A corporation (“issuer”) often retains the services of a securities broker to oversee an initial public offering. The issuing corporation may decide to enter into a best efforts agency agreement (see template D03200 of our Business Precedents templates) with a broker who undertakes to use its best efforts to find buyers for the shares the corporation is offering in its prospectus, without however acquiring them.

Our agreement template defines the relationship between the best efforts underwriter, the depositary and the issuer. It includes the obligation for the depositary to hold the negotiable instruments provided by the best efforts underwriter in trust, until the latter i) confirms that the minimal conditions of the investment are met or that the transaction is cancelled and ii) schedules a closing session at which the depositary will transfer the sums in its custody to the issuing corporation.

This template only applies in the case where the depositary’s tasks are to be completed by the best efforts underwriter or another party. If this does not apply to your scenario, it would be best to use the Escrow Agency Agreement (template D03400).

It is important to pay a particular attention to the applicable legislation that could affect the interpretation of certain clauses in this agreement, such as the Civil Code of Quebec, especially its provisions concerning mandates, deposit agreements, administering the property of others and service agreements, and the Quebec Securities Act and its regulations, in particular its provisions concerning brokers.

We recommend using the escrow agreement in order to define the relationship between the different parties involved in a share subscription until the shares are finally acquired by investors.

An investor who signs a subscription form must provide a negotiable instrument, such as a cheque, made out to the depositary for the total amount of the subscription. The depositary must keep these negotiable instruments until the broker i) confirms that the minimal conditions of the investment are met and ii) schedules a closing session at which the depositary will transfer the sums in its custody to the issuing corporation. This agreement, once signed by all the parties, must be filed with the Autorité des marchés financiers (AMF) and available for public consultation.

The depositary’s tasks may be completed by the best efforts underwriter alone or by another third party. Our template only applies to the case where the broker acts as a best efforts underwriter and not as a depositary. When the best efforts underwriter also acts as depositary, you should use the Escrow Agency Agreement (template D03400).

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Agreement
0.01.02 AMF
0.01.03 Breach
0.01.04 Closing Session
0.01.05 Commercial Paper
0.01.06 Commercial Paper Security
0.01.07 Deadline
0.01.08 Event of Default
0.01.09 Force Majeure
0.01.10 Initial Public Offering
0.01.11 Intellectual Property
0.01.12 Law
0.01.13 Legal Representatives
0.01.14 Minimum Distribution
0.01.15 Ordinary Course of Business
0.01.16 PARTY
0.01.17 Person
0.01.18 Prime Rate
0.01.19 Prospectus
0.01.20 Trust Account
0.02 Entire Agreement
0.03 Jurisdiction
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
1.00 PURPOSE
1.01 Appointment
1.01.01 Initial Appointment
1.01.02 Removal
1.01.03 New Appointment
1.01.04 Delivery
1.01.05 Liability
1.02 Mandate
2.00 CONSIDERATION
2.01 Professional Fees
2.01.01 Amount
2.01.02 Indexation
2.01.03 Additional Fees
2.02 Disbursements
3.00 TERMS OF PAYMENT
3.01 Lump Sum Fee
3.02 Additional Fees
3.03 Disbursements
3.04 Interest
3.05 Loss of Term
3.06 Reimbursement of Legal Costs
4.00 SECURITY
4.01 In Favour of ISSUER
4.02 In Favour of ESCROW AGENT
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Authority
5.02 Binding Agreement
6.00 REPRESENTATIONS AND WARRANTIES OF ISSUER
7.00 OTHER REPRESENTATIONS AND WARRANTIES
7.01 ESCROW AGENT
7.01.01 Authorizations
7.02 AGENT
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Representations
9.00 DUTIES AND OBLIGATIONS OF ISSUER
9.01 Terms of Initial Public Offering
9.01.01 Prospectus
a) Undertaking
b) Default
9.01.02 Period
9.02 Agency Agreement
9.03 Closing Session
9.03.01 Minimum Distribution Realized
9.03.02 Additional Closing Session
9.04 Commercial Paper Security
10.00 OTHER DUTIES AND OBLIGATIONS
10.01 ESCROW AGENT
10.01.01 Mandate
10.01.02 Custody of Commercial Paper
10.01.03 Minimum Distribution Realized
a) Notice
b) Commercial Paper Security
c) Cashing-In
d) Commercial Paper Not Honoured
e) Release
i) Amount Cashed In
ii) Commercial Paper Security
10.01.04 Minimum Distribution Not Realized
a) By the Deadline
b) Before the Deadline
10.01.05 Dispute
10.01.06 Liability
a) Acts, Errors or Omissions
b) Non Liability
i) Acts by PARTIES
ii) Validity of Commercial Paper
iii) Legal Counsel
c) Legal Proceedings
10.01.07 Resignation
10.02 AGENT
10.02.01 Validity of Subscription
10.02.02 Transmitting Commercial Paper
11.00 SPECIAL PROVISIONS
11.01 Assignment
11.01.01 Prohibition
11.01.02 Exception
11.02 Force Majeure
11.02.01 No Default
11.02.02 Duty
11.02.03 Rights of Other PARTY
11.03 Further Assurances
11.04 Legal Costs
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
12.02.02 Mediation
a) Process
b) Mediator
c) Settlement
d) Legal Proceedings [OR Arbitration]
12.02.03 Arbitration
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.03 Remedies
12.03.01 Election
12.03.02 No Limitations
12.04 Election
12.05 Counterparts
12.06 Amendment
12.07 No Waiver of Rights
12.08 Electronic Transmission
12.09 Language
13.00 TERMINATION
13.01 Mutual Consent
13.02 Without Notice
13.03 With Notice
13.03.01 With Time to Cure Event of Default
13.03.02 Without Time to Cure Event of Default
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 End of Agreement
15.02 Survival
16.00 SCOPE


SCHEDULE A – EXCERPT OF A RESOLUTION OF ..........
SCHEDULE 0.01.19 – PROSPECTUS