<PAGE> 1
As Filed with the Securities and Exchange Commission on October 13, 1998
Commission File No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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JAWS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
603-7th Avenue S.W.
Suite 550
Calgary, Alberta CANADA T2P 2T5
(403) 508-5055
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Nevada 7371 98-0167013
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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ROBERT KUBBERNUS
CHIEF EXECUTIVE OFFICER
JAWS TECHNOLOGIES, INC.
603-7th Avenue S.W., Suite 380
Calgary, Alberta CANADA T2P 2T5
(403) 508-5055
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon
as possible after the Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<PAGE> 2
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CALCULATION OF REGISTRATION FEE
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Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount To Offering Price Per Aggregate Offering Amount of
To Be Registered Be Registered(1) Security (2) Price Registration Fee
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Common Stock Underlying 25,000,000 Shares of
Bristol Asset Shares Common Stock $0.28 $ 7,000,000 $2,372.88
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Common Stock Underlying 3,000,000 Shares of
Bristol Asset Warrants Common Stock $0.28 $ 840,000 $ 284.75
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Common Stock Underlying TK
Convertible Debentures 12,000,000 $0.28 $ 3,000,000 $1,016.95
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Common Stock Underlying TK
Warrants 1,428,572 $0.28 $ 400,000 $ 135.59
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TOTAL 41,428,572 Shares $0.28 $11,240,000 $3,810.17
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(1) Calculated pursuant to Rule 457(c) and (g).
(2) Based on the closing bid price of the Registrant's Common Stock on October
7, 1998, as quoted in The NASD OTC Bulletin Board.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
THE INFORMATION IN THIS REGISTRATION STATEMENT IS NOT COMPLETE AND MAY
BE CHANGED. THE COMPANY MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES EXCHANGE COMMISSION IS EFFECTIVE. THIS
REGISTRATION STATEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
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<PAGE> 3
JAWS TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
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ITEM NUMBER AND HEADING IN LOCATION
FORM SB-2 REGISTRATION STATEMENT IN PROSPECTUS
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1. Front of the Registration Statement and Outside
Front Cover Page of Prospectus.................. Not Applicable
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Not Applicable
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Not Applicable
6. Dilution........................................ Not Applicable
7. Selling Security Holders........................ Selling Security Holders
8. Plan of Distribution............................ Plan of Distribution
9. Legal Proceedings............................... Business
10. Directors, Executive Officers, Promoters and
Control Persons................................. Management; Certain Transactions; Risk Factors
11. Security Ownership of Certain Beneficial Owners
and Management.................................. Security Ownership of Certain Beneficial Owners and
Management
12. Description of Securities....................... Description of Securities
13. Interest of Named Experts and Counsel........... Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
15. Organization Within Last Five Years............. The Company; Business
16. Description of Business......................... Business; Prospectus Summary; Risk Factors;
Management's Discussion and Analysis
17. Management's Discussion and Analysis or Plan
of Operations................................... Management's Discussion and Analysis
18. Description of Property ........................ Business
19. Certain Relationships and Related Transactions.. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters............................. Market for Common Equity and Related Stockholder
Matters; Description of Securities
21. Executive Compensation.......................... Management; Executive Compensation
22. Financial Statements............................ Financial Statements
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.......... Not Applicable
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<PAGE> 4
PROSPECTUS October 13, 1998
JAWS TECHNOLOGIES, INC.
25,000,000 SHARES OF COMMON STOCK UNDERLYING BRISTOL ASSET RESERVED SHARES
3,000,000 SHARES OF COMMON STOCK UNDERLYING BRISTOL ASSET WARRANTS
12,000,000 SHARES OF COMMON STOCK UNDERLYING
THOMSON KERNAGHAN CONVERTIBLE DEBENTURES
1,428,572 SHARES OF COMMON STOCK UNDERLYING THOMSON KERNAGHAN WARRANTS
This Prospectus relates to (i) 25,000,000 shares of Common Stock
underlying a put option issued by Bristol Asset Management V LLC ("Bristol
Asset") in Jaws Technologies, Inc., a Nevada corporation ("Jaws US" or the
"Company") held by the Company; and (ii) 3,000,000 warrants to purchase
3,000,000 shares of Common Stock of the Company, issuable to Bristol Asset; and
(iii) 12,000,000 shares of Common Stock of Jaws US issuable upon the exercise of
a 10% Convertible Debentures with a US $2,000,000 principal amount held by
Thomson Kernaghan & Co. Ltd. ("TK") ("Convertible Debenture"); and (iv)
1,428,572 warrants (the "TK Warrants") to purchase 1,428,572 shares of Common
Stock of Jaws US issued to TK. The securities issued to Bristol Asset and to TK
were issued in Reg. S transactions by Jaws US on August 27, 1998 and September
25, 1998, respectively. See "Selling Security Holders".
The Put Options granted by Bristol Asset and executed by the Company
through a series of options allow the Company to issue 25,000,000 shares of the
Company's Common Stock in consideration of up to $7,000,000 at a price per share
equal to 77% of the lowest sale price during the twenty-day period immediately
prior to the purchase. The 3,000,000 warrants issuable to Bristol Asset are at
an exercise price equal to ninety-four percent (94%) of the average closing bid
price as of the date of issuance of the warrant. The Convertible Debenture
issued allows TK to convert to shares of Common Stock of Jaws US at a conversion
price equal to the lesser of seventy-eight percent (78%) of the average closing
bid price on the OTC Bulletin Board for the Jaws US shares of Common Stock in
the three trading days prior to (i) the date of notice of conversion, which must
be on or before October 31, 2001 or (ii) the initial closing date of September
25, 1998 (the "TK Initial Closing Date"). The 1,428,572 warrants issued to TK
are at an exercise price per share equal to the average closing bidding price of
the Common Stock for the three trading days preceding the closing date expiring
October 31, 2001.
Bristol Asset and Thomson Kernaghan & Co., Ltd. (collectively, the
"Selling Security Holders") may be deemed underwriters within the meaning of the
1933 Act, with respect to the securities offered, and any profits realized or
commissions received may be deemed underwriting compensation.
In the event all the warrants, put options and Convertible Debenture
features are exercised, the Company will receive gross proceeds up to
$11,240,000. See "Selling Security Holders", "Plan of Distribution" and "Use of
Proceeds". The Company will pay all of the expenses of this prospectus estimated
at approximately $50,000.
Jaws US' Common Stock is traded on the NASD OTC Bulletin Board under the
Symbol, JAWZ, and last traded at $0.28 on October 7, 1998.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. FOR
INFORMATION REGARDING CERTAIN RISKS RELATING TO THE COMPANY, SEE "RISK FACTORS"
ON PAGES 9-12.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 5
AVAILABLE INFORMATION
The Company has filed a registration statement with the Commission under
the Securities Act with respect to the Securities registered hereby. This
Prospectus omits certain information contained in said registration statement as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is made
to the registration statement, including the exhibits thereto. Statements
contained herein concerning the contents of any contract or any other document
are not necessarily complete, and in each instance, reference is made to such
contract or other document filed with the Commission as an exhibit to the
registration statement, or otherwise, each such statement being qualified in all
respects by such reference. The registration statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such materials can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and at the Commission's web site.
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<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in or incorporated by reference into this Prospectus. The statements
which are not historical facts contained in this Prospectus are forward-looking
statements that include risks and uncertainties, including those described under
"Risk Factors". Except where otherwise indicated, all share and per share data
and information included in this Prospectus relating to the number of shares of
Common Stock assumes no exercise of (i) the Bristol Asset Warrants, (ii) the TK
Warrants; (iii) the Bristol Asset Reserved Shares; or (iv) the options available
for grant under the Company's 1998 Incentive Stock Option Plan. Unless the
context otherwise requires, all share information in this Prospectus gives
effect to an increase in the share capital to be effected immediately prior
to Closing.
THE COMPANY
GENERAL
Jaws US is a Nevada corporation which owns a 100% interest in Jaws
Technologies, Inc., a company registered in Alberta, Canada located in Calgary,
Alberta ("Jaws Canada"). Jaws Canada has developed proprietary software
encompassing encryption algorithms which are used to secure binary data in
various forms, including streaming or block based data.
Currently, Jaws Canada's software technology is capable of encrypting to
a bit level of 4,096. Jaws Canada software operates under Windows 3.1, Windows
95, Windows 98, and Windows NT. Other platforms are currently under development.
The programming of Jaws Canada software has been in development for
approximately 15 years. Commercialization of Jaws Canada's first product JAWS L5
DATA ENCRYPTION SOFTWARE, began in May 1998. The program has been tested and
validated through a number of engineering sources for its programming
efficiency, structure and strengths.
Numerous markets exist for the Jaws Canada software. Management believes
that Value Added Resellers (VAR) entail a significant potential market for Jaws
Canada products. Such external software developers can use the Jaws Canada
software as a utility embedded in their product to augment or enhance their
particular product offering. Accounting software programs, database
developments, E-mail programs and communication software are all potential
channels for Jaws Canada software. Additional potential customers include the
Smart Card industry, hand-held computing devices, telecommunications and access
control devices. The product is implemented as a software utility to provide
security enhancements to existing product offerings by other manufacturers.
Direct sales channels include product offerings to Internet service providers
(ISP), data warehouses, corporate networks and personal computer users.
Jaws US has entered into an investment agreement with Bristol Asset
Management V LLC ("Bristol Asset") dated August 27, 1998 pursuant to which
Bristol Asset has granted to the Company the right to require Bristol Asset to
purchase up to $7,000,000 in Common Stock of the Company, subject to conditions,
at a price equal to seventy-seven percent (77%) of the lowest sale price during
the ten day period immediately prior to the purchase. Bristol Asset also
received warrants to purchase up to 3,000,000 shares at $0.28 per share.
Jaws US has also entered into a Debenture Acquisition Agreement dated
September 25, 1998 with Thomson Kernaghan & Co., Ltd. an Ontario corporation
("TK"). Pursuant to this agreement TK has purchased from Jaws up to $2,000,000
of a 10% Convertible Debenture and $400,000 in warrants.
The Company's executive offices are located at 603-7th Avenue, S.W.,
Suite 550, Calgary, Alberta, Canada T2P-2T5 and its telephone number is (403)
508-5055.
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<PAGE> 7
THE OFFERING
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Common Stock Offered Hereby.................... 41,428,572 shares
Common Stock Outstanding as of
September 1, 1998.......................... 8,700,000 shares
Common Stock Outstanding after
the Offering............................... 50,128,572 shares
Use of Proceeds................................ For the product development, expansion of sales and
marketing and working capital. See "Use of Proceeds."
Risk Factors................................... An investment in the Common Stock involves a high degree
of risk and immediate substantial dilution. See "Risk
Factors" and "Dilution".
NASD OTC Bulletin Board Symbol................. JAWZ
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SUMMARY FINANCIAL DATA
CONSOLIDATED FINANCIAL STATEMENTS
The summary financial data in the table are derived from the audited
consolidated financial statements and related notes thereto of Jaws US. The data
should be read in conjunction with the consolidated financial statements and the
related notes contained elsewhere herein.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL INFORMATION
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Six month period ended January 27, 1997 through
June 30, 1998 December 31, 1997
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Results of operations
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Revenue $ 1,938 $ --
Expenses $1,593,871 $ 136,854
Net loss for the period $1,591,933 $ 136,854
Financial position
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Current assets $ 158,800 $ 7,611
Working capital (Deficiency) $ (9,983) $ (25,365)
Total assets $ 237,093 $ 9,931
Total liabilities $ 184,948 $ 111,135
Stockholder's equity (Deficiency) $ 52,145 $(101,204)
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<PAGE> 8
FORWARD-LOOKING STATEMENTS
When included in this Prospectus, the words "expects,"
"intends,""anticipates," "plans," "projects" and "estimates," and analogous or
similar expressions are intended to identify forward-looking statements. Such
statements, which include statements contained in "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," are inherently subject to a variety of
risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements. For a discussion of
certain of such risks, see "Risk Factors." These forward-looking statements
speak only as of the date of this Prospectus. The Company expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
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<PAGE> 9
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THE PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
BEFORE MAKING AN INVESTMENT. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE
COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY
STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE TO ALL
RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.
RISKS CONCERNING JAWS US
Solvency of the Company. The Company has incurred significant losses
since its establishment in 1997. The Company may require additional financing,
above and beyond the Bristol Asset shares and the TK financing detailed herein,
in order to carry on its business. There can be no assurance that such financing
will be available or, if available, will be upon terms satisfactory to Jaws.
Dividends and Cash Flow. The Company has a limited history and currently
does not have an operating business. The Company has no present intention to pay
dividends to the holders of its Jaws US Common Shares.
Tradename. A number of U.S. international companies currently use all or
a portion of the name "Jaws" in connection with products or services in similar
industries as that engaged in by the Company. While the Company is attempting to
qualify under a trademark its name throughout the U.S. and Canada, significant
issues may be present as to the ability to widely use the name in connection
with the products or services to be rendered by the Company.
Intellectual Property and Proprietary Rights. The Company attempts to
protect its proprietary rights in the Company's software by utilizing copyright,
trademark, and trade secrets laws, employee and third party
non-disclosure/confidentiality agreements, and other methods of protection
common in the industry. Despite any precautions that may be taken by the
Company, it may be possible for an unauthorized third party to copy or
reverse-engineer certain portions of the Company's software or to obtain and use
information that the Company regards as proprietary. The Company does not
presently own any patents, patent applications, copyright registrations, or
registered trademarks, but is in the process of preparing a U.S. patent
application. The Company licenses the source code for its software to some
customers to enable them to customize the software to meet particular
requirements. Although the Company's source code license contains
confidentiality and nondisclosure provisions, there can be no assurance that
such customers will take adequate precautions to protect the source code. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. There
can be no assurance that the mechanisms used by the Company to protect its
software will be adequate or that the Company's competition will not
independently develop software products that are substantially equivalent or
superior to the Company's software products. As the number of software products
in the industry increases and the functionality of these products further
overlaps, the Company believes that software programs could become increasingly
the subject of infringement claims. See "Business -- Intellectual Property."
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<PAGE> 10
Limitation of Liability of Directors. As permitted by the Nevada General
Corporation Law, the Company's Articles of Incorporation, as amended, eliminate,
with certain exceptions, the personal liability of its directors to the Company
and its shareholders for monetary damages as a result of a breach of fiduciary
duty. Such a provision makes it more difficult to assert a claim and obtain
damages from a director in the event of a breach of his fiduciary duty. The
Nevada General Corporation Law provides that a corporation has the power to (i)
indemnify directors, officers, employees and agents of the corporation against
judgments, fines and amounts paid in settlement in connection with suits,
actions and proceedings and against certain expenses incurred by such parties if
specified standards of conduct are met; and (ii) purchase and maintain insurance
on behalf of any of the foregoing parties against liabilities incurred by such
parties in the foregoing capacities. The Bylaws of the Company provide for
indemnification of its officers and directors against expenses actually and
necessarily incurred by them in connection with the defense of any action, suit
or proceeding in which they are made parties by reason of being or having been
officers or directors of the Company; except in relation to matters as to which
any such director or officer is adjudged in such action, suit or proceeding to
be liable for gross negligence or willful misconduct in the performance of duty.
However, such indemnification is not exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement, vote of
shareholders or otherwise.
Dependence on Key Personnel. The success of the Company depends to a
significant extent upon the performance of its key officers, the loss of one or
more of whom could have a material adverse effect on the Company. The Company
believes that its future success also will depend in large part upon its ability
to attract and retain highly skilled managerial, technical and sales and
marketing personnel, who are in demand. There can be no assurance that the
Company will be successful in attracting and retaining such personnel.
Risks Related to Possible Acquisitions. The Company may expand its
operations through the acquisition of additional businesses. There can be no
assurance that the Company will be able to identify, acquire or profitably
manage additional businesses or successfully integrate any acquired businesses
into the Company without substantial expenses, delays or other operational or
financial problems. Further, acquisitions may involve a number of special risks
or effects, including diversion of management's attention, failure to retain key
acquired personnel, unanticipated events or circumstances, legal liabilities and
amortization of acquired intangible assets and other one-time or ongoing
acquisition related expenses, some or all of which could have a material adverse
effect on the Company's business, operating results and financial condition.
Client satisfaction or performance problems of a single acquired firm could have
a material adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that the acquired businesses, if any, will
achieve anticipated revenues and earnings. The failure of the Company to arrange
its acquisition strategy successfully could have a material adverse effect upon
the Company's business, operating results and financial condition.
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<PAGE> 11
Although the Company's products have never been the subject of
infringement claims, there can be no assurance that third parties will not
assert infringement claims against the Company in the future or that any such
assertion will not require the Company to enter into royalty arrangements or
result in costly litigation and liability.
Year 2000 Compliance Risk. The Company believes that its principal
software products are Year 2000 compliant. However, because the Company's
products are designed to work with other software products developed and sold by
third parties, any failure of these third party software products to be Year
2000 compliant could result in the failure of the Company's software products to
effectively operate. Any such failure could harm the Company's reputation in the
market and could have an adverse effect on sales of the Company's products and
its financial performance.
RISKS CONCERNING JAWS CANADA
Creditworthiness of Clients. The value of Jaws Canada's computer
equipment, software, and intellectual property thereto may depend on the credit
and financial stability of Jaws Canada's customers. Jaws Canada's projected
income would be adversely affected if a significant number of customers were
unable to meet their obligations to Jaws Canada or if Jaws Canada were unable to
continue to collect its accounts receivables. In the event of default by
customers, Jaws Canada may experience delays in enforcing its rights as a vendor
and may incur substantial costs in protecting its investment.
Start-Up Company. The business of Jaws Canada should be considered
highly speculative due to its present stage of development. Jaws Canada does not
have a history of earnings nor has it sufficiently diversified such that it can
mitigate the risks associated with its planned activities. Jaws Canada has
limited cash and other assets and a limited business history. Security holders
must rely solely upon the ability, expertise, judgement, discretion, integrity
and good faith of the Company's management in all aspects of the development and
implementation of Jaws Canada's business strategy.
Competition. The market for IT services is very competitive. There are a
large number of competitors and it is a rapidly changing environment. Primary
competitors include participants from a variety of market segments, including
"Big Five" accounting firms, systems consulting and implementation firms,
application software firms, service groups of computer equipment companies,
facilities management companies, general management consulting firms and
programming companies. Many of these competitors have significantly greater
financial, technical and marketing resources and greater name recognition than
Jaws Canada. In addition, Jaws Canada competes with its client's internal
resources, particularly where these resources represent a fixed cost to the
client. Such competition may impose additional pricing pressures on Jaws Canada.
There can be no assurances that Jaws Canada will compete successfully with its
existing competitors or with any new competitors.
Rapid Technological Change; Dependence on New Solutions. Jaws Canada's
success will depend in part on its ability to develop IT solutions that keep
pace with continuing changes in IT, evolving industry standards and changing
client preferences. There can be no assurance that Jaws Canada will be
successful in adequately addressing these developments on a timely basis or
that, if these developments are addressed, Jaws Canada will be successful in the
marketplace. In addition, there can be no assurance that products or
technologies developed by others will not render Jaws Canada's services
uncompetitive or obsolete. Jaws Canada's failure to address these developments
could have a material adverse effect on Jaws Canada's business, operating
results and financial conditions.
Attraction and Retention of Employees. Jaws Canada's business involves
the delivery of professional services and is labor-intensive. Jaws Canada's
success depends in large part upon its ability to attract, develop, motivate and
retain highly skilled technical employees. Qualified technical employees are in
great demand and are likely to remain a limited resource for the foreseeable
future. There can be no assurance that Jaws Canada will be able to attract and
retain sufficient numbers of highly skilled technical employees in the future.
Jaws Canada has historically experienced turnover rates which it believes are
consistent with industry norms. An increase in this rate could have a material
adverse effect on Jaws Canada's business, operating results and financial
condition, including its ability to secure and complete engagements.
Dividends. Since incorporation, Jaws Canada has not paid any dividends
on its outstanding Jaws Canada Common Shares and has no present intention to pay
dividends thereon.
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<PAGE> 12
RISKS CONCERNING THE SECURITIES OF JAWS US
Limited Trading History of Jaws US Common Shares; Stock Price
Volatility. Between February 1, 1998 and October 7, 1998, the closing sale
price for the Company's stock has ranged from $.28 per share to $1.28 per share.
The market price of the Company's Common Stock could continue to fluctuate
substantially due to a variety of factors, including quarterly fluctuations in
results of operations, adverse circumstances affecting the introduction of
market acceptance of new products and services offered by the Company,
announcements of new products and services by competitors, changes in the
information technology ("IT") environment, changes in earnings estimates by
analysts, changes in accounting principles, sales of Jaws US Common Shares by
existing holders, loss of key personnel and other factors.
The market price for the Jaws US Common Shares may also be affected by
the Company's ability to meet analysts' expectations, and any failure to meet
such expectations, even if minor, could have a material adverse effect on the
market price of Jaws US Common Shares.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies for reasons unrelated to the operating
performance of these companies. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been instituted against such a company. Any such litigation instigated
against the Company could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon the Company's business, operating results and financial condition.
Possible Volatility of Securities Prices. The stock market has from time
to time experienced significant price and volume fluctuations that may be
unrelated to the operating performance of any particular company. The market
prices of the securities of many publicly-traded companies in the computer
industry have in the past been and can be expected in the future to be
especially volatile. Factors such as the Company's operating results,
announcements by the Company or its competitors concerning technological
innovations, new products or systems may have a significant impact on the market
price of the Company's securities.
Risks of Low-Priced or Penny Stock. The Common Stock of the Company is
traded on the NASD OTC Bulletin Board. As such it is subject to Rule 15(g)-(9)
under the 1934 Act such Rule adversely effects the ability of purchasers in this
Offering to sell of the securities acquire hereby in the secondary market.
Rule 15g-9 requires additional disclosure, relating to the market for
penny stocks, in connection with trades in any stock defined as a penny stock.
The Commission defines a penny stock to be any equity security that has a market
price of less than $5.00 per share (exclusive of commissions), subject to
certain exceptions. Such exceptions include any equity security listed on Nasdaq
and any equity security issued by an issuer that has (i) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000, if such issuer has been in continuous operation
for less than three years. Unless an exemption is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith.
In addition, trading in the Common Stock would be covered by Rules 15g-1
through 15g-6 trading in the Common Stock would be covered by Rules 15g-1
through 15g-6 under the 1934 Act for non-Nasdaq and non-exchange listed
securities. Under such rules, broker/dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from these rules if the market price is at least $5.00 per share.
Although the Company's securities are, as of the date of this
Prospectus, outside the definitional scope of penny stocks as they are listed on
Nasdaq, in the event the Company's securities were subsequently to become
characterized as penny stocks, the market liquidity for the Company's securities
could be severely affected. In such an event, the regulations on penny stocks
could limit the ability of broker/dealers to sell the Company's securities and
thus the ability of purchasers of the Company's securities to sell their
securities in the secondary market.
No Dividends Anticipated on Common Stock. The Company has not paid any
dividends on its Common Stock to date. The Company does not currently intend to
declare or pay any dividends on its Common Stock in the foreseeable future, but
plans to retain earnings, if any, for development and expansion of its business
operations.
Current Prospectus and State Registration Required to Exercise Warrants.
The purchasers of the Warrants will only be able to exercise the Warrants if:
(i) a current Registration Statement under the 1933 Act relating to the Common
Stock is qualified for sale or exempt from qualification under the 1933 Act and;
(ii) such Common Stock is qualified for sale or exempt from qualification under
the applicable securities laws of the states in which the various holders of the
Warrants reside. Although the Company will use its best efforts to maintain the
effectiveness of the current Registration Statement covering the Common Stock
issuable upon the exercise of the Warrants, there can be no assurance the
Company will be able to continue to do so. The value of the Warrants may be
greatly reduced if a current Registration Statement covering the Common Stock
issuable upon the exercise of the Warrants is not kept effective or if such
Common Stock is not qualified or exempt from qualification in the states in
which the holders of the Warrants reside.
-12-
<PAGE> 13
USE OF PROCEEDS
It is currently anticipated that the net proceeds from the exercise of
the put options and the 10% Convertible Debenture and all underlying warrants
will be added to the general funds of the Company and used for working capital
and other general corporate purposes. To date, only $200,000 of proceeds is
assured and additional financing may not occur. The Company will pay all the
expenses of this Prospectus, estimated to be approximately $50,000.
The foregoing represents the Company's best estimates of its application
of the net proceeds of this Offering based upon present plans and current
business conditions. Unforeseen events, changed business conditions and a number
of other factors that are beyond the control of the Company, could necessitate
changes in the application of net proceeds. The Company reserves the right to
reallocate the net proceeds of this Offering among the various uses described
above or for such other purposes as it, in its sole discretion, deems necessary
or desirable. In the event that the Company changes the use of proceeds of this
Offering, the Company may require immediate additional debt or equity financing
to meets its business plan. If the need should arise, there can be no assurance
that any such financing would be available on terms that are favorable to the
Company, if at all.
The Company may use a portion of the net proceeds to acquire businesses,
products or technologies complementary to the Company's current business. The
Company has no present commitments or agreements and is not currently involved
in any negotiations with respect to any such acquisitions. The Company has not
determined the amounts it plans to expend on each of such uses or the timing of
such expenditures. The amounts actually expended for each such use, if any, are
at the discretion of the Company and may vary significantly depending upon a
number of factors, including future revenue growth and the amount of cash
generated by the Company's operations.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and has no
current plans to pay dividends on the Common Stock in the foreseeable future.
The Company intends to reinvest future earnings, if any, in the development and
expansion of its business. Any future determination to pay dividends will depend
upon the Company's results of operations, financial condition and capital
requirements and such other factors deemed relevant by the Company's Board of
Directors.
-13-
<PAGE> 14
MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company commenced quotation on the OTC Bulletin
Board under the symbol "JAWZ" in late 1997. Until the third quarter of 1997 no
substantial public trading market had developed for the Common Stock of Jaws.
NASD OTC Bulletin Board ...... Symbols
Common Stock ........... JAWZ
The Company has not paid any dividends on its Common Stock since its
inception and has no current plans to pay dividends on the Common Stock in the
foreseeable future. In addition, the Company's ability to pay cash dividends is
restricted by the Company's current credit facilities, and future borrowings may
contain similar restrictions. The Company intends to reinvest future earnings,
if any, in the development and expansion of its business. Any future
determination to pay dividends on the Common Stock will depend upon the
Company's results of operations, financial condition and capital requirements
and such other factors deemed relevant by the Company's Board of Directors.
The closing price of the Common Stock of the Company as reported on the
NASD OTC Bulletin Board Issues on October 7, 1998, by brokers making a
market, was $.28.
Jaws US' Common Stock is traded on the NASDAQ OTC Bulletin Board under
the symbol JAWZ. The following table summarizes the trading activity of Jaws
from February 1998.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Price Range Trading Volume Share Value
NOTE 1
- ----------------------------------------------------------------------------------
High Low
<S> <C> <C> <C> <C>
February, 1998 1.00 0.59 333,800 $ 196,942
March, 1998 1.06 0.88 693,200 $ 709,420
April, 1998 1.22 0.94 2,480,000 $2,596,312
May, 1998 0.88 0.75 869,700 $ 685,498
June, 1998 0.85 0.55 1,740,000 $1,278,900
July 6-10, 1998 0.64 0.48 274,500 $ 175,680
July 13-17, 1998 0.51 0.58 289,700 $ 168,026
July 20-31, 1998 0.76 0.47 1,993,900 $1,345,883
August 3-7, 1998 0.78 0.66 344,500 $ 248,040
August 10-14, 1998 0.68 0.54 887,100 $ 518,066
August 17-21, 1998 0.60 0.54 475,400 $ 274,781
August 24-31, 1998 0.56 0.35 575,900 $ 264,914
Totals 10,957,700 $8,455,462
- ----------------------------------------------------------------------------------
</TABLE>
Note 1) Calculated by multiplying the average daily price reported by
Bloomberg by the daily volume. This is only an estimate of the true
share values traded. This method would tend to overstate the true share
value.
On October 7, 1998 the high and low prices of the Company's Common
Stock were $.30 and $.27 per share, respectively. As of October 7, 1998 there
were approximately 45 holders of record of Jaws US Common Stock.
-14-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Jaws Canada develops software encompassing encryption algorithms to be
used to secure binary data in various forms. Since the commencement of
operations in October of 1997 and through the present, the Company and Jaws
Canada have been in a development stage. During this period, the Company has
been and is engaged primarily in recruiting personnel, establishing a corporate
headquarters, developing software and licensing software from external
developers for integration in Jaws Canada proprietary software.
The Company's internal product development costs incurred prior to
establishing technological feasibility are expensed in accordance with the
Financial Accounting Standards Board Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed." In accordance with SFAS No. 86, the Company
capitalizes product development costs subsequent to establishing technological
feasibility and amortizes previously capitalized product development costs by
using: (i) the revenue curve method; or (ii) the straight-line method over the
estimated economic life of the product, which typically ranges from six months
to two years.
The Company has experienced significant losses since its inception,
resulting primarily from overhead and other costs incurred in the development
and growth of the Company. Moreover, the Company expects to incur substantial
up-front expenditures and operating costs in connection with the expansion of
its marketing efforts, which may result in significant losses for the
foreseeable future. There can be no assurance that the Company will be able to
successfully implement its growth and business strategies, that its revenues
will continue to increase in the future or that it will be able to achieve or
sustain profitable operations.
COMPARATIVE AMOUNTS
Jaws US was incorporated on January 27, 1997 but did not commence
operations until July, 1997. Accordingly, the following discussion and analysis
compares the financial position of the Company as at June 30, 1998 with that as
at December 31, 1997, and compares the results of operations for the six months
ended June 30, 1998 with those for the fiscal period ended December 31, 1997.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 compared to fiscal period ended December
31, 1997
The Company did not earn any revenues during 1997 since it was in the
initial stages of development and startup. Revenues earned during the six months
ended June 30, 1998 in the amount of $1,938 consisted entirely of interest
earned on excess funds invested in term deposits. Although substantial sales and
marketing efforts were undertaken during this period, sales contracts are not
booked as revenue until actually realized. Management believes that sales for
the next period will positively reflect these efforts.
Expenses in all categories have increased significantly as a result of
establishment of operations and moving toward commercialization stage. These
include expenses related to the preparation of various marketing and sales
documents and materials, requirements for office space, supplies and stationery,
and related costs. The significant increase in consulting expenses reflects the
Company's decision to obtain various marketing, promotion, financial and general
business assistance and expertise on a contract basis for the immediate term.
Management anticipates that all its operating, and general and administrative
expenses will continue to rise as the operation grows its markets and sales
opportunities.
-15-
<PAGE> 16
The loss from operations includes a one time write-off of the Company's
acquired software development costs. The Company's policy of expensing software
development costs as incurred until technological feasibility has been
established, is consistent with generally accepted accounting principles;
however, the write-off of $909,003 is a non-cash item and therefore did not
result in any cash flow hardship for the company.
Management believes that expenses will continue to increase and revenues
for the next period will not be sufficient to support the expenses. Management
will continue to require equity investment for the next period to support these
losses, with the gap between revenue and expenses lessening slightly.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $420,204 for the six month
period ended June 30, 1998 compared to $110,798 for the fiscal period ended
December 31, 1997, as a result of the increased expenses incurred as noted
above. Although the Company's working capital deficiency of $9,983 as at June
30, 1998 improved from the deficiency of $25,365 at December 31, 1997,
management believes the negative working capital position must be addressed in
the next period and is working towards arranging the appropriate equity
investments to maintain reasonable levels of working capital.
Cash on hand at June 30, 1998 increased to $139,958 from $111 at
December 31, 1997 primarily as a result of a series of stock issuances. A net
amount of $754,686 was raised during the six months ended June 30, 1998
(compared to only $35,650 during 1997) and was deployed primarily to fund
working capital requirements, with a balance remaining of $139,958 at June 30,
1998. In addition, the Company repaid stockholder loans in the amount of
$116,000 during this period, and acquired approximately $80,000 of fixed assets
as part of building the necessary infrastructure and systems needed to support
the additional staff hired during the period. Management estimates that for each
new position created in the Company, approximately $7,200 will be expended in
infrastructure costs (i.e. furniture, software licensing, technology and general
office and stationery requirements).
Prepaid expenses, consisting of premises deposits and legal fee
retainers increased from $7,500 at December 31, 1997 to $18,842 at June 30,
1998. The decrease in organizational costs from December 31, 1997 to June 30,
1998 reflects the amortization of these costs over a 60 month period.
Accounts payable have increase dramatically from $32,976 at December 31,
1997 to $168,783 at June 30, 1998 as a result of the efforts expended to
commercialize the products and services offered by the company. The Company has
moved from research and development to full commercialization during this
reporting period and an increase in this category was anticipated as a result of
the increased activity. Management also believes that this trend will continue
until cash flow from sales are realized allowing the company to reduce the trade
accounts in a more timely fashion.
The Company has not established any lines of credit out side of trade
accounts, and will not be in a position to negotiate any lines of credit until
sales contracts have been validated and matured. The Company has not used any
debt instruments to date due to its early stage of operations.
FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly operating results have fluctuated significantly
in the past and will likely fluctuate significantly in the future depending on a
variety of factors, several of which are not in the Company's control. Such
factors include the demand for the Company's products and the products of its
competitors, development and promotional expenses related to the introduction of
products or enhancements, the degree of market acceptance for the Company's
products and enhancements, the timing of orders from significant customers,
delays in shipment, the level of price competition, changes in computing
platforms, the nature and magnitude of product returns, order cancellations,
software defects and other quality problems, the length of product life cycles,
the percentage of the Company's sales related to international sales and changes
in personnel. Based on the foregoing, the Company believes that period to period
comparisons of operating results should not be relied upon as indicative of
future results.
-16-
<PAGE> 17
YEAR 2000 COMPLIANCE AND COSTS
As has been widely reported, there is worldwide concern that Year 2000
technology problems may materially and adversely impact a variety of businesses,
local, national and global economies. The Company, in response to this effort,
has commenced a process of identifying operating and application software
systems that will be impacted by the Year 2000. The Company's preliminary
analysis indicates that the Company will require enhancement of software in
older systems, as well as updating and enhancing various accounting and other
systems. The Company believes that it will complete upgrades of its operating
and application software systems prior to the Year 2000, although competition
for goods and services relating to such upgrades, including computer equipment
and installation expertise, may cause delays in implementation. The Company
currently anticipates that the cost to the Company of such software
enhancements, including installation costs and related expenses, will total
approximately $50,000 to $100,000, which will be funded out of the working
capital of the Company. This expense is not anticipated to be material to the
Company's financial position or future results of operations, although there can
be no assurance that presently unforeseen computer programming difficulties will
arise.
The Company has not conducted a systematic evaluation of the Year 2000
compliance of its vendors and customers. As a result, it is possible that the
Company's future performance may be adversely impacted by payment and financial
difficulties experienced by customers, and by shipping, fulfillment and
accounting difficulties experienced by vendors. The Company believes that it has
sufficient resources, including cash reserves and inventory supplies, to
maintain operations during delays in payments or supplies of inventories.
However, the Company is aware that extended difficulties by larger vendors or
customers may have a significant impact; however, it is unable, at this time, to
anticipate the extent of any such impact, were it to occur.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("SFAS No. 130"), which establishes new
guidance for the reporting and display of comprehensive income and its
components. The Company believes the adoption of SFAS No. 130 will have no
impact on the Company's net income or stockholders' equity.
In July 1997, the FASB issued Statement #131, "Disclosures about
Segments of an Enterprise and Related Information." This Statement expands
certain reporting and disclosure requirements for segments from current
standards. In February 1998, the FASB issued Statement #132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This Statement
revises employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans. The
Company is not required to adopt these Statements until December 1998 and does
not expect the adoption of these standards to result in material changes to
previously reported amounts.
In June 1998, the FASB issued Statement #133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that all derivative instruments (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The accounting
provisions for qualifying hedges allow a derivative's gains and losses to offset
related results on the hedged item in the income statement, and requires that
the Company must formally document, designate, and assess the effectiveness of
transactions that qualify for hedge accounting. The Company is not required to
adopt this Statement until January 2000. The Company has not determined its
method or timing of adopting this Statement or the impact on its financial
statements. However, when adopted, this Statement could increase volatility in
reported earnings and other comprehensive income of the Company.
-17-
<PAGE> 18
BUSINESS
Jaws US is a Nevada corporation which owns a 100% interest of Jaws
Technologies, Inc. a corporation formed under the laws of the Province of
Alberta, Canada ("Jaws Canada"). Jaws Canada has offices in Alberta, Canada and
develops encryption proprietary software encompassing encryption algorithms
which are used to secure binary data in various forms, including streamlining or
block based data. Jaws US was incorporated as a Nevada corporation on January
27, 1997 under the name E-Biz Solutions Inc. On March 27, 1998, the Company
changed its name to Jaws Technologies, Inc.
Jaws Canada develops software encompassing encryption algorithms used to
secure binary data on various forms, including streaming and blocked based data.
Currently, Jaws Canada's software technology is capable of encrypting to a bit
level of 4,096. Jaws Canada software operates under Windows 3.1, Windows 95,
Windows 98, and Windows NT. Other platforms are currently under development.
The programming of Jaws Canada software has been in development for
approximately 15 years. Commercialization of Jaws' first product, JAWS L5 DATA
ENCRYPTION SOFTWARE, began in May 1998. The program has been tested and
validated through a number of engineering sources for its programming
efficiency, structure and strengths.
Numerous markets exist for the Jaws Canada software. Management believes
that Value Added Resellers (VAR) entail a significant potential market for Jaws
Canada products. Such external software developers can use the Jaws software as
a utility embedded in their product to augment or enhance their particular
product offering. Accounting software programs, database developments, e-mail
programs and communication software are all potential channels for Jaws
software. Additional potential customers include the Smart Card industry,
hand-held computing devices, telecommunications and access control devices. The
product is implemented as a software utility to provide security enhancements to
existing product offerings by other manufacturers. Direct sales channels include
product offerings to Internet service providers (ISP), data warehouses,
corporate networks and personal computer users.
Services
The Company's efforts to remain competitive in the marketplace include
providing customers with professional services such as security audit practices,
security business plan development (including security policy development),
implementation practices and re-audit or validation processes. The Company has
developed its services around the premise of full information security
solutions. This means professional services followed by strong product offerings
to maintain the best possible solution for the given client. The Company
believes that the marketplace is not geographically restricted, size restricted,
or sector specific. The Company's professional services can be offered to
government agencies, military agencies, small corporations, large corporations,
financial institutions, industrial clientele and foreign entities.
The Company's security audit technology is sold to customers and used by
customers so that they may understand the full magnitude and risks inherent with
their current systems information technology ("IT"). This is achieved through a
number of practices including intrusion testing, penetration testing, site
mapping and systems testing with specialized software. Once the Company fully
understands the risk revealed in the audit, its customer-specific business plan
for IT securities can be developed. At the option of the client, the Company can
then integrate the appropriate software and products to meet customer needs. The
cost analysis associated with such implementation and products is a critical
planning path. This ensures that the customer meets its objectives, and provides
policy guideline development to ensure that the Company, and the customer,
understand the necessary uses of security. The business plan generally includes
a cost analysis to ensure the customer understands the true cost of security in
relationship to its risk, a critical path schedule to ensure the customer meets
its objectives and policy guidelines development to ensure employees of the
Company fully understand the security elements. Finally, the Company provides
training for the customers' staff to ensure that its employees adopt the
corporate culture established by the business plan.
The Company also offers re-auditing practices to assist the customer in
maintaining its security policies. The re-audit is much like a report card for
the customer to ensure that it is maintaining the policies and procedures
underlying the Jaws Canada software.
-18-
<PAGE> 19
The security service division of the Company believes that in order to
provide satisfactory solutions for its customers, product offerings must include
those of competitors, and in most cases, suppliers of security software,
hardware and firmware. This is achieved through standard licensing contracts
with other security product vendors such as Network Associates, and providers of
intrusion detection products, and other security products.
Information Security Marketplace
The Company believes that the marketplace for encryption software is
virtually unrestricted by size and geography. With the ongoing drive of the
computer industry toward open computing, enormous security risks have been
revealed. Corporations, government, institutions and foreign entities are all
faced with security questions, and as these organizations grow, their network
security will constantly be faced with new challenges. The information industry
in the last ten years has changed from information gathering and information
warehousing, to information sharing. Such information sharing is growing
exponentially, with security being the first component of any solid information
system, whether it is internal or external. More and more, corporations are
finding that their information is their asset and such proprietary information
whether it is market intelligence, corporate planning, corporate development, or
client information, must at all costs remain secure within the organization
while at the same time, be available to strategic partners, employees and
management. The only way to ensure maximum use of all information gathered and
deployed is through security.
According to San Jose, CA, based Data Quest, IT services now make up
37.5% of all IT spending. Computer sales represent 28.8%, software 14.3% and
telecommunication equipment 9.3%. Approximately $262 billion were spent on IT
services in 1996 and it is anticipated that users will spend approximately $413
billion in the year 2000. A portion of this enormous IT budget for the year 2000
will include a significant amount towards system security.
COMPETITION
Products
A number of companies have developed various security products ranging
from encryption software to firewalls to intrusion detection software or
hardware solutions. No one particular product in the marketplace controls market
share. Two distinctive competitors, RSA and PGP (Network Associates) have led in
the sale of encryption software. The Company believes that this lead is a result
of being first to the marketplace and commercializing a product specific to
individual users rather than government agencies. With only two strong
competitors in the marketplace, the Company believes that there is room for
additional products, specifically those products that provide stronger, faster,
and easier to use solutions for the consumer.
An added enhancement of the opportunity for new players in the
marketplace is the typical customer's unwillingness to turn over all security to
a specific product or corporation. Jaws US engages in market study and
competitive study research to ensure that the Company remains aware of other
competing product development. Although other products have entered the
marketplace, due to the size of the market plus the constantly changing
atmosphere, the Company believes it can penetrate the market with its
products. The Company also believes that healthy competition has aided in the
development of the marketplace through customer awareness that information
security is critical.
Services
Information auditing services, security business planning,
implementation, and security management are relatively new industries, as such,
very few large size competitors exist and only small firms are providing the
services at this time. The growth is anticipated to be exponential over the next
number of years. The Company is positioning itself to be one of the dominant
market players in these areas of professional services. It will achieve this
through both internal growth, and external growth through acquisitions. The
Company is aggressively pursuing a number of the small operators in this field
in order to maintain its high sales expectations.
-19-
<PAGE> 20
BUSINESS STRATEGY
The blend of both product and services offered by Jaws US is the
Company's strategy for ensuring that it is well positioned in the customer's
mind as being the number one source for information security solutions. The
Company has developed specific business processes and marketing strategies that
will ensure that it meets and exceeds the market expectations. Reaching the
marketplace is achieved through conventional marketing tactics but also through
educational processes, such as seminar delivery through accounting and legal
firms to their client base, value added reselling programs and a strong channel
marketing strategy. The Company believes it can grow its practices, deliver
services and products in a cost-effective manner, but yet be able to handle
superior volumes through exceptional business processes developed by the
Company.
Customer Support
The Company provides a high degree of initial and continuing customer
service, and support at a level the Company believes generally exceeds industry
standards. The Company believes that its focus on customer service will be a key
factor in its high level of customer retention and growth in revenues. Support
is available to the customer through a help desk process and eventually regional
technicians.
Technological Change
Although the Company is not aware of any pending or perspective
technological change that would adversely affect its business, new development
in technology could have material effect on the development or sale on some or
all of the Company's services or could render its services not competitive or
obsolete. There can be no assurance that the Company will be able to develop or
acquire new or improved services or systems, which may be required in order to
remain competitive. The Company believes however, that technological change does
not present a material risk to the Company's business but enhances its business
opportunities. Each technological change reveals new security issues which must
be addressed by professional services and results in new products.
Intellectual Property Matters
The Company is in the process of applying for a U.S. patent. The Company
maintains strict confidentiality practices with its employees including
contractual obligations by the employees. The Company has not registered any of
its trademarks, trade names or service marks. The Company owns the copyright in
all the software created by its employees and the copyrights which it has
contractually acquired. The Company also believes that because of the rapid pace
of technological change in the computer industry, copyright and other forms of
intellectual property protection are of less significance within its services
division. The Company's business is not dependent on a single license or group
of licenses. The Company is experienced in handling confidential and sensitive
client information that is intrinsic or critical to its corporate culture.
FINANCING
Bristol Asset
The Company has entered into an Investment Agreement with Bristol Asset
Management V LLC ("Bristol Asset") dated August 27, 1998 pursuant to which
Bristol Asset has granted to the Company the right to require Bristol Asset to
purchase up to $7,000,000 in shares of Common Stock of the Company. Bristol
Asset, upon request of the Company, is required to purchase shares at a 23%
discount to the lowest trade price in the prior ten (10) days. Bristol also
received warrants to purchase up to 3,000,000 shares at $0.28 per share.
The total number of shares of Common Stock underlying the Bristol Asset
put options and warrants that are registered pursuant to the Form SB-2
Registration Statement equals 28,000,000.
-20-
<PAGE> 21
Thomson Kernaghan
The Company entered into a Debenture Acquisition Agreement dated
September 25, 1998 with Thomson Kernaghan & Co., Ltd., an Ontario corporation
("TK"). Pursuant to this agreement, TK purchased from Jaws US up to $2,000,000
of a 10% Convertible Debenture ("Debenture") and $300,000 in a series of
warrants.
The purchase price for the Debenture shall be payable in a series of the
closings. The initial closing on October 1, 1998 provided Jaws US with $200,000,
less commissions and fees, to be utilized by the Company primarily for operating
capital.
Additional closings at the rate of no more than one per month and in the
amount $200,000 per month are scheduled conditioned upon effectiveness of the
Company's 1933 Securities Act and 1934 Securities Act Registration maintenance,
minimum bid prices and daily volume requirements.
TK shall receive a 10% commission on all payments made for the
Debenture, and $100,000 principal amount of a series of warrants of Jaws US
exercisable at a per share price equal to the average of the closing bid prices
of the Common Stock of the Company as quoted on the NASD Electronic Bulletin
Board for the three days prior to the initial funding date.
The Company will be depositing into escrow a total of 13,428,572 shares
of Common Stock, all of which shall be registered pursuant to this Form SB-2
Registration Statement with the Securities and Exchange Commission, as the
Common Stock underlying the Debenture and the warrants issued to TK.
The Debenture is all due and payable on October 31, 2001, provided that
TK shall have the right, at its option beginning on the 30th day after the
initial funding date to convert in $100,000 increments or multiples thereof the
principal amount to shares of the Company's at a conversion price equal to the
lower of 78% of the average closing bid price of the Common Stock on the
principal market for the Common Stock for the three trading days immediately
preceding (i) the date of notice of conversion, or (ii) the date of the
Convertible Debenture (September 25, 1998). If the price of the Common Stock of
the Company has substantially diminished for the three trading days prior to
notice of conversion, the number of shares of Common Stock issuable upon
conversion could exceed the amount registered hereunder.
The warrants to purchase Common Stock consist of two separate warrants,
one for $300,000 face amount and the other for $100,000 face amount, both issued
to TK in consideration for its execution and funding under the Debenture
Acquisition Agreement. The total number of shares of the Common Stock underlying
the TK warrants that are registered pursuant to the Form SB-2 Registration
Statement equals 1,428,572.
ENVIRONMENTAL LAWS
The Company endeavors to follow all recycling programs and maintains its
awareness of the changing environmental laws.
EMPLOYEES
As of September 1, 1998, the Company had approximately 13 full time
employees with an aggressive hiring plan over the next 12 months. None of the
Company's employees are represented by any type of labor organization and the
Company is not aware of any activity seeking organization. The Company considers
its relationships with it employees to be satisfactory. The Company has, in its
early stages, developed strong human resources practices with belief that the
growth of the Company is completely reliant on its human resources and as such,
pays great detail and attention to human resource factors.
INSURANCE
The Company maintains insurance coverage that management believes is
reasonable, including key man life insurance policies, business interruption
insurance, asset protection and public liability insurance. The Company also
maintains extensive data backup procedures to protect both client and Company
data.
-21-
<PAGE> 22
DESCRIPTION OF PROPERTY
The Company maintains its offices and computer center in a facility
containing approximately 3,000 square feet in Calgary, Alberta, Canada, under a
lease, which expires December 15, 2000. In the past, the Company has purchased
most of its equipment, and is now considering leasing all future equipment. The
Company believes that its current and proposed facilities are in good condition
.
LEGAL PROCEEDINGS
There are no pending legal proceedings that in the opinion of management
would materially affect the financial condition or results of the operation of
the Company.
MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position Held
---- --- -------------
<S> <C> <C>
Robert J. Kubbernus 38 Chairman of the Board and Chief Executive Officer
Cameron B. Chell 29 Vice President and Director
Julia Johnson 34 Outside Director
Arthur Wong 30 Outside Director
Mitch Tarr 39 Vice President Marketing & Sales
Vera Gmitter 41 Vice President Operations
Tej Minhas 38 Vice President Technology
Garry Leitch 46 Vice President Channels
</TABLE>
Robert Kubbernus has 13 years of financial experience working with high
tech firms in the Calgary area. Before joining Jaws in 1997, he raised more than
$475 million in debt financing for a long-term corporate client base. Since
joining Jaws as CEO and Chairman, his primary responsibilities have been to
oversee the Company's security product developers, provide executive direction
and develop key contacts within government, corporations, funders, clients,
insurance underwriters and the investment community. From 1992 to 1997, Mr.
Kubbernus held the position of President and CEO at Bankton Financial
Corporation. He headed up a team of corporate financial consultants who
specialize in the placement of debt instruments with institutional and private
lenders. Before 1992, he was the Chief Financial Officer as well as the Chief
Development Officer at Bankers Capital Group, where he developed new products
and markets as well as overseeing the financial controls of the organization.
Cameron Chell has several years of experience in developing financing
solutions for high-tech organizations. As a registered broker, he has aided
corporations through their initial financing and start-up phases. As Vice
President of Corporate Finance for the Company, Mr. Chell is responsible for
securing financing opportunities to bring Jaws products to market. Mr. Chell is
also CEO and Chairman of FutureLink Distribution Corp. In 1997, in partnership
with Mr. Chris McNeill, an investor relations specialist, Mr. Chell opened his
own investment banking firm, Chell McNeill Inc. The firm was established to
assist high-tech companies like Jaws, FutureLink and others in acquiring market
and investor relations support.
Julia L. Johnson is a nationally-recognized authority on utility
regulation in the U.S. She currently serves as Chairman of the Florida Public
Service Commission (the "Commission"), state Chair person of the Federal/State
Joint Board on Universal Service, Vice Chairman of the Communications Committee
of the National Association of Regulatory Utility Commissioners, and board
member for the Markle Foundation on a project that encourages the use of new
communications technologies for socially beneficial purposes. Before being
appointed to the Commission, Ms. Johnson served as the Director of Legislative
Affairs and senior land use attorney for the Department of Community Affairs.
She was the chief lobbyist representing the agency before the
-22-
<PAGE> 23
Florida Legislature on land use issues. In 1997, Ms. Johnson received the
Dollars & $ense Magazine's Best and Brightest Business & Professional Men and
Women award. In 1996, she received the University of Florida Association of
Black Alumni's Outstanding Leadership Award. Ms. Johnson holds a Juris Doctorate
with a concentration in corporate and real estate transactions from the
University of Florida School of Law, as well as a Bachelor of Science in
Business Administration from the University of Florida.
Art Wong provides strategic direction to the Company in the area of
channel development. In the past seven years Mr. Wong has founded one oil and
gas and three technology companies, taking two of those companies public. In his
current role of Fellow for Network Associates Inc. of Santa Clara, California,
Mr. Wong heads up Active Security issues and spearheads the adoption of new
security infrastructures for global enterprises and integrators. He also
develops standards for new security infrastructures and works on its integration
and adaptation internationally. In 1996, Mr. Wong founded and managed Secure
Networks Inc., an organization that developed Internet security tools and
offered security consulting before it was acquired by Network Associates Inc.
for approximately $25 million. He is the Managing Director and Founder of H2O
Entertainment Corp., a Calgary-based organization that develops products for
Nintendo and its N64 game platform. Mr. Wong also founded Millennium Systems
Canada Inc., a wholesale distributor of high-end computer equipment. Mr. Wong
holds a Bachelor of Science in Communication from the University of Calgary.
Mitch Tarr is Vice President of Sales and Marketing for the Company. Mr.
Tarr is responsible for developing a client- directed, solutions-oriented
approach to delivering top-notch security products and services. Mr. Tarr has
worked in the high tech field for almost 20 years, marketing software solutions
for a variety of high tech organizations across Canada. His experience includes
six years with IBM Corporation where he specialized in direct sales to Canadian
businesses, two years with Applied Data Research, a subsidiary of Ameritech
Inc., and two years with Petroleum Information Canada. He also operated his own
sales consultancy for five years. Before joining Jaws in April, 1998, Mr. Tarr
delivered marketing solutions to Calgary-based AccuMap, EnerData Corp and QC
Data. Mr. Tarr received his Bachelor of Economics from the University of
Alberta.
Vera Gmitter is Vice President of Operations for Jaws. Ms. Gmitter is
responsible for day to day operations including financing, government
regulation, policies and procedures. Ms. Gmitter has owned and operated numerous
businesses in the service and retail industries. Before joining Jaws, Ms.
Gmitter held the position of General Manager at Bankton Financial Corporation.
Through Continuing Education, she has helped women entrepreneurs retraining to
enter the workforce. She has also taught Junior Achievement, a North
America-wide business program aimed at educating Elementary school aged
children. Ms. Gmitter holds a Bachelor of Arts in Political Science and
Economics from the Augustana University.
Tej Minhas has professional experience with Sybase Professional
Services, Dofasco, Pace and the Government of Ontario. His knowledge of software
development platforms includes expertise in C, C++, COBOL, Pascal, OO, Assembly,
PL1 and hardware (e.g. IBM, SUN, HP, Intel, DEC, Apple, GEAC) platforms. Mr.
Minhas has provided IT consulting services to a variety of industry sectors
including insurance, banking, telecommunications, oil & gas, retail and
agriculture. While working with Sybase, Mr. Minhas moved from principal
consultant to district manager for Canada. Mr. Minhas holds a Bachelor of
Science in Computer Science from the University of Toronto.
Garry Leitch is Vice President of Channel Development for the Company.
Mr. Garry Leitch is responsible for the establishment of all direct and indirect
sales channels for Jaws' suite of products and services. Mr. Leitch has held the
position of President of The Sales Consultancy, a management and leadership
effectiveness training company from 1983-1998. He was responsible for sales,
sales support and service professionals training, specializing in the
technology, telecommunications and financial services sectors. He has also held
senior sales and marketing management positions with high profile technology
organizations including Archives Corporation (1991-1993), Digital Equipment
(1987-1990) and NBI (1982-1987). His educational background includes a Bachelor
of Arts and a [Diploma in Education] from the University of Victoria, British
Columbia.
ADMINISTRATIVE PROCEEDING
Cameron Chell, director and vice president of the Company, was a registered
representative of a brokerage firm in Calgary, Alberta from 1994 until May 1997.
The brokerage firm was under the supervision of the Alberta Stock Exchange. In a
Notice of Hearing, the Alberta Stock Exchange has alleged that Cameron Chell
-23-
<PAGE> 24
breached the provisions of the Securities Act (Alberta), the Rules of the
Alberta Stock Exchange and various industry rules. To date, no hearing has been
held and no findings of fact or law have been made.
BOARD OF DIRECTORS AND COMMITTEES
Jaws US: The Board of Directors has nominated a Compensation Committee
consisting of two outside directors and one internal director. Any and all
compensation plans for the executive members are reviewed on an annual basis.
The executive compensation for Jaws US is pursuant to a Company Stock Option
Plan.
The Compensation Committee currently consists of Julia Johnson, Arthur
Wong and Cameron Chell. The Compensation Committee establishes salaries,
incentives and other forms of compensation for officers of Jaws US. The Audit
Committee consists of Julia Johnson, Arthur Wong and Cameron Chell.
COMPENSATION OF BOARD OF DIRECTORS
Directors are not remunerated in their capacities as such. Out of pocket
expenses of directors related to their attendance at meetings of the Board of
Directors of Jaws Canada are paid by Jaws Canada. Jaws Canada may reimburse
expenses incurred by directors related to Board of Directors meetings. No other
payments have been made to directors. The directors are eligible to receive
stock options under the Jaws US Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of
the eight senior officers and directors of Jaws Canada for the fiscal period
from January 1 to September 1, 1998.
<TABLE>
<CAPTION>
=====================================================================================================
Long Term
Annual Compensation Compensation
---------------------------------------- ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME AND SALARY BONUS COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION PERIOD ENDED ($) ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chief Executive 1998 261,000 CDN$ Nil Nil 350,000 CDN$
Officer
Robert Kubbernus
Vice-President 1998 87,000 CDN$ Nil Nil 250,000 CDN$
Cameron Chell
Director 1998 87,000 CDN$ Nil Nil 200,000 CDN$
Julia Johnson
Director 1998 87,000 CDN$ Nil Nil 200,000 CDN$
Arthur Wong
VP, Sales & 1998 100,000 CDN$ Nil Nil 110,000 CDN$
Marketing
Mitch Tarr
VP, Operation 1998 45,000 CDN$ Nil Nil 49,500 CDN$
Vera Gmitter
VP, Technology 1998 80,000 CDN$ Nil Nil 88,000 CDN$
Tej Minhas
====================================================================================================
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
=====================================================================================================
Long Term
Annual Compensation Compensation
---------------------------------------- ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME AND SALARY BONUS COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION PERIOD ENDED ($) ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VP, Channel Sales 1998 90,000 CDN$ Nil Nil 110,000 CDN$
Garry Leitch
=====================================================================================================
</TABLE>
STOCK OPTION PLAN
Jaws US has adopted a Stock Option Plan (the "Jaws US Stock Option
Plan") for senior officers, directors and full-time employees of the Company,
which does not restrict the number of options that may be granted. The number of
options and the exercise price of all options is set by the board of directors
of Jaws US, or a committee thereof, at the time of grant.
The following table sets forth options to purchase Jaws US Common Shares
which are outstanding under the Plan as of the date hereof:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
OPTION GRANTS
- ----------------------------------------------------------------------------------------------------------------
NAME OF OPTIONEE EXERCISE PRICE VESTING AMOUNT VEST DATE EXPIRE DATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cameron Chell $0.48 83,333.33 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 83,333.33 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 83,333.33 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Raghunath Kilambi $0.40 33,333.33 22-Feb-99 22-Feb-02
- ----------------------------------------------------------------------------------------------------------------
$0.40 33,333.33 22-Feb-00 22-Feb-03
- ----------------------------------------------------------------------------------------------------------------
$0.40 33,333.33 22-Feb-01 22-Feb-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Riaz Mamdani $0.40 33,333.33 22-Feb-99 22-Feb-02
- ----------------------------------------------------------------------------------------------------------------
$0.40 33,333.33 22-Feb-00 22-Feb-03
- ----------------------------------------------------------------------------------------------------------------
$0.40 33,333.33 22-Feb-01 22-Feb-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Robert Kubbernus $0.48 116,666.66 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 116,666.66 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 116,666.66 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Mitch Tarr $0.49 36,666.66 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.49 36,666.66 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.49 36,666.66 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Vera Gmitter $0.48 16,500.00 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 16,500.00 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 16,500.00 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Tej Minhas $0.37 29,333.33 01-Sep-99 01-Sep-02
- ----------------------------------------------------------------------------------------------------------------
$0.37 29,333.33 01-Sep-00 01-Sep-03
- ----------------------------------------------------------------------------------------------------------------
$0.37 29,333.33 01-Sep-01 01-Sep-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Jim Morrison $0.48 33,333.33 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME OF OPTIONEE EXERCISE PRICE VESTING AMOUNT VEST DATE EXPIRE DATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$0.48 33,333.33 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 33,333.33 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Brandin Asuchak (Chivilo) $0.48 12,000.00 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 12,000.00 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 12,000.00 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Ed Macnab $0.48 20,000.00 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 20,000.00 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 20,000.00 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Joey Roa $0.37 16,000.00 01-Sep-99 01-Sep-02
- ----------------------------------------------------------------------------------------------------------------
$0.37 16,000.00 01-Sep-00 01-Sep-03
- ----------------------------------------------------------------------------------------------------------------
$0.37 16,000.00 01-Sep-01 01-Sep-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Garry Leitch $0.59 26,666.66 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.59 26,666.66 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.59 26,666.66 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Maggie Burry $0.69 12,000.00 01-Aug-99 01-Aug-02
- ----------------------------------------------------------------------------------------------------------------
$0.69 12,000.00 01-Aug-00 01-Aug-03
- ----------------------------------------------------------------------------------------------------------------
$0.69 12,000.00 01-Aug-01 01-Aug-04
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Suzanne White $0.48 7,400.00 23-Jul-99 23-Jul-02
- ----------------------------------------------------------------------------------------------------------------
$0.48 7,400.00 23-Jul-00 23-Jul-03
- ----------------------------------------------------------------------------------------------------------------
$0.48 7,400.00 23-Jul-01 23-Jul-04
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF SECURITIES
JAWS US
As of the effective date of this Registration Statement, the Company
shall be authorized to issue: (a) 100,000,000 shares of Common Stock, par value
of $.001 per share; and (b) 5,000,000 shares of Preferred Stock, par value $.001
per share. As of October 7, 1998, there were 19,628,572 shares of Common Stock
issued and outstanding as fully paid and non-assessable and no shares of
Preferred Stock issued. As of the date hereof, the Company has reserved for
issuance: (a) 1,429,700 shares of Common Stock pursuant to the Stock Option
Plan; and (b) 25,000,000 shares of Common Stock underlying the Bristol Asset
Shares; and (c) 4,428,572 shares of Common Stock pursuant to the Warrants. There
are no issued and outstanding Preferred Shares.
The following is a general description of the material rights,
privileges and restrictions and conditions attaching to each class of shares:
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to the holders of outstanding shares of Preferred Stock, if any, the
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy". In the event of liquidation,
dissolution or winding up of the company, and subject to the prior distribution
rights of the holders of outstanding shares of Preferred Stock, if any, the
holders of shares of Common Stock shall be entitled to receive pro rata all of
the remaining assets of the Company available for distribution to its
stockholders. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
-26-
<PAGE> 27
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by the laws of the State of Nevada, with approval by the Company's
stockholders, to provide for the issuance of up to 5,000,000 shares of Preferred
Stock in one or more series, to establish from time to time the number of shares
to be included in each such series, to fix the designations, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the stockholders. The Board of Directors
may authorize and issue Preferred Stock with voting or conversion rights that
could adversely affect the voting power or other rights of the holders of
Shares.
TRANSFER AGENT
U.S. Stock Transfer Corporation is the transfer agent and registrar for
the shares of Common Stock.
CERTAIN TRANSACTIONS
The only material contracts entered into by Jaws US and/or Jaws Canada
since incorporation which can reasonably be regarded as presently material to
the Company are as follows:
1. Stock Option Agreements dated various dates various employees of
Jaws Canada.
2. Indemnity Agreement dated July 30, 1998.
3. Jaws US Stock Option Plan.
4. Investment Agreement with Bristol Asset Management. See "Business -
Financing".
5. Debenture Acquisition Agreement with Thomson Kernaghan & Co. See
"Business - Financing".
SELLING SECURITY HOLDERS
The Selling SECURITY HOLDERS (or pledges, donees, transferees or
successors in interest) may sell all or a portion of the respective Selling
SECURITY HOLDERS' Securities held by them from time to time while the
registration statement of which this Prospectus is a part remains effective. The
aggregate proceeds to the Selling SECURITY HOLDERS from the sale of the
respective Selling SECURITY HOLDERS' Securities offered by the Selling SECURITY
HOLDERS hereby will be the prices at which such securities are sold, less any
commissions. There is no assurance that the Selling SECURITY HOLDERS will sell
any or all of the Selling SECURITY HOLDERS' Securities offered hereby.
The Selling SECURITY HOLDERS' Securities may be sold by the Selling
SECURITY HOLDERS in transactions on the NASDAQ Bulletin Board, in negotiated
transactions, or by a combination of these methods, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices or through the writing of options on
the Selling SECURITY HOLDERS' Securities. The Selling SECURITY HOLDERS may elect
to engage a broker or dealer to effect sales in one or more of the following
transactions: (a) block trades in which the broker or dealer so engaged will
attempt to sell the Selling SECURITY HOLDERS' Securities as agent but may
position and resell a portion of the block as principal to facilitate the
-27-
<PAGE> 28
transaction, (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus, and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
In effecting sales, brokers and dealers engaged by the Selling SECURITY HOLDERS
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling SECURITY HOLDERS in amounts to
be negotiated (and, if such broker-dealer acts as agent for the purchaser of
such Selling SECURITY HOLDERS' Securities, from such purchaser). Broker-dealers
may agree with the Selling SECURITY HOLDERS to sell a specified number of such
Selling SECURITY HOLDERS' Securities at a stipulated price per Selling Security
Holder's Security, and to the extent that such broker-dealer is unable to do so,
acting as agent for the Selling SECURITY HOLDERS to purchase as principal any
unsold Selling SECURITY HOLDERS' Securities at the price required to fulfill the
broker-dealer commitment to the Selling SECURITY HOLDERS. Broker-dealers who
acquire Selling SECURITY HOLDERS' Securities as principal may thereafter resell
such Selling SECURITY HOLDERS' Securities from time to time in transactions
(which may involve crosses and block transaction and sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may pay to or
receive from the purchasers of such Selling SECURITY HOLDERS' Securities
commissions as described above.
The Selling SECURITY HOLDERS and any broker-dealers or agents that
participate with the Selling SECURITY HOLDERS in sales of the Selling SECURITY
HOLDERS' Securities may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 in connection with such sales. In such event, any
commissions received by such broker-dealers or agent and any profit on the
resale of the Selling SECURITY HOLDERS' Securities purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act of
1933.
The Company will pay all expenses incidental to this offering and sale
of the Selling SECURITY HOLDERS' Securities to the public other than selling
commissions and fees.
The Selling SECURITY HOLDERS have been advised that during the time
they are engaged in "distribution" (as defined under Regulation M under the
Securities Exchange Act of 1934, as amended) of the securities covered by this
Prospectus, they must comply with Regulation M under the Securities Exchange Act
of 1934, as amended, and pursuant thereto: (i) shall not engage in any
stabilization activity in connection with the Company's securities; and (ii)
shall not bid for or purchase any securities of the Company or attempt to
include any person to purchase any of the Company's securities other than as
permitted under the Securities Exchange Act of 1934, as amended. Any Selling
SECURITY HOLDERS who are "affiliated purchasers" of the Company, as defined in
Regulation M, have been further advised that they and their affiliates must
coordinate their sales under this Prospectus and otherwise with the Company and
any other "affiliated purchasers" of the Company for purposes of Regulation M.
The Selling SECURITY HOLDERS must also furnish each broker through which Selling
SECURITY HOLDERS' Securities are sold copies of this Prospectus.
LEGAL OPINION
The validity of certain of the Securities offered hereby will be passed
upon for Jaws US by Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles,
California.
EXPERTS
The Consolidated Financial Statements of Jaws US audited by Ernst &
Young LLP, Independent Chartered Accountants have been included herein in
reliance on their report given in their authority as experts in accounting and
auditing.
The audited Financial Statements of Jaws Canada, audited by Ernst &
Young LLP, Independent Chartered Accountants have been included herein in
reliance on their report given on their authority as experts in accounting and
auditing.
-28-
<PAGE> 29
CONSOLIDATED FINANCIAL STATEMENTS
JAWS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
JUNE 30, 1998
<PAGE> 30
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
JAWS TECHNOLOGIES, INC.
We have audited the accompanying consolidated balance sheets of JAWS
TECHNOLOGIES, INC. (a development stage company) as at June 30, 1998 and
December 31, 1997 and the related consolidated statements of loss, deficit, and
cash flows for the six month period ended June 30, 1998, the period from the
date of incorporation on January 27, 1997 to December 31, 1997 and for the
cumulative period since inception. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Jaws
Technologies, Inc. (a development stage company) as at June 30, 1998 and
December 31, 1997 and the consolidated results of its operations and its
consolidated cash flows for the six month period ended June 30, 1998 and for the
period from the date of incorporation on January 27, 1997 to December 31, 1997
and for the cumulative period since inception in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 1 to the financial statements, the Company's recurring
losses from operations and net capital deficiency raise substantial doubts about
its ability to continue as a going concern. Management's plans as to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Calgary, Canada
August 26, 1998 Chartered Accountants
<PAGE> 31
JAWS TECHNOLOGIES, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(all amounts are in U.S. dollars)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 139,958 111
Prepaid expenses and deposits 18,842 7,500
- --------------------------------------------------------------------------------
158,800 7,611
Fixed assets [note 4] 76,263 --
Organization costs, net of amortization 2,030 2,320
- --------------------------------------------------------------------------------
237,093 9,931
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 168,783 32,976
- --------------------------------------------------------------------------------
Due to stockholders [note 6] 16,165 78,159
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock [note 5] 1,780,084 35,650
Foreign currency translation adjustment 848 --
Deficit accumulated during the development stage (1,728,787) (136,854)
- --------------------------------------------------------------------------------
52,145 (101,204)
- --------------------------------------------------------------------------------
237,093 9,931
================================================================================
</TABLE>
See accompanying notes
<PAGE> 32
JAWS TECHNOLOGIES, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(all amounts are in U.S. dollars)
For the six month period ended June 30, 1998 (with comparative figures for the
period from the date of incorporation on January 27, 1997 to December 31,
1997)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS SINCE
1998 1997 INCEPTION
---------- -------- ----------
$ $ $
- --------------------------------------------------------------------------------
(note 10)
<S> <C> <C> <C>
REVENUE 1,938 -- 1,938
- --------------------------------------------------------------------------------
EXPENSES
Accounting and legal 59,862 69,952 129,814
Advertising and promotion 170,684 35,000 205,684
Wages and employee benefits 23,124 -- 23,124
Rent 8,787 -- 8,787
Consulting 340,908 30,731 371,639
Depreciation and amortization 4,912 580 5,492
Travel 43,377 -- 43,377
Write-off of acquired software 909,003 -- 909,003
development costs
Other 33,214 591 33,805
- --------------------------------------------------------------------------------
1,593,871 136,854 1,730,725
- --------------------------------------------------------------------------------
Loss before income taxes (1,591,933) (136,854) (1,728,787)
Provision for income taxes [note 7] -- -- --
- --------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (1,591,933) (136,854) (1,728,787)
OTHER COMPREHENSIVE LOSS --
Foreign currency translation adjustment 848 -- 848
- --------------------------------------------------------------------------------
COMPREHENSIVE LOSS (1,591,085) (136,854) (1,727,939)
================================================================================
DEFICIT, BEGINNING OF PERIOD (136,854) --
NET LOSS FOR THE PERIOD (1,591,933) (136,854)
- --------------------------------------------------------------------------------
DEFICIT, END OF PERIOD (1,728,787) (136,854)
================================================================================
Net loss per common share (0.24) (0.03)
Weighted average number of shares
outstanding 6,516,851 4,000,000
================================================================================
</TABLE>
See accompanying notes
<PAGE> 33
JAWS TECHNOLOGIES, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six month period ended June 30, 1998 (with comparative figures for the
period from the date of incorporation on January 27, 1997 to December 31,
1997)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS SINCE
1998 1997 INCEPTION
$ $ $
- --------------------------------------------------------------------------------
(note 10)
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period (1,591,933) (136,854) (1,704,337)
Adjustments to reconcile net loss to net
cash provided by operating activities
Consulting expense not involving the
payment of cash [note 5] 150,000 -- 150,000
Depreciation and amortization 4,912 580 5,492
Write-off of acquired software
development costs 909,003 -- 884,553
Changes in non-cash working capital
balances [note 9] 107,814 25,476 133,290
- --------------------------------------------------------------------------------
(420,204) (110,798) (531,002)
- --------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of fixed assets (77,883) -- (77,883)
Cash acquired on acquisition of
subsidiary 1,380 -- 1,380
Organizational costs -- (2,900) (2,900)
- --------------------------------------------------------------------------------
(76,503) (2,900) (79,403)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common
stock, net of issue costs 754,686 35,650 790,336
Increase in (repayment of) stockholder
loans (116,437) 78,159 (38,278)
- --------------------------------------------------------------------------------
638,249 113,809 752,058
- --------------------------------------------------------------------------------
EFFECTS OF FOREIGN EXCHANGE ON CASH (1,695) -- (1,695)
- --------------------------------------------------------------------------------
INCREASE IN CASH 139,847 111 139,958
Cash, beginning of period 111 -- --
- --------------------------------------------------------------------------------
CASH, END OF PERIOD 139,958 111 139,958
================================================================================
See accompanying notes
</TABLE>
<PAGE> 34
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Company was incorporated on January 27, 1997 under the laws of the State of
Nevada. The Company maintains a fiscal year ending on December 31. The business
purpose is developing and selling encryption software. These activities are
carried out through the Company's wholly owned Canadian Subsidiary. The Company
is in the development stage.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company is in the development stage and, at June 30, 1998, has
accumulated losses from operations amounting to $1,728,787. Management believes
that additional funding will be required to finance expected operations until a
market has been developed for the Company's software. Management intends to seek
additional financing through future private or public offerings of stock and
through the exercise of stock options. The Company's continuation as a going
concern is dependent on its ability to generate sufficient cash flow, to meet
its obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain successful operations. However, no assurance
can be given at this time as to whether the Company will achieve any of these
conditions. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern
for a reasonable period of time.
On March 27, 1998, "E-Biz" Solutions, Inc. changed its name to Jaws
Technologies, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The financial statements have, in management's opinion, been properly prepared
in accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates which would affect the amount
of recorded assets, liabilities, revenues and expenses. Actual amounts could
differ from these estimates.
1
<PAGE> 35
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Jaws Technologies, Inc., an Alberta, Canada
corporation, after elimination of intercompany accounts and transactions.
FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash, accounts payable,
and amounts due to or from stockholders approximate their fair values. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments.
FIXED ASSETS
Fixed assets are recorded at cost and are depreciated at the following annual
rates which are designed to amortize the cost of the assets over their estimated
useful lives.
<TABLE>
<S> <C>
Furniture and fixtures - 20% diminishing balance
Computer hardware - 33% straight line
Computer software - 33% straight line
</TABLE>
SOFTWARE DEVELOPMENT
Software development costs are expensed as incurred, as technological
feasibility has not yet been established.
ORGANIZATION COSTS
Organization costs are capitalized and amortized over 60 months on a
straight-line basis.
ADVERTISING
Advertising costs are expensed as incurred.
2
<PAGE> 36
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's subsidiary is Canadian dollars.
Accordingly, assets and liabilities of the subsidiary are translated at the
year-end exchange rate and revenues and expenses are translated at average
exchange rates. Gains and losses arising from the translation of the financial
statements of the subsidiary are deferred in a "Foreign Currency Translation
Adjustment" account in shareholders' equity.
NET LOSS PER COMMON SHARE
The net loss per common share has been calculated based on the weighted average
number of common shares outstanding during the period. Outstanding stock options
would not have a dilutive effect on the net loss per common share.
3. ACQUISITION
On February 10, 1998 the Company issued 1,500,000 restricted common shares as
well as options to purchase 400,000 shares of its restricted common stock at
$0.50 per share to the stockholders of Jaws Technologies, Inc., an Alberta,
Canada corporation ("Jaws Alberta"), in exchange for all of its outstanding
common stock. The options issued in connection with the acquisition have been
ascribed no value. Jaws Alberta is a development stage company which at the time
of acquisition was in the process of creating a new encryption software product.
The acquisition has been accounted for by the purchase method.
The purchase price was determined based on estimates by management as to the
replacement cost for the encryption software development which had been incurred
by Jaws Alberta prior to the acquisition date. The purchase price has been
allocated to the net assets acquired based on their estimated fair values as
follows:
<TABLE>
<CAPTION>
$
- --------------------------------------------------------------------------------
<S> <C>
NET ASSETS ACQUIRED
Non-cash working capital (5,087)
Software under development 909,003
Fixed assets 2,891
Due to stockholders (54,443)
- --------------------------------------------------------------------------------
Net assets acquired, excluding cash 852,364
Less accrued acquisition costs (13,996)
Cash 1,380
</TABLE>
3
<PAGE> 37
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
<TABLE>
- ---------------------------------------------------------------------------------
<S> <C>
NET ASSETS ACQUIRED FOR COMMON STOCK 839,748
- ---------------------------------------------------------------------------------
</TABLE>
The operating results of the acquired company are included in the consolidated
statement of loss and deficit from the date of acquisition.
Pro forma loss and pro forma net loss per common share for the six month period
ended June 30, 1998, giving effect to the acquisition of Jaws Alberta as at
January 1, 1998 are $1,599,901 and $0.25 respectively.
Pro forma loss and pro forma net loss per common share for the period from the
date of incorporation on January 27, 1997 to December 31, 1997, giving effect to
the acquisition of Jaws Alberta as at September 18, 1997 (being the date of
inception of Jaws Alberta), are $1,038,995 and $0.19 respectively.
4. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 1998 1997
---------------------------------------------
ACCUMULATED NET BOOK COST AND NET
COST DEPRECIATION VALUE BOOK VALUE
$ $ $ $
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Furniture and fixtures 33,168 2,777 30,391 --
Computer hardware 41,455 1,833 39,622 --
Computer software for internal 6,631 381 6,250 --
use
- --------------------------------------------------------------------------------
81,254 4,991 76,263 --
================================================================================
</TABLE>
4
<PAGE> 38
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
5. SHARE CAPITAL
a) AUTHORIZED
20,000,000 common shares at $0.001 par value
5,000,000 preferred shares at $0.001 par value
b) COMMON STOCK ISSUED
<TABLE>
<CAPTION>
CAPITAL IN
EXCESS OF
DATE SHARES PAR VALUE PAR VALUE TOTAL
$ $ $
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 27, 1997 -- -- -- --
Issuance of common stock
for cash 4,000,000 4,000 56,000 60,000
Less share issue costs -- -- (24,350) (24,350)
- ---------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 4,000,000 4,000 31,650 35,650
Issuance of common stock Feb. 3/98 50,000 50 24,950 25,000
Issuance of common stock
for acquisition of
subsidiary [note 3] Feb. 10/98 1,500,000 1,500 838,248 839,748
Issuance of common stock
for cash Feb. 18/98 600,000 600 299,400 300,000
Issuance of common stock April 2/98 625,000 625 249,375 250,000
Issuance of common stock April 5/98 50,000 50 19,950 20,000
Issuance of common stock April 8/98 625,000 625 249,375 250,000
Issuance of common stock Jan. 1/98 250,000 250 124,750 125,000
Less share issue costs -- -- (65,314) (65,314)
- ---------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998 7,700,000 7,700 1,772,384 1,780,084
=======================================================================================
</TABLE>
The Company issued 300,000 restricted common shares to a consultant for services
provided in relation to the establishment of the capital structure of the
Company. The shares were recorded at their estimated fair value of $150,000.
5
<PAGE> 39
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
Of the stock options to purchase 400,000 shares of the Company's restricted
common stock at $0.50 per share issued to the founder stockholders of the
acquired subsidiary (see note 3), none have been exercised as at June 30, 1998.
The outstanding options expire two years from February 10, 1998. Additional
stock options to purchase 50,000 shares at $0.50 per share were issued during
the period. None of these have been exercised at June 30, 1998. They expire
February 9, 2000.
6. RELATED PARTY TRANSACTIONS
Amounts due to stockholders at June 30, 1998 consist of the following amounts,
which are non-interest bearing and have no set repayment terms:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
DUE TO 1998 1997
$ $
- ------------------------------------------------------------------------------
<S> <C> <C>
Bankton Financial Corporation 14,122 --
Cameron Chell 2,043 --
Other stockholders -- 78,159
- ------------------------------------------------------------------------------
16,165 78,159
==============================================================================
</TABLE>
The amounts due to Bankton are for consulting services provided to the Company.
All other amounts due to stockholders represent advances received by the
Company.
7. INCOME TAXES
The Company accounts for income taxes under the liability method required by
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
6
<PAGE> 40
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
(a) recovery of income taxes differ from the amount computed by applying
corporate income tax rates to loss before income taxes. The reasons for this
difference are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Corporate income tax rate 35% 34%
Recovery of income taxes based on corporate income
tax rate (557,177) (46,530)
Increase (decrease) in taxes resulting from:
Accounting losses not tax effected 695,520 46,530
Foreign tax rate differences (138,343) --
- --------------------------------------------------------------------------------
Total deferred tax assets (liabilities) -- --
================================================================================
</TABLE>
(b) the components of the Company's deferred tax assets and liabilities,
including the valuation allowance, comprise the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Depreciation and write-off of acquired software
development costs in excess of capital cost 411,131 --
allowance
Net operating loss carryforwards 238,191 --
Start-up costs not deducted for tax purposes 119,208 46,333
Organization costs not deducted for tax purposes 299 197
- --------------------------------------------------------------------------------
768,829 46,530
Valuation allowance (768,829) (46,530)
- --------------------------------------------------------------------------------
Total deferred tax assets (liabilities) -- --
================================================================================
</TABLE>
(c) the Company has Canadian net operating loss carryforwards of approximately
$470,000 which expire in 2005 and 2006.
The foreign currency translation adjustment included in comprehensive loss for
the period has not been tax effected.
7
<PAGE> 41
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
8. COMMITMENTS
The Company is committed to the following minimum lease payments under operating
leases for premises and equipment:
<TABLE>
<CAPTION>
$
-----------------------------
<S> <C>
Remainder of 1998 10,423
1999 20,846
2000 20,846
2001 2,848
2002 2,558
2003 1,364
</TABLE>
9. NET CHANGE IN NON-CASH WORKING CAPITAL
RELATED TO OPERATING ACTIVITIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Prepaid expenses and deposits (21,535) (7,500)
Accounts payable and accrued liabilities 129,349 32,976
- --------------------------------------------------------------------------------
107,814 25,476
================================================================================
</TABLE>
10. COMPARATIVE AMOUNTS
The Company was incorporated on January 27, 1997 but did not commence operations
until July, 1997. Accordingly, the comparative 1997 figures provided are for the
period from the commencement of operations on July, 1997 to December 31, 1997.
8
<PAGE> 42
JAWS TECHNOLOGIES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in U.S. dollars)
June 30, 1998
11. SEGMENTED INFORMATION
The Company's activities are conducted in two geographic segments: Canada and
the United States. All activities relate to the development and sale of
encryption software.
As at December 31, 1997 and during the period from January 27, 1997 to December
31, 1997, all the Company's activities were carried out in the United States.
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
CANADA U.S. TOTAL
$ $ $
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue 1,938 -- 1,938
Expenses 1,385,366 208,505 1,593,871
- --------------------------------------------------------------------------------
Net loss for the period (1,383,428) (208,505) (1,591,933)
================================================================================
Assets 234,190 2,903 237,093
================================================================================
Capital expenditures 77,883 -- 77,883
================================================================================
Depreciation, depletion and amortization 4,622 290 4,912
================================================================================
</TABLE>
9
<PAGE> 43
FINANCIAL STATEMENTS
JAWS TECHNOLOGIES INC.
DECEMBER 31, 1997
<PAGE> 44
AUDITORS' REPORT
To the Shareholders of
JAWS TECHNOLOGIES INC.
We have audited the balance sheet of JAWS TECHNOLOGIES INC. as at December 31,
1997 and the statements of earnings and deficit and cash flows for the period
from September 18, 1997 to December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1997 and the
results of its operations and the changes in its financial position for the
period from September 18, 1997 to December 31, 1997 in accordance with
generally accepted accounting principles.
Calgary, Canada
July 9, 1998 Chartered Accountants
<PAGE> 45
JAWS TECHNOLOGIES INC.
BALANCE SHEET
As at December 31
<TABLE>
1997
<S> <C>
$
ASSETS
CURRENT
Cash 275
Prepaid expenses and deposits 1,900
Capital assets [note 3] 2,175
2,746
Software [note 4] 1,200,000
1,204,921
- ---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 7,761
Due to shareholder [note 6] 65,300
SHAREHOLDERS' EQUITY
Share capital [note 5] 1,200,000
Deficit (68,140)
- ---------------------------------------------------------------------
1,131,860
1,204,921
- ---------------------------------------------------------------------
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
<PAGE> 46
JAWS TECHNOLOGIES INC.
STATEMENT OF EARNINGS AND DEFICIT
For the period from the date of incorporation on
September 18, 1997 to December 31, 1997
1997
$
---------
REVENUE --
- -------------------------------------------------------------------
EXPENSES
Accounting and legal 4,000
Consulting 2,750
Depreciation 687
Other 60,703
68,140
Loss before income taxes (68,140)
Provision for income taxes --
- -------------------------------------------------------------------
NET LOSS FOR THE PERIOD AND DEFICIT, END OF PERIOD (68,140)
- -------------------------------------------------------------------
See accompanying notes
<PAGE> 47
JAWS TECHNOLOGIES INC.
STATEMENT OF CASH FLOWS
For the period from the date of incorporation on
September 18, 1997 to December 31, 1997
<TABLE>
<CAPTION>
1997
<S> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year $ (68,140)
Items not requiring cash
Depreciation 687
Funds from operations (67,453)
Net change in non-cash working capital related
to operating activities [note 8] 5,861
(61,592)
INVESTING ACTIVITIES
Purchase of capital assets (3,433)
Purchase of software (1,200,000)
(1,203,433)
FINANCING ACTIVITIES
Issuance of common shares 1,200,000
Shareholder loan 65,300
1,265,300
INCREASE IN CASH 275
Cash position, beginning of period --
CASH POSITION, END OF PERIOD 275
</TABLE>
- --------------------------------------------------------------
See accompanying notes
<PAGE> 48
JAWS TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. DESCRIPTION OF BUSINESS
Jaws Technologies Inc. (the "Company") was incorporated under the laws of
Alberta on September 18, 1997 and is engaged in the business of developing and
selling encryption software. The business comprises one segment for financial
reporting purposes.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
Canadian generally accepted accounting principles. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates and approximations which have been made using careful judgment.
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash, prepaid expenses
and deposits, accounts payable and accrued liabilities and due to shareholder
approximate their fair values.
CAPITAL ASSETS
Capital assets are recorded at cost and are depreciated at the following annual
rates which are designed to amortize the cost of the assets over their estimated
useful lives
Furniture and fixtures - 20% diminishing balance
SOFTWARE DEVELOPMENT
Software development costs are capitalized if it can be demonstrated that the
product is technologically and commercially feasible, and future benefits from
selling the product can be regarded as reasonably certain. Amortization of the
capitalized development costs will commence when the software is available for
general release to customers.
1
<PAGE> 49
JAWS TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
1997
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
----- ------------ --------
<S> <C> <C> <C>
Furniture and fixtures 3,433 687 2,746
----- --- -----
</TABLE>
4. SOFTWARE
The Company develops encryption software. The Company expects to complete all
coding and testing activities by May 10, 1998. Amortization of the software will
commence when the software is available for general release to customers.
5. SHARE CAPITAL
a) AUTHORIZED
Unlimited Class "A, B, C" common shares
Unlimited Class "D and E" non-voting common shares
Unlimited Class "F and G" preferred shares, voting, non-cumulative,
redeemable and retractable
Unlimited Class "H" preferred shares, non-voting, non-cumulative, redeemable
and retractable
<TABLE>
<CAPTION>
1997
-----------------------
SHARES $
------ ---------
<S> <C> <C>
b) ISSUED
CLASS A COMMON SHARES
Balance, beginning of period -- --
Founders shares 835 8
Shares issued in exchange for software 165 1,200,000
----- ---------
BALANCE, END OF PERIOD 1,000 1,200,008
----- ---------
</TABLE>
On October 20, 1997 the Company purchased from Jaws Software Ltd. encryption
software and technology in consideration of the issuance of 165 Class A common
shares of the Company valued at $1,200,000.
2
<PAGE> 50
JAWS TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
6. RELATED PARTY TRANSACTIONS
At December 31, 1997 the Company had amounts due to a shareholder of $65,300.
The amounts do not carry interest and have no set repayment terms.
7. COMMITMENTS
The Company is committed to the following minimum lease payments under an
operating lease for premises:
<TABLE>
<CAPTION>
$
------
<S> <C>
1998 14,328
1999 14,328
2000 14,328
</TABLE>
8. NET CHANGE IN NON-CASH WORKING CAPITAL
BALANCES RELATED TO OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1997
$
<S> <C>
Prepaid expenses and deposits (1,900)
Accounts payable and accrued liabilities 7,761
-------
5,861
-------
</TABLE>
9. SUBSEQUENT EVENTS
On February 10, 1998 "E-Biz" Solutions, Inc. issued common shares to the
shareholders of the Company in exchange for 100% of the outstanding common
shares of the Company.
3
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
JAWS US
Indemnification of Directors and Officers
The registrant has the power to indemnify its directors and officers against
liability for certain acts pursuant to the laws of Nevada, being the
Registrant's state of incorporation. In addition, under the Articles of
Incorporation of the Registrant, no director, officer or agent is personally
liable to the corporation or its stockholders for monetary damages arising out
of a breach of such person's fiduciary duty to the Registrant, unless such
breach involves intentional misconduct, fraud or a knowing violation of law.
Liability of Directors and Officers. No director or officer shall be personally
liable to the corporation or stockholders for monetary damages for any breach of
fiduciary duty by such person as a director or officer. Notwithstanding the
foregoing sentence, the director or officer shall be liable to the extent
provided by the applicable laws for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law.
The provisions hereof shall not apply to or have any effect on the liability or
alleged liability of any officer or director of the corporation for or with
respect to any acts or omissions of such person occurring prior to this
amendment. Jaws US' Articles state that it may, in its sole discretion indemnify
and advance expenses to any person who incurs liability or expense by reason of
such person acting as a director, officer, employee or agent of Jaws US, to the
fullest extent allowed by the Nevada General Corporation Law.
Section 78.7502 of the Nevada General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the corporation or for amounts paid in settlement to the corporation, unless
and only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter
therein, the corporation shall indemnify him against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with the
defense.
<PAGE> 52
The articles of incorporation of Jaws US provide that Jaws US will exercise, to
the extent permitted by law, its power of indemnification, and that the
foregoing right of indemnification shall not be exclusive of other rights to
which a person shall be entitled as a matter of law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
JAWS CANADA
Jaws Canada's Articles state that it may, in its sole discretion indemnify and
advance expenses to any person who incurs liability or expense by reason of such
person acting as a director, officer, employee or agent of the Corporation, to
the fullest extent allowed by the Business Corporations Act (Alberta).
The Business Corporations Act (Alberta) provides that a corporation may
indemnify its current and former officers and directors against reasonable
expenses which, in each case, were incurred in connection with actions, suits,
or proceedings in which such persons are parties by reason of the fact that they
are or were an officer or director of the corporation, if: (i) they acted
honestly and in good faith; (ii) in the case of a criminal or administrative
proceeding, they had no reasonable cause to believe the conduct was unlawful.
Unless limited by its articles of incorporation, a corporation shall be required
to indemnify an officer or who was wholly successful in defense of a proceeding,
against reasonable attorneys' fees.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following tables sets forth the various expenses in connection with the sale
and distribution of the securities being registered, other than underwriting
discounts and commissions and non-accountable expense allowance. All of the
amounts shown are estimates, except the Securities and Exchange Commission
registration.
<PAGE> 53
<TABLE>
<S> <C>
SECURITIES AND EXCHANGE COMMISSION REGISTRATION FEE.............. $ 3,810.17
ACCOUNTING FEES AND EXPENSES..................................... $10,000.00
PRINTING AND ENGRAVING EXPENSES.................................. $ 5,000.00
TRANSFER AGENT AND REGISTRAR (FEES AND EXPENSES)................. $ 2,000.00
BLUE SKY FEES AND EXPENSES (INCLUDING COUNSEL FEES).............. $ 2,000.00
OTHER LEGAL FEES AND LEGAL EXPENSES.............................. $20,000.00
MISCELLANEOUS EXPENSES........................................... $ 7,189.83
----------
TOTAL............................................................ $50,000.00
==========
</TABLE>
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES.
The following securities have been sold by Jaws US since the Company's
incorporation in 1997.
1. Offering Memorandum dated February 14, 1997 with a Sticker Update dated
April 1,1997 pursuant to which the Company sold 4,000,000 shares of Common Stock
at $.015 per share for an aggregate investment of $60,000. The Offering was made
pursuant to an exemption provided by Rule 504 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"). The sale of shares was to 14
investors in the state of Nevada and 27 additional investors, all of which
purchases took place outside the United States.
2. Offering Memorandum dated November 7, 1997 pursuant to which the
Company sold 250,000 shares of Common Stock at $1.75 per share for an aggregate
investment of $437,500. The Offering was made pursuant to an exemption provided
by Rule 504 of Regulation D promulgated under the Securities Act of 1933, as
amended.
3. Share Exchange Agreement between the Company and shareholders of Jaws
Canada dated February 10, 1998 pursuant to which Jaws US issued 1,500,000 shares
of Common Stock and options to purchase 400,000 shares of Common Stock at $0.50
per share to the shareholders of Jaws Canada in exchange for all of the issued
and outstanding shares of Jaws Canada.
4. Offering Memorandum dated February 18, 1998 (the "February O.M.")
pursuant to which the Company sold 600,000 shares of Common Stock at $0.50 per
share for an aggregate investment of $300,000. The Offering was made pursuant to
an exemption provided by Rule 504 of Regulation D promulgated under the Act. The
sale of shares was to 26 investors.
5. Sale pursuant to the February O.M. of 1,250,000 shares of Common Stock
of the Company at $0.40 per share for an aggregate investment of $500,000 to
Bristol Asset Management, LLC.
<PAGE> 54
6. Sale pursuant to the February O.M. of 450,000 shares of Common Stock of
the Company at $0.40 per share for an aggregate investment of $180,000 to two
investors (225,000 shares each) Hampton Park Ltd. and Linear Strategies Ltd.
ITEM 27. EXHIBITS.
(a) Exhibits
The following exhibits pursuant to Rule 601 of Regulation SB are included
herein.
<TABLE>
<S> <C>
3.1.1 Articles of Incorporation of "E-Biz" Solutions, Inc. (now Jaws
US), a Nevada Corporation as amended on March 11, 1998.
3.1.2 Articles of Incorporation of Jaws Canada dated September 17, 1997.
3.2.1 Bylaws of E-Biz Solutions Inc. (now Jaws US) dated January 27,
1997.
3.2.2 Bylaws No. 1 of Jaws Canada dated October 20, 1997 and Bylaw No. 2
of Jaws Canada dated October 20, 1997.
4.1.1. Debenture Acquisition Agreement by and between Jaws US and
Thomson Kernaghan & Co. Ltd. dated September 25, 1998.
4.1.2 Investment Agreement by and between Jaws US and Bristol Asset
Management V, LLC dated August 27, 1998.
5.1.1 Jeffer, Mangels, Butler & Marmaro LLP legal opinion (to be filed
by amendment).
10.1.1 Lease Agreement by and between Jaws US and The Manufacturer of
Life Insurance Company dated December 15, 1997.
10.1.2 Director's Agreement between Jaws US and Arthur Wong dated July
1998.
10.1.3 Director's Agreement between Jaws US and Julia Johnson dated July
30, 1998.
10.1.4 Incentive and Non-Qualified Stock Option Plan for Jaws US.
21 Subsidiaries of Issuer include: Jaws Canada.
23.1 Consent of Jeffer, Mangels, Butler & Marmaro LLP
23.2 Consent of Ernst & Young.
</TABLE>
<PAGE> 55
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any Prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually, or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement; notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum Offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section
230.424(b) of this Chapter) if, in the aggregate,
the changes in volume and price represent no more
than a 20% change in the maximum aggregate
Offering price set forth in the "Calculation of
Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein,
and the Offering of such securities at that time shall
be deemed to be the initial bona fide Offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that
remain unsold at the termination of the Offering.
Insofar as indemnification for liabilities arising from the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
<PAGE> 56
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Calgary, Province of
Alberta on the 12th day of October, 1998.
JAWS TECHNOLOGIES INC.
By: /s/ ROBERT KUBBERNUS
-----------------------------------------
Robert Kubbernus, Chief Executive Officer
<PAGE> 57
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert
Kubbernus or Cameron Chell, or either of them, his true and lawful
attorney-in-fact and agent, acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, any Amendments thereto and any Registration
Statement for the same Offering which is effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, each acting
alone, full powers and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorney-in-fact and agent, acting alone, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ ROBERT KUBBERNUS CEO and Director October 12, 1998
- -------------------------
Robert Kubbernus
/s/ CAMERON CHELL Director/Vice President Finance October 12, 1998
- --------------------------
Cameron Chell
/s/ JULIA JOHNSON Director October 12, 1998
- -------------------------
Julia Johnson
/s/ ARTHUR WONG Director October 12, 1998
- -------------------------
Arthur Wong
</TABLE>
<PAGE> 1
EXHIBIT 3.1.1
ARTICLES OF INCORPORATION
OF
E-BIZ SOLUTIONS, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a Corporation under and pursuant to the laws
of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
E-biz solutions, inc.
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for which
this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or desirable
to accomplish the above purposes, and to do all other things incidental
thereto which are not forbidden by law or by these Articles of
Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers granted
by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation
is formed. In addition, the Corporation shall have the following specific
powers:
(a) To elect or appoint officers and agents of the Corporation and to fix
their compensation;
(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the ownership
or possession thereof, sell, or otherwise dispose of, shares or other
interests in, or obligations of, individuals, associations, partnerships,
corporations, or governments;
<PAGE> 2
(d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of
shares of the corporation, but such shares may only be purchased, directly
or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for charitable,
scientific or educational purposes, and in time of war, to make donations in
aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 shares of Capital Stock at
$.001 par value per share as set forth in subsections (a) and (b) of this
Section 1 of Article VI.
(a) The total number of shares of Common Stock which this
Corporation is authorized to issue is 20,000,000 shares at $.001
par value per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 5,000,000 shares at $.001
par value per share, which Preferred Stock may contain special
preferences as determined by the Board of Directors of the
Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be issued
for such consideration, as shall be fixed from time to time by the Board
of Directors. In the absence of fraud, the judgment of the Directors as
to the value of any property for shares shall be conclusive. When shares
are issued upon payment of the consideration fixed by the Board of
Directors, such shares shall be taken to be fully paid stock and shall
be non-assessable. The Articles shall not be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided by
the Board of Directors, no holder of any shares of the stock of the
Corporation, shall have any preemptive right to purchase, subscribe for,
or otherwise acquire any shares of stock of the Corporation of any class
now or hereafter authorized, or any securities exchangeable for or
convertible into such shares, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase, or otherwise
acquire such shares.
Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and conditions
and at such times and prices as the Board of Directors may provide,
which terms and conditions shall be incorporated in an instrument or
instruments evidencing
<PAGE> 3
such rights. In the absence of fraud, the judgment of the Directors as
to the adequacy of consideration for the issuance of such rights or
options and the sufficiency thereof shall be conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation, after
the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid up shall ever be
assessable or assessed. The holders of such stock shall not be individually
responsible for the debts, contracts, or liabilities of the Corporation and
shall not be liable for assessments to restore impairments in the capital of the
Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business, and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board of the
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, terms of office, manner of election,
time and place of meeting, and powers and duties shall be such as are
prescribed by statute and in the by-laws of the Corporation. The name
and post office address of the directors constituting the first board of
directors, which shall be One (1) in number are:
NAME ADDRESS
Max C. Tanner 2950 East Flamingo Road
Suite G
Las Vegas, NV 89121
Section 2. Powers of Board. In furtherance and not in limitation of the
powers conferred by the laws of the State of Nevada, the Board of
Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the
power of the shareholders to alter or repeal the By-Laws made by
the Board of Directors.
(b) Subject to the applicable provisions of the By Laws then in
effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the Corporation, or
any of them, shall be open to shareholder inspection. No
shareholder shall have any right to inspect any of the accounts,
books or documents of the Corporation, except as permitted by
law, unless and until
<PAGE> 4
authorized to do so by resolution of the Board of Directors or
of the Shareholders of the Corporation;
(c) To issue stock of the Corporation for money, property, services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with
the action of the board of directors without vote or consent of
the shareholders and the judgment of the board of directors as
to value received and in return therefore shall be conclusive
and said stock, when issued, shall be fully-paid and
non-assessable.
(d) To authorize and issue, without shareholder consent, obligations
of the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine,
and to pledge or mortgage, as security therefore, any real or
personal property of the Corporation, including after-acquired
property;
(e) To determine whether any and, if so, what part, of the earned
surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and
disposition of any such earned surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other
lawful purpose;
(g) To establish bonus, profit-sharing, stock option, or other types
of incentive compensation plans for the employees, including
officers and directors, of the Corporation, and to fix the
amount of profits to be shared or distributed, and to determine
the persons to participate in any such plans and the amount of
their respective participation.
(h) To designate, by resolution or resolutions passed by a majority
of the whole Board, one or more committees, each consisting of
two or more directors, which, to the extent permitted by law and
authorized by the resolution or the By-Laws, shall have and may
exercise the powers of the Board;
(i) To provide for the reasonable compensation of its own members by
By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority herein before, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, subject, nevertheless,
to the provisions of the laws of the State of Nevada, of these
Articles of Incorporation, and of the By-Laws of the
Corporation.
Section 3. Interested Directors. No contract or transaction between this
Corporation
<PAGE> 5
and any of its directors, or between this Corporation and any other
corporation, firm, association, or other legal entity shall be
invalidated by reason of the fact that the director of the Corporation
has a direct or indirect interest, pecuniary or otherwise, in such
corporation, firm, association, or legal entity, or because the
interested director was present at the meeting of the Board of Directors
which acted upon or in reference to such contract or transaction, or
because he participated in such action, provided that: (1) the interest
of each such director shall have been disclosed to or known by the Board
and a disinterested majority of the Board shall have nonetheless
ratified and approved such contract or transaction (such interested
director or directors may be counted in determining whether a quorum is
present for the meeting at which such ratification or approval is
given); or (2) the conditions of N.R.S. 78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal
liability of a director or officer of the corporation to the corporation or the
Shareholders for damages for breach of fiduciary duty as a director or officer
shall be limited to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law.
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit
or proceeding, if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best
interests of the corporation and with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suite or
proceeding, by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not of itself
create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(b) The corporation may indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending
or completed action or suit by or in the right of the
corporation, to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint
<PAGE> 6
venture, trust or other enterprise against expenses including
amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or
settlement of the action or suit, if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may
not be made for any claim, issue or matter as to which such a
person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals there from, to be liable to the
corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this Article, or in defense of any
claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorney's fees,
actually and reasonably incurred by him in connection with the
defense.
(d) Any indemnification under subsections (a) and (b) unless ordered
by a court or advanced pursuant to subsection (e), must be made
by the corporation only as authorized in the specific case upon
a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written
opinion; or
(iv) If a quorum consisting of directors who were not parties
to the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(e) Expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of
an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified
by the corporation. The provisions of this
<PAGE> 7
subsection do not affect any rights to advancement of expenses
to which corporate personnel other than directors or officers
may be entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may
be entitled under the certificate or articles of
incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise,
for either an action in his official capacity or an
action in another capacity while holding his office,
except that indemnification, unless ordered by a court
pursuant to subsection (b) or for the advancement of
expenses made pursuant to subsection (e) may not be made
to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of
action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of
the heirs, executors and administrators of such a
person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the State
of Nevada, the shareholders and the Directors shall have power to hold their
meetings, and the Directors shall have power to have an office or offices and to
maintain the books of the Corporation outside the State of Nevada, at such place
or places as may from time to time be designated in the By-Laws or by
appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be added.
All rights herein conferred on the directors, officers and shareholders are
granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 27th day of January, 1997.
<PAGE> 8
------------------------------
Max C. Tanner
STATE OF NEVADA )
COUNTY OF CLARK )
On January 27, 1997, personally appeared before me, a Notary Public, Max C.
Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for E-biz solutions, inc., a Nevada corporation.
------------------------------
Notary Public
<PAGE> 1
EXHIBIT 3.1.2
CORPORATE ACCESS NUMBER
20751981
ALBERTA
GOVERNMENT OF ALBERTA
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
INCORPORATION
JAWS TECHNOLOGIES INC.
WAS INCORPORATED IN ALBERTA
ON SEPTEMBER 18, 1997.
[GOVERNMENT OF ALBERTA SEAL]
-----------------------------------
Registrar of Corporations
<PAGE> 2
BUSINESS CORPORATIONS ACT
(Section 6)
ALBERTA FORM 1
Consumer and
Corporate Affairs ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
1. Name of Corporation:
JAWS TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
2. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE:
SEE ATTACHED SCHEDULE "A".
- --------------------------------------------------------------------------------
3. RESTRICTIONS ON SHARE TRANSFERS (IF ANY):
NO SHARES OF THE CORPORATION SHALL BE TRANSFERRED WITHOUT THE
APPROVAL OF THE BOARD OF DIRECTORS BY RESOLUTION PASSED AT A DULY
CONSTITUTED MEETING OF THE BOARD.
- --------------------------------------------------------------------------------
4. NUMBER, OR MINIMUM AND MAXIMUM NUMBER, OF DIRECTORS THAT THE
CORPORATION MAY HAVE:
MINIMUM OF ONE (1) AND A MAXIMUM OF TEN (10)
- --------------------------------------------------------------------------------
5. IF THE CORPORATION IS RESTRICTED FROM CARRYING ON A CERTAIN
BUSINESS, OR RESTRICTED TO CARRYING ON A CERTAIN BUSINESS, SPECIFY
THE RESTRICTION(S):
None
- --------------------------------------------------------------------------------
6. OTHER RULES OR PROVISIONS (IF ANY):
As per Schedule "B"
- --------------------------------------------------------------------------------
7. DATE: SEPTEMBER 17, 1997
INCORPORATORS NAMES: K.E. STAROZIK (SOLICITOR)
ADDRESS: #400, 1010-8 AVE SW, CALGARY, ALBERTA`
SIGNATURE: _______________________________
<PAGE> 3
SCHEDULE "A"
The Class "A", "B" and "C" common shares shall have the following
rights, privileges and conditions attached to them:
(a) the right to receive notice, attend and to vote at any meeting
of shareholders of the Corporation;
(b) to receive any dividend declared by the Corporation;
(c) to receive the remaining property of the Corporation on
dissolution.
The Class "D" and "E" shall have the following rights, privileges,
restrictions and conditions attached to them:
(a) the right to receive any dividend declared by the Corporation;
(b) the right to share pro-rata with the holders of Class "A", Class
"B" and Class "C" common shares the remaining property of the
Corporation on dissolution.
The holder of Class "D" and "E" common shares shall not have the
right to receive notice, attend or to vote at any meeting of shareholders of the
Corporation.
The directors may declare such dividends as there may be determined
from time to time to any or all classes of common shares, and if they so
determine to the exclusion of any other class.
The Class "F", "G" and "H" preferred shares shall have the following
rights, privileges, restrictions and conditions attached to them:
(a) the holders of Class "F" preferred shares shall have the right
to receive notice, vote and attend at any meeting of the
shareholders of the Corporation;
(b) the Corporation, at the opinion of the Board of Directors, may
redeem or repurchase at any time any part of the then outstanding
Class "F" preferred shares on payment for each share to be redeemed
or purchased for an amount equal to the redemption value, being
$1,000.00 per share plus declared but unpaid dividends (hereinafter
referred to as "the Redemption Value");
(c) the holder of Class "F" preferred shares, upon ten (10) days
notice, may request that some or all of his shares be redeemed in
which case the Corporation shall pay the holder the Redemption Value
thereof at the time he presents to the registered office of the
Corporation the share certificate or certificates that he seeks to
redeem;
<PAGE> 4
(d) the holders of Class "F" preferred shares shall not be entitled
to any preferential dividend except in the event that the
Corporation is in default of redemption and to that extent and from
the date thereof, there shall attach a fixed preferential cumulative
cash dividend at the rate of ten (10%) percent of the Redemption
Value;
(e) no dividend shall be paid on shares other than the Class "F"
preferred shares so as to reduce the value of the Class "F"
preferred shares below their Redemption Value;
(f) the Class "F" preferred shares shall not be redeemed or
purchased by the Corporation for cancellation for an amount in
excess of the Redemption Value or for an amount less than the lesser
of the Redemption Value and the realizable value of the net assets
of the Corporation;
(g) in the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of assets or property of the
Corporation among shareholders for the purpose of winding up its
affairs, the holders of Class "F" preferred shares shall be entitled
to receive from the assets and property of the Corporation, in
priority to any distribution to the holders of the common shares, a
sum equivalent to the full Redemption Value in respect of each Class
"F" preferred share held by them, before any amount shall be paid or
property or assets of the Corporation distributed. The holders of
Class "F" preferred shares shall not be entitled to share in any
further distribution of the assets or the property of the
Corporation;
(h) the stated capital of the Class "F" preferred share or shares
shall be determined by the Directors at the time of allotment;
(i) the rights attaching to the Class "F" preferred shares shall
only be amended upon the passing of a Special Resolution as defined
by the Alberta Business Corporations Act.
Class "G" Preferred Shares
(a) the holders of Class "B" preferred shares shall have the right
to receive notice, vote and attend at any meeting of the
shareholders of the Corporation;
(b) the Corporation, at the option of the Board of Directors, may
redeem or repurchase at any time any part of the them outstanding
Class "G" preferred shares on payment for each share to be redeemed
or purchased for an amount equal to the redemption value, being
$1,000.00 per share plus declared but unpaid dividends (hereinafter
referred to as "the Redemption Value");
<PAGE> 5
(c) holder of Class "G" preferred shares, upon ten (10) days notice,
may request that some or all of his shares be redeemed in which case
the Corporation shall pay the holder the Redemption Value thereof at
the time he presents to the registered office of the Corporation the
share certificate or certificates that he seeks to redeem;
(d) the holders of Class "G" preferred shares shall not be entitled
to any preferential dividend except in the event that the
Corporation is in default or redemption and to that extent and form
the date thereof, there shall attach a fixed preferential cumulative
cash dividend at the rate of ten (10%) percent of the Redemption
Value;
(e) no dividend shall be paid on shares other than the Class "G"
preferred shares so as to reduce the value of the Class "G"
preferred shares below their Redemption Value;
(f) the Class "G" preferred shares shall not be redeemed or
purchased by the Corporation for cancellation for an amount in
excess of the Redemption Value and the realizable value of the net
assets of the Corporation;
(g) in the event of liquidation, dissolution or winding up of the
Corporation or other distribution of assets or property of the
Corporation among shareholders for the purpose of winding up its
affairs, the holders of the Class "G" preferred shares shall be
entitled to receive from the assets and property of the Corporation,
in priority to any distribution to the holders of the common shares,
a sum equivalent to the full Redemption Value in respect of each
Class "G" preferred share held by them, before any amount shall be
paid or property or assets of the Corporation distributed. The
holders of Class "B" preferred shares shall not be entitled to share
in any further distribution of the assets or the property of the
Corporation;
(h) the stated capital of the Class "G" preferred share or shares
shall be determined by Directors at the time of allotment;
(i) the rights attaching to the Class "G" preferred shares shall
only be amended upon the passing of a Special Resolution of the
holders thereof, being a Special Resolution as defined by the
Alberta Business Corporations Act;
(j) upon the death, liquidation, winding up or bankruptcy or a
holder thereof other than a transfer on death or otherwise to a
spouse or a trust in favour of only one spouse, the Class "G"
preferred shares shall be converted into a similar number of Class
"H" preferred shares and the Class "G" preferred shares shall
thereafter be cancelled and returned to Treasury.
<PAGE> 6
Class "H" Preferred Shares
(a) the Class "H" preferred Shares shall not be entitled to receive
a notice, vote or attend at any meeting of the shareholders of the
Corporation;
(b) the Corporation, at the option of the Board of Directors, may
redeem or repurchase at any time any part of the then outstanding
Class "H" preferred shares on payment for each share to be redeemed
or purchased for an amount equal to the redemption value, being
$1,000.00 per share plus declared but unpaid dividends (hereinafter
referred to as "the Redemption Value");
(c) the holders of the Class "H" preferred shares shall be entitled
to non-cumulative preferential dividend at a rate to be determined
by the Board of Directors and in the event that the Corporation is
in default of redemption and to that extent and from the date
thereof ,shall attach a fixed preferential cumulative cash dividend
at the rate of ten (10%) percent of the Redemption Value;
(d) no dividend shall be paid on shares other than the Class "H"
preferred shares so as to reduce the value of the Class "H"
preferred shares so as to reduce the value of the Class "H"
preferred shares below their Redemption Value;
(e) the Class "H" preferred shares shall not be redeemed or
purchased by the Corporation for cancellation for an amount in
excess of the Redemption Value or for an amount less than the lesser
of the Redemption Value and the realizable value of the net assets
of the Corporation;
(f) in the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of assets or property of the
Corporation among shareholders for the purpose of winding up its
affairs, the holders of the Class "H" preferred shares shall be
entitled to receive from the assets and property of the Corporation,
in priority to any distribution to the holders of the common shares,
a sum equivalent to the full Redemption Value in respect of each
Class "H" preferred share held by them, before any amount shall be
paid or property or assets of the Corporation distributed. The
holders of Class "H" preferred shares shall not be entitled to share
in any further distribution of the assets or the property of the
Corporation;
(g) the stated capital of the Class "H" preferred shares shall be
determined by the Directors at the time of allotment;
(h) the rights attaching to the Class "H" preferred shares shall
only be amended upon the passing of a Special Resolution of the
holders thereof, being a Special Resolution as defined by the
Alberta Business Corporations Act.
<PAGE> 7
SCHEDULE "B"
1. The number of shareholders of the Corporation is limited to not more
than fifty (50) persons, exclusive of persons who are in its
employment or persons who, having been formerly in the employment of
the Corporation have continues to be shareholders; two (2) or more
persons who are the joint registered owners of one (1) or more
shares being counted as one (1) shareholder.
2. The directors and/or shareholders by unanimous resolution may hold
meetings by telephone as and when required so long as such meetings
are documented in writing within a reasonable time thereafter.
3. Any invitation to the public to subscribe for any securities of the
Corporation is prohibited.
<PAGE> 1
EXHIBIT 3.2.1
BY-LAWS OF
E-BIZ SOLUTIONS INC.
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders
shall be held at such date and time as shall be designated by the board of
directors and stated in the notice of the meeting or in a duly-executed waiver
of notice thereof. If the corporation shall fail to provide notice of the annual
meeting of the shareholders as set forth above, the annual meeting of the
shareholders of the corporation shall be held during the month of November or
December of each year as determined by the Board of Directors, for the purpose
of electing directors of the corporation to serve during the ensuing year and
for the transaction of such other business as may properly come before the
meeting. If the election of the directors is not held on the day designated
herein for any annual meeting of the shareholders, or at any adjournment
thereof, the president shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may
be called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders
of record written or printed notice of any meeting at least ten (10)
days, but not more than sixty (60) days, before the date of such
meeting; which notice shall state the place, date and time of the
meeting, the general nature of the business to be transacted, and, in
the case of any meeting at which directors are to be elected, the names
of nominees, if any, to be presented for election.
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(b) In the case of any meeting, any proper business may be
presented for action, except that the following items shall be valid
only if the general nature of the proposal is stated in the notice or
written waiver of notice:
(1) Action with respect to any contract or
transaction between the corporation and one or more of its
directors or another firm, association, or corporation in
which one or more of its directors has a material financial
interest;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or
dissolution of the corporation.
(c) The notice shall be personally delivered or mailed by
first class mail to each shareholder of record at the last known
address thereof, as the same appears on the books of the corporation,
and the giving of such notice shall be deemed delivered the date the
same is deposited in the United States mail, postage prepaid. If the
address of any shareholder does not appear upon the books of the
corporation, it will be sufficient to address any notice to such
shareholder at the principal office of the corporation.
(d) The written certificate of the person calling any meeting,
duly sworn, setting forth the substance of the notice, the time and
place the notice was mailed or personally delivered to the several
shareholders, and the addresses to which the notice was mailed shall be
prima facie evidence of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date
as a record date for the determination of the shareholders entitled to
notice of any meeting or to vote or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled
to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days prior to
the date of such meeting nor more than sixty (60) days prior to any
other action. When a record date is so fixed, only shareholders of
record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of
rights, or to exercise their rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
corporation after the record date.
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(b) If no record date is fixed by the Board of Directors, then
(1) the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which written consent is
given; and (3) the record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the
sixtieth (60th) day prior to the date of such other action, whichever
is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the
issued and outstanding shares of the corporation represented in person
or by proxy, shall constitute a quorum.
(b) If less than a majority of the issued and outstanding
shares are represented, a majority of shares so represented may adjourn
from time to time at the meeting, until holders of the amount of stock
required to constitute a quorum shall be in attendance. At any such
adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted as originally called.
When a shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken,
unless the adjournment is for more than ten (10) days in which event
notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly
authorized proxy or attorney-in-fact shall be entitled to one (1) vote
for each share of stock standing registered in such shareholder's name
on the books of the corporation on the record date.
(b) Except as otherwise provided herein, all votes with
respect to shares standing in the name of an individual on the record
date (included pledged shares) shall be cast only by that individual or
such individual's duly authorized proxy or attorney-in-fact. With
respect to shares held by a representative of the estate of a deceased
shareholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do
not stand in the name of such holder. In the case of shares under the
control of a receiver, the receiver may cast votes carried by such
shares even though the shares do not stand in the name of the receiver
provided that the order of the court of competent jurisdiction which
appoints the receiver contains the authority to cast votes carried by
such shares. If shares stand in the name of a minor, votes may be cast
only by the duly-appointed guardian of the estate of such minor if such
guardian has provided the corporation with written notice and proof of
such appointment.
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(c) With respect to shares standing in the name of a
corporation on the record date, votes may be cast by such officer or
agents as the by-laws of such corporation prescribe or, in the absence
of an applicable by-law provision, by such person as may be appointed
by resolution of the Board of Directors of such corporation. In the
event no person is so appointed, such votes of the corporation may be
cast by any person (including the officer making the authorization)
authorized to do so by the Chairman of the Board of Directors,
President or any Vice President of such corporation.
(d) Notwithstanding anything to the contrary herein contained,
no votes may be cast by shares owned by this corporation or its
subsidiaries, if any. If shares are held by this corporation or its
subsidiaries, if any, in a fiduciary capacity, no votes shall be cast
with respect thereto on any matter except to the extent that the
beneficial owner thereof possesses and exercises either a right to vote
or to give the corporation holding the same binding instructions on how
to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise and shares held by two or
more persons (including proxy holders) having the same fiduciary
relationship respect in the same shares, votes may be cast in the
following manner:
(1) If only one such person votes, the votes of such
person binds all.
(2) If more than one person casts votes, the act of
the majority so voting binds all.
(3) If more than one person casts votes, but the vote
is evenly split on a particular matter, the votes shall be
deemed cast proportionately as split.
(f) Any holder of shares entitled to vote on any matter may
cast a portion of the votes in favor of such matter and refrain from
casting the remaining votes or cast the same against the proposal,
except in the case of elections of directors. If such holder entitled
to vote fails to specify the number of affirmative votes, it will be
conclusively presumed that the holder is casting affirmative votes with
respect to all shares held.
(g) If a quorum is present, the affirmative vote of holders of
a majority of the shares represented at the meeting and entitled to
vote on any matter shall be the act of the shareholders, unless a vote
of greater number or voting by classes is required by the laws of the
State of Nevada, the Articles of Incorporation and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by proxy
with respect to the shares held by an instrument in writing and subscribed to by
the holder of such shares entitled to vote. No proxy shall
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be valid after the expiration of six (6) months from the date of execution
thereof, unless coupled with an interest or unless otherwise specified in the
proxy. In no event shall the term of a proxy exceed seven (7) years from the
date of its execution. Every proxy shall continue in full force and effect until
its expiration or revocation. Revocation may be effected by filing an instrument
revoking the same or a duly-executed proxy bearing a later date with the
secretary of the corporation.
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and
existence of quorum;
(2) Reading and approval of the minutes of the
previous meeting or meetings;
(3) Reports of the Board of Directors, the president,
treasurer and secretary of the corporation, in the order
named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting
of the shareholders are as valid as though had at a meeting duly-held after
regular call and notice if a quorum is present, either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice if such objection is
expressly made at the beginning. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be specified
in any written waiver of notice, except as otherwise provided in Section 1.04(b)
of these By-Laws.
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Section 1.12 Action Without Meeting. Any action which may be taken by
the vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or such
greater proportion as may be required by the laws of the State of Nevada, the
Articles of Incorporation, or these By-Laws. Whenever action is taken by written
consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of at
least one (1) but no more than nine (9) persons, who shall be elected at the
annual meeting of the shareholders of the corporation and who shall hold office
for one (1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board or
the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the
corporation, by a majority vote, may declare vacant the office of a
director who has been declared incompetent by an order of a court of
competent jurisdiction or convicted of a felony.
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death,
resignation, removal, change in number of directors, or otherwise may
be filled by the shareholders at any regular or special meeting or any
adjourned meeting thereof or the remaining director(s) by the
affirmative vote of a majority thereof. A Board of Directors consisting
of less than the maximum number authorized in Section 2.01 of ARTICLE
II constitutes vacancies on the Board of Directors for purposes of this
paragraph and may be filled as set forth above including by the
election of a majority of the remaining directors. Each successor so
elected shall hold office until the next annual meeting of shareholders
or until a successor shall have been duly-elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office
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who have been elected by the shareholders shall constitute less than a
majority of the directors then in office, any holder or holders of an
aggregate of five percent (5%) or more of the total number of shares
entitled to vote may call a special meeting of shareholders to be held
to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
Section 2.06 Regular Meetings. Immediately following the adjournment
of, and at the same place as, the annual meeting of the shareholders, the Board
of Directors, including directors newly elected, shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of the Board of
Directors may be called by the chairman and shall be called by the chairman upon
the request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
Section 2.09 Notice of Meetings. Except as otherwise provided in
Section 2.06, the chairman shall deliver to all directors written or printed
notice of any special meeting, at least three (3) days before the date of such
meeting, by delivery of such notice personally or mailing such notice first
class mail, or by telegram. If mailed, the notice shall be deemed delivered two
(2) business days following the date the same is deposited in the United States
mail, postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, unless such attendance is for the express purpose of objecting to
the transaction of business threat because the meeting is not properly called or
convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall
constitute a quorum.
(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may adjourn, from time to
time, until a quorum is present, and no notice of such adjournment
shall be required. At any adjourned meeting where a quorum is present,
any business may be transacted which could have been transacted at the
meeting originally called.
Section 2.11 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a written consent thereto is signed by all of
the members of the Board of Directors or of such committee. Such written consent
or consents shall be filed with the minutes of the proceedings of
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the Board of Directors or committee. Such action by written consent
shall have the same force and effect as the unanimous vote of the Board
of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors
may be held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting constitutes
presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of
Incorporation or the laws of the State of Nevada, the Board of
Directors is invested with the complete and unrestrained authority to
manage the affairs of the corporation, and is authorized to exercise
for such purpose as the general agent of the corporation, its entire
corporate authority in such manner as it sees fit. The Board of
Directors may delegate any of its authority to manage, control or
conduct the current business of the corporation to any standing or
special committee or to any officer or agent and to appoint any persons
to be agents of the corporation with such powers, including the power
to sub-delegate, and upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders
at annual meetings of the shareholders, and when called for by a
majority vote of the shareholders at a special meeting of the
shareholders, a full and clear statement of the condition of the
corporation, and shall, at request, furnish each of the shareholders
with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of
the shareholders or any special meeting properly called for the purpose
of considering any such contract or act, provided a quorum is present.
The contract or act shall be valid and binding upon the corporation and
upon all the shareholders thereof, if approved and ratified by the
affirmative vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized and empowered to issue stock of the Corporation
for money, property, services rendered, labor performed, cash advanced,
acquisitions for other corporations or for any other assets of value in
accordance with the action of the Board of Directors without vote or
consent of the shareholders and the judgment of the Board of Directors
as to the value received and in return therefore shall be conclusive
and said stock, when issued, shall be fully-paid and non-assessable.
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Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board.
Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman to preside at the meetings of the
Board of Directors. The Board of Directors may also elect such other
board officers and for such term as it may, from time to time,
determine advisable.
(b) Any vacancy in any board office because of death,
resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting of
the Board of Directors shall be as follows:
(1) Determination of members present and existence of
quorum;
(2) Reading and approval of the minutes of any
previous meeting or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it
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may deem advisable; prescribe their duties; and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general perform all duties incident to the
office of the secretary. All corporate books kept by the secretary shall be open
for examination by any director at any reasonable time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary
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of the corporation or by the Board of Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors. The treasurer shall, if
required by the Board of Directors,give a bond to the corporation in such sum
and with such security as shall be approved by the Board of Directors for the
faithful performance of all the duties of the treasurer and for restoration to
the corporation in the event of the treasurer's death, resignation, retirement,
or removal from office, of all books, records, papers, vouchers, money and other
property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property belonging to the corporation. The expense of
such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall
be issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal
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of the corporation and shall be signed by the president or the vice president
and also by the secretary or an assistant secretary. Each certificate shall
contain the name of the record holder, the number, designation, if any, class or
series of shares represented, a statement of summary of any applicable rights,
preferences, privileges, or restrictions thereon, and a statement that the
shares are assessable, if applicable. All certificates shall be consecutively
numbered. The name and address of the shareholder, the number of shares, and the
date of issue shall be entered on the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificates shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any shareholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or mutilated shall, prior to the issuance of a replacement, provide
the corporation with his, her or its affidavit of the facts surrounding the
loss, theft, destruction or mutilation and an indemnity bond in an amount and
upon such terms as the treasurer, or the Board of Directors, shall require. In
no case shall the bond be in amount less than twice the current market value of
the stock and it shall indemnify the corporation against any loss, damage, cost
or inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of
Incorporation are amended in any way affecting the statements contained in the
certificates for outstanding shares of capital stock of the corporation or it
becomes desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of shareholders until the holder has
complied with the order provided that such order operates to suspend such rights
only after notice and until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all certificates
for shares of stock to bear the signature of such transfer agent and such
registrar of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period
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of ten (10) days prior to all meetings of the shareholders and shall be closed
for the payment of dividends as provided in Article V hereof and during such
periods as, from time to time, may be fixed by the Board of Directors, and,
during such periods, no stock shall be transferable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06 of these By-laws,
prior to the dividend payment for the purpose of determining shareholders
entitled to receive payment of any dividend. The Board of Directors may close
the stock transfer books for such purpose for a period of not more than ten (10)
days prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation
in the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the corporation may have an
office in any other state or territory as the Board of Directors may designate.
Section 6.02 Records. The stock transfer books and a certified copy of
the By-laws, Articles of Incorporation, any amendments thereto, and the minutes
of the proceedings of the shareholders, the Board of Directors, and committees
of the Board of Directors shall be kept at the principal office of the
corporation for the inspection of all who have the right to see the same and for
the transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
Section 6.03 Financial Report on Request. Any shareholder or
shareholders holding at least five percent (5%) of the outstanding shares of any
class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period of
the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such period.
In addition, if no annual report for the last fiscal year has been sent to
shareholders, such shareholder or shareholders may make a request
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for a balance sheet as of the end of such fiscal year and an income statement
and statement of changes in financial position for such fiscal year. The
statement shall be delivered or mailed to the person making the request within
thirty (30) days thereafter. A copy of the statements shall be kept on file in
the principal office of the corporation for twelve (12) months, and such copies
shall be exhibited at all reasonable times to any shareholder demanding an
examination of them or a copy shall be mailed to each shareholder. Upon request
by any shareholder, there shall be mailed to the shareholder a copy of the last
annual, semiannual or quarterly income statement which it has prepared and a
balance sheet as of the end of the period. The financial statements referred to
in this Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of
proceedings of the shareholders and the Board of Directors and
committees of the Board of Directors shall be open to inspection upon
the written demand of any shareholder or holder of a voting trust
certificate at any reasonable time during usual business hours for a
purpose reasonably related to such holder's interest as a shareholder
or as the holder of such voting trust certificate. This right of
inspection shall extend to the records of the subsidiaries, if any, of
the corporation. Such inspection may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and
make extracts.
(b) Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation
and/or its subsidiary corporations. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes
the right to copy and make extracts.
Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall
be the calendar year or such other term as may be fixed by resolution of the
Board of Directors.
Section 6.07 Reserves. The Board of Directors may create, by
resolution, out of the earned surplus of the corporation such reserves as the
directors may, from time to time, in their discretion, think proper to provide
for contingencies, or to equalize dividends or to repair or maintain any
property of the corporation, or for such other purpose as the Board of Directors
may deem beneficial to the corporation, and the directors may modify or abolish
any such reserves in the manner in which they were created.
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ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited
by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be so involved in any threatened, pending or completed action suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that the Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding, must be paid by the corporation as they are
incurred and in advance of the final disposition of any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses, (iii) that the
Indemnitee shall be presumed to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv)
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the establishment of a letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred,
paid or accrued, (ii) all attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, food and
lodging expenses while traveling, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service, freight or
other transportation fees and expenses, (iii) all other disbursements
and out-of-pocket expenses, (iv) amounts paid in settlement, to the
extent permitted by Nevada Law, and (v) reasonable compensation for
time spent by the Indemnitee for which he is otherwise not compensated
by the corporation or any third party, actually and reasonably incurred
in connection with either the appearance at or investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a
right to indemnification under any agreement or arrangement, this
Article, the Nevada Law or otherwise; provided, however, that
"Expenses" shall not include any judgments or fines or excise taxes or
penalties imposed under the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type
whatsoever, including, but not limited to, judgments or fines, ERISA or
other excise taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada
Revised Statutes as amended and in effect from time to time or any
successor or other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through
7.04 of these By-Laws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including
this Paragraph, of these By-Laws may be amended by the stockholders
only by vote of the holders of sixty-six and two-thirds percent (66
2/3%) of the entire number of shares of each class, voting separately,
of the outstanding capital stock of the corporation (even though the
right of any class to vote is otherwise restricted or denied);
provided, however, no amendment or repeal of this Article shall
adversely affect any right of any Indemnitee existing at the time such
amendment or repeal becomes effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this
Paragraph of these By-Laws may be amended or repealed by the Board of
Directors only by vote of eighty percent (80%) of the total number of
Directors and the holders of sixty-six and two-thirds percent (66 2/3)
of the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided,
however, no amendment or repeal of this Article shall adversely affect
any
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right of any Indemnitee existing at the time such amendment or repeal
becomes effective.
ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may be
made at any regular or special meeting of the Board of Directors by a vote of
not less than all of the entire Board, or may be made by a vote of, or a consent
in writing signed by the holders of a majority of the issued and outstanding
capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these By-laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the
Corporation, do hereby certify that the foregoing By-laws were adopted by the
Board of Directors on the 27th day of January, 1997.
-----------------------------------
Max C. Tanner, Secretary
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EXHIBIT 3.2.2
GENERAL BY-LAW
TABLE OF CONTENTS
<TABLE>
<S> <C>
Interpretation ................................................................. 1
Borrowing, Banking and Securities .............................................. 2
Execution of Instruments ....................................................... 2
Directors ...................................................................... 2
Meeting of Directors ........................................................... 4
Protection of Directors, Officers and Others ................................... 5
Officers ....................................................................... 6
Shareholders' Meetings ......................................................... 8
Shares ......................................................................... 11
Transfer of Securities ......................................................... 12
Dividends and Rights ...................................................... 13
Information Available to Shareholders .......................................... 13
Notices ...................................................................... 13
Miscellaneous............................................................... 14
</TABLE>
General By-Law
BY-LAW NO. 1
A by-law relating generally to the conduct of the affairs of
JAWS TECHNOLOGIES INC.
BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of
JAWS TECHNOLOGIES INC.
(hereinafter called the "Corporation") as follows:
DIVISION ONE
<PAGE> 2
INTERPRETATION
1.01 In this by-law and all other by-laws of the Corporation, unless the context
otherwise specifies or requires:
(a) Act means the Business Corporations Act of Alberta, as from time to time
amended and every statute that may be substituted therefor and, in the case of
each substitution, any references in the by-laws of the Corporation to the
provisions of the Act shall be read as references to the substituted provisions
therefor in the new statute or statutes;
(b) "Appoint" includes "elect" and vice versa;
(c) "Articles" means the Articles of Incorporation or the Articles of
Continuance of the Corporation, as the case may be, as from time to time
amended, supplemented or restated;
(d)"Board" means the board of directors of the Corporation;
(e) "By-laws" means this by-law and all other by-laws of the Corporation from
time to time in force and effect;
(f) "Meeting of Shareholders" includes an annual or other general meeting of
shareholders and a special meeting of shareholders; "special meeting of
shareholders" includes a meeting of any class or classes of shareholders;
(g) "Regulations" means the Regulations under the Act as published or from time
to time amended and every regulation that may be substituted therefor and, in
the case of such substitution, any references in the by-laws of the Corporation
to provisions of the Regulations shall be read as references to the substituted
provisions therefor in the new regulations;
(h) "Signing Officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the corporation by virtue of Section
3.01 of this by-law or by a resolution passed pursuant thereto.
Save as aforesaid, all terms which are contained in the by-laws of the
Corporation and which are defined in the Act or Regulations shall have the
meanings given to such terms in the Act or Regulations. Words importing the
singular number include the plural and vice versa; the masculine shall include
the feminine; and the word "person" shall include an individual, partnership,
association, body corporate, corporation, company, syndicate, trustee, executor,
administrator, legal representative, and any number or aggregate of persons.
DIVISION TWO
BORROWING, BANKING AND SECURITIES
<PAGE> 3
2.01 BORROWING POWER: Without limiting the borrowing powers of the Corporation
as set forth in the Act, the board may from time to time on behalf of the
Corporation, without authorization of the shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, re-issue, sell or pledge bonds, debentures, note or other evidences
of indebtedness or guarantee of the Corporation, whether secured or unsecured;
(c) to the extent permitted by the Act, give a guarantee on behalf of the
Corporation to secure performance of any present or future indebtedness,
liability or obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in all
or any currently owned or subsequently acquired real or personal, moveable or
immoveable, property of the Corporation including book debts, rights, powers,
franchises and undertakings, to secure any such bonds, debentures, note or other
evidences of indebtedness or guarantee or any other present or future
indebtedness, liability or obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by
the Corporation on bills of exchange or promissory notes made, drawn, accepted
or endorsed by or on behalf of the Corporation.
2.02 DELEGATION: The board may from time to time delegate to a committee of the
board, a director or an officer of the Corporation or any other person as may be
designated by the board all or any of the powers conferred on the board by the
preceding section of this by-law or by the Act to such extent and in such manner
as the board may determine at the time of such delegation.
2.03 BANKING ARRANGEMENTS: The banking business of the Corporation including,
without limitation, the borrowing of money and the giving of security therefor,
shall be transacted with such banks, trust companies or other bodies corporate
or organizations as may from time to time be designated by or under the
authority of the board. Such banking business or any part thereof shall be
transacted under such agreements, instructions and delegations of powers as the
board may from time to time prescribe.
DIVISION THREE
EXECUTION OF INSTRUMENTS
3.01 Deeds, transfers, assignments, contracts, obligations, certificates and
other instruments may be signed on behalf of the Corporation by such officer or
officers or person or persons, whether or not officers of the Corporation and in
such manner as the board of directors may from time to time designate by
resolution, in addition, the board or the said person or persons may from time
to time direct the manner in which and the person or persons by whom any
particular instrument or class of instruments may or shall be signed. All
documents so signed shall be binding upon the Corporation without further
authorization or formality.
<PAGE> 4
3.02 CHEQUES, DRAFTS AND NOTES: All cheques, drafts or orders for the payment of
money and all notes and acceptances and bills of exchange shall be signed by
such officer or officers or person or persons, whether or not officers of the
Corporation, and in such manner as the board of directors may from time to time
designate by resolution.
DIVISION FOUR
DIRECTORS
4.01 NUMBER: The board of directors shall consist of the number fixed by the
articles.
4.02 ELECTION AND TERM: The election of directors shall take place at each
annual meeting of shareholders and all the directors then in office, unless
elected for a longer period of time, shall retire but, if qualified, shall be
eligible for re-election. The number of directors to be elected at any such
meeting shall be the number of directors then in office, or the number of
directors whose terms of office expire at the meeting, as the case may be,
except that if cumulative voting is not required by the articles and the
articles otherwise permit, the shareholders may resolve to elect some other
number of directors. Where the shareholders adopt an amendment to the articles
to increase the number or minimum number of directors, the shareholders may, at
the meeting at which they adopt the amendment, elect the additional number of
directors authorized by the amendment. If an election of directors is not held
at the proper time, the incumbent directors shall continue in office until their
successors are elected. If the articles provide for cumulative voting each
director elected by shareholders (but not directors elected or appointed by
creditors or employees) ceases to hold office at the annual meeting and every
shareholder entitled to vote at an election of directors has the right to cast
votes for the directors to be elected equal to the number of votes attached to
the shares held by him multiplied by the number of directors he is entitled to
vote for, and he may cast all such votes in favour of one candidate or
distribute them among the candidates in such manner as he sees fit. If he has
voted for more than one candidate without specifying the distribution among such
candidates he shall be deemed to have divided his votes equally among the
candidates for whom he voted.
4.03 REMOVAL OF DIRECTORS: Subject to the Act, the shareholders may by ordinary
resolution passed at a meeting specially called for such purpose remove any
director from office, except a director elected by employees or creditors
pursuant to the articles or a unanimous shareholder agreement, and the vacancy
created by such removal may be filled at the same meeting, failing which it may
be filled by the board. Provided, however, that if the articles provide for
cumulative voting no director shall be removed pursuant to this section where
the votes cast against the resolution for his removal would, if cumulatively
voted at an election of the full board, be sufficient to elect one or more
directors.
<PAGE> 5
4.04 QUALIFICATION: No person shall be qualified for election as a director if
he is less than Eighteen (18) years of age; if he is of unsound mind and has
been so found by a Court in Canada or elsewhere; if he is not an individual; or
if he has the status of a bankrupt. A director need not be a shareholder.
4.05 CONSENT: No election or appointment of a person as director shall be
effective unless: (a) he is present at the meeting when he was elected or
appointed and did not refuse to act as director; or
(b) he consents in writing to act as a director before his election or
appointment or within ten (10) days thereafter; or (c) he acts as a director
pursuant to the election or appointment.
4.06 VACATION OF OFFICE: A director ceases to hold office when he dies; when he
is removed from office by the shareholders or by creditors or employees who
elected him, as the case may be; when he ceases to be qualified for election as
a director; or when his written resignation is sent or delivered to the
Corporation, or, if a time is specified in such resignation, at the time so
specified, whichever is later.
4.07 COMMITTEE OF DIRECTORS: The directors may appoint from among their number
one or more committees of directors, however designated, and subject to the Act
may delegate to any such committee any of the powers of the directors. The
composition of such committee shall be in compliance with the residency
requirements, if any, specified under the Act.
4.08 REMUNERATION AND EXPENSES: The directors shall be paid such remuneration
for their services as the board may from time to time determine. The directors
shall also be entitled to be reimbursed for travelling and other expenses
properly incurred by them in attending meetings of the board or any committee
thereof or in performance of their duties as directors. Nothing herein contained
shall preclude any director from serving the Corporation in any other capacity
and receiving remuneration therefor.
4.09 CASUAL VACANCIES AND ADDITIONAL DIRECTORS: The directors shall have power
from time to time and at any time, to appoint any other person as a director,
either to fill a casual vacancy or as an addition to the board, but so that the
total number of directors shall not at any time exceed the maximum number fixed
by these presents or by a general meeting.
<PAGE> 6
4.10 SUBSTITUTE DIRECTORS: A director being absent either temporarily or
permanently from the Province of Alberta may appoint and authorize for a period
not exceeding one (1) year from the date of such appointment, any person to
attend and vote as fully and effectively as if such director were personally
present at any meeting of the directors of the company, and to accept any such
notice of such meeting. A person so appointed shall be known as and referred to
as a "substitute director". For the purpose of computing a quorum of the board
for any meeting a substitute director attending thereat shall be deemed to be a
director. The appointment of a substitute director shall be executed by the
director making the appointment. Such appointment may be revoked at any time
upon notice to the company. All the foregoing shall, however, be subject to the
consent of the other directors of the company or a majority thereof.
DIVISION FIVE
MEETING OF DIRECTORS
5.01 PLACE OF MEETING: Meetings of the board of directors and of committees of
directors (if any) may be held within or outside Alberta.
5.02 NOTICE OF MEETING: Notice of the time and place of each meeting of the
board shall be given in the manner provided in Section 13.01 to each director
not less than forty-eight (48) hours before the time when the meeting is to be
held. A notice of a meeting of directors need not specify the purpose of or the
business to be transacted at the meeting except where the Act requires such
purpose or business to be specified, including any proposal to:
(a) submit to the shareholders any question or matter requiring approval of the
shareholders;
(b) fill a vacancy among the directors or in the office of the auditor;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation;
(f) pay a commission for the sale of shares;
(g) approve a management proxy circular;
(h) approve a take-over bid circular or director's circular;
(i) approve any annual financial statements; or
(j) adopt, amend or repeal by-laws.
Provided, however, that a director may in any manner waive notice of a
meeting and attendance of a director at a meeting of directors shall constitute
a waiver of notice of the meeting except where a director attends a meeting for
the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called.
For the first meeting of the board of directors to be held immediately
following an election of directors, or for a meeting of the board of directors
at which a director is to be appointed to fill a vacancy in the board, no notice
of such meeting shall be necessary to the newly elected or appointed director or
directors in order to legally constitute the meeting, provided that a quorum of
the directors is present.
<PAGE> 7
5.03 ADJOURNED MEETING: Notice of an adjourned meeting of the board is not
required if a quorum was present at the original meeting and if the time and
place of the adjourned meeting is announced at the original meeting. Where a
meeting is adjourned because a quorum is not present, notice of the time and
place of the adjourned meeting shall be given, and the adjourned meeting may
proceed with business even though a quorum is not present.
5.04 REGULAR MEETINGS: The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A copy
of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, and
forthwith to each director subsequently elected or appointed, but no other
notice shall be required for any such regular meeting except where the Act or
this by-law requires the purpose thereof or the business to be transacted
thereat to be specified.
5.05 CHAIRMAN: The chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and is present at the meeting: chairman of the board, managing director
or president. If no such officer is present, the directors present shall choose
one of their number to be chairman.
5.06 QUORUM: The quorum for the transaction of business at any meeting of the
board shall consist of a majority of the directors holding office or such
greater number of directors as the board may determine.
5.07 REPRESENTATION AT MEETINGS: The board shall not transact business at a
meeting, other than filling a vacancy in the board, unless the residency
requirements, if any, specified in the Act are complied with except where:
(a) a director possessing the necessary residency requirements who is unable to
be present approves in writing or by telephone or other telecommunication
facilities the business transacted at the meeting; and
(b) at least half of the members present would have satisfied the residency
requirements had that director been present at the meeting.
5.08 VOTING: Questions arising at any meeting of the board of directors shall be
decided by a majority of votes. In case of an equality of votes the chairman of
the meeting, in addition to his original vote, shall have a second or casting
vote.
<PAGE> 8
5.09 MEETING BY TELEPHONE: If all the directors of the Corporation consent, a
director may participate in a meeting of the board or a committee of the board
by means of such telephone or other communication facilities as permit all
persons participating in the meeting to hear each other, and a director
participating in such a meeting by such means is deemed to be present at the
meeting. Any such consent shall be effective whether given before, during or
after the meeting to which it relates and may be given with respect to all
meetings of the board and of committees of the board.
5.10 RESOLUTION IN LIEU OF MEETING: Notwithstanding any of the foregoing
provisions of this bylaw, a resolution in writing signed by all the directors
entitled to vote on that resolution at a meeting of the directors or a committee
of directors, if any, is as valid as if it had been passed at a meeting of the
directors or the committee of directors, if any.
DIVISION SIX
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
6.01 CONFLICT OF INTEREST: A director or officer shall not be disqualified by
his office, or be required to vacate his office, by reason only that he is a
party to, or is a director or officer or has a material interest in any person
who is a party to, a material contract or proposed material contract with the
Corporation or subsidiary thereof. Such a director or officer shall, however,
disclose the nature and extent of his interest in the contract at the time and
in the manner provided by the Act. Any such contract or proposed contract shall
be referred to the board or shareholders for approval even if such contract is
one that in the ordinary course of the Corporation's business would not require
approval by the board or shareholders. Subject to the provisions of the Act, a
director shall not by reason only of his office be accountable to the
Corporation or to its shareholders for any profit or gain realized from such a
contract or transaction, and such contract or transaction shall not be void or
voidable by reason only of the director's interest therein, provided that the
required declaration and disclosure of interest is properly made, the contract
or transaction is approved by the directors or shareholders, and it is fair and
reasonable to the Corporation at the time it was approved and, if required by
the Act, the director refrains from voting as a director on the contract or
transaction and absents himself from the director's meeting at which the
contract is authorized or approved by the directors, except attendance for the
purpose of being counted in the quorum.
6.02 LIMITATION OF LIABILITY: Every director and officer of the Corporation in
exercising his powers and discharging his duties shall act honestly and in good
faith with a view to the best interests of the Corporation and exercise the
care, diligence and skill that a reasonable and prudent person would exercise in
comparable circumstances. Subject to the foregoing, no director or officer for
the time being of the Corporation shall be liable for the acts, receipts,
neglects or defaults of any other director or officer or employee or for joining
in any receipt or act for conformity, or for any loss, damage, or expense
happening to the Corporation through the insufficiency or deficiency of title to
<PAGE> 9
any property acquired by the Corporation or for or on behalf of the Corporation
or for the insufficiency or deficiency of any security in or upon which any of
the monies of or belonging to the Corporation shall be placed out or invested or
for any loss, conversion, misapplication or misappropriation of or any damage
resulting from any dealings with any monies, securities or other assets
belonging to the Corporation or for any other loss, damage or misfortune
whatever which may happen in the execution of the duties of his respective
office or trust or in relation thereto; provided that nothing herein shall
relieve any director or officer from the duty to act in accordance with the Act
and the regulations thereunder or from liability for any breach thereof. The
directors for the time being of the Corporation shall not be under any duty or
responsibility in respect of any contract, act or transaction whether or not
made, done or entered into the name or on behalf of the Corporation, except such
as shall have been submitted to and authorized or approved by the board of
directors.
6.03 INDEMNITY: Subject to the Act, the Corporation shall indemnify a director
or officer, a former director or officer, or a person who acts or acted at the
Corporation's request as a director or officer of a body corporate of which the
Corporation is or was a shareholder or creditor, and his heirs, executors,
administrators and other legal representatives, from and against,
(a) any liability and all costs, charges and expenses that he sustains or incurs
in respect of any action, suit or proceeding that is proposed or commenced
against him for or in respect of anything done or permitted by him in respect of
the execution of the duties of his office; and (b) all other costs, charges and
expenses that he sustains or incurs in respect of the affairs of the
Corporation, except where such liability relates to his failure to act honestly
and in good faith with a view to the best interests of the Corporation.
The Corporation shall also indemnify such persons in such other
circumstances as the Act permits or requires. Nothing in this Section shall
limit the right of any person entitled to indemnity to claim indemnity apart
from the provisions of this Section.
6.04 INSURANCE: Subject to the Act, the Corporation may purchase and maintain
insurance for the benefit of any person referred to in the preceding section
against any liability incurred by him in his capacity as a director or officer
of the Corporation or of any body corporate where he acts or acted in that
capacity at the Corporation's request.
DIVISION SEVEN
OFFICERS
7.01 ELECTION OR APPOINTMENT: The board from time to time shall elect or appoint
a president and a secretary, and may elect or appoint one or more
vice-presidents (to which title may be added words indicating seniority or
function), a general manager, a treasurer and such other officers as the board
may determine, including one or more assistants to any of the officers so
elected or appointed. The board from time to time may also elect or appoint a
chairman of the board, who must be a director, but
<PAGE> 10
otherwise the officers of the Corporation need not be directors of the
Corporation. Two or more offices may be held by the same person.
7.02 CHAIRMAN OF THE BOARD: The chairman of the board shall, when present,
preside at all meetings of the board of directors, committees of directors and,
in the absence of the president, at all meetings of shareholders. In addition
the board may assign to him any of the powers and duties that may by the
provisions of this by-law be assigned to the managing director or to the
president; and he shall have such other powers and duties as the board may
specify.
7.03 MANAGING DIRECTOR: The Managing Director, if any, shall exercise such
powers and have such authority as may be delegated to him by the board of
directors in accordance with the provisions of the Act and, in particular, the
board may delegate to him such of the powers and duties as may be assigned by
this by-law to a general manager or manager.
7.04 PRESIDENT: The president shall be the chief executive officer of the
Corporation and, subject to the authority of the board and the managing
director, if any, shall have such other powers and duties as the board may
specify. During the absence or disability of the managing director, or if no
managing director has been appointed, the president shall also have the powers
and duties of that office; provided, however, that unless he is a director he
shall not preside as chairman at any meeting of directors or of a committee of
directors.
7.05 VICE-PRESIDENT: During the absence or disability of the president, his
duties shall be performed and his powers exercised by the vice-president or, if
there are more than one, by the vice-president designated from time to time by
the board or the president; provided, however, that a vice-president who is not
a director shall not preside as chairman at any meeting of directors or of a
committee of directors. A vice-president shall have such other powers and duties
as the board or the president may prescribe.
7.06 SECRETARY: The secretary shall attend and be the secretary of all meetings
of the board, shareholders and committees of the board and shall enter or cause
to be entered in records kept for that purpose minutes of all proceedings
thereat; he shall give or cause to be given, as and when instructed, all notices
to shareholders, directors, officers, auditors and member of committees of the
board; he shall be the custodian of the stamp or mechanical device generally
used for affixing the corporate seal of the Corporation and of all books,
papers, records, documents and instruments belonging to the Corporation, except
when some other officer or agent has been appointed for that purpose; and he
shall have such other powers and duties as the board of the chief executive
officer may specify.
7.07 TREASURER: The treasurer shall keep proper accounting records in compliance
with the Act and shall be responsible for the deposit of money, the safekeeping
of securities and the disbursements of the funds of the Corporation; he shall
render to the board
<PAGE> 11
whenever required an account of all his transactions and he shall have such
other powers and duties as the board of the chief executive officer may specify.
7.08 GENERAL MANAGER OR MANAGER: If elected or appointed, the general manager
shall have, subject to the authority of the board, the manager director, if any,
and the president, full power to manage and direct the business and affairs of
the Corporation (except such matters and duties as by law must be transacted or
performed by the board of directors and/or by the shareholders) and to employ
and discharge agents and employees of the Corporation or may delegate to him or
them any lesser authority. A general manager or manager shall conform to all
lawful orders given to him by the board of directors of the Corporation and
shall at all reasonable times give to the directors or any of them all
information they may require regarding the affairs of the Corporation. Any agent
or employee appointed by a general manager or manager shall be subject to
discharge by the board of directors.
7.09 POWERS AND DUTIES OF OTHER OFFICERS: The powers and duties of all other
officers shall be such as the terms of their engagement call for or as the
board, the managing director, or the president may specify. Any of the powers
and duties of an officer to whom an assistant has been appointed may be
exercised and performed by such assistant, unless the board otherwise directs.
7.10 VARIATION OF POWERS AND DUTIES: The board may from time to time and subject
to the provisions of the Act, vary, add to or limit the powers and duties of any
officer.
7.11 VACANCIES: If the office of any officer of the Corporation shall be or
become vacant by reason of death, resignation, disqualification or otherwise,
the directors by resolution shall, in the case of the president or the
secretary, and may, in the case of any other office, appoint a person to fill
such vacancy.
7.12 REMUNERATION AND REMOVAL: The remuneration of all officers appointed by the
board of directors shall be determined from time to time by resolution of the
board of directors. The fact that any officer or employee is a director or
shareholder of the Corporation shall not disqualify him from receiving such
remuneration as may be determined. All officers, in the absence of agreement to
the contrary, shall be subject to removal by resolution of the board of
directors at any time, with or without cause.
7.13 AGENTS AND ATTORNEYS: The Corporation, by or under the authority of the
board, shall have power from time to time to appoint agents or attorneys for the
Corporation in or outside Canada with such powers (including the power to
sub-delegate) of management, administration or otherwise as may be thought fit.
DIVISION EIGHT
SHAREHOLDERS' MEETINGS
<PAGE> 12
8.01 ANNUAL MEETINGS: The annual meeting of shareholders shall be held at such
time and on such day in each year as the board, may from time to time determine,
for the purpose of considering the financial statements and reports required by
the Act to be placed before the annual meeting, electing directors, appointing
an auditor if required by the Act or the articles, and for the transaction of
such other business as may properly be brought before the meeting.
Notwithstanding the foregoing an annual meeting shall be held not later than
eighteen (18) months after the date of the Corporation's incorporation and
subsequently not later than fifteen (15) months after the last preceding annual
meeting, unless otherwise ordered by the Court.
8.02 SPECIAL MEETINGS: The board, the chairman of the board, the managing
director or the president shall have the power to call a special meeting of
shareholders at any time and shall call such a meeting as soon as may be done,
when requested to do so by a shareholder or shareholders holding at least five
(5%) percent of the shares carrying the right to vote at the meeting sought to
be held. Such special meeting shall be called and held for the purposes stated
in such requisition.
8.03 PLACE OF MEETINGS: Meetings of shareholders shall be held at any place
within Alberta as the directors may by resolution determine or, if all the
shareholders entitled to vote at the meeting so agree, outside Alberta.
8.04 RECORD DATE FOR NOTICE: The board may fix in advance a date, preceding the
date of any meeting of shareholders by not more than fifty (50) days and not
less than twenty-one (21) days, as a record date for the determination of
shareholders entitled to notice of the meeting. If no record date is fixed, the
record date for the determination of the shareholders entitled to receive notice
of the meeting shall be the close of business on the date immediately preceding
the day on which the notice is given or, if no notice is given, the day on which
the meeting is held.
8.05 NOTICE: A printed, written or typewritten notice stating the day, hour and
place of each meeting of shareholders shall be given in the manner provided in
Section 13.01 not less than twenty-one (21) nor more than fifty (50) days before
the date of the meeting to each director, to the auditor, and to each
shareholder who at the close of business on the record date for notice is
entered in the securities register as the holder of one or more shares carrying
the right to vote at the meeting. Notice of a meeting of shareholders called for
any purpose other than consideration of the financial statements and auditor's
report, election of directors and reappointment of the incumbent auditor shall
state the nature of such business in sufficient detail to permit the
shareholders to form a reasoned judgement thereon and shall state the text of
any special resolution to be submitted to the meeting.
8.06 RIGHT TO VOTE: At any meeting of shareholders, every person shall be
entitled to vote who, on the record date, or if no record date is set, at the
close of business on the date preceding the date notice is sent, or if no notice
is sent, on the date of the meeting, is entered in the securities register as
the holder of one or more shares carrying the right to vote at such meeting
except:
<PAGE> 13
(a) that where such person transfers his shares after the record date is set, or
if no record date is set, after the close of business on the date preceding the
date notice of the meeting is sent to shareholders; and
(b) the transferee, at least ten (10) days prior to the meeting, produces
properly endorsed share certificates to the secretary or transfer agent of the
Corporation or otherwise establishes his ownership of the share in which case
the transferee may vote those shares. If notice is not sent, the transferee may
establish his ownership to the shares in the manner aforesaid at any time prior
to the holding of the meeting.
8.07 WAIVER OF NOTICE: A shareholder and any other person entitled to attend a
meeting of shareholders may in any manner waive notice of a meeting of
shareholders and attendance of any such person at a meeting of shareholders
shall constitute a waiver of notice of the meeting except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called.
8.08 CHAIRMAN, SECRETARY AND SCRUTINEERS: The president or, in his absence, the
chairman of the board, if such an officer has been elected or appointed and is
present, otherwise a vice-president who is a shareholder of the Corporation
shall be chairman of any meeting of shareholders. If no such officer is present
within fifteen (15) minutes from the time fixed for holding the meeting, the
persons present and entitled to vote shall choose one of their number to be
chairman. If the secretary of the Corporation is absent, the chairman shall
appoint some person, who need not be a shareholder, to act as secretary of the
meeting. If desired, one or more scrutineers, who need not be shareholders, may
be appointed by a resolution or by the chairman with the consent of the meeting.
8.09 PERSONS ENTITLED TO BE PRESENT: The only persons entitled to be present at
a meeting of shareholders shall be those entitled to vote thereat, the directors
and auditors of the Corporation and others who, although not entitled to vote,
are entitled or required under the provision of the Act or the articles or
by-laws to be present at the meeting. Any other person may be admitted only on
the invitation of the chairman of the meeting or with the consent of the
meeting.
8.10 QUORUM: A quorum for the transaction of business at any meeting of
shareholders shall be: (a) where the Corporation has only one (1) shareholder,
or one (1) shareholder holds a majority of the shares entitled to vote at the
meeting, that shareholder, in person or represented by proxy;
(b) in all other cases two (2) shareholders personally present and owning or
representing by proxy twenty-five (25%) percent of the shares entitled to vote
at the meeting;
If a quorum is present at the opening of any meeting of shareholders,
the shareholders present or represented may proceed with the business of the
meeting
<PAGE> 14
notwithstanding that a quorum is not present throughout the meeting. If a quorum
is not present at the opening of the meeting of shareholders, the shareholders
present or represented may adjourn the meeting to a fixed time and place but may
not transact any other business.
8.11 PARTICIPATION IN MEETING BY TELEPHONE: A shareholder or any other person
entitled to attend a meeting of shareholders may participate in the meeting by
means of telephone or other telecommunication facilities that permit all persons
participating in the meeting to hear each other if all the shareholders entitled
to vote at the meeting consent and a person participating in such a meeting by
those means is deemed to be present at the meeting.
8.12 PROXYHOLDERS AND REPRESENTATIVES: Votes at meetings of the shareholders may
be given either personally or by proxy; or, in the case of a shareholder who is
a body corporate or association, by an individual authorized by a resolution of
the board of directors or governing body of the body corporate or association to
represent it at the meeting of shareholders of the Corporation, upon producing a
certified copy of such resolution or otherwise establishing his authority to
vote to the satisfaction of the chairman.
A proxy shall be executed by the shareholder or his attorney authorized
in writing and is valid only at the meeting in respect to which it is given or
any adjournment of that meeting. A person appointed by proxy need not be a
shareholder.
Subject to the regulations, a proxy may be in the following form:
The undersigned shareholder of___________________________________-hereby
appoints_________________________of ______________________________ , or failing
him __________________________________-as the nominee of the undersigned to
attend and act for the undersigned and on behalf of the undersigned at the
________________________________________meeting of the shareholders of the said
Corporation to be held on the___________________day of________________, 19
_______-, and at any adjournment or adjournments thereof.
DATED this________________day of_____________, 19__________ _.
__________________________
SIGNATURE OF SHAREHOLDER
8.13 TIME FOR DEPOSIT OF PROXIES: The board may specify in a notice calling a
meeting of shareholders a time, preceding the time of such meeting by not more
than forty-eight (48) hours exclusive of Saturdays and holidays, before which
time proxies to be used at such meeting must be deposited. A proxy shall be
acted upon only if, prior to the time so specified, it shall have been deposited
with the Corporation or an agent thereof
<PAGE> 15
specified in such notice or if, no such time having been specified in such
notice, it has been received by the secretary of the Corporation or by the
chairman of the meeting or any adjournment thereof prior to the time of voting.
8.14 JOINT SHAREHOLDERS: If two or more persons hold a share jointly, any one of
them present in person or duly represented at a meeting of shareholders may, in
the absence of the other or others, vote that share; but if two or more of those
persons are present in person or represented and vote, they shall vote as one
the share jointly held by them.
8.15 VOTES TO GOVERN: At any meeting of shareholders every question shall,
unless otherwise required by the articles or by-laws or by law, be determined by
a majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a ballot, the chairman of the meeting shall
be entitled to a second or casting vote.
8.16 SHOW OF HANDS: Subject to the Act, any question at a meeting of
shareholders shall be decided by a show of hands, unless a ballot thereon is
required or demanded hereinafter provided. Upon a show of hands every person who
is present and entitled to vote shall have one (1) vote. Whenever a vote by show
of hands shall have been taken upon a question, unless a ballot thereon is so
required or demanded, a declaration by the chairman of the meeting that the vote
upon the question has been carried or carried by a particular majority or not
carried and an entry to that effect in the minutes of the meeting shall be prima
facie evidence of the fact without proof of the number of votes recorded in
favour of or against any resolution or other proceeding in respect of the said
question, and the result of the vote so taken shall be the decision of
shareholders upon the said question.
8.17 BALLOTS: On any question proposed for consideration at a meeting of
shareholders, a shareholder, proxyholder or other person entitled to vote may
demand and the chairman may require that a ballot be taken either before or upon
the declaration of the result of any vote by show of hands. If a ballot is
demanded on the election of a chairman or on the question of adjournment it
shall be taken forthwith without an adjournment. A ballot demanded or required
on any other question shall be taken in such a manner as the chairman shall
direct. A demand or requirement for a ballot may be withdrawn at any time prior
to the taking of the ballot. If a ballot is taken each person present shall be
entitled, in respect to the shares that he is entitled to vote at the meeting
upon the question, to the number of votes as provided for by the articles or, in
the absence of such provision in the articles, to one vote for each share he is
entitled to vote. The result of the ballot so taken shall be the decision of the
shareholders upon the question.
<PAGE> 16
8.18 ADJOURNMENT: The chairman at a meeting of shareholders may, with the
consent of the meeting and subject to such conditions as the meeting may decide,
adjourn the meeting from time to time and from place to place. If a meeting of
shareholders at which a quorum is present is adjourned for less than thirty (30)
days, it shall not be necessary to give notice of the adjourned meeting, other
than by announcement at the time of the adjournment. Subject to the Act, if a
meeting of shareholders is adjourned by one or more adjournments for an
aggregate of thirty (30) days or more, notice of the adjourned meeting shall be
given in the same manner as notice for the original meeting. Notice of the time
and place of an adjourned meeting shall be given when a quorum was not present
at the original meeting. Such adjourned meeting may proceed with business even
though a quorum is not present.
8.19 RESOLUTION IN LIEU OF A MEETING: Notwithstanding any of the foregoing
provisions of this by-law a resolution in writing signed by all the shareholders
entitled to vote on that resolution at a meeting of shareholders is as valid as
if it had been passed at a meeting of the shareholders.
8.20 ONLY ONE SHAREHOLDER: Where the Corporation has only one shareholder or
only one holder of any class or series of shares, the shareholder present in
person or duly represented consitutes a meeting of the Company or of that class
of shareholders, as the case may be.
DIVISION NINE
SHARES
9.01 ALLOTMENT AND ISSUANCE: The shares of the Corporation shall be under the
control of the board and, subject to the Act and the articles, the board may
from time to time allot or grant options to purchase the whole or part of the
authorized and unissued shares of the Corporation at such times and to such
persons and for such consideration as the board shall determine, provided that
no share shall be issued until it is fully paid as provided by the Act.
9.02 COMMISSIONS: The board may from time to time cause the Corporation to pay a
reasonable commission to any person in consideration of his purchasing or
agreeing to purchase shares of the Corporation, whether from the Corporation or
from any other person, or procuring or agreeing to procure purchasers for any
such shares.
9.03 NON-RECOGNITION OF TRUSTS: Subject to the Act, the Corporation may treat
the registered holder of any share as the person exclusively entitled to vote,
to receive notices, to receive any dividend or other payments in respect of the
share, and otherwise to exercise all the rights and powers of an owner of the
share.
9.04 CERTIFICATES: Share certificates and the form of stock transfer power on
the reverse side thereof shall (subject to Section 45 of the Act) be in such
form as the board of directors may by resolution approve and such certificates
shall be signed manually by the chairman of the board, or the president, or the
vice-president, or the secretary, or by on behalf of a registrar, transfer
agent or branch transfer agent of the
<PAGE> 17
Corporation, if any. The corporate seal, if any, need not be impressed upon a
share certificate issued by the Corporation.
9.05 REPLACEMENT OF SHARE CERTIFICATES: The board or any other officer or agent
designated by the board may in its or his discretion direct the issue of a new
share or other such certificate in lieu of and upon cancellation of a
certificate that has been mutilated or in substitution for a certificate claimed
to have been lost, destroyed or wrongfully taken on payment of such reasonable
fee and on such terms as to indemnity, reimbursement of expenses and evidence of
loss of title as the board may from time to time prescribe, whether generally or
in any particular case.
9.06 JOINT HOLDERS: If two or more persons are registered as joint holders of
any share, the Corporation shall not be bound to issue more than one certificate
in respect thereof, and delivery of such certificate to one of such persons
shall be sufficient to all of them. Any one of such persons may give effectual
receipts for the certificate issued in respect thereof or for any dividend,
bonus, return of capital or other money payable or warrant issuable in respect
of such share.
DIVISION TEN
TRANSFER OF SECURITIES
10.01 REGISTRATION OF TRANSFER: Subject to the Act, no transfer of a share shall
be registered in a securities register except upon presentation of the
certificate representing such share with an endorsement which complies with the
Act made thereon or delivered therewith duly executed by an appropriate person
as provided by the Act, together with such reasonable assurance that the
endorsement is genuine and effective as the board may from time to time
prescribe, upon payment of all applicable taxes and any reasonable fees
prescribed by the board and upon compliance with such restrictions on transfer
as are authorized by the articles and upon satisfaction of any lien referred to
in Section 10.05.
10.02 TRANSFER AGENTS AND REGISTRARS: The board may from time to time by
resolution appoint or remove one or more transfer agents registered under the
Trust Companies Act to maintain a central securities register or registers and
one or more branch transfer agents to maintain branch securities register or
registers. A transfer agent or branch transfer agent so appointed may be
designated as such or may be designated as a registrar, according to his
functions of both registrar and transfer or branch transfer agent. The board may
provide for the registration of transfers of securities by and in the offices of
such transfer agent, or branch transfer agents or registrars. In the event of
any such appointment in respect of any of the shares of the Corporation, all
share certificates issued by the Corporation in respect to those shares shall be
countersigned by or on behalf of one of the said transfer agents, branch
transfer agents or registrars, if any, as the case may be.
<PAGE> 18
10.03 SECURITIES REGISTERS: A central securities register of the Corporation
shall be kept at the designated records office of the Corporation, if any,
otherwise the registered office of the Corporation, or at an office or offices
of a company or companies registered under the Trust Companies Act as may from
time to time be designated by resolution of the board of directors to act as the
Corporation's transfer agent or agents. Branch securities register or registers
may be kept either in or outside Alberta at such office or offices of the
Corporation as the directors may determine, or at the office or offices of such
other person or persons or companies as may from time to time be designated by
resolution of the directors to act as the Corporation's branch transfer agent or
agents. A branch securities register shall contain particulars of securities
issued or transferred at that branch. Particulars of each issue or transfer of a
security registered in a branch securities register shall also be kept in the
corresponding central securities register.
10.04 DECEASED SHAREHOLDERS: In the event of the death of a holder, or of one of
the joint holders, of any share, the Corporation shall not be required to make
any entry in the securities register in respect thereof or to make any dividend
or other payments in respect thereof except upon production of all such
documents as may be required by law and upon compliance with the reasonable
requirements of the Corporation and its transfer agents.
10.05 LIEN FOR INDEBTEDNESS: If the articles provide that the Corporation shall
have a lien on shares registered in the name of a shareholder indebted to the
Corporation for any unpaid amount owing on a share issued by the Corporation on
the date the Corporation was continued under the Act, such lien may be enforced,
subject to the articles and to any unanimous shareholder agreement, by the sale
of the shares thereby affected or by any other action, suit, remedy or
proceeding authorized or permitted by law or by equity and, pending such
enforcement, the Corporation may refuse to register a transfer of the whole or
any part of such shares.
DIVISION ELEVEN
DIVIDENDS AND RIGHTS
11.01 DIVIDENDS: Subject to the Act, the Board may from time to time declare a
dividend, In such amounts, and at such times, as the Board may In their
discretion determine proper, and In accordance with the Business Corporations
Act of Alberta, In favour of any class of shares, to the exclusion of any other
class of shares, and dividends so declared to any class of shares shall, by
Itself, not entitle any other class of shares to any such dividend unless the
Board shall expressly declare such dividend In favour of such other share
classes, or any of them.
11.02 DIVIDEND CHEQUES: A dividend payable in money shall be paid by cheque to
the order of each registered holder of shares of the class or series in respect
of which it
<PAGE> 19
has been declared, and mailed by prepaid ordinary mail to such registered holder
at his address recorded in the Corporation's securities register or registers
unless such holder otherwise directs. In the case of joint holders the cheque
shall, unless such joint holders otherwise direct, be made payable to the order
of all such joint holders and mailed to one of them at his recorded address. The
mailing of such cheque as aforesaid, unless the same is not paid on due
presentation, shall satisfy and discharge the liability for the dividend to the
extent of the sum represented thereby plus the amount of any tax which the
Corporation is required to and does withhold.
11.03 NON-RECEIPT OF CHEQUES: In the event of non-receipt of any dividend cheque
by the person to whom it is sent as aforesaid, the Corporation shall issue to
such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of non-receipt and of title as
the board may from time to time prescribe, whether generally or in any
particular case.
11.04 UNCLAIMED DIVIDENDS: Any dividend unclaimed after a period of six (6)
years from the date of which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
DIVISION TWELVE
INFORMATION AVAILABLE TO SHAREHOLDERS
12.02 Except as provided by the Act, no shareholder shall be entitled to obtain
information respecting any details or conduct of the Corporation's business
which would not, in the opinion of the board, be in the interests of the
Corporation to communicate to the public.
12.02 The board may from time to time, subject to rights conferred by the Act,
determine whether and to what extent and at what time and place and under what
conditions or regulations the documents, books and registers and accounting
records of the Corporation or any of them shall be open to the inspection of
shareholders and no shareholder shall have any right to inspect any document or
book or register or account record of the Corporation except as conferred by
statute or authorized by the board or by a resolution of the shareholders.
DIVISION THIRTEEN
NOTICES
13.01 METHOD OF GIVING NOTICES: Any notice or other document required by the
Act, the Regulations, the articles or the by-laws to be sent to any shareholder
or director or to the auditor shall be delivered personally or sent by prepaid
mail or by telegram or cable or telex to any such shareholder at his latest
address as shown in the records of the Corporation or its transfer agent and to
any such director at his latest address as shown on the records of the
Corporation or in the last notice filed under Section 101 or 108 of the Act, and
to the auditor at his business address. A notice shall be deemed to be given
when it is delivered personally to any such person or to his address as
<PAGE> 20
aforesaid; a notice mailed shall be deemed to have been given when deposited in
a post office or public letter box; and a notice sent by any means of
transmitted or recorded communication shall be deemed to have been given when
dispatched or delivered to the appropriate communication company or agency or
its representative for dispatch. The secretary may change or cause to be changed
the recorded address of any shareholder, director, officer, auditor or member of
a committee of the board in accordance with any information believed by him to
be reliable. The signature to any notice to be given by the Corporation may be
lithographed, written, printed or otherwise mechanically reproduced.
13.02 NOTICE OF JOINT SHAREHOLDERS: If two or more persons are registered as
joint holders of any share, any notice may be addressed to all of such joint
holders but notice addressed to one of such persons shall be sufficient notice
to all of them.
13.03 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW: Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address being
entered on the securities register (whether such notice was given before or
after the happening of the event upon which he became so entitled) and prior to
his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.
13.04 NON-RECEIPT OF NOTICES: If a notice or document is sent to a shareholder
by prepaid mail in accordance with Section 13.01 and the notice or document is
returned on three (3) consecutive occasions, it shall not be necessary to send
any further notice or document to the shareholder until he informs the
Corporation in writing of his new address; provided, always, that the return of
a notice of a shareholder's meeting mailed to a shareholder in accordance with
Section 13.01 of this by-law shall be deemed to be received by the shareholder
on the date deposited in the mail notwithstanding the return of the notice.
13.05 OMISSIONS AND ERRORS: The accidental omission to give any notice to any
shareholder, director, officer, auditor or member of a committee of the board or
the non-receipt of any notice by any such person or any error in any notice not
affecting the substance thereof shall not invalidate any action taken at any
meeting held pursuant to such notice or otherwise founded thereon.
13.06 SIGNATURE ON NOTICES: Unless otherwise specifically provided, the
signature of any director or officer of the Corporation to any notice or
document to be given by the Corporation may be written, stamped, typewritten or
printed or partly written, stamped, typewritten or printed.
<PAGE> 21
13.07 WAIVER OF NOTICE: Any shareholder, proxyholder, other person entitled to
attend a meeting of shareholders, director, officer, auditor, or member of a
committee of the board may at any time waive any notice, or waive or abridge the
time for any notice, required to be given to him under the Act, the Regulations
thereunder, the articles, the by-laws or otherwise and such waiver or
abridgement, whether given before, during or after the meeting or other event of
which notice is required to be given, shall cure any default in the giving or in
the time of such notice, as the case may be. Any such waiver or abridgement
shall be in writing except a waiver of notice of a meeting of shareholders or of
the board, a committee of the board, which may be given in any manner.
DIVISION FOURTEEN
MISCELLANEOUS
14.01 SHAREHOLDERS' APPROVAL TO AMEND BY-LAW #1: When these by-laws have been
approved by the shareholders, the board shall not, without prior approval of the
shareholders entitled to vote at an annual meeting of the Corporation, given by
ordinary resolution at any general meeting, amend or repeal any provision of
this by-law.
14.02 INTERPRETATION: In case of any conflict between this by-law and a
unanimous shareholders agreement, whether such unanimous shareholders agreement
exists at the coming into force of these by-laws or not, such unanimous
shareholders agreement shall prevail.
14.03 EFFECTIVE DATE: This by-law shall come in the force on the date the
Corporation is incorporated under the Act, or the date on which this by-law is
enacted.
ENACTED this______________________ day of______________,19_____.
(WITNESS the corporate seal of the Corporation.)
President/Director Secretary/Director
______________________________ ________________________________________
Corporate
Seal
<PAGE> 22
1
BY-LAW NUMBER 2 OF
JAWS TECHNOLOGIES INC.
(hereinafter referred to as the "Corporation")
A by-law respecting the borrowing of money, the issuing of securities and the
securing of liabilities by the Corporation.
BE IT ENACTED as a by-law of the Corporation as follows:
1. The Board of Directors may from time to time on behalf of the Corporation,
without authorization of the shareholders:
(a) borrow money upon the credit of the Corporation in such amount and upon
such terms as they think proper;
(b) issue, re-issue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured;
(c) to the extent permitted by the Business Corporations Act, give a
guarantee on behalf of the Corporation to secure performance of any
present or future indebtedness, liability or obligation of any person;
and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in
all or any currently owned or subsequently acquired real or personal,
movable or immovable property of the Corporation including book debts,
rights, powers, franchises and undertakings, to secure any such bonds,
debentures, notes or other evidences of indebtedness or guarantee or any
other present or future indebtedness, liability or obligation of the
Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
2. The Board may, by resolution, from time to time delegate to a committee of
the Board, one or more of the Directors and/or one or more of the Officers of
the Corporation or any other person or persons as may be designated by the Board
all or any of the powers conferred on the Board by paragraph 1 hereof to such
extent and in such manner as the Board may determine at the time of such
delegation.
3. The powers hereby conferred are in supplement of and not in substitution of
any powers possessed by the Directors or Officers of the Corporation
independently of this By-Law No. 2.
MADE by the Board of Directors as at the 4~20~day of October A.D., 1997.
<PAGE> 23
Corporate
seal
_________________________________________
Robert Kubbernus- President
_________________________________________
Wesley C. Fairbairn- Secretary
<PAGE> 1
EXHIBIT 4.1.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
DEBENTURE ACQUISITION AGREEMENT
THIS DEBENTURE ACQUISITION AGREEMENT (the "Agreement") is made
and entered into as of September 25, 1998, by and between JAWS TECHNOLOGIES
INC., a Nevada corporation ("Seller") and THOMSON KERNAGHAN & CO. LTD, an
Ontario corporation ("Buyer"), with respect to the following facts:
A. Seller desires to sell to the Buyer, and Buyer desires to
purchase from the Seller up to $2,000,000 of a 10% Convertible Debentures (the
"Debentures") of Seller and $300,000 of Warrants of Seller (the "Warrants")
exercisable at a per share price equal to the average of the closing bid prices
of the Common Stock of the Seller as quoted on the NASD Electronic Bulletin
Board for the three trading days prior to the Initial Funding Date, September
25, 1998 (as hereinafter defined), equal to U.S. Twenty-Eight Cents ($0.28) in
the forms of Exhibit A and Exhibit D hereto, respectively, (collectively, the
"Securities"), upon the terms and conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing facts and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
1. PURCHASE AND SALE OF SECURITIES. Seller hereby sells to the
Buyer, and Buyer hereby purchases the Securities from Seller. Seller is
acquiring the Securities as Nominee and intends to resale the Securities to its
customers.
2. PURCHASE PRICE. The total purchase price (the "Purchase
Price") for the Securities shall be up to Two Million Dollars ($2,000,000),
payable in cash in accordance with the terms, conditions and procedures set
forth herein.
<PAGE> 2
3. TRANSFER OF SECURITIES AND DELIVERY OF PURCHASE
PRICE.
3.1
(a) On the Initial Funding Date, the Buyer will advance
Two Hundred Thousand Dollars ($200,000) to be used for working capital provided
that:
(i) The Seller has filed on an appropriate form
with the United States Securities and Exchange Commission (the "SEC") to
register its Common Stock under Section 12(g) of the Securities Exchange Act of
1934, as amended, and the registration statement with the SEC under the
Securities Act of 1933, as amended, as provided for in Section 6 hereof, which
registration statements contains the required clean opinion on the financial
statements of the Seller by Ernst & Young and was reviewed by United States
securities counsel for the Seller, Jeffer, Mangels, Butler & Marmaro LLP; and
(ii) the opinion of the Seller's counsel, Jeffer,
Mangels, Butler and Marmaro, LLP to the effect that the Seller is duly
incorporated and has the corporate power to enter into this Agreement and the
Exhibits thereto, that this Agreement and the Exhibits thereto that have been
entered into as of the Initial Closing Date have been duly approved by all
necessary action on behalf of the Seller and this Agreement and such Exhibits
are binding agreements effective according to their respective terms except for
bankruptcy and equitable principal.
The amount advanced shall be represented by a Debenture(s)
in the form of Exhibit B hereto for the amount advanced; provided that
Debentures, at the Buyer's request may be issued in amounts of One Hundred
Thousand Dollars ($100,000) or multiples thereof, whether issued at the Initial
Funding Date or any Subsequent Funding Date. The Seller shall also deliver to
the Buyer on the Initial Funding Date, the Warrants in the form of Exhibit A
hereto.
(b) After the Initial Funding Date, one or more Subsequent
Funding Dates may occur in which the Buyer will advance to the Seller no more
than an aggregate of One Million Eight Hundred Thousand Dollars ($1,800,000)
under the following terms and conditions:
(i) No more than Two Hundred Thousand Dollars
($200,000) may be advanced on any Subsequent Funding Date;
(ii) A Subsequent Funding Date will occur on the
thirtieth (30) day (or the next business day if such thirtieth (30th) day is not
a business day, as defined in the form of the Debenture) after the Buyer
receives a written request (the "Request") from the Seller to advance additional
funds under this Section 3(b), with such written request being sent by facsimile
to the Buyer followed up in writing by overnight courier service;
-2-
<PAGE> 3
(iii) Notwithstanding any other provision of
this Section 3(b), the Buyer at a proposed Subsequent Funding Date is not
required to advance any additional amounts to the Seller if (A) the Form 10 or
Form 10-SB registration statement described in Section 3(a) hereof has not
become effective under the Securities Exchange Act of 1934, as amended and the
registration statement under the Securities Act of 1933, as amended, as provided
for in Section 6 hereof has not become effective; (B) the average closing bid
price for the Common Stock of the Seller on the principal market in which such
Common Stock is then trading was Twenty-Five Cents ($0.25) or less for the five
trading days in such principal market preceding the date the Request is dated,
as reported by the principal market on which the Common Stock is then traded; or
(C) the average daily trading volume of the Common Stock of the Seller on the
principal market in which such Common Stock is traded averaged Fifty Thousand
(50,000) shares or less per day for the five trading days in such principal
market preceding the date the Request is dated, as reported by the principal
market on which the Common Stock is then traded. The principal market for the
Common Stock of the Seller shall a the market within the United States on which
the greatest trading volume is occurring. Currently, the principal market for
such Common Stock is the NASD Electronic Bulletin Board;
(iv) The Resale Securities (as defined in
Section 6 hereof) have not been placed in the escrow provided for by the Escrow
Agreement in the form of Exhibit C hereto.
3.2 On the Initial Funding Date, Seller shall (i) pay a
commission to the Buyer, as placement agent for Buyer's own account, an amount
equal to Ten Percent (10%) of the Principal Sum (as defined in the Debenture)
that is funded on the Initial Funding Date, (ii) pay to the Buyer, for Buyer's
own account, Buyer's reasonable attorney's fees and costs incurred in entering
into this Agreement, (but not more than $10,000) against detailed invoices, and
(iii) issue to the Buyer, for Buyer's own account, $100,000 of Warrants of the
Seller exercisable at a per share price equal to the average of the closing bid
prices of the Common Stock of the Seller as quoted on the NASD Electronic
Bulletin Board for the three trading days prior to the Initial Funding Date,
Twenty-Eight Cents ($0.28), in the form of Exhibit D hereto (the "Buyer
Warrants").
3.3 On each Subsequent Funding Date. the Seller shall pay
a commission to the Buyer, as placement agents, for Buyer's own account, an
amount equal to Ten percent (10%) of the Principal Sum that is funded on each
such Subsequent Funding Date.
3.4 On the Initial Funding Date, the Seller and the Buyer
shall enter into the Escrow Agreement in the form of Exhibit C hereto, with the
Buyer as Escrow Agent.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Buyer as follows:
-3-
<PAGE> 4
4.1 Any Common Stock of Seller issuable upon conversion of
or as payment of interest pursuant to the Debentures and the exercise of the
Warrants and the Buyer's Warrants, will be duly and validly issued fully paid
and nonassessable Common Stock of the Seller.
4.2 The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. The Seller
has full corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Seller is duly qualified to do business as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
have a material adverse effect on the Seller. The Seller has furnished the Buyer
or its special counsel with true, correct and complete copies of its Articles of
Incorporation and Bylaws, as amended, as in effect on the date hereof.
4.3 The Seller has and will have at the Initial Date, all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Exhibits hereto, to sell and issue the Securities and the
Buyer's Warrants and all Common Stock underlying the Securities and the Buyer's
Warrants hereunder, and to carry out and perform its obligations under the terms
of this Agreement and the Exhibits hereto.
4.4 The authorized capital stock of the Seller consists of
(a) 20,000,000 shares of Common Stock, par value $.001 per share, of which
8,700,000 were issued and outstanding as of September 24, 1998 and, (b)
5,000,000 shares of Preferred Stock, par value $.001 per share, none of which
are issued and outstanding immediately prior to the Initial Funding Date.
Schedule 4.4(a) sets forth a true and correct list of the current stockholders
of the Seller indicating the number of shares of each class of the Seller's
stock held by each such stockholder. Except as set forth on Schedule 4.4(b), the
Seller does not have any authorized or outstanding options, warrants,
convertible debentures, rights or other securities exercisable for or
convertible into any capital stock of any of the Seller. Except for rights
granted under this Agreement, no person is entitled to any preemptive right or
right of first refusal or similar right with respect to any issuance of capital
stock or other securities by the Seller. Except for the Seller's obligations
under this Agreement, there are no outstanding obligations of the Seller to
redeem, purchase or otherwise acquire capital stock or other securities of any
corporation. Except as provided herein no person has any right to require the
Seller to register any shares of its capital stock for sale pursuant to the
Securities Act of 1933, as amended.
4.5 All corporate action on the part of the Seller, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Exhibits hereto, the authorization,
sale, issuance and delivery of the Securities the Buyer's Warrants and all
underlying Common Stock and the performance of all of the Seller's obligations
hereunder and under each of the Exhibits hereto has been duly taken by the
Seller. This Agreement, when executed and delivered by the Seller, constitutes,
and each of the Exhibits thereto shall, when executed and delivered, constitute,
a valid and binding obligation of the Seller, enforceable in accordance with
their terms except for bankruptcy and
-4-
<PAGE> 5
equitable remedies. The Common Stock when issued in compliance with the
Securities and the Buyer's Warrants, shall be validly issued, fully paid and
non-assessable. The Securities and the Buyer's Warrants are free of any liens
claims or encumbrances; provided, however, that the will be subject to
restrictions on transfer under applicable state and/or federal securities laws
as set forth herein. The issuance of the Securities or Buyer's Warrants will not
be subject to any preemptive rights or rights of first refusal, or result in any
default of, or conflict with, the Articles of Incorporation or Bylaws of the
Seller, any contract or agreement to which the Seller is a party or by which it
is bound or any other obligation or commitment of the Seller.
4.6 The Seller has delivered to the Buyer the unaudited
balance sheet and statements of operations and cash flows of the Seller as of
and for the period ended May 31, 1998 (the "Financial Statements"). The
Financial Statements are complete and correct and have been prepared in
accordance with the books and records of the Seller on a consistent basis. The
Financial Statements accurately set out, present fairly and describe the
consolidated financial condition and operating results of the Seller as of the
dates, and during the periods, indicated therein.
4.7 Except as set forth in Schedule 4.7 hereto, the Seller
has no liabilities or obligations of any kind, absolute, contingent or
otherwise, except (a) the liabilities and obligations set forth in the Financial
Statements, (b) liabilities with respect to equipment leases entered into in the
ordinary course of business, and (c) liabilities and obligations which have been
incurred subsequent to May 31, 1998, in the ordinary course of business and
consistent with past practice.
4.8 The Seller has good and marketable title to its
properties and assets, and has good title to all its leasehold interests, in
each case subject to no lien, claim or encumbrance other than (a) the lien of
current taxes not yet due and payable, (b) possible minor liens and encumbrances
which do not in any case or in the aggregate materially detract from the value
of the property subject thereto or materially impair the operations of the
Seller, and which have not arisen otherwise than in the ordinary course of
business. The assets and properties of the Seller are adequate to conduct the
operations currently conducted and proposed to be conducted by it. The Seller
enjoys peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect. The leasehold improvements of the Seller and all of their tangible
personal property, machinery, equipment, fixtures and inventories used in the
ordinary course of business are in good repair and in good operating condition,
reasonable wear and tear excluded.
4.9 The Seller is not in violation of any term of its
Articles of Incorporation or Bylaws, or of any material term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decree, including without limitation any Material Contract. The Seller is in
compliance with all judgments, decrees, governmental orders, laws, statutes,
rules and regulations by which it is bound or to which it or any of its
properties or assets is subject, except where the failure to comply would not
have a material adverse effect on the Seller. The Seller has all permits,
licenses, franchises and authorizations
-5-
<PAGE> 6
(collectively, the "Licenses") which are required by law and/or necessary to
operate its business as conducted or proposed to be conducted, except where the
failure to have any such License would not have a material adverse effect on the
Seller. All such Licenses were validly issued and are in full force and effect.
The Seller is in compliance in all material respects with all of its Licenses
and no suspension, revocation or termination of any License is pending or, to
the knowledge of the Seller, threatened. The execution, delivery and performance
of and compliance with this Agreement and the Exhibits thereto, and the issuance
of the Securities and the Buyer's Warrants have not resulted and will not result
in any violation of, or conflict with, or constitute a material default under,
(a) the Articles of Incorporation or By-laws of the Seller or (b) assuming the
accuracy of the representations and warranties of the Seller set forth in
hereto, any applicable law, statute, rule, regulation or License, or (c) any
agreement, contract, franchise or instrument to which the Seller is a party, and
has not resulted and will not result in the creation of, any Lien upon any of
the properties or assets of the Seller.
4.10 The Seller has good and marketable title to, or valid
and continuing rights and licenses to use, all patents, patent rights, trade
secrets, trademarks, trademark rights, service marks, trade names, copyrights,
franchises, licenses, permits, inventions, customer lists, and all rights with
respect to the foregoing, which are necessary for the operation of its business
as presently conducted and now proposed to be operated (collectively, with any
application with respect to the issuance or granting of any of the foregoing,
the "Intangible Property"). To the Seller's knowledge, the conduct of business
of the Seller as now operated and as now proposed to be operated does not and
will not conflict with any valid intellectual property right of others. The
Seller has not received any notice of any claim against it that any of its
operations, activities, products or publications infringes on any patent,
trademark, trade name, copyright or other property right of a third party, or
that it is illegally or otherwise using the trade secrets or any property rights
of others. The Seller has no knowledge that any licensor of it has any disputes
with or claims against any third party for infringement by such third party of
any trade name or other Intangible Property. Each employee of the Seller has
executed a confidentiality and non-disclosure agreement in favor of the Seller.
4.11 There are no actions, suits, proceedings or
investigations pending against the Seller or its properties before any court or
governmental agency (nor, to the best of the Seller's knowledge, is there any
reasonable basis therefor or threat thereof).
4.12 To the best of the Seller's knowledge, no employee of
the Seller is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Seller.
4.13 All agreements material to the business of the Seller
("Material Contracts") are valid, binding and in full force and effect in all
material respects. The Seller and, to the best of the Seller's knowledge, each
other party to a Material Contract have in all material respects performed all
the obligations required to be performed by them, have received no notice of
default and are not in default under any Material Contract.
-6-
<PAGE> 7
4.14 The Seller (a) has accurately prepared and timely
filed all tax returns that are required to have been filed by it with all
appropriate federal, state, county and local governmental agencies (and all such
returns fairly reflect the Seller's operations for tax purposes); and (b) has
paid in full or made adequate provision on the Financial Statements for the
payment of all taxes.
4.15 None of this Agreement (including the Exhibits and
Schedules hereto), any instrument, certificate or report furnished to the
Shareholder when read together, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading. The Seller knows of no information or fact that has and/or
could have a material adverse effect on it that has not been disclosed to the
Buyer in writing.
4.16 The Seller represents that it has not offered the
Securities to the Subscriber in the U.S. or, to the best knowledge of the
Seller, to any person in the United States or any U.S. person (as defined in
Regulation S promulgated by the United States Securities and Exchange
Commission).
4.17 To the best of the knowledge of the Seller, neither
the Seller nor any person acting for the Seller has conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S.
5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
BUYER. The Buyer hereby represents and warrants to and covenants and agrees with
the Seller the following:
5.1 The Buyer represents and warrants to the Seller that
(i) the Buyer is not a "U.S. person" as that term is defined in Rule 902(o) of
Regulation S; (ii) the Securities and the Buyer's Warrants were not offered to
the Buyer in the United States and at the time of execution of this Agreement
and of any offer to buy the Securities and Buyer's Warrants hereunder the Buyer
was physically outside the United States; (iii) the Buyer is purchasing the
Securities and Buyer's Warrant for its own account and not on behalf of or for
the benefit of any U.S. person and the sale of the Securities has not been
prearranged with or on behalf of any buyer in the United States; (iv) the Buyer
and to the best knowledge of the Buyer each distributor, if any, participating
in the offering of the Securities and Buyer's Warrants, has agreed and the Buyer
hereby agrees that all offers and sales of the Securities and the Buyer's
Warrants prior to the expiration of a period commencing on the closing of all
the sale of all Debentures offered by this Agreement and ending one year
thereafter (the "Distribution Compliance Period") shall not be made to U.S.
persons or for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S. The Buyer is a dealer
with respect to this transaction and consequently a "distributor" as defined in
Regulation S.
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<PAGE> 8
5.2 The Purchase Price to be paid by Buyer to Seller for
the Securities and Buyer's Warrants has been determined by Buyer as fair and
appropriate based solely upon Buyer's independent investigation and due
diligence of the Seller, and neither the Seller nor any of its agents,
including, without limitation, any of their officers, directors, employees,
accountants and attorneys, has made any representations or warranties whatsoever
in connection with the sale of the Securities and Buyer's Warrants by the Seller
to the Buyer, except as specifically set forth herein. The Buyer has had
sufficient opportunity in connection with the sale of the Securities and Buyer's
Warrants to review the Seller's business and affairs (including, without
limitation, the Seller's financial statements and other information) and to
inquire of the Seller's management with respect thereto. The Buyer has had
answered to its satisfaction any questions with respect to the Seller's business
and affairs. The Buyer further has had the opportunity to obtain independent
financial, legal, accounting, business, tax and other appropriate advice with
respect to the transactions contemplated by this Agreement, and is not relying
upon the Seller or any of its agents in any manner in connection with same.
5.3 The certificates representing the Securities and the
Buyer's Warrants shall bear the first legend set forth on the first page of this
Agreement and any other legend, if such legend or legends are reasonably
required by the Seller to comply with state, federal or foreign law.
5.4 THE BUYER UNDERSTANDS AND AGREES WITH THE SELLER, THAT
IN THE ABSENCE OF THE REGISTRATION OF THE SECURITIES, THE BUYER'S WARRANTS AND
THE UNDERLYING COMMON STOCK UNDER THE ACT, THE SECURITIES, THE BUYER'S WARRANTS
AND THE UNDERLYING COMMON STOCK MAY ONLY BE RESOLD AS PROVIDED FOR IN RULES 903
OR 904 OF REGULATION S, PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER
THE ACT, INCLUDING SALES UNDER RULE 144. Rule 144, promulgated by the United
States Securities and Exchange Commission under the Act, may not be currently
available for sale of the Securities and Buyer's Warrants and underlying Common
Stock in the United States, and there is no assurance that it will be available
at any particular time in the future. Sales of Common Stock underlying the
Securities and the Buyer's Warrants may be made in reliance upon Rule 144 but
ONLY (i) limited quantities after the completion of the Distribution Compliance
Period (for Common Stock underlying the Warrants, one year after exercise if
latter), or (ii) in unlimited quantities by non-affiliates after the first
yearly anniversary of the completion of the Distribution Compliance Period (for
Common Stock underlying the Warrants, two years after exercise if latter), in
each case in accordance with the conditions of the Rule, all of which must be
met (including the requirement, if applicable, that adequate information
concerning the Seller is then available to the public).
5.5 To the best of the knowledge of the Buyer and Seller
neither the Buyer nor any distributor, if any, participating in the offering of
the Securities and Buyer"s Warrants nor any person acting for the Buyer or any
such distributor has conducted any "directed selling efforts" as that terms is
defined in Rule 902 of Regulation S.
5.6 The Buyer understands that the Securities, the Buyer's
Warrants and all underlying Common Stock have not been registered under the Act
and are being offered
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<PAGE> 9
and sold pursuant to a "safe harbor" from registration contained in Regulation S
promulgated under the Act based in part upon the representations of the Seller
contained herein. The Seller has reviewed the terms of the Warrants and the
Buyer's Warrants and is aware of the restrictions on exercise of the Warrants
and the Buyer's Warrants by U.S. Persons, namely the following:
THE WARRANTS AND THE BUYER'S WARRANTS MAY ONLY BE EXERCISED (I) BY A PERSON WHO
IS NOT A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED), (II) IF NOT EXERCISED ON BEHALF OF A U.S.
PERSON, (III) IF NO U.S. PERSON HAS ANY INTEREST IN THE WARRANTS OR BUYER'S
WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (IV) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS AND THE BUYER'S WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED
STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANTS AND THE BUYER'S
WARRANTS CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE SELLER
PRIOR TO EXERCISE OF THE WARRANTS AND BUYER'S WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
5.7 The Buyer knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale of
the Securities and the Buyer's Warrants, the Buyer's Warrants or any underlying
Common Stock.
5.8 The Buyer is acquiring the Securities to be issued and
sold hereunder (and the Common Shares issuable thereunder) as a nominee (but is
acquiring the Buyer's Warrants (and the underlying Common Stock) for its own
account for investment and not as a nominee and not with a view to the
distribution thereof). The Buyer understands that it must bear the economic risk
of this investment indefinitely unless the sale of such Securities
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<PAGE> 10
and Buyer's Warrants and the underlying shares of Common Stock is registered
pursuant to the Act, or an exemption from such registration is available, and
that the Buyer has no present intention of registering any such sale of the
Securities, the Buyer's Warrants and any underlying Common Stock, except as
otherwise specifically provide for herein. The Buyer represents and warrants to
the Seller that it has no present plan or intention to sell any of such
Securities, the Buyer's Warrants and the underlying Common Stock in the United
States or to a United States person pursuant to any predetermined arrangements.
The Buyer covenants that neither it not its affiliates nor any person acting on
its or their behalf has the intention of entering or will enter during the
Distribution Compliance Period, into any put option, short position, hedging
transactions, equity swaps or other similar instrument or position with respect
to any of such Securities, the Buyer's Warrants and the underlying Common Stock
or securities of the same class as any of such Securities, the Buyer's Warrants
and the underlying Common Stock in violation of the Act and neither the Buyer
nor any of its affiliates or any person acting on its or their behalf will use
at any time any of such acquired pursuant to this Agreement to settle any put
option, short position, hedging transactions, equity swaps or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement in violation of the Act.
5.9 The Buyer further covenants that it will not make any
sale, transfer or other disposition of the Securities and the Buyer's Warrants
or any underlying Common Stock in violation of the Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder.
5.10 The Buyer has the full power and authority to
execute, deliver and perform this Agreement. This Agreement when executed and
delivered by the Buyer will constitute a valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms except for bankruptcy and
equitable remedies.
5.11 The Buyer has reviewed with his, her or its own tax
advisors the foreign, federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. The Buyer is relying solely on such advisors and not on any
statements or representations of the Seller or any of its agents and understands
that the Buyer (and not the Seller) shall be responsible for the Buyer's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
5.12 The Buyer acknowledges that it has had this Agreement
and the transactions contemplated by this Agreement reviewed by its own legal
counsel. The Buyer is relying solely on such counsel and not on any statements
or representations of the Seller or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement.
5.13 The Buyer is a "distributor" as defined in Regulation
S will send to any broker/dealer or other person receiving a commission on the
sale of the Securities. the Buyer's Warrants and the underlying Common Stock, a
confirmation or other notice stating
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<PAGE> 11
that such person is subject to the same restrictions on transfer to U.S. Persons
or for the account of or benefit of U.S. Persons during the Distribution
Compliance Period as provided herein.
5.14 Upon any transfer of the Securities, the Buyer's
Warrants or the underlying Common Stock unless such transfer is subject to Rule
144 or is covered by a current and effective registration statement under the
Act, the transferee must supply to the Seller with the same representations and
warranties as provided for in Section 5 hereof.
5.15 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS
AGREEMENT, THE DEBENTURES, THE WARRANTS OR THE BUYER'S WARRANTS, THE SELLER DOES
NOT HAVE TO AND WILL NOT RECOGNIZE AND WILL TREAT AS NULL AND VOID ANY ATTEMPT
TO TRANSFER THE DEBENTURES, THE WARRANTS, THE BUYER'S WARRANTS AND THE
UNDERLYING COMMON STOCK MADE IN VIOLATION OF THIS AGREEMENT OR REGULATION S OR
TO EXERCISE THE WARRANTS AND THE BUYER'S WARRANTS OTHER THAN AS PROVIDED
THEREIN.
6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) As soon as possible after this date (but in no case
prior to the Initial Funding Date), the Seller will include in an appropriate
form of registration statement filed under the Securities Act of 1933 (the
"Act") for resale by the potential holders (the "Buyer") the following shares of
Common Stock, but only Common Stock, of the Seller (collectively, the "Resale
Securities"):
(i) One hundred fifty percent (150%) of the
shares underlying the Debentures, assuming the aggregate outstanding Principal
Sum was Two Million Dollars ($2,000,000) based on a Conversion Price per share
equal to Seventy-eight Percent of the closing bid prices for the Common Stock of
the Seller for the three trading days prior to filing the registration
statement, Twenty-Five Cents ($0.25);
(ii) One hundred percent (100%) of the shares
underlying the Warrants to purchase Three Hundred Thousand Dollars ($300,000) of
the Common Stock of the Seller based on an exercise price per share equal to the
closing bid price for the Common Stock of the Seller for the three trading days
prior to the filing of the registration statement, Twenty-Eight Cents ($0.28);
and
(iii) One hundred percent (100%) of the shares
underlying the Buyer Warrants to purchase One Hundred Thousand Dollars
($100,000) of the Common Stock of the Seller based on the same exercise price
per share as the Warrants.
(b) The Seller shall use its best efforts to cause the
registration statement provided for in Section 6(a) hereof to become effect
under the Act no latter than the ninetieth (90th) day after the Initial Funding
Date; provided, that if such registration statement
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<PAGE> 12
has not been declared effective by the close of such ninetieth (90th) day after
the Initial Funding Date, then for each of the next thirty (30) days after such
ninetieth (90th) day after the Initial Funding Date that such registration
statement has not been declared effective, the Seller shall pay the Holder an
amount equal to the Principal Sum funded on the Initial Funding Date times Nine
Hundred Eighty Six One Thousands of a percent (0.986%); provided further, that
if such registration statement has not been declared effective by the close of
the one hundred twentieth (120th) day after the Initial Funding Date, then for
each day after such one hundred twentieth (120th) day after the Initial Funding
Date that such registration statement has not been declared effective, the
Seller shall pay the Holder and amount equal to the Principal Sum funded on the
Initial Funding Date times One Thousand Six Hundred Four-four One Ten Thousands
of a percent (0.1644%). Any amounts due to the Holder under this Section 6(b)
shall be paid by check no later than the next business day after an amount is
incurred.
(c) The following provision of this Section 6 shall also
be applicable:
(i) The Buyer shall furnish the Seller with such
appropriate information (relating to the intentions of such holders with regard
to the sale of the Resale Securities included in the registration statement as
the Seller shall reasonably request in writing. Following the effective date of
such registration statement, the Seller shall upon the request of the Buyer
forthwith supply such a number of prospectuses meeting the requirements of the
Act, as shall be requested by the Buyer to permit the Buyer to make a public
offering of all the Resale Securities from time to time offered or sold to the
Buyer provided that the Buyer shall from time to time furnish the Seller with
such appropriate information (as provided for in the immediately proceeding
sentence) as the Seller shall request in writing and provided, further, that the
Seller shall keep such registration statement current and effective until the
last to occur of thirtieth (30th) day after the last to occur of (i) the
Principal Sum of the Debentures being reduced to zero or (ii) the first to occur
of the exercise or all of the Warrants and the Buyer's Warrants or the
expiration of the Warrants and the Buyer's Warrants. The Seller shall also use
its best efforts to qualify the Resale Securities for sale in New York and
Florida, provided that the Seller shall not be required to file a general
consent to service of process in any state pursuant to this sentence.
(ii) The Seller shall fill the registration
statement at its own expense and without charge to the Buyer. The Buyer shall,
however, bear the fees of his own counsel and any transfer taxes or underwriting
discounts or commissions applicable to the Resale Securities sold by it pursuant
thereto.
(iii) The Seller shall indemnify and hold
harmless the Buyer and each underwriter, within the meaning of the Act, who may
purchase from or sell for any the Buyer any Resale Securities from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement or any post-effective amendment thereto under the Act or
any prospectus included therein required to be filed or furnished by reason of
this Section 6 or caused by any omission or alleged omission to state therein a
material fact required to be
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<PAGE> 13
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in writing
to the Seller by the Buyer or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that the Seller
shall not be obliged so to indemnify any such underwriter or controlling person
unless such underwriter shall at the same time indemnify the Seller, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Seller within the meaning of such Act, from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Section 6 or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement or omission based
upon information furnished in writing to the Seller by any such underwriter
expressly for use therein.
(iv) The Seller's agreements with respect to the
Resale Securities in this Section 6 shall continue in effect regardless or the
conversion and surrender of the Debenture or any exercise of the Warrants or the
Buyer's Warrants. The registration rights of the Buyer under this Section 6 will
inure to the benefit and be assignable automatically to any transferee of the
Securities, the Warrants, the Buyer's Warrants or the underlying Common Stock,
except for any such underlying Common Stock sold pursuant to a registration
statement under the Act or sold pursuant to Rule 144.
7. ENTIRE AGREEMENT. This Agreement, and the Exhibits hereto,
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings relating to such subject matter.
8. CHOICE OF LAW AND VENUE. This Agreement shall be governed by
and construed under the laws of the Province of Alberta, Canada, without regard
to choice of laws, in force from time to time. Any proceeding arising out of
this Agreement shall be brought in Ontario, Canada.
9. ATTORNEYS' FEES. In any action to enforce this Agreement, the
prevailing party shall be entitled to recover from the non-prevailing party all
reasonable costs, including, without limitation, attorneys' fees.
10. PARTIES BOUND. This Agreement is binding on and shall inure
to the benefit of the parties and their respective successors, assigns, heirs,
and legal representatives.
11. NOTICES. Except as otherwise provided herein, all notices,
instructions or other communications required or permitted hereunder shall be in
writing and sent by registered mail, postage prepaid, addressed as follows:
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<PAGE> 14
To Jaws Technologies Inc.
380-603-7 Avenue SW
Calgary, Alberta Canada T2P 2T5
Fax: 403-508-5058
Voice: 403-508-5055
Attn: Robert Kubbernus
President and CEO
To Thomson Kernaghan & Co. Limited:
365 Bay Street,
Toronto, Ontario Canada M5H 2V2
Fax: 416-367-8055
Voice: 416-860-8800
Attn: Robert F. Wilson
or such other address, telephone numbers or contact persons as shall be
furnished in writing by such party to the other parties hereto. Any such notice,
instruction or communication shall be deemed to have been given three (3)
business days after the date mailed by registered mail or if sent by fax, upon
electronic confirmation or receipt.
12. GENDER. Masculine nouns and pronouns shall include feminine
nouns and pronouns.
13. ARBITRATION. All disputes that may arise between the parties
regarding the interpretation or application of this Agreement and the Exhibits
thereto and the legal affect of this Agreement shall, to the exclusion of any
court of law, be arbitrated and determined by a board of arbitrators, unless the
parties can resolve the dispute by mutual agreement. Either party shall have the
right to submit any dispute to arbitration thirty (30) days after the other
party has been notified as to the nature of the dispute. If the dispute goes to
arbitration, each party shall select one arbitrator and the two arbitrators so
selected shall jointly select a third arbitrator. The arbitration shall be
governed by the arbitration rules of the International Chamber of Commerce. The
arbitration proceeding shall be governed by the statutes of the Province of
Ontario, Canada, and the proceeding shall be held in Toronto, Ontario, Canada.
Anything to the contrary contained in the above-mentioned rules and statutes
notwithstanding, the parties consent that any papers, notices, or process
necessary or proper for the institution or continuance of, or relating to any
arbitration proceeding, or for the confirmation of an award and entry of
judgment on any award made, including appeals in connection with any judgment or
award, may be served on each of the parties by registered mail addressed to the
party at the principal office of the party, or by personal service on the party
in or without the above-mentioned state. The parties recognize and consent to
the above-mentioned arbitration association's jurisdiction over each and every
one of them.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
Seller: JAWS TECHNOLOGIES INC.
By:
---------------------------------------
Its:
--------------------------------------
Buyer: THOMSON KERNAGHAN & CO. LTD.
By:
---------------------------------------
Its:
--------------------------------------
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<PAGE> 16
EXHIBIT LIST
<TABLE>
<S> <C>
Exhibit A WARRANT TO PURCHASE 1,071,429 SHARES OF COMMON STOCK
Exhibit B 10% CONVERTIBLE DEBENTURE
Exhibit C ESCROW AGREEMENT
Exhibit D BUYER WARRANTS
</TABLE>
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<PAGE> 17
EXHIBIT A
Void after 5:00 p.m. Alberta Time, on October 31, 2001
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
--------------------------------
WARRANT TO PURCHASE 1,071,429 SHARES OF COMMON STOCK
OF
JAWS TECHNOLOGIES INC.
--------------------------------
This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN & CO. LTD.,
an Ontario corporation , or assigns ("Holder"), is entitled to purchase, subject
to the provisions of this Warrant, from JAWS TECHNOLOGIES INC., a Nevada
corporation ("Company"), the fully paid, validly issued and nonassessable shares
of Common Stock, $0.001 par value, of the Company ("Common Stock") at any time
or from time to time during the period from the date hereof, through and
including October 31, 2001, but not later than 5:00 p.m. Calgary, Alberta Time,
on October 31, 2001 ("Exercise Period") at an initial exercise price equal to
$0.28 per share. The total number of shares of Common
<PAGE> 18
Stock to be issued upon exercise of this Warrant shall be 1,071,429 shares. The
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is being issued
pursuant to the Company's private placement consisting of up to $2,000,000
principal amount of a 10% Convertible Debenture (the "Debenture") and a
Debenture Acquisition Agreement dated as of September 25, 1998 between the
Company and Thomson Kernaghan & Co. Ltd. All dollar references are to United
States Dollars.
(a) Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time or from time to time during the Exercise Period; provided,
however, that (i) if the last day of the Exercise Period is a day on which
banking institutions in the Province of Alberta are authorized by law to close,
then the Exercise Period shall terminate on the next succeeding day which shall
not be such a day, and during such period the Holder shall have the right to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998, at its
principal office, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON
(AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED
<PAGE> 19
OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE
WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY
PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT
REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.
(b) Reservation of Shares. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made (or reported) on such day, the average closing bid and asked prices for
such day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the Electronic Bulletin Board or
National Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other warrants which
carry the
<PAGE> 20
same rights upon presentation hereof at the principal office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt of the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated September 25, 1998.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The respective Exercise Price in effect
at any time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the respective Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
respective Exercise Price by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the respective number of Shares initially issuable upon
exercise of this Warrant by the respective
<PAGE> 21
Exercise Price in effect on the date hereof and dividing the product so obtained
by the respective Exercise Price, as adjusted.
(3) No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection (3) is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section (f) shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
(4) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (3) inclusive above.
(5) Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of share purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section (f),
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the
<PAGE> 22
Common Stock or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (iii) if the capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The failure to give such notice shall not otherwise effect the
action taken by the Company.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) Registration Under the Securities Act of 1933.
The shares of Common Stock underlying this Warrant shall be registered
under the United States Securities Act of 1933, as amended, to the extend and
subject to the provisions of the Debenture.
<PAGE> 23
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by the undersigned, each being duly authorized, as of the date below.
JAWS TECHNOLOGIES INC.
____________________________________
By: Robert Kubbernus
Its:President
Dated: September 25, 1998
ATTEST:
__________________________________
_______________________, Secretary
<PAGE> 24
EXERCISE FORM
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED); (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON; (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE; AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing $_____________ worth of the shares of Common Stock of
Jaws Technologies Inc. at $_______ per share for ___________ shares of Common
Stock.
--------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _______________________________________________________
(Please typewrite or print in block letters)
Address __________________________________________________________
Social Security of Federal I.D. Number: __________________________
THE UNDERSIGNED REPRESENTS AND WARRANTS TO JAWS TECHNOLOGIES INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO U.S. PERSON
HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.
Signature _____________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE> 25
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________________
(Please typewrite or print in block letters)
Address ______________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of Jaws Technologies Inc.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
Attorney, to transfer the same on the books of Jaws Technologies Inc. with full
power of substitution in the premises.
Date __________ __, ______
Signature _____________________________________
(Sign exactly as your name appears on
the first page of this Warrant)
NOTE: This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated _____________, 1998.
<PAGE> 26
EXHIBIT B
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
JAWS TECHNOLOGIES INC.
10% CONVERTIBLE DEBENTURE
$200,000 September 25, 1998
JAWS TECHNOLOGIES INC., a Nevada corporation (the "Company"), for the
value received, hereby unconditionally and absolutely promises to pay to the
order of THOMSON KERNAGHAN & CO. LTD., or holder (collectively, the "Holder"),
upon presentation and surrender of this Debenture to Thomson Kernaghan & Co.
Ltd. at its office at 356 Bay Street, Toronto, Ontario, Canada M5H 2V2 or such
other place as the Company may, from time to time, designate, the Principal Sum
due under this Debenture, on October 31, 2001, or if such day is not a regular
business day, then on the next business day thereafter (the "Maturity Date"),
plus interest at the simple rate of ten percent (10%) per annum with all accrued
and unpaid interest due and payable on the Maturity Date.
All dollar amounts set forth in this Debenture are United States
Dollars. A regular business day is a day on which banks in the State of New York
and the Province of Alberta are open for business and a trading day is a day in
which the New York Stock Exchange is open for trading.
1. PRINCIPAL SUM.
The Principal Sum outstanding at any time shall be Two Hundred
Thousand Dollars ($200,000) less any Principal Sum prepaid through the date of
the calculation and less any Principal Sum which had been converted into Common
Stock as
<PAGE> 27
provided for in Section 2 hereof through the date of the calculation.
2. CONVERSION.
(a) The Holder of this Debenture shall have the right, at its option,
beginning on the thirtieth (30th) day after the Initial Funding Date through
5:00 p.m. Alberta, Canada time on the last regular business day immediately
prior to the Maturity Date to convert, subject to the terms and provisions of
this Section 2, any or all of the outstanding Principal Sum of this Debenture in
increments of at least One Hundred Thousand Dollars ($100,000) or multiples
thereof, unless the outstanding Principal Sum at the time of the conversion is
less than One Hundred Thousand Dollars ($100,000) or not multiples of One
Hundred Thousand Dollars ($100,000) then the entire outstanding Principal Sum
may be converted. Conversions pursuant to this Section 2 are at a price per
share equal to the lower of seventy-eight percent (78%) of the average closing
bid price of the Common Stock of the Company on the principal market for such
Common Stock for the three (3) trading days immediately preceding (i) the date
of the Notice of Conversion (on the form attached hereto), as reported by the
principal market on which the Common Stock is then traded or (ii) the date of
this Debenture (the "Conversion Price").
To convert this Debenture, this Debenture must be surrendered at the
principal executive office of the Escrow Agent pursuant to an Escrow Agreement
between the Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998,
accompanied by Notice of Conversion duly executed, and, accompanied by a written
instrument or instruments of transfer in form satisfactory to the Escrow Agent
duly executed by the Holder or his attorney duly authorized in writing to
specify whether the Holder desires interest on the amount of the Principal Sum
being converted to be paid in cash by Company check or in shares of Common Stock
of the Company.
(b) As promptly as practicable after the surrender, as herein
provided, of this Debenture for conversion and the completed and executed Notice
of Conversion, the Company shall deliver or cause to be delivered, to or upon
the written order of the Holder of this Debenture so surrendered: (i)
certificates representing the largest number of fully paid and nonassessable
full shares of Common Stock into which this Debenture may be converted in
accordance with the provisions of this Section 2; (ii) a check in payment for
fractional shares, based on amount in cash equal to such fraction multiplied by
the current "Market Price" as defined in Section 4 hereof; (iii) cash or
additional shares of Common Stock of the Company for the accrued but unpaid
interest due on the Principal Sum being converted through the date of the Notice
of Conversion; and (iv) a replacement Debenture identical to this Debenture,
except as to the issue date and as adjusted to reflect the Principal Amount
actually outstanding after the conversion, if less than the then outstanding
Principal Sum is being converted. Such conversion shall be deemed to have been
made at the close of business on the date that this Debenture shall have been
received by the Company for conversion, with a Notice of Conversion duly
executed, in satisfactory form for conversion, so that the rights of the Holder
of this Debenture as a Debenture holder as to the Principal Sum being converted
shall cease at such time and, subject to the provisions of this Section 2(b),
the person or
<PAGE> 28
persons entitled to receive the shares of Common Stock upon conversion of this
Debenture shall be treated for all purposes as having become the record holder
or holders of such shares of Common Stock (including any Common Stock issued for
interest) at such time and such conversion shall be at the Conversion Price in
effect at such time.
3. PREPAYMENT.
The Company may prepay at any time, upon at least thirty (30) days
advance written notice any or all of the outstanding Principal Sum of this
Debenture by notifying the Holder in writing of the date the prepayment is to be
made. Along with any prepayment of the Principal Sum, all accrued but unpaid
interest on such Principal Sum shall also be paid. Within ten (10) days of the
receipt of a notice of prepayment, the Holder shall notify the Company as to
whether the interest to be paid shall be in cash by Company check or in Common
Stock of the Company. Notwithstanding any notice of intention to prepay any or
all of the then outstanding Principal Sum, such Principal Sum may be converted
into Common Stock pursuant to Section 2 hereof until the prepayment actually is
made.
4. INTEREST.
(a) At the Holder's election, accrued but unpaid interest must be paid
in Common Stock of the Company in an amount of shares equal to the interest to
be paid in Common Stock divided by the "Market Price Per Share" of the Common
Stock. Not earlier than the sixtieth (60th ) day and not latter than the
thirtieth (30th) day prior to the Maturity Date, the Holder shall notify the
Company if it desires to have the accrued but unpaid interest due on the
Maturity Date paid in shares of Common Stock of the Company. If the Holder does
not give any such notice in a timely manner, the interest at Maturity shall be
paid in cash by Company check.
(b) For purpose of this Debenture, the "Market Price Per Share" of the
Common Stock of the Company shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the "Market Price Per Share" shall be the
average of the last reported sale prices of the Common Stock on such principle
exchange or system on the five trading days prior to the date the Holder gives
the Company its notice of election to have the interest payments made in the
Common Stock of the Company (or for payment of fractional shares, the date of
the relevant Conversion Notice) or if no such sale is made on any such day, the
average of the closing bid and asked prices for such day on such exchange or
system; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the "Market Price Per Share" shall be the average of the
mean of the last reported bid and asked prices reported by the OTC Bulletin
Board, if so quoted, or the "pink sheets" of the National Quotation Bureau, Inc.
on the five trading days prior to the date the Holder gives the Company its
notice of election to have the interest payments made in the
<PAGE> 29
Common Stock of the Company (or for payment of fractional shares, the date of
the relevant Conversion Notice); or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
"Market Price Per Share" shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the Conversion Notice; provided, however, in the case of this Section
4(b)(iii) payment of interest shall be paid only in cash by Company check and
not in Common Stock of the Common.
5. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon conversion of this Debenture) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by converting this Debenture at any time prior to the payment in full
of the Debenture, to acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been acquired
upon conversion of this Debenture immediately prior to such reclassification,
change consolidation, merger, sale or conveyance. Any such provi sion shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Debenture. The foregoing
provisions of this Section 5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 5 hereof.
6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Company shall register certain of the shares of the Common Stock
which may be issued upon the conversion of this Debenture to the extent and as
provided for under the Debenture Acquisition Agreement between the Company and
the Holder, dated September 25, 1998. (the "Debenture Acquisition Agreement").
7. REGULATION S.
<PAGE> 30
This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.
8. EVENTS OF DEFAULT.
If one or more of the following described events shall occur (each an
"Event of Default"):
(a) The Company shall fail to pay the principal of, or interest on,
this Debenture within five (5) days after the Holder has given written notice to
the Company that the same has become due; or
(b) The Company shall fail to perform or observe any of the provisions
contained in any other Section of this Debenture or the Debenture Acquisition
Agreement and such failure shall continue for more than thirty (30) days after
the Holder has given written notice to the Company; or
(c) Any material representation or warranty made in writing by or on
behalf of the Company in this Debenture shall prove to have been false or
incorrect in any material respect, or omits to state a material fact required to
be stated therein in order to make the statements contained therein, in the
light of the circumstances under which made, not misleading, on the date as of
which made, and the Company shall have failed to cure such false or incorrect
statement within thirty (30) days after the Holder has given written notice to
Borrower; or
(d) The Company shall be adjudicated a bankrupt or insolvent, or admit
in writing its inability to pay its debts as they mature, or make an assignment
for the benefit of creditors; or the Company shall apply for or consent to the
appointment of a receiver, trustee, or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar officer
shall be appointed without the application or consent of the Company and such
appointment shall continue undischarged for a period of sixty (60) days; or the
Company shall institute (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Company and shall remain undismissed for a
period of ninety (90) days; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a substantial
part of the property of the Company and such judgment, writ, or similar process
shall not be released, vacated or fully bonded within ninety (90) days after its
issue or levy; or
(e) A final judgment for money of over One Hundred Thousand
<PAGE> 31
($100,000) not covered by insurance shall be rendered against the Company and
if, within ninety (90) days after entry thereof, such judgment shall not have
been discharged, satisfied or execution thereof stayed pending appeal, or if,
within ninety (90) days after the expiration of any such stay, such judgment
shall not have been discharged or satisfied; or
(f) The Company shall be enjoined, restrained or in any way prevented
by a court order from continuing to conduct all or any material part of its
business affairs;
THEN, or at any time thereafter, and in each and every case:
(1) Where the Company is in default under the provisions of
Section 8(d) hereof, the entire unpaid principal amount of the Debenture, all
interest accrued and unpaid thereon, and all other amounts payable to the Holder
hereunder shall automatically become and be forthwith due and payable without
offset or counterclaim of any kind and without presentment, demand, protest or
notice of any kind, and without regard to the running of the statute of
limitations, all of which are hereby expressly waived by the Company; and
(2) In any other case referred to in this Section 8, the Holder
may, by written notice to the Company, declare the entire unpaid principal
amount of this Debenture, all interest accrued and unpaid hereon, and all other
amounts payable hereunder to be forthwith due and payable, whereupon the same
shall become immediately due and payable, without offset or counterclaim of any
kind and without presentment, demand, protest or further notice of any kind, and
without regard to the running of any statutes of limitation, all of which are
hereby expressly waived by the Company.
Any declaration made pursuant to Section 8(2) hereof is subject to the
condition that, if at any time after the principal of this Debenture shall have
become due and payable, and before any judgment or decree for the payment of the
moneys so due, or any thereof, shall have been entered, all arrears of interest
upon this Debenture (except that Principal Sum of this Debenture which by such
declaration shall have become payable) shall have been duly paid, and every
Event of Default shall have been made good, waived or cured, then and in every
such case the Holder shall be deemed to have rescinded and annulled such
declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
9. CORPORATE OBLIGATION.
It is expressly understood that this Debenture is solely a corporate
obligation of the Company and that any and all personal liability, either at
common law or in equity, or by constitution or statute, of, and any and all
rights and claims against, every stockholder, officer, or director, as such,
past, present or future, are expressly waived and released by the Holder as a
part of the consideration for the issuance hereof.
<PAGE> 32
10. TRANSFER.
Subject to the appropriate provisions of the Act and of Section 7
hereof, this Debenture or any portion of the principal amount hereof in One
Hundred Thousand Dollars ($100,000) increments, or multiples thereof (unless the
entire Principal Sum is being transferred), is transferable on the records of
the Company upon presentation of this Debenture, properly endorsed, at its
principal office; upon such presentation and transfer a new Debenture or
Debentures will be issued; provided, however, no transfer shall be made no any
competitors of the Company. For the purposes of payment and all other purposes,
the Company shall deem and treat the person in whose name this Debenture is
registered as the absolute owner hereof and the Company shall not be affected by
any notice to the contrary.
11. MISCELLANEOUS.
(a) Notwithstanding the foregoing, the Company promises to pay
interest after maturity (whether by acceleration or otherwise, and before as
well as after judgment) at the same rate as above provided prior to maturity on
balances, if any, then outstanding.
(b) Interest under this Debenture shall be computed on the basis of a
thirty (30) day month and a year of 360 days for the actual number of days
elapsed.
(c) In case at any time any Common Stock shall be listed on any stock
exchange or NASDAQ, the Company will list on such exchange or NASDAQ, and all
other exchanges where such stock or other stock, warrants, and securities at the
time issuable upon the conversion of this Debenture may be listed, and keep
listed thereon subject to listing requirements of such exchange or exchanges, an
official notice of issuance upon the conversion of this Debenture, all shares of
common stock and other stock and securities from time to time issuable upon such
conversion.
(d) Unless otherwise specifically proved herein, any notice required
by this Agreement is effective and deemed delivered when faxed to the numbers
set forth herein and receipt of such fax is electronically confirmed. Any such
notice shall also be sent on the day such fax is sent (or if such day is not a
business day, the next business day by overnight courier), properly addressed.
Notices will be sent to the fax numbers and addresses set forth in this
Agreement, unless either party notifies the other of an fax and/or address
change in writing.
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed in
Calgary, Alberta, Canada as of the day and year first above written.
JAWS TECHNOLOGIES INC.
<PAGE> 33
By:_________________________________
Its:________________________________
By:_________________________________
Its:________________________________
[Signatures Continued from Page 7]
____________________________________
(Fax Number, including Area Code)
____________________________________
(Contact Person)
THOMSON KERNAGHAN & CO. LTD.
By:_________________________________
(Address)
____________________________________
(City) (State) (Zip Code)
____________________________________
(Fax Number, including Area Code)
____________________________________
(Contact Person)
<PAGE> 34
CONVERSION NOTICE
TO: JAWS TECHNOLOGIES INC.
The undersigned Holder of this Debenture hereby irrevocably exercises the
option to convert $________________ of the Principal Sum of this Debenture into
shares of Common Stock of JAWS TECHNOLOGIES INC. in accordance with the terms of
this Debenture, or of such other kind of stock or other property as shall be
authorized under the terms of this Debenture, and directs that the shares or
other property issuable and deliverable upon the conversion, together with any
check in payment for fractional shares and any accrued and unpaid interest on
the portion being converted and any Debenture representing the unconverted
portion of this Debenture, be issued and delivered to the undersigned unless a
different name has been indicated below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
The accrued and unpaid interest due upon the Principal Sum being converted
shall be paid in cash__ or Common Stock __. (Please check one of the blanks, if
no blanks are checked, the interest shall be paid in cash.)
The date of this Conversion Notice is _______ ___, _____. The undersigned
has determined the closing bid price for the Common Stock of JAWS TECHNOLOGIES
INC. for the three trading days preceding the date of this [Notice of
Conversion] or of the [Date of Convertible Debenture] on the principal market
for such Common Stock, was $_____, $______ and $____, or an average of $____.
Therefore pursuant to Section 2(a) of the Debenture, the Conversion Price is
$_____ per share.
If you want the stock certificate made out in another person's name, fill
in the form below and have your signature guaranteed: (Insert other person's
social security or tax I.D. no.)
(Print or type other person's name, address and zip code)
Date:_________________,___ Your Signature:
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee:
<PAGE> 35
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
I or we assign and transfer this Security to
(insert assignee's social security or tax I.D. no.)
(print or type other person's name, address and zip code)
and irrevocably appoint
______________________ agent to transfer this Debenture on the books of the Jaws
Technologies Inc. The agent may substitute another to act for him.
Date:_________________,___ Your Signature:
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee:
NOTE: This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.
<PAGE> 36
EXHIBIT C
THESE SECURITIES SUBJECT TO THIS ESCROW AGREEMENT HAVE NOT BEEN REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THE SECURITIES HAVE BEEN OFFERED PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED
IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION
OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
ESCROW AGREEMENT
This Escrow Agreement is entered into this 25 day of September, 1998, by
and among JAWS TECHNOLOGIES INC. (the "Jaws") and THOMAS KERNAGHAN & CO.
LIMITED. ("Escrow Agent").
1. Escrow
The Company has filed a registration statement under the United States
Securities Act of 1933, as amended (the "Act") relating to the following shares
of Common Stock (the "Shares"), all of which are being placed in Escrow with the
Escrow Agent and in the Escrow Agent's name:
(a) 9,500,000 shares in the name of Escrow Agent which may be issued
upon conversion a 10% Convertible Debenture for up to $2,000,000 , dated
September 25, 1998 (the "Debenture"), and issued to the Escrow Agent (the
"Debenture Shares");
(b) 1,071,429 shares in the name of Escrow which may be issued upon
the exercise of $300,000 of Warrants, dated September 25, 1998 (the "Warrants"),
and issued to the Escrow Agent (the "Warrant Shares"); and
(c) 357,143 shares in the name of the Escrow Agent which may be
<PAGE> 37
issued upon the exercise of $100,000 Warrants, dated September 25, 1998 (the
"Escrow Agent Warrants"), and issued to Escrow Agent (the "Escrow Agent
Shares").
For convenience one total share certificate for a total of 10,928,572
shares has been issued to the Escrow Agent.
Upon the opening of the Escrow, the Escrow Agent shall place the Shares
with the Depository Trust Company.
Copies of the form of the Debentures, the Warrants and the Escrow Agent
Warrants have also been placed in Escrow.
2. Release of the Shares
The Escrow Agent shall release the Shares from Escrow as follows:
(a) Upon any conversion of the Debenture, a copy of the Conversion
Notice attached hereto shall be promptly faxed to the Company by the Escrow
Agent simultaneously as it is sent by overnight courier service to the Company.
Unless the Escrow Agent receives a written objection sent by facsimile within
forty-eight hours of sending the fax to the Company provided for in the
immediately preceding sentence and the Company takes the action provided for in
Section 6 hereof within such forty-eight hours, the Escrow Holder shall promptly
release to the Escrow Agent, the number of Debenture Shares being acquired upon
conversion of the Debenture as set forth in the Conversion Notice.
(b) Upon any exercise of the Warrants, a copy of the Exercise Form
attached hereto and evidence of payment for the Shares being exercised shall be
promptly faxed by the Escrow Agent simultaneously as such Exercise Form and
payment is sent by overnight courier service to the Company. Unless the Escrow
Agent receives a written objection sent by facsimile within forty-eight hours of
sending the fax to the Company provided for in the immediately preceding
sentence and the Company takes the action provided for in Section 6 hereof
within such forty-eight hours, the Escrow Holder shall promptly release to the
Escrow Agent, the number of Shares being acquired upon exercise of the Warrants
as set forth in the Exercise Form.
(c) Upon any exercise of the Escrow Agent Warrants, a copy of the
Exercise Form attached hereto and evidence of payment for the Stark Shares being
exercised shall be promptly faxed to the Company by the Escrow Agent
simultaneously as such Exercise Form and payment is sent by overnight courier
service to the Company. Unless the Escrow Agent receives a written objection
sent by facsimile within forty-eight hours of sending the fax to the Company
provided for in the immediately preceding sentence and the Company takes the
action provided for in Section 6 hereof within such forty-eight hours, the
Escrow Agent, the number of Escrow Agent Shares being acquired upon exercise of
the Escrow Agent Warrant as set forth in the Exercise Form.
<PAGE> 38
(d) If prior to the conversion of a Debenture or the exercise of the
Warrants or the Escrow Agent Warrants, such securities have been transferred,
then:
(i) the transferee shall become a party to this Escrow Agreement
by executing an amended thereto reasonably acceptable to the Company and the
Escrow Agent;
(ii) the transferee must not be in the United States or a U.S.
Person (all as defined in Regulation S as promulgated under the United States
Securities Act of 1933) and the transfer must comply with the terms of the
respective security and with the terms and conditions of the Debenture
Acquisition Agreement between the Company and the Escrow Agent, dated September
25, 1998 and further, any exercise of the Warrants and the Escrow Agent Warrants
must be in strict compliance with their respective terms; and
(iii) upon conversion of the Debenture, the Conversion Notice and
upon exercise of the Warrants or the Escrow Agent Warrants, the Exercise Form
and the payment shall be delivered to the Escrow Agent and the Escrow Agent
shall then promptly comply with Section 2(a), (b) or (c) as is applicable,
3. Dividends and Other Distributions
As long as any Shares are held in Escrow pursuant to this Agreement, then
no dividends or other distributions shall be payable with respect to such
Shares. However, any shares of Common Stock resulting from a stock split,
reverse stock split or stock dividend which would be receivable upon exercise of
the Warrants or the Escrow Agent Warrant shall be placed in Escrow.
4. Voting Rights
During the term of this Agreement, and so long any Shares are in Escrow, no
one may vote the Shares on any matter.
5. Payment of the Debentures and Expiration of the Warrants
Upon the payment in full of the Debentures as evidenced by a writing signed
by the Company and the then holder, the Escrow Agent shall release all the
remaining Debenture Shares relating to such Debenture and have the Debenture
Shares transferred into the name of the Company. Upon the expiation of the
Warrants or the Escrow Agent Warrants, the Escrow Agent shall release all the
remaining Warrant Shares or the Escrow Agent Shares, respectively, and have the
Warrant Shares or the Escrow Agent Shares, respectively, into the Company. Any
such transfer of the Shares into the name of the Company may be accomplish by
transfer the Shares for an account of the Company through the Depository Trust
Company, provided that the Company so notifies the Escrow Agent of such account
and the information
<PAGE> 39
needed to effect such a transfer.
6. Objections
(a) If the Company shall notify by fax the Escrow Agent that it has
any objections to releasing any of the Shares pursuant to Section 2 hereof, the
Company shall also within the respective forty-eight hour period provided for in
Sections 2(a), (b) or (c), as the case may be also deliver to the Escrow Agent
(i) an Certificate signed by an Officer of the Company setting forth the reasons
for the objection, (ii) an opinion from the counsel to the Company, Jeffer,
Mangles, Butler and Marmaro, LLP, that the conversion or the exercise, as the
case may be, would violate either the United States Securities Act of 1933, as
amended, or the United States Securities Exchange Act of 1934, as amended, and
an indemnity bond from an person licensed to issue such bonds in Ontario, Canada
in an amount equal to the number of Shares being objected to being released from
Escrow time Two Hundred Percent of the average closing bid price of the Common
Stock of the Company on the principal market for such Common Stock for the three
(3) trading days immediately preceding the date of the Conversion Notice or the
Exercise Form, as the case may, with such bond lasting until the dispute is
settled by agreement of the parties thereto or a final action of a court of
competent jurisdiction without the right to appeal or the expiration of the
right to appeal.
(b) If the Escrow Agent does NOT receive within such forty-eight hour
period all of the original signed documents and bond provided for in Section
6(a) hereof, it shall at the end of such forty-eight hour period, release the
Shares in question as requested in the respective Conversion Notice or Exercise
Form.
(c) If the Escrow Agent does receive within such forty-eight hour
period all of the original signed documents and bond provided for in Section
6(a) hereof, it shall at the end of such forty-eight hour period, if the
objection has not be withdrawn or the parties to the Debenture, the Warrants or
the Escrow Agent Warrants, as the case may be, otherwise agree, shall surrender
the Shares in question to an appropriate court in Toronto, Ontario and submit
the issue to the court to resolve in the nature of an interpleader action.
7. Escrow Agent
Escrow Agent, when acting as Escrow Agent, shall not be liable for any
action taken or omitted by it in good faith, and believed by it to be authorized
or within the rights or powers conferred upon it by this Agreement, and may rely
and shall be protected in acting or refraining from acting in reliance upon any
notice or certificate, instrument, request, paper or other documents believed by
it to be genuine and made, sent, signed or presented by the proper party or
parties. The Escrow Agent, acting as Escrow Agent. shall not be liable for
anything it does or may not do as Escrow Agent under this Agreement, except for
its own gross negligence, willful misconduct.
Escrow Agent shall not be responsible for the validity or sufficiency of
any
<PAGE> 40
stock certificate or other instrument evidencing any security delivered to
it pursuant hereto, or for the identity or authority of any person delivering
any such certificate or other instrument to it.
Until Escrow Agent shall receive from some person interested in this
Agreement written notice of any event upon which the right to receive any
release, distribution or payment may depend, it shall incur no liability for
actions taken in good faith.
Escrow Agent shall not be obligated to take any action to enforce this
Agreement, or to appear in, prosecute or defend any action or legal proceeding
or to file any income or other tax return if any such action, in its opinion,
would or might involve cost, expense, loss or liability unless, and as often as
required by it, it shall be furnished with security and an indemnity
satisfactory to it from the Company against all such cost, expense, loss or
liability.
Escrow Agent shall not be responsible for the validity of any provision of
this Agreement or for the execution thereof by any other party, or for the truth
of any recitals or other statements of fact herein contained. The Escrow Agent
shall be considered as a fiduciary under this Agreement and is not required or
entitled to act in any capacity hereunder other than as a Escrow Agent.
8. Notices
Except as otherwise provided herein, all notices, instructions or other
communications required or permitted hereunder shall be in writing and sent by
registered mail, postage prepaid, addressed as follows:
To Jaws Technologies Inc.
603-7 Avenue SW, Suite 380
Calgary, Alberta Canada T2P 2T5
Fax: (403) 508-5058
Tel: (403) 508-5055
Attn: Robert Kubbernus, President and CEO
To Thomson Kernaghan & Co. Limited:
365 Bay Street,
Toronto, Ontario Canada M5H 2V2
Fax: 416-367-8055
Voice: 416-860-8800
Attn: Robert F. Wilson
or such other address, telephone numbers or contact persons as shall be
furnished in writing by
<PAGE> 41
such party to the other parties hereto. Any such notice, instruction or
communication shall be deemed to have been given three (3) business days after
the date mailed by registered mail or if sent by fax, upon electronic
confirmation or receipt.
9. Deliveries
Escrow Agent shall make the deliveries of the Shares pursuant to this
Agreement at the addresses set forth herein, by overnight deliver service with
the ability to trace the delivery or through the Depository Trust Company
accounts.
10. Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
11. Choice of Law and Venue.
This Agreement shall be governed by and construed under the laws of the
Province of Alberta, Canada, without regard to choice of laws, in force from
time to time. Any proceeding arising out of this Agreement shall be brought in
Ontario, Canada.
12. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original.
13. Attorneys' Fees
If an action is brought to enforce the terms and provisions of this
Agreement, the prevailing party in said action shall be entitled to reasonable
attorneys' fees and costs of suit. This Agreement is subject to arbitration as
provided for in that Debenture Acquisition Agreement between the Company and
Escrow Agent of even date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
The Company: JAWS TECHNOLOGIES INC.
By: ________________________________
_________________, _____________
Escrow Agent: THOMAS KERNAGHAN & CO. LTD.
By: ________________________________
_________________, _____________
<PAGE> 42
EXHIBIT D
Void after 5:00 p.m. Alberta Time, on October 31, 2001
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
--------------------------------
WARRANT TO PURCHASE 357,143 SHARES OF COMMON STOCK
OF
JAWS TECHNOLOGIES INC.
--------------------------------
This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN & CO. LTD.,
an Ontario corporation , or assigns ("Holder"), is entitled to purchase, subject
to the provisions of this Warrant, from JAWS TECHNOLOGIES INC., a Nevada
corporation ("Company"), the fully paid, validly issued and nonassessable shares
of Common Stock, $0.001 par value, of the Company ("Common Stock") at any time
or from time to time during the period from the date hereof, through and
including October 31, 2001, but not later than 5:00 p.m. Calgary, Alberta Time,
on October 31, 2001 ("Exercise Period") at an initial exercise price equal to
$0.28 per share. The total number of shares of Common
<PAGE> 43
Stock to be issued upon exercise of this Warrant shall be 357,143 shares. The
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is being issued
pursuant to the Company's private placement consisting of up to $2,000,000
principal amount of a 10% Convertible Debenture (the "Debenture") and a
Debenture Acquisition Agreement dated as of September 25, 1998 between the
Company and Thomson Kernaghan & Co. Ltd. All dollar references are to United
States Dollars.
(a) Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time or from time to time during the Exercise Period; provided,
however, that (i) if the last day of the Exercise Period is a day on which
banking institutions in the Province of Alberta are authorized by law to close,
then the Exercise Period shall terminate on the next succeeding day which shall
not be such a day, and during such period the Holder shall have the right to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998, at its
principal office, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED
<PAGE> 44
OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE
WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY
PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT
REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.
(b) Reservation of Shares. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made (or reported) on such day, the average closing bid and asked prices for
such day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the Electronic Bulletin Board or
National Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other warrants which
carry the
<PAGE> 45
same rights upon presentation hereof at the principal office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt of the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated September 25, 1998.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The respective Exercise Price in effect
at any time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the respective Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
respective Exercise Price by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the respective number of Shares initially issuable upon
exercise of this Warrant by the respective
<PAGE> 46
Exercise Price in effect on the date hereof and dividing the product so obtained
by the respective Exercise Price, as adjusted.
(3) No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection (3) is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section (f) shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
(4) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (3) inclusive above.
(5) Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of share purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section (f),
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the
<PAGE> 47
Common Stock or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (iii) if the capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The failure to give such notice shall not otherwise effect the
action taken by the Company.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) Registration Under the Securities Act of 1933.
The shares of Common Stock underlying this Warrant shall be registered
under the United States Securities Act of 1933, as amended, to the extend and
subject to the provisions of the Debenture.
<PAGE> 48
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by the Undersigned, each being duly authorized, as of the date below.
JAWS TECHNOLOGIES INC.
____________________
By: Robert Kubbernus
Its:President
Dated: September 25, 1998
ATTEST:
__________________________________
_______________________, Secretary
<PAGE> 49
EXERCISE FORM
THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED); (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON; (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE; AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing $_____________ worth of the shares of Common Stock of
Jaws Technologies Inc. at $_______ per share for ___________ shares of Common
Stock.
--------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _______________________________________________________
(Please typewrite or print in block letters)
Address ____________________________________________________
Social Security of Federal I.D. Number: __________________________
THE UNDERSIGNED REPRESENTS AND WARRANTS TO JAWS TECHNOLOGIES INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO U.S. PERSON
HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.
Signature _____________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
<PAGE> 50
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of Jaws Technologies Inc.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
Attorney, to transfer the same on the books of Jaws Technologies Inc. with full
power of substitution in the premises.
Date __________ __, ______
Signature _____________________________________
(Sign exactly as your name appears on
the first page of this Warrant)
NOTE: This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated _____________, 1998.
<PAGE> 1
EXHIBIT 4.1.2
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "Agreement") dated as of August 27, 1998
between Bristol Asset Management V LLC, a limited liability company organized
and existing under the laws of the State of Delaware (the "Investor"), and Jaws
Technology, Inc., a corporation organized and existing under the laws of the
State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $7,000,000 in the
Company's Common Stock, par value $.01 per share (the "Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Purchase and Sale of Common Stock; Issuance of Warrants
Section 1.1 Purchase and Sale of Common Stock. Upon the terms and
subject to the conditions set forth herein, the Company shall issue and sell to
the Investor, and the Investor shall purchase from the Company, up to $7,000,000
of Common Stock, such stock to be valued as provided in Section 1.3(b) herein.
Section 1.2 Delivery of Put Notices.
(a) At any time prior to the date which is three years from the
effective date of the Registration Statement (as defined below), the Company may
deliver written notices to the Investor (each such notice hereinafter referred
to as a "Put Notice") in the form of the Put Notice annexed to this Agreement as
Exhibit A stating a dollar amount (the "Dollar Amount") of Common Stock which
the Company intends to sell to the Investor five business days following the
date (the "Put Notice Date") on which the Put Notice is given to the Investor by
the Company in accordance with Section 5.4 herein, provided that each Put Notice
Date and Dollar Amount shall be subject to Section 1.3(a) below. "Business
day(s)" shall mean any day on which the New York Stock Exchange is open for
trading. The Dollar Amount designated by the Company in any given Put Notice
shall be an amount equal to at least $50,000.
(b) Notwithstanding any of the foregoing, the Company may not
deliver a Put Notice if (i) trading of the Common Stock on the principal market
on which it is then traded (the "Principal Market") is then suspended or the
Common Stock is then delisted from or is no longer eligible to be traded on the
Principal Market, (ii) the closing price of the Common Stock on the Principal
Market is less than $.10 per share (appropriately adjusted for any stock splits,
reverse splits or combinations, stock dividends and similar events), (iii) the
Dow Jones Industrial Average has dropped more than 3% within the preceding five
business days, or (iv) the Common Stock is not then registered under the
Securities Exchange Act of 1934, as amended (the "Exchange
1
<PAGE> 2
Act"). If any of the events described in clauses (i), (ii), (iii) or (iv) above
occurs after a Put Notice is delivered but prior to the Closing (as defined
below) associated with such Put Notice, such Put Notice shall be null, void and
of no force and effect and a new Put Notice shall be required following the
termination of any such event.
Section 1.3 Determination of Share Number; Valuation Period
(a) Within ten days after the end of each calendar month, at the
option of the Company it may require a purchase of Common Stock by the Investor
(except as hereinafter in this Agreement provided), subject to the procedures
set forth in Section 1.2(a), in a maximum amount not to exceed the lesser of (i)
$7,000,000, less all amounts previously paid by the Investor pursuant to this
Section 1.3(a), (ii) $583,333, (iii) the product of (x) the number of shares of
Common Stock traded on the Principal Market during the preceding calendar month,
multiplied by (y) the average of the closing bid prices as reported by Bloomberg
L.P. ("Bloomberg") (or other appropriate published source) for the Common Stock
during the prior calendar month, multiplied by (z) 10% and (iv) such Dollar
Amount which, together with the related Warrants (as defined below) to be issued
pursuant to Section 1.4 below, would result in the Investor beneficially owning
no more than 4.9% of the Common Stock outstanding on the Closing Date (as
defined below) in question (including without limitation Common Stock deemed
beneficially owned by the Investor pursuant to any Warrants), as determined in
accordance with Section 13(d) of the Exchange Act and the regulations
promulgated thereunder. The Put Notice shall include a representation of the
Company as to the Common Stock outstanding on the Put Notice Date as determined
in accordance with Section 13(d) of the Exchange Act and the regulations
promulgated thereunder. In the event that the amount of Common Stock outstanding
as determined in accordance with Section 13(d) of the Exchange Act and the
regulations promulgated thereunder is different on a Closing Date than on the
Put Notice Date associated with such Closing Date, the amount of Common Stock
outstanding on such Closing Date shall govern for purposes of determining
whether the Investor would own more than 4.9% of the Common Stock as of such
Closing Date.
For example, if a total of 2,000,000 shares of Common Stock
traded during January of a particular year on the Principal Market and the
average of the closing bid prices was $1.00, on or before February 10 the
Company could request a draw down not to exceed 10% of $2,000,000 or $200,000,
so long as such amount was available under this Agreement and so long as such
amount did not result in the Investor beneficially owning more than 4.9% of the
Common Stock.
(b) Simultaneously with the deposit of the funds from the
Investor in the amount of the draw down (except as otherwise provided in Section
1.4 below) the Company shall issue and sell to the Investor and the Investor
shall be deemed to have purchased, in consideration of the funds so deposited,
the number of shares of Common Stock equal to the draw down divided by 77% of
the lowest sale price for the Common Stock on the Principal Market as reported
by Bloomberg (or other appropriate published source) (the "Lowest Sale Price")
during the ten trading days prior to the Put Notice Date (the "Look Back
Period"). For example, if the Lowest
2
<PAGE> 3
Sale Price for the Look Back Period was $1.00 and the draw down was $100,000,
the number of shares of Common Stock to be issued would be 129,870 shares.
Notwithstanding the foregoing, in the event that the Lowest Sale Price during
the 20 trading days after a particular Closing is less than 95% of the Lowest
Sale Price applicable to such Closing, then the Company shall promptly issue to
the Investor an additional number of shares of Common Stock with respect to such
Closing such that the number of shares of Common Stock issued to the Investor at
such Closing plus such additional number of shares to be issued are equal to the
funds drawn down at such Closing divided by 77% of the Lowest Sale Price during
such 20 trading day period. The Investor shall also be issued additional
Warrants equal to 12% of the number of additional shares so issued and the
exercise price of such additional Warrants shall equal, and the exercise price
of the Warrants issued at such prior Closing shall be adjusted to, 94% of the
average closing bid price for the Common Stock on the Principal Market as
reported by Bloomberg (or other appropriate published source) during such 20
trading day period.
(c) The Company shall not be required to issue fractional shares
of Common Stock and instead shall refund to the Investor an amount equal to the
fraction which would otherwise have been issued times 77% of the average closing
bid price during the Look Back Period determined as provided in Section 1.3(b)
above.
Section 1.4 Closing.
(a) Each Closing of a purchase and sale of Common Stock (a
"Closing") shall take place at 10:00 a.m. Los Angeles time on the fifth business
day following the Put Notice Date to which such Closing relates or the earliest
date thereafter on which all conditions to Closing have been satisfied. Each
date on which a Closing occurs is referred to herein as a "Closing Date."
(b) On each Closing Date the Investor shall deliver to the
Company the Dollar Amount with respect to such Closing by cashier's check or
wire transfer to such account as shall be designated in writing by the Company;
provided however, that to the extent the Company has not paid fees and expenses
of the Investor's representatives and counsel which are payable by the Company
under this Agreement, the amount of such fees and expenses may be withheld by
the Investor and applied to such unpaid fees and expenses with no reduction in
the number of shares to be issued and sold to the Investor. On each Closing
Date, the Company shall deliver to the Investor unlegended certificates
representing the number of shares to be issued and sold to the Investor on such
date and registered in the name of the Investor. In addition, each of the
Company and the Investor shall deliver all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement at or
prior to each Closing.
(c) On each Closing Date, except as provided in Section 1.4(d)
below, the Company shall also deliver to the Investor warrants in the form
annexed to this Agreement as Exhibit B ("Warrants") to purchase shares of Common
Stock (the "Warrant Shares"), which Warrants shall expire on the fifth
anniversary of the date of issuance thereof. The Warrants issuable at any
Closing shall entitle the holders thereof from time to time (the "Warrant
Holders")
3
<PAGE> 4
to purchase a number of Warrant Shares equal to 12% of the number of shares of
Common Stock purchased at the Closing in question at an initial exercise price
(subject to the provisions of Section 1.3(b) above) equal to 94% of the average
closing bid price for the Common Stock on the Principal Market as reported by
Bloomberg (or other appropriate published source) during the Look Back Period in
question.
(d) (i) To the extent that the Investor has not purchased shares
of Common Stock in an aggregate Dollar Amount equal to $2,333,333 on or before
one year from the date of this Agreement for any reason (other than the
Investor's breach of this Agreement and then only to the extent of such breach),
additional Warrants shall be issued within ten days thereafter to the Investor
as follows. The number of Warrants to be so issued shall be equal to 12% of the
difference between (x) $2,333,333 and (y) the aggregate Dollar Amount of Common
Stock purchased by the Investor on or prior to such one year anniversary
(including any amounts withheld by the Investor pursuant to Section 1.4(b)),
divided by (z) 77% of the Lowest Sale Price for the Common Stock on the
Principal Market as reported by Bloomberg (or other appropriate published
source) during the ten trading days prior to such one year anniversary. The
initial exercise price of such Warrants shall be equal to the lower of (A) 94%
of the average closing bid price for the Common Stock on the Principal Market as
reported by Bloomberg (or other appropriate published source) during the ten
trading days prior to such one year anniversary and (B) 94% of the average of
the Monthly Closing Prices (as defined below) for any months in the year ending
on such one year anniversary with respect to which no Shares were purchased by
the Investor. The term Monthly Closing Price means the average closing bid price
for the Common Stock on the Principal Market as reported by Bloomberg (or other
appropriate published source) during the last ten trading days of the calendar
month in question.
(ii) To the extent that the Investor has not purchased shares
of Common Stock in an aggregate Dollar Amount equal to $4,666,667 on or before
two years from the date of this Agreement for any reason (other than the
Investor's breach of this Agreement and then only to the extent of such breach),
additional Warrants shall be issued within ten days thereafter to the Investor
as follows. The number of Warrants to be so issued shall be equal to 12% of the
difference between (x) $4,666,667 and (y) the aggregate Dollar Amount of Common
Stock purchased by the Investor on or prior to such two year anniversary
(including any amounts withheld by the Investor pursuant to Section 1.4(b)),
divided by (z) 77% of the Lowest Sale Price for the Common Stock on the
Principal Market as reported by Bloomberg (or other appropriate published
source) during the ten trading days prior to such two year anniversary. The
initial exercise price of such Warrants shall be equal to the lower of (A) 94%
of the average closing bid price for the Common Stock on the Principal Market as
reported by Bloomberg (or other appropriate published source) during the ten
trading days prior to such two year anniversary and (B) 94% of the average of
the Monthly Closing Prices for any months in the year ending on such two year
anniversary with respect to which no Shares were purchased by the Investor.
(iii) To the extent that the Investor has not purchased
shares of Common Stock in an aggregate Dollar Amount equal to $7,000,000 on or
before three years from the date of this Agreement for any reason (other than
the Investor's breach of this Agreement and then
4
<PAGE> 5
only to the extent of such breach), additional Warrants shall be issued within
ten days thereafter to the Investor as follows. The number of Warrants to be so
issued shall be equal to 12% of the difference between (x) $7,000,000 and (y)
the aggregate Dollar Amount of Common Stock purchased by the Investor on or
prior to such three year anniversary (including any amounts withheld by the
Investor pursuant to Section 1.4(b)), divided by (z) 77% of the Lowest Sale
Price for the Common Stock on the Principal Market as reported by Bloomberg (or
other appropriate published source) during the ten trading days prior to such
three year anniversary. The initial exercise price of such Warrants shall be
equal to the lower of (A) 94% of the average closing bid price for the Common
Stock on the Principal Market as reported by Bloomberg (or other appropriate
published source) during the ten trading days prior to such three year
anniversary and (B) 94% of the average of the Monthly Closing Prices for any
months in the year ending on such three year anniversary with respect to which
no Shares were purchased by the Investor.
On each Closing Date subsequent to the issuance of Warrants pursuant to
this Section 1.4(d), notwithstanding the provisions of Section 1.4(c) above, the
Company shall only be obligated to issue Warrants pursuant to Section 1.4(c) at
such times as and to the extent that the total Dollar Amount of Common Stock
purchased by the Investor exceeds the Dollar Amount set forth in the clause
pursuant to which the Warrants were issued, in each case including any amounts
withheld by the Investor pursuant to Section 1.4(c). For example, if Warrants
are issued pursuant to clause (i) above, then no Warrants shall thereafter be
issuable pursuant to Section 1.4(c) until such time as the aggregate Dollar
Amount of Common Stock purchased by the Investor pursuant to this Agreement
exceeds $2,500,000.
Section 1.5. Registration.
(a) The Company agrees that all shares of Common Stock issued to
the Investor pursuant to this Agreement shall, at the time of such issuance and
for so long thereafter as is required by this Agreement, be subject to an
effective registration statement covering the resale or other disposition of
such shares thereof by the Investor at any time and from time to time after each
such issuance and, with respect to the Warrant Shares, covering the resale or
other disposition by the holders of the Warrant Shares at any time and from time
to time after each such issuance for so long as is required by this Agreement.
The shares of Common Stock to be issued to the Investor pursuant to this
Agreement and any Warrant Shares are collectively referred to as the "Shares."
The Company agrees that the registration statement described in this Section
1.5(a) (together with all amendments and supplements thereto, including any
additional registration statements filed in accordance with Section 1.5(b)
below, the "Registration Statement") shall, in accordance with Section 1.5(c)
below, remain effective pursuant to the provisions of the Securities Act of
1933, as amended (the "Securities Act"), or otherwise, (x) in the case of any
Shares issued pursuant to this Agreement at all times during the term of this
Agreement and for a period of 120 days thereafter and (y) in the case of any
Warrant Shares at all times during the term of the Warrants and for a period of
three years thereafter (as applicable, the "Registration Period").
(b) The Company shall use its best efforts in order that the
Registration Statement may become effective within 30 days of the date of this
Agreement. The Registration
5
<PAGE> 6
Statement shall register at least 50% of the number of shares of Common Stock
and 100% of the number of Warrant Shares issuable during the term of this
Agreement. In the event that the Company has not initially registered all shares
of Common Stock issuable under this Agreement, a new registration statement
shall be filed covering the remaining shares of Common Stock, and the Company
shall use its best efforts in order that the new registration statement may
become effective within 60 days of the first anniversary of this Agreement.
(c) The Company shall, as expeditiously as reasonably possible
and in accordance with Section 1.5(a) herein:
(i) Prepare and file with the Securities and Exchange
Commission (the "SEC") such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
comply with this Agreement and the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement.
(ii) Furnish to the Investor and any Warrant Holders, as the
case may be, such numbers of conformed copies of the Registration Statement and
of each amendment and supplement thereto (in each case including all exhibits
and documents incorporated by reference), such number of copies of the
prospectus contained in the Registration Statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 promulgated under the Securities Act, and such other documents as the
Investor and Warrant Holders, as the case may be, may reasonably require in
order to facilitate the disposition of shares sold pursuant to this Agreement or
issued pursuant to the Warrants.
(iii) Insure that all Shares subject to the Registration
Statement shall at all times during the applicable Registration Period be
registered and qualified under such other securities or "Blue Sky" laws of such
jurisdictions as shall be requested by the Investor and/or the Warrant Holders,
as the case may be, provided that the Company shall not be required in
connection herewith or as a condition hereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(iv) Notify the Investor and/or any Warrant Holders of (A)
the happening of any event or the existence of any circumstance as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and as soon as may be
practicable prepare and file with the SEC such amendments and supplements to
such Registration Statement and prospectus used in connection therewith as may
be necessary to eliminate or correct such untrue statement or omission and
otherwise to cause such Registration Statement and prospectus to remain current
and useable for the purposes intended hereunder; (B) receipt of any request by
the SEC or any other federal or state governmental authority for additional
information, amendments or supplements to the Registration Statement or related
prospectus; (C) the issuance by the SEC or any other federal or state
governmental authority of
6
<PAGE> 7
any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; or (D) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(v) Make available for inspection by the Investor's
designated representatives upon request from time to time, all documents filed
by the Company with the SEC (including any documents which may be filed pursuant
to the Exchange Act), require the Company's employees to supply all information
reasonably required by the Investor's designated representatives in connection
with the Registration Statement, require the Company's employees to meet with
representatives of the Investor's designated representatives during normal
business hours and on such basis as the Investor's designated representatives
may reasonably request, and make available to the Investor's designated
representatives, contemporaneously with the provision of such information, any
and all information about the Company provided by the Company to securities
analysts. In addition, the Company will permit the Investor's designated
representatives access to the Company's premises and personnel, consultants,
agents, attorneys, accountants, customers, suppliers, bankers and others who
have significant relationships or agreements with the Company and the Company's
assets, books and records and the Company will provide the Investor's designated
representatives with information (financial and otherwise) concerning the
Company to enable the Investor's designated representatives to conduct
reasonably appropriate ongoing due diligence review of the Company. The Company
will disseminate to the Investor's designated representatives all press releases
and public information disseminated by the Company at the same time it
disseminates such releases and information to others.
(vi) Except as required, in the opinion of the Company's
counsel, by law or consented to in advance by the Investor (which consent shall
not be unreasonably withheld), refrain from using the name of the Investor in
the Registration Statement or other regulatory filings (including the SEC
Documents).
(vii) The Company shall enter into reasonably customary
agreements and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Shares (whereupon the Investor
and/or the Warrant Holders, as the case may be, may at their option require that
any or all of the representations, warranties and covenants of the Company also
be made to and for the benefit of the Investor and/or the Warrant Holders, as
the case may be).
(d) (i) The Company shall indemnify, defend and hold harmless the
Investor and Warrant Holders and each of their respective officers, directors,
partners, employees, agents and counsel and each person, if any, who controls
any such person within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, an "Indemnified Party") from and against,
and shall reimburse the Indemnified Parties with respect to, any and all claims,
suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which such Indemnified Parties may become subject
under the Securities Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue
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statement of any material fact contained in the Registration Statement or any
prospectus contained therein or (B) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company shall not be liable in any such
case to the extent that any such Liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Investor or any Warrant
Holder in writing specifically for use in the preparation thereof.
(ii) The Investor and/or the Warrant Holder, as the case may
be, shall indemnify, defend and hold harmless the Company and each of its
respective officers, directors, partners, employees, agents and counsel and each
person, if any, who controls any such person within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each, an "Indemnified
Party") from and against, and shall reimburse the Indemnified Parties with
respect to, any and all Liabilities to which such Indemnified Parties may become
subject under the Securities Act or otherwise, arising from or relating to (A)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any prospectus contained therein or (B) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent and only to the extent that any such Liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by the Investor or the
Warrant Holder, as the case may be, in writing specifically for use in the
preparation thereof. In addition, if a Registration Statement is suspended by
the SEC as a result of any untrue statement of a material fact intentionally
made by the Investor in the Registration Statement, then the Investor shall
indemnify, defend and hold harmless the Company from losses actually incurred by
the Company (excluding any speculative or consequential damages or damages for
loss of profits or lost opportunities) from its failure to be able to require
purchases of Common Stock under this Agreement during the period of such
suspension provided that the Company proves that (a) it would have required such
purchases and (b) no alternative sources of financing were available.
(iii) Promptly after receipt by an Indemnified Party of
notice of the commencement of any action, the Indemnified Party shall, if a
claim in respect thereof is to be made against the other party (the
"Indemnifying Party") hereunder, notify the Indemnifying Party in writing
thereof, but the omission so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any Liability which it may have to any Indemnified
Party other than under this section and shall only relieve it from any Liability
which it may have to the Indemnified Party under this section if and to the
extent the Indemnifying Party is materially prejudiced by such omission. In case
any such action shall be brought against an Indemnified Party and the
Indemnified Party shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate in the defense
thereof with counsel reasonably satisfactory to the Indemnified Parties. If the
Investor is a defendant in such action, the Investor shall select separate
counsel to represent the Investor and all Indemnified Parties; however, if the
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Investor is not a defendant, such separate counsel shall be selected by the
majority of the Indemnified Parties named as defendants; in each case the fees
and expenses of such counsel and other expenses related to the action shall be
reimbursed by the Indemnifying Party as such fees and expenses are incurred. The
legal fees and expenses of any Indemnified Party choosing not to be represented
by such separate counsel selected by the Investor or the majority of the
Indemnified Parties, as the case may be, shall be borne by such Indemnified
Party.
(e) If the indemnification provided for in Section 1.5(d) above
is unavailable to an Indemnified Party in respect of any Liabilities, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Liabilities such proportion of such Liabilities as is appropriate to
reflect the relative fault of the Indemnifying Party and of the Indemnified
Party in connection with such statements or omissions described in Section
1.5(d)(i) or (ii) above, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
"Liabilities" pursuant to this Section 1.5(e) and Section 1.5(d) shall be deemed
to include without limitation any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any action
or claim by a third party and in connection with any enforcement of this Section
1.5(e) and Section 1.5(d).
(f) (i) All legal, accounting and other fees, costs and expenses
of and incidental to the Registration Statement (including without limitation
the fees, costs and expenses of the Investor's designated representatives as
provided in Section 1.5(c)(v) and the fees, costs and expenses of the Investor's
counsel) shall be borne by the Company (other than such fees, costs and expenses
as are in the nature of commissions incurred in connection with the sale of
Shares by the Investor or any Warrant Holder). The Company shall pay such
advances and retainers toward such expenses as the Investor may from time to
time reasonably request.
(ii) The fees, costs and expenses to be borne by the Company
as provided in this subsection (f) shall include, without limitation, all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company and all legal fees and disbursements and
other expenses of complying with state securities or "Blue Sky" laws of any
jurisdiction or jurisdictions in which securities to be offered are to be
registered and qualified. The Company shall pay such advances and retainers
toward such expenses as the Investor may from time to time reasonably request.
Section 1.6 Distributions. In the event the Company delivers a Put
Notice, the Company shall not make any distributions to its shareholders
(including without limitation any rights to purchase securities or properties)
or have any record dates with respect thereto from the beginning of the Look
Back Period until five business days after the Closing.
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Section 1.7 Delisting and Registration Statement Suspension. If within
60 days after a Closing the Common Stock is delisted from or is no longer
eligible to be traded on the then Principal Market or the Common Stock is not
registered under the Exchange Act, the Investor shall have the right, at its
option in its sole discretion, which right shall be exercised within 30 days of
such delisting or deregistration, to sell to the Company, and the Company agrees
to buy, promptly upon the exercise of such right by the Investor, a number of
Shares up to the number of the Shares purchased by the Investor at such Closing
and the immediately prior Closing at a price equal to the purchase price
therefor, as well as all Warrants then held by the Investor and/or the Warrant
Holders at a price equal to the average closing sales prices for the Common
Stock on the Principal Market as reported by Bloomberg (or other appropriate
published source) for the five trading days prior to the commencement of the
event in question (less any applicable exercise price for unexercised Warrants).
In addition if at any time during the Registration Period the Registration
Statement is not effective for a five-day period or if the Investor and/or the
Warrant Holders are not otherwise able to sell their Shares pursuant to the
Registration Statement for a five-day period or trading is halted in the Common
Stock for more than a five-day period, then the Investor and/or the Warrant
Holders, as the case may be, shall have the right, at their option in their sole
discretion, which right shall be exercised within 90 days after such five-day
period to sell to the Company, and the Company agrees to buy, promptly upon the
exercise of such right, all or any part of the Shares then held by the Investor
and/or the Warrant Holders, as the case may be, and/or the Warrants held by the
Warrant Holders at a price equal to the average closing sales prices for the
Common Stock on the Principal Market as reported by Bloomberg (or other
appropriate published source) for the ten trading days prior to the commencement
of the event in question (less any applicable exercise price for unexercised
Warrants).
ARTICLE 2
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
makes the following representations and warranties to the Investor as of the
date hereof and as of each Closing Date:
(a) Organization and Qualification. The Company is a corporation
duly incorporated in and existing in good standing under the laws of the State
of Nevada and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary and where
the failure to so qualify would have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the operations, properties,
prospects or financial condition of the Company and/or any of its subsidiaries
which is material to the Company and its subsidiaries taken as a whole.
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(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue all Shares and Warrants in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been and the Warrants will be duly executed and
delivered by the Company. This Agreement constitutes and the Warrants will
constitute a valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. As of ____________, 1998, the authorized
capital stock of the Company and the shares thereof currently issued and
outstanding (and shares subject to issuance upon outstanding options, warrants,
purchase agreements and rights and/or convertible securities) were as follows:
_______________________________________. All of the outstanding shares of Common
Stock have been validly issued and are fully paid and non-assessable. No shares
of Common Stock are entitled to preemptive rights. The Company owns 100% of the
equity securities of any of its subsidiaries, and no other person has the right
(contingent or otherwise) to acquire any such securities.
(d) Issuance of Shares. The issuance of all Shares and Warrants
to be issued hereunder has been duly authorized and all such Shares, when paid
for and issued in accordance with the terms hereof and the Warrants, shall be
validly issued, fully paid and non-assessable. The Company has authorized and
reserved and will continue to reserve for issuance the requisite number of
shares of Common Stock to be issued pursuant to the Warrants.
(e) Agreements. There has been no breach or default by the
Company or by any other party thereto of any provisions of any material
agreements to which the Company is a party which would result in a Material
Adverse Effect, and nothing has occurred which, with lapse of time or the giving
of notice of both, would constitute such a breach or default by the Company by
any other party thereto.
(f) Brokers. The Investor shall not be responsible for any fees
of any broker, finder, commission agent or other person employed by the Company
in connection with this Agreement and the transactions contemplated hereby.
(g) No Conflicts. The execution, delivery and performance of this
Agreement and the Warrants by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i) result
in a violation of the Company's charter documents or by-laws or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument
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to which the Company is a party, or result in a violation of any Federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). The business of the Company is not being conducted in violation
of any law, ordinance or regulations of any governmental entity, except for
violations which either singly or in the aggregate do not have a Material
Adverse Effect. The Company is not required under law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
any shares in accordance with the terms hereof or to enable the Investor to sell
Shares on the Principal Market (other than the filing and effectiveness of the
Registration Statement and compliance with applicable state securities or "Blue
Sky" laws).
(h) SEC Documents, Financial Statements. Upon the effectiveness
of the Registration Statement and at all times thereafter, the Common Stock will
be registered pursuant to Section 12 of the Exchange Act, and the Company will
timely file all reports, schedules, forms, statements and other documents,
together with all exhibits, financial statements and schedules thereto, required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) (all
of the foregoing, including materials filed with the SEC and the Registration
Statement, when declared effective and as it may be amended from time to time,
being hereinafter referred to herein as the "SEC Documents"). As of their
respective dates, the SEC Documents will comply in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder and other
Federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents will contain any untrue statement of a
material fact or will omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of the date of
delivery by the Investor and/or a holder of Warrant Shares of the prospectus
contained in the Registration Statement in connection with sales of Shares by
the Investor and/or holder of Warrant Shares, such prospectus will comply in all
material respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder, and other Federal, state and
local laws, rules and regulations applicable to such prospectus. The financial
statements of the Company included in the SEC Documents will comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except (x) as may be otherwise indicated in
such financial statements or the notes thereto or (y) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and will fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations
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and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(i) There is not in effect any agreement by the Company pursuant
to which any holders of securities of the Company have a right to cause the
Company to register or qualify such securities under the Securities Act or any
securities or blue sky laws of any jurisdiction.
(j) The SEC has not issued an order preventing or suspending the
use of any prospectus relating to the offering of any Shares nor instituted
proceedings for that purpose.
(k) No Material Adverse Change. No Material Adverse Effect has
occurred or exists with respect to the Company since the date of this Agreement.
(l) No Undisclosed Events or Circumstances. No material event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial condition which should be
disclosed by the Company under the Exchange Act or other applicable law if the
Company were selling Common Stock but which has not been so publicly announced
or disclosed.
(m) There has been no material adverse change in the number
and/or stature of firms making a market in the Common Stock since the date of
this Agreement.
Section 2.2 Representations and Warranties of the Investor. The Investor
makes the following representations and warranties to the Company as of the date
hereof and as of each Closing Date:
(a) Authorization; Enforcement. The Investor is duly organized
and validly existing under the laws of the State of Delaware. The Investor has
the requisite power and authority to enter into and perform this Agreement and
to purchase the Shares to be sold hereunder. The execution and delivery of this
Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action, and no further consent or authorization of the Investor is
required. This Agreement has been duly authorized, executed and delivered by the
Investor. This Agreement constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation of the
Investor's charter documents or (ii) conflict with, or constitute a default (or
an event which with notice of lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
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cancellation of, any agreement, indenture or instrument to which the Investor is
a party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Investor or any of its properties (except for such conflicts, defaults and
violations as would not individually or in the aggregate have a material adverse
effect on the Investor or a Material Adverse Effect on the Company or the
transactions contemplated hereunder). The Investor is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or purchase securities in accordance
with the terms hereof.
(c) Opportunity for Review. The Investor has been afforded, to
the satisfaction of the Investor, the opportunity to review the SEC Documents
and obtain such additional information concerning the Company and its business,
and to ask such questions and receive such answers, as the Investor deems
necessary to make an informed investment decision and to evaluate the merits and
risks of entering into this Agreement.
(d) Investment Representation. The Investor is an "accredited
investor" as that term is defined by the Securities Act. The Investor is
purchasing the shares of Common Stock and the Warrants for its own account. The
Investor has no present intention to sell any such securities (or shares of
Common Stock issuable upon exercise of the Warrants) except in compliance with
the Securities Act.
ARTICLE 3
Covenants
Section 3.1 Securities Compliance.
(a) The Company shall notify the SEC and the Principal Market and
any other applicable market in accordance with their requirements, if any, of
the transactions contemplated by this Agreement and shall take all other
necessary action and proceedings as may be required by applicable law, rule and
regulation for the legal and valid issuance of all securities to be issued to
the Investor hereunder.
(b) The Company will cause its Common Stock to continue to be
registered under Section 12 of the Exchange Act, will comply in all material
respects with its reporting and filing obligations under said Act, will comply
with all requirements related to the Registration Statement, and will not take
any action or file any document (whether or not permitted by said Act or the
rules thereunder) to terminate or suspend such Registration Statement or to
terminate or suspend its reporting and filing obligations under the Exchange
Act, expect as permitted herein. The Company will take all action necessary to
continue the listing or trading of its Common Stock on the Principal Market and
will comply in all material respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal Market.
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(c) The Company will file in a timely manner information,
documents and reports in compliance with the Securities Act and the Exchange Act
and will, at its expense, promptly take such further action as holders of Shares
and/or holders of Warrants may reasonably request to enable such holders to sell
Shares without registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act ("Rule 144"),
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. If at any time the Company is not
required to file such reports, it will, at its expense, forthwith upon the
written request of any holder of Shares, make available adequate current public
information with respect to the Company within the meaning of paragraph (c)(2)
of Rule 144 or such other information as may be necessary to permit sales
pursuant to Rule 144. Upon the request of the Investor, the Company will deliver
to the Investor a written statement, signed by the Company's principal financial
officer, as to whether it has complied with such requirements.
Section 3.2 Preliminary Put Notice. The Company shall deliver to the
Investor, at least seven calendar days prior to the delivery of each Put Notice,
a preliminary Put Notice which notice shall state that the Company is
considering delivery of a Put Notice to the Investor ten or more calendar days
following delivery of the preliminary Put Notice and the maximum Dollar Amount
of such Put Notice. In no event shall delivery of a preliminary Put Notice to
the Investor obligate the Company to deliver any Put Notice to the Investor, but
any Put Notice so delivered shall not require the Investor to purchase a Dollar
Amount greater than the amount set forth in such preliminary Put Notice.
Notwithstanding anything to the contrary contained in this Agreement, the
Investor shall have the right to decline to purchase the Common Stock which the
Investor would otherwise be required to purchase under any two Put Notices
designated by the Investor in any 12 month period.
ARTICLE 4
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
Issue Shares. The obligation hereunder of the Company to issue shares of Common
Stock hereunder to the Investor is further subject to the satisfaction at or
before each Closing of each of the following conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Accuracy of the Investor Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made and as of the date of each Closing
Date as though made at that time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing.
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(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Investor to
Purchase any Shares. The obligation of the Investor to purchase any Shares under
this Agreement is subject to the satisfaction, at or before each Closing, of
each of the following conditions set forth below. These conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of each Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date or refer to a particular point in time).
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to such Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Adverse Change and Proper Disclosure. There shall have
been no adverse change in the business, assets, liabilities or prospects of the
Company since the date of this Agreement which the Investor reasonably believes
could have a Material Adverse Effect. The Investor shall not have advised the
Company that the Investor believes in good faith that the disclosures contained
in the Registration Statement may not comply with applicable law.
(e) Principal Market. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market, and trading in
securities generally as reported by the Principal Market shall not have been
suspended or limited or minimum prices shall not have been established on
securities whose trades are reported by the Principal Market.
(f) Opinion of Counsel, Etc. At each Closing the Investor shall
have received an opinion of counsel to the Company, which counsel shall be
reasonably satisfactory to the Investor, dated the effective date of such
Closing concerning such matters as the Investor shall reasonably request, a copy
of a "cold comfort" letter addressed to the Company from an accounting firm
satisfactory to the Investor, dated the effective date of such Closing
concerning such matters as the Investor shall reasonably request, and such other
certificates, opinions of other
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counsel, and documents as the Investor or its counsel shall reasonably request
incident to such Closing. The form of all such certificates, opinions, "cold
comfort" letters and other documents shall be satisfactory to the Investor.
(g) Effectiveness of Registration Statement. The Registration
Statement covering the Shares previously issued to the Investor (to the extent
the Investor has not disposed of such Shares in accordance with the Registration
Statement) and the Warrant Shares underlying the Warrants previously issued to
the Investor (to the extent the Investor has not disposed of such Warrant Shares
in accordance with the Registration Statement) and covering the Shares and the
Warrant Shares underlying the Warrants to be issued at the Closing shall be
effective at the time of each Closing and no stop order suspending the
effectiveness of the Registration Statement shall have been instituted, be
pending or be threatened.
(h) Accuracy of Registration Statement. The Registration
Statement (including information or documents incorporated by reference therein)
and any amendments or supplements thereto shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Officers' Certificate. At each Closing the Investor shall
have received certificates from the CEO and the CFO of the Company concerning
such matters as the Investor shall reasonably request incident to such Closing.
The form of such certificates shall be satisfactory to the Investor.
ARTICLE 5
Miscellaneous
Section 5.1 Fees and Expenses. The Company shall pay the legal and other
fees and expenses of the Investor in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement, which are
agreed to be $10,000 for services through the date of this Agreement. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of any Shares issued pursuant hereto.
Section 5.2 Specific Enforcement; Consent to Jurisdiction.
(a) The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
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(b) Except as hereinafter provided, each of the Company and the
Investor (i) hereby irrevocably submits to the exclusive jurisdiction of the
Federal and state courts in Los Angeles County, California for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Notwithstanding the foregoing, at the option of the Investor, all
controversies, claims, disputes or counterclaims arising under or relating to
Section 1.4(d) of this Agreement, whether they involve a disagreement about its
meaning, interpretation, application, performance, breach, termination,
enforceability or validity and whether based on statute, tort, contract, common
law or otherwise (a "Dispute") shall be arbitrable (an "Arbitration"). Any such
Arbitration shall be conducted in Los Angeles, California by the American
Arbitration Association, and the judgment rendered by the arbitrator may be
entered in any court having jurisdiction thereof. Any such Arbitration shall
commence within 14 days of the date of filing a demand for arbitration, and the
arbitrator shall render his or her decision within 30 days of the date of filing
a demand for arbitration. In any such Arbitration, the arbitrator, who shall be
a certified public accountant, shall determine all questions or arbitrability,
including, without limitation, the scope of this agreement to arbitrate a
Dispute, whether an agreement to arbitrate exists and if so whether it covers
the Dispute in question or any other form of disagreement or conflict among the
parties to this Agreement whether such Dispute existed, prior to or arises after
the date of this Agreement.
Any such Arbitration shall be administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules. The
arbitrator, shall have no power to order discovery. The arbitration award shall
be in writing. The arbitrator may not make any ruling, finding or award that
does not conform to the terms and conditions of this Agreement. The arbitrator
shall have the authority to award any remedy or relief that a court of the State
of California could order or grant, including, without limitation, specific
performance of any obligation created under Section 1.4(d) of this Agreement
(including specific performance of the issuance of the Warrants provided for
thereunder). To the extent that the Company has not timely issued Warrants to
the Investor in accordance with Section 1.4(d) above, in any such Arbitration
the arbitrator shall order the Company to issue such Warrants at an exercise
price equal to the lower of the exercise price specified in Section 1.4(d) and a
price equal to 94% of the average closing bid price for the Common Stock on the
Principal Market as reported by Bloomberg (or other appropriate published
source) during the ten trading days prior to the date the Warrants are actually
issued by the Company, which date shall be no later than ten days after the date
or the arbitrator's ruling, finding or award. The arbitrator is empowered to
award damages in excess of compensatory damages, including punitive damages. The
parties and the arbitrator may not disclose the existence, content or results of
any Arbitration hereunder without the prior written consent of all of the
parties, except as required by the Civil Code of Procedure of California Section
1281-9 or as required by applicable law.
Each of the Company and the Investor consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for
18
<PAGE> 19
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
paragraph shall affect or limit any right to serve process in any other manner
permitted by law. The prevailing party in any such suit, action or proceeding
shall be entitled to attorney's fees and costs.
Section 5.3 Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties with respect to the transactions
contemplated hereby and, except as specifically set forth herein, neither the
Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section 5.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective upon
hand delivery or delivery by facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received). The addresses for such communications shall be:
to the Company: Jaws Technology, Inc.
603 7th Avenue SW, Suite 380
Calgary, Alberta Canada T2P 2T5
Attn:___________________
Facsimile No. (___) _______
with copies to: Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067-5010
Facsimile No. (310) 203-0567
to the Investor: Bristol Asset Management V LLC
10990 Wilshire Boulevard, Suite 1800
Los Angeles, CA 90024
Attn: Paul Kessler
Facsimile No. (310) 473-8858
with copies to: Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars, l8th fl.
Los Angeles, CA 90067
Attn: Stephen D. Silbert, Esq.
Facsimile No. (310) 556-2920
Either party hereto may from time to time change its address for notices under
this Section 5.4 by giving written notice of such changed address to the other
party hereto.
19
<PAGE> 20
Section 5.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter. The parties hereto waive any and
all rights to a jury trial in connection with any action or proceeding arising
under this Agreement or the transactions contemplated hereby.
Section 5.6 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 5.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their permitted successors and
permitted assigns. The parties hereto may amend this Agreement without notice to
or the consent of any third party. Neither the Company nor the Investor shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other (which consent may be withheld for any reason in
the sole discretion of the party from whom consent is sought).
Section 5.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and the holders of Warrants and their
respective permitted successors and assigns and is not for the benefit of, nor
may any provisions hereof be enforced by, any other person other than a holder
of Warrants. Notwithstanding the foregoing, this Agreement may be amended
(and/or requirements hereunder may be waived) from time to time by the Company
and the Investor.
Section 5.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without regard to the principles of conflict of laws.
Section 5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
Section 5.11 Publicity and Confidentiality. The Company and the Investor
shall consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby, provided the foregoing shall not interfere with the legal obligations of
either party with respect to public disclosure.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
"The Company"
Jaws Technology, Inc.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title: Secretary
"The Investor"
Bristol Asset Management V LLC
By:
--------------------------------------
Name:
Title:
21
<PAGE> 22
EXHIBIT A
Jaws Technology, Inc.
603 7th Avenue SW, Suite 380
Calgary, Alberta Canada T2P 2T5
--------------------, -----
Bristol Asset Management V LLC
10990 Wilshire Boulevard, Suite 1800
Los Angeles, CA 90024
Attn: Paul Kessler
Gentlemen:
Reference is made to that certain Investment Agreement (the
"Agreement") dated as of August 27, 1998 between you and the undersigned. This
is a Put Notice as that term is defined in Section 1.2 of the Agreement.
This is to advise you that the undersigned will sell to you five
business days (as that term is defined in the Agreement) following the date this
Put Notice is given to you in accordance with Section 5.4 of the Agreement
$______________ of the undersigned's Common Stock.
The undersigned hereby represents that the number of shares of
Common Stock outstanding as of the date hereof and expected to be outstanding as
of five business days after the date hereof, determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, is
_________________.
Very truly yours,
Jaws Technology, Inc.
By
---------------------------------------
22
<PAGE> 1
EXHIBIT 10.1.1.
THIS AGREEMENT made this 15th day of December, 1997
BETWEEN:
THE MANUFACTURERS LIFE INSURANCE COMPANY,
A body corporate, having its head office
In Toronto, Canada, and having a local
Office at 1475, 550-6th Avenue SW
In the City
Of Calgary, Province of Alberta
(hereinafter called the "Landlord")
OF THE FIRST PART,
- ---and---
JAWS TECHNOLOGIES INC.
Having an office at Suite 380, 603-7th Avenue SW
In the city
Of Calgary, Province of Alberta
(hereinafter called the "Tenant")
OF THE SECOND PART,
In consideration of the rents, covenants and agreements hereafter
contained, the Landlord and Tenant hereby agree as follows:
1. LEASED PREMISES
The landlord does demise and lease to the Tenant the premises (the "Leased
Premises") located in a building (the "Building") having a municipal address of
603-7th Ave SW in the City of Calgary, Province of Alberta and known as Manulife
House ( the Leased Premises, the Building, together with the lands described in
Schedule "A" attached hereto and present and future improvements, additions and
changes thereto being herein called the "Property"). The Leased Premises are
located on the third (3rd) floor and the approximate location is outlined in
heavy black and cross hatched on the plan marked Schedule "B1" attached hereto.
The parties agree that the Rentable Area of the Leased Premises is One Thousand
One Hundred forty-six rentable square feet (1,146 s.f.r.) and has been measured
in accordance with the provisions of Schedule "B" attached hereto.
2. TERM
(a) TO HAVE AND TO HOLD the Leased Premises for and during the term of three
(3) years and zero (0) days/months (the "Term") to be computed from the 1st
day of January, 1998, and to be fully complete and ended on the 31st day of
December, 2000, unless otherwise terminated.
(b) If the Leased Premises or any part thereof are not ready for occupancy on
the date of commencement of the Term, no part of the "Rent" (as hereinafter
defined) or only a proportionate part thereof, in the event that the Tenant
shall occupy a part of the Leased Premises, shall be payable for the period
prior to the date when the entire Leased Premises are ready for occupancy
and the full Rent shall accrue only after such last mentioned date. The
Tenant agrees to accept any such abatement of Rent in full settlement of
all claims which the Tenant might otherwise have by reason of the Leased
Premises not being ready for occupancy on the date of commencement of the
Term, provided that when the Landlord has completed construction of such
part of the Leased Premises as it is obliged hereunder to construct, the
Tenant shall not be entitled to any abatement of Rent for any delay in
occupancy due to
<PAGE> 2
the Tenant's failure or delay to provide plans or to complete any special
installations or other work required for its purposes of due to any other
reason, nor shall the Tenant be entitled to any abatement of Rent for any
delay in occupancy if the Landlord has been unable to complete construction
of the Leased Premises by any reason of such failure or delay by the
Tenant. A certificate of the Landlord as to the date the Leased Premises
were ready for occupancy and such construction as the Landlord is obliged
to complete is substantially completed, or as to the date upon which the
same would have been ready for occupancy and completed respectively but for
the failure or delay of the Tenant, shall be conclusive and binding on the
Tenant and Rent in full shall accrue and become payable from the date set
out in the said certificate. Notwithstanding any delay in occupancy, the
expiry date of this Lease shall remain unchanged.
(c) If at the expiration of the Term or sooner termination hereof, the Tenant
shall remain in possession without any further written agreement or in
circumstances where a tenancy would thereby be created by implication of
law or otherwise, a tenancy from year to year shall not be created by
implication of law or otherwise, but the Tenant shall be deemed to be a
monthly tenant only, at double "Basic Rent" (as hereinafter defined)
payable monthly in advance plus "Additional Rent" (as hereafter defined)
and otherwise upon and subject to the same terms and conditions as herein
contained, excepting provisions for renewal (if any) and leasehold
improvement allowance (if any), contained herein, and nothing, including
the acceptance of any Rent by the Landlord, for periods other than the
monthly periods, shall extend this Lease to the contrary except an
agreement in writing between the Landlord and the Tenant and the Tenant
hereby authorizes the Landlord to apply any moneys received from the Tenant
in payment of such monthly Rent.
3. RENT
(a) (I) The Tenant shall without demand, deduction or right of offset pay to
the Landlord yearly and every year during the Term as rental ( herein
called "Basic Rent"), the sum of Fourteen Thousand Three Hundred
Twenty-eight Dollars ($14,328.00) of lawful money of the jurisdiction in
which the Leased Premises are located , in equal monthly installments of
One Thousand One Hundred Ninety-four Dollars ($1,194.00) each in advance on
the first day of each month during the Term, the first payment to be made
on the first day on January, 1998.
(b) The Tenant shall, without deduction or right of offset pay to the Landlord
yearly and every year during the Term as additional rental (herein called
"Additional Rent")
(i) The amounts of any Taxes payable by the Tenant to the Landlord
pursuant to the provisions of Schedule "C" attached hereto; and
(ii) The amounts required to be paid to the Landlord pursuant to the
provisions of Schedule "D" attached hereto.
(c) Additional Rent shall be paid and adjusted with reference to a fiscal
period of twelve (12) calendar months ("Fiscal Period"), which shall be a
calendar year unless the Landlord shall from time to time have selected a
Fiscal Period which is not a calendar year by written notice to the Tenant.
The Landlord shall advise the Tenant in writing of its Additional Rent
to be payable by the Tenant during the Fiscal Period (or broken portion of
the Fiscal Period, as the case may be, if applicable at the commencement or
end of the term or because of a change in Fiscal Period) which commenced
upon the commencement date of the Term and for each succeeding Fiscal
Period or broken portion thereof which commences during the Term. Such
estimate shall in every case be a reasonable estimate and, if requested by
the Tenant, shall be accompanied by reasonable particulars of the manner in
which it was calculated. The Additional Rent payable by the Tenant shall be
paid in equal monthly installments in advance at the same time as payment
of Basic Rent is due hereunder based on the Landlord's estimate as
aforesaid. From time to time, the Landlord may re-estimate, on a reasonable
basis, the amount of Additional Rent for any Fiscal Period or broken
portion thereof, in which case the Landlord shall advise the Tenant in
writing of such re-estimate and fix new equal monthly installments for the
remaining balance of such Fiscal Period or broken portion thereof and a
calculation of the amounts by which the Additional Rent payable by the
Tenant exceeds or is less than (as the case may be) the aggregate
installments paid by the Tenant on account of Additional Rent for such
Fiscal Period.
<PAGE> 3
Within thirty (30) days after the submission of such statement either the
Tenant shall pay to the Landlord any amount by which the amount found
payable by the Tenant with respect to such Fiscal Period of broken portion
thereof exceeds the aggregate of the monthly payments made by it on account
thereof during such Fiscal Period or broken portion thereof , or the
landlord shall pay to the Tenant any amount by which the amount found
payable as aforesaid is less than the aggregate of such monthly payments.
(d) In this Lease "Rent" means all amounts required to be paid by the Tenant
pursuant to this Lease including without limitation Basic Rent and
Additional Rent.
(e) Basic Rent and Additional Rent shall be considered as accruing from day to
day, and for an irregular period of less than one year or less than one
calendar month shall be apportioned and adjusted by the Landlord for the
Fiscal Periods of the Landlord in which the tenancy created hereby
commences and expires. Where the calculation of Additional Rent for a
period cannot be made until after the termination of this Lease, the
obligation of the Tenant to pay Additional Rent shall survive the
termination hereof and Additional Rent for such period shall be payable by
the Tenant upon demand by the Landlord. If the Term commences or expires on
any day other than the first or last day of the month, Basic Rent and
Additional Rent for such fraction of a month shall be apportioned and
adjusted as aforesaid and paid by the Tenant on the commencement date of
the Term.
(f) The information set out in statements, documents or other writings setting
out the amount of Additional Rent submitted to the Tenant under or pursuant
to this Lease shall be binding on the Tenant and deemed to be accepted by
it and shall not be subject to amendment for any reason unless the Tenant
gives written notice (the "Dispute Notice") to the Landlord within sixty
(60) days of the Landlord's submission of such statement, document, or
writing. The Dispute Notice shall set out in reasonable detail the reason
why such statement, document or writing is in error or otherwise should not
be binding on the Tenant. If the Tenant disputes the amount of the
Additional Rent as aforesaid, and if such dispute is not resolved within
thirty (30) days after the Tenant delivers the Dispute Notice to the
Landlord, then the Landlord shall cause an audited statement of Additional
Rent to be prepared by an independent nationally recognized firm of
chartered accountants. The statement of Additional Rent as prepared by such
accountants shall be final and binding upon their parties hereto and within
fifteen (15) days after delivery of such statement of Additional Rent to
the parties by the accountants the Landlord and Tenant shall readjust
Additional Rent as contemplated by section 3(c). The cost of preparation
of such audited statement shall be paid by the Tenant as Rent unless the
amount of Additional Rent payable by the Tenant as set forth in such
audited financial statement is at least 4% less than the amount of
Additional Rent demanded by the Landlord in accordance with the statement
delivered to the Tenant pursuant to section 3(C).
4. SECURITY DEPOSIT
The Tenant shall pay to the Landlord on execution of this Lease by the
Tenant the sum of One Thousand Nine Hundred Dollars ($1,900.00) as a
deposit to the Landlord to stand as security for the payment by the Tenant
of any and all present and future debts and liabilities of the Tenant to
the Landlord and for the performance by the Tenant of all of its
obligations arising under or in connection with this Lease (the "Debts,
Liabilities and Obligations"). The Landlord shall not be required to keep
the deposit separate from its general funds. In the event of the Landlord
disposing of its interest in this Lease, the Landlord shall credit the
deposit to the Tenant. Subject to the foregoing and to the Tenant not being
in default under this Lease, the Landlord shall repay thee security deposit
to the Tenant without interest at the end of the Term or sooner termination
of the Lease provided that all Debts, Liabilities and Obligations of the
Tenant to the Landlord are paid and performed in full, failing which the
Landlord may on notice to the Tenant elect to retain the security deposit
and to apply it in reduction of the Debts, Liabilities and Obligations and
the Tenant shall remain fully liable to the Landlord for payment and
performance of the remaining Debts, Liabilities and Obligations.
5. GENERAL COVENANTS
(a) The Landlord covenants with the Tenant:
(i) for quiet enjoyment;and
(ii) to observe and perform all the covenants and obligations of the
Landlord herein.
<PAGE> 4
(b) The Tenant covenants with the Landlord:
(i) to pay Rent;and
(ii) to observe and perform all the covenants and obligations of the Tenant
herein.
6. USE AND OCCUPANCY
The Tenant covenants with the Landlord:
(a) not to use the Leased Premises for any purpose other than an office for
the conduct of the Tenant's business which is computer software and
technology.
and such use shall be consistent with the character of the Property and
compatible with the other uses of the Property;
(b) not to commit, or permit, any waste, injury or damage to the Property
including the Leasehold Improvements and any trade fixtures therein, any
loading of the floors thereof in excess of the maximum degree of loading as
determined by the Landlord acting reasonably, any nuisance therein or any
use or manner of use causing annoyance to other tenants and occupants of
the Property or to the Landlord;
(c) not to do, omit or permit to be done or omitted to be done upon the
Property anything which would cause to be increased the Landlord's cost of
insurance or the costs of insurance of another tenant of the Property
against perils as to which the Landlord or such other tenant has insured or
which shall cause any policy of insurance on the Property to be subject to
cancellation:
(d) to comply at its own expense with all governmental laws, regulations
and requirements pertaining to the occupation and use of the Leased
Premises, the condition of the Leasehold Improvements, trade fixtures,
furniture and equipment installed by or on behalf of the Tenant therein and
making by the Tenant of any repairs, changes or improvements therein;
(e) (1) to conduct and maintain its business an operations at the
Leased Premises so as to comply in all respects with common law and
with all present and future applicable federal, provincial/state,
local, municipal, governmental or quasi-governmental laws, by-laws,
rules, regulations, licenses, orders, guidelines, directives, permits,
decisions, or requirements concerning occupational or public health and
safety or the environment and any order, injunction, judgement,
declaration, notice or demand issued thereunder, ("Environmental
Laws");
(ii) not to permit or suffer any substance which is hazardous or is
prohibited, restricted, regulated or controlled under any Environmental
Law to be present at , on or in the Leased Premises, unless it has
received the prior written consent of the Landlord which consent may e
arbitrarily withheld;
(f) to observe and perform, and to cause its employees, invitees and others
over whom the Tenant can reasonably be expected to exercise control to
observe and perform, the Rules and Regulations contained in Schedule"E"
hereto, and such further and other reasonable rules and regulations and
amendments and additions therein as may hereafter be made by the Landlord
and notified in writing to the Tenant, except that no change or addition
may be made that is inconsistent with this Lease unless as may be required
by governmental regulation or unless the Tenant consents thereto. The
imposition of such Rules and Regulations shall not create or imply any
obligation of the Landlord to enforce them or create any liability of the
Landlord for their non-enforcement or otherwise.
7. ASSIGNMENT AND SUB-LETTING
(a) The Tenant covenants that it will not assign this Lease or sublet all
or any part of the Leased Premises or mortgage or encumber this Lease or
the Leased Premises or any part thereof, or suffer or permit the occupation
of all or any part thereof by others (each of which is a "Transfer")
without prior
<PAGE> 5
written consent of the Landlord, which consent the Landlord covenants not
to withhold unreasonably (I) as to any assignee, subtenant or occupant (the
Transferee") who is in a satisfactory financial condition, agrees to use
the Leased Premises for those purposes permitted hereunder, and is
otherwise satisfactory to the Landlord, and (ii) as to any portion of the
Leased Premises which, in the Landlord's sole judgement, is a proper and
rational division of the Leased Premises, subject to the Landlord' right of
termination arising under this paragraph. This prohibition against a
Transfer shall be construed to include a prohibition against any Transfer
by operation of law.
(b) The tenant shall not effect a Transfer unless:
(i)it shall have received or procured a bona fide written offer to
take an assignment or sublease which is not inconsistent with the
Laws, and the acceptance of which would not breach any provision of
this Lease if this paragraph is complied with and which the Tenant has
determined to accept subject to this paragraph being complied with,
and
(ii) it shall have first requested and obtained the consent in writing
of the Landlord thereto.
Any request for consent shall be in writing and accompanied by a copy of
the offer certified by the Tenant to be true and complete, and the Tenant
shall furnish to the Landlord all information available to the Tenant and
requested by the landlord as to the responsibility, financial standing and
business of the proposed Transferee. Notwithstanding the provisions of
sub-paragraph (a), within twenty (20) days after the receipt by the
Landlord of such request for consent and of all information which the
Landlord shall have requested hereunder, the Landlord shall have the right
upon written notice of termination submitted to the Tenant, if the request
is to assign this Lease or sublet a part of the Leased Premises only, to
cancel and terminate this Lease with respect to the part, in each case as
of a termination which shall be not less than sixty (60) days or more than
ninety (90) days following the giving of such notice. In such event the
Tenant shall surrender the whole or part, as the case may be, of the Leased
Premises in accordance with such notice of termination and Basic Rent and
Additional Rent shall be apportioned and paid to the date of surrender and,
if a part only of the Leased Premises is surrendered, Basic Rent and
Additional Rent shall after the date of surrender abate proportionately. If
such consent shall be given the Tenant shall effect the Transfer only upon
the terns set out tin the offer submitted to the Landlord as aforesaid and
not otherwise. Any consent shall be given without prejudice to the
Landlord's rights under the Lease and shall be limited to the
particular Transfer in respect of which it was given and shall not be
deemed to be an authorization for or consent to any further or other
Transfer.
(c) In the event the Landlord consents to any Transfer, the Tenant shall
pay to the Landlord, as and when amounts on account are due or paid by the
Transferee to the Tenant, all excess Transfer rents (hereafter called the
"Excess Transfer Rent"), if any, as Rent. The Excess Transfer Rent shall be
determined in accordance with the following formula:
all gross revenue received by the Tenant from the Transferee and
attributable to the Transfer less:
(i) the Rent paid by the Tenant to the Landlord during the term of the
Transfer;
(ii) any reasonable and customary out of pocket transaction costs incurred
by the Tenant in connection with such Transfer including attorney's fees,
brokerage commissions, cash inducements and alteration costs (which
transaction costs shall be amortized on a straight line basis over the term
of the Transfer)
The Tenant agrees to promptly furnish such information with regard to the
Excess Transfer Rent as the Landlord may request from time to time.
(d) No Transfer shall be effective unless the Transferee shall execute an
agreement on the Landlord's form, assuming all the obligations of the
Tenant hereunder, and shall have paid to the Landlord its reasonable fee
for processing the Transfer.
<PAGE> 6
(e) The Tenant agrees that any consent to a Transfer shall bot thereby
release the Tenant of its obligations hereunder.
(f) If the Tenant or occupant of the Leased Premises at any time is a
corporation, it is acknowledged and agreed that the transfer of thee
majority of the issued capital stock of the corporation or the transfer or
issuance of any capital stock of the corporation sufficient to transfer
effective voting control of the corporation to others than the shareholder
or shareholders having effective voting control of the corporation
immediately prior to such transfer or issuance, shall be deemed for all
purposes of this paragraph 7 to be a Transfer and, accordingly, a violation
this paragraph 7 respecting assignment of this Lease unless the prior
written consent of the Landlord is first obtained, and the Landlord shall
have all of the same rights in respect thereof as though any such transfer
or issuing of shares or proposed transferring or issuing of shares were a
Transfer. The Landlord shall have access at all times to the corporate
books and records of the Tenant, and the Tenant shall make the same
available to the Landlord or its representatives upon request, for
inspection and copying at all times in order to ascertain whether or not
there has at any time during the Term of this Lease been a transfer or
issuing of shares sufficient to constitute a change in the effective voting
control of the Tenant. This subparagraph 7 (f) shall not apply to the
Tenant if and for so long as the Tenant is a corporation whose shares are
listed and traded on any recognized stock exchange in Canada or the United
States.
(g) Notwithstanding anything in this Lease to the contrary, the Tenant
shall not be permitted without the written consent of the Landlord to
effect a Transfer to tenants currently occupying space in the Property.
8. REPAIR AND DAMAGE
(a) The Landlord covenants with the Tenant to keep in a good and reasonable
state of repair and decoration:
(i) those portions of the Property consisting of the entrance, lobbies,
stairways, corridors, landscaped areas, parking areas, and other
facilities from time to time provided for use in common by the Tenant
and other tenants of the Building or Property, and the exterior
portions (including foundations and roofs) of all buildings and
structures from time to time forming part of the Property and affecting
its general appearance; and
(ii) the Building (other than the Leased premises and premises of other
tenants) including the systems for interior climate control, the
elevators and escalators (if any), entrances, lobbies, stairways,
corridors and washrooms from time to time provided for use in common by
the Tenant and other tenants of the Building or Property and the
systems provided for use in common by the Tenant and other tenants of
the Building or Property and the systems provided for bringing
utilities to the Leased Properties.
(b) The Landlord covenants with the Tenant to repair, so far as reasonably
feasible, and as expeditiously as reasonably feasible, defects in standard
demising walls or in structural elements, exterior walls of the Building,
suspended ceiling, electrical and mechanical installations standard to the
Building installed by the Landlord in the Leased Premises (if and to the
extent that such defects are sufficient to impair the Tenant's use of the
Leased Premises while using them in a manner consistent with this Lease)
and "Insured Damage" (as herein defined). The Landlord shall in no event be
required to make repairs to Leasehold Improvements made by the Tenant, or
by the Landlord on behalf of the Tenant or another tenant or to make
repairs to wear and tear within the Leased Premises.
<PAGE> 7
(c) The Tenant covenants with the Landlord to repair, maintain and keep
at the Tenant's own cost, except insofar as the obligation to repair
rests upon the Landlord present to this paragraph, the Leased Premises,
including Leasehold Improvements in good and substantial repair,
reasonable wear and tear excepted, provided that this obligation shall
not extend to structural elements or to exterior glass or to repairs
which the Landlord would be required to make under this paragraph but
for the exclusion therefrom of defects not sufficient to impair the
Tenants use of the Leased Premises while using them in a manner
consistent with this Lease. The Landlord may enter the Leased Premises
at all reasonable times and view the condition thereof and the Tenant
covenants with the Landlord to repair, maintain and deep the Leased
Premises in good and substantial repair according to notice in writing,
reasonable wear and tear excepted. If the Tenant shall fail to repair
as aforesaid after reasonable notice to do so, the Landlord may effect
the repairs and the Tenant shall pay the reasonable cost thereof to the
Landlord on demand. The Tenant covenants with the Landlord that the
Tenant will at the expiration of the Term or sooner termination thereof
peaceably surrender the Leased Premises and appurtenances in good and
substantial repair and condition, reasonable wear and tear excepted.
(d) If any part of the Property becomes out of repair, damaged or
destroyed through the negligence of, or misuse by, the Tenant or its
employees, agents, invitees or others under its control, the Tenant
shall pay the Landlord on demand the expense of repairs or
replacements, including the Landlord's reasonable administration charge
thereof, necessitated by such negligence or misuse.
(e)It is agreed between the Landlord and the Tenant that:
(i)In the event of damage to the Property or to any part
thereof, if in the reasonable opinion of the Landlord the
damage is such that the Leased Premises or any substantial
part thereof is rendered not reasonably capable of use and
occupancy by the Tenant for the purposes of its business for
any period of time in excess of ten (10) days, then
(1) unless the damage was caused by the fault or negligence of
the Tenant or its employees, agents, invitees or others under
its control, from the date of occurrence of the damage and
until the Leased Premises are again reasonably capable for use
and occupancy as aforesaid, the Tent payable pursuant to this
Lease shall abate from time to time in proportion to the part
or parts of the Leased Premises not reasonable capable of such
use and occupancy, and
(2) unless this Lease is terminated as hereinafter provided,
the Landlord or the Tenant as the case may be (according to
the nature of the damage and their respective obligations to
repair as provided in sub-paragraphs (a), (b) and (c) of this
paragraph) shall repair such damage with all reasonable
diligence, but to the extent that any part of the Leased
Premises is not reasonably capable of such use and occupancy
by reason of damage which the Tenant is obligated to repair
hereunder, any abatement of Rent to which the Tenant would
otherwise be entitled hereunder shall not extend later than
the time by which, in the reasonable opinion of the Landlord,
repairs by the Tenant ought to have been completed with
reasonable diligence;
(ii) if the damage is such that the Leased Premises are
rendered untenantable, in whole or in part, and if, in the
opinion of the Landlord, the damage cannot be repaired with
reasonable diligence within one hundred and eighty (180) days
from the happening of the damage, then the Landlord may,
within thirty (30) days after the date of the damage,
terminate this Lease by notice to the Tenant. Upon the
Landlord giving such notice, this Lease shall be terminated as
of the date of the damage and the Tent and all other payments
for which the Tenant is liable under the terns of this Lease
shall be apportioned and paid in full to the date of the
damage;
(iii) the Landlord shall not be required to use plans and
specifications and working drawings used in the original
construction of the Building and nothing in this Section
requires the Landlord to rebuild the Building in the condition
and state that existed before
<PAGE> 8
the damage, but the Building, as rebuilt, will have reasonably
similar facilities and services to those in the Building prior
to the damage;and
(iv) If premises whether of the Tenant or other tenants of the
Property comprising in the aggregate half or more of the total
number of square feet of rentable office area in the Property
or half or more of the total number of square feet of rentable
office area in the Building (as determined by the Landlord )
or portions of the Property which affect access or services
essential thereto, are substantially damaged or destroyed by
any cause and if in the reasonable opinion of the Landlord the
damage cannot reasonably be repaired within one hundred and
eighty (180) days after the occurrence thereof, then thee
Landlord may by written notice to the Tenant given in which
event neither the Landlord nor the Tenant shall be bound to
repair as provided in sub-paragraphs (a), (b) and (c) of this
paragraph, and the Tenant shall instead deliver up possession
of the Leased Premises to the Landlord with reasonable
expedition but in any event within sixty (60) days after
delivery of such notice of termination, and Rent shall be
apportioned and paid to the date upon which possession is so
delivered up (but subject to any abatement to which the Tenant
may be entitled under the sub-paragraph (e) (I) of this
paragraph).
9. INSURANCE AND LIABILITY
(a) The Landlord shall take out and keep in force during the Term
insurance with respect to the Property except for the "Leasehold
Improvements" (as hereafter defined) in the Leased Premises. The
insurance to be maintained by the Landlord shall be in respect of
perils and in amounts and on terms and conditions which from time to
time are insurable at a reasonable premium and which are normally
insured by reasonable prudent owners of properties similar to the
Property, all as from time to time determined at reasonable intervals
by insurance advisors selected by the Landlord, and whose opinion shall
be conclusive. Unless and until the insurance advisors shall state that
any such perils are not customarily insured against by owners of
properties similar to the Property, the perils are not customarily
insured against by owners of properties similar to the Property, the
perils to be insured against by owners of properties similar to the
Property, the perils to be insured against by the Landlord shall
include, without limitation, public liability, boilers and machinery,
fire and extended perils and may include at the option of the Landlord
losses suffered by the Landlord in its capacity as Landlord through
business interruption. The insurance to be maintained by the Landlord
shall contain a waiver by the insurer of any rights of subrogation or
indemnity or any other claim over which the insurer might otherwise be
entitled against the Tenant or the agents or employees of the Tenant.
(b) The Tenant shall take out and keep in force during the Term:
(i) comprehensive general public liability insurance all on an
occurrence basis with respect to the business carried on in or
from the Leased Premises and the Tenant's use and occupancy of
the Leased Premises and of any other part of the Property,
with coverage for any one occurrence or claim of not less than
Five Million Dollars ($5,000,000) or such other amount as the
Landlord may reasonably require upon not less than one (1)
month notice at any time during the Term, which insurance
shall include the Landlord as a named insured and shall
contain a cross liability clause protecting the Landlord in
respect of claims by the Tenant as if the Landlord were
separately insured;
(ii) insurance in respect of fire and such other perils as are
from time to time in the usual extended coverage endorsement
covering the Leasehold Improvements, trade fixtures, and the
furniture and equipment in the Leased Premises for not less
than 80% of the full replacement cost thereof, and which
insurance shall include the Landlord as a named insured as the
Landlord's interest may appear; and
(iii) insurance against such other perils and in such amounts
as the Landlord may from time to time reasonably require upon
not less than ninety (90) says' written notice, such
<PAGE> 9
requirement to be made on the basis that the required
insurance is customary at the time for prudent tenants of
properties similar to the Property.
All insurance required to be maintained by the Tenant shall be on terms
and with insurers satisfactory to the Landlord. Each policy shall
contain: (A) a waiver by the insurer of any rights of subrogation or
indemnity or any other claim over to which the insurer might otherwise
be entitled against the Landlord or the agents or employees of the
Landlord, (B) a cross liability clause and (C) an undertaking by the
insurer that no material change adverse to the Landlord or the Tenant
will be made, and the policy will not lapse or be canceled, except
after not less than thirty (30) days' written notice to the Landlord of
the intended change, lapse or cancellation. The Tenant shall furnish to
the Landlord, if and whenever requested by it, certificates or other
evidences acceptable to the Landlord as to the insurance from time to
time effected by the Tenant and its renewal or continuation in force,
together with evidence as to the method of determination of full of
full replacement cost of the Tenant's Leasehold Improvements, trade
fixtures, furniture and equipment, and if the Landlord reasonably
concludes that the full replacement cost has been underestimated, the
Tenant shall forthwith arrange for any consequent increase in coverage
required under sub-paragraph (b). If the Tenant shall fail to take out,
renew and keep in force such insurance, or if the evidence submitted to
the Landlord are unacceptable to the Landlord (or such evidences are
submitted within a reasonable period after request therefor by the
Landlord), then the Landlord may give to the Tenant written notice
requiring compliance with this sub-paragraph and specifying the
respects in which the Tenant is not then in compliance with this
sub-paragraph. If the Tenant does not within forty-eight hours (48)
hours provide appropriate evidence of compliance with this
sub-paragraph, the Landlord may (but shall not be obligated to) obtain
some or all of the additional coverage or other insurance which the
Tenant shall have failed to obtain, without prejudice to any other
rights of the Landlord under this Lease or otherwise, and the Tenant
shall pay all premiums and all other reasonable expenses incurred by
the Landlord to the Landlord on demand.
(c) The Tenant agrees that the Landlord shall not be liable for any
bodily injury or death of, or loss or damage to any property belonging
to, the Tenant or its employees, invitees or licensees or any other
person in, on or about the Property unless resulting from the actual
willful misconduct or gross negligence of the Landlord or its own
employees. In no event shall the Landlord be liable for any damage,
including indirect, special or consequential damages, which is caused
by steam, water, rain or snow or other thing which may leak into, issue
or flow from any part of the Property or from the popes or plumbing
works, including the sprinkler system (if any) therein or from any
other place or for any damage caused by or attributable to the
condition or arrangement of any electric or other wiring or of
sprinkler heads (if any) or for any such damage caused by anything done
or omitted by any other tenant.
(d) Except with respect to claims or liabilities in respect of any
damage which is Insured Damage to the extent of the cost of repairing
such Insured Damage, the Tenant agrees to indemnify and save harmless
the Landlord in respect of:
(i) all claims for bodily injury or death, property damage or
other loss or damage arising from the conduct of any work or
any act or omission of the Tenant or any assignee, sub-tenant,
agent, employee, contractor, invitee or licensee of the
Tenant, and in respect of all costs, expenses and liabilities
incurred by the Landlord in connection with or arising out of
all such claims, including the expenses of any action or
proceeding pertaining thereto; and
(ii) any loss, cost, (including, without limitation, lawyers'
fees and disbursements ), expense or damage suffered by the
Landlord arising from any breach by the Tenant of any of its
covenants and obligations under this Lease.
(e) For purposes of this Lease, "Insured Damage" means that part of any
damage occurring to the Property of which the entire cost of repair (or
the entire cost of repair other than deductible
<PAGE> 10
amount properly collectable by the Landlord as part of the Additional
Rent) is actually recovered by the Landlord under a policy or policies
of insurance from time to time effected by the Landlord pursuant to
sub-paragraph (a).
10. EVENTS OF DEFAULT AND REMEDIES
(a) In the event of the happening of any one of the following events:
(i) the Tenant shall have failed to pay an installment of Tent
or any other amount payable hereunder when due, and such
failure shall be continuing for a period of more than ten (10)
days after the date such installment or amount was due;
(ii) there shall be a default of or with any condition,
covenant, agreement or other obligation on the part of the
Tenant to be kept, observed or performed hereunder (other than
the obligation to pay Rent or any other amount of money) and
such default shall be continuing for a period of more than
fifteen (15) days after written notice by the Landlord to the
Tenant specifying the default and requiring that it be cured;
(iii) if any policy of insurance upon the Property or any part
thereof from time to time effected by the Landlord shall be
canceled or about to be canceled by the insurer by reason of
the use or occupation of the Leased Premises by the Tenant or
any assignee, sub-tenant or licensee of the Tenant or anyone
permitted by the Tenant to be upon the Leased Premises and the
Tenant after receipt of notice in writing from the Landlord
shall have failed to take such immediate steps in respect of
such use or occupation as shall enable the Landlord to
reinstate or avoid cancellation (as the case may be) of such
policy of insurance;
(iv) the Leased Premises shall, without the prior written
consent of the Landlord, be used by any other persons than the
Tenant or a permitted Transferee or for any purpose other than
that for which they were leased or occupied or by any persons
whose occupancy is prohibited by this Lease;
(v) the Leased Premises shall be vacated or abandoned, or
remain unoccupied without the prior written consent of the
Landlord for fifteen (15) consecutive days or more while
capable of being occupied;
(vi) the balance of the Term of this Lease or any of the goods
and chattels of the Tenant located in the Leased Premises,
shall at any time be seized in execution or attachment; or
(vii) the Tenant shall make any assignment for the benefit of
creditors or become bankrupt or insolvent or take the benefit
of any statute for bankrupt or insolvent debtors or, if a
corporation, shall take any steps or suffer any order to be
made for its winding-up or other termination of its corporate
existence; pr a trustee, receiver or receiver-manager or agent
or other like person shall be appointed of any of the assets
of the Tenant;
then the Landlord shall have the following rights and remedies all of
which are cumulative and not alternative and not to the exclusion of
any other or additional rights and remedies in law or equity available
to the Landlord by statute or otherwise:
(A) to remedy or attempt to remedy any default of the Tenant,
ad in so doing to make any payments due to or alleged to be
due b the Tenant to third parties and to enter upon the Leased
Premises to do any work or other things therein, and in such
event all reasonable expenses of the Landlord in remedying or
attempting to remedy such default shall be payable by the
Tenant to the Landlord on demand;
<PAGE> 11
(B) with respect to unpaid overdue Rent, to the payment by the
Tenant of the Rent and of interest (which said interest shall
be deemed included herein in the term "Rent") thereon at a
rate equal to the lesser of three percent (3%) above the prime
commercial loan rate charged to borrowers having the highest
credit rating from time to time by the Landlord's principal
bank from the date upon which the same was due until actual
payment thereof and the maximum amount allowed under the laws
of the jurisdiction in which the Building is located;
(c ) to terminate this Lease forthwith by leaving upon the
Leased Premises or by affixing to an entrance door to the
Leased Premises notice terminating the Lease and to
immediately thereafter cease to furnish any services hereunder
and enter into and upon the Leased Premises or any part
thereof in the name of the whole and the same to have again,
re-possess and enjoy as of its former estate, anything in this
Lease contained to the contrary notwithstanding. Provided,
however, that notwithstanding such forfeiture the Landlord
shall have the right to recover arrears of Rent and damages
for any prior default by the Tenant under this Lease and
provided that notwithstanding any such forfeiture the Landlord
shall have the right to recover from the Tenant damages for
loss of Rent which would, but for the premature determination
of the Lease, otherwise have been owing for the balance of the
Term and all damages it may have incurred by reason of this
Lease having been prematurely determination of the Lease,
otherwise have been owing for the balance of the Term and all
damages it may have incurred by reason of this Lease having
been prematurely determined, including the cost of recovering
the Leased Premises, enforcing the Lease and reletting the
Leased Premises; and
(D) to enter the Leased Premises as agent of the Tenant and as
such agent to re-let them and to receive the rent therefor and
as the agent of the Tenant to take possession of any furniture
or other property thereon and upon giving ten (10) days'
written notice to the Tenant to store the same at the expense
and risk of the Tenant or to sell or otherwise dispose of the
dame at public or private sale without further notice and to
apply the proceeds thereof and any rent derived from
re-letting the Leased Premises upon account of the Rent due
and to become due under this Lease and the Tenant shall be
liable to the Landlord for the deficiency if any and for all
damages the Landlord may have incurred by reason of the
Tenant's breach.
No such re-entry or taking possession of the Leased Premises by the
Landlord shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention be given to the
Tenant or unless the termination thereof is decreed by a court of
competent jurisdiction. Notwithstanding any reletting of the Leased
Premises without termination, the Landlord may at any time thereafter
elect to terminate this Lease for such previous breach. Should the
Landlord at any time terminate this Lease for any breach in addition to
any other remedies it may have, it may recover from the Tenant all
damages it may have incurred by reason of such breach including the
cost of recovering the Premises, and damages for loss of Rent, which
would, but for the premature determination of the Lease, otherwise have
been owing for the balance of the Term.
(b) Upon the giving by the Landlord of a notice in writing terminating
this Lease under sub-paragraph 10 (a) (C) above, this Lease and the
Term shall terminate, Rent and any other payments for which the Tenant
is liable under this Lease shall be computed, apportioned and paid in
full to the date of such termination forthwith, and there shall
immediately become due and payable forthwith the full amount of the
current month's Rent together with the next three (3) month's
installments of Rent, all of which shall accrue on a day-to-day basis
and shall immediately become due and payable as accelerated rent, and
the Landlord may immediately distrain for the same. Upon termination if
this Lease and the Term, the Tenant shall immediately deliver up
possession of the Leased Premises to the Landlord, and the Landlord may
forthwith re-enter and take possession of them.
<PAGE> 12
(c) The Tenant shall pay to the Landlord on demand all costs and
expenses, including lawyers' fees, incurred by the Landlord in
enforcing any of the obligations of the Tenant under this Lease.
ADDITIONAL PROVISIONS
11. The Tenant acknowledges and agrees that the common areas of the
Property shall at all times be subject to the exclusive management and
control of the Landlord. Without limiting the generality of the
foregoing, the Tenant specifically acknowledges and agrees that the
Landlord may temporarily close or restrict the use of all or any part
of the common areas of the Property in an emergency, or for security or
crowd control purposes, to facilitate tenants moving in or out of the
building, or for the purpose of making repairs, alterations or
renovations. The Landlord agrees not to permanently alter such common
areas in any manner which would deny reasonable access to the Leased
Premises. In the event of any such temporary closure or restriction of
use or if changes are made to such common areas by the Landlord, the
Landlord shall not be subject to any liability nor shall the Tenant be
entitled to any compensation or any diminution or abatement of Rent and
such closures, restriction and changes shall not be deemed to be a
constructive or actual eviction or a breach of the Landlord's covenant
for quiet enjoyment.
12. The Landlord shall have the right at any time upon sixty (60) days'
written notice (the "Notice of Relocation") to relocate the Tenant to
other premises in the Property (the "Relocated Premises") and the
following terms and conditions shall be applicable:
(a) the Relocated Premises shall contain approximately the same as, or
greater Rentable Area than, the Leased Premises;
(b) the Landlord shall provide at its expense leasehold improvements in
the Relocated Premises equal to the standards of the Leasehold
Improvements in the Leased Premises which have been completed or which
the Landlord is obliged herein to provide in the Leased Premises;
(c) the Landlord shall pay for the reasonable moving costs (if any)
from the Leased Premises to the Relocated Premises of the Tenant's
trade fixtures and furnishings;
(d) as compensation for all other costs, expenses and damages which the
Tenant may suffer or incur in connection with the relocation including
disruption and loss of business, Basic Rent and Additional Rent for the
Relocated Premises for the period of the first one (1) month of
occupancy shall abate:
(e) during the remaining Term of the Lease but not including any
renewals of the Lease, the Basic Rent and Tenant's Proportionate Share
of Additional Rent for the Relocated Premises shall be no greater than
the Basic Rent and Tenant's Proportionate Share of Additional Rent for
the Leased Premises, notwithstanding the Relocated Premises may contain
a greater Rentable Area;
(f) all other terms and conditions of the Lease shall apply to the
Relocated Premises except as are inconsistent with the terms and
conditions of this sub-paragraph;
(g) the Tenant agrees to execute the Landlord's standard form of lease
amendment then being used by the Landlord for the Building to give
effect to the relocation.
13. This Lease and all rights of the Tenant hereunder are subject and
subordinate to all underlying leases and charges, or mortgages now or hereafter
existing (including charges, and mortgages by way of debenture, note, bond,
deeds of trust and mortgage and all instruments supplemental thereto) which may
now or hereafter affect the Property or any part thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof provided the
lessor, chargee, mortgagee or trustee agrees to accept this
<PAGE> 13
Lease if not in default; and in recognition of the foregoing the Tenant agrees
that it will, whenever requested, attorn to such lessor, chargee, mortgagee as a
Tenant upon all the terms of this Lease. The Tenant agrees to execute promptly
whenever requested by the Landlord or by the holder of any such lease, charge,
or mortgage an instrument of subordination or attornment as may be required of
it.
14. The Tenant agrees that it shall promptly whenever requested by the Landlord
from time to time execute and deliver to the Landlord, and if required by the
Landlord, to any lessor, chargee, or mortgagee (including any trustee) or other
person designated by the Landlord, an acknowledgment in writing as to the then
status of this Lease, including as to whether it is in full force and effect, is
modified or unmodified, confirming the Rent payable hereunder and the state of
the accounts between Landlord and the Tenant, the existence or non-existence of
defaults, and any other matters pertaining to this Lease as to which the
Landlord shall request an acknowledgment.
15. The Landlord shall be permitted at any time and from time to time to enter
and to have its authorized agents, employees and contractors enter the Leased
Premises for the purposes of inspection, window cleaning, maintenance, providing
janitor service, making repairs, alterations or improvements to the Leased
Promises or the Property, or to have access to utilities and services (including
all ducts and access panels (if any), which the Tenant agrees not to obstruct)
and the Tenant shall provide free and unhampered access for the purpose, and
shall not be entitled to compensation or any diminution or abatement of Rent for
any inconvenience, nuisance or discomfort caused thereby. The Landlord and its
authorized agents and employees shall be permitted entry to the Leased Premises
for the purpose of exhibiting them to prospective tenants. The Landlord in
exercising its rights under this paragraph shall do so to the extent reasonably
necessary so as to minimize interference with the Tenant's use and enjoyment of
this Leased Premises provided that in an emergency the Landlord of persons
authorized by it may enter the Leased Premises without regard to minimizing
interference.
16. Except as herein otherwise expressly provided, if and whenever an to the
extent that either the Landlord or the Tenant shall be prevented, delayed or
restricted in the fulfillment of any obligation hereunder in respect of the
supply or provision of any service or utility, the making of any repair, the
doing of any work or any other thing (other than the payment of moneys required
to be paid by the Tenant to the Landlord hereunder) by reason of:
(a) Strikes or work stoppages;
(b) Being unable to obtain any material, service, utility or labor required
to fulfill such obligation;
(c) any state, law or regulation of, or inability to obtain any permission
from any government authority having lawful jurisdiction preventing,
delaying or restricting such fulfillment;
or
(d) other unavoidable occurrence,
the time for fulfillment of such obligation shall be extended during the period
in which such circumstance operates to prevent, delay or restrict the
fulfillment thereof, and the other party to this Lease shall not be entitled to
compensation for any inconvenience, nuisance or discomfort thereby occasioned;
provided that nevertheless the Landlord will use its best efforts to maintain
services essential to the use and enjoyment of the Leased Premises and provided
further that if the Landlord shall be prevented, delayed or restricted in the
fulfillment of any such obligation hereunder by reason of any of the
circumstances set out in sub-paragraph (c) of this paragraph 15 and to fulfill
such obligation could not, in the reasonable opinion of the Landlord, be
completed without substantial additions to or renovations of the Property, the
Landlord may on sixty (60) days' written notice to the Tenant terminate this
Lease.
<PAGE> 14
17. If either the Landlord or the Tenant shall overlook, excuse, condone or
suffer any default, breach, non-observance, improper compliance or
non-compliance by the other of any obligation hereunder, this shall not operate
as a waiver of such obligation in respect of any continuing or subsequent
default, breach, or non-observance, and no such waiver shall be implied but
shall only be effective if expressed in writing.
18. (a) The term "Landlord" as used in this Lease, means only the owner for the
time being of the Property, so that in the event of any sale or sales or
transfer or transfers of the Property, or the making of any lease or leases
thereof, or the sale or sales or the transfer or transfers or the assignment or
assignments of any such lease or leases, previous landlords shall be and hereby
are relieved of all covenants and obligations of Landlord hereunder. It shall be
deemed and construed without further agreement between the parties, or their
successors in interest, or between the parties and the transferee or acquirer,
at any such sale, transfer or assignment, or lessee on the making of any such
lease, that the transferee, acquirer or lessee has assumed and agreed to carry
out any and all of the covenants and obligations of Landlord hereunder to
Landlord's exoneration, and Tenant shall thereafter be bound to and shall attorn
to such transferee, acquirer or lessee, as the case may be, as Landlord under
this Lease;
(b) Notwithstanding anything contained in this Lease to the contrary, in the
event the Landlord intends to demolish or to renovate substantially all the
Building, then the Landlord, upon giving the Tenant one hundred and eighty (180)
days" written notice, shall have the right to terminate this Lease and this
Lease shall thereupon expire on the expiration of one hundred and eighty (180)
days from the date of the giving of such notice without compensation of any kind
to the Tenant.
19. The Landlord and Tenant shall co-operate, each with the other, in respect of
any Public Taking of the Leased Premises or any part thereof so that the Tenant
may receive the maximum award for all other compensation arising from or
relating to such Public Taking (including all compensation for the value of the
Tenant's leasehold interest subject to the Public Taking) which shall be the
property of the Landlord, and the Tenant's rights to such compensation are
hereby assigned to the Landlord. If the whole or any part of the Leased Promises
is Publicly Taken, as between the parties hereto, their respective rights and
obligations under their Lease shall continue until the day on which the Public
Taking authority takes possession thereof. If the whole or any part of the
Leased Premises is Publicly Taken, the Landlord shall have the option, to be
exercised by written notice to the Tenant, to terminate this Lease and such
termination shall be effective on the day the Public Taking authority takes
possession of the date of such termination and the Tenant shall, on the date of
such Public Taking, vacate the Leased Premises and surrender the same to the
Landlord, with the Landlord, with the Landlord having the right to re-enter and
repossess the Leased Premises discharged of this Lease and to remove all persons
therefrom. In this paragraph, the words "Public Taking" shall include
expropriation, condemnation or taking, in lieu of or under threat of
expropriation or taking and "Publicly Taken" shall have a corresponding meaning.
20. The Tenant agrees with the landlord not to register this Lease in any
recording office and not to register notice of this Lease in any form without
the prior written consent of the Landlord. If such consent is provided such
notice of Lease or caveat shall be in such form as the Landlord shall have
approved and upon payment of the Landlord's reasonable fee for same and all
applicable transfer or recording taxes or charges. The Tenant shall remove and
discharge at Tenant's expense registration of such a notice or caveat at the
expiry or earlier termination of the Term, and in the event of Tenant's failure
to so remove or discharge
<PAGE> 15
such notice or caveat after ten (10) day's written notice by Landlord to Tenant,
the Landlord may in the name and on behalf of the Tenant execute a discharge of
such a notice or caveat in order to remove and discharge such notice of caveat
and for the purpose thereof the Tenant hereby irrevocably constitutes and
appoints any officer of the Landlord the true and lawful attorney of the Tenant.
21. The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions express or implied, collateral or otherwise
forming part of or in any way affecting or relating to this Lease save as
expressly set out in this lease and Schedules attached hereto and that this
Lease and such Schedules constitute the entire agreement between the Landlord
and the Tenant and may not be modified except as herein explicitly provided or
except by agreement in writing executed by the Landlord and the Tenant.
22. Any notice, advice, document or writing required or contemplated by any
provision hereof shall be given in writing and if to the Landlord, either
delivered personally to an officer of the Landlord or mailed by prepaid mail
addressed to the Landlord at the said local office address of the Landlord shown
above, and if to the Tenant, either delivered personally to the Tenant (or to an
officer of the Tenant, if the corporation) or mailed by prepaid mail addressed
to the Tenant at the Leased Premises, or if an address of the Tenant is shown in
the description of the Tenant above, to such address. Every such notice, advice,
document or writing shall be deemed to have been given when delivered
personally, or if mailed as aforesaid, upon the fifth day after being mailed.
The Landlord may from time to time by notice in writing to the Tenant designate
another address as the address to which notices are to be mailed to it, or
specify with greater particularity the address and persons to which such notices
are to be mailed and may require that copies of notices be sent to an agent
designated by it. The Tenant may, if an address of the Tenant is shown in the
description of the Tenant above, from time to time by notice in writing to the
Landlord, designate another address as the address to which notices are to be
mailed to it, or specify with greater particularity the address to which such
notices are to be mailed.
23. In this Agreement "herein", "hereof", "hereby", "hereunder", "hereto",
"hereinafter", and similar expressions refer to this Lease and not to any
particular paragraph, clause or other promotion thereof, unless there is
something in the subject matter or context inconsistent therewith; and the
parties agree that all of the provisions of this lease are to be construed as
covenants and agreements as though words importing such covenants and agreements
were used in each separate paragraph hereof, and that should any provision or
provisions of this Lease be illegal or not enforceable it or they shall be
considered separate and severable from the Lease and its remaining provisions
shall remain in force and be binding upon the parties hereto as though the said
provision or provisions had never been included, and further that the captions
appearing for the provisions of this lease have been inserted as a matter of
convenience and for reference only and in no way define, limit or enlarge the
scope or meaning of this lease or of any provisions hereof.
24. This Agreement and everything herein contained shall enure to the benefit of
and binding upon the respective heirs, executors, successors, assigns and other
legal representatives, as the case may be, of each and every of the parties
hereto, subject to the granting of consent by the Landlord to any assignment or
sublease, and every reference herein to any party hereto shall include the
heirs, executors, administrators, successors, assigns and other legal
representatives of such party, and where there is more that one tenant or there
is a male or female party the provisions hereof shall be read with all
grammatical changes thereby rendered necessary and all covenants shall be deemed
joint and several.
25. If the Tenant shall for any reason use or occupy the leased Premises in any
way prior to the commencement of the Term without there being an existing lease
between the Landlord and Tenant under which the Tenant has occupied the leased
Premises, then during such prior use or occupancy the Tenant shall be a Tenant
of the Landlord and shall be subject to the same covenants and agreements in
this Lease mutatis mutandis.
<PAGE> 16
26. The provisions of the following Schedules attached hereto shall form part of
this lease as if the same were embodied herein:
Schedule "A" - Legal Description of Property
Schedule "B" - Measurement of Rentable Area
Schedule "B-1" - Location of Leased Premises
Schedule "C" - Taxes Payable by Landlord and Tenant
Schedule "D" - Services and Costs
Schedule "E" - Rules and Regulations
Schedule "F" - Leasehold Improvements
Schedule "K" - Occupancy Prior to Commencement of Term
IN WITNESS WHEREOF the parties hereto have executed this Agreement. I/We have
authority to bind the corporation.
Landlord:
THE MANUFACTURES LIFE INSURANCE COMPANY
_________________________________ By Signature ___________________________
Witness as to signing Title:
by Landlord
Tenant:
JAWS TECHNOLOGIES INC.
_________________________________ By Signature ___________________________
Witness as to singing by Title:
Tenant or officer(s) of Tenant Name:
By Signature ___________________________
Title:
Name:
SCHEDULE "A"
(Legal Description of Property)
TO A LEASE AGREEMENT BETWEEN
<PAGE> 17
THE MANUFACTURERS LIFE INSURANCE COMPANY
-and-
JAWS TECHNOLOGIES INC.
Those portions of Lots Seventeen (17), Eighteen (18),
Nineteen (19) and Twenty (20), which lie to the South of
the Northerly Seven (7) feet throughout the said Lots and
Seventeen (17), Eighteen (18), Nineteen (19) and
Twenty (20) in Block Forty-eight (48) on Plan "A-1", Calgary,
Expecting out of Lots Nineteen (19) and Twenty (20)
All mines and minerals.
(hereinafter referred to as the "Property")
DATED the 15th day of December, 1997
MUNICIPALLY DESCRIBED AS: 603-7TH Avenue S.W.
Calgary, Alberta
Property Name: MANULIFE HOUSE
SCHEDULE "B"
(Measurement of Rentable Area)
Single Tenant Floor
<PAGE> 18
The "Rentable Area" of a single tenant floor shall be computed by measuring from
the inside finish of the permanent outer Building walls or from the glass line
in accordance with the standards of the Building established by the Landlord.
Rentable area shall include all areas within outside walls or glass line less
stairs (but including stair landings where they provide access to washrooms,
storage rooms, etc.), elevator shafts, flues, pipe shafts, vertical ducts, and
their enclosing walls. Washroom, janitor rooms, on-floor storage rooms,
telephone rooms, electrical closets shall be included in the Rentable Area.
Where the space on both sides of a wall is Rentable Area, the wall is to be
included in the Rentable Area. No deductions shall be made for columns and
projections necessary to the Building.
Multi-Tenant Floor
The Rentable Area of a multi-tenant floor tenant shall be computed by
multiplying such portion of the Usable Area (as set out below) allocated to the
multi-tenant floor tenant by the ratio of the total Rentable Area of the floor
to the total Useable Area of the floor.
The "Useable Area" of a multi-tenant floor is the Rentable Area of a single
tenant floor less the area of the Normal Corridor (as set out below), washrooms,
janitor closets, telephone rooms, electrical closets, air conditioning rooms and
their enclosing walls.
The Usable Area of the multi-tenant shall be computed by measuring form the
inside finish of the permanent outer building Wall or from the glass line to the
Useable Area side of the Normal Corridor and/or other permanent partitions and
to the centre line of partitions which demise tenant areas.
The "Normal Corridor" is the minimum corridor permitted by the applicable code,
yet practical for leasing purposes. For example, although the code may permit a
42 inch wide corridor, for aesthetic reasons or because of grid restrictions,
the corridor might well be 4'6" or 5.0" wide. Once the corridor dimensions have
been established they shall remain unchanged and marked on the master plan
showing all dimensions used to calculate Rentable Area and Usable Area.
The ground floor is measured as Usable Area.
If the Normal Corridor is extended to provide a multi-tenant floor tenant access
to its space, the area of the corridor extension is included in the tenant's
Usable Area or allocated proportionately to the multi-tenant floor tenants
benefiting from the extension of the Normal Corridor.
Property Name: MANULIFE HOUSE
SCHEDULE "B1"
(Location of Leased Premises cross-hatched)
<PAGE> 19
This Schedule is for identification purposes only and is not to be interpreted
as being a representation or warranty on the party of the Landlord as to the
exact location, area, configuration and layout.
(insert diagram of floor plan)
Property Name: MANULIFE HOUSE
SCHEDULE "C"
TAXES PAYABLE BY LANDLORD AND TENANT
1. (a) The Tenant covenants to pay all Tenant's Taxes, as and when the same
become due and payable. Where any Tenant's Taxes are payable by the
Landlord to the relevant taxing authorities, the Tenant covenants to pay
the amount thereof to the Landlord.
(b) The Tenant covenants to pay the Landlord the Tenant's Proportionate
Share of the amount of the Landlord's Taxes in each Fiscal Period.
(c) The Tenant covenants to pay to the Landlord the Tenant's Proportionate
Share of the costs and expenses (including legal and other professional
fees and interest and penalties on deferred payments) incurred in good
faith by the Landlord in contesting, resisting or appealing any of the
Taxes.
(d) The Landlord covenants to pay all Landlord's Taxes subject to the
payments on account of Landlord's Taxes required to be made by the
Tenant elsewhere in this lease. The Landlord may appeal any official
assessment or the amount of any Taxes or other taxes based on such
assessment and relating to the Property. In connection with any such
appeal, the Landlord may defer payment of any Taxes or other taxes, as
the case may be, payable by it to the extent permitted by law, and the
Tenant shall co-operate with Landlord and provide the Landlord with all
relevant information reasonably required by the Landlord in connection
with any such appeal.
(e) In the event that the Landlord is unable to obtain from the taxing
authorities any separate allocation of Landlord's Taxes, Tenant's Taxes
or assessment as required by the Landlord to make calculations of
Additional Rent under this Lease, such allocation shall be made by the
Landlord acting reasonably and shall be conclusive.
(f) Whenever requested by the Landlord, the Tenant shall deliver to it
receipts for payment of all the Tenant's Taxes and furnish such other
information in connection therewith as the Landlord may reasonably
require.
(g) If the Building has not been taxed as a completed and fully occupied
building for any Fiscal Period, the Landlord's Taxes will be determined
by the Landlord as if the Building had been taxed as a completed
building fully occupied by commercial tenants for any such Fiscal
Period.
2. In this Lease:
(a) "Landlord's Taxes" shall mean the aggregate of all Taxes attributable
to Property, the Rent or the Landlord in respect thereof and including,
any amounts imposed, assessed, levied or charged in
<PAGE> 20
substitution for or in lieu of any such Taxes, but excluding such taxes as
capital gains taxes, corporate income, profit or excess profit taxes to
the extent such taxes are not levied in lieu of any of the foregoing
against the Property or the Landlord in respect thereof;
(b) "Taxes" shall mean all taxes, rates, duties, levies, fees, charges,
local improvement rates, capital taxes, rental taxes and assessments
whatsoever including fees, rents, and levies for air rights and
encroachments on or over municipal property imposed, assessed, levied or
charged by an school, municipal, regional, state, provincial, federal,
parliamentary or other body, corporation, authority, agency or commission
provided that "Taxes" shall not include any special utility, levies, fees
or charges imposed, assessed, levied or charged which are directly
associated with initial construction of the Property;
(c) "Tenant's Taxes" shall mean the aggregate of:
(i) all Taxes (whether) imposed upon the Landlord or the Tenant)
attributable to the personal property, trade fixtures, business,
income, occupancy or sales of the Tenant or any other occupant of
the Leased Premises, and to any Leasehold Improvements or fixtures
installed by or on behalf of the Tenant within the Leased Premises,
and to the use by the Tenant of any of the Property; and
(ii) the amount by which Taxes (whether imposed upon the Landlord or the
Tenant) are increased above the Taxes which would have otherwise
been payable as a result of the Leased Premises or the Tenant or any
other occupant of the Leased Premises being taxed or assessed in the
support of separate schools; and
(d) "Tenant's Proportionate Share" shall mean once decimal four three percent
(1.43%) subject to adjustment as determined solely by the Landlord and
notified to the Tenant in writing for physical increases or decreases in
the total Rentable Area of the Property provided that total Rentable Area
of the Property and the Rentable Area of the Leased Premises shall
exclude areas designated (whether or not rented) for parking and for
storage.
<PAGE> 21
SCHEDULE "D"
SERVICES AND COSTS
1. The Landlord covenants with the Tenant:
(a) To maintain in the Leased Premises conditions of reasonable
temperature and comfort in the accordance with good standards
applicable to normal occupancy of premises for office purposes
subject to governmental regulations during hours to be
determined by the landlord (but to be at least the hours from
8:00 a.m. to 6:00 p.m. from Monday to Friday inclusive with
exception of holidays, Saturdays and Sundays), such conditions
to be maintained by means of a system for heating and cooking,
filtering and circulating air; the Landlord shall have no
responsibility for any inadequacy of performance of the said
system if the occupancy of the Leased Premises or the
electrical power or other energy consumed on the Leased
premises for all purposes exceeds reasonable amounts as
determined by the Landlord or the Tenant installs partitions
or other installations in locations which interfere with the
proper operation of the system of the interior climate control
or if the window covering on exterior windows is not kept
fully closed;
(b) To provide janitor and cleaning services to the Leased
Premises and to common of the Building consisting of
reasonable services in accordance with the standards of
similar office buildings;
(c) To keep available the following facilities for use by the
Tenant and its employees and invitees in common with other
persons entitled thereto:
(i) passenger and freight elevator service to each floor upon
which the Leased Premises are located provided such service is
installed in the Building and provided that the Landlord may
prescribe the hours during which and the procedures under
which freight elevator service shall be available and may
limit the number of elevators providing service outside normal
business hours;
(ii) common entrances, lobbies, stairways and corridors giving
access to the Building and the Leased Premises, including such
other areas from time to time which may be provided by the
Landlord for common use and enjoyment with the Property;
(iii) the washrooms as the Landlord may assign from time to
time which are standard to the Building, provided that the
Landlord and the Tenant acknowledge that where an entire floor
is leased to the Tenant or some other tenant the Tenant or
such other tenant, as the case may be, may exclude others from
the washrooms thereon.
2. (a) The Landlord covenants with the Tenant and the Landlord shall
have the sole right to furnish electricity to the Leased
Premises (except Leased Premises which have separate meters)
for normal office use for lighting and for office equipment
capable of operating from the circuits available to the Leased
Premises and standard to the Building during hours to be
determined by the Landlord (but to be at least the hours from
8:00 a.m. to 6:00 p.m.) from Monday to Friday inclusive with
the exception of holidays, Saturdays and Sundays) and during
such
<PAGE> 22
other hours that the Tenant elects at its sole cost and
expense subject to governmental regulations;
(b) The amount of electricity consumed on the Leased Premises in
excess of electricity required by the Tenant for normal office
use shall be as determined by the Landlord acting reasonably
or by a metering device installed by the Tenant for normal
office use shall be as determined by the Landlord acting
reasonably or by a metering device installed by the Tenant at
the Tenant's expense. The Tenant shall pay the Landlord for
any such excess electricity on demand.
3. The Landlord shall maintain and keep in repair the facilities required for
the provision of the interior climate control, elevator (is installed in the
Building) and other services referred to in sub-paragraph (a) and (c) of
paragraph 1 and sub-paragraph (a) of paragraph 2 of this Schedule in accordance
with the standards of office buildings similar to the Building but reserves the
right to stop the use of any of these facilities and the supply of the
corresponding services when necessary by reason of accident or breakdown or
during the making of repairs, alterations or improvements, in the reasonable
judgment of the Landlord necessary or desirable to be made, until the repairs,
alterations or improvements shall have been completed to the satisfaction of the
Landlord.
4. (a) The Landlord may (but shall not be obligated) on request of
the Tenant supply services or materials to the Leased Premises
and the Property which are not provided for under this Lease
and which are used by the Tenant (the "Additional Services")
including, without limitation, and which are used by the
Tenant (the "Additional Services") including, without
limitation,
(i) replacement of tubes and ballasts;
(ii) carpet shampooing;
(iii) window covering cleaning;
(iv) locksmithing;
(v) removal of bulk garbage;
(vi) picture hanging; and
(vii) special security arrangement.
(b) When Additional Services are supplied or furnished by the
Landlord, accounts therefor shall be rendered by the Landlord
and shall be payable by the Tenant to the Landlord on demand.
In the event the Landlord shall elect not to supply or furnish
Additional Services, only persons with prior written approval
by the Landlord (which approval shall not be unreasonably
withheld) shall be permitted by the Landlord or the Tenant to
supply or furnish Additional Services to the Tenant and the
supplying and furnishing shall be subject to the reasonable
rules fixed by the Landlord with which the Tenant undertakes
to cause compliance and to comply.
5. (a) The Tenant covenants to pay the Landlord the Tenant's
Proportionate Share of the amount of the Operating Costs in
each Fiscal Period;
(b) Subject to the other terms and conditions of this Lease, the
Landlord shall not be responsible during the Term for any
costs, charges, expenses and outlays of any nature whatsoever
arising from or relating to the Leased Premises and the Tenant
shall pay all charges, impositions, costs and expenses of
every nature and kind relating to the Leased Premises and the
amounts included as Additional Rent whether or not
specifically provided for herein and the Tenant covenants with
the Landlord accordingly;
(c) In this Lease "Operating Costs" shall include all costs
incurred or which will be incurred by the Landlord in
discharging its obligations under this Lease and in the
maintenance, operation, administration and management of the
Property including without limitation:
<PAGE> 23
(i) cost of heating, ventilating and air-conditioning;
(ii) cost of water and sewer charges;
(iii) cost of electricity, fuel or other form of energy
which are not separately metered and recovered or
paid by tenants;
(iv) costs of insurance carried by the Landlord pursuant
to paragraph 9(a) of this Lease and cost of any
deductible amount paid by the Landlord in connection
with each claim made by the Landlord under such
insurance;
(v) cost of building office expenses, including
telephone, rent, stationery and supplies;
(vi) costs of all elevator and escalator (if installed in
the Building) maintenance and operation;
(vii) costs of operating staff, management staff and other
administrative personnel, including salaries, wages,
and fringe benefits;
(viii) cost of providing security and costs of repair,
maintenance and replacement of communications, fire
and life safety systems serving the Property;
(ix) cost of providing janitorial services, window
cleaning, garbage and snow removal and pest control;
(x) cost of supplies and materials;
(xi) cost of decoration of common areas;
(xii) cost of landscaping;
(xiii) cost of maintenance and operation of the parking area
and costs of operating, maintaining, repairing, and
replacing all pedestrian and vehicular entrances and
exits, passageways, driveways, tunnels, subway
connections and delivery and holding areas used in
connection with the Property;
(xiv) cost of consulting, and professional fees including
expenses;
(xv) cost of replacements, additions and modifications
unless otherwise included under Operating Costs under
subparagraph (xvi), and cost of repair and;
(xvi) costs in respect of each Major Expenditure (as
hereinafter defined) as amortized over the period of
the Landlord's reasonable estimate of the economic
life of the Major Expenditure, but not to exceed
fifteen (15) years, using equal monthly installments
of principal and interest at ten percent (10%) per
annum compounded semi-annually. For the purpose
hereof "Major Expenditure" shall mean any expenditure
incurred after the date of substantial completion of
the Building for replacement of machinery, equipment,
building elements, systems or facilities forming a
part of or used in connection with Property or for
modifications, upgrades or additions to the Property
or facilities used in connection therewith, provided
that, in each case, such expenditure was more that
ten percent (10%) of the total Operating Costs for
the immediately preceding Fiscal Period.
(d) In this Lease there shall be excluded from Operating Costs the
following:
(i) interest on debt and capital retirement of debt;
(ii) such of the Operating Costs as are recovered from
insurance proceeds; and
(iii) costs as determined by the Landlord of acquiring
tenants for the Property.
6. In calculating Operating Costs for any Fiscal Period, if less than one
hundred percent (100%) of building is occupied by tenants, than the amount of
such Operating Costs shall be deemed for the purposes of this Schedule to be
increased to an amount equal to the like Operating Costs which normally would be
expected by the Landlord to have been incurred had such occupancy been one
hundred percent (100%) during such entire period.
7. In this Lease, "Tenant's Proportionate Share" shall mean one decimal four
three percent (1.43%) subject to adjustment as determined solely by the Landlord
and notified to the Tenant in writing for physical increases or decreases in the
total Rentable Area of the Property provided that total Rentable Area of the
Property and the Rentable Area of the Leased Premises shall exclude areas
designated (whether or not rented) for parking and for storage.
<PAGE> 24
SCHEDULE "E"
RULES AND REGULATIONS
1. The sidewalks, entry passages, elevators (if installed in the Building) and
common stairways shall not be obstructed by the Tenant or used for any other
purpose that for ingress and egress to and from the Leased Premises. The Tenant
will not place or allow to be placed in the Building corridors or public
stairways any waste paper, dust, garbage, refuse or anything whatever.
2. The washroom plumbing fixtures and other water apparatus shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown therein. The
expense of any damage resulting by misuse by the Tenant shall be borne by the
Tenant.
3. The Tenant shall permit window cleaners to clean the windows of the leased
Premises during normal business hours.
4. No birds or animals shall be kept in or about the Property nor shall the
Tenant operate or permit to be operated by any musical or sound-producing
instruments or device or make or permit any improper noise inside or outside the
Leased Premises which may be heard outside such Leased Premises.
5. No one shall use the Leased Premises for residential purposes, or for the
storage of personal effects or articles other than those required for business
purposes.
6. All persons entering and leaving the Building at anytime other than normal
business hours shall register in the books which by be kept by the Landlord at
or near the night entrance and the Landlord will have the right to prevent any
person from entering or leaving the Building or the Property unless provided
with a key to the premises to which such person seeks entrance and a pass in
form to approved by the Landlord. Any persons found in the Building at such
times without such keys and passes will be subject to the surveillance of the
employees and agents of the Landlord.
7. No dangerous or explosive materials shall be kept or permitted to be kept in
the Leased Premises.
8. The Tenant shall not permit any cooking in the Leased Premises except for
food warmed up in microwaves for consumption by employees or guests of the
Tenant. The Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Leased Premises without the prior
written approval of the Landlord. Only persons authorized by the Landlord shall
be permitted to deliver or to use the elevators (if installed in the Building)
for the purpose of delivering food or beverage to the Leased Premises.
9. The Tenant shall not bring in or take out, position, construct, install or
move and safe, business machine or other heavy office equipment without first
obtaining the prior written consent of the Landlord. In giving such consent, the
Landlord shall have the right in its sole discretion, to prescribe the weight
permitted and the position thereof, and the use and design of planks, skids or
platforms to distribute the weight thereof. All damage done to the Building by
moving or using any such heavy equipment or other office equipment or furniture
shall be repaired at the expense of the Tenant. The moving of all heavy
equipment or other office equipment or furniture shall occur only at times
consented by the Landlord and the persons employed to move the same in and out
of the Building must be acceptable to the Landlord. Safes and other heavy office
equipment will be moved through the halls and corridors only upon steel
<PAGE> 25
bearing plates. No freight or bulky matter of any description will be received
into the Building or carried in the elevators (if installed in the Building)
except during hours approved by the Landlord.
10. Tenant shall give the Landlord prompt notice of any accident to or any
defect in the plumbing, heating, air-conditioning, ventilating, mechanical or
electrical apparatus or any other part of the Building.
11. The parking of automobiles shall be subject to the charges and the
reasonable regulations of the Landlord. The Landlord shall not be responsible
for damage to or theft of any car, its accessories or contents whether the same
be the result of negligence or otherwise.
12. The Tenant shall not mark, drill into or in any way deface the walls,
ceiling, partitions, floors or other parts of the Leased Premises and the
Building.
13. Except with the prior written consent of the Landlord, nor tenant shall use
or engage any person or persons other than the janitor or janitorial contractor
of the Landlord for the purpose of any cleaning of the Leased Premises.
14. If the Tenant desires any electrical or communications wiring, the Landlord
reserves the right to direct qualified persons as to where and how the wires are
to be introduced, and without such directions no borings or cutting for wires
shall take place. No other wires or pipes of any kind shall be introduced
without the prior written consent of the Landlord.
15. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord. Additional keys may be
obtained from the Landlord at the cost of the Tenant.
16. The Tenant shall be entitled to have its name shown upon the directory board
of the building and at one of the entrance doors to the Leased Premises all at
the Tenant's expense, but the Landlord shall in its sole discretion design the
style of such identification and allocate the space on the directory board for
the Tenant.
17. The Tenant shall keep the window coverings (if any) in a closed position
during period of direct sun load. The Tenant shall not interfere with or
obstruct any perimeter heating, air-conditioning or ventilating units.
18. The Tenant shall not conduct, and shall not permit any, canvassing in the
Building.
19. The Tenant shall take care of the rugs and drapes (if any) in the Leased
Premises and shall arrange for the carrying-out of regular spot cleaning and
shampooing of carpets and dry cleaning of drapes in a manner acceptable to the
Landlord.
20. The Tenant shall permit the periodic closing of lanes, driveways and
passages for the purpose of preserving the Landlord's rights over such lanes,
driveways and passages.
21. The Tenant shall not place or permit to be placed any sign, advertisement,
notice or other display on any part of the exterior of the Leased Premises or
elsewhere if such sign, advertisement, notice or other display is visible from
outside the Leased Premises without the prior written consent of the Landlord
which may be arbitrarily withheld. The Tenant, upon request of the Landlord,
shall immediately remove any sign, advertisement, notice or other display which
the Tenant has placed or permitted to be placed which , in the opinion of the
Landlord, is objectionable, and if the Tenant shall fail to do so, the Landlord
may remove the same at the expense of the Tenant.
22. The Landlord shall have the right to make such other and further reasonable
rules and regulations and to alter the same as in its judgment may from time to
time be needful for the safety, care, cleanliness and appearance of the Leased
Premises and the Building and for the preservation of good order therein, and
the same shall be kept and observed by the tenants, their employees and
<PAGE> 26
servants. The Landlord also has the right to suspend or cancel any or all of
these rules and regulations herein set out.
SCHEDULE "F"
Leasehold Improvements
1. For purposes of this Lease, the term "Leasehold Improvements" includes,
without limitation, all fixtures, improvements, installations, alterations and
additions from time to time made, erected, or installed by or on behalf of the
Tenant, or any previous occupant of the Leased Premises, in the Leased Premises
and by or on behalf of other tenants in other premises in the Building
(including the Landlord if an occupant of the Building), including all
partitions, doors and hardware however affixed, and whether or not movable, all
mechanical, electrical and utility installation and all carpeting and drapes
with the exception only of furniture and equipment not of the nature of
fixtures.
2. The Tenant shall not make, erect, install or alter any Leasehold Improvements
in the Leased Premises without having requested and obtained the Landlord's
prior written approval. The Landlord's approval shall not, if given, under any
circumstances be construed as consent to the Landlord having its estate charged
with the cost of work. The Landlord shall not unreasonably withhold its approval
to any such request, but failure to comply with the Landlord's reasonable
requirements from time to time for the Building shall be considered sufficient
reason for refusal. In making, erecting, installing or altering any Leasehold
Improvements the Tenant shall not, without the prior written approval of the
Landlord, alter or interfere with any installations which have been made by the
Landlord or others and in no event shall alter or interfere with window
coverings (if any) or other light control devices (if any) installed in the
Building. The Tenant's request for any approval hereunder shall be in writing
and accompanied by an adequate description of the contemplated work and, where
considered appropriate by the Landlord, working drawings and specifications
thereof. If the Tenant requires from the Landlord, working drawings and
specifications thereof. If the Tenant requires from the Landlord drawings or
specifications of the Building in connection with the Leasehold Improvements
shall be paid by the Tenant to the Landlord on demand. All work to be performed
in the Leased Premises shall be performed by competent and adequately insured
contractors and subcontractors of whom the Landlord shall be performed by
competent and adequately insured contractors and subcontractors of whom the
Landlord shall have approved in writing prior to commencement of any work, such
approval not to be unreasonably withheld (except that the Landlord may require
that the Landlord's contractors and sub-contractors be engaged for any
mechanical or electrical work) and by workmen who have labor union affiliations
that are compatible with those affiliations ( if any) of workmen who have labor
union affiliations that are compatible with those affiliations (if any) of
workmen employed by the Landlord and its contractors and sub-contractors. All
such work including the delivery, storage and removal of materials shall be
subject to the reasonable supervision of the Landlord, shall be performed in
accordance with any reasonable conditions or regulations imposed by the Landlord
including, without limitation, payment on demand of a reasonable fee of the
Landlord for such supervision, and shall be completed in good and workmanlike
manner in accordance with the description of the work approved by the Landlord
and in accordance with all laws, regulations and by-laws of all regulatory
authorities. Copies of required building permits or authorizations shall be
obtained by the Tenants at its expense and copies thereof shall be provided to
the Landlord. If the Tenant undertakes Leasehold Improvements, upon completion
of such Leasehold Improvements the Tenant shall supply to the Landlord complete
"As-Built" drawings representing Leasehold Improvements installed and, if
applicable, an engineer approved air balance report. No locks shall be installed
on the entrance doors or in any doors in the Leased Premises that are not keyed
to the Building master key system.
3. In connection with the making, erection, installation or alteration of
Leasehold Improvements and all other work or installations made by or for the
Tenant in the Leased Premises the Tenant shall comply
<PAGE> 27
with all the provisions of the construction lien and other similar statutes from
time to time applicable thereto (including any proviso requiring or enabling the
retention by way of holdback of portions or any sums payable), and, except as to
any such holdback, shall promptly pay all accounts relating thereto. The Tenant
will not created any mortgage, conditional sale agreement or other encumbrance
in respect of its Leasehold Improvements or, without the written consent on the
Landlord, with respect to its trade fixtures nor shall the Tenant take any
action as a consequence of which any such mortgage, conditional sale agreement
or other encumbrance would attach to the Property or any part thereof. If and
whenever any construction or other lien for work, labor, services or materials
supplied to or for the Tenant or for the cost of which the Tenant may be in any
way liable or claims therefor shall arise or be filed or any such mortgage,
conditional sale agreement or other encumbrance shall attach, the Tenant shall
within twenty (20) days after submission by the Landlord of notice thereof
procure the discharge thereof, including any certificate of action registered in
respect of any lien, by payment or giving security or in such other manner as
may be required or permitted by law, and failing which the Landlord may avail
itself of any of its remedies hereunder for default of the Tenant and may make
any payments or take any steps or proceedings required to procure the discharge
of any such liens or encumbrances, an shall be entitled to be repaid by the
Tenant on demand for any such payments and to be paid on demand by the Tenant
for all costs and expenses in connection with steps or proceedings taken by the
Landlord and the Landlord's right to reimbursement and to payment shall not be
affected or impaired if the Tenant shall then or subsequently establish or claim
that any lien or encumbrances so discharged was without merit or excessive or
subject to any abatement, set-off or defense. The Tenant agrees to indemnify the
Landlord from all claims, costs and expenses which may be incurred by the
Landlord in any proceedings brought by any person against the Landlord alone or
with another or others for or in respect of work, labor, services or materials
supplied to or for the Tenant.
4. All Leasehold Improvements in or upon the Leased Premises shall immediately
upon their placement be and become the Landlord's property without compensation
therefore to the Tenant. Except to he extent otherwise expressly agreed by the
Landlord in writing, no Leasehold Improvements, furniture or equipment shall be
removed by the Tenant from the Leased Premises either during or at the
expiration or sooner termination of the Term except that:
a) The Tenant shall, prior to the end of the Term, remove such of the
Leasehold Improvements and trade fixtures in the Leased Premises as the
Landlord shall require to be removed; and
b) the Tenant may, at the times appointed by the Landlord and subject to
availability of elevators (if installed in the Building), remove its
furniture and equipment at the end of the Term, and also during the
Term in the usual and normal course of its business where such
furniture or equipment has become excess for the Tenant's purposes or
the Tenant is substituting therefor new furniture and equipment.
The Tenant shall, in the case of every removal, make good at the expense of the
Tenant any damage caused to the Property by the installation and removal. In the
event of the Non-removal by the end of the Term, or sooner termination of this
Lease, of such trade fixtures or Leasehold Improvements required by the Landlord
of the Tenant to be removed, the Landlord shall have the option, in addition to
its other remedied under this Lease to declare to the Tenant that such trade
fixtures are the property of the Landlord and the Landlord upon such a
declaration may dispose of such trade fixtures and retain any proceeds of
disposition as security for obligations of the Tenant to the Landlord and the
Tenant shall be liable to the Landlord for any expenses incurred by the
Landlord.
5. For the purpose of this Lease,
THE TENANT ACCEPTS THE PREMISES ON AN "AS IS " BASIS.
<PAGE> 28
SCHEDULE "K"
OCCUPANCY PRIOR TO COMMENCEMENT OF TERM
The Tenant may enter the Leased Premises 15 days prior to commencement of the
Term for the sole purpose of installing Leasehold Improvements (the "Improvement
Period"). Landlord and Tenant mutually acknowledge and agree that the
Improvement Period precedes and is not part of Basic Rent Free Period, if any,
provided for in this Lease.
Tenant's occupancy of the Leased Premises during the Improvement Period shall be
upon and subject to the following conditions:
1. During the improvement Period the Tenant, its servants, agents,
employees, contractors, subcontractors, officers and directors shall be
subject to and bound by all of the terms and conditions of this Lease
including without limiting the generality of the foregoing insurance
and indemnification subject only to the following:
(a) During the Improvement Period the Tenant shall not be obligated to pay
Rent except those charges set out in 1(d).
(b) In the event the Tenant commences to conduct its business form the
Leased Premises during the Improvement Period all Rent and other
charges shall commence from the date of such commencement
notwithstanding that the Term has not yet begun.
(c) During the Improvement Period the Landlord shall have no obligation to
provide the Tenant any of the services required to be provided by the
Landlord hereunder to the Tenant including without limitation any of
the services referred to in paragraphs 1, 2, 3, and 4 Schedule "D" of
this Lease except those services reasonably required by the Tenant for
the purposes of installing the Leasehold Improvements an the Landlord
shall not be liable to the Tenant for any loss whatsoever resulting
from Landlord not providing any such services.
(d) The Tenant shall be responsible for the Landlord's reasonable charges
during the Improvement Period for services and utilities used for or in
connection with the Leased Premises, including, without limiting the
generality of the foregoing, those relating to security and access to
the Leased Premises, garbage removal from the Leased Premises and the
use and consumption of utilities such as water, fuel, power and
telephone. The Tenant shall pay to the Landlord on demand the amount of
such charges, based on estimates by the Landlord.
<PAGE> 1
EXHIBIT 10.1.2
THIS AGREEMENT made the ___ day of July, 1998.
B E T W E E N:
ARTHUR WONG, of Atherton, in the State of California,
(hereinafter referred to as "Arthur Wong")
OF THE FIRST PART;
- and -
JAW TECHNOLOGIES INC. a corporation incorporated pursuant to
the laws of the State of Nevada,
(hereinafter referred to as the "Corporation")
OF THE SECOND PART.
AND WHEREAS the Corporation wishes to retain the services of
Arthur Wong to provide Services to the Corporation, as and when requested by the
Directors of the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of
the mutual covenants and conditions hereinafter contained, the parties agree as
follows:
ARTICLE 1.00 - APPOINTMENT AND TERM
1.1 Appointment. The Corporation hereby retains Arthur Wong to act as a director
of the Corporation effective July 21,1998. The Corporation will make press
releases and other appropriate announcements upon this appointment. This
appointment are subject to approval by the shareholders of the Corporation.
Arthur Wong agrees to perform the duties and exercise such powers consistent
with his position and such additional powers as may from time to time be
assigned or vested in his by the by-laws of the Corporation or by the
resolutions of the Board of Directors of the Corporation. In particular, Arthur
Wong shall, without limiting the foregoing:
(a) provide advice with respect to the targeting and structuring of
acquisitions of other businesses by the Corporation;
(b) assist in the development of the profile of the Corporation with the
general public and with the financial community; and
(c) introduce the Corporation and its executive officers to contacts of
Arthur Wong who would be of assistance to the Corporation in obtaining
funds for proposed acquisitions as well as the day to day financing
requirements of the Corporation;
<PAGE> 2
2
all such duties being hereinafter referred to as the "Services". Arthur Wong
agrees that he shall perform the Services faithfully and to the best of his
abilities. While the role of external director is not a full-time position,
Arthur Wong agrees to devote such time and attention as is reasonably necessary
for the fulfilment of the Services and is consistent with standards for external
directors.
1.2 Term. Arthur Wong is retained hereunder for a term commencing on the date
hereof and continuing for eighteen (18) months (the "Term") unless earlier
terminated in accordance with the terms hereof.
ARTICLE 2.00 - COMPENSATION
2.1 Initial Compensation. As initial compensation for the Services performed
pursuant to this Agreement, the Corporation shall pay to Arthur Wong a fee of
stock or cash equal to $60,000.00 within twelve (12) months of execution of this
agreement. Arthur Wong shall also be compensated as a director of the
Corporation in the same manner as other members of the Board of Directors in
performing their roles as directors of the Corporation. Arthur Wong shall also
be entitled to be reimbursed for his reasonable expenses incurred while
performing the Services on behalf of the Corporation including entertainment,
meals, travel and accommodation expenses, outside of Calgary.
ARTICLE 3.00 - TERMINATION
3.1 Termination by Corporation. This Agreement may only be terminated by the
Corporation for cause prior to the expiration of the Term if Arthur Wong is in
default in the performance of the Services and such default continues for a
period of thirty (30) days after notice thereof or upon the death or disability
of Arthur Wong. Disability shall occur if Arthur Wong is unable to attend to his
duties due to medical reasons for a continuous period of 30 days during the
Term.
3.2 Termination by Arthur Wong. This Agreement may only be terminated by Arthur
Wong, by resignation, prior to the expiration of the Term if the Corporation is
in default in the performance of any of its covenants, obligations or agreements
herein contained and such default shall continue for a period of thirty (30)
days following notice thereof.
3.3 Termination by Mutual Agreement. It is acknowledged that this Agreement may
be terminated at any time upon the mutual agreement of the parties hereto.
ARTICLE 4.00 - STOCK OPTION
4.1 The Corporation hereby grants to Arthur Wong options to purchase a total of
200,000 shares of the Corporation at a strike price of $0.48 per share until
August 1, 2000. Option A is for 50,000 shares and vests immediately upon
execution of this agreement. Option B is for 150,000 shares and vests one year
after the execution of this agreement.
<PAGE> 3
3
ARTICLE 5.00 - CONFIDENTIALITY AND NON-DISCLOSURE
5.1 In this Article, the following words have the following meanings:
(a) "Business Secrets" means confidential or sensitive business information,
including without limitation, data, business strategies, plans, contracts,
financial records and budgets, marketing techniques, pricing policies, costing
information, and information relating to or pertaining to targeted acquisitions
of the Corporation;
(b) "Contractors" of the Corporation means customers, suppliers, partners,
co-venturers and other contractors of the Corporation and also includes
potential customers of the Corporation in respect of whom access to Business
Secrets has been obtained for the purpose of evaluating proposed projects or for
submitting of tenders, bids or proposals.
(c) "Corporation", in this Article 5.00 only, shall mean the Corporation and any
and all affiliated or related corporations.
(c) "Documentation" means all materials constituting or containing Technology or
Business Secrets, including electronic storage media.
(d) "Technology" means all computer program, protocols, product technical
specifications including installation, performance and maintenance
specifications, patents, designs, drawings, manuals and generally all knowledge,
know-how, expertise and information of a technical nature, whether or not
protected under patent, design, copyright or other intellectual property laws,
and includes any and all future changes, modifications, additions, improvements
and enhancements thereof.
5.2 Arthur Wong will not divulge Technology or Business Secrets belonging to the
Corporation or Contractors of the Corporation to any persons whatsoever, other
than to:
(a) employees of Corporation;
(b) persons to whom Arthur Wong is authorized and directed to release
such Technology or Business Secrets, and only then to the extent
of such authorization.
5.3 Arthur Wong shall always:
(a) exercise reasonable care and diligence to protect the
confidentiality and integrity of Technology or Business Secrets
belonging to the Corporation or its Contractors; and
(b) strictly adhere to all policies, procedures and directions of the
Corporation relating to the protection and custody of Technology
and Business Secrets of the Corporation or its Contractors.
5.4 All Technology and Business Secrets belonging to the Corporation will be
assumed by Arthur Wong to be confidential.
<PAGE> 4
4
5.5 Arthur Wong will only use Technology and Business Secrets belonging to the
Corporation in performance of his duties hereunder and for no other use
whatsoever.
5.6 The obligation of confidentiality in this Article shall apply unless Arthur
Wong can establish that he reasonably believed that such Technology or Business
Secrets were generally known in the industry.
5.7 Upon any termination of this agreement for any reason, Arthur Wong shall
forthwith return to the Corporation all Documentation relating to the Technology
and Business Secrets of either the Corporation or its Contractors, and if any
such information is electronically copied and stored by Arthur Wong, upon
request he shall destroy such electronically stored copies.
5.8 The obligations of Arthur Wong set out in this Article shall continue in
full force and effect after termination of this agreement regardless of the
reason or cause of such termination.
5.9 Arthur Wong agrees that he will not, during the term hereof and for a period
of two years following termination of this agreement, be a party to or abet any
solicitation of customers, clients or Contractors of the Corporation, to
transfer business from the Corporation to any other person, or seek in any way
to persuade or entice any employee, officer or director of the Corporation to
leave their office or employment or to be a party to or abet such action.
ARTICLE 6.00 - GENERAL PROVISIONS
6.1 Notices. All notices, requests, demands or other communications required or
desired to be given or made by one party to another shall be given in writing by
personal delivery or prepaid registered mail or by facsimile transmission or
other means of instantaneous transmission in regular commercial usage at such
time, verified by a transmission report, as follows:
to the Corporation: JAWS Technologies Inc.
Suite 380, 603 - 7 Avenue SW
Calgary, Alberta
T2P 2T5
to Arthur Wong of Atherton, California
or at such other address as may be given by any of them to the others. Any
notice or other communication so given or made shall be conclusively deemed to
have been given and received when delivered personally, if delivered personally,
provided that if it is delivered on a day which is not a Business Day then the
notice or communication shall be deemed to have been given and received on the
next business day following such date, or on the fifth (5th) business day
following the date of mailing, if mailed by prepaid registered mail, except in
the event of disruption of mail services in which event any notice shall be
delivered personally.
<PAGE> 5
5
6.2 Time of the Essence. Time is of the essence of this Agreement and every part
of this Agreement and no extension or variation of this Agreement shall operate
as a waiver of this provision.
6.3 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Alberta, and the laws of Canada
applicable therein, and the parties hereto attorn to the non-exclusive
jurisdiction of the courts of such Province.
6.4 Entire Agreement: This Agreement and the terms hereof constitute the entire
agreement between the parties hereto with respect to all of the matters herein
and its execution has not been induced by, nor do any of the parties hereto rely
upon or regard as material, any representations or writings not incorporated
herein and made a part hereof and this Agreement shall not be amended or altered
or qualified except by memorandum in writing signed by both of the parties.
6.5 Severability. If any of the provisions contained in this Agreement are, for
any reason, held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained in
this Agreement unless the deletion of such provision or provisions would result
in such a material change as to cause the completion of the transactions
contemplated in this Agreement to be unreasonable.
6.6 Further Assurances. The parties covenant and agree to execute such further
and other documents and undertake such other actions as may be reasonably
required to give effect to the terms and intent of the transactions contemplated
in this Agreement.
6.7 Enurement. The provisions hereof, where the context permits, shall enure to
the benefit of and be binding upon the heirs, executors, administrators or other
legal representatives of Arthur Wong and the successors and assigns of the
Corporation. With respect to Arthur Wong, this Agreement, being personal, may
not be assigned.
6.8 Time Periods. When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement, the date
which is the reference day in calculating such period shall be excluded.
6.9 Extended Meanings. In this Agreement, where the context requires, the
singular number includes the plural and vice versa, the masculine gender
includes the feminine and neuter genders and vice versa and the word person is
not limited to an individual but includes any entity recognized by law.
6.10 Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set out in this Agreement. No supplement,
modification, waiver or termination of this Agreement shall be binding, unless
executed in writing by the party or parties to be bound thereby.
<PAGE> 6
6
6.11 Headings. All headings are included solely for convenience of reference and
are not intended to be full or accurate descriptions of the contents thereof.
6.12 Recitals. Each of the parties acknowledges that the recitals of this
Agreement, so far as they relate to such party, are true and correct in
substance and in fact.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
JAWS TECHNOLOGIES INC.
Per:
------------------------------------
Robert Kubbernus
------------------------------------
Cameron Chell
- ---------------------------- ------------------------------------
WITNESS Arthur Wong
<PAGE> 1
Exhibit 10.1.3
Director's Agreement between Jaws and Julie Johnson-Same form as Exhibit 10.1.2
<PAGE> 1
EXHIBIT 10.1.4
JAWS TECHNOLOGIES, INC.
STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purpose.............................................................................1
2. Incentive and Non-Qualified Stock Options...........................................1
3. Definitions.........................................................................1
3.1 Board......................................................................1
3.2 Code.......................................................................1
3.3 Common Stock...............................................................1
3.4 Company....................................................................1
3.5 Disabled or Disability.....................................................1
3.6 Fair Market Value..........................................................1
3.7 Incentive Stock Option.....................................................2
3.8 Non-Qualified Stock Option.................................................2
3.9 Optionee...................................................................2
3.10 Plan.......................................................................2
3.11 Plan Administrator.........................................................2
3.12 Stock Option or Option.....................................................2
4. Administration......................................................................2
4.1 Administration by Board....................................................2
4.2 Administration by Committee................................................3
5. Eligibility.........................................................................3
6. Shares Subject to Options...........................................................3
7. Terms and Conditions of Options.....................................................4
7.1 Number of Shares Subject to Option.........................................4
7.2 Option Price...............................................................4
7.3 Notice and Payment.........................................................4
7.4 Term of Option.............................................................5
7.5 Exercise of Option.........................................................5
7.6 No Transfer of Option......................................................5
7.7 Limit on Incentive Stock Options...........................................6
7.8 Restriction on Issuance of Shares..........................................6
7.9 Investment Representation..................................................6
7.10 Rights as a Shareholder or Employee........................................6
7.11 No Fractional Shares.......................................................7
7.12 Exercisability in the Event of Death.......................................7
7.13 Recapitalization or Reorganization of Company..............................7
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
7.14 Modification, Extension, and Renewal of Options............................8
7.15 Other Provisions...........................................................8
8. Termination or Amendment of the Plan................................................8
9. Indemnification.....................................................................8
10. Effective Date and Term of Plan.....................................................8
</TABLE>
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<PAGE> 4
JAWS TECHNOLOGIES, INC.
STOCK OPTION PLAN
1. PURPOSE. The purpose of this JAWS Technologies, Inc. Stock Option
Plan ("Plan") is to further the growth and development of JAWS Technologies,
Inc. (the "Company") by providing, through ownership of stock of the Company, an
incentive to officers, other key employees and directors who are in a position
to contribute materially to the prosperity of the Company, to increase such
persons' interests in the Company's welfare, to encourage them to continue their
services to the Company or its subsidiaries, and to attract individuals of
outstanding ability to enter the employment of the Company or its subsidiaries,
to remain or become directors of the Company and to provide valuable services to
the Company or its subsidiaries.
2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of Stock Options
(referred to herein as "Options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as Incentive Stock
Options under Section 422 of the Code and Non-Qualified Stock Options not
specifically authorized or qualified for favorable income tax treatment by the
Code.
3. DEFINITIONS. The following definitions are applicable to the Plan:
3.1 BOARD. The Board of Directors of the Company.
3.2 CODE. The Internal Revenue Code of 1986, as amended from time to
time.
3.3 COMMON STOCK. The shares of the $.01 par value per share common
stock of the Company.
3.4 COMPANY. JAWS Technologies, Inc., a Delaware corporation.
3.5 DISABLED OR DISABILITY. For the purposes of Section 7.4, a
disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is Disabled or has a Disability is
determined under procedures established by the Plan Administrator for purposes
of the Plan.
3.6 FAIR MARKET VALUE. For purposes of the Plan, the "fair market
value" per share of Common Stock of the Company at any date shall be (a) if the
Common Stock is listed on an established stock exchange or exchanges or the
NASDAQ National Market System, the closing price per share on the last trading
day immediately preceding such date on the principal exchange on which it is
traded or as reported by NASDAQ, or (b) if the Common Stock is not then listed
on an exchange or the NASDAQ National Market System, the closing price per share
on the last trading day immediately preceding such date reported by
<PAGE> 5
NASDAQ, or if sales are not reported by NASDAQ, the average of the closing bid
and asked prices per share for the Common Stock in the over-the-counter market
as quoted on NASDAQ on the last trading day immediately preceding such date, or
(c) if the Common Stock is not then listed on an exchange, the NASDAQ National
Market System or quoted on NASDAQ, an amount determined in good faith by the
Plan Administrator.
3.7 INCENTIVE STOCK OPTION. Any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
3.8 NON-QUALIFIED STOCK OPTION. Any Stock Option that is not an
Incentive Stock Option.
3.9 OPTIONEE. The recipient of a Stock Option.
3.10 PLAN. The JAWS Technologies, Inc. Stock Option Plan, as amended
from time to time.
3.11 PLAN ADMINISTRATOR. The Board or the Compensation Committee
designated pursuant to Section 4.2 hereof to administer, construe and interpret
the terms of the Plan.
3.12 STOCK OPTION OR OPTION. Any option to purchase shares of Common
Stock granted pursuant to Section 7 hereof.
4. ADMINISTRATION.
4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2 hereof, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are "outside directors"
as defined in Treas. Regs. '1.162-27(e)(3) ("outside directors"). Anything to
the contrary notwithstanding, the requirement that all members of the Board be
outside directors shall not apply for any period of time during which the
Company's Common Stock is not registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended. Subject to the provisions of the
Plan, the Plan Administrator shall have authority to construe and interpret the
Plan, to promulgate, amend, and rescind rules and regulations relating to its
administration, from time to time to select from among the eligible employees
and directors (as determined pursuant to Section 5) of the Company and its
subsidiaries those employees and directors to whom Stock Options will be
granted, to determine the timing and manner of the grant of the Options, to
determine the exercise price, the number of shares covered by and all of the
terms of the Stock Options, to determine the duration and purpose of leaves of
absence which may be granted to Stock Option holders without constituting
termination of their employment for purposes of the Plan, and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Plan Administrator of any provision of
the Plan, or of any agreement issued and executed under the Plan, shall be final
and binding upon all
-2-
<PAGE> 6
parties. No member of the Board shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.
4.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole
discretion, delegate any or all of its duties as Plan Administrator and, subject
to the provisions of Section 4.1 of the Plan, at any time the Board includes any
person who is not an outside director, the Board shall delegate all of its
duties as Plan Administrator during such period of time to a compensation
committee (the "Committee") of not fewer than two (2) members of the Board, all
of the members of which Committee shall be persons who, in the opinion of
counsel to the Company, are outside directors and "non-employee directors"
within the meaning of Rule 16b-3(b)(3)(i) promulgated by the Securities and
Exchange Commission, to be appointed by and serve at the pleasure of the Board.
Anything to the contrary notwithstanding, the requirement that all members of
the Committee be non-employee directors and outside directors shall not apply
for any period of time during which the Company's Common Stock is not registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. Those
provisions of the Plan that make express reference to Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, shall apply only to reporting
persons. From time to time, the Board may increase or decrease (to not less than
two members) the size of the Committee, and add additional members to, or remove
members from, the Committee. The Committee shall act pursuant to a majority
vote, or the written consent of a majority of its members, and minutes shall be
kept of all of its meetings and copies thereof shall be provided to the Board.
Subject to the provisions of the Plan and the directions of the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may deem advisable. No member of the Committee shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
5. ELIGIBILITY. Any employee or director (including any officer or
director who is an employee) of the Company or any of its subsidiaries shall be
eligible to receive Options under the Plan; provided, however, that no person
who owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any of its parent or subsidiary
corporations shall be eligible to receive an Incentive Stock Option under the
Plan unless at the time such Incentive Stock Option is granted the Option price
(determined in the manner provided in Section 7.2 hereof) is at least 110% of
the Fair Market Value of the shares subject to the Option and such Option by its
terms is not exercisable after the expiration of five years from the date such
Option is granted. An Optionee may receive more than one Option under the Plan.
However, non-employee directors are not eligible to receive an Incentive Stock
Option under the Plan.
6. SHARES SUBJECT TO OPTIONS. The stock available for grant of Options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Options granted under the Plan, as amended, shall not
exceed 20% of all outstanding common shares (subject to adjustment as provided
in Section 7.13 hereof), including shares previously issued under the Plan. The
maximum number of shares with respect to which options may be
-3-
<PAGE> 7
granted to any employee in any one calendar year shall be 500,000 shares. In the
event that any outstanding Option under the Plan for any reason expires, or is
terminated, the shares of Common Stock allocable to the unexercised portion of
the Option shall again be available for Options under the Plan as if no Option
had been granted with respect to such shares.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:
7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option agreement shall
specify the number of shares subject to the Option.
7.2 OPTION PRICE. The purchase price for the shares subject to any
Option shall be determined by the Plan Administrator at the time of grant, but
shall not be less than par value per share. Anything to the contrary
notwithstanding, the purchase price for the shares subject to any Incentive
Stock Option shall not be less than 100% of the Fair Market Value of the shares
of Common Stock of the Company on the date the Stock Option is granted. In the
case of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations, the Option
price shall not be less than 110% of the fair market value per share of the
Common Stock of the Company on the date the Option is granted.
7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock Option may
be exercised only by:
(a) delivery of a written notice to the Company, prior to the
time when such Stock Option becomes unexercisable under Section 7.4 hereof,
stating the number of shares being purchased and complying with all applicable
rules established by the Plan Administrator;
(b) payment in full of the exercise price of such Option by, as
applicable, (i) cash or check for an amount equal to the aggregate Option
exercise price for the number of shares being purchased, (ii) in the discretion
of the Plan Administrator, upon such terms as the Plan Administrator shall
approve, a copy of instructions to a broker directing such broker to sell the
Common Stock for which such Option is exercised, and to remit to the Company the
aggregate exercise price of such Options (a "cashless exercise"), or (iii) in
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, the Optionee may pay all or a portion of the
purchase price for the number of shares being purchased by tendering shares of
the Company's Common Stock owned by the Optionee, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal to the
aggregate purchase price of the shares with respect to which such Stock Option
or portion is thereby exercised (a "stock-for-stock exercise");
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(c) payment of the amount of tax required to be withheld (if any)
by the Company or any parent or subsidiary corporation as a result of the
exercise of a Stock Option. At the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall approve, the Optionee may pay all or
a portion of the tax withholding by (i) cash or check payable to the Company,
(ii) cashless exercise, (iii) stock-for-stock exercise, or (iv) a combination of
one or more of the foregoing payment methods; and
(d) delivery of a written notice to the Company requesting that
the Company direct the transfer agent to issue to the Optionee (or to his
designee) a certificate for the number of shares of Common Stock for which the
Option was exercised or, in the case of a cashless exercise, for any shares that
were not sold in the cashless exercise.
Notwithstanding the foregoing, the Company may extend and maintain, or arrange
for the extension and maintenance of, credit to any Optionee to finance the
Optionee's purchase of shares pursuant to exercise of any Stock Option, on such
terms as may be approved by the Plan Administrator, subject to applicable
regulations of the Federal Reserve Board and any other laws or regulations in
effect at the time such credit is extended.
7.4 TERM OF OPTION. No Option shall be exercisable after the
expiration of the earliest of (a) ten years after the date the Option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates if such termination is for any reason
other than Disability or death, (c) one year after the date the Optionee's
employment with the Company and its subsidiaries terminates if such termination
is a result of death or Disability; provided, however, that the Option agreement
for any Option may provide for shorter periods in each of the foregoing
instances. In the case of an Incentive Stock Option granted to an employee who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its parent or subsidiary corporations,
the term set forth in (a), above, shall not be more than five years after the
date the Option is granted.
7.5 EXERCISE OF OPTION. No Option shall be exercisable during the
lifetime of an Optionee by any person other than the Optionee. Subject to the
foregoing, the Plan Administrator shall have the power to set the time or times
within which each Option shall be exercisable and to accelerate the time or
times of exercise. Unless otherwise provided by the Plan Administrator, each
Option granted under the Plan shall become exercisable on a cumulative basis as
to one-third (1/3) of the total number of shares covered thereby at any time
after one year from the date the Option is granted and an additional one-third
(1/3) of such total number of shares at any time after the end of each
consecutive one-year period thereafter until the Option has become exercisable
as to all of such total number of shares. To the extent that an Optionee has the
right to exercise an Option and purchase shares pursuant thereto, the Option may
be exercised from time to time by written notice to the Company, stating the
number of shares being purchased and accompanied by payment in full of the
exercise price for such shares.
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7.6 NO TRANSFER OF OPTION. No Option shall be transferable by an
Optionee otherwise than by will or the laws of descent and distribution.
7.7 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair market value
(determined at the time the Option is granted) of the stock with respect to
which Incentive Stock Options granted after 1986 are exercisable for the first
time by an Optionee during any calendar year (under all Incentive Stock Option
plans of the Company and its subsidiaries) shall not exceed $100,000. To the
extent that the aggregate Fair Market Value (determined at the time of the Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all Incentive Stock Option plans of the Company and any parent or
subsidiary corporations) exceeds $100,000, such Stock Options shall be treated
as Non-Qualified Stock Options. The determination of which Stock Options shall
be treated as Non-Qualified Stock Options shall be made by taking Stock Options
into account in the order in which they were granted.
7.8 RESTRICTION ON ISSUANCE OF SHARES. The issuance of Options and
shares shall be subject to compliance with all of the applicable requirements of
law with respect to the issuance and sale of securities, including, without
limitation, any required qualification under the California Corporate Securities
Law of 1968, as amended, or other state securities laws. If an Optionee acquires
shares of Common Stock pursuant to the exercise of an Option at a time when the
shares are not registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended, the Plan Administrator, in its sole discretion, may require
as a condition of issuance of shares covered by the Option that the shares of
Common Stock shall be subject to restrictions on transfer. The Company may place
a legend on the certificates evidencing the shares, reflecting the fact that
they are subject to restrictions on transfer pursuant to the terms of this
Section. In addition, the Optionee may be required to execute a shareholders'
agreement in favor of the Company, its designee and/or other shareholders with
respect to all or any of the shares so acquired. In such event, the terms of
such agreement shall apply to such shares.
7.9 INVESTMENT REPRESENTATION. Each Option shall contain and any
Optionee may be required, as a condition of the grant of the Option and the
issuance of shares covered by his or her Option, to represent that the Option
and the shares to be acquired pursuant to exercise of the Option will be
acquired for investment and without a view to distribution thereof; and in such
case, the Company may place a legend on the certificate evidencing the shares
reflecting the fact that they were acquired for investment and cannot be sold or
transferred unless registered under the Securities Act of 1933, as amended, or
unless counsel for the Company is satisfied that the circumstances of the
proposed transfer do not require such registration.
7.10 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An Optionee or transferee
of an Option shall have no right as a shareholder of the Company with respect to
any shares covered by any Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether cash,
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securities, or other property) or distributions or other rights for which the
record date is prior to the date such share certificate is issued, except as
provided in Section 7.13. Nothing in the Plan or in any Option agreement shall
confer upon any employee any right to continue in the employ of the Company or
any of its subsidiaries or interfere in any way with any right of the Company or
any subsidiary to terminate the Optionee's employment at any time.
7.11 NO FRACTIONAL SHARES. In no event shall the Company be required
to issue fractional shares upon the exercise of an Option.
7.12 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death
of the Optionee, any Option or unexercised portion thereof granted to the
Optionee, to the extent exercisable by him or her on the date of death, may be
exercised by the Optionee's personal representatives, heirs, or legatees subject
to the provisions of Section 7.4 hereof.
7.13 RECAPITALIZATION OR REORGANIZATION OF COMPANY. Except as
otherwise provided herein, appropriate and proportionate adjustments shall be
made in the number and class of shares subject to the Plan, to the Option rights
granted under the Plan, including the any formula grants or automatic grant
authorizations, and the exercise price of such Option rights, in the event that
the number of shares of Common Stock of the Company are increased or decreased
as a result of a stock dividend (but only on Common Stock), stock split, reverse
stock split, recapitalization, reorganization, merger, consolidation,
separation, or like change in the corporate or capital structure of the Company.
In the event there shall be any other change in the number or kind of the
outstanding shares of Common Stock of the Company, or any stock or other
securities into which such common stock shall have been changed, or for which it
shall have been exchanged, whether by reason of a complete liquidation of the
Company or a merger, reorganization, or consolidation of the Company with any
other corporation in which the Company is not the surviving corporation or the
Company becomes a wholly-owned subsidiary of another corporation, then if the
Plan Administrator shall, in its sole discretion, determine that such change
equitably requires an adjustment to shares of Common Stock currently subject to
Options under the Plan, or to prices or terms of outstanding Options, such
adjustment shall be made in accordance with such determination.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Plan
Administrator, the determination of which in that respect shall be final,
binding, and conclusive. No right to purchase fractional shares shall result
from any adjustment of Options pursuant to this Section. In case of any such
adjustment, the shares subject to the option shall be rounded down to the
nearest whole share. Notice of any adjustment shall be given by the Company to
each Optionee whose Options shall have been so adjusted and such adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the Plan.
In the event of a complete liquidation of the Company or a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, any unexercised Options
theretofore granted under the Plan
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shall be deemed cancelled unless the surviving corporation in any such merger,
reorganization, or consolidation elects to assume the Options under the Plan or
to issue substitute Options in place thereof; provided, however, that,
notwithstanding the foregoing, if such Options would be cancelled in accordance
with the foregoing, the Optionee shall have the right, exercisable during a
ten-day period ending on the fifth day prior to such liquidation, merger, or
consolidation, to exercise such Option in whole or in part without regard to any
installment exercise provisions in the Option agreement.
7.14 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted under the
Plan, and accept the surrender of outstanding Options (to the extent not
theretofore exercised). The Plan Administrator shall not, however, modify any
outstanding Incentive Stock Option in any manner which would cause the Option
not to qualify as an Incentive Stock Option within the meaning of Section 422 of
the Code. Notwithstanding the foregoing, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights of the Optionee
under the Option. However, a termination of the Option in which the Optionee
receives a cash payment equal to the difference between the Fair Market Value
and the exercise price for all shares subject to exercise under any outstanding
Option shall not alter or impair any rights of the Optionee.
7.15 OTHER PROVISIONS. Each Option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be determined
by the Plan Administrator.
8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the Plan; provided that, without approval of the holders of a
majority of the shares of Common Stock of the Company represented and voting at
a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum) or by the
written consent of a majority of the outstanding shares of Common Stock, there
shall be, except by operation of the provisions of Section 7.13, no increase in
the total number of shares covered by the Plan, no change in the class of
persons eligible to receive Options granted under the Plan, and no extension of
the term of the Plan beyond ten (10) years after the earlier of the date the
Plan is adopted or the date the Plan is approved by the Company's shareholders;
and provided further that, without the consent of the Optionee or as provided by
Section 7.14 hereof, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof.
9. INDEMNIFICATION. To the extent permitted by law, the Certificate of
Incorporation of the Company, the Bylaws of the Company and any indemnity
agreements between the Company and its directors or employees, the Company shall
indemnify each member of the Board and of the Plan Administrator, and any other
employee of the Company with duties under the Plan, against expenses (including
any amount paid in settlement) reasonably incurred by him in connection with any
claims against him by reason of his conduct in the performance of his duties
under the Plan.
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10. EFFECTIVE DATE AND TERM OF PLAN. This Plan shall become effective
(the "Effective Date") on July 1, 1998. No options granted under the Plan will
be effective unless the Plan is approved by shareholders of the Company within
12 months of the date of adoption. Unless sooner terminated by the Board in its
sole discretion, the Plan will expire on June 30, 2008.
Dated: _________, 1998
JAWS TECHNOLOGIES, INC.
By:___________________________________
Robert Kubbernus, President
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EXHIBIT 23.1
CONSENT OF JEFFER, MANGELS, BUTLER & MARMARO LLP
We consent to the reference to our firm under the caption "Legal
Opinion" and to the inclusion of our opinion as an Exhibit to the Form SB-2
Registration Statement of Jaws Technologies, Inc. as filed with the Securities
and Exchange Commission on October 13, 1998.
/s/ JEFFER, MANGELS, BUTLER & MARMARO LLP
<PAGE> 1
EXHIBIT 23.2
[ERNST & YOUNG LLP LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated August 26, 1998 and July 9, 1998 in the Registration
Statement (Form SB-2) of Jaws Technologies, Inc. for the registration of
41,428,572 shares of its common stock.
/s/ ERNST & YOUNG LLP
----------------------
Calgary, Canada Chartered Accountants
October 12, 1998
