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Chrystal Capital Partners LLP
New Broad Street House, 35 New Broad Street,
London EC2M 1NH
Telephone +44(0)20 7850 4760 www.chrystalcapital.com
STRICTLY PRIVATE AND CONFIDENTIAL
Discovery Energy Corp.
One Riverway, Suite 1700
Houston, TX 77056
USA
30 September 2012
FOR THE ATTENTION OF KEITH SPICKELMIER, EXECUTIVE CHAIRMAN & KEITH MCKENZIE, CEO
Dear Sirs
ENGAGEMENT LETTER
DISCOVERY ENERGY CORP. ("DISCOVERY", "COMPANY", "CLIENT", "YOU" OR "YOUR")
This letter refers to our recent discussions concerning your proposed plans to
raise up to USD $20m of financing, potentially in multiple phases and including
potential farm-in arrangements, to develop your assets in the Cooper Basin,
Australia (the "FUND RAISE(S)" or "OBJECTIVES").
This letter, together with the attached terms and conditions in Appendix 1 and
other Appendices below, which are intended to be legally binding, set out the
basis of the engagement of Chrystal Capital Partners LLP ("CHRYSTAL CAPITAL") to
act as financial adviser to you. Accordingly we set out below the nature of the
responsibilities and conditions which Chrystal Capital and the Client undertake
in relation to the Objectives.
Based on information provided by you and pursuant to the rules of the Financial
Services Authority (the "FSA"), which requires all of our clients to be
classified into one of three regulatory categories, we have classified the
Company as a "Retail Client".
1. CHRYSTAL CAPITAL'S SCOPE OF ENGAGEMENT
The services we expect to be providing to you comprise the following (together,
the "SERVICES") which can be broken down into the following broad phases:
Initial Preparation
In advance of commencing the first round of Fund Raises Chrystal Capital will
provide you with advisory services in relation to your intent to progress the
Company through multiple rounds of Fund Raises. This will include, but will not
be limited to:
1.1 Advising on how to structure the Company to be attractive to investors;
1.2 Advising on the type of reports needed and the level of detail required;
1.3 Introducing you to companies qualified to provide these resource
reports;
1.4 Advising and supporting on any financing rounds that you intend to lead
and complete, (whether initiated by Chrystal or the Company) and;
1.5 Providing on-going analysis of the resource and consulting advice on
best practice in the capital markets.
Fund Raising Phases
1.6 Advising generally with regard to the raising of funds from Prospects
(as defined in Appendix 1) interested in participating in a financing
round. The round size is likely to be determined by the structure of the
financing with dilution and valuation being the key considerations;
1.7 Working alongside you to gather and organise the necessary information
needed to allow Prospects to properly assess the investment opportunity.
Advice on the population of the electronic data room and UK regulatory
know your client files;
1.8 Corporate governance and management reporting framework issues that are
consistent with both the Company's and Chrystal Capital's regulatory
obligations;
1.9 Reviewing and providing guidance on financial modelling and projections
and drafting or repositioning the power point presentation of the
results in accordance to the particular requirements of Prospects and in
a manner consistent with the Company's regulatory obligations;
1.10 Selecting appropriate Prospects to introduce you to with a particular
emphasis on Prospects that can add skills and value to the Objectives
and development of the Company in addition to the provision of capital;
1.11 Producing pre-financing documentation to lend credibility and stimulate
the interest of Prospects;
1.12 Organising, booking and attending the road show and providing advice in
advance of the road show;
1.13 Providing support and guidance throughout the Objectives including
Prospect selection and assistance with negotiation of terms and
conditions and;
1.14 Liaising with the Company's directors, legal advisers, accountants,
brokers, auditors, financial public relations advisers and registrars as
necessary through to completion of the Objectives.
Post Financing Services Phase
1.15 Advising generally with regard to the raising of funds from Prospects
post financing through defined secondary placements alongside the
engaged Placement Agent(s);
1.16 Coordinating advisers such as legal advisers, accountants, brokers,
auditors, financial public relations advisers and registrars on an on-
going basis through the financial calendar events;
1.17 Driving a PR marketing programme to ensure maximum Prospects exposure
and retail liquidity;
1.18 Marketing the Company to a wider selection of brokers to increase the
number of analysts covering the stock with high quality research
reports;
1.19 Advising on drafting RNS releases to the market; and
1.20 Providing on-going help with the solicitation of potential partners,
clients and ultimately likely bidders for the Company.
This is not an exhaustive list of the Services we will perform but merely a
broad guidance of the critical role that we will perform as the Company's
financial advisor.
In connection with the provision of its services hereunder, Chrystal hereby
agrees to comply with all laws, regulations and rules applicable to such
services.
2. YOUR OBLIGATIONS
In consideration of our agreeing to act for you in relation to the
Objectives, you agree and represent that, for so long as we act for you,
you will (and will procure that your Related Companies will):
2.1 comply at all times (to the extent applicable) without delay with the
FSA Handbook of Rules and Guidance, including those rules made
under the Financial Services and Markets Act 2000 ("FSMA") (the "FSA
RULES"), which for the avoidance of doubt includes the Listing
Rules, the Disclosure and Transparency Rules, the Prospectus Rules,
the Criminal Justice Act 1993, the AIM Rules for Companies published
by the London Stock Exchange from time to time, the PLUS Rules for
Issuers and the PLUS Trading Rules published by the PLUS Markets Group
Plc, any Admission and Disclosure Standards, the City Code on
Takeovers and Mergers (the "CODE") (and any rulings and instructions
given by the Takeover Panel), the rules and requirements of the Bank
of England, the Companies Act 2006 and such other rules,
regulations and laws in any jurisdiction that may apply from time to
time (collectively the "RULES") and all directions given by ourselves
in relation to compliance with the applicable Rules;
2.2 comply at all times with section 21 of FSMA which restricts persons who
are not authorised by the FSA from communicating invitations or
inducements to engage in investment activity during the course of
business;
2.3 register transfers of securities in the Company in in a manner
consistent with the Company's regulatory obligations and despatch share
certificates as applicable, without delay;
2.4 forward to us for our prior perusal and written approval proofs of all
documents and press announcements (other than routine press
announcements) to be communicated that relate to, or have an effect on,
the Objectives;
2.5 ensure that the contents of all statements or financial promotions
approved by us at your request, and the contents of all documents or
announcements published or otherwise issued by you, are true, complete,
accurate and not misleading and that any expressions of opinion or belief
are made on reasonable grounds;
2.6 if required by the Rules, ensure that an appropriate dealing regime is
in place in respect of your directors' and relevant employees' dealings;
2.7 notify us immediately upon becoming aware of any breach or alleged
breach of the Rules and any other legal or regulatory issues that you
are aware of or which may arise;
2.8 notify us in a timely manner before the engagement of any professional
advisers and provide us with the details of any other professional
advisers or other corporate finance advisers engaged by you within the
last 24 months; and
2.9 Ensure that all Prospects pay their investments directly to the legal
advisor who is nominated by the Company to receive the proceeds of the
Fund Raise (the "Legal Advisor") and use reasonable endeavours to ensure
that a term substantially in the form set out in Appendix 6 is detailed
in any agreement between a Prospect and the Company in connection with
the Objectives.
2.10 The company shall be entitled to reject any Prospect or proposed
transaction presented by Chrystal Capital for any reason that the
Company believes appropriate.
3. CHRYSTAL CAPITAL TEAM AND POINTS OF CONTACT
Kingsley Wilson will be the individual in charge of providing the
Services and your principal point of contact within Chrystal Capital. He
will be assisted by such other or additional members of the Chrystal
Capital team as we may consider appropriate from time to time.
4. BASIS OF CHARGES
In consideration of us providing the Services, you agree to
remunerate us as follows:
4.1 COMMITMENT AND ADVISORY FEES
(a) A rolling monthly client commitment fee in the sum of GBP 7,500
(Sterling) is payable in cash, which is non-refundable. This fee is
payable until this agreement is terminated in accordance with the
section on termination below.
4.2 SUCCESS FEES - CASH
(a) Upon completion of each and every successful closing of a
Fund Raise (other than one involving a Pre-Existing
Exception (as defined in 4.2(b))) during the Exclusivity
Period or the 18-month trailing period thereafter, a success
fee amounting to 7% (seven per cent) of the gross amount of
all such funds raised pursuant to the Objectives is payable
in cash due on completion. Any funds raised under a farm-in
agreement where the investors have been introduced by you
will result in a 3% (three per cent) success being payable in
cash due on completion. For the avoidance of doubt a 7%
(seven per cent) fee will be payable in cash under a
farm-in agreement where the investors are introduced by us.
(b) In the event that you complete a Fund Raise of any type or
manner from any source in any country subject to the Pre-
Existing Exceptions (as defined below) during the Exclusivity
Period (as defined in clause 5 of this letter) a fee of 7%
(seven per cent) of the gross amount of all such funds raised is
also payable by you to us in cash on completion of the Fund
Raise. For the avoidance of doubt this clause applies to each
and every Fund Raise completed during the Exclusivity Period
subject to the Pre-Existing Exceptions. The "Pre-Existing
Exceptions" are:
(i) Up to $2m in equity funding currently being
marketed by Company financings with, or facilitated
by, existing shareholders in this initial Fund Raise.
For the avoidance of doubt this equity funding
will no longer be a Pre-Existing Exception once
completed.
(ii) Any Fund Raise by MIGO, which is currently under review,
within 45 days from the signing of this Engagement
Letter. After 45 days from the signing of this
Engagement Letter MIGO will then be deemed to become a
Chrystal Prospect and no longer a Pre-Existing Exception
and any Fund Raise by MIGO will result in a 3% (three
per cent) success fee being payable in cash due on
completion.
(c) Any fees payable in cash (other than the rolling
monthly client commitment fees) may in our sole discretion be
paid to us in the form of shares of your common stock equal to
the fees due. The subscription price shall be the share price
as at the immediately previous fundraising completed by the
Company.
4.3 SUCCESS FEES - SHARES
(a) In consideration of the Services provided to you
pursuant to this letter, the Company hereby agrees to
issue and allocate us and/or our nominees, pursuant to
the Restricted Share Award Agreement attached hereto as
Appendix 7, a total of 6,472,425 (six million, four
hundred and seventy two thousand and four hundred and
twenty five) shares of the Company's common stock
("SHARES"), which is equivalent to 5% (five per cent) of
the total outstanding share capital of the Company
calculated as fully diluted (129,448,500) at the date
of the signing of this letter. Such Shares will be
allotted to us nil paid or at nominal value and will
be sent to us or our lawyers on the signing of this
letter and the aforementioned Restricted Share Award
Agreement to be held in escrow pending completion of
the Objective.
(b) In the event that you complete a Fund Raise of any type
or manner from any source in any country from Prospects
not introduced by us, during the Exclusivity Period (as
defined in clause 5 of this letter), the Shares allotted
to us pursuant to clause 4.3(a) of this letter will
become fully paid against completion of the Fund Raise
subject to the Company investors described in clause
4.2(b). In event of a Fund Raise by MIGO completing after
45 days of the signing of this Engagement Letter,
Chrystal will retain 50% of the allotted shares in 4.3(a)
and return the balance to Company on completion of the
Fund Raise.
(c) We acknowledge that in granting us the Exclusivity Period
in which to raise the capital and otherwise provide the
Services, you are bearing a material opportunity cost
risk that we fail to complete the Objectives. We
therefore agree that if we are unsuccessful in completing
the Objectives or providing the Services, defined as the
Company not receiving any capital from our Prospects,
then all of the Shares will be returned to the Company,
less any cash paid.
(d) The attached Restricted Share Award Agreement shall
govern the share issuance provided for by this Section
4.3. Accordingly, if any inconsistency arises between
the terms, provisions and conditions of this Agreement
and those of such Restricted Share Award Agreement, the
terms, provisions and conditions of such Restricted Share
Award Agreement shall control.
4.4 SUCCESS FEES - OPTIONS
(a) On completion of each Objective, any Fund Raise
(other than one involving a Pre-Existing Exception
(as defined in 4.2(b))) within the Exclusivity
Period (as defined in clause 5 of this letter) and on any
subsequent Fund Raise, the Company hereby grants to
Chrystal Capital or its nominees, with immediate effect,
an option to acquire ordinary shares/common stock or
such equivalent as may be relevant (which entitles
us on exercise to full voting rights and which rank
pari passu with all other shares in the Company) in the
capital of the Company. The total number of shares
under option capable of being exercised on a successful
completion of each Objective shall be calculated in
accordance with the provisions of the option
agreement attached to this letter in Appendix 3.
(b) None of the options to be issued pursuant to Section
4.4(a), and none of the shares to be issued pursuant to
such options, shall be covered by the Discovery Energy
Corp. 2012 Equity Incentive Plan.
4.5 TERMINATION AND FURTHER TRANSACTION FEES
(a) If the Services are terminated before completion of the
Objectives and the Objectives or a transaction
similar to one set out in the Objectives completes
within a period of 18 months after the effective date of
termination with Prospects, or Related Companies of
the Prospects, or Placement Agents sourced by Chrystal
Capital pursuant to the Objectives, the Company shall pay
Chrystal Capital the fees and expenses referred to in
paragraphs 4.1, 4.2 and 4.3 of this letter in respect of
the similar transaction less any amount already paid.
(b) If the Objectives are successfully completed pursuant to
the terms of this letter and a further Fund Raise of any
description is carried out by the Company, within a period
of 18 months after the effective date of the completion
of the Objectives, using the same Prospects, or Related
Companies of the Prospects, or Placement Agents sourced by
Chrystal Capital pursuant to the Objectives, the Company
shall pay Chrystal Capital the fees and expenses referred
to in paragraphs 4.2, and 4.3, as applicable, in respect
of the further Fund Raise.
(c) You shall have the right to terminate this letter by
giving us notice in writing at any time within the first
45 (forty-five) days after the date of this agreement.
If the Services are terminated within:
(i) 15 days of the signing of this letter the Company
hereby agrees to pay Chrystal a fee of $33,500
together with any outstanding pro rata monthly
client commitment fee and any outstanding
expenses;
(ii) 30 days of the signing of this letter the Company
hereby agrees to pay Chrystal a fee of $67,000
together with any outstanding pro rata monthly
client commitment fee and any outstanding
expenses;
(iii) 45 days of the signing of this letter the Company
hereby agrees to pay Chrystal a fee of $100,000
together with any outstanding pro rata monthly
client commitment fee and any outstanding
expenses;
(iv) For the avoidance of doubt Clauses 4.5 (a) and (b)
would still apply, but the Company will owe no
further remuneration to Chrystal Capital other
than the preceding break-up fee and as provided in
Clauses 4.5 (a) and (b).
4.6 EXPENSES
In addition to the fees set out in this letter, you will you will
also be responsible for all our properly and reasonably incurred
expenses in providing the Services. You agree to reimburse our
expenses properly and reasonably incurred in providing the Services
within five working days of the issue of an invoice by Chrystal
Capital. Invoices for expenses will be raised on a monthly basis and
include, for example, travel, subsistence, accommodation, courier,
delivery, photocopying and printer expenses. We will use our
reasonable endeavours to obtain your prior approval before incurring
any single expense in excess of GBP 500 (Sterling) and before
overall expenses exceed GBP 1,000 (Sterling). However, in the first
instance, the Company must provide an expenses pre-payment of
5,000 to cover initial expenses. Any balance will be returned to the
Company on completion or termination of this engagement.
Our fees and expenses due pursuant to this letter are due and payable
(unless stated otherwise to the contrary).
The fees and expenses referred to in this letter are in addition to any
placing or financing fees, commissions or other separately agreed sums
which may become payable in connection with the Objectives.
5. EXCLUSIVITY PERIOD
Our agreement to act on your behalf is conditional upon Chrystal Capital
having sole and exclusive conduct on all matters within the scope of
this letter and the attached terms and conditions and the Objectives as
set out in this letter. The exclusivity period will be for two (2)
months (the "EXCLUSIVITY PERIOD") from the signing this letter, and then
on a rolling monthly basis unless you or we terminate this letter in
accordance with the termination provisions set out below or in Section
4.5(c).
In the event of a successful Fund Raise, the Exclusivity Period will be
extended to a year from the date of the completion of the Fund
Raise and will automatically be renewed every year, unless terminated
in accordance with the termination provisions set out below.
For the avoidance of doubt, if you terminate this letter in the
Exclusivity Period (other than in accordance with Section 4.5(c) or
Section 6 below), you will:
(a) pay us the due retainer and fees set out in clause 4.1(a) and
4.2(b) of this letter; and
(b) allot us the Shares set out in clause 4.3 of this letter; and
(c) pay us the expenses set out in clause 4.6 of this letter.
Any other services to be provided by us to you at your request shall
be the subject of separate terms of engagement between Chrystal
Capital and you.
6. TERMINATION
You shall have the right to terminate this letter by giving us one
month's notice in writing at any time 60 (sixty) days after the date of
this agreement, or at any time that;
(a) Kingsley Wilson becomes incapacitated and unable to serve
as your primary contact under this letter.
(b) Chrystal or any of its principals become the subject of an
investigation with respect to misconduct of any nature with
respect to securities dealings or financial schemes.
We reserve the right to terminate this letter immediately by giving
notice in writing in the event that:
(c) we become aware of facts or circumstances of which we were unaware
(and of which we could not have been expected to have been aware) at
the commencement of this letter which, in our reasonable
opinion, would preclude us from completing the Objectives;
(d) fundamentally damaging information comes to our attention which had
not been fully disclosed to us before the date of this letter and
which, in our reasonable opinion, would preclude us from completing
this letter (including but not limited to any serious litigation
against you, any form of actual or threatened insolvency procedure
against you, your shareholders or director(s), and any form of
criminal act, past or present, committed by a member of your
management team);
(e) material information is unavailable to us, or any information which
it had been agreed at the outset of this letter would be provided by
you is unavailable or not produced in a timely fashion (including
but not limited to a request for information over the course of
several weeks, and if it has not been provided, this would be deemed
to fall within this category);
(f) we decide not to continue our relationship with you under paragraph
H below;
(g) any fee or expense amount due in relation to this letter becomes
overdue by more than four weeks;
(h) you fail to comply with the 'sole and exclusive conduct' clause in
paragraph 5 of this letter; or
(i) you are in breach of any of the terms or provisions of this letter.
Termination, howsoever caused, will not affect our rights of
remuneration, indemnification and non-circumvention as set out in
this letter or the Appendices, or any other accrued rights which we
may have upon termination and shall be without prejudice to the
completion of transactions already initiated.
7. GENERAL
You agree that any advice, including (without limitation) any valuation,
written report or material prepared by us, is provided solely for your
use and benefit for the purpose of the Objectives and may not be used or
relied on for any other purpose or disclosed to any other person
(excluding your other professional advisers, who may place no reliance
on such advice) without our prior written consent.
Save as required by the Rules, no advice that we give nor any
communication we make in connection with the Objectives may be quoted
or referred to in any public statement, report, document, release or
other communication whether written, electronic or oral by you or by any
Related Company without our prior written consent.
You acknowledge that we act solely for you in connection with the
Objectives and no one else and accordingly that we will not be responsible
to anyone other than you for providing the protections afforded to our
customers or for providing advice in relation to or in connection
with the Objectives.
You and each of the directors of the Company acknowledge that we
are not responsible for providing you or them with legal advice in
respect of any applicable laws and regulations in connection with the
Objectives and you and each of the directors of the Company undertake
to obtain appropriate legal advice and to communicate to us such advice
whenever relevant or necessary to the proper performance of our
services in connection with the Objectives.
8. CLIENT DUE DILIGENCE
As we have not conducted corporate finance business with you before, this
letter is subject to the satisfactory completion of our statutory Anti-
Money Laundering and Know Your Client formalities.
The Company hereby authorises Chrystal Capital to make such enquiries and
obtain such references as it may consider necessary to fulfil its
legal obligations (including without limitation instructing third
party investigatory agencies where appropriate). This letter also
authorises Chrystal Capital to make such further enquiries and references
as it may from time to time consider necessary to enable it to continue
to comply with those obligations. Any fees or expenses incurred by
Chrystal Capital in making such enquiries or obtaining such
references shall promptly be reimbursed by the Company.
9. CLIENT ACKNOWLEDGEMENT
We should be grateful if you would signify your understanding and
acceptance of the engagement, including this letter and the attached
terms and conditions in Appendix 1 and the matters set out in the
other Appendices, by signing and returning the enclosed duplicate.
Yours faithfully,
Kingsley Wilson
For and on behalf of CHRYSTAL CAPITAL PARTNERS LLP
To: CHRYSTAL CAPITAL PARTNERS LLP
I agree with the terms and conditions of the arrangements set out in the letter
and the terms and conditions in Appendix 1 and the matters set out in the other
Appendices as evidenced by my signature below:
Agreed & Acknowledged
Print Name:
Printed Title:
For and on behalf of:
Date:
APPENDIX 1
TERMS AND CONDITIONS
(A) INTRODUCTION
These terms and conditions are supplemental to the provisions contained in the
letter to which they are attached and, together with the letter, form the
agreement. In the event of any conflict between the express provisions of the
letter and these terms and conditions, the provisions in the letter shall
prevail. This agreement sets out the entire agreement and understanding between
Chrystal Capital and the Company in connection with the Objectives. This
agreement supersedes and terminates any prior agreement, arrangement or
understanding, whether written or oral, between the parties and any prior
representation by Chrystal Capital relating to the engagement pursuant to this
agreement.
(B) DEFINITIONS
The following words shall have the following meanings (unless the context
otherwise requires):
"FUND RAISE" means the raising of funds or capital of any type and in any
manner, including but not limited to equity, mezzanine, hybrid/convertible,
debt, or in any other such structure, through a Placement Agent or a Prospect;
"INTRODUCE" OR "INTRODUCTION" means where we are the effective cause directly or
indirectly, and regardless of whether effected orally or in writing (including
for the avoidance of doubt, by email), of initiating with a Prospect or a
Placement Agent, a meaningful contact (being a meeting or phone call with a
Prospect or a Placement Agent during which you have an opportunity to present
your Company) notwithstanding that you obtain the Prospect's details
subsequently, whether as a result of your own initiatives or otherwise; or where
a Prospect or a Placement Agent we introduce you to introduces you to some other
person or entity capable of being a Prospect or a Placement Agent;
"PLACEMENT AGENT" means any person or entity to whom we Introduce you who
subsequently completes a transaction for the Company, directly or indirectly;
"PROSPECT(S)" means a variety of potential investors capable of providing funds
or capital in any manner, to whom you are introduced, directly or indirectly,
such potential investors being, without limit any one or more of financial
institutions, brokers, banks, hedge funds, family offices, debt providers,
private equity, operational companies, corporate investors, farm-in investors
and operators and high net worth individuals including any successor to a
Prospect or successor to a business of a Prospect. Where you are introduced to a
Prospect that does not participate in an initial Fund Raise, but you
subsequently obtain funding from such Prospect, at any time during the term of
this agreement and for eighteen (18) months after its termination, such Prospect
shall be deemed to be a Prospect for the purposes of this definition, except
where you can show that you had an established relationship or meaningful
contact with such person prior to the date of this agreement; and
"RELATED COMPANY"
(a) in respect of Chrystal Capital, any parent undertaking of Chrystal
Capital and any subsidiary undertaking or subsidiary undertaking of that parent
undertaking (except Chrystal Capital);
(b) in respect of the Company, any parent undertaking of the Company and any
subsidiary undertaking or subsidiary undertaking of that parent undertaking
(except the Company); and
(c) in respect of a Prospect, any parent undertaking of a Prospect and any
subsidiary undertaking or subsidiary undertaking of that parent undertaking
(except a Prospect)
and for these purposes "PARENT UNDERTAKING", "SUBSIDIARY UNDERTAKING" and
"SUBSIDIARY" shall bear the meanings respectively given to them in the Companies
Act 2006 and "RELATED COMPANIES" shall be construed accordingly.
(C) ANTI-DILUTION
Standard anti-dilution protection rights will apply i.e. we have the right to
maintain our percentage share ownership in the Company and the ability to
purchase a proportional number of shares of any future issue of shares, common
stock, options or warrants issued/agreed with existing shareholders, proposed
shareholders or third parties, at the price at which they are issued, excluding
management performance options or warrants. The share figures quoted in this
agreement will also need to be adjusted proportionally in the event of any
changes in the capital structure including but not limited to stock splits.
(D) PAYMENT
All payments to be made under this agreement should be made by electronic
transfer to the following account, unless otherwise agreed:
Bank: NatWest Bank Plc
Address: 1 Princes Street, London, EC2R 8PA
Account name: Chrystal Capital Partners LLP
Sort code: 60-00-01
Account number: 39529746
Swift: NWBK GB 2L
IBAN: GB42 NWBK 6000 0139 5297 46
We reserve the right to charge interest on overdue amounts at an annual rate of
13.5% (thirteen point five per cent) from the day payments are due, as per this
agreement, under UK statutory late payment legislation. Late payment fees will
be calculated on a daily basis.
(E) ACCESS AND INFORMATION
The Company agrees to provide Chrystal Capital with all data and information
concerning its business and affairs, or those of any of its Related Companies,
which is relevant to the provision of the Services by Chrystal Capital pursuant
to this agreement from time to time and all such other information as Chrystal
Capital may reasonably request and the Company shall update such information as
necessary. Chrystal Capital shall be granted full access to the directors,
employees and advisers of the Company and those of its Related Companies.
The Company undertakes that all information provided to Chrystal Capital shall
be true, accurate and complete in all material respects and shall not be
misleading. There shall not be any material omissions from the information and
every statement of opinion or intention in the information provided to Chrystal
Capital shall be honestly and fairly based. The Company shall promptly notify
Chrystal Capital and take all steps as Chrystal Capital may reasonably require
correcting any statement, announcement or publication which is found to be
untrue, inaccurate or misleading.
Chrystal Capital shall be entitled to rely for all purposes upon the accuracy
and completeness of all information provided to it by the Company or any of its
advisers without any obligation to verify or confirm the same.
The Company undertakes that it shall have or obtain the right to supply such
information free of restriction and that the supply of such information and its
receipt and use by Chrystal Capital for the purposes of the Objectives shall be
permitted.
(F) CLIENT AUTHORISATION
Our understanding is that we may communicate with you and your fellow directors.
Notwithstanding the above, you authorise us to rely on the authority of any
instructions, notices or requests (whether in writing or not and however
communicated to us) from any person nominated by you or such other persons as we
may reasonably assume are intended to have such authority. Instructions given
to us shall not take effect until actually received by us. Communications by
you to us under this agreement may be made by facsimile or email and shall be
deemed effective on the working day next following transmission of the
communication.
The engagement by the Company of Chrystal Capital in connection with the
Objectives confers on Chrystal Capital all powers, authorities, permissions and
discretions on the Company's behalf which are necessary for, reasonably
incidental to or customary in the provision of, the Services to be provided
pursuant to the Objectives. The Company hereby agrees to ratify and confirm
everything which Chrystal Capital shall reasonably and lawfully do in the proper
exercise of such powers, authorities and discretions in relation to the
Objectives.
It is expressly agreed between Chrystal Capital and you that in all dealings
with third parties we will be acting as agent on your behalf and not as
principal, and that we shall be entitled to make this clear in all
communications with such third parties.
Chrystal Capital will not have any responsibility for due diligence in relation
to the Objectives which would normally be carried out by your other advisors
such as legal, accountancy, tax advisers and other consultants notwithstanding
that Chrystal Capital may be in possession of advice provided by such advisers.
It is your responsibility to ensure that the advice received from its other
advisers in connection with completing the Objectives is considered adequate for
the purpose. Chrystal Capital reserves the right to request additional due
diligence and verification as required through the process.
(G) CLIENT MONIES
We are not registered to hold third party monies and consequently any cheques or
payments receivable by us in respect of third parties must be appropriately
addressed. Any monies to be received by the Company under a Fund Raise will be
channelled through the Company's lawyers, with such lawyers being instructed and
entitled to withhold and pay to us all our fees due under this agreement prior
to transmission of proceeds of the Fund Raise to the Company.
(H) CONFLICTS OF INTEREST
Chrystal Capital and its Related Companies are involved in the provision of
corporate finance advisory services and may have a financial interest in
transactions involving or relating to the Company and/or its Related Companies
or other material interest, relationship or arrangement which may involve a
potential conflict with Chrystal Capital's duties under the Objectives. These
situations may include, without limitation, Chrystal Capital acquiring shares or
options, warrants or other rights in shares in the Company (together
"SECURITIES") in lieu of fees or Related Companies engaging in investment
management business and dealing in, holding or otherwise effecting transactions
in relation to Securities.
The Company agrees that Chrystal Capital shall be entitled to perform the
Services in connection with the Objectives notwithstanding any such interest or
conflict of interest or duty; and nothing in this agreement or otherwise shall
give rise to any fiduciary or equitable duty which would prevent or restrict
Chrystal Capital or any Related Company from doing so. Chrystal Capital will
take reasonable steps to identify and manage any such conflict to ensure fair
treatment of the Company, in accordance with the FSA Rules.
Subject to the FSA Rules and to any contrary prior instructions given by the
Company in writing, Chrystal Capital shall be entitled, in the course of
providing corporate finance services, to deal with or use the services of any
Related Company.
Subject to the FSA Rules and to any such contrary prior written instructions,
Chrystal Capital and its Related Companies shall, without any liability to
account to the Company, remain entitled to retain any profits, benefits or other
advantages arising from: (a) being interested in any transaction involving or
relating to the Company (including the acquisition, holding or disposal of
Securities); and (b) any dealings with, or the provision of services by Related
Companies, notwithstanding this agreement. Chrystal Capital shall not be
required to disclose any such profit, benefit or advantage to the Company
(except as required by the FSA Rules).
(I) CONFIDENTIALITY
Chrystal Capital shall keep confidential as provided in this paragraph I any
confidential information relating to the Company and the Company's business
affairs that the Company discloses to Chrystal Capital ("CONFIDENTIAL
INFORMATION").
Confidential Information shall however not include any information that:
(a) at the time of disclosure to Chrystal Capital is already in the public
domain;
(b) at any time after such disclosure falls into the public domain,
otherwise than as a result of a breach by Chrystal Capital of its obligations
under this paragraph I;
(c) was lawfully in the possession of Chrystal Capital prior to such
disclosure; or
(d) (for the avoidance of doubt) was or is received by Chrystal Capital from
any third party who at the time, so far as is known to Chrystal Capital, was or
is not bound by any restrictions on disclosure by such party.
Chrystal Capital shall not disclose Confidential Information to any third party
save:
(a) to any adviser instructed by the Company or by Chrystal Capital in
connection with the Objectives and for the purposes of the Objectives;
(b) where required by law or by any court or tribunal of competent
jurisdiction or where required by the rules of or in accordance with the request
of any regulatory authority the jurisdiction to which Chrystal Capital is
subject;
(c) in connection with legal proceedings to which Chrystal Capital is party
and which are directed to the enforcement of the Company's rights or those of
Chrystal Capital pursuant to the Objectives; or
(d) the fact of Chrystal Capital's role in the Objectives but only if the
existence of the Objectives is in the public domain.
Any advice or opinion, written or oral, provided by Chrystal Capital pursuant to
this agreement shall be solely for the Company's information and assistance in
connection with the Objectives and must be kept confidential by the Company.
Such advice or opinion may not be used for any other purpose or circulated,
quoted, referred to or publicly filed or disclosed to any third party, except in
each case with the prior written consent of Chrystal Capital.
All original share certificates, documents of title and other documents received
from the Company and held to its order will be returned on request subject to
payment of any outstanding fees and expenses and to Chrystal Capital being
entitled to retain copies in order to comply with its regulatory or other
record-keeping requirements.
Neither Chrystal Capital nor any of its Related Companies shall be required to
disclose to the Company any information which comes to their notice in the
course of carrying on any other business or as a result of or in connection with
the provision of services to any other person. The Company accepts that
Chrystal Capital and its Related Companies may be prohibited by legal
obligations or otherwise from disclosing, or it may be inappropriate for
Chrystal Capital and its Related Companies to disclose, information to the
Company even if the same relates to or would be of benefit to the Company or to
the Objectives.
The provisions of this paragraph shall continue in full force and effect
notwithstanding the termination of our engagement pursuant to this agreement or
the completion of the Services.
(J) DATA PROTECTION
Any information, including personal data, that we collect in our business may be
controlled, stored and processed in, and transferred among, any office of
another Chrystal Capital entity and any such contractors as we engage to assist
us in our business and may be transferred to and through any country, including
countries outside the European Economic Area (EEA), which may not have privacy
(data protection) legislation and regulations comparable to those in the EEA.
The location of our offices and of such contractors may change from time to time
and we may acquire offices and engage contractors in other countries at any
time. In engaging us, you expressly consent to such control, storage,
processing and transfers.
(K) FINANCIAL SERVICES AND MARKETS ACT 2000
Chrystal Capital Partners LLP is authorised and regulated by the FSA. All
Services provided by Chrystal Capital are subject to the rules and regulations
of the FSA. The address of the FSA is 25 The North Colonnade, Canary Wharf,
London E14 5HS or www.fsa.gov.uk.
In providing its Services, Chrystal Capital proposes to treat you as a Retail
Client within the meaning of the FSA Rules.
As a consequence of this categorisation, you may be entitled to a certain level
of protection traditionally afforded to Retail Clients under the FSA Rules and
may additionally be entitled to bring an action for damages against Chrystal
Capital under sections 71 and 150 of FSMA.
Please see the Notice of Treatment as Retail Client section in Appendix 4 for
more details
Chrystal Capital provides its services subject to the FSA Rules. Chrystal
Capital may take all such steps as may in its opinion be necessary or desirable
to comply with the FSA Rules. The Company agrees to comply with and to procure
that its Related Companies comply at all times with the FSA Rules. In
particular in the case of a transaction which is subject to the Code, the
Company shall procure that its associates and any person with whom it is acting
in concert (the expressions "ASSOCIATES" and "ACTING IN CONCERT" having the
meanings given in the Code) comply with the FSA Rules as the Code may require.
(L) MONEY LAUNDERING REGULATIONS
We require a copy of a proof of address such as a recent utility bill or bank
statement, together with a copy of photo ID such as a passport or photo card
driving licence for one of the directors and the certificate of incorporation
and latest company accounts for the Company. This is to comply with our
responsibilities under the Proceeds of Crime Act 2002 and in particular the
Money Laundering Regulations 2007 and other legislation.
(M) APPROVAL OF DOCUMENTS AND ANNOUNCEMENTS
The Company and its directors shall provide Chrystal Capital with all assistance
and information which Chrystal Capital may reasonably request to enable it to
satisfy itself that any announcement made in connection with the Objectives is
true, complete and accurate, is not false or misleading and does not omit any
material information. Except where required by law or the rules of a competent
regulatory authority, Chrystal Capital shall not be held responsible for
ensuring the truth, accuracy, entirety or fairness of any announcement,
statement, publication or document made by the Company, on the Company's behalf
or by any of the Company's other advisers in connection with the Objectives.
Such responsibility shall be that of the Company and its directors alone. The
Company warrants and represents to Chrystal Capital that all information that it
provides to Chrystal Capital in connection with a document or announcement is
true, complete, accurate and not misleading in any material respect.
If Chrystal Capital is requested to approve, issue or communicate any financial
promotion or other document or announcement it shall, in accordance with its
compliance procedures, require assurances and representations from the Company
concerning the contents of them.
Chrystal Capital retains the right to refuse to issue, communicate or approve,
or arrange for the issue, communication or approval of, a particular document or
announcement and to require the Company to cease from distributing a document or
announcement which, in Chrystal Capital's opinion, has any connection with or
potential effect on the Objectives if at any time Chrystal Capital becomes aware
of information which, in its opinion, renders the document or announcement
untrue, incomplete, inaccurate or misleading in any material respect.
Chrystal Capital will not approve any real time financial promotion.
The Company agrees that it shall take such action as Chrystal Capital may
reasonably request from time to time in connection with any announcement in
relation to the Objectives or otherwise, including any request by Chrystal
Capital to make a particular announcement or a corrective announcement. If the
Company fails to comply with Chrystal Capital's reasonable request in relation
to an announcement Chrystal Capital may (in addition to any other action it may
take) terminate this agreement forthwith in accordance with the terms of this
agreement (but without prejudice to payment of any outstanding fees and expenses
payable under the terms of this agreement).
Chrystal Capital may at its expense place an announcement or advertisement in
such newspapers, periodicals and publications as Chrystal Capital may choose
following the public announcement of this agreement, stating that it is acting
or has acted as financial adviser to the Company, as appropriate.
(N) INTELLECTUAL PROPERTY
Chrystal Capital copyright subsists in all Chrystal Capital developed
proprietary material provided to the Company. We require that you keep
confidential any proprietary Chrystal Capital methodologies and technology used
to carry out the engagement as set out in this agreement.
(O) FORCE MAJEURE
If any failure, interruption or delay in the performance of Chrystal Capital's
obligations under this agreement results or arises from acts, events or
circumstances not reasonably within Chrystal Capital's control (including but
not limited to the interruption, suspension or failure of any communications
system, computer system or other facility of Chrystal Capital or other persons
or any banking or money or securities settlement system), Chrystal Capital shall
not be liable or have any responsibility of any kind for any loss or damage
incurred or suffered by the Company or its Related Companies as a result
thereof.
(P) SEVERANCE
If all or part of this agreement is or becomes illegal, invalid or unenforceable
in any respect, then the remainder of this agreement shall remain valid and
enforceable and the parties shall negotiate in good faith to amend and modify
this agreement as may be necessary or desirable in the circumstances.
(Q) NOTICES
Notices which may or are required to be given under this agreement shall be in
writing, if by the Company addressed to the relevant director of Chrystal
Capital in charge of the matter and if by Chrystal Capital to a director of the
Company and sent by prepaid first class post to the relevant party at the
address in the letter or to such other address, including an e-mail address, as
may be designated by such party to the other by written notice from time to
time.
(R) THIRD PARTY RIGHTS
No provision of this agreement, except as expressly provided for Indemnified
Parties in Appendix 2 of these terms, is intended to be enforceable pursuant to
the Contracts (Rights of Third Parties) Act 1999. Accordingly, save as provided
in relation to Appendix 2, no third party shall have any right to enforce or
rely on any provision of this agreement.
The parties may rescind, vary, waive, release, assign, novate or otherwise
dispose of all or any of their respective rights or obligations under this
agreement without the consent of any person who is not a party to this
agreement.
(S) ASSIGNMENT
Chrystal Capital shall be entitled to assign or transfer all or part of its
rights or obligations under this agreement to a Related Company, from when
references to Chrystal Capital shall be read as references to such Related
Company.
In order that Chrystal Capital may execute and carry out its duties properly
under this agreement, the Company agrees not to assign or transfer any of its
rights and obligations under this agreement to any party without the prior
written consent of Chrystal Capital.
(T) AMENDMENTS
This agreement may only be varied by mutual agreement in writing and signed by
both parties. No variation shall, unless both parties agree, affect any rights
or obligations which may have previously accrued to or been incurred by Chrystal
Capital or the Company.
(U) PAYMENTS, VALUE ADDED TAX AND FSA CLIENT MONEY RULES
All sums payable by the Company under this agreement shall be paid free of all
deductions or withholdings (unless required by law in which event the Company
shall pay such additional amount as shall be required to ensure that the net
amount received by Chrystal Capital shall equal the full amount which would have
been received by Chrystal Capital had no such deduction or withholding been
required to be made).
All sums quoted in this agreement are exclusive of any applicable value added
tax (or any equivalent tax in any other jurisdiction) and the Company shall
promptly pay to Chrystal Capital an amount equal to any value added tax (or any
equivalent tax in any other jurisdiction) chargeable in respect of payments made
to Chrystal Capital or otherwise chargeable in respect of the engagement
pursuant to this agreement.
The Company acknowledges that Chrystal Capital is not authorised by the FSA to
hold client monies and agrees that monies of the Company held or received by
Chrystal Capital will not be subject to the protections conferred by the FSA's
client money rules. As a consequence, these monies will not be segregated from
the monies of Chrystal Capital and may be used by Chrystal Capital in the course
of its business.
(V) COMPLAINTS
Any complaints about the conduct or performance of Chrystal Capital personnel or
their advisers should initially be addressed in writing to Chrystal Capital at
New Broad Street House, 35 New Broad Street, London EC2M 1NH.
(W) JURISDICTION
This agreement shall be governed by and construed in accordance with English
law. The Company hereby irrevocably submits to the jurisdiction of the English
courts. The parties irrevocably agree that the English courts shall have
exclusive jurisdiction to settle any dispute or claim that arises out of or in
connection with this Agreement or its subject matter or formation (including any
non-contractual disputes or claims).
(X) CONDUCT OF CLAIMS
If:
(a) a third party makes a claim or begins any proceedings, action or
investigation (whether civil, criminal or regulatory) against Chrystal Capital
or a Related Company or threatens to do so; or
(b) Chrystal Capital or a Related Company incurs any loss, liability, cost,
expense, charge or penalty directly or indirectly arising out of or in
connection with this agreement, the Objectives and/or a related appointment
(including for the avoidance of doubt any Losses to which Appendix 2 applies)
which enables Chrystal Capital or its Related Company to bring a claim or
proceedings against a third party,
Chrystal Capital shall have sole conduct in defending or making such claim or in
such proceedings, including its settlement or compromise, in its own name, in
whatever way it sees fit.
The Company hereby agrees on request and at its own expense to support Chrystal
Capital in relation to such claim or proceedings, including by assisting in
investigating, preparing for or defending the same. Chrystal Capital shall keep
the Company informed of the progress of the claim or proceedings. Chrystal
Capital may take all action necessary to comply with the terms of any of its
applicable insurance policies or as its insurers may require.
(Y) LIMITATION OF LIABILITY
We will not be responsible for any losses arising from the supply by you or
others of incorrect or incomplete information, or your or others' failure to
supply any appropriate information or your failure to act on our advice which
leads to a loss or your failure to respond promptly to communications from us.
Subject to the requirements of any applicable law or regulation to the contrary,
the liability of our company (including its staff and associated entities) in
respect of breach of contract or breach of duty or fault or negligence or
otherwise whatsoever arising out of or in connection with the Services shall not
exceed the aggregate amount of our fees earned from the Objectives.
The Company undertakes that it has not accepted and will not accept any express
financial limitation of liability from any of its other advisers in connection
with the Objectives. If the Company were to accept any such limitation, then:
(i) the total liability of Chrystal Capital or its Related Companies to the
Company in connection with any successful claims by the Company shall be reduced
so as not to exceed the total amount for which such person would have been
liable but for such limitation; and (ii) the Company shall as soon as reasonably
practicable inform Chrystal Capital that it has accepted such limitation and
shall provide written confirmation to Chrystal Capital in a form and substance
satisfactory to Chrystal Capital to give effect to the provisions of this
paragraph Y.
In no event shall Chrystal Capital be liable to or required to compensate any
other adviser of the Company with the Objectives.
We will not advise on the commercial merits of any transaction and will rely on
the Company's directors' commercial assessment of the Objectives. Nothing in the
advice provided to the Company should be construed as advice to proceed or not
to proceed with the Objectives since ultimately this is a commercial decision
for the Company and its directors.
Our duties and responsibilities under this agreement are limited solely to those
expressly specified in this agreement and do not include approving any part of
any document other than in relation to those parts for which we have given
express written consent.
(Z) NON-CIRCUMVENTION
The Company shall not seek to circumvent Chrystal Capital by directly or
indirectly contacting any Prospect or Placement Agent that Chrystal Capital
introduces to the Company in connection with the Objectives or to solicit
business in connection with the Objectives from such introductions for a period
of two (2) years from the date of this letter, regardless of the date of
termination of this letter.
APPENDIX 2
INDEMNITY
The Company hereby agrees and undertakes to indemnify and hold harmless Chrystal
Capital and its Related Companies and each of their respective directors,
employees and advisers (each an "INDEMNIFIED PARTY"), against all losses
(including direct or indirect losses, loss of profits and loss of reputation),
claims, demands, proceedings, damages, costs, charges, expenses, taxes,
penalties and other liabilities, whether in tort, contract or otherwise
(together "LOSSES"), which an Indemnified Party may suffer or incur which
directly or indirectly arise in connection with or relate to:
(c) the actions and advice and the provision of services by an Indemnified
Party in connection with the Objectives;
(d) any breach or alleged breach by the Company or its directors of their
obligations set out in this agreement;
(e) any failure or alleged failure by the Company, its Related Companies or
any of their respective directors, employees or advisers to comply with
applicable law or regulation, including without limitation the Rules; and/or
(f) the issue or approval of any financial promotion, or the making of any
announcement or the publication of any circular or other document on behalf of
or relating to the Company or the Objectives.
The Company hereby agrees and undertakes to reimburse each Indemnified Party for
all costs, charges and expenses (including without limitation all legal or other
professional fees and expenses) incurred by the Indemnified Party in connection
with any claim, action, demand, arbitration, mediation, proceedings or
investigation arising from or connected with the matters referred to in
sub-paragraphs (a) to (d) above, whether the same are actual, pending or
threatened (including those incurred in investigating, preparing for, disputing,
defending, negotiating, settling, counter-claiming or pursuing the same or
appealing against any judgment, award or decision of any court, tribunal,
arbitrator or regulatory or other authority) to which an Indemnified Party is a
party or is otherwise involved, and whether or not resulting in any Losses on
the part of any Indemnified Party.
If HM Revenue & Customs or any other taxing authority in any jurisdiction brings
into any charge to taxation (or into any computation of income or profits for
the purposes of any charge to taxation) and any sum payable under this
indemnity, then the amount so payable shall be grossed up by such amount as will
ensure that after deduction of the taxation so chargeable there shall remain a
sum equal to the amount that would otherwise be payable under such indemnity
(such additional payments as are necessary to achieve this purpose being made by
the Company on demand from Chrystal Capital from time to time).
The Company agrees that no Indemnified Party shall owe any liability to the
Company or its Related Companies (whether direct or indirect, in contract, tort
or otherwise) arising from or relating in any way to the Objectives except to
the extent that any such liability is finally judicially determined by a court
of competent jurisdiction in England to have resulted from the fraud, wilful
default or gross negligence of Chrystal Capital or its Related Companies or a
material breach by such person of the Rules or this agreement.
The Company further acknowledges that no Indemnified Party shall be liable to
the Company for any statements, representations, or advice made or given by it
prior to the date of this agreement.
The indemnity in favour of the Indemnified Parties contained in this Appendix 2
shall not be limited by any other term or provision of this agreement and shall
be in addition to and not be construed to limit, affect or prejudice any other
right or remedy available to Chrystal Capital or any Related Company.
APPENDIX 3
FOR USE ON EACH FUND RAISE
OPTION AGREEMENT
DATED 30 September 2012
DISCOVERY ENERGY CORP. (1)
- and -
CHRYSTAL CAPITAL PARTNERS LLP (2)
OPTION AGREEMENT
----------------
THIS AGREEMENT is made on 30 September 2012
BETWEEN
(1) DISCOVERY ENERGY CORP. (Incorporated in the State of Nevada) whose
registered office is at Suite 1700, One Riverway Drive, Houston, Texas 77056
(the "COMPANY").
(2) CHRYSTAL CAPITAL PARTNERS LLP (Registered No. OC349574) whose business
address is at New Broad Street House, 35 New Broad Street, London, EC2M 1NH
("CHRYSTAL CAPITAL" or the "PARTNERSHIP").
IT IS AGREED as follows:
I. DEFINITIONS AND INTERPRETATIONS
i. In this Agreement (which expression shall be deemed to include the
Schedule hereto) unless the context otherwise requires:
"CONDITION" means the condition set out in clause III.(i);
"THE DIRECTORS" means the board of directors of the Company from time to
time;
"ENGAGEMENT LETTER" means the Engagement Letter between the Company (1) and
the Partnership (2) dated 30 September 2012;
"EXERCISE PRICE" means the price per Share at which the Prospects will
invest as agreed by the Company and the Partnership;
"FUND RAISE" has the same meaning as defined in the Engagement
Letter;
"OPTION" means the conditional option to subscribe for the
Option Shares granted to the Partnership pursuant to
clause II (i);
"OPTION NOTICE" means a notice exercising the Option given pursuant to
clause III (iv);
"OPTION PERIOD" means the period commencing upon satisfaction of all the
Conditions and expiring 3 years thereafter;
"POST FUND RAISE means the gross amount of the proceeds of the Fund Raise
SHARE CAPITAL" plus the pre Fund Raise valuation of the Company;
"OPTION SHARES" means such number of Shares as calculated in accordance with
the formula set out in clause III (ii); and
"SHARES" the fully paid shares with a par value $0.001 each in the
capital of the Company.
II. THE OPTION
i. In accordance with the terms of the Engagement Letter, the Company hereby
grants to the Partnership the Option to subscribe or be issued with the
Option Shares at the Exercise Price per Option Share during the Option
Period subject to and in accordance with the terms of this
Agreement.
ii. The Partnership may assign or transfer in whole any of its rights or
obligations under this Agreement to any member of the
Partnership.
III. EXERCISE OF THE OPTION
i. The right to exercise an Option is conditional upon a successful
completion of a Fund Raise.
ii. The number of Option Shares shall be calculated as 7% (seven per cent)
of the shares issued in each and every Fund Raise. For the avoidance of
doubt and example of this calculation in the initial Fund Raise
would be:
If the Fund Raise is for the amount of $10,000,000 at a price of $0.25
per share so a total share issuance of 40,000,000 shares then the
number of Option Shares would be 2,800,000 at an Exercise Price
of $0.25 per share.
iii. The Option is only capable of being exercised in whole (subject to the
terms of this Agreement and satisfaction of the Condition) during the
Option Period unless it shall have lapsed in accordance with the
terms of this Agreement.
iv. The Option may be exercised by the Partnership (or such assignee under
clause II.(ii) giving notice in writing to the Company in the form set
out in the Schedule hereto. The Option Notice must be accompanied by a
remittance for the aggregate of the subscription monies payable in
respect of the Option Shares to be subscribed for or issued,
calculated as the Exercise Price per Option Share.
v. If the Option or any part of the Option is not exercised during the
Option Period, the Option or such part of the Option as remains
unexercised shall lapse and cease to have any further effect.
vi. Neither the Option issued pursuant to this Agreement, nor any of the
Option Shares to be issued pursuant to the Option, shall be covered
by the Discovery Energy Corp. 2012 Equity Incentive Plan. Consequently,
the following customary legend shall be placed on all stock
certificates representing the Option Shares:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE LAW, AND THEY MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW OR DELIVERY TO THE CORPORATION OF AN OPINION OF
LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED."
IV. ALLOTMENT OF SHARES
i. Subject to satisfaction of all the Condition the relevant number of
Option Shares as specified in the Option Notice shall be allotted
to the Partnership, credited as fully paid.
ii. The Company shall at all times keep available sufficient authorised but
unissued Shares to satisfy an exercise of the Option.
iii. The Option Shares allotted pursuant to this Agreement shall be
identical to and rank pari passu with the other issued Shares.
V. VARIATION OF SHARE CAPITAL
i. In the event of any variation of the share capital of the Company by way
of capitalisation, rights issue, consolidation, sub division or
reduction, the number of Option Shares and the Exercise Price shall be
adjusted in such manner as the auditors for the time being of the
Company shall in writing advise the Directors to be in their opinion
fair and reasonable.
ii. As soon as reasonably practicable after making any such adjustment the
Directors shall give written notice thereof to the Partnership and
at the written request of the Partnership and/or upon the surrender of
this Agreement shall either endorse a memorandum thereon recording such
adjustment (under the hand of a Director) and return the same to
the Partnership or execute and deliver to the Partnership a new agreement
reflecting such adjustment but in all other respects incorporating the
terms hereof.
VI. NOTICES
Notices or documents required to be given to the Partnership shall
either be delivered by hand, sent by first class post or by facsimile to
the Partnership's address as shown above or to such other address in
England as the Partnership may designate by notice given in accordance
with the provisions of this clause. Notices or documents required to be
given to the Company shall be addressed to the Secretary of the
Company and shall either be delivered by hand, sent by first class
post or by facsimile to the registered office of the Company.
Notices shall be deemed to have been served if delivered by hand when
delivered, if sent by first class post 48 hours after posting
and if by facsimile transmission when despatched.
VII. GENERAL
i. Any time, date or period mentioned in this Agreement may be extended by
agreement between the parties, but as regards any time, date or period
(whether or not extended as aforesaid) time shall be of the
essence.
ii. Subject to the Engagement Letter, this Agreement supersedes any previous
agreement between the parties in relation to the matters dealt with
herein and represents the entire agreement and understanding between
the parties in relation thereto. No variation, modification or waiver
of any provision of this Agreement shall be effective unless made by
an express written agreement and signed by the parties who are
affected thereby.
iii. The parties shall, and shall use their respective reasonable endeavours
to procure that any necessary third parties shall do, execute and
perform all such further agreements, documents, assurances, acts and
things as any of the parties may reasonably require by notice in writing
to the others to carry the provisions of this Agreement into full
force and effect.
iv. No neglect, delay or indulgence on the part of any party hereto in
enforcing any term or condition of this Agreement shall operate as a
waiver thereof.
v. This Agreement shall be governed by and construed in accordance with
English law and the parties hereby submit to the exclusive jurisdiction
of the English Courts.
vi. Each provision of this Agreement shall be construed separately and (save
as otherwise expressly provided herein) none of the provisions hereof
shall limit or govern the extent, application or construction of any
other of them and notwithstanding that any provision of this Agreement
may prove to be illegal or unenforceable in whole or in part the other
provisions of this Agreement and the remainder of the provision in
question shall continue in full force and effect.
vii. Nothing in this Agreement will create or confer any right or other
benefits on or in favour of any person who is not a party to this
Agreement whether pursuant to the Contracts (Rights of Third
Parties) Act 1999 or otherwise.
viii. This Agreement may be executed in any number of counterparts all of
which when taken together shall constitute a single instrument.
This Agreement has been executed and delivered on the date first written above.
THE SCHEDULE
NOTICE OF EXERCISE
TO: Discovery Energy Corp.
For the attention of: Keith Spickelmier, Executive Chairman & Keith McKenzie,
CEO
FROM:
1. We hereby give notice to Discovery Energy Corp. that with immediate
effect on your receipt of this notice we are exercising our right,
granted pursuant to an Option Agreement dated 30 September 2012, to
subscribe for the Option Shares (such term being defined as it is in the
said Option Agreement) in the capital of Discovery Energy Corp. at a
total subscription price of $[ ], subject however to the terms
of the said Option Agreement.
2. We enclose herewith a cheque for the sum of $[ ] in favour of
Discovery Energy Corp. and crossed "a/c payee" in payment for the
shares referred to in paragraph I.
Dated
Signed for and on behalf of
Chrystal Capital Partners LLP
EXECUTED as an AGREEMENT by )
DISCOVERY ENERGY CORP. )
by the signature of two duly )
authorised officers: )
Keith Spickelmier, Chairman
-----------------------------
Keith McKenzie, CEO/Director
------------------------------
EXECUTED as an AGREEMENT by )
CHRYSTAL CAPITAL PARTNERS LLP )
by the signature of all of its )
partners: )
------
APPENDIX 4
NOTICE OF TREATMENT AS RETAIL CLIENT
The Financial Services Authority Market Act 2000 ("FSMA") covers, inter alia,
promotion of potential investments in unlisted UK and European (EU) funds to
certain categories of potential investors. Some of these potential investors may
be regulated by the Financial Services Authority ("FSA"); some may be listed
companies, institutions, funds, trusts, pension schemes, investment schemes etc.
Others may be categorised as "CLIENTS" for regulatory purposes, as explained
further below. Some may be individuals, some not. Some may be experienced in
investments, some not.
On the basis of information you have given us, we have categorised you as a
"RETAIL CLIENT", by reason of your experience and understanding in relation to
investments. A Retail Client may be afforded the greatest level of protection
under the FSA rules in comparison to the other deemed client classifications.
As a consequence of this categorisation, if you are able to meet the "ELIGIBLE
COMPLAINANT" classification and are dissatisfied with our services/ products you
may be entitled to make a claim under the Financial Ombudsman Services.
Similarly, if you qualify as an "ELIGIBLE CLAIMANT" you may be able to make a
claim under the Financial Services Compensation Scheme.
APPENDIX 5
SHAREHOLDER REGISTER
[ ]
APPENDIX 6
[TO BE PLACED ON DISCOVERY ENERGY CORP HEADED NOTEPAPER]
To: [LEGAL ADVISOR OF Discovery Energy Corp]
[Date]
Dear Sirs
FUND RAISING
Pursuant to an engagement letter entered into between Discovery Energy Corp
("the Company") and Chrystal Capital Partners LLP ("Chrystal Capital") dated 30
September 2012 (the "Engagement Letter"), a copy of which is enclosed, we hereby
confirm that we irrevocably authorise and instruct you to:
1. pay to Chrystal Capital, the Cash Success Fee as defined in paragraph 4.2
of the Engagement Letter, by way of deduction. Such payment will be made
by you to Chrystal Capital immediately after you have received the
proceeds of the Fund Raise; and
2. insert in any agreement between a Prospect and the Company in connection
with the Fund Raise (as defined in the Engagement Letter) a term
substantially in the form of:
"On completion of this [Subscription Agreement], the Company shall settle with
Chrystal Capital (or as it may direct), the Cash Success Fees as defined in
paragraph 4.2 of the Engagement Letter dated 30 September 2012 between Discovery
Energy and Chrystal Capital Partners LLP"
Yours faithfully
For and on behalf of
Discovery Energy Corp
cc. Chrystal Capital Partners LLP
APPENDIX 6
RESTRICTED SHARE AWARD AGREEMENT
THIS RESTRICTED SHARE AWARD AGREEMENT (the "Award Agreement") is between
Discovery Energy Corp., a Nevada corporation ("Company"), and Chrystal Capital
Partners LLP ("Chrystal Capital").
WITNESSETH:
WHEREAS, the Company and Chrystal Capital have entered into an engagement
agreement (the "Engagement Agreement") pursuant to which Chrystal Capital is to
provide to the Company certain services including those pertaining to the
raising of capital for the Company (all capitalized terms that are used herein
but not defined shall have the meanings ascribed to them in the Engagement
Agreement); and
WHEREAS, the Engagement Agreement requires the Company and Chrystal Capital
to enter into this Agreement whereby Chrystal Capital receives a grant of a
stock award (a "Stock Award"); and
NOW, THEREFORE, in consideration of the above premises, the Company and
Chrystal Capital agree as follows:
1. GRANT OF STOCK AWARD
Subject to the terms and conditions set forth herein, and for and in
consideration of services heretofore provided and hereafter to be provided by
further consideration, a Stock Award consisting of a total of 6,472,425 (six
million, four hundred and seventy two thousand and four hundred and twenty five)
shares of the Company's common stock, par value $.001 per share ("Common
Stock"). For purposes of this Award Agreement, the date of grant of the Stock
Award (the "Date of Grant") shall be 30 September 2012.
2. VESTING
(a) Vesting of Restricted Shares. Immediately upon issuance of the
shares comprising the Stock Award, all 6,472,425 shares comprising the Stock
Award (such shares being referred to hereinafter as the "Restricted Shares")
shall be vested, restricted and subject to forfeiture in accordance with the
following terms:
(i) During the period during which the restrictions provided for herein
remain in effect (the "Restriction Period"), Chrystal Capital shall not be
permitted to sell, transfer, pledge or assign any Restricted Shares.
(ii) Except as otherwise provided for herein, Chrystal Capital shall
have, with respect to the Restricted Shares, all of the rights of a stockholder
of the Company, including the right to vote the shares and the right to receive
any cash dividends.
(iii) The restrictions provided for herein with respect to the
Restricted Shares shall lapse as follows:
(A) The restrictions on all 6,472,425 Restricted Shares shall
lapse immediately after the Company closes on a Fund Raise (other than a Fund
Raise constituting or involving one of the Pre-Existing Exceptions) during the
Exclusivity Period.
(B) The restrictions on 3,236,213 Restricted Shares shall lapse
immediately after the Company closes on a Fund Raise by MIGO 45 days after the
Date of Grant but during the Exclusivity Period. Upon the lapse of the
restrictions on the preceding 3,236,213 Restricted Shares, the remaining
3,236,212 Restricted Shares shall be forfeited.
(iv) If a Fund Raise with respect to which restrictions on the
Restricted Shares are to lapse pursuant to subsection (iii) immediately above is
not completed by the end of the Exclusivity Period, then all Restricted Shares
still subject to restrictions shall be forfeited by Chrystal Capital.
(b) All stock certificates representing Restricted Shares issued
pursuant to this Award Agreement shall be subject to the following legends:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE LAW, AND THEY MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR DELIVERY TO THE
CORPORATION OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AND POTENTIAL FORFEITURE PURSUANT TO THE PROVISIONS OF THE RESTRICTED SHARE
AWARD AGREEMENT, DATED SEPTEMBER ____, 2012, BETWEEN THE COMPANY AND CHRYSTAL
CAPITAL PARTNERS LLP, WHICH WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
THIS CERTIFICATE UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS
OR REGISTERED OFFICE OF A WRITTEN REQUEST FROM THE HOLDER REQUESTING SUCH COPY."
(c) The Company shall cause the certificate(s) representing the
Restricted Shares to be delivered to Chrystal Capital's attorneys as a
depository for safekeeping until the occurrence of an event leading to vesting
or forfeiture. Upon the execution and delivery of this Award Agreement,
Chrystal Capital shall deliver to the Company a stock power (endorsed in blank
and medallion guaranteed) relating to the Restricted Shares in the form attached
hereto as Exhibit A (the "Stock Power), which authorizes the Company to transfer
to the Company any and all forfeited Restricted Shares. Upon the occurrence of
an event leading to vesting, the Company shall cause a new certificate to be
issued without the legend referring to this Award Agreement in the name of
Chrystal Capital for the Restricted Shares thereupon becoming vested. Upon the
occurrence of an event leading to forfeiture, Chrystal Capital shall cause its
attorneys to return all certificate(s) representing the Restricted Shares to be
returned to the Company.
3. MISCELLANEOUS TERMS
(a) Entire Agreement: Governing Law. This Award Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Chrystal Capital with respect to the subject matter hereof, and this
Award Agreement may not be amended except by means of a writing signed by the
Company and Chrystal Capital. In the event of conflict between the terms of the
Engagement Agreement and the terms of this Award Agreement, the terms of this
Award Agreement shall control. THIS AWARD AGREEMENT IS GOVERNED BY TEXAS LAW
EXCEPT FOR THAT BODY OF LAW PERTAINING TO CONFLICT OF LAWS.
(b) Warranties, Representations and Covenants. Chrystal Capital
acknowledges and agrees that nothing in this Award Agreement shall confer upon
Chrystal Capital any right with respect to continuation of its engagement by the
Company, nor shall it interfere in any way with Chrystal Capital's right or the
Company's right to terminate Chrystal Capital's engagement or other services at
any time, with or without cause, as provided in the Engagement Agreement.
(c) Anti-Dilution. The terms, provisions and conditions of this Award
Agreement shall be appropriately adjusted in the event that the outstanding
shares of the Company's common stock shall be subdivided into a greater number
of shares or combined into a smaller number of shares, or a dividend in the
Company's common stock shall be paid in respect of such common stock.
[SIGNATURES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement as of
the ____ day of September 2012.
"COMPANY" "CHRYSTAL CAPITAL"
DISCOVERY ENERGY CORP., CHRYSTAL CAPITAL PARTNERS LLP
a Nevada corporation
By:__________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:___________________________ Title:_______________________________
Address: Discovery Energy Corp. Address: New Broad Street House
Houston, Texas 77056 35 New Broad Street
London EC2M 1NH
EXHIBIT A
STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, Chrystal Capital Partners LLP hereby sells, assigns and
transfers unto
____________________________________________________________________
_____________________________________ Shares of the Common Stock of Discovery
Energy Corp., a Nevada corporation, standing in his/her/its name on the Books of
said corporation represented by Certificate(s) No. ______________ herewith, and
does hereby irrevocably constitute and appoint ___________________________
attorney to transfer the said stock on the Books of the within named corporation
with full power of substitution in the premises.
Dated ___________________ _____, 2012
CHRYSTAL CAPITAL PARTNERS LLP
By:________________________________
Name:______________________________
Title:_______________________________
In Presence of
______________________________
______________________________
[Affix Medallion Guarantee Here]
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