Document:

ex10-4_f8k072010.htm

Exhibit 10.4

LIMITED CONTINUING GUARANTY

 

 

STATEMENTS

 

A.   SPAR Group, Inc., SPAR Incentive Marketing, Inc., PIA Merchandising Co., Inc., Pivotal Sales Company, National Assembly Services, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR, Inc. SPAR Group International, Inc .,  and SPAR/Burgoyne Retail Services, Inc., (f/k/a Retail Information, Inc.) (jointly and severally, "Borrower") has or is about to receive a loan and may desire in the future to obtain financial accommodations from Sterling National Bank and Cornerstone Bank ("Lenders").

 

B.   Robert G. Brown, currently having a residence at __________________ ________________ , and William Bartels, currently having a residence at __________________ ________________ (jointly and severally "Guarantor"), have agreed to guaranty in writing the performance of all debts, liabilities and duties of the Borrower, limited as hereinafter provided, to Lenders in order to induce Lenders to render or to continue to render financial accommodations to the Borrower.

 

NOW, THEREFORE, in consideration of the promises, covenants and understandings set forth in this Limited Continuing Guaranty ("Guaranty") and the benefits to be received from the performance of such promises, covenants and understandings and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Guarantor agrees as follows:

 

LIMITED GUARANTY

 

ARTICLE 1.  LIMITED GUARANTY OF THE OBLIGATIONS OF THE BORROWER

 

Subject to the aggregate maximum limit to the Guarantor's liability under Section 1.7 hereof:

 

Section 1.1  Existing Obligations

 

The Guarantor agrees to unconditionally pay and perform on demand, all debts, liabilities, duties, representations, covenants and warranties of the Borrower to Lenders, whether now or in the future existing, direct, indirect or acquired by negotiation, or the result of any derivative transaction, purchase, discount or assignment, primary or secondary, joint or several, fixed or contingent, (regardless of form, existence of collateral therefor, whether guaranteed, or subject to a participation agreement) secured or unsecured, whether arising from an extension of credit, funds transfers, letter of credit, deposit relationship, or otherwise, and any amendments, extensions or renewals thereof, together with all costs, taxes, expenses and attorneys' fees (whether or not charged by outside counsel) incurred in connection therewith relating to or incurred in connection with the Revolving Loan and Security Agreement of even date herewith, or as it may be subsequently amended ("Loan Agreement").  Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Loan Agreement.

 

 

  

  

  

 

Section 1.2  Future Advances

 

The Guarantor agrees to unconditionally pay and perform on demand, future advances, loans, debts, liabilities, duties, representations, covenants and warranties of the Borrower to Lenders, whether now or in the future existing, direct, indirect or acquired by negotiation, or the result of any derivative transaction, purchase, discount or assignment, primary or secondary, joint or several, fixed or contingent, (regardless of form, existence of collateral therefor, whether guaranteed, or subject to a participation agreement) secured or unsecured, whether arising from an extension of credit, funds transfers, letter of credit, deposit relationship, or otherwise, and any amendments, extensions or renewals thereof, together with all costs, taxes, expenses and attorneys' fees (whether or not charged by outside counsel) incurred in connection with the Loan Agreement.

 

Section 1.3  Expenses in Preserving Interests of Lenders

 

The Guarantor agrees to unconditionally pay on demand, such advances made by Lenders to or for the account of the Borrower, including advances for insurance, repairs to any Collateral, taxes, and such costs incurred by Lenders (in its discretion and regardless as to whether any such advance increases the unpaid balance of the Loan or the Debt) in the discharge of any lien, security interest, encumbrance, lease, pledge or assignment whether prior to or following judgment, relating to or incurred in connection with the Loan Agreement.

 

Section 1.4  Obligations to Lenders Affiliates

 

The Guarantor agrees to unconditionally pay and perform on demand, all other debts, liabilities, duties, representations, covenants and warranties of the Borrower under the Loan Documents to any Affiliate or Participant of Lenders, whether now or in the future existing, direct, indirect or acquired by negotiation, or the result of any related derivative transaction, purchase, discount or assignment, primary or secondary, joint or several, fixed or contingent (regardless of form, existence of collateral therefor, whether guaranteed, or subject to a participation agreement), secured or unsecured, whether arising from an extension of credit, funds transfers, letter of credit, deposit relationship, or otherwise, and any amendments, extensions or renewals thereof, together with all costs, taxes, expenses and attorneys' fees (including the reasonable allocated charges of in-house counsel) incurred in connection therewith relating to or incurred in connection with the Loan Agreement.

 

Section 1.5  Expenses in Realizing Upon Security Interest

 

The Guarantor agrees to unconditionally pay, on demand, all costs and expenses, including reasonable attorneys fees of both outside and in-house counsel, incurred by Lenders to preserve, collect, protect, foreclose, sell, or otherwise realize upon its security interest in any security agreement executed by the Borrower, or any indorser (other than any Lender) or guarantor (other than the Guarantor) in favor of the Lenders, whether prior to or following judgment, relating to or incurred in connection with the Loan Agreement.

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Section 1.6  Expenses in Enforcing and Defending Rights

 

(a)           The Guarantor agrees to unconditionally pay, on demand, all costs and expenses, including reasonable attorneys fees of both outside and in-house counsel, incurred by Lenders in the prosecution or defense of any action or proceeding relating to the subject matter of any agreement or instrument executed by the Borrower  or any indorser (other than any Lender) or guarantor (other than the Guarantor) of the obligations of the Borrower to Lenders, whether prior to or following judgment, relating to or incurred in connection with the Loan Agreement.

 

(b)           The Guarantor agrees to unconditionally pay, on demand, all costs and expenses, including reasonable attorneys fees of both outside and in-house counsel, incurred by Lenders in the prosecution or defense of any action or proceeding relating to the subject matter of any agreement or instrument executed by the Guarantor, whether prior to or following judgment, relating to or incurred in connection with the Loan Agreement or this Guaranty.

 

Section 1.7  Limit of Liability

 

Notwithstanding anything in this Guaranty to the contrary:

 

(a)           The liability of the Guarantor set forth in this Guaranty is not to exceed, in the aggregate, the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) at any time outstanding less any payments made on account thereof by the Guarantor plus any expenses referred to in Sections 1.3, 1.5 or 1.6.

 

(b)           The Lender may make any required demand hereunder only following the acceleration or other maturity (whether actual or deemed) of the Revolving Loan and other Debt under the Loan Agreement.

 

Section 1.8  Guarantors' Right of Contribution Against Each Other.

 

(a)           As between themselves, each Guarantor hereby agrees with the other Guarantor as follows: (i) Mr. Brown shall have 44/72 and Mr. Bartels shall have 28/72 of the aggregate liability of the Guarantors under Article 1 of this Guaranty (each a "Proportionate Share"), which reflects the relative proportions of their approximate ownership interests in SGRP; and (ii) to the extent that a Guarantor shall have paid more than his proportionate share of any payment made under Article 1 of this Guaranty, such Guarantor shall be entitled to seek and receive contribution from and against the other Guarantor hereunder in the amount necessary to adjust the payments of each to his Proportionate Share of the aggregate payments to the Agent and Lenders (excluding for this purpose the amount of the Agent's expenses of enforcement against the Guarantors).

 

(b)           The Guarantors acknowledge and agree with the Agent and Lenders that the provisions of this Section shall in no way limit the obligations and liabilities of any Guarantor to the Agent or any Lender, and each Guarantor shall remain liable to the Purchasers for the full amount guarantied by the Guarantors under Section 1.7 hereof.

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ARTICLE 2.  COLLATERAL SECURITY

 

The Guarantor acknowledges and agrees that the validity and enforceability of this Guaranty is not affected by the existence, value or condition of any collateral security for any of the provisions of Article 1.

 

ARTICLE 3. VARIATIONS OF THE TERMS OF

THE OBLIGATIONS OF THE BORROWER

 

The Guarantor acknowledges and agrees that, without notice, the performance or payment by the Borrower of any of its debts, liabilities, duties, representations, covenants and warranties may be waived, modified, accelerated, extended, compromised, renewed or subordinated (in whole or in part), or any collateral of either the Guarantor or the Borrower may be exchanged, surrendered, ignored or disposed of, and any liens or security interests may be abandoned, extended, modified or discharged, by Lenders without affecting the liability of the Guarantor in this Guaranty.  The Guarantor expressly waives any defense that Lenders, by its action or inaction, has impaired any such collateral or any rights of subrogation.  The Guarantor waives (1) the option to demand that any collateral for this Guaranty or any obligation of the Borrower to Lenders be marshaled and (2) the exercise or enforcement of any right of subrogation as long as any obligation(s) described in this Guaranty remain outstanding or unsatisfied.

 

ARTICLE 4.  GUARANTOR OBLIGATED TO BE INFORMED

 

The Guarantor has established adequate means of obtaining, on a continuing basis, all facts pertaining to the risks of this Guaranty.  The Guarantor assumes the responsibility for being and keeping itself informed of all the facts pertaining to such risks and agrees that Lenders has no duty to disclose any such facts to the Guarantor.  The Guarantor recognizes that this Guaranty imposes certain risks upon the Guarantor and that these risks may increase in the future due to changing circumstances.  Any such risks, increases in such risks, or future risks do not and will not alter the liability of the Guarantor in this Guaranty.

 

ARTICLE 5.  COLLATERAL FOR LIMITED CONTINUING GUARANTY

 

To secure this Guaranty, the Guarantor hereby pledges, sets over, assigns and grants a security interest and right of set-off to Lenders in every deposit account of the Guarantor with Lenders or its affiliates, in any other property, rights and instruments of the Guarantor which may be delivered or come into the possession, custody or control of Lenders (as such terms are defined in the Uniform Commercial Code), and such additional security interests which may be granted by the Guarantor to Lenders in any separate agreement executed between the Guarantor and Lenders.

 

ARTICLE 6.  CONTINUING NATURE OF GUARANTY

 

This Guaranty is a continuing guaranty and is not affected by any change in circumstances or events including those by which the Borrower may be deemed to be in default or breach to Lenders.  The Borrower or any co-guarantor may be released or discharged by Lenders without affecting the liability or obligations of the Guarantor.

 

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ARTICLE 7.  FINANCIAL STATEMENTS

 

The Guarantor agrees to provide to Lenders such financial statements, in such form otherwise required by Lenders, on an annual basis, and at the same time as the Borrower submits its annual financial statements to Lenders.

 

ARTICLE 8.  NO CONDITIONS

 

The Guarantor agrees that this Guaranty is effective irrespective of and hereby waives notice of default, notice of dishonor, notice of protest, notice of presentment, notice of acceptance or acceptance of this Guaranty, any other suretyship or similar event, defense or claim, notice of any nonpayment, Material Adverse Effect or other Default, and any other proof, notice, claim or demand of any kind whatsoever respecting any exercise or enforcement of any right or remedy of the Agent or any Lender against any Borrower, any other person or any Collateral, in respect of any of the Debt, or otherwise under any Loan Document or applicable law.  This is a guaranty of payment, not collection.

 

ARTICLE 9.  RECOVERY OF PREFERENCE

 

The Guarantor agrees that if, at any time, all or any part of any payment previously applied by Lenders on account of this Guaranty or obligation of the Borrower must be returned by Lenders for any reason, whether by court order, administrative order, or settlement, the Guarantor remains liable for the full amount returned as if such payment had never been received by Lenders, and notwithstanding any termination by Lenders of this Guaranty or the cancellation of any instrument(s) evidencing the obligations of the Borrower.

 

ARTICLE 10. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR

 

Section 10.1  Consent; Payments to Agent

 

The Guarantor consents to all of the terms and conditions of any and all documents, agreements or instruments evidencing the debts, liabilities, duties, representations, covenants and warranties of the Borrower to Lenders, including the Loan Agreement.  All payments made by Guarantor hereunder are to be made to Sterling National Bank, as Agent, pursuant to the Loan Agreement.

 

Section 10.2  Notice of Material Adverse Effect

 

The Guarantor agrees that so long as this Guaranty is effective, the Guarantor will notify Agent in writing of any Material Adverse Effect to the extent that it relates to the Guarantor.  Guarantor agrees to provide to Lenders such tax returns, financial information, data and documents as may be requested from time to time by Lenders.

 

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ARTICLE 11.  NO ADVERSE ACTIONS

 

Each Guarantor agrees that it is not to take any action, or fail to take any action, which would render any representation, warranty, covenant or obligation of itself or the Borrower to Lenders to be untrue or incapable of performance in any material respect.

 

ARTICLE 12.  BINDING EFFECT

 

This Guaranty inures to the benefit of and is enforceable by and as to the estate, personal representatives, successors and assigns of Lenders and the Guarantor. This Guaranty is not assignable by the Guarantor without the prior written consent of Lenders.

 

ARTICLE 13.  NON WAIVER; AMENDMENTS

 

    The Guarantor agrees that no failure or delay on the part of Lenders, or its successors and assigns, in the exercise of any right, power or privilege is to operate as a waiver.  A partial exercise of any right, power, or privilege by Lenders is not to preclude any further right, power, or privilege, nor be deemed a waiver.  Any waiver or modification to this Guaranty or any other document, instrument or agreement executed by the Guarantor is to be in a writing consented to by Lenders.

 

ARTICLE 14.  NOTICES

 

Each demand, notice, or other communication by Lenders to the Guarantor or by the Guarantor to Lenders is to be deemed sent as provided in the Loan Agreement and the Guarantor consents and acknowledges that notice to the Borrower is deemed notice to Guarantor.

 

ARTICLE 15.  CAPTIONS

 

The captions and titles appearing in this Guaranty are inserted for the convenience of the parties hereto and are intended to refer to specified representations, warranties, covenants and other terms and conditions of this Guaranty.

 

ARTICLE 16.  ENTIRE AGREEMENT

 

There are no understandings, agreements, representations, warranties or covenants, express or implied, which are not specified herein, or in the other written instruments, documents, or agreements referred to in this Guaranty.  All prior oral understandings, negotiations, or agreements are deemed to be superseded by the terms of this Guaranty and such other written instruments, documents or agreements referred to in this Guaranty.

 

ARTICLE 17.  SEVERABILITY

 

In the event that any portion of this Guaranty is deemed unenforceable by a Court of competent jurisdiction, such provision declared to be unenforceable is to be deemed to have been omitted from this Guaranty, and all such remaining terms and conditions of this Guaranty are to continue in full force and effect.

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ARTICLE 18.  JOINT AND SEVERAL LIABILITY

 

The terms and conditions of this Guaranty are jointly and severally binding upon all parties identified herein as the "Guarantor".

 

ARTICLE 19.  APPLICABLE LAW

 

Pursuant to Section 5-1401 of the New York General Obligations Law, the substantive laws of the State of New York, without regard to the choice of law principles that might otherwise apply to defer to the substantive laws of another jurisdiction, shall govern the validity, construction, enforcement and interpretation of this Guaranty.

 

Guarantor hereby irrevocably consents to the jurisdiction of the Courts of the State of New York and their venue in the City and County of New York and to the jurisdiction of the United States District Court for the Southern District of New York, for the purpose of any suit, action or other proceeding arising out of or relating to this Guaranty or the Debt, or the subject matter hereof or thereof. Guarantor hereby waives and agrees not to assert in any such suit, action or proceeding any claim that it is not personally subject to such jurisdiction, or any right to remove an action brought in State to Federal Court, or any claim that such suit, action or proceeding is in an inconvenient forum or that the venue thereof is improper.  Guarantor hereby consents that it may be served with process by the notification procedure set forth in this Guaranty to the fullest extent permitted by applicable law.

 

ARTICLE 20.  REPRESENTATION BY COUNSEL

 

The Guarantor acknowledges the opportunity to consult independent counsel of its own choice, and that it has relied upon such counsel's advice concerning this Guaranty, the enforceability and interpretation of the terms contained in this Guaranty and the consummation of the transactions and matters covered by this Guaranty. Guarantor acknowledges that it has not executed this Guaranty under duress.

 

 

 

 

 

 

[Remainder of Page Left Intentionally Blank]

 

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ARTICLE 21.  WAIVE JURY TRIAL

 

THE GUARANTOR HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS GUARANTY OR RELATED DOCUMENTS AS AN INDUCEMENT TO THE ACCEPTANCE OF THIS GUARANTY.

 

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty effective July 6, 2010.

 

 

	
Witness:

	  
	
/s/ James R. Segreto

Print Name:

	
/s/ Robert G. Brown

ROBERT BROWN

	  	  
	
/s/ James R. Segreto

Print Name:

	
/s/ William H. Bartels

WILLIAM BARTELS

 

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STATE OF NEW YORK                    )

COUNTY OF WESTCHESTER        )ss:

 

 

 

On June 29, 2010, before me, the subscriber, a Notary Public of the State of New York, personally appeared Robert G. Brown and William H. Bartels who, I am satisfied, are the persons who signed the annexed Limited Continuing Guaranty, and having first made known to them the contents thereof, they acknowledged that they signed, sealed and delivered the same as their voluntary act and deed for the uses and purposes therein expressed.

 

	 	
/s/ Lawrence David Swift                                                                 

 

-9-EXHIBIT 4.25

 

 

 

		
Investment & Corporate Banking  

4th Floor, 1 First Canadian Place

Toronto, Ontario  M5X 1H3

 

 

 

 

 

June 19th, 2009

 

 

Brazauro Resources Corp.

16360 Park Ten Place, Suite 217

Houston, Texas 77084

 

Attention:  Mark Jones, Chairman and Chief Executive Officer

 

We are pleased to confirm the appointment of BMO Nesbitt Burns Inc. (“BMO Capital Markets”) to act as financial advisor to Brazauro Resources Corp. (the “Company”) with respect to (a) any proposal to acquire control (as defined below) of the Company by way of an offer to acquire outstanding shares of the Company or otherwise, (b) a sale of all or substantially all of the Company’s assets or a material portion of, or any interest in, the assets of the Company, by way of a negotiated purchase, lease, license, exchange, joint venture transaction or other means, (c) any merger, amalgamation, plan of arrangement, reorganization or other business combination pursuant to which the assets and business of the Company are combined with one or more other persons, (d) the issue by the Company to one or more other persons of securities of the Company in numbers sufficient to constitute an acquisition of control (as defined below) of the Company, (e) any acquisition of control (as defined below) of the Company, directly or indirectly, otherwise than as contemplated by any of the foregoing paragraphs (a) to (d) inclusive, and (f) any other alternative transaction to enhance shareholder value, including, without limitation, a recapitalization of the Company, the payment of a special dividend or other distribution to security holders, but for the avoidance of doubt shall not include any equity offering or equity linked financing other than as set out in (d) (any transaction contemplated in paragraphs (a) to (f) above being referred to in this agreement as a “Transaction”).  For the purposes of this agreement, acquisition of “control” shall mean any transaction or series of transactions in which one or more persons or entities acquires, directly or indirectly, at least 20% of any of the shares, assets, revenues, income or businesses of the Company or otherwise gains control of the Company, regardless of the structure or form of the transaction.

 

1.         Scope of Engagement.  We will perform such financial advisory and investment banking services for you as are customary and appropriate in engagements of this type and as you may reasonably request.  If requested, we will provide an opinion (the “Opinion”) as to whether the consideration to be received in a proposed Transaction is fair from a financial point of view to you or your shareholders (other than the purchaser(s)), as the case may be, provided that we receive from you a certificate in our customary form executed by the Chief Executive Officer and the Chief Financial Officer of the Company with respect to the business and affairs of the Company and as to the accuracy and completeness of all information provided to us hereunder.  Any such Opinion will be prepared solely for the use of your Board of Directors and will not be disclosed or given to any other person without our prior written consent.  If reference to our Opinion is required by law to be made in an information circular or directors’ circular, we will not unreasonably withhold our consent to such reference provided that the Opinion is reproduced in full in the circular and we approve in advance the text of any accompanying disclosure.

 

2.         Fees and Expenses.  For our services hereunder, you will pay us the following fees

 

	
  

	
(a)

	
Work Fees – A fee of $30,000 payable in cash one month following the date of this agreement, at which time, any additional work fees will be re-assessed.  The Work Fees will be credited against any Completion Fee which becomes payable under this agreement;

 

  

 

  

 

	
  

	
(b)

	
Opinion Fee – A fee of $250,000 per Opinion, payable in cash on the date that we advise you we are prepared to deliver each requested Opinion.  The first Opinion fee will be credited against any Completion Fee or Defence Fee which becomes payable under this agreement;

 

	
  

	
(c)

	
Defence Fee – If, during the term of this engagement or within the period of 9 months following termination of this agreement, an unsolicited offer is made for any of the securities of the Company, you will pay us a defence fee (the “Defence Fee”) in accordance with the fee grid attached hereto as Schedule B which will be determined by straight line interpolation between the two closest thresholds of the Transaction Value (as defined below) whether or not the Transaction is completed.  The Defence Fee will be credited against any Completion Fee which becomes payable under this agreement; and

 

	
  

	
(d)

	
Completion Fee – If, during the term of this engagement or within the period of 12 months following termination of this agreement, a Transaction is completed or you announce, or enter into an agreement in respect of, a Transaction which is subsequently completed, you will pay us a completion fee (the “Completion Fee”) in accordance with the fee grid attached hereto as Schedule B which will be determined by straight line interpolation between the two closest thresholds of the Transaction Value (as defined below).  For greater clarity, a Completion Fee will only be owed by the Company in the event that a Transaction is completed.

 

“Transaction Value” means an amount equal to the sum of (without duplication):

 

	
  

	
(i)

	
the aggregate cash consideration paid or payable to the Company or to its security holders and the aggregate fair market value of any securities or other non-cash consideration paid or payable to the Company or to its security holders (including, any joint venture interest delivered to, or retained by, the Company) in connection with a Transaction;

 

	
  

	
(ii)

	
the amount of all indebtedness and preferred shares of the Company or any subsidiary of the Company which is assumed or acquired by the purchaser or retired, refinanced or otherwise extinguished in connection with the Transaction; and

 

	
  

	
(iii)

	
any dividends or other distributions declared, paid or made by the Company prior to or upon completion of the Transaction.

 

The fair market value of any securities issued, any other non-cash consideration paid, any non-cash dividend or distribution declared, paid or made, and any assets disposed of or retained in connection with a Transaction shall be the value upon the closing date of the Transaction as determined by BMO Capital Markets and the Company in good faith, provided that any publicly-traded securities shall be valued at the volume weighted average of their trading prices on the principal stock exchange on which they trade (as determined by volume) for the five trading days ending on the third trading day prior to the date on which value is being assessed.  Any delayed or subsequent payments forming part of the consideration payable to the Company or its security holders shall be discounted to and valued at the applicable date in a manner determined by the Company and BMO Capital Markets in good faith.  The Transaction Value of a Transaction involving the acquisition of less than 100% of the Company’s equity securities, assets or business shall be the result obtained when the price paid or payable in such Transaction is divided by the percentage of the Company’s equity securities, assets or business that were acquired in the Transaction.

 

  

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Any Completion Fee or Defence Fee to which we may become entitled pursuant to clauses (c) and (d) above shall be paid in cash to our legal counsel in trust for us five days prior to the proposed closing date of the Transaction (which in the case of a take-over bid or tender offer shall be the first date on which the offeror may take up securities under the offer) and shall be released from such trust to us upon completion of the Transaction (which in the case of a take-over bid or tender offer shall be the first date on which the offeror takes up securities under the offer) without any further formality.  If the Transaction is not completed we will instruct our legal counsel to return such funds to the Company without delay.

 

You will reimburse us on request from time to time for all reasonable out-of-pocket expenses incurred by us in respect of this engagement, including reasonable travel and document production costs, the reasonable fees and disbursements of counsel, the reasonable fees and disbursements of any consultants engaged by us with your prior consent and other customary expenses for engagements of this type.  We agree that we will not incur expenses exceeding $150,000 without your prior written approval.

 

The fees and expenses referred to above may be subject to goods and services taxes which will be payable by you to us.

 

3.         Disclosure and Use.  All opinions, advice and other materials provided by us hereunder, including any Opinion, are to be used solely by your Board of Directors in considering a proposed Transaction and shall not be quoted from, summarized or otherwise disclosed, nor will any reference to us or to this engagement be made, without our prior consent.  BMO Capital Markets hereby consents to the inclusion of the Opinion and a summary thereof in any information circular or directors’ circular of the Company.

 

4.         Information.  You will arrange for us to have such timely access to your directors, officers, employees and auditors, to your counsel and other consultants, and to your information as we may reasonably request in carrying out this engagement.  In addition, you will keep us fully informed with respect to all negotiations regarding a Transaction and will promptly provide us with copies of all material documents, draft or final, relating to a Transaction.  You agree to provide, or arrange to have provided to, us such information, including any financial forecasts, as we believe appropriate to permit us to perform our services hereunder and you will update such information as appropriate.  You agree that we may rely upon such information and that all such information will be true, accurate and complete in all material respects.  You acknowledge that we will be entitled to rely upon such information, and we are entitled to assume, and are under no obligation to verify independently, the accuracy, completeness or reasonableness of such information.  Further, we are under no obligation to investigate any changes which may occur in such information after the date upon which it is provided to us.  Notwithstanding the foregoing, you will advise us promptly of any material change or change in a material fact, actual or contemplated, and of any material information of which it becomes aware which might reasonably be considered relevant to our engagement.  You will advise us promptly of any communication or notice received by you from, and of any proceeding initiated before or by, any applicable regulatory authority (including any stock exchange) or court relating to the Transaction or which might otherwise be relevant to this engagement.  If requested, we will testify or provide reasonable support services before any regulatory authority or court.  Our testimony or support services will be confined to the services performed under this agreement.  We shall have the right to employ counsel and shall be paid customary fees and reimbursed by you for our reasonable out-of-pocket costs, charges and expenses, including the reasonable fees and disbursements of counsel.

 

5.         Indemnification.  You agree to indemnify us and certain other parties in accordance with the provisions contained in Schedule A hereto, which Schedule forms part of this agreement.

 

6.         Relationship.  You agree that we have been retained to act solely as your financial advisor and not as an advisor to any other party, including your security holders.  We shall act as an independent contractor and any duties that we have arising out of this engagement shall be owed solely to you and not to any other party.  You

 

  

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acknowledge and understand that (i) we act as a trader of, and dealer in, securities both as principal and on behalf of our clients and, as such, we may have had, and may in the future have, long or short positions in the securities of one or more parties to a Transaction or any of their respective related entities and, from time to time, may have executed or may execute transactions on behalf of such persons, (ii) we conduct research on securities and may, in the ordinary course of our business, provide research reports and investment advice to our clients on investment matters, including with respect to any such person and/or Transaction, and (iii) we or our controlling shareholder, Bank of Montreal, may, in the ordinary course of business, extend loans or provide other financial services to any such person (collectively, “BMO Business”).  You agree not to seek to restrict or challenge the ability of BMO Capital Markets, Bank of Montreal or their affiliates to conduct BMO Business that is not directly related to the Transaction.  You acknowledge and agree that if a potential acquirer of the Company or any of its subsidiaries or other assets seeks financing for such an acquisition, we or our controlling shareholder, Bank of Montreal, may act as underwriter, agent or lender in respect of such financing provided that we and any of our affiliates who are involved in such financing implement reasonable procedures to ensure that no confidential information relating to the proposed Transaction or the acquisition financing, as applicable, is exchanged between the respective teams of employees and agents who are involved in the separate engagements.  Neither we nor any of our affiliates will act as mergers and acquisitions adviser to any potential purchaser in respect of a possible Transaction.

 

7.         Termination and Survival.  This agreement shall terminate on the earliest of (a) the date a Transaction is completed, and (b) the date on which either you or we give written notice of termination to the other party.  The provisions of section 2 (Fees), section 3 (Disclosure and Use), section 5 (Indemnification), section 7 (Termination and Survival) and section 9 (Other Matters) shall survive such termination.

 

8.         Announcements.  You agree that we may, at our own expense, place advertisements or announcements in any newspapers, periodicals or other publications, or otherwise disclose to third parties, that we have acted as your financial advisor in connection with a Transaction.  If requested by us, you will include a reference to BMO Capital Markets as being your financial advisor in any press release or public announcement made with respect to the Transaction.

 

9.         Other Matters.  This agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors.  This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the parties irrevocably attorn to the non-exclusive jurisdiction of the courts of the Province of Ontario.  All financial references in this agreement are to Canadian dollars unless otherwise expressly indicated.  No waiver, amendment or other modification of this agreement shall be effective unless in writing and signed by each party hereto.

 

If the foregoing is in accordance with your understanding, please indicate your agreement by signing and returning the enclosed duplicate copy of this letter.

 

  

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Yours sincerely,

 

	BMO NESBITT BURNS INC.	 
	 	 	 	 
	by  	/s/ Egizio Bianchini	 
	 	Name:  	Egizio Bianchini	 
	 	Title:	Managing Director	 

 

 

 

 

	BMO NESBITT BURNS INC.	 
	 	 	 	 
	by  	/s/ Dan Barclay	 
	 	Name:  	Dan Barclay	 
	 	Title:	Managing Director	 

 

 

 

Accepted and agreed to as of the date first set out above.

 

 

	
BRAZAURO RESOURCES CORP.

	 
	 	 	 	 
	by  	/s/ Mark Jones	 
	 	Name:  	Mark Jones	 
	 	Title:	Chairman and Chief Executive Officer	 

 

 

 

 

 

  

5

  

 

		
Investment & Corporate Banking  

4th Floor, 1 First Canadian Place

Toronto, Ontario  M5X 1H3

 

 

Schedule A – Indemnification

 

As consideration for BMO Nesbitt Burns Inc. (“BMO Capital Markets”) agreeing to provide the services described in the engagement letter to which this Schedule is attached (the “Engagement”), Brazauro Resources Corp. (the “Indemnitor”) agrees to indemnify and hold harmless BMO Capital Markets and its affiliates, and each of their respective directors, officers, employees and agents (collectively, the “Indemnified Parties” and each, an “Indemnified Party”), to the full extent lawful, from and against all expenses, losses, damages and liabilities of any nature (including the reasonable fees and expenses of their respective counsel and other expenses, but not including any amount for lost profits) (collectively, “Losses”) that are incurred in investigating, defending and/or settling any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party (collectively, the “Claims”) or to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims arise out of or are based upon, directly or indirectly, the Engagement together with any Losses that are incurred in enforcing this indemnity.  This indemnity shall not be available to an Indemnified Party in respect of Losses incurred where a court of competent jurisdiction in a final judgment that has become non-appealable determines that such Losses incurred solely from the negligence or willful misconduct of the Indemnified Party.

 

If for any reason (other than a determination as to any of the events referred to above) this indemnity is unavailable to an Indemnified Party or is insufficient to hold an Indemnified Party harmless in respect of any Claim, the Indemnitor shall contribute to the Losses paid or payable by such Indemnified Party as a result of such Claim in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnitor on the one hand and the Indemnified Party on the other hand but also the relative fault of the Indemnitor and the Indemnified Party as well as any relevant equitable considerations; provided that the Indemnitor shall in any event contribute to the Losses paid or payable by an Indemnified Party as a result of such Claim, the amount (if any) equal to (i) such amount paid or payable, minus (ii) the amount of the fees received by the Indemnified Party, if any, under the Engagement.

 

The Indemnitor agrees that in case any legal proceeding shall be brought against, or an investigation is commenced in respect of, the Indemnitor and/or an Indemnified Party and an Indemnified Party or its personnel are required to testify in connection therewith or shall be required to respond to procedures designed to discover information regarding, in connection with or by reason of the Engagement, the Indemnified Party shall have the right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel as well as the reasonable costs (including an amount to reimburse the Indemnified Party for time spent by its personnel in connection therewith at their normal per diem rates together with such disbursements and out-of-pocket expenses incurred by the Personnel in connection therewith) shall be paid by the Indemnitor as they occur.

 

BMO Capital Markets will notify the Indemnitor promptly in writing after receiving notice of an action, suit, proceeding or claim against BMO Capital Markets or any other Indemnified Party or receipt of notice of the commencement of any investigation which is based, directly or indirectly, upon any matter in respect of which indemnification may be sought from the Indemnitor, stating the particulars thereof, will provide copies of all relevant documentation to the Indemnitor and, unless the Indemnitor assumes the defence thereof, will keep the Indemnitor advised of the progress thereof and will discuss all significant actions proposed.  The omission to so notify the Indemnitor shall not relieve the Indemnitor of any liability which the Indemnitor may have to an Indemnified Party except only to the extent that any such delay in giving or failure to give notice as herein required materially prejudices the defence of such action, suit, proceeding, claim or investigation or results in any material increase in the liability under this indemnity which the Indemnitor would otherwise have incurred had BMO Capital Markets not so delayed in giving, or failed to give, the notice required hereunder.

 

The Indemnitor shall be entitled, at its own expense, to participate in and to the extent it may wish to do so, assume the defence of any Claim, provided such defence is conducted by experienced and competent counsel.  Upon the Indemnitor notifying BMO Capital Markets in writing of its election to assume the defence and retaining counsel, the 

 

  

 

  

 

Indemnitor shall not be liable to an Indemnified Party for any legal expenses subsequently incurred by it in connection with such defence.  If such defence is assumed by the Indemnitor, the Indemnitor throughout the course thereof will provide copies of all relevant documentation to BMO Capital Markets, will keep BMO Capital Markets advised of the progress thereof and will discuss with BMO Capital Markets all significant actions proposed.

 

Notwithstanding the foregoing paragraph, any Indemnified Party shall have the right, at the Indemnitor’s expense, to separately retain counsel of such Indemnified Party’s choice, in respect of the defence of any Claim if:  (i) the employment of such counsel has been authorized by the Indemnitor; or (ii) the Indemnitor has not assumed the defence and employed counsel therefor promptly after receiving notice of such action, suit, proceeding, claim or investigation; or (iii) counsel retained by the Indemnitor or the Indemnified Party has advised the Indemnified Party that representation of both parties by the same counsel would be inappropriate for any reason, including for the reason that there may be legal defences available to the Indemnified Party which are different from or in addition to those available to the Indemnitor (in which event and to that extent, the Indemnitor shall not have the right to assume or direct the defence on such Indemnified Party’s behalf) or that there is a conflict of interest between the Indemnitor and the Indemnified Party or the subject matter of the Claim may not fall within the indemnity set forth herein (in any of which events the Indemnitor shall not have the right to assume or direct the defence on such Indemnified Party’s behalf), provided that the Indemnitor shall not be responsible for the fees or expenses of more than one legal firm in any single jurisdiction for all of the Indemnified Parties.  No admission of liability and no settlement of any Claim shall be made by the Indemnitor without the prior written consent of the Indemnified Parties affected (which consent may not be unreasonably withheld) unless such settlement includes an unconditional release of each Indemnified Party from any liabilities arising out of such Claim without any admission of negligence, misconduct, liability or responsibility by any Indemnified Party.

 

The Indemnitor hereby acknowledges that BMO Capital Markets acts as trustee for the other Indemnified Parties of the Indemnitor’s covenants under this indemnity and BMO Capital Markets agrees to accept such trust and to hold and enforce such covenants on behalf of such persons.

 

The indemnity and contribution obligations of the Indemnitor hereunder shall be in addition to any liability which the Indemnitor may otherwise have (including under the Engagement), shall extend upon the same terms and conditions to the Indemnified Parties and shall be binding upon and enure to the benefit of any successors, permitted assigns, heirs and personal representatives of the Indemnitor, BMO Capital Markets and any other Indemnified Party.  The foregoing provisions shall survive any termination of the Engagement.

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