EXHIBIT 3.11
XXX.XXX INTERNATIONAL INC.
(FORMERLY, INTERNET LIQUIDATORS INTERNATIONAL INC.)
SUBSCRIPTION AND PURCHASE AGREEMENT
U.S. PURCHASERS
TO: XXX.XXX INTERNATIONAL INC,
(FORMERLY, INTERNET LIQUIDATORS INTERNATIONAL INC.)
AND TO: XXXX XXXXX
XXXXXXX XXXXXXXXX
AND TO: YORKTON SECURITIES INC.
1. SUBSCRIPTION
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The undersigned (the "Purchaser") hereby irrevocably subscribes for and
agrees to purchase, on and subject to the terms and conditions set forth herein
and in the Underwriting Agreement and the Special Warrant Indenture (each as
defined below), from Xxx.Xxx International Inc. (formerly, Internet Liquidators
International Inc.) (the "Corporation") such number of special warrants of the
Corporation ("Special Warrants") as set forth in section 19 (collectively the
"Purchased Warrants") at a price of $1.40 per Special Warrant (the "Subscription
Price"). The Purchased Warrants form part of a larger offering (the "Offering")
of 8,600,000 Special Warrants, of which 8,100,000 Special Warrants (the
"Treasury Special Warrants") shall be issued and sold by the Corporation and
500,000 Special Warrants (the "Secondary Special Warrants") to be issued and
sold by Xxxx Xxxxx and Xxxxxxx Xxxxxxxxx (collectively, the "Selling
Securityholders") on a pro rata basis (or such other basis as the Selling
Securityholders and the Underwriter (as hereinafter defined) may otherwise
agree) pursuant to an underwriting agreement (the "Underwriting Agreement") to
be entered into by Yorkton Securities Inc. (the "Underwriter"), the Selling
Securityholders and the Corporation on August 4, 1998 or such other date as the
Corporation, the Selling Securityholders and the Underwriter may agree (the
"Closing Date"). Certain details of the Offering are provided in the term sheet
attached hereto as Schedule II.
2. DESCRIPTION OF SPECIAL WARRANTS
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The Special Warrants shall be created and issued pursuant to a special
warrant indenture (the "Special Warrant Indenture") to be entered into between
CIBC Mellon Trust Company or another registered trust company, in its capacity
as Special Warrant agent thereunder, the Selling Securityholders and the
Corporation dated as of the Closing Date.
The specific attributes of the Special Warrants shall be set forth in the
Special Warrant Indenture, which will provide, among other things, that the
holders of Special Warrants shall be entitled to receive, upon the exercise
thereof and without payment of any consideration, one unit of the Corporation
("Unit"). Each Unit will consist of one common share of the Corporation
("Common Share") and one-half of one Common Share purchase warrant ("Warrant").
Each whole Warrant will entitle the holder thereof to acquire one Common Share
at a price of $1.65 per Common Share for a period ending on the date which is
the earlier of: (i) ten (10) business days following the date on which the
Corporation delivers a notice (the "U.S. Offering Notice") to all holders of
Warrants confirming that it has filed a preliminary prospectus or registration
statement in connection with a U.S. public offering (the "U.S. Offering") of at
least $7,000,000; and (ii) 12 months following the Closing Date. The Purchaser
hereby acknowledges and understands that notwithstanding the delivery of a U.S.
Offering Notice, the U.S. Offering may not proceed to completion for a variety
of reasons including, without limitation, the state of the financial markets and
the demand for the Corporation's securities at the relevant time. ACCORDINGLY,
THE DELIVERY OF THE U.S. OFFERING NOTICE SHALL NOT CONSTITUTE OR BE DEEMED TO
CONSTITUTE A GUARANTEE OR ASSURANCE BY THE CORPORATION OR THE UNDERWRITER THAT
THE U.S. OFFERING WILL BE COMPLETED AND, IN DETERMINING WHETHER OR NOT TO
EXERCISE THEIR WARRANTS, HOLDERS ARE ADVISED TO CAREFULLY CONSIDER THE
POSSIBILITY THAT THE U.S. OFFERING ULTIMATELY MAY NOT PROCEED. The Common
Shares and the Warrants issuable on exercise of the Special Warrants are
collectively referred to herein as the "Subject Securities".
Unless previously retracted, the Special Warrants shall be exercisable by
the holders thereof at any time and will be automatically exercised at 5:00 p.m.
(Toronto time) on the earlier of the following dates (such date being the
"Expiry Date"): (i) the fifth business day after a receipt is issued by the last
of the relevant securities regulatory authorities in each of the Qualifying
Jurisdictions (the "Securities Regulators") for a (final) prospectus (the "Final
Prospectus") qualifying the Units issuable on the exercise of the Special
Warrants; and (ii) one year after the Closing Date.
IN THE EVENT THAT THE CORPORATION IS UNABLE TO OBTAIN A RECEIPT FOR THE FINAL
PROSPECTUS IN A QUALIFYING JURISDICTION, THE SPECIAL WARRANTS AND SUBJECT
SECURITIES MAY BE SUBJECT TO STATUTORY RESALE RESTRICTIONS UNDER THE APPLICABLE
SECURITIES LEGISLATION OF THAT PROVINCE. IN ADDITION, STATUTORY RESTRICTIONS
MAY APPLY ON THE RESALE OF THE SUBJECT SECURITIES THAT ARE ACQUIRED PRIOR TO THE
ISSUANCE OF RECEIPTS FOR THE PROSPECTUS BY THE SECURITIES REGULATORY AUTHORITIES
IN ANY OF THE QUALIFYING JURISDICTIONS. PURCHASERS ARE ADVISED TO CONSULT THEIR
OWN LEGAL ADVISORS IN THIS REGARD.
In the event that the Corporation is unable to obtain the written consent
to the Offering by holders of not less than 50% of the Common Shares on or prior
to the date that is ten (10) Business Days following the Closing Date, the
Corporation shall covenant and agree to convene a special meeting (the
"Meeting") of the shareholders of the Corporation (the "Shareholders") as soon
as possible and in any event within 75 days following the Closing Date in
accordance with the by-laws of the Corporation and applicable corporate and
securities laws in order to seek approval of the Offering by the Shareholders
(the "Shareholder Approval").
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At the Closing, the gross proceeds of the Offering less an amount equal to
75% of the Underwriter's commission and estimated costs and expenses incurred in
connection with the Offering (the "Escrowed Proceeds") shall be deposited into
escrow with a mutually agreed upon escrow agent (the "Escrow Agent") as interest
bearing funds. Upon the execution and delivery of a binding agreement announced
in the public domain in respect of a private placement (the "Private Placement")
on or before August 15, 1998 pursuant to which a strategic investor purchases
not less than 1,500,000 Common Shares of the Corporation (the "Private Placement
Shares") at a price of not less than $1.20 per share, the Escrow Agent shall
release 25% of the Escrowed Proceeds (less a holdback of $200,000 to be applied
against any cash penalty events as described below) to the Corporation and the
Selling Securityholders on a pro rata basis. Provided that the Shareholder
Approval has been obtained, the Private Placement has closed and a receipt for
the Final Prospectus has been issued by the last of the Securities Regulators in
each of the Qualifying Jurisdictions, the Escrow Agent shall release the balance
of the Escrowed Proceeds less, for greater certainty, the aggregate Automatic
Retraction Price and Discretionary Retraction Price (as hereinafter defined), if
any, and the remaining 25% of the Underwriter's commission and estimated costs
and expenses incurred in connection with the Offering, to the Corporation and
the Selling Securityholders on a pro rata basis.
If the Private Placement has not closed on or before August 15, 1998 or the
Final Prospectus is not filed and a receipt issued therefor by the last of the
Securities Regulators on or before the date (such date being hereinafter
referred to as the "Qualification Deadline") that is:
(i) 90 days after the Closing Date, where the Meeting is not required to
be convened;
(ii) 105 days following the Closing Date, where the Meeting is required to
be convened;
each Special Warrant exercised or deemed to be exercised thereafter shall
entitle the holder to receive 1.07 Units (in lieu of one Unit).
In the event that the Meeting must be convened but is not convened within
75 days of the Closing Date, Purchasers shall be entitled to receive from the
Escrowed Proceeds an amount (the "Cash Penalty Price") equal to 7% of the
Subscription Price per Special Warrant for each Treasury Special Warrant
purchased.
In the event that the Shareholder Approval is not obtained within 90 days
of the Closing Date, the Corporation shall retract and cancel, on a pro rata
basis, that number of Treasury Special Warrants sold pursuant to the Offering
less the number of Treasury Special Warrants that may be issued and sold by the
Corporation without Shareholder Approval (being a minimum of 1.9 million Special
Warrants), at a retraction price per Special Warrant (the "Automatic Retraction
Price") payable from the Escrowed Proceeds equal to the sum of the Subscription
Price per Special Warrant (together with all interest accrued thereon) and 7% of
the aggregate Subscription Price of the Treasury Special Warrants divided by the
number of Treasury Special Warrants to be retracted.
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In the event that the Private Placement has not occurred on or before
August 15, 1998 or the Final Prospectus has not been filed and receipts issued
therefor by the last of the Securities Regulators in each of the Qualifying
Jurisdictions or on before the Qualification Deadline, the Purchasers shall be
entitled, at their option, to require the Corporation to retract and cancel on a
pro rata basis up to such number of Special Warrants as may be retracted from
the Escrowed Proceeds at a retraction price per Special Warrant (the
"Discretionary Retraction Price") equal to the Subscription Price per Special
Warrant (together with all interest accrued thereon). For greater certainty, any
amounts paid to the Underwriter out of the gross proceeds of the Offering in
respect of the Underwriter's commission or expenses shall be paid by the
Corporation to the Escrow Agent prior to the payment of the Discretionary
Retraction Price. In the event that the Escrowed Proceeds are not sufficient to
satisfy the aggregate Automatic Retraction Price or the Cash Penalty Price, the
Corporation shall pay to the Escrow Agent, prior to the return of the Escrowed
Proceeds to the Purchasers, an amount equal to the shortfall.
THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE RIGHTS OF SPECIAL
WARRANTHOLDERS MAY BE MODIFIED UNDER THE SPECIAL WARRANT INDENTURE PURSUANT TO
AN EXTRAORDINARY RESOLUTION APPROVED EITHER BY SPECIAL WARRANTHOLDERS THAT
ATTEND OR ARE REPRESENTED AT A DULY CONVENED MEETING OF SPECIAL WARRANTHOLDERS
AND ARE ENTITLED TO ACQUIRE NOT LESS THAN 66 2/3 PERCENT OF THE AGGREGATE NUMBER
OF COMMON SHARES IN THE CAPITAL OF THE CORPORATION ("COMMON SHARES") WHICH WOULD
BE ISSUED OR TRANSFERRED ON THE EXERCISE OF ALL OF THE THEN OUTSTANDING SPECIAL
WARRANTS OR BY WRITTEN CONSENT OF SPECIAL WARRANTHOLDERS ENTITLED TO ACQUIRE NOT
LESS THAN 66 2/3 PERCENT OF THE AGGREGATE NUMBER OF COMMON SHARES WHICH WOULD BE
ISSUED OR TRANSFERRED ON THE EXERCISE OF ALL OF THE THEN OUTSTANDING SPECIAL
WARRANTS. REFERENCE SHOULD BE MADE TO THE SPECIAL WARRANT INDENTURE, FOR A
COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS ON WHICH THE SPECIAL WARRANTS
ARE TO BE ISSUED.
The foregoing description of the Special Warrants is a summary only and is
subject to the detailed provisions of the Special Warrant Indenture under which
such securities shall be issued.
All dollar amounts referred to herein are in Canadian dollars.
3. PAYMENT
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The aggregate amount payable by the Purchaser in respect of the Purchased
Warrants (the "Subscription Price") must accompany this Subscription Agreement
and shall be made by certified cheque or bank draft drawn on a Canadian
chartered bank, and payable to the Underwriters or payable in such other manner
as may be specified by the Underwriters.
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4. CONDITIONS OF CLOSING
---------------------
The Purchaser must complete, sign and return one executed copy of this
Subscription Agreement to Xxxxxxx Xxxxx, Yorkton Securities Inc., BCE Place, 000
Xxx Xxxxxx, Xxxxx 0000, X.X. Xxx 000, Xxxxxxx, Xxxxxxx, X0X 0X0, as soon as
possible, and, in any event, no later than 5:00 p.m. (Toronto time) on July 31,
1998.
As a condition of Closing (defined below), the Corporation must obtain any
necessary approvals of The Toronto Stock Exchange (the "TSE") in respect of the
issue of the Special Warrants (and the Subject Securities into which they are
exercisable). The Purchaser agrees to complete and return the form of TSE
Private Placement Questionnaire and Undertaking attached as Schedule III with
this Subscription Agreement and to promptly execute and deliver all such
documents and other instruments as the TSE may require.
If the Purchaser is resident in the Province of British Columbia, the
Purchaser must complete and return a report in the form attached hereto as
Schedule IV with this Subscription Agreement.
Closing shall also be subject to conditions of closing in favour of the
Underwriter to be provided for in the Underwriting Agreement.
5. FACSIMILED SUBSCRIPTIONS
------------------------
The Corporation and the Underwriter will be entitled to rely on delivery by
facsimile of an executed copy of this subscription, and acceptance by the
Corporation of such facsimile copy will be legally effective to create a valid
and binding agreement between the Purchaser and the Corporation in accordance
with the terms hereof.
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6. CLOSING
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Delivery and payment for the Special Warrants will be completed (the
"Closing") at the offices of counsel to the Company, Gowling, Strathy &
Xxxxxxxxx, Xxxxx 0000, Xxxxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0 at 11:00
a.m. (Toronto time) (the "Closing Time") on August 4, 1998 or such earlier or
later dates or times as the Corporation and the Underwriters may agree (the
"Closing Date"). This executed Subscription Agreement is open for acceptance in
whole or in part by the Corporation and the Selling Securityholders at any time
prior to the Closing Time. Confirmation of acceptance or rejection of a
subscription will be forwarded to the Purchaser promptly after acceptance or
rejection has been made. If this subscription is rejected in whole and if the
Purchaser has delivered a certified cheque or bank draft representing the
Subscription Price for the Purchased Warrants, then such cheque or bank draft
will be promptly returned to the Purchaser without interest. If this
subscription is accepted only in part and the Purchaser has delivered a
certified cheque or bank draft as aforesaid, a cheque representing the portion
of the Subscription Price for that portion of the Purchaser's subscription for
Special Warrants which is not accepted will be promptly returned to the
Purchaser without interest.
Certificates representing the Special Warrants (individually, a "Special
Warrant Certificate", and collectively, the "Special Warrant Certificates") will
be available for delivery against payment of the Subscription Price in the
manner specified above. If the Purchaser does not choose to attend the Closing
to receive the Special Warrant Certificate representing the Purchased Warrants,
then the Purchaser, on its own behalf or on behalf of others for whom it is
contracting hereunder, hereby appoints the Underwriter, with full power of
substitution, as its true and lawful attorney and agent with the full power and
authority in its place and stead to swear, execute, file and record any document
necessary to accept delivery of the Special Warrants on the Closing Date, to
terminate this subscription on its behalf in the event that any condition
precedent to the offering has not been satisfied, to execute a receipt for the
Purchased Warrants and all other documentation, modify or waive any conditions
or grant any waivers on its behalf in connection with this transaction, and to
deliver Special Warrant Certificates to the undersigned at the address set forth
above promptly after Closing.
7. PROSPECTUS EXEMPTIONS
---------------------
The Purchaser acknowledges and agrees that the sale and delivery of the
Purchased Warrants to the Purchaser (or to others for whom it is contracting
hereunder) is conditional upon such sale being exempt from the requirements
under applicable securities legislation requiring the filing of a prospectus in
connection with the distribution of the Special Warrants or the delivery of an
offering memorandum (as defined in the applicable securities legislation), or
upon the issuance of such rulings, orders, consents or approvals as may be
required to permit such sale without the requirement of filing a prospectus or
delivering an offering memorandum.
The Purchaser, on its own behalf (or on behalf of others for whom it is
contracting hereunder) acknowledges and agrees that: (a) it has received a term
sheet in the form attached hereto as Schedule II setting out the principal terms
of this Subscription Agreement and the
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offering of Special Warrants; (b) it (or others for whom it is contracting
hereunder) has not received, nor has it requested, nor does it have any need to
receive, a prospectus or any offering memorandum, or any other document (other
than financial statements, interim financial statements or any other document,
the content of which is prescribed by statute or regulation) describing the
business and affairs of the Corporation which has been prepared for delivery to,
and reviewed by, prospective purchasers in order to assist it in making an
investment decision in respect of the Purchased Warrants; (c) its decision to
execute this Subscription Agreement and purchase the Purchased Warrants (on its
own behalf or on behalf of others for whom it is contracting hereunder) has not
been based upon any verbal or written representations as to fact or otherwise
made by or on behalf of the Underwriters or the Corporation and that its
decision (or the decision of others for whom it is contracting hereunder) is
based entirely upon information concerning the Corporation contained in
documents the content of which is prescribed by statute or regulation (any such
information having been delivered to it without independent investigation or
verification by the Underwriters); (d) the sale of the Purchased Warrants was
not accompanied by any advertisement in printed media of general and regular
paid circulation, radio or television; (e) the Underwriters and each of their
respective directors, officers, employees, agents and representatives assume no
responsibility or liability of any nature whatsoever for the accuracy or
adequacy of any such publicly available information or as to whether all
information concerning the Corporation required to be disclosed by it has been
generally disclosed; (f) it (or others for whom it is contracting hereunder) has
been advised to consult its own legal advisors with respect to trading in the
Special Warrants, the Subject Securities and securities underlying the Subject
Securities and to resale restrictions imposed by applicable securities
legislation in the jurisdiction in which it resides, that no representation has
been made respecting the applicable hold periods or other resale restrictions
applicable to such securities, that the Purchaser (or others for whom it is
contracting hereunder) is solely responsible (and neither the Corporation nor
the Underwriters is in any way responsible) for compliance with applicable
resale restrictions and that it is aware that it may not be able to resell such
securities except in accordance with limited exemptions under applicable
securities legislation and regulatory policy; and (g) the Special Warrants are
otherwise subject to the terms, conditions and provisions of the Special Warrant
Indenture and the Underwriting Agreement.
The Purchaser agrees that the Corporation, the Selling Securityholders
and/or the Underwriter may be required by law or otherwise to disclose to
regulatory authorities the identity of the Purchaser and each beneficial
purchaser of Special Warrants for whom the Purchaser may be acting.
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8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
----------------------------------------------------------
The Purchaser hereby represents, warrants and covenants to and with
the Underwriter and the Corporation (which representations, warranties and
covenants shall survive Closing) that:
(A) the Purchaser is purchasing the Special Warrants as principal for its
own account and not for the benefit of any other person except as
otherwise set forth below under its name in Section 18 - "Subscription
Particulars";
(B) the Purchaser will execute and deliver all documentation as may be
required by applicable Securities Laws and The Toronto Stock Exchange,
including the Private Placement Questionnaire and Undertaking attached
as Schedule "II" hereto;
(C) the address set forth below is the true and correct address of a place
of business of the Purchaser (or, if the Purchaser is acting as agent
for any person, of such person) and the Purchaser (or such person) is
resident in that jurisdiction;
(D) upon acceptance by the Corporation and/or the Selling Shareholders,
this subscription will constitute a valid and legally binding contract
of the Purchaser enforceable against the Purchaser in accordance with
its terms;
(E) if an individual, the Purchaser has obtained the age of majority and
is legally competent to execute this agreement and to take all actions
required pursuant thereto.
(F) the Purchaser is an "accredited investor" within the meaning of
Regulation D ("Regulation D") of the General Rules and Regulations
promulgated under the Securities Act of 1933, as amended (the
"Securities Act") since the Purchaser meets one of the following
standards for determination of "accredited investor" status:
(i) Any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended;
(ii) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(iii) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same
income level in the current year;
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(iv) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in Rule 506(b)(2)(ii) of Regulation D;
(v) Any organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation,
Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000; or
(vi) Any entity in which all of the equity owners are "accredited
investors".
(G) The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the Special Warrants, and that he is able to bear
the economic risk of such investment for an indefinite period of time.
The Purchaser is purchasing the Special Warrants for the Purchaser's
own account, for investment purposes only and not with a view to any
resale or distribution thereof and the Purchaser does not have any
contracts, understandings, agreements or arrangements with any person
or entity to sell, transfer or grant a participation with respect to
any of the Special Warrants or Subject Securities of the Company. The
Purchaser understands that the Special Warrants and the Subject
Securities being purchased are characterized as "restricted
securities" (as defined in Rule 144 under the Securities Act) and that
the Special Warrants and the Subject Securities may not be resold
without registration or an exemption from registration under the
Securities Act.
(H) The Purchaser understands and agrees that the certificates evidencing
the Special Warrants and the Subject Securities will bear an
appropriate legend evidencing the restricted nature of the Special
Warrants and the Subject Securities indicating that no transfer of any
of the Special Warrants or the Subject Securities may be made unless
such Special Warrants and the Subject Securities are registered under
the Securities Act or an exemption from such registration is
available, and that the Company will instruct its transfer agent not
to transfer any such Special Warrants or Subject Securities unless
such transfer shall be made in compliance with such legend. The
legend shall be substantially in the form set forth below:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS DULY
REGISTERED UNDER THE ACT OR UNLESS, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, SUCH
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TRANSACTION IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE
ACT."
(I) The Purchaser has had: (i) the opportunity to seek outside advice with
respect to the terms and conditions of the offering and his investment
in the Special Warrants; and (ii) the opportunity to ask questions and
receive answers from the Company concerning the terms and conditions
of the offering of the Special Warrants and the Company and any
additional information or documents relating to the Company which he
believes necessary to his purchase of the Special Warrants.
9. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------------
The Purchaser acknowledges that the representations and warranties and
covenants contained in this Subscription Agreement are made with the intent that
they may be relied upon by the Underwriter, the Selling Securityholders and the
Corporation and their respective counsel to, among other things, determine its
eligibility or (if applicable) the eligibility of others on whose behalf it is
contracting hereunder to purchase Purchased Warrants. The Purchaser further
agrees that by accepting the Purchased Warrants, the Purchaser shall be
representing and warranting that the foregoing representations and warranties
are true as at the Closing Time with the same force and effect as if they had
been made by the Purchaser at the Closing Time and that they shall survive the
purchase by the Purchaser of the Purchased Warrants and shall continue in full
force and effect notwithstanding any subsequent disposition by it of the
Purchased Warrants or the Subject Securities, as the case may be.
10. COMMISSION TO THE UNDERWRITERS
------------------------------
The Purchaser understands that upon completion of the sale by the
Corporation and the Selling Securityholders of the Special Warrants, the
Underwriter will receive from the Corporation and the Selling Securityholders,
on a pro rata basis, a cash commission equal to 8.0% of the issue price of all
Special Warrants to be sold by the Underwriter. It is further understood that,
as additional compensation for the services provided, the Corporation will grant
to the Underwriter compensation warrants exercisable to acquire, without payment
of any consideration, compensation options, which compensation options are
exercisable to acquire a number of Units equal to 10% of the total number of
Special Warrants sold by the Underwriter and not retracted, at an exercise price
equal to $1.40 per Unit for a term of fifteen months from the Closing Date. The
compensation warrants will be exercisable on the same basis as the Special
Warrants and the compensation options issuable upon exercise of the compensation
warrants will be qualified pursuant to the Prospectus (to the extent permitted
by applicable securities laws). In exercising the compensation options (whether
in whole or in part), the Underwriter may, at its sole discretion, in lieu of
satisfying the exercise price in cash, elect to receive a specified number of
Common Shares and Warrants.
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No other fee or commission is payable by the Corporation or the
Selling Securityholders in connection with the sale of the Special Warrants.
However, the Corporation and the Selling Securityholders will pay those fees and
expenses in connection with the offering as are set out in the Underwriting
Agreement.
The Purchaser understands that the Underwriter and representatives of
the Underwriter may have an interest in securities of the Corporation.
11. COSTS
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The Purchaser acknowledges and agrees that all costs and expenses
incurred by the Purchaser (including any fees and disbursements of any special
counsel retained by the Purchaser) relating to the sale of the Purchased
Warrants to the Purchaser shall be borne by the Purchaser.
12. APPOINTMENT OF UNDERWRITER
--------------------------
The Purchaser, on its own behalf and (if applicable) on behalf of
others for whom the Purchaser is contracting hereunder, hereby:
(a) irrevocably authorizes the Underwriter to negotiate and settle the
form of the Special Warrant Indenture, the warrant indenture pursuant
to which the Warrants will be created and issued and any other
agreement to be entered into in connection with this transaction and
to waive on its own behalf and on behalf of the purchasers of Special
Warrants in whole or in part, or extend the time for compliance with,
any of the closing conditions in such manner and on such terms and
conditions as the Underwriter may determine, acting reasonably,
without in any way affecting the Purchaser's obligations or the
obligations of such others hereunder; and
(b) acknowledges and agrees that the Underwriter, the Selling
Securityholders and the Corporation may vary, amend, alter or waive,
in whole or in part, one or more of the conditions set forth in the
Underwriting Agreement in such manner and on such terms and conditions
as they may determine, acting reasonably, without affecting in any way
the Purchaser or such others' obligations hereunder; provided however,
that the Underwriter shall not vary, amend, alter or waive any such
condition where to do so would result in a material change to any of
the material attributes of the Special Warrants described herein.
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13. GOVERNING LAW
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This Subscription Agreement is governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein. The Purchaser, in its
personal or corporate capacity and, if applicable, on behalf of each beneficial
purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the
courts of the Province of Ontario.
14. SURVIVAL
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This Subscription Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the Purchaser
notwithstanding the completion of the purchase of the Purchased Warrants by the
Purchaser pursuant hereto, the completion of the offering of Special Warrants of
the Corporation and any subsequent disposition by the Purchaser of the Purchased
Warrants or the Subject Securities.
15. ASSIGNMENT
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This Subscription Agreement is not transferable or assignable by the
parties hereto.
16. ENGLISH LANGUAGE
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We, the undersigned, hereby acknowledge that we have consented and
requested that all documents evidencing or relating in any way to the sale of
the Special Warrants be drawn up in the English language only.
Nous, soussignes, reconnaissons par les presentes avoir consenti et
demande que tous les documents faisant foi ou se rapportant de quelque maniere a
la vente de ces bons de souscription achets soient redigis en anglais seulement.
17. COUNTERPARTS
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This Subscription Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same document.
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18. SUBSCRIPTION PARTICULARS
------------------------
SUBSCRIPTION. The aggregate number of the Special Warrants being subscribed for
is _______________________________. At a price equal to $1.40 per Special
Warrant, the aggregate price of the Special Warrants being subscribed for is
$__________________________________.
REGISTRATION. The Special Warrants and the Subject Securities are to be
registered in the name of:
______________________________________________________________
______________________________________________________________
______________________________________________________________
DELIVERY. The certificate representing the Special Warrants and the
certificates representing the Subject Securities are to be delivered to:
______________________________________________________________
(name)
______________________________________________________________
(address)
______________________________________________________________
______________________________________________________________
(contact name and number)
AGENT FOR DISCLOSED PRINCIPAL. If the Purchaser is signing as agent for one or
more disclosed principals and not as agent for a fully managed account, the name
and address of each such principals:
______________________________________________________________
______________________________________________________________
______________________________________________________________
(if space is insufficient, attach a list).
DATED as of the ____ day of ___________, 1998.
____________________________________________________
Name of Purchaser (please type or print)
By: ________________________________________________
(Signature of Authorized Representative)
________________________________________________
(Name of Person Signing)
________________________________________________
(Office or Title)
______________________________________________________________
(Address of Purchaser)
______________________________________________________________
______________________________________________________________
IN ORDER TO FACILITATE SETTLEMENT, THESE INSTRUCTIONS MUST BE RECEIVED
BY 5:00 P.M. (TORONTO TIME) ON JULY 31, 1998.
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19. ACCEPTANCE
----------
The Corporation and/or the applicable Selling Securityholder(s) hereby
accept the above-mentioned offer to purchase Special Warrants.
DATED as of this _____ day of _____________, 1998.
XXX.XXX INTERNATIONAL INC.
By:___________________________________________
Authorized Signing Officer
_______________________ ____________________________
Witness Xxxx Xxxxx
_______________________ ____________________________
Witness Xxxxxxx Xxxxxxxxx
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SCHEDULE I
TERM SHEET
ISSUER: Xxx.Xxx International Inc. (formerly Internet
Liquidators International Inc.) (the "Corporation").
SIZE OF OFFERING: $12,040,000
PURCHASED SECURITIES: 8,600,000 special warrants ("Special Warrants"), of
which 8,100,000 shall be issued and sold by the
Corporation (the "Treasury Special Warrants") and
500,000 shall be issued and sold by Xxxx Xxxxx and
Xxxxxxx Xxxxxxxxx (the "Secondary Special Warrants") on
a pro rata basis (or on such other basis as the
Underwriter and the Xxxx Xxxxx and Xxxxxxx Xxxxxxxxx may
otherwise agree). Subject to adjustment in certain
events, each Special Warrant shall be exercisable, for
no additional consideration, to acquire one unit
("Unit"), each Unit consisting of one common share
("Common Share") and one-half of one Common Share
purchase warrant ("Warrant") of the Corporation.
WARRANTS: Each whole Warrant shall entitle the holder thereof to
acquire one Common Share for a period ending on the date
which is the earlier of (i) ten (10) business days
following the date on which the Corporation delivers a
notice to all holders of Warrants confirming that it has
filed a preliminary prospectus or registration statement
in connection with a U.S. public offering of at least
$7,000,000 and (ii) 12 months following the Closing Date
(defined below) at an exercise price of $1.65 per Common
Share.
PURCHASE PRICE: $1.40 per Special Warrant.
UNDERWRITER: Yorkton Securities Inc.
CLOSING DATE: August 4, 1998 or such other date as the Underwriter and
the Corporation may agree (the "Closing Date").
EXERCISE AND Unless previously retracted, the Special Warrants shall
PROSPECTUS CONDITIONS: be exercisable by the holders thereof at any time and
will be automatically exercised at 5:00 p.m. (Toronto
time) on the earlier of the following dates (such date
being the "Expiry Date"): (i) the fifth business day
after a receipt is issued by the last of the relevant
securities regulatory authorities in the Qualifying
Jurisdictions (the "Securities Regulators") for a
(final) prospectus (the "Final Prospectus") qualifying
the Units issuable on the exercise of the Special
Warrants; and (ii) one year after the Closing Date.
SHAREHOLDER APPROVAL: In the event that the Corporation is unable to obtain
the written consent to the Offering by holders of not
less than 50% of the Common Shares on or prior to the
date that is ten (10) business days
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following the Closing Date, the Corporation shall
covenant and agree to convene a special meeting (the
"Meeting") of the shareholders of the Corporation (the
"Shareholders") as soon as possible and in any event
within 75 days following the Closing Date in accordance
with the by-laws of the Corporation and applicable
corporate and securities laws in order to seek approval
of the Offering by the Shareholders (the "Shareholder
Approval").
CLOSING CONDITIONS: Among other conditions of closing standard for a
transaction of this nature, on or prior to the Closing
Date (i) holders of not less than 7,500,000 Common
Shares shall have executed and delivered written
consents to the Offering as required by The Toronto
Stock Exchange; (ii) the principal shareholders of the
Corporation shall have executed and delivered
irrevocable undertakings to vote all of their Common
Shares in favour of the Offering if the Meeting is
required; and (iii) Xxxx Xxxxx and Xxxxxxx Xxxxxxxxx
shall have deposited a sufficient number of Common
Shares in escrow to satisfy their obligations upon
exercise of the Secondary Special Warrants and the
Warrants comprising part of the Secondary Special
Warrants.
ESCROW ARRANGEMENTS: The gross proceeds of the Offering less an amount equal
to 75% of the Underwriter's commission and estimated
costs and expenses incurred in connection with the
Offering (the "Escrowed Proceeds") shall be deposited
into escrow with counsel to the Underwriter (the "Escrow
Agent") as interest bearing funds on the Closing Date.
Upon the execution and delivery of a binding agreement
announced in the public domain in respect of a private
placement (the "Private Placement") on or prior to
August 15, 1998 pursuant to which a strategic investor
(the "Strategic Investor") purchases not less than
1,500,000 Common Shares of the Corporation at a price of
not less than $1.20 per share, the Escrow Agent shall
release 25% of the Escrowed Proceeds (less a holdback of
$200,000 to be applied against any cash penalty events
as described below) to the Corporation, Xxxx Xxxxx and
Xxxxxxx Xxxxxxxxx on a pro rata basis.
Provided that the Shareholder Approval has been
obtained, the Private Placement has closed and a receipt
for the Final Prospectus has been issued by the last of
the Securities Regulators in each of the Qualifying
Provinces, the Escrow Agent shall release the balance of
the Escrowed Proceeds less, for greater certainty, the
aggregate Automatic Retraction Price and Discretionary
Retraction Price (as hereinafter defined), if any, and
the remaining 25% of the Underwriter's commission and
estimated costs and expenses incurred in connection with
the Offering, to the Corporation, Xxxx Xxxxx and Xxxxxxx
Xxxxxxxxx on a pro rata basis.
PENALTY EVENTS: In the event that the Private Placement has not closed
on or before
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August 15, 1998 or in the event that the Final
Prospectus has not been filed and receipts issued
therefor by the last of the Securities Regulators on or
prior to the date (such date being hereinafter referred
to as the "Qualification Deadline") that is:
(i) 90 days after the Closing Date, in the case where
the Meeting is not required to be convened; and
(ii) 105 days following the Closing Date, in the case
where the Meeting is required to be convened,
each Special Warrant exercised or deemed to be exercised
thereafter shall entitle the holder to receive 1.07
Units (in lieu of one Unit).
In the event a Meeting must be convened but is not
convened within 75 days of the Closing Date, Purchasers
shall be entitled to receive from the Escrowed Proceeds
an amount (the "Cash Penalty Price") equal to 7% of the
Purchase Price per Special Warrant for each Treasury
Special Warrant purchased.
RETRACTION: In the event that the Shareholder Approval is not
obtained within 90 days of the Closing Date, the
Corporation shall retract and cancel, on a pro rata
basis, that number of Treasury Special Warrants equal to
the total number of Treasury Special Warrants sold
pursuant to the Offering less the number of Treasury
Special Warrants that may be issued and sold by the
Corporation without Shareholder Approval (being a
minimum of 1.9 million Special Warrants), at a
retraction price per Special Warrant (the "Automatic
Retraction Price") payable from the Escrowed Proceeds
equal to the sum of (i) the Purchase Price per Special
Warrant (together with all interest accrued thereon);
and (ii) 7% of the aggregate Purchase Price of the
Treasury Special Warrants divided by the number of
Treasury Special Warrants to be retracted.
In the event that the Private Placement has not occurred
on or before August 15, 1998 or the Final Prospectus has
not been filed and receipts issued therefor by the last
of the Securities Regulators on or before the
Qualification Deadline, the Purchasers shall be
entitled, at their option, to require the Corporation to
retract and cancel on a pro rata basis up to such number
of Special Warrants as may be retracted from the
Escrowed Proceeds at a retraction price per Special
Warrant (the "Discretionary Retraction Price") equal to
the Purchase Price per Special Warrant (together with
all interest accrued thereon). For greater certainty,
any amounts paid to the Underwriter out of the gross
proceeds of the Offering in respect of the Underwriter's
commission or expenses shall be paid by the Corporation
to the Escrow Agent prior to payment of the
Discretionary Retraction Price.
For greater certainty, in the event that the Escrowed
Proceeds are not sufficient to satisfy the aggregate
Automatic Retraction Price or the
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Cash Penalty Price, the Corporation shall pay to the
Escrow Agent, prior to the return of the Escrowed
Proceeds to the Purchasers, an amount equal to the
shortfall.
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SCHEDULE II
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities: Xxx.Xxx International Inc. (formerly,
Internet Liquidators International Inc.)
(b) Number and Description of Securities to be Purchased: ________ Special
Warrants
(c) Purchase Price: $1.40 per Special Warrant
2. DETAILS OF PURCHASER
(a) Name of Purchaser :_____________________________________________________
(b) Address:________________________________________________________________
(c) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser:______________________________________________
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c) above) an insider
of the issuer for the purposes of the Securities Act (Ontario) (before
giving effect to this private placement)? Is so, state the capacity in
which the Purchaser (or person named in response to 2(c)) qualifies as an
insider
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(b) If the answer to (a) is "no", are the Purchaser and the issuer controlled
by the same person or company? If so, give details:
________________________________________________________________________
________________________________________________________________________
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in the
securities of the issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the 60
days preceding the date hereof:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
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UNDERTAKING
TO: THE TORONTO STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for the lesser of:
(a) a period of six months from the date of the closing of the transaction
herein or for such period as is prescribed by applicable securities legislation,
whichever is longer; and (b) a period ending on the date that a receipt for a
final prospectus in respect of the said securities or any securities derived
therefrom has been issued by the Ontario Securities Commission, without the
prior consent of The Toronto Stock Exchange and any other regulatory body having
jurisdiction.
DATED at __________________ this ________ day of _____________________, 1998.
__________________________________________
(Name of Purchaser - please print)
__________________________________________
(Authorized Signature)
__________________________________________
(Official Capacity - please print)
__________________________________________
(please print here name of individual
whose signature appears above, if
different from name of purchaser printed
above)
-20-
