to the Company; such
business day shall not be more than five (5) business days after the Termination
Date, or such other time or place as shall be agreed upon by the Agent and the
Company. Certificates for Shares shall be delivered directly to the purchasers
in accordance with their respective Subscription Agreement. The hour and date
upon which the Company shall release for delivery or deliver the Shares sold,
receive the funds due to Company from the Agent and pay the compensation due to
Agent hereunder, according to the terms hereof (the "Closing") with respect to
the Offering are referred to herein as the "Closing Date." After the first
Closing Date, each subsequent Closing shall be at such times and dates as the
Company and the Agent may determine. In any event, funds received by the Agent
for which the Company does not accept a Subscription Agreement shall also be
promptly returned to the subscriber. For purposes of this Agreement, the term
"Termination Date" shall mean April 10, 1999 unless the Offering is extended by
the Company to a date no later than , 1999 by written notice delivered to Agent
by the Company.
SECTION 3. Offering.
The Shares are to be offered in the Offering at the Offering Price.
SECTION 4. Representations and Warranties.
The Company represents and warrants to the Agent and agrees as follows:
(a) The Registration Statement does not, and at the Closing Date will not,
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that this representation and warranty shall not apply to
statements and/or omissions from the Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by the Agent
expressly for use in the Prospectus.
(b) The accountants who certify the financial statements and supporting
schedules, if any, included or incorporated by reference in the Registration
Statement are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of Regulation S-X under the 1933
Act.
(c) Each "significant subsidiary" of the Company(as such term is defined in
Rule 1-02 of Regulation S-X) has been duly organized and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or of leasing of property or the conduct of business; and,
except as described in the Prospectus, all of the issued and outstanding capital
stock of each such subsidiary has been duly authorized and validly issued, is
fully paid and nonassessable and, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding shares of capital stock of
the subsidiaries was issued in violation of any preemptive or similar rights
operating by operation of law, or under the charter or bylaws of any subsidiary
or under any agreement to which the Company or any subsidiary is a party. The
only subsidiary of the Company is iQ Battery.
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(d) The financial statements of the Company and iQ Battery, audited and
unaudited, if any, included in the Prospectus present fairly the financial
position of the Company at the dates indicated and the results of its operations
for the periods specified; and such financial statements were prepared in
conformity with generally accepted accounting principles applied on a consistent
basis for the periods presented. The financial, statistical and proforma
information and related notes included in the Prospectus are accurate and
present fairly the information therein on a basis consistent with the financial
statements of the Company and iQ Battery included in the Prospectus.
(e) Since the respective dates as of which information is given in the
Prospectus, except as may otherwise be stated therein: (i) on the date hereof
there has not been, and of the Closing Date there will not be, any material
adverse change in the condition, earnings, business affairs or business
prospects of the Company or iQ Battery, financial or otherwise, whether or not
arising in the ordinary course of business, and (ii) on the date hereof there
has not been, and as of the Closing Date there will not be, any material
transactions entered into by the Company or iQ Battery.
(f) As of the date of the Prospectus and the Closing Date: (i) the Company
is a corporation, duly incorporated, validly existing and in good standing under
the laws of Canada with full power and authority (corporate and other) to own or
lease its properties and to conduct its business as described in the Prospectus;
(ii) the Company is in good standing in each jurisdiction in which the character
of the business conducted by it or the location of the properties owned by it
makes such qualification necessary, and (iii) the Company has obtained all
licenses, permits and other governmental authorizations required for the conduct
of its business.
(g) The authorized capital stock of the Company consists of _____Common
Shares. As of the date of the Prospectus there were 16,179,425 Common Shares
issued and outstanding. The Shares have been duly and validly authorized for
issuance and, when issued and delivered by the Company against payment of the
consideration therefor, the Shares will be duly and validly issued, fully paid
and non-assessable and will be free and clear of any voting restrictions,
trading restrictions other than _____, security interest, pledge, lien,
encumbrance, claim or equity other than created by the purchase thereof; the
issuance of the Shares will not be in violation of any pre-emptive rights or
other rights to subscribe for or to purchase, or any restriction upon the voting
or transfer of, any Common Shares pursuant to the Company's articles of
incorporation, bylaws or other governing documents or any agreement or other
instrument to which the Company is a party or by which it is bound; and the
terms and provisions of the Shares conform and will conform in all material
respects to the description thereof contained in the Prospectus.
(h) As of the date of the Prospectus and the Closing Date, neither the
Company nor iQ Battery is in violation of any material law, rule, regulation or
order (including laws, rules, regulations and orders pertaining to the offer and
sale of securities), or in violation of its articles of incorporation or by
laws, or in default in the performance or observance of any material obligation,
agreement, covenant, or condition contained in any material contract, lease,
loan agreement, indenture or other instrument to which it is a party or by which
it or any of its properties may be bound, except where such violation or default
does not have a material adverse effect on the condition, financial or
otherwise, or the business, operations or income of the Company or iQ Battery;
nor will the consummation of any of the transactions described in the
Prospectus, nor the execution and delivery of this Agreement or the consummation
of the transactions herein contemplated, conflict with or constitute a violation
of the articles of incorporation or bylaws of the Company or iQ Battery, or any
law, rule, regulation or order applicable to the Company, or result in a default
under any material contract, lease or other instrument to which the Company or
iQ Battery is a party, except where such conflict or violation would not have a
material adverse effect on the condition, financial or otherwise, of the
business, operations or income of the Company or iQ Battery.
(i) As of the Closing Date and the date of the Prospectus, the Company and
iQ Battery each has good and marketable title in fee simple to all items of real
property, and good and marketable title to all personal property and assets
which are material to its business and are described in the Prospectus as owned
by it as of such dates, in each case, free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or do not affect the
value of such property and do not interfere in any material respect with the
business of the Company or iQ Battery and all agreements by which the Company
holds an interest in a property, business or asset are in good standing
according to their terms.
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(j) As of the date of the Prospectus and the Closing Date, the Company and
iQ Battery are each conducting its business so as to comply in all material
respects with all applicable statutes and regulations, and there is no suit or
proceedings, charge, investigation or action before or by any court, regulatory
authority or governmental agency or body pending or, to the best of the
knowledge of the Company, threatened, which might affect the performance of this
Agreement or the consummation of the transactions herein contemplated or
described in the Prospectus or which might result in any material adverse change
in the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company or iQ Battery, or which would materially
affect any of their properties or assets.
(k) Any certificate signed by the President and the Secretary of the
Company and delivered to the Agent or its counsel that refers to this Agreement
and any certificate signed by said officers of the Company and delivered to the
Agent or its counsel shall be deemed to be a representation and warranty by the
Company to the Agent as to the matters covered thereby with the same effect as
if such representation and warranty were set forth herein.
(l) The Company has not granted or authorized nor made prior arrangements
to grant or authorize any options, warrants or rights to purchase the Company's
capital stock other than as described in the Prospectus.
(m) This Agreement has been duly authorized, executed and delivered by the
Company and is the legal, valid and binding agreement of the Company enforceable
in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights, to general principles of equity and
to the extent that rights to indemnity hereunder may be limited under applicable
laws.
(n) Each lease of real property (together with any improvements thereon)
and personal property to which the Company or iQ Battery is a party has been
duly authorized, executed and delivered, and is the legal, valid and binding
agreement of the Company or iQ Battery, as the case may be, enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors rights, to general principles of equity and
to the extent that rights to indemnity thereunder may be limited under
applicable laws.
(o) The Company has not taken and shall not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of the Shares to facilitate the sale of the Shares.
(p) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental body or agency, domestic or foreign, now pending or, to the
knowledge of the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be described in the Prospectus, or which might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, properties, or conduct of business of the
Company or any subsidiary (a "Material Adverse Effect").
(q) There are no contracts or documents which are required to be described
in the Registration Statement or the Prospectus or filed as exhibits thereto
which have not been so described and filed as required.
(r) The Company and each subsidiary has filed all tax returns on or before
the date such returns are required to be filed or has filed for an extension as
permitted by applicable law, and has paid all taxes due on or before the date
due.
(s) No relationship, direct or indirect, exists between the Company, on one
hand, and the directors, officers, shareholders, customers or suppliers of the
Company on the other hand, which is required to be described in the Prospectus
and is not so described.
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(t) Except as described in the Registration Statement and Prospectus, there
are no persons with registration rights or similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(u) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective business and as is customary for companies engaged in
similar businesses.
(v) Upon their issuance, the Agent's option, any Shares issued on exercise
of the Agent's option and any Shares issued in payment of the Corporate Finance
Fee will be validly created, issued and outstanding, fully paid and
non-assessable shares of the Company, free and clear of all voting restrictions,
trading restrictions other than _____, liens, charges, or encumbrances of any
kind whatsoever.
(w) All of the material transactions of the Company have been promptly and
properly recorded or filed in or with the books or records of the Company and
the minute books of the Company contain all records of the meetings and
proceedings of the Company's directors, shareholders and other committees, if
any, since its incorporation.
(x) There are no material liabilities of the Company, whether direct,
indirect, absolute, contingent or otherwise which are not disclosed or reflected
in the Company's Financial Statements except those incurred in the ordinary
course of business of the Company since _____ which are recorded in the books
and records of the Company; and
(y) No order ceasing or suspending trading in securities of the Company nor
prohibiting the sale of such securities has been issued to the Company or its
directors, officers or promoters or to any other companies that have common
directors, officers or promoters and no investigations or proceedings for such
purposes are pending or threatened.
SECTION 5. Representations and Warranties of the Agent.
The Agent represents and warrants to, and covenants with, the Company as
follows:
(a) IPO is registered, to the extent registration is required, with the
appropriate governmental agency in each jurisdiction in which the Agent intends
to offer or sell the Shares and will use its best efforts to maintain such
registrations, qualifications and memberships throughout the term of the
Offering.
(b) To the knowledge of the Agent, no action or proceeding is pending
against the Agent or any of its officers or directors concerning the Agent's
activities as a broker or dealer that would materially adversely affect the
Company's offering of the Shares.
(c) The Agent, in connection with the offer and sale of the Shares and in
the performance of its duties and obligations under this Agreement, agrees to
comply with all applicable laws of the jurisdictions in which the Shares are
offered and sold, and will not, in connection with its efforts hereunder to sell
the Shares, make any representation or give any information other than as
contained in the Prospectus or in any marketing materials prepared by the
Company with the assistance of Agent, which materials must be approved for use
by Agent.
(d) The Agent is a corporation duly organized, validly existing and in good
standing under the laws of the Province of British Columbia. The Agent has all
requisite power and authority to enter into this Agreement and to carry out its
obligations hereunder.
(e) This Agreement has been duly authorized, executed and delivered by the
Agent and is a valid agreement on the part of the Agent, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting creditors rights, to
general principles of equity and to the extent that rights to indemnity
thereunder may be limited under applicable laws.
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(f) Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will result in any breach of any of the terms
or conditions of, or constitute a default under, the articles of incorporation
or bylaws of the Agent or any indenture, agreement or other instrument to which
the Agent is a party or violate any order directed to the Agent of any court or
any provincial or federal or state regulatory body or administrative agency
having jurisdiction over the Agent or its affiliates.
(g) The Agent knows of no person who rendered any services in connection
with the introduction of the Company to the Agent who will be entitled to
receive from the Agent or from the Company any finder's fees or similar
payments.
(h) The Agent agrees that it will not offer or sell the Agent's options or
Shares issuable upon exercise of the Agent's option or in satisfaction of the
Corporate Finance Fee except (i) pursuant to an effective registration statement
under the United States Securities Act of 1933, as amended, (ii) en exemption
from such registration is available, or (iii) the Shares are offered and sold
outside the United States in accordance with Regulation S under the Act, if
available.
SECTION 6. Covenants of the Company.
The Company hereby covenants with you as follows:
(a) In the United States, the Company will only offer the Shares in the
states of New York and California and any other states mutually agreeable to the
Company and the Agent. The Company will to the extent required, use its best
efforts to have the Offering approved in those states; and will notify you (i)
of the receipt of any comments from the SEC or any other regulatory authority
with respect to the Offering or any other matter referred to in the Registration
Statement, (ii) of any request by the SEC or any other regulatory authority for
any amendment or supplement to the Registration Statement, the Blue Sky
Materials (as hereinafter defined) or for additional information, (iii) of the
issuance by the SEC or any other regulatory authority of any order or other
action suspending the Offering or the use of the Prospectus or any other filing
of the Company under applicable state law or the threat of any such action, and
(iv) of the issuance by the SEC or any regulatory authority of any stop order
suspending the use of the Prospectus or of the initiation or threat of
initiation of any proceedings for that purpose. The Company will make every
reasonable effort to prevent the issuance by the SEC or any regulatory authority
of any such order, and if any such order shall at any time be issued, to obtain
the lifting thereof at the earliest possible time. The Company shall file with
the state securities authorities of the states listed above, to the extent
necessary, appropriate registration materials in order to comply with the laws
of such states applicable to the sale of the Shares ("Blue Sky Materials").
(b) The Company will give you notice of its intention to amend or file any
amendment or supplement to the Prospectus which differs from the Prospectus most
recently filed with the SEC and will not amend or file any such amendment or
supplement to the Prospectus to which you shall reasonably object.
(c) The Company has or will deliver to you and to your counsel at least one
(1) conformed copy of the Registration Statement and the Blue Sky Materials, as
originally filed, and each amendment thereto or correspondence in connection
therewith.
(d) The Company will furnish to you, from time to time, such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the respective applicable rules and
regulations of the NASD.
(e) As of the effective date of the Registration Statement and continuing
through each Closing Date, the Company will comply, at its own expense, with all
requirements imposed upon it by the SEC, state securities regulators and by any
other applicable regulatory authority, so far as necessary to permit the
continuance of sales or dealing in Common Shares during such period in
accordance with the provisions hereto and the Prospectus, provided, however,
that the Company may, in its sole discretion, withdraw from selling Shares in
any state listed in (a) above after prior written notice to and consultation
with Agent.
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(f) If any event relating to or affecting the Company shall occur, as a
result of which it is necessary, in the reasonable opinion of counsel for the
Company to amend or supplement the Prospectus in order to make the Prospectus
not misleading in light of the circumstances existing at the time it is
delivered to a purchaser, the Company will forthwith prepare and furnish to you
a reasonable number of copies of an amendment or amendments of, or a supplement
or supplements to, the Prospectus (in form and substance satisfactory to each of
Company's counsel and your counsel) which will amend or supplement the
Prospectus so that, as amended or supplemented, it will not contain any untrue
statement of any material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a prospective purchaser or a
purchaser, not misleading. For the purpose of this subsection (f), the Company
will furnish to you such information with respect to itself as you may from time
to time reasonably request; provided, however, that any information which is of
a confidential or proprietary nature shall not be delivered to any third party
other than your legal counsel or accountants in connection with the Offering, or
as otherwise required by law.
(g) During the period of eighteen (18) months from the last Closing Date,
the Company will furnish to you as soon as practicable after the end of each
fiscal year, but not later than one hundred and twenty (120) days after the end
of such fiscal year, a balance sheet and statements of income, shareholders'
equity and cash flows of the Company and its subsidiaries, if any, as of the end
of and for such year, audited by independent public accountants.
(h) During the period of eighteen (18) months from the Closing Date, the
Company will furnish to its shareholders as soon as practicable after the end of
each fiscal year, but not later than one hundred and twenty (120) days after the
end of such fiscal year, an annual report including a consolidated balance sheet
and statements of consolidated income, shareholder's equity and cash flows of
the Company and its subsidiaries, if any, as of the end of and for such year,
audited by independent public accountants.
(i) During the period of eighteen (18) months from the Closing Date , the
Company will furnish to you as soon as available, a copy of each report of the
Company furnished generally to shareholders of the Company or, to the extent
required, filed with the SEC, or any national securities exchange or system on
which any class of securities of the Company may be listed or quoted.
(j) The Company will use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus under the caption, "Use of Proceeds".
(k) Other than the Prospectus or as permitted by applicable law, the
Company will not distribute any prospectus, offering circular or other offering
material in connection with the offer and sale of the Shares and will not
publish any writing which constitutes an offer or prospectus.
(l) The Company will use all reasonable efforts to comply with such
requirements as may be necessary for brokerage firms to make an active market
for the Common Shares.
(m) The Company shall not be deemed to have accepted any subscription offer
accompanied by a check or comparable instrument until final payment has been
made on such check or instrument and the Company accepts the subscription by
executing the Subscription Agreement.
(n) The Company will timely file such reports pursuant to the 1934 Act as
are necessary in order to make generally available to its security holders as
soon as practicable an earnings statement for the purposes of, and to provide
the benefits contemplated by the last paragraph of Section 11 of the ▇▇▇▇ ▇▇▇.
(o) The Company further covenants with the Agent that unless this Agreement
is terminated by the Agent, neither the Company nor iQ Battery shall solicit or
accept any offer for debt or equity financing not approved by the Agent until
the earlier of July 31, 1999 and four months from the date of the Company's Form
8-A is filed with the SEC.
-8-
(p) In the event of a breach of paragraph 6(o) by the Company or iQ
Battery, the Company will immediately pay to Agent a fee in the amount of
US$200,000.
(q) The Company will reserve or set aside sufficient Common Shares in its
treasury to issue the Shares to be issued in the Offering, all shares which may
be issued on exercise of the Agent's option and, in the event that the Agent
elects to receive any portion of the Corporate Finance Fee in Shares, the Shares
in payment of the Corporate Finance Fee.
(r) The Company covenants not to place a U.S. securities law restrictive
legend on the certificates representing the Agent's options or any Shares issued
on exercise thereof or in satisfaction of the Corporate Finance Fee.
(s) The Company will use its best efforts to have its Registration
Statement on Form 8-A be declared effective by the SEC and have its Common
Shares listed on the OTC Bulletin Board.
(t) If, after the Registration Statement is first filed with the SEC but
before the conclusion of the distribution of all the Shares under the
Registration Statement, a material change (as defined in the Securities Act
(British Columbia)) occurs in the affairs of the Company, the Company will:
(i) notify the Agent immediately, in writing, with full particulars of
the change;
(ii) file with the SEC as soon as practicable, and in any event no
later than 10 days after the change occurs, an amendment to the
Registration Statement in a form acceptable to the Agent disclosing
the material change; and
(iii) provide as many copies of that amendment to the Agent as the
Agent may reasonably request.
SECTION 7. Payment of Expenses.
The Company agrees to pay to the Agent on the earlier of the Closing and
the termination of this Agreement all expenses in connection with the Offering
and otherwise incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to, the following: (i) the
preparation, issuance and delivery of certificates for the Shares to the
subscribers in the Offering, (ii) the fees and disbursements of the Company's
legal counsel and accountants, (iii) the filing fees, if any, incurred in
connection with the qualification of the Shares under all applicable securities
or Blue Sky laws, (iv) the printing and delivery to you, in such quantities as
you shall reasonably request, of copies of the Prospectus and all other
documents in connection with the Offering and this Agreement, (v) the cost of
preparing and printing marketing materials, advertising expenses and expenses
relating to meetings with prospective subscribers, (vi) the cost of printing all
stock certificates and all other documents related to the Offering, and the fees
and charges of any transfer agent, registrar and other similar agents, if any,
(vii) documented out-of-pocket expenses incurred by you in connection with the
Offering and this Agreement, and (viii) fees, disbursements and other expenses
of your counsel, in addition to amounts specified in clause (iii)above. The
Company authorizes the Agent to deduct its expenses in connection with the
Offering from the proceeds of the Offering, except expenses for which an account
has not yet been rendered to the Company
SECTION 8. Indemnification.
(a) The Company agrees to indemnify and hold harmless you, your officers,
directors, agents, employees and each person, if any, who controls you within
the meaning of Section 15 of the 1933 Act, against all losses, claims, damages
or liabilities, joint or several, to which you or any of them may become subject
under all applicable federal and state laws or otherwise, and to reimburse you
and such persons for any expenses (including reasonable fees and disbursements
of counsel) incurred by you or any of them in connection with
-9-
investigating, preparing or defending any actions, to the extent such losses,
claims, damages, liabilities or actions (i) arise out of or are based upon any
untrue statement or alleged untrue statement contained in the Registration
Statement (or any amendment or supplement thereto), or any Blue Sky application
or other instrument executed by the Company or based upon written information
supplied by the Company filed in any state or jurisdiction to qualify any or all
of the Shares under the securities laws thereof (collectively the "Blue Sky
Application"), or (ii) arise out of or are based upon the omission or alleged
omission to state in any of the foregoing documents 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, or (iii) arise from or
are based upon any Prospectus or any other documentation distributed in
connection with the offering and this Agreement or any oral representation made
by the Company to an investor or potential investor in connection with the
Offering, or (iv) arising directly or indirectly out of any order made by any
regulatory authority based upon an allegation that any such untrue statement or
omission exists (except information and statements referring solely to the
Agent) including, without limitation, an order that trading in or distribution
of the Shares is to cease, or (v) resulting from the failure by the Company to
file an amendment to the Registration Statement, or (vi) resulting from the
breach by the Company of any of the terms of this Agreement, or (vii) resulting
from any representation or warranty made by the Company herein not being true or
ceasing to be true, or (viii) if the Company fails to issue and deliver the
certificates for the Shares in the form and denominations satisfactory to the
Agent at the time and place required by the Agent with the result that any
completion of a sale of the Shares does not take place, or (ix) if, following
the completion of a sale of any of the Shares, a determination is made by any
competent authority setting aside the sale unless that determination arises out
of an act or omission by the Agent.; provided, however, that the Company shall
not be liable in any such case to the extent such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact in, or material omission or alleged
material omission from, the Prospectus (or any amendment or supplement thereto)
made in reliance upon and in conformity with information furnished in writing to
the Company by you regarding you expressly for use in the Prospectus or if you
fail to deliver a Prospectus that corrects a deficient disclosure if such
corrected Prospectus was made available to you on a timely basis. The Company
agrees that the only information furnished by you for use in the Prospectus is
set forth on the cover page of the Prospectus and under section entitled "Plan
of Distribution" in the Prospectus.
(b) You agree to indemnify and hold harmless the Company, its directors,
officers, employees, agents and each person, if any, who controls the Company
within the meaning of section 15 of the 1933 Act against all losses, claims,
damages or liabilities, joint or several, to which they, or any or them, may
become subject under all applicable federal and state laws or otherwise, and to
reimburse the Company and such persons for any expenses(including reasonable
fees and disbursements of counsel) incurred by them, in connection with
investigating, preparing or defending any actions, to the extent such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus (or any amendment or supplement thereto), or based upon the omission
or alleged omission to state in the Prospectus a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that your obligations under this
Section 8(b) shall exist only if and only to the extent that such untrue
statement or alleged omitted material fact was contained in the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company by you regarding you expressly
for use in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party. If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that any indemnified party shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such
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indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
iii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 8(a) and 8(b) shall use its best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) The agreements contained in this Section 8 and in Section 9 hereof and
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of you or your officers, directors or
controlling persons, or by or on behalf of the Company or any officers,
directors or controlling persons of the Company, (ii) delivery of and payment
for the Shares, or (iii) any termination of this Agreement.
SECTION 9. Contribution.
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in Section 8 is due in accordance with
its terms but is for any reason held by a court to be unavailable from the
Company, the Company and you shall contribute to the aggregate losses, claims,
damages and liabilities (including any investigation, legal and other expenses)
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, (but after deducting any contribution
received by the Company from persons other than you, who may also be liable for
contribution) to which the Company may be subject in such proportion so that you
are responsible for that portion represented by the percentage that the fees
paid to the Agent pursuant to Section 1 of this Agreement (not including
expenses) bears to the gross proceeds received by the Company from the sale of
the Shares in the Offering, and the Company shall be responsible for the
balance. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and you on the other hand in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and you on the other hand shall be deemed to be in the
same proportion as total net proceeds from the sale of Shares (before deducting
expenses) received by the Company bear to the total fees (not including
expenses) received by the Agent. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to written information supplied by the Company on the one hand or you on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
considerations referred to above in this Section 9. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
9shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, you shall not
be required to contribute any amount in excess of the amount by which the
aggregate price of Shares sold by the Agent in the Offering exceeds the amount
of any damages which you would have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of any fraudulent misrepresentation (within the meaning of
▇▇▇▇▇▇▇▇▇(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not
-11-
guilty of such fraudulent misrepresentation. The obligations of the Company
under this Section 9 and under Section 8 shall be in addition to any liability
which the Company may otherwise have. For purposes of this Section 9, each of
your officers and directors and each person, if any, who controls you within the
meaning of the 1933 Act shall have the same rights to contribution as you and
each person, if any, who controls the Company within the meaning of the 1933
Act, and each officer and director of the Company shall have the same rights to
contribution as the Company. Any party entitled to contribution, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against another
party under this Section 9, will notify such party from whom contribution may
besought, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
hereunder or otherwise than under this Section 9.
SECTION 10. Conditions to Closing.
Unless otherwise agreed upon by you and the Company, the consummation of
this Offering is subject to the condition that all representations and
warranties and other statements of the Company herein are, as applicable, at and
as of the commencement of the Offering or as of each Closing Date, true and
correct in all material respects, the condition that the Company shall have
performed in all material respects all its obligations hereunder to be performed
on or before such dates, and to the following further conditions:
(a) The Registration Statement shall have been declared effective and no
stop order suspending the use of the Prospectus shall have been issued under any
applicable law or proceedings thereof initiated or threatened by any regulatory
authority, and no order or other action suspending the consummation of the
transactions described in the Prospectus shall have been issued or proceeding
therefor initiated or threatened by the SEC or any other regulatory authority.
(b) On each Closing Date you shall have received:
(1) The opinion addressed to you, as of the Closing Date, from counsel for
the Company, in form and substance satisfactory to your counsel, including
opinions to the effect that:
(i) The Company and iQ Battery have been duly incorporated and is validly
existing and in good standing under the laws of Canada.
(ii) The Company has the corporate power and authority to conduct its
business and to own, lease and operate its properties as described in the
Prospectus and as otherwise contemplated.
(iii) All Shares offered pursuant to the Offering or to be issued upon
exercise of the Agent's option or in payment of the Corporate Finance Fee have
been duly and validly authorized for issuance, and when issued, sold and
delivered by the Company pursuant to the terms of the Offering against payment
of the consideration set forth in the Prospectus, the Shares will be duly and
validly issued and fully paid and nonassessable.
(iv) The Agent's option has been duly and validly created and authorized
for issuance;
(v) All of the capital stock of the Company to be issued and outstanding
immediately following the conclusion of the Offering has been duly authorized
and, upon payment of consideration therefor in accordance with the description
set forth in the Prospectus, will be validly issued, fully paid, and
nonassessable.
(vi) This Agreement, and each lease of real property of the Company or iQ
Battery described in the Prospectus, if any, has been duly authorized, executed
and delivered by the Company and is the legal, valid and binding agreement of
the Company enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability
-12-
relating to or affecting creditors' rights, to general principles of equity and
to the extent that rights to indemnity thereunder may be limited under
applicable laws.
(vii) No stop order suspending the use of the Prospectus has been issued
or, to the best of such counsel's knowledge, proceedings therefor initiated or
threatened by any regulatory authority respecting the issuance of the Shares.
(viii) No further approval, registration, authorization, consent or other
order of any public board or body is required in connection with the execution
and delivery of this Agreement, the issuance of the Shares and the consummation
of the transactions described in the Prospectus.
(ix) In the course of the preparation of the Registration Statement and the
Prospectus, we participated in conferences with officers and representatives of
the Company, with the Company's independent public accountants, at which
conferences the content of the Registration Statement and the Prospectus were
discussed and at which conferences we made inquiries of such officers,
representatives and accountants, and, on the basis of the foregoing, nothing has
come to our attention that would lead us to believe that either the Registration
Statement or any amendment thereto, as of the date the Registration Statement or
such amendment is or was declared effective, and as of the Closing Date, or the
Prospectus as of the date thereof and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that we do not express any belief with respect
to the financial statements, and the notes and schedules related thereto and
other financial information or statistical data included in the Registration
Statement, any amendment thereto, or the Prospectus). Without limiting the
generality of the foregoing, we assume no responsibility for the accuracy,
completeness or fairness of any statements contained in the Registration
Statement or Prospectus, other than statements insofar as they relate to legal
matters under the captions "Description of Capital Stock" and "Shares Available
for Future Sale."
(x) The information in the Prospectus under the captions: "Description of
Capital Stock," and "Securities Eligible for Future Sale," to the extent such
information purports to summarize provisions of law or summarizes legal
conclusions, are accurate summaries in all material respects.
(xi) The terms and provisions of the Shares conform to the description
thereof contained in the Prospectus, and the form of certificate to be used to
evidence the Shares is in due and proper form.
(xii) There are no pending or, to the best of counsel's knowledge,
threatened legal or governmental proceedings which are required to be disclosed
in the Prospectus, other than those disclosed therein, and all pending or, to
the best of counsel's knowledge, threatened legal and governmental proceedings
to which the Company is a party are described in the Prospectus other than
ordinary routine litigation incidental to the business of the Company which are,
considered in the aggregate, not material.
(xiii) To the best of such counsel's knowledge after reasonable inquiry,
there are no material contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments of the Company required to be described or referred
to in the Registration Statement or to be included as exhibits thereto other
than those described or referred to therein or included exhibits thereto, the
descriptions thereof or references thereto are correct in all material respects.
(xiv) The Company and iQ Battery have all material licenses, permits and
other governmental authorizations currently required for the conduct of its
business as described in the Prospectus, all such licenses, permits and other
governmental authorization are or will be in full force and effect, and the
Company is in all material respects in compliance therewith.
(xv) Neither the Company or iQ Battery is in violation of its articles of
incorporation or bylaws, or to the best of such counsel's knowledge, in
violation of any material obligation,
-13-
agreement, covenant or condition contained in any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it is a party
other than loans it makes in the ordinary course of business or by which it or
its properties may be bound; the execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action and do not conflict with or constitute a material breach of, or
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or iQ Battery pursuant to
its articles of incorporation, or, to the best of such counsel's knowledge, any
material contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company or iQ Battery is a party or by which it may be
bound or any applicable law, regulation or order.
In rendering the foregoing opinions, counsel may rely, as to factual
matters, on certificates of officers of the Company and on certificates of
appropriate public officials. In addition, any opinion given by the Company's
United States counsel may be limited to the laws of the United States of
America.
(c) At each Closing Date, you shall receive a joint certificate of the
Chief Executive Officer, and the Chief Financial Officer of the Company, dated
as of such Closing Date, to the effect that (i) since the respective dates as of
when information was given in the Prospectus, there has been no material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, whether or not arising in the
ordinary course of business, (ii) the representations and warranties in Section
4 are true and correct with the same force and effect as though expressly made
at and as of the Closing Date, (iii) the Company has complied with all
agreements and satisfied all conditions relating to the Offering and this
Agreement on its part to be performed or satisfied at or prior to the applicable
Closing Date, (iv) no stop order suspending the use of the Prospectus has been
issued and no proceedings for that purpose have been initiated or threatened
and, (v) no order suspending the Offering or the authorization for final use of
the Prospectus has been issued and no proceedings for that purpose have been
initiated or threatened.
(d) An opinion of the auditor of the Company, dated as of the date of the
Registration Statement and addressed to you and your counsel, relating to the
accuracy of the financial statements forming part of the Registration Statement
and the accuracy of the financial, numerical and certain other information
disclosed in the Registration Statement.
(e) At each Closing Date your counsel shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the sale of Shares as herein contemplated and related
proceedings or in order to evidence the accuracy or completeness of any of the
representations or warranties, or the fulfillment of any of the conditions
herein contained; and all proceedings taken by the Company in connection with
the Offering, this Agreement and the sale of the Shares as herein contemplated
shall be satisfactory in form and substance to you and your counsel.
(f) Neither the Company nor iQ Battery shall have sustained, since the date
of the latest audited financial statements included in the Prospectus, any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and since the respective dates as of which
information is given in the Prospectus, there shall not have been any change or
any development involving a prospective change in, or affecting the general
affairs, management, financial position, shareholders' equity or results to
operations of the Company or iQ Battery, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
above, is in your judgment so material and adverse as to make it impracticable
or inadvisable to proceed with the Offering or the delivery of the Shares on the
terms and in the manner contemplated in the Prospectus.
(g) Subscriptions for at least 3,000,000 Shares (and payment therefor)
shall have been received by the Agent and accepted by the Company.
(h) The Company shall have completed all necessary steps such that its
Common Shares are eligible for quotation on the NASD over-the-counter Bulletin
Board.
-14-
If any of the conditions specified in this section shall not have been
fulfilled when and as required by this Agreement, this Agreement and all of your
obligations hereunder may be cancelled by you by notifying the Company of such
cancellation in writing or by telegram at any time at or prior to the Closing
Date, and any such cancellation shall be without liability of any party to any
other party except as otherwise provided in Sections 1, 7, 8, and 9 hereof.
SECTION 11. Garnishing Orders
(a) If at any time, up to and including the final date of payment for the
Shares, the Agent receives a garnishing order or other form of attachment
purporting to attach or garnish a part of all of the sale price of the Shares,
the Agent will be free to pay the amount purportedly attached or garnished into
court.
(b) Any payment by the Agent into court contemplated by this Agreement will
be deemed to have been received by the Company as payment by the Agent against
the sale price of the Shares to the extent of the amount paid, and the Company
will be bound to issue and deliver the Securities proportionately to the amount
paid by the Agent.
(c) The Agent will not be bound to ascertain the validity of any garnishing
order or attachment, or whether in fact it attaches any monies held by the
Agent, and the Agent will be free to act with impunity in replying to any
garnishing order or attachment.
(e) The Company will release, indemnify and save harmless the Agent in
respect of all damages, costs, expenses or liability arising from any acts of
the Agent under this Article.
SECTION 12. Right of First Refusal
(a) The Company will notify the Agent of the terms of any further public
equity financing that it requires or proposes to obtain during the 12 months
following the Closing Date and the Agent will have the right of first refusal to
provide any such financing.
(b) The right of first refusal must be exercised by the Agent within 15
days following the receipt of the notice by notifying the Issuer that it will
provide such financing on the terms set out in the notice.
(c) If the Agent fails to give notice within the 15 days that they will
provide such financing upon the terms set out in the notice, the Issuer will
then be free to make other arrangements to obtain financing from another source
on the same terms or on terms no less favorable to the Company.
(d) The right of first refusal will not terminate if, on receipt of any
notice from the Company under this Section, the Agent fails to exercise the
right.
(e) The right of first refusal granted under this Section will terminate if
the Offering is not made by the Agent within the period provided in this
Agreement.
SECTION 13. Termination.
(a) Upon the occurrence of any of the following events, Agent, at its
election, may terminate this Agreement and neither party to this Agreement shall
thereafter have any obligation to the, other hereunder, except for obligations
of the Company to the Agent as set forth in Sections 1,7, 8, and 9 hereof, if:
(i) at any time prior to the Closing Date, Agent in its sole discretion
determines that a material adverse change has occurred in the financial
condition or operations of the Company; (ii) prior to the commencement of the
Offering, Agent, in its sole discretion, determines that the Prospectus and/or
related disclosure documents do not accurately and satisfactorily disclose all
relevant information of and concerning the Company and that the sale of the
Shares based on such information is not advisable; (iii) Agent, in its sole
discretion, determines that due to the market
-15-
conditions prevailing at the time the Offering is to be commenced it is
inadvisable to proceed with the Offering, (iv) any order to cease or suspend
trading (including communicating with persons in order to obtain expressions of
interest) in the securities of the Company, or an order to cease or suspend
trading by a director, office or promoter of the Company, or any one of them, is
issued by any competent regulatory authority; (v) the Company is in breach of
any term of this Agreement; (vi) the Agent determines that any of the
representations or warranties made by the Company in this Agreement are false or
have become false; (vii) an inquiry or investigation (whether formal or
informal) in relation to the Company, or the Company's directors, officers or
promoters, is commenced or threatened by an officer or official of any competent
authority, (viii) there should develop, occur, or come into effect any
catastrophe of national or international consequence or event, accident,
governmental law, or regulation or other occurrence of any nature which, in the
opinion of the Agent, seriously affects or will seriously affect the financial
markets or the business of the Company or any subsidiary of the Company or the
ability of the Agent to perform its obligations under this Agreement, or an
investor's decision to purchase Shares, even if the investor has already
executed a subscription agreement; or (ix) following a consideration of the
history, business, products, property or affairs of the Company or its
principals, or of the state of the financial markets in general, or the state of
the market for the Company's securities in particular, the Agent determines, in
its sole discretion, acting reasonably, that it is not in the interest of the
investors to complete the purchase and sale of the Shares or that the Shares
cannot be profitably marketed.
(b) In the event the Company fails to meet the conditions specified in
Section 10 hereof within the period specified in, and in accordance with the
Prospectus, at the election of either party hereto this Agreement shall
terminate and neither party to this Agreement shall thereafter have any
obligation to the other hereunder, except for obligations of the Company to the
Agent as set forth in Sections 1, 7, 8, and 9 hereof.
(c) This Agreement may only be terminated by Agent, with respect to Agent's
obligations hereunder and the obligations of any subscribers to the offering, by
notifying the Company in writing of the same, and neither party to this
Agreement shall thereafter have any obligation to the other, except for
obligations of the Company to the Agent as set forth in Sections 1, 7, 8, and 9
hereof.
SECTION 14. Survival.
The respective indemnities, agreements, representations, warranties and
other statements of or respecting the Company and you, as set forth in this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of you or any of your officers or directors or any person controlling you, or
the Company, and shall survive delivery of and payment for the Shares.
SECTION 15. Counterparts.
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one instrument.
SECTION 16. Miscellaneous.
(a) Notices hereunder, except as otherwise provided herein, shall be given
in writing or by telegraph, addressed (i) to the Agent at (Attention ▇▇▇▇
▇▇▇▇▇), with a copy to: Catalyst Corporate Finance Lawyers ▇▇▇▇-▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇, (Attention:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇) and (ii) to the Company at the Company's principal office
(Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇).
(b) This Agreement in made solely for the benefit of and will be binding
upon the parties hereto and their respective successors and the controlling
persons, directors and officers referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder. The term "successor" shall
not include any purchaser, as such, of any of the Shares.
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(c) This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia.
If the foregoing correctly sets forth the arrangement between the Company
and the Agent, please indicate acceptance thereof in the space provided below
for that purpose, whereupon this letter and your acceptance shall constitute a
binding agreement.
Very truly yours,
iQ Power Technology Inc.
By: ------------------------------------
Accepted as of the date first above written IPO Capital Corp.
By: ------------------------------------
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