EXHIBIT 3.7
INTERNET LIQUIDATORS INTERNATIONAL INC.
SUBSCRIPTION AGREEMENT FOR SPECIAL WARRANTS
TO: INTERNET LIQUIDATORS INTERNATIONAL INC.
AND TO: YORKTON SECURITIES INC.
AND TO: FIRST MARATHON SECURITIES INC.
1. SUBSCRIPTION
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The undersigned (the "Purchaser") hereby irrevocably subscribes for and
agrees to purchase, on and subject to the terms and conditions set forth herein
and in the Underwriting Agreement and the Special Warrant Indenture (each as
defined below), from Internet Liquidators International Inc. (the "Corporation")
such number of special warrants of the Corporation ("Special Warrants") as set
forth in section 18 (collectively the "Purchased Warrants") at a price of $1.50
per Special Warrant (the "Subscription Price"). The Purchased Warrants form part
of a larger offering of a minimum of 5,000,000 and a maximum of 6,335,000
Special Warrants by the Corporation pursuant to an underwriting agreement (the
"Underwriting Agreement") to be entered into by Yorkton Securities Inc. and
First Marathon Securities Inc. (collectively the "Underwriters") and the
Corporation on October 3, 1997 or such other date as the Corporation and the
Underwriters may agree (the "Closing Date").
2. DESCRIPTION OF SPECIAL WARRANTS
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The Special Warrants shall be created and issued pursuant to a special
warrant indenture (the "Special Warrant Indenture") to be entered into between
CIBC Mellon Trust Company of Canada or another registered trust company, in its
capacity as Special Warrant agent thereunder, and the Corporation dated as of
the Closing Date.
The specific attributes of the Special Warrants shall be set forth in
the Special Warrant Indenture, which will provide, among other things, that the
holders of Special Warrants shall be entitled to receive, upon the exercise
thereof and without payment of any consideration, one unit of the Corporation
("Unit") for each Special Warrant held, provided that, if a receipt for a
(final) prospectus of the Corporation (the "Prospectus") qualifying the issuance
of the Subject Securities (defined below) to be issued upon exercise of the
Special Warrants is not issued by the securities regulatory authority in the
province in which the Purchaser resides (such province hereinafter referred to
as a "Qualifying Province") on or before 5:00 p.m. (Toronto time) on the date
that is 120 days following the Closing Date (the "Qualification Deadline"), any
Special Warrants exercised after the Qualification Deadline shall entitle the
holders thereof resident in
such Qualifying Province to receive 1.1 Units (in lieu of one Unit), without
payment of any additional consideration, for each Special Warrant held.
The specific attributes of the Special Warrants shall be set forth in
the Special Warrant Indenture, which will provide, among other things, that the
holders of Special Warrants shall be entitled to receive, upon the exercise
thereof and without payment of any consideration, one unit of the Corporation
("Unit") for each Special Warrant held, provided that, if a receipt for a
(final) prospectus of the Corporation (the "Prospectus") qualifying the issuance
of the Subject Securities (defined below) to be issued upon exercise of the
Special Warrants is not issued by the securities regulatory authority in the
province in which the Purchaser resides (such province hereinafter referred to
as a "Qualifying Province") on or before 5:00 p.m. (Toronto time) on the date
that is 120 days following the Closing Date (the "Qualification Deadline"), any
Special Warrants exercised after the Qualification Deadline shall entitle the
holders thereof resident in such Qualifying Province to receive 1.1 Units (in
lieu of one Unit), without payment of any additional consideration, for each
Special Warrant held.
Each Unit will consist of one common share of the Corporation ("Common
Share") and one-half of one Common Share purchase warrant ("Warrant"). Each
whole Warrant will entitle the holder thereof to purchase one additional Common
Share at a price of $1.65 per Common Share until the date that is 15 months
after the Closing Date. The Common Shares and the Warrants issuable on exercise
of the Special Warrants are collectively referred to herein as the "Subject
Securities".
The Special Warrants shall be exercisable at any time prior to 5:00
p.m. (Toronto time) on the date (such date hereinafter referred to as the
"Expiry Date") which is the earlier of: (i) five Business Days after a receipt
is issued for the Prospectus by the last securities regulatory authority in each
of the Qualifying Provinces qualifying the issuance of the Subject Securities;
and (ii) one year after the Closing Date. Any Special Warrants not exercised
prior to 5:00 p.m. (Toronto time) on the Expiry Date shall be deemed to have
been exercised immediately prior thereto without any further action on the part
of the holder. For the purposes hereof, "Business Day" means any day except
Saturday, Sunday or a statutory holiday in Toronto, Ontario.
IN THE EVENT THAT THE CORPORATION IS UNABLE TO OBTAIN A RECEIPT FOR
THE PROSPECTUS IN A QUALIFYING PROVINCE, THE SPECIAL WARRANTS AND SUBJECT
SECURITIES MAY BE SUBJECT TO STATUTORY RESALE RESTRICTIONS UNDER THE APPLICABLE
SECURITIES LEGISLATION OF THAT PROVINCE. IN ADDITION, STATUTORY RESTRICTIONS MAY
APPLY ON THE RESALE OF THE SUBJECT SECURITIES THAT ARE ACQUIRED PRIOR TO THE
ISSUANCE OF RECEIPTS FOR THE PROSPECTUS BY THE SECURITIES REGULATORY AUTHORITIES
IN ANY OF THE QUALIFYING PROVINCES. PURCHASERS ARE ADVISED TO CONSULT THEIR OWN
LEGAL ADVISORS IN THIS REGARD.
75% of the gross proceeds (net of an amount equal to the Underwriters'
pro-rata commission thereon and its costs and expenses incurred in connection
with the Offering) shall be paid to the Corporation on the Closing Date. The
balance of the proceeds will be deposited into escrow with a mutually agreed
upon escrow agent as interest bearing funds. Such proceeds, inclusive of
interest (the "Escrowed Proceeds"), shall be released to the Corporation on the
issuance of
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receipts for the Prospectus, by the securities regulatory authorities in each of
the Qualifying Provinces less an amount equal to the remainder of the
Underwriters' commission, a pro-rata share of the interest earned on the
Escrowed Proceeds and any remaining costs and expenses incurred in connection
with the Offering not previously paid. If the Prospectus is not filed and a
receipt issued therefor by the securities regulatory authority in the Qualifying
Province in which the Purchaser resides on or before the Qualification Deadline,
such Purchaser shall also be entitled at its option, on the surrender of a pro
rata share of its Special Warrants, to obtain from the Escrowed Proceeds a
refund of its subscription proceeds together with all interest thereon.
THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE RIGHTS OF SPECIAL
WARRANTHOLDERS MAY BE MODIFIED UNDER THE SPECIAL WARRANT INDENTURE PURSUANT TO
AN EXTRAORDINARY RESOLUTION APPROVED EITHER BY SPECIAL WARRANTHOLDERS THAT
ATTEND OR ARE REPRESENTED AT A DULY CONVENED MEETING OF SPECIAL WARRANTHOLDERS
AND ARE ENTITLED TO ACQUIRE NOT LESS THAN 66 2/3 PERCENT OF THE AGGREGATE NUMBER
OF COMMON SHARES IN THE CAPITAL OF THE CORPORATION ("COMMON SHARES") WHICH WOULD
BE ISSUED OR TRANSFERRED ON THE EXERCISE OF ALL OF THE THEN OUTSTANDING SPECIAL
WARRANTS OR BY WRITTEN CONSENT OF SPECIAL WARRANTHOLDERS ENTITLED TO ACQUIRE NOT
LESS THAN 66 2/3 PERCENT OF THE AGGREGATE NUMBER OF COMMON SHARES WHICH WOULD BE
ISSUED OR TRANSFERRED ON THE EXERCISE OF ALL OF THE THEN OUTSTANDING SPECIAL
WARRANTS. REFERENCE SHOULD BE MADE TO THE SPECIAL WARRANT INDENTURE, FOR A
COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS ON WHICH THE SPECIAL WARRANTS
ARE TO BE ISSUED.
The foregoing description of the Special Warrants is a summary only
and is subject to the detailed provisions of the Special Warrant Indenture under
which such securities shall be issued.
All dollar amounts referred to herein are in Canadian dollars.
3. PAYMENT
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The aggregate amount payable by the Purchaser in respect of the
Purchased Warrants (the "Subscription Price") must accompany this Subscription
Agreement and shall be made by certified cheque or bank draft drawn on a
Canadian chartered bank, and payable to the Underwriters or payable in such
other manner as may be specified by the Underwriters.
4. CONDITIONS OF CLOSING
---------------------
The Purchaser must complete, sign and return one executed copy of this
Subscription Agreement to ▇▇▇▇▇▇▇ ▇▇▇▇▇, Yorkton Securities Inc., BCE Place, ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, as soon as
possible, and, in any event, no later than 5:00 p.m. (Toronto time) on October
1, 1997.
As a condition of Closing (defined below), the Corporation must obtain
any
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necessary approvals of The Canadian Dealing Network ("CDN") in respect of the
issue of the Special Warrants (and the Subject Securities into which they are
exercisable). The Purchaser agrees to promptly execute and deliver all such
documents and other instruments as CDN may require.
Closing shall also be subject to conditions of closing in favour of
the Underwriters to be provided for in the Underwriting Agreement.
5. FACSIMILED SUBSCRIPTIONS
------------------------
The Corporation and the Underwriters will be entitled to rely on
delivery by facsimile of an executed copy of this subscription, and acceptance
by the Corporation of such facsimile copy will be legally effective to create a
valid and binding agreement between the Purchaser and the Corporation in
accordance with the terms hereof.
6. CLOSING
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Delivery and payment for the Special Warrants will be completed (the
"Closing") at the offices of counsel to the Company, Gowling, Strathy &
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ at 11:00
a.m. (Toronto time) (the "Closing Time") on October 3, 1997 or such earlier or
later dates or times as the Corporation and the Underwriters may agree (the
"Closing Date"). This executed Subscription Agreement is open for acceptance in
whole or in part by the Corporation at any time prior to the Closing Time.
Confirmation of acceptance or rejection of a subscription will be forwarded to
the Purchaser promptly after acceptance or rejection has been made. If this
subscription is rejected in whole and if the Purchaser has delivered a certified
cheque or bank draft representing the Subscription Price for the Purchased
Warrants, then such cheque or bank draft will be promptly returned to the
Purchaser without interest. If this subscription is accepted only in part and
the Purchaser has delivered a certified cheque or bank draft as aforesaid, a
cheque representing the portion of the Subscription Price for that portion of
the Purchaser's subscription for Special Warrants which is not accepted will be
promptly returned to the Purchaser without interest.
Certificates representing the Special Warrants (individually, a
"Special Warrant Certificate", and collectively, the "Special Warrant
Certificates") will be available for delivery against payment of the
Subscription Price in the manner specified above. If the Purchaser does not
choose to attend the Closing to receive the Special Warrant Certificate
representing the Purchased Warrants, then the Purchaser, on its own behalf or on
behalf of others for whom it is contracting hereunder, hereby appoints the
Underwriters, with full power of substitution, as its true and lawful attorney
and agent with the full power and authority in its place and stead to swear,
execute, file and record any document necessary to accept delivery of the
Special Warrants on the Closing Date, to terminate this subscription on its
behalf in the event that any condition precedent to the offering has not been
satisfied, to execute a receipt for the Purchased Warrants and all other
documentation, modify or waive any conditions or grant any waivers on
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its behalf in connection with this transaction, and to deliver Special Warrant
Certificates to the undersigned at the address set forth above promptly after
Closing.
7. PROSPECTUS EXEMPTIONS
---------------------
The Purchaser acknowledges and agrees that the sale and delivery of
the Purchased Warrants to the Purchaser (or to others for whom it is contracting
hereunder) is conditional upon such sale being exempt from the requirements
under applicable securities legislation requiring the filing of a prospectus in
connection with the distribution of the Special Warrants or the delivery of an
offering memorandum (as defined in the applicable securities legislation), or
upon the issuance of such rulings, orders, consents or approvals as may be
required to permit such sale without the requirement of filing a prospectus or
delivering an offering memorandum.
The Purchaser, on its own behalf (or on behalf of others for whom it
is contracting hereunder) acknowledges and agrees that: (a) it has received a
term sheet in the form attached hereto as Schedule II setting out the principal
terms of this Subscription Agreement and the offering of Special Warrants; (b)
it (or others for whom it is contracting hereunder) has not received, nor has it
requested, nor does it have any need to receive, a prospectus or any offering
memorandum, or any other document (other than financial statements, interim
financial statements or any other document, the content of which is prescribed
by statute or regulation) describing the business and affairs of the Corporation
which has been prepared for delivery to, and reviewed by, prospective purchasers
in order to assist it in making an investment decision in respect of the
Purchased Warrants; (c) its decision to execute this Subscription Agreement and
purchase the Purchased Warrants (on its own behalf or on behalf of others for
whom it is contracting hereunder) has not been based upon any verbal or written
representations as to fact or otherwise made by or on behalf of the Underwriters
or the Corporation and that its decision (or the decision of others for whom it
is contracting hereunder) is based entirely upon information concerning the
Corporation contained in documents the content of which is prescribed by statute
or regulation (any such information having been delivered to it without
independent investigation or verification by the Underwriters); (d) the sale of
the Purchased Warrants was not accompanied by any advertisement in printed media
of general and regular paid circulation, radio or television; (e) the
Underwriters and each of their respective directors, officers, employees, agents
and representatives assume no responsibility or liability of any nature
whatsoever for the accuracy or adequacy of any such publicly available
information or as to whether all information concerning the Corporation required
to be disclosed by it has been generally disclosed; (f) it (or others for whom
it is contracting hereunder) has been advised to consult its own legal advisors
with respect to trading in the Special Warrants, the Subject Securities and
securities underlying the Subject Securities and to resale restrictions imposed
by applicable securities legislation in the jurisdiction in which it resides,
that no representation has been made respecting the applicable hold periods or
other resale restrictions applicable to such securities, that the Purchaser (or
others for whom it is contracting hereunder) is solely responsible (and neither
the Corporation nor the Underwriters is in any way responsible) for compliance
with applicable resale restrictions and that it is aware that it may not be able
to resell such securities except in accordance with limited exemptions under
applicable securities legislation and regulatory policy; and (g) the Special
Warrants are
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otherwise subject to the terms, conditions and provisions of the Special Warrant
Indenture and the Underwriting Agreement.
The Purchaser agrees that the Corporation and/or the Underwriters may
be required by law or otherwise to disclose to regulatory authorities the
identity of the Purchaser and each beneficial purchaser of Special Warrants for
whom the Purchaser may be acting.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
----------------------------------------------------------
The Purchaser hereby represents, warrants and covenants to and with
the Underwriter and the Corporation (which representations, warranties and
covenants shall survive Closing) that:
(A) in the case of a purchase by the Purchaser of Special Warrants as
principal for its own account and not for the benefit of any other
person, the Purchaser is purchasing the Purchased Warrants as
principal for its own account, and not for the benefit of any other
person or company and not with a view to the resale or distribution of
all or any of the Purchased Warrants, and this Subscription Agreement
has been authorized, executed and delivered by, and constitutes a
legal, valid and binding agreement of the undersigned, and:
(1) the Purchaser is one of the following:
(i) if subject to applicable securities legislation of the
Province of Alberta, a loan corporation, trust
corporation, treasury branch or credit union or a
subsidiary of such an entity where such entity owns
beneficially all of the voting securities of that
subsidiary;
(ii) if subject to applicable securities legislation of the
Province of Ontario, a loan corporation or trust
corporation registered under the Loan and Trust
Corporations Act (Ontario);
(iii) if subject to the applicable securities legislation of the
Province of Quebec, a savings company holding a licence
under the Act respecting trust companies and savings
companies (Quebec), a loan and investment society
registered in accordance with the Loan and Investment
Societies Act (Quebec), a federation or a confederation of
savings and credit unions within the meaning of the
Savings and Credit Unions Act (Quebec), the Caisse
centrale ▇▇▇▇▇▇▇▇▇▇ du Quebec established under the Act
respecting the Mouvement des caisses ▇▇▇▇▇▇▇▇▇▇ (Quebec)
or a trust company licensed under the Act respecting trust
companies and savings companies (Quebec) or a subsidiary
of such trust company to the extent that such trust
company holds all of the voting securities of
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that subsidiary;
(iv) if subject to applicable securities legislation of the
Province of Alberta, an insurance company licensed under
the Insurance Act (Alberta) or a subsidiary of such
insurance company where such insurance company owns
beneficially all of the voting securities of the
subsidiary;
(v) if subject to applicable securities legislation of the
Province of Alberta, an insurance company licensed under
the Insurance Act (Alberta) or a subsidiary of such
insurance company where such insurance company owns
beneficially all of the voting securities of the
subsidiary;
(vi) if subject to applicable securities legislation of the
Province of British Columbia, an insurance company or a
subsidiary of such insurance company where such insurance
company owns beneficially all of the voting securities of
the subsidiary, except the voting securities required by
law to be owned by directors of that subsidiary;
(vii) if subject to applicable securities legislation of the
Province of Ontario, an insurance company licensed under
the Insurance Act (Ontario);
(viii) if subject to applicable securities legislation of the
Province of Quebec, an insurance company licensed under
the Act respecting insurance (Quebec) or a subsidiary of
such insurance company to the extent that such insurance
company holds all voting securities of that subsidiary; or
(ix) a bank listed in Schedule I or II of the Bank Act
(Canada), or the Business Development Bank of Canada
incorporated under the Federal Business Development Bank
Act (Canada);
(2) the Purchaser is recognized or designated as an exempt purchaser
under applicable securities legislation and, if subject to the
securities legislation of one of the provinces of Alberta,
British Columbia or Ontario, is not an individual; or
(3) the Purchaser is purchasing a sufficient number of Special
Warrants such that the aggregate acquisition cost to the
Purchaser of such Special Warrants is not less than $150,000 (if
subject to the securities legislation of the provinces of Ontario
or Quebec) or $97,000 (if subject to the securities legislation
of the province of Alberta or British Columbia);
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(B) in the case of the purchase by the Purchaser of Special Warrants as
agent for a disclosed principal, each beneficial purchaser of the
Purchased Warrants for whom the Purchaser is acting is purchasing as
principal for its own account and not for the benefit of any other
person; the Purchaser is an agent with due and proper authority to
execute this Subscription Agreement and all other documentation in
connection with the purchase of the Purchased Warrants on behalf of
the beneficial purchaser; and this Subscription Agreement has been
duly authorized, executed and delivered by or on behalf of, and
constitutes the legal, valid and binding agreement of, the disclosed
principal; and the beneficial purchaser:
(1) is recognized or designated as an exempt purchaser under
applicable Canadian provincial securities legislation and, if
subject to the securities legislation of one of the provinces of
Alberta or Ontario, is not an individual; or
(2) is purchasing a sufficient number of Special Warrants such that
the aggregate acquisition cost to the beneficial purchaser of
such Special Warrants is not less than $150,000 (if subject to
the securities legislation of the provinces of Ontario or
Quebec), or $97,000 (if subject to the securities legislation of
the provinces of Alberta or British Columbia);
(C) in the case of the purchase by the Purchaser of Special Warrants as
trustee or as agent for a principal which is undisclosed or identified
by account number only, this Subscription Agreement has been duly
authorized, executed and delivered by, and constitutes a legal, valid
and binding agreement of, the undersigned acting in such capacity, and
either:
(1) (i) if subject to applicable securities legislation of the
Province of Alberta, the Purchaser is:
(a) a trust corporation as defined in such securities
legislation, and any amendments thereto, trading as a
trustee or an agent; or
(b) a portfolio manager or a person or a company trading
as an agent that is exempt from registration as a
portfolio manager under applicable securities
legislation,
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for accounts that are fully managed by the Purchaser;
or
(ii) if subject to the applicable securities legislation
of the Province of Ontario, the Purchaser is a trust
company registered under the Loan and Trust
Corporations Act (Ontario) and is purchasing the
Purchased Warrants as trustee or as agent for
accounts that are fully managed by the Purchaser;
(2) the beneficial purchaser of the Purchased Warrants for whom the
Purchaser is acting is an individual or corporation and is
purchasing as principal for its own account, and not for the
benefit of any other person, and
(i) is purchasing a sufficient number of Special Warrants
such that the beneficial purchaser's aggregate
acquisition cost of such Special Warrants is not less
than $150,000 (if subject to the securities
legislation of the provinces of Ontario or Quebec) or
$97,000 (if subject to the securities legislation of
the provinces of Alberta or British Columbia); or
(ii) is recognized or designated as an exempt purchaser
under applicable securities legislation and, if
subject to the securities legislation of one of the
provinces of Alberta, British Columbia or Ontario, is
not an individual;
(D) if the Purchaser is an individual, the Purchaser has attained the age
of majority and is legally competent to execute this Subscription
Agreement and to take all actions required pursuant hereto;
(E) if the Purchaser is not an individual or a corporation, each member of
the partnership, syndicate or other unincorporated organization which
is the beneficial purchaser, or each beneficiary of the trust which is
the beneficial purchaser, as the case may be, is an individual who is
purchasing Special Warrants having an aggregate acquisition cost to
such individual of not less than $150,000 (if subject to the
securities legislation of the provinces of Ontario or Quebec) or
$97,000 (if subject to the securities legislation of the provinces of
Alberta or British Columbia);
(F) if the Purchaser is not a corporation, an individual or other
unincorporated organization (including, without limitation, a
syndicate, partnership, trust, association or other form of
unincorporated organization), then the Purchaser falls within one of
the following categories: (i) pension plans; (ii) groups of pension
plans under common management; (iii) organizations of members of a
family fund formed to make investments of family funds; (iv)
testamentary trusts and
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estates; (v) organizations which have primary ongoing business
activities other than investing in securities; (vi) mutual funds other
than "private mutual funds" (within the meaning of subsection 1(1) of
the Securities Act (Ontario)) or the equivalent provision of other
applicable Canadian provincial securities legislation; (vii) group
registered retirement savings plans or group deferred profit sharing
plans; or (viii) a partnership, interests in which are offered by
prospectus, which in turn invests in securities in reliance upon
clause 72(1)(d) of the Securities Act (Ontario) and section 27 of the
Regulation (the "Regulation") made thereunder or upon subsection 14(f)
of the Regulation (or in each case, the equivalent provisions of other
applicable Canadian provincial securities legislation);
(G) if the Purchaser is a resident of British Columbia, then the Purchaser
is hereby notified that:
(1) with respect to a sale by the Purchaser of any Purchased Warrants
(or with respect to a sale by the Purchaser of the Subject
Securities into which such Purchased Warrants are exercisable
where a receipt for the Prospectus is not obtained in British
Columbia), the Purchaser must file with the British Columbia
Securities Commission (i) a report in the form required under the
British Columbia Securities Commission's blanket order ruling
#95/17 - "In the Matter of the Legending of Certificates" (the
"Initial Trade Report"), or (ii) the report required under the
laws of the jurisdiction in which the Corporation carries on
business or which the Corporation is incorporated, organized or
continued, provided that the report requires substantially the
same information as required in the Initial Trade Report (the
"Purchaser's Report"), within 10 days of the initial trade of the
Purchased Warrants (or Subject Securities into which such
Purchased Warrants are exercisable where a receipt for the
Prospectus is not obtained in British Columbia), by the
Purchaser; and
(2) where the Purchaser has filed an Initial Trade Report or a
Purchaser's Report with respect to any Purchased Warrants (or
Subject Securities into which such Purchased Warrants are
exercisable where a receipt for the Prospectus is not obtained in
British Columbia), the Purchaser is not required to file a
further report in respect of additional trades of Purchased
Warrants (or Subject Securities where a receipt for the
Prospectus has not been obtained from the British Columbia
Securities Commission) acquired on the same date and under the
same exemptions as the Purchased Warrants (or Subject Securities
where a receipt for the Prospectus has not been obtained from the
British Columbia Securities Commission) that are the subject of
the Initial Trade Report or the Purchaser's Report;
(H) neither the Purchaser nor any party on whose behalf it is acting has
been established, formed or incorporated solely to acquire or permit
the purchase of the Purchased Warrants without a prospectus in
reliance on an exemption from the
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prospectus requirements of applicable securities legislation;
(I) if the Purchaser sells the Purchased Warrants or the Subject
Securities before any receipt for a Prospectus is obtained, it will
comply with the securities legislation of the jurisdiction within
which such Purchaser and the person to whom such Purchaser sells the
Purchased Warrants or the Subject Securities resides;
(J) as the Purchased Warrants and the Subject Securities are subject to
resale restrictions under applicable Canadian provincial securities
legislation, the Purchaser, or in the case of a purchase by the
Purchaser acting as agent for a disclosed principal, each beneficial
purchaser, shall comply with all relevant securities legislation
concerning any resale of the Purchased Warrants or the Subject
Securities (and neither the Corporation nor the Underwriters is in any
way responsible for such compliance) and shall consult with its own
legal advisors with respect to such compliance;
(K) the Purchaser (or, if applicable, others for whom it is contracting
hereunder) will execute and deliver within the applicable time periods
all documentation as may be required by applicable Canadian securities
legislation and regulations to permit the purchase of the Purchased
Warrants on the terms herein set forth;
(L) if required by applicable securities legislation, policy or order of a
securities regulatory authority, stock exchange or other regulatory
authority, the Purchaser will execute, deliver, file and otherwise
assist the Corporation in filing such reports, undertakings and other
documents with respect to the issuance of the Special Warrants or
Subject Securities as may be required;
(M) the Purchaser will promptly execute and deliver all documentation as
may be required by applicable Canadian securities legislation and
policy statements and by CDN to permit the purchase of the Purchased
Warrants hereunder on the terms as set forth herein;
(N) either (i) the Purchaser and each beneficial purchaser for whom it is
acting are resident in the province set out in their address in this
Subscription Agreement; or (ii) the Purchaser is not a citizen or
resident of Canada or the United States, or a corporation, partnership
or other entity created in or organized under the laws of Canada or
the United States or any province or territory thereof (collectively a
"Canadian person") and such Purchaser is not purchasing the Special
Warrants or the Subject Securities for the account of any Canadian
person;
(O) if the Purchaser is a resident of a jurisdiction other than Canada or
the United States:
(i) the Purchaser is purchasing the Purchased Warrants as
principal for investment purposes only and not with a view
to resale or
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distribution;
(ii) the Purchaser has knowledge and experience with respect to
an investment of this type enabling it to evaluate the
merits and risks thereof and has the capacity to obtain
competent independent, business, legal and tax advice
regarding this investment; and
(iii) the purchase of the Special Warrants by such Purchaser does
not contravene any of the applicable securities legislation
in the jurisdiction in which it is resident and does not
trigger (A) any obligation to prepare and file a prospectus
or similar document, or any other report with respect to
such purchase, and (B) any registration or other obligation
on the part of the Underwriters;
(P) the Purchaser hereby acknowledges that no prospectus has been filed by
the Corporation with any securities commission in any jurisdiction in
connection with the issuance of the Special Warrants and the issuance
is exempted from the prospectus requirements available under the
provisions of applicable securities legislation and applicable
securities regulations (the "Securities Legislation") and as a result:
(i) the Purchaser is restricted from using most of the civil
remedies available under the Securities Legislation;
(ii) the Purchaser may not receive information that would otherwise
be required to be provided to him under the Securities
Legislation; and
(iii) the Corporation is relieved from certain obligations that
would otherwise apply under the Securities Legislation; and
(P) the Purchaser is capable of assessing the proposed investment as a
result of the Purchaser's financial or investment experience or as a
result of advice received from a registered person other than the
Corporation or an affiliate thereof, and is able to bear the economic
loss of its investment.
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9. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------------
The Purchaser acknowledges that the representations and warranties and
covenants contained in this Subscription Agreement are made with the intent that
they may be relied upon by the Underwriters and the Corporation and their
respective counsel to, among other things, determine its eligibility or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase Purchased Warrants. The Purchaser further agrees that by
accepting the Purchased Warrants, the Purchaser shall be representing and
warranting that the foregoing representations and warranties are true as at the
Closing Time with the same force and effect as if they had been made by the
Purchaser at the Closing Time and that they shall survive the purchase by the
Purchaser of the Purchased Warrants and shall continue in full force and effect
notwithstanding any subsequent disposition by it of the Purchased Warrants or
the Subject Securities, as the case may be.
10. COMMISSION TO THE UNDERWRITERS
------------------------------
The Purchaser understands that upon completion of the sale by the
Corporation of the Special Warrants, the Underwriters will receive from the
Corporation a cash commission equal to 8.0% of the issue price of all Special
Warrants to be sold by the Underwriters. It is further understood that, as
additional compensation for the services provided, the Corporation will grant to
the Underwriters compensation warrants exercisable to acquire, without payment
of any consideration, compensation options, which compensation options are
exercisable to acquire a number of Units equal to 10% of the total number of
Special Warrants sold by the Underwriters, at an exercise price equal to $1.50
per Unit for a term of fifteen months from the Closing Date. No other fee or
commission is payable by the Corporation in connection with the sale of the
Special Warrants. However, the Corporation will pay those fees and expenses in
connection with the offering as are set out in the Underwriting Agreement.
The Purchaser understands that the Underwriters and representatives of
the Underwriters may have an interest in securities of the Corporation.
11. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
------------------------------------------
By its acceptance of this Subscription Agreement, the Corporation
hereby grants to the undersigned a contractual right of action for rescission in
the form attached hereto as Schedule I and the Purchaser agrees to assign and
explicitly extend the benefit of such right (but without liability to a
Purchaser who is not one of the Underwriters) to any permitted assignee or
transferee of the Purchased Warrants.
The Purchaser expressly waives and releases the Corporation and the
Underwriters from all rights of withdrawal to which it might otherwise be
entitled pursuant to
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subsection 71(2) of the Securities Act (Ontario), subsection 106(1) of the
Securities Act (Alberta), or equivalent provisions of securities laws of the
jurisdiction in which the Purchaser is resident.
12. COSTS
-----
The Purchaser acknowledges and agrees that all costs and expenses
incurred by the Purchaser (including any fees and disbursements of any special
counsel retained by the Purchaser) relating to the sale of the Purchased
Warrants to the Purchaser shall be borne by the Purchaser.
13. APPOINTMENT OF UNDERWRITERS
---------------------------
The Purchaser, on its own behalf and (if applicable) on behalf of
others for whom the Purchaser is contracting hereunder, hereby:
(a) irrevocably authorizes the Underwriters to negotiate and settle the
form of the Special Warrant Indenture and any other agreement to be
entered into in connection with this transaction and to waive on its
own behalf and on behalf of the purchasers of Special Warrants in
whole or in part, or extend the time for compliance with, any of the
closing conditions in such manner and on such terms and conditions as
the Underwriters may determine, acting reasonably, without in any way
affecting the Purchaser's obligations or the obligations of such
others hereunder; and
(b) acknowledges and agrees that the Underwriters and the Corporation may
vary, amend, alter or waive, in whole or in part, one or more of the
conditions set forth in the Underwriting Agreement in such manner and
on such terms and conditions as they may determine, acting reasonably,
without affecting in any way the Purchaser or such others' obligations
hereunder; provided however, that the Underwriters shall not vary,
amend, alter or waive any such condition where to do so would result
in a material change to any of the material attributes of the Special
Warrants described herein.
14. GOVERNING LAW
-------------
This Subscription Agreement is governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein. The Purchaser, in its
personal or corporate capacity and, if applicable, on behalf of each beneficial
purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the
courts of the Province of Ontario.
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15. SURVIVAL
--------
This Subscription Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the Purchaser
notwithstanding the completion of the purchase of the Purchased Warrants by the
Purchaser pursuant hereto, the completion of the offering of Special Warrants of
the Corporation and any subsequent disposition by the Purchaser of the Purchased
Warrants or the Subject Securities.
16. ASSIGNMENT
----------
This Subscription Agreement is not transferable or assignable by the
parties hereto.
17. COUNTERPARTS
------------
This Subscription Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same document.
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18. SUBSCRIPTION PARTICULARS
------------------------
SUBSCRIPTION. The aggregate number of the Special Warrants being subscribed for
is _______________________________. At a price equal to $1.50 per Special
Warrant, the aggregate price of the Special Warrants being subscribed for is
$__________________________________.
REGISTRATION. The Special Warrants and the Subject Securities are to be
registered in the name of:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
DELIVERY. The certificate representing the Special Warrants and the
certificates representing the Subject Securities are to be delivered to:
_________________________________________________________________
(name)
_________________________________________________________________
(address)
_________________________________________________________________
_________________________________________________________________
(contact name and number)
AGENT FOR DISCLOSED PRINCIPAL. If the Purchaser is signing as agent for one or
more disclosed principals and not as agent for a fully managed account, the name
and address of each such principals:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(if space is insufficient, attach a list).
DATED _________________________________, 1997.
______________________________________________________
Name of Purchaser (please type or print)
By: __________________________________________________
(Signature of Authorized Representative)
__________________________________________________
(Name of Person Signing)
__________________________________________________
(Office or Title)
_______________________________________________
(Address of Purchaser)
_______________________________________________
_______________________________________________
IN ORDER TO FACILITATE SETTLEMENT, THESE INSTRUCTIONS MUST BE RECEIVED
BY 5:00 P.M. (TORONTO TIME) ON OCTOBER 1, 1997.
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19. ACCEPTANCE
----------
The above subscription is hereby accepted and agreed to by the
Corporation.
DATED ________________, 1997.
INTERNET LIQUIDATORS INTERNATIONAL INC.
By: _____________________________________
Authorized Signing Officer
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SCHEDULE I
CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
1. In the event that the subscriber executing the Subscription Agreement
to which this Schedule is annexed (the "Purchaser") acquires Common Shares (as
defined in the Subscription Agreement) upon the exercise of the Special Warrants
(as defined in the Subscription Agreement) and is or becomes entitled under
applicable Canadian provincial securities legislation to the remedy of
rescission by reason of the (final) prospectus to be filed (as contemplated in
the Subscription Agreement) or any amendment thereto containing a
misrepresentation, the Purchaser shall be entitled to rescission with respect to
not only the Purchaser's exercise of the Special Warrants but also to the
purchase of the Special Warrants, and shall be entitled in connection with such
rescission to a full refund from the Corporation of the amount of the purchase
price paid in respect of the Special Warrants. The provisions hereof are a
direct contractual right extended by the Corporation alone (but specifically not
by the directors or officers of the Corporation or by the Underwriters) to the
Purchaser and to any permitted assignee of the Special Warrants of the
Purchaser, such assignee to be entitled to exercise such rights of rescission
and refund as if such assignee was the original subscriber. The foregoing is in
addition to any other right or remedy available to the holder of the Special
Warrants under section 130 of the Securities Act (Ontario) or other applicable
Canadian provincial securities legislation, or otherwise at law and is subject
to sections 2 and 3 below.
2. The foregoing contractual rights of action for rescission described in
paragraph 1 shall be subject to the defences, limitations and other provisions
described under section 130 of the Securities Act (Ontario) and the equivalent
provisions of any other applicable Canadian provincial securities legislation,
each of which are incorporated herein by reference, mutatis mutandis.
3. No action shall be commenced to enforce the foregoing rights of action
for rescission more than 180 days after the Expiry Date (as defined in the
Subscription Agreement).
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SCHEDULE II
TERM SHEET
ISSUER: Internet Liquidators International Inc. (the "Corporation")
SECURITIES: Special warrants ("Special Warrants") to acquire units
("Units"), each Unit to consist of one common share ("Common
Share") of the Corporation and one-half of one Common Share
purchase warrant ("Warrant"). Each whole Warrant is
exercisable for a period of one year following the Closing
Date to acquire one Common Share at a price of $0.30 per
share.
SIZE OF ISSUE: 5,000,000 to 6,335,000 Special Warrants.
OFFERING AMOUNT: $7,500,000 to $8,835,000
PRICE: $1.50 per Special Warrant.
CLOSING DATE: October 3, 1997 (the "Closing Date").
EXPIRY DATE: Unless exercised earlier by the holder thereof, the Special
Warrants will be deemed to have been exercised immediately
prior to 5:00 p.m. (Toronto time) on the date ("Expiry
Date") which is the earlier of:
(i) the date which is five Business Days after a
receipt is issued by the securities regulatory
authority (the "Regulator") in the province (the
"Qualifying Province") in which the purchaser of
the Special Warrants resides for the (final)
prospectus qualifying the issuance of the Units on
the exercise of the Special Warrants
("Prospectus"); and
(ii) one year from the Closing Date.
ESCROW: 75% of the net proceeds of the Offering shall be released to
the Corporation on the Closing Date and the balance of the
net proceeds (the "Escrowed Proceeds") shall be held in
escrow pending the issuance of a receipt for the Prospectus
by the Regulator in each Qualifying Province.
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ADJUSTMENT: In the event that a receipt for the Prospectus is not issued
by the Regulator in any Qualifying Province on or before
5:00 p.m. (Toronto time) on the date that is 120 days after
the Closing Date, each Special Warrant exercised by a holder
resident in the Qualifying Province after such date shall
entitle the holder to receive 1.1 Common Shares and 0.55
Warrants instead of one Common Share and one-half of one
Warrant, without payment of additional consideration.
Alternatively, the holder shall have the option to obtain
from the Escrowed Proceeds a refund of its subscription
price, and all interest accrued thereon, upon surrender of a
pro rata share of its Special Warrants.
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