AGENCY AGREEMENT
----------------
April 18, 2000
SoftQuad Software Ltd.
000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X IJ5
Attention: Xx. Xxxxxxx Xxxxxxxxxxx
President
Dear Sirs:
We understand that Softquad Software Ltd. (the "Corporation") proposes
to issue up to 2,500,000 units (as defined below) at a price of US$7.50 per Unit
(the "Canadian Offering"). We understand that the Corporation is currently
offering U.S. Units (as defined below) in the United States (the "US Offering").
The gross proceeds from the securities sold in the Canadian Offering and the US
Offering (together the "Offering") will be up to US$18,750,000 payable to the
Corporation.
Subject to the terms and conditions set forth below, the Corporation
hereby appoints Thomson Kemaghan & Co. Limited (the "Agent") as the sole and
exclusive agent of the Corporation to solicit, on a best efforts basis, offers
to purchase the Units, and the Agent hereby agree to act as such agent. It is
understood and agreed that the Agent is under no obligation to purchase any
Units, although it may subscribe for and purchase Units if it so desires.
The terms and conditions relating to the purchase and sale of the Units
are as follows:
1. CANADIAN UNITS - The material attributes and characteristics of the Canadian
Units shall be substantially as described herein.
The Canadian Units shall each be comprised of one special warrant
(collectively the "Special Warrants") and one-half (1/2) of a share purchase
warrant (collectively the "Share Purchase Warrants"), with the attributes
described herein.
The Special Warrants shall be issued pursuant to the terms of a special
warrant certificate (the "Special Warrant Certificate"). The terms and
conditions of the Special Warrant Certificate shall be satisfactory to the
Corporation and the Agent and consistent with the terms of this Agreement.
Subject to adjustment in accordance with the terms of the Special Warrant
Certificate, the Special Warrants shall entitle the holders thereof to receive,
without additional payment upon exercise of the Special Warrants, one (1) newly
issued common share in the capital of the Corporation (the "Newly Issued
Shares").
The Special Warrants will be exercisable by a purchaser at any time on
or before 5:00 p.m. (Toronto time) on the date (the "Expiry Date") which is the
fifth Business Day (as defined below) after a receipt is issued by the
securities regulatory authority in the Qualifying Provinces (as defined in
Section 2(a)) in which such purchaser is resident, as indicated by the address
set forth by such purchaser in subscription agreements among such purchaser and
the Corporation, for a (final) prospectus of the Corporation (the "Prospectus")
qualifying (inter alia) the distribution of the Shares, the Warrant Shares and
the Compensation Shares (the "Prospectus Qualification"). All Special Warrants
not exercised on or before 5:00 p.m. (Toronto time) on the Expiry Date will be
deemed to have been exercised on behalf of the holders thereof immediately prior
thereto. For the purpose of this Agreement, "Business Day" shall mean any day
except Saturday, Sunday or a statutory holiday in Toronto, Ontario. The Special
Warrant Certificate shall be in the form of Schedule A attached.
The Share Purchase Warrants shall be issued pursuant to the provisions
of a share purchase warrant indenture (the "Share Purchase Warrant Indenture")
to be entered into between the Corporation and Montreal Trust Company of Canada
(the "Warrant Agent"). The terms and conditions of the Share Purchase Warrant
Indenture shall be satisfactory to the Corporation and the Agent and consistent
with the terms of this Agreement. Each whole Share Purchase Warrant shall
entitle the holder thereof to purchase one Warrant Share at a price of US$12.50,
subject to adjustments as set forth therein, at any time on or before 5:00 p.m.
(Toronto time) on the date which is the first anniversary of the date of
effectiveness of the Registration Statement (as such ten-n is defined in the
Share Purchase Warrant Indenture). If the securities regulatory authority in
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 and the Warrant Shares are subject to resale
restrictions under applicable provincial securities laws (a "non-Qualification
Event"), by August 31, 2000, the exercise price per Share Purchase Warrant shall
be reduced by US$0.25 per month, or pro-rated portion thereof, until the earlier
of (i) the date of issuance of a receipt and (ii) October 31, 2000. If by
October 31, 2000 a Non-Qualification Event has occurred, the exercise price per
Purchase Warrant shall thereafter be reduced by US$0.50 per month (to a minimum
of US$3.75) or pro-rated portion thereof until a receipt has been issued. The
Share Purchase Warrants shall be subject to usual anti-dilution provisions to be
contained in the Share Purchase Warrant Indenture.
The Newly Issued Shares in the capital of the Corporation issuable upon
exercise of the Special Warrants are referred to herein as the "Shares", the
common shares in the capital of the Corporation issuable upon exercise of the
Share Purchase Warrants are referred to herein individually as a "Warrant Share"
and collectively as the "Warrant Shares" and the common shares in the capital of
the Corporation are referred to herein as the "Common Shares".
2. THE CANADIAN OFFERING
---------------------
(a) Sale on Exempt Basis. The Agent will use its best efforts to
arrange for purchasers who are Accredited Investors for the
purpose of (the "Purchasers") of the Special Warrants in the
provinces of Xxxxxxx, Xxxxxx, Xxxxxxx and British Columbia
(the "Qualifying Provinces") and in such jurisdictions outside
of Canada as may be determined by the Agent and the
Corporation, to persons who are "Accredited Investors" within
the meaning of Regulation D of the U.S. Securities Act of
-2-
1933. The sale of the Units to Purchasers in Ontario shall be
effected in a manner exempt from the prospectus requirements
of the Securities Act (Ontario) and the rules and regulations
thereunder and the analogous provisions of securities
legislation in the other Qualifying Provinces (together with
applicable published policy statements of the securities
regulatory authorities in the Qualifying Provinces,
collectively, "Securities Laws"). Each Purchaser of Special
Warrants resident in Ontario shall purchase under subsections
72(l)(a), (c) or (d) of the Securities Act (Ontario), as
qualified by Rule 45-501 thereunder, and each Purchaser of
Special Warrants resident in any other Qualifying Province
shall purchase under the analogous provisions of securities
legislation of such Qualifying Province. Neither the
Corporation nor the Agent shall provide to prospective
purchasers any document or other material that would
constitute an offering memorandum within the meaning of the
Securities Laws.
(b) Commission. The Corporation agrees to pay to the Agent at the
Time of Closing (as defined in Section 6) a commission equal
to US$1,200,000 (the "Commission") and upon any Additional
Closing (as defined in Section 6) a commission to be agreed
upon between the parties in accordance with the terms of the
engagement letter between the Company and the Agent dated on
March 28, 2000 (the "Engagement Letter"), in consideration of
the services to be rendered by the Agent in connection with
the Offering. The Agent's services shall include:
(i) acting as agent of the Corporation to solicit, on a
best efforts basis, offers to purchase the Units;
(ii) participating in the preparation of the preliminary
version of the prospectus (the "Preliminary
Prospectus") and the Prospectus, together with any
documents supplemental thereto or any amending or
supplementary prospectus or other supplemental
documents or any similar document (collectively the
"Supplementary Material") required to be filed under
Securities Laws;
(iii) assisting in the preparation of the forms of
subscription agreements (the "Subscription
Agreements") to be entered into by the Corporation
and each of the Purchasers; and
(iv) advising the Corporation with respect to the private
placement of the Units.
In addition to the Commission, as additional consideration for
the performance of its obligations hereunder, the Corporation
shall issue to the Agent at the Closing, non-transferable
agent's compensation warrants (the "Agent's Compensation
Warrants"), in form and substance substantially similar to the
Agent's Compensation Warrant attached as Schedule B hereto,
entitling the holder thereof to acquire until 12 months
following the date of effectiveness of a registration
statement in the United States registering the Warrant Shares,
without additional payment upon exercise of the Agent's
-3-
Compensation Warrants, that aggregate number of compensation
options (the "Compensation Options") equal to 200,000 Units.
In the event of any Additional Closing, the Agent shall be
entitled to receive a additional Compensation Warrant
entitling the Agent to acquire a number of Units to be agreed
upon by the parties in accordance with the Engagement Letter.
The Compensation Options will be in form and substance
satisfactory to the Agent and each Compensation Option will be
exercisable at any time prior to twenty-four (24) months from
the date of the Prospectus Qualification in the province of
Ontario to purchase one Common Share (a "Compensation Share")
at U.S.$7.50 for each Compensation Share. The distribution of
the Compensation Options pursuant to the exercise of the
Agent's Compensation Warrants will be qualified by the
Prospectus to the extent possible, it being acknowledged and
agreed that proposed rule 48-502 of the Ontario Securities
Commission (the "Proposed Rule") and companion policy 48-502C
limit the amount of compensation securities that can be
qualified by a prospectus to 5% of the size of the relevant
offering. If not yet exercised by the holders, the Agent's
Compensation Warrants will be exercised by the Corporation on
behalf of the holder thereof, without any action on the part
of the holders, on 5:00 p.m. (Toronto time) on the Expiry
Date.
(c) Right of First Refusal. Provided that the Agent shall have
completed the Offering, the Agent shall also have a right of
first refusal to be the lead agent of any subsequent
financings contemplated by the Corporation for a period of one
year following the completion of the Offering, subject to the
Corporation and the Agent, both acting reasonably, agreeing to
the terms and conditions thereof.
(d) Appointment of Sub-agent. The Corporation agrees that the
Agent will be permitted to appoint other registered dealers
(or other dealers duly qualified in their respective
jurisdictions) as its agent to assist in the Offering and that
the Agent may determine the remuneration payable to such other
dealers appointed by it provided that the Corporation shall
not be required to pay or grant, as the case may be, to the
Agent or any sub-agent appointed, more than the Commission and
the Agent's Compensation Warrants and provided further that
the Agent shall advise any such sub-agents of its obligations
and covenants hereunder and shall be responsible for breaches
thereof of such sub-agents.
(e) Covenants of the Agent. The Agent covenants, represents and
warrants to the Corporation that: (i) it will comply with all
applicable Securities Laws in connection with the Offering and
the Prospectus Qualification; (ii) it will not solicit or
procure subscriptions for Units so as to require registration
thereof or filing of a prospectus with respect thereto under
the laws of any jurisdiction other than those of the
Qualifying Provinces; (iii) it, or its duly appointed
sub-agents, are duly qualified in the Qualifying Provinces in
which they solicit or procure subscriptions in connection with
the Offering; (iv) it will obtain from each purchaser an
executed Subscription Agreement in a form reasonably
acceptable to the Corporation and to the Agent relating to the
transactions herein contemplated; (v) it will, and will
-4-
require any sub-agent appointed by it to, refrain from
advertising in printed public media, radio television or
telecommunications, including electronic display, with respect
to the Offering; (vi) the Agent will provide a breakdown of
the number of Units distributed in each Qualifying Province
where such breakdown is required for the purposes of
calculating fees payable to a securities commission; (vii) it
will not, and will require any of the sub-agents not to, make
any representations or warranties with respect to the
Corporation, the Units, the Purchase Warrants, the Special
Warrants or Common Shares other than as set forth in this
Agreement, the Subscription Agreements, the Preliminary
Prospectus or the Prospectus; (viii) subject to section 5(i)
hereof, execute and deliver to the Corporation the certificate
required to be executed by it under the applicable Securities
Laws in connection with the Preliminary Prospectus, the
Prospectus and any Supplementary Material and (ix) upon the
Corporation obtaining the necessary final receipt therefor
from the securities regulatory authorities in the Qualifying
Provinces, it will deliver one copy of the Prospectus to
persons who are to acquire the securities pursuant to the
Prospectus. The Agent also acknowledges that the Compensation
Options and the Compensation Shares have not been registered
under the United States Securities Act of 1933 as amended (the
"U.S. Securities Act") and such securities may not be offered
or sold in the United States or to or for the account or
benefit of a U.S. person as defined in Regulation S under the
U.S. Securities Act. The Agent agrees that it will not offer
or sell such securities in the United States or to or for the
account or benefit of a U.S. person except: (1) pursuant to an
effective registration statement under the U.S. Securities
Act; (2) in a transaction that complies with Rule 903 or 904
of Regulation S if applicable; or (3) in a transaction that is
exempt from registration under the U.S. Securities Act.
3. Representations and Warranties of the Corporation - The Corporation
represents and warrants to the Agent and acknowledges that the Agent is relying
upon such representations and warranties, that, except as disclosed to the Agent
on April 17, 2000:
(a) The Corporation has been incorporated and organized and is
validly subsisting under the laws of its jurisdiction of
incorporation and has all requisite corporate power and
authority to enter into this Agreement, the Special Warrant
Certificates, the Share Purchase Warrant Indenture and the
Agent's Compensation Warrants (collectively the "Material
Contracts") and to carry out its obligations hereunder and
thereunder;
(b) The Corporation is not a reporting issuer or the equivalent
thereof, in any Canadian province. The Corporation is a
reporting company under the Securities Exchange Act of 1934.
(c) All press releases, material change reports and other
documents filed by or on behalf of the Corporation with the
securities regulatory authorities or the NASD during the last
two years were true and correct in all material respects
(except to the extent that information therein relates to the
-5-
capitalization of the Corporation or to the timing of the
acquisition of SoftQuad Software Inc.)
(d) The Corporation has two subsidiaries (as that term is defined
in the Securities Act (Ontario)) Softquad Software, Inc. and
Softquad Acquisition Corp. (the "Subsidiaries"), which are
material to the Corporation.
For the balance of this Section 3, the Corporation shall mean
the Corporation and its Subsidiaries.
(e) The Corporation has conducted and is conducting its business
in compliance in all material respects with all applicable
laws, rules and regulations of each jurisdiction in which it
carries on business and possess all material certificates,
authorities, pen-nits, licences, trademarks, copyrights,
patents or other intellectual property rights issued by the
appropriate provincial, state, municipal, federal or other
regulatory agency or body necessary to carry on the business
currently carried on by it, is in compliance in all material
respects with such certificates, authorities, permits,
licences, trademarks, copyrights, patents or other
intellectual property rights and with all laws, regulations,
tariffs, rules, orders and directives material to its
operation, and the Corporation has not received any notice of
proceedings relating to the revocation or modification of any
such certificates, authorities, permits, licences, trademarks,
copyrights, patents or other intellectual property rights
which, singly or in the aggregate, if the subject of an
unfavourable decision, order, ruling or finding, would
materially and adversely affect the conduct of the business,
operations, financial condition or income of the Corporation
on a consolidated basis.
(f) Except as disclosed in the documents which have been filed by
the Corporation with the Securities Exchange Commission and in
all press releases (the "Disclosure Documents") of the
Corporation, the Corporation is the legal and beneficial owner
of, and has good and marketable title to, all of the material
assets of the Corporation, as described in the Disclosure
Documents including, without limitation, all patents,
trademarks and other intellectual property, free of all
mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands whatsoever other than as
disclosed in the Disclosure Documents. No other material
property rights are necessary for the conduct of the
Corporation's business. There are no restrictions on the
ability of the Corporation to use, transfer or otherwise
exploit any such property rights, and the Corporation does not
know of any claim or basis for a claim that may adversely
affect such rights.
(g) Except as disclosed in the Disclosure Documents any and all
agreements pursuant to which the Corporation holds its assets
are valid and subsisting agreements in full force and effect,
enforceable in accordance with their respective terms (subject
to customary qualifications concerning the application of laws
affecting creditors rights and the availability of equitable
remedies being in the discretion of courts), the Corporation
is not in material default of any of the provisions of any
-6-
such agreements nor has any such default been alleged and such
assets are in good standing under the applicable statutes and
regulations of the jurisdictions in which they are situate,
all leases pursuant to which the Corporation derives its
interest in such assets are in good standing and there has
been no material default under any such leases and all real or
other property taxes required to be paid with respect to such
assets to the date hereof have been paid.
(h) Except as disclosed in or contemplated by the Disclosure
Documents:
(i) the Corporation has not paid or declared any
dividends or incurred any material capital
expenditure or made any commitment therefor;
(ii) the Corporation has not incurred any obligation or
liability, direct or indirect, contingent or
otherwise, except in the ordinary course of business
and which is not material; and
(iii) the Corporation has not entered into any material
transaction;
(i) Other than as disclosed in the Disclosure Documents, the
Corporation has not approved, is not contemplating, has not
entered into any agreement in respect of, and has no knowledge
of:
(j) To the best of the knowledge of the Corporation, none of the
directors or officers of the Corporation or any associate or
affiliate of any of the foregoing had, has or intends to have
any material interest, direct or indirect, in the transactions
contemplated by this agreement or in any proposed material
transaction with the Corporation which, as the case may be,
materially affects, is material to or will materially affect
the Corporation.
(k) The authorized capital of the Corporation consists of
50,000,000 Common Shares and 25,000,000 Preference Shares and
one Special Voting Share. As of the date hereof, the
Corporation has outstanding options, warrants and other
outstanding rights to acquire 1,878,368, 3,863,500 and
5,773,605 Common Shares, respectively.
(l) Except as set forth in Schedule C and except for options,
warrants and rights referred to in clause (k) above, no person
has any agreement or option, or right or privilege (whether
pre-emptive or contractual) capable of becoming an agreement
for the purchase, subscription or issuance of any of the
unissued shares, securities, warrants (including convertible
securities or warrants) of the Corporation.
(m) Certain common shares in the share capital of the Corporation
are quoted on the OTC Bulletin Board.
(n) The Warrant Agent has been duly appointed as warrant agent
under the Share Purchase Warrant Indenture.
-7-
(o) All necessary corporate action has been taken to duly
authorize the issue, sale and delivery of the Units (and the
securities comprising same) and, upon payment of the requisite
consideration therefor, the Units (and the securities
comprising same) will be validly issued.
(p) At the Closing and any Additional Closing, (i) the Agent's
Compensation Warrants will be duly and validly created and
issued, (ii) the Shares will be duly and validly allotted and
reserved for issuance upon the exercise of the Special
Warrants, (iii) the Compensation Shares will be duly and
validly allotted and reserved for issuance upon the exercise
of the Compensation Options; and (iv) the Warrant Shares will
be duly and validly allotted and reserved for issuance upon
the due exercise of the Share Purchase Warrants.
(q) The offering and sale in the Qualifying Provinces of the
Units, the compliance by the Corporation with the provisions
of this Agreement and the consummation of the transactions
referred to herein do not (i) require the consent, approval,
authorization, registration or qualification of or with any
governmental authority, stock exchange, securities regulatory
authority or other third party, except (A) such as have been
obtained, and (B) such as may be required (and shall be
obtained as provided in this Agreement) under the Securities
Laws of the Qualifying Province, or (ii) conflict with or
result in any breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or
instrument to which the Corporation or any of its properties
is bound, or the articles or by-laws of the Corporation or any
statute or any judgment, decree, order, rule or regulation of
any court or other governmental authority or any arbitrator,
or stock exchange or securities regulatory authority
applicable to the Corporation or any of its properties or
assets which could have a material adverse effect on the
condition (financial or otherwise), business, properties, net
worth, or results of operations of the Corporation, on a
consolidated basis.
(r) The execution and delivery of each of the Material Contracts
and the performance and compliance with the terms of the
Material Contracts will not result in any material breach of,
or be in conflict with, or constitute a material default under
or create a state of facts which after notice or lapse of time
or both, constitutes a material default under, any term or
provisions of the articles, by-laws or resolutions of the
directors or shareholders of the Corporation or any mortgage,
note, indenture, contract, agreement (written or oral),
instrument, lease, license or other document, to which the
Corporation is a party or to which it is subject or any
judgment, decree, order, statute, rule or regulation
applicable to the Corporation.
(s) Each of the Material Contracts has been (or will be at the
Closing Date) duly authorized, executed and delivered by the
Corporation and constitutes or will constitute a valid and
binding obligation of the Corporation, enforceable against the
Corporation in accordance with its terms, except that
enforcement thereof may be limited by bankruptcy, insolvency,
-8-
reorganization, moratorium or similar laws affecting the
rights of creditors generally; equitable remedies, including,
without limitation, specific performance and injunction, may
be granted only in the discretion of a court of competent
jurisdiction; and rights of indemnity, contribution and waiver
of contribution provided for herein may be limited under
applicable law.
(t) No order preventing or suspending trading in any securities of
the Corporation or prohibiting the issue and sale of
securities by the Corporation has been issued and no such
proceedings for such purposes are pending or, to the best of
the knowledge of the Corporation, threatened.
(u) No federal, provincial, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, has given written notice
or to the best of the knowledge of the Corporation has been
threatened in writing to modify or remove any licence, permit
or operating certificate necessary in order for the
Corporation to carry on business and the Corporation is in
compliance in all material respects with the terms and
conditions of its licences, permits and operating
certificates.
(v) The Corporation has filed all necessary tax returns and
notices and has paid all applicable taxes of whatever nature
for all tax years to the date hereof to the extent such taxes
have become due or have been alleged to be due and the
Corporation is not aware of any tax deficiencies or interest
or penalties accrued or accruing, or alleged to be accrued or
accruing, thereon where, in any of the above cases, it might
reasonably be expected to result in any material adverse
change in the condition, financial or otherwise of the
Corporation.
(w) There are no actions, suits, proceedings or enquiries pending
or, to the best of the knowledge of the Corporation,
threatened, against or affecting the Corporation or to which
any property of the Corporation is subject, at law or in
equity, or before or by any federal, provincial, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which
may in any way materially and adversely affect the
Corporation, on a consolidated basis.
(x) The Corporation has not withheld, and will not withhold, from
the Agent any facts relating to the Corporation or to the
offering of the Units that could reasonably be expected to be
material to a prospective purchaser of the Units.
4. Covenants of the Corporation - The Corporation hereby covenants to and with
the Agent that it will:
(a) fulfil all legal requirements to permit the creation,
issuance, offering and sale of the Units (including the
securities comprising and underlying same) as contemplated in
this Agreement including, without limitation, compliance with
-9-
the Securities Laws to enable the Units to be offered for sale
and sold to Purchasers without the necessity of filing a
prospectus in the Qualifying Province;
(b) use its reasonable best efforts to arrange for the posting for
trading of the Shares, and the Warrant Shares and the
Compensation Shares on the OTC Bulletin Board as soon as
possible under applicable securities laws;
(c) use its reasonable best efforts to maintain the quotation of
certain of the Common Shares on the OTC Bulletin Board and
maintain its status as a registrant;
(d) prepare and file the Preliminary Prospectus and other related
documents relating to the proposed distribution of Shares,
Warrant Shares and Compensation Shares in each of the
Qualifying Provinces and use its best efforts to do so as soon
as possible;
(e) both before and after the Qualification Deadline, resolve as
soon as reasonably practicable any regulatory deficiencies in
respect of the Preliminary Prospectus on a basis acceptable to
the Agent, acting reasonably, and, as soon as reasonably
practicable after such deficiencies have been resolved or
satisfied, prepare, file and use its best efforts to obtain
receipts under the applicable legislation of each of the
Qualifying Provinces for the Prospectus and take all other
steps and proceedings that may be necessary in order to
qualify the Shares, Warrant Shares and (subject to the
limitations of the Proposed Rule) Compensation Shares for
distribution or distribution to the public in the Qualifying
Provinces as soon as possible;
(f) prior to the filing of the Preliminary Prospectus and
thereafter and prior to the filing of the Prospectus and any
Supplementary Material, permit the Agent and its counsel to
participate fully in the preparation of such documents and
allow the Agent and its counsel to conduct all due diligence
which the Agent may reasonably require to conduct in order to
fulfil its obligations under the Securities Laws and in order
to enable the Agent responsibly to execute any certificate
required to be executed by the Agent in connection with the
Preliminary Prospectus, the Prospectus or any Supplementary
Material;
(g) if the Prospectus is not filed and receipts issued therefor by
the securities regulatory authorities in the Qualifying
Provinces where a Purchaser is resident on or before the
Qualification Deadline, issue to persons who exercise their
Share Purchase Warrant after the Qualification Deadline,
without payment of any additional consideration, a revised
number of Warrant Shares in accordance with the adjustment
provisions provided for in the Share Purchase Warrants;
(h) ensure that at the respective times of filing and at all times
subsequent to the filing thereof during the distribution of
the Shares and Warrant Shares, the Preliminary Prospectus,
Prospectus and any Supplementary Material will fully comply
with the requirements of applicable securities legislation,
provided that the foregoing shall not apply with respect to
-10-
statements contained in such documents relating solely to the
Agent and the Corporation hereby acknowledges and agrees that
the Agent shall be under no obligation to sign the certificate
page of the Preliminary Prospectus, the Prospectus or any
Supplementary Material until it is satisfied in its sole
discretion, that the Securities Laws of the Qualifying
Provinces have been complied with;
(i) deliver in Toronto, within three Business Days of the issue of
a receipt for the Preliminary Prospectus and the Prospectus,
as the case may be, and within three Business Days of
execution of any Supplementary Material, without charge to the
Agent, as many copies of the Preliminary Prospectus, the
Prospectus and any Supplementary Material as the Agent may
reasonably request for the purposes contemplated hereunder and
contemplated by the Securities Act (Ontario), and such
delivery shall constitute: (A) the consent of the Corporation
to use such documents in connection with the distribution or
the distribution to the public, as the case may be, of the
Shares and Warrant Shares, subject to the provisions of the
securities legislation of the Qualifying Provinces; and (B)
the Corporation's representation and warranty to the Agent
that, at the time of delivery, the information and statements
contained therein (except information and statements relating
solely to or provided by the Agent) contain no
misrepresentation and constitute full, true and plain
disclosure of all material facts relating to the Offering, the
Corporation and the Common Shares;
(j) cause to be delivered to the Agent concurrently with the
filing of the Prospectus and any Supplementary Material,
comfort letters of the auditors of the Corporation in each
case dated the date of the Prospectus or the Supplementary
Material to which such letter relates (as the case may be)
addressed to the Agent and to the directors of the
Corporation, in form and substance satisfactory to the Agent
acting reasonably, relating to the financial statements to be
included in the Prospectus and any Supplementary Material and
verifying in accordance with U.S. Generally Accepted
Accounting Principles, the financial information, accounting
data and other numerical data contained in the Prospectus or
any Supplementary Material and matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Prospectus to a date not
more than two Business Days prior to the date of such letter;
and
(k) forthwith after the Closing, to file such documents as may be
required under the Securities Laws of the Qualifying Provinces
relating to the private placement of the Units which, without
limiting the generality of the foregoing, shall include a Form
45-501F as prescribed by Rule 45-501 under the Securities Act
(Ontario) and the equivalent thereof in the other Qualifying
Provinces.
The obligation of the Agent to execute any certificate or deliver any
documents pertaining to the Preliminary Prospectus, the Prospectus or
any Supplementary Material shall be conditional upon compliance by the
Corporation to the date of such execution and delivery with those
-11-
covenants contained in this Agreement to be complied with prior to the
filing of the Preliminary Prospectus, the Prospectus or any
Supplementary Material as the case may be.
5. Conditions of Closing - The Agent's obligation to complete the Closing, and
the Purchasers' obligations to purchase the Units at the Closing, shall be
subject to the Agent having received at the Time of Closing:
(a) favourable legal opinions, in form and substance satisfactory
to the Agent, acting reasonably, dated the Closing Date from
counsel for the Corporation, Xxxxxxx, Philips and Vineberg,
Toronto, or, in the case of laws other than those of Canada
and the Province of Ontario from local counsel addressed to
the Agent and the Purchasers and to the extent appropriate as
to matters of fact based on certificates of officers of the
Corporation to the following effect:
(i) the Corporation has been incorporated and is existing
under the laws of the State of Delaware and is
qualified as a corporation to do business under the
laws of the Province of Ontario;
(ii) the Corporation has all necessary corporate power and
authority to own, lease and operate its business and
assets and to conduct its business as now conducted;
(iii) the authorized capital of the Corporation consists of
50,000,000 Common Shares and 25,000,000 Preference
Shares and one Special. Voting Share;
(iv) the Corporation has all necessary corporate power,
capacity and authority to authorize, execute and
deliver the Material Contracts and to perform all of
its obligations thereunder;
(v) the execution, delivery of and performance by the
Corporation of the Material Contracts have been
authorized by all necessary corporate action on the
part of the Corporation;
(vi) each of the Material Contracts has been duly executed
and delivered by the Corporation and, subject to the
usual qualifications, constitutes a legal, valid and
binding obligation of the Corporation enforceable
against the Corporation in accordance with its terms;
(vii) the Special Warrants and Share Purchase Warrants have
been authorized, executed and issued by the
Corporation and certified and delivered in accordance
with the provisions of the Special Warrant
Certificate and the Share Purchase Warrants and,
subject to the usual qualifications, constitute
legal, valid and binding obligations of the
Corporation enforceable in accordance with their
respective terms, and are entitled to the benefit of
-12-
the Special Warrant Certificate and the Share
Purchase Warrant Certificate, respectively;
(viii) the Shares issuable upon the exercise of the Special
Warrants have been allotted and reserved for issuance
to the holders, from time to time, of the Special
Warrants and such Shares will, when issued upon the
exercise of the Special Warrants (without additional
payment) in accordance with the terms of the Special
Warrant Certificate be validly issued as fully paid
and non-assessable Common Shares;
(ix) the Agent's Compensation Warrants have been validly
issued and the Compensation Options to be issued upon
the exercise of the Agent's Compensation Warrants
will, when issued upon the exercise of the Agent's
Compensation Warrants in accordance with the terms of
the Agent's Compensation Warrants, be validly issued
to the Agent without additional payment;
(x) the Compensation Shares to be issued upon the
exercise of the Compensation Options have been
allotted and reserved for issuance to the holders of
the Compensation Options, and such Compensation
Shares will, when issued upon exercise of the
Compensation Options in accordance with the terms of
the Compensation Options, be validly issued and,
fully paid and non-assessable Common Shares;
(xi) the Warrant Shares to be issued upon the exercise of
the Share Purchase Warrants have been allotted and
reserved for issuance to the holders, from time to
time of the Share Purchase Warrants, and such Warrant
Shares will, when issued upon the exercise of the
Share Purchase Warrants in accordance with the terms
of the Share Purchase Warrant Indenture, be validly
issued as fully paid and non-assessable Common
Shares;
(xii) the offering, sale and delivery of the Units and the
Agent's Compensation Warrants has been effected in
such a manner as to be exempt, either by statute,
regulation or order, from the prospectus and
registration requirements of the Securities Laws of
the Qualifying Provinces subject to the filing of all
necessary reports, certificates or undertakings
required to be filed under the Securities Laws;
(xiii) upon the issuance of a receipt for the Prospectus
from the securities regulatory authorities in each of
the Qualifying Provinces prior to the exercise of the
Special Warrants, the Share Purchase Warrant and the
Agent's Compensation Warrants, the Shares,
Compensation Shares, and Warrant Shares will not be
subject to any statutory holding period (except to
the extent that the Prospectus does not qualify the
distribution of the Compensation Shares) under the
laws of the Qualifying Provinces and no other
documents are required to be filed, proceedings taken
or approvals, permits consents, orders or
-13-
authorizations of regulatory authorities required to
be obtained under the Securities Laws, in connection
with the first trade of the Shares, Compensation
Shares (except to the extent that the Prospectus does
not qualify the distribution of the Compensation
Shares), and Warrant Shares, in each case through
registrants registered under the applicable
securities laws of such Qualifying Provinces who have
complied with such applicable laws (subject to the
usual qualifications);
(xiv) in the event that a receipt for the Prospectus is not
issued prior to the exercise of the Special Warrants
by a Purchaser or the exercise of the Agent's
Compensation Warrants by an Agent, then the issuance
of the Shares, Compensation Shares, and Warrant
Shares will be exempt from the registration and
prospectus requirements of the Securities Laws of the
Qualifying Provinces;
(xv) in the event that a receipt for the Prospectus is not
issued prior to the exercise of the Special Warrants
or Share Purchase Warrants by a Purchaser or the
exercise of the Agent's Compensation Warrants by an
Agent, with respect to the statutory hold period
applicable to the resale of the Shares, Compensation
Shares, and Warrant Shares (subject to the usual
qualifications);
(xvi) the authorization, execution and delivery of and
performance by the Corporation of the Material
Contracts and the performance by the Corporation of
its obligations contemplated thereunder, do not and
will not conflict with, and do not and will not
result in a breach of (whether after notice or lapse
of time, or both), any of the terms, conditions or
provisions of the articles or by-laws of the
Corporation or resolutions of the directors (or any
committee thereof) or shareholders of the
Corporation;
(xvii) the Corporation is a reporting company under the
Securities Exchange Act of 1934 and not in default
under the applicable federal and state laws;
(xviii) the form and terms of the certificates representing
each of the Common Shares, Special Warrants, Agent's
Compensation Warrants, Compensation Options and Share
Purchase Warrants has been or will be duly approved
by the directors of the Corporation and in the case
of the Common Shares, conforms with all legal
requirements relating thereto;
(xix) Atlas Stock Transfer Corp. at its principal office in
Salt Lake City, Utah has been appointed as the
registrar and transfer agent for the Common Shares;
and
-14-
(xx) Montreal Trust Company of Canada at its principal
office in Toronto has been appointed as warrant agent
for the Share Purchase Warrants under the Share
Purchase Warrant Indenture.
(b) certificates dated the Closing Date, signed by appropriate
officers of the Corporation, addressed to the Agent, its
counsel, and the Purchasers, with respect to the articles and
by-laws of the Corporation, all resolutions of the directors
of the Corporation and other corporate action relating to this
Agreement and to the creation, allotment, issue and sale of
the Units and specimen signatures of signing officers and with
respect to such other matters as the Agent may reasonably
request;
(c) evidence satisfactory to the Agent that the Corporation has
obtained all necessary approvals for the quotation of the
common shares on the OTC Bulletin Board;
(d) a certificate or certificates dated the Closing Date and
executed on behalf of the Corporation by the President and
Chief Executive Officer of the Corporation or such other
officer of the Corporation as the Agent may approve, addressed
to the Agent, its counsel and the Purchasers certifying, to
the best of the information, knowledge and belief of the
person so signing, after having made due enquiry, that
(i) there are no contingent liabilities affecting the
Corporation which are material to the Corporation;
(ii) no order, ruling or determination having the effect
of suspending the sale or ceasing the trading of the
Common Shares or any other securities of the
Corporation has been issued or made by any stock
exchange, securities commission or other regulatory
authority and is continuing in effect and no
proceedings for that purpose have been instituted or
are pending or contemplated or threatened by any
stock exchange, securities commission or other
regulatory authority;
(iii) there are no actions, suits, proceedings or enquiries
pending or threatened against or affecting the
Corporation or to which any property of the
Corporation is subject, at law or in equity, or
before or by any federal, provincial, state,
municipal or other governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, which may, in any way,
materially and adversely affect the Corporation;
(iv) no failure or default on the part of the Corporation
exists under any law or regulation applicable to the
Corporation or under any licence, permit, contract,
agreement or other instrument to which the
Corporation is a party or by which the Corporation is
bound, which may in any way materially and adversely
affect the Corporation and the execution, delivery
and performance of this Agreement and the allotment,
-15-
issue and sale of the Units will not result in any
such default;
(v) the Corporation has duly complied in all material
respects with all of the terms and conditions of this
Agreement on its part to be complied with up to the
Time of Closing;
(vi) the representations and warranties of the Corporation
contained in this Agreement are true and correct as
of the Closing Date with the same force and effect as
if made at and as of the Time of Closing after giving
effect to the transactions contemplated by this
Agreement; and
(vii) such other matters as the Agent may reasonably
request; and
(e) the Special Warrant Certificates and the Share Purchase
Warrant Indenture shall have been executed and delivered by
the Corporation and the Warrant Agent, in form and substance
satisfactory to the Agent and its counsel;
(f) the Commission shall have been paid to the Agent either by
deducting such amount from the amount to be received by the
Corporation or by certified cheque addressed to the Agent to
be delivered on Closing, as may be agreed between the Agent
and the Corporation.
6. Closing. The purchase and sale of the Units (the "Closing") shall be
completed at the offices of Xxxxxxx, Xxxxxxxx and Xxxxxxxx, Toronto at [ ] p.m..
(Toronto time) (the "Time of Closing") on April [18], 2000 or at such other time
or on such other date as the Corporation and the Agent may agree upon (the
"Closing Date" which for greater certainty, shall not include any Additional
Closing, as such term is defined below), provided that the purchase and sale of
additional Units (the "Additional Closing"), if any, may occur within five
Business Days of the Closing Date, for an additional number of Units not to
exceed when added to the number of Units issued on the Closing Date, the
aggregate number of Units to be issued pursuant to the Offering as set out on
page one (1) hereof, and provided that the Corporation and the Agent so agree.
(a) At the Time of Closing the Corporation shall deliver to the
Agent on behalf of the Purchasers:
(i) certificates representing the Special Warrants and
Purchase Warrants duly registered as the Agent may
direct;
(ii) the requisite legal opinions and certificates as
contemplated in Section 5 hereof; and
(iii) such further documentation as may be contemplated
herein or as counsel to the Agent or the applicable
regulatory authorities may reasonably require; or
-16-
(b) On any Additional Closing, the Corporation shall deliver to
the Agent on behalf of the Purchasers;
(i) certificates representing the Special Warrants and
Purchase Warrants duly registered as the Agent may
direct;
(ii) certificates as contemplated in Section 5 hereof (as
may be reasonably requested by Counsel to the Agent)
updated to the date of the Additional Closing; and
(iii) such further documentation as may be contemplated
herein or as counsel to the Agent or the applicable
regulatory authorities may reasonably require;
in each case, against delivery by the Agent to the Corporation of duly executed
Subscription Agreements to purchase such Units, and payment of the purchase
price by certified cheque or bank draft payable to the Corporation.
In the event that the Prospectus Qualification does not occur by the
Qualification Deadline, each Purchaser shall be entitled, without payment of any
additional consideration, upon exercise of the Share Purchase Warrants, to
receive a revised number of Warrant Shares in accordance with the adjustment
provided for in the Share Purchase Warrant Certificate.
7. Expenses - Whether or not the Closing or Additional Closing occurs, the
Corporation shall pay all costs, fees and expenses of the Agent which relate to
or are incidental to the performance of the obligations of the Agent or the
Corporation under this Agreement including, without limitation: (i) the cost of
qualifying the Shares, Warrant Shares and Compensation Shares for distribution
in the Qualifying Provinces, (ii) the cost of printing the Preliminary
Prospectus, the Prospectus, any Supplementary Material and certificates for the
Special Warrants, Purchase Warrants, Compensation Option, Shares, Compensation
Shares and Warrant Shares, (iii) the cost of registration, countersignature (in
the case of Share Purchase Warrants) and delivery of the Special Warrants, Share
Purchase Warrants, Shares, Warrant Shares, Compensation Option and Compensation
Shares (iv) the fees and expenses of the Corporation's auditors, counsel and any
local counsel, and (v) the reasonable fees and expenses of the Agent's counsel,
Messrs. Stikeman Elliott and the Agent's reasonable out-of-pocket expenses
(including marketing expenses). Such amounts payable to the Agent shall be paid
by the Corporation to the Agent in respect of expenses and fees incurred upon
receipt of invoices regarding such expenses but in any event no later than on
the Expiry Date.
8. Material Changes - If after the date hereof and prior to the Expiry Date:
(a) there occurs any material change or material changes (actual,
proposed or prospective) in respect of the Corporation;
(b) there occurs any change in any material fact contained in the
Preliminary Prospectus, Prospectus or any Supplementary
Material; or
-17-
(c) any new material fact arises which would, under the Securities
Laws of any of the Qualifying Provinces, require an amendment
to the Preliminary Prospectus, Prospectus or any Supplementary
Material,
the Corporation shall:
(i) promptly notify the Agent, in writing, providing full
particulars of any such change;
(ii) if required by applicable law, prepare and deliver to
each Purchaser an amendment to the Prospectus;
(iii) file or cause to be filed with reasonable promptness,
and in any event within any statutory limitation
period therefor, any document required to be filed
with any regulatory body having jurisdiction and
comply with all requirements of any applicable
securities legislation of such jurisdiction; and
(iv) comply with all legal requirements necessary to
qualify the Shares, Warrant Shares and (subject to
the limitations of the Proposed Rule) the
Compensation Shares for distribution in the
Qualifying Provinces.
The Corporation shall in good faith discuss with the Agent any
change in circumstances (actual, proposed or prospective) in respect of which
there is reasonable doubt whether written notice should be given to the Agent
pursuant to this section and shall consult the Agent with respect to the form
and content of any amendment to the Preliminary Prospectus, Prospectus or
Supplementary Material proposed to be issued or filed or any public announcement
or communication to holders of the Corporation's securities proposed to be made
by the Corporation as a result of such change prior to the issuance or filing
thereof.
In this Agreement, the terms "material change", "material
fact", "misrepresentation" and "distribution" include the respective meanings
ascribed thereto in the Securities Act (Ontario).
9. Indemnities - The Corporation covenants and agrees to protect, indemnify and
hold harmless the Agent and its directors, officers, employees, shareholders,
representatives and agent (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") from and against all losses (except for
loss of profits), claims, expenses, costs, damages and/or liabilities, whether
joint or several (including the aggregate amount paid in reasonable settlement
of any actions, suits, proceedings or claims) which they may suffer or incur
caused by or arising directly or indirectly by reason of:
(a) the performance by the Agent of its services hereunder or
otherwise in connection with the matters contained herein;
-18-
(b) any information or statement (except any information or
statement relating solely to the Agent) contained in the
Preliminary Prospectus, Prospectus or any Supplementary
Material being or being alleged to be a misrepresentation;
(c) the omission to state in the Preliminary Prospectus,
Prospectus or any Supplementary Material a material fact
required to be stated therein or necessary to make the
statements therein not misleading (except the omission to
state a material fact relating solely to the Agent);
(d) the Corporation not complying with any requirement of the
Securities Laws in connection with the Offering or the
Prospectus Qualification;
(e) any order made or any inquiry, investigation or proceeding
commenced or threatened by any regulatory authority based upon
an allegation that any untrue statement or alleged omission or
any misrepresentation or alleged misrepresentation in the
Preliminary Prospectus, the Prospectus or any Supplementary
Material exists (except information and statements relating
solely to the Agent) which prevents or restricts the trading
in or distribution of the Special Warrants, Share Purchase
Warrants or Common Shares; or
(f) the Corporation's failure to comply with any of its
obligations hereunder.
If any action or claim shall be asserted against an
Indemnified Party in respect of which indemnity may be sought from the
Corporation pursuant to the provisions hereof, or if any potential claim
contemplated by this section shall come to the knowledge of an Indemnified
Party, the Indemnified Party shall promptly notify the Corporation in writing of
the nature of such action or claim (provided that any failure to so notify shall
not affect the Corporation's liability under this paragraph unless such delay
has prejudiced the defence to such claim). The Corporation shall be entitled but
not obliged to participate in or assume the defence thereof, provided, however
that the defence shall be through legal counsel acceptable to the Indemnified
Party, acting reasonably. In addition, the Indemnified Party shall also have the
right to employ separate counsel in ' any such action and participate in the
defence thereof, and the reasonable fees and expense of such counsel shall be
borne by the Indemnified Party unless (i) the employment thereof has been
specifically authorized in writing by the Corporation (ii) the Indemnified Party
has been advised by counsel acceptable to the Corporation, acting reasonably,
that representation of the Corporation and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing interests
between them; or (iii) the Corporation have failed within a reasonable time
after receipt of such written notice to assume the defence of such action or
claim. It is understood and agreed that the Corporation shall not, in connection
with any suit in the same jurisdiction, be liable for the legal fees and
expenses of more than one separate legal firm to represent the Indemnified
Parties. Neither party shall effect any settlement of any such action or claim
or make any admission of liability without the written consent of the other
party, such consent not to be unreasonably withheld or delayed. The indemnity
hereby provided for shall remain in full force and effect and shall not be
limited to or affected by any other indemnity in respect of any matters
specified in this section obtained by the Indemnified Party from any other
person.
-19-
To the extent that any Indemnified Party is not a party to
this Agreement, the Agent shall obtain and hold the right and benefit of this
section in trust for and on behalf of such Indemnified Party.
The Corporation hereby waives its right to recover
contribution from the Agent misrepresentation contained in the Preliminary
Prospectus, the Prospectus or in any Supplementary Material; provided, however,
that such waiver shall not apply in respect of liability caused or incurred by
reason of or arising out of any misrepresentation which is based upon or results
from information relating solely to the Agent contained in such document.
The Corporation hereby consents to personal jurisdiction and
service and venue in any court in which any claim which is subject to
indemnification hereunder is brought against the Agent or any Indemnified Party
and to the assignment of the benefit of this section to any Indemnified Party
for the purpose of enforcement provided that nothing herein shall limit the
Corporation's right or ability to contest the appropriate jurisdiction or forum
for the determination of any such claims.
10. Contribution - In the event that, for any reason, the indemnity provided for
in section 9 hereof is illegal or unenforceable, the Agent and the Corporation
shall contribute to the aggregate of all losses, claims, costs, damages,
expenses and/or liabilities (except loss of profits in connection with the sale
of Units) of the nature provided for in Section 9 hereof such that the Agent
shall be responsible for that portion represented by the percentage that the
Commission bears to the gross proceeds from the Offering and the Corporation
shall be responsible for the balance provided that in no event shall the Agent
be responsible for any amount in excess of the portion of the Commission
actually received by them. Notwithstanding the foregoing, a person guilty of
fraudulent misrepresentation shall not be entitled to contribution from any
other party. Any party entitled to contribution will, promptly after receiving
notice of commencement of any claim, action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this section, notify such party or parties from whom
contribution may be sought. In no case shall such party from whom contribution
may be sought be liable under this Agreement unless such notice shall have been
provided, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
otherwise than under this section. The right to contribution provided in this
section shall be in addition and not in derogation of any other right to
contribution which the Agent may have by statute or otherwise by law.
11. Termination Rights - In addition to any other remedies which may be
available to the Agent, the Agent shall be entitled, at its option, to terminate
and cancel, without any liability on its part, all of its obligations under this
Agreement and the obligations of any person whom the Agent has solicited to
purchase the Units and who has executed a Subscription Agreement, by notice in
writing to that effect delivered to the Corporation prior to the Time of Closing
or prior to the Additional Closing with respect to the Units purchased at such
time if:
(a) the Agent is not satisfied in its sole discretion, acting
reasonably, with the results of all or any portion of its due
diligence review and investigations of the Corporation;
-20-
(b) there is in the sole opinion of the Agent a material change or
change in material fact or new material fact or an undisclosed
material fact or material change which might be expected to
have a significant adverse effect on the business, affairs,
profitability or prospects of the Corporation on a
consolidated basis or on the market price or value of the
Common Shares, Special Warrants, Share Purchase Warrants or
other securities of the Corporation;
(c) there should develop, occur or come into effect any occurrence
of national or international consequence, or any action, law
or regulation, inquiry, or other occurrence of any nature
whatsoever which, in the sole opinion of the Agent, seriously
affects, or may seriously affect, the financial markets or the
business of the Corporation, or the market price or value of
the Common Shares, Special Warrants, Share Purchase Warrants
or other securities of the Corporation;
(d) the state of the financial markets is such that in the sole
opinion of the Agent, acting reasonably, it would be
unprofitable to offer or continue to offer the Units for sale;
(e) there is an inquiry, action, suit, proceeding or investigation
(whether formal or informal instituted or announced or
threatened) in relation to the Corporation or any one of the
Corporation's directors, officers or principal shareholders;
(f) any order to cease trading in the securities of the
Corporation is made, threatened or announced by a competent
securities regulatory authority; or
(g) the Corporation is in breach of a term, condition, or covenant
of this Agreement or any representation or warranty given by
the Corporation in this Agreement is or becomes false.
If the Agent terminates this Agreement pursuant to this
section there shall be no further liability on the part of the Agent or of the
Corporation to the Agent except in respect of any liability which may have
arisen or may thereafter arise under Sections 7, 9 or 1 0 hereof.
The right of the Agent to terminate its obligations under this
Agreement is in addition to such other remedies as it may have in respect of any
default, act or failure to act of the Corporation in respect of any of the
matters contemplated by this Agreement.
12. Breach of Agreement - All terms and conditions of this Agreement to be
performed or satisfied by the Corporation shall be constituted as conditions and
any breach of, or failure by the Corporation to comply with, any term or
condition of this Agreement shall entitle the Agent, on behalf of the Purchasers
of the Special Warrants, to terminate their respective obligations to purchase
the Special Warrants by notice to that effect given to the Corporation prior to
the Time of Closing. In the event of any such termination, there shall be no
further liability on the part of the Corporation or the Agent except in respect
of any liability which may have arisen or may thereafter arise under 7, 9 or 10
hereof. The Agent may waive, in whole or in part, or extend the time for
compliance with, any terms and conditions without prejudice to its rights in
respect of any other terms and conditions or any other or subsequent breach or
-21-
non-compliance provided, however, that any waiver or extension must be in
writing and signed by the Agent IN order to be binding upon them.
13. No Further Offerings - The Corporation shall not, from the date hereof,
until September 1, 2000 directly or indirectly sell, agree or offer to sell,
grant any option for the sale of, or otherwise dispose of any Common Shares or
Securities convertible into its Common Shares without the prior written consent
of the Agent, which consent shall not be unreasonably withheld, other than
Common Shares which are issued in connection with:
(a) normal course exercises of options pursuant to any existing
stock option plan or similar agreement of the Corporation; and
(b) the exercise of any convertible securities, options or
warrants to acquire securities of the Corporation outstanding
on the Closing Date.
14. Notices - Any notice under this Agreement shall be given in writing and
either delivered or telecopied to the party to receive such notice at the
address or telecopy numbers indicated below:
to the Corporation:
Softquad Software Ltd..
Suite 400
000 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X XX0
Xxxxxx
Attention: Xxxxxxx Xxxxxxxxxxx
President
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxx & Xxxxxxxx
Suite 2400, 000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X0X0
Attention: Neill May and Xxxxxx Xxxx
Fax: (000) 000-0000
-22-
to the Agent or any Indemnified Party:
Thomson Kemaghan & Co. Limited 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention- Xxxxxx Xxxxxxxx and Xxxx Xxxxxx
Fax: 000 000-0000
with a copy to:
Stikeman Elliott
Barristers and Solicitors
Xxxxx 0000
Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X IB9
Attention: Xxxxxxxx Xxxxxxx
Fax: (000) 000-0000
or such other address or telecopy number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; and if such notice is telecopied (with
receipt confirmed), it shall be effective on the Business Day following the date
such notice is telecopied.
15. Survival - All representations, warranties, and agreements of the
Corporation contained herein or contained in any document submitted pursuant to
this Agreement or in connection with the purchase of the Units shall survive the
purchase of the Units by the Purchasers and shall continue in full force and
effect unaffected by any subsequent disposition or conversion of the Units,
Special Warrants, Share Purchase Warrants and Compensation Warrants, until the
earlier of (i) the issuance of a receipt from the securities commission where
the Purchaser is resident; or (ii) eighteen months from the Closing, and the
Agent shall not be limited or prejudiced by any investigation made by or on
behalf of the Agent in the course of the preparation of the Preliminary
Prospectus, the Prospectus or any Supplementary Material or the distribution of
the Units, Special Warrants, Share Purchase Warrants and Compensation Warrants.
16. Entire Agreement - The provisions herein contained constitute the entire
agreement between the parties hereto and supersede all previous communications,
representations, understandings and agreements between the parties with respect
to the subject matter hereof, whether verbal or written.
17. Counterparts - This Agreement may be executed in any number of counterparts
all of which when taken together shall be deemed to be one and the same document
and not withstanding their actual date of execution shall be deemed to be dated
as of the date first above written.
-23-
18. General - The Agreement shall be governed by and interpreted in accordance
with the laws of Ontario and the federal laws of Canada applicable therein and
time shall be of the essence hereof.
19. Language - At the request of the parties hereto, this Agreement as well as
all documents relating thereto, including notices, have been and shall be
drafted in English; a la demande des parties aux presentes, cette convention, de
meme que toutes conventions s'y rapportant, y compris xxx xxxx, ont ete seront
rediges en anglais.
20. Currency - Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in lawful money of Canada.
21. Contractual Right or Action for Rescission - As part of the Subscription
Agreements, the Corporation shall deliver, and shall be deemed to have delivered
to the Purchasers (including the Agent) contractual rights of action for
rescission at the Time of Closing or subsequent thereto.
If the above is in accordance with your understanding, please
sign and return to the Agent a copy of this letter, whereupon this letter and
your acceptance shall constitute a binding agreement between the Corporation and
the Agent.
THOMSON KERNAGHAN & CO. LIMITED
Per:
------------------------------
The above offer is hereby accepted and agreed to as of the
date first above written.
SOFTQUAD SOFTWARE, LTD.
Per:
------------------------------
-24-
SCHEDULE A
SPECIAL WARRANT CERTIFICATE
-25-
SCHEDULE B
COMPENSATION WARRANTS
-26-
SCHEDULE C
DISCLOSURE
-27-
