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SUBSCRIPTION AGREEMENT
(FOR CANADIAN SUBSCRIBERS)
This Subscription Agreement (this "Agreement") is made and entered into
as of April , 2000 (the "Effective Date"), between SoftQuad Software Ltd. (the
"Company"), a Delaware corporation, Thomson Kernaghan & Co. Limited (the
"Agent"), as agent, and the subscriber (the "Subscriber") which has executed and
delivered this Agreement in Section 9 hereof.
BACKGROUND
The Company has authorized the issuance, sale, and delivery of up to
2,000,000 (subject to increase on the exercise of an agent's option to a maximum
of 2,500,000) units (the "Units") at a purchase price of U.S.$7.50 per Unit
(with a minimum subscription by Canadian subscribers of the equivalent of
Cdn.$500,000 and by non-Canadian subscribers of U.S.$333,000), each Unit being
comprised of:
(i) one-half of one share purchase warrant (collectively, the
"Purchase Warrants"), each whole Purchase Warrant entitling
the holder thereof to acquire one share of Common Stock, par
value $0.01 ("Common Stock") at any time until the first
anniversary of the date of effectiveness of the Registration
Statement (as defined below) at an exercise price of
U.S.$12.50, subject to adjustments as set forth in subsection
3(d) of Schedule "A"; and
(ii) in the case of Canadian subscribers, one special warrant
(collectively, the "Special Warrants"), each Special Warrant
being exercisable, for no additional consideration, on and
subject to the terms set forth in Schedule "A" hereto, for one
(1) share of the Company's Common Stock; and
(iii) in the case of non-Canadian subscribers, one share of Common
Stock.
The Subscriber wishes to purchase the number of Units set forth in
Section 9.1 hereof, upon the terms and conditions stated in this Agreement, in
reliance upon an exemption from the registration requirements of Section 5 of
the U.S. Securities Act of 1933, as amended (the "Securities Act"), the safe
harbor afforded by Rule 903 promulgated by the U.S. Securities and Exchange
Commission (the "SEC"), and upon an exemption from the prospectus requirements
of applicable Canadian provincial securities laws.
AGREEMENT
For and in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Agent and the
Subscriber hereby agree as follows:
SECTION 1 UNITS.
SECTION 1.1 SUBSCRIPTION FOR THE UNITS.
The Subscriber hereby irrevocably agrees to subscribe for that number
of Units (the "Purchased Units") set forth in Section 9.1 at the Closing (as
defined below), for the aggregate subscription price (the "Subscription Price")
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set forth in Section 9.1. The particulars of the Units and other terms and
conditions are set out in Schedule "A" hereto.
SECTION 1.2 CLOSING.
The closing of the purchase and sale of the Units (the "Closing") shall
take place at the offices of Goodman Phillips & Vineberg, 250 Yonge Street,
Toronto, Ontario, M5B 2M6, at 10:00 a.m., Toronto time (the "Closing Time"), on
April 14, 2000 (the "Closing Date"), or on such other date or such other time or
place as the Company and the Agent may agree.
SECTION 1.3 DELIVERIES AT CLOSING
At the Closing the Company shall deliver to the Agent, on behalf of the
Subscriber, in consideration of the receipt of the Subscription Price:
(a) this Agreement, executed by the Company;
(b) Certificates for the Special Warrants and Purchase Warrants
comprising the Purchased Units (the "Purchased Securities"),
registered in accordance with the Subscriber's instructions
set forth in Section 9.1 hereof, free and clear of any claims,
and containing a legend complying with the requirements of SEC
Rule 903(b)(3)(iii)(B)(3);
(c) the Registration Rights Agreement (defined in Section 4.8
below), executed by the Company, in substantially the form of
Exhibit B hereto;
(d) an opinion of Goodman Phillips & Vineberg, Canadian counsel to
the Company, in customary form;
(e) an opinion of Sonfield & Sonfield, legal counsel to the
Company, in customary form; and
(f) the certificates described in Sections 6(d) (the "Compliance
Certificate") and 6(g) (the "Secretary Certificate") hereof,
each executed by the Company.
SECTION 2 SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES
SECTION 2.1 U.S. SECURITIES REPRESENTATIONS
The Subscriber represents and warrants with if the Company (and hereby
indemnifies the Company and the Agent and their respective directors, officers,
employees and agents for any damages they may suffer as a consequence of a
misrepresentation as to the following) that it:
(a) acquiring the Purchased Securities (and on exercise thereof
will be acquiring the underlying shares (the "Underlying
Shares")), for its own account for investment only and not
with a view towards, or for resale in connection with, the
public sale or distribution thereof, provided however, that by
making the representations herein, the Subscriber does not
agree to hold any Purchased Securities or Underlying Shares
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for any minimum or other specific term. The Subscriber
acknowledges that the Purchased Securities and the Underlying
Shares may not be resold in the United States, or to or for
the account of a U.S. person as defined by SEC Rule 902(k),
except pursuant to an effective registration statement under
the Securities Act or after the expiration of the one-year
distribution compliance period provided in SEC Rule
903(b)(3)(iii)(A);
(b) it is an "accredited investor" as that term is defined in Rule
501(a)(3) of Regulation D of the SEC;
(c) it understands and acknowledges that the Purchased Secirotoes
(and the Underlying Shares) are being offered and sold to it
in reliance on the exemption from the registration
requirements of Section 5 of the Securities Act for offshore
transactions as defined in SEC Rule 902(h), and that the
Company is relying in part upon the truth and accuracy of, and
the Subscriber's compliance with, its representations,
warranties, agreements, acknowledgements, and understandings
of the Subscriber set forth herein in order to determine the
availability of such exemptions and the eligibility of the
Subscriber to acquire such securities. With respect to that
exemption, the Subscriber further represents and warrants to
the Company that:
(i) it is not a U.S. Person as defined in SEC Rule
902(k);
(ii) the offer to sell the Purchased Units (and the
Underlying Shares) to the Subscriber was not made in
the United States, and was made in Canada;
(iii) the Subscriber's buy order for the Purchased Units
was made outside the United States, and was made in
Canada; and
(iv) the Subscriber has complied with all of the
conditions required of it by SEC Rule 903(b)(3);
(d) it (and its advisors, if any), have been furnished with all
materials relating to the proposed business, financial
condition, and operations of the Company and materials
relating to the offer and sale of the Purchased Units (and the
Underlying Shares), that have been requested. It (and its
advisors, if any), have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other
due diligence investigations conducted by the Subscriber or
its advisors, if any, or its representatives shall modify,
amend, or affect the Subscriber's right to rely on the
Company's representations and warranties contained in Section
3 below. It understands that its investment in the Purchased
Units (and the Underlying Shares) involves a high degree of
risk. It has sought such accounting, legal, and tax advice as
it has considered necessary to make an informed investment
decision with respect to its acquisition of the Purchased
Units (and the Underlying Shares);
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(e) it understands that no United States federal or state agency
or any other government or governmental agency has passed on
or made any recommendation or endorsement of the Units (or the
securities comprising the Units) (or the Underlying Shares),
or the fairness or suitability of the investment in the Units
(or the Underlying Shares), nor have such authorities passed
upon or endorsed the merits of the offering of such
securities;
(f) this Agreement has been duly and validly authorized, executed,
and delivered by the Subscriber and is a valid and binding
agreement of the Subscriber severally enforceable in
accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, and other
similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies; and
(g) the acquisition of the Purchased Securities (and the
Underlying Shares) is not a transaction (or any element of a
series of transactions) that is part of a plan or scheme to
evade the registration provisions of the Securities Act.
SECTION 2.2 CANADIAN SECURITIES AND OTHER REPRESENTATIONS
The Subscriber hereby makes the representations and warranties to the
Company and to the Agent set forth in Schedule "B" hereto.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Agent and the Subscriber
that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is not qualified as a foreign corporation to do business
in any other jurisdiction. The Company has two wholly-owned subsidiaries,
SoftQuad Acquisition Corp. and SoftQuad Software Inc.
SECTION 3.2 AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS.
(a) The Company has the requisite corporate power and authority to
enter into and perform this Agreement and to issue the
Purchased Securities and the Underlying Shares;
(b) the execution and delivery of this Agreement by the Company,
and the consummation by it of the transactions contemplated
hereby, including without limitation the issuance of the
Purchased Securities and the issuance of the Underlying Shares
on the due exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of
Directors or its stockholders;
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(c) this Agreement has been duly executed and delivered by the
Company and the persons signing on behalf of the Company have
full power and authority to do so; and
(d) this Agreement constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, or
similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
SECTION 3.3 CAPITALIZATION
Immediately prior to Closing, the authorized capital stock of the
Company consisted of 75,000,001 shares, divided into (i) 50,000,000 shares of
Common Stock, $0.001 par value, of which 5,372,372 are issued and outstanding
(on a non-diluted basis); (ii) 25,000,000 shares of Preferred Stock, $0.001 par
value, of which (a) 1,473,405 shares have been designated Class A Convertible
Preferred Stock, all of which are issued and outstanding, and (b) 1,722,222
shares have been designated Class B Convertible Preferred Stock, all of which
are issued and outstanding; and (iii) one share of Special Voting Stock, which
is issued and outstanding. There will be outstanding immediately prior to
Closing 1,878,367 share purchase warrants 1,000,000 special warrants
(exercisable for no additional consideration), 1,557,500 options to acquire
shares of Common Stock and 5,773,785 exchangeable shares in the capital of the
Company's subsidiary Softquad Acquisition exchangeable for shares of Common
Stock. No shares of the Company's capital stock are subject to preemptive rights
or any other similar rights.
SECTION 3.4 ISSUANCE OF PURCHASED SECURITIES AND UNDERLYING
SHARES
The Purchased Special Warrants and the Underlying Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
validly issued, fully paid, and nonassessable, are free from all taxes, liens,
and charges with respect to the issue thereof and are entitled to the rights and
preferences set forth therein. The Purchased Securities and Underlying Shares
are "restricted securities" as defined by SEC rules, and may be transferred,
assigned or resold by the Subscriber only in accordance with the Securities Act
and the SEC rules promulgated thereunder.
SECTION 3.5 NO CONFLICTS
The execution, delivery, and performance of this Agreement by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby, will not (a) result in a violation of the Certificate of
Incorporation, any Certificate of Designation applicable to any Preferred Stock
of the Company, or the Bylaws of the Company or (b) conflict with, constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration, or cancellation of, any agreement, indenture, or instrument to
which the Company is a party, or result in a violation of any law, rule,
regulation, order, judgment, or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
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asset of the Company is bound or affected. The Company is not in violation of
any term of, or in default under, its Certificate of Incorporation or Bylaws, or
any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree, or order or any statute, rule, or regulation applicable to the
Company. The business of the Company is not being conducted and shall not be
conducted in violation of any law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state or provincial securities laws,
the Company is not required to obtain any consent, authorization, or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver, and perform any of its obligations under or
contemplated by this Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, orders, filings, and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is unaware of
any facts or circumstances which might give rise to any of the foregoing.
SECTION 3.6 FINANCIAL STATEMENTS
The Company's financial statements, which the Company has delivered to
the Subscriber and which the Subscriber acknowledges having received, are true,
accurate and complete in all material respects. The Company has not engaged in
any transaction, maintained any bank account, or used any of the funds of the
Company that are not reflected in the normally maintained books and records of
the Company. No other information provided by or on behalf of the Company to the
Subscriber which is not included in the Financial Statements, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES
Since the date of the Company's opening balance sheet, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations, or prospects
of the Company. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
SECTION 3.8 ABSENCE OF LITIGATION
There is no action, suit, proceeding, inquiry, or investigation before
or by any court, public board, government agency, self-regulatory organization,
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company, in which an unfavorable decision, ruling or finding would
(a) have a material adverse effect on the transactions contemplated hereby, or
(b) have a material adverse effect on the business, operations, properties,
financial condition, or results of operation of the Company.
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SECTION 3.9 THE AGENT
The Company acknowledges that the Agent is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated herein. The Company further
represents to the Subscriber that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.
SECTION 3.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS, OR
CIRCUMSTANCES
No event, liability, development, or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
businesses, properties, prospects, operations, or financial condition, which
could be material but which has not been publicly announced or disclosed in
writing to the Subscriber.
SECTION 3.11 NO GENERAL SOLICITATION
Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Units or the Underlying Shares.
SECTION 3.12 NO INTEGRATED OFFERING
Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would require registration of the securities comprising the Units or the
Underlying Shares under the Securities Act or cause this offering to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable stockholder approval provisions.
SECTION 3.13 INTERNAL ACCOUNTING CONTROLS
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management's general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 3.14 NO MATERIALLY ADVERSE CONTRACTS, ETC.
The Company is not subject to any charter, corporate, or other legal
restriction, or any judgment, decree, order, rule, or regulation which in the
judgment of the Company's officers has, or is expected in the future to have, a
material adverse effect on the business, properties, operations, financial
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condition, results of operations, or prospects of the Company. The Company is
not a party to any contract or agreement which in the judgment of the Company's
officers has, or is expected to have, a material adverse effect on the business,
properties, operations, financial condition, results of operations, or prospects
of the Company.
SECTION 3.15 TAX STATUS
The Company has made or filed all federal and state income and all
other tax returns, reports, and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes), and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports, and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports,
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
SECTION 3.16 CERTAIN TRANSACTIONS
Except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers, and
directors), including any contract, agreement, or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director, or such employee or, to the knowledge of the Company, any
corporation, partnership, trust, or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee, or partner.
SECTION 3.17 FEES AND RIGHTS OF FIRST REFUSAL
The Company is not obligated to offer the securities offered hereunder
on a right of first refusal basis or otherwise to any third parties including,
but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents, or other third parties. The Company is not obligated to pay any
commission or fee in connection with the issuance and sale of the Units (or the
Underlying Shares) for which the Agent or the Subscriber is or may become
liable.
SECTION 3.18 REGULATION S EXEMPTION
The Company understands that the Subscriber is purchasing the Purchased
Units (and the Underlying Shares) in reliance on the exemption from the
registration requirements of Section 5 of the Securities Act for offshore
transactions as defined in SEC Rule 902(h), and that the Subscriber (and the
Agent) are relying in part upon the truth and accuracy of, and the Company's
compliance with, the representations, warranties, agreements, acknowledgements,
and understandings of the Company set forth herein in order to determine the
availability of such exemptions and the eligibility of the Company to issue and
sell the Purchased Securities (and the Underlying Shares) to the Subscriber
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without having complied with those registration requirements. With respect to
that exemption, the Company further represents and warrants to the Agent and the
Subscriber that:
(a) The Company has not offered any of the Purchased Units (and
the Underlying Shares) to a U.S. Person (as defined in SEC
Rule 902(k)) or to a person in the United States.
(b) The offer and sale of the Purchased Units (and the Underlying
Shares) to the Subscriber are being made in an offshore
transaction as defined in SEC Rule 902(h).
(c) The Company has not engaged in any directed selling efforts,
as defined in SEC Rule 902(c), with respect to the Purchased
Units (and the Underlying Shares).
(d) The Company has complied with all of the conditions required
of it under SEC Rule 902(b)(3).
SECTION 4 COVENANTS
SECTION 4.1 BEST EFFORTS
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Section 5 and Section 6 of this
Agreement.
SECTION 4.2 COMPLIANCE WITH REGULATION S
Each party shall comply with all of the terms of SEC Rule 903(b)(3)
required of it with respect to the Purchased Units (and the Underlying Shares).
SECTION 4.3 REPORTING STATUS
The Company is a "reporting company" under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), as defined by the rules and
regulations of the SEC and the NASD, and shall use its commercially reasonable
efforts to timely file all reports and other information required by it to be
filed with the SEC under the Exchange Act in order to remain a reporting
company, for so long as the Subscriber is the holder or beneficial owner of any
Common Stock.
SECTION 4.4 USE OF PROCEEDS
The Company will use the proceeds from the sale of the Purchased Units
and the shares underlying the exercised Purchase Warrants) for general working
capital purposes.
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SECTION 4.5 LISTING
The Company shall maintain the listing of its Common Stock on the
NASDAQ OTC Bulletin Board, and upon the NASDAQ Small Cap Market as soon
thereafter as it is eligible therefor.
SECTION 4.6 CORPORATE EXISTENCE
So long as the Subscriber holds 1% or more of the outstanding Common
Stock, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, consolidation, sale of all or substantially all
of the Company's assets, or any similar transaction or related transactions
(each such transaction, a "Sale of the Company") except if the surviving or
successor entity in such transaction is a publicly traded corporation whose
Common Stock is listed for trading on the New York Stock Exchange, Inc., the
American Stock Exchange, or the NASDAQ National Market.
SECTION 4.7 TRANSACTIONS WITH AFFILIATES
So long as the Subscriber holds 1% or more of the outstanding Common
Stock, the Company shall not, and shall cause each of its subsidiaries not to,
enter into, amend, modify, or supplement, or permit any subsidiary to enter
into, amend, modify, or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary's officers, directors, persons who
were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of any class of the Company's
capital stock, or affiliates, or with any individual related by blood, marriage,
or adoption to any such individual or with any entity in which any such entity
or individual owns a 5% or more beneficial interest (each, a "Related Party"),
except for (i) customary employment arrangements and benefit programs on
reasonable terms, (ii) any agreement, transaction, commitment, or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (iii) any agreement,
transaction, commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company, for purposes hereof, any director who is
also an officer of the Company or any subsidiary of the Company shall not be
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(1) has a 5% or more equity interest in that person or entity, (2) has 5% or
more common ownership with that person or entity, (3) controls that person or
entity, or (4) share common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
SECTION 4.8 REGISTRATION RIGHTS
As soon as is practicable after the date of this Agreement, the Company
shall file a registration statement (the "Registration Statement") with the SEC
to register (among other things) the resale of the Underlying Shares, and shall
use its best efforts to cause the Registration Statement to become effective,
all as provided in the Registration Rights Agreement (the "Registration Rights
Agreement") attached as Exhibit B to this Agreement.
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SECTION 5 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the Purchased
Units to the Subscriber at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) The Subscriber shall have executed this Agreement and
delivered the same to the Company.
(b) The Agent shall (on behalf of the Subscriber) have delivered
the Subscription Price for the Purchased Units to the Company.
(c) The representations and warranties of the Subscriber shall be
true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time,
and the Subscriber shall have performed, satisfied, and
complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied, or complied with by it at or prior to
the Closing Date.
SECTION 6 CONDITIONS TO THE SUBSCRIBER'S OBLIGATION TO PURCHASE
The obligation of the Subscriber hereunder to purchase the Purchased
Units at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Subscriber's sole benefit and may be waived by the Subscriber at any
time in its sole discretion:
(a) The Company shall have executed this Agreement.
(b) The Company shall have executed the Registration Rights
Agreement.
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the
extent that any of such representations and warranties is
already qualified as to materiality in Section 3 above, in
which case, such representations and warranties shall be true
and correct without further qualification) as of the date when
made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
specific date) and the Company shall have performed,
satisfied, and complied in all material respects with the
covenants, agreements, and conditions required by this
Agreement to be performed, satisfied, or complied with by the
Company at or prior to the Closing Date. The Subscriber shall
have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be
reasonably requested by the Subscriber including, without
limitation an update as of the Closing Date regarding the
representation contained in Section 3.3 above.
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(d) The Subscriber shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form,
scope, and substance reasonably satisfactory to the Subscriber
and in substantially the form of Exhibit A attached hereto.
(e) The Board of Directors of the Company shall have authorized
and adopted the resolutions in substantially the form attached
to the Secretary Certificate delivered herewith.
(f) The Subscriber shall have received a certificate of the
Secretary of the Company dated the Closing Date and
certifying: (i) that attached thereto is a true and complete
copy of the Certificate of Incorporation as then in effect,
certified or bearing evidence of filing by the Secretary of
State of the State of Delaware, and (ii) a certificate of the
Delaware Secretary of State, dated as of a recent date as to
the due incorporation and good standing of the Company, the
payment of all franchise taxes by the Company, and listing all
documents of the Company on file with the Secretary of State;
(iii) that attached thereto is a true and complete copy of the
Bylaws of the Company as in effect on the date of such
certification; (iv) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery,
and performance of this Agreement and the issuance, sale, and
delivery of the Units (and the Underlying Shares), and that
all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the foregoing
agreements and the transactions contemplated thereby; (v) that
the Certificate of Incorporation has not been amended since
the date of the last amendment referred to in the certificate
delivered pursuant to clause (i) above; and (vi) to the
incumbency and specimen signature of each officer of the
Company executing this Agreement and any certificate or
instrument furnished pursuant hereto and thereto, and a
certification by another officer of the Company as to the
incumbency and signature of the officer signing the
certificate.
SECTION 7 INDEMNIFICATION
In consideration of the Subscriber's execution and delivery of this
Agreement and acquiring the Purchased Units hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify, and hold harmless the Subscriber, and all of its officers,
directors, employees, and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities, and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement, or any
other certificate, instrument, or document contemplated hereby or thereby, (b)
any breach of any covenant, agreement, or obligation of the Company contained in
this Agreement, or (c) any cause of action, suit, or claim brought or made
<PAGE>
- 13 -
against such Indemnitee and arising out of or resulting from the execution,
delivery, performance, or enforcement of this Agreement, or any other
instrument, document, or agreement executed pursuant hereto by any of the
Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Purchased
Units, or the status of the Subscriber as a stockholder in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 8 GENERAL PROVISIONS
SECTION 8.1 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware; provided, however, (i) that if any provision
of this Agreement is unenforceable under the laws of the State of Delaware, but
is enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario; and (ii) that the exemption from the registration
requirements of the Securities Act for the sale shall be governed by SEC Rule
903. The parties agree that the courts of the Province of Ontario, Canada, shall
have exclusive jurisdiction and venue for the adjudication of any civil action
between them arising out of relating to this Agreement, and hereby irrevocably
consent to such jurisdiction and venue.
SECTION 8.2 COUNTERPARTS
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof.
SECTION 8.3 HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
SECTION 8.4 SEVERABILITY
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
<PAGE>
- 14 -
SECTION 8.5 ENTIRE AGREEMENT, AMENDMENTS
This Agreement supersedes all other prior oral or written agreements
between the Subscriber, the Company, their affiliates and persons acting on
their behalf with respect to the issuance and sale of the Purchased Units, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company, the Agent nor the Subscriber makes any representation, warranty,
covenant, or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
SECTION 8.6 NOTICES
Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (a) upon receipt, when delivered
personally, (b) upon receipt, when sent by facsimile, provided a copy is mailed
by certified or registered mail, return receipt requested, (c) three (3) days
after being sent by certified mail, return receipt requested, or (d) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be, if to the Purchaser, at the
address set forth in Section 9.1:
if to the Company: with a copy (which shall not
constitute notice) to:
SoftQuad Software Ltd. Sonfield & Sonfield
c/o Chell.com 770 Post Oak Lane
1215 - 13th Street S.E., Suite 114 Houston, Texas 77056
Calgary, Alberta T2G 3J4, Canada
Attention: Robert L. Sonfield, Jr.
Attention: Cameron Chell, President
Telephone: (713) 877-8333
Telephone: (403) 303-2345
Facsimile: (403) 303-2376
if to the Agent: with a copy (which shall not
constitute notice) to:
Thomson Kernaghan & Co. Limited John M. Mann
365 Bay Street, 10th Floor Attorney at Law
Toronto, Ontario M5H 2V2, Canada 1330 Post Oak Boulevard, Suite 2800
Houston, Texas 77056-3060
Attention: Mark E. Valentine, Chairman
Telephone: (713) 622-7114
Telephone: (416) 860-8800 Facsimile: (713) 622-7185
Facsimile: (416) 367-8055
<PAGE>
- 15 -
Each party shall provide five (5) day's prior written notice to the other party
of any change in address or facsimile number.
SECTION 8.7 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Subscriber. The Subscriber may assign its rights
hereunder without the consent of the Company, provided however, that any such
assignment shall not release the Subscriber from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption.
SECTION 8.8 NO THIRD PARTY BENEFICIARIES
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
SECTION 8.9 SURVIVAL
The representations and warranties of the Company and the Subscriber
contained in Section 2 the agreements and covenants set forth in Section 4 and
Section 5 , and the indemnification provisions set forth in Section 7 , shall
survive the Closing.
SECTION 8.10 PUBLICITY
The Company and the Agent shall have the right to approve, before
issuance, any press releases or any other public statements with respect to the
transactions contemplated hereby; provided however, that the Company shall be
entitled, without the prior approval of the Agent, to make any press release or
other public disclosure with respect to such transactions as is required by
applicable law and regulations (although the Agent shall be consulted by the
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
SECTION 8.11 FURTHER ASSURANCES
Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
<PAGE>
- 16 -
SECTION 8.12 NO STRICT CONSTRUCTION
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
SECTION 8.13 CURRENCY
All dollar amounts expressed in this Agreement are currency of the
United States of America.
SECTION 9 SUBSCRIPTION
SECTION 9.1 SUBSCRIPTION
The Subscriber, by its due execution hereof hereby irrevocably
subscribes, as of the date first above written, for Units as follows:
Number of Units to be purchased at U.S.$7.50 each: __________ Special Warrants
Total Subscription Price: U.S.$ ______________
Name and Address of Subscriber: Name: ___________________________________
(Please Print)
Address: ___________________________________
(Street Address)
___________________________________
(City, Province and Postal Code)
Alternate Registration Instructions (if other than in the name of the
Subscriber):
Name: ___________________________________
(Please Print)
Address: ___________________________________
(Street Address)
___________________________________
(City, Province and Postal Code)
Delivery Instructions: The name and address (including contact name and
telephone number) of the person to whom the certificate representing the Special
Warrants is to be delivered, if other than the Subscriber:
Name: ____________________________________
(Please Print)
Address: ___________________________________
(Street Address)
___________________________________
<PAGE>
- 17 -
(City, Province and Postal Code)
___________________________________
Contact Name and Phone Number
IN WITNESS WHEREOF the Subscriber has executed, or caused its duly
authorized representative to execute, on its own behalf and, if applicable, on
behalf of each other person for whom it is contracting hereunder, this
subscription agreement as of the date first above written. The Subscriber also
hereby authorizes the Agent to deliver a copy of this Agreement on its behalf to
the Company.
__________________________________________ ____________________________________
Signature of Subscriber (if an individual) Name of Subscriber (if not an
individual)
__________________________________________ Per: _______________________________
Name of Subscriber (if an individual) (signature of authorized
representative)
____________________________________
Name and Title of Authorized
Representative
A C C E P T A N C E
The forgoing is acknowledged, accepted and agreed to by the undersigned
as of the date first above written.
SOFTQUAD SOFTWARE, LTD.
By: By:
__________________________________________________
Name:
Title
<PAGE>
SCHEDULE "A"
TERMS OF OFFERING
THIS IS SCHEDULE "A" TO THE SUBSCRIPTION AGREEMENT RELATING TO THE PURCHASE OF
UNITS OF SOFTQUAD SOFTWARE, INC. CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE
DEFINED SHALL HAVE THE MEANINGS ASCRIBED THERETO IN THE SUBSCRIPTION AGREEMENT.
1. OFFERING. The Units subscribed for hereunder form part of a larger sale of
up to 2,000,000 Units (the "OFFERING") through the Agent, subject to the
exercise of a right of KBL Capital Partners Inc. to sell, as agent for the
Company, up to an additional 500,000 Units.
2. DEFINITIONS. In the Agreement and the schedules, the defined terms set out
in the first page of the Agreement shall apply and, unless the context
otherwise requires:
"AGENT" means Thomson Kernaghan & Co. Limited;
"AGREEMENT" means the subscription agreement among the Company, the
Agent and the Subscriber, pursuant to which the Subscriber agreed to
purchase and the Company agreed to issue that number of Units specified
therein, to which this Schedule is appended;
"BUSINESS DAY" means any day except Saturday, Sunday or a statutory
holiday in any Qualifying Province;
"COMPANY" means SoftQuad Software, Ltd.;
"FINAL PROSPECTUS" means the final version of the Prospectus;
"MISREPRESENTATION" means, with respect to circumstances in which the
Securities Laws of a Province are applicable, a misrepresentation as
defined under the Securities Laws of that Province and, if not so
defined or in circumstances in which no particular provincial laws are
applicable, a misrepresentation as defined under the Securities Act
(Ontario);
"OFFERING" has the meaning ascribed thereto in section 1 hereof;
"PRELIMINARY PROSPECTUS" means the preliminary version of the
Prospectus;
"PROSPECTUS", as the context may require, means the preliminary or
final version of the prospectus to be filed in each Qualifying Province
relating to the distribution of the Underlying Shares to the holders of
Special Warrants upon exercise thereof and, unless the context
otherwise requires, includes any amendments or supplements thereto;
"PROSPECTUSES" means both the Preliminary Prospectus and Final
Prospectus;
"PURCHASERS" means those persons who subscribe for Special Warrants
under the Offering, including the Subscriber;
"QUALIFYING PROVINCES" means the Provinces of Ontario, Quebec, British
Columbia and Alberta and "QUALIFYING PROVINCE" means any of them;
<PAGE>
- 2 -
"SECURITIES COMMISSIONS" means, collectively, the securities
commissions or other securities regulatory authorities in the
Qualifying Provinces, and "SECURITIES COMMISSION" means any one of
them;
"SECURITIES LAWS" means, collectively, the applicable securities laws
of each of the Qualifying Provinces and the respective regulations made
and forms prescribed thereunder together with all applicable published
policy statements, rules and blanket orders and rulings of the
Securities Commissions;
"SHARES" means shares of Common Stock in the capital of the Company;
"UNDERLYING SHARES" means the Shares issuable upon the exercise or
deemed exercise of the Warrants;
"UNDERWRITERS' COMMISSION" means the aggregate of:
(i) the fee payable by the Company to the Agent equal to 8.0% of
the gross proceeds of the Offering provided; and
(ii) a number of Warrants (the "Agent's Warrants") equal to 10% of
the number of Special Warrants sold pursuant to the Offering;
and
"WARRANTS" means Special Warrants and the Purchased Warrants.
3. DESCRIPTION OF WARRANTS.
(a) Special Warrants. The holders of Special Warrants shall be entitled
to receive, upon the exercise thereof and without payment of any additional
consideration, one Share for each Special Warrant held, subject to adjustment as
described in paragraph (c).
(b) Purchase Warrants. The holders of Purchase Warrants shall be
entitled to receive, upon due exercise thereof and payment of the U.S.$12.50 per
Purchase Warrant exercise price (subject to adjustment as paragraph (d), one
Share for each Purchase Warrant held, subject to adjustment as described in
paragraph (c). The Purchase Warrants will be created and issued pursuant to the
terms of a common share purchase warrant indenture (the "Purchase Warrant
Indenture") to be entered into between the Company and a purchase warrant agent.
The attributes of the Purchase Warrants will be set out in the Purchase Warrant
Indenture. The Purchase Warrant Indenture shall be in such form and contain such
terms as shall be approved by the Agent and its counsel and by the Company and
its counsel. The Subscriber acknowledges and agrees that the rights of holders
of Purchase Warrants may be modified under the Purchase Warrant Indenture in the
manner prescribed thereby.
(c) Adjustment. In the event of any subdivision, consolidation,
reclassification or change of the Shares, or any capital reorganization of the
Company or a consolidation, amalgamation or merger with or into any other entity
or the sale of substantially all of the properties and assets as an entirety to
any other entity while any Warrant is outstanding, the holder of any such
Warrant, if the holder has not exercised such Warrant prior to the effective
date of such event, shall thereafter, upon exercise, be entitled to receive upon
due exercise and shall accept in lieu of the number of Shares previously due to
him upon exercise thereof the number of Shares (or other securities or property
<PAGE>
- 3 -
of the entity resulting from such merger, amalgamation or consolidation or to
which such sale may be made, as the case may be), that the holder would have
been entitled to receive if such holder had exercised such warrant prior to the
occurrence of such event, all as more particularly to be set forth in the
Purchase Warrant Indenture, and the Subscriber expressly acknowledges and agrees
that its rights with respect to any adjustment shall, in the event of any
inconsistency between the Purchase Warrant Indenture and the terms hereof, be
governed by the terms of the Purchase Warrant Indenture, and that the foregoing
description of the attributes of the Purchase Warrants is expressly subject to
the detailed provisions of the Purchase Warrant Indenture.
(d) Further Adjustment. If the Registration Statement is not declared
effective, and/or the Securities Commission in the Qualifying Province in which
the warrantholder is resident (for this purpose, warrantholders not resident in
a Qualifying Province shall be deemed to be resident in the province of Ontario)
has not issued a receipt for the Final Prospectus such that the Shares
underlying the Purchase Warrants are subject to resale restrictions under
applicable provincial securities laws (a "non-Qualification Event"), by August
31, 2000, the exercise price per Purchase Warrant shall be reduced by U.S.$0.25
per month, or pro-rated portion thereof, until the earlier of (i) the date of
effectiveness and/or issuance of a receipt, as the case may be, and (ii) October
31, 2000. If the Registration Statement is not declared effective by October 31,
2000 and a Non-Qualification Event has occurred, the exercise price per Purchase
Warrant shall thereafter be reduced by U.S.$0.50 per month (to a minimum of
U.S.$3.75), or pro-rated portion thereof until it is declared effective and/or a
receipt has been issued, as the case may be.
(e) Restrictions. SINCE THE COMPANY IS NOT CURRENTLY A "REPORTING
ISSUER" IN ANY OF THE QUALIFYING PROVINCES OR ELSEWHERE, THE SPECIAL WARRANTS,
THE PURCHASE WARRANTS AND UNDERLYING SHARES WILL BE SUBJECT TO RESTRICTIONS ON
THEIR RESALE UNDER APPLICABLE SECURITIES LEGISLATION UNTIL SUCH TIME AS OR
UNLESS: (I) THE COMPANY BECOMES A "REPORTING ISSUER" UNDER SUCH LAWS AND THE
APPROPRIATE "HOLD PERIODS", IF ANY, UNDER SUCH LAWS HAVE EXPIRED; (II) A FURTHER
STATUTORY EXEMPTION FROM THE REGISTRATION AND PROSPECTUS REQUIREMENTS OF SUCH
LAWS IS RELIED UPON BY THE HOLDER; OR (III) AN APPROPRIATE DISCRETIONARY ORDER
OR RULING IS OBTAINED UNDER SUCH LAWS TO PERMIT THE TRANSFER BY THE PURCHASER OR
ITS SECURITIES.
THE COMPANY HAS AGREED TO USE ITS REASONABLE BEST EFFORTS, TO FILE,
CLEAR, AND OBTAIN A RECEIPT FOR THE FINAL PROSPECTUS IN EACH OF THE QUALIFYING
PROVINCES. IN THE EVENT THAT THE COMPANY IS UNABLE TO OBTAIN A RECEIPT FOR THE
FINAL PROSPECTUS IN A QUALIFYING PROVINCE, THE SPECIAL WARRANTS, THE PURCHASE
WARRANTS AND UNDERLYING SHARES WILL BE SUBJECT TO STATUTORY RESALE RESTRICTIONS
UNDER THE APPLICABLE SECURITIES LEGISLATION OF THAT PROVINCE AND THE APPLICABLE
HOLD PERIOD FOR THE SPECIAL WARRANTS, THE PURCHASE WARRANTS AND UNDERLYING
SHARES MAY NEVER EXPIRE. IN ADDITION, STATUTORY RESTRICTIONS MAY APPLY ON THE
RESALE OF THE UNDERLYING SHARES THAT ARE ACQUIRED PRIOR TO THE ISSUANCE OF
RECEIPTS FOR THE FINAL PROSPECTUS BY THE SECURITIES COMMISSION IN ANY OF THE
QUALIFYING PROVINCES.
PURCHASERS ARE ADVISED TO CONSULT THEIR OWN LEGAL ADVISORS IN THIS
REGARD.
4. COVENANT OF THE COMPANY. The Company hereby covenants and agrees to use its
reasonable best efforts to obtain receipts for the Preliminary Prospectus
and Final Prospectus and to qualify the Underlying Shares for distribution
<PAGE>
- 4 -
to the holders of Warrants resident in the Qualifying Provinces upon the
exercise thereof.
5. ACCEPTANCE OR REJECTION. The Company and the Agent will have the right to
accept or reject the Subscriber's agreement to purchase at any time at or
prior to the Closing Time. Notwithstanding the foregoing, the Subscriber
acknowledges and agrees that the acceptance of the Subscription Agreement
will be conditional inter alia upon the sale of the Units to the Subscriber
being exempt from any prospectus and offering memorandum requirements of
all applicable Securities Laws. The Company will be deemed to have accepted
the Agreement upon the deliver at closing of the certificate representing
the Purchased Special Warrants.
6. INFORMATION AND DOCUMENTS. As soon as practicable and in any event by no
later than 4:00 p.m. (Toronto time) on April 11, 2000 (or such other date
as the Agent advises the Subscriber which shall in all cases be the last
Business Day prior to the Closing Date), the Subscriber will deliver or
arrange to have delivered or telecopied to the Agent (or to such other
person or at such address as the Agent may direct by notice), a completed
and executed copy of the Agreement, and will, promptly upon request by the
Company or the Agent, provide the Company or the Agent with such
information and execute and deliver to the Company or the Agent such
additional undertakings, questionnaires and other documents as the Company
or the Agent may request in connection with the issue and sale of the Units
(and the filing of the Prospectuses, if applicable). The Subscriber
acknowledges and agrees that such undertakings, questionnaires and other
documents, when executed and delivered by it, will form part of and will be
incorporated into the Subscription Agreement with the same effect as if
each constituted a representation and warranty or covenant of the
Subscriber hereunder in favour of the Company and the Agent. The Subscriber
hereby consents to the filing of such undertakings, questionnaires and
other documents as may be required to be filed with any securities
regulatory authority in connection with the transactions contemplated
hereby.
The Subscriber acknowledges that pursuant to the Securities Laws in the
Qualifying Province in which the Subscriber or, if applicable, the others
for whom it is contracting, is resident or otherwise subject, the
Subscriber or, if applicable, the others for whom it is contracting
hereunder, may be required to file a report with the applicable Securities
Commission in the required form within 10 days of each disposition of all
or any of the Special Warrants purchased hereunder or any of the Underlying
Shares issued upon the exercise thereof and, if so required, the
Subscriber, on its behalf and, if applicable, on behalf of others for whom
it is contracting hereunder, undertakes to file the required report.
7. RESALE RESTRICTIONS. The Subscriber, on its own behalf and, if applicable,
on behalf of others for whom it is contracting hereunder, understands and
acknowledges that the securities comprising the Purchased Units and in
certain circumstances the Underlying Shares, will be subject to resale
restrictions under applicable Securities Laws and the Subscriber agrees to
comply with such restrictions. THE SUBSCRIBER FURTHER UNDERSTANDS AND
ACKNOWLEDGES THAT THE COMPANY IS NOT CURRENTLY A "REPORTING ISSUER" AND
THAT HOLDERS OF SECURITIES OF THE COMPANY MAY NOT BE ABLE TO SELL SUCH
SECURITIES FOR AN INDEFINITE PERIOD OF TIME WITHOUT THE FINAL PROSPECTUS
BEING FILED AND A RECEIPT OBTAINED THEREFOR. The Subscriber, on its own
behalf and, if applicable, on behalf of others for whom it is contracting
hereunder, also acknowledges that it has been advised to consult its own
legal advisors with respect to applicable resale restrictions and that it
is solely responsible for complying with such restrictions (and neither the
<PAGE>
- 5 -
Company nor the Agent is in any manner responsible for ensuring compliance
by the Subscriber, on its own behalf and, if applicable, on behalf of
others for whom it is contracting hereunder, with such restrictions).
8. NO REVOCATION. The Subscriber, on its own behalf and, if applicable, on
behalf of others for whom it is contracting hereunder, agrees that this
offer is made for valuable consideration and may not be withdrawn,
cancelled, terminated or revoked by the Subscriber, on its own behalf and,
if applicable, on behalf of others for whom it is contracting hereunder.
9. COMPENSATION TO AGENT. The Subscriber, on its own behalf and, if
applicable, on behalf of others for whom it is contracting hereunder,
understands that in connection with the Offering, the Agent will receive
the Agent's Commission and is entitled to reimbursement of certain of its
expenses in connection with the Offering.
10. INDEMNITY. The Subscriber, on its own behalf and, if applicable, on behalf
of others for whom it is contracting hereunder, agrees to indemnify and
hold harmless the Company and the Agent and their respective directors,
officers, employees, agents, advisers and shareholders from and against any
and all loss, liability, claim, damage and expense whatsoever (including,
but not limited to, any and all fees, costs and expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
claim, lawsuit, administrative proceeding or investigation whether
commenced or threatened) arising out of or based upon any representation,
warranty or covenant of the Subscriber, on its own behalf and, if
applicable, on behalf of others for whom it is contracting hereunder,
contained herein or in any document furnished by the Subscriber to the
Company or the Agent in connection herewith being untrue in any material
respect or any breach or failure by the Subscriber, on its own behalf and,
if applicable, on behalf of others for whom it is contracting hereunder, to
comply with any covenant or agreement made by the Subscriber herein or in
any document furnished by the Subscriber, on its own behalf and, if
applicable, on behalf of others for whom it is contracting hereunder, to
the Company or the Agent in connection herewith.
11. MODIFICATION. Neither the Agreement nor any provision hereof shall be
modified, changed, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
12. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its acceptance and
acknowledgement of the Agreement, the Company hereby agrees to provide a
contractual right of action for rescission as hereinafter set forth, which
right shall be exercisable by the Subscriber and assigned to any permitted
assignee or transferee from time to time of the Purchased Special Warrants:
(i) In the event that a holder of a Special Warrant, who acquires
Underlying Shares upon exercise of the Special Warrant, is or
becomes entitled under applicable securities legislation to
the remedy of rescission by reason of the Final Prospectus or
any amendment thereto containing a misrepresentation, such
holder shall, subject to available defences and any limitation
period under applicable securities legislation, be entitled to
rescission not only of the holder's exercise of its Special
Warrant but also of the private placement transaction pursuant
to which the Special Warrant was initially acquired, and shall
be entitled in connection with such rescission to a full
<PAGE>
- 6 -
refund of all consideration paid to the Underwriters or the
Company, as the case may be, on the acquisition of the Special
Warrant. The provisions hereof are a direct contractual right
extended to the holder of a Special Warrant and to any
permitted assignee of the interest of the Subscriber, such
permitted assignee to be entitled to exercise the rights of
rescission and refund granted hereunder as if such permitted
assignee was such original holder. The foregoing is in
addition to any other right or remedy available to a holder of
the Special Warrant under section 130 of the Securities Act
(Ontario) or other applicable Canadian provincial securities
legislation, or otherwise at law, and is subject to paragraph
(ii) below.
(ii) The contractual rights of action for rescission described in
paragraph (i) shall be subject to the defences, limitations
(including time limitations) and other provisions described
under section 130 of the Securities Act (Ontario) and the
equivalent provisions of any other applicable Canadian
provincial securities legislation, all of which are
incorporated herein by reference, mutatis mutandis, or
otherwise at law. No action shall be commenced to enforce the
foregoing rights of action for rescission or damages more than
180 days following the Qualification Date.
Subject to the foregoing, the Subscriber hereby waives and releases the Company
and the Agent from, to the fullest extent permitted by law, all rights of
withdrawal which the Subscriber might otherwise be entitled to under applicable
Securities Laws.
13. COSTS. The Subscriber acknowledges and agrees that all costs and expenses
incurred by the Subscriber (including any fees and disbursements of any
special counsel retained by the Subscriber) relating to the sale of the
Purchased Units to the Subscriber shall be borne by the Subscriber.
14. LANGUAGE. The Subscriber, on its own behalf and, if applicable, on behalf
of others for whom it is contracting hereunder, acknowledges its consent
and requests that all documents evidencing or relating in any way to its
purchase of Special Warrants be drawn up in the English language only. Nous
reconnaissons par les presentes avoir consenti et demande que tous les
documents faisant foi ou se rapportant de quelque maniere a notre achat
soient rediges en anglais seulement.
<PAGE>
SCHEDULE "B"
SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES
THIS IS SCHEDULE "B" TO THE SUBSCRIPTION AGREEMENT RELATING TO THE PURCHASE OF
SPECIAL WARRANTS OF SOFTQUAD SECURITIES SOFTWARE, INC. TERMS USED HEREIN AND NOT
OTHERWISE DEFINED SHALL HAVE THE MEANING ASCRIBED THERETO IN THE SUBSCRIPTION
AGREEMENT OR IN SCHEDULE "A" THERETO.
The Subscriber, on its own behalf and, if applicable, on behalf of others for
whom it is contracting hereunder, represents and warrants to the Company and the
Agent, as representations and warranties that are true as of the date of this
subscription agreement and as of the Closing Date (with the acknowledgement that
the representations and warranties of the Subscriber contained herein shall
survive the termination of all or part of the Subscription Agreement), that:
1. General
(a) AUTHORIZATION AND EFFECTIVENESS. If the Subscriber is a
corporation, the Subscriber is a valid and subsisting
corporation, has the necessary corporate capacity and
authority to execute and deliver the Subscription Agreement
and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in
respect thereof. If the Subscriber is a partnership, syndicate
or other form of unincorporated organization, the Subscriber
has the necessary legal capacity and authority to execute and
deliver the Subscription Agreement and to observe and perform
its covenants and obligations hereunder and has obtained all
necessary approvals in respect thereof. If the Subscriber is a
natural person, he or she has attained the age of majority and
is legally competent to execute the subscription agreement and
to take all actions required pursuant thereto.
Whether the Subscriber is a natural person or a corporation,
partnership or other entity, upon acceptance by the Company,
the Subscription Agreement will have been duly executed and
delivered and will constitute a legal, valid and binding
contract of the Subscriber, and any beneficial purchaser for
whom it is purchasing, enforceable against the Subscriber and
any such beneficial purchaser in accordance with its terms.
(b) RESIDENCE. The Subscriber and any beneficial purchaser for
whom it is acting is a resident of the jurisdiction referred
to under "Name and Address of Subscriber" in Section 9.1 of
the Subscription Agreement, which address is the residence or
place of business of the Subscriber not created or used solely
for the purpose of acquiring Units.
(c) PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase by
the Subscriber of Units as agent or trustee for any principal
whose identity is disclosed or undisclosed or identified by
account number only, the Subscriber has due and proper
authority to act as agent or trustee for and on behalf of such
beneficial purchaser in connection with the transactions
contemplated hereby.
<PAGE>
- 2 -
(d) NO OFFERING MEMORANDUM. The Subscriber has not received, nor
has it requested, nor does it have any need to receive, any
prospectus, offering memorandum, sales or advertising
literature or any other document (other than a document
setting out current information about the Company for the
benefit of prospective investors familiar with the Company
through prior investment or business contacts) purporting to
describe the business and affairs of the Company which has
been prepared primarily for delivery to, and review by, a
prospective purchaser in order to assist it in making an
investment decision in respect of the Units and it has not
become aware of any advertisement in printed public media,
radio, television or telecommunications, including electronic
display, with respect to the distribution of the Units or the
Underlying Shares.
(e) NO REPRESENTATIONS. In making its investment decision, the
Subscriber, and (if applicable) the others for whom it is
contracting hereunder, have relied solely upon publicly
available information relating to the Company and not upon any
verbal or written representation as to any fact or otherwise
made by or on behalf of the Company or the Agent or any
employee, agent or affiliate thereof or any person associated
therewith, and it, and (if applicable) the others for whom it
is contracting hereunder, agree that the Agent assumes no
responsibility or liability of any nature whatsoever for the
accuracy, adequacy or completeness of any publicly available
information concerning the Company.
(f) NO RE-SALE. No person has made any written or oral
representation(s) that any person will re-sell or re-purchase
the Purchased Units or Underlying Shares, as to the future
price or value of the securities comprising the Purchased
Units or the Underlying Shares that any person will refund the
purchase price of the Purchased Units, or that the securities
comprising the Purchased Units or the Underlying Shares will
be listed and posted for trading on any stock exchange on
which they are not presently listed or that application has
been or will be made therefor.
(g) INVESTMENT SUITABILITY. The Subscriber, and any beneficial
purchaser for whom it is purchasing, has such knowledge and
experience in financial and business affairs as to be capable
of evaluating the merits and risks of the investment hereunder
in Units (and the Underlying Shares in respect thereof) and is
able to bear the economic risk of loss of such investment.
(h) PROSPECTUS EXEMPTIONS. The Subscriber acknowledges and agrees
that the sale and delivery of the Units to the Subscriber (or,
if applicable, to others for whom it is contracting
hereunder), is conditional upon such sale being exempt from
the requirements under applicable Securities Laws requiring
the filing of a prospectus or delivery of an offering
memorandum in connection with the distribution of the Units or
upon the issuance of such rulings, orders, consents and
approvals as may be required to permit such sale without the
requirement of filing a prospectus or delivery of an offering
memorandum. The Subscriber acknowledges and understands that
no Canadian federal or provincial securities regulatory
authority or other governmental agency has passed on or made
any recommendation or endorsement of the Units (or the
securities comprising same or the Underlying Shares) or the
<PAGE>
- 3 -
fairness or suitability of an investment in Units (or the
securities comprising same or the Underlying Shares), nor has
any such authority passed on or endorsed the merits of the
offering of such securities.
2. If the Subscriber is resident in Canada:
(a) PURCHASING AS PRINCIPAL. In the case of the purchase by the
Subscriber of Units as principal, (A) the Subscriber is
purchasing as principal for its own account, and not for the
benefit of any other person, a sufficient number of Units such
that the aggregate acquisition cost to the Subscriber for such
Units is sufficient to ensure the availability of an exemption
from the prospectus requirements of applicable securities
legislation (being $97,000 for residents of British Columbia
and Alberta and $150,000 for persons resident elsewhere in
Canada), or (B) the Subscriber is purchasing as principal or:
(i) (is not a resident of Quebec or British Columbia and)
is a bank listed in Schedule I or II to the Bank Act
(Canada), or the Business Development Bank of Canada
incorporated under the Business Development Bank of
Canada Act (Canada) or a subsidiary of such entity
where such entity owns all of the voting securities
of such subsidiary;
(ii) (is not a resident of Quebec or British Columbia and)
is a trust company or trust corporation licensed or
registered under the applicable act respecting trust
companies or trust corporations in the Subscriber's
province of residence and, if so defined, as defined
in the securities legislation of the province of
residence of the Subscriber;
(iii) (is not a resident of Quebec or British Columbia and)
is an insurance company or insurance corporation
licensed under the applicable act respecting insurers
in the Subscriber's province of residence and, if so
defined, as defined in the securities legislation of
the province of residence of the Subscriber;
(iv) (is not a resident of Quebec or British Columbia and)
is a loan company or loan corporation (or, in the
case of Alberta, is a loan corporation, credit union
or treasury branch) licensed or registered under the
applicable act respecting loan companies or loan
corporations (other than a credit union or treasury
branch in Alberta which is licensed or registered as
required under the laws of Alberta) and if so
defined, as defined, where applicable, in the
securities legislation of the province of residence
of the Subscriber;
(v) is recognized or designated under the securities laws
of its province of residence as being an exempt
purchaser (and, if a resident of British Columbia, is
not an individual) or a "sophisticated investor" as
defined in sections 44 and 45 of the Securities Act
(Quebec) if a resident of Quebec;
<PAGE>
- 4 -
(vi) is the Government of Canada or the Government of a
Canadian province or a municipal corporation, public
board or commission in Canada;
(vii) is resident in British Columbia and is an insurer or
a savings institution within the meaning of the
Securities Act (British Columbia) or the Business
Development Bank of Canada incorporated under the
Business Development Bank of Canada Act (Canada);
(viii) is resident in British Columbia and is a subsidiary
of the Business Development Bank of Canada or of an
insurer or a savings institution within the meaning
of the Securities Act (British Columbia), all of the
voting securities of which are owned beneficially by
the Business Development Bank of Canada or such
insurer or savings institution, except the voting
securities required by law to be owned by directors
of that subsidiary;
(ix) is resident in Alberta and is a wholly-owned
subsidiary of a financial institution within the
meaning of the Securities Act (Alberta);
(x) is a dealer or adviser registered in conformity with
the Securities Act (Quebec);
(xi) is resident in Quebec and is the Caisse Centrale
Desjardins du Quebec established under the Act
respecting the Mouvement des Daisses Desjardins
(Quebec);
(xii) is resident in Quebec and is a pension fund with
assets of over $100,000,000 and governed by the
Supplemental Pension Plans Act (Quebec) or the
Pension Benefits Standards Act, 1985 (Canada);
(xiii) is a resident in Quebec and is a bank governed by the
Bank Act or by the Quebec Savings Banks Act, an
insurance company licensed under the Act Respecting
Insurance (Quebec) or a trust company licensed under
An Act Respecting Trust Companies and Savings
Companies (Quebec) or a wholly-owned subsidiary
thereof;
(xiv) is resident in Quebec and is a federation or
confederation of savings and credit unions within the
meaning of the Savings and Credit Union Act (Quebec);
or
(xv) the purchase is otherwise exempt under applicable
Securities Laws and the Purchaser has satisfied the
Company and the Underwriters in that respect.
(b) PURCHASING AS AGENTS FOR DISCLOSED PRINCIPAL(S). In the case
of the purchase by the Subscriber of Units as agent for a
disclosed principal, each beneficial purchaser of the Units
for whom the Subscriber is acting is either (i) purchasing as
principal for its own account, and not for the benefit of any
other person, a sufficient number of Units such that the
aggregate acquisition cost to each such purchaser for such
<PAGE>
- 5 -
Units is sufficient to ensure the availability of an exemption
from the prospectus requirements of applicable Securities Laws
(being $97,000 for residents of British Columbia and Alberta,
and $150,000 for persons resident elsewhere in Canada), or
(ii) if not resident in Quebec, is recognized under the
securities laws of its province of residence as being an
exempt purchaser (and, if a resident of British Columbia, is
not an individual) or, if resident in Quebec, is a
"sophisticated investor" as defined in sections 44 and 45 of
the Securities Act (Quebec) if a resident of Quebec.
(c) PURCHASING FOR UNDISCLOSED PRINCIPAL(S). In the case of the
purchase by the Subscriber of Units as trustee, agent or
portfolio manager for a principal which is undisclosed or
identified by account number only the Subscriber acknowledges
that the Company may be required by law to disclose to certain
regulatory authorities the identity of each beneficial
purchaser of Units for whom the Subscriber may be acting and
the Subscriber is:
(i) resident in or otherwise subject to the securities
laws of the Province of Ontario and is a portfolio
manager registered under the Securities Act (Ontario)
(or a broker or investment dealer who is exempt from
registration as an advisor pursuant to subsection
148(a) of the Regulations under such Act and who is
not exempt from the by-laws or regulations of The
Toronto Stock Exchange or the Investment Dealers
Association referred to in that subsection) and is
purchasing the Units as trustee or as agent for
accounts of clients established in writing under
which the portfolio adviser to the account makes
investment decisions for the account without
requiring the client's express consent to a
transaction in accordance with Ontario Securities
Commission Rule 45-504 under such Act;
(ii) resident in British Columbia and is a trust company
or insurer authorized to carry on business under the
Financial Institutions Act (British Columbia) or is a
trust company or an insurance company authorized
under the terms of a Province or Territory of Canada
other than British Columbia to carry on business in
that Province or Territory and is purchasing Units
having an aggregate acquisition cost of not less than
$97,000 as trustee or as agent for accounts fully
managed by it; the Subscriber is solely responsible
for management of its managed accounts and has
absolute discretion as to purchasing or selling for
the account; all investment decisions are made by the
Subscriber and the Subscriber receives no
instructions respecting purchasing or selling for the
account from any person beneficially interested in
the account or any other person;
(iii) resident in British Columbia and is registered under
the Securities Act (British Columbia) as a portfolio
manager (as therein defined) or is exempt from such
registration under the Act, and in either case is
purchasing as agent for accounts that are fully
managed by the Subscriber; the Subscriber is solely
responsible for management of its managed accounts
<PAGE>
- 6 -
and has absolute discretion as to purchasing or
selling for the account; all investment decisions are
made by the Subscriber and the Subscriber receives no
instructions respecting purchasing or selling for the
account from any person beneficially interested in
the account of any other person as agent in
connection with such purchase and is purchasing Units
having an aggregate acquisition cost of not less than
$97,000;
(iv) resident in Alberta and is a trust corporation within
the meaning of the laws of Alberta and is purchasing
Units having an aggregate acquisition cost of not
less than $97,000, for accounts fully managed by it,
as trustee or as agent;
(v) resident in Alberta and is registered as a portfolio
manager under the Securities Act (Alberta), or is
exempt under the Securities Act (Alberta) from such
registration under the Act, and is purchasing Units
having an aggregate acquisition cost of not less than
$97,000, as agent for accounts fully managed by it;
(vi) resident in Ontario and is a trust corporation
registered under the Loan and Trust Corporations Act
(Ontario) and is purchasing the Units as trustee or
as agent for accounts fully managed by it;
(vii) resident in Quebec and is a trust company licensed
under an Act respecting trust companies and savings
companies (Quebec), an insurance company holding a
license under an Act respecting insurance (Quebec),
or a dealer or advisor appropriately licensed or
registered under the Securities Act (Quebec), and is
purchasing the Units as trustee or as agent for the
account or portfolio of third persons managed solely
by it and is purchasing Units having an aggregate
acquisition cost to the Subscriber of not less than
$150,000;
(viii) acting on behalf of one or more beneficial purchasers
of the Units who are individuals or corporations and
are purchasing as principal for their own account,
and not for the benefit of any other person, and are
purchasing a sufficient number of Units so that each
such beneficial purchaser has an aggregate
acquisition cost for such Units of not less than the
amount specified in paragraph (a)(A) and complies
with the provisions of paragraphs (d) through (n)
hereof, as applicable, or the purchase of the Units
by such beneficial purchasers is otherwise exempt
under the applicable securities legislation and the
Subscriber has satisfied the Company and the
Underwriters in that respect; or
(ix) relying on and is purchasing the Units in accordance
with an order of the applicable Securities Commission
of the Subscriber's province of residence exempting
the sale of such Units from the requirements to file
a prospectus or deliver an offering memorandum issued
on or before the Closing Date, a copy of which order
and evidence of compliance of the Subscriber with the
<PAGE>
- 7 -
terms thereof shall be provided to the Company and
the Underwriters forthwith upon request;
and the Subscriber has due and proper authority to execute this subscription
agreement and all other documentation in connection with the purchase on behalf
of each such undisclosed principal;
(d) if the Subscriber is resident in Ontario and is a corporation
or a syndicate, partnership, trust, investment club or other
unincorporated organization, it was not created or is not
being used primarily to permit purchases without a prospectus
or, if it was created or is being used primarily to permit
purchases without a prospectus, the share or portion of each
member or partner of the partnership, syndicate or
unincorporated organization, each beneficiary of the trust or
each shareholder of the corporation of the aggregate
acquisition cost to the corporation, syndicate, partnership,
trust or other unincorporated organization of the purchased
Units is not less than $150,000;
(e) if the Subscriber is resident in Ontario and is an investment
club, the share or portion of each member of the investment
club of the aggregate acquisition cost to the investment club
of the Units being purchased is at least $150,000;
(f) if the Subscriber is resident in British Columbia and is not
an individual but is a corporation, partnership, trust, fund,
association or any other organized group of persons, it was
not created solely, nor is it used primarily, to permit a
group of individuals to purchase securities without a
prospectus and the Subscriber would have an aggregate
acquisition cost of purchasing the Units of not less than
$97,000 or, if the Subscriber is an entity created or used
primarily for such purpose, the aggregate acquisition cost of
Units to each of the individuals who form part of the group is
at least $97,000;
(g) if the Subscriber is resident in Alberta and is a corporation,
syndicate, partnership or other form of unincorporated
organization, it pre-existed the offering of the Units and has
a bona fide purpose other than investment in Units or, if
created to permit such investment, the individual share of the
aggregate acquisition cost for each participant is not less
than $97,000 and it acknowledges that it must file a report on
Form 21 with the Alberta Securities Commission within 10 days
of each disposition of all or any part of the Units; and
(h) if the Subscriber is resident in Quebec it is not a company
established solely to acquire the Units or, if it was so
established, each shareholder has contributed at least
$150,000 for the investment in the Units of the Company, and
each such person is acting for his own account.
(i) BRITISH COLUMBIA FILING REQUIREMENTS. The Subscriber, or any
beneficial purchaser (the "beneficiary") for whom it is
purchasing, if a resident of British Columbia, acknowledges
being advised that the Subscriber or their beneficiary must
file with the British Columbia Securities Commission (i) a
report in the form attached to the Blanket Order and Ruling
<PAGE>
- 8 -
#95/17 of the British Columbia Securities Commission (the
"Initial Trade Report"), or (ii) the report required under the
laws of the jurisdiction in which the Company carries on
business or in which the Company is organized, provided that
the report requires substantially the same information as
required in the Initial Trade Report (the "Purchaser's
Report"), within ten days of the initial trade of the Units or
the Underlying Shares by the Subscriber (in the event that
such Underlying Shares are acquired prior to the issuance of a
receipt for the Final Prospectus by the British Columbia
Securities Commission). Where the Subscriber or their
beneficiary has filed an Initial Trade Report or the
Purchaser's Report, the Subscriber is not required to file a
further report in respect of additional trades of securities
acquired on the same date and under the same exemption as the
security which is the subject of the Initial Trade Report or
the Purchaser's Report; and
(j) BRITISH COLUMBIA FORM. The Subscriber, or any beneficial
purchaser for whom it is acting, if an individual who is a
resident of British Columbia or subject to the laws of British
Columbia, has completed and executed the Form 20A(IP) under
the Regulation to the Securities Act (British Columbia) in the
form attached hereto as Schedule "C".
4. RELIANCE. The Subscriber acknowledges that the representations and warranties
contained herein are made by it with the intention that they may be relied upon
by the Agent and the Company in determining the Subscriber's eligibility, or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase Units under relevant securities legislation. The
Subscriber further agrees that by accepting delivery of the Purchased Units on
the Closing Date, it will be representing and warranting that the foregoing
representations and warranties are true and correct as at the time of Closing
with the same force and effect as if they had been made by the Subscriber at the
time of Closing and that they will survive the purchase by the Subscriber of
Units and will continue in full force and effect notwithstanding any subsequent
disposition by the Subscriber of such Units or the Underlying Shares issued for
the exercise thereof. The Subscriber hereby agrees to notify the Company and the
Agent immediately of any change in any representation, warranty, covenant or
other information relating to the Subscriber or any beneficial purchaser on
whose behalf it is acting contained in the Subscription Agreement which takes
place prior to the Closing.
<PAGE>
SCHEDULE "C"
FORM 20A (TP) - ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
RESIDENT IN BRITISH COLUMBIA
SECURITIES ACT (BRITISH COLUMBIA)
1. I have agreed to purchase from Softquad Software, Ltd. (the "Issuer")
_____________ Units, each comprised of one special warrant and one-half
of one share purchase warrant (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I have not received an offering memorandum describing the Issuer and
the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, and
(b) there is no government or other insurance covering the
Securities, and
(c) I may lose all of my investment, and
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, and
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, and
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, and
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that I am purchasing Securities that have an
aggregate acquisition cost of $97,000 or more.
<PAGE>
- 2 -
The statements made in this report are true.
DATED this _____ day of April, 2000.
------------------------------------
Signature of Purchaser
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Name of Purchaser
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Address of Purchaser
