Backers Terms and Conditions
Backers Network Inc. (“Backers”) and The Registered Dealer (the “Dealer”) are pleased to act as partners in connection with the proposed Initial Backers Offering of The Company’s (the “Issuer”) equity securities (the “Initial Backers Offering” or “IBO”). The Initial Backers Offering may be completed in a series of closings, each bound by the same terms and conditions specified herein. The purpose of this letter is to set forth the terms of engagement by the Issuer of Backers and the Dealer (the “Agreement”).
The terms of the IBO and the obligations of Backers and the Dealer hereunder shall be subject to the execution of a definitive agency agreement (the “Agency Agreement”) to be entered into between the Issuer and Backers and the Dealer as described in section 4.
Services to the Issuer will commence immediately and will include the following:
- IBO – Initial Backers Offering
Backers and the Dealer shall perform the services described in this Agreement on a “best efforts” basis, in good faith and in a professional manner consistent with industry practice and always with a view to furthering the best interests of the Issuer and its existing shareholders.
It is understood that this letter does not represent a firm commitment of the Dealer to underwrite the IBO. The pricing will be contingent upon market conditions at the time of the IBO and the completion of satisfactory due diligence by the Dealer and/or their representatives.
The Dealer will be entitled, subject to the terms hereof, to appoint, in respect of the IBO, a selling group consisting of other duly registered sub-Agent acceptable to the Issuer, acting reasonably (together with the Dealer, the “Agent”).
The Issuer will make available or cause to be made available to Backers and the Dealer and their counsel on a timely basis, all information (financial or otherwise), data, documents, opinions, appraisals, valuations or other information and materials of whatsoever nature or kind respecting the Issuer, and its subsidiaries and affiliates as Backers and the Dealer may reasonably require or consider appropriate in carrying out their services hereunder. The Issuer also agrees to provide Backers and the Dealer with timely access to the directors, officers, employees, independent auditors, consultants and financial, legal and other professional advisors of the Issuer and its subsidiaries and affiliates as Backers and the Dealer may reasonably require or consider appropriate in performing their services hereunder.
Backers and the Dealer shall be entitled to rely upon such information and all other information that is filed by the Issuer with applicable regulators or other similar authorities, and Backers and the Dealer shall be under no obligation to verify independently any such information so provided to or otherwise obtained by Backers and the Dealer. Backers and the Dealer shall also be under no obligation to determine whether there have been, or to investigate, any changes in any of such information occurring after the date the same were provided or obtained.
The Issuer will advise Backers and the Dealer promptly of any material change, actual or contemplated, in the business of the Issuer or in any information provided to Backers and the Dealer concerning the IBO or the Issuer. Unless so advised otherwise, Backers and the Dealer will be entitled to assume that there has been no material change in such information and will be entitled to rely thereon.
Backers and the Dealer shall have the right to conduct adequate due diligence and obtain satisfactory results in their sole opinion therefrom prior to Closing and shall have the right to terminate this IBO if it deems appropriate.
3. Terms of Engagement.
Backers and the Dealer will provide services to the Issuer as provided in this Agreement until the earlier of (i) the closing or termination of the IBO, (ii) twelve months from the date of this Agreement, and (iii) the termination of Backers and the Dealers engagement by Backers and the Dealer upon 30 days written notice to the Issuer or by the Issuer upon 30 days written notice to Backers and the Dealer, provided that in any such event, the Issuer’s obligations under paragraphs 4, 5, 6, and 8 (b) and (d), and the obligation of the Issuer and Backers and the Dealer to maintain confidentiality shall survive the termination hereof. Notwithstanding the foregoing, the obligations of the Issuer to Backers and the Dealer shall terminate immediately upon the termination of this Agreement as a result of a material breach of this Agreement by Backers and the Dealer.
4. Agency Agreement.
The definitive terms of the IBO will be governed by the Agency Agreement to be negotiated and entered into on or prior to the closing date for the IBO (the “Closing Date”). The Agency Agreement will be negotiated in good faith between the Issuer and Backers and the Dealer and will contain representations, warranties, covenants, conditions (including the delivery of legal opinions from counsel to the Issuer with respect to, without limitation, the IBO and title-related matters, together with other relevant corporate and securities law matters as well as the validity of certain material contracts to which the Issuer is or will be a party, acceptable to Backers and the Dealer and their counsel, acting reasonably), indemnities and termination provisions (including, without limitation, a “disaster-out”, broad “market out”, “material adverse change-out”, “litigation-out”, “due diligence-out”, and “regulatory-out” rights) customary in agreements of this type and will be consistent in all material respects with this letter agreement, unless otherwise agreed between the parties. The completion of the IBO is conditional upon, among other things, the execution and delivery by the Issuer or its legal counsel of such documents and opinions as Backers and the Dealer shall reasonably require. The Issuer is hereby deemed to repeat herein in favour of Backers and the Dealer, and acknowledges that Backers and the Dealer are entitled to rely upon, all of the representations and warranties given by the Issuer to, and all of the covenants made by the Issuer in favour of, any purchaser of securities in any agreement(s) entered into between the Issuer and any such purchaser as if such representations and warranties and covenants were incorporated and set out herein in full in favour of Backers and the Dealer, notwithstanding that Backers and the Dealer may not be among the parties to such agreement(s).
5. Success Based Fees.
For providing the services in connection with this Agreement, the Issuer will pay Backers and the Dealer the following:
Success Based Fees: If, during the period Backers is retained by the Issuer and an IBO is consummated or the Issuer enters into an agreement by which an IBO subsequently results, a fee (the “Success Based Fee”) equal to 7.99% cash of projected target capital raise pursuant to the IBO and equity equal to 7.99% of the number of projected target securities pursuant to the IBO shall be payable upon closing of the IBO.
Other Fees: The Company will be responsible for all expenses related to the Offering, whether or not it is completed, including all fees and disbursements of its legal counsel. For greater clarity, expenses shall also include all reasonable expenses, background search fees and filing fees.
In connection with this engagement, the Issuer (as defined in the Agreement) agrees to indemnify and save harmless Backers and the Dealer, their affiliates and their respective directors, officers, employees, partners, Agent, advisors and shareholders (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind (excluding loss of profits), including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, disbursements and taxes of their counsel in connection with any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly, the Engagement whether performed before or after the Issuer’s execution of the Agreement and to reimburse each Indemnified Party forthwith, upon demand, for any legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim.
The Issuer also agrees that no Indemnified Party shall have any liability (either direct or indirect, in contract or tort or otherwise) to the Issuer or any person asserting claims on the Issuer’s behalf or in right for or in connection with the Engagement, except to the extent that any losses, expenses, claims, actions, damages or liabilities incurred by the Issuer are determined by a court of competent jurisdiction in a final judgement that has become non-appealable to have resulted from the gross negligence or wilful misconduct of such Indemnified Party.
In the event and to the extent that a court of competent jurisdiction in a final judgement that has become non-appealable determines that an Indemnified Party was grossly negligent or guilty of wilful misconduct in connection with a Claim in respect of which the Issuer has advanced funds to the Indemnified Party pursuant to this indemnity, such Indemnified Party shall reimburse such funds to the Issuer and thereafter this indemnity shall not apply to such Indemnified Party in respect of such Claim. The Issuer agrees to waive any right the Issuer might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy or security or claim payment from any other person before claiming under this indemnity.
In case any action, suit, proceeding or claim is brought against an Indemnified Party or an Indemnified Party has received notice of the commencement of any investigation in respect of which indemnity may be sought against the Issuer, the Indemnified Party will give the Issuer prompt written notice of any such action, suit, proceeding, claim or investigation of which the Indemnified Party has knowledge and the Issuer will undertake the investigation and defence thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Parties affected and the payment of all expenses. Failure by the Indemnified Party to so notify shall not relieve the Issuer of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in forfeiture by the Issuer of substantive rights or defences.
No admission of liability and no settlement, compromise or termination of any action, suit, proceeding, claim, or investigation shall be made without the Issuer’s consent and the consent of the Indemnified Parties affected, such consents not to be unreasonably withheld. Notwithstanding that the Issuer will undertake the investigation and defence of any Claim, an Indemnified Party will have the right to employ separate counsel with respect to any Claim and participate in the defence thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:
a) employment of such counsel has been authorized in writing by the Issuer;
b) the Issuer has not assumed the defence of the action within a reasonable period of time after receiving notice of the claim;
c) the named parties to any such claim include both the Issuer and the Indemnified Party and the Indemnified Party shall have been advised by counsel to the Indemnified Party that there may be a conflict of interest between the Issuer and the Indemnified Party; or
d) there are one or more defences available to the Indemnified Party which are different from or in addition to those available to the Issuer;
in which case such fees and expenses of such counsel to the Indemnified Party will be for the Issuer’s account. The rights accorded to the Indemnified Parties hereunder shall be in addition to any rights an Indemnified Party may have at common law or otherwise.
If for any reason the foregoing indemnification is unavailable (other than in accordance with the terms hereof) to the Indemnified Parties (or any of them) or is insufficient to hold them harmless, the Issuer will contribute to the amount paid or payable by the Indemnified Parties as a result of such Claims in such proportion as is appropriate to reflect not only the relative benefits received by the Issuer or the Issuer’s shareholders on the one hand and Backers and the Dealer on the other, but also the relative fault of the parties and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Issuer will in any event contribute to the amount paid or payable by the Indemnified Parties as a result of such Claim any amount in excess of the fees actually received by Backers and the Dealer for their services in respect of the Engagement.
The Issuer hereby constitutes Backers and the Dealer as trustee for each of the other Indemnified Parties of the Issuer’s covenants under this indemnity with respect to such persons and Backers and the Dealer agree to accept such Issuer and to hold and enforce such covenants on behalf of such persons.
The Issuer agrees to reimburse Backers and the Dealer monthly for the time spent by Backers and the Dealer’ personnel in connection with any Claim at their normal per diem rates. The Issuer also agrees that if any action, suit, proceeding or claim shall be brought against, or an investigation commenced in respect of the Issuer or the Issuer and Backers and the Dealer and personnel of Backers and the Dealer shall be required to testify, participate or respond in respect of or in connection with the Engagement, Backers and the Dealer shall have the right to employ their own counsel in connection therewith and the Issuer will reimburse Backers and the Dealer monthly for the time spent by their personnel in connection therewith at their normal per diem rates together with such disbursements and reasonable out-of-pocket expenses as may be incurred, including fees and disbursements of Backers and the Dealer’ counsel.
7. Acknowledgement of Securities Activities.
Backers and the Dealer acknowledge their responsibility to comply with applicable securities laws, including prohibitions on trading securities with knowledge of a material fact or a material change that has not been generally disclosed. Further, Backers and the Dealer have strict internal procedures, which require the placing of relevant securities on a “grey list” or a “restricted list” and for restrictions on trading by Backers and its investment banking personnel for their own account in accordance with such procedures.
8. Other Matters.
(a) This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the parties hereby irrevocably attorn to the jurisdiction of the courts of the Province of Ontario. All financial references in this Agreement are in Canadian dollars unless otherwise indicated. If any provision hereof shall be determined to be invalid or unenforceable in any respect such determination shall not affect such provision in any other respect or any other provision hereof. Headings used herein are for convenience of reference only and shall not affect the interpretation or construction of this Agreement. It is understood that this Agreement supersedes any previous verbal or written Agreement between Backers and the Dealer and the Issuer with respect to the issuance of securities.
(b) Until completion of the IBO, the Issuer agrees not to sell or negotiate or enter into an arrangement to sell all or substantially all of the assets of the Issuer or enter into a merger or other business combination with a third party or other similar transaction, which transaction does not provide for the completion of the IBO (an “Alternative Transaction”). In the event the Issuer enters into an Agreement or makes a public announcement with respect to an Alternative Transaction prior to completion of the IBO, the Issuer agrees to make payments to Backers and the Dealer forthwith upon entering into such Agreement or making such announcement in the amount equal to 5.99% of the contemplated maximum gross proceeds for the IBO in full satisfaction of all claims against the Issuer in this regard.
(c) From the date hereof and until the 90th day after the Closing Date, the Issuer and management agree not to, without the prior written consent of Backers and the Dealer, such consent not to be unreasonably withheld, authorize, sell or issue or announce its intention to authorize, sell or issue, or negotiate or enter into an Agreement to sell or issue any securities of the Issuer other than (i) pursuant to the IBO; (ii) the issue of non-convertible debt securities; (iii) upon the exercise of convertible securities, options or warrants of the Issuer outstanding at the date hereof; or (iv) pursuant to the Issuer’s Stock Option Plan.
(d) In the event that the IBO is not completed and equity securities (including securities convertible into equity securities) of the Issuer are sold or agreed to be sold within 12 months of the date of the termination of this Agreement to investors identified by Backers and the Dealer and connected to the Issuer prior to the date of the termination, then Backers and the Dealer shall be entitled to receive from the Issuer the fees set forth in this Agreement in respect of any such sales.
(e) Subject to the closing of the IBO, the Issuer will grant Backers and the Dealer a customary right of first refusal to provide services to lead any future financing for a period of 12 months from completion of the IBO. Any Agreement to lead a future financing of the Issuer entered into pursuant to the right of first refusal will be in accordance with standard industry terms at the time of the future financing.
You agree, if so requested by Backers and the Dealer, to include a reference to us and our role in any press release or other public communication issued by you with respect to the Initial Backers Offering. If the IBO is successfully completed, and provided Backers and the Dealer are not in breach of any material provision hereof, Backers and the Dealer shall be permitted to publish, at our own expense, subject to your prior consent, not to be unreasonably withheld or delayed, such advertisements or announcements relating to the services provided hereunder in such newspaper or other publications as we consider appropriate. You also agree that you will not refer to Backers and the Dealer in any communication or press release without our prior written consent, not to be unreasonably withheld or delayed.
Please confirm that the foregoing is in accordance with the Issuer’s understanding by agreeing to these terms, which shall thereupon constitute a binding agreement between the Issuer and Backers and the Dealer.