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EXHIBIT 10.99(e)  

THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) WITHOUT REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 
 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
  U.S. RESIDENTS    
  

Dated
for Reference: January 12, 2000 

TO: PHOTOCHANNEL NETWORKS INC.

Suite 800, 900 West Hastings Street

Vancouver, B.C. V6C 1E5 

 
 

Purchase of Subordinate Convertible Redeemable Debentures    
  

    1.  Subscription  

    1.1 The
undersigned (the "Lender") hereby irrevocably subscribes for and agrees to purchase from PhotoChannel Networks Inc. (the "Company"), subject to the terms
and conditions set forth herein, that number of subordinate convertible redeemable debentures of the Company (the "Debentures") set out above the Lender's name on the execution page hereof at a price
of $1,000 in principal amount of Debentures. Subject to the terms hereof, this Subscription will be effective upon its acceptance by the Company. The Debentures are being sold by the Company on a
non-brokered basis pursuant to applicable securities exemptions. The Private Placement is not subject to any minimum subscription level, and therefore the proceeds (the "Subscription
Proceeds") received from the Lender for this Subscription will be available to the Company immediately upon the acceptance of this Subscription by the Company. 

    1.2 All currency amounts set out herein refer to Canadian currency unless otherwise indicated.

    2.  Description of Debentures  

    2.1 The
Debentures shall be issued under and governed by the terms and conditions set forth in the certificates (the "Certificates") evidencing the Debentures. The
following description of the Debentures is a summary only and is subject to the detailed provisions of the Certificates evidencing the Debentures. 

    2.2 The
Debentures shall be secured obligations of the Company ranking subordinate to existing charges registered in favour of Saskatchewan Opportunities Corporation,
Xerox Canada Inc. and 597924 B.C. Ltd. 

    2.3 The
Lender agrees that it will advance an aggregate of $2,300,000 to the Company against the issue of the Debentures, as follows: 

	(a)
	$350,000
on or before January 30, 2000;

	(b)
	$750,000
on or before February 29, 2000; and

	(c)
	$1,200,000
on or before April 14, 2000. 

 

The
final advance of $1,200,000 will be conditional upon: 

	(a)
	the
Company obtaining by March 31, 2000 a firm date for the delivery of a Fuji Frontier Digital Minilab; and

	(b)
	the
Company securing facilities in the United States of America for the operation of the Minilab; 

which
conditions may be waived by the Lender. 

    2.4 The
Debentures shall mature and be repayable on April 30, 2000 (the "Maturity Date") unless redeemed or converted prior to such time. 

    2.5 No
interest will accrue on the outstanding principal amount of the Debentures. 

    2.6 The
Debentures are convertible at the option of the Lender at any time and from time to time, in principal amounts of $1,000, into common shares of the Company up
until the earlier of the date of repayment of the principal amount of the Debentures outstanding and the date which is ten (10) days after a notice of redemption is delivered by the Company
pursuant to Section 2.7 below at the rate of one share for each $0.50 converted. 

    2.7 The
Debentures may be redeemed by the Company, in whole or in part, at any time before April 30, 2000 upon ten days written notice to the Debenture holder.
The Company may repay the principal amount being redeemed (the "Redemption Amount") in cash or, at the Company's sole and exclusive discretion, repay such amount by issuing that number of common
shares obtained by dividing the Redemption Amount by $0.50. 

    2.8 In
this Agreement, the Debentures, Warrants (as hereinafter defined), and common shares issued on conversion, redemption or exercise thereof are collectively
referred to as the "Securities". 

    2.9 The
Company agrees that it will issue to the Lender at the time the Lender makes the advances set forth in Section 2.3 above, an aggregate of 920,000 common
share purchase warrants (the "Warrants"), each Warrant entitling the Lender to acquire one common share of the Company at the prices set forth below: 

	(a)
	140,000
Warrants on January 14, 2000 (with an exercise price of $0.75 per share);

	(b)
	a
further 300,000 Warrants in February 14, 2000 (with an exercise price of $1.00 per share) and

	(c)
	480,000
Warrants on April 14, 2000 (with an exercise price of $1.25 per share) 

The
Warrants will only be issued to the extent that advances are made by the Lender, at the rate of one warrant for each $2.50 advanced. 

    2.10 The
terms of this Private Placement are also set out on the Term Sheet in Schedule "V" hereto. 

    2.10 The
Company is not a reporting issuer in any jurisdiction other than British Columbia, Ontario, Quebec, and the United States. Any Debentures that are converted or
redeemed prior to the expiry of applicable hold periods will result in statutory restrictions on the resale of the common shares acquired thereby. Lenders are advised to consult their own legal
advisors in connection with any applicable resale restrictions. 

2

 

    2.11 The Lender understands that the Securities have not been and will not be registered under the 1933 Act or any state securities laws. 

    3.  Payment  

    3.1 The
Subscription Proceeds, for the initial instalment, must accompany this Subscription and shall be paid by certified cheque, bank draft or money order drawn on a
Canadian chartered bank and made payable to "Anfield Sujir Kennedy & Durno in trust", by wire transfer to the trust account of Anfield Sujir Kennedy & Durno, or in such other manner as
the Company may request. 

    3.2 The
Lender hereby acknowledges and agrees that the Private Placement is not subject to a minimum subscription level and accordingly, the amount representing the
Subscription Proceeds will be immediately made available to the Company against delivery of the Certificate by the Company. 

    3.3 The
Lender and the Company jointly and severally release, indemnify and save harmless Afield Sujir Kennedy & Durno from all costs, damages, charges, claims,
losses and expenses resulting from Anfield Sujir Kennedy & Durno's compliance in good faith with this Subscription. 

    4.  Questionnaire and Undertaking and Direction  

    4.1 The
Lender must complete, sign and return the following documents along with one (1) executed copy of this Subscription to the Company: 

	(a)
	Schedule I,
a direction to the Company with respect to registration and delivery instructions;

	(b)
	Schedule II,
a questionnaire and undertaking required by the Montreal Exchange ("ME");

	(c)
	Schedule III,
a declaration of investment intent and undertaking reuired by the ME; and

	(d)
	if
the Lender is a U.S. Person, an acknowledgment in the form attached as Schedule IV. 

    4.2 The
Lender shall complete, sign and return to the Company as soon as possible on request by the Company any other documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, stock exchanges and applicable law. The Lender acknowledges that the Company
will file, with the ME, the questionnaire and undertakings of those Lenders whose Subscriptions are accepted. 

    4.3 In
this Subscription, the term "U.S. Person" shall have the meaning ascribed thereto in Rule 902 of Regulation S under the 1933 Act, which for the
purpose of this Subscription includes any person in the United States. 

    5.  Closing  

    5.1 Delivery
and payment for the Debentures will be completed at the offices of Anfield Sujir Kennedy & Durno, Barristers & Solicitors, Suite
1600 - 609 Granville Street, Vancouver, British Columbia, at such time or times and on such date or dates as the Company may determine (each a "Closing Date"). Subject to the
prior receipt of all necessary regulatory approvals, the Company may complete the purchase and sale of any number of Debentures as it may determine, at one or more closings, as subscription proceeds
are received. 

    6.  Acknowledgments of Lender  

    6.1 The
Lender acknowledges and agrees that: 

	(a)
	the
Securities have not been registered under the 1933 Act or under any state securities laws, and cannot be offered or resold without registration under the 1933 Act and the
securities laws of all applicable states of the United States unless an exemption from registration is available or registration is not required pursuant to Regulation S under the 1933 Act, and
the 

3

 

Company
has no obligation or present intention of filing a registration statement under the 1933 Act in respect of the Securities; 

	(b)
	its
decision to execute this Subscription and purchase the Debentures agreed to be purchased hereunder has not been based upon any oral or written representation as to fact or
otherwise made by or on behalf of the Company, and that its decision is based entirely upon its review of information (the receipt of which is acknowledged) which has been filed by the Company with
the British Columbia
Securities Commission (the "BCSC") in compliance, or intended compliance, with applicable securities legislation (collectively the "Public Record"), including the Company's audited financial
statements as at and for the year ended September 30, 1999, and its unaudited financial statements as at and for the nine-month period ended June 30, 1999, (collectively the
"Financial Statements");

	(c)
	the
Company has advised the Lender that the Company is relying on an exemption from the requirements to provide the Lender with a prospectus and to sell the Securities through a
person registered to sell securities under the British Columbia Securities Act (the "B.C. Act"), and as a consequence of acquiring the
Securities pursuant to this exemption and the fact that no prospectus has been or is required to be filed with respect to any of the Securities under applicable Canadian or U.S. securities
legislation:

	(i)
	the
Lender is restricted from using certain of the civil remedies available under such legislation;

	(ii)
	the
Lender may not receive information that might otherwise be required to be provided to it under such legislation; and

	(iii)
	the
Company is relieved from certain obligations that would otherwise apply under such legislation; 

	(d)
	it
(or others for whom it is contracting hereunder) has been advised to consult its own legal advisors with respect to the merits and risks of an investment in the Securities and
with respect to applicable resale restrictions, and it (or others for whom it is contracting hereunder) is solely responsible (and neither the Company nor Anfield Sujir Kennedy & Durno is in
any way responsible) for compliance with applicable resale restrictions;

	(e)
	the
Company is a reporting issuer in British Columbia, Ontario, Quebec and the United States of America only, and any Securities issued to a Lender may be subject to indefinite
resale restrictions imposed under the laws of the jurisdiction in which such Lender is resident;

	(f)
	to
the knowledge of the Lender, the offer and sale of the Debentures was not accompanied by any advertisement;

	(g)
	the
offer made by this Subscription is irrevocable and requires acceptance by the Company;

	(h)
	this
Subscription is not enforceable by the Lender unless it has been accepted by the Company and the Lender waives any requirement on the Company's behalf to communicate its
acceptance for this Subscription to the Lender;

	(i)
	the
Private Placement is not subject to any minimum subscription level and accordingly, the Subscription Proceeds will be available to the Company on closing of the Private
Placement;

	(j)
	the
Securities are speculative investments which involve a substantial degree of risk;

	(k)
	there
is no government or other insurance covering the Securities;

	(1)
	the
Lender has had access to and has received all such information concerning the Company that the Lender has considered necessary in connection with the Lender's investment
decision, including, where required by law, a copy of the Offering Memorandum; 

4

 

	(m)
	no
agency, governmental authority, regulatory body, securities commission, stock exchange or other entity has reviewed or made any finding or determination as to the merit for
investment of, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to, the Securities;

	(n)
	the
Company will rely on the representations and warranties made herein or otherwise provided by the Lender to the Company in completing the sale and issue of the Securities to the
Lender; and

	(o)
	no
agent has been retained to act on behalf of the Company to solicit offers to purchase the Debentures, but in the event that a person does introduce the Company to a Lender, the
Company may pay such person a finder's fee in accordance with applicable laws in respect of any Debentures sold. 

    7.  Representations, Warranties and Covenants of the Lender  

    7.1 The
Lender hereby represents, Warrants and covenants to the Company (which representations, warranties and covenants shall survive closing) that; 

	(a)
	if
it is purchasing the Debentures as principal for its own account, it is purchasing such Debentures not for the benefit of any other person and not with a view to the resale or
distribution of any or all of the Debentures and;

	(i)
	it
is an individual and it will have an aggregate acquisition cost of purchasing the Debentures of not less than $97,000; or

	(ii)
	it
is not an individual but is a corporation, partnership, trust, fund, association or any other organization of a group of persons that was not
created solely, nor is it used primarily, to permit a group of individuals to purchase securities without a prospectus, and it will have an aggregate acquisition cost of purchasing the Debentures of
not less than $97,000 or, if it is such an entity created or used primarily for such purpose, each of the individuals who form part of the group has contributed at least $97,000 to such entity for the
purpose of purchasing the Debentures; or

	(iii)
	it
is (i) a "sophisticated purchaser" (as defined in Appendix A to Schedule IV hereof), (ii) a spouse, parent,
brother, sister or child of a senior officer or director of the Issuer, or of an affiliate of the Issuer, or (iii) a company all the voting securities of which are beneficially owned by one or
more of a senior officer or director of the Issuer or of an affiliate of the Issuer or a spouse, parent, brother, sister or child of a senior officer or director of the Issuer or of an affiliate of
the Issuer; or

	(iv)
	it
is a spouse, parent, brother, sister, child or close personal friend of a senior officer or director of the Issuer or an affiliate of the
Issuer, or a company all the voting securities of which are beneficially owned by one or more of a senior officer or director of the Issuer or a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer or of an affiliate of the Issuer; or

	(v)
	it
is not a resident of British Columbia and has otherwise complied with the laws pertaining to the purchase of Debentures hereunder in the
jurisdiction where the Lender is resident (and any other laws applicable to the Lender), which compliance shall be, at the Company's request, supported by a opinion of legal counsel prepared at the
Lender's expense in a form satisfactory to the Company; 

5

 

	(b)
	if
it is not purchasing the Debentures as principal for its own account, it is duly authorized to enter into this Subscription and to execute all documentation in connection with
the purchase on behalf of each beneficial purchaser and:

	(i)
	it
is a trust company or an insurer which has received a business authorization under the Financial Institutions
Act (British Columbia) or is a trust company or an insurer authorized under the laws of another province or territory of Canada to carry on such business in
such province or territory, and the Lender is purchasing the Debentures as an agent or trustee for accounts that are fully managed by the Lender;

	(ii)
	it
is an advisor who manages the investment portfolios of clients through discretionary authority granted by one or more clients and is registered
as an advisor under the Securities Act (British Columbia) (the "B.C. Act") or the laws of another province or territory of Canada, or
the Lender is exempt from such registration, and the Lender is purchasing the Debentures as an agent for accounts that are fully managed by the Lender;

	(iii)
	it
carries on business as a portfolio manager outside of Canada and certifies those matters set forth in section 6 of Schedule II to
this Subscription; or

	(iv)
	it
is purchasing as agent for a disclosed principal; 

and
it (or if the Lender is purchasing as agent for a disclosed principal, such principal) falls within one of the categories set out in section 7.1(a); 

	(c)
	the
Lender has no knowledge of a "material fact" or "material change", as those terms are defined in the B.C. Act, in respect of the affairs of the Company that has not been
generally disclosed to the public;

	(d)
	the
Lender and any beneficial purchaser for whom it is acting are resident in the jurisdiction set out under the heading "Name and Address of Lender" on the execution page of this
Subscription;

	(e)
	the
Lender has the legal capacity and competence to enter into and execute this Subscription and to take all actions required pursuant hereto and, if the Lender is a corporation, it
is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize
execution of this Subscription on behalf of the Lender;

	(f)
	the
entering into of this Subscription and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or the
constating documents of, the Lender or of any agreement, written or oral, to which the Lender may be a party or by which the Lender is or may be bound;

	(g)
	the
Lender has duly and validly authorized, executed and delivered this Subscription and except as specifically provided otherwise herein, it constitutes a valid and binding
agreement of the Lender enforceable against the Lender;

	(h)
	in
connection with the Lender's investment in the Securities, the Lender has not relied upon the Company or the Company's legal counsel or advisers for investment, legal or tax
advice, and has, if desired, in all cases sought the advice of the Lender's own personal investment advisor, legal counsel and tax advisers, and the Lender is either experienced in or knowledgeable
with regard to the affairs of the Company or, either alone or with its professional advisors, is capable by reason of knowledge and experience in financial and business matters in general, and
investments in particular, of evaluating the merits and risks of an investment in the Debentures and the Lender is able to bear the economic risk of the 

6

 

investment
and it can otherwise be reasonably assumed to have the capacity to protect its own interest in connection with the investment in the Debentures; 

	(i)
	the
Lender is a U.S. Person and has completed Schedule IV to this Subscription and represents, Warrants and covenants to the Company as to the accuracy of all matters set
out therein;

	(j)
	no
person has made to the Lender any written or oral representations:

	(i)
	that
any person will resell or repurchase the Securities;

	(ii)
	that
any person will refund the purchase price for the Securities;

	(iii)
	as
to the future price or value of the Securities; or

	(iv)
	that
the Shares will be listed and posted for trading or any stock exchange or that application has been made to list the common shares of the
Company on any stock exchange other than the Montreal Exchange global transport document; 

	(k)
	it
has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons; and

	(l)
	the
Lender will comply with the applicable provisions of the B.C. Act and any other relevant securities legislation concerning the purchase and holding of the Debentures and any
resale of the Securities. 

    8.  Resale Restrictions and Legending of Subject Securities  

    8.1 The
Lender acknowledges that any resale of the Securities will be subject to resale restrictions contained in the securities legislation applicable to each Lender
or to any proposed transferee, as well as any restrictions on resale imposed by the ME. The Lender acknowledges that a legend will be placed on any certificates representing the Securities to the
effect that the Securities are subject to a hold period and may not be traded until the expiry of such hold period excepted as permitted by applicable securities law and exchange requirements. 

    8.2 The Company is not a reporting issuer in any jurisdiction other than British Columbia, Ontario, Quebec and the United States of America and
will not become a reporting issuer in any other jurisdiction as a result of this Private Placement. As such, the applicable hold period under the laws of jurisdictions outside of such Reporting
Jurisdictions may never expire. The Lender acknowledges that if no further statutory exemption may be relied upon or if no discretionary order or ruling is obtained, the Securities may be subject to
restrictions on resale, pursuant to the laws of jurisdictions outside of the Reporting Jurisdiction, for an indefinite period of time.

    8.3 The
Lender acknowledges that the Securities have not been registered under the 1933 Act or under any state securities laws, and cannot be offered or resold without
registration under the 1933 Act and the securities laws of all applicable states of the United States unless an exemption from registration is available, and the Company has no obligation or present
intention of filing a registration statement under the 1933 Act in respect of the Securities. The Securities may bear a legend denoting the foregoing. 

7

  

    8.4 The
Lender agrees to file any reports required pursuant to applicable securities legislation upon any resale of the Securities. 

    9.  Costs  

    9.1 The
Lender acknowledges and agrees that all costs and expenses incurred by the Lender (including any fees and disbursements of any special counsel retained by the
Lender) relating to the purchase of the Debentures shall be borne by the Lender. 

    10.  Governing Law  

    10.1 This
Subscription is governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein. The Lender, in his personal or
corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom he is acting, irrevocably attorn to the jurisdiction of the courts of the Province of British Columbia. 

    11.  Survival  

    11.1 This
Subscription, including, without limitation, the representations, warranties, acknowledgements and covenants contained herein, shall survive and continue in
full force and effect and be binding upon the Lender notwithstanding the completion of the purchase of the Debentures by the Lender pursuant hereto, the completion of the issue of Debentures of the
Company and any subsequent exercise of the Debentures, or the disposition by the Lender of the Securities. 

    12.  Assignment  

    12.1 This
Subscription is not transferable or assignable. 

    13.  Time of the Essence  

    13.1 Time
is of the essence of this Agreement and will be calculated in accordance with the provisions of the Interpretation
Act (British Columbia). 

    14.  Amendments  

    14.1 The
parties may amend this Agreement only in writing. 

    15.  Execution  

    15.1 The
Company shall be entitled to rely on delivery by facsimile machine of an executed copy of this Subscription and acceptance by the Company of such facsimile
copy shall be equally effective to create a valid and binding agreement between the Lender and the Company in accordance with the terms hereof. 

    16.  Severability  

    16.1 The
invalidity or unenforceability of any particular provision of this Subscription shall not affect or limit the validity or enforceability of the remaining
provisions of this Subscription. 

    17.  Entire Agreement  

    17.1 Except
as expressly provided in this Subscription and in the agreements, instruments and other documents contemplated or provided for herein, this Subscription
contains the entire agreement between the parties with respect to the sale of the Debentures and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral
or written, by statute, by common law, by the Company, by the Lender, or by anyone else. 

    IN WITNESS WHEREOF the Lender has duly executed this Subscription as of the date first above mentioned. 

8

 

    Number of Debentures to be purchased at a price of $1,000 each: 

    Total
Purchase Price: 

	 	 	CHOICES ENTERTAINMENT CORPORATION
 (Name of Lender—Please type or print)
	

 	
 	

/s/ TRACY M. SHIER, PRESIDENT   
 (Signature and, if applicable, Office)
	

 	
 	

121 VINE STREET, SUITE 1903
 (Address of Lender)
	

 	
 	

SEATTLE, WASHINGTON 98121-1456

    If
the Lender is signing as agent for a principal and the Lender is not a trust company signing as trustee or as an agent for a fully-managed account, please complete the following: 

	 	 	
 (Name of Beneficial Purchaser—Please type or print)
	

 	
 	

(Address of Beneficial Purchaser)
	

 	
 	

(City, Province, Postal Code of Beneficial Purchaser)

 
 

ACCEPTANCE    
  

    The above-mentioned Subscription is hereby accepted by PhotoChannel Networks Inc. 

    DATED
at Vancouver, British Columbia, the              day of     1999. 

	 	 	PHOTOCHANNEL NETWORKS INC.
	

 	
 	

Per:	
 	

 Authorized Signing Officer

9

 
 
 

Schedule "I" to Private Placement Subscription Agreement    
  

PHOTOCHANNEL
NETWORKS INC.

Suite 800, 900 West Hastings Street

Vancouver, British Columbia

V6C 1E5 

Dear
Sirs: 

RE: PhotoChannel Networks Inc. — Subordinate Convertible Redeemable Debentures

	1.	 	Delivery - please deliver the Debenture certificate(s) to:
	

 	
 	

CHOICES ENTERTAINMENT CORPORATION

	

 	
 	

121 VINE STREET, SUITE 1903, SEATTLE WAHINGTON 98121-1456

	

2.	
 	
Registration - registration of the single certificate which is to be delivered at closing should be made as follows:
	

 	
 	

SAME AS ABOVE
 (name)
	

 	
 	

 (address)

DATED:                    ,
1999. 

	 	 	CHOICES ENTERTAINMENT CORPORATION

	

 	
 	
(Name of purchaser)
	

 	
 	

Per:	
 	

/s/ TRACY M. SHIER   
(Signature)
	

 	
 	

President
(Position)

10

  

 
 

SCHEDULE II    
  

    QUESTIONNAIRE TO BE COMPLETED BY A PRIVATE PLACEMENT PURCHASER (THE "PURCHASER") OF LISTED SECURITIES OR SECURITIES CONVERTIBLE INTO LISTED SECURITIES (THE
"SECURITIES") 

	1
	 Description of the Transaction

	(a)
	Name
of the issuer of the Securities: PhotoChannel Networks Inc.,

	(b)
	Number
and description of the securities (if the securities are convertible into listed securities give details including conversion ratio) 

$1000
per Subordinate Convertible Redeemable Debenture, convertible and redeemable at the rate of one share for each $0.50 outstanding. SEE SCHEDULE "V" ATTACHED 

	(c)
	Purchase
Price 

$1000
PER DEBENTURE 

	(d)
	Date
of subscription letter (copy to be attached) 

DATED
FOR REFERENCE JANUARY 12, 2000 

	(e)
	Date
where preliminary negotiations commenced 

JANUARY
4, 2000

	2
	 Details on Purchaser

	(a)
	Name
of Purchaser 

CHOICES
ENTERTAINMENT CORPORATION 

	(b)
	Address

121
VINE STREET, SUITE 1903, SEATTLE WASHINGTON 98121-1456 

	(c)
	If
purchaser is a corporation, state of jurisdiction of incorporation 

DELAWARE

	(d)
	General
nature of business 

TECHNOLOGY
AND INTERNET HOLDING COMPANY 

	(e)
	If
the purchaser is a corporation or partnership, give names and addresses of persons having a greater than 5% beneficial interest in the purchaser. 

THIS
INFORMATION IS AVAILABLE IN THE COMPANY'S FORM 10KSB AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE PERIOD ENDING DECEMBER 31, 1998 AVAILABLE ON EDGAR AT WWW.SEC.GOV. 

	(f)
	Give
details of any direct or indirect relationship, which the purchaser, its officers, directors or other insider have with the issuer. If none, so state. 

NONE.

	(g)
	Give
particulars of any securities of the issuers (other than debt securities which are not convertible into equity securities) owned by the purchaser at the date hereof. If none,
so state. 

NONE. 

11

 

	(h)
	Give
details of any trading by the purchaser in the securities of the issuer (other than debt securities which are not convertible into equity securities), within the 60 days
preceding the date hereof. If none, so state. 

NONE 

	(i)
	Summarize
the purchaser's present investment objective in this transaction specifying the estimated term during which the purchaser expects to hold the securities. 

AS
A MATTER OF POLICY WE HOLD SECURITIES WITH A THREE TO FIVE YEAR HOLDING PERIOD EXPECTATION. 

Dated
at                                      this   
                       day of                  
                                         
      , 2000.
 

	(Name of Purchaser—Print)	 	CHOICES ENTERTAINMENT CORPORATION
	

(Authorized Signature)	
 	

/s/ Tracy M. Shier
	

(Official Capacity—Print)	
 	

PRESIDENT
	

 	
 	

Tracy M. Shier

(Print—name
of individual whose signature appears above if different from name of purchaser printed above) 

12

 
 
 

SCHEDULE III
  
    INVESTMENT INTENT AND UNDERTAKING    
  

The
Montreal Exchange

The Stock Exchange Tower

P.O. Box 61, 800 Square Victoria

Montreal, Quebec

H4Z 1A9 

Gentlemen:

    The
undersigned has agreed to purchase, as principal,                       Principal amount Subordinate Convertible Redeemable Debentures
from PhotoChannel
Networks Inc. ("the Company") convertible and redeemable into common shares of the Company at the rate of one common share for each $0.50 principal amount outstanding. 

    The
undersigned hereby declares that the securities are being purchased by it for investment purposes only and not with a view to resell or distribute them. The undersigned undertakes
not to sell or otherwise dispose or any of the securities of any listed securities derived from the conversion of the securities for a period of six months or such longer period as is prescribed by
applicable securities legislation from the date of the closing of the transaction on the date where notice of the transaction as filed by the issuer is accepted by the Exchange, whichever is later,
without having obtained the prior written consent of the Exchange. 

Dated
at                                      this   
                       day of                  
                                         
      , 2000.
 

	Tracy M. Shier

(Name of Purchaser—Print)	 	 
	

/s/ Tracy M. Shier

(Authorized Signature)	
 	

 
	

President

(Official Capacity—Print)	
 	

 

(Print—name
of individual whose signature appears above if different from name of purchaser printed above) 

13

  

 
 

SCHEDULE IV    
  

    All capitalized terms herein, unless otherwise defined, have the meanings ascribed thereto in the Private Placement Subscription Agreement. 

    The
Lender covenants, represents and Warrants to PhotoChannel Networks Inc. (the "Company") that: 

	(a)
	it
is a resident of the United States;

	(b)
	it
has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment and it is able to bear the economic risk
of loss of the investment;

	(c)
	it
is purchasing the Securities for its own account for investment purposes only and not with a view to resale or distribution;

	(d)
	it
understands that the Securities have not been and will not be registered under the 1933 Act or the securities legislation of any state in the United States, and that the sale
contemplated hereby is being made in reliance on an exemption from such registration requirement;

	(e)
	if
it satisfies one or more of the categories indicated below, it has so indicated by placing an "X" beside each such category. (Satisfaction of one or more of the categories is not
a pre-requisite for being an investor, if the investment is otherwise suitable for the investor): 

	__	 	Category 1.	 	An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the
Securities with total assets in excess of US$5,000,000;
	

__	
 	

Category 2.	
 	

A natural person whose individual net worth, or joint net worth with that person's spouse, at the date hereof exceeds US$1,000,000;
	

__	
 	

Category 3.	
 	

A natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same
income level in the current year;
	
	
 	

 	
 	

 

14

 

	

__	
 	

Category 4.	
 	

A "bank" as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of such act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan with total assets in excess of
$5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 whose investment decisions is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;
	

__	
 	

Category 5.	
 	

A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
	

__	
 	

Category 6.	
 	

A director or executive officer of the Company;
	

__	
 	

Category 7.	
 	

A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act; or
	

__	
 	

Category 8.	
 	

An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories;

	(f)
	the
Company made available to it at a reasonable time prior to its purchase of the Securities the opportunity to ask questions and receive answers concerning the terms and
conditions of the offering and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the
information furnished to it pursuant to the Offering Memorandum;

	(g)
	the,
Securities will bear a legend to the effect that the Securities have not been registered under the 1933 Act or the securities laws of any state in the United States, and am
issued pursuant to an exemption under the 1933 Act. The Securities may not be offered, sold, pledged or hypothecated in the absence of an effective registration statement as to the securities under
the 1933 Act, or an opinion of counsel satisfactory to the Company that registration is not required;

	(h)
	it
understands there is no public market for the Debentures or the underlying common stock of the Company in the United States, and that it is unlikely any public market for any of
the Securities of the Company will exist in the United States;

	(i)
	the
investor's net worth (present value of assets less liabilities) is at least 10 times the amount of its investment herein (Yes or No) [Circle
applicable response.];

	(j)
	it
acknowledges that it has not purchased the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or broadcast over 

15

 

radio,
or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 

	(k)
	it
agrees that if it decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities, directly or
indirectly, unless;

	(i)
	the
sale is to the Company;

	(ii)
	the
sale, pursuant to consent of the Company, and upon provision to the Company of such documentation, representations and/or opinion of counsel as
the Company may require, is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act, if available, and in compliance with
applicable local laws and regulations;

	(iii)
	the
sale, pursuant to consent of the Company, and upon provision to the Company of such documentation, representations and/or opinion of counsel
as the Company may require, is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder, if available, and in accordance with any
applicable state securities laws; or

	(iv)
	the
Securities, pursuant to consent of the Company, and upon provision to the Company of such documentation, representations and/or opinion of
counsel as the Company may require, are sold in a transaction that does not otherwise require registration under the 1933 Act or any applicable U.S. state laws and regulations governing the offer and
sale of Securities; and

	(l)
	the
Lender, if an individual's is a resident of the state or other jurisdiction listed in its address on the signature page of the Subscription
Agreement, or if the Lender is not an individual, the office of the Lender at which the Lender received and accepted the offer to purchase the Securities is the address listed on the signature page of
the Subscription Agreement. 

	

	
 	

 
	Date            	 	/s/ TRACY M. SHIER, President
Duly authorized signatory for Lender
 CHOICES ENTERTAINMENT CORPORATION

Print name of Lender

16

  

 
 

SCHEDULE V
  
    TERM SHEET    
  

	Issuer/Borrower:	 	PhotoChannel Networks Inc.
	

Subscriber/Lender:	
 	

Choices Entertainment Corporation, and its affiliates
	

Principal:	
 	

$2,300,000.00) which will be advanced by the Lender in the following instruments:
	

 	
 	

(a)	
 	

$350,000.00 by January 30, 2000
	

 	
 	

(b)	
 	

$750,000 by February 29, 2000
	

 	
 	

(c)	
 	

$1,200,000.00 by April 14, 2000
	

 	
 	

The final advance of $1,200,000 by April 14, 2000 will be conditional upon:
	

 	
 	

(i)	
 	

PhotoChannel obtaining by March 31, 2000 a firm date for the delivery of a Fuji Frontier Digital Minilab; and
	

 	
 	

(ii)	
 	

PhotoChannel securing facilities in the United States of America for the operation
	

 	
 	

which conditions may be waived by the Lender.
	

Interest:	
 	

Nil
	

Maturity:	
 	

Principal will be due and payable on April 30, 2000. PhotoChannel may redeem or convert the principal prior to maturity upon 10 days written notice to the Lender. Upon receipt of notice of redemption by PhotoChannel, the Lender may then
exercise its conversion option.
	

Convertibility:	
 	

The principal advanced by the Lender may, at the option of either the Lender PhotoChannel, be converted into Common Shares of PhotoChannel at the price of $0.50 per share. Either party may exercise the conversion option by giving 10 days written
notice of convention to the other. The conversion option, if not exercised, will expire at time of maturity of the debenture. PhotoChannel will have the unrestricted right to raise additional funds by the allotment, reservation and issuance of
additional Common Shares or other securities convertible into Common Shares of PhotoChannel. The Lender's advance of funds shall be cumulative to April 14, 2000 and the Lender's right under the Convertible Subordinated Debenture, the Conversion
Option and the issuance of the Warrants will be coextensive with (and proportionate to) the actual amount of funds advanced to PhotoChannel.
	

Warrants:	
 	

In consideration of the Lender advancing the loan, PhotoChannel will grant 920,000 transferable share purchase warrants to the Lender in the following instalments and at the following exercise prices (provided the Lender has advanced the applicable
portion of the loan to PhotoChannel):
	

 	
 	

(a)	
 	

140,000 share purchase warrants by January 14, 2000 (with an exercise price of $0.75 per share)
	

 	
 	

(b)	
 	

300,000 share purchase warrants by February 14, 2000 (with an exercise price of $1.00 per share)
	

 	
 	

(c)	
 	

480,000 share purchase warrants by April 14, 2000 (with an exercise price of $1.25 per share).
	
 	
 	

 	
 	

 

17

 

	

 	
 	

Each share purchase warrant will entitle the holder to purchase one Common Share of PhotoChannel at the applicable exercise price. The share purchase warrants, if not exercised by the holder, will expire at 5:00 p.m. on June 30,
2000.
	

Security:	
 	

PhotoChannel will issue a Convertible Subordinated Debenture to the Lender to evidence and secure the above loan. The Convertible Subordinated Debenture will grant the Lender a floating charge on the assets of PhotoChannel, subject to existing
charges registered in favour of Saskatchewan Opportunities Corporation, Xerox Canada Inc. and 597924 B.C, Ltd. In the event of default, the Lender may crystallize the Convertible Subordinated Debenture and appoint a Receiver-Manager
over the mortgaged property. PhotoChannel may deal with its property in the ordinary course of business so long as the floating charge has not been crystallized by the Lender. The Lender will execute a subscription agreement and supporting documents
for the issuance of the Convertible Subordinated Debenture and share purchase warrants.
	

Regulatory	
 	

 	
 	

 
	Approval:	 	The issuance of the Convertible Subordinated Debenture, the Conversion Option and the Share Purchase Warrants by PhotoChannel are subject to the consent and requirements of the Montreal Exchange.
	

Other	
 	

 	
 	

 
	Approvals:	 	The issuance of the Convertible Subordinated Debenture, the Conversion Option and the Share Purchase Warrants by PhotoChannel are subject to the approval of the Board of Directors of PhotoChannel, Saskatchewan
Opportunities Corporation and 597924 B.C. Ltd., if necessary.
	

Board	
 	

 	
 	

 
	Appointment:	 	Subject to the Lender advancing the entire loan of $2,300,000.00, PhotoChannel will nominate one candidate (to be named by the Lender) for appointment to the Board of Directors of PhotoChannel at the Annual
General Meeting to be held on March 15, 2000.

18

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PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT U.S. RESIDENTS

Purchase of Subordinate Convertible Redeemable Debentures

ACCEPTANCE

Schedule "I" to Private Placement Subscription Agreement

SCHEDULE II

SCHEDULE III INVESTMENT INTENT AND UNDERTAKING

SCHEDULE IV

SCHEDULE V TERM SHEETPrepared by MERRILL CORPORATION www.edgaradvantage.com

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EXHIBIT 10.99(f)  

 
 

SUBSCRIPTION AGREEMENT    
  

    This Subscription Agreement is made by and between Tridium Research, Inc., a Washington corporation (the "Company"), and the undersigned (the
"Investor"), who hereby subscribes for the shares of the Company's Common Stock described below (the "Shares"). 

    In
consideration of the Company's agreement to sell the Shares to the Investor, upon the following terms and conditions, the Investor hereby agrees, represents and warrants as
follows: 

 
 

Section 1
  Subscription    
  

    1.1  Purchase of Shares.  The Investor subscribes for the number of Shares set forth on the signature
page below at a price of $0.20 per Share. It is understood that the minimum investment is $25,000. The Company's Board of Directors may, at its sole discretion, reduce this minimum investment amount
for certain otherwise qualified investors. With this Subscription Agreement, the Investor agrees to remit payment for subscribed shares within three (3) days following execution of this
Subscription Agreement by the Investor. 

    1.2  Stock Purchase Warrants.  There are no Stock Purchase Warrants associated with this Subscription
Agreement. 

    1.3  Documents Provided to the Investor.  The Investor acknowledges receipt of materials describing the
Company listed on attached Exhibit B. 

    1.4  Acknowledgements by the Investor.  The Investor understands and acknowledges that: 

    (a) The
Company may accept or reject this Subscription Agreement in its sole and absolute discretion. 

    (b) This
Subscription Agreement is and shall be irrevocable except that the Investor shall have no obligations hereunder in the event this Subscription Agreement is
rejected for any reason. 

    (c) No
federal or state agency has made any finding or determination as to the fairness of this offering for investment, nor any recommendation or endorsement of the
Shares. 

    (d) Because
no public market for the Shares or other securities of the Company is expected to develop, the economic risk of the investment must be borne indefinitely by
the Investor. 

    (e) No
assignment, sale, transfer, exchange or other disposition of the Shares or other securities of the Company can be made except in accordance with applicable
transfer and other restrictions. 

    (f)  Funds
received from investors, including the Investor, will be immediately available to the Company upon acceptance of the subscriptions. The funds will not be
subject to escrow pending receipt of a minimum amount necessary to accomplish the objectives of the Company set forth in the Company's Business Plan. 

    (g) The
Investor hereby consents to the placement of a legend on all certificates representing the Shares in substantially the following form: 

These
securities have not been registered under the Securities Act of 1933, as amended, the Securities Act of Washington, or the securities act of any other state. They may not be sold or offered for
sale in the absence of an effective registration statement under the appropriate Act, or an opinion of counsel satisfactory to the issuer of securities that an exception under the Act is available and
that such registration is not required. 

 

    (h) The
Company has relied upon the information set forth in this Subscription Agreement to qualify for exemptions from securities registration requirements. 

    1.4  Confidential Nature of Information.  The Investor acknowledges that the information provided to the
Investor regarding the Company is confidential and nonpublic and agrees that all of the information will be kept in confidence by the Investor and neither used to the Investor's personal benefit
(other than in connection with the Investor's investment decision) nor disclosed to any third party; provided, that this obligation does not apply to
any such information that: (i) is part of the public knowledge or literature and is readily accessible as of the date of this Subscription Agreement; (ii) becomes part of the public
knowledge or literature and, hence, readily accessible by publication; or (iii) is received from third parties, except third parties who disclose it in violation of confidentiality agreements
they may have with the Company. 

    1.5  Investor Responsibility for Due Diligence Investigation.  The Investor acknowledges that he, she or
it must rely upon his, her or its own examination of the Company, and the terms of the offering, including the merits and risks involved in making an investment decision on the Shares. The Company's
offering documents, offering materials, and any statements made to Investors, all with respect to the business of the Company, its management or its financial condition, have not been reviewed or
passed upon by the Company's counsel, accountants or other independent parties. The Company has not received any independent valuation of the Shares or the assistance of its counsel in preparing its
business plan. Consequently, the Company's counsel should not be looked to for any assurance that there have not been material omissions or misstatements in the offer and sale of the Shares.
Projections furnished by the Company have been prepared by the Company and represent only the good faith estimate by the Company of future financial performance and should not be considered as facts
or certainties. 

    1.6  Investor Indemnification of the Company.  The Investor hereby agrees to indemnify and hold the
Company harmless for liabilities or damages incurred by the Company arising as a result of any false statement or misrepresentation made by the Investor in this Subscription Agreement including, but
not limited to, liabilities or damages incurred in connection with the loss of exemptions from securities registration requirements. Said indemnification shall be limited to the amount of the
Subscriber's investment. 

    1.7  Shareholders' Buy-Sell Agreement.  The Investor understands and acknowledges that the
Shares purchased by the Investor will be subject to a Shareholders' Buy-Sell Agreement dated August 23, 1994, as amended, a copy of which has been provided to the Investor. The
Investor has signed the Consent To Be Bound By Shareholders' Buy-Sell Agreement attached to this Subscription Agreement as Exhibit C.
The Investor understands that all certificates representing the Shares will bear a legend in the form set forth in the Shareholders' Buy-Sell Agreement. 

    1.8  C Corporation Status.  The Investor understands that the Company was originally incorporated in
August 1994 as an S Corporation and subsequently converted to a C Corporation in 1997. 

    1.9  Substantial Risks of Investment.  THE INVESTOR UNDERSTANDS AND ACKNOWLEDGES THAT THE PURCHASE OF
SHARES INVOLVES SIGNIFICANT RISKS THAT COULD RESULT IN THE LOSS OF THE INVESTOR'S ENTIRE INVESTMENT. Attached as Exhibit D is a description of
some of the principal risks that the Company has identified to date. The Investor has carefully reviewed Exhibit D and acknowledges that there
may be additional risks. 

    1.10  Summary Information Regarding Capital Structure of the Company.  The Investor has reviewed the
"Summary Information Regarding Capital Structure" of the Company attached as Exhibit E. The Investor acknowledges that this information is in
brief summary form, without a description of the ramifications to the holders of Common Stock. The Investor acknowledges that the 

2

 

Company has recommended that the Investor consult his or her own attorney and/or tax advisor respecting an investment in the Shares. 

 
 

Section 2
  Representations and Warranties    
  

    2.1  Availability of Information.  The Company has made available to the Investor, or to the Investor's
attorney, accountant or representative, all documents that the Investor has requested, and the Investor has requested all documents and other information that the Investor has deemed necessary to
consider respecting an investment in the Company. The Company has provided answers to all questions concerning the offering and an investment in the Company. The Investor has carefully considered and
has, to the extent the Investor believes such discussion necessary, discussed with the Investor's professional legal, tax and financial advisers and his, her or its representative (if any) the
suitability of an investment in the Company for the Investor's particular tax and financial situation. All information the Investor has provided to the Company concerning the Investor and the
Investor's financial position is correct and complete as of the date set forth below, and if there should be any material adverse change in such information prior to the acceptance of this
Subscription Agreement by the Company, the Investor will immediately provide such information to the Company. 

    2.2  Shares Restricted.  The Investor knows that the Shares and other securities of the Company have not
been registered under either federal or state securities laws, and the Investor represents and warrants that the Investor is purchasing the Shares for investment for his, her, or its own account and
not on behalf of any other person, nor with a view to, or for resale or other distribution of the Shares. The Investor also understands that the Company is under no obligation and has no intention to
register the Shares or other securities of the Company or to take any actions to make available exemptions from the registration requirements of state and federal securities laws, and that the Shares
or other securities of the Company cannot be sold or otherwise distributed in the absence of an exemption from such registration requirements. 

    2.3  Investment in Not Readily Marketable Securities Not Disproportionate.  The Investor's overall
commitment to investments that are not readily marketable is not disproportionate to the Investor's net worth. The Investor's investment in the Shares will not cause such overall commitment to become
excessive. 

    2.4  Adequate Net Worth.  The Investor has adequate net worth and means of providing for his, her or its
current needs and personal contingencies to sustain a complete loss of the investment in the Company at the time of investment, and the Investor has no need for liquidity in the investment in the
Shares. 

    2.5  Risk of Investment.  The Investor recognizes that an investment in the Company involves certain
substantial risks, which could result in the loss of the entire investment. 

    2.6  Truthfulness or Investor Representations.  The Investor represents and warrants that all of the
information set forth in this Subscription Agreement is complete and correct. 

 
 

Section 3
  Status as a Qualified Investor    
  

    3.1 By initialing the appropriate space(s) below, the Investor represents and warrants that he, she or it is: 

	(a)
	An
"Accredited Investor" as defined in Section 3.2 below, or

	(b)
	A
"Qualified Investor" as that term is defined in Section 3.3 below. 

3

 

    3.2  Accredited Investor.  The Investor is an Accredited Investor, if he, she or it is (initial all
applicable spaces): 

	
	 	(a	)	A natural person whose individual income exceeded $200,000 in each of the last two years or joint income with his or her spouse exceeded $300,000 in each of those years and who reasonably expects to receive the same level
of income in the current year;
	
	 	(b	)	A natural person whose individual net worth, or joint net worth with his or her spouse, now exceeds $1,000,000 and whose net worth will exceed $1,000,000 on the date of the Company's acceptance of this Subscription
Agreement; or
	
	 	(c	)	Any other "accredited investor" as that term is defined in Regulation under the Securities Act of 1933.

    3.3  Qualified Investor.  The Investor is a Qualified Investor if (initial all applicable spaces): 

	
	 	(a	)	The Investor's investment in the Company does not exceed 10% of the Investor's net worth (exclusive of home, furnishings and automobiles); or
	X
	 	(b	)	The Investor either alone or with his, her or its purchaser representative(s) has such knowledge and experience in financial and business matters that he or she is or they are capable of evaluating the merits and risks of
the investment in the Company. In the event that the Investor is a Qualified Investor only because of meeting the conditions set forth in this Section 3.3 (b), the Investor hereby agrees to submit to the Company a letter describing the
Investor's education, employment history and financial and business experience, including a description of the Investor's experience with investments that are not readily marketable (e.g., restricted
stock, tax shelters, limited partnerships, etc.).

 
 

Sections 4 - 12
  Miscellaneous    
  

    4.1  Washington Law Governs.  This Subscription Agreement shall be enforced, governed and construed in
all respects in accordance with the laws of the State of Washington. This Subscription Agreement and the rights, powers and duties set forth herein shall be binding upon the Investor, the Investor's
heirs, estate, legal representatives, successors and assigns and shall inure to the benefit of the Company, its successors and assigns. 

    4.2  Company Address.  An Investor completing and executing this Subscription Agreement should deliver
it, together with a check (made payable to the order of "Tridium Research, Inc." in the amount of the Investor's subscription, to: 

Tridium
Research, Inc.

8826 122nd Avenue N.E.

Kirkland, Washington 98033

Attn: Patrick Howard 

    5.  Warrants.  [RESERVED]. 

    6.  Options.  [RESERVED]. 

    7.  Dilution of Investors Interest.  Substantial dilution may accrue to investors in the event that the
Company finds it necessary to raise additional capital, to use stock and stock options to compensate engineers and sub-contractors, or for any other lawful purpose as deemed necessary by
the Company in its sole discretion. 

4

 

    8.  Lack of Liquidity.  The Company stock is to be sold in a private offering. Currently stock can only
be transferred to an individual stockholder's family members, and other stockholders of the Company, including the Company itself. If and when the Company is publicly traded, stock transfers could be
more liquid. Other possible ties for liquidity may include sale of the company, in which individual stockholders may have the option of cash or the purchasing company's stock. There can be no
assurances that these alternatives will become available. 

    9.  Determination of Stock Price.  The initial price of $0.20 per share has been arbitrarily determined
by the Company. (This price per share value shall equal that amount listed in Section 1.1 Purchase of Shares, page 3 of this Subscription
Agreement.) 

    10.  Indemnification and Release of Directors.  The Company's Articles of Incorporation and
By-laws indemnify the directors against any third party claims and claims from the stockholders. This is subject to exceptions imposed by violations of law, wrongdoing and improper
personal gain. 

    11.  Lack of Patent Protection.  The Company has applied for patent protection. Even though the patent
application process has moved forward having completed preliminary examination, there can be no assurance that the PTC will grant patents pertaining to the technology. Additionally, there can be no
assurance that the Company's patent(s), once issued, will not be challenged, invalidated or circumvented, or that any such rights will provide any competitive advantage. 

    11.1  Uncertain Ability to Protect Proprietary Technology and Intellectual Property Rights.  Because of
the crucial importance of the protection of proprietary technology in the computer industry, litigation relating to intellectual property rights is common. Under certain circumstances, the Company may
find it necessary or prudent to initiate or respond to such intellectual property claims in the ordinary course of business. It is very likely that the maintenance of any such litigation would require
the dedication of significant management and financial resources, which would be likely to have an adverse impact on the Company regardless of the outcome of such proceedings. Of course, any adverse
results on the merits of any such action would also have a negative impact on the Company, perhaps to the extent that the Company's ability to continue operation would be substantially impaired. 

    The
Company will be required to rely on trade secrets, know-how and continuing technological innovation to maintain its competitive position. There can be no assurance
that the Company will be able to effectively protect its rights to its proprietary information and trade secrets. 

    While
it is highly probable the Company will find it necessary to raise substantial amounts of additional capital to pursue its Business Plan, the amounts required will vary depending
on the specific
opportunities and strategic alternatives pursued by the Company, as welt as overall market conditions. Adequate funds for the pursuit of the Company's plans, whether raised through the financial
markets or by means of collaborative or other arrangements with corporate partners, or from other sources, may not be available when needed or on terms that would be acceptable to the Company.
Insufficient funds may hinder or prevent the Company from implementing its Business Plan or may require the Company to delay, scale back or eliminate certain of its marketing or development programs.
It is impossible at this time for the Company to estimate the amount of capital that will be required in the future, the timing of such capital retirements, or what valuation and share pricing such
capital requirements might be expected. 

    12.  Competition.  The Company will operate in an extremely competitive and volatile environment against
established computer technology companies. Nearly all of those competitors have substantially greater resources, development and engineering capabilities, distribution networks and relationships, and
industry experience than the Company and can be expected to react strongly to the Company's marketing efforts. Such competitive responses may include, without limitation: seeking to surpass the
Company's development programs, seeking to dominate critical distribution channels, engaging in intense and aggressive price competition, attempting to hire away the Company's key 

5

 

technical, marketing or management personnel; and attempting to obtain the Company's trade secrets. The Company will be heavily dependent upon the skills of its management and other key staff, its
ability to recruit and retain key personnel, its ability to establish and exploit distribution relationships, and its ability to raise additional financing when needed in order to withstand such
competitive threats. Even if the Company is able to successfully respond to such competitive pressures, the Company's competitive environment may change fundamentally, which would be likely to have a
material impact on the Company's prospects and future earnings. 

	INITIAL(S)	 	/s/ TMS
	 	DATE	 	  3/1/2000

	

 	
 	

	
 	

DATE	
 	

    IN
WITNESS WHEREOF, the Investor has executed this Subscription Agreement as of March 1, 2000. 

	Number of Shares: 250,000	 	Total Price: $50,000

    Indicate
ownership as:

	

	
 	

(a)	
 	

Individual
	

	
 	

(b)	
 	

Community Property
	

	
 	

(c)	
 	

Joint Tenants with Right of Survivorship
	

	
 	

(d)	
 	

Tenants in Common
	

X
	
 	

(e)	
 	

Other (specify)    Corporation  

    The
undersigned is a resident of the State of   Delaware    . 

INVESTOR(S):  

	/s/ Tracy M. Shier	 	 
	
	 	

	Signature	 	Signature of Joint Signer (if any)
	

Tracy M. Shier	
 	

 
	
	 	

	Name (type or print)	 	Name of Joint Signer (type or print)

6

 

	Choices Entertainment Corporation
 Name as it should appear on

stock certificate

	121 Vine Street, #1903	 	 
	
	 	

	Residence Address	 	Address for Sending Notices
	(or Business if not an individual)	 	(if different)
	

Seattle, WA 98121	
 	

 
	
	 	

	City, State and Zip Code	 	City, State and Zip Code
	

206 443 6948	
 	

 
	
	 	

	Telephone Number	 	Telephone Number
	

tms 1903 @ hotmail.com	
 	

 
	
	 	

	E-mail Address	 	E-mail Address
	

Investor's Taxpayer ID or

Social Security No.:	
 	

Citizen of:
	

52-1529536	
 	

 
	
	 	

ACCEPTED
this 1st day of March, 2000: 

Tridium Research, Inc.

	By	 	/s/ PATRICK HOWARD

	Its	 	President

7

  

 
 

EXHIBIT A
  (to Subscription Agreement)    

Common Stock Purchase Warrant
  (in addition to this Subscription Agreement) 

There
are no Stock Purchase Warrants associated with this Subscription Agreement. 

8

 
 
 

EXHIBIT B
  (to Subscription Agreement)    

Documents and Information Provided to the Investor
  (in addition to this Subscription Agreement) 

	1.
	Articles of Incorporation as filed with the Washington Secretary of State on August 23, 1994.

	2.
	Shareholders' Buy-Sell Agreement dated August 23, 1994, as amended

	3.
	Business Plan dated as of   1999  . 

9

 
 
 

EXHIBIT C
  (to Subscription Agreement)    

 
 

CONSENT TO BE BOUND BY
  SHAREHOLDERS BUY-SELL AGREEMENT    
  

    In consideration of the issuance, sale, pledge, or other transfer to the undersigned of shares of stock in TRIDIUM RESEARCH INC., each of the
undersigned hereby consents and becomes a party to and agrees to be bound by the Shareholders' Buy-Sell Agreement dated August 23, 1994, as amended, receipt of a copy of which is
hereby acknowledged, as fully as if he or she were one of its of the original parties, and all of the shares owned by the undersigned shall be held in accordance with and restricted by the terms of
such Shareholders' Buy-Sell Agreement. Said Agreement has been amended and is attached hereto as amended. 

    DATED:
  March 1, 2000   

	 	 	CHOICES ENTERTAINMENT CORP.
	

 	
 	

By:	
 	

/s/ TRACY M. SHIER   
  Shareholder
	

 	

 	

 	

 	

 Shareholder's Spouse

	

 	
 	

Address:	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	

 	

 Social Security Number

10

  

 
 

SHAREHOLDERS' BUY-SELL AGREEMENT    
  

    THIS SHAREHOLDERS' BUY-SELL AGREEMENT (this "Agreement") is entered into effective as of the 23rd day of August, 1994, as amended, by and among
TRIDIUM RESEARCH, INC., a Washington corporation (the "Corporation"), the persons listed on attached Exhibit A to this Agreement are those who currently hold all of the issued and
outstanding stock of the Corporation (the "Current Shareholders"), as witnessed by having executed the Consent to Be Bound by this Agreement in the form of attached Exhibit C to the
Subscription Agreement. The persons listed on attached Exhibit A shall be referred to, collectively, as the "Shareholders" and, individually, as a "Shareholder". 

 
 

RECITALS    
  

    The Shareholders and the Corporation believe it is in their and the Corporation's best interest to restrict the free transferability of the Corporation's
common stock (the "Shares") to assure continuity in the control and management of the corporation. 

    NOW,
THEREFORE, the parties agree as follows: 

 
 

AGREEMENT    
  

    1.  General Restriction on Transfer. No Share or any interest therein shall be validly sold, assigned, awarded, pledged,
encumbered, confirmed, or otherwise transferred, for consideration or otherwise, whether voluntarily, involuntarily, or by operation of law (collectively, a "Transfer"), except in accordance with the
provisions of this Agreement. A purported transferee of a Transfer not made in accordance with the provisions of this Agreement shall not be recognized as a shareholder of the Corporation for any
purpose whatsoever. A Transfer or attempt to effect a Transfer subject to the provisions of this Agreement shall be deemed to occur whenever any interest in any Share is transferred or is attempted to
be transferred, voluntarily, involuntarily, or by operation of law, irrespective of whether any change in the record ownership of the Shares occurs. 

    2.  Transfers to Family. Notwithstanding anything in this Agreement to the contrary, a Shareholder may, during his life,
effect a Transfer of all or any portion of his or her Shares to his or her spouse, or his or her lineal ancestors or descendants, or a trustee of a trust for the exclusive benefit of such spouse or
ancestors or descendants (the "Permitted Transferees," who would then become "Shareholders"), provided that the transferee shall execute a Consent to be Bound by this Agreement in the form of attached  Exhibit
 C to the Subscription Agreement. 

3.  Transfers.  

    3.1 Offer Notice. If any Shareholder (the "Transferor") desires to effect a Transfer of any or all of his or her Shares
to any person other than a Permitted Transferee pursuant to a bona fide third party offer, the Transferor shall (a) give notice to the
Corporation (an "Offer Notice") specifying the name and address of the proposed transferee, the number of Shares proposed to be transferred (the "Offered Shares"), the price per Share proposed to be
paid by the proposed transferee for the Offered Shares (the "Offered Price"), and all other terms and conditions of the proposed Transfer; and (b) provide such additional information about the
proposed transferee as the Corporation or any Remaining Shareholder (defined below) may reasonably request, which information shall be provided within ten (10) days of receipt of the request. 

    3.2 Offer to Sell. Giving an Offer Notice to the Corporation shall constitute an offer by the Transferor on the date the
Offer Notice is given ("Offer Date") to sell the Offered Shares to the Corporation and/or the other Shareholders (the "Remaining Shareholders") at a purchase price per Share (the "Purchase Price")
equal to the Offered Price and in the manner provided in Section 3.3. If 

11

 

the Offered Shares are proposed to be sold for consideration other than solely cash, the Offered Price shall be deemed to be the sum of (a) the fair market value of the consideration other than
cash offered for the Offered Shares as determined in good faith by the Board of Directors of the Corporation, and (b) any cash consideration so offered. 

    3.3 Share Purchase Procedures. Each purchase of Shares by the Corporation and/or the Remaining Shareholders pursuant to
this Section 3 shall be made as follows: 

    3.3.1  The Corporation shall have the first right to purchase any of the Offered Shares. It shall
exercise this right by giving written notice to the Transferor (the "Corporation Acceptance Notice") within 14 days (the "Corporation Acceptance Period") after the Offer Date, stating the
number of Offered Shares that the Corporation agrees to purchase. Provided that the Corporation and/or the Remaining Shareholders agree to purchase an the Offered Shares, delivery of the Corporation
Acceptance Notice to the Transferor shall create a binding contract between the Corporation and the Transferor for the purchase and sale, at the Purchase Price and on the terms and conditions
described in Section 3, of the number of Shares specified in the Corporation Acceptance Notice. 

    3.3.2  No later than five (5) business days after the expiration of the Corporation Acceptance
Period, the Corporation shall provide each of the Remaining Shareholders with a copy of the Offer Notice and inform them of the number of Offered Shares the Corporation has agreed to purchase. If the
Corporation does not exercise its right to purchase all of the Offered Shares, each of the Remaining Shareholders shall then have the right to purchase those Offered Shares that the Corporation has
elected not to purchase (the "Remaining Offered Shares") which are allocated to the Shareholder pursuant to Section 3.3.4.

    3.3.3  Within thirty (30) days after the expiration of the Corporation Acceptance Period (the
"Shareholder Acceptance Period"), each Remaining Shareholder desiring to purchase all or part of the Remaining Offered Shares (an "Accepting Shareholder") shall deliver to the Corporation notice of
his or her acceptance of the offer (the "Shareholder Acceptance Notice"), specifying the number of such Shares that he or she agrees to purchase. Provided that the Corporation and/or the Remaining
Shareholders agree to purchase all the Offered Shares, delivery of a Shareholder Acceptance Notice to the Corporation shall create a binding contract between the Accepting Shareholder and the
Transferor for the purchase and sale, at the Purchase Price and on the terms and conditions described in Section 4, of that portion of the Remaining Offered Shares allocated to such Accepting
Shareholder under Section 3.3.4.

    3.3.4  Each Accepting Shareholder shall first have allocated to him or her such portion of the Remaining
Offered Shares as the number of Shares held by such Shareholder bears to the total number of Shares held by all of the Accepting Shareholders (a Shareholder's "Pro
Rata Portion"), but limited by the number of Shares specified in his or her Shareholder Acceptance Notice. If any Accepting Shareholder agrees to purchase less than his or her  Pro Rata Portion of the Remaining Offered Shares, each Accepting Shareholder who agrees to purchase more than his or her Pro
Rata Portion of the Remaining Offered Shares shall have allocated to him or her such additional portion of the Remaining Offered Shares not so allocated under the preceding
sentence as the number of Shares held by such Accepting Shareholder bears to the total number of Shares held by all Accepting Shareholders who agree to purchase more than their  Pro Rata Portion of the
Remaining Offered Shares, but again limited by the number of Shares specified in his or her Shareholder Acceptance Notice. This
procedure shall continue until the Remaining Offered Shares have been allocated among the Accepting Shareholders to the extent specified in their respective Shareholder Acceptance Notices. 

    3.3.5  If the Corporation and the Remaining Shareholders have not agreed to purchase all of the Offered
Shares, the Transferor may effect a Transfer of the Offered Shares to the proposed transferee at any time within sixty (60) days after the expiration of the Shareholder Acceptance Period at the
Offered Price and on the terms and conditions stated in the Offer Notice only, provided that the 

12

 

proposed transferee shall have first executed a Consent to Be Bound by this Agreement in the form of attached Exhibit C to the Subscription
Agreement. 

    4.  Terms of Sale and Closing. The Transfer of all of the Offered Shares to the Corporation and/or to Accepting
Shareholders (collectively, the "Purchasers") shall be consummated on the terms and conditions set forth in the Offer Notice on a date set by the Corporation (the "Closing Date"), which date shall be
not less than fifteen (15) nor more than thirty (30) days after expiration of (a) the Corporation Acceptance Period if the Corporation is purchasing all of the Offered Shares; or
(b) the Shareholder Acceptance Period if the Corporation and the Remaining Shareholders are purchasing all of the Offered Shares. At least fourteen (14) days prior to the Closing Date,
the Corporation shall give notice to the Transferor and all the Remaining Shareholders, specifying the number, if any, of the Offered Shares to be purchased by the Corporation and each of the
Remaining Shareholders and specifying the Closing Date. 

5.  Other Events Constituting an Offer to Transfer Shares.  

    5.1 Repurchase Events. Each of the following events or conditions shall constitute a Repurchase Event: 

    (a) the
filing of a petition in bankruptcy by or against the Shareholder; 

    (b) any
general assignment by the Shareholder for the benefit of his or her creditors; 

    (c) any
decree of divorce, dissolution or separate maintenance, or any property settlement or separation agreement wherein Shares are awarded to the former or separated
spouse of a Shareholder who is also an employee of the Corporation; 

    (d) the
termination of employment of any Shareholder who is also an employee of the Corporation; provided, however, that the Corporation's board of directors, in its
sole discretion, may determine that the termination of employment of any Shareholder who is also an employee of the Corporation shall not be considered a Repurchase Event ("employment" shall include
full time employment, part time employment, or service as a consultant, on an advisory board, or on the Corporation's board of directors; "termination of employment" shall include all ways in which an
employee's employment relationship with the Corporation can terminate, including, but not limited to, termination of employment as the result of retirement, voluntary termination or involuntary
termination); 

    (e) the
death of a Shareholder; 

    (f)  any
Non-complying Transfer (defined in Section 7); or 

    (g) any
other event which, were it not for the provisions of this Agreement, would cause any such Shares, or any interest therein, to be sold, assigned, awarded,
confirmed or otherwise transferred, for consideration or otherwise, to any person, whether voluntarily, involuntarily or by operation of law under circumstances that would not bring such event within  Section
 3 of this Agreement. 

    5.2 Purchase of Shares. Upon the occurrence of a Repurchase Event, as defined in  Section 5.1 (except the Repurchase Event described in Section 5.1 (c)),
the Corporation and secondarily the Remaining Shareholders shall
have the right to purchase such Shareholder's Shares on the same terms and conditions as if such Shareholder had made an offer to sell such Shares pursuant to  Section 3 at a price per Share equal
to the Determined Price established pursuant to  Section 6. Upon the occurrence of the Repurchase Event specified in Section 5.1(c), first
that Shareholder whose former or separated spouse was awarded Shares, and then the Corporation and, after the Corporation, the Remaining Shareholders shall have the right to purchase any or all Shares
owned, in whole or in part, by that Shareholder's former or separated spouse on the same terms and conditions as if such Shareholder's 

13

 

spouse had made an offer to sell such Shares pursuant to Section 3 at a price per Share equal to the Determined Price established pursuant to  Section 6.

    5.3 Offer Notice; Offered Price. Within thirty (30) days after the occurrence of a Repurchase Event, the Shareholder or
his or her trustee in bankruptcy, personal representative, guardian, executor or administrator, as appropriate (the "Transferor"), shall give written notice to the Corporation and the
other Shareholders (the "Remaining Shareholders") of such event specifying the date of such event and describing in reasonable detail the nature of the event and the number of Shares affected. The
price per Share shall be the Determined Price established pursuant to Section 6. Such notice shall be deemed to be the Offer Notice for purposes of  Section 3, the number of Shares affected shall be deemed to be the Offered Shares, and such Determined Price shall be deemed to be the Offered Price. If
the Corporation or any Remaining Shareholder has not received this notice upon the expiration of the thirty (30) day period, any Shareholder or director of the Corporation who has knowledge of such
event may give notice to the Corporation and the Remaining Shareholders at any time after the end of such period, and the notice shall be deemed to be the Offer Notice. 

    5.4 Payment for the Shares. The Purchase Price for the Offered Shares for purposes of this  Section 5 shall be paid in five (5) equal annual installments, together
with interest on the unpaid balance at a per annum rate equal to the minimum
rate of interest per annum necessary to avoid the imputation of interest under federal income tax laws. The first installment of principal and interest shall be paid on April 1 immediately
following the end of the fiscal year in which the Repurchase Event occurred. Interest shall accrue commencing on the Closing Date as defined in Section
4. The unpaid balance of the Purchase Price for the Offered Shares may be prepaid in whole or in part at any time without penalty, and may be accelerated in the event of
failure to pay any installment when due, in which case reasonable attorneys' fees and costs may also be recovered if any legal action for collection is commenced. The other terms and conditions and
procedures for transferring Offered Shares shall be determined in accordance with Section 4.

    6.  Determined Price. The Determined Price for each Share shall be calculated as follows: 

    6.1 Within sixty (60) days of the Repurchase Event, the Corporation and the Transferor shall attempt to agree on the
Determined Price. 

    6.2 If the Corporation and the Transferor are unable to agree upon the Determined Price within such period, the
Determined Price shall equal the value of the Corporation, as established by an independent qualified appraiser, divided by the total number of Shares outstanding as of the date the Repurchase Event
occurs, and discounted to reflect any diminution in value resulting from the Shares of the Transferor comprising less than all of the outstanding Shares. The Corporation and the Transferor shall
attempt to agree upon such an appraiser, and, if an appraiser is agreed upon in writing by the parties, the resulting calculation shall be final and binding. The costs of such appraiser shall be
divided evenly between the Corporation and the Transferor. 

    6.3 If the Corporation and the Transferor are unable to agree upon a single appraiser within ninety (90) days of
the Repurchase Event, then either party shall be entitled to notify the other in writing of such party's institution under the following two-appraiser process: 

    Within
ten (10) days of one party's giving notice to the other that he or she is instituting the two-appraiser process, each party shall notify the other in writing
of his or her appointed qualified independent appraiser, which appraiser must be experienced in the valuation of closely held corporations and of the type of business engaged in by the Corporation.
Each appraiser shall complete a calculation of the Determined Price, pursuant to Section 6.1 within sixty (60) days of the appointment of
the first appraiser. The Determined Price shall be determined by the average of the two figures calculated by the two appraisers. Each party shall bear the costs associated with the appraiser he or
she selects. If either party fails to appoint an appraiser within the allotted time period, or if either 

14

 

appraiser fails to complete the calculation within the allotted time period, the calculation of the appraiser appointed by the other party shall be final and binding and shall be deemed to constitute
the Determined Price. 

    7.  Effect of Non-complying Transfer. If any Transfer in violation of this Agreement shall be attempted, or
if any involuntary or other purported Transfer by law of any Shares occurs or is attempted (each, a "Non-complying Transfer"), it shall be void and upon presentation for transfer the
Corporation shall not give effect to such purported Transfer. The failure of the Corporation or its Shareholders to purchase, pursuant to  Section 5, Shares, which are the subject matter of a
Non-complying Transfer, shall not be construed as permission to proceed with
such Transfer. In addition, any Shareholder or the Corporation may institute and maintain a proceeding to compel specific performance of this Agreement by the Shareholder attempting such Transfer, it
being agreed that the other Shareholders not in default and the Corporation do not have an adequate remedy at law. 

    8.  Special Restrictions. [RESERVED]. 

    8.1 Not Less Than All Shares. Unless the transferee is the Corporation, or one or more other Shareholders, a
transferring Shareholder may only transfer all, but not less than all, of his or her Shares in any single transaction. For purposes of this Section 8.1, all transfers pursuant to a single Offer
Notice or Decedent's Offer Notice, as the case may be, shall be considered transferred in a single transaction. 

    8.2  Transferees Must Be Eligible Shareholders.  The transferring Shareholder (or personal representative
in the case of a deceased Shareholder) may only transfer his or her Shares to an "eligible shareholder," as defined in Section 3 of the Subscription Agreement. 

    8.3  Terminating Transfer Void.  No transfer of Shares may be made if the effect of such transfer, in the
opinion of the Corporation on advice from Corporation counsel or accountants, would be to terminate the Corporation's status as a C Corporation (or to violate any code restrictions on the transfer of
C Corporation shares). 

    8.4  Resolution to Revoke.  No resolution to revoke the Corporation's election to be taxed as an C
Corporation shall be effective for such purpose unless Shares representing greater than fifty percent (50%) of the total Shares of the Corporation vote in favor of such resolution. 

    8.5  No Disproportionate Distributions.  If, at any time, the Board of Directors resolves to distribute
earnings of the Corporation, such earnings shall be distributed pro rata among the Shareholders in proportion to the relative number of Shares held by
each. The Corporation shall not make any distribution to Shareholders which varies the foregoing rule either with respect to timing or amount. 

    8.6  Minimum Annual Distributions.  [RESERVED]. 

    8.7  Termination of S Election.  [RESERVED]. 

    8.8  Termination of Shareholder's Interest.  [RESERVED]. 

    8.9  Corporation's Duties.  The Corporation shall use its best efforts and shall take such action as may
be reasonably necessary to avoid a termination of its corporate election status. In furtherance of and not by way of limitation of the Corporation's obligations, the Corporation shall not
(a) issue more than one class of stock (except for a class of stock which only differs with respect to voting rights), (b) borrow funds from a Shareholder unless such borrowings satisfy
the "straight debt"' safe harbor as defined in Code Section 1361(c)(S), (c) acquire a stock ownership interest in another corporation if the acquisition of such an interest will result
in the Corporation becoming a member of an affiliated group as defined in Code Section 1361(b)(2)(A) unless counsel for the Corporation renders an opinion that such affiliation will not cause
the Corporation's existing election status to terminate, or (d) process on its books and records any transfer prohibited by this Shareholder Agreement. 

15

  

    9.  Miscellaneous Provisions.  

    9.1  Further Assurances.  Each party agrees to perform any further acts and to execute and deliver any
further documents that may be reasonably necessary to carry out the provisions of this Agreement. The obligation imposed by this Section 9.1
shall be specifically enforceable. 

    9.2  Attorney's Fees.  In the event it is necessary for any party to engage an attorney to enforce the
terms of this Agreement, regardless of whether a lawsuit or arbitration is commenced, the prevailing party shall, in addition to any other relief, be entitled to recover from the party in default
reasonable attorney's fees and costs, including any on appeal. 

    9.3  Construction Venue.  It is agreed and understood that this Agreement made in accordance with and
shall be interpreted under the laws of the State of Washington. If any action or other proceeding be brought on or in connection with this Agreement, the venue of said actions shall be in King County,
Washington. 

    9.4  Number and Gender.  Unless some other meaning or intent is apparent from the context, the plural
shall include the singular and vice versa, and masculine, feminine and neuter words shall be used interchangeably. 

    9.5  Section Headings.  Section headings have been included solely for convenience and shall not be
considered a part of this Agreement for any purpose relating to the interpretation or construction of its terms. 

    9.6  Spousal Consent.  The execution of this Agreement by a Shareholder's spouse signifies that he or she
authorizes, ratifies, confirms and approves the execution of this Agreement by the Shareholder, with the same force and effect as if a party hereto, and he or she further authorizes and appoints his
or her spouse as his or her attorney-in-fact to exercise all rights he or she may have with respect to the ownership of any Shares, including the encumbrance and disposition of
such Shares. 

    9.7  Legend on Shares.  Upon execution of this Agreement, Shareholders shall deliver all certificates
representing Shares to the Corporation to have substantially the following legend placed upon them: 

The
Shares represented by this certificate are subject to the terms of a Shareholders' Buy-Sell Agreement dated August 23, 1994, as amended, a copy of which may be examined at the
principal office of the Corporation. All terms and provisions of the Shareholders' Buy-Sell Agreement are hereby incorporated by reference and made a part of this certificate. 

    9.8  Amendments.  The provisions of this Agreement may be waived, altered, amended or repealed, in whole
or in part, only upon the written consent of the Corporation and the Shareholders holding two-thirds (2/3) of the outstanding Shares. 

    9.9  Successors and Assigns.  This Agreement shall be binding on, and shall inure to the benefit of, the
parties to it and their respective heirs, personal representatives, successors and assigns. 

    9.10  Severability.  Should any provision or portion of this Agreement be held unenforceable or invalid
for any reason, the remaining provisions and portions shall be unaffected by such holding. 

    9.11  Entire Agreement.  This instrument constitutes the sole and entire agreement of the parties with
respect to its subject matter and correctly sets forth the rights, duties and obligations of each as to the other with respect to the subject matter as of its date. Any prior agreements, promises,
negotiations or representations concerning its subject matter not expressly set forth in this Agreement are of no force or effect. 

16

 

    9.12  Termination.  This Agreement shall terminate on the written agreement of all parties, the
dissolution, bankruptcy, or insolvency of the Corporation, or at such time as only one Shareholder remains, after the Shares of all other Shareholders have been transferred, redeemed or purchased, 

    9.13  Notices.  Any notice or other communication required or permitted to be given under this Agreement
shall be in writing, and notice shall be deemed given when delivered personally to, or deposited in the United States mail, first-class, postage prepaid, addressed to the Corporation at 8826 122nd
Avenue N.E., Kirkland, WA 98033, or to the Shareholder at the Shareholder's address as set
forth on attached Exhibit A. Any party may at any time give notice in writing to the other parties of a change of his or her address for purposes
of this Section 9.13. 

    9.14  Counterparts.  This Agreement may be executed by the parties in one or more counterparts, all of
which taken together shall constitute one instrument. 

    IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written above. 

	TRIDIUM RESEARCH, INC.	 	SHAREHOLDERS:

CECS CORP.
	

By	
 	

/s/ Patrick Howard
	
 	

/s/ Tracy M. Shier

	 	 	Patrick Howard, President	 	  By:
	

 	
 	

 	
 	

	 	 	 	 	  By:

17

 
 
 

EXHIBIT D
  (to Subscription Agreement)    
  

RISKS:  

    THIS INVESTOR PACKET, PARTICULARLY THE RISK FACTORS IN THIS EXHIBIT D AND THE RELATED BUSINESS PLAN, SHOULD BE CAREFULLY REVIEWED PRIOR TO MAKING A DECISION TO
INVEST. THE INVESTOR UNDERSTANDS AND ACKNOWLEDGES THAT INVESTMENT IN THE SHARES INVOLVES VERY SIGNIFICANT RISKS, WHICH COULD RESULT IN THE LOSS OF THE INVESTOR'S ENTIRE INVESTMENT. 

    1.  Assumptions and Forecasts based Solely on Management's Knowledge and Belief; Accountants Not Yet
Engaged.  The Company's financial forecasts in the business plan were not prepared by an accountant and are not based on any standard or accepted forecasting
techniques or procedures, but are limited to presenting, to the best of management's belief and knowledge, the expected financial results of the Company. Such forecasts are entirely dependent on a
number of assumptions, some of which are described in the business plan, which management believes to be reasonable on the basis of the information presently known to them. However, these assumptions
necessarily reflect matters of judgment and speculation, and it is therefore inevitable that the results of the Company's operations, when and if it conducts business operations, will vary from the
forecaster projections, and possibly quite significantly. Investors should recognize that there can be no assurance that the forecasted results can be achieved, and should not place excessive reliance
upon the Company's forecasts or the underlying assumptions. The Company has not yet chosen accountants to review all sales and expenditures, and there have been no sales of product or services
described in the business plan as of this date. 

    2.  Manufacturing Arrangements to be Determined.  Achieving the Company's production goals will require
considerable planning and documentation. The Company may experience unanticipated problems with vendors and suppliers such as shortages, long lead times, foreign manufactured parts and conflicts of
interest with the various parts manufacturers. Additional unforeseen technical problems could arise with FCC class B testing before consumer sales begin. 

    3.  Dependence on Key Personnel/Other Commitments of Management.  Management of the Company will depend
upon the services of its key personnel (its Chief Executive Officer, President, Vice Presidents, Hardware and Software Engineers, or other Officers of the Company). In addition, there are other key
positions that have yet to be hired. Initially, some positions will not be required to devote their full time to the Company. No assurances are given that other obligations of these key individuals
will not interfere with their ability to discharge their obligations to the Company. In addition, loss of even the partial services of any such key personnel could have an adverse effect on the
Company. The Company does not currently intend to require its key management personnel to sign employment contracts or to agree to non-competition limitations in the event that they cease
to be officers of the Company. 

    4.  Negative Cash Flow Anticipated.  The Company anticipates that even as sales increase, it will
continue to have negative cash flow while additional development and marketing continue. Assurances cannot be made that the Company will be profitable over any specific period or at all. 

    5.  Lack of Market Interest.  The Company has not hired a market research firm to assess market demand.
Instead the management is relying on personal knowledge of the market and selected interviews with various existing technology concerns. 

    6.  Significant Capital Needs.  The Company may not be able to raise all the capital necessary to compete
effectively. The initial offering limits the Company to $500,000 of investment. Additional filings to the Secretary of States Office of the State of Washington will be done as the Company raises in
excess of $500,000. Based on assumptions presently available management perceives this to be sufficient to develop and market the Company's planned product line. However, market conditions are
dynamic, making capital requirements variable for design, production and marketing not predictable, To date, the Company has raised $250,000 and is currently seeking to raise additional capital. This
may cause for the Company to request a higher offering limit by filing the required documentation with the State of Washington. 

18

  

 
 

EXHIBIT E
  (to Subscription Agreement)
  
    SUMMARY INFORMATION REGARDING CAPITAL STRUCTURE    
  

Authorized Shares  

    The Company's authorized capital consists of 10,000,000 shares of Common Stock. The rights of the holders of these shares are as provided in the Company's  Articles of
Incorporation, a copy of which the Investor has received in accordance to the Subscription Agreement. Holders of Common Stock do not have
preemptive rights or the right to cumulate their votes in elections of directors. All shares of the Company's stock are subject to a Shareholders' Buy-Sell Agreement dated
August 23, 1994, as amended. In addition, the Company presently operates as a C Corporation, having changed its status from an Subchapter S Corporation in 1997. 

Issued, Outstanding and Reserved Shares  

    As of 1/31/  , 2000, 4,117,822 shares of Common Stock of the Company had been issued. 

    In
addition, the Company's Board of Directors has reserved a total of 1,000,000 shares of Common Stock for issuance to key employees, consultants, officers and directors pursuant to
stock options granted or to be granted by the Board of Directors. The Board of Directors further intends to adopt an employee stock option plan. 

Shares Offered  

    In this offering, the Company intends to sell up to 4,250,000 shares of Common Stock at a price of $0.20 per share. The Company may not be able to, or may not
choose to, sell all of the shares offered
in this offering at stipulated price per share, and may, at its sole discretion, elect to sell large blocks of shares at less than the offering price per share specified in this Subscription
Agreement. Additional filings will be done with the Secretary of the State of Washington as the Company nears, and expects to exceed, $500,000 of investment. 

19

 

	Tridium Research, Inc.	 	EXHIBIT F

Signature Page	 	CONFIDENTIAL

    This
Signature Page to the Subscription Agreement ("Agreement") classifies all the information and documents obtained by CECS ("Viewer") on product, market, marketing, systems and
hardware design, propriety software and algorithms, unit packaging, business plans and financial projections, production rates and pricing, trade secrets, patents pending and trademarks (collectively
referred to as "Secrets") to be the property of Tridium Research, Inc., ("Tridium") a Washington Corporation. 

    The
Viewer understands that the information reviewed pursuant to this Agreement is absolutely confidential and proprietary and is intended only for the persons to whom it is
transmitted by Tridium. The Viewer also acknowledges that any reproduction of this Agreement, in whole or in part, or the divulgence of any of its contents, without the prior written consent of
Tridium are expressly prohibited. 

    The
Viewer agrees not to disclose or appropriate any of the Secrets to a third party without prior written permission of Tridium. The Viewer also agrees not to transmit the identity
of Tridium or its principals or the specifics of any business negotiations or contractual Agreements entered into to any third parties without the prior written consent of Tridium. This Agreement
shall be binding upon and inure to the benefit of all Viewers and all persons and companies, partnerships, corporations and their subsidiaries, domestic and foreign, which they represent or are a part
of and their successors or assigns. A facsimile of this Agreement may be executed by each party separately and when each party has executed a copy thereof, such copies taken together shall be deemed
to be a full and complete contract between the parties. 

    The
Viewer acknowledges that these documents do not constitute an offer to sell any securities and any such solicitation will be undertaken only under appropriate documents and
pursuant to all applicable
securities laws. The information set forth herein is believed by Tridium to be reliable. It must be recognized, however, that projections and predictions about future performance of Tridium are
subject to a high degree of uncertainty and no warranty of such projections is expressed or implied hereby. Also, all appropriate documents shall be read before investing in or subscribing for shares
of Tridium (if investing) and the Viewer will have had opportunity to discuss this material with and ask questions of Tridium's President and/or Officers. 

VIEWER(s):  

	CHOICES ENTERTAINMENT CORPORATION
	

/s/ Tracy M. Shier
	
 	

Title	
 	

President

	
	 	Title	 	

TRIDIUM:  

	Accepted by	 	/s/ Patrick Howard
	 	Date	 	3/1/2000

	Title	 	President
	 	 	 	 

	CIRCLE APPROPRIATE:	 	Business Plan	 	Subscription Agreement	 	Other ______________

20

 
 
 

TRIDIUM RESEARCH INC.
  Subscription Agreement    
  

Kirkland, Washington

E-mail: info@dualmonitor.com

(T) (425) 822.2400 (F) (425) 827.3902 

CONFIDENTIALITY  

    The information and data provided in this document are strictly confidential and are supplied on the understanding that they will be held confidentiality and
not disclosed to third parties without the prior written consent of Tridium Research, Inc. Any breach of this statement will result in legal action as permitted under the laws of the State of
Washington. 

21

 
TRIDIUM RESEARCH, INC.

Instructions for Investing  

    If you wish to purchase shares of Common Stock in Tridium Research, Inc., please complete the attached Subscription
Agreement and check the appropriate space(s) on page 7. Then, please mail or
deliver the Subscription Agreement, together with your check made payable to "Tridium Research, Inc." to: 

Tridium
Research, Inc.

8826 122nd Avenue N.E.

Kirkland, Washington 98033

Attn: Patrick Howard

(current legal mailing address of company)

(may change as the company grows and/or moves to new offices) 

    Upon
acceptance of your Subscription Agreement, an officer of Tridium Research, Inc. will sign it and return a copy, as signed,
together with a stock certificate representing your shares and, if appropriate, a Common Stock Purchase Warrant. 

    If
you have any questions please call the Tridium offices at (425) 822-2400. 

22

QuickLinks

SUBSCRIPTION AGREEMENT

Section 1 Subscription

Section 2 Representations and Warranties

Section 3 Status as a Qualified Investor

Sections 4 - 12 Miscellaneous

EXHIBIT A (to Subscription Agreement)

EXHIBIT B (to Subscription Agreement)

EXHIBIT C (to Subscription Agreement)

CONSENT TO BE BOUND BY SHAREHOLDERS BUY-SELL AGREEMENT

SHAREHOLDERS' BUY-SELL AGREEMENT

RECITALS

AGREEMENT

EXHIBIT D (to Subscription Agreement)

EXHIBIT E (to Subscription Agreement) SUMMARY INFORMATION REGARDING CAPITAL STRUCTURE

TRIDIUM RESEARCH INC. Subscription Agreement

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