SOFTQUAD SOFTWARE, LTD.
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MONTREAL TRUST COMPANY OF CANADA
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WARRANT INDENTURE
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Dated as of April 18, 2000
Providing for the Issue of
Common Share Purchase Warrants
TABLE OF CONTENTS
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SOFTQUAD SOFTWARE, LTD.........................................................1
ARTICLE 1 INTERPRETATION......................................................1
Section 1.01 Definitions...............................................1
Section 1.02 Headings..................................................4
Section 1.03 Gender, Number, etc.......................................4
Section 1.04 Business Day..............................................4
Section 1.05 Meaning of "outstanding"..................................4
Section 1.06 Time......................................................4
Section 1.07 Governing Law.............................................4
Section 1.08 Severability..............................................4
Section 1.09 Currency..................................................4
ARTICLE 2 ISSUE AND PURCHASE OF WARRANTS......................................5
Section 2.01 Creation and Issue of Warrants............................5
Section 2.02 Form and Terms of Warrants................................5
Section 2.03 Registration and Transfer of Warrants.....................5
Section 2.04 List of Warrantholders....................................5
Section 2.05 Transfer and Ownership of Warrants........................5
Section 2.06 Warrantholders Not Shareholders...........................6
Section 2.07 Signing of Warrants.......................................6
Section 2.08 Countersigning............................................7
Section 2.09 Loss, Mutilation, Destruction or Theft of Warrants........7
Section 2.10 Issue of Warrants.........................................7
Section 2.11 Fractions.................................................8
Section 2.12 Warrants to Rank Pari Passu...............................8
Section 2.13 Exchange of Warrants......................................8
Section 2.14 Recognition of Registered Holder..........................8
Section 2.15 Cancellation of Surrendered Warrants......................9
Section 2.16 No Registration Under the U.S. Securities Act.............9
Section 2.17 Special Transfer Restrictions.............................9
Section 2.18 Legends...................................................9
ARTICLE 3 COVENANTS OF THE COMPANY...........................................10
Section 3.01 Covenants of the Company.................................10
Section 3.02 Performance of Covenants By Trustee......................11
Section 3.03 Suits by Warrantholder...................................11
ARTICLE 4 ADJUSTMENT OF SUBSCRIPTION RIGHTS..................................12
Section 4.01 Adjustment of Subscription Rights........................12
Section 4.02 Proceedings Prior to any Action Requiring Adjustment.....16
Section 4.03 Adjustment of Exercise Consideration.....................17
Section 4.04 Certificate of Adjustment................................17
Section 4.05 Adjustment Rules.........................................17
Section 4.06 Notice of Special Matters................................18
Section 4.07 No Action after Notice...................................18
Section 4.08 Protection of Trustee....................................18
ARTICLE 5 EXERCISE AND CANCELLATION OF WARRANTS..............................19
Section 5.01 Exercise of Warrants.....................................19
Section 5.02 Effect of Exercise of Warrants...........................20
Section 5.03 Postponement of Delivery of Certificates.................21
Section 5.04 Warrants Void after Expiry Time..........................21
Section 5.05 Fractions................................................21
Section 5.06 Accounting and Recording.................................22
ARTICLE 6 MEETINGS OF WARRANTHOLDERS.........................................22
Section 6.01 Convening of Meeting.....................................22
Section 6.02 Notice...................................................22
Section 6.03 Chairman.................................................22
Section 6.04 Quorum...................................................23
Section 6.05 Power to Adjourn.........................................23
Section 6.06 Show of Hands............................................23
Section 6.07 Poll.....................................................23
Section 6.08 Regulations..............................................24
Section 6.09 Minutes..................................................24
Section 6.10 Powers Exercisable by Extraordinary Resolution...........24
Section 6.11 Meaning of "Extraordinary Resolution"....................26
Section 6.12 Powers Cumulative........................................26
Section 6.13 Company, Warrantholders and Trustee May be Represented...26
Section 6.14 Instruments in Writing...................................27
Section 6.15 Binding Effect of Resolutions............................27
Section 6.16 Holdings by the Company or Subsidiaries of the Company
Disregarded..............................................27
ARTICLE 7 SUPPLEMENTAL AGREEMENTS, MERGER, SUCCESSORS........................27
Section 7.01 Provision for Supplemental Agreements for Certain
Purposes.................................................27
Section 7.02 Company May Consolidate, etc. on Certain Terms...........28
Section 7.03 Successor Body Corporate Substituted.....................29
ARTICLE 8 CONCERNING THE TRUSTEE.............................................29
Section 8.01 Conditions Precedent to Trustee's Obligation to Act......29
Section 8.02 Evidence.................................................30
Section 8.03 Standard of Conduct; Experts and Advisers................31
Section 8.04 Documents, Moneys, etc. Held by Trustee..................31
Section 8.05 Action by Trustee to Protect Interests...................32
Section 8.06 Trustee Not Required to Give Security....................32
Section 8.07 Protection of Trustee....................................32
Section 8.08 Replacement of Trustee...................................33
Section 8.09 Conflict of Interest.....................................34
Section 8.10 Trustee's Authority to Carry on Business.................34
Section 8.11 Appointment and Acceptance of Trust......................34
Section 8.12 Trustee's Discretion Absolute............................34
Section 8.13 Indemnity................................................34
ARTICLE 9 NOTICE AND CERTIFICATES............................................35
Section 9.01 Notice to Company and Trustee; Presentations to Trustee..35
Section 9.02 Notice to Warrantholders.................................36
Section 9.03 General Provisions as to Certificates....................36
ARTICLE 10 GENERAL PROVISIONS................................................37
Section 10.01 Suits By Warrantholders..................................37
Section 10.02 Limitation of Liability..................................38
Section 10.03 Waiver of Default........................................38
Section 10.04 Language.................................................38
Section 10.05 Execution in Counterparts and by Telecopier..............39
WARRANT INDENTURE
THIS WARRANT INDENTURE is made as of April 18, 2000 between SoftQuad
Software, Ltd., a company incorporated under the laws of Delaware (the
"COMPANY") and Montreal Trust Company of Canada (the "TRUSTEE"), a trust company
incorporated under the federal laws of Canada.
WHEREAS the Company accordingly proposes to create and issue Warrants
to be constituted and issued in the manner herein set forth;
AND WHEREAS the Company is authorized to issue the Warrants;
AND WHEREAS the Company represents to the Trustee that all necessary
resolutions of the directors of the Company have been duly enacted, passed or
confirmed and all other proceedings taken and conditions complied with to
authorize the execution and delivery of this Indenture and the execution and
issuance of the Warrants and to make the same legal, valid and binding on the
Company in accordance with the laws relating to the Company;
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by the Company and not by the Trustee;
AND WHEREAS the Trustee has agreed to act as trustee on behalf of the
Warrantholders on the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
SECTION 1.01 DEFINITIONS.
As used in this Indenture unless there is something in the subject matter or
context inconsistent therewith, the following words have the respective meaning
indicated below:
"ACCREDITED INVESTOR" means an accredited investor as defined in Rule 501(a) of
Regulation D under the U.S. Securities Act;
"BUSINESS DAY" means a day on which chartered banks are normally open for
business in the City of Toronto, excluding Saturdays, Sundays and any statutory
or civic holiday;
"CERTIFICATE OF THE COMPANY" means a certificate signed by any officer or
director of the Company in accordance with Section 9.03;
"CLOSING DATE" means April 18, 2000;
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"COMMON SHARES" means the fully paid and non-assessable common shares in the
capital of the Company, par value U.S. $0.001 per share, as such shares exist on
the date hereof and the common shares to be issued upon the exercise of Warrants
hereunder, provided that in the event of any adjustment pursuant to Article 4,
Common Shares will thereafter mean the shares or other securities or property
relating to such adjustment;
"COMPANY" means SoftQuad Software, Ltd., a company incorporated under the laws
of Delaware;
"COMPANY'S AUDITORS" means the firm of accountants appointed by the shareholders
of the Company from time to time as the auditors of the Company;
"COUNSEL" means a barrister and solicitor or a firm of barristers and solicitors
retained by the Trustee or retained by the Company and acceptable to the
Trustee;
"CURRENT MARKET PRICE" in respect of a Common Share at any date means the
weighted average trading price of a Common Share for any twenty (20) consecutive
trading days ending on the third trading day before such date, on such primary
stock exchange on which the Common Shares are then listed as may be selected for
such purpose by the directors of the Company or, if the Common Shares are not
then listed on more than one stock exchange, on such stock exchange on which the
Common Shares are then listed or, if the Common Shares are not then listed on
any stock exchange, on the over-the-counter market, or, if the Common Shares are
not then traded in the over-the-counter market, the Current Market Price of the
Common Shares shall be the fair value of a Common Share as determined by the
directors of the Company, after consultation with a nationally recognized
investment banking firm with respect to the fair value of such securities;
"DIRECTOR" means a director of the Company for the time being, and reference to
action by the directors means action by the directors of the Company as a board
or, whenever duly empowered, action by a committee of the board;
"EFFECTIVENESS DATE" means the date of effectiveness of the Registration
Statement;
"EXERCISE CONSIDERATION" means the sum of U.S.$12.50 in respect of each Warrant
exercised, subject to adjustment under Article 4;
"EXPIRY DATE" means the first anniversary of the Effectiveness Date;
"EXPIRY TIME" means 5:00 p.m. (Toronto time) on the Expiry Date;
"EXTRAORDINARY RESOLUTION" has the meaning attributed to it in Section 6.11 and
Section 6.14 hereof;
"INDENTURE", "HERETO", "HEREUNDER", "HEREOF", "HEREBY" and similar expressions
mean or refer to this Indenture and not to any particular Article, Section,
Subsection, paragraph, clause, subdivision or portion hereof and include any
agreement, deed or instrument supplemental or ancillary hereto and the
expressions "Article", "Section", "Subsection" and "paragraph" followed by a
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number mean and refer to the specified Articles, Sections, Subsections or
paragraphs of this Indenture;
"NON-QUALIFICATION EVENT", with respect to a jurisdiction, means the
non-issuance of a receipt by the provincial securities regulatory authority in
such jurisdiction for a (final) prospectus qualifying the distribution of the
Common Shares underlying the special warrants issued by the Company on the date
hereof and the issuance of Common Shares upon the exercise of the Warrants;
"PERSON" includes individuals, bodies corporate, partnerships, firms and
unincorporated associations, trusts and trustees, and governments and their
agencies and instrumentalities, and a syndicate, and words importing persons
have a similar meaning;
"REGISTRATION STATEMENT" means a registration statement filed by the Corporation
registering, among other things, the Common Shares issuable upon the exercise of
the Warrants under the U.S. Securities Act;
"REGULATION S" means Regulation S under the U.S. Securities Act;
"SUBSIDIARY OF THE COMPANY" means a corporation of which voting securities
carrying a majority of votes attached to all outstanding voting securities are
owned, directly or indirectly, by the Company or by one or more subsidiaries of
the Company, or by the Company and one or more subsidiaries of the Company, and,
as used in this definition, voting securities means securities, other than debt
securities, carrying a voting right to elect directors either under all
circumstances or under some circumstances that may have occurred and are
continuing;
"UNITED STATES" means the "United States" as that term is defined in Regulation
S;
"U.S. PERSON" means a "U.S. person" as defined in Rule 902 of Regulation S under
the U.S. Securities Act; and
"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
"WARRANT CERTIFICATE" means a certificate substantially in the form of Schedule
"A" evidencing one or more Warrants;
"WARRANTHOLDER" or "HOLDER" means the registered holder of a Warrant hereunder;
and
"WARRANTS" means, collectively, the Common Share purchase warrants of the
Company issued and certified hereunder entitling holders thereof to receive,
upon the exercise thereof, one Common Share and/or such kind and amount of
securities or property determined pursuant to Article 4 hereof; and
"WRITTEN ORDER OF THE COMPANY", "WRITTEN REQUEST OF THE COMPANY" AND "WRITTEN
CONSENT OF THE COMPANY" means, respectively, a written order, request and
consent or other document signed in the name of the Company by any director or
officer of the Company and may consist of one or more instruments so executed.
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SECTION 1.02 HEADINGS.
The division of this Indenture into Articles, Sections, Subsections or other
subdivisions, the provision of a Table of Contents and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Indenture or the Warrants.
SECTION 1.03 GENDER, NUMBER, ETC.
Reference to gender includes all genders and, except where the context otherwise
requires, the singular includes the plural and vice-versa.
SECTION 1.04 BUSINESS DAY.
Any action or payment required or permitted to be taken or made hereunder on a
day which is not a business day shall or may be, as the case may be, taken or
made on the next succeeding business day with the same force and effect as if
taken within the period for the taking of such action.
SECTION 1.05 MEANING OF "OUTSTANDING".
Every Warrant represented by a Warrant Certificate certified and delivered by
the Trustee hereunder shall be deemed to be outstanding until it shall be
cancelled or deemed cancelled or delivered to the Trustee for cancellation
provided that where a new Warrant Certificate has been issued pursuant to
Section 2.09 hereof to replace one which has been mutilated, lost, stolen or
destroyed, the Warrants represented by only one of such Warrant Certificate
shall be counted for the purpose of determining the aggregate number of Warrants
outstanding.
SECTION 1.06 TIME.
Time shall be of the essence hereof and of the Warrants issued hereunder.
SECTION 1.07 GOVERNING LAW.
This Indenture and the Warrants shall be construed in accordance with the laws
of the Province of Ontario and the federal laws of Canada applicable therein and
shall be treated in all respects as Ontario contracts.
SECTION 1.08 SEVERABILITY
In the event that any provision hereof shall be determined to be invalid or
unenforceable in any respect, such determination shall not affect such provision
in any other respect or any other provision hereof, all of which shall remain in
full force and effect.
SECTION 1.09 CURRENCY
Except as otherwise stated, all dollar amounts herein are expressed in U.S.
dollars.
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ARTICLE 2
ISSUE AND PURCHASE OF WARRANTS
SECTION 2.01 CREATION AND ISSUE OF WARRANTS.
A total of up to 1,250,000 Warrants are hereby created and authorized to be
issued and/or shall be executed by the Company and certified by or on behalf of
the Trustee upon the written order of the Company and delivered by the Trustee
in accordance with the written direction of the Company. Subject to the
provisions hereof, the Warrants to be issued under this Indenture shall be
limited in the aggregate to 1,250,000 Warrants and each whole Warrant shall
entitle a holder, upon exercise thereof and payment of the Exercise
Consideration, to acquire one Common Share (except in certain circumstances
noted below) and/or such other kind and amount of securities or property
determined pursuant to the provisions of Article 4, as the case may be.
SECTION 2.02 FORM AND TERMS OF WARRANTS.
The Warrants shall be issued in registered form and the Warrant Certificates,
including all replacements issued in accordance with this Indenture, shall be
substantially in the form set out in Schedule "A" hereto with, subject to the
provisions of this Indenture, such additions, variations and/or omissions as may
from time to time be agreed upon between the Company and the Trustee, shall be
dated as of the Closing Date, and shall be numbered in such manner as the
Company, with the approval of the Trustee, may prescribe. All Warrants shall,
save as to denominations, be of like tenor and effect. No change in the form of
the Warrant Certificates shall be required by reason of any adjustment made
pursuant to Article 4 hereof. Warrant Certificates may be engraved, lithographed
or printed or such combination thereof as the Company may determine.
SECTION 2.03 REGISTRATION AND TRANSFER OF WARRANTS.
The Trustee shall maintain a register of the holders of Warrants at its
principal stock and bond transfer office in the city of Toronto, which shall be
open for inspection by any agent or representative of the Company or a
Warrantholder, in which shall be entered the names and addresses of the
Warrantholders and the number of Warrants held by them and all other information
required by law, and in which will be recorded all transfers of Warrants and the
date and other particulars of each transfer.
SECTION 2.04 LIST OF WARRANTHOLDERS.
The Trustee shall, from time to time when requested to do so by the Company in
writing, furnish the Company with a list of the names and addresses of the
Warrantholders entered in the register kept by the Trustee and showing the
number of Warrants held by each such holder.
SECTION 2.05 TRANSFER AND OWNERSHIP OF WARRANTS.
The Warrants may only be transferred on the register kept at the office of the
Trustee set forth in Section 2.03 in accordance with applicable laws and upon
compliance with the conditions hereof by the holder or his or her legal
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representatives or his or her or their attorney duly appointed by an instrument
in writing in form and substance satisfactory to the Trustee and upon surrender
of the Warrant Certificate representing the Warrants to be transferred and due
execution by the holder of the transfer in the form set forth in the Warrant
Certificate and delivery of the same to the Trustee and compliance with such
other reasonable requirements as the Company and the Trustee may prescribe, such
transfer shall be duly noted on the register by the Trustee and the Company
shall, in accordance with the provisions of Section 2.10 hereof, cause a new
Warrant Certificate to be issued and sent to the new holder. The reasonable
transfer charges of the Trustee with respect to the transfer of Warrants shall
be payable by the applicable Warrantholder. The Warrants are subject to a hold
period under applicable securities legislation and may not be transferred until
the expiry of the hold period, except as permitted in compliance with applicable
securities legislation. The Company shall direct the Trustee as to matters
related to the applicable legislation.
Subject to the provisions of this Indenture and applicable law, the
Warrantholder shall be entitled to the rights and privileges attaching to the
Warrants free from all equities and rights of set-off or counter claim between
the Company and the transferor or any previous holder of Warrants and the
issuance of Common Shares by the Company upon the exercise of Warrants by any
Warrantholder in accordance with the terms and conditions herein contained shall
discharge all responsibilities of the Company and the Trustee with respect to
such Warrants.
SECTION 2.06 WARRANTHOLDERS NOT SHAREHOLDERS.
A Warrantholder shall not, as such, be deemed to be or regarded as a shareholder
of the Company nor shall such Warrantholder be entitled to any right or
interest, including any right to vote at, receive notice of or attend any
meeting of shareholders or any other proceeding of the Company or any right to
receive any dividend or other distribution, except as is expressly provided in
this Indenture and in the Warrant Certificate.
SECTION 2.07 SIGNING OF WARRANTS.
The Warrant Certificates shall be signed either manually or by facsimile
signature by any officer or director of the Company and may, but need not be,
under the corporate seal of the Company. Such facsimile signatures will be
binding on the Company as if they had been manually signed by such officers or
directors. A facsimile signature upon any Warrant Certificate shall for all
purposes hereof be deemed to be the signature of the person whose signature it
purports to be and to have been signed at the time such facsimile signature is
reproduced. If a person whose signature, either manually or in facsimile,
appears on a Warrant Certificate is not a director or officer of the Company at
the date of this Indenture or at the date of the countersigning and delivery of
such Warrant Certificate, such fact shall not affect in any way the validity of
the Warrants evidenced thereby or the entitlement of the holder thereof to the
benefits of this Indenture.
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SECTION 2.08 COUNTERSIGNING.
No Warrant Certificate shall be issued, or if issued, shall be valid or
exercisable or entitle the holder thereof to the benefits of this Indenture
until the Warrant Certificate has been countersigned by or on behalf of the
Trustee. The Trustee will countersign the Warrant Certificates upon the written
direction of the Company. The countersignature by or on behalf of the Trustee on
any Warrant Certificate shall not be construed as a representation or warranty
by the Trustee as to the validity of this Indenture or of the Warrants or as to
the performance by the Company of its obligations under this Indenture, and the
Trustee shall in no way be liable or answerable for the use made of the Warrants
or any of them or of the consideration therefor except as specified herein. The
countersignature of the Trustee shall, however, be a representation and warranty
of the Trustee that the Warrant Certificate has been duly countersigned by or on
behalf of the Trustee pursuant to the provisions of this Indenture and shall be
conclusive evidence as against the Company that the Warrant Certificate so
countersigned has been duly issued hereunder and the holder is entitled to the
benefits hereof.
SECTION 2.09 LOSS, MUTILATION, DESTRUCTION OR THEFT OF WARRANTS.
In case any of the Warrant Certificates issued and countersigned hereunder shall
become mutilated or be lost, destroyed or stolen, the Company shall, upon the
holder complying with this Section 2.09 and subject to applicable law, issue and
thereupon the Trustee shall countersign and deliver, a new Warrant Certificate
of like date and tenor in exchange for and in place of the one mutilated, lost,
destroyed or stolen upon surrender and cancellation of such mutilated Warrant
Certificate or in lieu of and in substitution for such lost, destroyed or stolen
Warrant Certificate, and the substituted Warrant Certificate shall be in a form
approved by the Trustee and shall entitle the holder thereof to the benefits
hereof and rank equally in accordance with its terms with all other Warrants
issued hereunder.
The applicant for the issuance of a new Warrant Certificate pursuant to this
Section 2.09 shall bear the reasonable costs (including applicable taxes) of the
issuance thereof and in case of loss, destruction or theft shall, as a condition
precedent to the issue thereof, furnish to the Company and to the Trustee such
evidence of ownership and of the loss, destruction or theft of the Warrant
Certificate so lost, destroyed or stolen as shall be satisfactory to the Company
and to the Trustee, in their discretion, and such applicant shall also be
required to furnish an indemnity and a surety bond in amount and form
satisfactory to the Company and the Trustee in their discretion, and to pay the
reasonable charges of the Company and the Trustee in connection therewith.
SECTION 2.10 ISSUE OF WARRANTS.
Warrant Certificates shall be signed by the Company as aforesaid and delivered
to the Trustee from time to time. The Trustee shall countersign any Warrant
Certificate delivered by the Company to the Trustee as aforesaid and shall
forthwith deliver to the person or persons in whose name or names the Warrant
Certificate is to be issued (as specified in any written order from time to time
given by the Company to the Trustee and signed by any officer or director of the
Company) or mail to such person or persons at their respective addresses
specified in the written order from the Company the Warrant Certificate for the
appropriate number of Warrants.
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SECTION 2.11 FRACTIONS.
Certificates representing fractional Warrants shall not be issued or otherwise
provided for.
SECTION 2.12 WARRANTS TO RANK PARI PASSU.
All Warrants shall rank pari passu, whatever may be the actual date of issue of
same.
SECTION 2.13 EXCHANGE OF WARRANTS.
Except as otherwise herein provided:
(a) Warrant Certificates may, upon compliance with the reasonable
requirements of the Trustee, be exchanged for Warrant
Certificates in any other authorized denomination representing
in the aggregate the same number of Warrants. The Company
shall sign, and the Trustee shall countersign, in accordance
with Section 2.07 and Section 2.08 all Warrant Certificates
necessary to carry out the exchanges contemplated herein;
(b) Warrant Certificates may be exchanged only at the principal
stock and bond transfer office of the Trustee in the city of
Toronto. Any Warrant Certificates tendered for exchange shall
be surrendered to the Trustee and cancelled; and
(c) the Trustee may charge registered holders requesting an
exchange a reasonable sum for each Warrant Certificate
exchanged and payment of such charges and reimbursement of the
Trustee or the Company for any and all taxes or governmental
or other charges required to be paid shall be made by the
party requesting such exchange as a condition precedent to
such exchange.
SECTION 2.14 RECOGNITION OF REGISTERED HOLDER.
The Company and the Trustee may deem and treat the registered holder of any
Warrant Certificate as the absolute beneficial owner of the Warrants represented
thereby for all purposes under this Indenture, and the Company and the Trustee
shall not be affected by any notice or knowledge to the contrary except where
the Company or the Trustee is required to take notice by statute or by order of
a court of competent jurisdiction. A Warrantholder shall be entitled to the
rights evidenced by the Warrants registered in his name free from all equities
or rights of set-off or counterclaim between the Company and the original or any
intermediate holder thereof and all persons may act accordingly and the receipt
by any such Warrantholder of the Common Shares issuable upon the exercise
thereof shall be a good discharge to the Company and the Trustee for the same
and neither the Company nor the Trustee shall be bound to inquire into the title
of any such holder except where the Company or the Trustee is required to take
notice by statute or by order of a court of competent jurisdiction.
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SECTION 2.15 CANCELLATION OF SURRENDERED WARRANTS.
All Warrant Certificates surrendered to the Trustee pursuant to Section 2.05,
Section 2.09, Section 2.13 (where a new certificate is issued) or Section 5.01
will be cancelled by the Trustee and, if required by the Company, the Trustee
will deliver to the Company a cancelled certificate identifying each Warrant
Certificate so cancelled.
SECTION 2.16 NO REGISTRATION UNDER THE U.S. SECURITIES ACT
The Trustee acknowledges that the Warrants and the Common Shares issuable upon
the exercise of the Warrants have not as of the date hereof been registered
under the U.S. Securities Act or any state securities laws.
SECTION 2.17 SPECIAL TRANSFER RESTRICTIONS
(1) In order to ensure compliance with applicable securities law and other laws
applicable to the Company, no direct or indirect sale or transfer of Warrants
shall be permitted from a registered holder to a purchaser or transferee unless
it is made in compliance with such laws and, if required by the Company, an
opinion of legal counsel, in form and substance acceptable to the Company, is
delivered to the Company and the Trustee in connection with such transfer.
(2) In determining the residency of a Warrantholder, the Trustee may act and
rely and shall be protected in acting and relying upon the registered address of
such Warrantholder for all purposes.
(3) No Warrants may be exercised in the United States or by or for the account
or benefit of a U.S. Person, and no certificate representing Common Shares will
be delivered to an address in the United States, unless an exemption from
registration under the U.S. Securities Act and applicable state securities laws
is available and evidence thereof satisfactory to the Company and the Trustee
(which may, at the option of the Company or the Trustee, include an opinion of
counsel) is received prior to the exercise. Evidence of an exemption from
registration shall not be required in the case of a Warrantholder that certifies
in writing that it was an original purchaser of Warrants from the Company and is
an Accredited Investor and provides evidence of such status satisfactory to the
Company and the Trustee (which may, at the option of the Company or the Trustee,
include financial statements).
(4) The Trustee will not register the transfer of any Warrant unless such
transfer has been approved by the Company. The Trustee will have no duty to
ensure compliance with applicable securities laws on the transfer of any
Warrants.
SECTION 2.18 LEGENDS
(a) Each Warrant Certificate issued to a Warrantholder shall bear
the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
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SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY
IN ACCORDANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THE
1933 ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS.
ARTICLE 3
COVENANTS OF THE COMPANY
SECTION 3.01 COVENANTS OF THE COMPANY.
The Company represents, warrants, covenants and agrees with the Trustee for the
benefit of the Trustee and the Warrantholders as follows:
(a) To Issue Warrants and Reserve Common Shares: The Company is
duly authorized to create and issue the Warrants and the
Warrant Certificates, and when issued and countersigned as
herein provided, will be valid and enforceable against the
Company and, subject to the provisions of this Indenture, the
Company will cause a sufficient number of the Common Shares
from time to time issuable upon the exercise of Warrants under
this Indenture together with the certificates representing
such Common Shares to be duly issued and delivered in
accordance with instructions on the Warrant Certificates and
the terms hereof. At all times prior to and including the
Expiry Time, while any of the Warrants are outstanding, the
Company shall reserve and allot out of its authorized capital
a number of Common Shares sufficient to enable the Company to
meet its obligation to issue Common Shares in respect of the
exercise of all Warrants outstanding hereunder from time to
time. All Common Shares acquired upon the exercise of the
Warrants shall be fully paid and non-assessable.
(b) To Pay Trustee's Remuneration: The Company will pay the
Trustee reasonable remuneration for its services hereunder and
will repay to the Trustee on demand the amount of all
expenditures whatsoever which the Trustee reasonably incurs in
and about the administration or execution of the trusts hereby
created (including the compensation and disbursement of its
counsel and other advisors not regularly in its employ), both
before any default hereunder and thereafter until all duties
of the Trustee hereunder have been finally and fully
performed.
(c) To Execute Further Assurances: The Company will do, execute,
acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, all other acts, deeds and
assurances in law as the Trustee may reasonably require for
effecting the intentions and provisions of this Indenture.
(d) Corporate Existence: Subject to the express provisions hereof,
the Company will at all times maintain its corporate
existence, carry on and conduct (and cause to be carried on
and conducted) its business in the same manner as heretofore
carried on and conducted, provided, however, that the Company
or any subsidiary of the Company may dispose of any business,
premises, property or operation if in the reasonable opinion
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of the directors or officers of the Company or any subsidiary
of the Company, as the case may be, it would be advisable and
in the best interests of the Company or any subsidiary of the
Company to do so; and subject to the express provisions
hereof, it will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence, provided, however, that (subject to compliance with
the provisions of Article 4 hereof) nothing herein contained
shall prevent the amalgamation, consolidation, merger or sale
of the Company or any subsidiary of the Company or the
abandonment of any rights and franchises of the Company or any
subsidiary of the Company if, in the reasonable opinion of the
directors or officers of the Company, or the directors or
officers of any subsidiary of the Company, as the case may be,
it would be advisable and in the best interests of the Company
or of such subsidiary of the Company to do so.
(e) Registration of Common Shares. The Company shall use its
commercially reasonable best efforts to register the Common
Shares underlying the Warrants under the U.S. Securities Act
as expeditiously as possible, in accordance with its
obligation under the registration rights agreement entered
into as of April 18, 2000 with Thomson Kernaghan & Co.,
Limited and the registration rights agreement entered into as
of April 18, 2000 with Small Caps Online, LLC. The Company
shall give written notice of the Effectiveness Date (and the
resulting Expiry Date) to the holders and the Trustee in
accordance with the terms hereof.
(f) Performance of Indenture: The Company will well and truly
perform and carry out all of the acts or things to be done by
it as provided in this Indenture.
(g) Effectiveness Date: The Company will advise the Trustee
forthwith upon the occurrence of the Effectiveness Date.
SECTION 3.02 PERFORMANCE OF COVENANTS BY TRUSTEE.
If the Company shall fail to perform any of its covenants contained in this
Indenture, the Trustee may notify the Warrantholders of such failure on the part
of the Company or may itself perform any of the said covenants capable of being
performed by it, but, subject to Section 8.03 hereof, the Trustee shall be under
no obligation to do so or to notify any Warrantholder. All sums reasonably
expended or advanced by the Trustee in performance of its rights provided for in
this Section 3.02 shall be repayable as provided in Section 3.01(b). No such
performance, expenditure or advance by the Trustee shall be deemed to relieve
the Company of any default hereunder or its continuing obligations hereunder.
SECTION 3.03 SUITS BY WARRANTHOLDER.
Subject to the provisions of this Indenture, all or any of the rights conferred
upon a Warrantholder by the terms of the Warrant held by him or by this
Indenture may be enforced by such Warrantholder by appropriate legal
proceedings, but subject to the rights which are hereby conferred upon the
Trustee and subject to the provisions of Section 6.10 hereof. Nothing contained
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herein shall in any way limit or derogate from any other rights a Warrantholder
may have in law or in equity.
ARTICLE 4
ADJUSTMENT OF SUBSCRIPTION RIGHTS
SECTION 4.01 ADJUSTMENT OF SUBSCRIPTION RIGHTS.
The subscription rights attaching to the Warrants (whether or not issued and
outstanding) and the Exercise Consideration shall be subject to adjustment from
time to time as follows and, for greater certainty, if an event occurs requiring
an adjustment pursuant to this Article 4, such adjustment shall apply to all
Warrants issued and outstanding (but not yet exercised) and the Company shall
give notice of such adjustment to each holder of Warrants, and otherwise treat
each holder of Warrants, as if it were a Warrantholder for the purposes of this
Article 4:
(a) if and whenever at any time from the date hereof and prior to
the Expiry Time, the Company shall:
(i) subdivide its outstanding Common Shares into a
greater number of shares;
(ii) consolidate its outstanding Common Shares into a
smaller number of shares; or
(iii) issue Common Shares or securities convertible into or
exchangeable for Common Shares to all or
substantially all of the holders of Common Shares by
way of stock dividend or otherwise,
the number of Common Shares obtainable upon the exercise of
each Warrant shall be adjusted, at no cost to such holder,
immediately after the effective date of such subdivision or
consolidation or the record date of such stock dividend, by
multiplying the number of Common Shares theretofore obtainable
on the exercise thereof by the fraction of which:
(A) the numerator shall be the total number of
Common Shares outstanding immediately after
such date, or, in the case of the issuance
of securities convertible into or
exchangeable for Common Shares, the total
number of Common Shares outstanding
immediately after such date plus the number
of Common Shares issuable upon conversion or
exchange of such securities, and
(B) the denominator shall be the total number of
Common Shares outstanding immediately prior
to such date,
and such adjustment shall be made successively whenever any
event referred to in this SubsSection 4.01(a) shall occur (and
all adjustments in this Subsection are cumulative);
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(b) if and whenever at any time from the date hereof and prior to
the Expiry Time, the Company shall fix a record date for the
issue of rights, options or warrants to all or substantially
all of the holders of Common Shares entitling the holders
thereof, within a period expiring not more than 45 days after
the date of the issue thereof, to subscribe for or purchase
Common Shares (or securities convertible into or exchangeable
for Common Shares) at a price per Common Share or underlying
Common Share less than 95% of the Current Market Price, on the
earlier of such record date and the date on which the Company
announces its intention to make such issuance, then, in each
such case, the number of Common Shares obtainable on the
exercise of each Warrant ("SHARE RATE") will be adjusted
immediately after such record date so that it will equal the
rate determined by multiplying the Share Rate in effect on
such record date by a fraction, of which the denominator shall
be the total number of Common Shares outstanding on such
record date plus a number of Common Shares equal to the number
arrived at by dividing the aggregate price of the total number
of additional Common Shares (or the total number of additional
Common Shares underlying securities convertible into or
exchangeable for Common Shares) so offered for subscription or
purchase by such Current Market Price, and of which the
numerator shall be the total number of Common Shares
outstanding on such record date plus the total number of
additional Common Shares so offered for subscription or
purchase (or the total number of Common Shares underlying the
convertible or exchangeable securities so offered); if by the
terms of such rights, options or warrants, there is more than
one purchase, conversion or exchange price per Common Share,
the aggregate price of the total number of additional Common
Shares offered for subscription or purchase, or the additional
conversion or exchange price of the convertible or
exchangeable securities so offered, shall be calculated for
the purposes of the adjustment on the basis of the lowest
purchase, conversion or exchange price per Common Share, as
the case may be. Such adjustment will be made successively
whenever such a record date is fixed, provided that if two or
more such record dates or record dates referred to in
SubSection 4.01(c) are fixed within a period of 20 trading
days on the principal stock exchange on which the Common
Shares are listed, such adjustment will be made successively
as if each of such record dates occurred on the earliest of
such record dates. To the extent that any such rights, options
or warrants are not so issued or any such rights, options or
warrants are not exercised prior to the expiration thereof,
the Exchange Consideration and the Share Rate will then be
readjusted to the Share Rate which would then be in effect if
such record date had not been fixed or to the Share Rate which
would then be in effect based upon the number of rights,
options or warrants actually distributed or based upon the
number of Common Shares (or securities convertible into or
exchangeable for Common Shares) actually issued upon the
exercise of such rights, options or warrants, as the case may
be;
(c) if and whenever at any time from the date hereof and prior to
the Expiry Time, the Company shall fix a record date for the
making of a distribution to all or substantially all of the
holders of Common Shares of:
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(i) securities other than Common Shares or securities
convertible into or exchangeable for Common Shares;
(ii) rights, options or warrants (other than rights,
options or warrants contemplated by SubSection
4.01(b));
(iii) evidences of indebtedness; or
(iv) cash or other property or assets (other than cash
dividends paid in the ordinary course);
then, in each such case, the Share Rate will be adjusted
immediately after such record date so that it will equal the
rate determined by multiplying the Share Rate in effect on
such record date by a fraction, of which the denominator shall
be the total number of Common Shares outstanding on such
record date multiplied by the Current Market Price on the
earlier of such record date and the date on which the Company
announces its intention to make such distribution, less the
aggregate fair market value (as determined by the directors at
the time such distribution is authorized) of such securities
or rights, options or warrants or evidences of indebtedness or
cash or other property or assets so distributed, and of which
the numerator shall be the total number of Common Shares
outstanding on such record date multiplied by such Current
Market Price. Such adjustment will be made successively
whenever such a record date is fixed, provided that if two or
more such record dates or record dates referred to in
SubSection 4.01(b) are fixed within a period of 20 trading
days on the principal stock exchange on which the Common
Shares are listed, such adjustment will be made successively
as if each of such record dates occurred on the earliest of
such record dates. To the extent that such distribution is
not so made or to the extent that any such rights, options or
warrants so distributed are not exercised prior to the
expiration thereof, the Share Rate will then be readjusted
to the Share Rate which would then be in effect if such
record date had not been fixed or to the Share Rate which
would then be in effect based upon such securities or rights,
options or warrants or evidences of indebtedness or cash or
other property or assets actually distributed or based upon
the number or amount of securities or the property or assets
actually issued or distributed upon the exercise of such
rights, options or warrants, as the case may be;
(d) if and whenever at any time from the date hereof and prior to
the Expiry Time, there is a reclassification of the Common
Shares or a capital reorganization of the Company other than
as described in SubSection 4.01(a), (b) or (c) or a
consolidation, amalgamation or merger of the Company or other
form of business combination of the Company with or into any
other body corporate, trust, partnership or other entity, or a
sale or conveyance of the property and assets of the Company
as an entirety or substantially as an entirety, any
Warrantholder who has not exercised his right of subscription
prior to the effective date of such reclassification, capital
reorganization, consolidation, amalgamation, merger, sale or
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conveyance, upon the exercise of such right thereafter, shall
be entitled to receive and shall accept the kind and number of
securities or property that such Warrantholder would have been
entitled to receive on such reclassification, capital
reorganization, consolidation, amalgamation, merger, sale or
conveyance, if, on the record date or the effective date
thereof, as the case may be, the Warrantholder had been the
registered holder of the number of Common Shares receivable
upon the exercise of Warrants then held, subject to adjustment
thereafter in accordance with provisions the same, as nearly
as may be possible, as those contained in this Section 4.01;
provided that no such action shall be carried into effect
unless all necessary steps shall have been taken so that the
holders of the Warrants shall thereafter be entitled to
receive such kind and number of securities and property. The
Company, its successor or purchasing body corporate,
partnership, trust or other entity, as the case may be, shall,
as a condition precedent to any such reclassification, capital
reorganization, consolidation, amalgamation, merger, sale or
conveyance, take all necessary steps hereunder to enter into
an agreement which shall provide, to the extent possible, that
the provisions set forth in this Indenture shall thereafter
correspondingly be made applicable, as nearly as may
reasonably be, to the securities and property to which a
Warrantholder is entitled on the exercise of his Warrants
thereafter. Any agreement entered into between the Company and
the Trustee pursuant to the provisions of this SubSection
4.01(d) shall be a supplemental agreement entered into
pursuant to the provisions of Article 7 hereof. Any agreement
entered into between the Company, any successor to the Company
or any purchasing body corporate, partnership, trust or other
entity and the Trustee shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the
adjustments provided in this Section 4.01 and which shall
apply to successive reclassifications, capital
reorganizations, amalgamations, consolidations, mergers, sales
or conveyances;
(e) in any case in which this Section 4.01 requires an adjustment
to become effective immediately after a record date for an
event referred to herein, the Company may defer, until the
occurrence of such event, issuing any Warrantholder exercising
or deemed to be exercising his subscription rights after such
record date the additional Common Shares or other securities
or property issuable upon such exercise by reason of the
adjustment required by such event; provided, however, that the
Company shall deliver to such holder an appropriate instrument
evidencing such holder's right to receive such additional
Common Shares or other securities or property, as the case may
be, upon the occurrence of the event requiring such adjustment
and the right to receive any distributions made on such
additional Common Shares or other securities or property, as
the case may be, declared in favour of holders of record of
such Common Shares or other securities or property, as the
case may be, on and after the date of exercise or such later
date as such holder would but for the provisions of this
SubSection 4.01(e), have become the holder of record of such
additional Common Shares, other securities or property, as the
case may be, upon the exercise of the Warrants held by such
holder;
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(f) after any adjustment pursuant to this Section 4.01, the term
"Common Shares" where used in this Indenture shall be
interpreted to mean securities of any class or classes or
property which, as a result of such adjustment and all prior
adjustments pursuant to this Section 4.01, a Warrantholder is
entitled to receive upon the exercise of such holder's
Warrants, and the number of Common Shares indicated to be
issuable upon any exercise of a Warrant shall be interpreted
to include the number of Common Shares or other securities or
property a Warrantholder is entitled to receive, as a result
of such adjustment and all prior adjustments pursuant to this
Section 4.01, upon the exercise of the Warrant;
(g) all shares of any class or classes or other securities or
property which a Warrantholder is at the time in question
entitled to receive on the exercise of his Warrant, whether or
not as a result of adjustments made pursuant to this Section
4.01 shall, for the purposes of the interpretation of this
Indenture, be deemed to be Common Shares which such
Warrantholder is entitled to subscribe for pursuant to the
exercise of such Warrant;
(h) anything in this Section 4.01 to the contrary notwithstanding,
no adjustment shall be made in the subscription rights
attaching to the Warrants if the issue of Common Shares is
being made pursuant to any stock option or stock purchase plan
in force from time to time for directors, officers or
employees of the Company or any other currently existing
obligation of the Company (including, without limitation, any
outstanding share purchase warrants); and
(i) in the event of any question arising with respect to the
adjustments provided for in this Section 4.01 such question
shall be conclusively determined, subject to the consent of
any stock exchange upon which the Common Shares are then
listed, by a firm of chartered accountants appointed by the
Company and reasonably acceptable to the Trustee (which may be
the Company's auditors). Such accountants shall have access to
all necessary records of the Company, and such determination
shall be binding upon the Company, the Trustee, all
Warrantholders and all other persons interested therein. In
the event that any such determination is made, the Company
shall deliver a certificate to the Trustee describing such
determination;
provided that no adjustment will be required if the holder of a Warrant is
otherwise entitled to participate in the event which triggers the adjustment
pursuant to this Section 4.01 on the same basis as such Warrantholder would have
been entitled had he exercised or been deemed to have exercised his Warrants and
subscribed for Common Shares immediately prior to such event.
SECTION 4.02 PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT.
As a condition precedent to the taking of any action which would require an
adjustment in any of the subscription rights attaching to the Warrants,
including the number of Common Shares which are to be received upon the exercise
thereof, the Company shall take any corporate action which may, in the opinion
of counsel, be necessary in order for the Company to allot and reserve for
- 17 -
issuance and to validly and legally issue as fully paid and non-assessable, such
number of Common Shares and validly and legally deliver all other securities or
property which the holders of such Warrants are entitled to receive on the
exercise thereof in accordance with the provisions hereof.
SECTION 4.03 ADJUSTMENT OF EXERCISE CONSIDERATION.
If (i) the Effectiveness Date has not occurred by August 31, 2000, and (ii) in
the case of holders whose address in the register maintained pursuant to Section
2.03 is in Canada, a Non-Qualification Event has occurred as of August 31, 2000
in the jurisdiction of residence of the holder as reflected in the said
register, the Exercise Consideration payable by such holder shall be reduced by
U.S.$0.25 per month or pro-rated portion thereof, until the earlier of (a) the
Effectiveness Date or, if applicable, the issuance of a receipt, as the case may
be, and (b) October 31, 2000. If (i) the Effectiveness Date has not occurred by
October 31, 2000 and (ii) in the case of holders whose address in the register
maintained pursuant to Section 2.03 is in Canada, a Non-Qualification Event has
occurred as of October 31, 2000 in the jurisdiction of residence of the holder
as reflected in the said register, the Exercise Consideration shall thereafter
be reduced by U.S.$0.50 per month to a minimum of U.S.$3.75 or pro-rated portion
thereof, until the occurrence of the Effectiveness Date and (if applicable) the
issuance of a receipt. For the purposes of this Section 4.03, holders resident
in a Canadian province or territory other than Ontario, Quebec, British Columbia
or Alberta shall be deemed to be resident in Ontario.
SECTION 4.04 CERTIFICATE OF ADJUSTMENT.
The Company shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Section 4.01
hereof, deliver a certificate of the Company to the Trustee specifying the
nature of the event requiring the same and the amount of the adjustment
necessitated thereby and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based, which
certificate and the amount of the adjustment specified therein shall be verified
by the auditors of the Company, upon whose verification the Trustee shall be
entitled to act and rely. When so verified, the Company shall, except in respect
of any subdivision or consolidation of the Common Shares, forthwith give written
notice to the Warrantholders specifying the event requiring such adjustment or
readjustment and the results thereof; provided that if the Company has already
given the required notices under Section 4.06 hereof covering all the relevant
facts in respect of such event and if the Trustee consents in writing, no
further notice need be given under this Section 4.04.
SECTION 4.05 ADJUSTMENT RULES.
The adjustments provided for in this Article 4 are cumulative and shall apply
(without duplication) to successive actions requiring an adjustment under the
provisions of Section 4.01; provided that, notwithstanding any other provision
of this Article 4, no adjustment shall be made in the number of Common Shares
which may be subscribed for on the exercise of a Warrant unless it would result
in a change of at least one-hundredth of a Common Share (provided, however, that
any adjustments which by reason of this Section 4.05 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment).
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In the event that the Company after the date of this Indenture shall take any
action affecting the Common Shares other than an action described in this
Article 4, the directors of the Company may, but shall not be required to, make
any other adjustments to the number of Common Shares which may be acquired upon
exercise of the Warrants, to the extent, if any, such directors deem
appropriate, provided that no such adjustment shall, in the opinion of the
directors, relying on the advice of counsel, be prejudicial to the interests of
the Warrantholders and that no such adjustment shall be made unless prior
approval of any stock exchange on which the Common Shares are then listed for
trading, if required, has been obtained.
SECTION 4.06 NOTICE OF SPECIAL MATTERS.
The Company covenants with the Trustee that from the date hereof until such time
as any Warrant remains outstanding it will give at least 14 days' prior written
notice in the manner provided for in Article 9 to the Trustee and to each
Warrantholder of any event which requires an adjustment to the subscription
rights attaching to any of the Warrants pursuant to this Article 4. The Company
covenants and agrees that such notice shall contain the particulars of such
event in reasonable detail and, if determinable, the required adjustment in the
manner provided for in this Article 4. The Company further covenants and agrees
that it shall promptly as soon as the adjustment calculations are reasonably
determinable, file a Certificate of the Company with the Trustee showing how
such adjustment shall be computed and direct the Trustee to send a copy of such
certificate to the Warrantholders.
SECTION 4.07 NO ACTION AFTER NOTICE.
The Company covenants with the Trustee that it will not close its transfer books
or take any other corporate action which might deprive the holder of a Warrant
of the opportunity of exercising his right of subscription pursuant thereto
during the period of thirty (30) days after the giving of the notice set forth
in Section 4.04 and Section 4.06 hereof.
SECTION 4.08 PROTECTION OF TRUSTEE.
The Trustee:
(a) shall not at any time be under any duty or responsibility to
any Warrantholder to determine whether any facts exist which
may require any adjustment contemplated by Section 4.01
hereof, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed
in making the same;
(b) shall not be accountable with respect to the validity or value
(or the kind or amount) of any Common Share or of any other
securities or property which may at any time be issued or
delivered upon the exercise of the subscription rights
attaching to any Warrant;
(c) shall not be responsible for any failure of the Company to
make any cash payment or to issue, transfer or deliver Common
Shares (or certificates representing same) upon the surrender
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of any Warrants upon the exercise of the subscription rights
attaching to any Warrants or to comply with any of the
covenants contained in this Article 4; and
(d) shall not incur any liability or responsibility whatever or be
in any way responsible for the consequence of any breach on
the part of the Company of any of the representations,
warranties or covenants herein contained or of any acts of the
agents or servants of the Company.
ARTICLE 5
EXERCISE AND CANCELLATION OF WARRANTS
SECTION 5.01 EXERCISE OF WARRANTS.
Upon and subject to the provisions of this Article 5, any holder of a Warrant
may exercise the right thereby conferred on him to subscribe for Common Shares
by delivering to the Trustee at any time following the issuance of the Warrant
until the Expiry Time at its principal stock and bond transfer office in the
city of Toronto, or any other place designated by the Company with the approval
of the Trustee, during normal business hours on a business day,
(a) the Warrant Certificate evidencing the Warrants, with the
exercise form attached to the Warrant Certificate duly
completed and executed by the holder or his executors or
administrators or other legal representatives or his or their
attorney duly appointed by an instrument in writing in form
and manner satisfactory to the Trustee; and
(b) a certified cheque, bank draft or money order in lawful money
of the United States payable to or to the order of the
Company, at par in such city or other place, in an amount
equal to the Exercise Consideration multiplied by the number
of Warrants being exercised.
Delivery of (a) and (b) above will be deemed to have been made only on personal
delivery of (a) and (b) above or, if sent by mail or other means of
transmission, on actual receipt thereof by, the Trustee at its office in
Toronto.
The exercise form attached to the Warrant Certificate shall be signed as set out
above and shall specify:
(i) the number of Warrants which the Warrantholder wishes
to exercise; and
(ii) the person or persons in whose name or names the
Common Shares issuable upon the exercise of such
Warrants are to be registered, the address or
addresses and the social insurance number or numbers
of such person or persons and the number of Common
Shares to be issued to each such person if more than
one is so specified, provided that the Warrantholder
shall only be entitled to direct his entitlement to
the Common Shares in a manner permitted by applicable
- 20 -
securities legislation, and provided further that no
certificates for Common Shares shall be registered at
or delivered to an address in the United States
unless the person in whose name the certificates are
to be registered has complied with the requirements
of SubSection 2.17(3) hereof.
If any of the Common Shares issuable upon the exercise of Warrants are to be
issued to a person or persons other than the Warrantholder in accordance with
the provisions of Sections 2.05 and 2.17 hereof, the Warrantholder shall pay to
the Trustee all requisite stamp or security transfer taxes or other governmental
charges exigible in connection with the issue of such Common Shares to such
other person or persons or shall establish to the satisfaction of the Trustee
that such taxes and charges have been paid.
The Company will not be required to issue or deliver any certificate evidencing
any Common Shares issuable upon the exercise of Warrants unless or until such
amount has been paid or the Warrantholder has established to the satisfaction of
the Company that such taxes and charges have been paid or that no such taxes or
charges are owing.
SECTION 5.02 EFFECT OF EXERCISE OF WARRANTS.
Upon a valid exercise of Warrants as provided in Section 5.01 hereof, the Common
Shares issuable upon the exercise of the Warrants shall be deemed to have been
issued, and such person or persons as are specified pursuant to Section 5.01
hereof shall be deemed to have become the holder or holders of record of such
Common Shares on the date of such valid exercise (herein called the "EXERCISE
DATE") unless the stock transfer books of the Company shall be closed by law on
the date of such valid exercise, in which case such securities shall be deemed
to have been issued, such person or persons shall be deemed to have become the
holder or holders of record of such Common Shares and the Exercise Date shall be
deemed to be on the date on which such stock transfer books are next re-opened.
The Trustee will not register the exercise of any Warrant unless such exercise
has been approved by the Company. The Trustee will have no duty to ensure
compliance with applicable securities laws on the exercise of any Warrant.
Upon a valid exercise of Warrants as aforesaid, the Trustee shall forthwith give
written notice thereof to the Company.
In the case of a Warrant which is exercised by a holder in accordance with the
provisions of Section 5.01, within five business days after the Exercise Date of
such Warrant, the Company shall:
(a) cause to be mailed to the person in whose name the Common
Shares so subscribed for are to be issued, as specified in the
exercise form attached to the Warrant Certificate representing
the Warrant exercised, at the address specified therein;
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(b) if so specified therein, cause to be delivered to such person
at the office of the Trustee where such Warrant was
surrendered; or
(c) if no specification as contemplated by (a) or (b) is provided,
cause to be mailed to the person in whose name the Common
Shares are to be issued at the address of such person last
appearing on the register maintained by the Trustee pursuant
hereto or as such person may otherwise notify the Trustee in
writing on or prior to the Exercise Date,
certificates representing the Common Shares to which the Warrantholder is
entitled upon exercise of the Warrants so exercised, provided that no
certificate shall be registered or delivered to an address in the United States
unless the subscriber shall have satisfied the requirements of Section 5.01.
If a time of exercise of a Warrant, there remain trading restrictions on the
Common Shares issuable upon such exercise pursuant to applicable securities
legislation, the Company may, upon the advice of counsel, endorse any such
securities to such effect.
SECTION 5.03 POSTPONEMENT OF DELIVERY OF CERTIFICATES.
The Company shall not be required to deliver certificates representing Common
Shares during any period when the stock transfer books of the Company are closed
by law and in the event of an exercise of a Warrant during such period, the
delivery of certificates evidencing such Common Shares may be postponed for a
period not exceeding five (5) business days after the date of the re-opening of
the stock transfer books.
SECTION 5.04 WARRANTS VOID AFTER EXPIRY TIME.
Upon the earlier of (i) the exercise of the Warrants and (ii) the Expiry Time,
the Warrants shall be void and of no value or effect.
SECTION 5.05 FRACTIONS.
To the extent that the holder of a Warrant is entitled to receive on the
exercise thereof a fraction of a Common Share, such right may only be exercised
in respect of such fraction which, in combination with another Warrant or other
Warrants, in the aggregate, entitle the holder to receive a whole number of
Common Shares.
If a holder is not able to, or elects not to, combine Warrants so as to be
entitled to acquire a whole number of Common Shares, the Company shall make an
appropriate cash adjustment to such holder in respect only of the entitlement to
a fractional Common Share. In respect of any holder, the Company shall only be
required to make such a cash adjustment once and for one (1) fractional Common
Share and no more. The amount of the cash adjustment shall be equal to the
fraction of a Common Share to which the holder would be entitled multiplied by
the Current Market Price. The Company will not, under any circumstances, be
obligated to issue a cheque to a Warrantholder of less than U.S.$10.00.
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SECTION 5.06 ACCOUNTING AND RECORDING.
The Trustee shall:
(a) promptly account to the Company with respect to Warrants
exercised and forward to the Company or to an account or
accounts of the Company at a bank or trust company designated
by the Company for that purpose, all cash or instruments of
payment received on the exercise of Warrants; and
(b) record the particulars of Warrants exercised, which
particulars shall include the names and addresses of the
persons who become holders of Common Shares on such exercise
and the Exercise Date in respect thereof. The Trustee shall
provide such particulars in writing to the Company within (5)
business days of any request by the Company therefor.
ARTICLE 6
MEETINGS OF WARRANTHOLDERS
SECTION 6.01 CONVENING OF MEETING.
A meeting of Warrantholders may be convened at any time by the Trustee or the
Company or by the holders of Warrants holding not less than twenty per cent
(20%) of the aggregate number of Warrants then outstanding, who shall serve the
Trustee with a requisition signed by such holders and the Trustee shall then be
bound to convene a meeting of Warrantholders upon receipt of appropriate funding
and indemnity therefor. In the event that the Trustee fails to convene the
meeting after being duly required to do so, the holders of then outstanding
Warrants representing no less than twenty per cent (20%) of the aggregate number
of Warrants then outstanding may themselves convene a meeting, the notice of
which shall be signed by any person as such Warrantholders may specify, provided
that every such meeting shall be held at the city of Toronto or such other place
as the Trustee may approve and the Trustee and the Company shall receive notice
of such meeting as provided in Section 6.02 hereof.
SECTION 6.02 NOTICE.
At least twenty-one (21) days prior notice of a meeting of Warrantholders shall
be given to all Warrantholders, the Trustee and the Company in accordance with
Article 9 hereof, and the notice shall state the time, the place and in general
terms the nature of the business to be transacted but it shall not be necessary
to specify the text of the resolutions to be considered. It shall not be
necessary to specify the nature of business to be transacted at an adjourned
meeting.
SECTION 6.03 CHAIRMAN.
The chairman of the meeting of Warrantholders shall be designated in writing by
the Trustee and need not be a Warrantholder. If no person is so designated or if
the person so designated is not present within twenty-five (25) minutes after
the time fixed for the holding of a meeting, the Warrantholders and proxyholders
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for Warrantholders present at the meeting shall choose one of their number to be
the chairman.
SECTION 6.04 QUORUM.
A quorum for meetings of Warrantholders shall consist of those Warrantholders,
whether present or represented by proxy, holding not less than twenty per cent
(20%) of the aggregate number of Warrants then outstanding. If at a meeting, a
quorum is not present or represented by proxy within thirty (30) minutes after
the time appointed for the meeting, then the meeting, if called by or upon the
requisition of Warrantholders, shall be dissolved, but in any other case after
the appointment of a chairman, the meeting shall stand adjourned to such day
(being not less than five (5) business days later) and to such place and time as
may be designated by the chairman of the meeting. At the adjourned meeting,
those persons present in person and owning Warrants or representing by proxy
Warrantholders shall, in any event, constitute a quorum for the transaction of
business for which the original meeting was convened. The chairman of any
meeting at which a quorum of the Warrantholders is present may, with the consent
of the meeting, adjourn any such meeting, and no notice of such adjournment need
be given except such notice, if any, as the meeting may prescribe.
SECTION 6.05 POWER TO ADJOURN.
The chairman of any meeting at which a quorum of the Warrantholders is present
may, with the consent of the meeting, adjourn any such meeting and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
SECTION 6.06 SHOW OF HANDS.
Subject to Section 6.07 hereof, every question submitted to a meeting, except
one necessitating an Extraordinary Resolution, shall be decided in the first
instance by a majority of hands on a show of hands, the outcome of which will be
declared by the chairman. Each Warrantholder present, in person or by proxy,
shall have one vote.
SECTION 6.07 POLL.
A poll shall be taken when requested by a Warrantholder acting in person or by
proxy and, when demanded on the election of a chairman or on the question of
adjournment, shall be taken forthwith. On an Extraordinary Resolution or if
demanded on any other question, a poll shall be taken in such manner and either
at once or after an adjournment as the chairman may direct. The result of a poll
shall be the decision of the meeting at which the poll was demanded. On a poll
vote, each Warrantholder acting in person or by proxy shall have one vote for
each Warrant which he holds or represents. Votes may be given in person or by
proxy and the proxyholder need not be a Warrantholder. The chairman of any
meeting shall be entitled to vote in respect of any Warrants and proxies held by
him.
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SECTION 6.08 REGULATIONS.
The Trustee, or the Company with the approval of the Trustee, may from time to
time make and from time to time vary such regulations not contrary to the
provisions of this Indenture as it shall think fit providing for and governing:
(a) the setting of the record date for a meeting for the purpose
of determining Warrantholders entitled to receive notice of
and to vote at a meeting;
(b) voting by proxy, the form of instrument appointing
proxyholders, the manner in which proxies are to be executed
and the production of the authority of any persons signing on
behalf of a Warrantholder;
(c) the lodging of and means of forwarding the instruments
appointing proxyholders and the time before the holding of a
meeting or adjourned meeting by which the instruments
appointing proxyholders are to be deposited; and
(d) any other matter relating to the conduct of meetings of
Warrantholders.
Any regulations so made shall be binding and effective and votes given in
accordance therewith shall be valid. The Trustee may permit Warrantholders to
provide proof of ownership of the Warrants in such manner as the Trustee may
approve. Save as aforesaid, the only persons who shall be recognized at any
meeting as Warrantholders or entitled to vote or, except as provided in Section
6.13 hereof, be present at the meeting in respect thereof shall be persons who
are registered holders of Warrants or are duly appointed proxyholders for
registered holders of Warrants.
SECTION 6.09 MINUTES.
Minutes of all resolutions passed and proceedings taken at every meeting as
aforesaid shall be made and duly entered in books to be from time to time
provided for that purpose by the Trustee at the expense of the Company and any
such minutes as aforesaid, if signed by the chairman of the meeting at which
such resolutions were passed or proceedings taken, or by the chairman of the
next succeeding meeting of Warrantholders, shall be prima facie evidence of the
matters therein stated and, until the contrary is proved, every such meeting in
respect of the proceedings of which minutes shall have been made shall be deemed
to have been duly held and convened and all resolutions passed thereat or
proceedings taken thereat to have been duly passed and taken.
SECTION 6.10 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION.
The Warrantholders shall have the power from time to time by Extraordinary
Resolution:
(a) to agree to or sanction any modification, abrogation,
alteration or compromise of the rights of the Warrantholders
or (subject to the prior consent of the Trustee therefor) the
Trustee in its capacity as trustee hereunder or on behalf of
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Warrantholders against the Company which shall be agreed to by
the Company whether such rights arise under this Indenture or
under the Warrants or otherwise;
(b) to assent to any change in or omission from the provisions
contained in the Warrants and this Indenture or any ancillary
or supplemental instrument which may be agreed to by the
Company, and to authorize the Trustee to concur in and execute
any ancillary or supplemental agreement embodying the change
or omission;
(c) with the consent of the Company, not to be unreasonably
withheld, to remove the Trustee or its successor in office and
to appoint a new trustee or trustees to take the place of the
Trustee so removed;
(d) to require, direct or authorize the Trustee to enforce any of
the covenants on the part of the Company contained in this
Indenture or the Warrants or to enforce any of the rights of
the Warrantholders in any manner specified in such
Extraordinary Resolution or to refrain from enforcing any such
covenant or right, in each case upon the Trustee being
furnished with an indemnity and such funding as the Trustee
may, in the reasonable exercise of its discretion, determine
it requires to so act;
(e) to restrain any Warrantholder from instituting or continuing
any suit or proceeding against the Company for the enforcement
of the covenants on the part of the Company contained in this
Indenture or the Warrants or of any of the rights conferred
upon the Warrantholders by the Warrants and this Indenture;
(f) to direct any Warrantholder who, as such, has brought any
suit, action or proceeding to stay or discontinue or otherwise
deal with the same upon payment of the costs, charges and
expenses reasonably and properly incurred by such
Warrantholder in connection therewith;
(g) to waive and direct the Trustee to waive any default on the
part of the Company in complying with any of the provisions of
this Indenture or the Warrants either unconditionally or upon
any conditions specified in such Extraordinary Resolution;
(h) to assent to any compromise or arrangement with any creditor
or creditors or any class or classes of creditors, whether
secured or unsecured, and with holders of any shares or other
securities of the Company; and
(i) to amend, alter or repeal any Extraordinary Resolution
previously passed or sanctioned by the Warrantholders.
An Extraordinary Resolution of the Warrantholders is binding upon all the
Warrantholders whether or not present at the meeting at which the Extraordinary
Resolution was passed or whether or not assented to in writing and each
Warrantholder, the Trustee and the Company shall be bound to give effect to the
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Extraordinary Resolution to the extent that the Extraordinary Resolution applies
to such party.
SECTION 6.11 MEANING OF "EXTRAORDINARY RESOLUTION".
The expression "EXTRAORDINARY RESOLUTION" when used in this Indenture means,
subject to Section 6.14, a resolution proposed to be passed as an extraordinary
resolution at a meeting of Warrantholders duly convened for the purpose and held
in accordance with the provisions of this Article 6 and attended in person or by
proxy by Warrantholders holding not less than fifty-one per cent (51%) of the
Warrants then outstanding and passed by not less than sixty-six and two-thirds
percent (66 2/3%) of the votes cast upon such resolution.
If, at any meeting called for the purpose of passing an Extraordinary
Resolution, Warrantholders holding at least fifty-one per cent (51%) of the
aggregate number of Warrants are not present in person or by proxy within thirty
(30) minutes after the time appointed for the meeting, then the meeting, if
convened by Warrantholders or on a Warrantholders' request, shall be dissolved;
but in any other case it shall be adjourned to such day (being not less than
twenty (20) or more than sixty (60) days later) and to such place and time as
may be designated by the chairman. Not less than ten (10) days' prior notice
shall be given of the time and place of such adjourned meeting in the manner
provided in Section 9.02. Such notice shall state that at the adjourned meeting
the Warrantholders present in person or by proxy shall form a quorum but it
shall not be necessary to set forth the purposes for which the meeting was
originally convened or any other particulars. At the adjourned meeting, the
Warrantholders present in person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened and a
resolution proposed at such adjourned meeting and passed by the requisite vote
as provided in this Section 6.10 shall be an Extraordinary Resolution within the
meaning of this Indenture notwithstanding that Warrantholders holding at least
fifty-one per cent (51%) of the aggregate number of Warrants outstanding are not
present in person or by proxy at such adjourned meeting.
Subject to Section 6.14 hereof, votes on an Extraordinary Resolution shall
always be given on a poll.
SECTION 6.12 POWERS CUMULATIVE.
It is hereby declared and agreed that any one or more of the powers or any
combination of the powers in this Indenture stated to be exercisable by the
Warrantholders by Extraordinary Resolution or otherwise may be exercised from
time to time and the exercise of any one or more of such powers or any
combination of powers from time to time shall not be deemed to exhaust the right
of the Warrantholders to exercise the same or any other such power or powers or
combination of powers then or thereafter from time to time.
SECTION 6.13 COMPANY, WARRANTHOLDERS AND TRUSTEE MAY BE REPRESENTED.
The Company and the Trustee, by their respective employees, officers and
directors, and the legal and financial advisors and auditors of the Company and
the Trustee may attend any meeting of the Warrantholders, but they shall have no
vote thereat. In addition, any Warrantholder is entitled to have his legal or
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financial advisers present at any such meeting, but they shall have no vote
thereat.
SECTION 6.14 INSTRUMENTS IN WRITING.
All actions that may be taken and all powers that may be exercised by the
Warrantholders at a meeting as hereinbefore in this Article provided may also be
taken and exercised by holders of not less than sixty-six and two-thirds per
cent (66 2/3%) of the aggregate number of Warrants then outstanding by an
instrument in writing signed in one or more counterparts by such holders and the
expression "Extraordinary Resolution" when used in this Indenture shall include
an instrument so signed.
SECTION 6.15 BINDING EFFECT OF RESOLUTIONS.
Every resolution and every Extraordinary Resolution passed in accordance with
the provisions of this Article 6 at a meeting of Warrantholders shall be binding
upon all the Warrantholders, whether present at or absent from such meeting and
every instrument in writing signed by Warrantholders in accordance with Section
6.14 shall be binding upon all the Warrantholders, whether signatories thereto
or not and each, and every Warrantholder and the Trustee (subject to the
provisions for indemnity herein contained) shall be bound to give effect
accordingly to every such resolution and Extraordinary Resolution. In the case
of an Extraordinary Resolution in writing, the Trustee shall give notice in
writing to all Warrantholders and the Company in the manner contemplated in
Article 9 of the effect of the Extraordinary Resolution as soon as it is
reasonably practicable.
SECTION 6.16 HOLDINGS BY THE COMPANY OR SUBSIDIARIES OF THE COMPANY
DISREGARDED.
In determining whether Warrantholders holding the required number of Warrants
are present at a meeting of Warrantholders for the purpose of determining a
quorum or have concurred to any consent, waiver, resolution, Extraordinary
Resolution or other action under this Indenture, Warrants owned legally or
beneficially by the Company or any subsidiary of the Company shall be
disregarded. The Company shall provide to the Trustee, upon written request, a
Certificate of the Company stating the registration and denomination of any
Warrants owned legally or beneficially by the Company or any subsidiary of the
Company, upon which the Trustee shall be protected in acting and relying.
ARTICLE 7
SUPPLEMENTAL AGREEMENTS, MERGER, SUCCESSORS
SECTION 7.01 PROVISION FOR SUPPLEMENTAL AGREEMENTS FOR CERTAIN PURPOSES.
From time to time the Company (when authorized by a resolution of its directors)
and the Trustee may, subject to the provisions of this Indenture, and they
shall, when so required by any provision of this Indenture, execute and deliver
by their proper officers, deeds, agreements or instruments supplemental hereto,
which thereafter shall form part hereof, for any one or more of the following
purposes:
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(a) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of counsel, are
necessary or advisable in the premises, provided that the same
are not, in the opinion of the Trustee, based on the advice of
counsel, prejudicial to the interests of the Warrantholders;
(b) giving effect to any Extraordinary Resolution passed as
provided in Article 6 hereof;
(c) making such provisions not inconsistent with this Indenture as
may be necessary or desirable with respect to matters or
questions arising hereunder or for the purpose of obtaining a
listing or quotation of the Common Shares issuable upon the
exercise of the Warrants on any stock exchange, or for the
purpose of complying with applicable laws, provided that such
provisions are not, in the opinion of the Trustee, relying on
the advice of counsel, prejudicial to the interests of the
Warrantholders;
(d) making any modification in the form of the Warrant Certificate
which does not affect the substance of the Warrants;
(e) evidencing any succession, or successive successions, of other
bodies corporate, trusts, partnerships or other entities to
the Company and the assumption by any successor of the
covenants of the Company contained herein and in the Warrant
Certificates as provided hereafter in this Article 7; and
(f) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective provisions, errors or omissions herein,
provided that, in the opinion of the Trustee, relying on the
advice of counsel, the rights of the Trustee and of the
Warrantholders are in no way prejudiced thereby.
SECTION 7.02 COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
Subject to SubSection 4.01(d), nothing in this Indenture shall prevent any
consolidation, arrangement, amalgamation or merger of the Company with or into
any other body corporate(s), trust(s), partnership(s) or other entity(ies), or a
conveyance or transfer of all or substantially all the property and assets of
the Company as an entirety to any body corporate(s), trust(s), partnership(s) or
other entity(ies) lawfully entitled to acquire and operate the same, provided,
however, that the body corporate(s), trust(s), partnership(s) or other
entity(ies) formed by such consolidation or amalgamation or arrangement or into
which such merger shall have been made or which acquires by conveyance or
transfer all or substantially all the property and assets of the Company as an
entirety shall execute and deliver to the Trustee prior to or contemporaneously
with such consolidation, amalgamation, arrangement, merger, conveyance or
transfer, and as a condition precedent thereto, an agreement supplemental hereto
wherein the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be performed or observed by the Company shall be
assumed by such body corporate(s), trust(s), partnership(s) or other entity(ies)
on terms and conditions not adverse to the Warrantholders. The Trustee shall be
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entitled to receive and shall be fully protected in relying upon an opinion of
counsel and such other advisors as it deems necessary that any such
consolidation, amalgamation, arrangement, merger, conveyance or transfer and any
supplemental agreement executed in connection therewith complies with the
provisions of this Section 7.02.
SECTION 7.03 SUCCESSOR BODY CORPORATE SUBSTITUTED.
In case the Company, pursuant to Section 7.02 hereof, shall be consolidated,
amalgamated, arranged or merged with or into any other body corporate(s),
trust(s), partnership(s) or other entity(ies) or shall convey or transfer all or
substantially all of the property and assets of the Company as an entirety to
another body corporate(s), trust(s), partnership(s) or other entity(ies), the
successor body corporate(s), trust(s), partnership(s) or other entity(ies)
formed by such consolidation, arrangement or amalgamation or into which the
Company shall have been merged or which shall have received a conveyance or
transfer as aforesaid shall succeed to and be substituted for the Company
hereunder with the same effect as nearly as may be possible as if it had been
named herein as a party in substitution for the Company. Such changes may be
made in the Warrants as may be appropriate in view of such consolidation,
amalgamation, merger, conveyance or transfer and as may be necessary to ensure
that the Warrantholders are not adversely affected by such consolidation,
amalgamation, merger, conveyance or transfer.
ARTICLE 8
CONCERNING THE TRUSTEE
SECTION 8.01 CONDITIONS PRECEDENT TO TRUSTEE'S OBLIGATION TO ACT.
The Trustee shall not be bound to give any notice or do or take any act, action
or proceeding by virtue of the powers conferred on it hereby unless and until it
shall have been required so to do under the terms hereof; nor shall the Trustee
be required to take or be deemed to have notice, actual or constructive, of any
default hereunder, unless and until notified in writing of such default, which
notice shall distinctly specify that the notice is in respect of this Indenture
and the default desired to be brought to the attention of the Trustee and, in
the absence of any such notice, the Trustee may for all purposes of this
Indenture conclusively assume that the Company is not in default hereunder or in
the observance or performance of any of the covenants, agreements or conditions
contained herein. Any such notice or requisition shall in no way limit any
discretion herein given to the Trustee to determine whether or not the Trustee
shall take action with respect to any default or take action without any such
requisition.
Subject to the Trustee's duty to act with the requisite standard of care, the
obligation of the Trustee to commence or continue any act, action or proceeding
for the purpose of enforcing any rights of the Trustee or the Warrantholders
hereunder shall be conditional upon the Warrantholders furnishing, when required
by notice in writing by the Trustee, sufficient funds to commence or continue
such act, action or proceeding and indemnity reasonably satisfactory to the
Trustee to protect and hold harmless the Trustee against the costs, charges and
expenses and liabilities to be incurred thereby and any loss and damage it may
suffer by reason thereof.
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None of the provisions contained in this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties or in the exercise of any of its rights or
powers.
The Trustee may, before commencing or at any time during the continuance of any
such act, action or proceeding, require the Warrantholders at whose instance it
is acting to deposit with the Trustee the Warrants held by them, for which the
Trustee shall issue receipts.
The Trustee shall be liable only for its acts, errors or omissions in performing
its duties and exercising its powers hereunder where such acts, errors or
omissions are attributable solely to its own gross negligence or its own wilful
misconduct, except that:
(a) this Section 8.01 shall not be construed to limit the
protective effect of Section 8.10 and Section 8.03;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a responsible officer or employee, unless it
shall be proved that the Trustee was grossly negligent in
ascertaining the pertinent facts or delegating to such officer
or employee the ability to exercise such judgment; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with an Extraordinary Resolution relating to the time, method
and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power
conferred upon the Trustee under this Indenture with respect
to the Warrants.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section 8.01.
SECTION 8.02 EVIDENCE.
Whenever it is provided in this Indenture, with reference to any application to
the Trustee for the certification and delivery of Warrants or other action
hereunder, that the Company shall deposit with the Trustee resolutions,
certificates, opinions, requests, orders or other documents, it is intended that
the truth, accuracy and good faith at the time of the granting of such
application (or on the effective date of any such certificate or report, as the
case may be) of the facts and opinions stated in all documents so deposited
shall, in each and every such case, be conditions precedent to the right of the
Company to have such application granted. The Trustee may act and rely and shall
be protected in acting and relying upon any such documents deposited with it in
purported compliance with any such provision or for any other purpose hereof,
but may in its discretion require further evidence before acting or relying
thereon.
The Trustee may act and rely and shall be protected in acting and relying upon
any certified resolution, certificate, order or request of the Company or any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, letter, facsimile transmission, telegram, cablegram or
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other paper or document believed by it to be genuine and to have been signed,
sent or presented by or on behalf of the proper party or parties.
SECTION 8.03 STANDARD OF CONDUCT; EXPERTS AND ADVISERS.
The Trustee shall act honestly and in good faith with a view to the best
interests of the Warrantholders and shall exercise the care, diligence and skill
that a reasonably prudent person would exercise in performing its obligations
and exercising its powers hereunder.
The Trustee may employ or retain such counsel, accountants, appraisers or other
experts or advisers as it may reasonably require for the purpose of determining
and discharging its rights and duties hereunder and shall not be responsible for
any misconduct on the part of any of them.
The Trustee may act and rely and shall be protected in acting and relying in
good faith on the opinion or advice of or information obtained from any counsel,
accountant, appraiser or other expert or adviser, whether retained or employed
by the Company or by the Trustee, in relation to any matter arising in the
administration of its duties hereunder.
An opinion of counsel may be based, insofar as it relates to factual matters of
which the Company has knowledge, upon the certificate or opinion of or
representations by an officer or officers of the Company unless such counsel
knows that the certificate, opinion or representation upon which such counsel's
opinion may be based is erroneous, or in the exercise of reasonable care should
have known that the same was erroneous.
Whenever it is required by any provision hereof that a certificate or opinion be
signed by a person acceptable to the Trustee, the acceptance by the Trustee of
the certificate or opinion signed by such person shall be sufficient evidence
that the signer is acceptable to the Trustee.
SECTION 8.04 DOCUMENTS, MONEYS, ETC. HELD BY TRUSTEE.
Any securities, documents of title or other instruments that may at any time be
held by the Trustee hereunder may be placed in the deposit vaults of the Trustee
for safekeeping. Unless herein otherwise expressly provided, any moneys so held,
pending the application or withdrawal thereof under any provisions of this
Indenture, shall be deposited in the name of the Trustee in a trust account
(including an affiliate or related party of the Trustee), at the rate of
interest (if any) then current on similar deposits or, upon the written
direction of the Company, may be invested in securities of or guaranteed by the
Government of Canada or any province thereof or any Schedule I Canadian
chartered bank (including an affiliate of the Trustee) provided that each such
obligation is rated at least B1 (middle) by Dominion Bond Rating Service, or an
equivalent rating by Canadian Bond Rating Service, maturing not more than 30
days from the date of investment. Except as otherwise provided in this
Indenture, all interest or other income received by the Trustee in respect of
such deposits and investments shall belong to the Company and shall be paid to
it.
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SECTION 8.05 ACTION BY TRUSTEE TO PROTECT INTERESTS
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the holders of Warrants.
SECTION 8.06 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect of the
execution of its duties under this Indenture or otherwise in respect of the
premises.
SECTION 8.07 PROTECTION OF TRUSTEE
By way of supplement to the provisions of any law for the time being relating to
trustees:
(a) the Trustee shall not be liable for or by reason of any
statements of fact or recitals in this Indenture or in the
Warrants (except the representations and warranties contained
in Section 8.09 and Section 8.10 and in the certificate of the
Trustee on the Warrants) or required to verify the same, but
all such statements and recitals are and shall be deemed to be
made by the Company;
(b) nothing herein contained shall impose any obligation on the
Trustee to see to or to require evidence of the registration
or filing (or renewal thereof) of this Indenture;
(c) the Trustee shall not be bound to give notice to any person of
the execution hereof;
(d) the Trustee shall be under no responsibility in respect of the
validity of this Indenture or the execution and delivery
hereof by or on behalf of the Company or in respect of the
validity or execution of any Warrant Certificate hereunder,
nor shall it be responsible for any breach of the Company of
any covenant or condition contained in this Indenture or in
any such Warrant Certificate, nor shall it by any act
hereunder be deemed to make any representation or warranty as
to authorization or reservation of any Common Shares or other
shares to be issued upon the right to acquire provided for in
this Indenture and/or in any Warrant Certificate or as to
whether any Common Shares or other shares will, when duly
issued, be duly authorized or be validly issued as fully paid
and non-assessable, it being hereby agreed and declared that
as to all matters and things referred to in this Indenture
relating to such matters, the duty and responsibility shall
rest upon the Company and not upon the Trustee and the failure
of the Company to discharge any such duty and responsibility
shall not in any way render the Trustee liable or place upon
it any duty or responsibility for breach of which it would be
liable;
(e) the Trustee shall have no duties except those which are
expressly set forth herein, and it shall not be bound by any
notice of claim or demand with respect to, or any waiver,
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modification, amendment, termination or recision of this
Indenture, unless received by it in writing, and signed by the
parties hereto and if its duties are herein affected, unless
it shall have been given prior written consent thereto;
(f) the Trustee shall retain the right not to act and shall not be
held liable for refusing to act unless it has received clear
and reasonable documentation which complies with the terms of
the Indenture. Such documentation must not require the
exercise of any discretion or independent judgment. In the
event of any disagreement arising regarding the terms of this
Indenture, the Trustee shall be entitled at its option to
refuse to comply with any or all demands whatsoever until the
dispute is settled either by agreement amongst the various
parties or by a court of competent jurisdiction;
(g) the Trustee may, as a condition precedent to any action to be
taken by it under this Indenture, require such opinions,
statutory declarations, reports, certificates or other
evidence as it, acting reasonably considers necessary or
advisable; and
(h) the Trustee shall incur no liability with respect to the
delivery or non-delivery of any certificate or certificates,
whether delivered by hand, mail or any other means.
SECTION 8.08 REPLACEMENT OF TRUSTEE
The Trustee may resign and be discharged from all further duties and liabilities
hereunder by giving to the Company not less than 30 days' notice in writing or
such shorter notice as the Company may accept as sufficient. In the event of the
Trustee resigning or being removed as aforesaid or being dissolved, becoming
bankrupt, going into liquidation or otherwise becoming incapable of acting
hereunder, the Company shall forthwith appoint a new trustee; failing such
appointment by the Company, the retiring Trustee or any Warrantholder may apply,
at the expense of the Company, to a Judge of the Superior Court of Justice of
the Province of Ontario, on such notice as such Judge may direct, for the
appointment of a new trustee. Any new trustee appointed under these provisions
shall be a corporation authorized to carry on the business of a trust company in
the Province of Ontario. On any new appointment, the new trustee shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as Trustee without any further assurance, conveyance,
act or deed, but there shall be immediately executed, at the expense of the
Company, all such conveyances or other instruments as, in the opinion of
counsel, may be necessary or advisable for the purpose of assuring the same to
the new trustee. On the appointment of a new trustee, the Company will promptly
give notice thereof to the Warrantholders. At the request of the Company, or the
new trustee, the retiring Trustee upon payment of the amounts, if any, due to it
pursuant to SubSection 3.01(b) (unless the Trustee waives any such payment) or
otherwise hereunder shall duly assign, transfer and deliver to the new trustee,
all property and money held and all records kept by the retiring Trustee
hereunder or in connection herewith.
Any company resulting from a merger, consolidation or amalgamation to which the
Trustee for the time being is a party shall be the successor Trustee under this
Indenture without any further act.
- 34 -
SECTION 8.09 CONFLICT OF INTEREST
The Trustee represents and warrants to the Company that, at the time of the
execution and delivery hereof, no material conflict of interest exists in the
Trustee's role hereunder and agrees that in the event of a material conflict of
interest arising hereafter it will, forthwith after ascertaining that it has
such material conflict of interest, notify the Company of such conflict and,
within 30 days thereafter, either eliminate the same or resign hereunder. If any
such material conflict of interest exists or hereunder shall exist, the validity
and enforceability of this Indenture and the Warrants shall not be affected in
any manner whatsoever by reason thereof.
The Trustee, in its personal or any other capacity, may buy, lend upon and deal
in securities of the Company or any subsidiary of the Company and generally may
contract and enter into financial transactions with the Company or any
subsidiary of the Company without being liable to account for any profit made
thereby.
Notwithstanding the foregoing, neither the Company, nor any person directly or
indirectly controlling, controlled by or under common control with the Company,
shall serve as a Trustee hereunder.
SECTION 8.10 TRUSTEE'S AUTHORITY TO CARRY ON BUSINESS
The Trustee represents and warrants to the Company that at the date hereof it is
authorized to carry on the business of a trust company in Ontario. If,
notwithstanding the provisions of this Section 8.10, it ceases to be authorized
to carry on such business, the validity and enforceability of this Indenture and
the Warrants issued hereunder shall not be affected in any manner whatsoever by
reason only of such event, provided that the Trustee, within 30 days after
ceasing to be authorized to carry on such business, either becomes so authorized
or resigns in the manner and with the effect specified in Section 8.08.
SECTION 8.11 APPOINTMENT AND ACCEPTANCE OF TRUST
The Company hereby appoints the Trustee as trustee under the terms and
conditions set forth in this Indenture. The Trustee hereby accepts the duties
set out and provided for under this Indenture and agrees to perform the same
upon the terms and conditions herein set forth.
SECTION 8.12 TRUSTEE'S DISCRETION ABSOLUTE
The Trustee, except as herein otherwise provided, shall as regards all the
powers, authorities and discretions vested in it, have absolute and uncontrolled
discretion as to the exercise thereof, whether in relation to the manner or as
to the mode and time for the exercise thereof.
SECTION 8.13 INDEMNITY.
In addition to and without limiting any other protection of the Trustee
hereunder or otherwise by law, the Company shall be liable for and indemnify and
save harmless the Trustee and its officers, directors and employees from and
against any and all liabilities, losses, claims, damages, penalties, actions,
suits, demands, levies, costs, expenses and disbursements including, without
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limitation, any and all legal and advisor fees and disbursements, of whatever
kind or nature which may at any time be suffered by, imposed on, incurred by or
asserted against the Trustee whether groundless or otherwise, howsoever arising
from or out of any act, omission or error of the Trustee made in connection with
its acting hereunder unless and except to the extent that the Trustee shall have
acted fraudulently, with gross negligence or in bad faith or wilfully
misconducted itself. Notwithstanding any other provisions hereof, this indemnity
shall survive removal or resignation of the Trustee, discharge of this Indenture
and termination of this Indenture
ARTICLE 9
NOTICE AND CERTIFICATES
SECTION 9.01 NOTICE TO COMPANY AND TRUSTEE; PRESENTATIONS TO TRUSTEE
(1) Any notice, direction or other communication hereunder shall be in writing
and shall be given by delivery or telecopier,
if to the Company, addressed to:
SoftQuad Software, Ltd.
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Neill May
Telecopier: (000) 000-0000
- 36 -
if to the Trustee, addressed to:
Montreal Trust Company of Canada
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Corporate Trust Services
Telecopier: (000) 000-0000
Any such notice shall be deemed to have been given if delivered during normal
business hours of the recipient on a business day, on the date of delivery and
if not, on the next following business day and if telecopied, on the business
day so telecopied, provided that any delivery made or sent by telecopier after
5:00 p.m. (Toronto time) on a business day, shall be deemed to be received on
the next following business day.
(2) All deliveries or presentations of Warrants or other securities to the
Trustee shall be made to the Trustee addressed to Montreal Trust Company of
Canada, 000 Xxxxx Xxxxxx West, 8th Floor, Toronto, Ontario, M5J 2N1, Attention:
Stock Transfer Department.
SECTION 9.02 NOTICE TO WARRANTHOLDERS
Any notice to the Warrantholders under the provisions of this Indenture shall be
valid and effective if delivered to or if given by insured mail, postage
prepaid, addressed to each Warrantholder at its address as the same will appear
in the register to be kept by the Trustee or, in the case of joint holders, to
the first such address, and shall be deemed to have effectively been given on
the date of delivery or, if mailed, five days after actual posting of such
notice; provided, however, that no such delivery shall be deemed to be valid and
effective if delivered during a postal disruption or if a postal disruption is
anticipated until such time as the notice is actually received. Accidental error
or omission by the Trustee in giving notice or accidental failure to mail notice
to any Warrantholder will not invalidate any action or proceeding founded
thereon.
SECTION 9.03 GENERAL PROVISIONS AS TO CERTIFICATES.
Each Certificate of the Company and opinion of counsel ("DOCUMENT") required
under or referred to in this Indenture or furnished in connection with any
application, written order or written request made to the Trustee or a
Warrantholder pursuant to any provisions of this Indenture shall specify the
section under which such Document, application, written order or written request
is being made and shall include:
(a) a statement that the person signing such Document has read and
understands the conditions precedent with respect to
compliance with which such evidence is being given;
- 37 -
(b) a description of the nature and scope of the examination or
investigation upon which the Document is based; and
(c) a statement that the person providing the Document has made
such examination or investigation as he believes is necessary
to enable him to make the statements or give the opinions
contained or expressed therein.
Any application, written demand, statement, request, notice, designation,
direction, nomination or other instrument to be made by the Company under any of
the provisions of this Indenture shall, unless otherwise provided, be deemed
sufficiently made and executed if executed by any officer or director of the
Company and need not be under the corporate seal of the Company. The Trustee
shall accept a certificate signed by any officer or director of the Company as
sufficient evidence of the passage of any resolution by the directors.
Any opinion of counsel may be based, insofar as it relates to factual matters,
upon information with respect to the Company which is in the possession of the
Company or upon the certificate or opinion of or representations by an officer
or officers of the Company, unless such counsel knows that the certificate or
opinion or representations with respect to the matters upon which the opinion
may be based as aforesaid are erroneous or, in the exercise of reasonable care,
should have known are erroneous.
Counsel, in giving any opinion under this Indenture, may rely in whole or in
part upon the opinion of other counsel, provided that counsel shall consider
such other counsel as one upon whom he may properly rely.
Any certificate of any expert, insofar as it relates to matters outside of such
expert's competence or responsibility, may be based upon a certificate or
opinion of or upon representations by counsel or some other qualified expert,
unless such first-mentioned expert knows that the certificate or opinion or
representations with respect to the matters upon which his certificate may be
based as aforesaid are erroneous or, in the exercise of reasonable care, should
have known are erroneous.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01 SUITS BY WARRANTHOLDERS
(1) No Warrantholder shall have any right to institute any action, suit or
proceeding at law or in equity for the purpose of enforcing the execution of any
trust or power hereunder or for the appointment of a liquidator or receiver or
for a receiving order or to have the Company wound up or to file or prove a
claim in any liquidation or bankruptcy proceedings or for any other remedy
hereunder unless (i) the Warrantholders by Extraordinary Resolution shall have
made a request to the Trustee and the Trustee shall have been afforded
reasonable opportunity to proceed or complete any action or suit for any such
purpose whether or not in its own name; and (ii) the Warrantholders or any of
them shall have furnished to the Trustee, when so requested by the Trustee,
sufficient funds and security and indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred therein or thereby; and (iii) the
- 38 -
Trustee shall have failed to act within a reasonable time or where the Trustee
shall have failed to have actively pursued any such action, suit or proceeding.
(2) Subject to the provisions of this Section 10.01 and Section 6.10 all or any
of the rights conferred upon a Warrantholder by the terms of a Warrant may be
enforced by such Warrantholder by appropriate legal proceedings without
prejudice to the right which is hereby conferred upon the Trustee to proceed in
its own name to enforce each and all of the provisions herein contained for the
benefit of the Warrantholders from time to time.
SECTION 10.02 LIMITATION OF LIABILITY
The obligations of the Company hereunder are not personally binding upon, nor
shall resort hereunder be had to, the directors or shareholders of the Company
or any of the past, present or future directors or shareholders of the Company
or any of the past, present or future officers, employees or agents of the
Company, but only the property of the Company shall be bound in respect hereof.
SECTION 10.03 WAIVER OF DEFAULT
Upon the happening of any default hereunder (i) the holders of more than 50% of
the Warrants shall have the power (in addition to the powers exercisable by
Extraordinary Resolution as provided in Section 6.10) by requisition in writing
to instruct the Trustee to waive any default hereunder and the Trustee shall
thereupon waive the default upon such terms and conditions as shall be
prescribed in such requisition; and (ii) the Trustee shall have power to waive
any default hereunder upon such terms and conditions as it may deem advisable,
if, in its opinion, the same shall have been cured or adequate provision made
therefor; provided that no delay or omission of the Trustee or of the
Warrantholders to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver of any such
default or acquiescence therein and provided further that no act or omission of
any of the Trustee or of the Warrantholders shall extend to or be taken in any
manner whatsoever to affect any subsequent default hereunder or the rights
resulting therefrom.
SECTION 10.04 LANGUAGE
The parties hereby acknowledge that they have expressly required this Indenture
and all notices, statements of account and other documents required or permitted
to be given or entered into pursuant hereto to be drawn up in the English
language only. Les parties reconnaissent avoir expressement demandees que la
presente Convention ainsi que tout avis, tout etat de compte et tout autre
document a etre ou pouvant etre donne ou conclu en vertu des dispositions des
presentes, soient rediges en langue anglaise seulement.
- 39 -
SECTION 10.05 EXECUTION IN COUNTERPARTS AND BY TELECOPIER
This Indenture may be executed in any number of counterparts, which taken
together shall form one and the same agreement. This Indenture, or any
counterpart copy, may be executed by telecopier and, if so executed, shall be
valid and binding as if originally signed.
IN WITNESS WHEREOF the parties have signed this Indenture this 18th day of
April, 2000.
SOFTQUAD SOFTWARE LTD.
PER: __________________________________
AUTHORIZED SIGNING OFFICER
MONTREAL TRUST COMPANY OF CANADA
PER: __________________________________
AUTHORIZED SIGNING OFFICER
PER: __________________________________
AUTHORIZED SIGNING OFFICER
SCHEDULE "A"
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH
AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS.
CERTIFICATES REPRESENTING SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
SHALL BEAR A LEGEND RESTRICTING TRANSFER SIMILAR TO THE LEGEND SET FORTH ABOVE,
TO THE EXTENT APPLICABLE.
THE HOLDER HEREBY ACKNOWLEDGES AND COVENANTS THAT THE WARRANTS EVIDENCED HEREBY
MAY NOT BE SOLD, TRANSFERRED OR EXERCISED EXCEPT IN COMPLIANCE WITH ALL
APPLICABLE SECURITIES LAWS.
EXERCISABLE ONLY BEFORE 5:00 P.M. (TORONTO TIME) ON THE FIRST ANNIVERSARY (THE
"EXPIRY DATE") OF THE DATE OF EFFECTIVENESS OF A REGISTRATION STATEMENT
REGISTERING, INTER ALIA, THE SHARES UNDERLYING THE WARRANTS AFTER WHICH TIME
THIS WARRANT WILL BE NULL AND VOID.
- 2 -
WARRANTS
SOFTQUAD SOFTWARE, LTD. (the "Company")
(Incorporated under the laws of the State of Delaware)
WARRANT CERTIFICATE NO. _______ ________ WARRANTS
THIS IS TO CERTIFY that, for value received, _________________________, the
registered holder hereof (the "holder") is entitled, for each Warrant held, to
purchase at any time before the Expiry Time, being 5:00 p.m. (Toronto time) on
the Expiry Date (as defined above) one fully paid and non-assessable Common
Share in the capital of SoftQuad Software, Ltd. (the "Company") as constituted
on the date hereof, or such other securities as are stipulated by the provisions
for adjustment contained in the Warrant Indenture hereinafter described, by
delivery to Montreal Trust Company of Canada (the "Trustee") at its principal
stock and bond transfer office in Toronto of this Warrant Certificate, with the
Exercise Form attached hereto duly completed and executed, and a bank draft,
certified cheque or money order in lawful money of the United States, payable to
or to the order of the Company, at par in the city where this Warrant
Certificate is so delivered, in an amount equal to the product of the Exercise
Consideration multiplied by the number of Warrants being exercised.
For the purposes of this Warrant Certificate and the Warrant Indenture,
"Exercise Consideration" means, in respect of each Warrant exercised, the sum of
$12.50 in lawful money of the United States, subject to adjustment pursuant to
the terms of the Indenture (as defined below).
The Warrants represented by this certificate are issued under and pursuant to a
Warrant Indenture (the "Indenture") made as of April 18, 2000 between the
Company and the Trustee (which expression shall include any successor trustee
appointed under the Indenture), to which Indenture (and any amendments thereto
and instruments supplemental thereto) reference is hereby made for a full
description of the rights of the holders of the Warrants and the terms and
conditions upon which such Warrants are or are to be, issued and held, all to
the same effect as if the provisions of the Indenture and all amendments thereto
and instruments supplemental thereto were herein set forth and to all of which
provisions the holder of these Warrants by acceptance hereof assents. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture.
In the event of any conflict or inconsistency between the provisions of the
Indenture (and any amendments thereto and instruments supplemental thereto) and
the provisions of this Warrant Certificate, except those that are necessary by
context, the provisions of the Indenture (and any amendments thereto and
instruments supplemental thereto) shall prevail. The terms and provisions of the
Indenture (and any amendments thereto and instruments supplemental thereto) are
incorporated herein by reference.
This Warrant Certificate shall be validly surrendered only upon personal
delivery thereof with payment as provided above, to the Trustee at its principal
stock and bond transfer office in the city of Toronto or, if sent by mail or
other means of transmission, on actual receipt thereof by, the Trustee at the
office specified above. The Exercise Form attached hereto shall be deemed not to
be duly completed if not fully completed in the manner indicated or if the name
and mailing address of the holder does not appear legibly on such Exercise Form
or such Exercise Form is not signed by the holder.
- 3 -
Not later than the fifth business day after the surrender to the Trustee of this
Warrant Certificate for the purposes of exercising Warrants represented hereby
with the attached Exercise Form duly completed and payment as provided above
(or, if the transfer books of the Company are closed by law during such period,
not later than the fifth business day after the date of the re-opening of such
transfer books), the Company will cause to be mailed to the holder, or to such
person as the holder may otherwise specify in the Exercise Form or by written
notice given to the Trustee prior to such mailing, at the address of the holder
or, if so specified, of such person, or, if specified in the Exercise Form or by
written notice given to the Trustee prior to such mailing, cause to be delivered
to such holder or person at the place where this Warrant Certificate was
surrendered certificates representing the number of Common Shares issuable upon
the exercise of such Warrants registered in the name of the holder or, if so
specified, such person. If less than all the Warrants evidenced by this Warrant
Certificate are exercised, the holder will be entitled to receive without charge
a new Warrant Certificate representing the balance of such Warrants.
Upon a valid exercise of Warrants as provided herein, the person or persons in
whose name or names the Common Shares are issuable, shall be deemed for all
purposes (except as provided in the Indenture) to be the holder or holders of
record of such Common Shares.
To the extent that the Warrants represented by this Warrant Certificate confer
the right to subscribe for a fraction of a Common Share, such right may be
exercised in respect of such fraction only in combination with an additional
Warrant or Warrants which in the aggregate entitle the holder to acquire a whole
number of Common Shares. No fractional Common Shares will be issued. If a holder
is not able to, or elects not to, combine Warrants so as to be entitled to
acquire a whole number of Common Shares, the Company shall make an appropriate
cash adjustment. In respect of any holder, the Company shall only be required to
make such a cash adjustment once and for one fractional Common Share and no
more. The amount of the cash adjustment shall be equal to the fraction of a
Common Share to which the holder would be entitled multiplied by the Current
Market Price. The Company will not, under any circumstances, be obligated to
issue a cheque to a Warrantholder of less than U.S.$10.00.
The Indenture provides for adjustments to the subscription rights attaching to
the Warrants represented by this Warrant Certificate in certain events and also
provides for the giving of notice by the Company prior to taking certain actions
necessitating such adjustments.
The holding of the Warrants evidenced by this Warrant Certificate shall not
constitute the holder hereof a shareholder of the Company or entitle such holder
to any right or interest in respect thereof except as herein and in the
Indenture expressly provided.
The Warrants evidenced by this Warrant Certificate may only be transferred upon
compliance with the conditions prescribed in the Warrant Indenture, on the
register of transfers to be kept at the principal stock and bond transfer office
of the Trustee in Xxxxxxx, Xxxxxxx, by the holder or his or her executors,
administrators or other legal representatives or his or her or their attorney
duly appointed by an instrument in writing in form and execution satisfactory to
the Trustee, and, upon compliance with such other reasonable requirements as the
Trustee may prescribe, such transfer will be duly recorded on such register of
- 4 -
transfers by the Trustee. Notwithstanding the foregoing, the Company will be
entitled, and may direct the Trustee, to refuse to permit and record any
transfer of any Warrant on such register if such transfer would constitute a
violation of the securities laws of any jurisdiction.
If any of the Common Shares issuable upon the exercise of Warrants are to be
issued to a person or persons other than the holder (as aforesaid), the holder
shall pay to the Trustee all requisite stamp transfer taxes or other
governmental charges exigible in connection with the issue of such Common Shares
to such other person or persons or shall establish to the satisfaction of the
Trustee that such taxes and charges have been paid.
No Common Shares will be issued upon the exercise of any Warrant if the issuance
of such Common Shares would constitute a violation of the securities laws of any
jurisdiction.
On presentation at the principal stock and bond transfer office of the Trustee
in the city of Toronto, subject to the provisions of the Warrant Indenture and
on compliance with the reasonable requirements of the Trustee, one or more
Warrant Certificates may be exchanged for one or more Warrant Certificates of
different denomination evidencing in total the same number of Warrants as the
certificate or certificates being exchanged.
The Warrant Indenture contains provisions making resolutions passed at properly
held meetings of Warrantholders and instruments in writing signed by
Warrantholders holding a specified majority of the outstanding Warrants binding
on all such holders.
This Warrant Certificate shall not be valid for any purpose whatever unless and
until it has been countersigned by or on behalf of the Trustee.
Time shall be of the essence hereof. The Warrants and the Indenture (and any
amendments thereto and instruments supplemental thereto) shall be governed by,
performed, construed and enforced in accordance with the laws of the province of
Ontario and the laws of Canada applicable therein and shall be treated in all
respects as Ontario contracts.
No Warrants may be exercised in the United States or by or for the account or
benefit of a U.S. Person, and no certificate representing Common Shares will be
delivered to an address in the United States, unless an exemption from
registration under the U.S. Securities Act and applicable state securities laws
is available and evidence thereof satisfactory to the Company and the Trustee
(which may, at the option of the Company or the Trustee, include an opinion of
counsel) is received prior to the exercise. Evidence of an exemption from
registration shall not be required in the case of a Warrantholder that certifies
in writing that it was an original purchaser of Warrants from the Company and is
an Accredited Investor and provides evidence of such status satisfactory to the
Company and the Trustee (which may, at the option of the Company or the Trustee,
include financial statements).
After the exercise of any of the Warrants represented by this Warrant
Certificate, the holder will no longer have any rights under either the Warrant
Indenture or this Warrant Certificate with respect to such Warrants, other than
the right to receive certificates representing the Common Shares issuable upon
- 5 -
the exercise of the Warrants represented by this Warrant Certificate, and such
Warrants shall be void and of no further value or effect.
IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed
by its duly authorized officer as of April 18th, 2000.
SOFTQUAD SOFTWARE, LTD.
PER: __________________________________
AUTHORIZED SIGNING OFFICER
Countersigned by:
MONTREAL TRUST COMPANY OF CANADA
PER: __________________________________
AUTHORIZED SIGNING OFFICER
- 6 -
EXERCISE INSTRUCTIONS TO WARRANTHOLDER
The registered holder hereof may exercise his right to subscribe for Common
Shares of SOFTQUAD SOFTWARE, LTD. (the "Company") by completing the exercise
form and surrendering this Warrant Certificate and the duly completed Exercise
Form, with payment of the applicable Exercise Consideration, to Montreal Trust
Company of Canada by delivering or mailing it to Montreal Trust Company of
Canada at its principal office in the city of Toronto, Ontario (151 Xxxxx Xxxxxx
Xxxx, 0xx Xxxxx, Xxxxxxx, Xxxxxxx, X0X 0X0).
For your own protection, it is suggested that all documentation be forwarded to
the Trustee by registered mail.
EXERCISE FORM
To: SoftQuad Software Ltd.
c/o Montreal Trust Company of Canada
000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
The undersigned holder of the within Warrant Certificate, pursuant to the
Warrant Indenture mentioned therein hereby exercises _________ of the Warrants
(the "Exercised Warrants") evidenced thereby and hereby subscribes for a number
of Common Shares of SoftQuad Software, Ltd. equal to such number of Common
Shares or number or amount of other securities or property, or combination
thereof, to which such exercise entitles him under the provisions of the Warrant
Indenture at an aggregate price equal to the product of the Exercise
Consideration and the number of Exercised Warrants, and on the terms specified
in such Warrant Certificate and the Warrant Indenture, and in payment therefor,
delivers herewith a bank draft, certified cheque or money order payable to
SoftQuad Software, Ltd.
The exercise price of the Warrants must be paid in lawful money of the United
States.
The undersigned hereby irrevocably directs that such Common Shares be issued and
delivered as follows:
Number(s) or
Social Insurance Amount(s) of Common
Name(s) in Full... Address(es) Number(s) Shares
------------------ ----------- --------- ------
----------------------------------- -------------------------------- ------------------ -----------------------
----------------------------------- -------------------------------- ------------------ -----------------------
----------------------------------- -------------------------------- ------------------ -----------------------
NO CERTIFICATES WILL BE REGISTERED OR DELIVERED TO AN ADDRESS IN THE UNITED
STATES UNLESS BOX B OR C BELOW IS CHECKED.
(Please print full name in which share certificates are to be issued. If any
Common Shares are to be issued to a person or persons other than the
Warrantholder, the Warrantholder must pay to the Trustee all exigible transfer
taxes or other government charges.)
- 2 -
The undersigned represents and warrants that it: [CHECK ONE ONLY]
/ / A. is not in the United States or a U.S. Person as defined in
Rule 902 of Regulation S under the U.S. Securities Act and is
not exercising the Exercised Warrants for the account or
benefit of or resale to a U.S. Person or a person in the
United States and has not executed or delivered the exercise
form in the United States; or
/ / B. is an original subscriber of Warrants and is an Accredited
Investor; or
/ / C. is a registered holder that acquired the Exercised Warrants in
a transaction that was exempt from registration under the U.S.
Securities Act and applicable state securities laws.
DATED at ___________________ this _____ day of _________________, _____.
--------------------------------------- ------------------------------------
Signature Guarantee* Signature of Subscriber**
------------------------------------
Name of Subscriber
------------------------------------
Address (include Postal Code)
------------------------------------
SIN/TIN Number (if any)
* If the Common Shares are to be issued to a person other than the registered
holder, then the signature of the Subscriber must be guaranteed by a
Canadian bank or a major Canadian trust company or by a Medallion signature
guarantee from a member of a recognized signature Medallion guarantee
program.
** This signature must correspond exactly with the name appearing on the
registration panel.
/ / Check box if the share certificates are to be delivered at the
office where this Warrant is exercised, failing which they will be
mailed.
TRANSFER OF WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:
--------------------------------------------------------------
Name
--------------------------------------------------------------
Address
--------------------------------------------------------------
_________________ Warrants of SoftQuad Software, Ltd. registered in the name of
the undersigned on the records of SoftQuad Software, Ltd. maintained by Montreal
Trust Company of Canada represented by the Warrant Certificate attached and
irrevocably appoints __________________________________ the attorney of the
undersigned to transfer the said securities on the books or register with full
power of substitution.
DATED this _____ day of ______________________, ________
-------------------------------------- ---------------------------------------
Signature Guaranteed (Signature of Warrant Holder)
---------------------------------------
Print full Name
---------------------------------------
Print full address and SIN/TIN (if any)
---------------------------------------
Instructions
------------
1. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Company.
2. The signature on the Transfer Form must be guaranteed by an authorized
officer of a Canadian chartered bank or major Canadian trust company or by
a Medallion signature guarantee from a member of a recognized signature
Medallion guarantee program.
3. Warrants will only be transferable in accordance with applicable securities
laws and stock exchange regulations. The transfer of Warrants to a
transferee may, depending on the residency of such transferee, result in
the securities obtained upon the exercise of the Warrants not being freely
tradeable in the jurisdiction where the transferee is resident.
