EXHIBIT 3.17
XXX.XXX INTERNATIONAL INC.
SUBSCRIPTION AND PURCHASE AGREEMENT
U.S. PURCHASERS
TO: XXX.XXX INTERNATIONAL INC,
AND TO: 1184041 ONTARIO INC.
XXXXXX GROUP COMPANY
AND TO: YORKTON SECURITIES INC.
1. SUBSCRIPTION
------------
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. (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 $1.75 per
Special Warrant (the "Subscription Price"). The Purchased Warrants form part of
a larger offering (the "Offering") of 5,714,984 Special Warrants (the "Treasury
Special Warrants"), to be issued and sold by the Corporation and 400,000
Special Warrants (the "Secondary Special Warrants") to be issued and sold by
1184041 Ontario Inc., a corporation controlled by Xxxx Xxxxx and Xxxxxx Group
Company, a corporation controlled by 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 November 30, 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 I.
2. DESCRIPTION OF SPECIAL WARRANTS
-------------------------------
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-quarter of one Common Share purchase warrant
("Warrant"). Each whole Warrant will entitle the holder thereof to acquire one
Common Share at a price of $1.75 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 (a "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 (a "U.S. Offering") of at least $7,000,000; and (ii)
December 31, 1999. The Purchaser hereby acknowledges and understands that
notwithstanding the delivery of a U.S. Offering Notice, a 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 A U.S. OFFERING
NOTICE SHALL NOT CONSTITUTE OR BE DEEMED TO CONSTITUTE A GUARANTEE OR ASSURANCE
BY THE CORPORATION OR THE UNDERWRITER THAT A 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 A U.S. OFFERING MAY NEVER BE
INITIATED AND, IF INITIATED, 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 (the "Securities Regulators")
in each of the provinces in which a Purchaser is resident (the "Qualifying
Jurisdictions") 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.
At the Closing, 75% of the gross proceeds of the Offering (net of an
amount equal to the 75% of Underwriter's commission and estimated costs and its
expenses incurred in connection with the Offering) shall be paid to the
Corporation and Selling Shareholders on a pro rata basis. The balance of the
proceeds (the "Escrowed Proceeds") shall be deposited into escrow with a
mutually agreed upon escrow agent (the "Escrow Agent").
If 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 90 days after
the Closing Date each Special Warrant exercised or deemed to be exercised
thereafter shall entitle the holder to receive 1.05 Units (in lieu of one Unit).
In the event that 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, at any time until 5:00 p.m.
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on the fifth business day after the Qualification Deadline (the "Retraction
Deadline") 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 "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
payment of the Retraction Price. In the event that the Escrowed Proceeds are not
sufficient to satisfy the Retraction 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. In the event that a Final Prospectus is filed
before the Qualification Deadline, on the Expiry Date, then the Escrow Agent
shall release the Escrowed Proceeds less, the remaining 25% of the commission
payable to the Underwriter (together with all interest accrued thereon) and the
balance of the estimated costs and expenses of the Underwriter incurred in
connection with the offering to the Company and the Selling Shareholder on a pro
rata basis.
In the event that a Final Prospectus is not filed on or prior to the
Qualification Deadline, the Escrow Agent shall release the balance of the
Escrowed Proceeds less, for greater certainty the aggregate Retraction Price, if
any, and the remaining 25% of the commission payable to the Underwriter
(together with all interest accrued thereon) and the balance of the estimated
costs and expenses of the Underwriter incurred in connection with the offering
to the Company and the Selling Shareholder on a pro rata basis.
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.
Unless otherwise indicated, all dollar amounts referred to herein are
in Canadian dollars.
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3. PAYMENT
-------
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.
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 November
26, 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 II 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.
6. CLOSING
-------
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 November 30, 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
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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 I setting out the principal
terms of this Subscription Agreement and the 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,
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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 general solicitation or general advertisement including,
but not limited to, any advertisement, article, notice or other communication in
any newspaper, magazine, printed media or similar medium of general and regular
paid circulation, or broadcast over radio or television or any seminar or
meeting where attendees were invited by any general solicitation or advertising;
(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.
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";
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(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 United States 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 US$1,000,000;
(iii) Any natural person who had an individual income in excess of
US$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;
(iv) Any trust, with total assets in excess of US$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 US$5,000,000; or
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(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, the Subject Securities and
the Underlying Securities (as defined in paragraph H)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 and the securities
underlying the Subject Securities (the "Underlying Securities") will
bear an appropriate legend evidencing the restricted nature of the
Special Warrants and the Subject Securities and the Underlying
Securities indicating that no transfer of any of the Special Warrants
or the Subject Securities or the Underlying Securities may be made
unless such Special Warrants and the Subject Securities and the
Underlying 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 or Underlying 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 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 the Subject Securities; and (ii) the
opportunity to ask questions and
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receive answers from the Company concerning the terms and conditions
of the offering of the Special Warrants and the Subject Securities 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 $1.75 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.
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.
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The Purchaser understands that the Underwriter and representatives of
the Underwriter may have an interest in securities of the Corporation.
11. COSTS
-----
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.
13. GOVERNING LAW
-------------
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.
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14. SURVIVAL
--------
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
----------
This Subscription Agreement is not transferable or assignable by the
parties hereto.
16. ENGLISH LANGUAGE
----------------
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
------------
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 $1.75 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 NOVEMBER 26, 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
1184041 ONTARIO INC.
__________________________________________
Per: Xxxx Xxxxx
I have authority to bind the Corporation
XXXXXX GROUP COMPANY
__________________________________________
Per: Xxxxxxx Xxxxxxxxx
I have authority to bind the Corporation
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SCHEDULE I
TERM SHEET
ISSUER: Xxx.Xxx International Inc. (the "Corporation").
SIZE OF OFFERING: $10,701,222
PURCHASED SECURITIES: 5,714,984 special warrants (the "Treasury Special
Warrants") to be sold by the Corporation and 400,000
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-quarter 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) December 31, 1999 at an
exercise price of $1.75 per Common Share.
PURCHASE PRICE: $1.75 per Special Warrant.
UNDERWRITER: Yorkton Securities Inc.
CLOSING DATE: November 30, 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.
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ESCROW ARRANGEMENTS: At the Closing, 75% of the gross proceeds of the
Offering (net of an amount equal to 75% of the
Underwriter's commission and its estimated costs and
expenses incurred in connection with the Offering)
shall be paid to the Corporation. The balance of the
proceeds (the "Escrowed Proceeds") shall be deposited
into escrow with a mutually agreed upon escrow agent
(the "Escrow Agent").
PENALTY EVENTS: 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 90 days after the
Closing Date.
each Special Warrant exercised or deemed to be
exercised thereafter shall entitle the holder to
receive 1.05 Units (in lieu of one Unit).
RETRACTION: In the event that 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
"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 Retraction Price.
For greater certainty, in the event that the Escrowed
Proceeds are not sufficient to satisfy the Retraction
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
(b) Number and Description of Securities to be Purchased: ________ Special
Warrants
(c) Purchase Price: $1.75 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)
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