A recent decision of the Ontario Superior Court in Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc. highlights the importance of including termination rights in bought deal letters and other engagement letters used in capital markets transactions.

The case involved Stifel Nicolaus Canada (then Thomas Weisel Partners) refusing to close a private placement of subscription receipts after executing a bought deal letter with Stetson Oil & Gas Ltd. in July of 2008. Following an unsuccessful marketing process, Stifel refused to proceed with the transaction, including failing to negotiate a definitive underwriting agreement.

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