Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.1

THIRD OMNIBUS AMENDMENT TO

TRANSACTION DOCUMENTS

THIS THIRD OMNIBUS AMENDMENT TO TRANSACTION DOCUMENTS, dated as of December 13, 2007 (this
“Amendment”), is entered into by and among LENNOX INDUSTRIES INC., HEATCRAFT REFRIGERATION
PRODUCTS LLC, LPAC CORP., YC SUSI TRUST, BANK OF AMERICA, NATIONAL ASSOCIATION, MARKET STREET
FUNDING LLC, PNC BANK, NATIONAL ASSOCIATION, LIBERTY STREET FUNDING LLC and THE BANK OF NOVA SCOTIA
and consented to by LENNOX INTERNATIONAL INC. (the “Assurance Provider”). Capitalized
terms used and not otherwise defined herein are used as defined in the Transaction Documents (as
defined in the Receivables Purchase Agreement, which is defined below).

WHEREAS, the Seller, the Master Servicer, Liberty Street, Scotiabank, YC SUSI Trust and Bank
of America, National Association have entered into that certain Second Amended and Restated
Receivables Purchase Agreement, dated as of June 16, 2003 (as amended to the date hereof, the
“Original Receivables Purchase Agreement” and, as amended hereby, the “Receivables
Purchase Agreement”);

WHEREAS, LPAC Corp, Lennox and Heatcraft Refrigeration have entered into that certain Purchase
and Sale Agreement, dated as of June 19, 2000 (as amended to the date hereof, the “Original
Sale Agreement” and, as amended hereby, the “Sale Agreement”);

WHEREAS, Lennox International, for the benefit of the Beneficiaries (as defined in the
Assurance Agreement, which is defined below) has entered into that certain Amended and Restated
Assurance Agreement, dated as of June 16, 2003; (as amended to the date hereof, the “Original
Assurance Agreement” and, as amended hereby, the “Assurance Agreement”);

WHEREAS, the parties hereto are entering into this Amendment to, among other things, (i)
remove Scotiabank as the Administrative Agent and substitute in lieu thereof Bank of America,
National Association (“Bank of America”) as successor to Scotiabank in the capacity of
Administrative Agent, (ii) remove Liberty Street Funding LLC as a Purchaser, (iii) remove
Scotiabank as the Liberty Street Purchaser Agent, (iv) add Market Street Funding LLC (“Market
Street”) as a Purchaser, (v) add PNC Bank, National Association (“PNC Bank”) as the
Market Street Purchaser Agent, (vi) add PNC Bank as a Market Street Investor (the “Market
Street Investor”) and (vii) terminate the obligations of Heatcraft Refrigeration as a Seller
under the Sale Agreement;

WHEREAS, the parties hereto desire to create a new Purchaser Group consisting of Market Street
as the Purchaser, the Market Street Investor as the Investor of such Purchaser Group and the Market
Street Purchaser Agent as the Purchaser Agent of such Purchaser Group (together with Market Street
and the Market Street Investor, the “Market Street Purchaser Group”), upon the terms and
conditions and as set forth herein;

 

 

 

WHEREAS, (i) Liberty Street Funding LLC (the “Terminating Purchaser”) wishes to
terminate its interest in all of the Terminating Purchaser’s right, title and interest and
obligations as a Purchaser under the Original Receivables Purchase Agreement, (ii) Scotiabank (the
“Terminating Liberty Street Investor”) wishes to terminate its interest in all of its
right, title and interest and obligations as a Liberty Street Investor under the Original Purchase
Agreement, including, without limitation, its Commitment in the amount of $75,000,000; and

WHEREAS, Market Street wishes to assume the right, title and interest and obligations as a
Purchaser under the Receivables Purchase Agreement and the Market Street Investor wishes to assume
the right, title and interest and obligations as a Market Street Investor under the Receivables
Purchase Agreement, in each case, upon the terms and subject to the conditions herein contained;

WHEREAS, the parties hereto desire to make other modifications to the Transaction Documents as
set forth herein;

NOW THEREFORE, in consideration of the premises and the other mutual covenants contained
herein, the parties hereto agree as follows:

SECTION 1. Global Amendments. Effective as of the Effective Date, the Transaction
Documents are hereby amended as follows:

(a) Administrative Agent Succession. Bank of America shall be successor
Administrative Agent to Scotiabank for all purposes of the Transaction Documents. Bank of America
hereby assumes all of the rights, duties and obligations of the “Administrative Agent” under the
Transaction Documents. Scotiabank hereby assigns all of its security interests and other rights,
duties and obligations as administrative agent under the Transaction Documents to Bank of America.
Any and all references in the Transaction Documents to Scotiabank in its capacity as
“Administrative Agent” are hereby amended to refer to “Bank of America” in the related capacity.
Scotiabank shall no longer have any rights, obligations or duties as “Administrative Agent” under
any of the Transaction Documents from and after the Effective Date. It is agreed by each of the
parties hereto that Bank of America shall have no liability for any action taken or not taken by
Scotiabank on or prior to the Effective Date.

(b) Liberty Street Termination; Market Street Joinder;.

(i) Liberty Street Termination. Upon the payment on the Effective Date by the
Seller to the Liberty Street Purchaser Agent for the benefit of the Liberty Street Investors
of all Earned Discount, Principal, Program Fees and Unused Fees accrued through December 12,
2007, Liberty Street, the Liberty Street Purchaser Agent, the Liberty Street Investors and
the Liberty Street Purchaser Group shall cease to be parties to the Transaction Documents
for all purposes and, Liberty Street, the Liberty Street Purchaser Agent, the Liberty Street
Investors and the Liberty Street Purchaser Group hereby assign all of their respective
right, title and interest in, to and under each Asset Tranche funded by the Liberty Street
Purchaser Group to the Seller and none of Liberty Street, the Liberty Street Purchaser Agent, the Liberty Street Investors and the
Liberty Street Purchaser Group shall have any rights, obligations or duties under any of the
Transaction Documents from and after the Effective Date.

 

2

 

(ii) Market Street Joinder. From and after the Effective Date, (w) Market
Street shall be a Purchaser under the Transaction Documents, (x) PNC Bank shall be the
Market Street Purchaser Agent under the Transaction Documents, (y) PNC Bank shall be a
Market Street Investor under the Transaction Documents and (z) each of them shall have all
of the rights, duties and obligations of a Purchaser, a Purchaser Agent and an Investor, as
applicable, under the Transaction Documents. Each of Market Street and PNC Bank hereby
appoints and authorizes the Administrative Agent to take such action on its behalf and to
exercise such powers under the Transaction Documents as are delegated to the Administrative
Agent by the terms thereof.

(c) Termination of Heatcraft Refrigeration Obligations. As of the Effective Date, the
parties hereto agree that Heatcraft Refrigeration will no longer sell, transfer, absolutely assign,
set over or convey Receivables originated by it, Related Rights and the proceeds thereof
(collectively “Heatcraft Receivables”), to the Company under the Original Sale Agreement.
As of the Effective Date, the Sale Agreement shall cease to constitute a continuing obligation of
Heatcraft Refrigeration from and after the Effective Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made by Heatcraft
Refrigeration pursuant to Article V, Article VIII and the provisions of Section 10.4 shall be
continuing and shall survive any termination of the Sale Agreement, with respect to Heatcraft
Refrigeration.

(d) Each reference in the Transaction Documents to each of the following terms are hereby
amended to refer to the related new defined term referred to below:

“Liberty Street” shall refer to “Market Street”;

“Liberty Street Broken Funding Costs” shall refer to “Market Street Broken Funding
Costs”;

“Liberty Street CP Costs” shall refer to “Market Street CP Costs”;

“Liberty Street Liquidity Agreement” shall refer to “Market Street Liquidity
Agreement”;

“Liberty Street Liquidity Bank” shall refer to “Market Street Liquidity Bank”;

“Liberty Street Purchaser Agent” shall refer to “Market Street Purchaser Agent”;

“Liberty Street Purchaser Account” shall refer to “Market Street Purchaser Account”;

“Liberty Street Purchaser Group” shall refer to “Market Street Purchaser Group”; and

 

3

 

“Liberty Street Purchaser Group Limit” shall refer to “Market Street Purchaser Group
Limit”.

SECTION 2. Commitment of Market Street Investor and Yorktown Investor.

(a) Effective as of the Effective Date, the Market Street Purchaser Group Limit of PNC Bank as
a Market Street Investor shall be $50,000,000.

(b) Effective as of the Effective Date, the Yorktown Purchaser Group Limit of Bank of America
as a Yorktown Investor shall be $75,000,000.

SECTION 3. Acknowledgments of Market Street Purchasers and Purchaser Agent. Each
member of the Market Street Purchaser Group hereby (a) confirms that it has received copies of the
Purchase Agreement and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment, become a party to the Purchase
Agreement and fulfill its obligations thereunder; (b) agrees that it will, independently and
without reliance upon the Terminating Purchaser, the Terminating Liberty Street Investor, the
Administrative Agent or any of their respective Affiliates and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Purchase Agreement and any other Related Document; (c)
appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Purchase Agreement and the other Related Documents as
are delegated to the Administrative Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (d) agrees that it will perform in accordance with
their terms all of the obligations and other undertakings which by the terms of the Purchase
Agreement are required to be performed by it as a Purchaser, an Investor or a Purchaser Agent, as
applicable; (e) specifies as its address for notices and its account for payments the office and
account set forth on Schedule I hereof and (f) agrees that it will not institute against Market
Street or the Yorktown Purchaser any proceeding of the type referred to in Section 14.6 of the
Purchase Agreement prior to the date which is one year and one day after the payment in full of all
Commercial Paper issued by the Market Street or the Yorktown Purchaser, as applicable. Each of the
Market Street and the Market Street Investor, in their respective capacities as a Purchaser and an
Investor, hereby appoints and authorizes the Market Street Purchaser Agent as the Purchaser Agent
for the Market Street Purchaser Group to take such action as agent on its behalf and to exercise
such powers and discretion under the Purchase Agreement and the other Related Documents as are
delegated to a Purchaser Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto. The Market Street Purchaser Agent hereby accepts the
appointment as Purchaser Agent for the Market Street Purchaser Group.

SECTION 4. Amendments to Original Receivables Purchase Agreement. Effective as of
the Effective Date, the Original Receivables Purchase Agreement is hereby amended to reflect the
changes marked in the conformed copy of the Receivables Purchase Agreement attached as Exhibit A hereto.

 

4

 

SECTION 5. Amendments to Original Sale Agreement. Effective as of the Effective
Date, the Sale Agreement is hereby amended as follows:

(a) Exhibit C referred to in, and attached to the Original Sale Agreement is hereby deleted
and replaced in its entirety with the revised Exhibit C attached hereto.

(b) Schedule 5.1(a) attached to the Original Sale Agreement hereto is hereby deleted and
replaced in its entirety with the revised Schedule 5.1(a) attached hereto.

(c) Schedule 5.1(n) referred to in, and attached to, the Original Sale Agreement, is hereby
deleted and replaced in its entirety with the revised Schedule 5.1(n) attached hereto.

(d) Schedule 10.2 referred to in, and attached to, the Original Sale Agreement, is hereby
deleted and replaced in its entirety with the revised Schedule 10.2 attached hereto.

SECTION 6. Release of Heatcraft Refrigeration; Consent to Retransfer.

(a) Scotiabank and Bank of America each does hereby sell, assign, transfer and reconvey,
without recourse, representation or warranty, all of its right, title and interest in and to each
Heatcraft Receivable to LPAC and does hereby release, terminate and discharge any and all Adverse
Claims created by it on all of the Heatcraft Receivables. In connection therewith Scotiabank and
Bank of America authorize the termination of any lockbox account arrangements and the filing of UCC
financing statement terminations relating to the Heatcraft Receivables. Each of LPAC and Heatcraft
Refrigeration hereby agrees that they shall not have any recourse against Scotiabank, Bank of
America or any other Secured Party with respect to any Heatcraft Receivable and none of Scotiabank,
Bank of America or any other Secured Party makes any representation or warranty or assumes any
responsibility with respect to the Heatcraft Receivables, except that Scotiabank, as to itself, and
Bank of America, as to itself, each represents and warrants that the rights and interests being
transferred by it are being transferred free and clear of any Adverse Claim created by such Person.

(b) Each of the Administrative Agent and the Secured Parties hereby consents to the transfer
and assignment by LPAC of the Heatcraft Receivables to Heatcraft Refrigeration pursuant to that
certain Transfer and Assignment, dated December 13, 2007 (the “Transfer and Assignment”), by and
between LPAC and Heatcraft Refrigeration.

SECTION 7. Consent of Assurance Provider.

The Assurance Provider hereby consents to the amendments to the Sale Agreement and to the
Purchase Agreement set forth in this Amendment and in each amendment to the Purchase Agreement and
each other Transaction Document made on or before the date hereof. The Assurance Provider hereby
represents and warrants that it has received executed copies of each of the documents referred to
in the immediately preceding sentence.

 

5

 

SECTION 8. Effective Date. This Amendment shall become effective as of the date (the
“Effective Date”) on which each of the following conditions precedent shall have been
satisfied:

(a) Amendments. Each of the following shall have been executed and delivered by a
duly authorized officer of each party thereto: (i) this Amendment, (ii) each amendment dated the
date hereof to each of the Lockbox Agreements and (ii) each of the Fee Letters dated the date
hereof.

(b) Fees. (i) All of the fees and other amounts due and payable on the date hereof
pursuant to the Fee Letters shall have been received by each of the Agents by wire transfer in
immediately available funds.

(c) Initial Seller Note Cancelled. The Administrative Agent shall have received
evidence that the Initial Seller Note issued to Heatcraft Refrigeration has been cancelled.

(d) Stock Certificate Cancelled. The Administrative Agent shall have received
evidence that the stock certificate issued by LPAC to Heatcraft Refrigeration has been cancelled.

(e) Financing Statements and Search Reports. The Administrative Agent shall have
received acknowledgement copies of proper Financing Statements and/or amendments or terminations to
existing Financing Statements, duly filed with the appropriate filing offices before the Effective
Date, or other similar instruments or documents, as may be necessary or, in the opinion of the Bank
of America, desirable under the UCC of all appropriate jurisdictions or any comparable law to
perfect the Secured Parties’ security interest in the Collateral.

(f) Representations and Warranties. Each Agent shall have received a Certificate of
an officer of each of the Seller and the Master Servicer certifying that the representations and
warranties of each of the Seller and the Master Servicer contained in the Transaction Documents are
true and correct on and as of the date hereof as though made on and as of the date hereof.

(g) Covenants. The Seller and the Master Servicer shall each be in compliance with
each of its covenants set forth herein and each of the Transaction Documents to which it is a
party.

(h) No Default. No event has occurred which constitutes a Liquidation Event and the
Termination Date shall not have occurred.

(i) Other Information. The Seller and the Master Servicer shall each have taken such
other action, including delivery of approvals, consents, opinions, documents and instruments, as
Bank of America may request.

(j) Perfection and Priority Opinion. The Administrative Agent, the Yorktown Purchaser
Agent and the Market Street Purchaser Agent shall have received an opinion of counsel to Lennox and
LPAC, in a form acceptable to the Administrative Agent, regarding the perfection and priority of
the security interest of the Administrative Agent, on behalf of the Secured Parties, in the
Collateral.

 

6

 

(k) Reliance Letters. The Administrative Agent, the Yorktown Purchaser Agent and the
Market Street Purchaser Agent shall have received letters allowing such entities to rely on the
opinions of counsel to Lennox and LPAC delivered to Scotiabank regarding true sale,
nonconsolidation and corporate matters.

SECTION 9. Approval of Independent Director.

Carrie L. Tillman has been elected as the Independent Director of LPAC Corp. By their
signatures hereto the Agents hereby give their approval of such Independent Director as provided in
the definition of “Independent Director”.

SECTION 10. Covenants Regarding Lockbox Agreements. The Seller and Lennox hereby
covenant and agree to execute and deliver within thirty (30) days from the Effective Date a Lockbox
Agreement in form and substance acceptable to the Agents with respect to all Lockbox Accounts.

SECTION 10. Miscellaneous.

(a) References in Transaction Documents. Upon the effectiveness of this Amendment,
each reference in a Transaction Document to “this Agreement”, “hereunder”, “hereof”, “herein”, or
words of like import shall mean and be a reference to such Transaction Document as amended hereby,
and each reference to a Transaction Document in any other Transaction Document or any other
document, instrument or agreement, executed and/or delivered in connection with any Transaction
Document shall mean and be a reference to such Transaction Document as amended hereby.

(b) Effect on Transaction Documents. Except as specifically amended above, the
Transaction Documents and all other documents, instruments and agreements executed and/or delivered
in connection therewith shall remain in full force and effect and are hereby ratified and
confirmed.

(c) No Waiver. The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of any Person under any Transaction Document or
any other document, instrument or agreement executed in connection therewith, nor constitute a
waiver of any provision contained therein.

(d) Successors and Assigns. This Amendment shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.

(e) Counterparts. This Amendment may be executed in any number of counterparts, and
by the different parties hereto on the same or separate counterparts, each of which shall be deemed
to be an original instrument but all of which together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page by facsimile shall be effective as
delivery of a manually executed counterpart of this Amendment.

 

7

 

(f) Headings. The descriptive headings of the various sections of this Amendment are
inserted for convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

(g) Amendments. This Amendment may not be amended or otherwise modified except as
provided in the Transaction Documents.

(h) GOVERNING LAW. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALLIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAW RULES THEREOF.

 

8

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective
officers thereunto duty authorized, as of the date first above written.

	 	 	 	 	 
	 	 	LPAC CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	LENNOX INDUSTRIES INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	HEATCRAFT REFRIGERATION PRODUCTS LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

[signatures continue]

[Signature Page to Third Omnibus Amendment]

 

 

 

	 	 	 	 	 
	 	 	BANK OF AMERICA, NATIONAL ASSOCIATION, as the Yorktown
Purchaser Agent and the Administrative Agent
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	YC SUSI TRUST, as the Yorktown Purchaser
	 
	 	 	 	 
	 	 	By: Bank of America, National Association,

     as Administrative Trustee
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

[signatures continue]

[Signature Page to Third Omnibus Amendment]

 

 

 

	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION, as the Market Street

Purchaser Agent
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	MARKET STREET FUNDING LLC, as a Purchaser
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

[signatures continue]

[Signature Page to Third Omnibus Amendment]

 

 

 

	 	 	 	 	 
	 	 	LIBERTY STREET FUNDING LLC, as Terminating Purchaser
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	THE BANK OF NOVA SCOTIA, as Terminating Liberty Street
Purchaser and as outgoing Administrative Agent
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

[signatures continue]

[Signature Page to Third Omnibus Amendment]

 

 

 

	 	 	 	 	 
	 	 	Acknowledged and consented to by:
	 
	 	 	 	 
	 	 	LENNOX INTERNATIONAL INC., as Assurance Provider
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

[end of signatures]

[Signature Page to Third Omnibus Amendment]Filed by Bowne Pure Compliance

 

Exhibit 10.1

SUBSCRIPTION AGREEMENT

A completed and originally executed copy of this Subscription Agreement, including all
applicable schedules hereto, must be delivered by no later than 12:00 p.m. (Eastern Standard time)
on December 14, 2007, unless extended by the Company, to Neutron Enterprises, Inc., at 3500 De
Maisonneuve W., Suite #1650, Montreal, Quebec, H3Z 3C1, Attention: Mr. Mitchell Rosen, Chief
Financial Officer (Fax: (514) 871-8561; e-mail address: mrosen@neutrongroup.com).

TO: NEUTRON ENTERPRISES, INC. (the “Company”)

The undersigned (the “Purchaser”), on its own behalf, and, if it is not purchasing as principal, on
behalf of those for whom the undersigned is contracting hereunder as trustee or agent (each a
“Beneficial Purchaser”), hereby irrevocably subscribes for and agrees to purchase the number of
Units (each a “Unit”) of the Company set out below to be issued at a price of U.S.$0.25 (the
“Purchase Price”) per Unit, for the aggregate consideration set out below, subject to the following
terms and conditions. Each Unit consists of one share of Common Stock of the Company and a warrant
(a “Warrant”) in the form attached as Exhibit A hereto. Each Warrant allows the holder thereof to
purchase one share of Common Stock at a price of U.S.$0.35 per share. This agreement, which for
greater certainty includes and incorporates the attached Annexes, Exhibits and Schedules, as each
may be amended, supplemented, replaced and/or restated from time to time, are collectively referred
to herein as the “Subscription Agreement” or the “Agreement”. The Purchaser on its own behalf, and
if not purchasing as principal, on behalf of those on whose behalf it is contracting hereunder as
trustee or agent, agrees to be bound by the terms and conditions set forth in the attached “Terms
and Conditions of Subscription” including without limitation the representations, warranties,
acknowledgements and covenants set forth in the Annexes, Exhibits and Schedules attached thereto.
The Purchaser further agrees on its own behalf, and if not purchasing as principal, on behalf of
those on whose behalf it is contracting hereunder as trustee or agent, without limitation, that the
Company may rely on the Purchaser’s representations, warranties, acknowledgements and covenants
contained in such documents.

Issue: Units

Price Per Unit: U.S.$0.25

Number of Units Purchased:                     

Total Subscription Price (number of Units purchased x U.S.$0.25): U.S.$                     

Number of shares of Common Stock of the Company currently owned or over which control and direction
is exercised (directly and indirectly):                     

 

 

 

DATED this
 _____ 
day of
 _____ 
, 200
 _____ 
..

	 	 	 
	Name and Address of Purchaser:
	 	 
	 
	 	 
	(Name of Purchaser — please print)

	 	(Purchaser’s Address)
	 
	 	 
	by:
	 	 
	 
	 	 
	Authorized Signature

	 	(Telephone Number)
	 
	 	 
	 

	 	 
	(Official Capacity or Title — please print)

	 	(Facsimile Number)
	 
	 	 
	 

	 	 
	(Please print name of individual whose signature
appears above if different from the name of the
Purchaser printed above.)

	 	(E-mail Address)

Details of the Beneficial Purchaser (if any, for whom the undersigned is contracting (the “Beneficial Owner”)):

	 	 	 
	 

	 	 
	(Name — please print)

	 	(Beneficial Purchaser’s Address)
	 
	 	 
	 

	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	(if space is inadequate please attach a
schedule containing the necessary
information)
	 	 

 

-2-

 

	 	 	 
	Registration Instructions
(registration of the certificates
representing the shares of Common
Stock should be made as follows):

	 	Delivery Instructions (the
certificates representing the shares
of Common Stock are to be delivered
as follows (if different from the
address of the Purchaser set forth
above)):
	 
	 	 
	 

	 	 
	Name
	 	 
	 
	 	 
	 

	 	 
	Account reference, if applicable

	 	Account reference, if applicable
	 
	 	 
	 

	 	 
	Address

	 	Contact Name
	 
	 	 
	 

	 	 
	 

	 	Address
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	Telephone Number

	 	Telephone Number
	 
	 	 
	 

	 	 
	Facsimile Number

	 	Facsimile Number
	 
	 	 
	 

	 	 
	E-mail Address

	 	E-mail Address

ACCEPTANCE

The foregoing is acknowledged, accepted and agreed to this
 _____ 
day of
 _____ 
, 200
 _____ 
..

	 	 	 	 	 
	NEUTRON ENTERPRISES, INC.	 	 
	 

	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Authorized Signing Officer	 	 

 

-3-

 

TERMS AND CONDITIONS OF SUBSCRIPTION

This Subscription Agreement is dated as of the date appearing on the first page hereof
between Neutron Enterprises, Inc. a Nevada corporation (the “Company”), and the Purchaser
identified on the first page hereof and on the signature page hereto;

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and/or Regulation D promulgated
therunder and pursuant to the Securities Laws (as defined below), the Company desires to
issue and sell in a private placement transaction up to 16,000,000 Units, subject to
increase by the Company;

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Purchaser agree as follows:

ARTICLE I.

DEFINITIONS; THE OFFERING

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section
1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(i).

“Affiliate” means any Person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.

“Business Day” means any day except Saturday, Sunday and any day which shall
be a federal legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.

“Canadian Purchaser” means a Purchaser residing in the Designated Provinces.

“Closing” means the closing of the purchase and sale of the Common Stock and
the Warrants pursuant to Section 2.1, on the date this Agreement is accepted
by the Company, which shall be no later than December 14, 2007; provided that the
Company may extend the Closing for an additional 120 days in its sole discretion. At
the Company’s election, the Company may have multiple Closings, each of which shall
be a Closing hereunder.

 

-4-

 

“Closing Date” means the date of the Closing.

“Commission” means the Securities and Exchange Commission of the United
States.

“Common Stock” means the common stock of the Company, $0.001 par value per
share, and any securities into which such common stock may hereafter be reclassified.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.

“Designated Provinces” means the provinces of Ontario and Quebec in Canada.

“Disclosure Schedules” means the Disclosure Schedules attached as Annex
I hereto.

“Exchange Act” means the Securities Exchange Act of 1934 of the United
States, as amended.

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal or other restriction.

“Material Adverse Effect” shall have the meaning ascribed to such term in
Section 3.1(a).

“NI 45-106” means National Instrument 45-106 — Prospectus and Registration
Exemptions, as such instrument is in effect (if applicable) on the Closing Date in
the provinces of Ontario and Quebec in which the Purchaser resides.

“Ontario Purchaser” means a Purchaser who is resident in the Province of
Ontario, Canada or is otherwise subject to the Ontario Securities Laws.

“Ontario Securities Act” means the Securities Act (Ontario), as amended.

“OSC” means the Ontario Securities Commission.

 

-5-

 

“Ontario Securities Laws” means the Ontario Securities Act, the Securities
Regulation thereto, and all instruments, policies, rules, orders, codes, notices and
interpretation notes of the OSC in effect as of the date hereto.

“Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any
kind.

“Per Unit Purchase Price” means U.S.$0.25.

“Purchaser” means the purchaser indicated on the first page of this
Subscription Agreement and includes Canadian Purchasers if applicable.

“Quebec Purchaser” means a Purchaser who is resident in the Province of
Quebec, Canada or is otherwise subject to the Quebec Securities Laws.

“Quebec Securities Act” means the Securities Act (Québec), as amended.

“Quebec Securities Laws” means the Quebec Securities Act, the regulations
thereunder, and all instruments, policies, rules, decisions, notices and
interpretation notes of the AMF in effect as of the date hereto.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect
as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(g).

“Securities” means the Shares, the Warrants and the Shares issuable upon
exercise of the Warrant.

“Securities Act” means the Securities Act of 1933 of the United States, as
amended.

“Securities Commissions” means, collectively, the applicable securities
regulatory authority in each of the Designated Provinces.

“Securities Laws” means, collectively, the applicable securities laws of each
of the Designated Provinces and the respective regulations and rules made and forms
prescribed thereunder together with all applicable and legally enforceable published
policy statements, blanket orders, rulings and notices of the
respective Securities Commissions or equivalent securities regulatory authorities in
the Designated Provinces.

 

-6-

 

“Shares” means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement, including the Shares issuable upon exercise of
the Warrants.

“Subscription Amount” means the amounts set forth below the Purchaser’s
signature block on the signature page hereto, in United States dollars and in
immediately available funds.

“Subsidiary” means a body corporate that:

	 	(a)	 	is controlled by:

	 	(i)	 	the Company;

	 
	 	(ii)	 	the Company and one or more bodies
corporate, each of which is controlled by the Company; or

	 
	 	(iii)	 	two or more bodies corporate, each
of which is controlled by the Company; or

	 	(b)	 	is a Subsidiary of a body corporate that is a
Subsidiary of the Company.

“Trading Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day
on which the Common Stock is traded on the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices); provided,
that in the event that the Common Stock is not listed or quoted as set forth in (i),
(ii) and (iii) hereof, then Trading Day shall mean a Business Day.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the OTC Bulletin
Board, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.

 

-7-

 

“Transaction Documents” means this Agreement and any Annex, Exhibit or
Schedule thereto, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

“United States” means the United States of America.

“United States Securities Laws” means, collectively, the applicable
securities laws of the United States and the regulations and rules made and forms
prescribed thereunder, together with all applicable and legally enforceable published
policy statements, blanket orders, rulings and notices of the Commission.

1.2 The Offering, The Company is offering (the “Offering”) up to 16,000,000
Units, for an aggregate purchase price of $4,000,000 (the “Maximum Amount”) unless increased
by the Company in its sole discretion. The Units will be sold on a reasonable “best
efforts” basis pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and/or Rule 506 of Regulation D thereunder. The Units are being offered
solely to a limited number of “accredited investors” as that term is defined in Rule 501(a)
of the Securities Act during an offering period (the “Offering Period”) commencing November
19, 2007 and terminating December 14, 2007 unless extended by the Company in its sole
discretion for up to an additional 120-day period (the “Termination Date”). The Offering
may be terminated by the Company at any time in its sole discretion. Unless waived by the
Company, subscriptions for less than $25,000 will not be accepted. Assuming the Company
sells the Maximum Amount, the net proceeds to the Company are estimated to be approximately
$3,900,000, after deducting commissions and offering expenses payable by the Company
estimated at $100,000. The Company intends to use the proceeds for general working capital
and other corporate purposes which may include the acquisition of additional assets or
businesses. The Company is not required to raise any minimum amount of proceeds prior to
executing this Agreement or other Agreements with other Purchasers. Because there is no
minimum amount of subscriptions which the Company must receive before accepting funds in the
Offering, Purchaser will not be assured that the Company will have sufficient funds to
operate its business and will bear the risk that the Company will be unable to secure the
funds necessary to meet its current and anticipated financial obligations.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing. At the Closing, the Purchaser shall purchase, and the Company
shall issue and sell, in the aggregate, a number of Units up to 16,000,000 Units. The
Purchaser shall purchase from the Company, and the Company shall issue and sell to
Purchaser, a number of Units equal to such Purchaser’s Subscription Amount divided by the
Per Unit Purchase Price as set forth on the first page of this Agreement. All
funds tendered by Purchaser will be held by the Company pending acceptance or rejection
of this Agreement by the Company and the Closing of the Purchaser’s purchase of the Units.
This Agreement will either be accepted by the Company, in whole or in part, or rejected by
the Company in its sole discretion as promptly as practicable. If this Agreement is
accepted only in part, Purchaser agrees to purchase such smaller number of Units as the
Company determines to sell to Purchaser. If this Agreement is rejected for any reason,
including the termination of the Offering by the Company, this Agreement and all funds
tendered herewith will be promptly returned to Purchaser, without interest or deduction of
any kind, and this Agreement will be void and of no further force or effect.

 

-8-

 

2.2 Closing Conditions.

The Closing is conditional upon the following:

(a) At the Closing, the Company shall deliver or cause to be delivered to
the Purchaser this Agreement, duly executed by the Company.

(b) Upon execution of this Agreement, Purchaser shall deliver or cause to be
delivered to the Company the following:

(1) this Agreement, duly executed by the Purchaser; and

(2) the Purchaser’s Subscription Amount by wire transfer to the account
of the Company as provided to the Purchaser in writing prior to the
Closing Date.

(c) All representations and warranties of each of the parties herein shall
remain true and correct as of the Closing Date.

(d) As of the Closing Date, there shall have been no Material Adverse Effect
with respect to the Company since the date hereof.

(e) From the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing
Date, trading in securities generally as reported by the Trading Market shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by the Trading Market, nor
shall a banking moratorium have been declared either by the United States or
New York State authorities.

 

-9-

 

2.3 Delivery and Payment. Upon execution of this Agreement, the Purchaser shall
(on its own behalf and, if applicable, on behalf of each Beneficial Purchaser) deliver to
the Company at the address set out on the first page of this Subscription Agreement, or at
such other time, date or place as the Company may advise:

(a) a completed and duly signed copy of this Subscription Agreement;

(b) if the Purchaser or a Beneficial Purchaser is resident in or otherwise
subject to the Securities Laws of the Designated Provinces and is purchasing
the Purchaser’s Securities as principal for its own account and not for the
benefit of any other person and is purchasing the Purchaser’s Securities as an
“accredited investor” as defined in NI 45-106, a duly completed and executed
copy of the Accredited Investor Status Certificate in the form attached hereto
as Schedule A;

(c) if the Purchaser or a Beneficial Purchaser is resident in or otherwise
subject to the Securities Laws of the Designated Provinces and is purchasing
the Purchaser’s Securities as principal for its own account and not for the
benefit of any other person and is purchasing a sufficient number of Units so
that the aggregate Purchase Price payable by the Purchaser in respect of the
Purchaser’s Securities will not be less than 150,000 Canadian Dollars, a duly
completed and executed Minimum Amount Investment Status Certificate in the
form attached hereto as Schedule B;

(d) if the Purchaser is resident in or otherwise subject to the Securities
Laws of the Designated Provinces and is purchasing the Purchaser’s Securities
as an “employee”, “executive officer”, “director” or “consultant” of the
Company as such terms are defined in NI 45-106, a duly completed and executed
copy of the Employee, Executive Officer, Director or Consultant Status
Certificate in the form attached hereto as Schedule C;

(e) any other documents required by the Securities Laws or as the Company may
request.

The Purchaser for and on behalf of itself and each Beneficial Purchaser, if any,
acknowledges and agrees that the documents referred to in this Section 2.3, when executed
and delivered by the Purchaser, will form part of and will be incorporated into this
Subscription Agreement and each shall constitute a representation, warranty or covenant of
the Purchaser and each Beneficial Purchaser, if any, hereunder in favour of the Company. The
Purchaser for and on behalf of itself and each Beneficial Purchaser, if any, consents to the
filing of such documents as may be required to be filed with the Trading Market or the
Securities Commissions in connection with the transactions contemplated hereby. The Purchaser for and on behalf of itself and each
Beneficial Purchaser, if any, acknowledges and agrees that the irrevocable offer contained
in this Subscription Agreement, the Purchase Price and any other documents delivered in
connection herewith will be held by the Company until such time as the Closing Conditions
set out hereinabove are satisfied or have been duly waived.

 

-10-

 

2.4 Deliveries by the Company. Within ten Trading Days of the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser certificates evidencing a
number of Shares equal to the Purchaser’s Subscription Amount divided by the Per Unit
Purchase Price, and certificates evidencing a number of Warrants equal to such Purchaser’s
Subscription Amount divided by the Per Unit Purchase Price, in each case registered in the
name of the Purchaser.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules delivered concurrently herewith, the
Company hereby makes the following representations and warranties as of the date hereof and
as of the Closing Date to the Purchaser:

(a) Organization and Qualification. The Company is an entity duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation of any of the provisions of its articles
of incorporation or bylaws. The Company is duly qualified to conduct business and is
in good standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may be,
would not have or reasonably be expected to result in (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or financial
condition of the Company, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”).

(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action
on the part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally; (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other
equitable remedies; and (iii) as limited by public policy.

 

-11-

 

(c) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any provision
of the Company’s articles of incorporation or bylaws; (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
material agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise) to which the Company is a party or by which any material property
or asset of the Company is bound or affected; or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any material property
or asset of the Company is bound or affected; except in the case of each of clauses
(ii) and (iii), such as would not have or reasonably be expected to result in a
Material Adverse Effect.

(d) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (a) the filing by
the Company with the Securities Commissions of a report on Form 45-106F1 prepared and
executed in accordance with NI 45-106, which is required to be made by the Company
within 10 days after the date of the issuance of any Securities to a Canadian
Purchaser together with the requisite filing fees; (b) such as have already been
obtained or such exemptive filings as are required to be made under applicable
securities laws; and (c) such other filings as may be required following the Closing
Date under the Securities Act, the Exchange Act, the Securities Laws or corporate
law.

 

-12-

 

(e) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and non-assessable, and free and clear of all Liens
imposed by the Company.

(f) Capitalization. Except for the issuance of Securities pursuant to this
Agreement and other similar agreements entered into in connection with the Offering
of which this Agreement is a part and except as set forth below, as of November 19,
2007, the Company is authorized to issue 200,000,000 shares of Common Stock, of which
55,114,749 are issued and outstanding, and 10,000,000 shares of preferred stock none
of which are outstanding. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result of the
purchase and sale of the Securities, except for employee stock options under the
Company’s stock option plans and except as set forth below, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue additional
 shares of Common Stock, or securities or rights convertible or exchangeable into
 shares of Common Stock. The issue and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other than
the Purchaser) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such securities.

As of November 19, 2007, the Company has outstanding or is obligated to issue:

	 	(i)	 	options to purchase 15,720,000 shares
of Common Stock;

	 
	 	(ii)	 	a warrant to Creata Promotions (USA),
Inc. to purchase 250,000 shares of Common Stock;

	 
	 	(iii)	 	100,000 shares of Common Stock
pursuant to a consulting agreement;

	 
	 	(iv)	 	50,000 shares of Common Stock in
exchange for 50,000 Class E Exchangeable Shares in the capital
stock of Neutron Media Inc.; and

 

-13-

 

	 	(v)	 	at the option of Caledonia Corporate
Management Group Limited (“Caledonia”) one share of Common Stock
for every $2.50 of principal and interest outstanding under the
terms of a secured convertible note payable to Caledonia in the
principal amount of $2,100,000.

The Company has agreed to issue to Dresden Capital Inc. (“Dresden”), as partial
consideration for fees payable to it in respect to the transactions contemplated by
this Agreement, a number of warrants equal to five percent (5%) of the total number
of Units subscribed for as contemplated by this Agreement sold by Dresden
(collectively, the “Agent’s Warrants”), on substantially the same terms as the
Warrants.

(g) SEC Reports; Financial Statements. The Company has filed all periodic
reports required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the one year
preceding the date hereof (the foregoing materials, including the exhibits thereto,
being collectively referred to herein as the “SEC Reports” and, together with
the Disclosure Schedules to this Agreement, the “Disclosure Materials”). As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with generally
accepted accounting principles applicable in the United States on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.

(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC Reports,
or in Schedule 3.1 (h): (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse Effect; (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses incurred
in the ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission; (iii) the Company
has not altered its method of accounting; (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of its
capital stock; and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock option
plans disclosed in Section 3(f) or as disclosed in the SEC Reports. The Company does
not have pending before the Commission any requests for confidential treatment of
information.

 

-14-

 

(i) Litigation. Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened in writing against the Company, or any of its
properties before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities; or (ii) could,
if there were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. The Company is not, and has not been, the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to
the knowledge of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former director or officer
of the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.

(j) Labour Relations. No material labour dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company which
could reasonably be expected to result in a Material Adverse Effect.

(k) Compliance. Except as disclosed in the SEC Reports, the Company is not
(i) in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the
Company), and the Company has not received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or any
other material agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or
violation has been waived); (ii) in violation of any order of any court, arbitrator
or governmental body; or (iii) in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state and
local laws applicable to its business; except in the case of clauses (i), (ii) and
(iii) as would not have or reasonably be expected to result in a Material Adverse
Effect.

 

-15-

 

(l) Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, other than a fee payable to Dresden
equal to five percent (5%) of the gross proceeds from the subscription for Units
contemplated by this Agreement sold by Dresden plus the Agent’s Warrants. The
Purchaser shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.

(m) Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to
the Purchaser as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

(n) Investment Company. The Company is not, and is not an Affiliates of, an
“investment company” within the meaning of the Investment Company Act of 1940, as
amended.

(o) Listing and Maintenance Requirements. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

The Purchaser acknowledges and agrees that the Company does not make or has not made
any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in this Section 3.1.

 

-16-

 

3.2 Representations and Warranties of the Purchaser. Each Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the Company as
follows:

(a) Organization; Authority. The Purchaser is legally competent natural
person or an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by the Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or similar action on the part of the Purchaser. Each Transaction
Document to which it is a party has been duly executed by the Purchaser, and, when
delivered by the Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms.

(b) Investment Intent. The Purchaser understands that (i) the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state or other securities law; and (ii) the Purchaser has not received a
prospectus, an offering memorandum (including, without limitation, as such term is
defined in the Ontario Securities Act), sales or advertising literature or similar
document in connection with the purchase of the Securities, and the Purchaser has not
requested, nor does the Purchaser need to receive, any such document. The Purchaser
is acquiring the Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such Securities or any
part thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the distribution of
such Securities. The Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. The Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities. The
Purchaser understands and acknowledges that the Securities are subject to certain
resale restrictions under applicable securities laws. The Purchaser also acknowledges
that it has been advised to consult its own legal advisers with respect to applicable
resale restrictions and that it is solely responsible for complying with such
restrictions (and that the Company is not in any manner responsible for ensuring
compliance by the Purchaser with such restrictions).

(c) Experience of Such Purchaser. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. The Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

 

-17-

 

(d) General Solicitation. The Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast over
television, radio or the internet or presented at any seminar or any other general
solicitation or general advertisement.

(e) Compliance with the Securities Laws. The Purchaser agrees to comply with
the requirements of Regulation M of the Exchange Act, if applicable, with respect to
the sale of the Shares by the Purchaser. The Purchaser hereby confirms its
understanding that it may not cover short sales made prior to the date hereof, nor
may it pledge, hypothecate, lend or otherwise facilitate short sales of Company
Shares. The Purchaser acknowledges that it does not intend to cover short positions
made by it before the Effective Date with Shares purchased by it hereunder.

(f) No Government Review. The Purchaser understands that neither the
Commission nor any securities commission or other governmental authority of any
state, country or other jurisdiction has approved the issuance of the Securities or
passed upon or endorsed the merits of the Securities, this Agreement or the Warrant,
or confirmed the accuracy of, determined the adequacy of, or reviewed this Agreement
or the Warrant.

(g) Restrictions on Transfer. The Purchaser understands that the Securities
are “restricted securities” as such term is defined in Rule 144 under the Securities
Act and have not been registered under the Securities Act or registered or qualified
under any state securities law, and may not be, directly or indirectly, sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and registration or qualification under
applicable state securities laws or the availability of an exemption therefrom.

(h) Access to Information. The Purchaser acknowledges that it has had access
to and has reviewed all documents and records relating to the Company that it has
deemed necessary in order to make an informed investment decision with respect to an
investment in the Securities, including, but not limited to, the SEC Reports; that it
has had the opportunity to ask representatives of the Company certain questions and
request certain additional information regarding the terms and conditions of such
investment and the finances, operations, business and prospects of the Company and
has had any and all such questions and requests answered to its satisfaction; and that it understands the
risks and other considerations relating to such investment.

 

-18-

 

(i) Certain Investment Risks. Purchaser understands that purchasing Units in
the Offering will subject Purchaser to certain risks, including, but not limited to,
each of the following:

(A) The offering price of the Units offered hereby has been determined
solely by the Company and does not necessarily bear any relationship to the
value of the Company’s assets, current or potential earnings of the Company,
or any other recognized criteria used for measuring value and, therefore,
there can be no assurance that the offering price of the Units is
representative of the actual value of the Units.

(B) In order to capitalize the Company, execute its business plan, and
for other corporate purposes, the Company has issued, and expects to issue
additional shares of Common Stock, securities exercisable or convertible into
 shares of Common Stock, or debt. Such securities have been and may be issued
for a purchase price consisting of cash, services or other consideration that
may be materially different than the purchase price of the Units. The
issuance of any such securities may result in substantial dilution to the
relative ownership interests of the Company’s existing shareholders and
substantial reduction in net book value per share. Additional equity
securities may have rights, preferences and privileges senior to those of the
holders of Common Stock, and any debt financing may involve restrictive
covenants that may limit the Company’s operating flexibility.

(C) There is no minimum amount required to be raised in this Offering
and, therefore, the Company may not generate enough net proceeds from this
Offering to execute its business plan and satisfy its working capital
requirements.

(j) Reliance on Representations. The Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions from
the registration requirements of the federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire the
Securities. The Purchaser represents and warrants to the Company that any
information that the Purchaser has heretofore furnished or furnishes herewith to the
Company is complete and accurate, and further represents and warrants that it will notify and supply corrective information to the
Company immediately upon the occurrence of any change therein occurring prior to the
Company’s issuance of the Securities. Within five (5) days after receipt of a
request from the Company, the Purchaser will provide such information and deliver
such documents as may reasonably be necessary to comply with any and all laws and
regulations to which the Company is subject.

 

-19-

 

(k) Purchaser Status. At the time the Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act, and shall be an “accredited investor” as of the date
of any exercise of the Warrants. The Purchaser is not required to be registered as a
broker dealer under Section 15 of the Exchange Act.

(l) Broker. Other than as contemplated by this Subscription Agreement, there
is no person acting or purporting to act in connection with the transactions
contemplated herein who is entitled to any brokerage or finder’s fee, and if any
person establishes a claim that any fee or other compensation is payable in
connection with this subscription for the Purchaser’s Securities, the Purchaser
covenants to indemnify and hold harmless the Company with respect thereto and with
respect to all costs reasonably incurred in the defence thereof.

The Company acknowledges and agrees that the Purchaser does not make or has not made
any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in this Section 3.2.

3.3 Representations and Warranties of Purchaser in the Designated Provinces. The
Purchaser on its own behalf and for and on behalf of each Beneficial Purchaser, if any,
represents, warrants and covenants in favour of the Company as follows and acknowledges that
the Company is relying on such representations, warranties and covenants in connection with
the transactions contemplated in this Subscription Agreement:

(a) Authorization and Effectiveness. If the Purchaser or any Beneficial
Purchaser is an individual, it is of the full age of majority and has all requisite
legal capacity and competence to execute and deliver this Subscription Agreement, to
subscribe for the Purchaser’s Securities and to observe and perform its covenants and
obligations hereunder, or if the Purchaser or any Beneficial Purchaser is a Company,
the Purchaser or such Beneficial Purchaser is duly incorporated and is a valid and
existing corporation, has the necessary corporate power, capacity and authority to
execute and deliver this Subscription Agreement, to subscribe for the Purchaser’s
Securities and to observe and perform its covenants and obligations hereunder and has
taken all necessary corporate action in respect thereof, or, if the Purchaser or any
Beneficial Purchaser is a partnership, syndicate or other form of unincorporated

 

-20-

 

organization, the Purchaser or such Beneficial Purchaser has the necessary legal
power, capacity and authority to execute and deliver this Subscription Agreement, to
subscribe for the Purchaser’s Securities and to observe and perform its covenants and
obligations hereunder and has obtained all necessary approvals in respect thereof,
and, in any case, upon acceptance by the Company, this Subscription Agreement will
constitute a legal, valid and binding agreement of the Purchaser and each Beneficial
Purchaser, if any, enforceable against the Purchaser and such Beneficial Purchaser in
accordance with its terms and will not result in a violation of or create a state of
facts which, after notice, lapse of time or both, would constitute a default or
breach of any of the Purchaser’s or any Beneficial Purchaser’s constating documents,
by-laws or authorizing resolutions (if applicable), any agreement, indenture or other
document to which the Purchaser or any Beneficial Purchaser is a party or by which it
is bound or any law applicable to the Purchaser or any Beneficial Purchaser or any
judgment, decree, order, statute, rule or regulation applicable to the Purchaser or
any Beneficial Purchaser.

(b) Residence. The Purchaser and each Beneficial Purchaser, if any, was
offered the Purchaser’s Securities in, and is a resident of, the Designated Provinces
as referred to under “Name and Address of Purchaser” and “Details of the Beneficial
Purchaser”, respectively, set out on the first page and page 2 hereof and intends
that the securities laws applicable in that jurisdiction govern any transactions
involving the Securities subscribed for by the Purchaser or such Beneficial Purchaser
and that such addresses were not created and are not used solely for the purpose of
acquiring the Purchaser’s Securities.

(c) Private Placement Exemptions. The Purchaser has properly completed,
executed and delivered to the Company the applicable questionnaire(s) and
certificate(s) (dated as of the date hereof) set forth in Schedules A through C
attached hereto and the information contained therein, and the representations,
warranties and covenants contained in the applicable Schedules attached hereto, are
and will be true and correct both as of the date of execution of this Subscription
Agreement and as at the Closing Date.

(d) Purchasing as Principal and For Investment Only. Unless Section 3.3(f)
below applies, the Purchaser is purchasing the Purchaser’s Securities as principal
(as required by applicable Securities Laws) for its own account, and not for the
benefit of any other person and is purchasing the Purchaser’s Securities for
investment only and not with a view to resale or distribution of all or any of the
Purchaser’s Securities.

(e) No Syndication. Unless Section 3.3(f) below applies, the Purchaser was
not created solely to purchase or hold securities (A) as an accredited investor
as described in paragraph (m) of the definition of “accredited investor” provided in
Schedule A, or (B) in reliance on the “Minimum Amount Investment” exemption provided
under Section 2.10 of NI 45-106 and such Purchaser pre-existed the offering of the
Securities and has a bona fide purpose other than investment in the Securities.

 

-21-

 

(f) Purchasing as Agent or Trustee.

(A) In the case of the purchase by the Purchaser of the Purchaser’s
Securities as agent or trustee for any principal whose identity is disclosed
or identified, each such Beneficial Purchaser of the Purchaser’s Securities is
purchasing its Purchaser’s Securities (i) as principal (as required by
applicable Securities Laws) for its own account and not for the benefit of any
other person; (ii) for investment only and not with a view to resale or
distribution of all or any of the Purchaser’s Securities; (iii) was not
created or used solely to purchase or hold securities in reliance on the
“Minimum Amount Investment” exemption provided under Section 2.10 of NI 45-106
and it pre-existed the offering of the Securities and has a bona fide purpose
other than investment in the Securities; (iv) was not created solely to
purchase or hold securities as an accredited investor as described in
paragraph (m) of the definition of “accredited investor” provided in Schedule
A; and (v) at an aggregate acquisition cost to such Beneficial Purchaser of
not less than 150,000 Canadian Dollars, or as an “accredited investor” as
defined in NI 45-106.

(B) In the case of the purchase by the Purchaser of the Purchaser’s
Securities as agent or trustee for any principal who is disclosed or
identified, the Purchaser is the duly authorized trustee or agent of such
Beneficial Purchaser with due and proper capacity, power and authority to
execute and deliver, on behalf of such Beneficial Purchaser, this Subscription
Agreement and all other Transaction Documents in connection with the purchase
of the Purchaser’s Securities hereunder, to agree to the terms and conditions
herein and therein set out and to make the representations, warranties,
acknowledgements and covenants herein and therein contained, all as if such
Beneficial Purchaser were the Purchaser and the Purchaser’s actions as trustee
or agent are in compliance with all applicable laws and the Purchaser and such
Beneficial Purchaser acknowledges that the Company is required by law to
disclose to certain regulatory authorities the identity of such Beneficial
Purchaser of Purchaser’s Securities for whom it may be acting.

(C) In the case of the purchase by the Purchaser of the Purchaser’s
Securities on behalf of an undisclosed Beneficial Purchaser, the
Purchaser is deemed under applicable Securities Laws to be purchasing as
principal.

 

-22-

 

(g) Broker. Other than as contemplated by this Subscription Agreement there
is no person acting or purporting to act in connection with the transactions
contemplated herein who is entitled to any brokerage or finder’s fee and if any
person establishes a claim that any fee or other compensation is payable in
connection with this subscription for the Purchaser’s Securities, the Purchaser
covenants to indemnify and hold harmless the Company with respect thereto and with
respect to all costs reasonably incurred in the defence thereof.

(h) Illegal Use of Funds. None of the funds being used to purchase the
Purchaser’s Securities are to the knowledge of the Purchaser and each Beneficial
Purchaser, if any, proceeds obtained or derived directly or indirectly as a result of
illegal activities. The funds being used to purchase the Purchaser’s Securities which
will be advanced by the Purchaser to the Company hereunder will not represent
proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada) (the “PCMLTFA”) and the Purchaser, on its own behalf
and on behalf of each Beneficial Purchaser, if any, acknowledges that the Company may
in the future be required by law to disclose the Purchaser’s and any Beneficial
Purchasers’ name and other information relating to this Subscription Agreement and
the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the
PCMLTFA. To the best of the Purchaser’s and each Beneficial Purchaser’s knowledge,
none of the funds to be provided by the Purchaser or a Beneficial Purchaser, if any,
is being tendered on behalf of a person or entity who has not been identified to the
Purchaser, and the Purchaser shall promptly notify the Company if the Purchaser or a
Beneficial Purchaser, if any, discovers that any of such representations cease to be
true, and shall promptly provide the Company with all necessary information in
connection therewith.

(i) Resale Restrictions. The Purchaser and each Beneficial Purchaser, if any,
(A) has been advised to, and will, consult its own legal advisors with respect to
trading in the Purchaser’s Securities (including the subscription therefor
hereunder), and with respect to the resale restrictions imposed by the Securities
Laws of the Designated Provinces in which the Purchaser or such Beneficial Purchaser,
if any, resides and other applicable Securities Laws and the rules of the Trading
Market, (B) acknowledges that resale restrictions, including applicable hold periods
imposed by the Securities Laws or other resale restrictions applicable to such
Securities that restrict the ability of the Purchaser or such Beneficial Purchaser,
if any, to resell such Securities are applicable to the Purchaser’s Securities and
may be of indefinite duration, (C) acknowledges that the Purchaser or such Beneficial
Purchaser, if any, is solely responsible to determine applicable resale restrictions, (D) is solely responsible
(and the Company is not in any way responsible) for compliance with applicable resale
restrictions and agrees to comply with all applicable resale restrictions, and (E) is
aware that the Purchaser or such Beneficial Purchaser, if any, may not be able to
resell the Securities except in accordance with limited exemptions under the
Securities Laws and other applicable securities laws.

 

-23-

 

(j) No Purchase or Offer in United States. The Canadian Purchaser and each
Beneficial Purchaser, if any:

	 	(i)	 	is not a discretionary account or similar account (other than an
estate or trust) held for the benefit or account of a non-U.S. Person by
a professional fiduciary organized, incorporated, or (if an individual)
resident in the United States; or

	 
	 	(ii)	 	is not, and is not purchasing the Purchaser’s Securities for
the account or benefit of, a U.S. Person under the U.S. Securities Act or
for resale in the United States or to a U.S. Person in violation of
United States federal or state securities laws, was not offered the
Purchaser’s Securities in the United States, at the time the purchase
order originated was outside the United States, and did not execute or
deliver this Subscription Agreement or related documents in the United
States.

(k) Company or Unincorporated Organization. If the Purchaser or a Beneficial
Purchaser, if any, is a corporation or a partnership, syndicate, trust, association,
or any other form of unincorporated organization or organized group of persons, the
Purchaser or such Beneficial Purchaser was not created or being used solely to permit
purchases of or to hold Securities without a prospectus in reliance on a prospectus
exemption.

(l) Absence of Offering Memorandum or Similar Document. The Purchaser and
each Beneficial Purchaser, if any, have not received, nor have they requested, nor do
they have any need to receive, any offering memorandum or any other document
describing the business and affairs of the Company (other than this Subscription
Agreement and SEC Reports), nor has any document been prepared for delivery to, or
review by, any of them or any other prospective purchasers for the purpose of
assisting them in making an investment decision in respect of the Securities.

(m) Absence of Advertising. The offering and sale of the Securities to the
Purchaser and each Beneficial Purchaser, if any, was not made or solicited through or
as a result of, and the Purchaser and each such Beneficial Purchaser is not aware of,
any general solicitation or general advertising with respect to the offering of the Securities, including advertisements, articles,
notices or other communications published, communicated or broadcast (as applicable)
in any printed public media, radio, television or telecommunications, including
electronic display (such as the Internet, including but not limited to the Company’s
website), or any seminar or meeting whose attendees have been invited by general
solicitation or general advertising.

 

-24-

 

(n) No Undisclosed Information. The Purchaser’s Securities are not being
purchased by the Purchaser or each Beneficial Purchaser, if any, as a result of, nor
does the Purchaser or any Beneficial Purchaser, if any, have knowledge of, any
material fact (as defined in applicable Securities Laws) or material change (as
defined in applicable Securities Laws) concerning the Company that has not been
generally disclosed and the decision of the Purchaser or such Beneficial Purchaser,
if any, to tender this irrevocable offer and acquire the Purchaser’s Securities has
not been made as a result of any oral or written representation as to fact or
otherwise made by or on behalf of the Company or any employees, agents or affiliates
thereof or any other person and is based entirely upon the SEC Reports.

(o) Investment Suitability. The Purchaser and each Beneficial Purchaser, if
any, understands that an investment in the Company includes a high degree of risk,
has such knowledge and experience in investments, financial and business affairs as
to be capable of evaluating the merits and risks of the investment hereunder in the
Purchaser’s Securities, is in a financial position to hold such Securities for an
indefinite period of time, and is able to bear the economic risk of total loss of
such investment.

(p) Resale. The Purchaser and each Beneficial Purchaser, if any, fully
understands that the Securities may not be sold in Canada or to Canadian residents,
unless (A) the sale is made pursuant to an available exemption from the prospectus
and registration requirements under applicable Securities Laws in the Purchaser’s
province or territory of residence, or (B) in addition to other resale requirements,
the required “hold” period under applicable Securities Laws, which may be of
indefinite duration, has expired since the acquisition by it of the Securities to be
sold and all other requirements of applicable Securities Laws are fulfilled, and the
Company is a reporting issuer under the Securities Laws at the time of the trade. The
Purchaser and each Beneficial Purchaser, if any, will not resell the Securities
except in accordance with the provisions of applicable Securities Laws.

(q) Other Documents. The Purchaser and each Beneficial Purchaser, if any,
will promptly execute, deliver and file any other documents required by applicable
Securities Laws or the Securities Commissions or the Trading Market
in order to permit the purchase of the Purchaser’s Securities on the terms herein set
forth which the Company requests.

 

-25-

 

(r) Personal Information. The Purchaser for and on behalf of itself and each
Beneficial Purchaser, if any, acknowledges that this Subscription Agreement requires
the Purchaser and each Beneficial Purchaser, if any, to provide certain personal
information (“Personal Information”) to the Company. Such Personal Information is
being collected and will be used by the Company for the purposes of completing the
offering of the Securities, which includes, without limitation, determining the
Purchaser’s and each Beneficial Purchaser’s eligibility to purchase the Purchaser’s
Securities under applicable Securities Laws, preparing and registering certificates
representing the Purchaser’s Securities and completing filings required by the
Securities Commissions and the Trading Market. The Purchaser, on its own behalf and
on behalf of each Beneficial Purchaser, if any, agrees that the Purchaser’s and each
Beneficial Purchaser’s Personal Information may be disclosed by the Company to: (A)
stock exchanges and applicable securities regulatory authorities, (B) a registrar and
transfer agent of the Company, and (C) any of the other parties involved in the
proposed offering of the Securities, including legal counsel, and may be included in
record books in connection with the offering of the Securities. By executing this
Subscription Agreement, the Purchaser for and on behalf of itself and each Beneficial
Purchaser, if any, consents to the foregoing collection, use and disclosure of the
Purchaser’s and each Beneficial Purchaser’s Personal Information, the collection, use
and disclosure of such Personal Information by the Securities Commissions and the
Trading Market, and the collection, use and disclosure of such Personal Information
by the Company for corporate finance and shareholder communication purchases or such
other purposes as are necessary to the Company’s business. The Purchaser, on its own
behalf and on behalf of each Beneficial Purchaser, acknowledges that the Trading
Market may collect such Personal Information. The Purchaser also consents for and on
behalf of itself and each Beneficial Purchaser, if any, to the filing of copies or
originals of any of the Purchaser’s or such Beneficial Purchaser’s documents
described in Section 2.3 as may be required to be filed with any stock exchange or
securities regulatory authority in connection with the transactions contemplated
hereby.

The Purchaser, on its own behalf and on behalf of each Beneficial Purchaser, if any,
acknowledges and agrees that the foregoing representations and warranties are made by it
with the intention that they may be relied upon by the Company in determining the
Purchaser’s eligibility or the eligibility of such Beneficial Purchaser, if any, to purchase
the Purchaser’s Securities under Securities Laws. The Purchaser on its own behalf and on
behalf of each Beneficial Purchaser, if any, further agrees that by

 

-26-

 

accepting delivery of the Purchaser’s Securities on the Closing Date, it shall be
representing and warranting that the foregoing representations and warranties are true and
correct as at the Closing Date with the same force and effect as if they had been made by
the Purchaser and such Beneficial Purchaser at the Closing Date and that they shall survive
the purchase by the Purchaser and such Beneficial Purchaser of the Purchaser’s Securities
and shall continue in full force and effect notwithstanding any subsequent disposition by
the Purchaser or such Beneficial Purchaser of the Purchaser’s Securities. The Purchaser on
its own behalf and on behalf of each Beneficial Purchaser, if any, undertakes to notify the
Company immediately of any change in any representation, warranty or other information
relating to the Purchaser or a Beneficial Purchaser set out in this Subscription Agreement
which takes place at or prior to the Closing date.

3.4 Purchaser’s Acknowledgements. The Canadian Purchaser for and on behalf of itself
and each Beneficial Purchaser, if any, acknowledges and agrees that:

(a) (A) no agency, securities commission, governmental authority, regulatory body,
stock exchange or other entity has reviewed, passed on, made any finding or
determination as to the merits of investment in, nor have any such agencies,
securities commissions, governmental authorities, regulatory bodies, stock exchanges
or other entities made any recommendation or endorsement with respect to, the
Securities, the Company or the offering of the Securities; (B) there is no government
or other insurance covering the Securities; and (C) there are risks associated with
the purchase of the Purchaser’s Securities;

(b) no prospectus, registration statement, offering memorandum or other offering
document has been filed by the Company with a securities commission or other
securities regulatory authority in any jurisdiction in or outside of Canada in
connection with the issuance of the Purchaser’s Securities, the Securities or the
offering of the Securities and such issuances are exempt from the prospectus
requirements otherwise applicable under the provisions of applicable Securities Laws
and United States Securities Laws and, as a result, in connection with its purchase
of the Purchaser’s Securities hereunder, as applicable:

	 	(i)	 	the Purchaser and such Beneficial Purchaser is restricted from
using most of the protections, rights and remedies available under
applicable Securities Laws including, without limitation, statutory
rights of rescission or damages;

	 
	 	(ii)	 	the Purchaser and such Beneficial Purchaser will not receive
information that may otherwise be required to be provided to the
Purchaser and such Beneficial Purchaser under applicable Securities
Laws or contained in a prospectus prepared in accordance with applicable
Securities Laws;

 

-27-

 

	 	(iii)	 	the Company is relieved from certain obligations that would
otherwise apply under applicable Securities Laws; and

	 
	 	(iv)	 	there are restrictions on the Purchaser’s ability to resell the
Purchaser’s Securities and it is the responsibility of the Purchaser and
such Beneficial Purchaser to determine these restrictions and to comply
with them before selling any such Securities;

(c) the Purchaser’s Securities are being offered for sale only on a “private
placement” basis;

(d) the Purchaser and such Beneficial Purchaser, if any, has had the opportunity to
review this Subscription Agreement and the transactions contemplated by this
Subscription Agreement and fully understands the same;

(e) all costs and expenses incurred by the Purchaser and such Beneficial Purchaser
(including any fees and disbursements of legal counsel retained by the Purchaser and
such Beneficial Purchaser) relating to the purchase of the Purchaser’s Securities
shall be borne by the Purchaser;

(f) none of the Company’s counsel assume any responsibility or liability of any
nature whatsoever for the accuracy or adequacy of the SEC Reports and as to whether
all information concerning the Company required to be disclosed by the Company has
been generally disclosed and that such counsel are entitled to the benefit of this
subsection;

(g) the Purchaser and each Beneficial Purchaser, if any, is responsible for obtaining
such legal and tax advice as it considers necessary or appropriate in connection with
the execution, delivery and performance by it of this Subscription Agreement and the
transactions contemplated herein;

(h) the Purchaser and each Beneficial Purchaser, if any, is solely responsible for
its own due diligence investigation of the Company and its business, for its own
analysis of the merits and risks of its investment in the Securities made pursuant to
this Subscription Agreement and for its own analysis of the terms of its investment;

(i) the Purchaser’s Securities will be subject to certain resale restrictions under
the Securities Laws and the Purchaser and each Beneficial Purchaser, if any, agrees
to comply with such restrictions and the Purchaser and each Beneficial Purchaser, if
any, has been advised to consult its own legal advisors with respect to applicable resale restrictions and is solely responsible (and the
Company is not in any manner responsible) for complying with such restrictions;

 

-28-

 

(j) the Company shall be entitled to make a notation on its records or give
instructions to any transfer agent of the Securities in order to implement the
restrictions on transfer set forth and described herein; and

(k) no person has made any written or oral representations or undertakings (A) that
any person will resell or repurchase the Purchaser’s Securities, (B) that any person
will refund all or any part of the Purchase Price, or (C) as to the future price or
value of the Purchaser’s Securities.

3.5 Further Authorization of the Purchaser. If the Purchaser or any Beneficial
Purchaser is resident in or otherwise subject to the securities laws of the Province of
Ontario, the Purchaser for and on behalf of itself and each Beneficial Purchaser, if any,
authorizes the indirect collection of Personal Information pertaining to the Purchaser and
such Beneficial Purchaser by the OSC and acknowledges and agrees that the Purchaser and such
Beneficial Purchaser has been notified by the Company (i) of the delivery to the OSC of
Personal Information pertaining to the Purchaser and such Beneficial Purchaser, including,
without limitation, the full name, residential address and telephone number of the Purchaser
and such Beneficial Purchaser, the number and type of securities purchased and the total
Purchase Price paid in respect of the Purchaser’s Securities, (ii) that this information is
being collected indirectly by the OSC under the authority granted to it under applicable
Securities Laws, (iii) that this information is being collected for the purposes of the
administration and enforcement of the securities laws of Ontario, and (iv) that the title,
business address and business telephone number of the public official in Ontario who can
answer questions about the OSC’s indirect collection of the information is the
Administrative Assistant to the Director of Corporate Finance, the Ontario Securities
Commission, Suite 1903, Box 5520, Queen Street West, Toronto, Ontario M5H 3S8, Telephone:
(416) 593-8086, Facsimile: (416) 593-8252.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than (i)
pursuant to an effective registration statement; or (ii) to the Company, the Company
may require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement.

 

-29-

 

(b) The Purchaser agrees to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.

4.2 Furnishing of Information. As long as the Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. As long as the Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make available in accordance with Rule 144(c) such information
as is required for the Purchaser to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time, to enable such Person to sell such
Securities without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the Securities to the
Purchaser or that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.

4.4 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for (i) general working capital purposes, (ii) to finance acquisitions,
and (iii) to finance software development and marketing.

 

-30-

 

4.5 Indemnification of Purchaser. The Company will indemnify and hold each Purchaser
and its directors, officers, shareholders, partners, employees and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation, that any
such Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents.
The Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred.

4.6 Indemnification of Company. Purchaser agrees to indemnify, defend and hold
harmless the Company and its respective affiliates and agents from and against any and all
demands, claims, actions or causes of action, judgments, assessments, losses, liabilities,
damages or penalties and reasonable attorneys’ fees and related disbursements incurred by
the Company that arise out of or result from a breach of any representations or warranties
made by Purchaser herein, and Purchaser agrees that in the event of any breach of any
representations or warranties made by Purchaser herein, the Company may, at its option,
forthwith rescind the sale of the Units to Purchaser.

4.7 Prohibition of Short Sales. Prior to the termination of this Offering, each
Purchaser shall not effect any “short sale” of the Company’s common stock. Each Purchaser
acknowledges and agrees that, in the event of an actual or threatened breach of any of the
provisions of this Agreement by such party, the harm to the others will be immediate,
substantial and irreparable and the monetary damages will be inadequate. Accordingly, each
Purchaser agrees that, in such event, the others will be entitled to equitable relief,
including an injunction and an order of specific performance, in addition to any and all
other remedies at law or in equity.

4.8 Confidentiality. Purchaser acknowledges and agrees that:

(a) All of the information contained in the Transaction Documents is of a confidential
nature and may be regarded as material non-public information under Regulation FD of the
Securities Act.

(b) The Transaction Documents have been furnished to Purchaser by the Company for the
sole purpose of enabling Purchaser to consider and evaluate an investment in the Company,
and will be kept confidential by Purchaser and not used for any other purpose.

 

-31-

 

(c) The existence of the Transaction Documents and the information contained therein
shall not, without the prior written consent of the Company, be disclosed by Purchaser to
any person or entity, other than Purchaser’s personal financial and legal advisors for the
sole purpose of evaluating an investment in the Company, and Purchaser will not, directly or
indirectly, disclose or permit Purchaser’s personal financial and legal advisors to
disclose, any of such information without the prior written consent of the Company.

(d) Purchaser shall make its representatives aware of the terms of this Section 4.8 and
to be responsible for any breach of this Agreement by such representatives.

(e) Purchaser shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade publications or
the press with respect to the subject matter of the Transaction Documents .

(f) If Purchaser decides to not pursue further investigation of the Company or to not
participate in the Offering, Purchaser will promptly return this Agreement and any
accompanying documentation to the Company.

4.9 Non-Public Information. Purchaser acknowledges that information concerning the
matters that are the subject matter of the Transaction Documents constitutes material
non-public information under United States federal securities laws, and that United States
federal securities laws prohibit any person who has received material non-public information
relating to the Company from purchasing or selling securities of the Company, or from
communicating such information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell securities of the Company.
Accordingly, until such time as any such non-public information has been adequately
disseminated to the public, Purchaser shall not purchase or sell any securities of the
Company, or communicate such information to any other person.

ARTICLE V.

MISCELLANEOUS

5.1 Fees and Expenses. Except as otherwise set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Securities.

 

-32-

 

5.2 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

5.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature pages attached
hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the
signature pages attached hereto.

5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchaser or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.

5.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will be applied
against any party.

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns.

5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

5.8 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of Nevada, without regard to
the principles of conflicts of law thereof. If any party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

-33-

 

5.9 Survival. The representations, warranties, agreements and covenants contained
herein shall survive the Closing and delivery of the Units.

5.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page were an
original thereof.

5.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a reasonable
substitute therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.

5.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefore, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs associated with the
issuance of such replacement Securities.

5.13 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchaser and the Company will
be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to waive in any
action for specific performance of any such obligation the defense that a remedy at law
would be adequate.

 

-34-

 

5.14 Currency. Save as otherwise set forth herein, all amounts expressed in dollars
or “$” shall refer to the lawful currency of the United States in immediately available
funds.

5.15 Language. The parties have requested that this document and all related
documents be drafted in the English language only. Les parties ont demandé que ce document
et tous documents y afférent soient rédigés en anglais seulement.

(Signature Page Follows)

 

-35-

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date first
indicated above.

	 	 	 
	Address for Notice:

	 	Rory Olson
	 

	 	Chief Executive Officer
	 

	 	Neutron Enterprises, Inc.
	 

	 	3500 de Maisonneuve West
	 

	 	Suite 1650
	 

	 	Montreal, Quebec H3Z 3C1
	 

	 	Canada
	 
	 	 
	 

	 	Tel: (514) 871-2222
	 
	 	 
	With copy to (which shall not

	 	Neutron Enterprises Inc.
	constitute notice):

	 	c/o Francine Wiseman
	 

	 	Corporate Secretary
	 

	 	5 Place Ville Marie
	 

	 	Suite 1203
	 

	 	Montreal, Quebec
	 

	 	H3B 2G2
	 
	 	 
	 

	 	Tel: (514) 875-2100
	 

	 	Fax: (514) 875-8237
	 

	 	E-mail: fwiseman@spiegelsohmer.com

[SIGNATURE PAGE CONTINUES]

 

-36-

 

(PURCHASER’S SIGNATURE PAGE)

[_________________________]

By:__________________________

Name:

Title:

Address:

Subscription Amount: U.S.$

[_________________________]

 

-37-

 

ANNEX I

DISCLOSURE SCHEDULE 3.1

 

 

 

EXHIBIT A

WARRANT

 

 

 

SCHEDULE A

ACCREDITED INVESTOR STATUS CERTIFICATE

TO BE COMPLETED BY ONTARIO AND QUEBEC ACCREDITED INVESTORS

The categories listed herein contain certain specifically defined terms. If you are unsure as to
the meanings of those terms, or are unsure as to the applicability of any category below, please
contact your broker and/or legal advisor before completing this certificate.

In connection with the purchase by the undersigned Purchaser of the Purchaser’s Securities, the
Purchaser, on its own behalf and on behalf of each Beneficial Purchaser, if any, hereby represents,
warrants, covenants and certifies to the Company (and acknowledges that the Company and its counsel
are relying thereon) that:

	 	(b)	 	the Purchaser or each such Beneficial Purchaser is resident in or otherwise
subject to the securities laws of one of the provinces of Ontario or Quebec;

	 
	 	(c)	 	the Purchaser or each such Beneficial Purchaser is purchasing the Purchaser’s
Securities as principal (as defined in applicable Securities Laws) for its own account
and not for the benefit of any other person;

	 
	 	(d)	 	the Purchaser or each such Beneficial Purchaser is an “accredited investor”
within the meaning of NI 45-106 on the basis that the Purchaser or such Beneficial
Purchaser qualifies in the category of “accredited investor” reproduced below beside
which the Purchaser has indicated the Purchaser or each such Beneficial Purchasers
qualifies; and

	 
	 	(e)	 	upon execution of this Schedule A by the Purchaser, this Schedule A shall be
incorporated into and form a part of the Subscription Agreement.

(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)

	 	 	 	 	 
	o

	 	(a)
	 	a Canadian financial institution, or a Schedule III bank;
	 
	 	 	 	 
	o

	 	(b)
	 	the Business Development Bank of Canada incorporated under the Business
Development Bank of Canada Act (Canada);

 

 

 

	 	 	 	 	 
	o

	 	(c)
	 	a subsidiary of any person referred to in paragraphs (a) or (b), if the
person owns all of the voting securities of the subsidiary, except the voting
securities required by law to be owned by directors of that subsidiary;
	 
	 	 	 	 
	o

	 	(d)
	 	a person registered under the securities legislation of a jurisdiction of
Canada as an adviser or dealer, other than a person registered solely as a
limited market dealer under one or both of the Securities Act (Ontario) or the
Securities Act (Newfoundland and Labrador);
	 
	 	 	 	 
	o

	 	(e)
	 	an individual registered or formerly registered under the securities
legislation of a jurisdiction of Canada as a representative of a person
referred to in paragraph (d);
	 
	 	 	 	 
	o

	 	(f)
	 	the Government of Canada or a jurisdiction of Canada, or any crown
corporation, agency or wholly owned entity of the Government of Canada or a
jurisdiction of Canada;
	 
	 	 	 	 
	o

	 	(g)
	 	a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de l’île de
Montréal or an intermunicipal management board in Québec;
	 
	 	 	 	 
	o

	 	(h)
	 	any national, federal, state, provincial, territorial or municipal
government of or in any foreign jurisdiction, or any agency of that government;
	 
	 	 	 	 
	o

	 	(i)
	 	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 jurisdiction of Canada;
	 
	 	 	 	 
	o

	 	(j)
	 	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 CDN.$1,000,000;
	 
	 	 	 	 
	o

	 	(k)
	 	an individual whose net income before taxes exceeded CDN.$200,000 in each
of the two most recent calendar years or whose net income before taxes combined
with that of a spouse exceeded CDN.$300,000 in each of the two most recent
calendar years and who, in either case, reasonably expects to exceed that net
income level in the current calendar year;

 

 

 

	 	 	 	 	 
	o

	 	(l)
	 	an individual who, either alone or with a spouse, has net assets of at
least CDN.$5,000,000;
	 
	 	 	 	 
	o

	 	(m)
	 	a person, other than an individual or investment fund, that has net assets
of at least CDN.$5,000,000 as shown on its most recently prepared financial
statements;
	 
	 	 	 	 
	o

	 	(n)
	 	an investment fund that distributes or has distributed its securities only
to (i) a person that is or was an accredited investor at the time of the
distribution, (ii) a person that acquires or acquired securities in the
circumstances referred to in sections 2.10 [Minimum amount investment] and 2.19
[Additional investment in investment funds] of NI 45-106, or (iii) a person
described in paragraph (i) or (ii) that acquires or acquired securities under
section 2.18 [Investment fund reinvestment] of NI 45-106;
	 
	 	 	 	 
	o

	 	(o)
	 	an investment fund that distributes or has distributed securities under a
prospectus in a jurisdiction of Canada for which the regulator or, in Québec,
the securities regulatory authority, has issued a receipt;
	 
	 	 	 	 
	o

	 	(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 in a jurisdiction of Canada or a foreign jurisdiction, acting on
behalf of a fully managed account managed by the trust company or trust
corporation, as the case may be;
	 
	 	 	 	 
	o

	 	(q)
	 	a person acting on behalf of a fully managed account managed by that
person, if that person (i) is registered or authorized to carry on business as
an adviser or the equivalent under the securities legislation of a jurisdiction
of Canada or a foreign jurisdiction, and (ii) in Ontario, is purchasing a
security that is not a security of an investment fund;
	 
	 	 	 	 
	o

	 	(r)
	 	a registered charity under the Income Tax Act (Canada) that, in regard to
the trade, has obtained advice from an eligibility adviser or an adviser
registered under the securities legislation of the jurisdiction of the
registered charity to give advice on the securities being traded;
	 
	 	 	 	 
	o

	 	(s)
	 	an entity organized in a foreign jurisdiction that is analogous to any of
the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and
function;

 

 

 

	 	 	 	 	 
	o

	 	(t)
	 	a person in respect of which all of the owners of interests, direct,
indirect or beneficial, except the voting securities required by law to be
owned by directors, are persons that are accredited investors;
	 
	 	 	 	 
	o

	 	(u)
	 	an investment fund that is advised by a person registered as an adviser or
a person that is exempt from registration as an adviser, or
	 
	 	 	 	 
	o

	 	(v)
	 	a person that is recognized or designated by the securities regulatory
authority or, except in Ontario and Québec, the regulator as (i) an accredited
investor, or (ii) an exempt purchaser in Alberta .

For the purposes hereof, the following definitions are included for convenience:

	 	(a)	 	“Canadian financial institution” means (i) an association governed by the
Cooperative Credit Associations Act (Canada) or a central cooperative credit society
for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan
corporation, trust company, trust corporation, insurance company, treasury branch,
credit union, caisse populaire, financial services cooperative, or league that, in each
case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on
business in Canada or a jurisdiction of Canada;

	 
	 	(b)	 	“control person” has the same meaning as in securities legislation except in
Ontario and Québec where control person means any person that holds or is one of a
combination of persons that holds (i) a sufficient number of any of the securities of
an issuer so as to affect materially the control of the issuer, or (ii) more than 20%
of the outstanding voting securities of an issuer except where there is evidence
showing that the holding of those securities does not affect materially the control of
the issuer;

	 
	 	(c)	 	“entity” means a company, syndicate, partnership, trust or unincorporated
organization;

	 
	 	(d)	 	“financial assets” means cash, securities, or a contract of insurance, a
deposit or an evidence of a deposit that is not a security for the purposes of
securities legislation;

	 
	 	(e)	 	“founder” means, in respect of an issuer, a person who, (i) acting alone, in
conjunction, or in concert with one or more persons, directly or indirectly, takes the
initiative in founding, organizing or substantially reorganizing the business of the
issuer, and (ii) at the time of the trade is actively involved in the business of the
issuer;

 

 

 

	 	(f)	 	“fully managed account” means an account of a client for which a person makes
the investment decisions if that person has full discretion to trade in securities for
the account without requiring the client’s express consent to a transaction;

	 
	 	(g)	 	“investment fund” means a mutual fund or a non-redeemable investment fund;

	 
	 	(h)	 	“person” includes (i) an individual, (ii) a corporation, (iii) a partnership,
trust, fund an association, syndicate, organization or other organized group of person,
whether incorporated or not, and (iv) an individual or other person in that person’s
capacity as a trustee, executor, administrator or personal or other legal
representative;

	 
	 	(i)	 	“related liabilities” means liabilities incurred or assumed for the purpose of
financing the acquisition or ownership of financial assets or liabilities that are
secured by financial assets;

	 
	 	(j)	 	“Schedule III bank” means an authorized foreign bank named in Schedule III of
the Bank Act (Canada);

	 
	 	(k)	 	“spouse” means an individual who (i) is married to another individual and is
not living separate and apart within the meaning of the Divorce Act (Canada), from the
other individual, (ii) is living with another individual in a marriage-like
relationship, including a marriage-like relationship between individuals of the same
gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or
is an adult interdependent partner within the meaning of the Adult Interdependent
Relationships Act (Alberta); and

	 
	 	(l)	 	“subsidiary” means an issuer that is controlled directly or indirectly by
another issuer and includes a subsidiary of that subsidiary.

In NI 45-106 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 NI 45-106 a person (first person) is considered to control another person (second person) if (a)
the first person, directly or indirectly, beneficially owns or exercises control or direction over
securities of the second person carrying votes which, if exercised, would entitle the first person
to elect a majority of the directors of the second person, unless that first person holds the
voting securities only to secure an obligation, (b) the second person is a partnership, other than
a limited partnership, and the first person holds more than 50% of the interests of the
partnership, or (c) the second person is a limited partnership and the general partner of the
limited partnership is the first person.

 

 

 

In NI 45-106 a trust company or trust corporation described in paragraph (p) above of the
definition of “accredited investor” (other than in respect of a trust company or trust corporation
registered under the laws of Prince Edward Island that is not registered or authorized under the
Trust and Loan Companies Act (Canada) or under comparable legislation in another jurisdiction of
Canada) is deemed to be purchasing as principal.

In NI 45-106 a person described in paragraph (q) above of the definition of “accredited investor”
is deemed to be purchasing as principal.

The foregoing representations, warranties, covenants and certifications contained in this
certificate are true and accurate as of the date of this certificate and will be true and accurate
as of the Closing Date. If any such representations, warranties, covenants and certifications shall
not be true and accurate prior to the Closing Date, the undersigned shall give immediate written
notice of such fact to the Company prior to the Closing Date.

	 	 	 	 	 	 	 
	Dated:

	 	 	 	Signed:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Witness (If Purchaser is an Individual)	 	Print the name of Purchaser
	 
	 	 	 	 	 	 
	 	 	 
	Print Name of Witness	 	If Purchaser is other than an individual,
print name and title of Authorized Signing
Officer

 

 

 

SCHEDULE B

MINIMUM AMOUNT INVESTMENT STATUS CERTIFICATE

TO BE COMPLETED BY ONTARIO AND QUEBEC PURCHASERS THAT ARE SUBSCRIBING UNDER THE “MINIMUM AMOUNT

INVESTMENT” EXEMPTION

In connection with the purchase by the undersigned Purchaser of the Purchaser’s Securities, the
Purchaser, on its own behalf and on behalf of each Beneficial Purchaser, if any, hereby represents,
warrants, covenants and certifies to the Company (and acknowledges that the Company and its counsel
are relying thereon) that:

	 	(a)	 	the Purchaser or each Beneficial Purchaser is resident in or otherwise subject
to the securities laws of one of the provinces of Ontario or Quebec;

	 
	 	(b)	 	the Purchaser or each Beneficial Purchaser is purchasing the Purchaser’s
Securities as principal (as defined in applicable Securities Laws) for its own account
and not for the benefit of any other person;

	 
	 	(c)	 	the Purchaser’s Securities have an acquisition cost to the Purchaser or each
Beneficial Purchaser of not less than 150,000 Canadian Dollars, payable in cash at the
Closing of the offering of the Securities;

	 
	 	(d)	 	the Purchaser’s Securities are a security of a single issuer;

	 
	 	(e)	 	the Purchaser and each Beneficial Purchaser was not created nor is it being
used solely to purchase or hold securities in reliance on the registration and
prospectus exemptions provided under Section 2.10 of NI 45-106, it pre-existed the
offering of the Securities and has a bona fide purpose other than investment in the
Securities; and

	 
	 	(f)	 	upon execution of this Schedule B by the Purchaser, this Schedule B shall be
incorporated into and form a part of the Subscription Agreement.

The foregoing representations, warranties, covenants and certifications contained in this
certificate are true and accurate as of the date of this certificate and will be true and accurate
as of the Closing Date. If any such representations, warranties, covenants and certifications shall
not be true and accurate prior to the Closing Date, the undersigned shall give immediate written
notice of such fact to the Company prior to the Closing Date.

 

 

 

	 	 	 	 	 	 	 
	Dated:

	 	 	 	Signed:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Witness (If Purchaser is an Individual)	 	Print the name of Purchaser
	 
	 	 	 	 	 	 
	 	 	 
	Print Name of Witness	 	If Purchaser is other than an individual,
print name and title of
Authorized Signing Officer

 

 

 

SCHEDULE C

EMPLOYEE, EXECUTIVE OFFICER, DIRECTOR OR CONSULTANT STATUS CERTIFICATE

TO BE COMPLETED BY EMPLOYEES, EXECUTIVE OFFICERS, DIRECTORS OR CONSULTANTS OF THE COMPANY

The categories listed herein contain certain specifically defined terms. If you are unsure as to
the meanings of those terms, or are unsure as to the applicability of any category below, please
contact your broker and/or legal advisor before completing this certificate.

In connection with the purchase by the undersigned Purchaser of the Purchaser’s Securities, the
Purchaser hereby represents, warrants, covenants and certifies to the Company (and acknowledges
that the Company and its counsel are relying thereon) that:

	 	(a)	 	the Purchaser is resident in or otherwise subject to the securities laws of one
of the provinces of Ontario or Quebec;

	 
	 	(b)	 	the Purchaser is purchasing the Purchaser’s Securities as principal for its own
account and not for the benefit of any other person;

	 
	 	(c)	 	the Purchaser’s participation in the trade is voluntary;

	 
	 	(d)	 	the Purchaser fits within one of the categories set out in Section 2.24 of NI
45-106 and reproduced below beside which the undersigned has indicated the undersigned
belongs to such category; and

	 
	 	(e)	 	upon execution of this Schedule C by the Purchaser, this Schedule C shall be
incorporated into and form a part of the Subscription Agreement.

(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY)

	 	 	 	 	 
	o

	 	(a)
	 	an employee, executive officer, director or consultant of the Company;
	 
	 	 	 	 
	o

	 	(b)
	 	an employee, executive officer, director or consultant of a related entity
of the Company; or
	 
	 	 	 	 
	o

	 	(c)
	 	a permitted assign of a person referred to in paragraph (a) or (b).

 

 

 

For the purposes hereof, the following definitions are included for convenience:

	(a)	 	“consultant” means, for an issuer, a person, other than an employee, executive officer, or
director of the issuer or of a related entity of the issuer, that (a) is engaged to provide
services to the issuer or a related entity of the issuer, other than services provided in
relation to a distribution, (b) provides the services under a written contract with the issuer
or a related entity of the issuer, and (c) spends or will spend a significant amount of time
and attention on the affairs and business of the issuer or a related entity of the issuer;

	 
	(b)	 	“executive officer” means, for an issuer, an individual who is (i) a chair, vice-chair or
president, (ii) a vice-president in charge of a principal business unit, division or function
including sales, finance or production, (iii) an officer of the issuer or any of its
subsidiaries and who performs a policy-making function in respect of the issuer, or (iv)
performing a policy-making function in respect of the issuer;

	 
	(c)	 	“director” means (i) a member of the board of directors of a company or an individual who
performs similar functions for a company, and (ii) with respect to a person that is not a
company, an individual who performs functions similar to those of a director of a company;

	 
	(d)	 	“permitted assign” means, for a person that is an employee, executive officer, director or
consultant of an issuer or of a related entity of the issuer,

	 	(i)	 	a trustee, custodian, or administrator acting on behalf of, or for the benefit
of the person,

	 
	 	(ii)	 	a holding entity of the person,

	 
	 	(iii)	 	an RRSP or a RRIF of the person,

	 
	 	(iv)	 	a spouse of the person,

	 
	 	(v)	 	a trustee, custodian, or administrator acting on behalf of, or for the benefit
of the spouse of the person,

	 
	 	(vi)	 	a holding entity of the spouse of the person, or

	 
	 	(vii)	 	an RRSP or a RRIF of the spouse of the person;

	(e)	 	“related entity” means, for an issuer, a person that controls or is controlled by the issuer
or that is controlled by the same person that controls the issuer; and

	 
	(f)	 	“related person” means, for an issuer, (i) a director or executive officer of the issuer or
of a related entity of the issuer, (ii) an associate of a director or executive officer of the
issuer or of a related entity of the issuer, or (iii) a permitted assign of a director or
executive officer of the issuer or of a related entity of the issuer.

In NI 45-106, a person (first person) is considered to control another person (second person) if
the first person, directly or indirectly, has the power to direct the management and policies
of the second person by virtue of (a) ownership of or direction over voting securities in the
second person, (b) a written agreement or indenture, (c) being the general partner or controlling
the general partner of the second person, or (d) being a trustee of the second person.

 

 

 

In NI 45-106 participation in a trade is considered voluntary if (a) in the case of an employee or
the employee’s permitted assign, the employee or the employee’s permitted assign is not induced to
participate in the trade by expectation of employment or continued employment of the employee with
the issuer or a related entity of the issuer, (b) in the case of an executive officer or the
executive officer’s permitted assign, the executive officer or the executive officer’s permitted
assign is not induced to participate in the trade by expectation of appointment, employment,
continued appointment or continued employment of the executive officer with the issuer or a related
entity of the issuer, and (c) in the case of a consultant or the consultant’s permitted assign, the
consultant or the consultant’s permitted assign is not induced to participate in the trade by
expectation of engagement of the consultant to provide services or continued engagement of the
consultant to provide services to the issuer or a related entity of the issuer.

The foregoing representations contained in this certificate are true and accurate as of the date of
this certificate and will be true and accurate as of the Closing Date. If any such representations
shall not be true and accurate prior to the Closing Date, the undersigned shall give immediate
written notice of such fact to the Company prior to the Closing Date.

	 	 	 	 	 	 	 
	Dated:

	 	 	 	Signed:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Witness (If Purchaser is an Individual)	 	Print the name of Purchaser
	 
	 	 	 	 	 	 
	 	 	 
	Print Name of Witness	 	If Purchaser is other than an individual,
print name and title of
Authorized Signing Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]