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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SIDEWARE SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
BRITISH COLUMBIA, CANADA 7372
(State or other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
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930 WEST FIRST STREET, SUITE 102, NORTH VANCOUVER,
BRITISH COLUMBIA, CANADA V7P 3N4
TELEPHONE (604) 988-0440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
NATIONAL REGISTERED AGENT
1090 VERMONT AVENUE, SUITE 910
WASHINGTON, D.C. 20005
TELEPHONE (202) 371-8090
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
GRANT SUTHERLAND, CHAIRMAN, SIDEWARE SYSTEMS INC.
1600 - 777 Dunsmuir St.,
Vancouver, B.C. V7Y 1K4
Tel: (604) 688-0047; Fax: (604) 688-0094
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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,
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Shares...................... 5,000,000 $5.00 $25,000,000 $6,600.00
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(1) Pursuant to Rule 416, this Registration Statement shall be deemed to cover
an indeterminate number of additional common shares in the event the number
of outstanding shares of Sideware Systems Inc. is increased by stock split,
stock dividend and/or similar transactions.
(2) Pursuant to Rule 457(c), the proposed maximum offering price per common
share and the proposed maximum aggregate offer price have been calculated on
the basis of $5.00 per share, the average of the high and low prices
reported in the OTC Bulletin Board as of April 14, 2000
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 COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
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SUBJECT TO COMPLETION DATED APRIL 18, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS 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.
PROSPECTUS
SIDEWARE SYSTEMS INC.
5,000,000 COMMON SHARES
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This is an offering of up to 5,000,000 common shares of Sideware
Systems Inc., a Canadian corporation, by the persons named in this prospectus as
selling shareholders. Of these shares:
- 2,500,000 shares were issued to the selling shareholders in a private
placement which we completed in January 2000.
- 2,500,000 shares are issuable upon the exercise of warrants issued in the
private placement.
Our common shares trade on the Canadian Venture Exchange under the symbol
"SYD.U" and through the OTC-Bulletin Board under the symbol "SWDSF." The closing
prices reported for our common shares on the Canadian Venture Exchange and the
OTC Bulletin Board on April 14, 2000 were US$4.31 and US$4.50, respectively.
The selling shareholders will control the number of shares offered for sale.
The selling shareholders are not required to sell all, or any, of the shares.
The selling shareholders will also control how the shares are offered for sale.
The selling shareholders may sell the shares either through the Canadian Venture
Exchange or the OTC-Bulletin Board, or in private sales at negotiated prices.
The selling shareholders may also enter into underwriting agreements, and may
pay underwriting discounts or commissions. The selling shareholders will control
the prices at which the shares are offered, and can reject any
proposed purchaser.
INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE.
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The date of this prospectus is April 14, 2000
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You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The common shares are not being
offered in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate after the
date of the document.
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934 as a foreign private issuer, as defined in Rule 3b-4 of the Exchange
Act. In accordance with those requirements, we file annual reports on
Form 20-F, reports on Form 6-K, and other information with the Securities and
Exchange Commission. The reports and other information we file can be inspected
and copied at the Public Reference Room of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549 and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, IL 60661-2511 and 7 World Trade Center,
13th Floor, New York, NY 10048. You can obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission also maintains a web site that contains reports and other information
that we file electronically. The address of the web site is HTTP://WWW.SEC.GOV.
INCORPORATED DOCUMENTS
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus. This means that we can disclose
important information to you by referring you to another document that we have
filed with the Commission. Information incorporated by reference is deemed to be
part of this prospectus, except for any information superseded by this
prospectus.
We incorporate by reference into this prospectus our annual report on
Form 20-F, as filed with the Commission on April 4, 2000.
All subsequent annual reports which we file on Form 20-F, Form 40-F, or
Form 10-K, and any subsequent filings we make on Form 10-Q or Form 8-K, shall be
deemed to be incorporated by reference into this prospectus.
We may incorporate by reference subsequent filings on Form 6-K by
identifying in such Forms that they are being incorporated by reference into
this prospectus.
We will deliver to each person (including any beneficial owner) to whom this
prospectus has been delivered a copy of any or all of the information that has
been incorporated by reference into this prospectus, but not delivered with this
prospectus. We will provide this information upon written or oral request, and
at no cost to the requester. Requests should be directed to Grant Sutherland,
Chairman, Sideware Systems Inc., 1600 Dunsmuir Street, Suite 1600, Vancouver,
British Columbia, Canada V7Y 1K4. Our telephone number at that location is
(604) 688-0047. Our corporate web site address is www.sideware.com. The
information on our web site is not intended to be a part of this prospectus.
ENFORCEMENT OF CIVIL LIABILITIES
Sideware Systems Inc. is a Canadian company and many of our assets are
located outside the United States. In addition:
- some of our directors and officers are residents of Canada;
- some or all of the experts named in this registration statement are
residents of Canada; and
- all or a substantial portion of the assets of those parties may be located
outside the United States.
As a result, investors may not be able to:
- enforce civil liabilities created by federal securities laws of the United
States against us, or against the other parties listed above;
- effect service of process within the United States on the parties listed
above; or
- realize in the United States on judgments of courts of the United States.
There is also doubt as to whether Canadian courts will enforce liabilities
created by United States federal securities laws, or judgments of United States
courts based on those laws.
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PROSPECTUS SUMMARY
THE COMPANY
We provide software which facilitates Internet commerce. Our principal
product, Dr. Bean, allows companies operating e-commerce Web sites to open
direct, real time communication with their customers over the Web. Dr. Bean thus
gives e-commerce vendors the best of both worlds--the range and flexibility of
the Internet combined with the personalised service of traditional marketing
methods.
The Internet is growing rapidly in importance as a medium for conducting
business. In addition to retail trade, the Internet is becoming a centre of
business-to-business commerce. International Data Corporation has projected that
the total value of goods and services purchased over the Internet will grow from
approximately $50 billion in 1998 to over $734 billion by 2002.
We released the initial version of Dr. Bean in April 1999. In April 2000 we
released Dr. Bean 3.2, our current version. Dr. Bean 3.2 contains features which
perform a broad range of e-CRM (Electronic Customer Relations Management)
functions.
We have entered into marketing agreements with IBM which we believe will
assist us in gaining market exposure, and in developing distribution channels
for Dr. Bean. In addition, in July 1999 we initiated the Sideware Partner
Program, to enlist value added resellers for Dr. Bean. We presently have over 20
value added resellers.
We have a limited operating history, and have not yet generated material
operating revenues. In addition, we operate in a highly competitive market. An
investment in our shares is speculative and involves a high degree of risk. The
principal risks affecting our business and securities are set out below under
the heading "RISK FACTORS."
Our executive offices are located at 931 West 1st Street, Suite 102, North
Vancouver, British Columbia, Canada V7P 3N4, and our telephone number is
(604) 988-0440. Our world-wide web address is www.sideware.com.
THE OFFERING
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COMMON SHARES BEING OFFERED BY THE Up to 5,000,000 common shares. 2,500,000 shares were issued
SELLING SHAREHOLDERS: to the selling shareholders in private placement which we
completed in January 2000. 2,500,000 shares are issuable
upon the exercise of warrants issued to the selling
shareholders in the private placement. The shares and share
purchase warrants were issued to United States purchasers
under exemptions from registration under the Securities Act
of 1933, and to Canadian purchasers.
RISK FACTORS: An investment in our common shares is speculative and
involves a high degree of risk. Before making an investment,
you should read this entire prospectus, and the information
incorporated in it by reference, carefully. You should also
consider the information under the heading "Risk Factors",
which begins on page 5.
USE OF PROCEEDS: We will not receive any proceeds from the sale of the common
shares offered by the selling shareholders. To the extent
that any of the warrants are exercised, we will receive the
warrant exercise price. Proceeds from the exercise of
warrants, if any, will be used for working capital purposes.
LISTING OR QUOTATION OF COMMON SHARES: Our common shares currently trade on the Canadian Venture
Exchange under the symbol "SYD.U" and quote on the OTC
Bulletin Board under the symbol "SDWSF".
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RISK FACTORS
INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE PURCHASING OUR
COMMON SHARES.
BECAUSE WE DO NOT YET EARN SIGNIFICANT REVENUE, WE FACE A RISK THAT OUR BUSINESS
WILL FAIL.
We have never earned significant operating revenue. We have been dependent
on equity financing to pay operating costs and to cover operating losses.
We have sufficient cash to pay ongoing operating expenses, at their current
level, for the balance of 2000, and for part of the first half of 2001. To
continue operation beyond that we will have to generate operating revenue or
raise additional capital. If we are unable to do so, we face a risk that our
business will fail, and that we may be unable to continue in operation.
Our audited financial statements include disclosure stating that there is
substantial doubt about our ability to continue as a going concern. Our plans to
deal with this issue are presented in the preceding paragraph, in our comments
below, and in the documents that are incorporated by reference.
BECAUSE WE HAVE A LIMITED OPERATING AND SALES HISTORY, WE DO NOT HAVE A RELIABLE
BASIS FOR PREDICTING THAT WE WILL EARN REVENUE IN THE FUTURE.
We commenced operations under new management in May 1995. The first version
of our principal product, Dr. Bean, was released in April 1999. Dr. Bean is a
relatively new product, without an established user base. In addition, Dr. Bean
is being offered in a new and rapidly changing market. The prospects for
Dr. Bean are difficult to predict and may change rapidly and without warning. We
have not at any time generated significant sales revenue from any of our
products, including Dr. Bean, and we have incurred losses consistently since
entering the field of software development.
As a result of our limited operating and sales history, we have no assurance
that we will earn substantial revenue in the future, nor any basis for
predicting the level of any future revenues.
BECAUSE OF OUR LIMITED OPERATING AND SALES HISTORY, WE CANNOT MAKE RELIABLE
PROJECTIONS OF OUR FUTURE OPERATING COSTS.
We have recently increased our work force and operating costs substantially.
In order to generate substantial sales revenue we may have to continue hiring
additional personnel or incur substantial advertising costs. As a result of our
lack of historical sales we cannot make reliable projections of the number of
additional personnel we will require, the cost of employing those personnel, or
the level of marketing and overhead expenses we will incur. We thus have no
assurance that any revenue we earn will be sufficient to cover the cost of
earning that revenue, or to generate operating profits.
BECAUSE WE LACK PROVEN DISTRIBUTION CHANNELS, WE MAY BE UNABLE TO REACH
POTENTIAL CUSTOMERS FOR DR. BEAN.
We presently plan to market Dr. Bean through two principal distribution
channels, our direct sales force and value added resellers. To date, we have not
generated significant sales revenue through either channel. Accordingly, we have
no assurance that these methods of sale will be effective in reaching potential
customers for Dr. Bean.
If we do not achieve substantial revenue through our direct sales force, we
may be dependent on value added resellers to sell our products. Failure to
recruit a sufficient number of value added resellers, or failure of our value
added resellers to market our products effectively, could prevent us from
achieving substantial sales revenue.
BECAUSE OUR PRODUCTS ARE OFFERED IN AN EMERGING MARKET, THE POTENTIAL MARKET FOR
OUR PRODUCTS IS UNCERTAIN.
Our products address a new and emerging market for Web-based, interactive
electronic business solutions. Therefore, our future success depends
substantially upon the widespread adoption of the Web as a
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primary medium for commerce and business applications. The failure of this
market to develop, or a delay in the development of this market, will have a
material adverse effect on our business, financial condition and
operating results.
The Web has experienced, and is expected to continue to experience,
significant user and traffic growth. This, at times, has caused user frustration
with slow access and download times. The Web infrastructure may not be able to
support the demands placed on it by the continued growth upon which our
success depends.
Moreover, important issues concerning the commercial use of the Web, such as
security, reliability, cost, accessibility, and quality of service, remain
unsolved and may negatively affect the growth of Web use or the attractiveness
of business communication over the Web. There is also substantial uncertainty
about how governments may attempt to regulate use of the Web in the future, or
tax Web-based transactions. The imposition of new government regulations or
taxes may impede use of the Web for business purposes, and impair the market for
our products.
BECAUSE WE ARE NOT A LARGE COMPANY, WE MAY BE UNABLE TO COMPETE.
The market for interactive Web-based electronic business solutions is highly
competitive and rapidly changing. Many of our current and potential competitors
have longer operating histories, greater name recognition, and substantially
greater financial, technical, marketing, and other resources than we have. Our
competitors may be able to expand and develop their technologies more quickly,
to devote greater resources to the development and marketing of their products,
or to respond more quickly to changing opportunities or technologies.
In addition, we expect that new competitors will enter the market with
competing products as the size and visibility of the market increases. We
believe that barriers to entry in our market are relatively small. We also
expect that competition will increase through software industry consolidations
and formations of alliances among industry participants. Increased competition
could result in pricing pressure, reduced margins, or the failure of our
products to achieve or maintain market share.
The market for computer software is also dominated by large corporations
which have assets much greater than ours, and which might be able to develop
software duplicating the features of our products at modest cost. We face a
continual risk that market opportunities or product features which we intend to
exploit can, within a short period of time, become dominated by much larger and
wealthier corporations, rendering our products obsolete or non-competitive.
BECAUSE WE HAVE NOT ACHIEVED SIGNIFICANT SALES REVENUE IN THE PAST, WE MAY NOT
HAVE ADEQUATE PERSONNEL OR SYSTEMS TO COPE WITH A RAPID INCREASE IN SALES.
We could experience rapid growth in orders, sales, and revenue. We cannot
assure that we will be able to manage the strains that future growth may place
on our administrative infrastructure, systems, and controls.
Qualified technical personnel are in great demand throughout the software
industry. Increased sales of our products may require us to hire additional
personnel to install and support our products. We may also be required to hire
additional technical personnel to continue development of our products. Our
success will depend, to a substantial degree, on our ability to attract, train,
motivate, and retain qualified personnel. We have no assurance that we will be
able to compete successfully in the job market, to attract or keep the qualified
employees we need.
BECAUSE MUCH OF OUR WORK FORCE HAS BEEN HIRED RECENTLY, WE ARE VULNERABLE TO
LOSS OF KEY EMPLOYEES.
We have increased our work force substantially during the last six months.
As a result, a substantial number of our employees are relatively new, and have
worked together for only a short period of time.
The success of our marketing efforts is substantially dependent on our
President, the President of Sideware Corp., and our Executive Vice
President/General Manager of US Operations. Continued
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development of our products and our technical work are substantially dependent
on our President, our General Manager of e-business solutions, and
our programmers.
The departure of a single employee or a small number of employees could hurt
our business. We cannot assure that we will be able to attract and retain
qualified personnel on acceptable terms. We do not have key man insurance on any
of our employees.
BECAUSE OUR BUSINESS IS DEPENDENT ON PROPRIETARY TECHNOLOGY, WE ARE VULNERABLE
TO MISAPPROPRIATION OF OUR TECHNOLOGY.
We rely heavily on our proprietary software technology. To protect our
proprietary technology we rely on confidentiality agreements with key employees
and third parties and on trade secret, trademark, and copyright laws. Although
we attempt to maintain confidentiality of our software technology, we cannot
assure that we have adequately protected our technology from misappropriation.
In addition, others may attempt to "reverse engineer" our products in order to
determine their method of operation and introduce competing products.
BECAUSE WE OPERATE IN A HIGH TECHNOLOGY FIELD, WE FACE A RISK OF INFRINGEMENT
CLAIMS FROM OTHER COMPANIES.
If any of our products violate third party proprietary rights we may be
required to re-engineer our products or seek licenses from third parties. We
have no reason to believe that any of our products infringe the proprietary
rights of third parties. However, we do not conduct comprehensive patent
searches to determine whether the technology used in our products infringes any
third party patents.
High tech markets are sometimes characterised by the existence of a large
number of patents with broad, and questionable, application. As the market for
our products develops, and the functionality of those products grows and
overlaps with products offered by competitors, our products may become
increasingly subject to infringement claims. Although we have no reason to
believe that any of our products infringe the proprietary rights of third
parties, there can be no assurance that infringement claims will not be asserted
against us, or that such claims will not require us to enter into royalty
arrangements or result in costly litigation.
BECAUSE OUR PRODUCTS INCORPORATE THIRD PARTY TECHNOLOGIES, WE MAY LOSE ACCESS TO
REQUIRED TECHNOLOGY.
Our Dr. Bean product incorporates software licensed from third parties. We
have no reason to believe that our license rights in respect of that software
will be terminated. However, we cannot assure that those license rights will
continue to be available to us. Loss of those license rights would require us to
license software performing similar functions from other parties, to develop
software performing those functions independently, or to re-engineer our
products to operate without the licensed software. This could result in
interruptions or delays in our ability to sell or continue development of our
products, or in loss of important features of our products.
BECAUSE OUR PRODUCTS ARE COMPLEX, THEY MAY CONTAIN UNKNOWN DEFECTS.
Software products are complex. Our products may contain undetected errors,
or bugs, which result in product failures. Our products may also be incompatible
with other software or hardware used by a substantial number of our potential
customers. Product performance failures could result in loss of revenues, loss
of market share, failure to achieve market acceptance, or injury to
our reputation.
During the week of April 26, 1999, we implemented the initial version of
Dr. Bean on IBM platforms, including principally the S390, AS400 and RS6000
platforms, and also the Windows NT, Linux and Sun Solaris operating systems, at
IBM facilities. During the implementation and testing, the initial version of
Dr. Bean operated successfully on the platforms and operating systems tested.
However, neither the original version of Dr. Bean, nor modifications which have
been added subsequently, have yet been in significant use under actual operating
conditions. Accordingly, we have no assurance that Dr. Bean will operate free of
material errors or defects.
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To the best of our knowledge, all of our products and internal systems are
Year 2000 compliant. However, we are subject to the possibility of unknown
Year 2000 problems affecting our products, our customers' systems, or our
internal systems.
BECAUSE OUR PRODUCTS ARE COMPLEX, WE COULD INCUR SUBSTANTIAL COSTS AS A RESULT
OF PRODUCT LIABILITY CLAIMS.
If any of our products fail, a customer may assert a claim for substantial
damages against us, regardless of whether we are responsible for the failure.
Product liability claims could require us to spend significant time and money in
litigation or to pay significant damages.
We currently carry limited insurance, which may not cover claims against us
for financial losses, and which will not be sufficient in amount to cover large
claims. In addition, there can be no assurance that any insurance coverage will
be available in the future on reasonable terms, that insurance we purchase will
be sufficient to cover any claims against us, or that insurers will not deny
coverage with respect to any future claim.
BECAUSE OUR BUSINESS HAS NOT BEEN PROFITABLE, AND BECAUSE OUR SHARE PRICE HAS
BEEN VOLATILE, WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL WE NEED.
We may require additional capital to continue the development of our
services and products, to pay the costs of marketing those products, or to cover
operating losses until we are able to become profitable. As we have never earned
operating profits, and as our share price has been volatile, we may not be able
to raise the amount of capital we require.
To raise additional capital we may have to issue additional shares, which
may dilute the interests of existing shareholders substantially. Alternatively,
we may have to borrow large sums, and assume obligations to make substantial
interest and capital payments. We may also have to sell significant interests in
some or all of our products. If we are able to raise additional capital, we
cannot assure that it will be on terms that enhance the value of our
common shares.
BECAUSE WE HAVE NON-ARM'S LENGTH AGREEMENTS WITH RELATED COMPANIES, GOVERNMENTS
MAY CHALLENGE OUR TAX RETURNS.
We are party to agreements with non-arm's length parties, including Sideware
Corp. and Sideware International SRL, in jurisdictions outside Canada. We
believe that these agreements have been implemented in accordance with taxation
laws, regulations, treaties, and assessment practices prevailing in Canada, the
United States, and the other jurisdictions involved. However, Canadian or U.S.
taxation authorities may challenge the terms or tax effect of these agreements,
and issue taxation assessments requiring us to pay additional income taxes
beyond the amounts we consider to be owing. Such assessments could lead to tax
liabilities substantially greater than we expect, or to duplicate tax
liabilities in different jurisdictions on the same income.
BECAUSE WE SHARE CERTAIN COSTS WITH ANOTHER DEVELOPMENT STAGE COMPANY, OUR
OPERATING COSTS COULD INCREASE IN THE FUTURE.
We share some of our premises and personnel with BrainTech, Inc.
BrainTech, Inc. is a public company whose shares trade on the OTC Bulletin
Board. Grant Sutherland, Owen Jones, and James Speros, members of our board of
directors, are also the directors of BrainTech, Inc. BrainTech, Inc. is a
development stage company which has not achieved profitable operation.
We currently share the cost of the common premises and personnel with
BrainTech, Inc. However, there is no assurance that BrainTech, Inc. will be able
to pay the portion of the costs for which it is responsible, with the result
that our cash requirements to continue operation may increase substantially.
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BECAUSE OF EXISTING LEGAL CLAIMS, WE FACE A RISK OF MATERIAL ADVERSE JUDGMENTS.
We are presently involved in several court proceedings with former
management. The principal court proceedings are described in the documents
incorporated by reference in this prospectus. In those proceedings, claims
totalling approximately $1.8 million have been advanced against us.
We are prosecuting our claims and defending our position in all of the
litigation proceedings. While we believe that our positions will be sustained,
there is a risk of losing some of the court actions. The results could include
substantial pecuniary judgments against us and the appointment of a receiver of
our assets.
BECAUSE THE MARKET PRICE OF OUR COMMON SHARES HAS BEEN PARTICULARLY VOLATILE,
INVESTORS IN OUR COMMON SHARES FACE A HIGH DEGREE OF MARKET RISK.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Web-related companies, have been extremely volatile, and
have experienced price fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies.
The price of our common shares has also experienced substantial
fluctuations. Between January 1, 2000 and April 14, 2000 our share price has
fluctuated between a high of US$25.50 and a low of US$3.50. The susceptibility
of our stock price to fluctuation exposes purchasers of our stock to a high
degree of risk.
As we have not at any time announced material earnings, we believe that the
fluctuations in our stock price have resulted primarily from market perceptions
of the speculative value of our business opportunities. The price of our common
shares could fall substantially if we do not generate future earnings that meet
the expectations of investors.
BECAUSE OUR STOCK MAY BE SUBJECT TO "LOW PRICE STOCK" RULES, THE MARKET FOR OUR
STOCK MAY BE LIMITED.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price less than $5.00. The price of our stock has been volatile, and may be
subject to those rules. The penny stock rules require broker-dealers to make a
special suitability determination before selling our stock to investors who are
not either regular customers or accredited investors. As a result, the potential
market for our stock may be limited.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, and the other reports we have filed from time to time with
the Securities and Exchange Commission, contain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Forward-looking statements deal with our current plans,
intentions, beliefs and expectations and statements of future economic
performance. Statements containing terms like "believes," "does not believe,"
"plans," "expects," "intends," "estimates," "anticipates," and other phrases of
similar meaning are considered to imply uncertainty and are forward-looking
statements.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause our actual results in future periods to differ materially from
what is currently anticipated. We make cautionary statements throughout this
prospectus and the annual report we have incorporated by reference, including
under "Risk Factors." You should read these cautionary statements as being
applicable to all related forward-looking statements wherever they appear in
this prospectus, the materials referred to in this prospectus, and the materials
incorporated by reference into this prospectus.
We cannot guarantee our future results, levels of activity, performance or
achievements. Neither we nor any other person assumes responsibility for the
accuracy and completeness of these statements.
We are under no duty to update any of the forward-looking statements after
the date of this prospectus.
7
<PAGE>
USE OF PROCEEDS
Except for exercise of warrants (as explained below), we will not receive
any proceeds from sale of the shares offered pursuant to this prospectus. The
selling shareholders will receive those proceeds.
If any of the selling shareholders exercise their warrants, we will receive
the exercise price of US$1.64 per share (for warrants exercised prior to
December 14, 2000) or US$1.89 per share (for warrants exercised between
December 14, 2000 and December 14, 2001). In the event that no warrants are
exercised, we will not receive any proceeds from this offering.
We will use funds received on the exercise of warrants, if any, for working
capital and other corporate purposes.
SELLING SHAREHOLDERS
The shares offered for sale pursuant to this prospectus consist of 2,500,000
shares which we issued on January 21, 2000 (the "Shares") and 2,500,000 shares
(the "Warrant Shares") issuable upon the exercise of 2,500,000 share purchase
warrants (the "Warrants"). Each Warrant entitles the holder to acquire one
Warrant Share for a period of two years at a price of US$1.64 per share up to
December 14, 2000 or US$1.89 per share up to December 14, 2001. The selling
shareholders acquired the Shares and Warrants pursuant to a private placement of
2,500,000 units completed in January 2000. Each unit consisted of one Share and
one Warrant. The price of the units was US$1.64 per unit. The Warrants are
non-transferable.
The selling shareholders may resell all, a portion, or none of the Shares
and Warrant Shares. The table below sets forth with respect to each selling
shareholder, based upon information available to us as of April 5, 2000, the
number of common shares beneficially owned, the number of Shares and Warrant
Shares registered by this prospectus, and the number and percent of outstanding
common shares that will be owned after the completion of this offering (assuming
that all of the Shares and Warrant Shares are sold).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE SHARES OFFERED OWNED AFTER THE
OFFERING(1)(2) ------------------- OFFERING(1)(3)
-------------------- WARRANT --------------------
SHARES PERCENT SHARES SHARES SHARES PERCENT
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
James Streit............................... 125,000 * 62,500 62,500 Nil *
Andrew Fisher.............................. 1,500,000 2.4% 750,000 750,000 Nil *
Kevin J. Murray............................ 125,000 * 62,500 62,500 Nil *
Brian C. Pennington........................ 625,000 1.0% 312,500 312,500 Nil *
Joshua L. Mandell.......................... 250,000 * 125,000 125,000 Nil *
Jeffrey Rosenbluth......................... 333,334 * 166,667 166,667 Nil *
Dennis Keegan.............................. 225,000 * 62,500 62,500 100,000 *
Robert Stavis.............................. 333,334 * 166,667 166,667 Nil *
William Montgomery......................... 333,334 * 166,666 166,666 Nil *
Frank Jordan............................... 125,000 * 62,500 62,500 Nil *
Titan Investment Group, LLC................ 365,990 * 182,925 182,925 Nil *
MacroSoft eCommerce Partners(4)............ 580,050 * 60,975 60,975 458,100 *
Reicher Capital Management................. 290,000 * 125,000 125,000 40,000 *
Erica Hughes............................... 7,200 * 3,600 3,600 Nil *
Canaccord Capital Corp. ITF Erica Hughes... 20,000 * 10,000 10,000 Nil *
Grant Sutherland(5)........................ 2,111,400 3.4% 60,000 60,000 1,991,400 3.2%
Owen Jones(6).............................. 4,271,500 6.7% 60,000 60,000 4,151,500 6.5%
James L. Speros(7)......................... 2,439,500 3.9% 60,000 60,000 2,319,500 3.7%
</TABLE>
- ------------------------
* Less than one percent (1%).
(1) As used in this table, "beneficial ownership" means the sole or shared
voting and investment power of common shares. Unless otherwise indicated,
each selling shareholder listed below has sole voting and investment power
with respect to the common shares indicated as beneficially owned thereby. A
person
8
<PAGE>
is deemed to have "beneficial ownership" of any common shares that that
person has a right to acquire within sixty days of the date of this
prospectus. In accordance with Rule 13d-3 of the Exchange Act, any common
shares that any selling shareholder has the right to acquire within sixty
days of the date of this prospectus are deemed to be outstanding for the
purpose of computing the beneficial ownership percentage of that selling
shareholder, but have not been deemed outstanding for the purpose of
computing the percentage for any other selling shareholder.
(2) Figures stated in this column include a total of 1,531,000 shares issuable
within sixty days pursuant to stock options and 5,070,000 shares issuable
within sixty days pursuant to share purchase warrants. 1,000,000 of the
share purchase warrants were exercised between April 5, 2000 and the date of
this prospectus.
(3) With respect to the selling shareholders, it has been assumed that all
common shares offered will be sold. Figures stated in this column include
1,531,000 shares issuable within sixty days pursuant to stock options and
2,570,000 shares issuable within sixty days pursuant to share purchase
warrants. 1,000,000 of the share purchase warrants were exercised between
April 5, 2000 and the date of this prospectus.
(4) MacroSoft eCommerce Partners is a partnership whose principals include one
current and one former employee. Figures stated for MacroSoft eCommerce
Partners include shares owned by all of the principals of MacroSoft
eCommerce partners.
(5) Grant Sutherland is the Chairman of the Board of Directors. Figures stated
for Mr. Sutherland prior to the offering include 478,000 shares issuable
within sixty days pursuant to stock options and 560,000 shares issuable
under share purchase warrants exercisable within 60 days. 500,000 of the
share purchase warrants were exercised between April 5, 2000 and the date of
this prospectus.
(6) Owen Jones is our President and one of our directors. Figures stated for
Mr. Jones prior to the offering include 678,000 shares issuable within sixty
days pursuant to stock options and 1,060,000 shares issuable within sixty
days pursuant to share purchase warrants.
(7) James Speros is one of our directors. Figures stated for Mr. Speros prior to
the offering include 375,000 shares issuable within sixty days pursuant to
stock options and 1,060,000 shares issuable within sixty days pursuant to
share purchase warrants. 500,000 of the share purchase warrants were
exercised between April 5, 2000 and the date of this prospectus.
The information stated in the table above was provided by the selling
shareholders, and is accurate to the best of our knowledge.
Erica Hughes is the wife of Clive Forth, who provides legal services to us.
Otherwise, except as otherwise disclosed above or in documents incorporated by
reference in this prospectus, the selling shareholders have not within the past
three years had any position, office or other material relationship with
our company.
The selling shareholders may have disposed of shares, or acquired additional
shares, since the dates they provided the information stated above. They may
also dispose of, or acquire, shares after the date of this prospectus, and may
sell all, some, or none of the Shares and Warrant Shares. For these reasons we
can only give an estimate (assuming the selling shareholders sell all of their
Shares and Warrant Shares) of the number of shares the selling shareholders will
own after this offering.
PLAN OF DISTRIBUTION
The prospectus covers the sale of Shares and Warrant Shares by the selling
shareholders. It also covers sales by people who receive Shares or Warrant
Shares from the selling shareholders by way of gift, pledge, partnership
distribution, or other non-sale related transfer. Any distribution of the Shares
or Warrant Share may be effected by any of those parties from time to time in
one or more of the following transactions:
- to underwriters who will acquire securities for their own account and
resell them in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale;
9
<PAGE>
- through brokers, acting as principal or agent, in transactions on the
Canadian Venture Exchange, through OTC Bulletin Board quotation service,
or on any other market or exchange on which the securities are
then listed;
- directly or through brokers or agents in private sales at
negotiated prices;
- through put or call option transactions, or through short sales of our
common shares at market prices prevailing at the time of sale or at
negotiated prices; or
- by any other legally available means.
Any public offering price and any discount or concessions allowed or paid to
underwriters may change from time to time. Sales through an exchange may involve
block transactions, special offerings, or exchange distributions, and may take
place at market prices prevailing at the time of sale, prices related to such
prevailing market prices, negotiated prices, or fixed prices.
The aggregate proceeds to the selling shareholders from the Shares and
Warrant Shares will be the offering price less applicable commissions or
discounts, if any. We do not know if the selling shareholders will sell any of
the Shares and Warrant Shares.
The selling shareholders and their underwriters, brokers, dealers or agents,
upon effecting a sale of securities, may be considered "underwriters" as that
term is defined in the Securities Act. The selling shareholders will be subject
to the prospectus delivery requirements because the selling shareholders may be
deemed to be "underwriters" within meaning of Section 2(a)(11) of the Securities
Act. Sales effected through agents, brokers, or dealers will ordinarily involve
payment of customary brokerage commissions, although some brokers or dealers may
purchase Shares and Warrant Shares as agents for others or as principals for
their own account. The selling shareholders will pay any sales commissions or
similar selling expenses applicable to the sale of the Shares and Warrant
Shares. A portion of any proceeds of sales and discounts, commissions, or other
sellers' compensation may be deemed to be underwriting compensation for purposes
of the Securities Act.
Selling shareholders also may resell all or a portion of the Shares or
Warrant Shares:
- in open market transactions in reliance upon Rule 144 under the Securities
Act; or
- through the Canadian Venture Exchange in reliance on Regulation S to the
Securities Act;
provided they meet the criteria and conform to the requirements of those
provisions.
Pursuant to applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares or Warrant Shares may not
simultaneously engage in market activities for our common shares for a period of
five business days prior to the commencement of the distribution. In addition,
each selling shareholder and any other person who participates in a distribution
of the securities will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including Regulation M. Those
provisions may limit the timing of purchases and may affect the marketability of
the securities and the ability of any person to engage in market activities for
our common shares.
At the time a particular offering of securities is made, to the extent
required, a prospectus supplement will be distributed which will set forth the
number of securities being offered and the terms of the offering, including the
purchase price or the public offering price, the name or names of any
underwriters, dealers, or agents, the purchase price paid by any underwriters
for securities purchased from the selling shareholders, any discounts,
commissions and other items constituting compensation from the selling
shareholders, and any discounts, commissions, or concessions allowed or paid to
dealers. In addition, we will file a supplement to this prospectus upon a
selling shareholder notifying us that a donee, pledgee, transferee, or other
successor-in-interest intends to sell more than 500 shares.
In order to comply with the securities laws of certain states, if
applicable, the securities will be sold in those jurisdictions, if required,
only through registered or licensed brokers or dealers. In addition, in certain
states the securities may not be sold unless the securities have been registered
or qualified for sale in the
10
<PAGE>
state or an exemption from registration or qualification is available and the
conditions of the exemption have been satisfied.
We have agreed that we will bear all costs, expenses, and fees in connection
with the registration or qualification of the Shares and Warrant Shares under
federal and state securities laws (currently estimated to be US$75,000). We and
each selling shareholder have agreed to indemnify each other and certain other
persons against certain liabilities in connection with the offering of the
Shares or Warrant Shares, including liabilities arising under the
Securities Act.
DESCRIPTION OF SECURITIES TO BE REGISTERED
The Shares and Warrant Shares are common shares without par value in our
capital stock. The holders of our common shares are entitled to receive notice
of, attend, and vote at all meetings of our members. The common shares carry one
vote per share and have no par value. The holders of the common shares are
entitled to receive dividends if, as, and when declared by our board of
directors. The common shares carry no pre-emptive rights, conversion rights,
redemption provisions, sinking fund provisions, or liability to further calls or
assessment. There are no restrictions on the repurchase or redemption of our
common shares by us, except under applicable securities laws and to the extent
that any such repurchase or redemption would render us insolvent.
Common shares without par value are the only class of shares authorised
under our memorandum of incorporation. As at April 14, 2000, we have 60,055,765
shares issued and outstanding.
MATERIAL CHANGES
Subsequent to our annual report filed April 4, 2000 covering the fiscal year
ended December 31, 1999, the following material changes have occurred.
PRODUCTS
At the Spring Internet World trade show in Los Angeles (April 5 - 7, 2000)
we released Dr. Bean 3.2 and demonstrated Dr. Bean On Call 1.0.
DR. BEAN 3.2
Dr. Bean 3.2 represents the current version of our product, and incorporates
the following new features.
MULTI-CHANNEL INTEGRATION
The multi-channel integration feature is designed to permit companies to
integrate all of the principal channels for customer service, including Internet
chat, telephone, e-mail, and fax into a single system. Through multi-channel
integration, all incoming customer communications, regardless of source, can be
put into a single queue, and then routed to individual CSR's according to
priorities set by the Dr. Bean user. The multi-channel integration feature can
thus be used to ensure that all forms of customer inquiry are dealt with in a
similar manner, and that any CSR can respond to any inquiry, regardless of
its source.
The multi-channel integration feature incorporates a "telephony bridge,"
which has been developed for us under contract by Science Applications
International Corp. ("SAIC"). The telephony bridge creates a digitized version
of audio telephone calls, to ensure that telephone calls can be processed and
distributed in the same manner as other incoming data.
The multi-channel integration feature also includes a persistent channel
session manager, which helps ensure that contact with a customer is not lost
through accidental disconnection. For example, if an Internet or telephone
connection with a customer is disconnected, Dr. Bean will keep track of the
source of the connection, and will re-connect automatically.
We expect that implementation of the multi-channel integration feature will
require a high degree of customization for individual installations, and will be
costly and labour intensive. We will likely also have to develop specialized
software to adapt the multi-channel integration feature to the telephone
switching
11
<PAGE>
technologies employed by different customers. At present we have developed
software to adapt the multi-channel integration feature to some, but not all, of
the telephone switching technologies presently in use in the market place. Owing
to the degree of customization required, the sales cycle for systems
incorporating multi-channel integration will likely be several months, at least
initially. We do not have historical data from which we can estimate the sales
cycle accurately, or the extent to which it may accelerate as our technology
becomes more developed.
E-MAIL RESPONSE
Dr. Bean 3.2 allows CSR's to respond to customers by sending pre-packaged
e-mail messages. This feature can be used, for example, to e-mail forms or
brochures requested by a customer.
PROFILING ENGINE
The profiling engine includes enhancements to the intelligent routing
feature, enabling Dr. Bean to assemble and utilize more detailed information on
individual customers.
Dr. Bean 3.2 is presently undergoing final testing and de-bugging.
The telephony bridge developed by SAIC is also intended to support audio
"voice over Internet" communication. That feature is still under development. We
do not have a definite timetable for its release.
DR. BEAN ON CALL 1.0
Dr. Bean On Call was previously identified as Dr. Bean NG.
Dr. Bean On Call will permit us (or other companies we license Dr. Bean On
Call to) to sell Dr. Bean as a service as opposed to a product. Through
Dr. Bean On Call, companies will be able to receive customer communications
through a central server system which we (or a licensee) will establish.
Dr. Bean On Call will thus enable users to enjoy the features and functions
offered by Dr. Bean without having to purchase Dr. Bean as a product, and
without incurring the resulting system administration and maintenance costs.
We plan to establish our own call centre for Dr. Bean On Call, and expect
that the call centre will be operational by June 30, 2000. We do not yet have
specific plans with respect to licensing Dr. Bean On Call to other companies who
wish to establish call centres of their own.
PRIVATE PLACEMENT
On April 13, 2000 we completed a private placement of 1,104,000 units. Each
unit consists of one share and one share purchase warrant. Each share purchase
warrant entitles the holder to purchase one additional share for a period of
two years, commencing April 13, 2000, at a price of US$10.00 per share in the
first year or US11.50 per share in the second year. The price of the units was
US$10.00 per unit.
SHARE PURCHASE WARRANTS
As at April 14, 2000 the following share purchase warrants are outstanding:
(a) 176,000 share purchase warrants permit the holder to purchase one
additional share at a price of $0.40 per share up to December 23, 2000.
These warrants were issued on the conversion of special warrants issued
on January 7, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of $0.35 per share
in the first year or $0.40 per share in the second year.
(b) 197,882 share purchase warrants permit the holder to purchase one
additional share at a price of US$0.383 per share up to March 26, 2001.
These warrants were issued on the conversion of special warrants issued
on April 7, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of US$0.333 per
share in the first year or US$0.383 per share in the second year.
12
<PAGE>
(c) 1,500,000 share purchase warrants permit the holder to purchase one
additional share at a price of $0.63 per share up to April 7, 2001. These
warrants were issued on the conversion of special warrants issued on
April 15, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of $0.55 per share
in the first year or $0.63 per share in the second year.
(d) 1,570,653 share purchase warrants permit the holder to purchase one
additional share at a price of US$1.64 per share up to September 14, 2000
or a price of US$1.89 per share up to September 14, 2001. These warrants
were issued on September 14, 1999. Each warrant entitled the holder to
purchase one additional share for a period of two years at a price of
US$1.64 per share in the first year or US$1.89 per share in the
second year.
(e) 2,500,000 share purchase warrants permit the holder to purchase one
additional share at a price of US$1.64 per share up to December 14, 2000
or a price of US$1.89 per share up to December 14, 2001. These warrants
were issued on January 21, 2000. Each warrant entitled the holder to
purchase one additional share for a period of two years at a price of
US$1.64 per share in the first year or US$1.89 per share in the second
year. Shares issued pursuant to these warrants will constitute the
Warrant Shares qualified for sale by this prospectus.
(f) 1,104,000 share purchase warrants, issued in the private placement
described above, permit the holder to purchase one additional share at a
price of US$10.00 per share up to April 14, 2001 or a price of
US$11.50 per share up to April 14, 2002.
Of the share purchase warrants listed above, the following are held by our
directors and executive officers.
(a) Owen Jones holds 1,000,000 of the warrants described in (c) and 60,000
of the warrants described in (e);
(b) James Speros holds 500,000 of the warrants described in (c) and 60,000
of the warrants described in (e); and
(c) Grant Sutherland holds 60,000 of the warrants described in (e).
LEGAL MATTERS
Certain legal matters relating to the legality of the issuance of the Shares
and Warrant Shares offered under this prospectus under Canadian law will be
passed upon by Swinton & Co., Vancouver, British Columbia.
EXPERTS
The consolidated financial statements of Sideware Systems Inc. as of
December 31, 1999 and December 31, 1998 and for the year ended December 31,
1999, the eight-month period ended December 31, 1998 and the years ended
April 30, 1998 and April 30, 1997 have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent chartered accountants, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG LLP covering the December 31, 1999 consolidated financial statements
contains additional comments for U.S. readers on Canada--U.S. reporting
differences with respect to conditions that cause substantial doubt as to our
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of
that uncertainty.
13
<PAGE>
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
our corporate Articles of Incorporation and Exchange, or otherwise, we have been
advised that in the opinion of the Commission indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against those liabilities (other than
the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons 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, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether the indemnification is
against public policy as expressed in the Securities Act. We will be governed by
the final judgment of that issue.
14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY SIDEWARE SYSTEMS INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Additional Information................ 1
Incorporated Documents................ 1
Enforcement of Civil Liabilities...... 1
Prospectus Summary.................... 2
Risk Factors.......................... 3
Special Note Regarding Forward-looking
Statements.......................... 7
Use of Proceeds....................... 8
Selling Shareholders.................. 8
Plan of Distribution.................. 9
Description of Securities to be
Registered.......................... 11
Material Changes...................... 11
Legal Matters......................... 13
Experts............................... 13
SEC Position on Indemnification for
Securities Act Liabilities.......... 14
</TABLE>
SIDEWARE SYSTEMS INC.
5,000,000 COMMON SHARES
---------------------
PROSPECTUS
---------------------
APRIL - , 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay substantially all the expenses incident to the registration,
offering and sale of the Shares and Warrant Shares to the public by the selling
shareholders other than fees, discounts and commissions of underwriters, dealers
or agents, if any, and transfer taxes. Those expenses are estimated as follows:
<TABLE>
<CAPTION>
AMOUNT(1)
-----------
<S> <C>
(STATED IN
US$)
SEC Registration Fee........................................ $ 6,600
Legal Fees and Expenses..................................... 20,000
Accounting Fees and Expenses................................ 10,000
Printing Expense............................................ 25,000
Miscellaneous Expenses...................................... 10,400
-------
Total................................................... $75,000
</TABLE>
- ------------------------
(1) All amounts have been estimated except the SEC registration fee. All of the
above expenses will be payable by us.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Articles of Incorporation of the company, subject to the
provisions of the Company Act British Columbia (the "Act"), the directors shall
cause the company to indemnify a director or former director of the company and
the directors may cause the company to indemnify a director or former director
of a corporation of which the company is or was a shareholder and the heirs and
personal representatives of any former director against all costs, charges and
expenses, including an amount to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of his
being or having been a director including any action brought by the company.
Each director of the company on being elected or appointed shall be deemed to
have contracted with the company on the terms of this indemnity.
Subject to the provisions of the Act, the directors may cause the company to
indemnify any officer, employee or agent of the company or of a corporation of
which the company is or was a shareholder (notwithstanding that he is also a
director) and his heirs and personal representatives against all costs, charges
and expenses whatsoever incurred by him or them and resulting from his acting as
an officer, employee or agent of the company or the corporation. In addition,
the company shall indemnify the Secretary or an Assistant Secretary of the
company (if he shall not be a full-time employee of the company and
notwithstanding that he is also a director) and his respective heirs and legal
representatives against all costs, charges and expenses whatsoever incurred by
him or them and arising out of the functions assigned to the Secretary by the
Act or Articles.
The failure of a director or officer of the company to comply with the
provisions of the Act or of the Memorandum or the Articles shall invalidate any
indemnity to which he is entitled.
The directors may cause the company to purchase and maintain insurance for
the benefit of any person who is or was serving as a director, officer, employee
or agent of the company or as a director, officer, employee or agent of any
corporation of which the company is or was a shareholder and his heirs or
personal representatives against any liability incurred by him as a director,
officer, employee or agent.
II-1
<PAGE>
ITEM 16. EXHIBITS
Index to Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ -------
<S> <C>
3.1(1) Memorandum of Incorporation dated March 30, 1983
3.2(1) Articles of Incorporation dated March 30, 1983
3.3(1) Special Resolution dated January 12, 1984
3.4(1) Special Resolution dated June 15, 1989
3.5(1) Special Resolution dated September 27, 1990
3.6(1) Special Resolution dated December 18, 1996
3.7(1) Articles of Incorporation
3.8(1) Special Resolution dated January 29, 1998
4.1(1) Escrow Agreement dated June, 1996
4.2(1) Agreement dated November 23, 1998 between the Company and
certain warrant holders of the Company
4.3(1) Agreement dated April 14, 1999 between the Company and
certain warrant holders of the Company
4.4(2) Agreement dated October 28, 1999 between the Company and
certain warrant holders of the Company
4.5 2000 Stock Option Plan
5.1 Opinion of Swinton & Co., Barristers & Solicitors
10.1(1) Operating Agreement between the Company and
BrainTech, Inc., dated October 18, 1996
10.2(2) Software Development and License Agreement dated
September 20, 1999 between the Company and
BrainTech, Inc.
10.3(2) Software Development License between the Company and
Sideware International SRL effective August 27, 1999
10.4(2) Research and Development Cost Sharing Agreement between the
Company and Sideware International SRL effective
August 27, 1999
10.5(2) Distribution and Sales Agreement between the Company and
Sideware Corp. effective January 1, 1999
10.6(1) Assignment of Lease and Modification of Lease Agreement
dated August 17, 1998 between HOOPP Realty Inc., Techwest
Management Inc., Sideware Systems Inc., and
BrainTech, Inc.
10.7(1) Lease Agreement dated January 25, 1999 between Sideware
Corp. and Elden Investments, LLC with Addendum dated
February 8, 1999
10.8(2) Agreement between the Company and IBM for participation in
the Enterprise Growth Opportunity program
10.9(2) Reseller agreement between the Company and Enterprise Soft
10.10(2) Software license agreement between the Company and ICEsoft
AS
10.11(2) Lease effective as of July 1, 1999 between the Company,
Techwest Management Ltd., BrainTech, Inc. and Pacific
Centre Leaseholds Ltd.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ -------
<S> <C>
10.12(2) Assignment Agreement effective as of July 1, 1999 between
the Company, Techwest Management Ltd., BrainTech, Inc.,
and SJM Management Ltd.
10.13(2) Cost Sharing and Allocation Agreement dated October 29, 1999
between the Company and BrainTech, Inc.
10.14(2) Agreement between the Company and Advanced Contact
Solutions Inc.
10.15(2) Contract Agreement No. SDW001 between the Company and
Science Applications International Corp.
10.16(2) IBM International Independent Software Vendor Agreement
10.17(2) Distribution and Sales Agreement between Sideware Corp. and
Sideware International SRL
10.18(3) Lease Agreement dated March 6, 2000 between Sideware Corp.
and Reston L.L.C.
10.19(3) Lease Agreement between Sideware Corp. and Sanctuary Park
Realty Holding Company
10.20(3) Sub-Lease Agreement dated January 15, 2000 among San Jose
State University Foundation and Sideware Systems Inc.
10.21(3) Lease Agreement dated February 24, 2000 between CEO
Suites, Inc. and Sideware Corp.
21.1(3) List of Subsidiaries
23.1 Consent of KPMG LLP
</TABLE>
- ------------------------
(1) Exhibit already on file -- exhibit to our Form 20-F registration statement
filed in May 1999.
(2) Exhibit already on file -- exhibit to our Form F-1 registration statement
filed in December 1999.
(3) Exhibit already on file -- exhibit to our Form 20-F registration statement
covering the year ended December 31, 1999.
ITEM 17. UNDERTAKINGS
(a) 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;
(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 which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Vancouver, British Columbia, on April 14, 2000.
<TABLE>
<S> <C> <C>
SIDEWARE SYSTEMS INC.
By: GRANT SUTHERLAND
----------------------------------------------
W. Grant Sutherland
CHAIRMAN OF THE BOARD OF DIRECTORS
</TABLE>
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes W.
Grant Sutherland, as attorney-in-fact, with full power of substitution, to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file, any and all amendments to this registration
statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director, Chairman of the Board of
GRANT SUTHERLAND Directors, Principal Financial
------------------------------------------- Officer, Principal Accounting April 14, 2000
W. Grant Sutherland Officer
OWEN JONES President, Chief Executive Officer
------------------------------------------- and Director (Principal Executive April 14, 2000
Owen L.J. Jones Officer)
JAMES L. SPEROS
------------------------------------------- Director April 14, 2000
James L. Speros
E. A. WHITE
------------------------------------------- Director April 14, 2000
Edward A. White
</TABLE>
II-4
<PAGE>
SIDEWARE SYSTEMS INC.
STOCK OPTION PLAN (2000)
1. INTERPRETATION
1.1 DEFINED TERMS - For the purposes of this Plan, the following terms
have the following meanings:
(a) "AFFILIATE" means a Parent Corporation or a Subsidiary Corporation
of a corporation;
(b) "BOARD" means the Board of Directors of the Company;
(c) "CDNX" means the Canadian Venture Exchange;
(d) "COMMITTEE" means a committee of the Board appointed in accordance
with this Plan, or if no such committee is appointed, the Board
itself;
(e) "COMPANY" means Sideware Systems Inc.;
(f) "DATE OF GRANT" means the date on which an Option is granted;
(g) "DISABILITY" means a medically determinable physical or mental
impairment expected to result in death or to last for a continuous
period of not less than six months, and which causes an individual
to be unable to engage in any substantial gainful activity;
(h) "EFFECTIVE DATE" means the effective date of this Plan, which is
February 8, 2000;
(i) "FAIR MARKET VALUE" means:
(i) where the Shares are listed for trading on the CDNX only,
the minimum price at which options may be granted under
CDNX rules, regulations and policies; or
(ii) where the Shares are listed for trading on the TSE, whether
or not interlisted with any other stock exchange or an over
the counter market, the closing price of the Shares on the
TSE on the last trading day prior to the Date of Grant; or
(iii) where the Shares are listed for trading on a stock exchange
or over the counter market other than the CDNX or the TSE,
the value which is determined by the Committee in
accordance with the rules, regulations and policies, if
any, of any such stock exchange or over the counter market;
or
(iv) where the Shares are not listed for trading on a stock
exchange or over the counter market, the value which is
determined by the Committee to be the fair value of the
Shares as of the day immediately prior to the Date of
Grant, taking into consideration all factors that the
Committee deems appropriate, including, without
<PAGE>
-2-
limitation, recent sale and offer prices of the Shares in
private transactions negotiated at arm's length;
(j) "GUARDIAN" means the guardian, if any, appointed for an Optionee;
(k) "OPTION" means an option to purchase Shares granted pursuant to the
terms of this Plan;
(l) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee specifying the terms of the Option being granted to the
Optionee under the Plan;
(m) "OPTION PRICE" means the price at which a Share may be purchased by
an Optionee under an Option;
(n) "OPTIONEE" means a person to whom an Option has been granted;
(o) "PARENT CORPORATION" means any corporation in an unbroken chain of
corporations ending with the Company if, at the Date of Grant, each
corporation, other than the Company, owns stock possessing 50
percent or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain;
(p) "PLAN" means this stock option plan of the Company;
(q) "SUBSIDIARY CORPORATION" means any corporation in an unbroken chain
of corporations beginning with the Company if, at the Date of Grant,
each of the corporations, other than the last corporation, owns
stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in
such chain;
(r) "SHARES" means common shares without par value in the capital of the
Company;
(s) "TERM" means the period of time during which an Option is
exercisable; and
(t) "TSE" means the Toronto Stock Exchange.
2. STATEMENT OF PURPOSE
2.1 PRINCIPAL PURPOSES - The principal purposes of the Plan are to:
(a) promote a proprietary interest in the Company among the directors,
officers, employees and consultants of the Company and its
Affiliates;
(b) retain and attract the qualified directors, officers, employees and
consultants the Company and its Affiliates require;
<PAGE>
-3-
(c) provide a long-term incentive element in overall compensation; and
(d) promote the long-term profitability of the Company and its
Affiliates.
3. ADMINISTRATION
3.1 BOARD OR COMMITTEE - The Plan shall be administered by the Board or,
if the Board so designates, by a Committee. Once appointed, the Committee
shall continue to serve until otherwise directed by the Board. From time to
time, the Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and appoint new members in
their place, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
3.2 QUORUM AND VOTING - A majority of the members of the Committee shall
constitute a quorum, and, subject to the limitations in this Section 3.2, all
actions of the Committee shall require the affirmative vote of members who
constitute a majority of such quorum. Members of the Committee may vote on
any matters affecting the administration of the Plan or the grant of Options
pursuant to the Plan, except that no such member shall act upon the granting
of an Option to himself (but any such member may be counted in determining
the existence of a quorum at any meeting of the Committee during which action
is taken with respect to the granting of Options to him).
3.3 POWERS OF COMMITTEE - The Committee will have the power and
authority to do the following:
(a) administer the Plan in accordance with its express terms, including
the authority to grant Options;
(b) determine all questions arising in connection with the
administration, interpretation, and application of the Plan,
including all questions relating to the value of the Shares;
(c) correct any defect, supply any information, or reconcile any
inconsistency in the Plan in such manner and to such extent as shall
be deemed necessary or advisable to carry out the purposes of the
Plan;
(d) prescribe, amend, and rescind rules and regulations relating to the
administration of the Plan;
(e) determine the duration and purposes of leaves of absence from
employment which may be granted to Optionees without constituting a
termination of employment for purposes of the Plan; and
<PAGE>
-4-
(f) do the following with respect to the granting of Options:
(i) determine when Options shall be granted,
(ii) determine the employees, officers, directors, or
consultants of the Company and of its Affiliates to whom
Options shall be granted, based on the eligibility criteria
set out in this Plan,
(iii) determine the number of Shares subject to each Option,
(iv) determine the Option Price of each Option,
(v) determine the vesting schedule, if any, upon which the
exercise of an Option is contingent, including, without
limitation, discretion to:
(A) allow full and immediate vesting upon the grant of
such Option,
(B) permit partial vesting in stated percentage
amounts based on the length of the Term of such
Option, or
(C) permit full vesting after a stated period of time
has passed from the Date of Grant;
(vi) determine the terms and provisions of the Option Agreement
to be entered into with any Optionee (which need not be
identical with the terms of any other Option Agreement),
(vii) amend the terms and provisions of Option Agreements,
provided the Committee obtains:
(A) the consent of the Optionee, and
(B) any required approval of any stock exchange on
which the Company is listed; and
make all other determinations necessary or advisable for
administration of the Plan. Notwithstanding paragraph (v), while the
Company is listed on the CDNX and is considered a Tier 2 company,
vesting schedules for Options issued pursuant to this Plan shall be,
at a minimum, in accordance with CDNX policy, unless upon
application CDNX permits a more favourable vesting schedule in any
particular case.
3.4 ADMINISTRATION BY COMMITTEE - The Committee's administration of the
Plan shall in all respects be consistent with the policies and rules of any
stock exchange and/or over the counter market on which the Shares are listed.
All determinations made by the Committee in good faith
<PAGE>
-5-
on matters referred to in Section 3.3 shall be final, conclusive, and binding
upon the Company and the relevant Optionee.
4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES - Subject to adjustment as contemplated by section
11, the number of Shares that may be issued pursuant to the exercise of
Options under the Plan shall not exceed 5,700,000 in the aggregate. Any stock
options of the Company outstanding immediately prior to the Effective Date
shall not be considered Options for any purpose under the Plan.
4.2 EXPIRY OF OPTION - Should an Option expire, terminate or cease to be
exercisable in accordance with the terms of the Plan without having been
exercised in full, then the Shares which were set aside for issue pursuant to
that Option but which were not issued shall become available for issue
pursuant to the Plan.
4.3 LIMITATIONS - Notwithstanding any other provision of the Plan, at no
time may the number of shares reserved for issuance pursuant to stock options
granted to any one person, whether granted pursuant to the Plan or otherwise,
exceed 5% of the issued and outstanding Shares from time to time. Subject to
the foregoing, there is no limitation on the ability of the Company to grant
options to its insiders and their associates.
5. ELIGIBILITY
5.1 ELIGIBILITY - Options may be granted to any director, officer,
employee or consultant of the Company or of any of its Affiliates. An
Optionee shall not be precluded from being granted an Option solely because
such Optionee may previously have been granted an Option under the Plan.
5.2 NO VIOLATION OF LAWS - No Option shall be granted to any Optionee
unless the Committee has determined that the grant of such Option and the
exercise thereof by the Optionee will not violate applicable securities laws.
6. GRANTING OF OPTIONS
6.1 GRANTS OF OPTIONS - The Committee may from time to time designate
directors, officers, employees or consultants of the Company or of its
Affiliates to whom Options to purchase Shares may be granted and the number
of Shares to be optioned to each, provided that the total number of Shares to
be optioned shall not exceed the number provided in Section 4.1 of this Plan.
<PAGE>
-6-
6.2 OPTION AGREEMENT - Each Option granted under the Plan shall be
evidenced by an Option Agreement between the Company and the Optionee in such
form as shall be approved by the Committee, which Option Agreement shall
include the following terms:
(a) the number of Shares subject to purchase pursuant to such Option;
(b) the Date of Grant;
(c) the Term, including the provisions in Section 7 of this Plan;
(d) the Option Price, provided that the Option Price shall not be less
than the Fair Market Value of the Shares;
(e) any vesting schedule upon which the exercise of an Option is
contingent;
(f) a provision that the Option is not assignable or transferable; and
(g) such other terms and conditions as the Committee deems advisable and
are consistent with this Plan.
7. OPTION TERM
7.1 OPTION TERM - The Term of an Option, subject to the provisions of
the Plan requiring acceleration of rights of exercise, will be such period as
may be determined by the Committee but subject to the rules of any stock
exchange or other regulatory body having jurisdiction. In addition, each
Option Agreement shall provide that:
(a) upon the death of the Optionee, the Option may be exercised by the
legal heirs or personal representatives of the Optionee until the
date determined by the Committee which shall not be more than twelve
months from the date of death;
(b) if the position of an Optionee as a director or officer of the
Company or of an Affiliate of the Company, or the employment of an
Optionee as an employee or consultant of the Company or of an
Affiliate of the Company, is terminated by the Company or its
Affiliate by reason of such Optionee's Disability, any Option held
by such Optionee that could have been exercised immediately prior to
such termination of service shall be exercisable by such Optionee,
or by his Guardian, for a period of 12 months following the
termination of service of such Optionee;
(c) if an Optionee who has ceased to be a director, officer, employee or
consultant of the Company or of an Affiliate of the Company by
reason of such Optionee's Disability dies within six months after
the termination of such employment, any Option held by such Optionee
that could have been exercised immediately prior to his or her death
shall pass to the legal heirs or personal representatives of such
Optionee, and shall be exercisable by such person for a period of 12
months following the death of such Optionee;
<PAGE>
-7-
(d) if the Optionee shall no longer be a director, officer, employee or
consultant of the Company or of an Affiliate of the Company by
reason other than such Optionee's Disability, the Option shall
terminate on the expiry of the period, not in excess of 90 days,
prescribed by the Committee at the Date of Grant, following the date
that the Optionee ceases to be a director, officer, employee or
consultant of either the Company or an Affiliate of the Company;
provided that nothing in the foregoing shall have the effect of extending the
Term of an Option beyond its original expiry date and provided that the
number of Shares that the Optionee (or his Guardian or legal heirs or
personal representatives) shall be entitled to purchase until such date of
termination shall be the number of Shares which the Optionee was entitled to
purchase on the date of death or the date the Optionee ceased to be a
director, officer, employee or consultant of the Company or its Affiliate, as
the case may be, notwithstanding the fact that the Option may have vested
thereafter with respect to the purchase of additional shares.
7.2 DEEMED NON-INTERRUPTION OF EMPLOYMENT - Employment shall be deemed
to continue intact during any sick leave or other bona fide leave of absence
if the period of such leave does not exceed 90 days or, if longer, for so
long as the Optionee's right to reemployment with the Company or an Affiliate
of the Company is guaranteed either by statute or by contract; but if the
period of such leave exceeds 90 days and the Optionee's reemployment is not
so guaranteed, then his or her employment shall be deemed to have terminated
on the ninety-first day of such leave.
7.3 VOLUNTARY TERMINATION - The Committee may, with the consent of an
Optionee, cancel any outstanding Option.
8. EXERCISE OF OPTION
8.1 METHOD OF EXERCISE - An Option may be exercised from time to time by
delivery to the Company at its head office or such other place as may be
specified by the Company, of a written notice of exercise specifying the
number of Shares with respect to which the Option is being exercised
accompanied by payment in full of the purchase price of the Shares then being
purchased by way of certified cheque or bank draft. In the event of the
exercise of an Option by an Optionee's legal heirs or personal
representatives, such legal heirs or personal representatives shall also
deliver evidence satisfactory to the Company that they are entitled to
exercise the Option.
8.2 ISSUANCE OF CERTIFICATE - As soon as practicable after exercise of
an Option in accordance with Section 8.1, the Company shall issue a
certificate evidencing the Shares with respect to which the Option has been
exercised. Until the issuance of such certificate, no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to such Shares, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the certificate is issued.
<PAGE>
-8-
9. RESTRICTIONS ON EXERCISE
9.1 REGULATORY COMPLIANCE - The exercise of each Option granted under
the Plan shall be subject to the condition that if at any time the Company
shall determine in its sole discretion that it is necessary or desirable to
comply with any legal requirements or the requirement of any stock exchange
or other regulatory authority or to obtain any approval or consent from any
such stock exchange or other regulatory authority as a condition of, or in
connection with, such exercise or the issue of Shares as a result thereof,
then in any such event such exercise shall not be effective unless such
compliance shall have been effected or such approval or consent obtained on
conditions satisfactory to the Company. The Company's inability to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability with
respect to the failure to issue or sell such Shares.
10. RESTRICTIONS ON TRANSFER
10.1 NON-ASSIGNABILITY - No Option shall be assignable, negotiable or
otherwise transferable other than by will or the laws of descent and
distribution and shall, subject to the terms hereof, be exercisable only by
the Optionee to whom it is granted or such Optionee's legal heirs or personal
representatives.
11. ADJUSTMENTS
11.1 ALTERATION OF CAPITAL - In the event of any material change in the
outstanding common shares of the Company prior to complete exercise of any
Option by reason of any stock dividend, split, recapitalization,
amalgamation, merger, consolidation, combination or exchange of shares or
other similar corporate change, an equitable adjustment shall be made in one
or more of the maximum number or kind of shares issuable under the Plan or
subject to outstanding Options or the Option Price of such shares. Any such
adjustment shall be made in the sole discretion of the Board, acting on
recommendations made by the Committee, and shall be conclusive and binding
for all purposes of the Plan.
11.2 GENERAL OFFER FOR SHARES - Notwithstanding anything else herein to
the contrary, in the event an offer to purchase common shares of the Company
shall be made to the holders of common shares generally, unless the Board
determines that such offer will not result in any change in control of the
Company, or in the event of a sale of all or substantially all of the assets
of the Company or the sale, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes a
subsidiary of another corporation, then unless provision is made by the
acquiring corporation for the assumption of each Option or the substitution
of a substantially equivalent option therefor, the Company shall give written
notice thereof to each Optionee holding Options under the Plan and such
Optionees shall be entitled to exercise all such Options in respect of all
Shares to which Options relate to the extent previously unexercised,
regardless of whether such Optionee would otherwise be entitled to exercise
such Options to such extent at that time, and the Optionees shall be entitled
to exercise
<PAGE>
-9-
such Options up to the closing date of any of the aforementioned
transactions, or such other date determined by the Company provided that the
Company has given thirty (30) days written notice of such date to each
Optionee. Any Options not so exercised will immediately terminate.
11.3 NO FRACTIONS - No fractional Shares shall be issued upon the
exercise of an Option and accordingly, if as a result of any adjustment set
out above an Optionee would be entitled to a fractional Share, the Optionee
shall have the right to purchase only the adjusted number of full Shares and
no payment or other adjustment shall be made with respect to the fractional
Share so disregarded.
12. NO OBLIGATION TO RETAIN OPTIONEE
12.1 NO OBLIGATION TO RETAIN OPTIONEE - Nothing contained in this Plan
shall obligate the Company or an Affiliate of the Company to retain an
Optionee as an employee, officer, director, or consultant for any period, nor
shall this Plan interfere in any way with the right of the Company or
Affiliates of the Company to reduce such Optionee's compensation.
13. CONDITIONS PRECEDENT
13.1 APPROVALS - The Plan is subject to the approval, if required, of any
stock exchange on which the Company's common shares are listed for trading
and is also subject to approval by the shareholders of the Company. Any
Options granted prior to such approvals shall be conditional upon such
approvals being given and no such Options may be exercised unless such
approvals, if required, are given.
14. EFFECTIVE DATE OF PLAN
14.1 EFFECTIVE DATE - The effective date of the Plan is February 8, 2000,
subject to receipt of all regulatory approvals which the Company requires in
connection with the implementation of the Plan and subject to approval of the
Plan by the shareholders of the Company.
15. AMENDMENT AND TERMINATION
15.1 AMENDMENT AND TERMINATION - The Board may at any time and from time
to time amend, suspend or terminate the Plan in whole or in part; provided,
however, that any such amendment will be subject to regulatory approval and,
other than as set out in Section 11, no such amendment may increase the
maximum number of Shares that may be optioned under the Plan, materially
modify the requirements as to eligibility for participation in the Plan or
change the manner of determining the Option Price unless such amendment is
approved by the affirmative votes of the holders of a majority of the voting
securities of the Company present or represented and entitled to vote at a
meeting duly held in accordance with the applicable corporate laws or by the
written consent of the holders of a majority of the securities of the Company
entitled to vote; provided however, that the Company may amend the terms of
the Plan to comply with the requirements of any applicable regulatory
authority without obtaining the
<PAGE>
-10-
approval of its shareholders. No such amendment, suspension or termination
shall adversely affect rights under any Options previously granted without
the consent of the Optionees to whom such Options were granted.
15.2 NO GRANT DURING SUSPENSION OF PLAN - No Option may be granted during
any suspension or after termination of the Plan. Amendment, suspension, or
termination of the Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option previously granted.
16. COMPLIANCE WITH LAWS
16.1 Transactions under the Plan are intended to comply with all relevant
provisions of law and the rules, regulations and policies of any stock
exchange or market upon which the Shares may be listed or quoted. To the
extent any provision of the Plan or action by the Committee fails to so
comply, the Committee may, to the extent permitted by law, do any of the
following as it deems advisable:
(a) treat such provision as null and void; or
(b) amend the terms of the Plan to comply with such applicable laws,
rules, regulations, or policies; or
(c) ensure that the administration of the Plan and the terms of the
individual option agreements comply with such applicable laws,
rules, regulations, and policies.
17. GOVERNING LAW
17.1 LAW - The laws of the Province of British Columbia shall govern the
Plan and all rights and obligations hereunder shall be determined in
accordance with such laws.
<PAGE>
April 13, 2000
Sideware Systems Inc.
930 West 1st Street, Suite 102
North Vancouver, B.C.
V7P 3N4
ATTENTION: GRANT SUTHERLAND
Dear Sirs/Mesdames:
RE: REGISTRATION STATEMENT ON FORM F-3
We have acted as special counsel to Sideware Systems Inc., a British Columbia
corporation (the "Company"), in connection with legal issues relating to the
issuance of:
(a) 2,500,000 Common Shares without par value (the "Shares") on January 14,
2000 to the persons named below as a "Selling Shareholder"; and
(b) 2,500,000 Common Shares without par value (the "Warrant Shares") to be
issued to the persons set out below as a Selling Shareholder on the
exercise of share purchase warrants (the "Warrants").
Each Warrant entitles the holder to acquire one additional share (the
"Warrant Shares") at any time up to December 14, 2001 at a price of US$1.64
per share up to December 14, 2000 or US$1.89 per share up to December 14,
2001.
<TABLE>
<CAPTION>
SELLING SHAREHOLDER NO. OF SHARES NO. OF WARRANTS
<S> <C> <C>
James Streit 62,500 62,500
Andrew Fisher 750,000 750,000
Kevin J. Murray 62,500 62,500
Brian C. Pennington 312,500 312,500
Joshua L. Mandell 125,000 125,000
Jeffrey Rosenbluth 166,667 166,667
Dennis Keegan 62,500 62,500
Robert Stavis 166,667 166,667
William Montgomery 166,666 166,666
Frank Jordan 62,500 62,500
Titan Investment Group, LLC 182,925 182,925
MacroSoft eCommerce Partners 60,975 60,975
Reicher Capital Management 125,000 125,000
Erica Hughes 13,600 13,600
Grant Sutherland 60,000 60,000
Owen Jones 60,000 60,000
James L. Speros 60,000 60,000
</TABLE>
We understand that the Company proposed to file a Registration Statement (the
"Registration Statement") with the Securities and Exchange Commission
registering the Shares and Warrant Shares. We have been provided with a draft
of the Registration Statement.
<PAGE>
-2-
We have examined such documents and records of the Company and such
certificates from officers and directors as to matters of fact as we have
deemed necessary for the purpose of this opinion. In doing so, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity of all documents submitted
to us as copies to the originals.
In our opinion:
1. The Shares are validly issued and fully paid and non-assessable
Common shares without par value in the capital of the Company.
2. The Warrants have been validly authorized and executed and delivered
on behalf of the Company.
3. The Warrant Shares will, when the Company has received notice of the
exercise of the Warrants and the exercise price of the Warrants, be
validly allotted.
4. Upon issuance of the Warrant Shares in accordance with the terms of the
Warrants and receipt by the Company of the consideration required for
the Warrant Shares in accordance with the terms of the Warrants, the
Warrant Shares will be validly issued and fully paid and
non-assessable Common shares without par value in the capital of the
Company.
We hereby consent to the filing of this opinion as an exhibit to a Registration
Statement registering the Shares and Warrant Shares. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under section 7 of the Securities Act of 1933.
We are solicitors qualified to carry on the practice of law in British Columbia
only and we express no opinion as to any laws, or other matters governed by any
laws, other than the laws of British Columbia and federal laws of Canada
applicable in British Columbia.
This opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in these sources of law or subsequent legal or factual developments which might
affect any matters or opinions set forth in this letter.
We are opining only as to the matters expressly stated in this letter, and no
opinion should be inferred as to any other matters.
Yours truly,
SWINTON & COMPANY
Per:
Martin L. MacLachlan
<PAGE>
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
The Board of Directors
Sideware Systems Inc.
We consent to the use of our report dated February 21, 2000 with respect to
the consolidated balance sheets of Sideware Systems Inc. as of December 31,
1999 and 1998 and the related consolidated statements of operations and
deficit and cash flows for year ended December 31, 1999, the eight months
ended December 31, 1998 and the years ended April 30, 1998 and 1997, included
in the annual report on Form 20-F of Sideware Systems Inc., incorporated by
reference in the registration statement on Form F-3 of Sideware Systems Inc.
Our report includes additional comments for U.S. readers on Canada-U.S.
reporting differences with respect to conditions that cause substantial doubt
as to Sideware Systems Inc.'s ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
"KPMG LLP"
Chartered Accountants
Vancouver, Canada
April 14, 2000
