EXHIBIT 4.9
SUBSCRIPTION AGREEMENT
TO: OFFSHORE SYSTEMS INTERNATIONAL LTD. (THE "COMPANY" OR THE "ISSUER")
The undersigned (the "Subscriber") hereby irrevocably subscribes for and agrees
to purchase _____________ units (the "Units") of the Issuer, and will pay in
cash on subscription Cdn$_______________ (the "Subscription Proceeds"),
representing Cdn$1,000.00 per Unit, upon and subject to the terms and conditions
set forth in this Subscription Agreement. Each Unit consists of (i) 20 Class B
Series 2 Preference Shares (each a "Preferred Share"), each convertible into the
number of common shares (the "Common Shares") of the Issuer that is determined
by dividing the issue price of Cdn$50 per Preferred Share by Cdn$0.85 (with each
Preferred Share being convertible into approximately 58.82 Common Shares), and
(ii) 588 Common Share purchase warrants (each a "Warrant"). Each Warrant
entitles the holder to purchase one Common Share (each a "Warrant Share") at
Cdn$0.85 per Warrant Share for five years from the Closing Date. The terms of
the Offering, the Preferred Shares and the Warrants are more particularly
described in Schedule "A" attached to and forming part of this Subscription
Agreement. The Warrants will be governed by the terms and conditions set out in
the certificate representing the Warrants which will be delivered to the
Subscriber upon Closing, subject to the terms and conditions of this
Subscription Agreement.
_____________________________________
(Name of Subscriber - please print)
By: _____________________________________
Authorized Signature
_____________________________________________
(Official Capacity or Title - please print)
________________________________________________________________________________
(Please print name of individual whose signature appears above if different than
the name of the subscriber printed above.)
_____________________________________
(Subscriber's Address)
_____________________________________
(Telephone Number)
_____________________________________
(Email Address)
REGISTER THE SECURITIES AS SET FORTH BELOW:
_____________________________________
(Name)
_____________________________________
(Account Reference, if applicable)
_____________________________________
(Address)
DELIVER THE SECURITIES AS SET FORTH BELOW:
_____________________________________
(Name)
_____________________________________
(Account Reference, if applicable)
_____________________________________
(Address)
_____________________________________
(Telephone Number)
ACCEPTANCE: The Issuer hereby accepts the above subscription on the terms and
conditions contained in this Subscription Agreement.
OFFSHORE SYSTEMS INTERNATIONAL LTD.
Dated: _____________________, 2005. By: _______________________________
Authorized Signatory
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INSTRUCTIONS TO COMPLETE THIS SUBSCRIPTION FOR THE UNITS OF OFFSHORE SYSTEMS
INTERNATIONAL LTD.
1. Enter number of Units purchased, name, address and signature on cover
page.
2. Complete registration or delivery instructions (if different from name and
address of Subscriber) on cover page.
3. If you are a resident or a citizen of the United States, complete the
Certificate of U.S. Person attached as Schedule "B" hereto.
4. Read and complete Schedule "D" (unless you are a resident or a citizen of
the United States).
5. If you are subscribing as an "accredited investor", read and complete
Annex I to Schedule D if you live in or are otherwise subject to the
securities laws of Ontario, and Annex II to Schedule D if you live in or
are otherwise subject to the securities laws of British Columbia, Alberta,
Saskatchewan, Manitoba, Newfoundland and Labrador, Nova Scotia or Prince
Edward Island.
6. If you are a resident of or otherwise subject to the securities laws of
Saskatchewan and are not an "accredited investor", read and complete and
duly execute the Risk Acknowledgement Form attached as Annex III to
Schedule D.
WARNING TO SUBSCRIBERS
IN MAKING AN INVESTMENT DECISION SUBSCRIBERS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD.
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1. DEFINITIONS
(a) "AGENT" means C. E. Unterberg, Towbin, LLC;
(b) "APPLICABLE SECURITIES LAWS" means the securities legislation having
application and the rules, policies, notices and orders issued by
applicable securities regulatory authorities, including the TSX,
having application to this Offering and the Issuer;
(c) "BROKER WARRANTS" means the Common Share purchase warrants to be
issued by the Issuer to E.B. Coxe and the Agent, subject to the
receipt of Shareholder Approval, and in accordance with Section 11
hereof; each Broker Warrant entitles the holder to purchase one
Common Share at the exercise price of Cdn$0.85 for a period of five
years from the date of issuance and the Broker Warrants will be
governed by the terms and conditions set out in the certificates
representing the Brokers Warrants;
(d) "CLOSING" means the completion of the issue and sale by the Issuer
and the purchase by the Subscriber of the Units pursuant to this
Subscription Agreement;
(e) "CLOSING DATE" means the day on which the Closing will occur, which
is expected to occur on or about April 9, 2005;
(f) "COMMON SHARE" means a common share without par value in the capital
of the Issuer;
(g) "CURRENT AIF" has the meaning set forth in Section 7.1(d);
(h) "ESCROW DATE" means the date on which this Subscription Agreement
and the Subscription Proceeds are delivered to and placed into
escrow with the Escrow Agent;
(i) "ESCROW AGENT" means McCarthy Tetrault LLP, appointed pursuant to an
escrow agreement to be entered into between the Issuer and the
Escrow Agent;
(j) "MATERIAL" means material in relation to the Issuer and its
subsidiaries considered on a consolidated basis;
(g) "MATERIAL CHANGE" has the meaning set out in the Securities Act
(British Columbia);
(h) "MATERIAL FACT" means any fact that significantly affects, or could
reasonably be expected to significantly affect, the market price or
value of the Issuer's securities;
(i) "OFFERING" means the sale by the Issuer of up to 19,500 Units of the
Issuer on the terms set forth in this Subscription Agreement and
similar subscription agreements with other subscribers;
(j) "PREFERRED SHARE" means a Class B Series 2 Preference Share in the
capital of the Issuer having the rights and restrictions set forth
in Schedule "C" attached hereto;
(k) "PUBLIC RECORD" means information which has been publicly filed at
www.sedar.com or www.sec.gov/edgar/searchedgar/webusers.htm by the
Issuer under Applicable Securities Laws, including, without
limitation, the Current AIF;
(l) "REGULATION D" means Regulation D under the U.S. Securities Act;
(m) "REGULATION S" means Regulation S under the U.S. Securities Act;
(n) "SCHEDULES" means the schedules attached hereto, namely:
(i) A - Term Sheet;
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(ii) B - Certificate of U.S. Person;
(iii) C - Class B Series 2 Preference Shares Special Rights and
Restrictions; and
(iv) D - Subscriber Qualifications, Representations, Warranties and
Covenants
(k) "SECURITIES" means, collectively, the Units, Preferred Shares,
Common Shares, Warrants and Warrant Shares;
(l) "SHAREHOLDER APPROVAL" means the requisite approval of the
shareholders of the Company, in accordance with applicable corporate
and securities laws, of certain matters in connection with the
Offering including, without limitation, the approval of the issuance
of the Warrants with an exercise price of Cdn$0.85 per Warrant
Share;
(m) "SUBSCRIBER" means the person or persons named as Subscriber on the
cover page of this Subscription Agreement and, if more than one
person is so named, means all of them jointly and severally;
(q) "SUBSCRIPTION AGREEMENT" means this subscription agreement between
the Subscriber and the Issuer, including all Schedules attached
hereto, as they may be amended or supplemented from time to time;
(r) "TSX" means The Toronto Stock Exchange;
(s) "UNITED STATES" means the United States of America, its territories
and possessions, any state of the United States, and the District of
Columbia;
(t) "UNIT" means 20 Preferred Shares and 588 Warrants sold together
hereunder;
(u) "U.S. ACCREDITED INVESTOR" means a U.S. Person who is an "accredited
investor" as defined in Rule 501(a) of Regulation D (see Schedule
"B");
(v) "U.S. PERSON" means a "U.S. person" as that term is defined in
Regulation S;
(w) "U.S. SECURITIES ACT" means the United States Securities Act of
1933, as amended;
(x) "WARRANTS" means the Common Share purchase warrants to be issued by
the Issuer, subject to the terms and conditions of this Subscription
Agreement; 588 Warrants are included as part of each Unit under the
Offering, and each whole Warrant is exercisable to acquire one
Warrant Share for a five year period after the Closing Date at a
price of Cdn$0.85; and
(y) "WARRANT SHARE" means a Common Share to be issued upon the exercise
of a Warrant.
Unless otherwise indicated herein, all dollar amounts referred to in this
Subscription Agreement, including the symbol "$", refer to Canadian currency.
2. PROSPECTUS EXEMPT SUBSCRIPTION COMMITMENT
2.1 The Subscriber hereby subscribes for and agrees to purchase from the
Issuer, subject to the terms and conditions set forth herein, that
number of Units of the Issuer set out on the cover page of this
Subscription Agreement at a price of Cdn $1,000.01 per Unit (which
includes the consideration for the Warrants as contemplated by
section 2.2). Subject to the terms hereof, this Subscription
Agreement will be deemed to have been made and be effective only
upon its acceptance by the Issuer.
2.2 Cdn $1,000 per Unit, paid in cash on subscription, will be allocated
to the purchase price of the Preferred Shares. The Subscriber will
pay additional consideration of Cdn $0.01 per Unit for the Warrants,
which consideration will be paid by the Subscriber on the date of
issue by way of offset
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against the interest on the Subscription Proceeds payable to the
Subscriber on the Closing Date pursuant to section 4.3(d) hereof.
3. ESCROW
3.1 The Subscriber will deliver to the Escrow Agent (a) this duly
completed and executed Subscription Agreement including the duly
completed Schedules; and (b) a certified cheque or bank draft
payable to "McCarthy Tetrault LLP in trust" for the Subscription
Proceeds or payment of the same amount in such other manner as is
acceptable to the Issuer, and each of the foregoing will be placed
in escrow on the Escrow Date with the Escrow Agent.
3.2 If the Issuer accepts the Subscription Agreement delivered by the
Subscriber, it will communicate its acceptance of same in writing to
the Agent, or if the Subscriber is SDS Capital Group Inc., to SDS
Capital Group Inc. on or before the Escrow Date.
4. CLOSING
4.1 The sale of the Units will be completed at the offices of McCarthy
Tetrault LLP, the Issuer's counsel, in Vancouver, British Columbia
at 10:00 a.m. (Vancouver time) on the Closing Date.
4.2 Closing is subject to TSX approval of the Offering and the receipt
of Shareholder Approval. It is expected that Shareholder Approval
will be sought at the Issuer's next annual general meeting of
shareholders on or about April 8, 2005.
4.3 If Shareholder Approval is obtained, the Closing shall occur and on
the Closing Date: (a) the Subscription Proceeds will be released by
the Escrow Agent to the Issuer; (b) the Issuer will deliver to the
Subscriber (to the address set forth on page 1 of this Agreement)
certificates representing the Preferred Shares and the Warrants,
registered as instructed by the Subscriber on page 1 of this
Agreement); (c) the Issuer will deliver to the Subscriber such other
documents relating to the Closing including, without limitation, an
opinion from counsel to the Company, regarding such matters as the
Subscriber may reasonably request; and (d) the Issuer will pay the
Subscriber interest on the Subscription Proceeds at a rate of 12%
per annum, accrued from the Escrow Date to, but not including, the
Closing Date, less applicable withholding tax and the consideration
for the Warrants as contemplated by section 2.2.
4.4 The Issuer shall be entitled to rely on delivery of a facsimile of
an executed copy of this Subscription Agreement and acceptance by
the Issuer of such facsimile Subscription Agreement shall be legally
effective to create a valid and binding agreement between the
Subscriber and the Issuer in accordance with the terms hereof.
4.5 If Shareholder Approval is not obtained, Closing will not occur and
the Escrow Agent will forthwith thereafter refund to the Subscriber
the Subscription Proceeds, and the Issuer will pay the Subscriber
interest on the Subscription Proceeds at a rate of 12% per annum,
less applicable withholding tax, accrued from the Escrow Date to,
but not including, the date upon which the Subscription Proceeds are
refunded and delivered to the Subscriber.
5. SUBSCRIBER'S ACKNOWLEDGEMENTS - REPRESENTATIONS, WARRANTIES AND
COVENANTS
5.1 The Subscriber represents and warrants to and acknowledges and
agrees with the Issuer that:
(a) it has no knowledge of a "material fact" or "material change" in
respect of the Issuer that has not been generally disclosed to the
public;
(b) it is resident in the jurisdiction set out on the cover page of this
Subscription Agreement, and will upon request by the Issuer confirm
its residency;
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(c) the Subscriber has the legal capacity and competence to enter into
and execute this Subscription Agreement and to take all actions
required pursuant to this Subscription Agreement and, if the
Subscriber is a corporation, it is duly incorporated and validly
subsisting under the laws of its jurisdiction of incorporation,
continuation or amalgamation and all necessary approvals by its
directors, shareholders and others have been given to authorize
execution of this Subscription Agreement on behalf of the
Subscriber;
(d) the entering into of this Subscription Agreement and the
transactions contemplated hereby do not result in the violation of
any of the terms and provisions of any law applicable to the
Subscriber;
(e) the Subscriber has duly and validly authorized, executed and
delivered this Subscription Agreement and understands it is intended
to constitute a valid and binding agreement of the Subscriber
enforceable against the Subscriber;
(f) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase the Units or
Securities;
(ii) that, other than as specified in the terms and conditions of
this Agreement, any person will refund the purchase price for
the Units; or
(iii) as to the future price or value of the Units or Securities;
(g) it understands and acknowledges that the Units are being purchased
pursuant to an exemption from the prospectus requirements contained
in the securities legislation in British Columbia and in the
jurisdiction in which it is resident or otherwise subject to and, as
a consequence:
(i) the Subscriber is restricted from using certain of the civil
remedies available under such securities legislation;
(ii) the Subscriber may not receive information that would
otherwise be required to be provided to the Subscriber under
such securities legislation; and
(iii) the Issuer is relieved from certain obligations that would
otherwise apply under such securities legislation;
(h) the Subscriber has been advised to consult its own legal and tax
advisors with respect to the merits and risks of an investment in
the Units, the tax consequences thereof, and with respect to
applicable resale restrictions and it is solely responsible for
compliance with such resale restrictions including, if applicable,
Rule 904 of Regulation S;
(i) to the knowledge of the Subscriber, the sale of the Units was not
accompanied by any advertisement in any form of such sale;
(j) this Subscription Agreement is not enforceable by the Subscriber
unless it has been accepted by the Issuer;
(k) the Units are speculative investments which involve a substantial
degree of risk;
(l) the Subscriber is sophisticated in financial investments, has had
access to and has received all such information concerning the
Issuer that the Subscriber considers advisable or necessary in
connection with the Subscriber's investment decision and the
Subscriber will not receive an offering memorandum or similar
disclosure document;
(m) the Subscription Proceeds will be available to the Issuer on
Closing;
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(n) no agency, governmental authority, regulatory body, stock exchange
or other entity has made any finding or determination as to the
merit of an investment in, nor have any such agencies or
governmental authorities made any recommendation or endorsement with
respect to, the Units;
(o) the Issuer will rely on the representations and warranties made
herein or otherwise provided by the Subscriber to the Issuer in
completing the sale and issue of the Units to the Subscriber,
subject to the terms and conditions of this Subscription Agreement;
and
(p) the Subscriber acknowledges that the Securities have not been
registered under the U.S. Securities Act and may not be offered or
sold in the United States unless registered under the U.S.
Securities Act and the securities laws of all applicable states of
the United States or an exemption from such registration
requirements is available.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER RELATING TO
AVAILABILITY OF PROSPECTUS EXEMPTIONS
6.1 By executing the Subscription Agreement, the Subscriber (if not
resident or citizen of the United States) makes the representations,
warranties and covenants set out in Schedule "D" hereto to the
Issuer and the Agent and acknowledges that the Issuer and its
counsel and the Agent and its counsel are relying thereon.
6.2 The Subscriber agrees to execute and deliver to the Issuer herewith
the Certificate of U.S. Person attached hereto as Schedule "B", if
applicable.
7. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
7.1 The Issuer represents and warrants to the Subscriber that, as of the
date of this Subscription Agreement and at Closing hereunder:
(a) the Issuer and its subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under the laws
of the jurisdictions in which they were incorporated, continued or
amalgamated and the Issuer is a "foreign private issuer" as defined
in section 230.405 of Regulation C promulgated under the U.S.
Securities Act and shall use its reasonable efforts to remain a
foreign private issuer during the period in which the Preferred
Shares may be converted and the Warrants may be exercised and the
Issuer has complied, or will comply, with all applicable corporate
and securities laws and regulations in connection with the offer,
sale and issuance of the Securities, and in connection therewith has
not engaged in any "directed selling efforts," as such term is
defined in Regulation S, or any "general solicitation or general
advertising" as described in Regulation D;
(b) no offering memorandum has been or will be provided to the
Subscriber;
(c) the financial statements contained in the Public Record accurately
reflect the financial position of the Issuer as at their respective
dates, and no adverse material changes in the financial position of
the Issuer have taken place since the date of the Issuer's last
financial statements contained in the Public Record, except as
disclosed in the Public Record;
(d) the Company has filed a current annual information form (the
"Current AIF") in respect of its fiscal year ended November 30,
2003;
(e) the Issuer has filed all documents that it is required to file
pursuant to Applicable Securities Laws and all of the documents so
filed as part of the Public Record comply with the requirements of
the Applicable Securities Laws and contain no untrue statement of a
material fact and do not omit to state a material fact that is
required to be stated or that is necessary to prevent a statement
that is made from being false or misleading in the circumstances in
which it was made;
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(f) there has not been any adverse material change in the Company from
that disclosed in the Public Record;
(g) the Company has not filed any confidential material change reports;
(h) since the date of the most recent financial statements contained in
the Public Record, the Company has not incurred, assumed or suffered
any liability (absolute, accrued, contingent or otherwise) or
entered into any transaction which is or may be material to the
Company and is not in the ordinary course of business, except as
contemplated by this Subscription Agreement or as disclosed in the
Public Record;
(i) the creation, issuance and sale of the Units and the Securities of
which the Units are comprised by the Issuer does not and will not
conflict with and does not and will not result in a breach of any of
the terms, conditions or provisions of its constating documents or
any agreement or instrument to which the Issuer is a party;
(j) the Securities will, at the time of issue, be duly allotted, validly
issued, fully paid and non-assessable and will be free of all liens,
charges and encumbrances and the Issuer will reserve sufficient
Common Shares in the treasury of the Issuer to enable it to issue
Common Shares and Warrant Shares on the conversion of the Preferred
Shares and exercise of the Warrants;
(k) this Subscription Agreement, when accepted by the Issuer, will have
been duly authorized by all necessary corporate action on the part
of the Issuer and, subject to acceptance by the Issuer, will
constitute a valid obligation of the Issuer legally binding upon the
Issuer and enforceable in accordance with its terms;
(l) the Issuer is an electronic filer under National Instrument 13-101 -
System for Electronic Document Analysis and Retrieval (SEDAR);
(m) no order ceasing or suspending trading in the securities of the
Issuer nor prohibiting sale of such securities has been issued to
the Issuer or its directors, officers or promoters and, to the best
of the Issuer's knowledge, no investigations or proceedings for such
purposes are pending or threatened;
(n) the authorized capital of the Issuer consists of 300,000,000 shares
divided into 100,000,000 Common shares without par value,
100,000,000 Class A Preferred shares without par value, of which
10,000,000 shares are designated Class A Preference Series A
Convertible shares, and 100,000,000 Class B Preference shares with a
par value of $50.00 per share, of which 10,000,000 are designated
Class B Series 1 Preference shares and of which 10,000,000 are
designated Class B Series 2 Preference Shares. A total of 27,488,074
of the Common Shares, 30,262 of the Class A Preference Series A
Convertible shares and 57,711 Class B Series 1 Preference Shares are
issued and outstanding as fully paid and non-assessable;
(o) other than as disclosed in the Public Record, the Issuer has no
material investments in any other company or business organization;
(p) except as set out in the Public Record or herein, no person has any
right, agreement or option, present or future, contingent or
absolute, or any right capable of becoming a right, agreement or
option for the issue or allotment of any unissued Common Shares or
any other security convertible or exchangeable for any such Common
Shares or to require the Issuer to purchase, redeem or otherwise
acquire any of the issued or outstanding Common Shares;
(q) the Preferred Shares will have the rights and will be subject to the
restrictions substantially as set forth in Schedule "C" attached
hereto; and
(r) the Subscriber will rely on the representations and warranties made
herein or otherwise provided by the Issuer to the Subscriber in
completing the sale and issue of the Units to the Subscriber.
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8. COVENANTS OF THE ISSUER
8.1 The Issuer hereby covenants with the Subscriber that it:
(a) will offer, sell, issue and deliver the Securities pursuant to
exemptions from the prospectus filing, registration or qualification
requirements of Applicable Securities Laws and otherwise fulfill all
legal requirements required to be fulfilled by the Issuer
(including, without limitation, compliance with all Applicable
Securities Laws) in connection with the Offering subject to the
terms and conditions of this Subscription Agreement;
(b) will use commercially reasonable efforts to maintain its status as a
"reporting issuer" not in default in British Columbia, Alberta,
Ontario and Quebec;
(c) will within the required time file with the TSX and any securities
regulatory authority any documents, reports and information, in the
required form, required to be filed by Applicable Securities Laws in
connection with the Offering, together with any applicable filing
fees and other materials;
(d) will use reasonable commercial efforts: (i) to satisfy as
expeditiously as possible any conditions of the TSX required to be
satisfied prior to the TSX acceptance of the Issuer's notice of the
Offering, and (ii) to maintain the listing of its Common Shares on
the TSX for so long as any Subscriber holds any of the Securities;
(e) will use its reasonable commercial efforts to obtain Shareholder
Approval as soon as reasonably practicable, subject to the
applicable requirements of corporate and securities laws, and if
Shareholder Approval is not obtained on or before May 31, 2005 the
Issuer will instruct the Escrow Agent to promptly return the
Subscription Proceeds to the Subscriber;
(f) will not provide the Subscriber or its agents or counsel with any
information that the Issuer believes constitutes material non-public
information, unless prior thereto the Subscriber shall have executed
a written agreement regarding the confidentiality and use of such
information. The Issuer understands and confirms that the Subscriber
shall be relying on the foregoing representations in effecting
transactions in securities of the Issuer;
(g) will file a Form D with the U.S. Securities and Exchange Commission
pursuant to the requirements of the U.S. Securities Act; and
(h) will issue a press release on the Escrow Date, announcing the final
terms of the Offering, and on the Closing Date, announcing
completion of the Offering, in accordance with Applicable Securities
Laws.
9. NO CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
9.1 The Subscriber acknowledges that it is purchasing the Securities
issued hereunder pursuant to an exemption which does not require
delivery to the Subscriber of an offering memorandum or similar
document, that it will not receive any offering memorandum in
connection with this Subscription and therefore is not entitled to
contractual rights of action or rescission.
10. RESALE RESTRICTIONS AND LEGENDING OF CERTIFICATES
10.1 The Subscriber acknowledges that any resale of the Securities will
be subject to resale restrictions contained in the Applicable
Securities Laws applicable to the Issuer, the Subscriber or any
proposed transferee. The Subscriber understands and acknowledges
that certificates representing the Securities and all certificates
issued upon conversion or in exchange therefor or in substitution
thereof, shall bear the following legend:
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"Unless permitted under securities legislation, the holder of the
securities shall not trade the securities before -, 2005 [INSERT
DATE THAT IS 4 MONTHS AND A DAY FROM THE DATE OF ISSUANCE]."
10.2 If the Subscriber is a U.S. Person or has an address in the U.S. or
has executed this Subscription Agreement in the United States, the
Subscriber understands and acknowledges that certificates
representing the Securities, and all certificates issued upon
conversion or in exchange therefor or in substitution thereof, shall
bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S.
SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,
AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
CORPORATION, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C) IN COMPLIANCE
WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT
PROVIDED BY RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, OR (D)
IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S.
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE
SELLER FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL OF
RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE
CORPORATION TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT
CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN CANADA. IF, AT ANY TIME THE CORPORATION IS A "FOREIGN
ISSUER" AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT,
THESE SECURITIES ARE BEING SOLD IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT, A NEW CERTIFICATE
BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY," MAY BE OBTAINED FROM THE CORPORATION'S TRANSFER AGENT
UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION,
IN A FORM SATISFACTORY TO THE CORPORATION'S TRANSFER AGENT AND THE
CORPORATION, TO THE EFFECT THAT THE SALE OF THE SECURITIES
REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT";
provided, that if, at the time the Issuer is a "foreign issuer", as
that term is defined by Regulation S under the U.S. Securities Act,
the Securities are being sold in compliance with the requirements of
Rule 904 of Regulation S, as referred to above, and in compliance
with Canadian local laws and regulations, the legend may be removed
by providing a declaration to the Issuer's registrar and transfer
agent for the Securities in the form attached hereto as Appendix A
to Schedule "B" (or as the Issuer may prescribe from time to time);
and
provided further, that, if any of the Securities are being sold
pursuant to Rule 144 of the U.S. Securities Act, the legend may be
removed by delivery to the Issuer's transfer agent of an opinion of
counsel of recognized standing in form and substance satisfactory to
the Issuer, to the effect that the legend is no longer required
under applicable requirements of the U.S. Securities Act or state
securities laws.
10.3 The Warrants may not be exercised in the United States or by or on
behalf of, or for the account or benefit of, a U.S. Person or a
person in the United States unless registered under the U.S.
Securities Act and any applicable state securities laws or unless an
exemption from such registration requirements is available; provided
that a U.S. Accredited Investor that purchased Units in the U.S.
private placement will not be required to deliver an opinion of
counsel in connection with the exercise
- 11 -
of Warrants that are a part of those Units. The certificates
representing the Warrants, and all certificates issued in exchange
therefor or in substitution thereof, shall bear the following
legend:
"THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED
IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR
BENEFIT OF, A U.S. PERSON UNLESS THIS WARRANT AND THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY
SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS
AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY
REGULATION S UNDER THE U.S. SECURITIES ACT."
10.4 The Preferred Shares may not be converted into Common Shares in the
United States or by, on behalf of, or for the account or benefit of,
a U.S. Person unless registered under the U.S. Securities Act and
any applicable state securities laws or unless an exemption from
such registration requirements is available; provided that a U.S.
Accredited Investor that purchased Units in the U.S. private
placement will not be required to deliver an opinion of counsel in
connection with the conversion of Preferred Shares that are a part
of those Units. The certificates representing the Preferred Shares,
and all certificates issued in exchange therefor or in substitution
thereof, shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES DELIVERABLE
UPON CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND
MAY NOT BE CONVERTED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR
FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THE SECURITIES
REPRESENTED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES
LEGISLATION OF ANY SUCH STATE OR ANY EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S.
PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES
ACT."
10.5 The Subscriber consents to the Issuer making a notation on its
records or giving instructions to any transfer agent of the
Securities in order to implement the restrictions on transfer,
exercise and conversion set forth and described herein.
11. FEES AND EXPENSES
11.1 Subject to the Company obtaining Shareholder Approval, in
consideration for services provided to the Company in connection
with structuring and arranging the Offering, the Company will upon
Closing: (a) pay an advisory services fee ("Advisory Services Fee")
in the amount of Cdn$800,000 and (b) issue 350,000 Broker Warrants.
11.2 Subject to the Company obtaining Shareholder Approval, in
consideration for the investment banking services provided by the
Agent in connection with the Offering, the Company will upon
Closing: (a) pay to the Agent an amount (the "Investment Banking
Fee") equal to 7% of the gross proceeds raised through the Agent's
placement of the Units with subscribers under the Offering; and (b)
issue to the Agent the number of Broker Warrants calculated by
dividing 50% of the Investment Banking Fee by CDN$0.85.
- 12 -
11.3 For greater certainty, in the event that Shareholder Approval is not
obtained: (a) the Advisory Services Fee and the Investment Banking
Fee will not be payable and (b) the Company will not be required to
issue any of the Broker Warrants.
11.4 The Company shall be responsible for the reasonable out-of-pocket
expenses of the Subscriber and the reasonable legal fees and
disbursements, together with any applicable tax thereon, of the
Subscriber's counsel incurred in connection with the Offering up to
an aggregate maximum of Cdn$75,000 in respect of the foregoing
expenses and fees of Agent, the Subscriber and all other subscribers
under the Offering. All such fees and expenses shall be paid
reasonably promptly by the Company directly to SDS Capital Group
Inc. and to the Agent, in respect of fees and expenses owing to all
other subscribers under the Offering, immediately after the receipt
by the Company of an invoice or invoices detailing such fees and
expenses.
12. RESTRICTION ON MANDATORY CONVERSION OF PREFERRED SHARES
12.1 The parties acknowledge that the rights and conditions attached to
the Preferred Shares stipulate, among other things, that the Company
may, at its option, require the Subscriber to convert its Preferred
Shares into Common Shares upon the occurrence of certain events as
described therein (each a "Triggering Event"). The Company
acknowledges and agrees that, notwithstanding the occurrence of a
Triggering Event, it may not exercise its right to require the
Subscriber to convert its Preferred Shares into Common Shares if the
number of Common Shares to be issued pursuant to such a conversion
would exceed, when aggregated with all other Common Shares owned by
the Subscriber at such time, the number of Common Shares which would
result in the Subscriber owning more than 4.99% of all of the Common
Shares outstanding at such time. For the purposes of determining
whether such percentage ownership would be exceeded as a result of
such conversion, after a Triggering Event occurs, the Subscriber
shall deliver to the Company from time to time upon written request
a sworn declaration or affidavit of the Chief Executive Officer, the
President or the Chief Financial Officer of the Subscriber (or
individual holding an equivalent office or position with the
Subscriber) stipulating the number of Common Shares beneficially
owned by the Subscriber as of a then current date. For greater
certainty, if and to the extent that conversion of a portion of the
Subscriber's Preferred Shares would not result in the Subscriber
owning more than 4.99% of all of the Common Shares outstanding at
such time, the Company may exercise its right to require the
Subscriber to convert such number of Preferred Shares into Common
Shares as would result in the Subscriber owning up to 4.99% of all
of the Common Shares outstanding at such time. The Company's
covenant set out in this section 12.1 is personal to the Subscriber
and is not assignable by the Subscriber to any transferee, purchaser
or other subsequent holder of the Subscriber's Preferred Shares.
13. RESTRICTION ON COMPANY'S RIGHT TO REDEEM WARRANTS
13.1 The parties acknowledge that the rights and conditions attached to
the Warrants stipulate, among other things, that the Company may, at
its option, redeem the Warrants upon the Common Shares trading at
the price and for the period stipulated in the certificate
representing the Warrants (the "Triggering Event"). The Company
acknowledges and agrees that, notwithstanding the occurrence of the
Triggering Event, it may not exercise its right to redeem the
Warrants if the number of Common Shares to be issued pursuant to
such a conversion would exceed, when aggregated with all other
Common Shares owned by the Subscriber at such time, the number of
Common Shares which would result in the Subscriber owning more than
4.99% of all of the Common Shares outstanding at such time. For the
purposes of determining whether such percentage ownership would be
exceeded as a result of the exercise of the Warrants, after the
Triggering Event occurs, the Subscriber shall deliver to the Company
from time to time upon written request a sworn declaration or
affidavit of the Chief Executive Officer, the President or the Chief
Financial Officer of the Subscriber (or individual holding an
equivalent office or position with the Subscriber) stipulating the
number of Common Shares beneficially owned by the Subscriber as of a
then current date. For greater certainty, if and to the extent that
the exercise of a portion of the Subscriber's Warrants would not
result in the Subscriber owning more than 4.99% of all of the Common
Shares outstanding at such time, the Company may
- 13 -
exercise its right to redeem the number of Warrants that, if
exercised, would result in the Subscriber owning up to 4.99% of all
of the Common Shares outstanding at such time. The Company's
covenant set out in this section 13.1 is personal to the Subscriber
and is not assignable by the Subscriber to any transferee, purchaser
or other subsequent holder of the Subscriber's Warrants.
14. RESTRICTION ON SUBSCRIBER'S RIGHT TO CONVERT PREFERRED SHARES OR
EXERCISE WARRANTS
14.1 Notwithstanding anything to the contrary set forth in this
Subscription Agreement, at no time may the Subscriber convert the
Preferred Shares or exercise any Warrants if the number of Common
Shares to be issued pursuant to such conversion or exercise would
exceed, when aggregated with all other Common Shares owned by such
Subscriber at such time, the number of Common Shares which would
result in such Subscriber owning more than 4.99% of all of the
Common Shares outstanding at such time; provided, however, that upon
the Subscriber providing the Company with at least 61 days notice
(the "Waiver Notice") that such Subscriber is waiving this section
14 with regard to any or all Common Shares issuable upon conversion
of the Preferred Shares or the Warrants, this section shall be of no
force or effect with regard to those Preferred Shares or Warrants
referenced in the Waiver Notice.
15. RIGHTS OF FIRST OFFER AND STANDSTILL
15.1 The Company shall deliver notice in writing (a "Financing Notice")
to the Subscriber, together with all other initial subscribers of
the Preferred Shares pursuant to the Offering (collectively, the
"Purchasers") of the material terms and conditions of any further
equity, equity-linked or debt financing which the Company proposes
to obtain during a period of 24 months following the Closing. The
Purchasers collectively shall have the right of first offer to
provide part or all of any such financing on the terms set out in
the Financing Notice. Further, in the event such proposed financing
is to be made at a price (or conversion or exercise price) per
Common Share at or below Cdn$0.75, the Purchasers collectively shall
have the right (the "Standstill Right") to cause the Company not to
complete such financing (such Standstill Right to be exercised by
the delivery of notice to that effect by Purchasers holding greater
than 50% of the number of Preferred Shares then outstanding).
15.2 The Purchasers may exercise their right of first offer or Standstill
Right by notice in writing delivered to the Company within 10 days
after receipt of the Company's Financing Notice. The Purchasers'
notice shall (i) stipulate the amount of the financing which the
Purchasers individually and collectively will provide, or (ii) state
that the Purchasers wish to exercise their Standstill Right. If the
financing proceeds, the Purchasers shall be entitled to participate
in the financing on a pro-rata basis in proportion to their
percentage participation in the Offering, or in such other
proportions as they, in consultation with the Issuer, may mutually
agree upon.
15.3 If a Purchaser fails to give notice within the time stipulated in
section 15.2 that it will provide all or any portion of such
financing on the terms set out in the Financing Notice, or if the
requisite number of Purchasers fail to give notice of exercise of
the Standstill Right, the Company will have the right to make other
arrangements to obtain such financing from other sources, provided
that such financing is provided on terms no less favourable to the
Company than those set out in the Company's Financing Notice.
15.4 The Purchaser's right of first offer and Standstill Right herein
will not terminate if the Purchaser fails to exercise such rights
with respect to any proposed financing, and will continue in force
with respect to any subsequent proposed financing described in
section 15.1 for the period stipulated therein.
15.5 Notwithstanding section 15.1, the right of first offer and
Standstill Right granted to the Subscriber hereunder shall not apply
to the issuance of any securities by the Company in connection with
an acquisition, strategic partnership, joint venture or other
business combination, any public "bought deal" underwritten
offering, or any vendor take-back debt financing in connection with
any acquisition.
- 14 -
16. RESTRICTIONS ON ISSUANCES OF SECURITIES AND DEBT OBLIGATIONS
16.1 The Company will not issue any securities or incur any debt
obligations (other than liabilities incurred in the ordinary course
of business such as trade payables; Technology Partnerships Canada
payables; wages, vacation, flextime and commissions payable;
employee taxes, CPP and EI payable; customer payments in excess of
revenue; federal excise and goods and services taxes payable;
provincial sales tax payable; and Workers' Compensation payable, and
liabilities of a similar nature) ranking in any way senior to or
pari passu with the Preferred Shares without the prior written
approval of the Subscriber, such approval not to be unreasonably
withheld. If the Company proposes to issue any securities or incur
any debt obligations, it shall deliver a notice in writing to the
Subscriber setting out the material terms and conditions of the
proposed transaction, the identities of the proposed participants in
the transaction (if known) and the principal reasons for such
transaction. The Subscriber shall, within 10 days of receipt of such
notice, deliver notice in writing to the Company indicating whether
it is consenting to the proposed transaction and, if not, the reason
or reasons for refusing its consent. The right granted to the
subscriber hereunder is personal to the Subscriber and may not be
assigned to any transferees, purchaser or subsequent holders of the
Subscriber's Preferred Shares other than affiliates (as defined in
the Business Corporations Act (British Columbia)) and associates (as
defined in the Securities Act (British Columbia)) of the Subscriber.
If and when more than 90% of the Preferred Shares originally issued
are converted or redeemed, or the Purchasers (as defined in Section
15) and their respective associates and affiliates otherwise
collectively cease to hold at least 10% of the number of Preferred
Shares originally issued under the Offering, the approval of the
Subscriber will no longer be required. The requirement for such
approval shall also not apply with respect to any increase in the
Company's operating line with its current bank or any other major
commercial bank or combination of banks provided that the total
borrowing ceiling for the operating line or lines established by the
Company and its subsidiaries does not exceed 15% of the Company's
then current consolidated annual gross revenues.
17. GENERAL
17.1 Time is of the essence hereof.
17.2 Neither this Subscription Agreement nor any provision hereof shall
be modified, changed, discharged or terminated except by an
instrument in writing signed by the party against whom any waiver,
change, discharge or termination is sought.
17.3 The parties hereto shall execute and deliver all such further
documents and instruments and do all such acts and things as may
either before or after the execution of this Subscription Agreement
be reasonably required to carry out the full intent and meaning of
this Subscription Agreement.
17.4 This Subscription Agreement shall be subject to, governed by and
construed in accordance with the laws of British Columbia and the
laws of Canada as applicable therein and the Subscriber hereby
irrevocably attorns to the exclusive jurisdiction of the courts
situate therein.
17.5 This Subscription Agreement may not be assigned by any party hereto;
however, subject to Applicable Securities Laws, the Subscriber shall
have the right to assign and transfer, without consent of the
Company or any other person, and without restriction: (a) all or any
portion of the Preferred Shares and Warrants and the rights thereto
to any person; (b) any rights hereunder to any affiliate (as defined
in the Business Corporations Act (British Columbia)) or associate
(as defined in the Securities Act (British Columbia)).
17.6 Without limitation, this Subscription Agreement and the transactions
contemplated hereby are conditional upon and subject to the Issuer
receiving Shareholder Approval and the acceptance of the TSX for
this Subscription Agreement and the transactions contemplated
hereby.
- 15 -
17.7 This Subscription Agreement may be signed by the parties in as many
counterparts as may be deemed necessary, each of which so signed
shall be deemed to be an original, and all such counterparts
together shall constitute one and the same instrument.
17.8 This Subscription Agreement, including, without limitation, the
representations, warranties, acknowledgements and covenants
contained herein, shall survive and continue in full force and
effect and be binding upon the parties notwithstanding the
completion of the purchase of the Units by the Subscriber pursuant
hereto.
17.9 The invalidity or unenforceability of any particular provision of
this Subscription Agreement shall not affect or limit the validity
or enforceability of the remaining provisions of this Subscription
Agreement.
17.10 Except as expressly provided in this Subscription Agreement and in
the agreements, instruments and other documents contemplated or
provided for herein, this Subscription Agreement contains the entire
agreement between the parties with respect to the sale of the Units
and there are no other terms, conditions, representations or
warranties, whether expressed, implied, oral or written, by statute,
by common law, by the Issuer, by the Subscriber, or by anyone else.
If there is any conflict between the provisions of this Subscription
Agreement and the provisions of the Term Sheet attached hereto as
Schedule "A", the provisions of this Subscription Agreement or the
certificates representing the Warrants or Broker Warrants, as the
case may be, shall prevail.
17.11 Any notice or delivery required or permitted to be given or made by
the Company to the Subscriber or vice versa shall be in writing and
shall be made or given by delivering the same manually or by mailing
the same by prepaid registered post to the intended recipient at the
address of the other party as follows:
to the Company:
107 - 930 West 1st Street
North Vancouver, British Columbia
V7P 3N4
to the Subscriber:
_____________________________
_____________________________
or such other address as the other party may direct from time to
time in writing. Any such notice shall be deemed to have been given
on the day of delivery, if delivered, or if mailed by prepaid
registered post, on the fourth business day after and excluding the
date of mailing.
SCHEDULE "A"
TERM SHEET
COMPANY: Offshore Systems International Ltd.
(the "Company")
PURCHASERS: SDS Capital Group SPC, Ltd and other
institutional investors (collectively, the
"Purchasers").
ISSUE: CDN$17 - $19.5 million (the "Issue Amount")
consisting of 17,000 to 19,500 Units. Each Unit
will consist of 20 preferred shares (the
"Preferred Shares") convertible into common
shares of the Company and 588 share purchase
warrants (the "Warrants"); provided that the
issuance of the Units is conditional upon the
Company obtaining TSX and shareholder approval.
PRICE PER UNIT: CDN$1,000.01 per Unit (including the
consideration for the Warrants of $0.01 per
Unit).
OPTIONAL CONVERSION: Each Preferred Share will be
convertible at the option of the holder into the
number of Common Shares of the Company that is
determined by dividing the issue price of CDN$50
per Preferred Share by CDN $0.85 (with each
Preferred Share being convertible into
approximately 58.82 common shares).
MANDATORY CONVERSION: The Company may require the Purchasers to
convert the Preferred Shares to Common Shares if
(i) at any time after twelve (12) months
following the closing date, the closing price of
the Common Shares has been greater than 250% of
the fixed Conversion Price of CDN $0.85 for at
least twenty (20) consecutive trading days, or
(ii) at any time upon the Company's sale of its
Common Shares in a firm commitment public
underwritten offering in which (a) the offering
price of the Common Shares is greater than 200%
of the fixed Conversion Price of CDN $0.85, (b)
the aggregate gross proceeds exceed CDN $40
million, and (c) the underlying Common Shares
are freely tradable.
CONVERSION DATE: The date on which a Purchaser delivers to
the Company a notice of conversion together with
the certificates representing the Preferred
Shares being converted duly endorsed for
transfer.
DIVIDENDS: Fixed cumulative dividends at the rate of 7% per
annum, payable semi-annually or upon conversion
or redemption.
WARRANTS: The number of whole Warrants issued for each
Unit subscribed for will be 588. Each whole
Warrant will entitle the holder to purchase one
Common Share of the Company at the exercise
price of CDN $0.85. The Warrants shall be
exercisable for a period of five years from the
date of issuance at any time at the election of
the holders. During the first twelve months
following closing, the Warrants will be
exercisable for cash. Thereafter until
expiration, the Warrants will be exercisable for
cash or by cashless exercise (reducing the
number of shares to be issued by the Company).
The Company may redeem the Warrants for $0.10
per Warrant upon twenty days notice, provided
that (i) the Common Shares closes above 300% of
the exercise price for a period of twenty
consecutive trading days, and (ii) the Common
Shares underlying the Warrants are freely
tradable. Any Warrants which are the subject of
a redemption notice may be exercised within the
20 day notice period.
A-2
COMPANY'S RIGHT OF The Company will also have the right, but not
REDEMPTION: the obligation, to redeem the Preferred Shares
at any time after 3 years following the closing
date at the original issue price plus a premium
of 20% of the original issue price. A holder
will have 20 days after receipt of notice of
redemption within which to convert the Preferred
Shares to Common Shares.
LIQUIDATION PREFERENCE: The liquidation preference per share shall equal
the purchase price per Preferred Share plus any
accrued but unpaid dividends thereon at the time
of liquidation.
VOTING: Each Preferred Share will entitle the holder to
one vote on all matters brought before the
holders of the common shares.
RIGHT OF FIRST OFFER: For any equity, equity linked, or debt financing
within twenty-four (24) months from the closing
date, the Purchasers shall have a right of first
offer to purchase all or part of the private
placement. The Purchasers will have ten (10)
trading days to respond. A carve-out of this
provision will be granted to the Company for the
issuance of stock or debt financing for
situations involving strategic partnerships,
acquisition candidates and public underwritten
offerings.
OTHER RIGHTS: Subject to securities laws and the policies of
the TSX, the Purchasers shall be entitled to
assign and transfer, without any other person's
or the Company's consent and without
restriction, all or any portion of the Preferred
Shares or Warrants and the rights thereto. All
per share amounts set forth herein are subject
to equitable adjustment for stock splits,
dividends, combinations, reorganizations and the
like. The Company will not issue any securities
or unsecured debt obligations senior to the
Preferred Shares without the prior written
approval of the holders of a majority of the
Preferred Shares, such approval not to be
unreasonably withheld.
The Company will have the right to make any
withholding or deduction in connection with the
Preferred Shares, Warrants, or the conversion or
exercise thereof, in respect of any present or
future tax, levy, duty, impost, assessment or
other governmental charge as required by law.
ESCROW AND SHAREHOLDER All subscription agreements and subscription
APPROVAL: funds will be held in escrow by a
third party escrow agent mutually acceptable to
the parties (the "Escrow Agent"). The Company
agrees to seek shareholder approval of certain
of the terms of the private placement as soon as
reasonably practicable, having regard to the
regulatory requirements for the calling of
shareholders' meetings. The Company's management
will recommend that the shareholders approve the
private placement as proposed herein and will
solicit proxies to vote in favour of approval.
For greater certainty, the parties intend that
upon receipt of shareholder approval, the
following shall promptly occur without further
agreement of the parties:
(a) the Preferred Shares will be issued to the
Purchasers;
(b) the Warrants will be issued to the
Purchasers;
(c) the Escrow Agent will release the
subscription funds to the Company; and
(d) the Purchasers will receive interest on
the subscription funds at a rate of 12%
per annum, less applicable withholding tax
and the consideration for the Warrants of
$0.01 per Unit.
A-3
If the shareholder approval is not obtained, the
Escrow Agent will immediately return the
subscription funds to the Purchasers, with
interest on such funds at a rate of 12% per
annum less applicable withholding tax.
CONDITIONS PRECEDENT TO Completion of legal documentation and due
CLOSING: diligence satisfactory to the Company
and Purchasers, and receipt of regulatory
approval (including TSX acceptance).
EXPENSES: At Closing, the Company will pay all reasonable
expenses incurred by the Purchasers in
connection with the negotiation, preparation and
execution of the definitive documents, including
attorneys' fees and expenses, to a total maximum
of CDN$75,000.
CONFIDENTIALITY: All parties agree to keep this private placement
proposal and all conversations and exchanged
information strictly confidential except to the
extent that the Company is required by
applicable securities laws and regulations to
disclose the proposed private placement
contemplated by this term sheet.
ACCEPTANCE OF SUBSCRIPTIONS: The Company reserves the right to accept or
reject subscriptions from prospective
Purchasers. SDS and parties who are engaged to
assist the Company in placing the private
placement will use their reasonable commercial
efforts to ensure that the subscriptions
solicited from prospective Purchasers will not,
if accepted by the Company: (a) upon conversion,
result in the acquisition by any Purchaser, or
group of Purchasers acting in concert, of a
control position in the Company; or (b) in the
case of subscriptions received from "related
parties" of the Company, require the Company to
obtain a formal valuation or shareholder
approval with respect to the private placement
under applicable securities regulations and TSX
policies (it being acknowledged that the Company
will require shareholder approval to fix the
conversion price and issue the warrants as
outlined above).
SCHEDULE "B"
CERTIFICATE OF U.S. PERSON
THIS FORM MUST BE COMPLETED BY UNITED STATES INVESTORS.
A "United States investor" is any person in the United States at the time such
person's buy order is made or any "U.S. person" as defined in Regulation S under
the United States Securities Act of 1933, as amended. This will include: (a) any
natural person resident in the United States; (b) any partnership or corporation
organized or incorporated under the laws of the United States; (c) any trust of
which any trustee is a U.S. person; (d) any partnership or corporation organized
outside the United States by a U.S. person principally for the purpose of
investing in securities not registered under the U.S. Securities Act of 1933,
unless it is organized or incorporated, and owned, by U.S. Accredited Investors
who are not natural persons, estates or trusts; and (e) any estate of which any
executor or administrator is a U.S. person.
The capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Subscription Agreement to which this Schedule "B" is
attached.
The Subscriber covenants, represents and warrants to the Issuer that:
(a) it understands that the Securities have not been registered under
the U.S. Securities Act or any state securities laws and that the
sale contemplated hereby is being made in reliance on the exemption
from such registration requirement provided by Rule 506 of
Regulation D;
(b) it acknowledges that it has not purchased the Securities as a result
of any form of general solicitation or general advertising,
including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or broadcast
over radio, or television, or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising;
(c) it understands and agrees that there may be material tax
consequences to the Subscriber of an acquisition, disposition or
exercise of any of the Securities. The Issuer gives no opinion and
makes no representation with respect to the tax consequences to the
Subscriber under United States, state, local or foreign tax law of
the undersigned's acquisition or disposition of such securities. In
particular, no determination has been made whether the Issuer will
be a "passive foreign investment company" ("PFIC") within the
meaning of Section 1291 of the United States Internal Revenue Code;
(d) it understands and agrees that the financial statements of the
Issuer have been prepared in accordance with Canadian generally
accepted accounting principles, which differ in some respects from
United States generally accepted accounting principles, and thus may
not be comparable to financial statements of United States
companies;
(e) if an individual, it is a resident of the state or other
jurisdiction listed in its address on the signature page of the
Subscription Agreement, or if the Subscriber is not an individual,
the office of the Subscriber at which the Subscriber received and
accepted the offer to purchase the Issuer's Units is the address
listed on the signature page of the Subscription Agreement;
(f) it, alone or with the assistance of its professional advisors, has
such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of an investment in
the Securities and is able, without impairing its financial
condition, to hold such securities for an indefinite period of time
and to bear the economic risk of loss of, and withstand the complete
loss of, its entire investment;
B-2
(g) the Issuer has provided to it the opportunity to ask questions and
receive answers concerning the terms and conditions of the offering
and it has had access to such information concerning the Issuer as
it has considered necessary or appropriate in connection with its
investment decision to acquire the Securities;
(h) it is acquiring the Securities for its own account and not on behalf
of any other person for investment purposes only and not with a view
to any resale, distribution or other disposition of the Securities
in violation of the United States federal and state securities laws;
(i) if it decides to offer, sell or otherwise transfer any of the
Securities, it will not offer, sell or otherwise transfer any of
such Securities directly or indirectly, unless
(i) the transfer is to the Issuer;
(ii) the transfer is made outside the United States in a
transaction meeting the requirements of Rule 904 of Regulation
S and in compliance with applicable local laws and
regulations;
(iii) the transfer is made in compliance with an exemption from the
registration requirements under the U.S. Securities Act
provided by Rule 144 or Rule 144A thereunder, if available; or
(iv) the Securities are transferred in a transaction that does not
require registration under the U.S. Securities Act or any
applicable state laws and regulations governing the offer and
sale of securities, and it has prior to such sale furnished to
the Issuer an opinion of counsel in form and substance
satisfactory to the Issuer;
(j) It is an "accredited investor" as defined in Regulation D by virtue
of satisfying one or more of the categories indicated below (please
place your initials on the appropriate line(s)):
_________ Category 1. A bank, as defined in Section 3(a)(2) of the
U.S. Securities Act, whether acting in its
individual or fiduciary capacity; or
_________ Category 2. A savings and loan association or other
institution as defined in Section 3(a)(5)(A) of
the U.S. Securities Act, whether acting in its
individual or fiduciary capacity; or
_________ Category 3. A broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of
1934; or
_________ Category 4. An insurance company as defined in Section 2(13)
of the U.S. Securities Act; or
_________ Category 5. An investment company registered under the
Investment Company Act of 1940; or
_________ Category 6. A business development company as defined in
Section 2(a)(48) of the Investment Company Act
of 1940; or
_________ Category 7. A small business investment company licensed by
the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business
Investment Act of 1958; or
_________ Category 8. A plan established and maintained by a state,
its political subdivision or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its employees,
with assets in excess of US$5,000,000; or
B-3
_________ Category 9. An employee benefit plan within the meaning of
the Employee Retirement Income Security Act of
1974 in which the investment decision is made by
a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and
loan association, insurance company or
registered investment advisor, or an employee
benefit plan with total assets in excess of
US$5,000,000 or, if a self-directed plan, the
investment decisions are made solely by persons
who are accredited investors; or
_________ Category 10. A private business development company as
defined in Section 202(a)(22) of the Investment
Advisors Act of 1940; or
_________ Category 11. An organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, a
Massachusetts or similar business trust, or a
partnership, not formed for the specific purpose
of acquiring the Shares, with total assets in
excess of US$5,000,000; or
_________ Category 12. A director or executive officer of the Issuer;
or
_________ Category 13. A natural person whose individual net worth, or
joint net worth with that person's spouse, at
the time of this purchase exceeds US$1,000,000;
or
_________ Category 14. A natural person who had an individual income in
excess of US$200,000 in each year of the two
most recent years or joint income with that
person's spouse in excess of US$300,000 in each
of those years and has a reasonable expectation
of reaching the same income level in the current
year; or
_________ Category 15. A trust, with total assets in excess of
US$5,000,000, not formed for the specific
purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated
person as described in SEC Rule 506(b)(2)(ii)
under the U.S. Securities Act; or
_________ Category 16. An entity in which each of the equity owners
meets the requirements of one of the above
categories.
For the purposes of British Columbia securities laws, the Subscriber certifies
that it is not resident in British Columbia and acknowledges that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities;
(b) there is no government or other insurance covering the Securities;
(c) there are risks associated with the purchase of the Securities;
(d) there are restrictions on the Subscriber's ability to resell the
Securities and it is the responsibility of the Subscriber to find
out what those restrictions are and to comply with them before
selling the Securities; and
B-4
(e) the Issuer has advised the Subscriber that the Issuer is relying on
an exemption from the requirements to provide the Subscriber with a
prospectus and to sell the Securities through a person registered to
sell securities under the Securities Act (British Columbia) and, as
a consequence of acquiring the Securities pursuant to this
exemption, certain protections, rights and remedies provided by the
Securities Act (British Columbia), including statutory rights of
rescission or damages, will not be available to the Subscriber.
ONLY UNITED STATES INVESTORS NEED TO COMPLETE AND SIGN
________________________________________
Date
________________________________________
Duly authorized signatory for Subscriber
________________________________________
(Print name of Subscriber)
B-5
APPENDIX A TO
SCHEDULE "B", CERTIFICATE OF U.S. PERSON
FORM OF DECLARATION FOR REMOVAL OF LEGEND
TO: Registrar and transfer agent for the shares of OFFSHORE SYSTEMS
INTERNATIONAL LTD. (the "Issuer").
The undersigned (A) acknowledges that the sale of the securities of the Issuer
to which this declaration relates is being made in reliance on Rule 904 of
Regulation S under the United States Securities Act of 1933, as amended (the
"U.S. Securities Act"), and (B) certifies that (1) the undersigned is not an
"affiliate" of the Issuer (as that term is defined in Rule 405 under the U.S.
Securities Act); (2) the offer of such securities was not made to a person in
the United States and either (a) at the time the buy order was originated, the
buyer was outside the United States, or the seller and any person acting on its
behalf reasonably believed that the buyer was outside the United States, or (b)
the transaction was executed on or through the facilities of the TSX and neither
the seller nor any person acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States; (3) neither the seller nor
any affiliate of the seller nor any person acting on their behalf has engaged or
will engage in any directed selling efforts in the United States in connection
with the offer and sale of such securities; (4) the sale is bona fide and not
for the purpose of "washing off" the resale restrictions imposed because the
securities are "restricted securities" (as that term is defined in Rule
144(a)(3) under the U. S. Securities Act); (5) the seller does not intend to
replace such securities with fungible unrestricted securities; and (6) the
contemplated sale is not a transaction, or part of a series of transactions,
which, although in technical compliance with Regulation S, is part of a plan or
scheme to evade the registration provisions of the U.S. Securities Act. Terms
used herein have the meanings given to them by Regulation S under the U.S.
Securities Act.
Dated _________, 2005.
X
Signature of individual (if Purchaser IS an individual)
X
Authorized signatory (if Purchaser is NOT an individual)
Name of Purchaser (PLEASE PRINT)
Name of authorized signatory (PLEASE PRINT)
Official capacity of authorized signatory (PLEASE PRINT)
SCHEDULE "C"
CLASS B SERIES 2 PREFERENCE SHARES
SPECIAL RIGHTS AND RESTRICTIONS
SCHEDULE "D"
SUBSCRIBER QUALIFICATIONS, REPRESENTATIONS, WARRANTIES AND COVENANTS
By executing this Subscription Agreement, the Subscriber represents,
warrants and covenants (on its own behalf or, if applicable, on behalf of those
for whom the Subscriber is contracting hereunder) to and in favour of the
Company and the Agent (which representations, warranties and covenants shall
survive the closing of the purchase of the Units) and acknowledges that the
Company and its counsel and the Agent and its counsel are relying thereon that:
(a) either (i) the Subscriber is purchasing the Units as principal for
its own account and not for the benefit of any other person, and not
with a view to the resale or distribution of all or any of the Units
and the Subscriber complies with such of the subparagraphs in
paragraph (b) below as are applicable to it by virtue of the place
of residence or by virtue of it being subject to the applicable
securities legislation of such province or paragraph (c) below; or
(ii) if the Subscriber is acting as agent or trustee for one or more
beneficial Subscribers whose identity is disclosed or undisclosed or
identified by account number only, each beneficial purchaser is
purchasing as principal for its own account and not for the benefit
of any other person, and not with a view to the resale or
distribution of all or any of the Units, and each beneficial
purchaser complies with such of the subparagraphs in paragraph (b)
below as are applicable to it by virtue of its place of residence or
by virtue of it being subject to the applicable securities
legislation of such province or paragraph (c) below; or (iii) the
Subscriber complies with such of the subparagraphs in paragraph (b)
below as are applicable to it by virtue of its place of residence or
by virtue of it being subject to the applicable securities
legislation of such province or paragraph (c) below and is deemed to
be purchasing as principal, by virtue of its place of residence in
British Columbia, Alberta, Saskatchewan, Manitoba, Newfoundland and
Labrador, Nova Scotia or Saskatchewan or by virtue of being subject
to the applicable securities legislation of such provinces it
satisfies subparagraphs (A), (B) or (C) below:
(A) Subject to subsection (B) below a trust company or trust
corporation registered or authorized to carry on business
under the Trust and Loan Companies Act (Canada) or under
comparable legislation in a jurisdiction of Canada or a
foreign jurisdiction, trading as a trustee or agent on behalf
of a fully managed account is deemed to be purchasing as
principal;
(B) Subsection (A) above does not apply to a trust company or
trust corporation registered under the laws of Prince Edward
Island that is not registered under the Trust and Loan
Companies Act (Canada) or under comparable legislation in
another jurisdiction of Canada;
(C) A person or company trading as agent on behalf of a fully
managed account if that person or company is registered or
authorized to carry on business under the securities
legislation of a jurisdiction of Canada or a foreign
jurisdiction as a portfolio manager or under an equivalent
category of advisor or is exempt from registration as a
portfolio manager or the equivalent category of advisor is
deemed to be purchasing as principal;
(b) the offering and sale of the Units to the Subscriber or beneficial
purchaser is exempt from the prospectus requirements of applicable
securities legislation by virtue of the fact that if the Subscriber
or beneficial purchaser, as the case may be, is a resident of or
otherwise subject to the securities legislation of:
(i) British Columbia, Alberta, Saskatchewan, Manitoba,
Newfoundland and Labrador, Nova Scotia or Prince Edward
Island, and:
(A) it is an "accredited investor" as defined in
Multilateral Instrument 45-103 - Capital Raising
Exemptions ("MI-45-103") such that one or more of the
categories set forth in Annex II to this Schedule A
correctly and in all respects describes the Subscriber,
and the Subscriber has so indicated by checking the box
opposite each category on such Annex II which so
describes it or the beneficial purchaser, as applicable,
and the Subscriber acknowledges that by signing this
Agreement it is
D-2
certifying that the statements made by checking the
appropriate accredited investor categories are true and
correct; or
(B) it is:
(I) a director, senior officer or control person of
the Company, or of an affiliate of the Company as
defined in Annex II to this Schedule A;
(II) a spouse, parent, grandparent, brother, sister or
child of any person referred to in subclause (I)
above; or
(III) a parent, grandparent, brother, sister or child of
the spouse of any person referred to in subclause
(I) above; or
(IV) a close personal friend of any person referred to
in subclause (I) above and, if requested by the
Company or the Agent, will provide a signed
statement describing any of such persons; or
(V) a close business associate of any person referred
to in subclause (I) above and, if requested by the
Company or the Agent, will provide a signed
statement describing any of such persons; or
(VI) a founder of the Company or a spouse, parent,
grandparent, brother, sister, child, close
personal friend or close business associate of a
founder of the Company above and, if requested by
the Company or the Agent, will provide a signed
statement describing any such personal friend or
close business associate; or
(VII) a parent, grandparent, brother, sister or child of
the spouse of a founder of the Company; or
(VIII) a person or company of which a majority of the
voting securities are beneficially owned by or a
majority of the directors are persons or companies
described in subclause (I) through (VII) above; or
(IX) a trust or estate of which all of the
beneficiaries or a majority of the trustees are
persons or companies described in subclause (I)
through (VII) above;
however, if a resident of or otherwise subject to the
securities legislation of Saskatchewan, and if
purchasing under (IV) or (V) above or as a close
personal friend or close business associate of a founder
of the issuer or as a person or company described in
(VIII) or (IX) above if the trade is based in whole or
in part on a close personal friendship or close business
association, the Subscriber has completed and delivered
to the Company Annex III to Schedule A in accordance
with the instruction therein; and
(ii) Ontario, and it is an "accredited investor" (as that term is
defined in Ontario Securities Commission Rule 45-501 - Exempt
Distributions) such that one or more of the categories set
forth in Annex I to this Schedule A correctly and in all
respects describes the Subscriber or the beneficial purchaser,
as applicable, and the Subscriber has so indicated by checking
the box opposite each category on such Annex I which so
describes it or the beneficial purchaser, as applicable, and
the Subscriber acknowledges that by signing this Subscription
Agreement it is certifying that the statements made by
checking the appropriate accredited investor categories are
true and correct; and
D-3
(iii) Quebec, and it is a "sophisticated purchaser" within the
meaning of Section 43, 44 or 45 of the Securities Act (Quebec)
and is purchasing the Units for its own account, or if it is a
trust company licensed under the Trust Companies and Savings
Companies Act (Quebec) or an insurance company holding a
license under the Act respecting insurance (Quebec) or a
dealer or adviser registered in conformity with Section 148 of
the Securities Act (Quebec), it is purchasing the Units for
the portfolio of a third person managed solely by that
company, dealer or adviser; and
(iv) if it is a person referred to in subparagraph (ii) or (iii)
above, it certifies that it is not resident in British
Columbia;
(c) if the Subscriber or beneficial purchaser, as the case may be, is
not a Subscriber under (b) above, it is purchasing (A) pursuant to
an exemption or other decision from applicable securities regulators
from any prospectus and registration requirements (particulars of
which are enclosed herewith) and the Issuer shall have approved such
purchase in reliance thereon, or (B) in any manner otherwise
available to the Issuer and the Subscriber under applicable
securities legislation (in which case particulars of which are
enclosed herewith) and the Subscriber or beneficial Subscriber, as
the case may be, has delivered to the Issuer such further
particulars of such exemption and the Subscriber's qualification
thereunder as the Issuer may reasonably request and the Issuer shall
have approved such purchase in reliance thereon;
(d) it and any beneficial purchaser for whom it is acting:
(i) is not a U.S. Person as defined in the United States Act of
1933, as amended (the "1933 Act") and is not purchasing the
Common Shares for the account of or the benefit of a U.S.
Person;
(ii) was not offered the Common Shares in the United States (as
defined in Regulation S under the 1933 Act); and
(iii) did not execute or deliver this agreement in the United
States;
(e) if the Subscriber is resident outside of Canada and the United
States, the Subscriber certifies that it is not resident in British
Columbia and acknowledges that:
(i) it is knowledgeable of, or has been independently advised as
to the applicable securities laws of the securities regulatory
authorities (the "Authorities") having application in the
jurisdiction in which the Subscriber is resident (the
"International Jurisdiction") which would apply to the
acquisition of the Subscriber's Units, if any;
(ii) it is purchasing the Subscriber's Units pursuant to exemptions
from the prospectus and registration requirements under the
applicable securities laws of the Authorities in the
International Jurisdictions or, if such is not applicable, the
Subscriber is permitted to purchase the Subscriber's Units
under the applicable securities laws of the Authorities in the
International Jurisdiction without the need to rely on any
exemption;
(iii) the applicable laws of the Authorities in the International
Jurisdiction do not require the Issuer to make any filings or
seek any approvals of any nature whatsoever from any Authority
of any kind whatsoever in the International Jurisdiction in
connection with the issue and sale or resale of the
Subscriber's Units;
(iv) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities;
(v) there is no government or other insurance covering the
Securities;
(vi) there are risks associated with the purchase of the
Securities;
D-4
(vii) there are restrictions on the Subscriber's ability to resell
the Securities and it is the responsibility of the Subscriber
to find out what those restrictions are and to comply with
them before selling the Securities; and
(viii) the Issuer has advised the Subscriber that the Issuer is
relying on an exemption from the requirements to provide the
Subscriber with a prospectus and to sell the Securities
through a person registered to sell securities under the
Securities Act (British Columbia) and, as a consequence of
acquiring the Securities pursuant to this exemption, certain
protections, rights and remedies provided by the Securities
Act (British Columbia), including statutory rights of
rescission or damages, will not be available to the
Subscriber.
D-5
ANNEX I TO SCHEDULE "D"
TO BE COMPLETED BY ONTARIO ACCREDITED INVESTORS
The Subscriber is a resident of or otherwise subject to the securities
legislation of Ontario and is an "accredited investor", as such term is defined
in Ontario Securities Commission Rule 45-501 - Exempt Distribution ("OSC Rule
45-501"), as at the Closing Date, the Subscriber falls within one or more of the
following categories (Please check one or more, as applicable):
[ ] (a) a bank listed in Schedule I or II of the Bank Act (Canada), or an
authorized foreign bank listed in Schedule III of that Act;
[ ] (b) the Business Development Bank incorporated under the Business
Development Bank Act (Canada);
[ ] (c) a loan corporation or trust corporation registered under the Loan
and Trust Corporations Act (Ontario) or under the Trust and Loan
Companies Act (Canada), or under comparable legislation in any
province or territory of Canada;
[ ] (d) a co-operative credit society, credit union central, federation of
caisses populaires, credit union or league, or regional caisse
populaire, or an association under the Cooperative Credit
Associations Act (Canada), in each case, located in Canada;
[ ] (e) a company licensed to do business as an insurance company in any
province or territory of Canada;
[ ] (f) a subsidiary entity of any person or company referred to in
paragraph (a), (b), (c), (d) or (e), where the company owns all
of the voting shares of the subsidiary;
[ ] (g) a person or company registered under the Securities Act (Ontario)
or securities legislation in another province or territory of
Canada as an adviser or dealer, other than a limited market
dealer;
[ ] (h) the government of Canada or of any province or territory of
Canada, or any crown corporation, instrumentality or agency of a
Canadian federal, provincial or territorial government;
[ ] (i) any Canadian municipality or any Canadian provincial or
territorial capital city;
[ ] (j) any national, federal, state, provincial, territorial or municipal
government of or in any country, or political subdivision of a
country, other than Canada, or any instrumentality or agency
thereof;
[ ] (k) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a provincial
pension commission or similar regulatory authority;
[ ] (l) a registered charity under the Income Tax Act (Canada);
[ ] (m) an individual who beneficially owns, or who together with a spouse
beneficially own, financial assets having an aggregate realizable
value that, before taxes but net of any related liabilities (as
defined below), exceeds $1,000,000;
[ ] (n) an individual whose net income before taxes exceeded $200,000 in
each of the two most recent years or whose net income before taxes
combined with that of a spouse exceeded $300,000 in each of those
years and who, in either case, has a reasonable expectation of
exceeding the same net income level in the current year;
[ ] (o) an individual who has been granted registration under the
Securities Act (Ontario) or securities legislation in another
province or territory of Canada as a representative of a person or
company referred to in paragraph (g), whether or not the
individual's registration is still in effect;
[ ] (p) a promoter of the issuer or an affiliated entity of a promoter of
the issuer;
D-6
[ ] (q) a spouse, parent, brother, sister, grandparent or child of an
officer, director or promoter of the issuer;
[ ] (r) a person or company that, in relation to the issuer is an
affiliated entity or a person or company referred to in clause (c)
of the definition of distribution in subsection 1(1) of the
Securities Act (Ontario);
[ ] (s) an issuer that is acquiring securities of its own issue;
[ ] (t) a company, limited liability company, limited partnership,
limited liability partnership, trust or estate, other than a
mutual fund or non-redeemable investment fund, that had net assets
of at least $5,000,000 as reflected in its most recently prepared
financial statements;
[ ] (u) a person or company that is recognized by the Commission as
an accredited investor;
[ ] (v) a mutual fund or non-redeemable investment fund that, in Ontario,
distributes its securities only to persons or companies that are
accredited investors;
[ ] (w) a mutual fund or non-redeemable investment fund that, in Ontario,
distributes its securities under a prospectus for which a receipt
has been granted by the Director or, if it has ceased distribution
of its securities, has previously distributed its securities
in this manner;
[ ] (x) a fully managed account if it is acquiring a security that is not
a security of a mutual fund or non-redeemable investment fund;
[ ] (y) an account that is fully managed by a trust corporation registered
under the Loan and Trust Corporations Act (Ontario) or under the
Trust and Loan Companies Act (Canada), or under comparable
legislation in any other jurisdiction;
[ ] (z) an entity organized outside of Canada that is analogous to any of
the entities referred to in paragraphs (a) through (g) and
paragraph (k) in form and function; and
[ ] (aa) a person or company in respect of which all of the owners of
interests, direct or indirect, legal or beneficial, are persons
or companies that are accredited investors.
For the purposes hereof, the following definitions are included for convenience:
"COMPANY" means any corporation, incorporated association,
incorporated syndicate or other incorporated organization;
"ENTITY" means a company, syndicate, partnership, trust or
unincorporated organization;
"FINANCIAL ASSETS" means cash, securities, or any contract of
insurance or deposit or evidence thereof that is not a security for
the purposes of the Securities Act (Ontario);
"FULLY MANAGED ACCOUNT" means an investment portfolio account of a
client established in writing with a portfolio adviser who makes
investment decisions for the account and has full discretion to
trade in securities of the account without requiring the client's
express consent to a transaction;
"MUTUAL FUND" includes an issuer of securities that entitle the
holder to receive on demand, or within a specified period after
demand, an amount computed by reference to the value of a
proportionate interest in the whole or in a part of the net assets,
including a separate fund or trust account, of the issuer of the
securities;
"NON-REDEEMABLE INVESTMENT FUND" means an issuer
(a) whose primary purpose is to invest money provided by its
security holders;
D-7
(b) that does not invest for the purpose of exercising effective
control, seeking to exercise effective control, or being
actively involved in the management of the issuers in which it
invests, other than other mutual funds or non-redeemable
investment funds; and
(c) that is not a mutual fund;
"PERSON" means an individual, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization,
trust, trustee, executor, administrator, or other legal
representative;
"PORTFOLIO ADVISER" means
(a) a portfolio manager;
(b) a broker or investment dealer exempted from registration as an
adviser under subsection 148(1) of the regulation made under
the Securities Act (Ontario) if that broker or investment
dealer is not exempt from the by-laws or regulations of The
Toronto Stock Exchange or the Investment Dealers' Association
of Canada referred to in that subsection;
"RELATED LIABILITIES" means liabilities incurred or assumed for the
purpose of financing the acquisition or ownership of financial
assets and liabilities that are secured by financial assets;
"SPOUSE", in relation to an individual, means another individual to
whom that individual is married, or another individual of the
opposite sex or the same sex with whom that individual is living in
a conjugal relationship outside marriage;
In OSC Rule 45-501 a person or company is considered to be an affiliated entity
of another person or company if one is a subsidiary entity of the other, or if
both are subsidiary entities of the same person or company, or if each of them
is controlled by the same person or company.
In OSC Rule 45-501 a person or company is considered to be controlled by a
person or company if
(a) in the case of a person or company,
(i) voting securities of the first-mentioned person or company
carrying more than 50 percent of the votes for the election of
directors are held, otherwise than by way of security only, by
or for the benefit of the other person or company, and
(ii) the votes carried by the securities are entitled, if
exercised, to elect a majority of the directors of the
first-mentioned person or company;
(b) in the case of a partnership that does not have directors, other
than a limited partnership, the second-mentioned person or company
holds more than 50 percent of the interests in the partnership; or
(c) in the case of a limited partnership, the general partner is the
second-mentioned person or company.
In OSC Rule 45-501 a person or company is considered to be a subsidiary entity
of another person or company if
(a) it is controlled by,
(i) that other, or
(ii) that other and one or more persons or companies each of which
is controlled by that other, or
(iii) two or more persons or companies, each of which is controlled
by that other, or
(b) it is subsidiary entity of a person or company that is the other's
subsidiary entity.
D-8
ANNEX II TO SCHEDULE "D"
TO BE COMPLETED BY BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,
NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA AND PRINCE EDWARD ISLAND ACCREDITED
INVESTORS
The Subscriber and any beneficial subscriber are each a resident of or otherwise
subject to the securities legislation of British Columbia, Alberta,
Saskatchewan, Manitoba, Newfoundland and Labrador, Nova Scotia and Prince Edward
Island and is an "accredited investor", as such term is defined in MI-45-103, as
at the Closing Date, and the Subscriber and any beneficial subscriber, as
applicable, falls within one or more of the following categories (Please check
one or more, as applicable):
[ ] (a) a Canadian financial institution, or an authorized foreign bank
listed in Schedule III of the Bank Act (Canada);
[ ] (b) the Business Development Bank of Canada incorporated under the
Business Development Bank of Canada Act (Canada);
[ ] (c) an association under the Cooperative Credit Association Act
(Canada) located in Canada or a central cooperative credit society
for which an order has been made under subsection 473(1) of that
Act;
[ ] (d) a "subsidiary" (within the meaning of that expression as used in
applicable securities laws) of any person or company referred to
in paragraphs (a) to (c), if the person or company owns all of the
voting securities of the subsidiary, except the voting securities
required by law to be owned by directors of that subsidiary;
[ ] (e) a person or company registered under the securities legislation,
or under the securities legislation of jurisdiction of Canada, as
an adviser or dealer, other than a limited market dealer
registered under the Securities Act (Ontario) or the Securities
Act (Newfoundland and Labrador);
[ ] (f) an individual registered or formerly registered under the
securities legislation of a jurisdiction of Canada, as a
representative of a person or company referred to in paragraph
(e);
[ ] (g) the government of Canada or a province or territory of Canada, or
any crown corporation or agency or wholly-owned entity of the
government of Canada or a province or territory of Canada;
[ ] (h) a municipality, public board or commission in Canada;
[ ] (i) any national, federal, state, provincial, territorial or municipal
government of or in any country other than Canada (or a political
subdivision thereof), or any agency of that government;
[ ] (j) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a pension
commission or similar regulatory authority of a province or
territory of Canada;
[ ] (k) an individual who, either alone or with a spouse, beneficially
owns, directly or indirectly, financial assets having an aggregate
realizable value that before taxes, but net of any related
liabilities, exceeds $1,000,000;
[ ] (l) an individual whose net income before taxes exceeded $200,000 in
each of the two most recent years or whose net income before taxes
combined with that of a spouse exceeded $300,000 in each of the
two most recent years and who, in either case, reasonably expects
to exceed that net income level in the current year;
[ ] (m) a person or company other than a mutual fund or non-redeemable
investment fund, that either alone or with a spouse has net assets
of at least $5,000,000, and unless the person or company is an
individual, the amount is shown on its most recently prepared
financial statements;
[ ] (n) a mutual fund or non-redeemable investment fund that, in the local
jurisdiction, distributes its securities only to persons or
companies that are accredited investors;
[ ] (o) a mutual fund or non-redeemable investment fund that, in the local
jurisdiction, is distributing or has distributed its securities
under one or more prospectuses for which the regulator has issued
receipts;
D-9
[ ] (p) a trust company or trust corporation registered or authorized to
carry on business under the Trust and Loan Companies Act (Canada)
or under comparable legislation of a province or territory of
Canada or a country other than Canada, trading as a trustee or
agent on behalf of a "fully managed" account (within the meaning
of that expression as used in applicable securities laws);
[ ] (q) a person or company trading as agent on behalf of a fully managed
account if that person or company is registered or authorized to
carry on business under the securities legislation of a province
or territory of Canada or a country other than Canada as a
portfolio manager or under an equivalent category or adviser or is
exempt from registration as a portfolio manager or the equivalent
category of adviser;
[ ] (r) a registered charity under the Income Tax Act (Canada) that, in
regard to the trade, has obtained advice from an "eligibility
adviser" (as defined in MI 45-103) or other adviser registered to
provide advice on the securities being traded;
[ ] (s) an entity organized in a country other than Canada (or a political
subdivision thereof) that is analogous to any of the entities
referred to in paragraphs (a) through (e) and paragraph (j) in
form and function; or
[ ] (t) a person or company in respect of which all of the owners of
interests, direct or indirect, legal or beneficial, except the
voting securities required by law to be owned by the directors,
are persons or companies that are "accredited investors" (as
defined in MI 45-103);
For the purposes hereof, the following definitions are included for convenience:
"AFFILIATE" means an issuer connected with another issuer because
(a) one of them is the subsidiary of the other, or
(b) each of them is controlled by the same person or
company;
"BENEFICIAL OWNERSHIP" of securities by a person occurs
(A) for the purposes of Saskatchewan, British Columbia, Nova
Scotia, Newfoundland and Labrador and Prince Edward Island
securities law, when such securities are beneficially owned by
(a) an issuer controlled by that person, or
(b) an affiliate of that person or an affiliate of an issuer
controlled by that person;
(B) for the purposes of Alberta securities law, when such
securities are beneficially owned by
(a) a company controlled by that person or an affiliate of
that company,
(b) an affiliate of that person, or
(c) through a trustee, legal representative, agent or other
intermediary of that person;
"CANADIAN FINANCIAL INSTITUTION" means a bank, loan corporation,
trust company, insurance company, treasury branch, credit union or
caisse populaire that, in each case, is authorized to carry on
business in Canada or a jurisdiction, or the Confederation des
caisses populaires et d'economie Desjardins du Quebec;
"CONTROL" occurs if
(A) for the purposes of British Columbia securities law,
(a) voting securities of a first party (person or company)
are held, other than by way of security only, by or for
the benefit of a second party (person or company), and
D-10
(b) the voting rights attached to those voting securities
are entitled, if exercised, to elect a majority of the
directors of the first party; and
(B) for the purposes of Alberta, Saskatchewan, Nova Scotia,
Newfoundland and Labrador and Prince Edward Island securities
law,
(a) voting securities of a first party (person or company)
carrying more than 50% of the votes that may be cast to
elect directors are held, other than for the purpose of
giving collateral for a bona fide debt, by or for the
benefit of a second party (person or company); and
(b) the votes carried by the securities referred to in (a)
are sufficient, if exercised, to elect a majority of the
board of directors of the first party; and
1. for the purposes of Manitoba securities law,
2. voting securities of a first party company carrying more
than 50% of the votes that may be cast to elect
directors are held, other than for the purpose of giving
collateral for a bona fide debt, by or for the benefit
of a second party person or company or by or for the
benefit of those other companies; and
3. the votes carried by the securities referred to in (a)
are sufficient, if exercised, to elect a majority of the
board of directors of the first party company.
"DIRECTOR"
(A) means for the purpose of British Columbia securities law, a
director of a corporation or an individual occupying or
performing, with respect to a corporation or any other person,
a similar position or similar functions;
(B) includes for purposes of Alberta, Saskatchewan, Nova Scotia,
Newfoundland and Labrador and Prince Edward Island securities
law, a person acting in a capacity similar to that of a
director of a company; and
(C) for the purposes of Manitoba law, a person occupying the
position of director by whatever name called;
"FINANCIAL ASSETS" means cash and securities;
"FOREIGN JURISDICTION" means a country other than Canada or a
political subdivision of a country other than Canada;
"FOUNDER", in respect of an issuer, means a person or company who,
(A) acting alone, in conjunction or in concert with one or more
other persons or companies, directly or indirectly, takes the
initiative in founding, organizing or substantially
reorganizing the business of the issuer, and
(B) at the time of the proposed trade, is actively involved in the
business of the issuer;
"JURISDICTION" means a province or territory of Canada except when
used in the term "foreign jurisdiction";
"LOCAL JURISDICTION" means the jurisdiction in which the applicable
securities regulatory authority is situate;
"MUTUAL FUND" includes an issuer of securities that entitles the
holder to receive on demand, or within a specified period after
demand, an amount computed by reference to the value of a
proportionate interest in the whole or in a part of the net assets,
including a separate fund or trust account, of the issuer of the
securities;
D-11
"NON-REDEEMABLE INVESTMENT FUND" means an issuer,
(A) whose primary purpose is to invest money provided by its
security holders,
(B) that does not invest for the purpose of exercising or seeking
to exercise effective control of an issuer or for the purpose
of being actively involved in the management of the issuers in
which it invests, other than other mutual funds or
non-redeemable investment funds, and
(C) that is not a mutual fund;
"PERSON OR COMPANY" includes
(A) for the purposes of British Columbia securities law, an
individual, corporation, partnership, party, trust, fund,
association and any other organized group of persons and the
personal or other legal representative of a person to whom the
context can apply according to law;
(B) for the purposes of Alberta, Saskatchewan, Nova Scotia,
Newfoundland and Labrador and Prince Edward Island, an
individual, corporation, partnership, unincorporated or
incorporated association, unincorporated or incorporated
syndicate, unincorporated or incorporated organization, trust,
trustee, executor, administrator or other legal
representative; and
(C) for the purposes of Manitoba securities law, an individual,
corporation, partnership, unincorporated or incorporated
association, unincorporated or incorporated syndicate,
unincorporated or incorporated organization, unincorporated
trust, trustee, executor, administrator and other legal
personal representative;
"RELATED LIABILITIES" means
(a) liabilities incurred or assumed for the purpose of
financing the acquisition or ownership of financial
assets, or
(b) liabilities that are secured by financial assets;
"SECURITIES LEGISLATION" means
(A) for British Columbia, the Securities Act (British Columbia)
and the regulations, rules and forms under such Act and the
blanket rulings and orders issued by the British Columbia
Securities Commission,
(B) for Alberta, the Securities Act (Alberta) and the regulations
and rules under such Act and the blanket rulings and orders
issued by the Alberta Securities Commission, and
(C) for other Canadian jurisdictions, such other statutes and
instruments as are listed in Appendix B of National Instrument
14-101 - Mutual Funds - Definitions and Interpretation;
"SECURITIES REGULATORY AUTHORITY" means
(A) the British Columbia Securities Commission,
(B) the Alberta Securities Commission,
(C) the Saskatchewan Financial Services Commission, and
(D) in respect of any local jurisdiction other than Alberta or
British Columbia, means the securities commission or similar
regulatory authority listed in Appendix C of National
Instrument 14-101 - Definitions;
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"VOTING SECURITY" means any security which:
(a) is not a debt security; and
(b) carries a voting right either under all circumstances or
under some contingency that has occurred and is
continuing.
BRITISH COLUMBIA SPECIFIC DEFINITIONS
"SPOUSE", means, for the purposes of British Columbia securities
law, a person who
(a) is married to another person and is not living separate
and apart, within the meaning of the Divorce Act
(Canada), from the other person, or
(b) is living and cohabitating with another person in a
marriage-like relationship, including a marriage-like
relationship between persons of the same gender.
D-13
ANNEX III TO SCHEDULE "D"
OFFSHORE SYSTEMS INTERNATIONAL LTD.
FORM 45-103F5
RISK ACKNOWLEDGEMENT
SASKATCHEWAN CLOSE PERSONAL FRIENDS AND CLOSE BUSINESS ASSOCIATES
I acknowledge that this is a risky investment:
- - I am investing entirely at my own risk.
- - No securities regulatory authority has evaluated or endorsed the merits of
these securities.
- - I will not be able to sell these securities for 4 months.
- - I could lose all the money I invest.
- - I do not have a 2-day right to cancel my purchase of those securities or
the statutory rights of action for misrepresentation I would have if I
were purchasing securities under a prospectus.
I am investing $______________________ [total consideration - $1,001 per Unit]
in total; this includes any amount I am obliged to pay in future.
I am CLOSE personal friend or CLOSE business associate of__________________
[state name], who is a ___________________[state title - founder, director,
senior officer or control person] of__________________ [state name of issuer or
its affiliates - if an affiliate state "an affiliate of the issuer" and give the
issuer's name].
I acknowledge that I am purchasing based on my close relationship with [state
name of founder, director, senior officer or control person] whom I know well
enough and for a sufficient period of time to be able to assess her/his
capabilities and trustworthiness.
I ACKNOWLEDGE THAT THIS IS A RISKY INVESTMENT AND THAT I
COULD LOSE ALL THE MONEY I INVEST.
___________________________ ___________________________
Date Signature of Purchaser
___________________________
Print Name of Purchaser
Sign 2 copies of this document. Keep one copy for your records.
WARNING
D-14
YOU ARE BUYING EXEMPT MARKET SECURITIES
They are called exempt market securities because two parts of securities law do
not apply to them. If an issuer wants to sell exempt market securities to you:
- - the issuer does not have to give you a prospectus (a document that
describes the investment in detail and gives you some legal protections),
and
- - the securities do not have to be sold by an investment dealer registered
with a securities regulatory authority.
There are restrictions on your ability to resell exempt market securities.
Exempt market securities are more risky than other securities.
YOU MAY NOT RECEIVE ANY WRITTEN INFORMATION ABOUT THE ISSUER OR ITS BUSINESS
If you have any questions about the issuer or its business, ask for written
clarification before you purchase the securities. You should consult your own
professional advisers before investing in the securities.
YOU WILL NOT RECEIVE ADVICE [Instruction: Delete if sold by registrant]
Unless you consult your own professional advisers, you will not get professional
advice about whether the investment is suitable for you.
For more information on the exempt market, refer to the Saskatchewan Financial
Services Commission's website at http://www.sfsc.gov.sk.ca.
[Instruction: The purchaser must sign 2 copies of this form. The purchaser and
the issuer must each receive a signed copy.]