EXHIBIT 2
SUBSCRIPTION AGREEMENT - ss. 74(2)(4)
THIS AGREEMENT MADE EFFECTIVE AS OF 2 MARCH 2000 (the "Effective Date").
BETWEEN:
XXXXXXXXXXXX.XXX, INC.;
(the "Company")
AND:
BLUE CAPITAL AG
(the "Purchaser")
WHEREAS:
A. Subject to fulfillment by the Company of certain conditions described
in Appendix 1 attached hereto, the Purchaser wishes to subscribe for a total of
342,000 common shares of the Company (collectively, the "Securities"), in three
separate stages (collectively, this "Subscription"), as follows:
i) 102,600 common shares (the "Closing Subscription Shares"),
immediately after acquisition by the Company of beneficial
(but not registered or legal) title to all the issued and
outstanding shares of Xxxxxxxxxxxx.xxx Holdings Limited (the
"Acquisition") and achievement of the Closing Milestones
defined in Appendix 1;
ii) 102,600 common shares (the "First Post-Closing Subscription
Shares") upon achievement of the First Post-Closing defined in
Appendix 1; and
iii) 136,800 common shares (the "Second Post-Closing Subscription
Shares") upon achievement of the Second Post-Closing
Milestones defined in Appendix 1;
B. It is the intention of the parties to this Agreement that this
Subscription will be made pursuant to appropriate exemptions (the
"Exemptions") from the registration and prospectus or equivalent
requirements of all rules, policies, notices, orders and legislation of
any kind whatsoever (collectively the "Securities Rules") of all
jurisdictions applicable to this Subscription;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the receipt of which is hereby
acknowledged, the parties covenant and agree with each other (the "Agreement")
as follows:
1. Representations and Warranties of the Purchaser
1.1. The Purchaser represents and warrants to the Company, and
acknowledges that the Company is relying on these representations and warranties
to, among other things, ensure that it is complying with all of the applicable
Securities rules, that:
(a) the Purchaser is purchasing a sufficient number of Securities
in each stage of this Subscription such that the aggregate
acquisition cost to the Purchaser of such Securities is not
less than $97,000, if the Purchaser is a resident of British
Columbia, Alberta, Manitoba, New Brunswick, Xxxxxx Xxxxxx
Island, Newfoundland or an International Jurisdiction, or
$150,000 if the Purchaser is a resident of Saskatchewan,
Ontario, Quebec or Nova Scotia, and the Purchaser is:
(i) purchasing such Securities as principal for its own
account and not for the benefit of any other person;
or
(ii) deemed to be acting as principal by virtue of it
being:
A. a trust company or insurer which is
authorized to carry on business in B.C.
under the Financial Institutions Act
(British Columbia) and which is acting as
agent or trustee for accounts that are fully
managed by it within the meaning of ss.
74(1)(a) of the Securities Act (British
Columbia Act (the "Act") and NIN #97/11
issued by the B.C. Securities Commission
(the "Commission"); or
B. a portfolio manager within the meaning of
ss.1(1) of the Act which is carrying on
business in B.C. and which is registered or
exempt from registration under the Act and
which is acting as agent for accounts that
are fully managed by it within the meaning
of ss.74(1)(b) of the Act and NIN #97/11; or
C. a trust company, insurer or portfolio
manager within the meaning of BOR #97/4
issued by the Commission which is acting, in
the case of a trust company or insurer, as
agent or trustee or, in the case of a
portfolio manager, as agent, for accounts
that are fully managed by it within the
meaning of BOR #97/4 and NIN 97/11;
and the Purchaser is also deemed to be acting as
principal under the analogous provisions of any other
Securities Rules having application;
(b) the Purchaser has not been formed, created, established or
incorporated for the purpose of permitting the purchase of the
Securities without a prospectus by groups of individuals whose
individual share of the aggregate acquisition cost for such
Securities is less than $97,000, if the beneficial purchaser
is a resident of British Columbia, Alberta, Manitoba, New
Brunswick, Xxxxxx Xxxxxx Island, Newfoundland or an
International Jurisdiction, or $150,000 if the beneficial
purchaser is a resident of Saskatchewan, Ontario, Quebec or
Nova Scotia;
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(c) the Purchaser is resident of an "International Jurisdiction"
(which means a country other than Canada or the United States)
and the Purchaser further represents and warrants that:
(i) the Purchaser is knowledgeable of, or has been
independently advised as to, the applicable
Securities Rules of the International Jurisdiction
which would apply to this Subscription, if there are
any;
(ii) the Purchaser is purchasing the Securities pursuant
to Exemptions under the Securities Rules of that
International Jurisdiction or, if such is not
applicable, the Purchaser is permitted to purchase
the Securities under the applicable Securities Rules
of the International Jurisdiction without the need to
rely on Exemptions; and
(iii) the applicable Securities Rules do not require the
Company to make any filings or seek any approvals of
any kind whatsoever from any regulatory authority of
any kind whatsoever in the International
Jurisdiction; and
the Purchaser will, if required by the Company, deliver to the
Company a certificate or opinion of local counsel from the
International Jurisdiction which will confirm the matters
referred to in subparagraphs (ii) and (iii) above to the
satisfaction of the Company, acting reasonably;
(d) [intentionally left blank]
(e) the Purchaser acknowledges that the Company is relying on the
Exemptions in order to complete the trade and distribution of
the Securities and the Purchaser is aware of the criteria of
the Exemptions to be met by the Purchaser, and the Purchaser
meets those criteria;
(f) the Purchaser acknowledges that because this Subscription is
being made pursuant to the Exemptions:
(i) the Purchaser is restricted from using certain of the
civil remedies available under the applicable
Securities Rules;
(ii) the Purchaser may not receive information that might
otherwise be required to be provided to the Purchaser
under the applicable Securities Rules if the
Exemptions were not being used;
(iii) the Company is relieved from certain obligations that
would otherwise apply under the applicable Securities
Rules if the Exemptions were not being used;
(iv) no securities commission, stock exchange or similar
regulatory authority has reviewed or passed on the
merits of the Securities;
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(v) there is no government or other insurance covering
the Securities;
(vi) there are no risks associated with the purchase of
the Securities; and
(vii) there are restrictions on the Purchaser's ability to
resell the Securities and it is the responsibility of
the Purchaser to find out what those restrictions are
and to comply with them before selling the
Securities.
(g) the Securities are not being subscribed for by the Purchaser
as a result of any material information about that Company's
affairs that has not been publicly disclosed;
(h) the offer and sale of these Securities was not accompanied by
an advertisement and the Purchaser was not induced to purchase
these Securities as a result of any advertisement made by the
Company;
(i) if the Purchaser is a corporation, the Purchaser is a valid
and subsisting corporation, has the necessary corporate
capacity and authority to execute and deliver this Agreement
and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in
respect thereof, or, if the Purchaser is a partnership,
syndicate, trust or other form of unincorporated organization,
the Purchaser has the necessary legal capacity and authority
to execute and deliver this Agreement and to observe and
perform its covenants and obligations hereunder and has
obtained all necessary approvals in respect thereof, and, in
either case, upon the Company executing and delivering this
Agreement, this Agreement will constitute a legal, valid and
binding contract of the Purchaser enforceable against the
Purchaser in accordance with its terms and neither the
agreement resulting from such acceptance nor the completion of
the transactions contemplated hereby conflicts with, or will
conflict with, or results, or will result, in a breach or
violation of any law applicable to the Purchaser, any
constating documents of the Purchaser or any agreement to
which the Purchaser is a party or by which the Purchaser is
bound;
(j) the Purchaser is not, and was not at any time that it
purchased the Securities or received an offer to purchase the
Securities pursuant to this subscription, a "U.S. Person" as
defined in Regulation S under the United States Securities Act
of 1933, as amended (the "U.S. Securities Act"), which
definition includes, but is not limited to, an individual
resident in the United States, an estate or trust of which any
executor or administrator or trustee, respectively, is a U.S.
person, and any partnership or corporation organized or
incorporated under the laws of the United States;
(k) the Purchaser did not receive any term sheet, subscription
form or other offering materials in connection with this
subscription in the United States, and did not execute or
deliver any such subscription form or other materials in the
United States;
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(l) no offers of Securities were made by any person to the
Purchaser while the Purchaser was in the United States; and
(m) the Purchaser is not acquiring Securities, directly or
indirectly, for the account or benefit of a U.S. Person or a
person in the United States.
1.2. The Company represents and warrants to the Purchaser, and
acknowledges that the Purchaser is relying on these representations and
warranties in entering into this Agreement, that:
(a) the Company is a valid and subsisting corporation duly
incorporated and in good standing under the laws of the State
of Nevada;
(b) the Company is not a reporting issuer in British Columbia and
any Securities issued to the Purchaser will be subject to an
indefinite hold period in British Columbia unless an exemption
from the registration and prospectus requirements of the
Securities Act is available. Such an exemption may not be
available;
(c) the Company's subsidiaries (the "Subsidiaries"), if any, are
valid and subsisting corporations and in good standing under
the laws of the jurisdictions in which they were incorporated;
(d) the common shares of the Company are eligible for quotation on
the N.A.S.D. OTC Bulletin Board ("OTC");
(e) upon their issuance, the Shares (as defined below) will be
validly issued and outstanding fully paid and non-assessable
common shares of the Company registered as directed by the
Purchaser, free and clear of all trade restrictions (except as
may be imposed by operation of the applicable Securities
Rules) and, except as may be created by the Purchaser, liens,
charges or encumbrances of any kind whatsoever;
(f) the Company and its Subsidiaries, if any, hold all licenses
and permits that are required for carrying on their business
in the manner in which such business has been carried on and
the Company and its Subsidiaries, if any, have the corporate
power and capacity to own the assets owned by them and to
carry on the business carried on by them and they are duly
qualified to carry on business in all jurisdictions in which
they carry on business;
(g) all prospectuses, exchange offering prospectuses, offering
memorandums, filing statements, information circulars,
material change reports, shareholder communications, press
releases and other disclosure documents of the Company
including, but not limited to, financial statements, contain
no untrue statement of a material fact as at the date thereof
nor do they omit to state a material fact which, at the date
thereof, was required to have been stated or was necessary to
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prevent a statement that was made from being false or
misleading in the circumstances in which it was made;
(h) to the best of its knowledge, and except as publicly
disclosed, there are no material actions, suits, judgments,
investigations or proceedings of any kind whatsoever
outstanding, pending or threatened against or affecting the
Company or its Subsidiaries, if any, at law or in equity or
before or by any Federal, Provincial, State, Municipal or
other governmental department, commission, board, bureau or
agency of any kind whatsoever and, to the best of the
Company's knowledge, there is no basis therefor;
(i) the Company has good and sufficient right and authority to
enter into this Agreement and complete its transactions
contemplated under this Agreement on the terms and conditions
set forth herein; and
(j) to the best of its knowledge, the execution and delivery of
this Agreement, the performance of its obligations under this
Agreement and the completion of its transactions contemplated
under this Agreement will not conflict with, or result in the
breach of or the acceleration of any indebtedness under, or
constitute default under, the constating documents of the
Company or any indenture, mortgage, agreement, lease, license
or other instrument of any kind whatsoever to which the
Company is a party or by which it is bound, or any judgment or
order of any kind whatsoever of any Court or administrative
body of any kind whatsoever by which it is bound.
2. Subscriptions
2.1. The Purchaser hereby subscribes US$1,500,525 (the "Closing
Subscription Funds") for and agrees to take up 102,600 common shares of the
Company at a price of U.S. $14.625 per share.
2.2. On the Effective Date, the Purchaser shall deliver the Closing
Subscription Funds for the Closing Subscription Shares in the form of a
solicitor's trust cheque, certified cheque, bank draft, money order or wire
transfer payable to "Xxxxxx, Xxxxxx & Xxxxxxxx in Trust" as the solicitors for
and on behalf of the Company. Upon receipt of the Closing Subscription Funds,
completion of the Acquisition and receipt of written notice from Xx. Xxxx
XxxXxxxxxx confirming that the Closing Milestones have been met, the Company
will immediately proceed to issue share certificates representing the Closing
Subscription Shares, and the Company will be entitled to use the Closing
Subscription Funds immediately upon the issuance of those certificates. The
Purchaser hereby confirms that upon the Company advising Xxxxxx, Xxxxxx &
Xxxxxxxx that it is holding such certificates for immediate delivery to the
Purchaser, Xxxxxx, Xxxxxx & Xxxxxxxx is hereby irrevocably authorized and
directed to release and deliver the Closing Subscription Funds, together with
any accrued interest thereon, to the Company or for use as directed by the
Company without prior notice to, consent of or action by the Purchaser and that
Xxxxxx, Xxxxxx & Xxxxxxxx can rely on this irrevocable direction as if it were a
party to this Agreement.
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2.3. The Purchaser hereby subscribes US$1,500,525 (the "First
Post-Closing Subscription Funds") for and agrees to take up 102,600 common
shares of the Company (the "First Post-Closing Subscription Shares") at a price
of U.S. $14.625 per share.
2.4. On the date of completion of the Acquisition (the "Closing
Date"), the Purchaser shall deliver the First Post-Closing Subscription Funds
for the First Post-Closing Subscription Shares in the form of a solicitor's
trust cheque, certified cheque, bank draft, money order or wire transfer payable
to "Xxxxxx Xxxxxx & Xxxxxxxx In Trust" as the solicitors for and on behalf of
the Company. Provided that the First Post-Closing Subscription Funds have been
so delivered and within 120 days after the Closing Date the Company receives
written notice from Xx. Xxxx XxxXxxxxxx confirming that the First Post-Closing
Milestones have been met, the Company will immediately upon receipt of that
notice proceed to issue share certificates representing the First Post-Closing
Subscription Shares, and the Company will be entitled to use the First
Post-Closing Subscription Funds immediately upon the issuance of those
certificates. The Purchaser hereby confirms that upon the Company advising
Xxxxxx, Xxxxxx & Xxxxxxxx that it is holding such certificates for immediate
delivery to the Purchaser, Xxxxxx, Xxxxxx & Xxxxxxxx is hereby irrevocably
authorized and directed to release and deliver the First Post-Closing
Subscription Funds, together with any accrued interest thereon, to the Company
or for use as directed by the Company without prior notice to, consent of or
action by the Purchaser and that Xxxxxx, Xxxxxx & Xxxxxxxx can rely on this
irrevocable direction as if it were a party to this Agreement. If within 120
days after the Closing Date the Company does not receive from Xx. Xxxx
XxxXxxxxxx written notice that the First Post-Closing Milestones have been met,
then at the option of the Purchaser the First Post-Closing Subscription Funds
shall be returned to the Purchaser and the Purchaser's subscription for the
First Post-Closing Subscription Shares shall be cancelled.
2.5. The Purchaser hereby subscribes US$2,000,700 (the "Second
Post-Closing Subscription Funds") for and agrees to take up 136,800 common
shares of the Company (the "Second Post-Closing Subscription Shares") at a price
of U.S. $14.625 per share.
2.6. Upon issuance of the First Post-Closing Subscription Shares,
the Purchaser shall deliver the Second Post-Closing Subscription Funds for the
Second Post-Closing Subscription Shares in the form of a solicitor's trust
cheque, certified cheque, bank draft, money order or wire transfer payable to
"Xxxxxx, Xxxxxx & Xxxxxxxx In Trust" as the solicitors for and on behalf of the
Company. Provided that the Second Post-Closing Subscription Funds have been so
delivered and within 120 days after the Closing Date the Company receives
written notice from Xx. Xxxx XxxXxxxxxx confirming that the Second Post-Closing
Milestones have been met, the Company will immediately upon receipt of that
notice proceed to issue share certificates representing the Second Post-Closing
Subscription Shares, and the Company will be entitled to use the Second
Post-Closing Subscription Funds immediately upon the issuance of those
certificates. The Purchaser hereby confirms that upon the Company advising
Xxxxxx, Xxxxxx & Xxxxxxxx that it is holding such certificates for immediate
delivery to the Purchaser, Xxxxxx, Xxxxxx & Xxxxxxxx is hereby irrevocably
authorized and directed to release and deliver the Second Post-Closing
Subscription Funds, together with any accrued interest thereon, to the Company
or for use as directed by the Company without prior notice to, consent of or
action by the Purchaser and that Xxxxxx, Xxxxxx & Xxxxxxxx can rely on this
irrevocable direction as if it were a party to this Agreement. If within 120
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days after the Closing Date the Company does not receive from Xx. Xxxx
XxxXxxxxxx written notice that both the First Post-Closing Milestones and the
Second Post-Closing Milestones have been met, then at the option of the
Purchaser the Second Post-Closing Subscription Funds shall be returned to the
Purchaser and the Purchaser's subscription for the Second Post-Closing
Subscription Shares shall be cancelled.
3. Covenants, Agreements and Acknowledgments
3.1. The Purchaser covenants and agrees with the Company to hold
and not sell, transfer or in any manner dispose of the Securities unless the
sale, transfer or disposition is made in accordance with all applicable
Securities Rules.
3.2. The Purchaser acknowledges and agrees that the Securities will
be subject to such trade restrictions as may be imposed by operation of the
applicable Securities Rules, and the share certificates representing the
Securities will bear such legends as may be required by the applicable
Securities Rules. The Purchaser further acknowledges and agrees that it is the
Purchaser's obligation to comply with the trade restrictions in all of the
applicable jurisdictions and the Company offers o advice as to those trade
restrictions.
3.3. The Purchaser acknowledges that:
(a) the Securities have not been registered under the U.S.
Securities Act and are "restricted securities" within the
meaning of Rule 144 under the U.S. Securities Act and may only
be resold in accordance with the provisions of Regulation S
under the U.S. Securities Act, pursuant to registration under
the U.S. Securities Act, or pursuant to an available exemption
from such registration. The Purchaser understands that the
Company has no obligation or present intention of filing a
registration statement under the U.S. Securities Act in
respect of the Securities;
(b) hedging transactions involving the Securities may not be
conducted unless in compliance with the U.S. Securities Act;
(c) there may be material tax consequences to the Purchaser of an
acquisition or disposition of Securities. The Company gives no
opinion and makes no representation with respect to the tax
consequences to the Purchaser under United States, state,
local or foreign tax law of the Purchaser's acquisition or
disposition of such securities;
(d) the certificates evidencing the Securities issued in this
subscription will bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND MAY BE OFFERED FOR SALE, SOLD
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OR OTHERWISE TRANSFERRED OR ASSIGNED ONLY (i) TO THE COMPANY;
(ii) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S
UNDER THE 1933 ACT; (iii) IN ACCORDANCE WITH RULE 144 UNDER
THE 1933 ACT; OR (iv) IN A TRANSACTION THAT IS OTHERWISE
EXEMPT FROM REGISTRATION UNDER THE 1933 ACT AND APPLICABLE
STATE SECURITIES LAWS, PROVIDED, PRIOR TO ANY SUCH SALE,
TRANSFER OR ASSIGNMENT, THE COMPANY SHALL HAVE RECEIVED AN
OPINION OF COUNSEL, IN FORM ACCEPTABLE TO THE COMPANY, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM
ANY PROPOSED TRANSFER OR ASSIGNMENT. HEDGING TRANSACTIONS
INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT."; and
(e) the Company is required to refuse to register any transfer of
the Securities not made in accordance with the provisions of
Regulation S under the U.S. Securities Act, pursuant to
registration under the U.S. Securities Act, or pursuant to an
available exemption from such registration.
3.4. The Company covenants and agrees with the Purchaser to file
the documents necessary to be filed under the applicable Securities Rules,
including Forms 20 (or the forms equivalent thereto), within the required time.
4. [Intentionally left blank]
5. [Intentionally left blank]
6. General
6.1. For the purposes of this Agreement, time is of the essence.
6.2. The parties hereto shall execute and deliver all such further
documents and instruments and do all such acts and things as may, either before
or after the execution of this Agreement, be reasonably required to carry out
the full intent and meaning of this Agreement.
6.3. This Agreement shall be subject to, governed by and construed
in accordance with the laws of British Columbia.
6.4. This Agreement may not be assigned by either party hereto.
6.5. This Agreement may be signed by the parties in as many
counterparts as may be deemed necessary, each of which so signed shall be deemed
to be an original, and all such counterparts together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF the parties have executed this written Agreement effective as
of the Effective Date.
XXXXXXXXXXXX.XXX, INC.
Per:
---------------------------
Authorized Signatory
TO BE COMPLETED BY THE PURCHASER:
--------------------------------
A. Name and Address (Note: Cannot be a U.S. Address). The name and address
(to establish the Purchaser's jurisdiction of residence for the purpose of
determining the applicable Securities Rules) of the purchaser (the "Purchaser")
is as follows:
BLUE CAPITAL COMPANY LIMITED
------------------------------------------
Name
Stadtle 35
------------------------------------------
Street Address
9490 Vaduz
------------------------------------------
City and Province
LIECHTENSTEIN
------------------------------------------
Country Postal Code
B. Registration Instructions (Note: Cannot be a U.S. Address). The name
and address of the person is whose name the Purchaser's Securities are to be
registered is as follows (if the name and address is the same as was inserted in
paragraph A above, then insert "N/A"):
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N/A
------------------------------------------
Name
N/A
------------------------------------------
Xxxxxx Xxxxxxx
X/X
------------------------------------------
City and Province
N/A
------------------------------------------
Country Postal Code
C. Delivery Instructions: (Note: Cannot be a U.S. Address). The name and
address of the person whom the certificates representing the Purchaser's
Securities referred to in paragraph A above are to be delivered is as follows
(if the name and address is the same as was inserted in paragraph A above, then
insert "N/A"):
N/A
------------------------------------------
Name
N/A
------------------------------------------
Xxxxxx Xxxxxxx
X/X
------------------------------------------
City and Province
N/A
------------------------------------------
Country Postal Code
TO BE COMPLETED AND SIGNED BY THE PURCHASER:
-------------------------------------------
BLUE CAPITAL COMPANY LIMITED
-------------------------------------------
Name of the "Purchaser" - use the name inserted in paragraph A above.
Per:
Xxxxxxxxx Xxxxxx
------------------------------
Signature of Purchaser
Member of the board
------------------------------
Title (if applicable)
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APPENDIX I
MILESTONES
1. Closing Milestones:
(i) The xxxxxxxxxxxx.xxx Website to be up and functional by 30
January 2000.
(ii) Undertaking by xxxxxxxxxxxx.xxx to register 50 "Founder
Executives" (i.e., key Executives to drive the terrestrial
marketing programme) within 60 days of Closing of Agreement.
(iii) Undertaking by xxxxxxxxxxxx.xxx to register at least 50,000
Members onto its website within 60 days of Closing of the
Agreement.
(iv) Schedule of xxxxxxxxxxxx.xxx's pre-start Assets and
Operational Costs incurred as at 3 February 2000 to be
completed.
2. First Post-Closing Milestones:
(i) 50 Founder Executives to be registered.
(ii) At least 50,000 Members to be registered.
(iii) Completion of the Marketing Plan for both on-line (surfing
Members) and off-line (terrestrial Members).
(iv) Completion of the Marketing Budget, identifying all areas of
promotional activity and costs.
(v) Confirmation that the following have been secured: - Hire of
PR Agency/Consultancy - Hire of Advertising Agency/Consultancy
- Hire of Investor Relations Agency or media Consultant -
Serviced offices for the main operations of xxxxxxxxxxxx.xxx -
Phase I team structure in place (substantially as per attached
Outline Document).
3. Second Post-Closing Milestones
(i) Completion of 2-year Business Plan, for use as a management
tool including full budget projections, which will include a
final Marketing Plan incorporating both on-line and off-line
methodologies.
(ii) Commissioning of a consumer research programme in relation to
brand awareness of the xxxxxxxxxxxx.xxx brand.
(iii) 250 Executive Members to be registered (in total). (iv)
100,000 Members to be registered (in total).
(v) Personnel for Phase II team structure (substantially as per
attached Phase II Outline Document) to be identified, with a
view to recruiting such personnel as soon as possible, subject
to operational requirements and funding.
