-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uphqc7nH/byk3TmWKh+tjkd8wOmzbNtg16t9BOVRoFry+9KvOkGtWDRZtTw1awuM 6PDQA3A8grbpjmDJhks88A== 0001094328-00-000166.txt : 20001218 0001094328-00-000166.hdr.sgml : 20001218 ACCESSION NUMBER: 0001094328-00-000166 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 20001214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: URBANA CA INC CENTRAL INDEX KEY: 0001058330 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 880393257 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: SEC FILE NUMBER: 333-44160 FILM NUMBER: 789453 BUSINESS ADDRESS: STREET 1: 750 WEST PENDER ST STREET 2: SUITE 804 CITY: VANCOUVER BRITISH CO STATE: A6 ZIP: V6C 2T8 BUSINESS PHONE: 7027322253 MAIL ADDRESS: STREET 1: 1600 E DESERT INN RD STREET 2: SUITE 102 CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED CARBONICS CORP DATE OF NAME CHANGE: 19980729 SB-2/A 1 0001.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM SB-2/A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 URBANA.CA, INC. (Name of Small Business Issuer in its Charter) Nevada 454110 88-0393257 (State or jurisdiction of (Primary Standard Industrial I.R.S. Employer incorporation or Classification Code Number) Identification No.) organization 750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8 (Address and telephone number of Registrant's principal executive offices and principal place of business) Brian F. Faulkner, Esq., 3900 Birch Street, Suite 113, Newport Beach, Ca (949) 975-0544 (Name, address, and telephone number of agent for service) Approximate date of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If the delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. CALCULATION OF REGISTRATION FEE Title of Amount to be Proposed Proposed Amount of Securities Registered Maximum Aggregate Registration to be Offering Offering Fee Registered Price Per Price Share (1) Common Stock 47,083,029 $0.6875 $32,369,582 $8,545.57 The company hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the company shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. (1) Pursuant to Rule 416, such additional amounts to prevent dilution from stock splits or similar transactions. (2) Calculated in accordance with Rule 457(c): The average of the high and low prices as of August 15, 2000 PROSPECTUS URBANA.CA, INC. 47,083,029 Shares Common Stock Urbana.ca, Inc., a Nevada corporation, is hereby offering shares of common stock on a delayed basis under a shelf registration under Rule 415 pursuant to the terms of this prospectus. A total of 47,083,029 shares of common stock are to be registered, as follows (maximum amounts): The company's initial public offering consists of 43,641,090 shares of common stock, par value $0.001 (of this amount, up to 25,000,000 shares will be sold for cash). This offering is being made on a best-efforts basis by the company, with no minimum purchase required. The company's common stock trades on the Over the Counter Bulletin Board under the trading symbol "URBA". Concurrent with this initial public offering, is an offering by certain selling shareholders of the company, in the total amount of 3,441,939 shares of common stock. These selling shareholders may offer their stock through public or private transactions, on or off the Over the Counter Bulletin Board, at prevailing market prices, or at privately negotiated prices. 847,989 of these shares will be sold upon the conversion of certain special warrants; the remainder are currently owned by the selling shareholders. The shares offered hereby are highly speculative and involve a high degree of risk to public investors and should be purchased only by persons who can afford to lose their entire investment (See "Risk Factors" on page 5). These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission or any state securities commission nor has the U.S. Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Price to Public Underwriting Proceeds to Discounts and Issuer (3) Commissions (2) Per Share $0.50 $0 $0.50 Total Maximum $12,500,000 $0 $12,500,000 Information contained herein is subject to completion or amendment. The registration statement relating to the securities has been filed with the U.S. Securities and Exchange Commission. The securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Subject to Completion, Dated: ______________, 2000 Table of Contents PROSPECTUS SUMMARY 5 RISK FACTORS 7 USE OF PROCEEDS 17 DETERMINATION OF OFFERING PRICE 18 SELLING SHAREHOLDERS 18 PLAN OF DISTRIBUTION 21 LEGAL PROCEEDINGS 30 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 30 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 32 DESCRIPTION OF SECURITIES 34 INTEREST OF NAMED EXPERTS AND COUNSEL 35 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 35 ORGANIZATION WITHIN LAST FIVE YEARS 40 DESCRIPTION OF BUSINESS 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 54 DESCRIPTION OF PROPERTY 57 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 57 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 58 EXECUTIVE COMPENSATION 60 FINANCIAL STATEMENTS 61 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 89 AVAILABLE INFORMATION 89 PROSPECTUS SUMMARY The following summary is qualified in its entirety by detailed information appearing elsewhere in this prospectus. Each prospective investor is urged to read this prospectus in its entirety. The Company. The company is an e-commerce, transaction and content company that intends to create Intranet and Internet-based systems in conjunction with local area governments and high profile corporations. The company intends to provide local communities with community based entertainment and information services widely used in all facets of everyday life and deliver these services through a customized set-top-box. The principal offices of the company's are located at 750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8. The telephone number for the company is (604) 682-8445. The Offering. 47,083,029 shares of common stock of the company will be sold on a delayed basis under a shelf registration under Rule 415 (shares outstanding prior to this offering: 22,038,283) (shares to be outstanding after this offering, assuming a full subscription: 69,121,312), as follows: Selling shareholders: 3,441,939. Shares to be issued upon the exercise of purchase warrants to be issued upon the exercise of special warrants: 423,994. Shares to be issued upon the exercise of agent's compensation options to be issued upon the exercise of agent's special warrants: 84,798. Shares to be issued upon the exercise of agent's purchase warrant to be issued upon the exercise of agent's compensation options: 42,399. Shares to be issued under units to be issued upon loan conversions: 2,059,933. Shares to be issued upon the exercise of purchase warrants under units to be issued upon loan conversions: 1,029,966. Shares to be sold for cash ($0.50 per share): 25,000,000. Shares for possible future acquisitions by the company of other companies and/or assets: 12,000,000. Shares to be issued for consulting services: 3,000,000. Use of Proceeds: The amount of proceeds from this offering will depend on the offering price per share and the number of shares sold for cash. The initial offering price of the shares has been set at $0.50 per share. The proceeds of the cash offering ($12,500,000), less the expenses of the offering (estimated at $45,546), will be used to provide working capital for the company. RISK FACTORS The securities offered hereby are highly speculative in nature and involve a high degree of risk. They should be purchased only by persons who can afford to lose their entire investment. Therefore, each prospective investor should, prior to purchase, consider very carefully the following risk factors among other things, as well as all other information set forth in this prospectus. The Company is in a New Business and Has Not Completed Development of its Products. The company is at an early stage of development. The company has not completed the development of any commercial products, and, accordingly, has no profitable operating history upon which investors may rely. The company has received limited revenues from operations and expects that most of its revenues in the foreseeable future will result from further corporate collaborations, if any. The company's product candidates will require significant additional investment in research and development will require substantial resources. There can be no assurance that any of the Issuer's products will meet applicable regulatory standards, obtain required regulatory approvals, or be capable of being produced in commercial quantities at reasonable costs. Products that may result from the company's research and development programs are not expected to be commercially available for a number of years, if at all, and it will be a number of years, if ever, before the company will receive any significant revenues from commercial sales of such products. There is no assurance that the company will be able to enter into any corporate collaborations or that the company will ever achieve profitability. The Company has had No Revenues and Anticipates Losses for the Foreseeable Future. The company has had no sales revenue to date. Although the company has been involved with e-commerce since 1999, it has been engaged only in research and development. The company has incurred significant operating losses, including a net loss of $568,750 in fiscal 1999. At June 30, 2000, the company had an accumulated deficit of $2,985,599. Notwithstanding the company's objective to accelerate the period in which a return on investment would typically be recognized with traditional technology companies, for some projects it may be a number of years, if ever, before the company will receive any significant revenues from commercial sales of products. The future growth and profitability of the company will be principally dependent upon its ability to successfully complete development of, obtain regulatory approvals for, and market or license its proposed products. Accordingly, the company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered in connection with the establishment of a new business in a highly competitive industry, characterized by new product introductions. The company anticipates that it will incur substantial operating expenses in connection with the research, development, testing and approval of its proposed products and expects these expenses to result in continuing and significant losses until such time as the company is able to achieve adequate revenue levels. There can be no assurance that the company will be able to significantly increase revenues or achieve profitable operations. Failure to obtain additional capital, if needed, would have a material adverse effect on the company's operations. The Company Will Need Additional Financing to Implement its Business Plan and Such Financing May Be Unavailable or Too Costly. The company has sufficient funds to undertake its currently planned research and development activities through fiscal 2000. However, the company will require substantial funds in order to conduct its future activities. The company intends to seek these funds through equity financing, collaborative arrangements with corporate sponsors, or from other sources. The company may also require additional funds in order to acquire technology or products that complement the company's efforts. Financing may not be available or on terms acceptable to the company. Additional equity financings could result in significant dilution to existing shareholders. If sufficient capital is not available, or available at prohibitive cost, the company may be required to delay, reduce the scope of, eliminate or divest one or more of its discovery, research or development programs, any of which could have a material adverse effect on the company's business, financial condition and results of operations. On June 15, 2000, the company entered into an agreement with Ladenburg Thalmann & Co., Inc. for the purpose of this firm to act as the company's exclusive placement agent (later revised to non- exclusive) and financial advisor in connection with a best efforts raising of up to $3,500,000. Under the terms of this agreement, the company agrees to pay Ladenburg a cash fee of 6% of the funds raised and to issued to this firm a warrant to purchase common stock equal to 6% of the funds so raised. To date no funds have been secured for the company under this agreement. There is no guarantee that funds will be available under this agreement in the future for use by the company. USE OF PROCEEDS The amount of proceeds from this offering will depend on the offering price per share and the number of shares sold for cash. The initial offering price of the shares has been set at $0.50 per share. The proceeds of the cash offering ($12,500,000), less the expenses of the offering, will be used to provide working capital for the company. The following table sets forth the use of proceeds from this offering (with three scenarios assuming 25%, 50%, and 100% subscriptions of the shares for cash): Use of Proceeds Subscriptions Subscriptions Subscriptions (1) of 25% of of 50% of of 100% of Total Total Total Transfer Agent Fee of $1,000 0.03% 0.015% 0.0075% Printing Costs of $1,000 0.03% 0.015% 0.0075% Legal Fees of $25,000 0.80% 0.40% 0.20% Accounting fees of $5,000 0.05% 0.025% 0.0125% Filing Fees of $13,546 0.43% 0.22% 0.11% Working Capital 98.66% 99.655% 99.6625% ($3,082,954) ($6,207,954) ($12,457,954) Total $3,125,000 $6,250,000 $12,500,000 (1) These are estimates, and the actual number could be higher or lower that these numbers. Management anticipates expending these funds for the purposes indicated above. To the extent that expenditures are less than projected, the resulting balances will be retained and used for general working capital purposes or allocated according to the discretion of the board of directors. Conversely, to the extent that such expenditures require the utilization of funds in excess of the amounts anticipated, supplemental amounts may be drawn from other sources, including, but not limited to, general working capital and/or external financing. The net proceeds of this offering that are not expended immediately may be deposited in interest or non-interest bearing accounts, or invested in government obligations, certificates of deposit, commercial paper, money market mutual funds, or similar investments. SELLING SHAREHOLDERS Selling shareholders will be offering a total of 3,441,939 shares of common stock of the company, as follows (in the chronological order of their original issuance as restricted shares) (currently, the only affiliate of the company among the selling shareholders is Da-Jung Resources Corp, by virtue of the size of its holdings of company common stock; there is no affiliation between any of the selling shareholders, and the company and its officers and directors): Da-Jung Resources Corp. On October 7, 1997, the company entered into an agreement with Da- Jung Resource Corp. to acquire 100% of this firm's interest in an agreement on establishment of a Sino foreign equity joint venture with the China-Canada Liumao Graphite Products Co., Ltd.. Consideration for this acquisition was 6,000,000 restricted shares of the company's common stock, plus $200,000 of which $70,000 has been paid and $130,000 was settled by the issuance of 325,000 restricted shares of common stock (in 1999). Da-Jung Resource Corp. currently owns a total of 4,842,900 shares of common stock of the company, obtained as set forth above. This firm is hereby offering a total of 1,000,000 shares of its stock under this prospectus (the sale of all these shares would leave this firm owning a total of 3,842,900 shares of common stock of the company; a percentage ownership of 17.44% of the issued and outstanding common stock of the company of 22,238,283 as of October 30, 2000). Settlement Conversions. During the fiscal year ended December 31, 1999, the company settled debts of $86,268 to Hound Pound Equities by the issuance of 215,665 restricted shares at $0.40 per share. The company also settled its agreement payable of $130,000 to Da-Jung Resources Corp., a major shareholder in the company (Da-Jung, prior to the debt settlement, sold the debt to Clyde Resources Ltd.), and various of its trade payables of $204,122, by the issuance of 325,000 and 510,303, respectively, restricted shares at $0.40 per share. Subsequent to December 31, 1999, the company settled $9,190 of accounts payable by the issuance of 22,975 restricted shares of common stock at a price of $0.40 per share. An aggregate of 1,073,950 shares of common stock converted from these settlements are being offered under this prospectus for the account of the following selling shareholders: Name of Amount Amount Offered Amount Percentage Selling Beneficially for Selling Beneficially Ownership Shareholders Owned Prior Shareholder's Owned After After to Offering Account Offering(1) Offering(1) Douglas Symes & 17,630 17,630 0 0.00% Brissenden Rescan Engineering Ltd. 169,000 169,000 0 0.00% Shawn F. Hackman, Esq. (former counsel)75,444 75,444 0 0.00% Nottinghill Resources 125,000 125,000 0 0.00% Hound Pound Equities Ltd. 215,665 215,665 0 0.00% F.R. Ventures Corp. 12,660 12,660 0 0.00% Yi-Hong Zhan 12,452 12,452 0 0.00% Robert Hoegler (former director) 20,000 8,137 11,863 0.05% Nu-Media Systems International 35,667 35,667 0 0.00% Lakefield Research Ltd. 51,795 51,795 0 0.00% The Letter Shop (1990) Ltd. 2,518 2,518 0 0.00% Clyde Resources Ltd. 325,000 325,000 0 0.00% Ed Dorffi 6,927 6,927 0 0.00% The LOM Group 16,050 16,050 0 0.00% Total 1,085,808 1,073,943 11,863 0.05% (1) Based on the issued and outstanding shares of common stock of 22,038,283 as of October 30, 2000. Questech Corporation. Questech Corporation currently owns a total of 520,000 shares of common stock of the company. These shares were acquired from Da-Jung Resources Corp. in a private transaction in January 2000. This firm is hereby offering all 520,000 shares of its stock under this prospectus (the sale of all these shares would leave this firm owning a no shares of common stock of the company; a percentage ownership of 0.00% of the issued and outstanding common stock of the company of 22,238,283 as of October 30, 2000). Units Offering. On May 11, 2000, the company completed a private placement of 847,989 special warrants to ten investors for total consideration of $1,059,986. Each special warrant is convertible for no additional consideration at any time after closing of the transactions on April 27, 2000 into one common share and one-half share purchase warrant, exercisable at a price of $5.00 per whole share purchase warrant. An aggregate of 847,989 shares of common stock to be converted from these special warrants are being offered under this prospectus for the account of the following selling shareholders: Name of Amount Amount Offered Amount Percentage Selling Beneficially for Selling Beneficially Ownership Shareholders Owned Prior Shareholder's Owned After After to Offering Account Offering Offering(1) National Bank Financial ITF Austin Consultancy Services Ltd. 174,000 116,000 58,000 0.26% National Bank Financial ITF Benevest S.A. 37,500 25,000 12,500 0.06% National Bank Financial ITF Wajde Darwish 124,500 83,000 41,500 0.19% Gordon G. Hoover 81,000 54,000 27,000 0.12% National Bank Financial ITF Joryjil Industries Ltd. 121,980 81,320 40,660 0.18% BMO Nesbitt Burns Inc. ITF Trevor Leslie 216,825 144,550 72,275 0.33% Prudential Securities Inc. ITF Societe Financiere Mirelis S.A. 119,998 79,999 39,999 0.18% HSBC Securities (Canada) Inc. ITF T.R.L. Investments Limited 124,200 82,800 41,400 0.19% National Bank Financial ITF Toyotatown Limited 150,000 100,000 50,000 0.23% John Ryan 121,980 81,320 40,660 0.18% Total 1,271,983 (2) 847,989 423,994 1.92% (1) Based on the issued and outstanding share of common stock of 22,038,283 as of October 30, 2000. (2) Included within this total is 423,994 shares underlying purchase warrants which are presently exercisable until 4:30 p.m. (Toronto time) on the date which is the earlier of: the fifth business day following the date on which the last of the final receipts of the filing of the prospectuses in Canada is issued and this Form SB-2 registration statement is declared effective by the Securities and Exchange Commission. April 26, 2002. The Plan of Distribution section of this prospectus contains a detailed discussion of this special warrants offering. PLAN OF DISTRIBUTION The company does not presently intend to use any underwriters, dealers, or finders in connection with the sales of shares under this offering. Units Offering. The company entered into an agency agreement effective April 10, 2000 with Groome Capital.com Inc. whereby the company and Groome engaged in a best efforts offering of up to 20,000,000 special warrants at a price of $1.25 per special warrant. The price of the special warrants was negotiated between the company and Groome Capital with reference to the market price of the common shares of the company, dilution, and the capital needs of the company. Each special warrant is convertible for no additional consideration into one common share and one-half share purchase warrant, exercisable at a price of $5.00 per whole share purchase warrant. On May 11, 2000, the company completed a private placement of 847,989 special warrants pursuant to exemptions from prospectus requirements of applicable securities laws in Canada, resulting in gross proceeds to the company of $1,059,986 from a total of ten investors, none of which is affiliated with the company (a similar offering was undertaken in the United States, but no sales resulted from this offering), as follows: Name of Special Warrant Holder No. of Warrants Special Warrants Purchased National Bank Financial ITF Austin Consultancy Services Ltd. 116,000 National Bank Financial ITF Benevest S.A. 25,000 National Bank Financial ITF Wajde Darwish 83,000 Gordon G. Hoover 54,000 National Bank Financial ITF Joryjil Industries Ltd. 81,320 BMO Nesbitt Burns Inc. ITF Trevor Leslie 144,550 Prudential Securities Inc. ITF Societe Financiere Mirelis S.A. 79,999 HSBC Securities (Canada) Inc. ITF T.R.L. Investments Limited 82,800 National Bank Financial ITF Toyotatown Limited 100,000 John Ryan 81,320 Total 847,989 Groome received an agent's fee equal to 8% of the total amount raised (reduced to 4% for investors on a president's list), resulting in total fees paid of $84,798.88. In addition, Groome has been granted non-assignable agent's special warrants equaling 10% of the number of special warrants sold, resulting in the issuance of 84,798 non-transferable agent's special warrants to Groome Capital. These warrants entitle the holder to acquire, without additional consideration, one non-transferable agent's compensation option. Each agent's compensation option will entitle Groome Capital to purchase, at a price of U.S. $1.25, one unit consisting of one agent's option share and one-half of one agent's purchase warrant. Each agent's purchase warrant will entitle Groome Capital to purchase one agent's warrant share at a price of U.S. $5.00 each. The warrants are exercisable at any time after closing until 4:30 p.m. (Toronto time) on the date which is the earlier of: the fifth business day following the date on which the last of the final receipts of the filing of the prospectuses in Canada is issued and this Form SB-2 registration statement is declared effective by the Securities and Exchange Commission. April 26, 2002. Any special warrants, agent's special warrants, agent's compensation options, or agent's purchase warrants not previously exercised will be automatically deemed to have been exercised by the holder at this time without any further action on the part of the holder. If, for any reason, a Form SB-2 to register the shares underlying the warrants and options is not declared effective by September 25, 2000, the holders of the special warrants and agent's warrants will be entitled to receive, for no additional consideration, a unit consisting of 1.1 common shares (rather than one common share) and 0.55 purchase warrants (rather than 0.50 purchase warrants) upon exercise of each special warrant held. This Form SB-2 has not yet been declared effective, so this penalty provision will apply. (a) Special Warrants All of the special warrants are identical in all respects. The special warrants were issued under and are subject to the terms of a special warrant agreement, dated April 27, 2000, between the company and Pacific Corporate Trust Company, and include the following terms and conditions: no fractional common shares will be issued; holders of special warrants may be entitled to cash payment in respect of fractional entitlements the special warrants, including the number of common shares issuable upon exercise or deemed exercise thereof, may be subject to adjustment upon the occurrence of certain stated events, including the subdivision or consolidation of common shares, certain distributions of common shares, or securities convertible into or exchangeable for common shares, or of other securities or assets of the company, certain offerings of rights, warrants or options and certain capital reorganizations the holding of special warrants will not give the holder rights as a shareholder of the company special warrants may be exercised by the holder at any time to and until the Expiry Time, and special warrants not exercised by the Expiry Time shall, immediately prior to the Expiry Time, be deemed to have been exercised without any further action on the part of the holder (b) Purchase Warrants All of the purchase warrants are identical in all respects. The purchase warrants were issued under and are subject to the terms of a purchase warrant agreement, dated April 27, 2000, between the company and Pacific Corporate Trust Company, and include: the purchase warrant agreement provides for the adjustment to exercise price of the Purchase warrants in certain circumstances, such as a common share reorganization including where the company subdivides its outstanding common shares into a greater number or common shares or where the company conducts a rights offering, and further provides for an adjustment in the number of common shares which the holder is entitled to receive upon the exercise of purchase warrants in certain circumstances, such as where there is an amalgamation of the company with or into any other corporation no fractional shares will be issued upon the exercise of the purchase warrants. (c) Agent's Warrants and Agent's Special Warrants. The agent's special warrants, agent's compensation options, and agent's purchase warrants contain provisions that, in the event of: the subdivision or consolidation of common shares any issue or distribution by the company of any securities to its shareholders, including rights, options, or warrants or securities convertible or exchangeable into common shares of the company or property or assets, or any reclassification or capital reorganization (other than as a result of a subdivision or consolidation) or any consolidation or merger of the company, or any sale or conveyance to another corporation of the property and assets of the company as an entirety or substantially as an entirety the number of common shares issuable upon exercise of the warrants or options will be adjusted, if necessary, so that the holders will be in the same position, to the extent reasonably possible, as they would have been in had the warrants or options been exercised prior to the occurrence of each such event. To the extent that the holder of a warrant or option would otherwise be entitled to purchase a fraction of a common share, such right may be exercised only in combination with other rights which in the aggregate entitle the holder to purchase a whole number of common shares; holders of such warrants or options will be entitled to cash payment in respect of fractional entitlements no adjustments as to dividends will be made upon any exercise of the warrants or options. holders of the warrants or options do not have any voting or pre- emptive rights or any other rights as shareholders of the company. (d) Escrowed Proceeds Pursuant to an agreement dated April 27, 2000, 15% of the gross proceeds of the private placement ($158,997.90) were placed into escrow pursuant to an escrow agreement between the company, the Agent and Pacific Corporate Trust Company (as escrow agent) on the closing of the private placement. The proceeds will be released to the company on the earlier of the Expiry Time. Loan Conversions. During fiscal year ended December 31, 1999, the company received loans totaling $60,000. For the quarter ended March 31, 2000, the company received additional loans of $1,224,161.86, for total loans of $1,284,161.86. These loans bear interest at an annual rate of 8% and were due and payable on March 15, 2000. The company did not repay these loans and as a result has offered the lenders the right to convert the principal into units of the company at a price of $0.57 per unit. Each unit is comprised of one restricted common share of the company and one-half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional share at a price of $5.00 per share for a period of two years. A total of $110,000 of the loans, plus accrued interest, has been repaid. An aggregate of 2,059,933 shares of common stock underlies the units and an aggregate of 1,029,966 shares of common stock underlies the purchase warrants, as follows: Loan Holders Principal Number of Number of Number of Amount of Units Upon Shares Shares Loan Conversion Underlying Underlying Of Units Purchase Principal Warrants J.M. Collingshaw $ 26,000 45,614 45,614 22,807 T.R.L. Investments Limited $ 50,000 87,719 87,719 43,859 Gordon McLean $ 20,000 35,088 35,088 17,544 Theresa Patterson $ 10,000 17,544 17,544 8,772 Marilyn Scott $ 10,000 17,544 17,544 8,772 Questech Corporation $ 63,000 110,526 110,526 55,263 The Loyalist Insurance Group Ltd. $ 10,000 17,544 17,544 8,772 Leanne Arnold $ 10,000 17,544 17,544 8,772 John Barthel $ 5,000 8,772 8,772 4,386 Aaron Fleischer $ 11,500 20,175 20,175 10,087 Laura Harding $ 1,368.80 2,401 2,401 1,200 John Wright $ 3,410.40 5,983 5,983 2,991 Ray Orser $ 3,410.40 5,983 5,983 2,991 James Pollard $ 10,000 17,544 17,544 8,772 Lillian Rottar $ 5,000 8,772 8,772 4,386 James Topliss $ 10,000 17,544 17,544 8,772 Peter Travis $ 5,000 8,772 8,772 4,386 Peter Wong & Karen Chiang $ 5,000 8,772 8,772 4,386 Kenneth Wright $ 3,410.40 5,983 5,983 2,991 Phantom Management $ 25,000 43,860 43,860 21,930 Brad Baker $ 10,000 17,544 17,544 8,772 Barbara Dunnington $ 10,000 17,544 17,544 8,772 Matthew Johnstone $ 12,457.39 21,855 21,855 10,927 Ron Pearson $ 31,000 54,386 54,386 27,193 Gary Shuchat $ 5,104.47 8,955 8,955 4,477 Steve Copp $ 10,000 17,544 17,544 8,772 Mark Donahue $ 10,000 17,544 17,544 8,772 Allan Drewlo $ 10,000 17,544 17,544 8,772 Murray Harvey $ 10,000 17,544 17,544 8,772 Doug Lamon $ 62,000 108,772 108,772 54,386 Roy Mayers $ 25,000 43,860 43,860 21,930 Michael Mollison $ 13,500 23,684 23,684 11,842 Steve Rice $ 25,000 43,860 43,860 21,930 W. Bryan Tamblyn $ 10,000 17,544 17,544 8,772 Trent Abraham $ 10,000 17,544 17,544 8,772 Linda Breese $ 17,000 29,825 29,825 14,912 John Crockett $ 20,000 35,088 35,088 17,544 Rosalie Harris $ 10,000 17,544 17,544 8,772 Kahntact Incorporated $ 40,000 70,175 70,175 35,087 Ladan Javid $ 10,000 17,544 17,544 8,772 Patrick Logue $ 10,000 17,544 17,544 8,772 Amax Holdings Ltd. $ 10,000 17,544 17,544 8,772 Martha Sharp $ 10,000 17,544 17,544 8,772 Scott Washington $ 1,500 2,632 2,632 1,316 Marilyn Williams $ 31,000 54,386 54,386 27,193 Gino Di Leonardo $ 10,000 17,544 17,544 8,772 Dr. Paul Kordish $ 100,000 175,439 175,439 87,719 Norma MacLean $ 5,000 8,772 8,772 4,386 Sharon L. Younger Living Trust $ 10,000 17,544 17,544 8,772 Ernest Raymond $ 75,000 131,579 131,579 65,789 Robert Kerr $ 10,000 17,544 17,544 8,772 Nicole Methe $ 2,500 4,386 4,386 2,193 Judy Rottar $ 26,000 45,614 45,614 22,807 Kensington International Enterprises Inc. $ 150,000 263,158 263,158 131,579 David Phillips $ 5,000 8,772 8,772 4,386 Ivan Vinnick $ 5,000 8,772 8,772 4,386 Dino Constabile $ 10,000 17,544 17,544 8,772 Ralph MacColl $ 10,000 17,544 17,544 8,772 Gordon Rottar $ 50,000 87,719 87,719 43,859 John Barthel $ 5,000 8,772 8,772 4,386 Totals $1,174,161.86 2,059,933 2,059,933 1,029,966 Registration under this Offering. 47,083,029 shares of common stock of the company will be sold on a delayed basis under a shelf registration under Rule 415 (shares outstanding prior to this offering: 22,038,283) (shares to be outstanding after this offering, assuming a full subscription: 69,121,312), as follows: Selling shareholders: 3,441,939. Shares to be issued upon the exercise of purchase warrants to be issued upon the exercise of special warrants: 423,994. Shares to be issued upon the exercise of agent's compensation options to be issued upon the exercise of agent's special warrants: 84,798. Shares to be issued upon the exercise of agent's purchase warrant to be issued upon the exercise of agent's compensation options: 42,399. Shares to be issued under units to be issued upon loan conversions: 2,059,933. Shares to be issued upon the exercise of purchase warrants under units to be issued upon loan conversions: 1,029,966. Shares to be sold for cash ($0.50 per share): 25,000,000. Shares for possible future acquisitions by the company of other companies and/or assets: 12,000,000. Shares to be issued for consulting services: 3,000,000. There can be no assurance that all of these shares will be issued or that any of them will be sold for cash. The gross proceeds to the company will depend on the amount actually sold for cash and the sales price per share. No commissions or other fees will be paid, directly or indirectly, by the company, or any of its principals, to any person or firm in connection with solicitation of sales of the shares. These securities are offered by the company subject to prior issue and to approval of certain legal matters by counsel. Selling Shareholders. (a) Manner of Sales; Broker-Dealer Compensation. The selling shareholders, or any successors in interest to the selling shareholders, may sell their shares of common stock in one or more of the following methods: ordinary brokers' transactions; transactions involving cross or block trades or otherwise on the Bulletin Board; purchases by brokers, dealers or underwriters as principal and resale by these purchasers for their own accounts pursuant to this prospectus; "at the market" to or through market makers or into an existing market for the company's common stock; in other ways not involving market makers or established trading markets, including direct sales to purchases or sales effected through agents; through transactions in options, swaps or other derivatives (whether exchange-listed or otherwise); in privately negotiated transactions; to cover short sales; or any combination of the foregoing. The selling shareholders also may sell their shares in reliance upon Rule 144 under the Securities Act at such times as they are eligible to do so. The company has been advised by the selling shareholders that they have not made any arrangements for the distribution of the shares of common stock. Brokers, dealers or underwriters who effect sales for the selling shareholders may arrange for other brokers, dealers or underwriters to participate. Brokers, dealers or underwriters engaged by the selling shareholders will receive commissions or discounts from them in amounts to be negotiated prior to the sale. These brokers, dealers or underwriters may act as agent or as principals. From time to time, one or more of the selling shareholders may pledge, hypothecate or grant a security interest in some or all of the shares of common stock being offered for sale, and the pledgees, secured parties or persons to whom these securities have been pledged shall, upon foreclosure in the event of default, be considered a selling shareholder hereunder. In addition, a selling shareholders may, from time to time, sell short their common stock. In these instances, this prospectus may be delivered in connection with these short sales and the shares of the common stock may be used to cover these short sales. From time to time one or more of the selling shareholders may transfer, pledge, donate or assign shares of their common stock to lenders or others and each of these persons will be considered a selling shareholder for purposes of this prospectus. The number of shares of the company's common stock beneficially owned by those selling shareholders who so transfer, pledge, donate or assign shares of their common stock will decrease as and when they take these actions. The plan of distribution for the company's common stock by the selling shareholders set forth herein will otherwise remain unchanged, except that the transferees, pledgees, donees or other successors will be considered selling shareholders hereunder. Subject to the limitations discussed above, a selling shareholder may enter into hedging transactions with broker-dealers and the broker-dealers may engage in short sales of the company's common stock in the course of hedging the positions they assume with this selling shareholders, including in connection with distributions of the common stock by these broker-dealers. A selling shareholder may also enter into option or other transactions with broker- dealers that involve the delivery of the company's common stock to the broker-dealers, who may then resell or otherwise transfer these shares. A selling shareholder also may loan or pledge the company's common stock to a broker-dealer and the broker-dealer may sell the common stock so loaned or upon a default may sell or otherwise transfer the pledged common stock. (b) Filing of a Post-Effective Amendment In Certain Instances. If any selling shareholders notifies the company that he, she, or it has entered into a material arrangement (other than a customary brokerage account agreement) with a broker or dealer for the sale of shares of common stock under this prospectus through a block trade, purchase by a broker or dealer or similar transaction, the company will file a post- effective amendment to the registration statement for this offering. The post-effective amendment will disclose: The name of each broker-dealer involved in the transaction. The number of shares of common stock involved. The price at which those shares of common stock were sold. The commissions paid or discounts or concessions allowed to the broker-dealer(s). If applicable, that these broker-dealer(s) did not conduct any investigation to verify the information contained or incorporated by reference in this prospectus, as supplemented. Any other facts material to the transaction. (c) Certain Persons May Be Deemed to Be Underwriters. The selling shareholders and any broker-dealers who execute sales for them may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 because of the number of shares of common stock to be sold or resold by these persons or entities or the manner of sale of these shares, or both. If a selling shareholder or any broker-dealer or other holders were determined to be underwriters, any discounts, concessions or commissions received by them or by brokers or dealers acting on their behalf and any profits received by them on the resale of their shares of common stock might be deemed to be underwriting discounts and commissions under the Securities Act. (d) Regulation M. The company has informed the selling shareholders that Regulation M promulgated under the Securities Exchange Act of 1934 may be applicable to them with respect to any purchase or sale the company's common stock. In general, Rule 102 under Regulation M prohibits any person connected with a distribution of the company's common stock from directly or indirectly bidding for, or purchasing for any account in which it has a beneficial interest, any of the common stock or any right to purchase this stock, for a period of one business day before and after completion of its participation in the distribution. During any distribution period, Regulation M prohibits the selling shareholders and any other persons engaged in the distribution from engaging in any stabilizing bid or purchasing the company's common stock except for the purpose of preventing or retarding a decline in the open market price of the common stock. None of these persons may effect any stabilizing transaction to facilitate any offering at the market. As the selling shareholders will be reoffering and reselling the company's common stock at the market, Regulation M will prohibit them from effecting any stabilizing transaction in contravention of Regulation M with respect to this stock. Opportunity to Make Inquiries. The company will make available to each offeree, prior to any sale of the shares, the opportunity to ask questions and receive answers from the company concerning any aspect of the investment and to obtain any additional information contained in this prospectus, to the extent that the company possesses such information or can acquire it without unreasonable effort or expense. Execution of Documents. Each person desiring to be issued shares, either as a conversion of a debenture, or an exercise of a warrant, must complete, execute, acknowledge, and deliver to the company certain documents. By executing these documents, the subscriber is agreeing that such subscriber will be, a shareholder in the company and will be otherwise bound by the articles of incorporation and the bylaws of the company in the form attached to this prospectus. LEGAL PROCEEDINGS The company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against the company has been threatened. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,AND CONTROL PERSONS The names, ages, and respective positions of the directors and executive officers of the company are set forth below; there are no other promoters or control persons of the company. The Directors named below will serve until the next annual meeting of the company's stockholders or until their successors are duly elected and have qualified. Directors are elected for a one-year term at the annual stockholders' meeting. Officers will hold their positions at the will of the board of directors, absent any employment agreement. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the company's affairs. The directors and executive officers of the company are not a party to any material pending legal proceedings and, to the best of their knowledge, no such action by or against them has been threatened. Officer and Directors. (a) David M. Groves, President/Chief Executive Officer/Director. Mr. Groves, age 50, brings over 20 years of senior management experience (CEO & COO positions) with particular expertise in emerging technologies and markets including e-commerce, internet marketing, wireless communications, electronic billing systems and a variety of internet business models. He was the President and CEO of Image Data International Corporation from 1991-1997 and went on to serve as Senior Vice President at Omega Digital Data Inc. until June 1998 and started E-Bill Direct, Inc. shortly thereafter. Along with his strong technical and administrative background, Mr. Groves brings considerable experience in the financial areas of acquisitions, divestitures, public offerings and private placements and he will be counted on to contribute in a leadership capacity in all these areas. He currently serves as CEO of Urbana Enterprises Corp. (b) Robert S. Tyson, Vice President/Secretary/Director. Mr. Tyson, age 40, is an experienced administrator of 12 years specializing in the development of emerging public companies having held senior management positions or management consulting positions with emerging companies in the manufacturing and high-tech sectors. From 1991 to 1996 Mr. Tyson was president of Watson Bell Communications, Inc. and its predecessor company, Silent Communications Inc. Watson Bell was a public company trading on the Vancouver Stock Exchange that developed a hand-held telecommunications device. Mr. Tyson has spent the past 4 years as a consultant with MCA Equities Ltd., a Vancouver based business consulting firm and has served as an officer and director of the issuer since 1997. Mr. Tyson is responsible for the corporate affairs of the company, including all issues to do with corporate governance and assisting with finance, administrative, contract and corporate communications issues. (c) Greg Alexanian, Vice President/Chief Operating Officer/Director. Mr. Alexanian, age 34, has developed a strong operations background from his 15 years experience performing a similar role as a major shareholder in a chain of 16 home carpet and accessories retailers, Alexanian Carpet. As COO of Urbana Enterprises Corp., he will be responsible for vendor and distributor relations and ensure that the company delivers product to its customers in a reliable and timely manner. (d) Rick Whittaker, Vice President, Business Development/Director. Mr. Whittaker, age 41, has extensive experience in the area of wireless monitoring and collection of public utility consumption data for billing purposes. From 1992-1998, he was the Vice President of Sales and a co-founder of Nexsys Commtech International Inc. where he was the project manager responsible for the successful development of a $3 million wireless meter reading project and its pilot testing with 3 Canadian and 1 American utility. He was also the president and co-founder of Enersphere in 1998. Mr. Whittaker is directly responsible for the development and expansion of the company's LocalNet project. Key Employees. (a) Henry Tyler, Vice President, Electronic Bill Presentment. Mr. Tyler, age 54, has more than 20 years experience with leading Canadian companies having mastered skills in analysis, design, development, tactical & strategic planning, project management, administration and sales. Mr. Tyler sold and managed the development and delivery of multi-million dollar E-commerce business solutions to companies such as American Express, IBM and four of Canada's five chartered banks. From 1996-1998, he was Vice President, Sales for Omega Digital Data, Inc. where he was responsible for the sale and delivery of the first hand-held wireless LAN terminal solutions to the Bank of Nova Scotia. He became a partner and Vice President of E-Bill Direct, Inc. in 1999. Mr. Tyler will be responsible to oversee and review all technical and product development issues as well as sales of the company's Electronic Bill Presentment products and solutions. (b) John Cullen, Chief Technology Officer. Mr. Cullen, age 39, has been developing and managing R&D and technical sales programs for the past 11 years. These projects include developing communications and information technology solutions for the utilities markets. Mr. Cullen has held executive management positions with various successful start-ups including Telular Canada Inc. and Control Advancements Inc. from 1989 to 1998. He then became a partner in Enersphere in 1998. Mr. Cullen is responsible for the research, product design and quality control of new product offerings as well as providing technical sales support. The company does not have standing audit, nominating or compensation committees of the board of directors, or committees performing similar functions. During the last fiscal year, the board of directors met on two occasions. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the beneficial ownership of shares of the company's common stock as of September 30, 2000 (22,038,283 issued and outstanding) by (i) all stockholders known to the company to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all directors and executive officers of the company, and as a group (each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them): Title of Name and Address of Amount of Percent Class Beneficial Owner Beneficial of Ownership(1) class Common Da-Jung Resources Corp. 4,842,900 21.97% Stock P.O. Box 71 Road Town, British Virgin Islands Common David Groves 1,817,500 (2) 8.25% Stock 22 Haddington Street Cambridge, Ontario, N1R 1B9 Common Richard Whittaker 1,575,000 (2) 7.15% Stock 22 Haddington Street Cambridge, Ontario, N1R 1B9 Common John Cullen 1,125,000 (2) 5.10% Stock 98 Willow Street Waterloo, Ontario N2J 1W2 Common Doris Cullen 1,125,000(2) (3) 5.10% Stock 98 Willow Street Waterloo, Ontario N2J 1W2 Common Jason Cassis 1,102,500 (2) 5.00% Stock 253 King Street North Waterloo, Ontario N2L 2Y8 Common Greg Alexanian 1,102,500 (2) 5.00% Stock 22 Haddington Street Cambridge, Ontario, N1R 1B9 Common Henry Tyler 725,000 (2) 3.29% Stock 22 Haddington Street Cambridge, Ontario, N1R 1B9 Common Robert S. Tyson 0 0.00% Stock 750 West Pender Street Suite 804 Vancouver, British Columbia V6C 2T8 Common Shares of all directors and 7,470,000 (2) 38.90% Stock executive officers as a group (6 persons) (1) Other than as set forth in footnote (2), none of these security holders has the right to acquire any amount of the shares within sixty days from options, warrants, rights, conversion privilege, or similar obligations. (2) These share holding consist solely of shares of the one wholly owned subsidiary of the company, U.R.B.A. Holdings Inc., a private British Columbia corporation, which are exchangeable into shares of the company. U.R.B.A. Holdings Inc. in turn owns all of the issued and outstanding shares of Urbana Enterprises Corp., a private Ontario corporation. Urbana Enterprises Corp. resulted from the merger of three subsidiaries of U.R.B.A. Holdings Inc., Urbana.ca Enterprises Corp. (a British Columbia private corporation), Enersphere.com Inc. (an Ontario private corporation) and E-Bill Direct, Inc. (an Ontario private corporation) on March 10, 2000. Urbana Enterprises Corp. is the operating subsidiary of the company. (3) Doris Cullen is the wife of John Cullen. DESCRIPTION OF SECURITIES Securities. (a) Common Stock. The securities being offered are shares of common stock. The authorized capital of the company consists of 80,000,000 shares of common stock, $0.001 par value per share. The holders of common stock shall: have equal ratable rights to dividends from funds legally available therefore, when, as, and if declared by the board of directors of the company are entitled to share ratably in all of the assets of the company available for distribution upon winding up of the affairs of the company are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all meetings of shareholders. The shares of common stock do not have any of the following rights: special voting rights preference as to dividends or interest preemptive rights to purchase in new issues of Shares preference upon liquidation, or any other special rights or preferences. In addition, the Shares are not convertible into any other security. There are no restrictions on dividends under any loan other financing arrangements or otherwise. As of September 30, 2000, the company had 22,038,283 shares of common stock issued and outstanding. (b) Preferred Stock. The authorized capital stock of the company also consists of 10,000,000 preferred shares, $0.001 par value per share. Currently, There are no preferred shares issued and outstanding. (c) Loan Conversions. At September 30, 2000 loans of $1,174,162 plus accrued interest of $51,213 were outstanding. These loans bear interest at an annual rate of 8% and were due and payable on March 15, 2000. Subsequent to March 15, 2000 $110,000 of principal has been repaid. The company has provided an option to the lenders for the remainder of the unpaid loans to convert the principal amount of the loans into units of the company at a price of $0.57 per unit. Each unit is comprised of one common share of the company and one- half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional common share of the company at a price of $5.00 per share. This offer is to be made by way of a prospectus which has been filed with the applicable Canadian and United States regulatory authorities. (d) Units Offering. The company entered into an agency agreement effective April 10, 2000 with Groome Capital.com Inc. whereby the company and Groome engaged in a best efforts offering of up to 20,000,000 special warrants at a price of $1.25 per special warrant. Each special warrant is convertible into one common share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. Groome received an Agent's Fee equal to 8% of the total amount raised (reduced to 4% for investors on a president's list). In addition, Groome has been granted non-assignable warrants to acquire, without payment of additional consideration, 1 year Compensation Options providing the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of Special Warrants sold under this offering. This offering, which has been closed as of May 11, 2000, resulted in total subscriptions for 847,989 units with total proceeds of $1,059,986 from a total of nine investors in Canada. A similar offering was undertaken in the United States, but no sales resulted from this offering. (e) Exchangeable Shares. (1) Urbana.ca Enterprises Corp. By agreement dated January 4, 2000, the company's wholly-owned subsidiary U.R.B.A. Holdings Inc. acquired 100% of the outstanding shares of Urbana.ca Enterprises Corp., a company engaged in distribution of Linux based set top boxes which are used as an alternative method of delivering internet content. Urbana.ca Enterprises Corp. was incorporated November 18, 1998 in the province of British Columbia. In consideration for the acquisition, U.R.B.A. Holdings Inc. issued 3,000,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. A holder of an exchangeable share may, at any time, require U.R.B.A. Holdings Inc. to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. U.R.B.A. Holdings Inc. may satisfy the resulting obligation in cash or in company shares at its option. Pursuant to the terms of the agreement, the company issued 3,000,000 common shares in trust to be held under the terms of a trust agreement executed January 4, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. (2) E-Bill Direct, Inc. By agreement dated January 10, 2000, the company's wholly- owned subsidiary U.R.B.A. Holdings Inc., acquired 100% of the outstanding shares of E-Bill Direct, Inc., a company engaged in designing, developing and providing electronic presentment and payment services to the business community. E-Bill Direct, Inc. was incorporated May 27, 1999 in the province of Ontario. In consideration for the acquisition, U.R.B.A. Holdings Inc. issued 2,950,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. A holder of an exchangeable share may, at any time, require U.R.B.A. Holdings Inc. to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. U.R.B.A. Holdings Inc. may satisfy the resulting obligation in cash or in company shares at its option. Pursuant to the terms of the agreement, the company issued 2,950,000 common shares in trust to be held under the terms of a trust agreement executed January 10, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. (3) Enersphere.com, Inc. By agreement dated January 9, 2000, the company's wholly-owned subsidiary U.R.B.A. Holdings Inc., acquired 100% of the outstanding shares of Enersphere.com, Inc., a content company that utilizes set top boxes as their medium to deliver internet and intranet-based services to customers. Enersphere.com, Inc. was incorporated September 28, 1999 in the province of Ontario. In consideration for the acquisition, U.R.B.A. Holdings Inc. paid $84,828 and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. A holder of an exchangeable share may, at any time, require U.R.B.A. Holdings Inc. to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. U.R.B.A. Holdings Inc. may satisfy the resulting obligation in cash or in company shares at its option. Pursuant to the terms of the agreement, the company issued 4,500,000 common shares in trust to be held under the terms of a trust agreement executed January 9, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. Non-Cumulative Voting. The holders of shares of common stock of the company do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of the company's directors. Dividends. The company does not currently intend to pay cash dividends. The company's proposed dividend policy is to make distributions of its revenues to its stockholders when the company's board of directors deems such distributions appropriate. Because the company does not intend to make cash distributions, potential shareholders would need to sell their shares to realize a return on their investment. There can be no assurances of the projected values of the shares, nor can there be any guarantees of the success of the company. A distribution of revenues will be made only when, in the judgment of the company's board of directors, it is in the best interest of the company's stockholders to do so. The board of directors will review, among other things, the investment quality and marketability of the securities considered for distribution; the impact of a distribution of the investee's securities on its customers, joint venture associates, management contracts, other investors, financial institutions, and the company's internal management, plus the tax consequences and the market effects of an initial or broader distribution of such securities. Possible Anti-Takeover Effects of Authorized but Unissued Stock. Upon the completion of this offering, assuming the maximum offering of 47,083,029 shares is sold, the company's authorized but unissued common capital stock will consist of 10,878,688 shares of common stock (based on the issued and outstanding shares of 22,038,283 as of September 30, 2000). One effect of the existence of authorized but unissued capital stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of the company by means of a merger, tender offer, proxy contest, or otherwise, and thereby to protect the continuity of the company's management. If, in the due exercise of its fiduciary obligations, for example, the board of directors were to determine that a takeover proposal was not in the company's best interests, such shares could be issued by the board of directors without stockholder approval in one or more private placements or other transactions that might prevent, or render more difficult or costly, completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group, by creating a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise. Transfer Agent. The company has engaged the services of Pacific Corporate Trust Co., 625 Howe Street, Suite 830, Vancouver, British Columbia V6C 3B8, to act as transfer agent and registrar. INTEREST OF NAMED EXPERTS AND COUNSEL No named expert or counsel was hired on a contingent basis, will receive a direct or indirect interest in the small business issuer, or was a promoter, underwriter, voting trustee, director, officer, or employee of the company. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Limitation of Liability. No director of the company will have personal liability to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director or officers involving any act or omission of any such director or officer. The foregoing provision shall not eliminate or limit the liability of a director: for any breach of the director's duty of loyalty to the Corporation or its stockholders for acts of omissions not in good faith or, which involve intentional misconduct or a knowing violation of law under applicable Sections of the Nevada Revised Statutes the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes, or for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts or omissions prior to such repeal or modification. Indemnification. The bylaws of the company provide the following with respect to indemnification: Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person of whom he is the legal representative is or was a director or officer of the corporation or is or was a director or officer of the corporation or is or was serving at the request of the corporation or for its benefit as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the General Corporation Law of the State of Nevada from time to time against all expenses, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. Such right of indemnification shall not be exclusive of any other right which such directors, officers or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of stockholders, provision of law or otherwise, as well as their rights under this Article. The board of directors may cause the corporation to purchase and maintain insurance on behalf of any person who is or who was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the corporation would have the power to indemnify such person. The board of directors may from time to time adopt further Bylaws with respect to indemnification and may amend these and such Bylaws to provide at all times the fullest indemnification permitted by the Nevada Revised Statutes. (a) NRS 78.7502 Discretionary and mandatory indemnification of officers, directors, employees and agents: General provisions. (1) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. (2) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. (3) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. (b) NRS 78.751 Authorization required for discretionary indemnification; advancement of expenses; limitation on indemnification and advancement of expenses. (1) Any discretionary indemnification under NRS 78.7502 unless ordered by a court or advanced pursuant to subsection 2, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (i) By the stockholders; (ii) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (iii) If a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; or (iv) If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. (2) The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. (3) The indemnification and advancement of expenses authorized in NRS 78.7502 or ordered by a court pursuant to this section: (i) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to or for the advancement of expenses made pursuant to subsection 2, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (ii) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. (c) NRS 78.752 Insurance and other financial arrangements against liability of directors, officers, employees and agents. (1) A corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. (2) The other financial arrangements made by the corporation pursuant to subsection 1 may include the following: (i) The creation of a trust fund. (ii) The establishment of a program of self-insurance. (iii) The securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation. (iv) The establishment of a letter of credit, guaranty or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court. (3) Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the board of directors, even if all or part of the other person's stock or other securities is owned by the corporation. (4) In the absence of fraud: (i) The decision of the board of directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (ii) The insurance or other financial arrangement: (A) Is not void or voidable; and (B) Does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. (5) A corporation or its subsidiary which provides self-insurance for itself or for another affiliated corporation pursuant to this section is not subject to the provisions of Title 57 of NRS. Undertaking. The company undertakes the following: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. ORGANIZATION WITHIN LAST FIVE YEARS The names of the officers and directors as disclosed elsewhere in this Form SB-2. None of these individuals, as promoters, have received anything of value from the company. DESCRIPTION OF BUSINESS Company History. The company was originally organized in the State of Delaware in February 1993 under the name of PLR, Inc. In November 1997, the company changed its name to Integrated Carbonics Corp. and moved its domicile to the State of Nevada. On July 23, 1999, Integrated Carbonics Corp. changed its name to Urbana.ca, Inc. In 1997, the company entered into agreements with Da-Jung Resources Corp. to acquire certain of Da-Jung's assets in the People's Republic of China. These assets have been abandoned due to the inability to raise project financing and, as such, have been written off the investment in its Chinese joint ventures. The company entered into three letters of intent during 1999 to acquire one British Columbia corporation (Urbana.ca Enterprises Corporation) and two Ontario corporations (Enersphere.com, Inc. and E-Bill Direct, Inc.). In addition, the company established a wholly owned subsidiary, U.R.B.A. Holdings Inc. (formerly known as ICC Integrated Carbonics (Canada) Corp.) to facilitate the transfer of shares pursuant to section 85 of the Income Tax Act (Canada) to the shareholders of the acquired entities. In January, 2000, the company formally completed the acquisition of each of the acquired entities after entering into share exchange and share purchase agreements with each company wherein the shareholders of each acquired entity received exchangeable non- voting shares in the capital of U.R.B.A. Holdings Inc. that are exchangeable on a one-for-one basis to restricted common shares in the capital of the company. The aggregate consideration paid for the acquired entities was 10,450,000 common shares of the company (after conversion) plus $84,828 CDN in cash payments to Enersphere.com, Inc. All consideration has been paid in full. In March 2000, the company undertook the merger of the three acquired entities into Urbana Enterprises Corp., an Ontario registered corporation wholly owned by the company. The resulting corporate structure has the company, which operates as a financing and holding company for its two wholly owned subsidiaries: U.R.B.A. Holdings Inc. a non-operating subsidiary which facilitated the acquisition of the subsidiaries, and Urbana Enterprises Corp., an Ontario registered corporation which is the operating, wholly owned subsidiary company established to execute the business plan of the company. The terms of each of these acquisitions is set forth below: (a) Urbana Enterprises Corp. Urbana Enterprises Corp. was incorporated November 18, 1998 in the province of British Columbia. Urbana Enterprises Corp. is engaged in the distribution of Linux based set top boxes used as an alternative method of delivering Internet content. From inception (second quarter in 1999) to the date of acquisition, losses totaled $193,171. In consideration of the acquisition, U.R.B.A. Holdings Inc. issued 3,000,000 non-voting exchangeable shares to the following: Greg Alexanian * 1,102,500 Jason Cassis 1,102,500 Bill Little 100,000 Stonewall Capital Corp. 200,000 Phil Cassis 495,000 Total 3,000,000 * Out of this group, Mr. Alexanian, who is Vice President/Chief Operating Officer/Director of the company, is affiliated with the company. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. The holder of these shares at any time may require U.R.B.A. Holdings Inc. to repurchase the shares at the then current market value of the common shares. At its option, U.R.B.A. Holdings Inc. may satisfy this obligation in cash or in company shares. Any exchangeable share not exchanged within 25 years is to be cancelled. Pursuant to the terms of the agreement, the company issued 3,000,000 common shares in trust to be held under the terms of a trust agreement executed January 4, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In connection with the acquisition, the company signed five-year management contracts with the two principals. The company agreed to grant a total of 400,000 stock options to these individuals. (b) E-Bill Direct, Inc. E-Bill was incorporated May 27, 1999 in the province of Ontario. E-Bill Direct, Inc. is engaged in designing, developing and providing electronic presentment and payment services to the business community. From inception (second quarter in 1999) to the date of acquisition, losses totaled $16,214. In consideration of the acquisition, U.R.B.A. Holdings Inc. issued 2,950,000 non-voting exchangeable shares to the following: David M. Groves ** 1,817,500 Henry Tyler ** 737,500 Questech Corporation 295,000 Rockrimmon Investment 100,000 Total 2,950,000 ** Out of this group, Mr. Groves, who is President/Director of the company, and Mr. Tyler, who is Vice President, Electronic Bill Presentment, are affiliated with the company. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. The holder of these shares at any time may require U.R.B.A. Holdings Inc. to repurchase the shares at the then current market value of the common shares. At its option, U.R.B.A. Holdings Inc. may satisfy this obligation in cash or in company shares. Any exchangeable share not exchanged within 25 years is to be cancelled Pursuant to the terms of the agreement, the company issued 2,950,000 common shares in trust to be held under the terms of a trust agreement executed January 10, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In connection with the acquisition, the company signed three-year management contracts with the two principals. The company agreed to grant a total of 200,000 stock options to these individuals. (c) Enersphere.com, Inc. Enersphere.com, Inc. was incorporated September 28, 1999 in the province of Ontario. Enersphere.com, Inc. is a content company that utilizes set top boxes as their medium to deliver internet and intranet-based services to customers. From inception (third quarter in 1999) to the date of acquisition, losses totaled $114,917. In consideration of the acquisition, U.R.B.A. Holdings Inc. paid $84,828 cash and issued 4,500,000 non-voting exchangeable shares to the following: John Cullen 1,125,000 Doris Cullen 1,125,000 Rick Whittaker 1,575,000 Barb Whittaker 675,000 Total 4,500,000 ** Out of this group, all are affiliated with the company: (a) Mr. Cullen, who is the Chief Technology Officer, is a five percent shareholder; (b) Doris Cullen, who is the wife of Mr. Cullen, is a five percent shareholder; (c) Rick Whittaker is the Vice President, Business Development/Director of the company; and (d) Barb Whittaker is the wife of Mr. Whittaker. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of U.R.B.A. Holdings Inc. held. The holder of these shares at any time may require U.R.B.A. Holdings Inc. to repurchase the shares at the then current market value of the common shares. At its option, U.R.B.A. Holdings Inc. may satisfy this obligation in cash or in company shares. Any exchangeable share not exchanged within 25 years is to be cancelled Pursuant to the terms of the agreement, the company issued 4,500,000 common shares in trust to be held under the terms of a trust agreement executed January 9, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In connection with the acquisition, the company signed two-year management contracts with the two principals. The company agreed to grant a total of 200,000 stock options to these individuals. General. The company is an e-commerce, transaction and content company that creates Intranet and Internet-based systems in conjunction with local area governments and high profile corporations. The company will provide local communities with community based entertainment and information services widely used in all facets of everyday life and deliver these services through a customized set- top-box. Internet success is predicated on rich content delivery and delivery mechanisms reaching a maximum target market on a one- to-one basis through both PC's and to areas and viewers where PC use is non-existent. The company's aim is to achieve that success by delivering rich content through a set-top-box medium to non-PC consumers. As part of its business strategy, the company will seek collaborative partners with experience in the development and marketing of its products in the relevant market areas. The intention is to select partners with both the human and financial resources to spearhead the market penetration and development of the company's products. The form of collaboration would depend in part on the product candidate, the stage of development, and the partner's expertise. The company would also expect any potential partner to be involved in the market of the products. No assurance can be given that any such proposed partnership arrangements will be entered into, or, if entered into, will be successful in completing the development programs for the products in any particular jurisdiction. The company has entered into agreements whereby two individuals have licensed two separate communities. Notwithstanding the company's business strategy described above, the company has no regular cash flow and is dependent, initially, on generating required funds primarily by way of equity financing. The company expects to continue to rely, in whole or in part, on outside sources of financing to meet its capital requirements for at least the next two years. There can be no assurance that the company will be able to arrange and complete the required financings on favourable terms. Such equity financings could be highly dilutive. The e-commerce industry is characterized by increasingly intense and intense competition. Competition in the e-commerce industry is based primarily on product performance, including efficacy, ease of use and adaptability to various modes of administration, price, marketing, and distribution. Barriers to entry into the market include the availability of patent protection in the United States and other jurisdictions of commercial interest, and the ability and time needed and cost incurred obtaining governmental approval for testing, manufacturing and marketing. The company's products are in the late stages of development. Therefore, any discussion of a market for the company's products is of a preliminary nature. In addition, some of the company's competitors may have substantially more financial and technical resources, more extensive research and development capabilities, products at a later stage of development, and greater marketing, distribution, production and human resources than the company. LocalNet Systems Technology. The company's LocalNet systems technology utilizes set top boxes as the medium to deliver various Internet and Intranet based community services to consumers. The LocalNet framework operates with community leaders and high profile corporations to create community based intranet systems that utilize the Internet to provide residents with current community activities, movies and other entertainment based content as well as such value added services as enhanced television, monitored smoke detectors, automatic meter reading, health and community services. The heart of the LocalNet business model is the set top box. In simplistic terms, the set top box is an electronic device that connects the Internet to a consumer's television through a connection provided by an Internet Service Provider. (a) The Vision of LocalNet. Until now, the world-wide web has been primarily a way of bringing together distant people and far-flung resources. Wired or unwired, people live, work, spend and use the resources overwhelmingly located right in their neighborhoods - and their information and communications needs reflect that local bias. The company and LocalNet focus on those in the community not utilizing the Web due to lack of content and those without Internet access. The vision of LocalNet is that regardless of what type of medium for access is provided to this segment of the community, this segment will not initiate access without focused content. LocalNet is not distant, it's local schools, local doctors, local entertainment, local grocery stores, local police, local government, local sports and fitness, local kid's events, local artists, local parks, local parents looking for local babysitters, local patrons reviewing local restaurants and local businesses going online for local customers. Five years from now the company believes, local Web will be everywhere, and it will, the company believes, be the dominant gateway to the electronic world. Powerful local content plus expanded access creates a virtuous circle: Better access generates more viewers which provides additional revenue for more and better content. (b) Strategy. The business model and marketing strategy will be a leveraged expansion of the Guelph Local Online Project which is currently in the final beta-test stage in Guelph, Ontario, Canada. About 50% of any community has computers in their homes and about 50% of this population subscribes to Internet services resulting in a 25%-30% Internet penetration rate. This has severely restrained the Internet's usefulness in a geographic area, limiting the ability for residents to use the Internet as a local medium for communication and limiting the ability for local advertisers to benefit from advertising on the Internet. While local retail and commercial vendors see value in promoting themselves locally, most have seen little value in promoting their businesses on the internet because of low access rate at the local level. The company has developed a unique method of providing a low cost portal connection (LocalNet) for every resident in a geographic area. The company strategy calls for local communities to provide a self-sustaining local Internet service where all residents are provided a low cost set top box funded with revenue recouped through local and national advertisers. Residents will be provided with a home gateway which provides basic Internet services such as communicating via e-mail and viewing of a community channel. These two services will provide all residents of the community with the ability to communicate with one another and with local service providers within the community. As described above, more access leads to more local Internet services. For example, teachers could now send homework assignments home via e-mail, residents could register for programs via the community channel and local merchants could reach their customers via the Internet. The supporting advertisement could take the form of banner ads on e-mail and community channel pages with the ability to click on the banner ads to go to the advertisers web page. The company and its consortium of sponsors receive revenue from the ads, which pays for the home gateways. Once in the home, the set top box provides much more functionality than just Internet service. It becomes a community gateway with the ability to become a true smart home manager. For example, through the Internet connection, the company can offer new services such as direct linkage to the fire department and to utility monitoring. These services are provided at a nominal fee which further defrays the cost of the set top box. (c) Growth Strategy. Based on the success of the Guelph project, the company will leverage its expertise as facilitator and project manager to gain competitive advantage. The critical elements of compelling content, access/penetration to local markets and new value added services will attract strategic partners both locally and internationally. Fiscal 2000 is planned to be highlighted by 2 internally funded LocalNet sites and 4 licensed sites in Canada and the U.S. Electronic Billing. (a) Background. The electronic bill presentment industry is poised to capitalize on the new digital age by driving paper and processing costs from $1.50 per bill to $0.40 - $0.50 per bill. According to a recent report by Killen & Associates, a market research firm, U.S. utilities could save $1.2 billion in billing costs by using electronic bill presentment and payment. (b) Product. The company's product offering is the digital processing and electronic transmission of high-volume data via e-mail with embedded digital marketing tools offered to a myriad of end user customers. The E-Bill Direct, Inc. process converts a standard print image file to a proprietary format and integrates various levels of security and unique digital marketing tools that include sound, graphics and animation that can be custom designed to meet client needs. (c) Strategy. The company's approach to bill presentment is as follows. Most organizations are luring customers to their websites to pay bills. This approach is time consuming for the recipient to locate the website and the billing information. The company does not believe that customers will continuously search for billing information from a multitude of creditors. Other organizations send e-mail to advise clients that their bill is ready for review. The company will send the bill as e-mail and eliminate the unnecessary steps. The company has the ability to offer our clients an outsourcing alternative to electronic bill presentment in that we will transmit their customer monthly data utilizing our server platform. The structure of the electronic bill presentment market is predicated on electronic delivery by pulling customers to web-centric sites. The company's animated graphics with sound, voice and motion provide an effective and unique advertising tool to attract customers to purchase or link to a specific website. Historically, Internet advertising has been governed by banner and static advertising. To date, rich, powerful advertising content has been restricted due to the adoption of high speed (high band- width) Internet access. Allowing ads to incorporate audio, video and other applications will allow the next development of advertising to exceed the current 2% response rate generated from banner ads. The company has the ability to integrate this rich, powerful, animated advertising. Compression techniques allow for statements and digital advertising to be transmitted in tolerable download times to customers without wide band-width transmission. The company's billing capacity has the ability to send up to (r) million e-mail transmissions per day thereby creating a just-in-time current statement. As a result, just-in-time delivery eliminates call center customer queries about why recent accounting activity is missed. This reduction in call center activity can equate to substantial dollar savings. (d) Markets. Management has identified 3 primary markets where client operating costs will be cut and traditional cost centers will become revenue producing entities. The three markets (loyalty programs, brokerage and utilities) are unique by nature but have identical inherent problems in the dissemination of date to clients. The various loyalty/affinity card type programs initiated by major petroleum, retail and transportation (airline/car rental) typically issue monthly or quarterly statements reflecting account activity and a bonus point balance summary. Most household (Canada and the U.S.) carry multiple cards reflecting loyalty and usage. As an example, "Airmiles" alone has a customer base of 6 million equating to 24 million statements sent annually. The brokerage industry not only mails monthly statements showing account activity and balances in the various equity markets, but it also sends daily settlement buy/sell slips by mail. The combined total transactions of the Toronto Stock Exchange, New York Stock Exchange, and National Association of Securities Dealers, Inc, Automated Quotation system, including mutual funds, approximates 2.4 billion transactions. Much of the cost of this could potentially be eliminated by eliminating the paper process of mailing statements and trade confirmations. (e) Major Competition. The company's major competitors are as follows: Canada Post: In pilot since 1999 with expected service offering in late 2000. E-Route: Consortium of large Canadian players including some major banks with expected roll-out in 2000. Xenos Group: Canadian software company offering electronic presentment of documents. Paytrust: a US based company with a web-based service offering consumer bill delivery. Others: Paysense, Edocs, Checkfree, Transpoint, Whitehill. (f) Competitive Advantage. The company has three competitive advantages over its competitors: Management has years of multimedia, animation and advertising experience combined with electronic processing expertise; The company currently has a capacity to transmit 20,000 units per hour; and The set top boxes the company plans to distribute can be used to reach the 75% of the current market that currently do not have Internet service in their homes. Set-Top Boxes. (a) Description. The set top box is a consumer electronics device that connects any television to the Internet via a standard analog phone line. Once connected, the end user of the set top box can easily access the Internet and can enjoy most of the applications the Internet has to offer such as e-mail, e-commerce, web surfing, video on demand, video conferencing and on-line banking. The company's approach to the set top box market is to offer consumers a set top box, with a standard Internet browser, and applications pre-loaded from the server at the internet service provider. Adding, updating or changing applications is done through the company or channel partner's networks, meaning the user does not need to install new software in the set top box every time a feature is added, enhanced or changed. The company is currently distributing a set top box in its pilot markets that is manufactured by Acer Corporation in Taiwan (Acer NT 150); however, the company has discovered that the Liberate operating system used by Acer is overly proprietary to meet the feature growth requirements of the company. The company therefore, has decided to deploy the next generation of set top box utilizing the Linux operating system and sourcing Eagle Wireless International Inc. set top boxes as described below. (b) Product and Manufacturing. The company entered into an exclusivity agreement with Eagle Wireless International Inc. in January 2000 wherein Eagle Wireless International Inc. agreed to manufacture and sell set top boxes to the company and granted the exclusive right to the company to sell Eagle Wireless International Inc. manufactured set top boxes in Canada and the non-exclusive right to sell the set top boxes in the United States. The company has chosen Eagle Wireless International, Inc. as its manufacturing and engineering partner because of this company's ability to produce a unique feature set with an operating system independent hardware platform that can accommodate all the popular operating systems and readily accept new software for different applications. Eagle Wireless International Inc. has the first right to provide the company's set top box requirements. The company must make certain volume purchases to maintain its rights under the exclusivity agreement. The company presently has no plans for developing an in-house manufacturing capability for its set top boxes. Eagle Wireless International Inc. is a Texas corporation with offices in League City, Texas. It was incorporated in Texas in May 1993 and began business in April 1996. Eagle Wireless International Inc. is a worldwide supplier of telecommunications equipment and related software used by service providers in the paging and other wireless personal communications markets. In 1999, Eagle Wireless International Inc. invested substantial resources in a multi-media Internet appliance product line known as a set top box in an effort to prepare it for the new era of wireless consumer products and multimedia internet related products. Eagle Wireless International Inc. announced sales of its first set top boxes in early 2000. Eagle Wireless International Inc. will have contracted the actual manufacturing of its set top box line to SCI Corp. of Singapore. (c) Product Features. The company's set top box has the following features: Linux operating system. Fully compliant 4.0 internet browser. Off-line e-mail/e-mail editor (optional depending on vertical market). Java Media Player for music and video. Enhanced television tuner. USB, PCI serial and parallel ports for expansion and accessories. Built-in radio frequency modulator for connection to any television, with audio and video in and out jacks. Ethernet input. Wireless keyboard and remote control. "Flash" read only memory for remote set top box software updates while in service. Smartcard reader and writer for programming, loyalty and financial operations. (d) Market Summary and Target Market. An set top box user can be anyone with a television set and a desire to go on-line. The consumer target market consists of a broad cross-section - from young families to senior citizens. Demographics indicate that convenience is of great importance to these market segments. They have moderate to average disposable incomes and currently own a television and video cassette recorder. They may have a satellite receiver and a computer. These users are looking for true value in their purchases and are not inclined to maneuver through the mass of information on the world wide web to find exactly what they need. The company's target markets are: Baby boomers - 89 million in the United States and Canada people born between 1946 and 1964. Empty nesters - top 1/4 of the baby boomers and beyond. Generation X group (born 1966 with young children). The fundamental market components are: 99% of households in North America have at least one television set. 75% have 2 or more television sets. Cable/Satellite television broadcast is available to 75% of United States households. Worldwide units sales of set top box were US$0.80M in 1999 compared to US$0.3M in 1996. Sales are expected to reach US$8.0M in 2002 - and are expected to dominate the marketplace by 10:1 according to "Cite eStats/Datamonitor". Currently there are 75 million Internet users in North America and that total is expected to climb to 95 million over the next year. According to "Data Source", the end of 1999 will see 61 million of these Internet users forming our target market. This presents an incredible "viewing" audience that is using the Internet on an average of 1.8 hours per day. Currently only the Grammy Awards and Super Bowl attract audiences of this size. (e) Industry Analysis and Trends. "Datamonitor" predicts that interactive television will reach 67 million homes in the United States and Europe by 2003 - a large increase from the 1998 level of 10.3 million. User options for connectivity are not limited to fibre-optic or coaxial cable but include satellite broadcast as well. Currently, competition is limited to a few big electronics manufacturers that have so far been unable to combine their product with a fully integrated and localized user package. For example, Microsoft's WEBTV paints all consumers of their service with a wide brush of viewer options. Established set top box distributors have high overheads created by current facilities, sales staff, inventory and shrinkage. To operate profitably requires typical retail markups on manufacturer's pricing - even for big box merchants. Launching an e-commerce website to leverage their existing brand equity does not impact the cost structure and markup requirements of established retailers. Advanced television set top boxes can connect to the Internet in another way. In Europe, satellite standards are beginning to compete with cable specifications signaling a possible trend in North America. Some United States companies such as DirecTV already offer satellite-based Internet connections, but these technologies are proprietary. The trend is toward having the standards process apply to satellite broadcasts and cable services. Whatever the method of connectivity, it has been predicted that this form of Internet access will rapidly provide such competition that the traditional internet service providers will experience a dramatic reduction in growth rate. A change in lifestyle toward home-based business and "cocooning", is one of the key contributors to the recent explosion of Internet connectivity with a strong emphasis placed on ease of use and content value. While it is difficult to predict exactly what the future hold for Internet surfers, it is safe to say the speed at which the mass public integrates Internet use into their overall lifestyle will grow exponentially. These users will expect the service providers and businesses with which they interact daily to keep up with the times. (f) Warranty, Technical Support and Service Policies. The company's technical support team communicates directly to customer technicians who, in turn, provide support to end-users. All end-user information is held at the "customer" level. The customer technicians are factory trained and supplemented with follow-up training and information. The company's technical support is provided by application engineers hired on contract. They work with the customer during the sales cycle to learn their needs. A toll free number has been provided to all company customers to ensure a single point for communications. All technical and reference materials are on-line in a secure website for customer access. (g) Direct Competition The competition in the set top box market consists of approximately 87 manufacturers who are actively marketing a number of set top boxes, and of these, approximately 12 are considered as being direct competitors with the company: WebTV Sony Philips Thompson DirectPC EchoStar (partnered with WebTV) Acer/Liberate Neon NetGem WebSurfer Paradise AOL TV (marketed through K Mart and Wal Mart) (i) Indirect Competition. The major cable networks are deploying two-way interactive services utilizing the Internet (e.g. AT&T, Rogers Cable and Cox Communications. Also, there exist the National Internet Service Providers and major portals (for example, America Online). The company will rely on its flexibility as a small company, the use of the Linux operating system and constant monitoring and upgrading to meet customer driven requirements to remain competitive against both its direct and indirect competitors. (j) Operations and Fulfillment Operations and fulfillment are managed in-house, although, most of the physical work is contracted out. This approach reduces costs related to overhead and employee payroll, provides access to state- of-the-art technologies and gives Urbana the resources to be successful in the market while incurring minimal costs. (k) Engineering and Design The company's engineering and design teams are limited to application engineering and high-level specification technical writers. The company is a sales and marketing company and has, therefore, outsourced its product engineering and manufacturing to Eagle Wireless International, Inc. This company's strengths are in consumer and commercial product, and solution engineering, wireless technologies and manufacturing. Status. The company has successfully completed a six month pilot project known as the Guelph LocalNet. The purpose of the pilot was to distribute 125 set top boxes to various local community target markets such as schools, local government, local corporations and individual users. The pilot is monitored for technical proficiency to gain market intelligence and to test the effectiveness of the Guelph LocalNet software. The company, upon the initial indications of success of the pilot, agreed to move the product to its next stage of development. The last stage of development will enable the company to move toward the preparation of licensing its product for sale in the fall of 2000. The preparation of the product and sale of the product are contingent on many factors, including, but not limited to, the raising of sufficient capital, completion of the software, delivery by Eagle Wireless International, Inc. of a merchandisable set-top box, etc. In January, 2000, the company entered into an exclusivity agreement with Eagle Wireless International, Inc. of League City, Texas. Within the terms of this agreement, Eagle Wireless International, Inc. has agreed to manufacture and sell set top boxes to the company and granted exclusive right to the company to sell Eagle Wireless International, Inc. manufactured set top boxes in Canada in return for certain volume purchases by the company over a 24 month period. The company also entered into a license agreement with USA Video of Mystic, Connecticut wherein certain compression technology developed by USA Video will be embedded in set top boxes manufactured by Eagle Wireless International, Inc. and sold by the company. To date, Eagle Wireless International, Inc. has failed to provide Urbana with a product that has met regulatory approval or is marketable to the overall market. The company has taken steps to ensure that it has alternative sources of set-top boxes if necessary. In March, 2000, the company entered into a non-binding letter of intent to purchase 100% of the issued and outstanding shares of J.D. Donahue & Associates, a private Maryland based company that is the principal provider of financial payment systems, systems application development and financial payment hardware/software and systems integration programs to state and federal governments in the United States. In the event the company proceeds with its acquisition of J.D. Donahue & Associates, the consideration paid will be a combination of cash and shares of common stock in the capital of the company. The final terms and consideration will be formalized following the completion of due diligence and financing. The company's agreement to purchase the J.D. Donahue & Associates shares is conditional upon its raising U.S. $25,000,000 in financing, a sum the company does not at this time expect to raise. The company has five potential revenue producing divisions: LocalNet advertising electronic billing set-top-box sales corporate sponsorships In the ordinary course of business, the company has entered into the following agreements during the year 2000: (a) Strategic Alliance with Learning Pay.com. On June 5, 2000, the company entered into a strategic alliance with Fort Lauderdale, Florida-based Learning Pays.com, an education technology company focused on improving student achievement, enhancing parental involvement and facilitating communication across school communities. Learning Pays.com's core product, the web-based School Tool, securely and privately links parents, students, teachers and administrators online. The strategic relationship is intended to enhance the educational content area of the company's local net portal by offering its users easy-to-use communications and education tools. The web-based applications for the schools and their teachers, students, administrators and parents will include personalized web pages, e- mail, expansion of the company's homework online, individualized and automatically-updated school and event calendars. (b) Strategic Alliance with WSMI.com Inc. and Bee-Trade.com. On June 26, 2000, the company formed a strategic alliance with WSMI.com Inc. and Bee-Trade.com. The alliance is intended to integrate the company's set-top box technology, local net portal design, and proprietary content transference into WSMI.com/Bee- Trade.com's e-enabler.net solution. The combined technologies of e-enabler.net and the company is intended to provide a turnkey, e- commerce network solution to both virtual and local communities for use on a worldwide basis. (c) License Agreements. On July 17, 2000, the company has licensed LocalNet in two communities in Canada. The company is targeting approximately 25,000 new customers for LocalNet within the first two communities. Deployment of the portal technology and Internet set-top boxes is expected to begin in the fall of 2000. The two licensed communities are Haldiman Norfolk and Grey Bruce. Under the terms of each license agreement, the company will receive a one-time fee per household in the community and an ongoing royalty of 10% of total revenue generated via LocalNet. (d) Agreement with Bell Nexxia. On August 31, 2000, the company completed an agreement to offer the low priced internet connection in Canada. The agreement combines the company's LocalNet software with Bell Nexxia's infrastructure. The agreement is intended to enable the company to rapidly deploy and expand its customer base across Canada. The company will offer a suite of competitively priced services to the communities across Canada. Through the agreement with Bell Nexxia, the company's customers are intended to benefit from access to a full range of advanced communications services to meet their individual needs. The company intends to seek similar types of agreement with United States communications companies. (e) Letter of Intent with Communilink Canada Corp. On November 8, 2000, the company entered into a letter of intent with Communilink Canada Corp. to provide the company's LocalNet portal in five new regions of Ontario, Canada. LocalNet provides residents the ability to connect globally to the Internet through an affordable set-top box and view meaningful community-specific information on a real-time basis. Under the terms of the proposed agreement, the company will receive a licensing fee and ongoing royalties from each community. These territories bring the number of LocalNets currently under development to nine and represent a combined population of approximately 700,000 potential viewers and over 50,000 local advertisers. The deployment of communities will begin immediately in the Peel/Halton Hills region, followed by expansion into four other communities, which are located primarily in South Western Ontario. (f) Licensing and Co-Marketing Agreement with Sage Systems. On November 17, 3000, the company entered into a licensing and co- marketing agreement with Sage Systems, creator of AladnT, a narrowband home networking technology that connects home appliances to each other and the Internet. Under the terms of agreement, the company will license and deploy Sage System's narrowband networking technology. The two companies have also signed a joint marketing agreement with expectations of marketing the combined system to electric companies and their customers. Milestones for Business Plan. ITEM BUSINESS PLAN Costs to Source of Anticipated Projected INITIATIVES/ complete funding start date revenues of revenues first year (000's) 1 Portal Development/ Delivery Phase 1 -Activation of first 4 LocalNets tier 2&3 cities) -Guelph LocalNet Completed/ Not Nov-00 $ 314,822 $0 applicable -Cambridge LocalNet Completed/ Not Nov-00 87,459 $0 applicable -Hanover LocalNet Completed/ Not Nov-00 267,115 $0 applicable -Simcoe LocalNet Completed/ Not Nov-00 145,764 $0 applicable Phase 2 (replication tier 2&3 cities) 0 -Sudbury LocalNet $0 Not Nov-00 342,909 applicable -Oxford County LocalNet $0 Not Mar-01 208,051 applicable -Richmond Hill LocalNet $0 Not Jan-01 583,057 applicable -Perth LocalNet $0 Not Jan-01 116,611 applicable -Ozz utility Mar-01 TBD* -ENAL electric utility in Italy (pilot LocalNet) Jan-01 TBD* -Louisville LocalNet $0 Not Dec-01 TBD* applicable Sub-total revenues LocalNet/set top box roll-out estimates 2,065,788 2 Set-top-box roll to first 4 LocalNets n/a Leasing Nov-00 Portion of Program Phase 1 Portal roll Out above 3 Electronic Presentment -pilots (Sudbury) (hardware) *$ 50,000 Hewlett Dec-00 175,000 Packard -roll-out (hardware) *$150,000 Hewlett Feb-01 1,500,000 Packard *Note: The company has negotiated with Hewlett Packard's Equipment assistance program 6 months free capital with payments over further 18 months. 4 Phase 3 Integration Merger (tier 1 cities) (Integration of technologies for tier 1 markets) -Additional applications for tier 1,2,& 3 (data collection health & safety, video on demand, meter reading,.) -Set top boxes 2nd Generation R&D $ 500,000 funds Apr-01 750,000 sourced from merged company -Call center activation (completion software dev) $400,000 " Feb-01 300,000 Total estimated Integration costs Total projected revenues for first year (to be absorbed by merged company) 1,050,000 5 OEM Set Top Box Sales (exclusive of LocalNet) 15,000 units @ $330 Jan-01 4,950,000 Prospects include: Multi Dwelling Units-new home builders/ Cable Co's/ Financial Institutions 6 Premier Supplier Not Nov-00 Included in of low cost Applicable Item #1 internet connectivity Agreement with Bell Nexia (wholly owned subsidiary of Bell Canada) whereby the company will provide bundled monthly connection services and set top boxes in LocalNet environments across Canada. Negotiated connection cost as low as $3.00 U.S. per subscriber. 7 Acquisitions Acquisition of JD Donahue & Associates $ 3.5 cash Term Debt/ 4,000,000 Secondary first year Offering revenues 8 Applications & Aggregation of Content License agreement with Sage Systems of Alameda, California for the purpose of permitting the company to have designed and integrated for distribution of SAGE Endpoint Products $0 Technology 440,000 fees $20,000 TOTAL $14,180,788 Proprietary Protection (a) General. The company's patent and trademark strategy is to pursue in selected jurisdictions the broadest possible patent protection on its proprietary products and technology. The company plans to protect its technology, any inventions and improvements to its inventions by filing patent applications in selected key countries according to industry standard in a timely fashion. In addition to its patents and licenses, the company also relies upon trade secrets, know-how and continuing technological innovations to develop its competitive position. It is the company's policy to require its directors, employees, consultants, members of its scientific advisory board and parties to collaborative agreements to execute confidentiality agreements upon the commencement of employment, consulting or collaborative relationships with the company. These agreements provide that all confidential information developed or made known during the course of the relationship with the company is to be kept confidential except in specific circumstances. In the case of employees and consultants, the agreements provide that all inventions resulting from work performed for the company utilizing property of the company or relating to the company's business and conceived or completed by the individual during employment are the exclusive property of the company to the extent permitted by law. (b) Patents, Copyrights and Trade Secrets. Set top boxes manufactured for Urbana Enterprises Corp. by Eagle Wireless International, Inc. incorporate "shelf" components and technologies that are custom configured to the company's specifications. This configuration will provide the consumer with a unique set of entertainment, education, Internet and utility monitoring features. All components have multiple manufacturers and suppliers that Eagle may use as sources of supply, therefore, Eagle Wireless International, Inc. and the company are not reliant on single- source, third party suppliers. This leaves the company with minimal risk associated with parts and component supply. The company, Eagle Wireless International, Inc. and USA Video Technologies of Mystic, Connecticut have entered into a License Agreement in January 2000 in which USA Video has licensed the use of its proprietary Wavelet technology to the company to be embedded into all set top box's manufactured for the company by Eagle Wireless International, Inc. This ensures the company's right and know-how to provide its customers with streaming video features. Eagle Wireless International, Inc., the technology licensor who has granted the company rights under an agreement, has been granted patents or has filed patent applications in the United States of America and other jurisdictions in respect of certain core technologies utilized by the company through its purchase of set top boxes from Eagle Wireless International, Inc. Given that the patent applications for these technologies involve complex legal, scientific and factual questions, there can be no assurance that patent applications relating to the technology used by the company will result in patents being issued or that, if issued, the patents will provide a competitive advantage or will afford protection against competitors with similar technology, or will not be challenged successfully or circumvented by competitors. The company itself does not have patents or patents pending and it is unlikely that the process by which the company produces its contemplated products would itself be patentable. (c) Trademark Applications. The company is in the process of applying for Canadian and United States protection for the trademark of "Urbana.ca". No filings have yet been completed. Organizational Structure and Facilities The company currently has 15 full-time employees, 9 of which are employed in research and development and 6 of which are engaged in administration. At this time, none of the company's employees are subject to collective bargaining agreements. A number of key employees, officers and directors have in place management agreements the terms of which protect the company from future competition by these persons and against disclosure of confidential information they come into contact with during the course of their employment or other association with the company. The company anticipates hiring 5 additional full-time personnel during the remainder of 2000 in order to meet its business objectives, of which 2 of the new personnel will fall within administration and 3 will fall within product research and development. Risks in Connection with Plan of Business. (a) No Assurance of Regulatory Approval - Potential Delays. In order for a product developed by the company or its collaborators to be marketed and sold in a particular country, it must receive all relevant regulatory approvals or clearances. The regulatory process, which includes extensive studies and trials of each product in order to establish its efficacy, is uncertain, can take many years and requires the expenditure of substantial resources. Data obtained from a trial and activities are susceptible to varying interpretations which could delay, limit or prevent regulatory approval or clearance. In addition, delays or rejections may be encountered based upon changes in regulatory policy during the period of product development and/or the period of review of any application for regulatory approval or clearance for a product. Delays in obtaining regulatory approvals or clearances would adversely affect the marketing of any products developed by the company or its collaborators, impose significant additional costs on the company and its collaborators, diminish any competitive advantages that the company or its collaborators may attain and adversely affect the company's ability to receive royalties and generate revenues and profits. There can be no assurance that, even after such time and expenditures, any required regulatory approvals or clearances will be obtained for any products developed by or in collaboration with the company. Any regulatory approval or clearances granted may entail limitations on the indicated uses for which the new product may be marketed that could limit the potential market for such product. In addition, product approvals or clearances, once granted, may be withdrawn if problems occur after initial marketing. Furthermore, manufacturers of approved products are subject to pervasive review, including compliance with detailed regulation governing good manufacturing practices. Failure to comply with applicable regulatory requirements can result in actions such as warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production and refusal of the government to renew marketing applications or criminal prosecution. The company is also subject to numerous federal, state and local laws, regulations and recommendations relating to safe working conditions, manufacturing practices, research and development activities. The company is unable to predict the extent of government regulations which might have an adverse effect on the discovery, development, production and marketing of the company's products. Also, there can be no assurance that the company will not be required to incur significant costs to comply with current or future laws or regulations or that the company will not be adversely affected by the cost of such compliance. (b) Acceptance And Effectiveness Of Internet Electronic Commerce. The company's success in establishing an e-commerce business web site will be dependent on consumer acceptance of e-retailing and an increase in the use of the Internet for e-commerce. If the markets for e-commerce do not develop or develop more slowly than the company expects, its e-commerce business may be harmed. If Internet usage does not grow, the company may not be able to increase revenues from Internet advertising and sponsorships which also may harm both our retail and e-commerce business. Internet use by consumers is in an early stage of development, and market acceptance of the Internet as a medium for content, advertising and e-commerce is uncertain. A number of factors may inhibit the growth of Internet usage, including inadequate network infrastructure, security concerns, inconsistent quality of service, and limited availability of cost-effective, high-speed access. If these or any other factors cause use of the Internet to slow or decline, our results of operations could be adversely affected. (c) Competition In Internet Commerce. Increased competition from e-commerce could result in reduced margins or loss of market share, any of which could harm both our retail and e-commerce businesses. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of the company's present and potential competitors are likely to enjoy substantial competitive advantages, including larger numbers of users, more fully-developed e-commerce opportunities, larger technical, production and editorial staffs, and substantially greater financial, marketing, technical and other resources. If the company does not compete effectively or if it experiences any pricing pressures, reduced margins or loss of market share resulting from increased competition, the company's business could be adversely affected. (d) Unreliability Of Internet Infrastructure. If the Internet continues to experience increased numbers of users, frequency of use or increased bandwidth requirements, the Internet infrastructure may not be able to support these increased demands or perform reliably. The Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and could face additional outages and delays in the future. These outages and delays could reduce the level of Internet usage and traffic on the company website. In addition, the Internet could lose its viability due to delays in the development or adoption of new standards and protocols to handle increased levels of activity. If the Internet infrastructure is not adequately developed or maintained, use of the company website may be reduced. Even if the Internet infrastructure is adequately developed, and maintained, the company may incur substantial expenditures in order to adapt its services and products to changing Internet technologies. Such additional expenses could severely harm the company's financial results. (e) Transactional Security Concerns. A significant barrier to Internet e-commerce is the secure transmission of confidential information over public networks. Any breach in our security could cause interruptions in the operation of our website and have an adverse effect on the company's business. (f) Patents, Permits and Licenses. The company considers patent protection and proprietary technology to be materially significant to its business. The company relies on certain patents and pending applications relating to various aspects of its potential products and technology. These patents and patent applications are either owned by or exclusively licensed to the company. There can be no assurance that the company will be able to obtain and retain all necessary patents, licenses and permits that may be required to carry out the research and development, manufacturing, testing, obtaining regulatory approvals and marketing of commercial products. There can also be no assurance that others will not independently develop similar technologies, duplicate any technology developed by the company, the company's technology will not infringe upon patents or other rights owned by others, that any of the company's patents will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide competitive advantages to the company. Litigation, which could result in substantial cost to the company, may be necessary to enforce the company's rights provided by its patents or to determine the scope and validity of others' proprietary rights. There have been no patent infringement claims filed by or against the company, and the company is not aware of any potential claims. (g) No Assurance Regarding Licensing of Proprietary Technology Owned by Others. The manufacture and sale of any products developed by the company will involve the use of processes, products, or information, the rights to certain of which are owned by others. Although the company has obtained licenses or rights with regard to the use of certain of such processes, products, and information, there can be no assurance that such licenses or rights will not be terminated or expire during critical periods, that the company will be able to obtain licenses or other rights which may be important to it, or, if obtained, that such licenses will be obtained on favorable terms. Some of these licenses provide for limited periods of exclusivity that may be extended only with the consent of the licensor. There can be no assurance that extensions will be granted on any or all such licenses. This same restriction may be contained in licenses obtained in the future. (h) No Assurance of Protection of Proprietary Information. Certain of the company's know-how and proprietary technology may not be patentable. To protect its rights, the company requires management personnel, employees, consultants, advisors and collaborators to enter into confidentiality agreements. There is no assurance, however, that these agreements will provide meaningful protection for the company's trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. (i) No Assurance of Market Acceptance. There can be no assurance that any products successfully developed by the company or its corporate collaborators, if approved for marketing, will ever achieve market acceptance. The company's products, if successfully developed, may compete with a number of traditional products manufactured and marketed by major e-commerce and technology companies, as well as new products currently under development by such companies and others. The degree of market acceptance of any products developed by the company or its corporate collaborators will depend on a number of factors, including the establishment and demonstration of the efficacy of the product candidates, their potential advantage over alternative methods and reimbursement policies of government and third party payors. There can be no assurance that the marketplace in general will accept and utilize any products that may be developed by the company or its corporate collaborators. (j) No Assurance of Successful Manufacturing. The company has no experience manufacturing commercial quantities of products and does not currently have the resources to manufacture any products that it may develop. The company presently has no plans for developing an in-house marketing or manufacturing capability. Accordingly, the company will be dependent upon securing a contract manufacturer or other third party to manufacture such products. There can be no assurance that the terms of any such arrangement would be favorable enough to permit the products to compete effectively in the marketplace. (k) Dependence on Outsourced Manufacturing. The risks of association with Eagle Wireless International, Inc. are related to aspects of this company's operations, finances and suppliers. Although there are clear and understandable reasons to choose Eagle Wireless International, Inc. as an outsourced manufacturer and fulfillment center, the company will suffer losses if Eagle Wireless International, Inc. fails to perform its obligations to manufacture and ship the set top boxes. Eagle Wireless International, Inc.'s financial affairs may also affect the company's ability to obtain product from this firm in a timely fashion should it fail to continue to obtain sufficient financing during a period of incremental growth. The company maintains a strong relationship with Eagle Wireless International, Inc. to ensure that any issues this firm may face are dealt with in a timely manner. Although the company is currently reliant on Eagle Wireless International, Inc., it does not intend to develop its own manufacturing capability. (l) Competition. There are inherent difficulties for any new company seeking to enter an established field. The company may experience substantial competition in its efforts to locate and attract customers for its services. Many competitors in the company's field have greater experience, resources, and managerial capabilities than the company and may be in a better position than the company to attract such customers. There are a number of larger companies which may directly compete with the company. Such competition could have a material adverse effect on the company' profitability or viability. (m) Dependence on and Management of Future Corporate Collaborations. The success of the company's business strategy is largely dependent on its ability to enter into collaborations such as research alliances and licensing arrangements with universities, e-commerce companies and large technological companies, and to effectively manage the relationships that may come to exist as a result of this strategy. The company is currently seeking corporate collaborators, but there can be no assurance that such efforts will lead to the establishment of any favorable collaboration. There can be no assurance that any of the company's future or existing collaborators will commit sufficient resources to the company's research and development programs or the commercialization of its products. Also, there can be no assurance that such collaborators will not pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with the company, or that disputes will not arise with respect to ownership of technology developed under any such collaborations. Management of the company's collaborative relationships will require significant time and effort from the company's management team and effective allocation of the company's resources. (n) Currency Fluctuations. The company reports its financial position and results of operations in United States dollars in its annual financial statements. The company's operations result in exposure to foreign currency fluctuation and such fluctuations may materially affect the company's financial position and results of operations. The company does not currently take any steps to hedge against currency fluctuations. (o) Influence of Other External Factors. The Internet industry in general is a speculative venture necessarily involving some substantial risk. There is no certainty that the expenditures to be made by the company will result in a commercially profitable business. The marketability of its services will be affected by numerous factors beyond the control of the company. These factors include market fluctuations, and the general state of the economy (including the rate of inflation and local economic conditions), which can affect peoples' discretionary spending. Factors which leave less money in the hands of potential customers of the company will likely have an adverse affect on the company. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the company not receiving an adequate, or any, return on invested capital. (p) Dependence Upon Key Personnel. The company is dependent upon a relatively small number of key management personnel and key employees and the loss of any of these key management personnel and key employees could have an adverse effect on the company. Competition among e-commerce companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to the success of the company. In order to reduce its risk regarding key employees, the company has entered into an employment agreement with each of its key employees. The company is also dependent, to some extent, on the guidance of certain members of its advisory board, none of whom is obligated, or will devote his full-time efforts, to the business of the company. There can be no assurance that the company will be able to attract and retain such individuals currently or in the future on acceptable terms, or at all. In addition, the company does not maintain "key person" life insurance on any officer, employee or consultant of the company. The company also has relationships with scientific collaborators at academic and other institutions, some of whom conduct research at the company's request or assist the company in formulating its research and development strategy. These collaborators are not employees of the company and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to the company. In addition, these collaborators may have arrangements with other companies to assist such other companies in developing technologies that may prove competitive to those of the company. In addition, all decisions with respect to the management of the company will be made exclusively by the officers and directors of the company. Investors will only have rights associated with minority ownership interest rights to make decisions which effect the company. The success of the company, to a large extent, will depend on the quality of the directors and officers of the company. Accordingly, no person should invest in the shares unless he is willing to entrust all aspects of the management of the company to the officers and directors. (q) Inexperience of Management. Senior management has limited direct experience in the sale of set top boxes and the other related businesses of the company. Management will rely on senior employees, consultants and strategic alliances to assist with project management. The company has every intention to continue adding experienced management commensurate with the growth of the company. (r) Management of Growth. The company's future growth, if any, may cause a significant strain on its management, operational, financial and other resources. The company's ability to manage its growth effectively will require it to implement and improve its operational, financial, manufacturing and management information systems and to expand, train, manage and motivate its employees. These demands may require the addition of new management personnel and the development of additional expertise by management. Any increase in resources devoted to research, product development and marketing and sales efforts without a corresponding increase in the company's operational, financial, manufacturing and management information systems could have a material adverse effect on the company's business, financial condition, and results of operations. (s) Control of the Company by Officers and Directors. The company's officers and directors beneficially own approximately 39% of the outstanding shares of the company's common stock. As a result, such persons, acting together, have the ability to exercise significant influence over all matters requiring stockholder approval. Accordingly, it could be difficult for the investors hereunder to effectuate control over the affairs of the company. Therefore, it should be assumed that the officers, directors, and principal common shareholders who control the majority of voting rights will be able, by virtue of their stock holdings, to control the affairs and policies of the company. (t) Limitations on Liability, and Indemnification, of Directors and Officers. Although neither the articles of incorporation nor the bylaws of the company provide for indemnification of officer or directors of the company, the Nevada Revised Statutes provides for permissive indemnification of officers and directors and the company may provide indemnification under such provisions. Any limitation on the liability of any director, or indemnification of directors, officer, or employees, could result in substantial expenditures being made by the company in covering any liability of such persons or in indemnifying them. (u) Potential Conflicts of Interest. The officers and directors of the company have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors. As a result, certain conflicts of interest may exist between the company and its officers and/or directors which may not be susceptible to resolution. In addition, an employee of the company's corporate counsel in Canada, Heenan Blaike, has a beneficial interest in or the right to acquire, up to 250,000 common shares of the company (which was previously issued in exchange for services rendered to the company). In addition, conflicts of interest may arise in the area of corporate opportunities. All of the potential conflicts of interest will be resolved through exercise by the directors of such judgment as is consistent with their fiduciary duties to the company. It is the intention of management, so as to minimize any potential conflicts of interest, to present first to the board of directors of the company, any proposed investments for its evaluation. (v) No Cumulative Voting. Holders of the shares are not entitled to accumulate their votes for the election of directors or otherwise. Accordingly, the holders of a majority of the shares present at a meeting of shareholders will be able to elect all of the directors of the company, and the minority shareholders will not be able to elect a representative to the company's board of directors. (w) Absence of Cash Dividends. The board of directors does not anticipate paying cash dividends on the shares for the foreseeable future and intends to retain any future earnings to finance the growth of the company's business. Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements, and the general operating and financial condition of the company, and will be subject to legal limitations on the payment of dividends out of paid-in capital. (x) Limited Public Market for Company's Securities. Prior to this offering, there has been only a limited public market for the shares of common stock being offered. There can be no assurance that an active trading market will develop or that purchasers of the shares will be able to resell their securities at prices equal to or greater than the respective initial public offering prices. The market prices for the securities of technology companies have historically been highly volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of any particular company. The market price of the shares may be affected significantly by factors such as announcements by the company or its competitors, variations in the company's results of operations, and market conditions in the retail, electron commerce, and internet industries in general. The market price may also be affected by movements in prices of stock in general. As a result of these factors, purchasers of the shares offered hereby may not be able to liquidate an investment in the shares readily or at all. (y) No Assurance of Continued Public Trading Market; Risk of Low Priced Securities. There has been only a limited public market for the common stock of the company. The common stock of the company is currently quoted on the Over the Counter Bulletin Board. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of the company's securities. In addition, the common stock is subject to the low-priced security or so called "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the U.S. Securities and Exchange Commission, any equity security that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing low-priced or penny stocks sometimes limit the ability of broker-dealers to sell the company's common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market. (z) Effects of Failure to Maintain Market Makers. If the company is unable to maintain at least one National Association of Securities Dealers, Inc. member broker/dealers as a market maker, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the company will be able to maintain such market makers. (aa) Escrowed Proceeds A portion of the gross proceeds of the private placement were placed into escrow pursuant to an escrow agreement between the company, Groome Capital.com, Inc., and Pacific Corporate Trust Company (as escrow agent) on the closing of the private placement. The proceeds will be released to the company on the earlier to occur of 4:30 p.m. on April 26, 2001, or the date on which the escrow agent receives written notice from Groome Capital.com, Inc. that both a receipt for the final prospectus has been issued by each of the Canadian securities commissions where qualification is required (and the confirmation has been received) and this Form SB- 2 is declared effective by the U.S. Securities and Exchange Commission. (bb) Offering Price. The offering price of the shares will be determined in relation to the then current market price of the shares on the Over the Counter Bulletin Board. Because of market fluctuations, there can be no assurance that the shares will maintain market values commensurate with the offering price. (cc) "Shelf" Offering. The shares are offered directly by the company on a delayed basis. No assurance can be given that any or all of the shares will be issued. No broker-dealer has been retained as an underwriter and no broker-dealer is under any obligation to purchase any of the shares. In addition, the officers and directors of the company, collectively, have limited experience in the offer and sale of securities on behalf of the company. (dd) Use of Proceeds Not Specific. The proceeds of this offering have been allocated only generally. Proceeds from the offering have been allocated generally to legal and accounting, and working capital. Accordingly, investors will entrust their funds with management in whose judgment investors may depend, with only limited information about management's specific intentions with respect to a significant amount of the proceeds of this offering. (ee) Shares Eligible For Future Sale. All of the 8,572,500 shares of common stock which are currently held, directly or indirectly, by management have been issued in reliance on the private placement exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person (or persons whose shares are aggregated) who has beneficially owned shares acquired in a non-public transaction for at least one year, including persons who may be deemed affiliates of the company (as that term is defined under that rule) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock, or the average weekly reported trading volume during the four calendar weeks preceding such sale, provided that certain current public information is then available. If a substantial number of the shares owned by these shareholders were sold pursuant to Rule 144 or a registered offering, the market price of the common stock could be adversely affected. (ff) Uncertainty Due to Year 2000 Problem. The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using the year 2000 date is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 issue may be experienced before, on, or after January 1, 2000, and if not addressed, the impact on operations and financial reporting may range from minor errors to significant system failure which could affect the company's ability to conduct normal business operations. This creates potential risk for all companies, even if their own computer systems are Year 2000 compliant. It is not possible to be certain that all aspects of the Year 2000 issue affecting the company, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. The company currently believes that its systems are Year 2000 compliant in all material respects. Although management is not aware of any material operational issues or costs associated with preparing its internal systems for the Year 2000, the company may experience serious unanticipated negative consequences (such as significant downtime for one or more of its suppliers) or material costs caused by undetected errors or defects in the technology used in its internal systems. Furthermore, the purchasing patterns of customers may be affected by Year 2000 issues. The company does not currently have any information about the Year 2000 status of its potential material suppliers. The company's Year 2000 plans are based on management's best estimates. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements of the company and notes thereto contained elsewhere in this prospectus. Results of Operations. (a) Nine Months Ended September 30, 2000 and 1999. For the nine months ended September 30, 2000, the company had a net loss of $2,309,452 or $0.20 cents per share. This loss compares with a net loss of $132,890 or $0.01 cents per share for the corresponding nine-month period ended September 30, 1999. The net loss for the nine months ended September 30, 2000 includes expenses as follows: consulting and management of $452,135, depreciation and amortization of $579,782, technology contract fees of $412,068, office and general of $292,614, professional fees of $236,600 and salaries of $239,710. During the nine month period ended September 30, 2000, the company, through its wholly-owned subsidiary company, U.R.B.A. Holdings Inc., acquired all of the outstanding shares of three Canadian companies which are in the business of developing and marketing internet based products and services through the distribution of set top boxes. The companies acquired were Urbana.ca Enterprises Corp., E-Bill Direct Inc., and Enersphere.com, Inc.. On March 10, 2000 these companies were amalgamated under the statutory laws of the province of Ontario to form Urbana Enterprises Corp. The business combination with Urbana.ca Enterprises Corp. was accounted for using the purchase method of accounting. The 3,000,000 shares issued on acquisition have been valued at $0.30 per share for a purchase price of $900,000. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $54,655 recorded during the quarter. The business combination with E-Bill Direct Inc. was accounted for using the purchase method of accounting. The 2,950,000 shares issued on the acquisition have been valued at $0.27 per share for a purchase price of $796,500. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $40,632 recorded during the quarter. The business combination with Enersphere.com, Inc. was accounted for using the purchase method of accounting. The 4,500,000 shares issued on the acquisition have been valued at $0.34 per share for a purchase price of $1,614,828, including the cash payment. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $86,486 recorded during the quarter. During the quarter, a wholly-owned subsidiary company, changed its name from ICC Integrated Carbonics (Canada) Corp. to U.R.B.A. Holdings Inc. (b) Fiscal Years Ended December 31, 1999 and 1998. During the last quarter of the fiscal year 1999, the company continued with its program to develop the firm into an operating company. For the 12 months ended December 31, 1999, the company had a net loss of $568,750 or $0.06 cents per share. This loss compares with a loss of $667,601 or $0.07 cents per share for the corresponding 12- month period ended December 31, 1998. During the year, the company continued to seek financing for its joint ventures in China. In this regard, the company engaged consultants to assist the company concerning structuring development plans, financing strategies, shareholder communications, and creating awareness with the brokerage community by electronic means. While continuing with efforts to obtain financing for the company's China graphite projects, management implemented a diversification strategy to reduce the risk of being unable to raise the necessary funding. As the company was unable to raise the funding, the joint ventures were abandoned and the company has written off its investment resulting in a loss of $253,408. During the year, a wholly owned subsidiary company, URBA, was incorporated in the province of British Columbia for the purpose of facilitating acquisitions in Canada. During the year the company entered into agreements to acquire, through U.R.B.A. Holdings Inc., all of the outstanding shares of three companies in Canada: Urbana Enterprises, E-Bill Direct Inc., and Enersphere.com, Inc.; the acquisitions were completed subsequent to the year-end. Liquidity and Capital Resources. (a) Nine Months Ended September 30, 2000 and 1999. The company is a development stage enterprise. The company has no revenue and is continuing to incur substantial costs in connection with pursuing the development of its business. The company's continued existence is dependent on its ability to obtain sufficient financing to meet its financial needs and ultimately to attain profitable operations. At September 30, 2000 the company had a working capital deficiency of $1,398,403 inclusive of loans payable. This compares with a working capital deficiency of $195,985 at September 30, 1999. (1) Debt Conversion. During the period the company settled debts of $40,000 due to a relative of a director of the company by the issuance of 100,000 restricted shares of common stock at $0.40 per share. The company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares of common stock at $0.30 per share and $9,190 of accounts payable by the issuance of 22,975 restricted shares of common stock at $0.40 per share. The company issued 50,000 restricted shares of common stock at $0.40 per share as a retainer on a media relations contract. As consideration for the acquisition of the three subsidiaries during the period, U.R.B.A. Holdings Inc. issued a total of 10,450,000 exchangeable shares. (2) Loan Conversions. At September 30, 2000 loans of $1,174,162 plus accrued interest of $51,213 were outstanding. These loans bear interest at an annual rate of 8% and were due and payable on March 15, 2000. Subsequent to March 15, 2000 $110,000 of principal has been repaid. The company has provided an option to the lenders for the remainder of the unpaid loans to convert the principal amount of the loans into units of the company at a price of $0.57 per unit. Each unit is comprised of one common share of the company and one- half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional common share of the company at a price of $5.00 per share. This offer is to be made by way of a prospectus which has been filed with the applicable Canadian and United States regulatory authorities. During the quarter the company received additional loans totaling $107,218. Accrued interest totals $615 to September 30, 2000. These loans bear interest at rates from 8% to 10% per annum. (3) Units Offering. The company entered into an agency agreement effective April 10, 2000 with Groome Capital.com Inc. whereby the company and this firm engaged in a best efforts offering of up to 20,000,000 special warrants at a price of $1.25 per special warrant. Each special warrant is convertible into one common share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. Groome Capital.com Inc. received an agent's fee equal to 8% of the total amount raised (reduced to 4% for investors on a president's list). In addition, Groome Capital.com Inc. has been granted non-assignable warrants to acquire, without payment of additional consideration, 1 year compensation options providing the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of special warrants sold under this offering. This offering, which has been closed as of May 11, 2000, resulted in total subscriptions for 847,989 units with total proceeds of $1,059,986 from a total of nine investors in Canada. A similar offering was undertaken in the United States, but no sales resulted from this offering. Pursuant to an agreement dated April 27, 2000, 15% of the gross proceeds of the private placement ($158,997.90) were placed into escrow pursuant to an escrow agreement between the company, Groome Capital.com, Inc., and Pacific Corporate Trust Company (as escrow agent) on the closing of the private placement. (4) LocalNet Development. During the quarter ended on September 30, 2000, the company completed and launched the first generation portal to serve several communities in Ontario, Canada. Development is ongoing to add additional user features and refine the current product. The company is continuing to develop its plans for entering its first revenue cycle by the licensing of LocalNet. (5) Proposed Merger. By a letter of intent dated September 8, 2000, the company agreed to a proposed merger with World Sales & Merchandising Inc., an Ontario company. In connection with this proposed merger, the shareholders of World Sales & Merchandising Inc. would receive 65% of the post-merger fully diluted common stock of the company. (6) Capital Expenditures. No capital expenditures were made during the quarter ended on September 30, 2000 (b) Fiscal Years Ended December 31, 1999 and 1998. During the year, the company continued its status as a development stage company. The company has no revenue and is continuing to incur substantial costs in pursuing business opportunities. The company's continued existence is dependent on its ability to obtain sufficient financing to meet its financial needs. At December 31, 1999 the company had a working capital deficiency of $195,985. This compares with a working capital deficiency of $283,305 at December 31, 1998. During the year the company settled debts of $86,268 to a private company of which an officer is a relative of a Director of the company by the issuance of 215,665 restricted shares at $0.40 per share. The company settled its agreement payable of $130,000 and various of its trade payables of $127,576 by the issuance of restricted shares at $0.40 per share for 325,000 shares and 510,303 shares respectively. During the year the company received loans totaling $60,000 and further loans of $1,224,162 subsequent to December 31, 1999 for total loans of $1,284,162. These amounts are due March 15, 2000 and bear interest at an annual rate of 8%. If the company defaults on these loans the lender has the right to convert the amount of principal borrowed into shares of the company at $0.50 per share subject to a 15% market price adjustment. In January, 2000, the company entered into an exclusivity agreement with Eagle Wireless International Corp. of League City, Texas wherein this firm agreed to manufacture and sell set-top boxes to the company and granted exclusive right to the company to sell Eagle Wireless International Corp. manufactured set-top boxes in Canada. Forward Looking Statements. The foregoing Management's Discussion and Analysis contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, including statements regarding, among other items, the company's business strategies, continued growth in the company's markets, projections, and anticipated trends in the company's business and the industry in which it operates. The words "believe," "expect," "anticipate," "intends," "forecast," "project," and similar expressions identify forward-looking statements. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the company's control. The company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, among others, the following: reduced or lack of increase in demand for the company's products, competitive pricing pressures, changes in the market price of ingredients used in the company's products and the level of expenses incurred in the company's operations. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained herein will in fact transpire or prove to be accurate. The company disclaims any intent or obligation to update "forward looking statements." DESCRIPTION OF PROPERTY The company and Urbana.ca Enterprises Corp. currently lease 10,000 square feet of office space for administration, product research and product development in Cambridge, Ontario. The term of the lease is 30 months and commenced on February 1, 2000. The lease has been pre-paid for its term. The Vancouver, British Columbia offices of the company are provided to the company without charge by Mr. Tyson; this office space consists of approximately 100 square feet within a larger office. These offices are suitable for the purposes of the company at this time (there is adequate insurance coverage on the assets of the company at these locations). CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the past two years, there have not been any transaction that have occurred between the company and its officers, directors, and five percent or greater shareholders, except as follows: By virtue of the acquisition of the three acquired entities (Urbana.ca Enterprises Corp., Enersphere.com, Inc. and E-Bill Direct, Inc.), and the fact that all directors and officers, except Robert Tyson, are shareholders of one of the acquired entities, said directors and officer beneficially own a cumulative total of 10,450,000 shares in the capital of the company. As such, these individuals are in a position to elect members of the board of directors, set their own compensation and approve affiliated transactions. Although the company's principals intend to act fairly and in full compliance with their fiduciary obligations, there can be no assurance that the company will not, as a result of the conflict of interest described above, possibly enter into arrangements under terms less favorable than it could have obtained had it been dealing with other persons. The Vancouver, British Columbia offices of the company are provided to the company without charge by Mr. Tyson; this office space consists of approximately 100 square feet within a larger office. This office is, in conjunction with other offices of the company, suitable for the purposes of the company at this time (there is adequate insurance coverage on the assets of the company at this location). Certain of the officers and directors of the company are engaged in other businesses, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on a board of directors. As a result, certain conflicts of interest may arise between the company and its officers and directors. The company will attempt to resolve such conflicts of interest in favor of the company. The officers and directors of the company are accountable to it and its shareholders as fiduciaries, which requires that such officers and directors exercise good faith and integrity in handling the company's affairs. A shareholder may be able to institute legal action on behalf of the company or on behalf of itself and other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to the company. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. The company's common stock is traded in the Over-the-Counter Bulletin Board (symbol "URBA"), having commenced trading on February 13, 1997. The range of closing prices shown below is as reported by this market. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. Per Share Common Stock Bid Prices by Quarter For the Fiscal Year Ending on December 31, 2000 High Low Quarter Ended March 31, 2000 12.94 1.12 Quarter Ended June 30, 2000 7.50 1.19 Quarter Ended September 30, 2000 2.69 0.69 Per Share Common Stock Bid Prices by Quarter For the Fiscal Year Ended on December 31, 1999 High Low Quarter Ended March 31, 1999 1.19 0.37 Quarter Ended June 30, 1999 1.00 0.32 Quarter Ended September 30, 1999 0.75 0.25 Quarter Ended December 31, 1999 1.37 0.37 Per Share Common Stock Bid Prices by Quarter For the Fiscal Year Ended December 31, 1998 High Low Quarter Ended March 31, 1998 2.37 1.50 Quarter Ended June 30, 1998 4.62 1.06 Quarter Ended September 30, 1998 1.37 0.50 Quarter Ended December 31, 1998 0.69 0.25 Holders of Common Equity As of September 30, 2000, there were approximately 43 shareholders of record of the company's common stock. A number of shareholders hold their shares through intermediaries such as American Depository. As a result, the company does not know the exact number of shareholders of its common shares. Dividend Information. The company has not declared or paid a cash dividend to stockholders since it was incorporated in February 1993. The board of directors presently intends to retain any earnings to finance company operations and does not expect to authorize cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon the company's earnings, capital requirements and other factors. EXECUTIVE COMPENSATION (a) Prior to the year 2000, none of the officers and directors received any compensation from the company. All directors, officers and key employees have been retained under Management Contracts, with an effective date of January 1, 2000. None of these individual's total compensation under these contracts, including special allowances or bonuses, will exceed $70,000 CDN this year (approximately $47,000 as of August 16, 2000). All officers and directors will be reimbursed for expenses incurred on behalf of the company including director expenses pertaining to attendance at meetings. It is anticipated that additional management will be hired as the company develops and revenue is generated. The salaries paid to new employees will be consistent with the salaries of others in similar positions in the industry. (b) During the year 1999, the company cancelled its previous stock option plan along with all outstanding stock options previously granted to directors, officers, and employees of the company. A new stock option plan was adopted during the year and received shareholders' approval. To date, no options have been granted under this plan. There are no other compensation plans of the company. (c) There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the company in the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the company. FINANCIAL STATEMENTS URBANA.CA, INC. (A development stage company) CONSOLIDATED BALANCE SHEET (Unaudited) September 30 2000 ASSETS CURRENT ASSETS Cash $ - Funds held in trust 163,022 Taxes recoverable 8,511 Prepaid expenses and deposits 110,712 282,245 DUE FROM RELATED PARTIES - FURNITURE AND EQUIPMENT, net of depreciation of $38,864 150,465 GOODWILL, net of amortization of $545,319 (Note 3) 3,090,159 $3,522,869 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $ 221 Accounts payable and accrued liabilities 347,219 Loans payable (Note 4) 1,333,208 1,680,648 DUE TO RELATED PARTIES (Note 6) 33,156 COMMITMENTS AND CONTINGENCIES (Notes 1 and 7) STOCKHOLDERS' EQUITY (DEFICIT) Capital stock (Note 5) Authorized Common stock, $0.0001 par value, 70,000,000 shares Preferred stock, $0.001 par value, 10,000,000 shares Issued and outstanding 11,588,283 (1999 - 11,082,318) shares of common stock 11,588 Additional paid-in capital 1,301,133 Special warrant proceeds (Note 5) 886,405 Exchangeable shares (Note 5) 3,226,500 Deficit accumulated during development stage (3,586,761) Accumulated other comprehensive income (loss) (29,800) 1,809,065 $3,522,869 The accompanying notes are an integral part of these consolidated financial statements URBANA.CA, INC. (A development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Nine Months February 23 Ended Ended 1993 September 30 September 30 (inception) 2000 1999 2000 1999 to September 30 2000 REVENUE Interest income 4,024 - 4,024 - 4,024 EXPENSES Consulting and management 116,742 - 452,135 - 670,420 Depreciation and Amortization 197,131 584 579,782 1,753 585,921 Technology contract fees 63,973 - 412,068 - 412,068 Engineering costs - - - - 274,170 Interest expense 22,557 133 67,193 266 76,829 Office and general (recovery) 25,902 (110,904) 292,614 97,832 552,498 Professional fees 91,891 5,933 236,600 16,491 3,440,602 Rent 12,082 5,023 33,374 16,548 86,455 Salaries 74,908 - 239,710 - 323,414 Write-off of interest in mineral property - - - - 15,000 Write-off of Graphite processing joint venture - - - - 253,408 605,186 (99,231)2,313,476 132,890 3,590,785 NET INCOME (LOSS) FOR THE PERIOD (601,162) (99,231)(2,309,452)(132,890) (3,586,761) BASIC NET INCOME (LOSS) PER SHARE (0.05) 0.01 (0.20) (0.01) WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 11,588,293 9,465,900 11,532,074 10,229,583 The accompanying notes are an integral part of these consolidated financial statement URBANA.CA, INC. (A development stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended February 23 1993 September, 30 (inception) to 2000 1999 September 30 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) for the period $(2,309,452) $(132,890) $(3,590,785) Adjustments to reconcile net loss to net cash from operating activities: depreciation and amortization 579,782 1,753 585,921 accrued interest income (4,024) - (4,024) imputed interest on long term debt - - 9,000 organization costs - - (308) loss on disposal of furniture and equipment - - 3,620 write-off of interest in mineral property - - 15,000 write-off of investment in graphite processing joint venture - - 253,408 net changes in non- cash working capital 152,116 90,704 518,108 CASH USED IN OPERATING ACTIVITIES (1,581,578) (40,433) (2,206,036) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of furniture and equipment (162,572) - (173,995) Proceeds from sale of furniture and equipment - - 1,972 Acquisitions of subsidiaries, net of cash acquired (Note 3) (75,602) - (75,602) Investment in graphite processing joint venture - - (37,463) Purchase of other assets - - (4,500) CASH USED IN INVESTING ACTIVITIES (238,174) - (289,588) CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft 221 - 221 Advances from (to) related parties (150,089) - (127,858) Payments on agreement Payable - - (70,000) Loan advances, net of interest and repayments 1,273,208 - 1,333,208 Issuance of common Stock - 39,780 662,446 Special warrant proceeds, net of trust funds 727,407 - 727,407 CASH FROM FINANCING ACTIVITIES 1,850,747 39,780 2,525,424 EFFECT OF EXCHANGE RATE CHANGES ON CASH (31,530) - (29,800) INCREASE (DECREASE) IN CASH (535) (653) - CASH, BEGINNING OF PERIOD 535 713 - CASH, END OF PERIOD - 60 - Non-cash activities: Refer to Notes 3 and 5. The accompanying notes are an integral part of these consolidated financial statement URBANA.CA, INC. (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION The Company was organized on February 23, 1993 under the laws of the State of Delaware as PLR, Inc. On October 3, 1997, it changed its name to Integrated Carbonics Corp. and on October 30, 1997, changed its jurisdiction of incorporation to Nevada. On April 15, 1999 a wholly-owned subsidiary company, U.R.B.A. Holdings Inc. ("URBA"), was incorporated under the laws of British Columbia to facilitate acquisitions in Canada. During January, 2000, the Company acquired, through URBA, 100% of the outstanding shares of Urbana.ca Enterprises Corp. ("Urbana Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"), which are in the business of developing and marketing internet based products and services through the distribution of set top boxes. The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is a development stage enterprise and as such has no revenue and is incurring substantial costs in connection with the development of its business and requires additional working capital to fund ongoing losses from operations. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to attain profitable operations. By a Letter of Intent dated September 8, 2000, the Company agreed to a proposed merger with World Sales & Merchandising Inc., an Ontario Company ("WSMI"). In connection with this merger, the shareholders of WSMI would receive 65% of the post-merger fully diluted common stock of the Company. The accompanying unaudited interim financial statements have been prepared in accordance with the rules and disclosure requirements of Regulation S-B and Form 10-QSB. They do not necessarily include all information and footnotes required by generally accepted accounting principles applicable to the Company's annual audited financial statements. However, except as disclosed herein, there has been no material change in accounting principles used or the information disclosed in the notes to the financial statements for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation have been made. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. These financial statements are expressed in US dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). There are no material measurement differences between US GAAP and Canadian GAAP. Principles of Consolidation. The financial statements include the accounts of the Company and its wholly-owned subsidiaries U.R.B.A. Holdings Inc. and Urbana Enterprises Corp. which was formed effective March 10, 2000, when Urbana Enterprises, Enersphere and E-Bill were amalgamated under the statutory laws of the Province of Ontario. All significant intercompany balances and transactions are eliminated on consolidation. Use of Estimates and Assumptions. Preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Goodwill. The company amortizes goodwill on a straight-line basis over five years. Fair Value of Financial Instruments. The Company estimates the fair value of financial instruments in accordance with the requirements of SFAS No. 107 - Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents and notes and accounts payable approximate carrying value due to the short-term maturity of the instruments. Foreign Currency Translation. The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. Net Loss per Common Share. Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflects the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share. Stock-based Compensation. The Company accounts for stock-based compensation using the intrinsic value based method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.25"). APB No. 25 requires that compensation cost be recorded for the excess, if any, of the quoted market price of the common stock over the exercise price at the date the options are granted. In addition, as required by SFAS No. 123, the company provides pro-forma disclosure of the impact of applying the fair value method of SFAS No. 123. NOTE 3 - ACQUISITIONS Urbana Enterprises. By agreement dated January 4, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of Urbana Enterprises, a company engaged in distribution of Linux based set top boxes which are used as an alternative method of delivering internet content. Urbana Enterprises was incorporated November 18, 1998 in the province of British Columbia. In consideration for the acquisition, URBA issued 3,000,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 3,000,000 common shares in trust to be held under the terms of a trust agreement executed January 4, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In anticipation of this acquisition, two shareholders of Urbana Enterprises, each holding a 36.75% interest in Urbana Enterprises, became directors of the Company effective July 21, 1999 and, subsequent to the acquisition, entered into five year management contracts for an aggregate of Cdn$120,000 in year 1 and for amounts to be negotiated for years 2 through 5. In addition, the Company has also agreed to grant a total of 400,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 17,716 Capital assets 7,387 Goodwill 1,093,102 1,118,205 Liabilities assumed at fair value: Accounts payable (87,474) Due to related parties (130,731) Purchase price 3,000,000 shares at $0.30 per share $ 900,000 Urbana Enterprises had net losses totaling $193,171 for the period from May 1, 1999 (inception) to the date of acquisition. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $163,962 has been recorded to September 30, 2000. Effective September 13, 2000, a former shareholder of Urbana Enterprises resigned as a director of the Company thus forfeiting all further management compensation and 200,000 stock options pursuant to this acquisition agreement. Effective October 20, 2000, a former shareholder of Urbana Enterprises resigned as a director of Urbana Enterprises Corp. thus forfeiting all further management compensation pursuant to this acquisition agreement. E-Bill. By agreement dated January 10, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of E-Bill, a company engaged in designing, developing and providing electronic presentment and payment services to the business community. E-Bill was incorporated May 27, 1999 in the province of Ontario. In consideration for the acquisition, URBA issued 2,950,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 2,950,000 common shares in trust to be held under the terms of a trust agreement executed January 10, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. E-Bill had losses totaling $16,214 for the period from May 27, 1999 (inception) to the date of acquisition. Subsequent to the acquisition, the Company signed three year management contracts with the two principals of E-Bill in the aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and Cdn$120,000 in year 3. In addition, the Company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 9 Capital assets 4,646 Goodwill 812,645 817,300 Liabilities assumed at fair value: Accounts payable (4,021) Due to related parties (16,779) Purchase price 2,950,000 shares at $0.27 per share $ 796,500 Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $121,896 has been recorded to September 30, 2000. Enersphere. By agreement dated January 9, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of Enersphere, a content company that utilizes set top boxes as their medium to deliver internet and intranet-based services to customers. Enersphere was incorporated September 28, 1999 in the province of Ontario. In consideration for the acquisition, URBA paid $84,828 and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 4,500,000 common shares in trust to be held under the terms of a trust agreement executed January 9, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. Enersphere had net losses totaling $114,917 for the period from September 28, 1999 (inception) to the date of acquisition. Subsequent to the acquisition, the Company signed two year management contracts with the two principals of Enersphere in the aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In addition, the Company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 3,540 Capital assets 10,324 Goodwill 1,729,731 1,743,595 Liabilities assumed at fair value: Accounts payable (28,995) Due to related parties (99,772) Purchase price $84,828 and 4,500,000 shares at $0.34 per share $1,614,828 Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $259,461 has been recorded to September 30, 2000. NOTE 4 - LOANS PAYABLE The Company has outstanding loans totaling $1,174,162 plus accrued interest of $51,213 calculated at an annual rate of 8%. These loans were due and payable on March 15, 2000. Subsequent to March 15, 2000 the Company has repaid $110,000 of principal. For the remainder of the unpaid loans, the Company has provided an option to the lenders to convert the principal amount of the loan into units of the Company at a price of $0.57 per unit. Each unit will consist of one common share of the Company and one-half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional common share of the Company at a price of $5.00 per share. This offer is to be made by way of a prospectus which has been filed with the applicable Canadian and United States regulatory authorities. During the quarter, the Company received additional loans totaling $107,218 plus accrued interest of $615. These loans are payable on demand and bear interest at rates from 8% to 10% per annum. NOTE 5 - CAPITAL STOCK During the nine month period ended September 30, 2000 the following shares were issued: Common Shares. The Company settled $40,000 due to a relative of a director by the issuance of 100,000 restricted shares of common stock at a price of $0.40 per share. The Company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares of common stock at a price of $0.30 per share. The Company settled $9,190 of accounts payable by the issuance of 22,975 restricted shares of common stock at a price of $0.40 per share. The Company issued 50,000 restricted shares of common stock, at a price of $0.40 per share, as a retainer pursuant to a media relations contract dated December 15, 1999. Exchangeable Shares. The Company's subsidiary, URBA, issued a total of 10,450,000 exchangeable shares as consideration for the acquisitions of Urbana Enterprises, E-Bill and Enersphere as described in Note 3. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held and may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Special Warrant Proceeds. During the second quarter of 2000 the Company completed a Special Warrant offering for 847,989 Special Warrants at $1.25 per Special Warrant for proceeds, net of offering costs, of $886,405. Currently $158,998 of these proceeds, plus accrued interest, are being held in trust until the earlier of one year or approval of a Prospectus in the applicable jurisdictions in Canada and a Registration with the Securities and Exchange Commission on Form SB-2, both of which have been filed. Each Special Warrant is convertible into one common share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. In addition, the Agent has been granted non-assignable warrants to acquire, without payment of additional consideration, 1 year Compensation Options providing the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of Special Warrants sold under this offering. Stock Option Plan. The Company has adopted a Stock Option Plan which will provide options to purchase up to 2,000,000 common shares of the Company for its employees, officers and directors. The options that will be granted pursuant to the Stock Option Plan are exercisable at a price of $0.50 which is equal to the fair value of the common shares at the time of adoption of the plan. As at September 30, 2000, no stock-based compensation cost has been recorded for any period and no stock options have been issued under this plan. Refer to Notes 3. NOTE 6 - RELATED PARTY TRANSACTIONS All amounts due to and from related parties are unsecured, non- interest bearing, and have no specific terms of repayment. Refer to Notes 3 and 5. NOTE 7 - COMMITMENTS AND CONTINGENCIES During the period the Company entered into a three year lease agreement on additional premises at annual rates of CDN $24,000, $25,000 and $26,000 respectively. AUDITORS' REPORT To the Board of Directors of Urbana.ca, Inc. We have audited the consolidated balance sheet of Urbana.ca, Inc. (a development stage company) as at December 31, 1999 and the consolidated statements of operations, changes in stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at December 31, 1999 and the results of its operations and the changes in stockholders' equity and cash flows for the year then ended in accordance with generally accepted accounting principles in the United States. The company's financial statements as at December 31, 1998 and for the year then ended were audited by other auditors who expressed an opinion without reservation on those statements in their report dated March 17, 1999. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants February 23, 2000, except as to Note 11 which is as of March 13, 2000 Vancouver, B.C. COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING DIFFERENCES In the United States, reporting standards for auditors' would require the addition of an explanatory paragraph following the opinion paragraph when the financial statements are affected by a significant uncertainty such as referred to in Note 1 regarding the company's ability to continue as a going concern. Our report to the directors dated February 23, 2000 is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainties in the auditors' report when the uncertainties are adequately disclosed in the financial statements. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants February 23, 2000 Vancouver, B.C Auditors' Report To the Board of Directors and Shareholders of Integrated Carbonics Corp. We have audited the balance sheets of Integrated Carbonics Corp. (a development stage company) as at December 31, 1998 and 1997 and the statements of operations, stockholders' equity and cash flows for the years then ended and for the period from February 23, 1993 (date of incorporation) to December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1998 and 1997 and the results of its operations, its cash flows and changes in shareholders' equity for the years then ended and for the period from February 23, 1993 (date of incorporation) to December 31, 1998 in accordance with generally accepted accounting principles in the United States of America. The Company's financial statements for the year ended December 31, 1996 and for the period from February 23, 1993 (date of incorporation) through December 31, 1996 were audited by other auditors whose report, dated November 19, 1997, expressed an unqualified opinion on those statements. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Chartered Accountants Vancouver, British Columbia March 17, 1999 Comments by Auditors for U.S. Readers on Canada - United States Reporting Differences In the United States, reporting standards for auditors would require the addition of an explanatory paragraph following the opinion paragraph when the financial statements are affected by a significant uncertainty such as referred to in Note 2 regarding the Corporation's ability to continue as a going concern. Our report to the shareholders dated March 17, 1999 is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainties in the auditors' report when the uncertainties are adequately disclosed in the financial statements. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Chartered Accountants Vancouver, British Columbia March 17, 199 URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) CONSOLIDATED BALANCE SHEETS December 31 December 31 1999 1998 ASSETS CURRENT ASSETS Cash $ 535 $ 713 Prepaid expenses 7,667 2,342 8,202 3,055 DUE FROM RELATED PARTIES (Note 7) 64,037 - FURNITURE AND EQUIPMENT, net of Depreciation - 4,784 INVESTMENT IN GRAPHITE PROCESSING JOINT VENTURE (Note 3) - 253,408 $ 72,239 $ 261,247 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued Liabilities $ 144,187 $ 156,360 Agreement payable (Note 4) - 130,000 Loans payable (Note 6) 60,000 - 204,187 286,360 COMMITMENTS AND CONTINGENCIES (Notes 1 and 10) STOCKHOLDERS' EQUITY (DEFICIT) Capital stock (Note 6) Authorized Common stock, $0.0001 par value, 70,000,000 shares Preferred stock, $0.001 par value, 10,000,000 shares Issued and outstanding 11,082,318 (1998 - 9,856,350) shares of common stock 11,082 9,856 Additional paid-in capital 1,132,549 673,590 Deficit accumulated during development stage (1,277,309) (708,559) Accumulated other comprehensive Income 1,730 - (131,948) (25,113) $ 72,239 $261,247 The accompanying notes are an integral part of these consolidated financial statements URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS Year ended Year ended February 23, 1993 December 31 December 31 (inception) to 1999 1998 December 31, 9999 EXPENSES Consulting $ 218,285 $ - $ 218,285 Depreciation 1,753 4,078 6,139 Engineering costs - 274,170 274,170 Interest expense - 9,549 9,636 Office and general 43,390 195,298 259,884 Professional fees 23,497 49,752 81,099 Transfer agent and filing fees 9,953 5,556 22,903 Rent 18,464 30,494 53,081 Salaries - 83,704 83,704 Write-off of interest in mineral Property - 15,000 15,000 Write-off of Graphite processing joint venture (Note 3) 253,408 - 253,408 NET LOSS FOR THE PERIOD $ 568,750 $ 667,601 $ 1,277,309 BASIC NET LOSS PER SHARE $ 0.06 $ 0.07 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,299,764 9,168,248 The accompanying notes are an integral part of these consolidated financial statements URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 23,1993 (INCEPTION) TO DECEMBER 31, 1999 Deficit Accumu Accumu lated Common Stock lated other Number Additional During Compre Of Paid In Develop hensive Shares Amount Capital ment Income Stage Total Common stock issued for cash 105,000 $ 105 $ 2,895 $ - $ - $3,000 Net loss, period ended December 31 1993 - - - (2,746) - (2,746) Balance December 31 1993 105,000 105 2,895 (2,746) - 254 Net loss year ended December 31 1994 - - - (61) - (61) Balance December 31 1994 105,000 105 2,895 (2,807) - 193 Net loss year ended December 31 1995 - - - (61) - (61) Balance December 31 1995 105,000 105 2,895 (2,868) - 132 Net loss year ended December 31 1996 - - - (861) - (861) Balance December 31 1996 105,000 105 2,895 (3,729) - (729) Issued for interest in mineral property 150,000 150 14,850 - - 15,000 Issued for Graphite Processing Joint Venture Investment (Note 3) 6,000,000 6,000 - - - 6,000 Common stock issued for cash 540,000 540 53,460 - - 54,000 Net loss year ended December 31 1997 - - - (37,229) - (37,229) Balance December 31 1997 6,795,000 6,795 71,205 (40,958) - 37,042 Common stock issued for cash 3,061,350 3,061 602,385 - - 605,446 Net loss year ended December 31 1998 - - - (667,601) - (667,601) Balance December 31 1998 9,856,350 9,856 673,590 (708,559) - (25,113) Issued for consulting services 535,000 535 172,992 - - 173,527 Shares Reacquired on cancellation of contract (360,000) (360) (133,362) - - (133,722) Issued on Settlement of debts 1,050,968 1,051 419,329 - - 420,380 Net loss year ended December 31 1999 - - - (568,750) - (568,750) Currency translation adjustment - - - - 1,730 1,730 Balance December 31 1999 11,082,318 11,082 1,132,549 (1,277,309) 1,730 (131,948) The accompanying notes are an integral part of these consolidated financial statements URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended Year ended February 23, 1993 December 31 December 31 (inception) to 1999 1998 December 31, 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $(568,750) $ (667,601) $ (1,277,309) Adjustments to reconcile net loss to net cash from operating activities: - - depreciation 1,753 4,078 6,139 - - imputed interest on long term debt - 9,000 9,000 - organization costs - - (308) - loss on disposal of furniture and equipment 2,031 1,589 3,620 - - write-off of interest in mineral property - 15,000 15,000 - write-off of investment in graphite processing joint venture 253,408 - 253,408 - - net changes in non-cash working capital 226,419 108,496 365,992 CASH USED IN OPERATING ACTIVITIES (85,139) (529,438) (624,458) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of furniture and equipment - (11,423) (11,423) Proceeds from sale of furniture and Equipment 1,000 972 1,972 Investment in graphite processing joint venture - (2,420) (37,463) Purchase of other assets - - (4,500) CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES 1,000 (12,871) (51,414) CASH FLOWS FROM FINANCING ACTIVITIES Advances from related parties 22,231 - 22,231 Payments on agreement payable - (70,000) (70,000) Loan advances 60,000 - 60,000 Issuance of common stock - 568,446 662,446 CASH FLOWS FROM FINANCING ACTIVITIES 82,231 498,446 674,677 EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,730 - 1,730 (DECREASE) INCREASE IN CASH (178) (43,863) 535 CASH, BEGINNING OF PERIOD 713 44,576 - CASH, END OF PERIOD 535 713 535 Non-cash activities: Refer to Notes 3, 4, 6 and 7. The accompanying notes are an integral part of these consolidated financial statements URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION The company was organized on February 23, 1993 under the laws of the State of Delaware as PLR, Inc. On October 3, 1997, it changed its name to Integrated Carbonics Corp. and on October 30, 1997, changed its jurisdiction of incorporation to Nevada. On April 15, 1999 a wholly-owned subsidiary company, ICC Integrated Carbonics (Canada) Corp. ("ICC"), was incorporated under the laws of British Columbia to facilitate acquisitions in Canada. The company subsequently changed its name to Urbana.ca, Inc. The company signed joint venture agreements in 1998 and 1997 for the construction and operation of two graphite processing plants in the People's Republic of China. During the fourth quarter of 1999, due to the inability of the company to raise project funding, these joint venture interests were abandoned (Refer to Note 3). Concurrently, the company entered into agreements to acquire, through ICC, 100% of the outstanding shares of Urbana.ca Enterprises Corp. ("Urbana Enterprises"), (formerly HomeNet100.com Enterprises, Inc.), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"). Each of these acquisitions was completed subsequent to year end. (Refer to Note 11) The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The company is a development stage enterprise and as such has no revenue and is incurring substantial costs in connection with pursuing business opportunities. At December 31, 1999 the company has a working capital deficiency of $195,985 and has losses of $568,750 for the year then ended. The ability of the company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to attain profitable operations. As of December 31, 1999, $60,000 has been raised through loans to the company. Subsequent to year end, the company has received additional loans totaling approximately $1,224,162. (Refer to Notes 5 and 11). NOTE 2 - SUMMARY OF SIGNIFICANT ACCONTING POLICIES Basis of Presentation These financial statements are expressed in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States. Principles of Consolidation The financial statements include the accounts of the company and its wholly-owned subsidiary ICC Integrated Carbonics (Canada) Corp. All significant intercompany balances and transactions are eliminated on consolidation. Use of Estimates and Assumptions Preparation of the company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Investment in Joint Ventures The company records its investment in joint ventures at cost until such time as the venturers contribute in full their initial capital contribution at which time they are recorded on the equity basis. The investment in joint ventures will be written down when an impairment in value has been determined and will be written off when abandoned. Foreign Currency Translation The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. Net Loss Per Common Share Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflects the potential dilution of securities that could share in the earnings of the company. Because the company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share. Stock-Based Compensation The company accounts for stock-based compensation using the intrinsic value based method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.25"). APB No. 25 requires that compensation cost be recorded for the excess, if any, of the quoted market price of the common stock over the exercise price at the date the options are granted. In addition, as required by SFAS No. 123, the company provides pro-forma disclosure of the impact of applying the fair value method of SFAS No. 123. Recent Accounting Policies. In June 1998, the FASB issued Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 establishes standards for accounting for derivative instruments. SFAS 133 is effective for fiscal years beginning after June 15, 1999. The adoption of SFAS 133 does not have a material effect on the company's financial statements. NOTE 3 - INVESTMENT IN GRAPHITE PROCESSING JOINT VENTURE Liumao Graphite Mine On October 7, 1997, the company entered into an agreement with Da- Jung Resource Corp., a company controlled by certain directors of the company, to acquire 100% of its rights and obligations pursuant to an "Agreement on Establishment of a Sino Foreign Equity Joint Venture" with Jixi Liumao Graphite Mine, of Heilongjiang Province, the People's Republic of China. Consideration for this agreement was 6,000,000 restricted shares of the company's common stock, plus $200,000 of which $70,000 has been paid and $130,000 was settled by the issuance of 325,000 restricted shares of common stock. On November 10, 1997, the company entered into a formal agreement with the Liumao Graphite Mine to form a joint venture company named ICC Liumao Graphite Products, Ltd. The purpose of the joint venture company is to establish value added graphite processing facilities at the Liumao Mine in China to produce high purity graphite, expandable graphite, graphite sheet or other graphite products. The total investment of the company in the joint venture company is stipulated as 80% of anticipated joint venture construction costs of $28 million, and the company will obtain an 80% share of the profits over a thirty year period. Further investment in the joint venture by the company is contingent on the completion of additional financing arrangements. Due to the inability of the company to raise project funding, the joint venture has been abandoned and the company has written off its investment resulting in a loss of $253,408. YiChang On September 21, 1998, the company entered into an interim agreement with YiChang Heng Da Graphite Group Company Ltd. ("YiChang") to obtain a 55% interest in a proposed joint venture between YiChang and the company. Due to the inability of the company to raise project funding, the joint venture project was abandoned without any financial loss to the company. NOTE 4 - AGREEMENT PAYABLE 1999 1998 Amount payable to Da-Jung Resource Corp. on acquisition of its interest in the graphite processing joint venture $ - $130,000 During the year this amount has been settled with the issuance of 325,000 shares of common stock of the company at a price of $0.40 per share. NOTE 5 - LOANS PAYABLE During the year the company received loans totaling $60,000. These amounts are due March 15, 2000 and bear interest at an annual rate of 8%. If the company defaults on these loans, the lender has the right to convert the amount of principal borrowed into shares of capital stock of the company at $0.50 per share subject to a 15% market price adjustment. Refer to Note 11. NOTE 6 - CAPITAL STOCK The company has given retroactive effect and restated share numbers to give effect to the following capital transactions: On March 15, 1996, the company changed its authorized common stock of 15,000 shares with $5.00 par value, to 50,000,000 common shares with par value $.001 and 10,000,000 preferred shares with a par value $.001. The company also approved a forward stock split on the basis of 3,500:1, increasing the number of outstanding shares of common stock from 600 shares to 2,100,000 shares. On January 17, 1997, the company completed a forward stock split of 5:1, increasing the number of shares of common stock outstanding from 2,100,000 shares outstanding to 10,500,000 shares outstanding. On October 31, 1997, at a special meeting of the Shareholders, the Shareholders approved a reverse stock split of 1:100 thus reducing the number of common shares outstanding from 25,500,000 shares to 255,000 shares of common stock. On October 31, 1997, the Shareholders authorized a Regulation D Rule 504 offering of a maximum of 2,300,000 units at $.10 per unit consisting of one common share and one warrant exercisable at $.33 per share for six months. Pursuant to this financing, the company issued 540,000 shares for proceeds of $54,000 during the year ended December 31, 1997 and 1,760,000 shares for proceeds of $176,000 during the year ended December 31, 1998. In addition, during the year ended December 31, 1998, 1,301,350 of the related share purchase warrants were exercised for proceeds of $429,446 and the remaining share purchase warrants expired. In January 1999, the company entered into a one-year corporate finance advisory agreement, cancellable at any time on 30 days written notice, and agreed to issue 350,000 restricted shares of common stock at predetermined dates over the course of the contract. 175,000 shares were issued at a value of $39,780 and subsequently the agreement was cancelled. Also in January 1999, the company entered into a consulting agreement and issued 360,000 restricted common shares at a value of $133,722. No services were provided under this contract and the parties subsequently agreed to terminate the agreement in August 1999 and the 360,000 shares were reacquired by the company at no cost and returned to treasury. On May 7, 1999, at the company's Annual General Meeting, the shareholders approved an increase in the number of authorized shares of common stock from 50,000,000 shares to 70,000,000 shares. During the year the following transactions were completed: The company settled debts of $86,268 to a private company of which an officer is a relative of a director of the company, and a director of Urbana Enterprises, by the issuance of 215,670 restricted shares of common stock at a price of $0.40 per share. As described in Note 4, the company settled its agreement payable by the issuance of 325,000 restricted shares of common stock at a price of $0.40 per share. The company settled certain of its trade accounts payable by the issuance of 510,305 restricted shares of common stock at a price of $0.40 per share Refer to Note 11. NOTE 7 - RELATED PARTY TRANSACTIONS As of December 31, 1998, accounts payable includes $3,929 due to certain directors of the company and companies under their control. During the year the these parties incurred $43,070 of expenses on behalf of the company and the company made net repayments of $20,109 leaving $26,890 due to these parties at December 31, 1999. During the year, net advances were made directly and indirectly on behalf of the company to Enersphere and Urbana Enterprises, two companies subsequently acquired by the company, totaling $16,266 and $114,661 respectively. (Refer to Note 11) During the year the company incurred $40,000 of consulting fees to a private company controlled by a relative of a director. In addition, the company incurred $3,335 of consulting fees to a private company of which an officer is a relative of a director of the company and this private company made advances on behalf of the company to Enersphere and Urbana Enterprises totaling $82,933. During the year $86,268 of these amounts were settled by the issuance of 215,670 restricted shares of common stock, leaving $40,000 payable at December 31, 1999 (Refer to Note 11). All amounts due to and from related parties are unsecured, non- interest bearing, and have no specific terms of repayment. NOTE 8 - STOCK BASED COMPENSATION During the year, the company cancelled its previous stock option plan and all options granted thereon. A new Stock Option Plan was adopted which will provide options to purchase up to 2,000,000 common shares of the company for its employees, officers and directors. The options that will be granted pursuant to the Stock Option Plan are exercisable at a price of $0.50 which is equal to the fair value of the common shares at the time of adoption of the plan. As at December 31, 1999, no stock-based compensation cost has been recorded for any period and no stock options have been issued under this plan. Refer to Note 11. NOTE 9 - INCOME TAXES The company has net operating loss carryforwards which result in deferred tax assets. The realization of the benefits from these deferred tax assets appears uncertain due to the company's limited operating history and continuing losses. Accordingly, no benefit has been recorded for deferred tax assets. NOTE 10 - COMMITMENTS AND CONTINGENCIES Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107. Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the company, using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents and notes and accounts payable approximate carrying value due to the short-term maturity of the instruments. Uncertainty Due to the Year 2000 Issue The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the company, including those related to customers, suppliers, or other third parties, have been fully resolved. NOTE 11 - SUBSEQUENT EVENTS Loans Payable During January and February 2000, the company received additional loans of $1,224,162 resulting in a total to date of $1,284,162. These amounts are due March 15, 2000 and bear interest at an annual rate of 8%. If the company defaults on these loans, the lender has the right to convert the amount of principal borrowed into shares of capital stock of the company at $0.50 per share subject to a 15% market price adjustment. Capital Stock The company settled $40,000 due to a relative of a director by the issuance of 100,000 restricted shares of common stock at a price of $0.40 per share. The company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares of common stock at a price of $0.30 per share relating to consulting agreements dated July 14, 1999 and July 19, 1999. The company settled $9,190 of accounts payable by the issuance of 22,975 restricted shares of common stock at a price of $0.40 per share. The company issued $50,000 restricted shares of common stock, at a price of $0.40 per share, as a retainer pursuant to a media relations contract dated December 15, 1999. Acquisitions Subsequent to year end, the company completed the following acquisitions: (a) Urbana Enterprises By agreement dated January 4, 2000, the company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of Urbana Enterprises, a company engaged in distribution of Linux based set top boxes which are used as an alternative method of delivering internet content. Urbana Enterprises was incorporated November 18, 1998 in the province of British Columbia. In consideration for the acquisition, ICC issued 3,000,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. ICC may satisfy the resulting obligation in cash or in company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. Pursuant to the terms of the agreement, the company issued 3,000,000 common shares in trust to be held under the terms of a trust agreement executed January 4, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In anticipation of this acquisition, two shareholders of Urbana Enterprises, each holding a 36.75% interest in Urbana Enterprises, became directors of the company effective July 21, 1999 and, subsequent to the acquisition, entered into five year management contracts for an aggregate of Cdn$120,000 in year 1 and for amounts to be negotiated for years 2 through 5. In addition, the company has also agreed to grant a total of 400,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. Urbana Enterprises had net losses totaling $193,171 for the period from May 1, 1999 (inception) to December 31, 1999. This business combination will be accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 17,716 Capital assets 7,387 Goodwill 1,093,102 1,118,205 Liabilities assumed at fair value: Accounts payable (87,474) Due to related parties (130,731) Purchase price 3,000,000 shares at $0.30 per share $900,000 Goodwill arising on this acquisition will be amortized on a straight-line basis over 5 years. (b) E-Bill By agreement dated January 10, 2000, the company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of E-Bill, a company engaged in designing, developing and providing electronic presentment and payment services to the business community. E-Bill was incorporated May 27, 1999 in the province of Ontario. In consideration for the acquisition, ICC issued 2,950,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. ICC may satisfy the resulting obligation in cash or in company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. Pursuant to the terms of the agreement, the company issued 2,950,000 common shares in trust to be held under the terms of a trust agreement executed January 10, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. This business combination will be accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 9 Capital assets 4,646 Goodwill 812,645 817,300 Liabilities assumed at fair value: Accounts payable (4,021) Due to related parties (16,779) Purchase price 2,950,000 shares at $0.27 per share $796,500 Goodwill arising on this acquisition will be amortized on a straight-line basis over 5 years. E-Bill had losses totaling $16,214 for the period from May 27, 1999 (inception) to December 31, 1999. Subsequent to the acquisition, the company signed three year management contracts with the two principals of E-Bill in the aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and Cdn$120,000 in year 3. In addition, the company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. (c) Enersphere By agreement dated January 9, 2000, the company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of Enersphere, a content company that utilizes set-top boxes as their medium to deliver internet and intranet-based services to customers. Enersphere was incorporated September 28, 1999 in the province of Ontario. In consideration for the acquisition, ICC paid $84,828 and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the company. ICC may satisfy the resulting obligation in cash or in company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. Pursuant to the terms of the agreement, the company issued 4,500,000 common shares in trust to be held under the terms of a trust agreement executed January 9, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. This business combination will be accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 3,540 Capital assets 10,324 Goodwill 1,729,731 1,743,595 Liabilities assumed at fair value: Accounts payable (28,995) Due to related parties (99,772) Purchase price $84,828 and 4,500,000 shares at $0.34 per share $1,614,828 Goodwill arising on this acquisition will be amortized on a straight-line basis over 5 years. Enersphere had net losses totaling $114,917 for the period from September 28, 1999 (inception) to December 31, 1999. Subsequent to the acquisition, the company signed two year management contracts with the two principals of Enersphere in the aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In addition, the company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. Financing Agreement Subsequent to December 31, 1999 the company entered into an agreement with an Agent to raise up to US$25,000,000 by a private placement offering of Special Warrants. The company will issue up to 5,555,555 Special Warrants at a price of US$4.50 per Special Warrant pursuant to a best efforts offering by the Agent. A cash commission of 8% of the capital raised by the Special Warrants is payable along with Compensation Options equal to 10% of the units issued. Each Special Warrant will entitle the holder to receive, for no additional consideration, one common share of the company and one half of one Common Share Purchase Warrant. Each whole Common Share Purchase Warrant will entitle the holder to purchase one common share at a price of US$10.00 for a period of 24 months from the date of closing of the offer which would result in further funding of US$27,777,777 if all the Common Share Purchase Warrants were exercised. Closing of the financing is to be April 26, 2000 or such other date as agreed by the company and the Agent. Amalgamation Effective March 10, 2000, Urbana Enterprises, Enersphere and E-Bill were amalgamated under the statutory laws of the Province of Ontario into a new company named Urbana Enterprises Corp. Name change Effective February 22, 2000, ICC changed its name to U.R.B.A. Holdings Inc. Proforma Consolidated Financial Information The following pro-forma consolidated financial information, consisting of the pro-forma consolidated balance sheet as at December 31, 1999, has been prepared to illustrate the estimated effect of ICC's acquisitions of Urbana Enterprises, Enersphere and E-Bill, as described in note 11, as if they had occurred on December 31, 1999. The pro-forma consolidated balance sheet presents the effect on the consolidated balance sheet of the company based on the following pro-forma adjustments: The acquisition of Urbana Enterprises as described in Note 11 and the allocation of the purchase price thereon. The acquisition of Enersphere as described in Note 11 and the allocation of the purchase price thereon. The acquisition of E-Bill as described in Note 11 and the allocation of the purchase price thereon. The reallocation and elimination of certain intercompany balances. COMPILATION REPORT To the Board of Directors of Urbana.ca, Inc. We have reviewed, as to compilation only, the accompanying pro- forma balance sheets of Urbana.ca, Inc. (a development stage company) as at December 31, September 30 and June 30, 1999 and the pro-forma consolidated statements of loss and deficit for the year ended December 31, 1999, the nine months ended September 30, 1999 and the six months ended June 30, 1999. In our opinion, these pro- forma consolidated financial statements have been properly compiled to give effect to the transactions and assumptions described in the notes thereto. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants April 21, 2000 Vancouver, B.C. URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A Development Stage Company) PRO FORMA CONSOLIDATED BALANCE SHEET Pro-Forma Adjustments Pro Forma Consoli Urbana dated Urbana.ca Enter- Enersphere E-Bill Urbana.ca, Inc. prises Inc. (1) (2) (3) (4) ASSETS CURRENT ASSETS 8,202 17,716 3,540 9 29,467 DUE FROM RELATED PARTIES 64,037 - - - (64,037) - FURNITURE AND EQUIPMENT net of depreciation - 7,387 10,324 4,646 - 22,357 GOODWILL - 1,093,102 1,729,731 812,645 - 3,635,478 72,239 1,118,205 1,743,595 817,300 (64,037) 3,687,302 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES 204,187 87,474 28,995 4,021 - 324,677 DUE TO RELATED PARTIES - 130,731 184,600 16,779 (64,037) 268,073 STOCKHOLDERS' EQUITY (DEFICIT) Common stock 11,082 - - - - 11,082 Additional paid In Capital 1,132,549 - - - - 1,132,549 Exchangeable Shares - 900,000 1,530,000 796,500 - 3,226,500 Deficit Accumulated during development stage (1,277,309) - - - - (1,277,309) Accumulated other comprehensive income 1,730 - - - - 1,730 (131,948) 900,000 1,530,000 796,500 - 3,094,552 72,239 1,118,205 1,743,595 817,300 (64,037) 3,687,302 URBANA.CA, INC. (Formerly Integrated Carbonics Corp.) (A development stage company) NOTES AND ASSUMPTIONS TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, SEPTEMBER 30 AND JUNE 30, 1999 (Unaudited - See Compilation Report) NOTE 1 - BASIS OF PRESENTATION In January 2000, the Company's wholly-owned subsidiary, ICC Integrated Carbonics (Canada) Corp. ("ICC"), acquired 100% of the outstanding shares of Urbana.ca Enterprises Corp. ("Urbana Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"). In consideration for these acquisitions, ICC issued exchangeable shares which are exchangeable on a 1 for 1 basis for shares of the Company. The pro-forma consolidated financial statements have been prepared to reflect the financial position of the Company as at December 31, September 30 and June 30, 1999 and the results of its operations for the year ended December 31, the nine months ended September 30 and the six months ended June 30, 1999 assuming the acquisitions of Urbana Enterprises, E-Bill and. Enersphere had occurred on the date of incorporation for E-Bill and Enersphere and the date of commencement of operations for Urbana Enterprises. The goodwill resulting from these acquisitions has been amortized from the assumed date of acquisition. (Refer to Note 3) The pro-forma consolidated financial statements are based on the audited financial statements of the Company, Urbana Enterprises, E- Bill and Enersphere as at December 31, 1999 and the unaudited financial statements of the Company, Urbana Enterprises, E-Bill and Enersphere as at September 30 and June 30, 1999. These consolidated pro-forma financial statements should be read in conjunction with Company's December 31, 1999 audited consolidated financial statements. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These pro-forma financial statements are expressed in US dollars. Principles of Consolidation These pro-forma financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated on consolidation. Goodwill The company amortizes goodwill on a straight-line basis over five years. NOTE 3 - ACQUISITIONS Urbana Enterprises By agreement dated January 4, 2000, the Company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of Urbana Enterprises, a company engaged in distribution of Linux based set top boxes which are used as an alternative method of delivering internet content. Urbana Enterprises was incorporated November 18, 1998 in the Province of British Columbia, Canada. For purposes of these pro-forma consolidated financial statements, it is assumed that this acquisition took place on May 1, 1999, the date of commencement of operations of Urbana Enterprises. In consideration for the acquisition, ICC issued 3,000,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. ICC may satisfy the resulting obligation in cash or in Company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows as at the actual and assumed acquisition dates: January 4 May 1, 1999 2000 (Actual) (Pro-Forma) Assets acquired at fair value: Current assets $ 17,716 $ 68 Capital assets 7,387 - Goodwill 1,093,102 899,932 1,118,205 900,000 Liabilities assumed at fair value: Accounts payable (87,474) - Due to related parties (130,731) - Purchase price 3,000,000 shares at $0.30 per share $ 900,000 $ 900,000 E-Bill By agreement dated January 10, 2000, the Company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of E-Bill, a company engaged in designing, developing and providing electronic presentment and payment services to the business community. E-Bill was incorporated May 27, 1999 in the Province of Ontario, Canada. For purposes of these pro-forma consolidated financial statements, it is assumed that this acquisition took place on the date of incorporation of E-Bill. In consideration for the acquisition, ICC issued 2,950,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. ICC may satisfy the resulting obligation in cash or in Company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows as at the actual and assumed acquisition dates: January 4 May 1, 1999 2000 (Actual) (Pro-Forma) Assets acquired at fair value: Current assets $ 9 $ 69 Capital assets 4,646 - Goodwill 812,645 796,431 817,300 796,500 Liabilities assumed at fair value: Accounts payable (4,021) - Due to related parties (16,779) - Purchase price 2,950,000 shares at $0.27 per share 796,500 796,500 Enersphere By agreement dated January 9, 2000, the Company's wholly-owned subsidiary ICC, acquired 100% of the outstanding shares of Enersphere, a content company that utilizes set-top boxes as their medium to deliver internet and intranet-based services to customers. Enersphere was incorporated September 28, 1999 in the Province of Ontario, Canada. For purposes of these pro-forma consolidated financial statements, it is assumed that this acquisition took place on the date of incorporation of Enersphere. In consideration for the acquisition, ICC paid $84,828 and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of ICC held. A holder of an exchangeable share may, at any time, require ICC to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. ICC may satisfy the resulting obligation in cash or in Company shares at its option. Any exchangeable share not exchanged within 25 years is to be cancelled. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows as at the actual and assumed acquisition dates: January 4 Sept 28, 1999 2000 (Actual) (Pro-Forma) Assets acquired at fair value: Current assets $ 3,540 $ 13 Capital assets 10,324 - Goodwill 1,729,731 1,614,815 1,743,595 1,614,828 Liabilities assumed at fair value: Accounts payable (28,995) - Due to related parties (99,772) - Purchase price $84,828 and 4,500,000 shares at $0.34 per share 1,614,828 1,614,828 NOTE 4 - GOODWILL Goodwill and amortization resulting from each acquisition has been recorded for the periods ended December 31, September 30 and June 30, 1999 as follows: December September June 30 31 1999 30 1999 1999 Goodwill on acquisition $3,311,178 $3,311,178 $1,696,363 Amortization (293,652) (128,091) (43,272) Goodwill, net of Amortization $3,017,526 $3,183,087 $1,653,091 NOTE 5 - PRO-FORMA ADJUSTMENTS The pro-forma consolidated financial statements reflect the following pro-forma adjustments to the financial statements of the Company, Urbana Enterprises, E-Bill and Enersphere as at December 31, 1999 September 30, 1999 and June 30, 1999: (1) Record the acquisitions of Urbana Enterprises, E-Bill, and Enersphere, and the issuance of exchangeable shares of ICC as described in Note 3. (2) Record goodwill on acquisitions, elimination of capital stock of subsidiaries, and Elimination of the Company's Investment in Subsidiaries of $3,311,328 at December 31, 1999 and September 30, 1999 and $1,696,500 at June 30, 1999 and allocation of the purchase price as described in Note 3. (3) Record amortization of Goodwill as described in Note 4. (4) Record the write-off of the Investment in Graphite Joint Venture upon acquisition of Urbana Enterprises and change in business. AUDITORS' REPORT To the Directors of Urbana.ca Enterprises Corp. We have audited the balance sheet of Urbana.ca Enterprises Corp. as at January 3, 2000 and the statements of loss and deficit, and cash flows for the initial period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at January 3, 2000 and the results of its operations and its cash flows for the initial period then ended in accordance with generally accepted accounting principles. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants March 31, 2000 Vancouver, B.C. URBANA.CA ENTERPRISES CORP. BALANCE SHEET January 3 2000 ASSETS CURRENT Cash $ 11,871 Accounts receivable 11,949 Other assets 1,750 25,570 CAPITAL ASSETS, net of amortization 10,662 $ 36,232 LIABILITIES CURRENT Accounts payable and accrued liabilities $ 21,187 Due to related parties (Note 4) 293,749 314,936 CAPITAL DEFICIENCY SHARE CAPITAL (Note 3) 100 DEFICIT (278,804) (278,704) $ 36,262 The accompanying notes are an integral part of these financial statements URBANA.CA ENTERPRISES CORP. STATEMENT OF LOSS AND DEFICIT May 1, 1999 (inception) to January 3, 2000 EXPENSES Amortization $ 2,204 Consulting and management fees 181,853 Office and general 85,313 Professional fees 5,684 Rent 3,750 NET LOSS FOR THE PERIOD 278,804 DEFICIT, BEGINNING OF PERIOD - DEFICIT, END OF PERIOD $ 278,804 The accompanying notes are an integral part of these financial statements URBANA.CA ENTERPRISES CORP. STATEMENT OF CASH FLOWS May 1, 1999 (inception) to January 3, 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (278,804) Adjusted for item not involving cash: - - amortization 2,204 (276,600) Net changes in non-cash working capital items 7,488 Cash flows used in operating activities (269,112) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of capital assets (12,866) Cash flows used in investing activities (12,866) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares 100 Advances from related parties 293,749 Cash flows from financing activities 293,849 INCREASE IN CASH 11,871 CASH, BEGINNING OF PERIOD - CASH, END OF PERIOD 11,871 The accompanying notes are an integral part of these financial statements URBANA.CA ENTERPRISES CORP. NOTES TO FINANCIAL STATEMENT JANUARY 3, 2000 NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS The Company was incorporated November 18, 1998 in the Province of British Columbia. Effective July 26, 1999 the Company changed its name from Home.net100.com Enterprises, Inc. to Urbana.ca Enterprises Corp. The Company is engaged in distribution of Linux based set-top boxes which are used as an alternative method of delivering internet content and commenced operations May 1, 1999. These financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has losses for the initial period ended January 3, 2000 which were financed primarily by advances from related parties. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to obtain profitable operations. Effective January 4, 2000, 100% of the outstanding shares of the Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British Columbia company which is a wholly-owned subsidiary of Urbana.ca, Inc., a publicly traded Nevada company listed on the OTC Bulletin Board which has raised funding to finance the development of the Company's business. In addition, effective March 10, 2000, the Company was amalgamated with E-Bill Direct Inc., a private Ontario company and Enersphere.com, Inc., a private Ontario company, both of which were also acquired by URBA. The companies were amalgamated into a new company named Urbana Enterprises Corp. under the statutory laws of the Province of Ontario. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are expressed in Canadian dollars and have been prepared in accordance with accounting principles generally accepted in Canada. Capital Assets Capital assets are recorded at cost and are amortized over their estimated useful lives at the following rates: Computer hardware - straight-line basis over two years; Office furniture - straight- line basis over five years; Computer software - straight-line basis over one year. Foreign Currency Translation The financial statements are presented in Canadian dollars. Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary items are translated at historical exchange rates, except for items carried at market value, which are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the period. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Financial Instruments The fair value of the Company's current assets and current liabilities were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. NOTE 3 - SHARE CAPITAL Authorized: 100,000,000 Common Shares, no par value Shares Value Issued and outstanding: Common Shares 10,000,000 $ 100 NOTE 4 - RELATED PARTY TRANSACTIONS During the period the Company incurred $152,824 in consulting and management fees to two directors of the Company. In addition, $56,772 was paid by these directors and a relative of a director on behalf of the Company for general and administrative expenses. A total of $105,064 of these amounts are unpaid as of the end of the period. The Company received net advances totaling $111,905 from Urbana.ca, Inc., U.R.B.A. Holdings Inc. and Enersphere.com, Inc. and $76,780 from a private company controlled by a relative of a director. All amounts are unsecured, non-interest bearing and have no specified terms of repayment. NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the Company have been fully resolved. AUDITORS' REPORT To the Directors of E-Bill Direct Inc. We have audited the balance sheet of E-Bill Direct Inc. as at January 9, 2000 and the statements of loss and deficit, and cash flows for the initial period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at January 9, 2000 and the results of its operations and its cash flows for the initial period then ended in accordance with generally accepted accounting principles. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants March 31, 2000 Vancouver, B.C. E-BILL DIRECT INC. BALANCE SHEET January 9, 2000 ASSETS CURRENT Accounts receivable $ 13 CAPITAL ASSETS, net of amortization 6,705 $ 6,718 LIABILITIES CURRENT Accounts payable and accrued liabilities $ 5,803 Due to related parties (Note 4) 24,217 30,020 CAPITAL DEFICIENCY SHARE CAPITAL (Note 3) 100 DEFICIT (23,402) (23,302) $ 6,718 The accompanying notes are an integral part of these financial statements E-BILL DIRECT INC. STATEMENT OF LOSS AND DEFICIT May 27, 1999 (inception) to January 9, 2000 EXPENSES Amortization $ 1,145 Office and general 16,617 Professional fees 5,640 NET LOSS FOR THE PERIOD 23,402 DEFICIT, BEGINNING OF PERIOD - DEFICIT, END OF PERIOD $ 23,402 The accompanying notes are an integral part of these financial statements E-BILL DIRECT INC. STATEMENT OF CASH FLOWS May 27, 1999 (inception) to January 9, 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (23,402) Adjusted for item not involving cash: - - amortization 1,145 (22,257) Net changes in non-cash working capital items 5,790 Cash flows used in operating activities (16,467) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of capital assets (7,850) Cash flows used in investing activities (7,850) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares 100 Advances from shareholders 24,217 Cash flows from financing activities 24,317 INCREASE IN CASH - CASH, BEGINNING OF PERIOD - CASH, END OF PERIOD - The accompanying notes are an integral part of these financial statements E-BILL DIRECT INC. NOTES TO FINANCIAL STATEMENTS JANUARY 9, 2000 NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS The Company was incorporated May 27, 1999 in the Province of Ontario and is engaged in designing, developing and providing electronic presentment services to the business community. These financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has losses for the initial period ended January 9, 2000 which were financed primarily by advances from related parties. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to obtain profitable operations. Effective January 10, 2000, 100% of the outstanding shares of the Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British Columbia company which is a wholly-owned subsidiary of Urbana.ca, Inc., a publicly traded Nevada company listed on the OTC Bulletin Board which has raised funding to finance the development of the Company's business. In addition, effective March 10, 2000, the Company was amalgamated with Urbana.ca Enterprises Corp., a private British Columbia company and Enersphere.com, Inc., a private Ontario company, both of which were also acquired by URBA. The companies were amalgamated into a new company named Urbana Enterprises Corp. under the statutory laws of the Province of Ontario. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are expressed in Canadian dollars and have been prepared in accordance with accounting principles generally accepted in Canada. Capital Assets Capital assets are recorded at cost and are amortized over their estimated useful lives at the following rates: Computer software - straight-line basis over three years. Foreign Currency Translation The financial statements are presented in Canadian dollars. Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary items are translated at historical exchange rates, except for items carried at market value, which are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the period. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Financial Instruments The fair value of the Company's current assets and current liabilities were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. NOTE 3 - SHARE CAPITAL Authorized: Unlimited Common Shares, no par value Unlimited Class "A" Preference shares, no par value Shares Value Issued and outstanding: Common Shares 2,950,000 $ 100 NOTE 4 - RELATED PARTY TRANSACTIONS During the period $16,467 of expenses were incurred by a director on behalf of the Company and a total of $7,850 of computer software was acquired from another director of the Company. Amounts due to related parties are unsecured, non-interest bearing and have no specified terms of repayment. NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the Company have been fully resolved. AUDITORS' REPORT To the Directors of Enersphere.com, Inc. We have audited the balance sheet of Enersphere.com, Inc. as at January 8, 2000 and the statements of loss and deficit, and cash flows for the initial period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at January 8, 2000 and the results of its operations and its cash flows for the initial period then ended in accordance with generally accepted accounting principles. /s/ La Bonte & Co. LaBonte & Co. Chartered Accountants March 31, 2000 Vancouver, B.C. ENERSPHERE.COM, INC. BALANCE SHEET January 8, 2000 ASSETS CURRENT Cash $ 1,445 Accounts receivable 3,664 5,109 CAPITAL ASSETS, net of amortization 14,900 $ 20,009 LIABILITIES CURRENT Accounts payable and accrued liabilities $ 41,848 Due to related parties (Note 4) 144,000 185,848 CAPITAL DEFICIENCY SHARE CAPITAL (Note 3) 20 DEFICIT (165,859) (165,839) $ 20,009 The accompanying notes are an integral part of these financial Statements. ENERSPHERE.COM, INC. STATEMENT OF LOSS AND DEFICIT September 28, 1999 (inception) to January 8, 2000 EXPENSES Amortization $ 3,003 Consulting and management fees 18,613 Office and general 146 Research and development 144,097 NET LOSS FOR THE PERIOD 165,859 DEFICIT, BEGINNING OF PERIOD - DEFICIT, END OF PERIOD $ 165,859 The accompanying notes are an integral part of these financial statements ENERSPHERE.COM, INC. STATEMENT OF CASH FLOWS September 28, 1999 (inception) to January 8, 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the year $ (165,859) Adjusted for items not involving cash: - - amortization 3,003 - - research and development 94,097 (68,759) Net changes in non-cash working capital items 38,184 Cash flows used in operating activities (30,575) CASH FLOWS FROM FINANCING ACTIVITIES Advances from related parties 32,000 Proceeds from issuance of shares 20 Cash flows from financing activities 32,020 INCREASE IN CASH 1,445 CASH, BEGINNING OF YEAR - CASH, END OF YEAR 1,445 The accompanying notes are an integral part of these financial statements ENERSPHERE.COM, INC. NOTES TO FINANCIAL STATEMENTS JANUARY 8, 2000 NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS The Company was incorporated September 28, 1999 in the Province of Ontario and is a content company that utilizes set-top boxes as their medium to deliver internet and intranet-based services to customers. These financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has losses for the initial period ended January 8, 2000 which were financed primarily by advances from related parties. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to obtain profitable operations. Effective January 9, 2000, 100% of the outstanding shares of the Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British Columbia company which is a wholly-owned subsidiary of Urbana.ca, Inc., a publicly traded Nevada company listed on the OTC Bulletin Board which has raised funding to finance the development of the Company's business. In addition, effective March 10, 2000, the Company was amalgamated with Urbana.ca Enterprises Corp., a private British Columbia company and E-Bill Direct Inc., a private Ontario company, both of which were also acquired by URBA. The companies were amalgamated into a new company named Urbana Enterprises Corp. under the statutory laws of the Province of Ontario. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are expressed in Canadian dollars and have been prepared in accordance with accounting principles generally accepted in Canada. Capital Assets Capital assets are recorded at cost and are amortized over their estimated useful lives at the following rates: Computer hardware - straight-line basis over two years. Research and development costs Ongoing research and development costs are expensed as incurred. Foreign Currency Translation The financial statements are presented in Canadian dollars. Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary items are translated at historical exchange rates, except for items carried at market value, which are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the period. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Financial Instruments The fair value of the Company's current assets and current liabilities were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. NOTE 3 - SHARE CAPITAL Authorized: Unlimited Common Shares, no par value Shares Value Issued and outstanding: Common Shares 2,123,000 $ 20 NOTE 4 - RELATED PARTY TRANSACTIONS During the period the Company acquired form shareholders computer equipment for $17,903 and intellectual property rights for $94,097 representing reimbursement of research and development costs incurred. At January 8, 2000 these amounts were outstanding and payable to the shareholders. During the period $12,000 of advances were made to the Company and $20,000 of accounts payable was paid on behalf of the Company by Urbana.ca Enterprises Corp. A total of $8,833 of management fees were paid to directors of the Company. Amounts due to related parties are unsecured, non-interest bearing and have no specified terms of repayment. NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the Company have been fully resolved. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE (a) Effective on March 31, 1999, the independent accountants who were previously engaged as the principal accountants to audit the company's financial statements, Deloitte & Touche LLP, resigned. The accountants' reports on the financial statements for the fiscal years ended December 31, 1997 and December 31, 1998 neither contained an adverse opinion or a disclaimer of opinion, nor was qualified or modified as to uncertainty, audit scope, or accounting principles, except that these reports were modified as to uncertainty that the company will continue as a going concern. The decision to change accountants was approved by the board of directors. (b) Effective on January 26, 2000, the independent accountant who was previously engaged as the principal accountant to audit the company's financial statements, Kurt D. Saliger, C.P.A., resigned. This accountant did not issue any financial statements for the company. The decision to change the accountant was approved by the Board of Directors. During the company's two most recent fiscal years and any subsequent interim period preceding such resignation, there were no disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In addition, there were no "reportable events" as described in Item 304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred within the company's two most recent fiscal years and the subsequent interim period preceding the former accountants' dismissal. (c) Effective on January 27, 2000, the firm of LaBonte & Co. was engaged to serve as the new principal accountants to audit the company's financial statements. The decision to retain the new firm was approved by the board of directors. During the company's two most recent fiscal years, and the subsequent interim period prior to engaging those accountants, neither the company (nor someone on its behalf) consulted the newly engaged accountants regarding any matter. AVAILABLE INFORMATION The company has filed with the U.S. Securities and Exchange Commission, Washington, D.C. 20549, a Registration Statement on Form SB-2 under the Securities Act of 1933 with respect to the shares of common stock offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed with the registration statement. Certain items are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the company and the common stock offered by this prospectus, reference is made to the registration statement and the exhibits and schedules filed with the registration statement. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. A copy of the registration statement, and the exhibits and schedules filed with it, may be inspected without charge at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's regional offices located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048, and copies of all or any part of the registration statement may be obtained from such offices upon the payment of the fees prescribed by the Commission. The public may obtain information on the operation of the public reference room by calling the Commission at 1 (800) SEC-0330. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including the company. The address of the site is http://www.sec.gov. The registration statement, including all its exhibits and any amendments, has been filed electronically with the Commission. PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS Information on this item is set forth in the propsectus under the heading "Disclosure of Commission Position on Indemnification for Securities Act Liabilities." ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered hereunder, all of which are being paid by the Company: Securities and Exchange Commission registration fee $ 8,546 Transfer agent's fees 1,000 Printing and engraving expenses 1,000 Legal fees and expenses 25,000 Accounting fees and expenses 5,000 State blue sky fees 5,000 Total $ 45,546* * All fees, except the Securities and Exchange Commission registration fee, are estimated. ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES Other than as set forth below, during the last three years there have not been any sales of unregistered securities of the company. Except as noted below, no commissions or fees were paid in connection with these sales. Except as noted below, all of the these sales were undertaken pursuant to the limited offering exemption from registration under the Securities Act of 1933 as provided in Regulation D as promulgated by the U.S. Securities and Exchange Commission. In addition, all the sales were made to the following class of persons: sophisticated investors; that is, investor either alone or with their purchaser representative(s) have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any sale that such purchasers comes within this description. Fiscal Year 1997. On October 7, 1997, the company entered into an agreement with Da-Jung Resource Corp. to acquire 100% of its interest under an agreement on establishment of a Sino foreign equity joint venture, China-Canada Liumao Graphite Products Co., Ltd., dated September 7, 2000. Consideration for this acquisition agreement was 6,000,000 restricted shares of the company's common stock, plus $200,000 of which $70,000 has been paid and $130,000 was settled by the issuance of 325,000 restricted shares of common stock (in 1999). On October 31, 1997, the shareholders authorized a Regulation D Rule 504 offering of a maximum of 2,300,000 units at $.10 per unit consisting of one common share and one warrant exercisable at $.33 per share for six months. Pursuant to this financing, the company issued 540,000 shares for proceeds of $54,000 between October 31, 1997 and December 31, 1997. Fiscal Year 1998. As a continuation of the offering commenced in 1997, the company issued 1,760,000 shares at $0.10 per share at varying times throughout 1998 for proceeds of $176,000. In addition, at varying times during the year ended December 31, 1998, 1,301,350 of the related share purchase warrants were exercised for proceeds of $429,446 and the remaining share purchase warrants expired. Fiscal Year 1999. During the fiscal year ended December 31, 1999 the following transactions were completed: In January 1999, the company entered into a one-year corporate finance advisory agreement, cancelable at any time on 30 days written notice, and agreed to issue 350,000 restricted shares of common stock at predetermined dates over the course of the contract. 175,000 shares were issued at a value of $39,780 and subsequently the agreement was cancelled. Also in January 1999, the company entered into a consulting agreement and issued 360,000 restricted common shares at a value of $133,722. No services were provided under this contract and the parties subsequently agreed to terminate the agreement in August 1999 and the 360,000 shares were reacquired by the company at no cost and returned to treasury. The company settled debts of $86,268 to Hound Pound Equities Inc., a private company, by the issuance of 215,670 restricted shares of common stock at a price of $0.40 per share. The company settled its amount payable of $130,000 to Da-Jung Resources, a major shareholder in the company, on acquisition of its interest in a graphite processing joint venture by the issuance of 325,000 restricted shares of common stock at a price of $0.40 per share. The company also settled its trade payables of $204,122 by the issuance of restricted shares at $0.40 per share for 510,305 shares. Quarter Ended March 31, 2000. During the quarter ended March 31, 2000, the company settled debts of $40,000 due to a relative of a director of the company by the issuance of 100,000 restricted shares at $0.40 per share. The company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares at $0.30 per share and $9,190 of accounts payable by the issuance of 22,975 restricted shares at $0.40 per share. The company issued 50,000 restricted shares at $0.40 per share as a retainer on a media relations contract. As consideration for the acquisition of the three subsidiaries during the quarter, URBA Holdings Inc. issued a total of 10,450,000 exchangeable shares. During fiscal year ended December 31, 1999, the company received loans totaling $60,000. For the quarter ended March 31, 2000, the company received additional loans of $1,224,162, for total loans of $1,284,162. These loans bear interest at an annual rate of 8% and were due and payable on March 15, 2000. The company did not repay these loans and as a result has offered the lenders the right to convert the principal into units of the company at a price of $0.57 per unit. Each unit is comprised of one common share of the company and one-half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional share at a price of $5.00 per share. This offer is to be made by way of a prospectus that is being conducted in Ontario, Quebec and British Columbia in Canada. Quarter Ended June 30, 2000. The company entered into an agency agreement effective April 10, 2000 with Groome Capital.com Inc. whereby the company and Groome engaged in a best efforts offering of up to 20,000,000 special warrants at a price of $1.25 per special warrant. Each special warrant is convertible into one common share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. Groome received an Agent's Fee equal to 8% of the total amount raised (reduced to 4% for investors on the President's List). In addition, Groome has been granted non-assignable warrants to acquire, without payment of additional consideration, 1 year Compensation Options providing the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of Special Warrants sold under this offering. This offering, which has been closed as of May 11, 2000, resulted in total subscriptions for 847,989 units with total proceeds of $1,059,986 from a total of nine investors in Canada; these transactions were exempt from the registration requirements under the Securities Act of 1933 based on Regulation S. A similar offering under Rule 506 of Regulation D was undertaken in the United States, but no sales resulted from that offering. These offerings were made only to sophisticated investors; that is, the investor either alone or with his purchaser representative(s) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any sale that such purchaser comes within this description ITEM 27. EXHIBITS The Exhibits required by Item 601 of Regulation S-B, and an index thereto, are attached. ITEM 28. UNDERTAKINGS The undersigned company hereby undertakes to: (a) (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and Notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation From the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (d) Provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorize, in the City of Cambridge, Province of Ontario, Canada, on December 11, 2000. Urbana.ca, Inc. By: /s/ David M. Groves David M. Groves, President Special Power of Attorney The undersigned constitute and appoint David M. Groves their true and lawful attorney-in-fact and agent with full power of substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments, including post- effective amendments, to this Form SB-2 registration statement, and to file the same with all exhibits thereto, and all documents in connection therewith, with the U.S. Securities and Exchange Commission, granting such attorney-in-fact the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated: /s/ David M. Groves David M. Groves President/Chief Executive Officer/Director December 11, 2000 /s/ Greg Alexanian Greg Alexanian Vice President/Chief Operating Officer/Director December 11, 2000 /s/ Robert S. Tyson Robert S. Tyson Vice President/Secretary/Director December 11, 2000 /s/ Rick Whittaker Rick Whittaker Vice President, Business Development/Director December 11, 2000 EXHIBIT INDEX Number Exhibit Description 2.1 Articles of Merger and Merger Agreement of Foreign Corporation into Integrated Carbonics Corp. (incorporated by reference to Exhibit 2 to the Registration Statement on Form 10- SB/A filed on December 17, 1998). 2.2 Amalgamation Agreement between Urbana.ca Enterprises Corp., Enersphere.com, Inc., and E-Bill Direct Inc., dated March 3, 2000 (incorporated by reference to Exhibit 2.2 of the Form 10- QSB filed on May 17, 2000). 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form 10-SB/A filed on December 17, 1998. 3.2 Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.2 of the Form 10-QSB filed on November 15, 1999). 3.3 Certificate of Amendment of Articles of Incorporation (see below). 3.4 Certificate of Amendment of Articles of Incorporation (see below). 3.5 Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form 10-SB/A filed on December 17, 1999). 4.1 Integrated Carbonics Corp. 1999 Stock Option Plan (incorporated by reference to Exhibit 4 to the Form 10-QSB filed on November 15, 1999). 4.2 Form of Private Placement Subscription Agreement between the company and investors (see below). 4.3 Form of Unit Warrants to Subscribe for Common Shares issued by the company to investors on April 27, 2000 (see below). 4.4 Form of Non-Assignable Agent's Compensation Options to Acquire Units, issued by the company to Groome Capital.com, Inc. on April 27, 2000 (see below). 4.5 Form of Non-Assignable Agent's Warrants to Acquire Common Shares, issued by the company to Groome Capital.com, Inc. on April 27, 2000 (see below). 4.6 Non-Assignable Agent's Warrants to Acquire Compensation Options, issued by the company to Groome Capital, Inc. on April 27, 2000 (see below). 4.7 Form of Unit Warrants to Subscribe for Common Shares to be issued by the company to holders of converted loans (see below). 4.8 Form of Common Stock Purchase Warrant to be issued by the company to Ladenburg Thalmann & Co. Inc. (see below). 5 Opinion Re: Legality (see below). 10.1 Agreement on Establishment of Sino Equity Joint Venture, China-Canada Liumao Graphite Products Co. Ltd., dated September 9, 1997 (incorporated by reference to Exhibit 10.3 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.2 Cooperative Joint Venture Agreement between Da-Jung Resource Corp. and Heilongjiang Geological and Mining Technology Development Corp., dated September 9, 1997 (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.3 Agreement between PLR, Inc. and Da-Jung Resource Corp., dated September 22, 1997 and PLR, Inc. (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.4 Agreement between Integrated Carbonics Corp. and Da-Jung Resource Corp., dated October 7, 1997 (incorporated by reference to Exhibit 10.2 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.5 Equity Joint Venture Agreement between Integrated Carbonics Corp. and Liumao Graphite Mine, dated November 10, 1997 (incorporated by reference to Exhibit 10.4 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.6 Share Exchange and Share Purchase Agreement between the company, ICC Integrated Carbonics (Canada) Corp., and Enersphere.com, Inc., dated December 1, 1999 (incorporated by reference to Exhibit 10.6 of the Form 10-QSB filed on May 17, 2000). 10.7 Share Exchange and Share Purchase Agreement between the company, ICC Integrated Carbonics (Canada) Corp., and Urbana.ca Enterprises Corp., dated January 4, 2000 (incorporated by reference to Exhibit 10.7 of the Form 10-QSB filed on May 17, 2000). 10.8 Management Contract between the company and Jason Cassis, dated January 4, 2000 (see below). 10.9 Share Exchange and Share Purchase Agreement between the company, ICC Integrated Carbonics (Canada) Corp., and E-Bill Direct, Inc., dated January 10, 2000 (incorporated by reference to Exhibit 10.8 of the Form 10-QSB filed on May 17, 2000). 10.10 License Agreement between the company, Eagle Wireless International, Inc., and USA Video Interactive Corp., dated January 13, 2000 (see below). 10.11 Exclusivity Agreement between Urbana.ca Enterprises Corp. and Eagle Wireless International, Inc., dated January 17, 2000 (incorporated by reference to Exhibit 10.9 of the Form 10- QSB filed on May 17, 2000). 10.12 Agency Agreement between the company and Groome Capital.com, Inc., dated April 10, 2000 (see below). 10.13 Administration and Services Agreement between the company, Groome Capital.com, Inc., and InvestIn.com Securities Corp., dated April 10, 2000 (see below). 10.14 Special Warrant Agreement between the company and Pacific Corporate Trust Company, dated April 27, 2000 (see below). 10.15 Share Purchase Warrant Agreement between the company and Pacific Corporate Trust Company, dated April 27, 2000 (see below). 10.16 Escrow Agreement between the company, Groome Capital.com, Inc., and Pacific Corporate Trust Company, dated April 27, 2000 (see below). 10.17 Letter Agreement between the company and Ladenburg Thalmann & Co. Inc., dated June 15, 2000 (see below). 10.18 Letter of Intent between the company and World Sales and Marketing, Inc., dated September 8, 2000 (incorporated by reference to Exhibit 10.18 of the Form 10-QSB filed on November 14, 2000). 16.1 Letter on change in certifying accountant (incorporated by reference to Exhibit 16 of the Form 8-K/A filed on October 25, 2000. 16.2 Letter on change in certifying accountant (incorporated by reference to Exhibit 16 of the Form 8-K filed on October 26, 2000). 21 Subsidiaries of the company (incorporated by reference to Exhibit 21 of the Form 10-KSB filed on March 31, 2000). 23.1 Consent of Accountants (see below). 23.2 Consent of Accountants (see below). 23.3 Consent of Counsel (see below). 27 Financial Data Schedule (see below). EX-3.3 2 0002.txt CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION (After Issuance of Stock) URBANA.CA, INC. We the undersigned DAVID M. GROVES and ROBERT S. TYSON OF URBANA.CA, INC. do hereby certify: That the Board of Directors of said corporation as a meeting duly convened, held on the 7th day of June, 1999, adopted a resolution to amend the original articles as follows: Article 4(1) is hereby amended to read as follows: Fourth: Capital Stock 1. Classes and Number of Shares: The total number of shares of all classes of stock which the corporation shall have the authority to issue is Eighty Million (80,000,000), consisting of Seventy Million (70,000,000) shares of Common Stock, par value $0.001 (the "Common Stock") and Ten Million (10,000,000) shares of Preferred Stock, which has a par value of $0.001 (the "Preferred Stock"). The number of shares of the corporation outstanding and entitled to vote on this amendment to the Articles of Incorporation is 10,366,350, that said change(s) and amendment have been consented to and approved by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. /s/ David M. Groves DAVID M. GROVES, President /s/ Robert S. Tyson ROBERT S. TYSON, Secretary EX-3.4 3 0003.txt CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF URBANA.CA, INC. I, Robert S. Tyson, certify that: 1. The original articles of Urbana.ca, Inc. were filed with the Office of the Secretary of State on October 9, 1997. 2. Pursuant to the unanimous written consent of the Board of Directors, the company hereby adopted the following amendments to the Articles of Incorporation of this Corporation: Article Fourth: Capital Stock is amended to read as follows: Classes and Number of Shares. The total number of shares of common stock that the Corporation shall have authority to issue is Eighty Million (80,000,000), par value of $0.001 per share ("Common Stock"). 3. At the Annual Meeting of the company, held on June 13, 2000, the company had 22,038,283 shares of voting common stock issued and outstanding. By a vote of 16,023,500 shares of this common stock, in person or by proxy (which represents 72.71% of the total shares), which vote was sufficient for approval, the foregoing amendment to the Articles of Incorporation of this corporation was approved. /s/ Robert S. Tyson Robert S. Tyson, Secretary Verification I, Christopher D. Farber, a notary public in and for the Province of British Columbia, certify that Robert S. Tyson, whose name is affixed to the attached instrument, appeared before me and confirmed that he is the person who signed as Secretary. I further certify that I verified the identity of this person and satisfied myself that he is the same person. Dated this 17th day of August, 2000, in the City of Vancouver in the Province of British Columbia. /s/ Christopher D. Farber Notary Public in and for the Province of British Columbia. My commission expires at the pleasure of the Queen. EX-4.2 4 0004.txt PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT FORM OF PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (for Canadian and other non-U.S. Subscriptions) A completed and originally executed copy of this subscription agreement must be delivered to Groome Capital.com Inc., 20 Toronto Street, Suite 900, Toronto, M5C 2B8 or transmitted by telecopier (416) 861-9992 by no later than 5:00 p.m. (Toronto time) on April 12, 2000 (Attention: Chris Conacher). To: Urbana.ca, Inc. (the "Issuer") 211 Water Street North Cambridge, Ontario N1R 3B9 And to: Groome Capital.com Inc. (the "Agent") 20 Toronto Street, Suite 900, Toronto, Ontario, Canada M5C 2B8 Subject to the terms and conditions of this Agreement and the Agency Agreement (hereinafter defined), the undersigned (the "Purchaser") irrevocably subscribes for and agrees to purchase Special Warrants (hereinafter defined) at a price of U.S. $1.25 (Cdn. $1.83) per Special Warrant. The particulars of the Special Warrants and certain covenants, representations and warranties to be made by the Purchaser so that the Issuer and the Agent can ensure compliance with the Securities Laws, are set out under the heading "Terms of the Offering" all of which forms a part of this Subscription Agreement. Attached as Schedule "A" is a Form 20A(IP) which must be completed by Purchasers who are individuals and resident in British Columbia. The Purchaser hereby irrevocably instructs the Issuer with respect to registration and delivery of the certificates representing the Special Warrants as follows: Number of Special Warrants to be purchased: at U.S. $1.25 each (Cdn. $1.83 for those purchasers settling in Canadian funds) NOTE: the minimum number of Special Warrants purchased for: Ontario and Quebec residents is: 22,831 Special Warrants B.C. and Alberta residents is: 14,697 Special Warrants Total Purchase Price: U.S. $ Total Purchase Price: Cdn.$ Name and Address of Purchaser: Name: Address: Phone No.: Fax: Registration Instructions: Register the Special Warrants as set forth below. Name: (Please Print) Account Reference (if applicable) Address: (Street Address) (City, Province and Postal Code) Delivery Instructions: The name and address (including contact name and telephone number) of the person to whom the certificate representing the Shares and Warrants comprising the Units are to be delivered, if other than the Purchaser: To: (Please Print) Account Reference (if applicable) Address: (Street Address) (City, Province and Postal Code) Contact Person: (Please Print) Phone No.: IN WITNESS WHEREOF the Purchaser has executed, or caused its duly authorized representative to execute, on its own behalf and, if applicable, on behalf of each other person for whom it is contracting hereunder, this subscription agreement. The Purchaser also hereby authorizes the Agent to deliver a copy of this Agreement on its behalf to the Issuer. DATED the day of , 2000 Signature of Purchaser (if an individual Name of Purchaser (if not an individual) Per: Name of Purchaser (if an individual) Signature of authorized representative (Please Print) Name and title of authorized representative (Please Print) 1. DEFINITIONS. 1.1 In this Agreement, the following words have the following meaning unless otherwise indicated: "Agency Agreement" means the agreement entered into or to be entered into on or before the Closing Date between the Issuer and the Agent, as it may be amended, relating to the Private Placement; "Agreement" or "Subscription Agreement" refers to this Subscription Agreement; "Alberta Act" means the Securities Act (Alberta), as amended, the regulations and rules made thereunder and all administrative policy statements, blanket orders, notices, directions and rulings issued by the Alberta Securities Commission; "BC Act" means the Securities Act (British Columbia), as amended, the regulations and rules made thereunder and all administrative policy statements, blanket orders, notices, directions and rulings issued by the British Columbia Securities Commission; "Canadian Securities Laws" means, collectively, the applicable securities laws of each of the Qualifying Provinces and the respective regulations, rules, rulings and orders made thereunder, the applicable policy statements, blanket orders and rulings issued by the respective Commissions; "Closing" means the closing of the Private Placement; "Closing Date" means April 19, 2000 or such other date as the Issuer and the Agent may agree; "Commissions" means collectively the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission and the Commission des valeurs mobil du Quebec (Quebec Securities Commission and) and "Commission" means any one of them; Distribution" means the proposed issuance of Unit Shares and Unit Warrants to the holders of Special Warrants on the exercise or deemed exercise of the Special Warrants; "Effective Registration" means the registration effected by filing a Registration Statement in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act, or any successor rule providing for offering securities on a continuing basis and the declaration or ordering of effectiveness of such Registration Statement by the SEC and all applicable state regulatory authorities; "Exchange" means the Over-the-Counter Bulletin Board in the United States; "material" means material in relation to the Issuer "material change" means any change in the business, operations, assets, liabilities, ownership or capital of the Issuer that would reasonably be expected to have a significant effect on the market price or value of the Underlying Securities and includes a decision to implement such a change made by the board of directors of the Issuer or by senior management of the Issuer who believes that confirmation of the decision by the board of directors is probable; "material fact" means any fact that significantly affects or would reasonably be expected to have a significant effect on the market price or value of the Underlying Securities, as the case may be; "misrepresentation" means, with respect to circumstances in which the Securities Laws of any jurisdiction are applicable, a misrepresentation as defined under the Securities Laws of that jurisdiction and, if not so defined or in circumstances in which the laws of a particular jurisdiction are not applicable, a misrepresentation as defined under the Securities Act (Ontario); "Ontario Act" means the Securities Act (Ontario), as amended, the regulations and rules made thereunder and all administrative policy statements, blanket orders, notices, directions and rulings issued by the Ontario Securities Commission; "Private Placement" means the offering of the Special Warrants pursuant to this Agreement, the Special Warrant Agreement and the Agency Agreement; "Prospectus" means a prospectus, including any amendments made thereto which, upon issuance of a receipt by each of the Commissions for the final prospectus, will qualify the Distribution; "Qualification Date" means the date which is the later of the date on which all of the Commissions have issued a receipt for the final Prospectus and the date of an Effective Registration; "Qualifying Provinces" means the Provinces of Ontario, Quebec, British Columbia and Alberta and such other Provinces as the Agent and the Issuer may determine before the Closing Date; "Quebec Act" means the Securities Act (Quebec), as amended, the regulations and rules made thereunder and all administrative policy statements, blanket orders, notices, directions and rulings issued by the Quebec Securities Commission; "Registration Statement" means a registration statement of the Issuer under the 1933 Act covering the Underlying Securities; "Regulation S" means Regulation S under the 1933 Act; "Regulatory Authorities" means the Commissions and the Exchange; "SEC" means the United States Securities and Exchange Commission; "Securities" means the Special Warrants, the Unit Shares, the Unit Warrants and the common shares of the Issuer issued upon exercise of the Unit Warrants; "Securities Acts" means, collectively, the Alberta Act, the BC Act, the Ontario Act and the Quebec Act; "Securities Laws" means collectively, the Canadian Securities Laws and U.S. Securities Laws; "Special Warrants" means the Special Warrants of the Issuer to be offered under and having the terms provided in this Agreement and issued pursuant to and subject to the terms of the Special Warrant Agreement; "Special Warrant Agreement" means the special warrant agreement to be entered into between the Issuer and the Trustee, in such form and containing such terms as approved by the Issuer and its counsel and the Agent and its counsel; "Trustee" means Pacific Corporate Trust Company or such other person appointed to act as trustee under the Special Warrant Agreement as may be mutually agreed to by the Agent and the Issuer; "Underlying Securities" means the Unit Shares and the Unit Warrants comprising the Units; "Unit" means one Unit Share and one-half of one Unit Warrant, subject to adjustment as provided in subsection 10.2; "Unit Shares" means the previously unissued common shares without par value of the Issuer which are issuable upon exercise or deemed exercise of the Special Warrants; "Unit Warrants" means the share purchase warrants of the Issuer to be issued upon the exercise or deemed exercise of the Special Warrants; "U.S. Securities Laws" means, collectively, all applicable federal and state securities laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases and rulings of the SEC and any applicable state securities regulatory authorities; and "1933 Act" means the United States Securities Act of 1933, as amended. 1.2 References to the Purchaser shall, where the context is not inconsistent therewith, be deemed to a reference to "the Purchaser on its own behalf and, if applicable, on behalf of others for whom it is contracting". 2. SUBSCRIPTION AND APPOINTMENT OF AGENT. 2.1 The Purchaser irrevocably subscribes for and agrees to purchase the number of Special Warrants specified on the first page of this Agreement, subject to the Purchaser's right to withdraw its subscription and terminate its obligation if the Agent exercises its right under the Agency Agreement not to proceed with the Private Placement. 2.2 The Purchaser shall deliver the following to the Agent at 20 Toronto Street, Suite 900, Toronto (to the attention of Chris Conacher) not later than 5:00 p.m. (Toronto time) on April 12, 2000: (a) a wire transfer, certified cheque or bank draft made payable to "Groome Capital.com Inc." representing the aggregate purchase price payable for the Special Warrants being purchased; and (b) an executed copy of this Agreement, together with Schedules "A" (only if the Purchaser is resident in British Columbia). 2.3 The Purchaser appoints the Agent to act as its agent to represent it at the Closing for the purpose of all closing matters and deliveries of documents and payments of funds. The Purchaser authorizes the Agent to amend the time and/or date of Closing and to modify or waive any conditions as may be contemplated herein or in the Agency Agreement as in its absolute discretion it may deem appropriate and to exercise any rights of termination contained in the Agency Agreement. The Purchaser further authorizes the Agent to make, on the Purchaser's behalf, non- material revisions to this Agreement as the Agent in its absolute discretion may deem appropriate, and to complete or correct any errors or omissions in any form or document provided by the Purchaser. 2.4 The acceptance by the Issuer of the Purchaser's irrevocable subscription to purchase the Units as contemplated by this Subscription Agreement shall constitute an agreement by the Issuer with the Agent and the Purchaser that the Purchaser shall have, in respect of such Units, the benefits of the representations, warranties and covenants of the Issuer contained in the Agency Agreement. 2.5 The obligations of the Purchaser to complete the purchase of the Units as contemplated in this Subscription Agreement are conditional upon the fulfilment at or before the Closing Time of each of the conditions for the Closing of the Offering to be set forth in the Agency Agreement which has not been waived by the Agent; 3. CONCERNING THE SPECIAL WARRANTS. 3.1 The Special Warrants will be issued and registered in the name of the Purchaser or its nominee as shown on the first page of this Agreement. 3.2 Each Special Warrant will be exercisable, at no additional cost, into one Unit. 3.3 The Special Warrants may be exercised by the holder, in whole or in part, at any time after the Closing. Any outstanding Special Warrants will be deemed to be exercised (at 4:30 p.m. Toronto time) on the day which is the earlier of: (a) the fifth (5th) business day after the Qualification Date; or (b) twelve (12) months from the Closing. 3.4 Upon exercise or deemed exercise, the Special Warrants will be automatically cancelled and will have no further force or effect. 3.5 The Special Warrant Agreement, pursuant to which the Special Warrants will be issued, will contain, among other things, provisions for the appropriate adjustment in the class and number of the Unit Shares and Unit Warrants issuable upon exercise or deemed exercise of the Special Warrants upon the occurrence of certain events, including any subdivision, consolidation or reclassification of the common shares of the Issuer, the payment of stock dividends or the amalgamation of the Issuer. 3.6 The issue of the Special Warrants will not restrict or prevent the Issuer from obtaining any other financing, or from issuing additional securities or rights. 4. CONCERNING THE UNIT WARRANTS. 4.1 The Unit Warrants will be non-transferable, and one full Unit Warrant will entitle the holder to purchase one additional common share of the Issuer at any time up to the close of business twenty-four (24) months from the Closing Date at a price of $5.00 (U.S.) per common share. 4.2 The terms and conditions which govern the Unit Warrants will be referred to in the Warrant Agreement pursuant to which the Unit Warrants will be issued and will contain, among other things, provisions for the appropriate adjustment in the class, number and price of the shares to be issued on the exercise of the Unit Warrants upon the occurrence of certain events including any subdivision, consolidation or reclassification of the shares, the payment of stock dividends or the amalgamation of the Issuer. 4.3 The issue of the Unit Warrants will not restrict or prevent the Issuer from obtaining any other financing, nor from issuing additional securities or rights. 5. REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS AND COVENANTS. 5.1 The Purchaser acknowledges, represents, warrants and covenants to and with the Issuer that, as at the date given above and at the Closing: (a) no prospectus has been filed by the Issuer with any securities commission or regulatory authority in connection with the issuance of the Special Warrants, the issuance is being made in reliance on exemptions from the prospectus requirements of the Securities Acts and that: (i) the Purchaser is restricted from using most of the protections, rights and remedies available under the Securities Acts, including civil remedies available under the Securities Acts; (ii) the Purchaser may not receive information that would otherwise be required to be provided to him under the Securities Acts; (iii) the Issuer is relieved from certain obligations that would otherwise apply under the Securities Acts; (iv) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Private Placement and the issuance of the Special Warrants; (b) the Purchaser is: (i) a person, other than an individual, purchasing as principal and is recognized by the securities regulatory authority in the province in which the Purchaser is resident as an exempt purchaser (or if the Purchaser is resident in Quebec, the Purchaser is a "sophisticated purchaser") and the Private Placement and the Distribution are made without advertisement; or (ii) purchasing sufficient Special Warrants so that the aggregate acquisition cost of the Special Warrants to the Purchaser is not less than: A. if the Purchaser is resident in British Columbia or Alberta, $97,000; and B. if the Purchaser is resident in Ontario, $150,000; or C. if the Purchaser is resident in Quebec, $150,000 and such Purchaser is active for his own account and the Private Placement and Distribution are made without advertisement; or (iii) in the case of a purchase of Special Warrants by the Purchaser as agent for a disclosed principal or for a principal which is undisclosed or identified by account number only, each beneficial purchaser of Special Warrants for whom the Purchaser is acting as agent, is purchasing as principal for its own account and not for the benefit of any other person, Special Warrants having an aggregate acquisition cost of not less than: A. in the case of a beneficial purchaser of Special Warrants resident in Ontario, $150,000; B. in the case of a beneficial purchaser of Special Warrants resident in British Columbia or Alberta, $97,000; and C. in the case of a beneficial purchase of Special Warrants resident in Quebec, $150,000 and such Purchaser is active for his own account and the Private Placement and Distribution are made without advertisement, and the Purchaser is an agent or trustee with proper authority to execute and deliver this Agreement and all documentation in connection with the purchase on behalf of the beneficial purchaser; or (iv) in the case of a purchase by the Purchaser of Special Warrants as a trustee or as an agent for a principal which is undisclosed or identified by account number only: A. if any beneficiary of a trust in respect of which the Purchaser acting as trustee or any such undisclosed principal or principal who is identified by account number only is resident in or otherwise subject to the securities legislation of Ontario, the Purchaser is a trust company registered under the laws of Ontario acting as trustee or as agent for accounts fully managed by the Purchaser or is a portfolio adviser and is purchasing the Special Warrants for accounts managed by it pursuant to Rule 45-504 made under the Ontario Act; or B. if any beneficiary of a trust in respect of which the Purchaser is acting as trustee or any such undisclosed principal or principal who is identified by account number only is resident in or otherwise subject to the securities legislation of British Columbia, the Purchaser is a trust company or an insurance company in respect of which a business authorization has been issued under the laws of British Columbia or an advisor who manages the investment portfolio of clients through discretionary authority granted by one or more clients and who is registered as a portfolio manager under the BC Act or is exempt from such registration and is purchasing Special Warrants as trustee for accounts fully managed by it; or C. if any beneficiary or a trust in respect of which the Purchaser is acting as trustee or any such undisclosed principal or principal who is identified by account number only is resident in or otherwise subject to the securities legislation of Alberta, the Purchaser is a trust company trading as a trustee or an agent or an advisor trading as agent who manages the investment portfolio of clients through discretionary authority granted by one or more clients and who is registered as a portfolio manager under the Alberta Act or is exempt from such registration and is purchasing Special Warrants for accounts fully managed by it; or D. if any beneficiary of a trust in respect of which the Purchaser is acting as trustee or any such undisclosed principal or principal who is identified by account number only is resident in or otherwise subject to the securities legislation of Quebec, the Purchaser is a trust company licensed under The Trust Companies and Savings Companies Act (Quebec), an insurance company holding a license under An Act Respecting Insurance (Quebec) or a dealer or advisor appropriately registered under the Quebec Act and is purchasing such Special Warrants for the portfolio of a third person managed solely by it; or (v) if the Purchaser is resident in or is subject to the securities laws of Ontarioand is not an individual, the Purchaser is: A. a corporation that was not incorporated or created solely to permit the purchase of the Special Warrants without the need for filing a prospectus in respect of its purchase of the Special Warrants or, if it is a corporation incorporated or created for such a purpose and a resident in Ontario, each shareholder of the corporation is an individual who has contributed at least $150,000 to the Issuer for the purpose of investment by the corporation in the Special Warrants; or B. a syndicate, partnership, trust or other unincorporated organization, and is purchasing as principal for its own account and was not created or being used primarily to permit purchases without a prospectus or if a syndicate partnership, trust or other unincorporated organization created or being used for such purposes: (1) each member of the syndicate, partnership, or other unincorporated organization or each beneficiary of the trust, as the case may be, is an individual who has contributed at least $150,000 for the Special Warrants purchased; or (2) it will have an aggregate acquisition cost of purchasing the Special Warrants of not less than $150,000 and falls within one of the following categories: pension plans, groups of pension plans under common management, organizations of members of a family fund formed to make investments of family funds, testamentary trusts and estates, organizations which have primary ongoing business activities other than investing in securities, mutual funds other than private mutual funds within the meaning of section 1 of the Ontario Act, group registered retirement savings plans or group deferred profit sharing plans, or partnerships, interests in which are offered by a prospectus, where the partnership invests in securities in reliance upon section 72(1)(d) of the Ontario Act; or C. an investment club and the share or portion of any member of the investment club of the aggregate acquisition cost to such investment club of the Special Warrants subscribed to hereunder is at least $150,000; or (vi) if the Purchaser is resident in or is otherwise subject to the securities laws of Alberta and is a corporation, syndicate, partnership or other form of unincorporated organization, it pre-existed the offering of the Special Warrants and has a bona fide purpose other than investment in the Special Warrants or, if created to permit such investment, the individual share of the aggregate acquisition cost for each participant is not less than $97,000; (vii) an individual exempted from registration and prospectus filing requirements by sections 45(2)(10) and 74(2)(9) of the BC Act as an employee, senior officer or director of the Issuer or an affiliate of the Issuer, or is a corporation all of the voting securities of which are owned by one of the foregoing persons, and the Purchaser has not been induced to purchase the Special Warrants by expectation of employment or continued employment by the Issuer; or (viii) if the Purchaser is not a resident of British Columbia, Alberta, Ontario or Quebec, they are purchasing in full compliance with the laws of the jurisdiction in which the Purchaser resides; (c) if the Purchaser is resident in or is otherwise subject to the securities laws of British Columbia and is a syndicate, partnership or other form of unincorporated organization, such syndicate, partnership or other unincorporated organization was not created solely to permit purchases under section 74(2)(4) of the BC Act by groups of individuals whose individual share of the aggregate acquisition cost is less than $97,000; (d) the Purchaser is resident in the jurisdiction specified on the first page of this Agreement and, if the Purchaser is acting as agent for a principal, the principal is also resident in the jurisdiction specified on the first page of this Agreement; (e) no person has made to the Purchaser any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; (iii) as to the future price or value of any of the Securities; or (iv) that the Securities will be listed and posted or quoted for trading on a stock exchange or that application has been made to list and post the Securities for trading or quotation on a stock exchange, other than the Exchange; (f) the Purchaser covenants and agrees to comply with the reporting requirements of the Securities Acts and any other applicable securities legislation; (g) the Purchaser is not a U.S. Person (as that term is defined in Rule 902 under the 1933 Act) and is not and will not be purchasing Special Warrants for the account or benefit of any U.S. Person was not offered the Special Warrants in the United States, and did not execute or deliver this Subscription Agreement in the United States; (h) the Purchaser acknowledges that the Securities have not been registered under the 1933 Act and may not be resold or otherwise transferred, other than in compliance with Regulation S pursuant to a registration under the 1933 Act and the securities laws of all applicable states of the United States or an exemption from such registration requirements is available. (i) the Purchaser has no knowledge of a "material fact" or "material change" in the affairs of the Issuer that has not been generally disclosed to the public, save knowledge of this particular transaction; (j) the Purchaser has the necessary legal capacity and competence to enter into and execute this Agreement and to take all actions required pursuant hereto and, if the Purchaser 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 given to authorize execution of this Agreement on behalf of the Purchaser. If the Purchaser is a natural person, he or she has attained the age of majority and is legally competent to execute this Subscription Agreement and to take all actions required pursuant thereto; (k) the entering into of this Agreement and the transactions contemplated hereby will not result in the violation of any of the terms and provisions of any law applicable to, or the constituting documents of, the Purchaser or of any agreement, written or oral, to which the Purchaser may be a part or by which he is or may be bound; (l) this Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding agreement of the Purchaser enforceable against the Purchaser; (m) the Purchaser has been independently advised as to the applicable hold period imposed in respect of the Securities by securities legislation in the jurisdiction in which the Purchaser resides and confirms that no representation has been made respecting the applicable hold periods for the Securities, and the Purchaser is aware of the risks involved in the purchase of the Special Warrants and has the ability to bear the economic risk of the loss of its investment in the Special Warrants, and the Purchaser is aware of the fact that the Purchaser may not be able to resell the Securities except in accordance with the applicable securities legislation and regulatory policies; (n) the Purchaser, and any beneficial purchaser for which it is purchasing, is capable of assessing and evaluating the merits and risks of the proposed investment as a result of the Purchaser's financial experience or as a result of advice received from a registered person and it, or where it is not purchasing as principal, each beneficial purchaser, is able to bear the economic risk of its investment; (o) if required by applicable securities legislation, policy or order or by any securities commission, stock exchange or other regulatory authority, the Purchaser will execute, deliver, file and otherwise assist the Issuer in filing, such reports, undertakings and other documents with respect to the issue of the Securities as may be required; (p) if the Purchaser is an individual resident in British Columbia, the Purchaser agrees to execute and deliver to the Issuer the Form 20A (IP), attached as Schedule "A"; (q) the Purchaser, or any beneficial purchaser (the "beneficiary") for whom it's purchasing, acknowledges that it or the beneficiary must file a report on the applicable form with, as applicable, the Alberta Securities Commission, British Columbia Securities Commission, Ontario Securities Commission or Quebec Securities Commission within 10 days of each disposition of all or any part of the Special Warrants and, unless the Distribution has been qualified by a Prospectus, Unit Shares and Unit Warrants; (r) the Purchaser covenants that the Purchaser's representations, warranties and covenants in this subsection are and will be true and correct both as of the execution of this Agreement and as of the Closing; (s) the Purchaser has not received, nor has it requested, nor does it have any need to receive, any offering memorandum, or a prospectus as defined in applicable Securities Laws, or any other document describing the business and affairs of the Issuer. The offer and sale to the Purchaser of the Purchaser's Units were not made through or as a result of, and the distribution of the Special Warrants is not being accompanied by, any advertisement in printed public media of general and regular paid circulation, radio, television or telecommunications, including electronic display or any other form of advertisement and except for this Subscription Agreement, the only documents, if any, delivered or otherwise furnished to the Purchaser in connection with such offer and sale were a term sheet describing the terms of the Private Placement and publicly available materials concerning the Issuer, none of which has been prepared for delivery to and reviewed by prospective purchasers in order to assist them in making an investment decision in respect of the Special Warrants and none of which has been independently verified by the Agent or its professional advisors; (t) the Purchaser has been advised by the Issuer to obtain its own legal, financial and tax advice with respect to the advisability of purchasing the Special Warrants and has had adequate opportunity to do so, and the Purchaser acknowledges and understands the terms and its rights and obligations under this Agreement; (u) the Purchaser, or each beneficial purchaser for whom it is purchasing, is acquiring Units for investment only and not with a view to immediate resale or distribution and will not resell or otherwise transfer or dispose of the Units except in accordance with the provision of applicable Securities Laws; (v) the Units are not being purchased by the Purchaser as a result of any material information concerning the Company which has not been publicly disclosed and the Subscriber's decision to subscribe for Units has not been made as a result of any verbal or written representation as to fact or otherwise made by or on behalf of the Company, the Underwriter or any other person and is based entirely upon currently available public information concerning the Company; (w) the Purchaser acknowledges and agrees that the sale and delivery of the Units to the Purchaser (or, if applicable, to others for whom it is contracting hereunder) is conditional upon such sale being exempt from the requirements under applicable Canadian Securities Laws requiring the filing of a prospectus or delivery of an offering memorandum in connection with the distribution of the Units or upon the issuance of such rulings, orders, consents and approvals as may be required to permit such sale without the requirement of filing a prospectus or delivery of an offering memorandum; (x) the Purchaser is not a "control person" of the Issuer (as defined in the Securities Act (Ontario)) and will not become a "control person" of the Issuer by virtue of the acquisition of the Units or the Underlying Securities pursuant to this subscription and does not intend to act in concert with any other person to form a control group; (y) neither the Issuer nor any party on whose behalf the Issuer is acting is a director, officer or trustee of the Issuer or any subsidiary thereof or is an "insider" of the Company as such term is defined under applicable Canadian Securities Laws; (z) in the case of a subscription by the Purchaser acting as agent for a principal, the Purchaser is duly authorized to execute and deliver this Agreement and all other necessary documentation in connection with this subscription on behalf of such principal and this Agreement has been duly authorized, executed and delivered by or on behalf of, and constitutes the legal, valid and binding agreement of such principal; (aa) the Purchaser acknowledges that the Issuer may enter into agreements similar to this Agreement with other persons in respect of the Private Placement, which agreements shall be made and dated for reference the same date as this Agreement. 5.2 The Purchaser's representations, warranties and covenants are made with the intent that they be relied upon by the Issuer and Agent in determining the Purchaser's suitability as a purchaser of Special Warrants, and the Purchaser hereby agrees to indemnify the Agent and Issuer against all losses, claims, fees, costs, expenses and damages or liabilities whatsoever which any of them may suffer or incur as a result of reliance thereon. The Purchaser undertakes to notify the Issuer and Agent immediately of any change in any representation, warranty or other information relating to the Purchaser set forth herein which takes place prior to the Closing. The covenants, representations and warranties contained herein shall survive the closing of the transaction contemplated hereby. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER. 6.1 The Issuer represents and warrants that each of the representations and warranties of the Issuer set forth in the Agency Agreement are true and correct. The Issuer further acknowledges and agrees that it is bound by each of its covenants, obligations and agreements set out in the Agency Agreement. 7. CLOSING. 7.1 The Purchaser acknowledges and agrees that the Closing will be completed at the place, time, date and manner specified in the Agency Agreement or such other place, time and/or date as the Issuer and the Agent may agree. 7.2 The Purchaser acknowledges and agrees that this Agreement and any other documents delivered in connection herewith will be held by the Agent until such time as the conditions for the benefit of the Agent set forth in the Agency Agreement are satisfied by the Issuer or waived by the Agent. Upon the satisfaction or waiver of these conditions, the Agent will, at the Closing, deliver this Agreement and any other documents delivered in connection herewith, to the Issuer and, on behalf of the Purchaser, pay to the Issuer an amount equal to the total Purchase Price for the Purchaser's Special Warrants (the "Subscription Funds") and the Issuer will deliver to the Agent, on behalf of the Purchaser, a certificate representing the Special Warrants purchased by the Purchaser registered in the name of the Purchaser or its nominee. In the event that the Purchaser's subscription offer is not accepted by the Issuer or the conditions referred to above are not satisfied by the Issuer, or waived by the Agent, within the appropriate time period therein, this Agreement and any other documents delivered in connection herewith will be returned to the Purchaser at the address of the Purchaser or nominee according to the delivery instructions shown on the first page of this Agreement. 8. RESALE RESTRICTIONS. 8.1 The Purchaser understands and acknowledges that the Purchaser's Special Warrants and, if the Purchaser's Special Warrants are exercised before the Qualification Date, the Unit Shares and Unit Warrants issued pursuant thereto, will be subject to certain resale restrictions under applicable securities legislation and that the certificates representing the Securities will bear a legend to that effect. The Purchaser also acknowledges that its has been advised to consult with its own legal advisors regarding the applicable resale restrictions and that the Purchaser is solely responsible (and neither the Issuer nor the Agent is in any manner responsible) for complying with such restrictions. The Purchaser covenants and agrees to sell, assign or transfer the Securities only in accordance with the Securities Acts and such legend. THE PURCHASER FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT THE ISSUER IS NOT CURRENTLY A "REPORTING ISSUER" UNDER CANADIAN SECURITIES LAWS AND THAT THE SPECIAL WARRANTS AND THE UNIT SHARES AND UNIT WARRANTS ISSUABLE UPON THE EXERCISE OF THE SPECIAL WARRANTS MAY NOT BE SOLD IN THE QUALIFYING PROVINCES EXCEPT PURSUANT TO EXEMPTIONS FROM THE PROSPECTUS REQUIREMENTS OF THE CANADIAN SECURITIES LAWS. 8.2 The offer and sale of the Special Warrants has been made, and the sale of shares of common stock upon exercise of Unit Warrants will be made, in reliance upon Regulation S promulgated by the SEC under the Securities Act of 1933 ("1933 Act"). Therefore, the Special Warrants, Unit Shares, Unit Warrants, and shares of common stock issuable upon exercise of the Unit Warrants will be "restricted securities" and as such may be resold only in accordance with an effective registration statement filed under the Act or compliance with Rule 144 under the 1933 Act. Regulation S requires that, for a period of 40 days following the closing of the offering, no offer or sale of a Special Warrant, Unit Warrant, Unit Share, or share of common stock issuable upon exercise of a Unit Warrant may be made to a United States Person, as that term is defined in Regulation S, or for the account of a United States Person. Regulation S also requires that each Special Warrant and Unit Warrant bear a legend stating that the Special Warrant and Unit Warrants, as the case may be, and the securities issuable upon its exercise have not been registered under the 1933 Act and that the Warrant may not be exercised by or on behalf of the United States Person unless such a registration is effective or an exemption from registration is available. Each person exercising a Special Warrant or Unit Warrant must provide the Issuer with either (i) written certification that it is not a United States Person and that the Warrant is not being exercised on behalf of a United States Person, or (ii) a written opinion of counsel satisfactory to the Issuer that the issuance of securities upon exercise of the Special Warrant or Unit Warrant has been registered under the 1933 Act and any applicable States securities law or is exempt from registration. Regulation S also provides for the resale of securities which are issued and outstanding. As noted above, the Special Warrants, Unit Shares, Unit Warrants, and shares issuable upon exercise of the Unit Warrants may be resold only in compliance with Regulation S or pursuant to an effective registration statement under the 1933 Act or an exemption from the registration requirements of the 1933 Act. Rule 904 of Regulation S provides that a resale of an outstanding security may be made pursuant thereto if the offer and sale of the security are made in an offshore transaction and if no directed selling effort is made in the United States with regard to the securities to be sold by the seller, an affiliate, or any person acting on their behalf. An offer or sale of securities is made in an "offshore transaction" if the offer is not made to a person in the United States and either (i) at the time the buy order is originated, the buyer is outside the United States, or the seller and any person acting on its behalf have good reason to believe that the buyer is outside the United States; and (ii) the transaction is executed in, on or through the facilities of a designated offshore securities market and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States. Offers and sales of securities specifically targeted at identifiable groups of United States citizens abroad shall, in no event, be deemed to be made in an offshore transaction. Rule 904 imposes additional limitations on resales by dealers and persons receiving selling concessions and affiliates of the issuer. Each certificate evidencing a Special Warrant and Unit Warrant will bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. INDEMNITY. 8.3 The Purchaser agrees to indemnify and hold harmless the Issuer and the Agent and their respective directors, officers, employees, agents, advisers and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, administrative proceeding or investigation commenced or threatened or any claim whatsoever arising out of or based upon any representation or warranty of the Purchaser contained herein or in any document furnished by the Purchaser to the Issuer or the Agent in connection herewith being untrue in any material respect or any breach or failure by the Purchaser to comply with any covenant or agreement made by the Purchaser herein or in any document furnished by the Purchaser to the Issuer or the Agent in connection herewith. 9. PROSPECTUS/REGISTRATION STATEMENT. 9.1 The Issuer has agreed with the Agent to prepare and file a final Prospectus and to use its reasonable best efforts to obtain receipts therefor from the Commissions and to have an Effective Registration with respect to the Underlying Securities on or before the date (the "Qualification Deadline") which is 150 days following the Closing (if such day is not a business day, then the next following business day). 9.2 If either receipts for the final Prospectus have not been issued by the applicable Commissions or an Effective Registration has not occurred before the Qualification Deadline, the Special Warrants shall be deemed to be exercisable into 1.1 Unit Shares (rather than one Unit Share) and 0.55 Unit Warrants (rather than one-half of one Unit Warrant) for no additional consideration. 9.3 Until each of the conditions set forth in Section 10.2 have been satisfied, 15% of the gross proceeds received in connection with the Private Placement in Canada will be maintained in Escrow by Pacific Corporate Trust Company or such other trustee as may be mutually agreed to between the Issuer and the Agent. 10. COMMISSION TO THE AGENT. 10.1 The Purchaser acknowledges that the Agent will receive from the Issuer a commission in an amount equivalent to 8% of the gross proceeds raised from the Private Placement in Canada provided, however, that the Agent shall receive a commission equivalent to 4% of the gross proceeds raised from the Private Placement in Canada from those persons identified on the President's List as provided by the Issuer and as defined in the Agency Agreement and a Fiscal Advisory Fee equal to 4% of the gross proceeds raised from the Private Placement in the United States. The Purchaser further acknowledges that the Agent will also receive Agent's Warrants (as defined in the Agency Agreement) which will be exercisable into Agent's Compensation Options (as defined in the Agency Agreement) and will entitle the Agent to purchase such number of Units of the Issuer as is equal to 10% of the Special Warrants sold under the Private Placement in the aggregate, inclusive of those Special Warrants sold in the United States, and is further entitled to reimbursement of its expenses in connection with the Private Placement. 10.2 The Purchaser acknowledges that the Agent, its directors, officers, employees, shareholders, affiliates and associates may, from time to time, hold positions in securities of the Issuer and may purchase Special Warrants. 11. CONDITIONAL UPON REGULATORY APPROVAL. 11.1 Without limitation, this subscription and the transactions contemplated hereby are conditional upon and subject to the Issuer receiving all necessary regulatory approvals under applicable Securities Laws relating to this subscription and the Private Placement. 12. CONTRACTUAL RIGHT OF ACTION. 12.1 In the event that the Purchaser becomes entitled under the BC Act, the Alberta Act, the Ontario Act or the Quebec Act to the remedy of rescission by reason of the Prospectus or any amendment thereto containing a misrepresentation, then, subject to any available defences and limitation periods under applicable securities legislation, the Purchaser will be entitled to rescission not only of the exercise of the Special Warrants purchased, but also of its subscription hereunder, and will be entitled in connection with such rescission to a full refund from the Issuer of all consideration paid to the Issuer on acquisition of such Special Warrants. 13. NO REVOCATION. 13.1 The Purchaser agrees that this offer is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Purchaser. 14. MISCELLANEOUS. 14.1 This Agreement may be delivered by fax and the Issuer and the Agent shall be entitled to rely on a fax copy of this executed Agreement. 14.2 This Agreement is not assignable or transferable by either party without the express written consent of the other. 14.3 This Agreement enures to the benefit of and is binding upon the parties to this Agreement and their respective heirs, executors, administrators, estate trustees, personal representatives, successors and permitted assigns. 14.4 This Agreement is to be read with all changes in gender or number as required by the context. 14.5 This Agreement will be governed by and construed exclusively in accordance with the laws of Ontario and the laws of Canada applicable therein, and the parties irrevocably attorn to and submit to the jurisdiction of the courts of Ontario with respect to any dispute related to this Agreement. 14.6 The parties hereto hereby confirm that they have each requested that this agreement and all other ancillary documentation be drawn up in the English language. Les parties aux presentes reconnaissent que chacune d'elles a exige que cette convention et tout autre document qui y est accessoire soient rediges en anglais. 14.7 Time shall be the essence of this Agreement. 14.8 All dollar amounts referred to in this Agreement and in any schedules hereto refer to the lawful currency of the United States unless otherwise indicated 14.9 This agreement resulting from the acceptance of this subscription agreement by the Issuer contains the whole agreement between the Issuer and the Purchaser in respect of the subject matter hereof and there are no warranties, representations, terms, conditions, collateral agreements, express, implied or statutory, other than as expressly set forth herein, in the Agency Agreement, and in any amendments hereto or thereto. All representations, warranties, agreements and covenants made or deemed to be made by the Purchaser herein will survive the execution and delivery and acceptance of this Subscription Agreement and the closing of the Private Placement. 14.10 The Purchaser acknowledges and agrees that all costs and expenses incurred by the Purchaser (including any fees and disbursements of any special counsel returned (the Purchaser) relating to the sale of the Special Warrants to the Purchaser shall be borne by the Purchaser. ACCEPTANCE This subscription is accepted by the Issuer at Toronto, Ontario. The Issuer represents and warrants to the Purchaser that the representations and warranties made by the Issuer to the Agent in the Agency Agreement are true and correct in all material respects as of this date (save and except as waived by the Agent) and that the Purchaser is entitled to rely thereon. DATED the day of , 2000. URBANA.CA, INC. by its authorized signatory: Signature: Name & Title: FOR BRITISH COLUMBIA RESIDENTS ONLY SCHEDULE "A" FORM 20A (IP) Securities Act Acknowledgement of Individual Purchaser 1. I have agreed to purchase from Urbana.ca Inc. (the "Issuer") _____________special warrants (the "Securities") of the Issuer. 2. I am purchasing the Securities as principal and, on closing of the agreement of purchase and sale, I will be the beneficial owner of the Securities. 3. I [tick one] have have not received an offering memorandum describing the Issuer and the Securities. 4. I acknowledge that: (a) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities, AND (b) there is no government or other insurance covering the Securities, AND (c) I may lose all of my investment, AND (d) there are restrictions on my ability to resell the Securities and it is my responsibility to find out what those restrictions are and to comply with them before selling the Securities, AND (e) I will not receive a prospectus that the British Columbia Securities Act (the "Act") would otherwise require be given to me because the Issuer has advised me that it is relying on a prospectus exemption, AND (f) because I am not purchasing the Securities under a prospectus, I will not have the civil remedies that would otherwise be available to me, AND (g) the Issuer has advised me that it is using an exemption from the requirement to sell through a dealer registered under the Act, except purchases referred to in paragraph 5(g), and as a result I do not have the benefit of any protection that might have been available to me by having a dealer act on my behalf. 5. I also acknowledge that: [tick one] (a) I am purchasing Securities that have an aggregate acquisition cost of $97,000 or more, OR (b) My net worth, or my net worth jointly with my spouse at the date of the agreement of purchase and sale of the security, is not less than $400,000, OR (c) my annual net income before tax is not less than $75,000, or my annual net income before tax jointly with my spouse is not less than $125,000, in each of the two most recent calendar years, and I reasonably expect to have annual net income before tax of not less than $75,000 or annual net income before tax jointly with my spouse of not less than $125,000 in the current calendar year, OR (d) I am registered under the Act, OR (e) I am a spouse, parent, brother, sister or child of a senior officer or director of the Issuer, or of an affiliate of the Issuer, OR (f) I am a close personal friend of a senior officer or director of the Issuer, or of an affiliate of the Issuer, OR (g) I am purchasing securities under section 128(c) ($25,000 registrant required) of the Rules, and I have spoken to a person [Name of registered person:] (the "Registered Person") who has advised me that the Registered Person is registered to trade or advise in the Securities and that the purchase of the Securities is a suitable investment for me. 6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I acknowledge that, on the basis of information about the Securities furnished by the Issuer, I am able to evaluate the risks and merits of the Securities because: [tick one] (a) of my financial, business or investment experience, OR I (b) have received advice from a person [Name of adviser:] (the "Adviser")] who has advised me that the Adviser is: (i) registered to advise, or exempted from the requirement to be registered to advise, in respect of the Securities, and (ii) not an insider of, or in a special relationship with, the Issuer. The statements made in this report are true. DATED: , 2000. Purchaser's Signature: Print Name: Address: EX-4.3 5 0005.txt FORM OF UNIT WARRANTS TO SUBSCRIBE FOR COMMON SHARES THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, (ii) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT, IF AVAILABLE, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND FROM QUALIFICATION UNDER ANY SECURITIES LAWS APPLICABLE IN CANADA, IF AVAILABLE, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A SHARE PURCHASE WARRANT AGREEMENT DATED AS OF APRIL 27, 2000, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. FORM OF UNIT WARRANTS TO SUBSCRIBE FOR COMMON SHARES OF URBANA.CA, INC. (Incorporated under the laws of the State of Nevada) Number of Unit Warrants Represented By this Certificate: ______________ Certificate Number:_________ THIS CERTIFIES THAT, for value received, ____________________________ (the Holder"), is entitled to purchase, at the price of US$5.00 per Common Share, one Common Share of Urbana.ca, Inc. (the "Issuer") for each of the Unit Warrants evidenced hereby, subject to adjustment as herein set forth, at any time prior to 4:30 p.m. (Toronto time) on April 26, 2002 (the "Expiry Date"): The following provisions shall be applicable to the Unit Warrants: 1. Interpretation 1.1 Currency All dollar amounts referred to herein shall be in lawful money of the United States. 1.222Defined Terms As used herein, the following words and phrases shall have the following meanings respectively: (a) "business day" means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; " (b) lose of business" means 4:30 p.m. (Toronto time); "closeofbusiness means 4\:30 p.m. (Toronto time); " (c) common Shares" means the common shares with a par value of $0.001 per share in the capital of the Issuer whether issued or unissued, as constituted at the date hereof; provided that in the event of a change, reclassification, subdivision, redivision, reduction, combination, or consolidation thereof, or successive such changes, reclassifications, subdivisions, redivisions, reductions, combinations or consolidations, and subject to adjustment, if any, having been made in accordance with the provisions of the Share Purchase Warrant Agreement, "Common Shares" shall thereafter mean the shares resulting from such change, reclassification, subdivision, redivision, reduction or combination; CommonShares means the common shares with a par value of $0.001 per share in the capital of the Issuer whether issued or unissued, as constituted at the date hereof; provided that in the event of a change, reclassification, subdivision, redivision, reduction, combination, or consolidation thereof, or successive such changes, reclassifications, subdivisions, redivisions, reductions, combinations or consolidations, and subject to adjustment, if any, having been made in accordance with the provisions of the Share Purchase Warrant Agreement, CommonShares shall thereafter mean the shares resulting from such change, reclassification, subdivision, redivision, reduction or combination; " (d) "Exercise Price" means US$5.00 per Common Share; ExercisePrice means US$5.00 per Common Share, unless such price shall have been adjusted in accordance with the provisions of Section 2.1 hereof, in which case it shall mean the adjusted price in effect at such time; " (e) "herein", "hereto", "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Unit Warrant certificate and not to any particular section, clause, subclause, subdivision or portion hereof, and the expressions, "Section", "clause" and "subclause" followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; tc " herein, hereto, hereunder, hereof, hereby and similar expressions mean or refer to this Unit Warrant certificate and not to any particular section, clause, subclause, subdivision or portion hereof, and the expressions, Section, clause and subclause followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; " \l 4 (f) "Holders" means the registered holders of Unit Warrants for the time being; tc " Holders means the registered holders of Unit Warrants for the time being; " \l 4 (g) "Share Purchase Warrant Agreement" means the agreement dated April 27, 2000 entered into between the Issuer and the Trustee regarding the Unit Warrants; (h) "Time of Expiry" means 4:30 p.m. (Toronto time) on the Expiry Date; tc " TimeofExpiry means 4\:30 p.m. (Toronto time) on the Expiry Date; " \l 4 (i) "Trustee" means Pacific Corporate Trust Company, of Vancouver, British Columbia, or any other trust corporation as the Issuer may appoint from time to time as the trustee of the Unit Warrants pursuant to the Unit Warrant Agreement. tc " Trustee means Pacific Corporate Trust Company, of Vancouver, British Columbia, or any other trust corporation as the Issuer may appoint from time to time as the trustee of the Unit Warrants pursuant to the Unit Warrant Agreement. " \l 4 (j) "Unit Warrants" means the warrants evidenced hereby; and tc " UnitWarrants means the warrants evidenced hereby; and " \l 4 (k) "Unit Warrant Register" means the register to be maintained by the Trustee in accordance with the Unit Warrant Agreement. tc " UnitWarrantRegister means the register to be maintained by the Trustee in accordance with the Unit Warrant Agreement. " \l 4 1.3 Manner of Exercise; Issuance of Certificates tc "Manner of Exercise; Issuance of Certificates " \l 3 The Holder may exercise its right to convert the Unit Warrants evidenced by this certificate, in whole or in part, for Common Shares hereunder, at any time prior to the Time of Expiry, by the surrender to the Trustee at 830-625 Howe Street, Vancouver, British Columbia, V6C 3B8 prior to the close of business on any business day, or at such other address as the Issuer may designate by notice in writing to the Holder at the address of the Holder appearing on the Unit Warrant Register, together with (a) a completed subscription in the form attached as Schedule "A" hereto (the "Unit Warrant Subscription Form"); and (b) a certified cheque, money order or bank draft payable to or to the order of the Issuer in lawful money of Canada in an amount equal to the Exercise Price multiplied by the number of Common Shares for which subscription is being made. The Special Warrants shall be deemed to be surrendered only upon personal delivery thereof or, if sent by mail or other means of transmission, upon actual receipt by the Trustee. 1.4 No Fractional Shares tc "No Fractional Shares " \l 3 Notwithstanding any adjustments provided for in Section 2.1 hereof or otherwise, the Issuer shall not be required upon the exercise of any Unit Warrants to issue fractional Common Shares in satisfaction of its obligations hereunder. Reference should be made to the Share Purchase Warrant Agreement for provisions regarding cash compensation which may be payable to the Holder in circumstances where a fractional Common Share would, but for this section, have been issued upon exercise of a Unit Warrant. 2. Adjustments tc "Adjustments " \l 2 The exercise of the Unit Warrants represented hereby is subject to adjustment in accordance with the provisions of the Share Purchase Warrant Agreement including, without limitation, Article 7 thereof. tc "The exercise of the Unit Warrants represented hereby is subject to adjustment in accordance with the provisions of the Share Purchase Warrant Agreement including, without limitation, Article 7 thereof. " \l 2 3. Transfer of Unit Warrants tc "3. Transfer of Unit Warrants " \l 002 The Unit Warrants evidenced hereby and the securities issuable upon exercise thereof may be subject to hold periods and resale restrictions under applicable securities laws and, if so, may not be traded except as permitted by such securities laws. Holders should consult with the Holder's professional advisor in order to assess the legal aspects of a transfer of the Unit Warrants evidenced hereby and/or the securities issuable upon exercise thereof. Subject to the foregoing, the Holder may transfer the Unit Warrants evidenced hereby either in whole or in part, using the transfer form in the form attached as Schedule "B" hereto. Every transfer of Unit Warrants, in order to be effective, must be in compliance with applicable securities laws and with the provisions of the Warrant Agreement. 4. Not a Shareholder Nothing in this certificate or in the holding of a Warrant shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Issuer. 5. Partial Exercise The Holder may subscribe for and acquire a number of Common Shares less than the number it is entitled to acquire pursuant to this certificate. In the event of any such subscription, the Holder shall in addition be entitled to receive, without charge, a new Warrant certificate in respect of the balance of the Common Shares which the Holder was entitled to acquire pursuant to this certificate and which were then not acquired. 6. Provisions of Share Purchase Warrant Agreement This certificate and the Unit Warrants represented hereby are subject in their entirety to the provisions of the Share Purchase Warrant Agreement. Reference is made to the Share Purchase Warrant Agreement and any instruments supplemental thereto for a full description of the rights of the holders of the Special Warrants and the terms and conditions upon which the Unit Warrants are, or are to be issued and held, with the same effect as if the provisions of the Share Purchase Warrant Agreement and all instruments supplemental thereto were herein set forth. By acceptance hereof, the Holder assents to all provisions of the Share Purchase Warrant Agreement. In the event of a conflict between the provisions of this Unit Warrant Certificate and the Unit Warrant Agreement, the provisions of the Share Purchase Warrant Agreement shall govern. 7. Time of the Essence Time shall be of the essence hereof. 8. Number and Gender Words importing the singular number only include the plural and vice versa and words importing any gender include all genders. 9. Headings The division of this Warrant certificate into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. 10. Binding Effect The terms and conditions of the Unit Warrants as set out herein shall enure to the benefit of and be binding upon the registered Holder hereof, its heirs, executors, estate trustees, administrators, successors and assigns to the extent provided herein and shall enure to the benefit of and shall be binding upon the Issuer and its successors and assigns. 11. Severability In the event any provision hereof shall be void or unenforceable for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. Any court with jurisdiction over any dispute with respect to the Unit Warrants may amend the provisions hereof to the minimum extent required to render the impugned provision valid and enforceable. 12. Language The parties hereto hereby confirm that they have each requested that this certificate be drawn up in the English language. 13. Certification This Unit Warrant Certificate shall not be valid for any purpose whatsoever unless and until it has been certified by or on behalf of the Trustee. IN WITNESS WHEREOF the Issuer has caused this certificate to be signed by its duly authorized officer as of the ____ day of _________________, 2000. URBANA.CA, INC. By: __________________________________ CERTIFIED BY PACIFIC CORPORATE TRUST COMPANY, Trustee By: _________________________________ SCHEDULE "A" EXERCISE AND SUBSCRIPTION FORM TO: PACIFIC CORPORATE TRUST COMPANY 830-625 Howe Street Vancouver, B.C. V6C 3B8 Attention: Client Services RE: UNIT WARRANT CERTIFICATE NUMBER: _______________ The undersigned holder of the attached Unit Warrant certificate hereby irrevocably subscribes for _________________________Common Shares of URBANA.CA, INC. (the "Issuer") pursuant to the terms of the Unit Warrants specified in such certificate and the Unit Warrant Agreement dated ___________________, 2000 entered into between the Issuer and Pacific Corporate Trust Company, as trustee, at a price of US$5.00 per share, and encloses and tenders herewith a certified cheque, bank draft or money order payable at par to or to the order of Urbana.ca, Inc. in lawful money of the United States, for an aggregate subscription price of $____________. DATED this day of (Please complete date including year NAME:______________________________ Signature:____________________________ Registration Instructions:__________________________ Please check box if the Common Share certificates are to be delivered at the office of the Issuer, failing which the Common Share certificates will be mailed to the subscriber at the address set out above. If any Unit Warrants represented by this certificate are not being exercised, a new Unit Warrant certificate will be issued and delivered with the Common Share certificates. SCHEDULE "B" TRANSFER FORM TRANSFER OF THE UNIT WARRANTS IS RESTRICTED - REFER TO THE TERMS OF THE ATTACHED CERTIFICATE. FOR VALUE RECEIVED, the undersigned transfers to (Print name and address of transferee) the Unit Warrants represented by the attached certificate. DATED: Signature guarantee: (the Holder's signature must be guaranteed Signature of Registered Holder (or its representative by a Canadian chartered bank or trust company if the Holder is not an individual) or medallion guaranteed by a member of a recognized member guarantee program. Name of Registered Holder Name and Title of Person signing on behalf of the Holder (if the Holder is not an individual) EX-4.4 6 0006.txt NON-ASSIGNABLE AGENT'S WARRANTS TO ACQUIRE COMPENSATION OPTIONS THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, (ii) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT, IF AVAILABLE, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND FROM QUALIFICATION UNDER ANY SECURITIES LAWS APPLICABLE IN CANADA, IF AVAILABLE, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. NON-ASSIGNABLE AGENT'S WARRANTS TO ACQUIRE COMPENSATION OPTIONS OF URBANA.CA, INC. (Incorporated under the laws of the State of Nevada) Number of Agent's Warrants represented by this Certificate: 84,798 Certificate Number: AW-1 THIS CERTIFIES THAT, for value received, National Bank Financial ITF Groome Capital.com Inc. is entitled to receive, upon exercise, without payment of additional consideration, one Agent's Compensation Option of URBANA.CA, INC. (the "Issuer") for each of the Agent's Warrants evidenced hereby, subject to adjustment as herein set forth, at any time prior to 4:30 p.m. (Toronto time) on the date (the "Expiry Date") which is the earlier of: (a) the fifth business day after the Qualification Date (hereinafter defined); and (b) April 26, 2002. The following provisions shall be applicable to the Agent's Warrants: 1. Interpretation 1.1 Currency All dollar amounts referred to herein shall be in lawful money of the United States. 1.2 Defined Terms As used herein, the following words and phrases shall have the following meanings respectively: (a) "Agency Agreement" means the agency agreement entered into between the Holder and the Issuer dated as of April 10, 2000; (b) "Agent's Compensation Options" means the non-assignable options of the Issuer to be issued, for no additional consideration, upon the exercise of the Agent's Warrants, entitling the holder to purchase 84,798Units; (c) "Agent's Warrants" means the agent's warrants evidenced hereby, issued pursuant to the Agency Agreement; (d) "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Commissions and the securities legislation and policies of each other relevant jurisdiction in Canada, U.S. Securities Laws and the applicable rules, regulations and policies of the Exchange; (e) "business day" means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; (f) "close of business" means 4:30 p.m. (Toronto time); (g) "Closing" means the closing of the Private Placement; (h) "Closing Date" means April 27, 2000;' (i) "Commissions" means the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission; the Commission des valuers mobilie du Quebec (Quebec Securities Commission); (j) "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Issuer; provided that if the exercise rights are subsequently adjusted or altered pursuant to Section 2, "Common Shares" will thereafter mean the shares or other securities or property that the Holder is entitled to on an Exchange after the adjustment; (k) "Convertible Security" means a security of the Issuer (other than the Special Warrants and the Agent's Compensation Options) convertible into or exchangeable for or otherwise carrying the right to acquire Common Shares; (l) "Current Market Price" at any date means the average of the closing prices of the Common Shares at which the Common Shares have traded on the NASDAQ OTC Bulletin Board, or, if the Common Shares in respect of which a determination of current market price is being made are not listed on the NASDAQ OTC Bulletin Board, on such stock exchange on which such shares are listed as may be selected for such purpose by the directors and approved by the Trustee, or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market, during the 20 consecutive trading days (on each of which at least 500 Common Shares are traded in board lots) ending on the third trading day prior to such date, and the weighted average price will be determined by dividing the aggregate sale price of all Common Shares sold in board lots o the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold, or in the event that at any date the Common Shares are not listed on any exchange or on the over-the-counter market, the current market price shall be as determined by the directors and approved by the Trustee; (m) "Dividends Paid In The Ordinary Course" means dividends paid in any financial year of the Issuer, whether in (i) cash, (ii) shares of the Issuer, (iii) warrants or similar rights to purchase any shares of the Issuer or property or other assets of the Issuer at a purchase or exercise price of at least 110% of the fair market value of the shares or property or other assets purchasable as of the date of distribution of such warrants or similar rights, or (iv) property or other assets of the Issuer, as the case may be, as determined by action by the directors except that, in the case of warrants or similar rights to purchase Common Shares or securities convertible into or exchangeable for Common Shares, such fair market value of the warrants or similar rights shall be equal to the number of Common Shares which may be purchased thereby (or the number of Common Shares issuable upon conversion or exchange) as of the date of distribution of such warrants or similar rights, multiplied by the Current Market Price of the Common Shares on the date of such distribution, provided that the value of such dividends does not in such financial year exceed the greater of: (i) the lesser of 50% of the retained earnings of the Issuer as at the end of the immediately preceding financial year and 200% of the aggregate amount of dividends paid by the Issuer on the Common Shares in the 12-month period ending immediately prior to the first day of such financial year, and (ii) 100% of the consolidated net earnings from continuing operations of the Issuer, before any extraordinary items, for the 12-month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada consistent with those applied in the preparation of the most recently audited financial statements of the Issuer); (n) "director" means a director of the Issuer for the time being, and unless otherwise specified herein, "by the directors" means action by the directors of the Issuer as a board or, whenever duly empowered, action by any committee of such board; (o) "Effective Registration" shall have the same meaning as ascribed to such term in the Special Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company save and except that such definition shall be deemed to include the Unit Shares issuable upon the exercise of the Agent's Compensation Options and the Warrant Shares issuable upon the exercise of the Unit Agent's Warrants as such terms are defined herein.; (p) "Exchange" means the Over the Counter Bulletin Board in the United States; (q) "Exchange Number" means the number of securities to be received by the Holder upon exercise of the Agent's Compensation Options, as may be adjusted under the provisions of Section 2; (r) "Exercise Date" means the date upon which the Holder exercises its subscription rights hereunder pursuant to Section 1.3 hereof; (s) "Exercise Period" means the period during which the Holder may exercise the Agent's Warrants, commencing on the Closing Date and ending at the Time of Expiry; (t) "herein", "hereto", "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Agent's Warrants certificate and not to any particular Section, clause, subclause, subdivision or portion hereof, and the expressions, "Section", "clause" and "subclause" followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; (u) "Holder" means National Bank ITF Groome Capital.com Inc.; (v) "Private Placement" means the offering of Special Warrants pursuant to the Agency Agreement; (w) "Qualification Date" means the date on which all of the Commissions have issued the Receipts; (x) "Qualification Deadline" means on or before 5:00 p.m. (Toronto time) on September 25, 2000 which is the first business day 150 days after the Closing Date or such later date as may be approved by the Holder in its sole and absolute discretion by written notice to Pacific Corporate Trust Company not less than five business days prior to the expiry of such 150 day period; (y) "Qualifying Prospectus" means the (final) prospectus and any amendment thereto required to be filed with the Commissions pursuant to Applicable Securities Laws, in respect of the distribution, inter alia, of the Agent's Compensation Options upon the exercise of the Agent's Warrants and as referred to in the Agency Agreement; (z) "Receipts" means, collectively the receipts for the final Qualifying Prospectus to be issued by the Canadian Commissions and confirmation of filing an effective resale registration statement registering these securities and the Special Warrants for resale in the United States of America; (aa) "Registration Statement" means a Registration Statement of the Company under the 1933 Act; (bb) "Regulatory Authorities" means the Exchange and the Commissions; (cc) "SEC" means the United States Securities and Exchange Commission; (dd) "Shareholder" means a holder of record of one or more Common Shares; (ee) "Special Warrants" means the special warrants issued upon closing of the Private Placement and subject to the terms and provisions of a special warrant agreement, dated April 27, 2000, between Pacific Corporate Trust Company and the Issuer; (ff) "Time of Expiry" means 4:30 p.m., Toronto time, on the Expiry Date; (gg) "trading day" with respect to a stock exchange means a day on which such stock exchange is open for business; (hh) "Unit Shares" means the previously unissued Common Shares which are issuable upon the exercise of the Agent's Compensation Options; (ii) "Unit Agent's Warrants" means the share purchase warrants of the Issuer which are issuable upon the exercise of the Agent's Compensation Options, each one Unit Agent's Warrant entitling the holder to acquire one Common Share at a price of US$5.00 each on or before April 26, 2002; (jj) "U.S. Securities Laws" means collectively, all applicable federal and state laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases, and rulings of the SEC and any applicable state securities regulatory authorities; (kk) "Warrant Shares" means the Common Shares issuable by the Issuer upon the exercise of the Unit Agent's Warrants. (ll) "1933 Act" means the United States Securities Act of 1933, as amended. 1.3 Manner of Exercise; Issuance of Certificates The Holder may exercise its right to convert the Agent's Warrants evidenced by this certificate for Agent's Compensation Options hereunder at any time prior to the Time of Expiry, by the surrender to the Issuer at 22 Haddington Street, Cambridge, Ontario of this Agent's Warrant certificate, together with a completed subscription in the form attached as Schedule "A" hereto (the "Agent's Warrant Subscription Form"), but without additional payment of any kind, prior to the close of business on any business day, or at such other address as the Issuer may designate by notice in writing to the Holder. The Agent's Compensation Options subscribed for shall be deemed to be issued to the Holder as the owner of record of such securities as of the close of business on the date on which this Agent's Warrant certificate shall have been so surrendered. The Agent's Warrants shall be deemed to be surrendered only upon personal delivery thereof or, if sent by mail or other means of transmission, upon actual receipt by the Issuer. Certificates for the Agent's Compensation Options so subscribed for shall be delivered to the Holder within a reasonable time, not exceeding five business days, after the subscription right provided for herein has been so exercised. 1.4 Deemed Exercise All unexercised Agent's Warrants will be deemed to have been exercised by the Issuer on behalf of the Holder immediately prior to the Time of Expiry without further action on the part of the Holder. 1.5 No Fractional Shares Notwithstanding any adjustments provided for in Section 2.1 hereof or otherwise, the Issuer shall not be required upon the exercise of any Agent's Warrants to issue fractional Agent's Compensation Options in satisfaction of its obligations hereunder. Where a fractional Agent's Compensation Options would, but for this Section 1.5, have been issued upon exercise of an Agent's Warrant, in lieu thereof, there shall be paid to the Holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the Current Market Price at the date of delivery of this certificate and the duly completed Agent's Warrant Subscription Form, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Issuer shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 2. Adjustments 2.1 (a) The rights of the Holder, including the number of Units for which the Holder may subscribe upon exercise of the Agent's Compensation Options, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section. (b) The Exchange Number in effect at any date will be subject to adjustment from time to time as follows: (i) Share Reorganization: If and whenever at any time during the Exercise Period, the Issuer shall (A) subdivide or redivide the outstanding Common Shares into a greater number of Common Shares, (B) consolidate or combine or reduces the outstanding Common Shares into a lesser number of Common Shares, or (C) fix a record date for the issue of Common Shares or Convertible Securities to all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, then, in each such event, the Exchange Number will, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exchange Number in effect immediately prior to such date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the numerator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment will be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under Section 2.1(b)(i) and (ii) hereof. Upon any adjustment of the Exchange Number pursuant to this paragraph 2.1(b)(i), the number of Unit Shares subject to the right of purchase under each Unit and the number of Warrant Shares subject to the right of purchase under each Unit Warrant not previously exercised will be contemporaneously adjusted by multiplying the number of Unit Shares or Warrant Shares, respectively, which theretofore may have been purchased under such Unit or Purchase Warrant by a fraction, the numerator of which shall be the Exchange Number in effect immediately before such adjustment and the denominator shall be the Exchange Number resulting from such adjustment. For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this section 2.1(b)(i) there will be included that number of Common Shares which would have resulted from the conversion at that time of all outstanding Convertible Securities which for greater certainty, includes the unexercised Special Warrants and Unit Agent's Warrants. (ii) Rights Offering: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or Convertible Securities) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the numerator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(ii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. (iii) Special Distribution: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the making of a distribution to all or substantially all of the holders of Common Shares of (A) shares of any class other than shares distributed to holders of Common Shares pursuant to the exercise of options to receive dividends in the form of such shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares, (B) rights, options or warrants (other than Unit Agent's Warrants and other than rights, options or warrants exercisable within 45 days from the date of issue thereof at a price per share, or at an exchange or conversion price per share in the case of securities exchangeable for or convertible into Common Shares, of at least 95% of the Current Market Price at the record date for such distribution), (C) evidences of indebtedness, or (D) any other assets including shares of other corporations (excluding cash dividends that holders of the Special Warrants receive under the provisions of the Special Warrant Indenture) in each such case and if such distribution does not constitute a Dividend Paid in the Ordinary Course, or fall under Sections 2.1(b)(i) or (ii) above, the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on the earlier of such record date and the date on which the Issuer announces its intention to make such distribution, less the aggregate fair market value (as determined by the directors, acting reasonably, at the time such distribution is authorized) of such shares or rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets so distributed, and of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price. Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(iii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants so distributed are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon such rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets actually distributed or based upon the number or amount of securities or the property or assets actually issued or distributed upon the exercise of such rights, options or warrants, as the case may be. (c) Capital Reorganization: If and whenever at any time from the date hereof during the Exercise Period there is a reorganization of the Issuer not otherwise provided for in Section 2.1(b)(i) or a consolidation or merger or amalgamation of the Issuer with or into another body corporate or other entity including a transaction whereby all or substantially all of the Issuer's undertaking and assets become the property of any other body corporate, trust, partnership or other entity (any such event being a "Capital Reorganization"), the Holder of any Agent's Warrants which have not been exercised prior to the effective date of the Capital Reorganization will be entitled to receive and will accept, upon the exercise of the Holder's right at any time after the effective date of the Capital Reorganization, in lieu of the number of Agent's Compensation Options to which it would have been entitled to receive upon exercise of the Agent's Warrants, the aggregate number of shares or other securities or property of the Issuer, or the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization that the Holder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, it had been the holder of the number of Agent's Compensation Options to which immediately before the transaction he was entitled upon exercise of the Agent's Warrants; no Capital Reorganization will be carried into effect unless all necessary steps will have been taken so that the Holder will thereafter be entitled to receive the number of shares or other securities or property of the Issuer, or of the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in this Section 2. (d) Reclassification of Common Shares: If the Issuer reclassifies or otherwise change the outstanding Common Shares, the exercise right will be adjusted effective immediately upon the reclassification becoming effective so that if the Holder exercises its rights thereafter it will be entitled to receive such shares as it would have been entitled to receive upon exercise of the Agent's Compensation Options had they exercised immediately prior to the effective date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, to those contained in this Section 2. 2.2 Rules Regarding Calculation of Adjustment of Exchange Number (a) The adjustments and readjustments provided for in this Section 2 are cumulative and subject to subsection 2.2(b), will apply (without duplication) to successive issues subdivisions, combinations, consolidations, distributions and any other events that require adjustment of the Exchange Number or the number or kind of shares or securities to be issued upon exercise of the Agent's Warrants. (b) No adjustment in the Exchange Number is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exchange Number; provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments. (c) No adjustment in the Exchange Number will be made in respect of any event described in Section 2.1, other than the events referred to in Section 2.1(b)(i)(A) and (B), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if the Holder had exercised the Agent's Warrants evidenced by this certificate prior to or on the effective date or record date of such event. (d) No adjustment in the Exchange Number will be made under Section 2.1 in respect of the issue from time to time of Common Shares issuable from time to time as Dividends Paid in the Ordinary Course. (e) If at any time a dispute arises with respect to adjustments of the Exchange Number, such dispute will be conclusively determined by the auditors of the Issuer or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action by the directors of the Issuer and any such determination, subject to any necessary regulatory approval, will be binding upon the Issuer and the Holder. (f) If and whenever at any time from the date hereof during the Exercise Period the Issuer takes any action affecting the Common Shares, other than action described in Section 2.1, which in the opinion of the board of directors of the Issuer would materially affect the rights of the Holder, the Exchange Number will be adjusted in such manner, if any, and at such time, by action by the directors of the Issuer in such manner as they may reasonably determine to be equitable in the circumstances but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Issuer so as to provide for an adjustment on or prior to the effective date of any action by the Issuer affecting the Common Shares will be conclusive evidence that the board of directors of the Issuer has determined that it is equitable to make no adjustment in the circumstances. (g) If the Issuer sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and thereafter legally abandons its plans to pay or deliver such dividend, distribution or subscription or purchase rights, then no adjustment in the Exchange Number will be required by reason of the setting of such record date. (h) As a condition precedent to the taking of any action which would require any adjustment to the Agent's Warrants evidenced hereby, including the Exchange Number, the Issuer shall take any corporate action which may be necessary in order that the Issuer have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof. (i) The Issuer will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 2.1, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exchange Number. (j) The Issuer covenants to and in favour of the Holder that so long as any of the Agent's Compensation Options evidenced by this certificate remain outstanding, it will give notice to the Holder of its intention to fix a record date for any event referred to in Section 2.1 which may give rise to an adjustment in the Exchange Number, and, in each case, such notice must specify the particulars of such event and the record date and the effective date for such event, and, to the extent determinable, any adjustment required and the computation of such adjustment; provided that the Issuer is only required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice must be given not less than fourteen days in each case prior to such applicable record date or effective date. (k) In any case where the application of any of this section 2 results in an increase of the Exchange Number taking effect immediately after the record date for or occurrence of a specific event, if any Special Warrants are exercised after that record date or occurrence and prior to completion of the event or of the period for which a calculation is required to be made, the Company may postpone the issuance, to the Holder, of the Securities to which the Holder is entitled by reason of the increase of the Exchange Number but the Securities will be so issued and delivered to that holder upon completion of that event or period, with the number of those Securities calculated on the basis of the Exchange Number on the Exercise Date adjusted for completion of that event or period, and the Company will forthwith after the Exercise Date deliver to the person or persons in whose name or names the Securities are to be issued an appropriate instrument evidencing the person's or persons' right to receive the Securities. 2.3 Successor Companies In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of the Issuer as an entirety or substantially as an entirety to another corporation ("successor corporation"), the successor corporation resulting from the consolidation, amalgamation, merger or transfer (if not the Issuer) will be bound by the provisions of this certificate and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this certificate to be performed by the Issuer. 2.4 Regarding the Special Warrant Agreement and Share Purchase Warrant Agreement. For greater clarity, the provisions of this section 2 are not intended to and shall not give the Holder rights in excess of or lesser than those rights granted in the Special Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company and the Share Purchase Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company (collectively, the "Agreements") with respect to the adjustment provisions contained in Article 7 of the respective agreements. To the extent there is any inconsistency between the adjustment provisions between the adjustment provisions herein and those contained in the Agreements, such inconsistently shall be resolved such that the Holder herein shall have the same adjustment rights as contained in the Agreements 3. Covenants The Issuer covenants and agrees that so long as any Agent's Warrants evidenced hereby remain outstanding it will: (a) at all times ensure that there are a sufficient number of Common Shares authorized to be issued upon the exercise of the Agent's Compensation Options and the Unit Agent's Warrants; provided that nothing herein contained shall affect or restrict the right of the Issuer to issue Common Shares from time to time subject to the terms and conditions of the Agent's Warrants; (b) at all times ensure that the Common Shares issued under the Agent's Compensation Options and the Unit Agent's Warrants will, upon payment therefor of the amount at which such Common Shares may be purchased, be issued as fully paid and non-assessable free from all taxes, liens, and charges with respect to the issue thereof and upon issuance such shares shall be listed on each national securities exchange on which the other shares of outstanding common stock of the Issuer are then listed or shall be eligible for inclusion in the NASDAQ National Market or the NASDAQ SmallCap Market if the other shares of outstanding common stock of the Company are so included; (c) preserve and maintain its corporate existence, and will use its best efforts to ensure that the Common Shares outstanding or issuable from time to time upon the exercise of the Agent's Compensation Options and the Unit Agent's Warrants are listed and may be traded through the NASDAQ OTC Bulletin Board and that it will use its commercial best efforts to list the Common Shares issuable upon the exercise of the Agent's Compensation Options and Unit Agent's Warrants and all other outstanding shares of its common stock on the NASDAQ National Market or if the Issuer does not meet the listing requirements of the NASDAQ National Market on the NASDAQ Smallcap Market as soon as possible after the Closing Date; (d) it will use its commercial best efforts to have an Effective Registration and to have the Receipts issued by the Commissions on or before the Qualification Deadline and will, in the event that either an Effective Registration is not filed or the Receipts are not issued on or before the Qualification Deadline, continue to use its commercial best efforts to file an Effective Registration and / or obtain the Receipts thereafter, as the case may be. Moreover, the Issuer covenants that if any securities to be reserved for the purpose of the exercise of the Special Warrants or the exercise of the Unit Warrants require registration with, or approval of, any governmental authority under any U.S. Securities Laws before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and expeditiously as reasonably possible to endeavour to secure such registration or approval. The Issuer will use commercial best efforts to obtain appropriate approvals or registrations under state "Blue Sky" security laws as applicable; (e) the Issuer will maintain its status as a reporting issuer in the Qualifying Provinces and as a "reporting company" with a class of equity securities registered pursuant to section 12(g) of the United States Securities Act of 1934 not in default of any reporting or filing requirements under U.S. Securities Laws thereafter and it will make all requisite filings under Applicable Securities Laws and stock exchange rules to report the exercise of the right to acquire the Unit Shares and the Unit Agent's Warrants, pursuant to the Agent's Compensation Options; and (f) the Issuer will send a written notice to the Holder in the manner provided in Section 11, of the issuance of the Receipts, together with a commercial copy of the Qualifying Prospectus, as soon as practicable but, in any event, not later than five business days after the issuance of the Receipts. 4. Transfer of Agent's Warrants The Agent's Warrants evidenced hereby are non-assignable. 5. Not a Shareholder Nothing in this certificate or in the holding of an Agent's Warrant shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Issuer. 6. Partial Exercise The Holder may subscribe for and acquire a number of Agent's Compensation Options less than the number it is entitled to acquire pursuant to this certificate. In the event of any such subscription, the Holder shall in addition be entitled to receive, without charge, a new Agent's Warrant certificate in respect of the balance of the Agent's Compensation Options which the Holder was entitled to acquire pursuant to this certificate and which were then not acquired. 7. No Obligation to Purchase Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Issuer to issue any securities except those securities in respect of which the Holder shall have exercised its right to subscribe hereunder in the manner provided for herein. 8. Representation and Warranty The Issuer hereby represents and warrants with and to the Holder that the Issuer is duly authorized and has the corporate and lawful power and authority to create and issue the Agent's Warrants evidenced hereby and the Agent's Compensation Options issuable upon the exercise of the Agent's Warrants and to perform its obligations hereunder and that the Agent's Warrants evidenced hereby represent a valid, legal and binding obligation of the Issuer enforceable in accordance with their terms. 9. Protection of Shareholders, Officers and Directors The Holder hereby waives and releases any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future shareholder, director, officer, employee or agent of the Issuer in their capacity as such, either directly or through the Issuer, relating to any obligations, representations, warranties and covenants under this certificate, it being acknowledged that all such obligations, representations, warranties and covenants are solely those of the Issuer. Accordingly, the obligations under this certificate are not personally binding upon, nor will resort hereunder be had to, the privately property of any of the past, present or future directors, officers, shareholders, employees or agents of the Issuer but only the property of the Issuer (or any successor corporation) will be bound in respect hereof. The protection afforded under this paragraph shall not extend to any misrepresentations knowingly made. 10. Lost Certificate If this Agent's Warrant certificate becomes stolen, lost, mutilated or destroyed, the Issuer may, on such terms as it may in its discretion impose, including the requirement to provide a bond of indemnity, respectively issue and countersign a new Agent's Warrant certificate of like denomination, tenure and date as the certificate so stolen, lost, mutilated or destroyed. 11. Notice Any notice or other communication, including a demand or a direction, required or permitted to be given hereunder shall be in writing and shall be given by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to a senior employee of the addressee at such address with responsibility for matters to which the information relates. Notice of change of address shall also be governed by this Section 11. Notice and other communications shall be addressed as follows: In the case of the Issuer: Urbana.ca, Inc. 22 Haddington Street Cambridge, ON N1R 2B9 Attention: Jason Cassis Fax: (519) 740-1190 With a copy to: Maitland & Company Barristers & Solicitors 700 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: Christopher D.Farber Fax: (604) 681-3896 In the case of the Holder: Groome Capital.com Inc. 20 Toronto Street, Suite 900 Toronto, Ontario M5C 2B8 Attention: Gordon Larock Fax: (416) 861-9992 With a copy to: Fraser Milner 1 First Canadian Place 100 King Street West Toronto, Ontario M5X 1B2 Attention: Mr. Rubin Rapuch Fax: (416) 863-4592 12. Governing Law The Agent's Warrants shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein. 13. Time of the Essence Time shall be of the essence hereof. 14. Business Day In the event that any date upon or by which any other action is required to be taken by the Issuer or the Holder is not a business day, then such action shall be required to be taken on or by the next succeeding day which is a business day. 15. Number and Gender Words importing the singular number only include the plural and vice versa and words importing any gender include all genders. 16. Headings The division of this Agent's Warrant certificate into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. 17. Binding Effect The terms and conditions of the Agent's Warrants as set out herein shall enure to the benefit of and be binding upon the registered Holder hereof, its heirs, executors, administrators, successors and assigns to the extent provided herein and shall enure to the benefit of and be binding upon the Issuer and its respective successors and assigns. 18. Severability In the event any provision hereof shall be void or unenforceable for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. Any court with jurisdiction over any dispute with respect to the Agent's Warrants may amend the provisions hereof to the minimum extent required to render the impugned provision valid and enforceable. IN WITNESS WHEREOF the Issuer has caused this Agent's Warrant certificate to be signed by its duly authorized officer this 27th day of April, 2000. URBANA.CA, INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer SCHEDULE "A" EXERCISE AND SUBSCRIPTION FORM TO: URBANA.CA, INC. RE: AGENT'S WARRANT CERTIFICATE NUMBER: AW-1 The undersigned holder of the attached Agent's Warrant certificate hereby irrevocably exercises its rights to acquire, without payment of additional consideration, subscribes for ____________Agent's Compensation Options of URBANA.CA, INC. pursuant to the terms of the Agent's Warrants specified in the attached certificate. DATED this day of (Please complete date including year) NAME: Signature: Registration instructions: Please check box if the Agent's Compensation Options certificates are to be collected from the Issuer's office, failing which the Agent's Compensation Options certificates will be mailed to the subscriber at the address set out above. If any Agent's Warrants represented by this certificate are not being exercised, a new Agent's Warrants certificate will be issued and delivered with the Agent's Compensation Options certificate. EX-4.5 7 0007.txt FORM OF NONASSIGNABLE AGENT'S COMPENSATION OPTIONS TO ACQUIRE UNITS THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, (ii) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT, IF AVAILABLE, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND FROM QUALIFICATION UNDER ANY SECURITIES LAWS APPLICABLE IN CANADA, IF AVAILABLE, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. FORM OF NON-ASSIGNABLE AGENT'S COMPENSATION OPTIONS TO ACQUIRE UNITS (EACH UNIT CONSISTING OF ONE UNIT SHARE AND ONE-HALF OF ONE UNIT AGENT'S WARRANT) OF URBANA.CA, INC. (Incorporated under the laws of the State of Nevada) Number of Agent's Compensation Options represented by this Certificate: ______________ Certificate Number: _____________ THIS CERTIFIES THAT, for value received, National Bank Financial ITF Groome Capital com. Inc. is entitled to receive, upon exercise and payment of $1.25 per Unit, one Unit of URBANA.CA, INC. (the "Issuer") for each of the Agent's Compensation Options evidenced hereby, subject to adjustment as herein set forth, at any time prior to 4:30 p.m. (Toronto time) on April 26, 2002 (the "Expiry Date"). The following provisions shall be applicable to the Agent's Compensation Options: 1. Interpretation 1.1 Currency All dollar amounts referred to herein shall be in lawful money of the United States. 1.2 Defined Terms As used herein, the following words and phrases shall have the following meanings respectively: (a) "Agency Agreement" means the agency agreement entered into between the Holder and the Issuer dated as of April 10, 2000; (b) "Agent's Compensation Options" means the compensation options evidenced hereby; (c) "Agent's Warrants" means the agent's warrants issued pursuant to the Agency Agreement; (d) "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Commissions and the securities legislation and polices of each other relevant jurisdiction in Canada, U.S. Securities Laws and the applicable rules, regulations and policies of the Exchange; (e) "business day" means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; (f) "close of business" means 4:30 p.m. (Toronto time); (g) "Closing Date" means April 27, 2000; (h) "Commissions" means the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission and the Commission des valuers mobilie du Quebec (Quebec Securities Commission); (i) "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Issuer; provided that if the exercise rights are subsequently adjusted or altered pursuant to Section 2, "Common Shares" will thereafter mean the shares or other securities or property that the Holder is entitled to on an exchange after the adjustment; (j) "Convertible Security" means a security of the Issuer (other than the Special Warrants and the Agent's Compensation Options) convertible into or exchangeable for or otherwise carrying the right to acquire Common Shares; (k) "Current Market Price" at any date means the average of the closing prices of the Common Shares at which the Common Shares have traded on the NASDAQ OTC Bulletin Board, or, if the Common Shares in respect of which a determination of current market price is being made are not listed on the NASDAQ OTC Bulletin Board, on such stock exchange on which such shares are listed as may be selected for such purpose by the directors and approved by the Trustee, or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market, during the 20 consecutive trading days (on each of which at least 500 Common Shares are traded in board lots) ending on the third trading day prior to such date, and the weighted average price will be determined by dividing the aggregate sale price of all Common Shares sold in board lots o the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold, or in the event that at any date the Common Shares are not listed on any exchange or on the over-the-counter market, the current market price shall be as determined by the directors and approved by the Trustee; (l) "Dividends Paid In The Ordinary Course" means dividends paid in any financial year of the Issuer, whether in (i) cash, (ii) shares of the Issuer, (iii) warrants or similar rights to purchase any shares of the Issuer or property or other assets of the Issuer at a purchase or exercise price of at least 110% of the fair market value of the shares or property or other assets purchasable as of the date of distribution of such warrants or similar rights, or (iv) property or other assets of the Issuer, as the case may be, as determined by action by the directors except that, in the case of warrants or similar rights to purchase Common Shares or securities convertible into or exchangeable for Common Shares, such fair market value of the warrants or similar rights shall be equal to the number of Common Shares which may be purchased thereby (or the number of Common Shares issuable upon conversion or exchange) as of the date of distribution of such warrants or similar rights, multiplied by the Current Market Price of the Common Shares on the date of such distribution, provided that the value of such dividends does not in such financial year exceed the greater of: (i) the lesser of 50% of the retained earnings of the Issuer as at the end of the immediately preceding financial year and 200% of the aggregate amount of dividends paid by the Issuer on the Common Shares in the 12-month period ending immediately prior to the first day of such financial year, and (ii) 100% of the consolidated net earnings from continuing operations of the Issuer, before any extraordinary items, for the 12-month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada consistent with those applied in the preparation of the most recently audited financial statements of the Issuer); (m) "director" means a director of the Issuer for the time being, and unless otherwise specified herein, "by the directors" means action by the directors of the Issuer as a board or, whenever duly empowered, action by any committee of such board; (n) "Effective Registration" shall have the same meaning as ascribed to such term in the Special Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company save and except that such definition shall be deemed to include the Unit Shares issuable upon the exercise of the Agent's Compensation Options and the Warrant Shares issuable upon the exercise of the Unit Agent's Warrants as such terms are defined herein. (o) "Exchange" means Over the Counter Bulletin Board in the United States; (p) "Exchange Number" means the number of securities to be received by the Holder upon exercise of the Agent's Compensation Options, as may be adjusted under the provisions of Section 2; (q) "Exercise Date" means the date upon which the Holder exercises its subscription rights hereunder pursuant to Section 1.3 hereof; (r) "Exercise Period" means the period during which the Holder may exercise the Agent's Compensation Options , commencing on the Closing Date and ending at the Time of Expiry; (s) "herein", "hereto", "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Agent's Compensation Options certificate and not to any particular Section, clause, subclause, subdivision or portion hereof, and the expressions, "Section", "clause" and "subclause" followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; (t) "Holder" means National Bank ITF Groome Capital.com Inc.; (u) "Private Placement" means the offering of Special Warrants pursuant to the Agency Agreement; (v) "Qualification Date" means the date on which all of the Commissions have issued the Receipts; (w) "Qualification Deadline" means on or before 5:00 p.m. (Toronto time) on September 25, 2000 which is the first business day 150 days after the Closing Date or such later date as may be approved by the Holder in its sole and absolute discretion by written notice to Pacific Corporate Trust Company not less than five business days prior to the expiry of such 150 day period; (x) "Qualifying Prospectus" means the (final) prospectus and any amendment thereto required to be filed with the Commissions pursuant to Applicable Securities Laws, in respect of the distribution, inter alia, of the Agent's Compensation Options upon the exercise of the Agent's Warrants and as referred to in the Agency Agreement; (y) "Receipts" means collectively, the receipts for the final Qualifying Prospectus to be issued by the Canadian Commissions and confirmation of filing with the Securities and Exchange Commission of an effective resale and registration statement registering these securities and the Special Warrants for resale in the United States of America; (z) "Registration Statement" means a Registration Statement of the Company under the 1933 Act; (aa) "Regulatory Authorities" means the Exchange and the Commissions; (bb) "SEC" means the United States Securities and Exchange Commission; (cc "Shareholder" means a holder of record of one or more Common Shares; (dd) "Special Warrants" means the special warrants issued upon closing of the Private Placement and subject to the terms and provisions of a special warrant agreement, dated April 27, 2000, between Pacific Corporate Trust Company and the Issuer; (ee) "Time of Expiry" means 4:30 p.m., Toronto time, on the Expiry Date; (ff) "trading day" with respect to a stock exchange means a day on which such stock exchange is open for business; (gg) "Unit Purchase Price" means US$1.25 per Unit; (hh) "Unit Shares" means the previously unissued Common Shares which are issuable upon the exercise of the Agent's Compensation Options; (ii) "Unit Agent's Warrants" means the share purchase warrants of the Issuer which are issuable upon the exercise of the Agent's Compensation Options, each one Unit Agent's Warrant entitling the holder to acquire one Common Share at a price of US$5.00 each on or before April 26, 2002; (jj) "U.S. Securities Laws" means collectively, all applicable federal and state laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases, and rulings of the SEC and any applicable state securities regulatory authorities; (kk) "Warrant Shares" means the Common Shares issuable by the Issuer upon the exercise of the Unit Agent's Warrants; (ll) "1933 Act" means the United States Securities Act of 1933, as amended. 1.3 Manner of Exercise; Issuance of Certificates The Holder may exercise its right to convert the Agent's Compensation Options evidenced by this certificate for Units hereunder at any time prior to the Time of Expiry, by the surrender to the Issuer at 22 Haddington Street, Cambridge, Ontario of this Agent's Compensation Options certificate, together with a completed subscription in the form attached as Schedule "A" hereto (the "Agent's Compensation Options Subscription Form"), together with the full Unit Purchase Price payable by certified cheque or bank draft, prior to the close of business on any business day, or at such other address as the Issuer may designate by notice in writing to the Holder. The Unit Shares and the Unit Agent's Warrants subscribed for shall be deemed to be issued to the Holder as the owner of record of such securities as of the close of business on the date on which this Agent's Compensation Options certificate shall have been so surrendered. The Agent's Compensation Options shall be deemed to be surrendered only upon personal delivery thereof or, if sent by mail or other means of transmission, upon actual receipt by the Issuer. Certificates for the Unit Shares and the Unit Agent's Warrants so subscribed for shall be delivered to the Holder within a reasonable time, not exceeding five business days, after the subscription right provided for herein has been so exercised. 1.4 No Fractional Shares Notwithstanding any adjustments provided for in Section 2.1 hereof or otherwise, the Issuer shall not be required upon the exercise of any Agent's Compensation Options to issue fractional Unit Shares in satisfaction of its obligations hereunder. Where a fractional Unit Share would, but for this Section 1.4, have been issued upon exercise of an Agent's Compensation Option, in lieu thereof, there shall be paid to the Holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the Current Market Price at the date of delivery of this certificate and the duly completed Agent's Compensation Options Subscription Form, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Issuer shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 2. Adjustments 2.1 (a) The rights of the Holder, including the number of Units for which the Holder may subscribe upon exercise of the Agent's Compensation Options, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section. (b) The Exchange Number in effect at any date will be subject to adjustment from time to time as follows: (i) Share Reorganization: If and whenever at any time during the Exercise Period, the Issuer shall (A) subdivide or redivide the outstanding Common Shares into a greater number of Common Shares, (B) consolidate or combine or reduces the outstanding Common Shares into a lesser number of Common Shares, or (C) fix a record date for the issue of Common Shares or Convertible Securities to all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, then, in each such event, the Exchange Number will, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exchange Number in effect immediately prior to such date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the numerator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment will be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under Section 2.1(b)(i) and (ii) hereof. Upon any adjustment of the Exchange Number pursuant to this paragraph 2.1(b)(i), the number of Unit Shares subject to the right of purchase under each Unit and the number of Warrant Shares subject to the right of purchase under each Unit Agent's Warrant not previously exercised will be contemporaneously adjusted by multiplying the number of Unit Shares or Warrant Shares, respectively, which theretofore may have been purchased under such Unit or Unit Agent's Warrant by a fraction, the numerator of which shall be the Exchange Number in effect immediately before such adjustment and the denominator shall be the Exchange Number resulting from such adjustment. For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this section 2.1(b)(i) there will be included that number of Common Shares which would have resulted from the conversion at that time of all outstanding Convertible Securities which, for greater certainty, includes the unexercised Special Warrants and Unit Agent's Warrants. (ii) Rights Offering: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or Convertible Securities) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the numerator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(ii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. (iii) Special Distribution: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the making of a distribution to all or substantially all of the holders of Common Shares of (A) shares of any class other than shares distributed to holders of Common Shares pursuant to the exercise of options to receive dividends in the form of such shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares, (B) rights, options or warrants (other than Unit Agent's Warrants and other than rights, options or warrants exercisable within 45 days from the date of issue thereof at a price per share, or at an exchange or conversion price per share in the case of securities exchangeable for or convertible into Common Shares, of at least 95% of the Current Market Price at the record date for such distribution), (C) evidences of indebtedness, or (D) any other assets including shares of other corporations (excluding cash dividends that holders of the Special Warrants receive under the provisions of the Special Warrant Indenture) in each such case and if such distribution does not constitute a Dividend Paid in the Ordinary Course, or fall under Sections 2.1(b)(i) or (ii) above, the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on the earlier of such record date and the date on which the Issuer announces its intention to make such distribution, less the aggregate fair market value (as determined by the directors, acting reasonably, at the time such distribution is authorized) of such shares or rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets so distributed, and of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price. Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(iii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants so distributed are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon such rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets actually distributed or based upon the number or amount of securities or the property or assets actually issued or distributed upon the exercise of such rights, options or warrants, as the case may be. (c) Capital Reorganization: If and whenever at any time from the date hereof during the Exercise Period there is a reorganization of the Issuer not otherwise provided for in Section 2.1(b)(i) or a consolidation or merger or amalgamation of the Issuer with or into another body corporate or other entity including a transaction whereby all or substantially all of the Issuer's undertaking and assets become the property of any other body corporate, trust, partnership or other entity (any such event being a "Capital Reorganization"), the Holder of any Agent's Compensation Options which have not been exercised prior to the effective date of the Capital Reorganization will be entitled to receive and will accept, upon the exercise of the Holder's right at any time after the effective date of the Capital Reorganization, in lieu of the number of Agent's Compensation Options to which it would have been entitled to receive upon exercise of the Agent's Compensation Options, the aggregate number of shares or other securities or property of the Issuer, or the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization that the Holder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, it had been the holder of the number of Agent's Compensation Options to which immediately before the transaction he was entitled upon exercise of the Agent's Compensation Options; no Capital Reorganization will be carried into effect unless all necessary steps will have been taken so that the Holder will thereafter be entitled to receive the number of shares or other securities or property of the Issuer, or of the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in this Section 2. (d) Reclassification of Common Shares: If the Issuer reclassifies or otherwise change the outstanding Common Shares, the exercise right will be adjusted effective immediately upon the reclassification becoming effective so that if the Holder exercises its rights thereafter it will be entitled to receive such shares as it would have been entitled to receive upon exercise of the Agent's Compensation Options had they exercised immediately prior to the effective date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, to those contained in this Section 2. 2.2 Rules Regarding Calculation of Adjustment of Exchange Number (a) The adjustments and readjustments provided for in this Section 2 are cumulative and subject to subsection 2.2(b), will apply (without duplication) to successive issues subdivisions, combinations, consolidations, distributions and any other events that require adjustment of the Exchange Number or the number or kind of shares or securities to be issued upon exercise of the Agent's Compensation Options. (b) No adjustment in the Exchange Number is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exchange Number; provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments. (c) No adjustment in the Exchange Number will be made in respect of any event described in Section 2.1, other than the events referred to in Section 2.1(b)(i)(A) and (B), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if the Holder had exercised the Agent's Compensation Options evidenced by this certificate prior to or on the effective date or record date of such event. (d) No adjustment in the Exchange Number will be made under Section 2.1 in respect of the issue from time to time of Common Shares issuable from time to time as Dividends Paid in the Ordinary Course. (e) If at any time a dispute arises with respect to adjustments of the Exchange Number, such dispute will be conclusively determined by the auditors of the Issuer or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action by the directors of the Issuer and any such determination, subject to any necessary regulatory approval, will be binding upon the Issuer and the Holder. (f) If and whenever at any time from the date hereof during the Exercise Period the Issuer takes any action affecting the Common Shares, other than action described in Section 2.1, which in the opinion of the board of directors of the Issuer would materially affect the rights of the Holder, the Exchange Number will be adjusted in such manner, if any, and at such time, by action by the directors of the Issuer in such manner as they may reasonably determine to be equitable in the circumstances but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Issuer so as to provide for an adjustment on or prior to the effective date of any action by the Issuer affecting the Common Shares will be conclusive evidence that the board of directors of the Issuer has determined that it is equitable to make no adjustment in the circumstances. (g) If the Issuer sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and thereafter legally abandons its plans to pay or deliver such dividend, distribution or subscription or purchase rights, then no adjustment in the Exchange Number will be required by reason of the setting of such record date. (h) As a condition precedent to the taking of any action which would require any adjustment to the Agent's Compensation Options evidenced hereby, including the Exchange Number, the Issuer shall take any corporate action which may be necessary in order that the Issuer have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof. (i) The Issuer will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 2.1, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exchange Number. (j) The Issuer covenants to and in favour of the Holder that so long as any of the Agent's Compensation Options evidenced by this certificate remain outstanding, it will give notice to the Holder of its intention to fix a record date for any event referred to in Section 2.1 which may give rise to an adjustment in the Exchange Number, and, in each case, such notice must specify the particulars of such event and the record date and the effective date for such event to the extent determinable, any adjustment required and the computation of such adjustment; provided that the Issuer is only required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice must be given not less than fourteen days in each case prior to such applicable record date or effective date. (k) In any case where the application of any of this section 2 results in an increase of the Exchange Number taking effect immediately after the record date for or occurrence of a specific event, if any Special Warrants are exercised after that record date or occurrence and prior to completion of the event or of the period for which a calculation is required to be made, the Company may postpone the issuance, to the Holder, of the Securities to which the Holder is entitled by reason of the increase of the Exchange Number but the Securities will be so issued and delivered to that holder upon completion of that event or period, with the number of those Securities calculated on the basis of the Exchange Number on the Exercise Date adjusted for completion of that event or period, and the Company will forthwith after the Exercise Date deliver to the person or persons in whose name or names the Securities are to be issued an appropriate instrument evidencing the person's or persons' right to receive the Securities. 2.3 Successor Companies In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of the Issuer as an entirety or substantially as an entirety to another corporation ("successor corporation"), the successor corporation resulting from the consolidation, amalgamation, merger or transfer (if not the Issuer) will be bound by the provisions of this certificate and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this certificate to be performed by the Issuer. 2.4 Regarding the Special Warrant Agreement and Share Purchase Warrant Agreement. For greater clarity, the provisions of this section 2 are not intended to and shall not give the Holder rights in excess of or lesser than those rights granted in the Special Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company and the Share Purchase Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company (collectively, the "Agreements") with respect to the adjustment provisions contained in Article 7 of the respective agreements. To the extent there is any inconsistency between the adjustment provisions between the adjustment provisions herein and those contained in the Agreements, such inconsistently shall be resolved such that the Holder herein shall have the same adjustment rights as contained in the Agreements 3. Covenants The Issuer covenants and agrees that so long as any Agent's Compensation Options evidenced hereby remain outstanding it will: (a) at all times ensure that there are a sufficient number of Common Shares authorized to be issued upon the exercise of the Agent's Compensation Options and the Unit Agent's Warrants; provided that nothing herein contained shall affect or restrict the right of the Issuer to issue Common Shares from time to time subject to the terms and conditions of the Agent's Compensation Options; (b) at all times ensure that the Common Shares issued under the Agent's Compensation Options and the Unit Agent's Warrants will, upon payment therefor of the amount at which such Common Shares may be purchased, be issued as fully paid and non-assessable free from all taxes, liens, and charges with respect to the issue thereof and upon issuance such shares shall be listed on each national securities exchange on which the other shares of outstanding common stock of the Issuer are then listed or shall be eligible for inclusion in the NASDAQ National Market or the NASDAQ SmallCap Market if the other shares of outstanding common stock of the Company are so included; (c) preserve and maintain its corporate existence, and will use its best efforts to ensure that the Common Shares outstanding or issuable from time to time upon the exercise of the Agent's Compensation Options and the Unit Agent's Warrants are listed and may be traded through the NASDAQ OTC Bulletin Board and that it will use its commercial best efforts to list the Common Shares issuable upon the exercise of the Agent's Compensation Options and Unit Agent's Warrants and all other outstanding shares of its common stock on the NASDAQ National Market or if the Issuer does not meet the listing requirements of the NASDAQ National Market on the NASDAQ Smallcap Market as soon as possible after the Closing Date; (d) it will use its commercial best efforts to have an Effective Registration and to have the Receipts issued by the Commissions on or before the Qualification Deadline and will, in the event that either an Effective Registration is not filed or the Receipts are not issued on or before the Qualification Deadline, continue to use its commercial best efforts to file an Effective Registration and / or obtain the Receipts thereafter, as the case may be. Moreover, the Issuer covenants that if any securities to be reserved for the purpose of the exercise of the Special Warrants or the exercise of the Unit Warrants require registration with, or approval of, any governmental authority under any U.S. Securities Laws before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and expeditiously as reasonably possible to endeavour to secure such registration or approval. The Issuer will use commercial best efforts to obtain appropriate approvals or registrations under state "Blue Sky" security laws as applicable; (e) the Issuer will maintain its status as a reporting issuer in the Qualifying Provinces and as a "reporting company" with a class of equity securities registered pursuant to section 12(g) of the United States Securities Act of 1934 not in default of any reporting or filing requirements under U.S. Securities Laws thereafter and it will make all requisite filings under Applicable Securities Laws and stock exchange rules to report the exercise of the right to acquire the Unit Shares and the Unit Agent's Warrants, pursuant to the Agent's Compensation Options; and (f) the Issuer will send a written notice to the Holder at the address of the Holder provided in Section 11, of the issuance of the Receipts, together with a commercial copy of the Qualifying Prospectus, as soon as practicable but, in any event, not later than five business days after the issuance of the Receipts. 4. Transfer of Agent's Compensation Options he Agent's Compensation Options evidenced hereby are non-assignable. 5. Not a Shareholder Nothing in this certificate or in the holding of an Agent's Warrant shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Issuer. 6. Partial Exercise The Holder may subscribe for and acquire a number of Unit Shares and Unit Agent's Warrants less than the number it is entitled to acquire pursuant to this certificate. In the event of any such subscription, the Holder shall in addition be entitled to receive, without charge, a new Agent's Compensation Options certificate in respect of the balance of the Units which the Holder was entitled to acquire pursuant to this certificate and which were then not acquired. 7. No Obligation to Purchase Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Issuer to issue any securities except those securities in respect of which the Holder shall have exercised its right to subscribe hereunder in the manner provided for herein. 8. Representation and Warranty The Issuer hereby represents and warrants with and to the Holder that the Issuer is duly authorized and has the corporate and lawful power and authority to create and issue the Agent's Compensation Options evidenced hereby and the Unit Shares and Unit Agent's Warrants issuable upon the exercise of the Agent's Compensation Options and to perform its obligations hereunder and that the Agent's Compensation Options evidenced hereby represent a valid, legal and binding obligation of the Issuer enforceable in accordance with their terms. 9. Protection of Shareholders, Officers and Directors The Holder hereby waives and releases any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future shareholder, director, officer, employee or agent of the Issuer in their capacity as such, either directly or through the Issuer, relating to any obligations, representations, warranties and covenants under this certificate, it being acknowledged that all such obligations, representations, warranties and covenants are solely those of the Issuer. Accordingly, the obligations under this certificate are not personally binding upon, nor will resort hereunder be had to, the privately property of any of the past, present or future directors, officers, shareholders, employees or agents of the Issuer but only the property of the Issuer (or any successor corporation) will be bound in respect hereof. The protection afforded under this paragraph shall not extend to any misrepresentations knowingly made. 10. Lost Certificate If this Agent's Compensation Options certificate becomes stolen, lost, mutilated or destroyed, the Issuer may, on such terms as it may in its discretion impose, including the requirement to provide a bond of indemnity, respectively issue and countersign a new Agent's Compensation Options certificate of like denomination, tenure and date as the certificate so stolen, lost, mutilated or destroyed. 11. Notice Any notice or other communication, including a demand or a direction, required or permitted to be given hereunder shall be in writing and shall be given by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to a senior employee of the addressee at such address with responsibility for matters to which the information relates. Notice of change of address shall also be governed by this Section 11. Notice and other communications shall be addressed as follows: in the case of the Issuer: Urbana.ca, Inc. 22 Haddington Street Cambridge, ON N1R 2B9 Attention: Jason Cassis Fax: (519) 740-1190 with a copy to: Maitland & Company Barristers & Solicitors 700 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: Christopher D. Farber Fax: (604) 681-3896 in the case of the Holder: Groome Capital.com Inc. 20 Toronto Street, Suite 900 Toronto, Ontario M5C 2B8 Attention: Gordon Larock Fax: (416) 861-9992 with a copy to: Fraser Milner 1 First Canadian Place 100 King Street West Toronto, Ontario M5X 1B2 Attention: Mr. Rubin Rapuch Fax: (416) 863-4592 12. Governing Law The Agent's Compensation Options shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein. 13. Time of the Essence Time shall be of the essence hereof. 14. Business Day In the event that any date upon or by which any other action is required to be taken by the Issuer or the Holder is not a business day, then such action shall be required to be taken on or by the next succeeding day which is a business day. 15. Number and Gender Words importing the singular number only include the plural and vice versa and words importing any gender include all genders. 16. Headings The division of this certificate into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. 17. Binding Effect The terms and conditions of the Agent's Compensation Options as set out herein shall enure to the benefit of and be binding upon the registered Holder hereof, its heirs, executors, administrators, successors and assigns to the extent provided herein and shall enure to the benefit of and be binding upon the Issuer and its respective successors and assigns. 18. Severability In the event any provision hereof shall be void or unenforceable for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. Any court with jurisdiction over any dispute with respect to the Agent's Compensation Options may amend the provisions hereof to the minimum extent required to render the impugned provision valid and enforceable. IN WITNESS WHEREOF the Issuer has caused this certificate to be signed by its duly authorized officer this 27th day of ________________, 2000. URBANA.CA, INC. By: __________________________________ SCHEDULE "A" EXERCISE AND SUBSCRIPTION FORM TO: URBANA.CA, INC. RE: AGENT'S COMPENSATION OPTIONS CERTIFICATE NUMBER: __________ The undersigned holder of the attached Agent's Compensation Options certificate hereby irrevocably exercises its rights to acquire, at a price of US$1.25 per Unit, and subscribes for ___________ Units, each Unit consisting of one (1) Unit Share and one-half of one Unit Agent's Warrant of URBANA.CA, INC. pursuant to the terms of the Agent's Compensation Options specified in the attached certificate. DATED this day of (Please complete date including year) NAME: Signature: Registration instructions: Please check box if the Unit Shares and Unit Agent's Warrants certificates are to be collected from the Issuer's office, failing which they will be mailed to the subscriber at the address set out above. If any Agent's Compensation Options represented by this certificate are not being exercised, a new Agent's Compensation Options certificate will be issued and delivered with the Unit Shares and Unit Agent's Warrants certificates. EX-4.6 8 0008.txt FORM OF NONASSIGNABLE AGENT'S WARRANTS TO ACQUIRE COMMON SHARES THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, (ii) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT, IF AVAILABLE, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND FROM QUALIFICATION UNDER ANY SECURITIES LAWS APPLICABLE IN CANADA, IF AVAILABLE, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. FORM OF NON-ASSIGNABLE AGENT'S WARRANTS TO ACQUIRE COMMON SHARES OF URBANA.CA, INC. (Incorporated under the laws of the State of Nevada) Number of Unit Agent's Warrants represented by this Certificate: _____________ Certificate Number: _____________ THIS CERTIFIES THAT, for value received, National Bank Financial ITF Groome Capital.com Inc. is entitled to receive, upon exercise and payment of US$5.00 per Warrant Share, one Warrant Share of URBANA.CA, INC. (the "Issuer") for each of the Unit Agent's Warrants evidenced hereby, subject to adjustment as herein set forth, at any time prior to 4:30 p.m. (Toronto time) on April 26, 2002 (the "Expiry Date"). The following provisions shall be applicable to the Agent's Unit Warrants: 1. Interpretation 1.1 Currency All dollar amounts referred to herein shall be in lawful money of the United States. 1.2 Defined Terms As used herein, the following words and phrases shall have the following meanings respectively: (a) "Agency Agreement" means the agency agreement entered into between the Holder and the Issuer dated as of April 10, 2000; (b) "Agent's Warrants" means the agent's warrants issued pursuant to the Agency Agreement; (c) "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Commissions and the securities legislation and polices of each other relevant jurisdiction in Canada, U.S. Securities Laws and the applicable rules, regulations and policies of the Exchange; (d) "business day" means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; (e) "close of business" means 4:30 p.m. (Toronto time); (f) "Closing Date" means April 27, 2000; (g) "Commissions" means the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission; the Commission des valuers mobilie du Quebec (Quebec Securities Commission); (h) "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Issuer; provided that if the exercise rights are subsequently adjusted or altered pursuant to Section 2, "Common Shares" will thereafter mean the shares or other securities or property that the Holder is entitled to on an exchange after the adjustment; (i) "Convertible Security" means a security of the Issuer (other than the Special Warrants and the Agent's Compensation Options) convertible into or exchangeable for or otherwise carrying the right to acquire Common Shares; (j) "Current Market Price" at any date means the average of the closing prices of the Common Shares at which the Common Shares have traded on the NASDAQ OTC Bulletin Board, or, if the Common Shares in respect of which a determination of current market price is being made are not listed on the NASDAQ OTC Bulletin Board, on such stock exchange on which such shares are listed as may be selected for such purpose by the directors and approved by the Trustee, or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market, during the 20 consecutive trading days (on each of which at least 500 Common Shares are traded in board lots) ending on the third trading day prior to such date, and the weighted average price will be determined by dividing the aggregate sale price of all Common Shares sold in board lots o the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold, or in the event that at any date the Common Shares are not listed on any exchange or on the over-the-counter market, the current market price shall be as determined by the directors and approved by the Trustee; (k) "Dividends Paid In The Ordinary Course" means dividends paid in any financial year of the Issuer, whether in (i) cash, (ii) shares of the Issuer, (iii) warrants or similar rights to purchase any shares of the Issuer or property or other assets of the Issuer at a purchase or exercise price of at least 110% of the fair market value of the shares or property or other assets purchasable as of the date of distribution of such warrants or similar rights, or (iv) property or other assets of the Issuer, as the case may be, as determined by action by the directors except that, in the case of warrants or similar rights to purchase Common Shares or securities convertible into or exchangeable for Common Shares, such fair market value of the warrants or similar rights shall be equal to the number of Common Shares which may be purchased thereby (or the number of Common Shares issuable upon conversion or exchange) as of the date of distribution of such warrants or similar rights, multiplied by the Current Market Price of the Common Shares on the date of such distribution, provided that the value of such dividends does not in such financial year exceed the greater of: (i) the lesser of 50% of the retained earnings of the Issuer as at the end of the immediately preceding financial year and 200% of the aggregate amount of dividends paid by the Issuer on the Common Shares in the 12-month period ending immediately prior to the first day of such financial year, and (ii) 100% of the consolidated net earnings from continuing operations of the Issuer, before any extraordinary items, for the 12-month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada consistent with those applied in the preparation of the most recently audited financial statements of the Issuer); (l) "director" means a director of the Issuer for the time being, and unless otherwise specified herein, "by the directors" means action by the directors of the Issuer as a board or, whenever duly empowered, action by any committee of such board; (m) "Effective Registration" shall have the same meaning as ascribed to such term in the Special arrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company save and except that such definition shall be deemed to include the Unit Shares issuable upon the exercise of the Agent's Compensation Options and the Warrant Shares issuable upon the exercise of the Unit Agent's Warrants as such terms are defined herein; (n) "Exchange" means the Over the Counter Bulletin Board in the United States; (o) "Exchange Number" means the number of securities to be received by the Holder upon exercise of the Unit Agent's Warrants , as may be adjusted under the provisions of Section 2; (p) "Exercise Date" means the date upon which the Holder exercises its subscription rights hereunder pursuant to Section 1.3 hereof; (q) "Exercise Period" means the period during which the Holder may exercise the Unit Agent's Warrants, commencing on the Closing Date and ending at the Time of Expiry; (r) "herein", "hereto", "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Unit Agent's Warrants certificate and not to any particular Section, clause, subclause, subdivision or portion hereof, and the expressions, "Section", "clause" and "subclause" followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; (s) "Holder" means Groome Capital.com Inc.; (t) "Private Placement" means the offering of Special Warrants pursuant to the Agency Agreement; (u) "Qualification Date" means the date on which all of the Commissions have issued the Receipts; (v) "Qualification Deadline" means on or before 5:00 p.m. (Toronto time) on September 25, 2000 which is the first business day 150 days after the Closing Date or such later date as may be approved by the Holder in its sole and absolute discretion by written notice to Pacific Corporate Trust Company not less than five business days prior to the expiry of such 150 day period; (w) "Qualifying Prospectus" means the (final) prospectus and any amendment thereto required to be filed with the Commissions pursuant to Applicable Securities Laws, referred to in the Agency Agreement; (x) "Receipts" means, collectively, the receipts for the final Qualifying Prospectus to be issued by the Canadian Commissions and confirmation of filing an effective resale registration statement registering these securities and the Special Warrants for resale in the United States of America; (y) "Registration Statement" means a Registration Statement of the Company under the 1933 Act; (z) "Regulatory Authorities" means the Exchange and the Commissions; (aa) "SEC" means the United States Securities and Exchange Commission; (bb) "Shareholder" means a holder of record of one or more Common Shares; (cc) "Special Warrants" means the special warrants issued upon closing of the Private Placement and subject to the terms and provisions of a special warrant agreement, dated April 27, 2000, between Pacific Corporate Trust Company and the Issuer; (dd) "Time of Expiry" means 5:00 p.m., Toronto time, on the Expiry Date; (ee) "trading day" with respect to a stock exchange means a day on which such stock exchange is open for business; (ff) "Unit Agent's Warrants" means the share purchase warrants of the Issuer evidenced hereby; (gg) "U.S. Securities Laws" means collectively, all applicable federal and state laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases, and rulings of the SEC and any applicable state securities regulatory authorities; (hh) "Warrant Share Purchase Price" means US$5.00 per Common Share; (ii) "Warrant Shares" means the Common Shares issuable by the Issuer upon the exercise of the Unit Agent's Warrants. (jj) "1933 Act" means the United States Securities Act of 1933, as amended. 1.3 Manner of Exercise; Issuance of Certificates The Holder may exercise its right to convert the Unit Agent's Warrants evidenced by this certificate for Warrant Shares hereunder at any time prior to the Time of Expiry, by the surrender to the Issuer at 22 Haddington Street, Cambridge, Ontario of this Unit Agent's Warrants certificate, together with a completed subscription in the form attached as Schedule "A" hereto (the "Unit Agent's Warrants Subscription Form"), together with the full Warrant Share Purchase Price payable by certified cheque or bank draft, prior to the close of business on any business day, or at such other address as the Issuer may designate by notice in writing to the Holder. The Warrant Shares subscribed for shall be deemed to be issued to the Holder as the owner of record of such securities as of the close of business on the date on which this Unit Agent's Warrants certificate shall have been so surrendered. The Unit Agent's Warrants shall be deemed to be surrendered only upon personal delivery thereof or, if sent by mail or other means of transmission, upon actual receipt by the Issuer. Certificates for the Warrant Shares so subscribed for shall be delivered to the Holder within a reasonable time, not exceeding five business days, after the subscription right provided for herein has been so exercised. 1.4 No Fractional Shares Notwithstanding any adjustments provided for in Section 2.1 hereof or otherwise, the Issuer shall not be required upon the exercise of any Unit Agent's Warrants to issue fractional Warrant Shares in satisfaction of its obligations hereunder. Where a fractional Warrant Share would, but for this Section 1.4, have been issued upon exercise of a Unit Agent's Warrants, in lieu thereof, there shall be paid to the Holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the Current Market Price at the date of delivery of this certificate and the duly completed Unit Agent's Warrants Subscription Form, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Issuer shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 2. Adjustments 2.1 (a) The rights of the Holder, including the number of Warrant Shares for which the Holder may subscribe upon exercise of the Unit Agent's Warrants, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section. (b) The Exchange Number in effect at any date will be subject to adjustment from time to time as follows: (i) Share Reorganization: If and whenever at any time during the Exercise Period, the Issuer shall (A) subdivide or redivide the outstanding Common Shares into a greater number of Common Shares, (B) consolidate or combine or reduces the outstanding Common Shares into a lesser number of Common Shares, or (C) fix a record date for the issue of Common Shares or Convertible Securities all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, then, in each such event, the Exchange Number will, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exchange Number in effect immediately prior to such date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the numerator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment will be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under Section 2.1(b)(i) and (ii) hereof. Upon any adjustment of the Exchange Number pursuant to this paragraph 2.1(b)(i), the number of Warrant Shares subject to the right of purchase under each Unit Agent's Warrant not previously exercised will be contemporaneously adjusted by multiplying the number of Warrant Shares which theretofore may have been purchased under such Unit Agent's Warrant by a fraction, the numerator of which shall be the Exchange Number in effect immediately before such adjustment and the denominator shall be the Exchange Number resulting from such adjustment. For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this section 2.1(b)(i) there will be included that number of Common Shares which would have resulted from the conversion at that time of all outstanding Convertible Securities which, for greater certainty, includes the unexercised Special Warrants and Unit Agent's Warrants. (ii) Rights Offering: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the numerator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(ii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. (iii) Special Distribution: If and whenever at any time during the Exercise Period, the Issuer shall fix a record date for the making of a distribution to all or substantially all of the holders of Common Shares of (A) shares of any class other than shares distributed to holders of Common Shares pursuant to the exercise of options to receive dividends in the form of such shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares, (B) rights, options or warrants (other than Unit Agent's Warrants and other than rights, options or warrants exercisable within 45 days from the date of issue thereof at a price per share, or at an exchange or conversion price per share in the case of securities exchangeable for or convertible into Common Shares, of at least 95% of the Current Market Price at the record date for such distribution), (C) evidences of indebtedness, or (D) any other assets including shares of other corporations (excluding cash dividends that holders of the Special Warrants receive under the provisions of the Special Warrant Indenture) in each such case and if such distribution does not constitute a Dividend Paid in the Ordinary Course, or fall under Sections 2.1(b)(i) or (ii) above, the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on the earlier of such record date and the date on which the Issuer announces its intention to make such distribution, less the aggregate fair market value (as determined by the directors, acting reasonably, at the time such distribution is authorized) of such shares or rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets so distributed, and of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price. Any Common Shares owned by or held for the account of the Issuer or any subsidiary of the Issuer shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(iii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants so distributed are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon such rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets actually distributed or based upon the number or amount of securities or the property or assets actually issued or distributed upon the exercise of such rights, options or warrants, as the case may be. (c) Capital Reorganization: If and whenever at any time from the date hereof during the Exercise Period there is a reorganization of the Issuer not otherwise provided for in Section 2.1(b)(i) or a consolidation or merger or amalgamation of the Issuer with or into another body corporate or other entity including a transaction whereby all or substantially all of the Issuer's undertaking and assets become the property of any other body corporate, trust, partnership or other entity (any such event being a "Capital Reorganization"), the Holder of any Unit Agent's Warrants which have not been exercised prior to the effective date of the Capital Reorganization will be entitled to receive and will accept, upon the exercise of the Holder's right at any time after the effective date of the Capital Reorganization, in lieu of the number of Unit Agent's Warrants to which it would have been entitled to receive upon exercise of the Unit Agent's Warrants, the aggregate number of shares or other securities or property of the Issuer, or the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization that the Holder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, it had been the holder of the number of Unit Agent's Warrants to which immediately before the transaction he was entitled upon exercise of the Unit Agent's Warrants; no Capital Reorganization will be carried into effect unless all necessary steps will have been taken so that the Holder will thereafter be entitled to receive the number of shares or other securities or property of the Issuer, or of the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in this Section 2. (d) Reclassification of Common Shares: If the Issuer reclassifies or otherwise change the outstanding Common Shares, the exercise right will be adjusted effective immediately upon the reclassification becoming effective so that if the Holder exercises its rights thereafter it will be entitled to receive such shares as it would have been entitled to receive upon exercise of the Unit Agent's Warrants had they exercised immediately prior to the effective date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, to those contained in this Section 2. 2.2 Rules Regarding Calculation of Adjustment of Exchange Number (a) The adjustments and readjustments provided for in this Section 2 are cumulative and subject to subsection 2.2(b), will apply (without duplication) to successive issues subdivisions, combinations, consolidations, distributions and any other events that require adjustment of the Exchange Number or the number or kind of shares or securities to be issued upon exercise of the Unit Agent's Warrants. (b) No adjustment in the Exchange Number is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exchange Number; provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments. (c) No adjustment in the Exchange Number will be made in respect of any event described in Section 2.1, other than the events referred to in Section 2.1(b)(i)(A) and (B), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if the Holder had exercised the Unit Agent's Warrants evidenced by this certificate prior to or on the effective date or record date of such event. (d) No adjustment in the Exchange Number will be made under Section 2.1 in respect of the issue from time to time of Common Shares issuable from time to time as Dividends Paid in the Ordinary Course. (e) If at any time a dispute arises with respect to adjustments of the Exchange Number, such dispute will be conclusively determined by the auditors of the Issuer or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action by the directors of the Issuer and any such determination, subject to any necessary regulatory approval, will be binding upon the Issuer and the Holder. (f) If and whenever at any time from the date hereof during the Exercise Period the Issuer takes any action affecting the Common Shares, other than action described in Section 2.1, which in the opinion of the board of directors of the Issuer would materially affect the rights of the Holder, the Exchange Number will be adjusted in such manner, if any, and at such time, by action by the directors of the Issuer in such manner as they may reasonably determine to be equitable in the circumstances but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Issuer so as to provide for an adjustment on or prior to the effective date of any action by the Issuer affecting the Common Shares will be conclusive evidence that the board of directors of the Issuer has determined that it is equitable to make no adjustment in the circumstances. (g) If the Issuer sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and thereafter legally abandons its plans to pay or deliver such dividend, distribution or subscription or purchase rights, then no adjustment in the Exchange Number will be required by reason of the setting of such record date. (h) As a condition precedent to the taking of any action which would require any adjustment to the Unit Agent's Warrants evidenced hereby, including the Exchange Number, the Issuer shall take any corporate action which may be necessary in order that the Issuer have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof. (i) The Issuer will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 2.1, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exchange Number. (j) The Issuer covenants to and in favour of the Holder that so long as any of the Agent's Compensation Options evidenced by this certificate remain outstanding, it will give notice to the Holder of its intention to fix a record date for any event referred to in Section 2.1 which may give rise to an adjustment in the Exchange Number, and, in each case, such notice must specify the particulars of such event and the record date and the effective date for such event, and, to the extent determinable, any adjustment required and the computation of such adjustment; provided that the Issuer is only required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice must be given not less than fourteen days in each case prior to such applicable record date or effective date. (k) In any case where the application of any of this section 2 results in an increase of the Exchange Number taking effect immediately after the record date for or occurrence of a specific event, if any Special Warrants are exercised after that record date or occurrence and prior to completion of the event or of the period for which a calculation is required to be made, the Company may postpone the issuance, to the Holder, of the Securities to which the Holder is entitled by reason of the increase of the Exchange Number but the Securities will be so issued and delivered to that holder upon completion of that event or period, with the number of those Securities calculated on the basis of the Exchange Number on the Exercise Date adjusted for completion of that event or period, and the Company will forthwith after the Exercise Date deliver to the person or persons in whose name or names the Securities are to be issued an appropriate instrument evidencing the person's or persons' right to receive the Securities. 2.3 Successor Companies In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of the Issuer as an entirety or substantially as an entirety to another corporation ("successor corporation"), the successor corporation resulting from the consolidation, amalgamation, merger or transfer (if not the Issuer) will be bound by the provisions of this certificate and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this certificate to be performed by the Issuer. 2.4 Regarding the Special Warrant Agreement and Share Purchase Warrant Agreement. For greater clarity, the provisions of this section 2 are not intended to and shall not give the Holder rights in excess of or lesser than those rights granted in the Special Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company and the Share Purchase Warrant Agreement dated April 27, 2000 between the Issuer and Pacific Corporate Trust Company (collectively, the "Agreements") with respect to the adjustment provisions contained in Article 7 of the respective agreements. To the extent there is any inconsistency between the adjustment provisions between the adjustment provisions herein and those contained in the Agreements, such inconsistently shall be resolved such that the Holder herein shall have the same adjustment rights as contained in the Agreements. 3. Covenants The Issuer covenants and agrees that so long as any Unit Agent's Warrants evidenced hereby remain outstanding it will: (a) at all times ensure that there are a sufficient number of Common Shares authorized to be issued upon the exercise of the Unit Agent's Warrants; provided that nothing herein contained shall affect or restrict the right of the Issuer to issue Common Shares from time to time subject to the terms and conditions of the Unit Agent's Warrants; (b) at all times ensure that the Common Shares issued under the Agent's Compensation Options and the Unit Agent's Warrants will, upon payment therefor of the amount at which such Common Shares may be purchased, be issued as fully paid and non-assessable free from all taxes, liens, and charges with respect to the issue thereof and upon issuance such shares shall be listed on each national securities exchange on which the other shares of outstanding common stock of the Issuer are then listed or shall be eligible for inclusion in the NASDAQ National Market or the NASDAQ SmallCap Market if the other shares of outstanding common stock of the Company are so included; (c) preserve and maintain its corporate existence, and will use its best efforts to ensure that the Common Shares outstanding or issuable from time to time upon the exercise of the Agent's Compensation Options and the Unit Agent's Warrants are listed and may be traded through the NASDAQ OTC Bulletin Board and that it will use its commercial best efforts to list the Common Shares issuable upon the exercise of the Agent's Compensation Options and Unit Agent's Warrants and all other outstanding shares of its common stock on the NASDAQ National Market or if the Issuer does not meet the listing requirements of the NASDAQ National Market on the NASDAQ Smallcap Market as soon as possible after the Closing Date; (d) it will use its commercial best efforts to have an Effective Registration and to have the Receipts issued by the Commissions on or before the Qualification Deadline and will, in the event that either an Effective Registration is not filed or the Receipts are not issued on or before the Qualification Deadline, continue to use its commercial best efforts to file an Effective Registration and / or obtain the Receipts thereafter, as the case may be. Moreover, the Issuer covenants that if any securities to be reserved for the purpose of the exercise of the Special Warrants or the exercise of the Unit Warrants require registration with, or approval of, any governmental authority under any U.S. Securities Laws before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and expeditiously as reasonably possible to endeavour to secure such registration or approval. The Issuer will use commercial best efforts to obtain appropriate approvals or registrations under state "Blue Sky" security laws as applicable; (e) the Issuer will maintain its status as a reporting issuer in the Qualifying Provinces and as a "reporting company" with a class of equity securities registered pursuant to section 12(g) of the United States Securities Act of 1934 not in default of any reporting or filing requirements under U.S. Securities Laws thereafter and it will make all requisite filings under applicable Securities Laws and stock exchange rules to report the exercise of the right to acquire the Unit Shares and the Unit Agent's Warrants, pursuant to the Agent's Compensation Options; and (f) the Issuer will send a written notice to the Holder at the address of the Holder provided in Section 11, of the issuance of the Receipts, together with a commercial copy of the Qualifying Prospectus, as soon as practicable but, in any event, not later than five business days after the issuance of the Receipts. 4. Transfer of Unit Agent's Warrants The Unit Agent's Warrants evidenced hereby are non-assignable. 5. Not a Shareholder Nothing in this certificate or in the holding of a Unit Agent's Warrant shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Issuer. 6. Partial Exercise The Holder may subscribe for and acquire a number of Warrant Shares less than the number it is entitled to acquire pursuant to this certificate. In the event of any such subscription, the Holder shall in addition be entitled to receive, without charge, a new Unit Agent's Warrants certificate in respect of the balance of the Warrant Shares which the Holder was entitled to acquire pursuant to this certificate and which were then not acquired. 7. No Obligation to Purchase Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Issuer to issue any securities except those securities in respect of which the Holder shall have exercised its right to subscribe hereunder in the manner provided for herein. 8. Representation and Warranty The Issuer hereby represents and warrants with and to the Holder that the Issuer is duly authorized and has the corporate and lawful power and authority to create and issue the Unit Agent's Warrants evidenced hereby and the Warrant Shares issuable upon the exercise of the Unit Agent's Warrants and to perform its obligations hereunder and that the Unit Agent's Warrants evidenced hereby represent a valid, legal and binding obligation of the Issuer enforceable in accordance with their terms. 9. Protection of Shareholders, Officers and Directors The Holder hereby waives and releases any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future shareholder, director, officer, employee or agent of the Issuer in their capacity as such, either directly or through the Issuer, relating to any obligations, representations, warranties and covenants under this certificate, it being acknowledged that all such obligations, representations, warranties and covenants are solely those of the Issuer. Accordingly, the obligations under this certificate are not personally binding upon, nor will resort hereunder be had to, the privately property of any of the past, present or future directors, officers, shareholders, employees or agents of the Issuer but only the property of the Issuer (or any successor corporation) will be bound in respect hereof. The protection afforded under this paragraph shall not extend to any misrepresentations knowingly made. 10. Lost Certificate If this Unit Agent's Warrants certificate becomes stolen, lost, mutilated or destroyed, the Issuer may, on such terms as it may in its discretion impose, including the requirement to provide a bond of indemnity, respectively issue and countersign a new Unit Agent's Warrants certificate of like denomination, tenure and date as the certificate so stolen, lost, mutilated or destroyed. 11. Notice Any notice or other communication, including a demand or a direction, required or permitted to be given hereunder shall be in writing and shall be given by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to a senior employee of the addressee at such address with responsibility for matters to which the information relates. Notice of change of address shall also be governed by this Section 11. Notice and other communications shall be addressed as follows: in the case of the Issuer: Urbana.ca, Inc. 22 Haddington Street Cambridge, ON N1R 2B9 Attention: Jason Cassis Fax: (519) 740-1190 with a copy to: Maitland & Company Barristers & Solicitors 700 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: Christopher D. Farber Fax: (604) 681-3896 in the case of the Holder: Groome Capital.com Inc. 20 Toronto Street, Suite 900 Toronto, Ontario M5C 2B8 Attention: Gordon Larock Fax: (416) 861-9992 with a copy to: Fraser Milner 1 First Canadian Place 100 King Street West Toronto, Ontario M5X 1B2 Attention: Mr. Rubin Rapuch Fax: (416) 863-4592 12. Governing Law The Unit Agent's Warrants shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein. 13. Time of the Essence Time shall be of the essence hereof. 14. Business Day In the event that any date upon or by which any other action is required to be taken by the Issuer or the Holder is not a business day, then such action shall be required to be taken on or by the next succeeding day which is a business day. 15. Number and Gender Words importing the singular number only include the plural and vice versa and words importing any gender include all genders. 16. Headings The division of this certificate into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. 17. Binding Effect The terms and conditions of the Unit Agent's Warrants as set out herein shall enure to the benefit of and be binding upon the Holder, its heirs, executors, administrators, successors and assigns to the extent provided herein and shall enure to the benefit of and be binding upon the Issuer and its respective successors and assigns. 18. Severability In the event any provision hereof shall be void or unenforceable for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. Any court with jurisdiction over any dispute with respect to the Unit Agent's Warrants may amend the provisions hereof to the minimum extent required to render the impugned provision valid and enforceable. IN WITNESS WHEREOF the Issuer has caused this certificate to be signed by its duly authorized officer this ____ day of _______________, 2000. URBANA.CA, INC. By: __________________________________ SCHEDULE "A" EXERCISE AND SUBSCRIPTION FORM TO: URBANA.CA, INC. RE: UNIT AGENT'S WARRANTS CERTIFICATE NUMBER: _____________ The undersigned holder of the attached Unit Agent's Warrants certificate hereby irrevocably exercises its rights to acquire, at a price of US$5.00 per Warrant Share, and subscribes for _____________ Warrant Shares of URBANA.CA, INC. pursuant to the terms of the Unit Agent's Warrants specified in the attached certificate. DATED this day of . (Please complete date including year) NAME: Signature: Registration instructions: Please check box if the Warrant Shares certificates are to be collected from the Issuer's office, failing which they will be mailed to the subscriber at the address set out above. If any Unit Agent's Warrants represented by this certificate are not being exercised, a new Unit Agent's Warrants certificate will be issued and delivered with the Warrant Shares certificates. EX-4.7 9 0009.txt FORM OF UNIT WARRANTS TO SUBSCRIBE FOR COMMON SHARES THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES ISSUABLE UPON THE EXERCISE OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), NOR QUALIFIED UNDER OR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE NOR UNDER OR PURSUANT TO THE SECURITIES LAWS OF ANY PROVINCE IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT, (ii) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT, IF AVAILABLE, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND FROM QUALIFICATION UNDER ANY SECURITIES LAWS APPLICABLE IN CANADA, IF AVAILABLE, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A SHARE PURCHASE WARRANT AGREEMENT DATED AS OF APRIL 27, 2000, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE INCLUDING ALL APPLICABLE RESALE RESTRICTIONS AND HOLD PERIODS. FORM OF UNIT WARRANTS TO SUBSCRIBE FOR COMMON SHARES OF URBANA.CA, INC. (Incorporated under the laws of the State of Nevada) Number of Unit Warrants represented By this Certificate: ______________ Certificate Number: ____________ THIS CERTIFIES THAT, for value received, ____________________________ (the "Holder"), is entitled to purchase, at the price of US$5.00 per Common Share, one Common Share of Urbana.ca, Inc. (the "Issuer") for each of the Unit Warrants evidenced hereby, subject to adjustment as herein set forth, at any time prior to 4:30 p.m. (Toronto time) on April 26, 2002 (the "Expiry Date"): The following provisions shall be applicable to the Unit Warrants: 1. Interpretation tc "Interpretation " \l 2 1.1 Currency tc "Currency " \l 3 All dollar amounts referred to herein shall be in lawful money of the United States. 1.2 Defined Terms tc "Defined Terms " \l 3 As used herein, the following words and phrases shall have the following meanings respectively: (a) "business day" means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; tc " businessday means a day other than a Saturday, Sunday, or any statutory or civic holiday in the City of Vancouver; " \l 4 (b) "close of business" means 4:30 p.m. (Toronto time); tc "closeofbusiness means 4\:30 p.m. (Toronto time); " \l 4 (c) Common Shares" means the common shares with a par value of $0.001 per share in the capital of the Issuer whether issued or unissued, as constituted at the date hereof; provided that in the event of a change, reclassification, subdivision, redivision, reduction, combination, or consolidation thereof, or successive such changes, reclassifications, subdivisions, redivisions, reductions, combinations or consolidations, and subject to adjustment, if any, having been made in accordance with the provisions of the Share Purchase Warrant Agreement, "Common Shares" shall thereafter mean the shares resulting from such change, reclassification, subdivision, redivision, reduction or combination; tc "CommonShares means the common shares with a par value of $0.001 per share in the capital of the Issuer whether issued or unissued, as constituted at the date hereof; provided that in the event of a change, reclassification, subdivision, redivision, reduction, combination, or consolidation thereof, or successive such changes, reclassifications, subdivisions, redivisions, reductions, combinations or consolidations, and subject to adjustment, if any, having been made in accordance with the provisions of the Share Purchase Warrant Agreement, CommonShares shall thereafter mean the shares resulting from such change, reclassification, subdivision, redivision, reduction or combination; " \l 4 (d) "Exercise Price" means US$5.00 per Common Share; tc " ExercisePrice means US$5.00 per Common Share, unless such price shall have been adjusted in accordance with the provisions of Section 2.1 hereof, in which case it shall mean the adjusted price in effect at such time; " \l 4 (e) "herein", "hereto", "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Unit Warrant certificate and not to any particular section, clause, subclause, subdivision or portion hereof, and the expressions, "Section", "clause" and "subclause" followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; tc " herein, hereto, hereunder, hereof, hereby and similar expressions mean or refer to this Unit Warrant certificate and not to any particular section, clause, subclause, subdivision or portion hereof, and the expressions, Section, clause and subclause followed by a number or letter mean and refer to the specified Section, clause or subclause hereof; " \l 4 (f) "Holders" means the registered holders of Unit Warrants for the time being; tc " Holders means the registered holders of Unit Warrants for the time being; " \l 4 (g) "Time of Expiry" means 4:30 p.m. (Toronto time) on the Expiry Date; tc " TimeofExpiry means 4\:30 p.m. (Toronto time) on the Expiry Date; " \l 4 (h) "Unit Warrants" means the warrants evidenced hereby; and tc " UnitWarrants means the warrants evidenced hereby; and " \l 4 1.3 Manner of Exercise; Issuance of Certificates tc "Manner of Exercise; Issuance of Certificates " \l 3 The Holder may exercise its right to convert the Unit Warrants evidenced by this certificate, in whole or in part, for Common Shares hereunder, at any time prior to the Time of Expiry, by the surrender to the Trustee at 830-625 Howe Street, Vancouver, British Columbia, V6C 3B8 prior to the close of business on any business day, or at such other address as the Issuer may designate by notice in writing to the Holder at the address of the Holder appearing on the Unit Warrant Register, together with (a) a completed subscription in the form attached as Schedule "A" hereto (the "Unit Warrant Subscription Form"); and (b) a certified cheque, money order or bank draft payable to or to the order of the Issuer in lawful money of Canada in an amount equal to the Exercise Price multiplied by the number of Common Shares for which subscription is being made. The Special Warrants shall be deemed to be surrendered only upon personal delivery thereof or, if sent by mail or other means of transmission, upon actual receipt by the Trustee. 1.4 No Fractional Shares tc "No Fractional Shares " \l 3 Notwithstanding any adjustments provided for in Section 2.1 hereof or otherwise, the Issuer shall not be required upon the exercise of any Unit Warrants to issue fractional Common Shares in satisfaction of its obligations hereunder. Reference should be made to the Share Purchase Warrant Agreement for provisions regarding cash compensation which may be payable to the Holder in circumstances where a fractional Common Share would, but for this section, have been issued upon exercise of a Unit Warrant. 2. Adjustments tc "Adjustments " \l 2 The exercise of the Unit Warrants represented hereby is subject to adjustment in accordance with the provisions of the Share Purchase Warrant Agreement including, without limitation, Article 7 thereof. tc "The exercise of the Unit Warrants represented hereby is subject to adjustment in accordance with the provisions of the Share Purchase Warrant Agreement including, without limitation, Article 7 thereof. " \l 2 3. Transfer of Unit Warrants tc "3. Transfer of Unit Warrants " \l 002 The Unit Warrants evidenced hereby and the securities issuable upon exercise thereof may be subject to hold periods and resale restrictions under applicable securities laws and, if so, may not be traded except as permitted by such securities laws. Holders should consult with the Holder's professional advisor in order to assess the legal aspects of a transfer of the Unit Warrants evidenced hereby and/or the securities issuable upon exercise thereof. Subject to the foregoing, the Holder may transfer the Unit Warrants evidenced hereby either in whole or in part, using the transfer form in the form attached as Schedule "B" hereto. Every transfer of Unit Warrants, in order to be effective, must be in compliance with applicable securities laws and with the provisions of the Warrant Agreement. 4. Not a Shareholder Nothing in this certificate or in the holding of a Warrant shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Issuer. 5. Partial Exercise The Holder may subscribe for and acquire a number of Common Shares less than the number it is entitled to acquire pursuant to this certificate. In the event of any such subscription, the Holder shall in addition be entitled to receive, without charge, a new Warrant certificate in respect of the balance of the Common Shares which the Holder was entitled to acquire pursuant to this certificate and which were then not acquired. 6. Provisions of Share Purchase Warrant Agreement This certificate and the Unit Warrants represented hereby are subject in their entirety to the provisions of the Share Purchase Warrant Agreement. Reference is made to the Share Purchase Warrant Agreement and any instruments supplemental thereto for a full description of the rights of the holders of the Special Warrants and the terms and conditions upon which the Unit Warrants are, or are to be issued and held, with the same effect as if the provisions of the Share Purchase Warrant Agreement and all instruments supplemental thereto were herein set forth. By acceptance hereof, the Holder assents to all provisions of the Share Purchase Warrant Agreement. In the event of a conflict between the provisions of this Unit Warrant Certificate and the Unit Warrant Agreement, the provisions of the Share Purchase Warrant Agreement shall govern. 7. Time of the Essence Time shall be of the essence hereof. 8. Number and Gender Words importing the singular number only include the plural and vice versa and words importing any gender include all genders. 9. Headings The division of this Warrant certificate into Sections, clauses, subclauses or other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. 10. Binding Effect The terms and conditions of the Unit Warrants as set out herein shall enure to the benefit of and be binding upon the registered Holder hereof, its heirs, executors, estate trustees, administrators, successors and assigns to the extent provided herein and shall enure to the benefit of and shall be binding upon the Issuer and its successors and assigns. 11. Severability In the event any provision hereof shall be void or unenforceable for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. Any court with jurisdiction over any dispute with respect to the Unit Warrants may amend the provisions hereof to the minimum extent required to render the impugned provision valid and enforceable. 12. Language The parties hereto hereby confirm that they have each requested that this certificate be drawn up in the English language. 13. Certification This Unit Warrant Certificate shall not be valid for any purpose whatsoever unless and until it has been certified by or on behalf of the Trustee. IN WITNESS WHEREOF the Issuer has caused this certificate to be signed by its duly authorized officer as of the ____ day of _________________, 2000. URBANA.CA, INC. By: __________________________________ SCHEDULE "A" EXERCISE AND SUBSCRIPTION FORM TO: URBANA.CA, INC. RE: UNIT WARRANT CERTIFICATE NUMBER: _______________ The undersigned holder of the attached Unit Warrant certificate hereby irrevocably subscribes for _________________________Common Shares of URBANA.CA, INC. (the "Issuer") pursuant to the terms of the Unit Warrants specified in such certificate at a price of US$5.00 per share, and encloses and tenders herewith a certified cheque, bank draft or money order payable at par to or to the order of Urbana.ca, Inc. in lawful money of the United States, for an aggregate subscription price of $____________. DATED this day of (Please complete date including year NAME:______________________________ Signature:____________________________ Registration Instructions:__________________________ Please check box if the Common Share certificates are to be delivered at the office of the Issuer, failing which the Common Share certificates will be mailed to the subscriber at the address set out above. If any Unit Warrants represented by this certificate are not being exercised, a new Unit Warrant certificate will be issued and delivered with the Common Share certificates. SCHEDULE "B" TRANSFER FORM TRANSFER OF THE UNIT WARRANTS IS RESTRICTED - REFER TO THE TERMS OF THE ATTACHED CERTIFICATE. FOR VALUE RECEIVED, the undersigned transfers to (Print name and address of transferee) the Unit Warrants represented by the attached certificate. DATED: Signature guarantee: (the Holder's signature must be guaranteed Signature of Registered Holder (or its representative by a Canadian chartered bank or trust company if the Holder is not an individual) or medallion guaranteed by a member of a recognized member guarantee program. Name of Registered Holder Name and Title of Person signing on behalf of the Holder (if the Holder is not an individual) EX-4.8 10 0010.txt FORM OF COMMON STOCK PURCHASE WARRANT FORM OF WARRANT THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED OR EXERCISED UNLESS AND UNTIL SUCH WARRANT AND/OR SHARES OF COMMON STOCK IS REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTIONS 4 AND 10 OF THIS WARRANT. Warrant No. 1 Number of Shares: _______ (subject to adjustment) Date of Issuance: ______________, 2000 [ISSUER] Common Stock Purchase Warrant (Void after [three years]) [Issuer], a ________________ corporation (the "Company"), for value received, hereby certifies that Ladenburg Thalmann & Co. Inc., or its registered assigns (the "Registered Holder"), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or from time to time on or after the date of issuance and on or before 5:00 p.m. (Eastern time) on________, 200_, ________________ shares of Common Stock, of the Company, at a purchase price of $__________ per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase Price," respectively. 1. Exercise. (a) This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by the Registered Holder or by the Registered Holder's duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. (b) The Registered Holder may, at its option, elect to pay some or all of the Purchase Price payable upon an exercise of this Warrant by canceling all or a portion of this Warrant. If the Registered Holder wishes to exercise this Warrant by this method, the number of Warrant Shares purchaseable (which shall in no event exceed the total number of Warrant Shares purchasable under this Warrant as set forth above), subject to adjustment under Section 2 of this Warrant) shall be determined as follows: X=Y[(A-B)/A]; where X= the number of Warrant Shares to be issued to the Holder. Y= the number of Warrant Shares with respect to which this Warrant is being exercised. A= the Fair Market Value of one share of Common Stock. B= the Purchase Price of one share of Common Stock. The Fair Market Value per share of Common Stock shall be determined as follows: (i) If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system (including, without limitation, the OTC Bulletin Board and, if the average daily trading volume for the preceding 10 days has been at least 100,000 shares, the Pink Sheets) as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately preceding the Exercise Date (provided that if no such price is reported on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (ii)). (ii) If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company); and, upon request of the Registered Holder, the Board of Directors (or a representative thereof) shall promptly notify the Registered Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board of Directors has not made such a determination within the three-month period prior to the Exercise Date, then (A) the Board of Directors shall make a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Registered Holder that it do so, and (B) the exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until such determination is made. (c) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in subsection 1(a) above accompanied by payment in full of the Purchase Price (the "Exercise Date"). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. (d) As soon as practicable after the exercise of this Warrant in full or in part, and in any event within 5 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of full Warrant Shares to which the Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of remaining Warrant Shares. 2. Adjustments. (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date on which this Warrant was first issued (the "Original Issue Date") effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made in the Purchase Price pursuant to subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. (d) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than shares of Common Stock) or in cash or other property (other than cash out of earnings or earned surplus, determined in accordance with generally accepted accounting principles), then and in each such event provision shall be made so that the Registered Holder shall receive upon exercise hereof, in addition to the number of shares of Common Stock issuable hereunder, the kind and amount of securities of the Company and/or cash and other property which the Registered Holder would have been entitled to receive had this Warrant been exercised into Common Stock on the date of such event and had the Registered Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained any such securities receivable, giving application to all adjustments called for during such period under this Section 2 with respect to the rights of the Registered Holder. (e) Adjustment for Mergers or Reorganizations, etc. If there shall occur any reorganization, recapitalization, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by subsections 2(a), 2(b) or 2(d)), then, following any such reorganization, recapitalization, consolidation or merger, the Registered Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Registered Holder would have been entitled to receive if, immediately prior to such reorganization, recapitalization, consolidation or merger, the Registered Holder had held the number of shares of Common Stock subject to this Warrant. Notwithstanding the foregoing sentence, if (x) there shall occur any reorganization, recapitalization, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for anything other than solely equity securities, and (y) the common stock of the acquiring or surviving company is publicly traded, then, as part of any such reorganization, recapitalization, consolidation or merger, (i) the Registered Holder shall have the right thereafter to receive upon the exercise hereof such number of shares of common stock of the acquiring or surviving company as is determined by multiplying (A) the number of shares of Common Stock then subject to this Warrant by (B) a fraction, the numerator of which is the Fair Market Value per share of Common Stock as of the effective date of such transaction, as determined pursuant to subsection 1(b), and the denominator of which is the fair market value per share of common stock of the acquiring or surviving company as of the effective date of such transaction, as determined in good faith by the Board of Directors of the Company (using the principles set forth in subsection 1(b) to the extent applicable), and (ii) the exercise price per share of common stock of the acquiring or surviving company shall be the Purchase Price divided by the fraction referred to in clause (B) above. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Registered Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant. (e) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Registered Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property for which this Warrant shall be exercisable and the Purchase Price) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Registered Holder, furnish or cause to be furnished to the Registered Holder a certificate setting forth (i) the Purchase Price then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the exercise of this Warrant. 3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall make an adjustment therefor in cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to subsection 1(b) above. 4. Requirements for Transfer. (a) This Warrant and the Warrant Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Registered Holder which is a corporation to a wholly owned subsidiary of such corporation, a transfer by a Registered Holder which is a partnership to a partner of such partnership or a retired partner of such partnership or to the estate of any such partner or retired partner, a transfer by a Registered Holder which is a limited liability company to a member of such limited liability company or a retired member or to the estate of any such member or retired member, or a transfer by a Registered Holder which is a member of the National Association of Securities Dealers (the "NASD") to an officer or employee of the Registered Holder as permitted by NASD rules, provided that the transferee in each case agrees in writing to be subject to the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144 under the Act. (c) Each certificate representing Warrant Shares shall bear a legend substantially in the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required." The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act or if an effective registration statement is then in effect permitting the resale of the Warrant Shares. (d) The Registered Holder shall have "piggyback" registration rights to have the Warrant Shares (but not the Warrants) registered for resale on any registration statement which the Company files for any purpose on a form available for such registration, after the Original Issue Date Such registration shall be subject to customary obligations by the Registered Holder to provide information to the Company and by the Company to indemnify the Registered Holder against Securities Act liabilities. 5. No Impairment. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 6. Notices of Record Date, etc. In the event: (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or (b) of the voluntary or involuntary dissolution, liquidation or winding- up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten days prior to the record date or effective date for the event specified in such notice. 7. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant. 8. Exchange of Warrants. Upon the surrender by the Registered Holder, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 4 hereof, issue and deliver to or upon the order of such Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in the name of the Registered Holder or as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant. 9. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 10. Transfers, etc. (a) The Company will maintain a register containing the name and address of the Registered Holder of this Warrant. The Registered Holder may change its or his address as shown on the warrant register by written notice to the Company requesting such change. (b) Subject to the provisions of Section 4 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company. (c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 11. Representations of the Registered Holder. The Registered Holder of this Warrant represents and warrants to the Company as follows: (a) Investment. The Registered Holder is acquiring this Warrant and the Warrant Shares issuable upon the exercise of this Warrant, for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same, except as otherwise may be permitted under applicable securities laws. (b) Authority. The Registered Holder has full power and authority to enter into and to perform this Warrant in accordance with its terms. The Registered Holder has not been organized specifically for the purpose of investing in the Company. (c) Accredited Investor. The Registered Holder is an Accredited Investor within the definition set forth in Rule 501(a) promulgated under the Securities Act. 12. Mailing of Notices, etc. All notices and other communications from the Company to the Registered Holder shall be mailed by first-class certified or registered mail, postage prepaid, to the address last furnished to the Company in writing by the Registered Holder. All notices and other communications from the Registered Holder or in connection herewith to the Company shall be mailed by first-class certified or registered mail, postage prepaid, to the Company at its principal office set forth below. If the Company should at any time change the location of its principal office to a place other than as set forth below, it shall give prompt written notice to the Registered Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. 13. No Rights as Stockholder. Until the exercise of this Warrant, the Registered Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company. Notwithstanding the foregoing, in the event (i) the Company effects a split of the Common Stock by means of a stock dividend and the Purchase Price of and the number of Warrant Shares are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), and (ii) the Registered Holder exercises this Warrant between the record date and the distribution date for such stock dividend, the Registered Holder shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. 14. Change or Waiver. Any term of this Warrant may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. 15. Section Headings. The section headings in this Warrant are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. 16. Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of New York (without reference to the conflicts of law provisions thereof). EXECUTED as of the Date of Issuance indicated above. [ISSUER] By:________________________________ Title:_______________________________ ATTEST: _________________________ EXHIBIT I PURCHASE FORM To:_________________ Dated:____________ The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby irrevocably elects to purchase (check applicable box): _____ shares of the Common Stock covered by such Warrant; or the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 1(b). The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $________. Such payment takes the form of (check applicable box or boxes): $______ in lawful money of the United States; and/or the cancellation of such portion of the attached Warrant as is exercisable for a total of _____ Warrant Shares (using a Fair Market Value of $_____ per share for purposes of this calculation); and/or the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 1(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 1(b). Signature:_____________________ Address:______________________ ______________________ EXHIBIT II ASSIGNMENT FORM FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No. ____) with respect to the number of shares of Common Stock covered thereby set forth below, unto: Name of Assignee Address No. of Shares Dated:_____________________ Signature:________________________________ Signature Guaranteed: By: _______________________ The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. EX-5 11 0011.txt OPINION RE: LEGALITY Brian F. Faulkner Attorney at Law 3900 Birch Street, Suite 113 Newport Beach, California 92660 (949) 975-0544 November 27, 2000 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Urbana.ca, Inc. - Form SB-2/A Dear Sir/Madame: I have acted as counsel to Urbana.ca, Inc., a Nevada corporation ("Company"), in connection with its Registration Statement on Form SB-2 relating to the registration of 43,641,090 shares of the Company's common stock ("Shares"), $0.001 par value per Share. In my representation I have examined such documents, corporate records, and other instruments as we have deemed necessary or appropriate for purposes of this opinion, including, but not limited to, the Articles of Incorporation, and all amendments thereto, and Bylaws of the Company. Based upon and in reliance on the foregoing, and subject to the qualifications and assumptions set forth below, it is my opinion that the Company is duly organized and validly existing as a corporation under the laws of the State of Nevada, and that the Shares, when issued and sold, will be validly issued, fully paid, and non-assessable. My opinion is limited by and subject to the following: (a) In rendering my opinion I have assumed that, at the time of each issuance and sale of the Shares, the Company will be a corporation validly existing and in good standing under the laws of the State of Nevada. (b) In my examination of all documents, certificates and records, I have assumed without investigation the authenticity and completeness of all documents submitted to me as originals, the conformity to the originals of all documents submitted to me as copies and the authenticity and completeness of the originals of all documents submitted to me as copies. I have also assumed the genuineness of all signatures, the legal capacity of natural persons, the authority of all persons executing documents on behalf of the parties thereto other than the Company, and the due authorization, execution and delivery of all documents by the parties thereto other than the Company. As to matters of fact material to this opinion, I have relied upon statements and representations of representatives of the Company and of public officials and have assumed the same to have been properly given and to be accurate. (c) My opinion is based solely on and limited to the federal laws of the United States of America and the Nevada Revised Statutes. I express no opinion as to the laws of any other jurisdiction. Sincerely, /s/ Brian F. Faulkner Brian F. Faulkner, Esq. EX-10.8 12 0012.txt MANAGEMENT CONTRACT MANAGEMENT AGREEMENT THIS AGREEMENT made as of the 4th day of January, 2000. BETWEEN: URBANA.CA INC., a Nevada corporation, having an office located at Suite 804, 750 West Pender Street, Vancouver, British Columbia, V6C 2T8 (the "Company") AND: JASON CASSIS, 1276 Shaver Road, Ancaster, Ontario, L9G 3L1 (the "Executive") A. The Company is a Nevada corporation whose shares are listed through the NASD OTCBB market in the United States; B. The Company, through its subsidiaries, is an internet service provider ("ISP"), and is engaged in providing ISP products and services; C. The Company wishes to retain the services of the Executive on the terms and conditions under which he was employed by the Company's subsidiary Urbana.ca Enterprises Corp.; and D. This Agreement is executed to replace and supercede the Executive's agreement with Urbana.ca Enterprises Corp. THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements hereinafter contained, the parties agree as follows: 1. EMPLOYMENT 1.1 The Company hereby employs the Executive as its chief executive officer, or in such other capacity as the parties may mutually agree, upon the terms and conditions of the Agreement. 1.2 The Executive shall carry out such duties as the Company's board of directors may from time to time reasonably determine, including but not limited to: (a) ensuring that sufficient funds are available to facilitate the implementation of the Company's goals and objectives or, if they are not, notifying the Company's board of directors accordingly; (b) providing his best efforts in raising equity and debt financing for the Company's needs and to that end, preparing and making presentations to the investment community; (c) managing employees in the implementation of corporate strategies, policies, procedures, financial forecasts and monitoring systems to promote the efficient use of the Company's financial resources; (d) developing and implementing the Company's internal policies, procedures, rules and regulations; (e) evaluating new business opportunities; and (f) reporting to the Company's board of directors in the manner and frequency as may be reasonably determined by the board of directors. 1.3 The Executive agrees to expend a minimum of 40 hours per week in the performance of his duties as set out in 1.2 above. 2. TERM 2.1 The term of this Agreement shall be for a period of two years commencing as of the date of this Agreement (the "Start Date"), subject to earlier termination as provided for in this Agreement. This Agreement shall be renewed no later than four (4) months prior to the expiry of its term provided the terms can be agreed upon by the parties hereto in writing. 2.2 In this Agreement, references to "Year" mean each 12 month period commencing from the Start Date and each anniversary of the Start Date. 3. REMUNERATION ETC. 3.1 In consideration of the Executive's services under this Agreement, the Company shall pay to the Executive: (a) the sum of $5,833.33 ($70,000 annually), payable on a monthly basis on the first day of each month, or if a Saturday, Sunday or holiday, the next following business day; and (b) a $500 per month car allowance, payable on the last day of each month worked . 3.2 The Executive shall be entitled to four (4) weeks vacation during each Year of this Agreement, to be taken at a time acceptable to both parties. 3.3 The Executive shall be entitled to participate in any stock option, profit sharing, medical reimbursement, insurance or other employee benefit plan as may be in effect from time to time subject to the participation standards and other terms thereof. The Executive shall not have any cash entitlement with respect to benefits the Executive has chosen not to receive. 3.4 The Company agrees to grant the Executive or a company wholly owned by him, on or near the Start Date, subject to the acceptance of such regulatory authorities as may be required, stock options entitling the Executive to purchase 200,000 common shares of the Company at an exercise price of $0.50 per share or such other exercise price as may be required by the regulatory authorities having jurisdiction. 3.5 The Company shall reimburse the Executive for all reasonable and / or pre-agreed expenses incurred by the Executive in furtherance of the Company's business. The Executive shall, to the greatest extent possible, submit statements and vouchers for all expenses claimed. The Executive acknowledges that the Company will only reimburse those expenses that the Company considers reasonable or to which the Company has granted prior authorization. 3.6 If the Company's board of directors should determine to insure the life of the Executive, the Executive shall cooperate with the Company and the insurer and do all reasonable things required to permit the placing or continuance of such insurance coverage upon his life. 3.7 All payments to be made by the Company to the Executive and benefits received by the Executive from the Company shall be subject to all applicable statutory deductions for taxes, unemployment insurance and pension contributions, and such other deductions as may be agreed upon by the parties for private insurance, medical and dental plans. 4. CONFIDENTIAL INFORMATION 4.1 The Executive acknowledges that, in the course of providing services to the Company, he will have access to confidential information concerning the Company and its subsidiaries and, therefore, the Executive agrees that he will not, either during the term of this Agreement or for a period of one (1) year thereafter, divulge or utilize to the detriment of the Company any of such confidential information so obtained. The provisions of this section shall survive the expiry or earlier termination of this Agreement. 5. DEVOTION OF TIME AND NON-COMPETITION 5.1 During the term and any renewal of this Agreement, the Executive shall devote sufficient time and attention to the Company's business as may be required to properly perform his duties hereunder, and in any event not less than 40 hours per week. 5.2 During the term and any renewal of this Agreement and for a period of one year thereafter, the Executive agrees that he shall not engage in any other business activities or serve as an officer or director in any company or other entity which is engaged in the high tech internet business that are closely related to those of the Company or any of its subsidiaries. 5.3 The provisions of this section shall survive the expiry or earlier termination of this Agreement. 6. TERMINATION OF AGREEMENT 6.1 This Agreement may be terminated: (a) by either party at any time, with cause, by giving the other party written notice of such termination at least seven (7) days prior to the termination date set forth in such written notice; (b) by the Company acting reasonably immediately upon the occurrence of any default by the Executive by giving written notice to the Executive specifying the nature of such default. A default shall be defined as the occurrence of any one or more of the following: (i) the Executive files a voluntary petition in bankruptcy, or is adjudicated as bankrupt or insolvent, or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute or law relating to bankruptcy, insolvency or other relief for debtors, or seeks, consents to, or acquiesces in the appointment of any trustee, receiver or liquidator of the Executive, or of all or any substantial part of his properties, and the same remains unvacated and unstayed for an aggregate of thirty (30) days from the date of entry thereof; or any trustee, receiver, or liquidator of the Executive or of all or any substantial part of his properties is appointed without the consent of or acquiescence of the Executive and such appointment remains unvacated and unstayed for an aggregate of thirty (30) days; or (ii) the Executive fails to perform any of his services in the manner or within the time required herein or commits or permits a breach of or default in any of his duties, liabilities or obligations hereunder and fails to fully cure or remedy such failure, breach or default within ten (10) days after written notice by the Company to the Executive specifying the nature of such failure, breach or default, or if such breach or default cannot reasonably be cured within ten (10) days, fails to commence such cure or remedy within the said 10-day period or at any time thereafter fails to diligently prosecute such cure or remedy to completion; (c) by the Executive acting reasonably immediately upon the occurrence of any default by the Company by giving written notice to the Board specifying the nature of such default. A default shall include the failure of the Company to pay the fees or expenses as provided for herein. 6.2 Upon termination of this Agreement for any reason, the Executive shall promptly deliver the following in accordance with the directions of the Company: (a) a final accounting, reflecting the balance of expenses incurred on behalf of the Company as of the date of termination; (b) all documents pertaining to the Company or this Agreement, including but not limited to all books of account, correspondence and contracts provided that the Executive shall be entitled thereafter to inspect, examine and copy all of the documents which it delivers in accordance with this provision at all reasonable times upon three days notice to the Company. 6.3 The parties acknowledge that the legal doctrines sometimes referred to as "corporate opportunity" and "business opportunity" apply to the Executive upon termination. 6.4 Upon termination of this Agreement, the Executive shall be entitled to receive as his full and sole compensation in discharge of obligations of the Company to the Executive under this Agreement, all sums due and payable under this Agreement to the date of termination and the Executive shall have no right to receive any further payments, including severance pay or other forms of compensation. If the Executive shall, at any time, by reason of illness or mental or physical disability, be incapacitated from carrying out the terms of this agreement, and shall furnish the Board of Directors with reasonable evidence of such incapacity and the cause thereof, he shall receive his full salary for the first three months or any shorter period, and one- half of his full salary for the fourth and any subsequent consecutive months during which such incapacity shall continue. If the Executive shall continue to be incapacitated for a longer period than four consecutive months, or if he shall be incapacitated at different times for more than 6 months in any one calendar year, then in either of such cases his contract shall, at the option of the Company's Board of Directors, forthwith be terminated as though it had been terminated under Section 6.1 save that he shall not be entitled to any additional compensation under this Section 6.4 or any additional compensation from the Company or any other person in respect of such termination. 7. MISCELLANEOUS 7.1 All notices and other communications required or permitted by this Agreement to be given or made by either party to the other shall be given or made in writing and be delivered by hand or registered mail (except during a postal disruption) to the parties at the addresses set forth in this Agreement, or at such other address as the parties designate by notice in writing to the other. Proof of delivery in such manner shall constitute proof of receipt. 7.2 This Agreement may not be assigned by either party without the prior written consent of the other. 7.3 This Agreement shall be construed under and governed solely by the laws of Ontario and the law of Canada applicable therein. 7.4 This Agreement represents the entire agreement between the parties regarding the Executive's employment with the Company and supercedes the agreement dated January 1, 2000 between the Executive and Urbana.ca Enterprises Corp. This Agreement may not be amended or otherwise modified except by an instrument in writing signed by both parties. 7.5 This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. 7.6 The Executive hereby acknowledges that Maitland & Company acts for the Company in the preparation and negotiation of this Agreement and acknowledges that he has been advised to seek independent legal counsel and review of this Agreement prior to its execution. IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written notwithstanding its actual date of execution. URBANA.CA, INC. By: /s/ Robert S. Tyson Robert S. Tyson, Secretary JASON CASSIS /s/ Jason Cassis Jason Cassis EX-10.10 13 0013.txt LICENSE AGREEMENT LICENSE AGREEMENT THIS LETTER OF AGREEMENT is made as of January 13, 2000. BETWEEN: USA VIDEO INTERACTIVE CORP. of 70 Essex Street Mystic, CT 06355 ("USA") OF THE FIRST PART AND: URBANA.CA, INC. 19 Concession Street Cambridge, Ontario Canada N1R 2G6 ("URBANA") OF THE SECOND PART AND: EAGLE WIRELESS 101 Courageous Dr. League City, TX 77573 ("EAGLE") OF THE THIRD PART WHEREAS: A. USA has USA Video-on-DemandT and Wavelet technologies that can enhance delivery of video/audio via the Internet and other systems, and expertise in designing and installing video solutions; and B. USA has a patented store and forward Video-on-Demand technology; and C. Eagle is a leading supplier of electronic equipment in the Set-Top Box and Internet access product markets; and D. Urbana.ca, Inc. is an e-commerce, transaction and content company that creates Intranet and Internet-based systems in conjunction with local area governments and high profile corporations. NOW THEREFORE, in view of the premises and in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto do hereby covenant and agree as follows: 1. EAGLE and URBANA have entered into an agreement whereby EAGLE will produce set-top boxes to URBANA with specifications detailed by URBANA. 2. EAGLE will embed into these URBANA set-top boxes the USA Wavelet compression technology; USA will provide technical assistance as required. 3. USA will license limited use of its patented Video-on-Demand technology and its Wavelet technology to EAGLE and URBANA for two dollars and fifty cents ($2.50USD) per set-top box. Use will be limited to decoding Wavelet-compressed data, and utilizing Video-on-Demand and Internet video data received by the set-top box as part of the deployments contracted by URBANA. Any other use of the USA's patented Video-on-Demand or Wavelet technology is prohibited. 4. The set-top boxes that have incorporated USA technology will be labelled as such, via a logo/icon either individually or with those of URBANA and/or EAGLE. 5. USA will provide Wavelet-equipped video servers and other equipment required by URBANA at competitive prices. 6. USA will provide site licenses for Wavelet encoding in its servers to EAGLE and URBANA at rates discounted by twenty percent (20%). 7. USA will provide content to URBANA as required and at competitive rates. This content can include, but not be limited to educations, entertainment, sports, etc.). 8. URBANA will include the above-specified USA technologies in a planned order for Q1 2000 of 50,000 set-top boxes. 9. Upon successful implementation of the first order, URBANA will work with and purchase from USA additional technologies, licensing and equipment for deployment in locations to be determined by URBANA. 10. USA can provide additional functionalities such as Video Email, Video Conferencing, Video Zooming and other technologies. Each of these functionalities will be negotiated in separate contacts as required, but are not included in this contract. 11. USA will provide EAGLE and URBANA with technical and other services as required at mutually agreed upon rate to be determined. 12. EAGLE and URBANA and USA will publicize and otherwise promote this contract and ongoing relationships as appropriate. There will be mutual review and approval of press releases and other publicity regarding these projects and relationships. 13. USA and EAGLE and URBANA will explore additional means of working together for worldwide distribution of specific products and services. 14. The parties hereto agree that this Agreement does not restrict either party from entering into a similar agreement with any other party. 15. The employees of USA or EAGLE and URBANA shall not be deemed to be employees of the other party. Neither party shall be authorized to obligate or bind, in any manner, the other party to any contract, affirmation, representation, warranty or other obligation concerning the sale of services, or to act in the name of the other party. 16. Neither party shall, in any event, be liable to the other party for any indirect, special, incidental or consequential damages, including, but not limited to, loss of revenue, cost of capital, loss of business reputation or opportunity arising from the good faith performance of this Agreement. 17. Unless terminated earlier as provided herein, the term of this Agreement shall commence on the date first set forth above and shall continue in effect for twelve consecutive months (the "Term"). Thereafter, this Agreement will be renewed annually by mutual agreement. 18. This Agreement may be terminated by either party during the Term or any renewal thereafter on 30 days prior written notice to the other party, subject to the terminating party fulfilling all outstanding commitments and obligations thereto. 19. In the event either party has defaulted in its performance of this Agreement, the other party shall provide written notification to the defaulting party of such default. If the defaulting party fails to correct such default within 30 days, the other party, upon written notice to the defaulting party, may terminate this Agreement and recover whatever damages may be recoverable against the defaulting party by operation of law. Any party not being in default has the right to cure the default of the defaulting party. 20. This Agreement shall be governed and interpreted in accordance with the laws of the State of Connecticut. The parties hereto agree to submit to the exclusive jurisdiction of the Courts of Connecticut in the event of a dispute. 21. This Agreement may be subject to regulatory approval. USA VIDEO INTERACTIVE CORP. By: /s/ Anthony J. Castagno Anthony J. Castagno for Edwin Molina, President EAGLE WIRELESS By: /s/ H. Dean Cubley H. Dean Cubley, President URBANA.CA, INC. By: /s/ Robert S. Tyson Robert S. Tyson, VP/Director EX-10.12 14 0014.txt AGENCY AGREEMENT GROOME CAPITAL.COM INC. AGENCY AGREEMENT April 10, 2000 Urbana.ca, Inc. 211 Water Street North Cambridge, Ontario N1R 3B9 Attention: Mr. Jason Cassis Dear Sirs/Mesdames: Groome Capital.com Inc. (the "Agent") understands that Urbana.ca, Inc. (the "Corporation") desires to issue and sell special warrants of the Corporation (the "Special Warrants"). Each Special Warrant will entitle the holder thereof to receive upon exercise or deemed exercise thereof, without additional payment, subject to adjustment, one unit (a "Unit") each Unit consisting of one common share of the Corporation (collectively, the "Common Shares") and one-half of one common share purchase warrant of the Corporation (collectively, the "Warrants") as more particularly described in Schedule "A" attached hereto. The offering of the Offered Securities (as defined below) by the Corporation is hereinafter referred to as the "Offering". In this Agreement, the term "Offered Securities" shall mean, collectively, the Special Warrants and, where applicable, the Unit Shares (as herein defined) issuable upon the exercise of the Special Warrants, the Warrants (as herein defined) and the Common Shares of the Corporation issuable upon exercise of the Warrants (the "Warrant Shares"). The Agent hereby agrees to act as the agent of the Corporation to use its commercially reasonable best efforts to offer for sale and obtain subscriptions for the Special Warrants from Purchasers (as hereinafter defined), upon and subject to the terms and conditions contained herein, and by its acceptance hereof the Corporation agrees to the appointment of the Agent, as the Corporation's exclusive agent in respect of the Offering in Canada; provided that the Agent shall be under no obligation to purchase any of the Special Warrants. In consideration of the services to be rendered by the Agent in connection with the Offering, the Corporation agrees to pay the Agency Fee (as hereinafter defined) to the Agent. Subject to the terms hereof, the Corporation agrees that the Agent will be permitted to appoint other registered dealers (or other dealers duly qualified in their respective jurisdictions) as its agents to assist in the Offering and that the Agent may determine the remuneration payable to such other dealers appointed by it, however in no case should such remuneration exceed that payable to the Agent hereunder. In the event the remuneration payable to a sub-agent is paid directly by the Corporation, the amount so paid shall be deducted from the amount otherwise payable to the Agent. No person shall be appointed a sub- agent in Canada unless such person has either agreed in writing to be bound by the terms of this Agreement or the Sub-Agent has entered into an agreement with the Agent providing for substantially the same obligations and covenants of the sub-agent as is contained herein in respect of the Agent. This offer is conditional upon and subject to the additional terms and conditions set forth below. The form of agreement between the Corporation and each purchaser providing for the subscription by each purchaser of Special Warrants (the "Subscription Agreement") is attached hereto as Schedule "E". The Special Warrants shall be issued pursuant to the provisions of a Special Warrant Agreement (the "Special Warrant Agreement") to be entered into between the Corporation and the Trustee. The terms and conditions of the Special Warrant Agreement shall be consistent with the terms and conditions herein contained and shall be satisfactory to the Agent and their counsel, acting reasonably. Exercise of Special Warrants The Special Warrants may, subject to the provisions hereof, be exercised by the holder thereof by surrendering the Special Warrants to Pacific Corporate Trust Company (the "Trustee") at any time after the Time of Closing (as hereinafter defined) and on or before 4:30 p.m. (Toronto time) on the earlier of (the "Time of Expiry"): (i) the fifth (5th) Business Day (as hereinafter defined) after the Qualification Date; and (ii) and the date which is twelve (12) months following the Closing Date. Any Special Warrants not exercised prior to the Time of Expiry shall be deemed to be exercised by the holders thereof immediately prior to such time without any further action on the part of such holders. Conversion Rate Increase In the event that the Qualification Date does not occur on or before 5:00 p.m. (Toronto time) on the date which is 150 days after the Closing Date (the "Qualification Deadline"), provided that if such day is not a Business Day, then the next following Business Day, or such later date as may be approved in writing (with notification to the Trustee) by the Agent in its sole and absolute discretion not less than five (5) Business Days prior to the end of the Qualification Deadline, each Special Warrant shall thereafter automatically entitle the holder to receive, without further payment, one Unit comprising 1.1 Common Shares and 0.55 of a Warrant, in lieu of 1 Common Share and 0.50 of a Warrant (the "Conversion Rate Increase"). 1. Interpretation 1.1 Unless expressly provided otherwise, where used in this Agreement or any schedule hereto, the following terms shall have the following meanings, respectively: "Agency Fee", "Agent's Compensation Options", "Agent's Warrants" and "Fiscal Advisory Fee" have the meanings ascribed thereto respectively in section 4 of this Agreement; "Agent" shall have the meaning ascribed thereto in the first paragraph of this Agreement; "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the respective regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Securities Commissions and the securities legislation and policies of each other relevant jurisdiction in Canada (collectively the "Canadian Securities Laws") and the U.S. Securities Laws; "Business Day" means any day other than a Saturday, Sunday or statutory or municipal holiday in the City of Toronto, Ontario; "Closing Date" means the date on which the Offering, as specified in Schedule "A" hereto is completed which includes the Offering in the United States and which date shall be signed off in writing as between the Agent and the Corporation; "Common Share" or "Common Shares" means the current issued and outstanding common shares in the capital of the Corporation, the common shares issuable upon the exercise of the Special Warrants and the Agent's Compensation Options, as the context requires; "Corporation" means Urbana.ca, Inc.; "Disclosure Documents" means all of the documents of the Corporation which have been filed with the Securities Commissions, the SEC or the Exchange during the period commencing one year prior to the date hereof and ending immediately prior to the Time of Closing; "Distribution" means the proposed issuance of Unit Shares and Warrants to the holders of Special Warrants on the exercise or deemed exercise of the Special Warrants; "Effective Registration" means the registration of the resale of the Unit Shares and the Common Shares issuable upon exercise of the Warrants pursuant to a Registration Statement which has been filed in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act, or any successor rule providing for offering securities on a continuing basis, and the declaration or ordering of the effectiveness of such Registration Statement by the SEC and all applicable state regulatory authorities; "Exchange" means the Over-the-Counter Bulletin Board in the United States; "Final Prospectus" means the (final) prospectus of the Corporation qualifying the Underlying Securities, as qualified herein with respect to the Agent's Compensation Options; "including" means including without limitation; "Intellectual Property" means all trademarks, tradenames, patents, copyrights, service marks, including all pending applications with respect to any of the foregoing, all industrial designs and all other industrial or intellectual property owned or used by the Corporation under license, in the conduct of its business; "knowledge", "to the knowledge of", "to the best of the knowledge" means, in respect of any representation or warranty given by the Corporation, to the knowledge, information and belief of the Corporation after having made all reasonable and necessary reviews of its books and records and inquiries of all appropriate persons with respect to the subject matter of such representation or warranty; "material" means material in relation to the Corporation; "material change" means a material change as defined under the Applicable Securities Laws or any of them or where undefined under the Applicable Securities Laws of a jurisdiction means a change in the business, operations or capital of the Corporation that would reasonably be expected to have a significant effect on the market price or value of any of the Corporation's securities and includes a decision to implement such a change made by the Corporation's board of directors or by senior management of the Corporation who believe that confirmation of the decision by the board of directors is probable; "material fact" means a material fact as defined under the Applicable Securities Laws or any of them or where undefined under the Applicable Securities Laws of a jurisdiction means a fact that significantly affects, or would reasonably be expected to have a significant effect on. the market price or value of any of the Corporation's securities; "misrepresentation" means a misrepresentation as defined under the Applicable Securities Laws or any of them or where undefined under the Applicable Securities Laws of a jurisdiction means (i) an untrue statement of a material fact, or (ii) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made; "Offered Securities" shall have the meaning ascribed thereto in the second paragraph of this Agreement; "Offering" shall have the meaning ascribed thereto in the first paragraph of this Agreement; "Offering Documents" means, collectively, the Preliminary Prospectus, the Final Prospectus, any Supplementary Material and the Registration Statement; "Outstanding Convertible Securities" means all options, (including options granted or proposed to be granted to officers, directors or employees), warrants, other rights to acquire securities and other convertible securities outstanding as at the date of this Agreement, whether issued pursuant to an established plan or otherwise, particulars of which are set out in Schedule "B" hereto; "person" includes any individual, corporation, limited partnership, general partnership, joint stock company or association, joint venture association, company, trust, bank, trust company, land trust, investment trust, society or other entity, organization, syndicate whether incorporated or not, trustee, estate trustee, executor or other legal or personal representative, and governments and agencies and political subdivisions thereof; "Preliminary Prospectus" means the preliminary prospectus of the Corporation relating to the distribution of (i) the Unit Shares and Warrants issuable on the exercise of the Special Warrants in the Qualifying Provinces, and (ii) to the extent permitted by the Ontario Securities Commission, the Agent's Compensation Options; "President's List means the list of subscribers for Special Warrants in the Qualifying Provinces or other jurisdictions in Canada, and the United States as identified by the Corporation in writing to the Agent; "Private Placement Exemptions" means the prospectus and registration exemptions pursuant to the Applicable Securities Laws, pursuant to which the Special Warrants are to be issued in the Qualifying Provinces and in the United States, as more specifically set out in Schedule "A" hereto; "Prospectus" means a prospectus, including any amendments made thereto, which upon issuance of a receipt by each of the Securities Commission for the final prospectus will qualify the Distribution; "Purchasers" means, collectively, each of the purchasers of Special Warrants pursuant to the Offering (including, if applicable, the Agent if it is purchasing Special Warrants); "Qualification Date" means the date which is the later of the date on which all of the Securities Commissions have issued a receipt for the final Prospectus and the date of an Effective Registration; "Qualifying Provinces" means the provinces of Alberta, British Columbia, Ontario and Quebec; "Registration Statement" means a registration statement of the Corporation under the 1933 Act covering the resale of the Unit Shares and the Warrant Shares; "Regulation S" means Regulation S under the 1933 Act; "SEC" means the United States Securities and Exchange Commission; "Securities Commissions" means, collectively, the securities commissions or similar regulatory authorities in each of the Qualifying Provinces; "Selling Group" means, collectively, those registered dealers appointed by the Agent to assist in the Offering as contemplated in the fifth paragraph of this Agreement; "Significant Interest Companies" means those companies in which the Corporation holds 20% or more of the outstanding voting securities; "Special Warrant Agreement" means the special warrant agreement to be entered into between the Corporation and the Trustee, in such form and containing such terms as approved by the Corporation and its counsel and the Agent and its counsel; "Special Warrants" shall have the meaning ascribed thereto in the first paragraph of this Agreement; "Subscription Agreements" means, collectively, the subscription agreements entered into between, inter alia, the Purchasers and the Corporation in respect of the Offering, the form of which is attached hereto in blank as Schedule "E"; "Subsidiary" has the meaning as ascribed to such term in the Business Corporations Act (Ontario); "Supplementary Material" means, collectively, any amendment to the Final Prospectus, any amended or supplemental prospectus or ancillary material required to be filed with any of the Securities Commissions in connection with the distribution of the Underlying Securities; "Survival Limitation Date" means the later of: (i) the second anniversary of the Closing Date; and (ii) the latest date under the Applicable Securities Laws relevant to a Purchaser (non-residents of Canada being deemed to be resident in the Province of Ontario for such purposes) that a Purchaser may be entitled to commence an action or exercise a right of rescission, with respect to a misrepresentation contained in the Final Prospectus or, if applicable, any Supplementary Material; "Time of Closing" means the time on the Closing Date at which the Offering is to be completed, as specified in Schedule "A" attached hereto; "Trustee" means Pacific Corporate Trust Company; "Underlying Securities" means the Agent's Compensation Options issuable upon the exercise of the Agent's Warrants and the Unit Shares and Warrants issuable upon the exercise of the Special Warrants and the Warrant Shares issuable upon the exercise of the Warrants, the particulars of which are set out in Schedule "A" attached hereto; "Unit" has the meaning ascribed thereto in the first paragraph of this Agreement; "Unit Shares" means the Common Shares issued by the Corporation on the exercise of the Special Warrants and on the exercise of the Agent's Compensation Options. "U.S. Person" shall have the meaning ascribed to such term in Regulation S under the 1933 Act; "U.S. Securities Laws" means, collectively, all applicable federal and state securities laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases and rulings of the SEC and any applicable state securities regulatory authorities; "Warrants" means the whole Common Share purchase warrants to be issued by the Corporation on the exercise of the Special Warrants and on the exercise of the Agent's Compensation Options, the particulars of which are set out in Schedule "A" attached hereto; "Warrant Shares" means the Common Shares issuable upon exercise of the Warrants, the particulars of which are set out in Schedule "A" hereto; and "1933 Act" means the United States Securities Act of 1933, as amended. 1.2 The division of this Agreement into sections, subsections, paragraphs and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless something in the subject matter or context is inconsistent therewith, references herein to sections, subsections, paragraphs and other subdivisions are to sections, subsections, paragraphs and other subdivisions of this Agreement. 1.3 This Agreement shall be governed by and construed exclusively in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the parties irrevocably agree to attorn to and submit to the jurisdiction of the courts of Ontario with respect to any dispute related to this Agreement; 1.4 Unless otherwise stated herein, all amounts expressed herein in terms of money refer to lawful currency of the United States and all payments to be made hereunder shall be made in such currency. 1.5 For the purposes of this Agreement, where the Canadian dollar equivalent is being paid for an amount denoted in U.S. dollars, the exchange rate applicable with respect to the payment in the Canadian dollar equivalent shall be the noon buying rate in the City of New York for cable transfers in Canadian dollars as certified for custom purposes by the Federal Reserve Bank of New York on the day which is the Business Day immediately preceding the date of such payment is being made in Canadian equivalent dollars. 1.6 The following are the schedules attached to this Agreement, which schedules (including the representations, warranties and covenants set out therein) are deemed to be a part hereof and are hereby incorporated by reference herein: Schedule "A" - Details of the Offering Schedule "B" - Outstanding Convertible Securities Schedule "C" - Material Changes ("Disclosure Schedule") Schedule "D" - List of Subsidiaries Schedule "E" - Form of Subscription Agreement 1.7 Unless the context otherwise requires, references herein to the "Offering" shall be deemed to a reference to the Offering in Canada and references herein to the "Purchasers" shall be deemed to be references to Purchasers in the Qualifying Provinces or other jurisdictions in Canada where the Special Warrants are sold. 2. Nature of Transaction 2.1 Each Purchaser resident in the Qualifying Provinces or resident in the United States and each U.S. Person shall purchase Special Warrants under one or more Private Placement Exemptions so that the purchases of such Special Warrants will be exempt from the prospectus and registration requirements of the Applicable Securities Laws. Each other Purchaser shall purchase in accordance with such procedures as the Corporation and the Agent may mutually agree, acting reasonably, in order to fully comply with the Applicable Securities Laws. It is expressly understood and agreed that other than the identification of a duly registered U.S. broker for the purposes set forth in Section 4.1 hereof, the Agent shall not perform any services or have any duties with respect to subscriptions from United States residents or U.S. Persons. The Corporation hereby agrees to use all reasonable efforts to secure compliance with all securities regulatory requirements on a timely basis in connection with the distribution of the Special Warrants to the Purchasers, including, without limitation, by filing within the periods stipulated under Applicable Securities Laws, and at the Corporation's expense, all private placement forms required to be filed by the Corporation and the Purchasers, respectively, in connection with the Offering and paying all filing fees required to be paid in connection therewith so that the distribution of the Special Warrants may lawfully occur without the necessity of filing a prospectus or any similar document under the Applicable Securities Laws, including, an offering memorandum as defined in Rule 14-501 of the Ontario Securities Commission or in or in subsection 1(m.2) of the Securities Act (Alberta). The Agent agrees to assist the Corporation in all reasonable respects to secure compliance with all regulatory requirements in the Qualifying Provinces in connection with the Offering. The Agent will notify the Corporation with respect to the identity of each Purchaser as soon as practicable and with a view to leaving sufficient time to allow the Corporation to secure compliance with all relevant regulatory requirements under Applicable Securities Laws relating to the sale of the Special Warrants. 3. Covenants and Representations of the Agent 3.1 The Agent covenants with the Corporation that it will (and will use its reasonable efforts to cause the members of the Selling Group to ensure that they will): (i) conduct its activities in connection with arranging for the sale of the Special Warrants and in distributing the Underlying Securities in compliance with the Canadian Securities Laws; (ii) not deliver to any prospective Purchaser any document or material without the consent of the Corporation; (iii) not solicit offers to purchase or sell the Special Warrants so as to require registration thereof or filing of a prospectus with respect thereto under the laws of any jurisdiction including, without limitation, the United States of America or any state thereof and not solicit offers to purchase or sell the Special Warrants in any jurisdiction outside of Canada where the solicitation or sale of the Special Warrants would result in any ongoing disclosure requirements in such jurisdiction, any registration requirements in such jurisdiction except for the filing of a notice or report of the solicitation or sale, or where the Corporation may be subject to liability in connection with the sale of the Special Warrants which is materially more onerous than its liability under the Applicable Securities Laws to which it would be subject after the completion of the Private Placement; (iv) obtain from each Purchaser an executed Subscription Agreement in the form attached hereto as Schedule "E", together with all documentation as may be necessary in connection with subscriptions for Special Warrants; (v) upon the Corporation obtaining the necessary receipts therefor from the Securities Commissions in the Qualifying Provinces, deliver one copy of the Final Prospectus (together with any Supplementary Material required to be provided to the Purchasers) to each of the Purchasers within the time period required by Applicable Securities Laws; (vi) refrain from advertising the Offering in printed public media, radio, television or telecommunications, including electronic display, and not make use of any green sheet or other internal marketing document without the consent of the Corporation; (vii) not make any representations or warranties with respect to the Corporation, the Special Warrants or the Underlying Securities, other than as set forth in the Preliminary Prospectus, the Final Prospectus, any Supplementary Material, any Subscription Agreement, this Agreement or in publicly available information filed by the Corporation; (viii) not solicit offers from a U.S. Person; and (ix) provided that they are otherwise satisfied, in their sole discretion, that it is responsible for them to do so, execute and deliver to the Corporation any certificate required to be executed by them under Canadian Securities Laws in connection with the Preliminary Prospectus, the Final Prospectus and any Supplementary Material. 4. Agent's Compensation 4.1 In consideration of the Agent's services to be rendered to the Corporation in connection herewith, including, without limitation, soliciting offers to purchase the Special Warrants, acting as financial advisor to the Corporation in respect of the sale of the Special Warrants, preparation of relevant documentation including assisting the Corporation in connection with the preparation of the Offering Documents, performing administrative work in connection with such matters, and all other services arising out of this Agreement, the Corporation agrees, subject to and upon the terms and conditions set out herein, to pay or cause to be paid to the Agent at the Time of Closing a fee equal to 8% of the amount of the aggregate gross proceeds from the sale of Special Warrants to Purchasers pursuant to the Offering in Canada and to grant to the Agent non-assignable warrants (the "Agent's Warrants") to acquire, without payment of additional consideration, compensation options (the "Agent's Compensation Options"). The Agent's Compensation Options will entitle the Agent to purchase at $4.50 (U.S.) per Unit, at any time on or prior to 4:30 p.m. (Toronto time) 12 months following the Closing Date, a number of Units equal to 10% of the number of Special Warrants sold under the Offering in the aggregate, including any portion of the Offering sold in the United States notwithstanding that the Agent has not conducted any activity in furtherance of soliciting offers in the United States other than the identification of a duly registered U.S. broker to be retained by the Corporation to provide administrative services in the United States, and notwithstanding that any of such sales are made to persons on the President's List. The Agent's Warrants may be exercised into non- assignable Agent's Compensation Options during the period commencing at the Time of Closing on the Closing Date, and ending at the earlier of 4:30 p.m. (Toronto time) on the fifth (5th) Business Day following the Qualification Date and 12 months following the Closing Date. The Corporation shall use its commercial best efforts to qualify the Agent's Compensation Options issuable upon exercise of the Agent's Warrants under the Final Prospectus and to register the resale of the Unit Shares and the Warrant Shares underlying the Agent's Compensation Options under the U.S. Securities Laws for a period of not less than 3 years following the Closing Date. The parties confirm that in the event the Agent appoints other registered dealers ("Sub-Agents") to assist in the Offering, then such Sub-Agents shall be entitled to receive Agent's Warrants as part of their compensation whether directly registered in such Sub-Agents' names or assigned by the Agent to such Sub-Agent, on the same basis as the Agent is entitled to receive Agent's Warrants provided that the maximum number of Agent's Warrants, issued by the Corporation shall not exceed 10% of the Special Warrants sold under the Offering. 4.2 In connection with proceeds received from subscriptions by those persons identified on the President's List, the Agent shall be entitled, notwithstanding Section 4.1, but subject to the limitation hereinafter set forth, to an Agent's Fee equal to 4% of the amount of the aggregate gross proceeds, not to exceed U.S. $8,000,000, from the sale of the Special Warrants to Purchasers identified on the President's List. To the extent the proceeds received from subscriptions by those persons identified on the President's List exceed $8,000,000, then the Agent, notwithstanding anything to the contrary contained in Section 4.2 or Section 4.3 shall be entitled to a fee of 8% of the proceeds so received in excess of $8,000,000. 4.3 With respect to the purchase of Special Warrants by U.S. Persons who are identified in writing to be on the President's List and notwithstanding that the Agent has not carried on any sales activities with respect thereto, the Agent shall be entitled to a fiscal advisory fee equal to 4% of the amount of the aggregate gross proceeds received by such person from the sale of the Special Warrants. The Corporation acknowledges and agrees that the only purchases in the United States of Special Warrants shall be by U.S. Persons who are identified in writing to be on the President's List. 4.4 The fees payable to the Agent pursuant to Sections 4.1, 4.2 and 4.3 are herein collectively referred to as the "Agent's Fee". 4.5 The Corporation and the Agent acknowledge and agree that if a separate fee were to have been charged to the Corporation for the services described above pertaining to the distribution of the Special Warrants, such separate fee would represent more than 50% of the Agent's Fee, and the Agent further acknowledges and agrees that the Agent will rely on the foregoing in not charging G.S.T. on such fees. Should it be determined by Revenue Canada, Customs, Taxation and Excise that G.S.T. should have been charged and is otherwise exigible on all or any part of the Agent's Fee, the Corporation shall pay forthwith to the Agent on demand an amount equal to the G.S.T. determined to be exigible. 4.6 The maximum amount that the Corporation shall be entitled to identify and denote as being on the President's List, in the aggregate, shall not exceed U.S. $8,000,000. 5. Representations, Warranties and Covenants of the Corporation 5.1 The Corporation hereby represents, warrants and covenants to and with the Agent and the Purchasers that: (a) it will as soon as practicable after the Closing Date and, in any event, within applicable time periods under the Applicable Securities Laws, file such documents as may be required under the Applicable Securities Laws relating to the private placement of the Special Warrants which, without limiting the generality of the foregoing, shall include a Form 45-501F1 as prescribed by Rule 45-501 of the Ontario Securities Commission and the equivalent provisions thereto in the other Qualifying Provinces, and pay all filing fees required to be paid in connection therewith; (b) it will use its commercial best efforts to cause the Prospectus (and any other documents required to be filed therewith) to be prepared and filed, and receipts obtained therefor, in each of the Qualifying Provinces in accordance with the Canadian Securities Laws as soon as practicable, and in any event within 150 days, following the Closing Date, which Prospectus shall be, in form and substance, satisfactory to the Corporation and the Agent, each acting reasonably and to take all other steps and proceedings that may be reasonably necessary in order to qualify the Unit Shares and Warrants issuable upon exercise of the Special Warrants for distribution to the public in each of the Qualifying Provinces and to qualify the Agent's Compensation Options for distribution by the Agent in the Province of Ontario to the extent permitted by the Ontario Securities Commission; (c) during the period commencing with the date hereof and ending on the first Business Day which is 150 days after the Closing Date, not issue, or agree or commit to issue, any Common Shares or securities convertible into or exchangeable for Common Shares without the prior consent in writing of the Agent, such consent not to be unreasonably withheld, save and except such Common Shares or securities convertible into or exchangeable for Common Shares issued in connection with and in satisfaction of indebtedness owing by the Corporation to its creditors including pursuant to a private placement of promissory notes provided that the number of Common Shares issued in satisfaction of such indebtedness shall not exceed [U.S. $1,250,000] and save and except for any Common Shares issued in connection with the transaction identified in a letter of understanding dated August 31, 1999 between E-Bill Direct Inc. and J.D. Donahue & Associates Inc. The Agent agrees that this covenant shall not apply to the disposition of Common Shares or securities convertible into or exchangeable for Common Shares pursuant to options or other rights to acquire Common Shares existing on the date hereof which have been granted by the Corporation or which may from time to time during such 150 day period be granted to its directors, officers, employees, independent contractors or consultants; (d) the Corporation will assure that any offers and sales of Special Warrants in the United States or to U.S. Persons are exempt from registration and qualification under U.S. Securities Laws. (e) it will use its commercial best efforts to ensure that the resale of the Unit Shares issuable upon the exercise of the Special Warrants and the Agent's Compensation Options and the Warrant Shares issuable pursuant to the exercise of the Warrants will be registered under all applicable U.S. Securities Laws during a period commencing not later than 150 days following the Closing Date and ending not earlier than three years from the Closing Date and that the same shall be listed and posted for trading on the Exchange upon their issue; (f) the National Association of Securities Dealers has cleared the Corporation for quotation of its Common Shares on the Exchange and that it will use its commercial best efforts to list the Unit Shares, Warrants Shares and all other outstanding shares of its common stock on the NASDAQ National Market or if the Corporation does not meet the listing requirements of the NASDAQ National Market, on the NASDAQ SmallCap Market, as soon as possible following the Closing Date but in the event not later than 90 days following the Closing Date and shall thereafter maintain such listing in good standing; (g) it will promptly comply with all filing and other requirements under Applicable Securities Laws in connection with the Offering, including, if required, the filing of amendments to the Final Prospectus in each of the Qualifying Provinces; (h) the Corporation does not have any Subsidiaries or Significant Interest Companies other than as set forth in Schedule "D"; (i) Schedule "D" is a complete list of each Subsidiary and the particulars of the types and percentages of securities in each Subsidiary; the Corporation holds all such securities free and clear of all mortgages, liens, charges, pledges, security, interests, encumbrances, claims and demands whatsoever except as otherwise disclosed in such schedule; (j) the Corporation (i) is duly existing under the Revised Statutes of Nevada, Chapter 78, pertaining to Private Corporations (as therein defined) (the "Act") and is and will at the Time of Closing be validly existing and in good standing under the laws of the State of Nevada; (ii) has all requisite corporate power and authority to carry on its business as now conducted and to own, lease and operate its properties and assets and is duly qualified or licensed and in good standing in each jurisdiction where it carries on business or where the location of its assets requires it to be so licensed or qualified; and (iii) has all required corporate power and authority to create, issue and sell the Offered Securities, to create and issue the Underlying Securities, to enter into this Agreement, and the Subscription Agreements and to carry out the provisions of each of such agreements; (k) each Subsidiary has been duly incorporated or amalgamated, as applicable, and duly organized and is and will at the Time of Closing: (i) be validly existing and in good standing laws of its jurisdiction of incorporation or amalgamation, as the case may be; (ii) have all requisite corporate power and authority to carry on its business as now conducted and to own, lease and operate its properties and assets; (l) the Corporation, and each Subsidiary, is in all material respects conducting its business in compliance with all applicable laws, rules and regulations of each jurisdiction in which its business is carried on and is duly licensed, registered or qualified in all jurisdictions in which it owns, leases or operates its property or carries on business to enable its business to be carried on as now conducted and its property and assets to be owned, leased and operated and all such licences, registrations and qualifications are and will at the Time of Closing be valid, subsisting and in good standing, except in respect of matters which do not and will not result in any material adverse change to the business, business prospects or condition (financial or otherwise) of the Corporation or any Subsidiary and except for the failure to be so qualified or the absence of any such licence, registration or qualification which does not and will not have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Corporation or any Subsidiary; (m) the authorized capital of the Corporation consists of 70,000,000 Common Shares with a par value of $0.001 per share and 10,000,000 preferred shares with a par value of $0.001 per share and, as at the date hereof, the issued and outstanding capital of the Corporation consists solely of [22,048,293] Common Shares; (n) except as disclosed in the Disclosure Documents, or in Schedule "B" hereto, the Corporation does not have any Outstanding Convertible Securities and, except under this Agreement and as otherwise disclosed in Schedule "B", no person now has any agreement or option or right or privilege capable of becoming an agreement for the purchase, subscription or issuance of any unissued shares, securities or warrants of the Corporation; (o) the Corporation and each Subsidiary possesses all material certificates, authority, permits or licences issued by the appropriate federal, state, provincial or municipal regulatory agencies or bodies necessary to conduct the business now owned or operated by it, and the Corporation has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority, permit or licence which, if the subject of an unfavourable decision, ruling or finding, would materially and adversely affect the conduct of the business, operations, financial condition or income of the Corporation; (p) except as otherwise disclosed in the Disclosure Documents or in Schedule "C" annexed hereto, or otherwise disclosed to the Agent in writing, since the date of the audited financial statements for the fiscal period ended December 31, 1999, including the notes to the said financial statements: (i) there has not been any material change in the assets, liabilities or obligations (absolute, accrued, contingent or otherwise) of the Corporation that has not been publicly disclosed in the manner required by the Applicable Securities Laws; (ii) there has not been any material change in the capital stock or long-term debt of the Corporation that has not been publicly disclosed in the manner required by the Applicable Securities Laws; (iii) there has not been any material change in the business, business prospects, condition (financial or otherwise) or results of the operations of the Corporation, on a consolidated basis, that has not been publicly disclosed in the manner required by the Applicable Securities Laws; and (iv) except as has been publicly disclosed in the manner required by the Applicable Securities Laws since its last fiscal year end, the Corporation and each Subsidiary has carried on its business in the ordinary course; (q) the audited consolidated financial statements of the Corporation for the fiscal period ended December 31, 1999, and any unaudited financial statements of the Corporation for any subsequent period prior to the Closing Date, have been prepared in accordance with American generally accepted accounting principles consistently applied and present fairly the financial condition and results of operations and changes in cash flow of the Corporation (including the assets and liabilities whether absolute or contingent or otherwise), on a consolidated basis for the periods then ended; (r) there is no action, proceeding or investigation (whether or not purportedly by or on behalf of the Corporation or any Subsidiary) pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation or any Subsidiary, at law or in equity (whether in any court, arbitration or similar tribunal) or before or by any federal, provincial, state, municipal or other governmental department, commission, board or agency, domestic or foreign, which in any way materially adversely affects, or which if determined adversely to the Corporation may materially adversely affect, the Corporation or the condition (financial or otherwise) of the Corporation on a consolidated basis, or which questions the validity of the Offered Securities, the Underlying Securities or of the issuance thereof as fully paid and non-assessable securities or any action taken or to be taken by the Corporation pursuant to or in connection with this Agreement. There are no judgments, awards, orders, decrees or executions outstanding against the Corporation or any Subsidiary or its business or any of its property or assets resulting in an aggregate monetary obligation in excess of $5,000; (s) the execution and delivery of this Agreement, the Subscription Agreements, the Special Warrant Agreement and the certificates representing the Special Warrants and the Agent's Warrants by the Corporation, the performance and compliance with the terms of this Agreement, the Subscription Agreements, the Special Warrant Agreement, the sale of the Offered Securities and the issuance of the Underlying Securities by the Corporation, will not result in any material breach of, or be in conflict with or constitute a default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a default under any term or provision of the constating documents, by-laws or resolutions of the Corporation or any mortgage, note, indenture, contract, agreement, instrument, lease or other document to which the Corporation is a party or by which it is bound or any judgment, decree, order, statute, rule or regulation applicable to the Corporation; (t) the Corporation is and will at the Time of Closing be a "reporting company" with a class of equity securities registered pursuant to Section 12(g) of the United States Securities Exchange Act of 1934, as amended (the "1934 Act"); the Corporation and its Subsidiaries are not in violation of any Applicable Securities Laws and the Corporation will use its best efforts to maintain such status for a period of at least twelve (12) months from the expiry of the Warrants. In particular, without limiting the foregoing, the Corporation has at all times complied with its obligations to make timely disclosure of all material changes relating to it pursuant to the 1934 Act, and its reports pursuant to the 1934 Act, taken as a whole, do not contain a material misstatement or omission; (u) the Common Shares are listed and quoted for trading on the Exchange, the Corporation is not in default or breach of any of the rules, policies and by-laws of the Exchange, no order ceasing or suspending trading in any securities of the Corporation or prohibiting the sale of the Offered Securities, the issuance of the Underlying Securities or the trading of any of the Corporation's issued securities has been issued and no proceedings for such purpose are pending or, to the knowledge of the Corporation, threatened; (v) the auditors of the Corporation who audited the financial statements of the Corporation most recently delivered to the securityholders of the Corporation and who delivered their report with respect thereto are independent public accountants as required by the Applicable Securities Laws; (w) there has never been any reportable disagreement (within the meaning of National Policy Statement No. 31 of the Canadian Securities Administrators) with the present or any former auditor of the Corporation to the knowledge of the Corporation's current management, there has never been a disagreement or resignation of the Corporation's auditors which was a required subject of disclosure pursuant to the 1934 Act, the 1933 Act or any rule or regulation adopted thereunder; (x) the Corporation, and each Subsidiary has established on its books and records reserves that are adequate for the payment of all taxes not yet due and payable and there are no liens for taxes on the assets of the Corporation and, to the knowledge of the Corporation, there are no audits pending of the tax returns of the Corporation or any Subsidiary (whether federal, state, provincial, local or foreign) and there are no claims which have been or may be asserted relating to any such tax returns, which audits and claims, if determined adversely, would result in the assertion by any governmental agency of any deficiency that would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Corporation and each Subsidiary taken as a whole; (y) all taxes (including income tax, capital tax, goods and services tax, sales tax, payroll taxes, employer health tax, workers' compensation payments, custom and land transfer taxes, duties, royalties, levies, imposts, assessments, deductions, charges or withholdings and all liabilities with respect thereto including any penalty and interest payable with respect thereto (collectively, "Taxes") due and payable by the Corporation and each Subsidiary have been paid. All tax returns, declarations, remittances and filings required to be filed by the Corporation and each Subsidiary have been filed with all appropriate governmental authorities and all such returns, declarations, remittances and filings are complete and accurate. No domestic or foreign taxation authority has asserted or, to the Corporation's knowledge, threatened to assert any assessment, claim or liability for taxes due or to become due in connection with any review or examination of the tax returns of the Corporation (including, without limitation, any predecessor companies) filed for any year which would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Corporation taken as a whole; (z) neither the Corporation nor any Subsidiary, nor to the Corporation's knowledge, any other party, is in default in the observance or performance of any term or obligation to be performed by it under any material contract, joint venture agreement, license or other instrument and no event has occurred which with notice or lapse of time or both would constitute such a default, in any such case, which default or event would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Corporation on a consolidated basis; (aa) prior to the filing of the Preliminary Prospectus and thereafter and prior to the filing of the Final Prospectus and any Supplementary Material, the Corporation will allow the Agent to participate fully in the preparation of the Preliminary Prospectus, the Final Prospectus and any such Supplementary Material and shall allow the Agent to conduct all due diligence which it may reasonably require to conduct in order to fulfil its obligations and in order to enable it responsibly to execute the certificate required to be executed by it at the end of each of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material; (bb) the Corporation will deliver from time to time without charge to the Agent as many copies of the Preliminary Prospectus, the Final Prospectus, any Supplementary Material as it may reasonably request for the purposes contemplated hereunder and contemplated by the Applicable Securities Laws in the Qualifying Provinces and such delivery shall constitute the consent of the Corporation to the Agent's use of such documents in connection with the distribution to the public of the Underlying Securities, subject to the provisions of the Applicable Securities Laws in the Qualifying Provinces and the provisions of this Agreement. The deliveries to be made pursuant to this subsection shall constitute the Corporation's representation and warranty that, at the time of delivery thereof, all information and statements (except information and statements relating solely to the Agent) contained in the Preliminary Prospectus, the Final Prospectus and the Supplementary Material: (i) were true and correct in all material respects; (ii) contained no misrepresentation; and (iii) when read together constituted full, true and plain disclosure of all material facts relating to the Special Warrants, the Agent's Warrants and the Underlying Securities. Such delivery shall also constitute the Corporation's consent to the Agent's use of the Preliminary Prospectus, Final Prospectus and Supplementary Material in the Qualifying Provinces in compliance with the provisions of this Agreement and all Applicable Securities Laws; (cc) all the information and statements to be contained in the Preliminary Prospectus, Final Prospectus, any Supplementary Material and the Registration Statement shall, at the date of delivery thereof, constitute full, true and plain disclosure of all material facts relating to each of the Offering, the Corporation, the Offered Securities and the Underlying Securities (provided that this representation is not intended to extend to information and statements relating to the Agent included in reliance upon and in conformity with information furnished to the Corporation by or on behalf of the Agent specifically for use therein) and shall otherwise contain the disclosure required by and conform, in all material respects, to the requirements of the applicable provisions of all Applicable Securities Laws; (dd) none of the Preliminary Prospectus, the Final Prospectus, any Supplementary Material or the Registration Statement will contain a misrepresentation (provided that this representation is not intended to extend to information and statements relating to the Agent included in reliance upon and in conformity with information furnished to the Corporation by or on behalf of the Agent specifically for use therein); (ee) all necessary corporate action has been taken or will have been taken prior to the Time of Closing by the Corporation so as to validly issue and sell the Special Warrants to the Purchasers and upon receipt by the Corporation of the purchase price as consideration for the issue of the Special Warrants, such Special Warrants will be validly issued and outstanding; (ff) this Agreement, the Special Warrant Agreement, the Subscription Agreements, the Special Warrants, the Warrants, the Agent's Warrants, the Agent's Compensation Options, and all other contracts and instruments required in connection with the issue and distribution of the Offered Securities shall be, on or prior to the Closing Date, duly authorized, executed and delivered by the Corporation and shall be valid and binding obligations of the Corporation enforceable in accordance with their respective terms, subject to any applicable bankruptcy, reorganization, winding-up, insolvency, moratorium or other laws of general application, the unavailability of any equitable remedies, and that the enforcement of any rights against the Corporation under this Agreement with respect to indemnity or contribution may be limited by applicable law and may or may not be ordered by a court on grounds of public policy; (gg) the attributes of the Underlying Securities will conform in all material respects with the description thereof described or to be described in the Final Prospectus and in the Registration Statement; (hh) the forms of the certificates representing the Special Warrants, the Common Shares, the Warrants, the Agent's Warrants and the Agent's Compensation Options have been duly approved by the Corporation and comply with the provisions of the laws of its jurisdiction of incorporation, the regulations of the Exchange and the Applicable Securities Laws; (ii) all necessary corporate action has been taken by the Corporation to authorize the creation of the Special Warrants, the issue and sale of the Special Warrants, the issue of the Underlying Securities upon the exercise of the Special Warrants, the creation and issue of the Agent's Warrants, the issue of the Agent's Compensation Options upon exercise of the Agent's Warrants and the issue of the Underlying Securities upon the exercise of the Agent's Compensation Options; (jj) the Unit Shares and Warrant Shares issuable upon the exercise of the Special Warrants, the Warrants and the Agent's Compensation Options have been duly reserved and allotted for issuance and the Corporation has irrevocably reserved for issuance and will at all times keep available free from pre-emptive and other rights, out of its authorized and unissued capital stock, such number of Common Shares so as to fully satisfy the exercise of all Special Warrants, Warrants and Agent's Compensation Options including any adjustments as a result of the Conversion Rate Increase; (kk) save as otherwise provided herein, other than the Agent, there is no person acting or to the Corporation's knowledge, purporting to act at the request of the Corporation, who is entitled to any brokerage, agency or other fiscal advisory or similar fee in connection with the transactions contemplated herein; (ll) the Corporation will promptly notify the Agent in writing if there shall occur any material change or change in a material fact (in either case, whether actual, anticipated, contemplated or threatened and other than a change or change in fact relating solely to the Agent) or any event or development involving a prospective material change or a change in a material fact or any other change in any or all of the business, affairs, operations, assets (including information or data relating to the estimated value or book value of assets), liabilities (contingent or otherwise), capital, ownership, control, management or prospects of the Corporation, on a consolidated basis, or any other change which is of such a nature as to result in, or could result in a misrepresentation in the Preliminary Prospectus, Final Prospectus or any Supplementary Material or could render any of the foregoing not in compliance with any of the Applicable Securities Laws; (mm) the Corporation will promptly notify the Agent in writing with full particulars of any such actual, anticipated, threatened or prospective change referred to in paragraph (ll) above and the Corporation shall, to the reasonable satisfaction of the Agent, file promptly and, in any event, within all applicable time limitation periods with the applicable regulatory authorities a new or amended Preliminary Prospectus, Final Prospectus or Supplementary Material, as the case may be, or material change report as may be required under the Applicable Securities Laws and shall comply with all other applicable filing and other requirements under the Applicable Securities Laws including, without limitation, any requirements necessary to qualify the issuance and distribution of the Common Shares and Warrants issuable upon the exercise of the Special Warrants and, to the extent permitted by the Ontario Securities Commission, the Agent's Compensation Options, and shall deliver to the Agent as soon as practicable thereafter its reasonable requirements of conformed or commercial copies of any such new of amended Preliminary Prospectus, Final Prospectus or Supplementary Material. The Corporation will not file any such new or amended disclosure documentation or material change report without first obtaining the written approval of the form and content thereof by the Agent, which approval shall not be unreasonably withheld or delayed, provided that the Corporation will not be required to file a registration statement or otherwise register or qualify the Underlying Securities for distribution outside Canada; (nn) all of the Disclosure Documents and other materials filed by or on behalf of the Corporation with the Securities Commissions, the SEC, and the Exchange were true and correct in all material respects as of the date of such filing, and, to the extent required, provided full, true and plain disclosure of all material facts relevant to the Corporation and did not contain a misrepresentation; (oo) the Corporation has not withheld, and will not withhold, from the Agent any material facts relating to the Corporation, the Subsidiaries or to the Offering, including, without limiting the generality of the foregoing, any material facts relating to any current or past business operations of the Corporation and any Subsidiary, and the Corporation has not, by omission, failed to advise the Agent or its counsel of any such material fact; (pp) there is not, in the constituting documents or the by-laws of the Corporation or in any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Corporation is party, any restriction upon or impediment to the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation to the holders of its Common Shares; (qq) the minute books of the Corporation and each Subsidiary provided to counsel to the Agent contain copies of all constituting documents and all resolutions of their directors and security holders; (rr) the Corporation is not aware of any licensing or environmental legislation, regulation, by-law or lawful requirement presently in force or proposed to be brought into force which the Corporation anticipates that it or any of its Subsidiaries will be unable to comply with without materially adversely affecting its financial condition, results of operations, business or prospects of each jurisdiction in which its business is carried on; (ss) the Corporation and each Subsidiary has conducted and is conducting its business in compliance, in all material respects, with all applicable licensing and environmental protection legislation, regulations or by-laws or other similar laws, bylaws, rules and regulations or other lawful requirements of each jurisdiction in which its business is carried on and holds all material licences, certificates, registrations, permits, consents or qualifications required in order to enable its business to be carried on as now conducted or as proposed to be conducted, and all such licences, certificates, registrations, permits, consents and qualifications are valid and subsisting and in good standing and none of such licenses, registrations or qualifications contains any burdensome term, provision, condition or limitation which has or is likely to have any material adverse effect on its business as now conducted and neither the Corporation nor any Subsidiary has received any notice of proceedings relating to the invocation of any such license, registration, permit or qualification which, if subject to an unfavorable decision, ruling or finding would materially adversely affect the business, operations, financial condition or income of the Corporation on a consolidated basis; (tt) no notice has been received by the Corporation or any Subsidiary in respect of any infringement or misappropriation by the Corporation or any Subsidiary or by any of their respective officers, directors, employees, consultants or agents of any industrial or intellectual property rights of any person and the Corporation's and each Subsidiary's use of its Intellectual Property does not infringe upon, or constitute any misappropriation of, any industrial or intellectual property rights of any person. To the Corporation's knowledge, there is, and has not been, no infringement or other violation of any of the rights of the Corporation in and to the Intellectual Property; (uu) all agreements between Da-Jung Resource Corp. and the Corporation, including without limiting the generality of the foregoing, the agreement made August 1997 between Heilongjiang Geological and Mining Technology Development Corp. have been terminated and the Corporation has no liability or obligations to Da-Jung Resource Corp. or any other Person under any such agreements, whether absolute or contingent or otherwise; (vv) except as disclosed in the Disclosure Schedule to the knowledge of the Corporation and the officers and directors of the Corporation, (i) neither the Corporation nor any Subsidiary nor any of their respective properties has ever been or is now in any material respect in violation of any applicable environmental laws or orders; (ii) neither the Corporation nor any such Subsidiary, nor any third party has prior to the date hereof ever used, generated, manufactured, stored or disposed of on, under or about such properties or transported to or from such properties any Hazardous Substances; (iii) no facts, past or present events or conditions interfere with or prevent continued material compliance by the Corporation or any of such Subsidiary which, or give rise to any material present or potential legal, common law or statutory liability of the Corporation or any of such Subsidiary under, any applicable environmental law or order; (iv) there is no pending civil or criminal litigation, notice of violation or administrative proceeding involving the Corporation or any such Subsidiary and relating in any way to any environmental law or order for the purposes of this representation and warranty "Environmental Law and Order" shall mean any domestic or foreign, federal, provincial, state or local statute, law, ordinance, rule, regulation, guideline, decree or requirement of any governmental, regulatory or administrative body, agency or authority or any court or tribunal of judicial authority or any public, private or industry regulatory authority, whether international, national, United States, Canadian, provincial, state or local, pertaining to the protection of the environment for human health including, without limitation, all requirements relating to the manufacturer, processing distribution, used, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials, or waste, whether solid, liquid or gaseous in nature. For the purpose of this representation and warranty "Hazardous Substance" means any substance which is defined as a Hazardous Substance under any environmental law or order or that is toxic, explosive, corrosive, flammable, radio active, carcinogenic or otherwise hazardous and is regulated by any governmental authority or agency; (ww) the Corporation and each Subsidiary owns all of its property and assets reflected in the audited consolidated financial statements, and the notes thereto, for the year ended December 31, 1999 and all other property and assets used by it in connection with its business with good and marketable title thereto, including without limitation its Intellectual Property, free and clear of all encumbrances, liens, charges, hypothecs, pledges, mortgages, title retention agreements, security interests of any nature, adverse claim, except as disclosed in Schedule "C" and save and except as to the property and assets which are subject to a license or other similar agreement in favour of the Corporation as disclosed in Schedule "C"; and (xx) the Corporation will, during the period of distribution of the Offered Securities and the Underlying Securities, maintain the Trustee as the transfer agent and registrar in respect of the Warrants and the Common Shares in the City of Vancouver, and such other cities of Canada as may be required under Applicable Securities Laws. 6. Conditions to Purchase Obligation 6.1 The following are conditions of the Purchasers' obligations to close the purchase of the Special Warrants from the Corporation as contemplated hereby, which conditions the Corporation covenants to exercise its reasonable best efforts to have fulfilled at or prior to the Closing Date, which conditions may be waived in writing in whole or in part by the Agent on its own behalf and on behalf of the Purchasers: (a) the Corporation shall have made and/or obtained the necessary filings, approvals, consents and acceptances to or from, as the case may be, the Securities Commissions, the SEC and the Exchange, if any, required to be made or obtained by the Corporation in connection with the Offering, on terms which are acceptable to the Corporation and the Agent, acting reasonably, prior to the Closing Date; (b) the Common Shares and the Warrant Shares (including the Common Shares and Warrant Shares issuable upon the exercise of the Agent's Compensation Options) issued in connection with the Offering shall have been accepted for listing and posting by the Exchange, subject to the usual conditions and payment of the applicable additional listing fee to the Exchange; (c) the Corporation's board of directors shall have authorized and approved this Agreement, the Subscription Agreements, Special Warrant Agreement, the respective forms of the Special Warrants, Warrants and Agent's Warrants, the Agent's Compensation Options and all other agreements and instruments prepared in connection with the Offering, the sale of the Offered Securities, the issuance of the Underlying Securities and all matters relating to the foregoing; (d) as at the Closing Date, the Corporation will deliver a certificate addressed to the Agent and to the Purchasers, signed by its Chief Executive Officer certifying that: (i) there has been no adverse material change (actual, proposed or prospective, whether financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise) or capital of the Corporation on a consolidated basis, since December 31, 1999 (the "Effective Date") which has not been generally disclosed; (ii) since the Effective Date, no material change relating to the Corporation, on a consolidated basis, except for the Offering, has occurred with respect to which the requisite material change statement or report has not been filed and no such disclosure has been made on a confidential basis; (iii) the representations and warranties of the Corporation contained in this Agreement are true and correct at the Time of Closing, with the same force and effect as if made by the Corporation as at the Time of Closing after giving effect to the transactions contemplated hereby; (iv) the Corporation has complied with all the covenants and satisfied all the terms and conditions of this Agreement on its part to be complied with or satisfied at or prior to the Time of Closing; (v) no order, ruling or determination having the effect of suspending the sale or ceasing the trading of the securities of the Corporation (including the Special Warrants, Agent's Warrants and the Underlying Securities) has been issued or made by any stock exchange, securities commission or other regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or to the knowledge of the Corporation, contemplated or threatened by any stock exchange, securities commission or other regulatory authority; (vi) there are no actions, suits, proceedings or inquiries, formal or informal pending or threatened against or affecting the Corporation, at law or in equity, before or by any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality in Canada, the United States or elsewhere which may, in any way, materially and adversely affect the Corporation; (vii) no failure or default on the part of the Corporation exists under any Applicable Law or any under license, permit or other instrument granted or issued to the Corporation or under any contract, license, agreement or other instrument to which the Corporation is a party or by which the Corporation is bound, which may, in any way, materially and adversely affect the Corporation and the execution, delivery and performance of this Agreement and the allotment, issue and sale of the Special Warrant, Agent's Warrants and Underlying Securities will not result in such default; (viii) the charter documents, including any articles of amendment and by-laws of the Corporation and each Subsidiary attached to the certificate are full, true and correct copies and are in full force and effect; and (ix) such other matters as the Agent or its legal counsel may reasonably request. (e) the Corporation will have caused a favorable legal opinion to be delivered by its Canadian and United States counsel, addressed to the Agent and the Purchasers with respect to such matters as the Agent may reasonably request relating to this transaction, acceptable in all reasonable respects to the Agent's counsel. In giving such opinion, counsel to the Corporation shall be entitled to rely, to the extent appropriate in the circumstances, upon local counsel and shall be entitled as to matters of fact not within their knowledge to rely upon a certificate of fact from responsible persons in a position to have knowledge of such facts and their accuracy including a certificate of the Corporation's registrar and transfer agent as to the outstanding securities of the Corporation. The Corporation agrees that the aforesaid legal opinions will be addressed to the Agent and the Purchasers and that the Agent may deliver copies thereof to such persons; (f) the Corporation shall have caused, on or before the Closing Date, the Agent's nominee to the board of directors of the Corporation to have been duly appointed to the board of directors of the Corporation; (g) each of the Corporation's senior officers, including, the Corporation's chief executive officer, chief financial officer and "Insiders" of the Corporation (within the meaning of the Applicable Securities Laws of Ontario) who own or control at least 5% of the issued and outstanding Common Shares shall have entered into an agreement with the Corporation and the Agent, providing that they will not, without the prior written consent of the Agent, from the date hereof, until the date which is the earlier of 150 days following the Closing Date and the date both a receipt for a Final Prospectus has been issued by each of the Securities Commissions in the Qualifying Provinces and an Effective Registration has been filed (the "Restricted Period") sell, assign, transfer or otherwise dispose of any of their securities of the Corporation. The Agent agrees that this contractual restriction shall apply to only 3,000,000 of the total number of Common Shares held by Da- Jung Resources Corp. The Agent further agrees that this contractual restriction shall not apply to incentive stock options existing on the date hereof which have been granted by the Corporation or the disposition of Common Shares acquired on the exercise of such incentive stock options and shall also be subject to the usual exemptions regarding the release of shares subject to an escrow including, pertaining to a takeover-bid made to all shareholders; (h) the delivery by the Corporation of such other certificates, statutory declarations, agreements or materials, in form and substance satisfactory to the Agent and its legal counsel as the Agent and its legal counsel may reasonably request; and (i) the Corporation shall have complied with and fulfilled all of the terms, covenants and conditions of this Agreement on its part to be complied with or fulfilled up to the Time of Closing. 7. Additional Documents Upon Filing of Prospectus. 7.1 The Corporation shall cause to be delivered to the Agent as required by Applicable Securities Laws, concurrently with the filing of the Preliminary Prospectus, Final Prospectus, or any Supplementary Material executed by the Agent, a comfort letter dated the date thereof from the auditors of the Corporation and addressed to the Agent and to the directors of the Corporation relating to: (a) the verification of the financial information and accounting data and other numerical data of a financial nature contained therein and matters involving changes or developments since the respective dates as of which specified financial information is given therein, to a date not more than two business days prior to the date of such letter; and (b) the period beyond the most recent year end of the Corporation for which an audited financial statement appears therein to a date not more than two business days prior to the date of such letter. 8. Closing. 8.1 The Offering, inclusive of the sales to and subscription by persons resident in the United States and by U.S. Persons, will be completed at the offices of the Corporation's counsel at the Time of Closing or such other place, date or time as may be mutually agreed to; provided that if the Corporation has not been able to comply with any of the covenants or conditions set out herein required to be complied with by the Time of Closing or such other date and time as may be mutually agreed to, the respective obligations of the parties will terminate without further liability or obligation except for payment of expenses, indemnity and contribution provided for in this Agreement. 8.2 At the Time of Closing, the Corporation shall deliver to the Agent on behalf of the Purchaser: (a) certificates duly registered as the Agent may in writing direct representing the Special Warrants, and the Agent's Warrants; (b) the requisite legal opinions and certificates as contemplated above; and (c) such further documentation as may be contemplated herein or as counsel to the Agent or the applicable regulatory authorities may reasonably require, against payment of the purchase price for the Special Warrants (net of the Fee and Legal Costs as defined below) and subject to Section 8.3 below, by certified cheque or bank draft payable to, or to the order of, the Corporation, and delivery of the Subscription Agreements and other documentation required to be provided by or on behalf of the Purchasers or the Agent pursuant to this Agreement. The Corporation covenants and agrees, upon receipt of such funds to forthwith make payment of the Agency Fee payable pursuant to Section 4.1 hereof and all fees, expenses, costs and disbursements payable to the Agent pursuant to Section 10 hereof (collectively the "Fee") payable to the Agent hereunder and the fees (inclusive of all disbursements and goods and services tax) of the Agent's legal counsel incurred in respect of the Offering (the "Legal Costs"). Alternatively, in full satisfaction of the Agent's obligations in respect to payment of the gross proceeds of the sale of the Special Warrants and the Corporation's obligation in respect of the Fee, the Agent may deliver a certified cheque in the amount of such gross proceeds, less the Fee and less the Legal Costs (which Legal Costs shall include the reasonable anticipated Legal Costs in respect of the preparation and filing of the Preliminary Prospectus, the Final Prospectus, the Registration Statement and all related matters provided such Legal Costs, inclusive of all disbursements, goods and services tax, local counsel fees and disbursements shall not exceed Cdn. $200,000) against delivery of the Corporation's receipt for the gross proceeds of the sale of the Special Warrants inclusive of the sale of the Special Warrants in the United States or to U.S. Persons. 8.3 The Corporation acknowledges and agrees that 15% of the gross proceeds received from Purchasers in Canada (the "Escrow Proceeds") shall be maintained in escrow by Pacific Corporate Trust Company or such other escrow agent as may be mutually agreed to between the Corporation and the Agent (the "Escrow Agent") pursuant to the terms of an escrow agreement. The escrow agreement shall provide that the Escrow Proceeds shall be maintained in escrow by the Escrow Agent until the earlier of the date of each of the receipts for the final prospectus has been issued by the Commissions in the Qualifying Provinces and an Effective Registration has been filed or 12 months following the Closing Date. 9. Termination of Purchase Obligation - the Agent. 9.1 Without limiting any of the foregoing provisions of this Agreement, and in addition to any other remedies which may be available to it, the Agent (on its own behalf and on behalf of the Purchasers) shall be entitled, at its option, to terminate and cancel, without any liability on its part (or on the part of the Purchasers), its obligations (and the obligations of the Purchasers) under this Agreement to purchase the Special Warrants, by giving written notice to the Corporation at any time through to the Time of Closing on the Closing Date if: (a) any order (other than an order based solely upon the activities or alleged activities of the Agent) to cease or suspend trading in any securities of the Corporation is made by any stock exchange, Securities Commission or other regulatory authority, which has not been rescinded, revoked or withdrawn; (b) any order or ruling is issued, any inquiry, investigation or other proceeding (whether formal or informal) in relation to the Corporation or directors or officers thereof is made, threatened or announced by any officer or official of any stock exchange, SEC, Securities Commissions or any other federal, state or provincial regulatory authority (other than an order based solely upon the activities or alleged activities of the Agent) or any law or regulation is promulgated or changed which, in the reasonable opinion of the Agent, operates to prevent or restrict trading in the Common Shares of the Corporation or distribution of the Offered Securities or, if, in the opinion of the Agent, the announcement or commencement thereof adversely affects or could reasonably be expected to affect adversely the offering or continued offering of the Special Warrants as herein contemplated; (c) there should develop, occur or come into effect any incident of national or international consequence, any law, regulation or inquiry or any other event, action or occurrence of any nature whatsoever which, in the reasonable opinion of the Agent, materially and adversely effects or may materially and adversely effect the business of the Corporation; (d) there should occur any material change or change in a material fact which, in the reasonable opinion of the Agent would be reasonably expected to have a material adverse effect on the market price or value of the Offered Securities or could reasonably be expected to result in the Purchaser's of a material number of Special Warrants exercising their right under Applicable Securities Laws to withdraw from or rescind the purchase thereof or sue for damages in respect thereof; (e) the state of the financial markets in Canada is such that in the reasonable opinion of the Agent, the Offered Securities cannot be profitably marketed or sold; or (f) the Corporation shall be in breach of, or default under or non- compliance with any representation, warranty, term of condition of this Agreement. The occurrence or non-occurrence of any of the foregoing events or circumstances to be determined in the sole discretion of the Agent, acting reasonably. The Agent shall make reasonable efforts to give notice to the Corporation (in writing or by other means) of the occurrence of any of the events or circumstances referred to in this section, provided that neither the giving nor the failure to give such notice shall in any way affect the Agent's entitlement to exercise this right at any time through to the Time of Closing. The Agent's rights of termination contained in this section are in addition to any other rights or remedies it may have in respect of any default, act or failure to act or non-compliance by the Corporation in respect of any of the matters contemplated by this Agreement. 9.2 If the obligations of the Agent and the Purchasers are terminated under this Agreement pursuant to the termination rights provided for in Section 9.1, the Corporation's liabilities to the Agent shall be limited to the Corporation's obligations under Sections 10, 12 and 12 which obligations shall remain in full force and effect in accordance with their respective terms. 10. Expenses and Work Fee. 10.1 Whether or not the Offering is completed, the Corporation agrees to pay all reasonable costs, fees and expenses incurred by the Agent from time to time in connection with the Offering or incidental to the performance of its obligation hereunder, including, without limitation: (a) all expenses incidental to the sale, issue or distribution of the Special Warrants, the qualification of the Underlying Securities and the other transactions herein set forth; (b) all costs incurred in connection with the preparation of documents or certificates relating to the Offering, including the Preliminary Prospectus, the Final Prospectus and the Registration Statement; and (c) all expenses and fees incurred by the Agent including all Legal Costs and all other fees and expenses incurred by the Agent or on its behalf in relation to the due performance of its obligations hereunder, including any expenses or reimbursement for expenses paid to a sub-agent by the Agent. The Agent acknowledges that it has received the amount of $15,000 as an advance against such expenses of which $10,000 shall be applied against its legal costs. To the extent that goods and services tax or provincial sales tax is exigible upon any of the foregoing fees or expenses, the Corporation shall be responsible for payment therefor. 11. Indemnity. 11.1 The Corporation covenants and agrees to indemnify the Agent and its directors, officers, employees and agents (each being hereinafter referred to as an "Indemnified Party"), against, and to reimburse the Agent promptly upon demand for any legal or other expenses reasonably incurred by the Agent in connection with investigating or defending, all losses (other than a loss of profits), claims, damages, liabilities, costs or expenses (collectively, a "Claim") which an Indemnified Party may suffer or incur, caused or incurred in connection with this Offering by reason of or in any way relating to directly or indirectly: (a) any statement, other than a statement relating solely to the Agent, contained in any of the Offering Documents which constitutes a misrepresentation; (b) any statement, other than a statement relating solely to the Agent and provided by or on behalf of the Agent, contained in the Disclosure Documents which at the time and in the light of the circumstances under which it was made, contained a misrepresentation; (c) the omission to state in any of the Offering Documents, in the Disclosure Documents or any certificate of the Corporation delivered hereunder or pursuant hereto any material fact (other than a material fact omitted in reliance upon and in conformity with information furnished to the Corporation by or on behalf of the Agent) required to be stated therein or necessary to make any statement therein not misleading in light of the circumstances under which it was made; (d) any order made or inquiry, investigation or proceeding commenced or threatened by any Securities Commission or other competent authority based upon any misrepresentation or alleged misrepresentation in any of the Offering Documents or the Disclosure Documents (other than a statement included in reliance upon and in conformity with information furnished to the Corporation by or on behalf of the Agent specifically for use therein) which prevents or restricts the trading in the Offered Securities or the distribution or distribution to the public, as the case may be, of the Offered Securities, in any of the Qualifying Provinces; (e) the Corporation not complying with any requirement of any Applicable Securities Laws or regulatory in connection with the transactions herein provided; or (f) any breach of any representation or warranty of the Corporation contained herein or the failure of the Corporation to comply with any of its obligations hereunder. 11.2 If any Claim shall be asserted against an Indemnified Party in respect of which indemnity may be sought from the Corporation pursuant to the provisions of Section 11.1 or if any potential Claim contemplated hereby shall come to the knowledge of an Indemnified Party, the Indemnified Party shall promptly notify the Corporation in writing; but the omission to so notify the Corporation will not relieve the Corporation from any liability it may otherwise have to the Indemnified Party pursuant to Section 11.1. The Corporation shall be entitled but not obligated to participate in or assume the defense thereof; provided, however, that the defence shall be through legal counsel acceptable to the Indemnified Party, acting reasonably. In addition, the Indemnified Party shall also have the right to employ separate counsel in any such action and participate in the defence thereof and the reasonable fees and expenses of such counsel shall be borne by the Indemnified Party unless: (a) the employment thereof has been specifically authorized in writing by the Corporation; (b) the Indemnified Party has been advised by counsel that representation of the Corporation and the Indemnified Party by the same counsel would be inappropriate due to actual or potential differing interests between them; or (c) the Corporation has failed within a reasonable time after receipt of such written notice to assume the defense of such action or claim; provided that in no event shall the Corporation be required to assume the fees and expenses of more than one counsel for all Indemnified Parties. Neither party shall effect any settlement of any such Claim or make any admission of liability without the written consent of the other party, such consent to be promptly considered and not to be unreasonably withheld. The indemnity hereby provided for shall remain in full force and effect and shall not be limited to or affected by any other indemnity in respect of any matters specified herein obtained by the Indemnified Party from any other person. 11.3 To the extent that any Indemnified Party is not a party to this Agreement, the Agent shall obtain and hold the right and benefit of the indemnity provisions of Section 11.1 in trust for and on behalf of such Indemnified Party. 11.4 The rights of indemnity contained in this Section 11 in respect of a Claim based on a misrepresentation or omission or alleged misrepresentation or omission in either the Preliminary Prospectus, Final Prospectus or any Supplementary Material shall not apply if the Corporation has complied with Section 5(ll) hereof and the person or company asserting such Claim was not provided with a copy of the Preliminary Prospectus, Final Prospectus or any Supplementary Material (which is required under the Applicable Securities Laws to be delivered to such person or company by the Agent) which corrects such misrepresentation or omission or alleged misrepresentation or omission which is the basis of such Claim. The Corporation hereby waives its rights to recover contribution from the Agent with respect to any liability of the Corporation by reason of or arising out of any misrepresentation contained in the Preliminary Prospectus, the Final Prospectus or in any Supplementary Material; provided, however, that such waiver shall not apply in respect of liability caused or incurred by reason of: (a) or arising out of any misrepresentation which is based upon or results from a statement or information relating solely to or provided by the Agent contained in such document; or (b) any failure by the Agent or members of their banking or selling group (if any) to provide prospective purchasers of the Special Warrants any document which the Corporation is required to provide to such prospective purchasers and which it has provided to the Agent to forward to such prospective purchasers. The Corporation hereby agrees to take all necessary and reasonable steps to ensure that no default judgment or other default proceedings are brought against an Indemnified Party in any jurisdiction in respect of any Claim and, where required for that purpose, will consent to or submit to the jurisdiction of any court and defend any Claim on behalf of any Indemnified Party in any such jurisdiction, provided that nothing herein shall limit the Corporation's right or ability to contest, at its expense, on behalf of an Indemnified Party the appropriate jurisdiction or forum for the determination of any such Claim so long as default judgment or other default proceedings are not in the interim brought by an party making such Claim. 12. Contribution. 12.1 In the event that the indemnity provided for in Section 11 is, for any reason, illegal, unenforceable or otherwise unavailable, in whole or in part, as being contrary to public policy or for any other reason, the Agent and the Corporation shall contribute to the aggregate of all losses, claims, costs, damages, expenses or liabilities (including any legal or other expenses reasonably incurred by the Indemnified Party in connection with investigating or defending any Claim which is the subject of this section but excluding loss of profits or consequential damages) of the nature provided for above such that the Agent shall be responsible for that portion represented by the percentage that the Agency Fee payable by the Corporation to the Agent bears to the gross proceeds from the sale of the Special Warrants and the Corporation shall be responsible for the balance, provided that, in no event, shall the Agent be responsible for any amount in excess of the amount of the Agency Fee actually received by it. In the event that the Corporation may be held to be entitled to contribution from the Agent under the provisions of any statute or law, the Corporation shall, in respect of the Agent, be limited to contribution in an amount not exceeding the lesser of: (i) the portion of the full amount of losses, claims' costs, damages, expenses and liabilities, giving rise to such contribution for which the Agent is responsible, as determined above, and (ii) the amount of the Agency Fee actually received by the Agent. Notwithstanding the foregoing, a party guilty of fraud, fraudulent misrepresentation, or gross negligence, shall not be entitled to contribution from the other party. Any party entitled to contribution will, promptly after receiving notice of commencement of any claim, action, suit or proceeding against such party in respect of which a claim for contribution may be made against the other party under this section, notify such party from whom contribution may be sought. In no case shall such party from whom contribution may be sought be liable under this Agreement unless such notice has been provided but the omission to so notify such party shall not relieve the party from whom contribution may be sought from any other obligation it may have otherwise than under this section. The right to contribution provided in this section shall be in addition and not in derogation of any other right to contribution which the Agent or the Corporation may have by statute or otherwise by law. 12.2 If any of the provisions of Section 12.1 is determined to be void, voidable or unenforceable, in whole or in part, such determination shall not affect or impair or be deemed to affect or impair the validity of any other provision of this Agreement and such void, voidable or unenforceable provision shall be severable from this Agreement. 13. The Special Warrants. 13.1 The Corporation agrees that the Special Warrant Agreement shall provide that in the event a receipt for the Final Prospectus is not issued therefor by the Securities Commission in the Qualifying Provinces or an Effective Registration is not filed on or before the Qualification Deadline, then: (a) the Corporation shall immediately deliver written notice to all holders of Special Warrants and the Agent advising them of such event or events; and (b) each holder of a Special Warrant will be entitled to receive, upon exercise and for no additional consideration, a Unit (comprising of 1.1 Common Shares and 0.55 of a Warrant in lieu of 1.0 Common Shares and 0.50 Warrant). For greater certainty, the Corporation acknowledges that the foregoing adjustment shall not derogate from the obligation of the Corporation to continue to use its commercial best efforts to prepare and file the Final Prospectus and obtain a final receipt of the Securities Commission in the Qualifying Province in respect of the Final Prospectus and to file an Effective Registration on or before the Time of Expiry. 14. Survival of Warranties, Representations, Covenants and Agreements. 14.1 All warranties, representations, covenants and agreements of the Corporation and the Agent herein contained, or contained in documents submitted or required to be submitted pursuant to this Agreement, shall survive the purchase by the Purchasers of the Offered Securities and shall continue in full force and effect for the benefit of the Purchasers for a period ending on the Survival Limitation Date. Notwithstanding the foregoing, the provisions contained in this Agreement in any way related to the indemnification of the Agent by the Corporation, or the contribution obligations of the Agent or those of the Corporation, shall survive and continue in full force and effect, until liability to the Indemnified Parties arising out of the transactions contemplated by this Agreement has been extinguished by operation of law. 15. Appointment as Fiscal Agent. 15.1 The Corporation appoints and retains the Agent as exclusive agent and fiscal advisor in Canada for a term of two (2) years from the Closing Date, and grants to the Agent a right of first refusal to participate and manage any subsequent Canadian financing, merger, acquisition, sale or takeover for a period of three (3) years from the Closing Date (excluding any non broker dealer transaction), contingent upon the successful completion of the Offering. 16. General Contract Provisions. 16.1 Any notice or other communication to be given hereunder shall be in writing and shall be given by delivery or by telecopier, as follows: if to the Corporation: c/o Urbana.ca Enterprises Group 211 Water Street North Cambridge, ON N1R 3B9 Attention: Jason Cassis, C.E.O. Fax: (519) 740-1190 with a copy to: Maitland & Company 700-625 Howe Street Vancouver, B.C. V6C 2T6 Attention: Chris Farber Fax: (604) 681-3896 or if to the Agent: Groome Capital.com Inc. 20 Toronto Street Suite 900 Toronto, ON M5C 2B8 Attention: Gordon Larock Fax: (416) 861-9992 with a copy to: Fraser Milner Suite 4100 1 First Canadian Place 100 King Street West Toronto, ON M5X 1B2 Attention: Rubin Rapuch Fax: (416) 863-4592 and if so given, shall be deemed to have been given and received upon receipt by the addressee or a responsible officer of the addressee if delivered, or four hours after being telecopied and receipt confirmed during normal business hours at the location of the recipient, as the case may be. Any party may, at any time, give notice in writing to the others in the manner provided for above of any change of address or telecopier number. 16.2 This Agreement and the other documents herein referred to (including the Subscription Agreements) constitute the entire agreement between the Agent and the Corporation relating to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, between the Agent and the Corporation with respect to their respective rights and obligations in respect of the Offering, including the Letter Agreement dated January 28, 2000. 16.3 This Agreement may be executed by telecopier and in one or more counterparts which, together, shall constitute an original copy hereof as of the date first noted above. 17. Successors. 17.1 This Agreement shall enure to the benefit of, be binding upon, the Corporation and the Agent and their respective successors (including successors by reason of amalgamation, merger, business combination or arrangement) and legal representatives and nothing expressed or mentioned in this Agreement is intended and shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. If this Agreement accurately reflects the terms of the transaction which we are to enter into and if such terms are agreed to by the Corporation, please communicate your acceptance by executing where indicated below and returning one originally executed copy to the Agent. Yours very truly, GROOME CAPITAL.COM INC. By: /s/ Gordon Larock Gordon Larock, President The foregoing accurately reflects the terms of the transaction which we are to enter into and such terms are agreed to with effect as of the date first above written. URBANA.CA, INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer SCHEDULE "A" DETAILS OF THE OFFERING This is Schedule "A" to the Agency Agreement between Urbana.ca, Inc. and Groome Capital.com Inc. made as of TERM SHEET Urbana.ca, Inc. Up to US$25,000,000 Private Placement Offering of Special Warrants Issuer: Urbana.ca, Inc. (the "Company") Agent: Groome Capital.com Inc. (the "Agent") Sub-Agent: InvestIn.com Securities Corp. (Delaware) Offering: The Company will issue up to 5,555,555 Special Warrants at a price of US$4.50 per Special Warrant pursuant to a best- efforts offering by the Agent in Canada (the "Canadian Offering"). Of the 5,555,555 Special Warrants, a maximum of 1,777,777 Special Warrants will be made available to subscribers on the President's List identified by the Company (the "President's List"). Some or all of the Subscribers on the President's List may be resident in the U.S. The only U.S. residents who will be subscribing for Special Warrants will be persons on the President's List in the United States as identified by the Company. To the extent that Special Warrants are sold to subscribers in the United States, the number of Special Warrants available for sale under the Canadian Offering will be correspondingly reduced. The Sub-Agent shall be responsible for carrying out all administrative functions with respect to subscriptions obtained or received from persons in the United States as identified by the Company (the "U.S. Offering"). Each Special Warrant will entitle the holder to receive, for no additional consideration, one Common Share and one half of one Common Share Purchase Warrant. Each whole Common Share Purchase Warrant will entitle the holder to purchase one Common Share at a price of US$10.00 for a period of 24 months from the date of closing of this offering. In connection with the Canadian Offering and the U.S. Offering, the Company will agree to use its best efforts to prepare and file, within 150 days following the date on which the Special Warrants are issued, a final prospectus (the "Prospectus") with the securities regulatory authorities in each Canadian jurisdiction in which the Special Warrants are sold (the "Qualifying Provinces") and to obtain receipts therefor qualifying the distribution of the Common Shares, Common Share Purchase Warrants and the Common Shares issuable on exercise of the Common Share Purchase Warrants (the "Underlying Securities") and to file an effective registration statement providing for the registration of the resale of the Common Shares issuable on the exercise of the Special Warrants and the Common Shares issuable upon the exercise of the Common Share Purchase Warrants with the United States Securities and Exchange Commission and state regulatory authorities as applicable (an "Effective Registration"). To the extent that Special Warrants are sold in the United States, the Company will make filings with federal and state securities regulatory authorities necessary and appropriate to secure exemptions from registration or qualification of such sale of the Special Warrants. The Company is under no obligation to accept a subscription for Special Warrants. Amount: Up to US$25,000,000 aggregate amount Special Warrants: The Special Warrants will be issued pursuant to a Special Warrant Agreement, which will provide that the Special Warrants will expire on the earlier of (i) the 5th business day after the later of the day on which a receipt for the final Prospectus has been issued by the last of the securities commissions in each of the Qualifying Provinces and the date of an Effective Registration, or (ii) the first anniversary of the date on which the Special Warrants are issued (the "Expiry Time"). The net proceeds from the sale of the Special Warrants will be received by the Company at the closing of the Special Warrant transaction (expected to occur on or about April 25, 2000) subject to any required approvals from applicable authorities. If either an Effective Registration or a receipt for the final Prospectus is not received from the last of the securities commissions in each of the Qualifying Provinces by 5:00 p.m. (Toronto time) on the date which is 150 days following the issue of the Special Warrants, then from and after such date, each Special Warrant will entitle the holder thereof to acquire, without payment of additional consideration, 1.1 Common Shares and 0.55 Common Share Purchase Warrants on the exercise or deemed exercise of the Special Warrant. Any Special Warrants not exercised prior to the Expiry Time will be deemed to have been exercised immediately prior to the Expiry Time without any further action on the part of the holder or the Company. Resale Restrictions: The Common Shares will be subject to statutory resale restrictions in Canada if the Special Warrants are exercised prior to the issuance of a receipt for a final Prospectus. In addition, the Special Warrants are subject to resale restrictions. Shares Outstanding: Pre-financing Basic 22, 048,293 Minimum Subscription Canadian Offering: $150,000 for subscribers resident in or subject to the laws of Ontario and Quebec and $97,000 for subscribers resident in or subject to the laws of Alberta and British Columbia, or such other jurisdictions as may be agreed to by the Company and the Agent. Use of Proceeds: The Company intends to use the proceeds of the offering, after deducting expenses and fees, to fund operating deficits, research and development, joint venture agreements, acquisitions and working capital. Dividend: The Company has never paid dividends and does not intend to pay dividends on its Common Shares in the foreseeable future. The Company's current intention is to reinvest earnings to finance long-term growth. Commission: At the Closing of the Special Warrant transaction, the Agent shall be paid (i) save as otherwise set forth below, a cash commission of 8.0% of the capital raised in respect of the Canadian Offering and a 4% fiscal advisory fee with respect to the capital raised in respect of the U.S. Offering provided that any fees paid by the Company, to an agent in connection with the U.S. Offering shall correspondingly reduce the fiscal advisory fee payable to the Agent. The Agent shall receive a cash commission of 4% (as opposed to 8%) in respect of capital raised from persons identified in writing by the Issuer on the 'President's List; and (ii) Compensation Options equal to 10% of the units issued pursuant to the Offering, inclusive of the U.S. Offering. Conditions Precedent to Closing: The closing of the Special Warrant transaction will be contingent upon customary closing conditions, including without limitation, the execution of an agency agreement acceptable to Agent and the completion of due diligence activities by or on behalf of Agent. Date of Closing: April 25, 2000 or such other date as agreed by the Company and the Agent. Note: These terms do not constitute any form of binding contract but rather are solely for the purpose of outlining those financial terms pursuant to which a definitive agreement may ultimately be entered into. The terms of any investment are contingent upon completion of due diligence to the satisfaction of Groome Capital.com Inc. The investment is also contingent upon, among other things, legal, technical, patent and market assessments, product review and negotiation of satisfactory closing documents, including without limitation the form of Special Warrant and an Agency Agreement containing covenants, representations and warranties. EX-10.13 15 0015.txt ADMINISTRATION AND SERVICES AGREEMENT ADMINISTRATION AND SERVICES AGREEMENT This Agreement dated the 10th day of April, 2000. Between: URBANA.CA, INC. (hereinafter called the "Corporation") Of The First Part - - and - GROOME CAPITAL.COM INC. (hereinafter called the "Groome") Of The Second Part - - and - INVESTIN.COM SECURITIES CORP. (DELAWARE) (hereinafter called "InvestIn") Of The Third Part WHEREAS: (a) Groome has agreed to enter into an Agency Agreement with Urbana.ca, Inc. (the "Corporation") on the terms and conditions as contained in the Agency Agreement to be dated effective April 10, 2000; (b) pursuant to the terms of the Agency Agreement, Groome is entitled to a fiscal advisory fee with respect to the Offering conducted in the United States, it being acknowledged that these services consist of identifying dealers registered in the United States to provide the services herein described; (c) the Corporation, as issuer of the Special Warrants, has identified those U.S. Persons who are accredited investors within the meaning of Rule 501(a) under the United States Securities Act of 1933, as amended (the "1933 Act"); NOW THEREFORE, this Agreement witnesseth that in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by the parties hereto), the parties hereto covenant and agree as follows: 1. All capitalized terms contained herein shall, unless otherwise herein defined, have the same meaning as ascribed to such terms in Schedule "A" annexed hereto. 2. The Corporation hereby retains InvestIn to provide administrative and related services, including: (a) delivery of the Corporation's Rule 506 Confidential Private Placement Memorandum (the "Confidential Memorandum") to U.S. Persons designated in writing by the Corporation and who have requested the same from InvestIn; reviewing subscription agreements to ensure the proper completion and execution of subscription agreements; (b) delivery of subscription funds to the Corporation; (c) delivery of the certificates representing the Special Warrants upon completion of the Offering with respect to orders which have been obtained from U.S. Persons; and (d) keeping the Corporation informed on reasonable basis of its activities in connection with the Offering, including providing notice to the Corporation at least 24 hours in advance of delivering any documents to U.S. Persons. The parties hereto acknowledge and agree that, in conducting its duties hereunder, InvestIn is acting solely as an agent and shall be under no obligation to purchase any of the Special Warrants. 3. In connection with InvestIn's retainer, InvestIn represents and warrants to the Corporation and acknowledges and agrees that the Corporation is relying on such representations and warranties in connection with the appointment of InvestIn hereunder as follows: (a) it is a corporation duly organized, validly existing and in good standing in the State of Delaware, United States of America; (b) it is duly qualified and registered as a broker-dealer with the United States Securities and Exchange Commission (the "Commission"), and it is a member of the NASD and has all requisite regulatory and statutory authority to carry out its functions and duties hereunder; (c) in carrying on its activities on behalf of the Corporation in respect of the Offering, it will: (i) use reasonable due diligence to ensure that subscriptions are obtained only from U.S. Persons who are "accredited investors" with the meaning of Rule 501(a) under the 1933 Act and will otherwise comply with U.S. Securities Laws; (ii) except as herein provided, not deliver to any prospective Purchaser any documents or materials, other than the Confidential Memorandum without the consent of the Corporation; (iii) not solicit offers to purchase the Special Warrants and shall not engage in any activity with regard to potential subscriptions other than as provided in Section 2 hereof; (iv) obtain from each Purchaser a duly completed and executed subscription agreement for Special Warrants in the form to be provided by the Corporation, together with all documentation and subscription funds as may be necessary in connection with the subscription for Special Warrants; (v) refrain from advertising the Offering in printed public media, radio, television or telecommunications, including electronic display and otherwise not engage in any form of general solicitation, and not make use of any green sheet or internal marketing document; (vi) not make any representations or warranties with respect to the Corporation, the Special Warrants or the Underlying Securities other than as set forth in the Confidential Memorandum as prepared by the Corporation; (vii) deliver the proceeds and documentation pertaining to be accepted subscriptions in accordance with the written instructions of the Corporation; and (viii) maintain complete and accurate records of all funds which it has received from Purchasers of Special Warrants. The representations and warranties of InvestIn shall survive the Closing until the Survival Limitation Date. 4. In consideration of the services to be provided by InvestIn for the Corporation hereunder, Groome agrees to pay, subject to receipt of its Fiscal Advisory Fees pursuant to the Agency Agreement, at the Time of Closing or as soon as practical thereafter, a fee ("InvestIn's Fee") equal to1% of the amount of aggregate proceeds obtained from subscriptions under Section 2 above. InvestIn shall be entitled to be reimbursed for its reasonable costs and expenses (the "Expenses") in carrying out its duties hereunder not to exceed, however, U.S. $2,000. The expenses shall be paid by and shall be the responsibility of the Corporation. 5. In the event that the terms of the Offering are amended, modified or otherwise changed by agreement between Groome and the Corporation, Groome shall notify InvestIn in writing of such amendment, modification or change and InvestIn shall be immediately bound thereby. 6. In the event that the Canadian Offering is terminated for any reason pursuant to either the Corporation's or Groome's rights under the Agency Agreement then this Agreement shall be likewise be deemed to be terminated, provided, that the obligation of InvestIn contained in Section 7 hereof shall survive in accordance with its terms. In the event that the agreement is terminated InvestIn shall, unless otherwise required by Applicable U.S. Securities Laws, return all subscription funds and subscription agreements to the respective subscribers forthwith. 7. InvestIn covenants and agrees to indemnify the Corporation and its directors, officers, employees and agents (each being hereinafter referred to an Indemnified Party) against, and to reimburse the Corporation promptly upon any demand, for any legal or other expenses reasonably incurred by the Corporation in connection with investigating or defending all losses (other than loss of profits) claims, damages, liabilities, costs or expenses (collectively a "Claim") which an Indemnified Party may suffer or incur, caused or incurred in connection with the Offering by reason of or in any way relating to directly or indirectly any breach of any representation or warranty of InvestIn contained herein or the failure of InvestIn to comply with its obligations hereunder. 8. The Corporation agrees to indemnify InvestIn against any claim brought by a third party against InvestIn as a result of any fraudulent act of the Corporation or as a result of the Corporation's negligence. 9. Any notice of other communication to be given hereunder shall be in writing and shall be given by delivery or by telecopier as follows: if to the Corporation c/o 211 Water Street North Cambridge, Ontario N1R 3B9 Attention: Jason Cassis Facsimile: (519) 740-1190 if to InvestIn: 1950 Stemmons Freeway Suite 2016 Dallas, Texas 75207 U.S.A. Attention: Laurence Briggs Facsimile: (214) 939-0116 if to Groome: Groome Capital.com Inc. 20 Toronto Street Suite 900 Toronto, Ontario M5C 2B5 Attention: Gordon Larock Facsimile: (416) 861-9992 and if so given, shall be deemed to have been and received upon receipt by the addressee or responsible officer of the addressee if delivered or four hours after being telecopied and receipt confirmed during normal business hours at the location of the recipient, as the case may be. Any party may, at any time, give notice in writing to the others in the manner provided for above of any change of address or telecopier number. 10. InvestIn shall ensure that all subscription funds received from Purchasers on closing of the Offering be delivered and paid to the Corporation, in trust. 11. This Agreement shall enure to the benefit of, be binding upon, the parties and their respective successors (including successors by reason of amalgamation, merger, business combination or arrangement) and legal representatives and nothing expressed or mentioned in this Agreement is intended and shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. 12. This Agreement may be executed by telecopier and in one or more counterparts which, together, shall constitute an original copy hereof as of the date first noted above. This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof. 13. This Agreement shall be governed by and wholly construed and each of the parties' obligations shall be governed by the laws of the Province of Ontario. The courts of the Province of Ontario shall have exclusive and original jurisdiction in any action or proceeding brought under this Agreement or for the purpose of enforcing this Agreement or any provision of it and the parties irrevocably attorn to the jurisdiction of the courts of the Province of Ontario provided that nothing in this Agreement shall prevent the Corporation from commencing or maintaining an action or proceeding in such other jurisdiction as it may be advised for the purpose of enforcing its rights under this Agreement. 14. If any provision of this Agreement or the application of the provision to any circumstances shall be held to be invalid or unenforceable, then the remaining provisions of this Agreement or the application of them to other circumstances shall not be affected by the invalidity or unenforceability and shall be valid and enforceable to the fullest extent permitted by law. 15. If, any time or from time to time during or after the termination of this Agreement, any dispute, difference or questions (the "Dispute") arises between or among any of the parties, or any other persons interested in this Agreement, touching or concerning the construction, meaning or effect of this Agreement, or any provision in it, or the rights or obligations of the parties, or any other persons under this Agreement or otherwise, with respect to any provision of this Agreement, the dispute shall be submitted to and settled by arbitration and the decision of the arbitrator, appointed in the manner set out below, to deal with the dispute shall be accepted by all parties to the dispute and shall be final and binding upon the parties to the dispute. The arbitration shall be conducted by a single arbitrator agreed upon by the parties to the dispute. If, within five days after notice of the dispute has been given by one party to the other or others, the parties cannot agree on a single arbitrator, the arbitration shall be conducted by a single arbitrator appointed by a judge of the Ontario Superior Court on the application of any party with notice to the other or others. The arbitration shall be conducted in accordance with the provisions of the Arbitrations Act, 1991, (Ontario), its amending or successor legislation in force at the time of such dispute, difference or question. The decision or the arbitrator shall be final and binding on all of the parties to the dispute and on the Corporation and there shall be no appeal from the decision. 16. The parties hereto acknowledge that Groome is a party hereto for the limited purposes set forth in Section 4 hereof. INVESTIN.COM SECURITIES CORP. (DELAWARE) By: /s/ Laurence Briggs Laurence Briggs, President URBANA.CA, INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer GROOME CAPITAL.COM INC. Per: /s/ Donald Page Donald Page, Vice President SCHEDULE "A" Unless expressly provided otherwise, where used in this Agreement or any schedule hereto, the following terms shall have the following meanings, respectively: "Applicable U.S. Securities Laws" means, collectively, all applicable federal and state securities laws in the United States including all "Blue Sky" laws, the United States Securities Act of 1933, as amended from time to time or any successor statute, and the United States Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules, regulations and orders of the Commission and the various state regulatory authorities promulgated or issued thereunder, including, without limitation, the securities laws, regulations, rules, rulings and orders of the United States Securities and Exchange Commission and the various state regulatory authorities applicable to broker dealers; "Business Day" means any day other than a Saturday, Sunday or statutory or municipal holiday in the City of Toronto, Ontario, Canada; "Closing Date" means the date on which the Offering is to be completed, being April 25, 2000 or such earlier or later date as Groome and the Corporation may agree; "Common Share" or "Common Shares" means the current issued and outstanding common shares in the capital of the Corporation, the common shares issuable upon the exercise of the Special Warrants and Groome's Compensation Options, as the context requires; "Corporation" means Urbana.ca, Inc.; "Exchange" means the Over-the-Counter Bulletin Board in the United States; "including" means including without limitation; "NASD" means the National Association of Securities Dealers, Inc.; "Offering" means the Canadian Offering and U.S. Offering of Special Warrants as detailed in the Term Sheet as annexed as Schedule "B" to this Agreement. "person" includes any individual, corporation, limited partnership, general partnership, joint stock company or association, joint venture association, company, trust, bank, trust company, land trust, investment trust, society or other entity, organization, syndicate whether incorporated or not, trustee, estate trustee, executor or other legal or personal representative, and governments and agencies and political subdivisions thereof; "President's List" means in respect of this Agreement, those U.S. Persons identified by the Corporation as being on the specified list of subscribers by the Corporation and who are accredited investors within the meaning of Rule 501(a) under the 1933 Act. "Purchasers" means, collectively, each of the purchasers of Special Warrants pursuant to the Offering; "Special Warrants" means the Special Warrants of the Corporation; "Survival Limitation Date" means the later of: (i) the second anniversary of the Closing Date; and (ii) the latest date under the Applicable Securities Laws relevant to a Purchaser (non-residents of Canada being deemed to be resident in the Province of Ontario for such purposes) that a Purchaser may be entitled to commence an action or exercise a right of rescission, with respect to a misrepresentation contained in the Final Prospectus or, if applicable, any Supplementary Material; "Term Sheet" means the Term Sheet annexed as Schedule "B" to this Agreement; "Time of Closing" means the time on the Closing Date at which the Offering is to be completed; and "U.S. Person" has the meaning ascribed to such term in Regulation S to the 1933 Act. SCHEDULE "B" [REVISED] TERM SHEET Urbana.ca, Inc. Up to US$25,000,000 Private Placement Offering of Special Warrants Issuer: Urbana.ca, Inc. (the "Company") Agent: Groome Capital.com Inc. (the "Agent") Sub-Agent: InvestIN.com Securities Corp. (Delaware) Offering: The Company will issue up to 5,555,555 Special Warrants at a price of US$4.50 per Special Warrant pursuant to a best- efforts offering by the Agent in Canada (the "Canadian Offering"). Of the 5,555,555 Special Warrants, a maximum of 1,777,777 Special Warrants will be made available to subscribers on the President's List identified by the Company (the "President's List"). Some or all of the Subscribers on the President's List may be resident in the U.S. The only U.S. residents who will be subscribing for Special Warrants will be persons on the President's List in the United States as identified by the Company. To the extent that Special Warrants are sold to subscribers in the United States, the number of Special Warrants available for sale under the Canadian Offering will be correspondingly reduced. The Sub-Agent shall be responsible for carrying out all administrative functions with respect to subscriptions obtained or received from persons in the United States as identified by the Company (the "U.S. Offering"). Each Special Warrant will entitle the holder to receive, for no additional consideration, one Common Share and one half of one Common Share Purchase Warrant. Each whole Common Share Purchase Warrant will entitle the holder to purchase one Common Share at a price of US$10.00 for a period of 24 months from the date of closing of this offering. In connection with the Canadian Offering and the U.S. Offering, the Company will agree to use its best efforts to prepare and file, within 150 days following the date on which the Special Warrants are issued, a final prospectus (the "Prospectus") with the securities regulatory authorities in each Canadian jurisdiction in which the Special Warrants are sold (the "Qualifying Provinces") and to obtain receipts therefor qualifying the distribution of the Common Shares, Common Share Purchase Warrants and the Common Shares issuable on exercise of the Common Share Purchase Warrants (the "Underlying Securities") and to file an effective registration statement providing for the registration of the resale of the Common Shares issuable on the exercise of the Special Warrants and the Common Shares issuable upon the exercise of the Common Share Purchase Warrants with the United States Securities and Exchange Commission and state regulatory authorities as applicable (an "Effective Registration"). To the extent that Special Warrants are sold in the United States, the Company will make filings with federal and state securities regulatory authorities necessary and appropriate to secure exemptions from registration or qualification of such sale of the Special Warrants. The Company is under no obligation to accept a subscription for Special Warrants. Amount: Up to US$25,000,000 aggregate amount Special Warrants: The Special Warrants will be issued pursuant to a Special Warrant Agreement, which will provide that the Special Warrants will expire on the earlier of (i) the 5th business day after the later of the day on which a receipt for the final Prospectus has been issued by the last of the securities commissions in each of the Qualifying Provinces and the date of an Effective Registration, or (ii) the first anniversary of the date on which the Special Warrants are issued (the "Expiry Time"). The net proceeds from the sale of the Special Warrants will be received by the Company at the closing of the Special Warrant transaction (expected to occur on or about April 25, 2000) subject to any required approvals from applicable authorities. If either an Effective Registration or a receipt for the final Prospectus is not received from the last of the securities commissions in each of the Qualifying Provinces by 5:00 p.m. (Toronto time) on the date which is 150 days following the issue of the Special Warrants, then from and after such date, each Special Warrant will entitle the holder thereof to acquire, without payment of additional consideration, 1.1 Common Shares and 0.55 Common Share Purchase Warrants on the exercise or deemed exercise of the Special Warrant. Any Special Warrants not exercised prior to the Expiry Time will be deemed to have been exercised immediately prior to the Expiry Time without any further action on the part of the holder or the Company. Resale Restrictions: The Common Shares will be subject to statutory resale restrictions in Canada if the Special Warrants are exercised prior to the issuance of a receipt for a final Prospectus. In addition, the Special Warrants are subject to resale restrictions. Shares Outstanding: Pre-financing Basic 22, 048,293 Minimum Subscription Canadian Offering: $150,000 for subscribers resident in or subject to the laws of Ontario and Quebec and $97,000 for subscribers resident in or subject to the laws of Alberta and British Columbia, or such other jurisdictions as may be agreed to by the Company and the Agent. Use of Proceeds: The Company intends to use the proceeds of the offering, after deducting expenses and fees, to fund operating deficits, research and development, joint venture agreements, acquisitions and working capital. Dividend: The Company has never paid dividends and does not intend to pay dividends on its Common Shares in the foreseeable future. The Company's current intention is to reinvest earnings to finance long-term growth. Commission: At the Closing of the Special Warrant transaction, the Agent shall be paid (iii) save as otherwise set forth below, a cash commission of 8.0% of the capital raised in respect of the Canadian Offering and a 4% fiscal advisory fee with respect to the capital raised in respect of the U.S. Offering provided that any fees paid by the Company, to an agent in connection with the U.S. Offering shall correspondingly reduce the fiscal advisory fee payable to the Agent. The Agent shall receive a cash commission of 4% (as opposed to 8%) in respect of capital raised from persons identified in writing by the Issuer on the 'President's List; and (iv) Compensation Options equal to 10% of the units issued pursuant to the Offering, inclusive of the U.S. Offering. Conditions Precedent to Closing: The closing of the Special Warrant transaction will be contingent upon customary closing conditions, including without limitation, the execution of an agency agreement acceptable to Agent and the completion of due diligence activities by or on behalf of Agent. Date of Closing: April 25, 2000 or such other date as agreed by the Company and the Agent. Note: These terms do not constitute any form of binding contract but rather are solely for the purpose of outlining those financial terms pursuant to which a definitive agreement may ultimately be entered into. The terms of any investment are contingent upon completion of due diligence to the satisfaction of Groome Capital.com Inc. The investment is also contingent upon, among other things, legal, technical, patent and market assessments, product review and negotiation of satisfactory closing documents, including without limitation the form of Special Warrant and an Agency Agreement containing covenants, representations and warranties. EX-10.14 16 0016.txt SPECIAL WARRANT AGREEMENT SPECIAL WARRANT AGREEMENT THIS SPECIAL WARRANT AGREEMENT is dated as of April 27, 2000 BETWEEN: URBANA.CA, INC.., a body corporate incorporated in the State of Nevada, having an office at 22 Haddington Street, Cambridge, Ontario, N1R 3B9 (the "Company" ) A N D: PACIFIC CORPORATE TRUST COMPANY, a trust company incorporated under the laws of British Columbia, located at located at #830-625 Howe Street, Vancouver, British Columbia, V6C 3B8 (the "Trustee") WHEREAS: A. Pursuant to the Agency Agreement (hereinafter defined), the Company proposes to issue special warrants (the "Special Warrants") in Canada and pursuant to an Administration and Services Agreement (hereinafter defined) to issue Special Warrants in the Unite States each exercisable by the holder on the terms set out in this Agreement into securities of the Company as described in this Agreement; B. All acts and deeds necessary have been done and performed to make the Special Warrants, when issued as provided in this Agreement, together with the Unit Warrants (as defined below), legal, valid and binding upon the Company with the benefits and subject to the terms of this Agreement; and C. The foregoing recitals are made as representations and statements of fact by the Company and not by the Trustee; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants herein, the parties agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATION tc "ARTICLE 1 DEFINITIONS AND INTERPRETATION" 1.1 Definitions (tc "1.1Definitions " \l 2) In this Agreement, unless otherwise specified: (a) "Administration and Services Agreement" means the administration and services agreement dated as of April 10, 2000 between the Company and InvestIn; (b) "Agency Agreement" means the agency agreement dated as of April 10, 2000, between the Company and the Agent relating to the offering of Special Warrants; (c) "Agent" means Groome Capital.com Inc.; (d) "Applicable Legislation" means the provisions of the Company Act (British Columbia) as from time to time amended, and any statute of Canada or its provinces and the regulations under those statutes relating to trust agreements or the rights, duties or obligations of corporations and trustees under trust agreements as are from time to time in force and applicable to this Agreement; (e) "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Commissions and the securities legislation and policies of each other relevant jurisdiction in Canada, U.S. Securities Laws and the applicable rules, regulations and policies of the Exchange; (f) "B.C. Act" means the Securities Act (British Columbia), as amended; (g) "business day" means a day that is not a Saturday, Sunday, or civic or statutory holiday in British Columbia; (h) "Closing" means the closing of the Private Placement; (i) "Closing Date" means April 27, 2000, or such other date as may be mutually agreed upon between the Company and the Agent; (j) "Commissions" means the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission, and the Commission de valeurs mobilie du Quebec (Quebec Securities Commission); (k) "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Company; provided that if the exercise rights are subsequently adjusted or altered pursuant to section 7.7 or 7.8, "Common Shares" will thereafter mean the shares or other securities or property that a Special Warrantholder is entitled to on an exchange after the adjustment; (l) "Company's auditors" means such firm of chartered accountants as may be duly appointed as the auditors of the Company; (m) "Convertible Security" means a security of the Company (other than the Special Warrants) convertible into or exchangeable for or otherwise carrying the right to acquire Common Shares; (n) "Current Market Price" at any date means the average of the closing prices of the Common Shares at which the Common Shares have traded on the Exchange, or, if the Common Shares in respect of which a determination of current market price is being made are not quoted on the Exchange, on such stock exchange on which such shares are listed as may be selected for such purpose by the directors and approved by the Trustee, or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market during the 20 consecutive trading days (on each of which at least 500 Common Shares are traded in board lots) ending on the third trading day prior to such date, and the weighted average price will be determined by dividing the aggregate sale price of all Common Shares sold in board lots on the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold, or in the event that at any date the Common Shares are not listed on any exchange or on the over-the-counter market, the current market price shall be as determined by the directors and approved by the Trustee; (o) "director" means a director of the Company for the time being, and unless otherwise specified herein, "by the directors" means action by the directors of the Company as a board or, whenever duly empowered, action by any committee of such board; (p) "Distribution" means the proposed issuance of Unit Shares and Unit Warrants to the holders of Special Warrants on the exercise or deemed exercise of the Special Warrants; (q) "Dividends Paid in the Ordinary Course" means dividends paid in any financial year of the Company, whether in (i) cash, (ii) shares of the Company, (iii) warrants or similar rights to purchase any shares of the Company or property or other assets purchasable as of the date of distribution of such warrants or similar rights, or (iv) property or other assets of the Company, as the case may be, as determined by action by the directors except that, in the case of warrants or similar rights to purchase Common Shares or securities convertible into or exchangeable for Common Shares, such fair market value of the warrants or similar rights shall be equal to the number of Common Shares which may be purchased thereby (or the number of Common Shares issuable upon conversion or exchange) as of the date of distribution of such warrants or similar rights, multiplied by the Current Market Price of the Common Shares on the date of such distribution, provided that the value of such dividends does not in such financial year exceed the greater of: (i) the lesser of 50% of the retained earnings of the Company as at the end of the immediately preceding financial year and 200% of the aggregate amount of dividends paid by the Company on the Common Shares in the 12 month period ending immediately prior to the first day of such financial year; and (ii) 100% of the consolidated net earnings from continuing operations of the Company, before any extraordinary items, for the 12 month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada consistent with those applied in the preparation of the most recent audited financial statements of the Company); (r) "Effective Date" means the date of this Special Warrant Agreement; (s) "Effective Registration" means the registration of the resale of the Unit Shares and the Common Shares issuable upon the exercise of the Warrants, effected by the filing of a Registration Statement in compliance with the 1933 Act and pursuant to rule 415 under the 1933 Act, or any successor rule providing for offering securities on a continuing basis and the declaration or order of effectiveness of such Registration Statement by the SEC under U.S. Securities Laws; (t) "Exchange" means the Over the Counter Bulletin Board in the United States; (u) "Exchange Number" means the number of Securities to be received by a Holder upon exercise or deemed exercise of the Special Warrants, as may be adjusted under the provisions of this Agreement; (v) "Exercise Date" with respect to any Special Warrant means the earlier of the date on which the Special Warrant is duly surrendered in accordance with the provisions of sections 6.4 to 6.6 or the date of deemed exercise of the Special Warrants pursuant to section 6.12; (w) "Exercise Period" means the period during which Investors may exercise the Special Warrants, commencing on the Closing Date and ending at 4:30 p.m. (Toronto time) on the day which is the earlier of: (i) the fifth business day after the Qualification Date; or (ii) the first anniversary of the date on which the Special Warrants were issued; (x) "InvestIn" means InvestIn.com Securities Corp.; (y) "Investor" or "Investors" means a purchaser or purchasers of Special Warrants under the Private Placement; (z) "person" means an individual, a corporation, a partnership, trust, trustee, executor, administrator, legal representative or any unincorporated organization and words importing persons have a similar meaning; (aa) "Private Placement" means the offering of the Special Warrants pursuant to the Agency Agreement and as contemplated under the Administration and Services Agreement; (ab) "Prospectus" means the (final) prospectus and any amendment thereto required to be filed with the Commissions pursuant to Applicable Securities Laws, in respect of the distribution in the Qualifying Provinces of the Unit Shares and Unit Warrants upon the exercise of the Special Warrants; (ac) "Qualification Date" means the date which is the later of the date on which all of the Commissions have issued a receipt for the final Prospectus and the date of an Effective Registration Statement; (ad) "Qualification Deadline" means on or before 5:00 p.m. (Toronto time) on September 25, 2000, which is the first regular business day 150 days after the Closing, or such later date as may be approved by the Agent in its sole and absolute discretion by written notice to the Trustee not less than five business days prior to the expiry of such 150 day period; (ae) "Qualifying Provinces" means the Provinces of Alberta, British Columbia, Ontario and Quebec; (af) "Receipts" means the receipts for the final Prospectus to be issued by the Commissions; (ag) "Registration Statement" means a Registration Statement of the Company under the 1933 Act; (ah) "Regulatory Authorities" means the Exchange and the Commissions; (ai) "SEC" means the United States Securities and Exchange Commission; (aj) "Securities" means the Unit Shares and the Unit Warrants; (ak) "Shareholder" means a holder of record or one or more Common Shares; (al) "Special Resolution" has the meaning given in sections 11.12 and 11.15; (am) "Special Warrants" means the special warrants authorized to be created by the Company under section 2.1 and issued and certified under this Agreement entitling the holder to acquire one Unit; (an) "Special Warrant Certificates" means certificates evidencing Special Warrants, substantially in the form attached as Schedule "A" to this Agreement, or such other form as may be approved under section 2.4; (ao) "Special Warrant Agreement" means the special warrant agreement to be entered into on the Closing Date between the Company and the Trustee as trustee under the special warrant agreement pursuant to which the Special Warrants will be issued and governed; (ap) "Special Warrant Purchase Price" means US$1.25 per Special Warrant; (aq) "Special Warrantholders" or "Holders" means the registered holders of Special Warrants for the time being; (ar) "Special Warrantholders' Request" means an instrument signed in one or more counterparts by Special Warrantholders holding, in the aggregate, not less than 25% of the aggregate number of Special Warrants then outstanding, requesting the Trustee to take some action or proceeding specified therein; (as) "Subscription Funds" means the total subscription price for the Special Warrants; (at) "trading day" with respect to a stock exchange means a day on which the stock exchange is open for business; (au) "Transfer Agent" means the transfer agent for the time being of the Common Shares; (av) "Trustee" means Pacific Corporate Trust Company, or any lawful successor thereto including through the operation of section 13.8; (aw) "Unit" means a unit of the Company issuable, for no additional consideration, upon the exercise or deemed exercise of the Special Warrants, each consisting of one Unit Share and one-half of one Unit Warrant, subject to adjustment as provided under Articles 7 and 8; (ax) "Unit Shares" means the previously unissued Common Shares which are issuable as part of the Units upon exercise or deemed exercise of the Special Warrants; (ay) "Unit Warrants" means the share purchase warrants of the Company to be issued as part of the Units upon the exercise or deemed exercise of the Special Warrants, with each whole Unit Warrant entitling the holder to purchase one additional Common Share, at a price of US$5.00 per Common Share, at any time up to 4:30 p.m. (Toronto time) on the day which is 24 months from the Closing Date; (az) "U.S. Securities Laws" means, collectively, all applicable federal and state laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases, and rulings of the SEC and any applicable state securities regulatory authorities; (ba) "Warrant Certificates" means the certificates evidencing the Unit Warrants; (bb) "Warrant Record Date" means the date on which the Special Warrants are exercised or deemed to be exercised in accordance with the Special Warrant Agreement; (bc) "Warrant Share" means a Common Share issuable upon the exercise of one Unit Warrant; (bd) "Warrantholders" means the registered holders of the Unit Warrants for the time being; (be) "written request of the Company" and "certificate of the Company" mean respectively a written request and certificate signed in the name of the Company by any one director or senior officer and may consist of one or more instruments so executed; and (bf) "1933 Act" means the United States Securities Act of 1933, as amended. 1.2 Interpretation (tc "1.2 Interpretation " \l 2) For the purposes of this Agreement and unless otherwise provided or unless the context otherwise requires: (a) "this Agreement", "this Special Warrant Agreement", "herein", "hereby" and similar expressions mean or refer to this Special Warrant Agreement and any agreement, deed or instrument supplemental or ancillary hereto; and the expressions "Article", "section" or "subsection" followed by a number or letter mean and refer to the specified Article, section or subsection of this Agreement; (b) words importing the singular include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders; (c) the division of this Agreement into Articles, sections, subsections and paragraphs, the provision of a table of contents and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation of this Agreement; (d) the word "including", when following any general statement, term or matter, is not to be construed to limit such general statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto but rather refers to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter; (e) any reference to a statute includes and, unless otherwise specified herein, is a reference to such statute and to the regulations made pursuant thereto, with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which has the effect of supplementing or superseding such statute or such regulation; (f) any capitalized term in this Agreement which is not defined in section 1.1 will have the meanings ascribed elsewhere in this Agreement; and (g) in the event that any day on which the Exercise Period expires or on or before which any action is required to be taken hereunder is not a business day, then the Exercise Period will expire on or the action will be required to be taken on or before the next succeeding day that is a business day. 1.3 Schedules (tc "1.3 Schedules " \l 2) The schedules attached to this Agreement are incorporated herein by reference. 1.4 Time of the Essence (tc "1.4 Time of the Essence " \l 2) Time is of the essence in this Agreement. 1.5 Applicable Law (tc "1.5Applicable Law " \l 2) This Agreement, the Special Warrant Certificates and the Warrant Certificates will be construed and enforced in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein, and will be treated in all respects as British Columbia contracts. The parties hereto agree to attorn to the courts thereof. 1.6 Currency (tc "1.6 Currency " \l 2) Except as otherwise stated, all dollar amounts herein are expressed in United States dollars. 1.7 Date of Issue (tc "1.7 Date of Issue " \l 2) A Receipt shall conclusively be deemed to be issued on the date appearing on such Receipt as the Receipt's date. ARTICLE 2 ISSUE OF SPECIAL WARRANTS ISSUE OF SPECIAL WARRANTS" 2.1 Issue of Special Warrants A total of up to 20,000,000 Special Warrants, each of which entitles the Holder to acquire, without additional consideration, one Unit, subject to adjustment in accordance with Articles 7 and 8, are hereby created and authorized to be issued. Subject to section 2.2 and Articles 5 and 6, upon receipt by the Company of the Special Warrant Purchase Price for each Special Warrant purchased, the Company will execute and the Trustee will certify up to 20,000,000 Special Warrants. 2.2 Terms of Special Warrants Subject to the provisions of Articles 5 and 6, each Special Warrant will entitle the holder thereof, upon exercise or deemed exercise at any time during the Exercise Period and without payment of any additional consideration, to be issued, subject to adjustment in accordance with Articles 7 and 8, one Unit. 2.3 Fractional Special Warrants Notwithstanding any adjustments provided for in this Agreement, the Company shall not be required upon the exercise or deemed exercise of any Special Warrants to issue fractional Unit Shares in satisfaction of its obligations hereunder. Where a fractional Unit Share, but for this section 2.3, would have been issued upon exercise of a Special Warrant, in lieu thereof there shall be paid to the holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the Current Market Price at the date of delivery of each respective Special Warrant Certificate, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Company shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 2.4 Form of Special Warrant Certificates Special Warrants will be issued in registered form only and will be evidenced only by Special Warrant Certificates, which will be substantially in the form attached as Schedule "A" or in such other form as may be approved by the Company, the Agent and the Trustee, will be dated as of the date of this Agreement (regardless of their actual dates of issue), and will bear such distinguishing letters and numbers as the Company will prescribe with the approval of the Trustee and will bear such legends as may be required under the Applicable Securities Laws and shall be issuable in any denomination excluding fractions. 2.5 Delivery of Special Warrant Certificates The Special Warrant Certificates for the non U.S. Investors will be delivered to the Agent and for the U.S. Investors will be delivered to InvestIn on the Closing Date. 2.6 Issue in Substitution of Special Warrants If any of the Special Warrant Certificates becomes mutilated, lost, destroyed or stolen (the "Old Certificate"), the Company, subject to applicable law and to section 2.7, will issue and the Trustee will certify and deliver a new Special Warrant Certificate of like date and tenor as the Old Certificate, upon surrender of, in place of and upon cancellation of the mutilated Old Certificate or in substitution for the lost, destroyed or stolen Old Certificate, and the substituted Special Warrant Certificate will be in a form approved by the Trustee and will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Special Warrant Certificates issued or to be issued under this Agreement. 2.7 Conditions for Replacement of Special Warrants The applicant for the issue of a new Special Warrant Certificate pursuant to section 2.6 will bear the cost of the issue thereof and in case of loss, destruction or theft will, as a condition precedent to the issue thereof furnish to the Company and to the Trustee such evidence of ownership and of the loss, destruction or theft of the Special Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company and to the Trustee in their sole discretion and the applicant may also be required to furnish an indemnity and surety bond or such security in amount and form satisfactory to them in their discretion, and will pay the reasonable charges of the Company and the Trustee in connection with the issue of the new Special Warrant Certificate. 2.8 Special Warrantholder not a Shareholder Nothing in this Agreement or in the holding of a Special Warrant evidenced by a Special Warrant Certificate, or otherwise, will be construed as conferring upon a Special Warrantholder any right or interest whatsoever as a shareholder, including but not limited to the right to vote at, to receive notice of, or to attend meetings of shareholders or any other proceedings of the Company or the right to receive any dividend and other distribution (except as provided in section 9.3). 2.9 Special Warrants to Rank Pari Passu Each Special Warrant will rank pari passu with all other Special Warrants, whatever may be the actual date of issue. 2.10 Signing of Special Warrants The Special Warrant Certificates will be signed by any one of the directors or officers of the Company and need not be under the seal of the Company. The signatures of any of these directors or officers may be mechanically reproduced in facsimile and Special Warrant Certificates bearing those facsimile signatures will be binding upon the Company as if they had been manually signed by the directors or officers. Notwithstanding that any of the persons whose manual or facsimile signature appears on any Special Warrant Certificate as a director or officer may no longer hold office at the date of the Special Warrant Certificate or at the date of certification or delivery thereof, any Special Warrant Certificate signed as aforesaid will, subject to section 2.11, be valid and binding upon the Company. 2.11 Certification by the Trustee No Special Warrant Certificate will be issued or, if issued, will be valid for any purpose or entitle the holder to the benefit hereof until it has been certified by manual signature by or on behalf of the Trustee in the form of the certificate set out in Schedule "A" hereto, and the certification by the Trustee upon any Special Warrant Certificate will be conclusive evidence as against the Company that the Special Warrant Certificate so certified has been duly issued under this Agreement and that the holder is entitled to the benefit of this Agreement. 2.12 Certification Not a Representation or Warranty The certification of the Trustee on Special Warrant Certificates issued under this Agreement will not be construed as a representation or warranty by the Trustee as to the validity of this Agreement or of the Special Warrant Certificates (except the due certification thereof) and the Trustee will in no respect be liable or answerable for the use made of the Special Warrants or any of them or of the consideration therefor, except as otherwise specified in this Agreement. ARTICLE 3 EXCHANGE AND OWNERSHIP OF SPECIAL WARRANTS EXCHANGE AND OWNERSHIP OF SPECIAL WARRANTS" 3.1 Exchange of Special Warrant Certificates Any Special Warrant Certificate representing a certain number of Special Warrants may, upon compliance with the reasonable requirements of the Trustee, be exchanged for one or more Special Warrant Certificates representing an equal aggregate number of Special Warrants. 3.2Place for Exchange of Special Warrant Special Warrants may be exchanged only at the principal transfer office of the Trustee in the city of Vancouver, Canada or at any other place that is designated by the Company with the Trustee's approval. Any Special Warrants tendered for exchange will be surrendered to the Trustee and cancelled. The Company will sign all Special Warrant Certificates necessary to carry out exchanges as aforesaid and those Special Warrant Certificates will be certified by or on behalf of the Trustee. 3.3 Charges for Exchange For each Special Warrant Certificate exchanged, the Trustee, except as otherwise herein provided, will charge a reasonable sum for each new Special Warrant Certificate issued. The party requesting the exchange, as a condition precedent to such exchange, will pay such charges and will pay or reimburse the Trustee or the Company for all eligible transfer taxes or governmental or other similar transfer charges required to be paid in connection with such exchange. 3.4 Ownership of Special Warrants The Company and the Trustee and their respective agents may deem and treat the holder of any Special Warrant as the absolute owner of that Special Warrant for all purposes, and the Company and the Trustee and their respective agents will not be affected by any notice or knowledge to the contrary except where so required by court order of a court of competent jurisdiction or by statute, concerning which the Company and the Trustee shall be entitled to rely upon advice from legal counsel. Subject to the provisions of this Agreement and applicable law, the holder of any Special Warrant will be entitled to the rights evidenced by that Special Warrant free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof and all persons may act accordingly and the receipt from any holder for the Units or monies obtainable pursuant thereto will be a good discharge to the Company and the Trustee for the same and neither the Company nor the Trustee will be bound to inquire into the title of any holder except where so required by court order or by statute, concerning which the Company and the Trustee shall be entitled to rely upon advice from legal counsel. ARTICLE 4 REGISTRAR AND TRANSFER AGENCIES 4.1 Appointment of Trustee as Registrar The Company hereby appoints the Trustee as registrar of the Special Warrants. The Company may hereafter with the consent of the Trustee, appoint one or more other additional registrars of the Special Warrants. 4.2 Register The Trustee shall maintain a register, at its principal transfer office in the city of Vancouver, in which will be entered the names and addresses of the Special Warrantholders and other particulars of the Special Warrants held by each of them respectively permitted by this Agreement. 4.3 Register to be Open for Inspection The register referred to in section 4.2 will at all reasonable times be open for inspection by the Company by the Trustee and by any Special Warrantholder. The register required to be kept at the city of Vancouver will not be closed at any time. 4.4 List of Special Warrantholders The Trustee will, when requested so to do by the Company, furnish the Company with a list of names and addresses of the Special Warrantholders showing the number of Special Warrants held by each Special Warrantholder. 4.5 Obligations of Trustee Except as required by law, neither the Trustee nor any other registrar nor the Company will be charged with notice of or be bound to see to the execution of any trust, whether express, implied or constructive, in respect of any Special Warrant. ARTICLE 5 TRANSFER OF SPECIAL WARRANT CERTIFICATES 5.1 Transfer of Special Warrant Certificates Subject to compliance with all applicable securities laws and requirements of regulatory authorities, including without limitation, any undertaking required to be given to the Exchange by the transferor and transferee, the holder of a Special Warrant may at any time and from time to time have the Special Warrants transferred by the Trustee in accordance with the conditions herein and such reasonable requirements as the Trustee may prescribe. Any such transfer shall be duly noted in the register of Special Warrants maintained by the Trustee. Upon compliance with the foregoing requirements, the Trustee shall issue to the transferee a Special Warrant Certificate representing the Special Warrants transferred. Compliance with all applicable securities laws and requirements of regulatory authorities shall be the Holder's responsibility and not that of the Trustee. 5.2 Validity of Transfer No transfer of Special Warrants will be valid unless made by the holder or the holder's executors or administrators or other legal representatives or the holder's attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the registrar, and upon compliance with such requirements as the registrar may prescribe. ARTICLE 6 EXERCISE OF SPECIAL WARRANTS 6.1 Exercise During Exercise Period The holder of a Special Warrant Certificate may exercise the Special Warrants represented by the Special Warrant Certificate at any time and from time to time in whole or in part during the Exercise Period. Any such exercise, or any deemed exercise pursuant to section 6.12, will be subject to the holder providing such assurances and executing such documents as may, in the reasonable opinion of the Company or the Trustee, be required to ensure compliance with Applicable Securities Laws. 6.2 Notice of Qualification Date If the Qualification Date occurs during the Exercise Period, the Company will forthwith give notice of such occurrence to the Trustee, together with copies of the Receipts. The notice will contain the certificate required under section 9.5. 6.3 Notice of Exercise Period Upon receipt by the Trustee of the notice referred to in section 6.2, the Trustee will forthwith give notice to the Special Warrantholders specifying the end of the Exercise Period and such information as may be needed, if any, to allow the Special Warrantholders to acquire Units issuable upon the exercise or deemed exercise of Special Warrants. 6.4 Method of Exercise of Special Warrants A Special Warrantholder may, during the Exercise Period, exercise the right under a Special Warrant to acquire a Unit by surrendering to the Trustee at its principal transfer office in the city of Vancouver or at any other place or places that may be designated by the Company with the approval of the Trustee, a certificate or certificates representing one Special Warrant for each Unit to be acquired, together with a fully completed and duly executed exercise form in the form attached to the Special Warrant Certificate. 6.5 Surrender of Special Warrants Except as provided in section 6.12, the Special Warrants will only be deemed to have been surrendered upon personal delivery of the applicable Special Warrant Certificate(s) to, or if sent by mail or other means of transmission, upon actual receipt thereof by the Trustee. 6.6 Completion and Execution of Exercise Form Any exercise form referred to in section 6.4 will be signed by the Special Warrantholder or the Special Warrantholder's executors or administrators, successors or other legal representatives or an attorney of the Special Warrantholder duly appointed by an instrument in writing satisfactory to the Trustee. The exercise form attached to the Special Warrant Certificate will be completed to specify the number of Special Warrants being exercised, and the address to which the certificates representing the Unit Shares and the Unit Warrants should be delivered if different from that appearing on the Special Warrant Certificate surrendered. If any of the Securities to be acquired are to be issued to a person or persons other than the Special Warrantholder, the Special Warrantholder will pay, as a condition to the issue and delivery of the certificates evidencing the Securities, to the Trustee or to its agent, on behalf of the Company, all exigible transfer taxes or governmental or other charges required to be paid in respect of the transfer of the Special Warrants or Securities. 6.7 Resale Restriction Legends If, at the time of exercise of the Special Warrants, there remain restrictions on resale under applicable securities legislation on the Securities acquired, the Company may, on the advice of counsel, endorse the certificates representing the Securities with respect to those restrictions, and prior to the issuance of any such certificates the Trustee shall consult with the Company to determine whether such endorsing or legending is required. 6.8 Effect of Exercise of Special Warrants Upon exercise or deemed exercise of the Special Warrants and compliance by the Special Warrantholder with sections 6.4 to 6.7, subject to sections 6.10, 6.11 and 7.9, the holder of the Special Warrants will be entitled to receive, without further payment therefor, one Unit for each Special Warrant exercised, and the Trustee will cause the holder thereof to be entered forthwith on its register of shareholders as the holder of the Unit Shares as of the Exercise Date. 6.9 Delivery of Securities Upon Exercise of Special Warrants Upon the due exercise of the Special Warrants as described in this Article 6, the Company will, within five business days after the Exercise Date, without charge therefor except as provided in section 6.6, forthwith cause to be mailed to the Holders at such person's address specified in the exercise form or, if not specified in the exercise form, then at the address recorded in the register of the Special Warrants, certificates for the appropriate number of Securities to which the Holder is entitled. 6.10 No Fractional Unit Shares Notwithstanding any adjustments provided for in this Agreement, the Company shall not be required upon the exercise or deemed exercise of any Special Warrants to issue fractional Unit Shares in satisfaction of its obligations hereunder. Where a fractional Unit Share, but for this section 6.10, would have been issued upon exercise of a Special Warrant, in lieu thereof, there shall be paid to the holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the closing price of the Common Shares on the Exchange (or if the Common Shares are not then listed thereon on such other exchange on which the Common Shares are then listed or, if not listed on, in the over-the-counter market as designated by the directors) for the last trading day prior to the Exercise Date at the date of delivery of each respective certificate, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Company shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 6.11 Expiration of Special Warrants The Special Warrants and the rights thereunder shall terminate and be of no further effect upon their exercise or deemed exercise. 6.12 Delivery of Securities Upon Deemed Exercise of Special Warrants If, immediately prior to the expiry of the Exercise Period, any Special Warrants have not been exercised by their Holders, such Special Warrants will be deemed to have been then exercised and surrendered by the Holder without any further action on the part of the Holder. In that event, subject to section 6.1, the Trustee will mail certificates evidencing the Securities issued upon such deemed exercise in the name of such Holder to the address of such Holder as recorded in the register of Special Warrants. 6.13 Accounting and Recording The Trustee will promptly notify the Company in writing with respect to Special Warrants exercised. The Trustee will, within five business days of each Exercise Date, specify the particulars of the Special Warrants exercised which will include the name(s) and addresses of the Holders whose Special Warrants have been exercised and the Exercise Date. 6.14 Cancellation of Surrendered Special Warrants All Special Warrant Certificates surrendered to the Trustee in accordance with the provisions of this Special Warrant Agreement will be cancelled by the Trustee and upon request therefor of the Company, the Trustee will furnish the Company with written confirmation of the Special Warrant Certificates so cancelled and the number of Securities which have been acquired pursuant to each. ARTICLE 7 ADJUSTMENT OF EXCHANGE NUMBER 7.1 Definitions In this Article the terms "record date" and "effective date" means the close of business on the relevant date. 7.2 Adjustment of Exchange Number The Exchange Number (or the number and kind of shares or securities to be received upon exercise in the case of sections 7.6 and 7.7) will be subject to adjustment from time to time in the events and in the manner provided in this Article. 7.3 Share Reorganization If and whenever at any time from the date hereof during the Exercise Period the Company: (a) issues to all or substantially all the holders of the Common Shares, by way of a stock dividend or other distribution, other than Dividends Paid in the Ordinary Course, Common Shares or Convertible Securities; or (b) subdivides, redivides or changes its outstanding Common Shares into a greater number of shares; or (c) combines, consolidates or reduces its outstanding Common Shares into a smaller number of shares, (any of those events being a "Share Reorganization"), the Exchange Number will be adjusted effective immediately after the record date at which the holders of Common Shares are determined for the purposes of the Share Reorganization to a number that is the product of (1) the Exchange Number in effect on the record date and (2) a fraction: (i) the numerator of which will be the number of Common Shares outstanding after giving effect to the Share Reorganization; and (ii) the denominator of which will be the number of Common Shares outstanding on the record date before giving effect to the Share Reorganization. For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this section 7.3 there will be included that number of Common Shares which would have resulted from the conversion at that time of all outstanding Convertible Securities (which, for greater certainty, includes the unexercised Special Warrants and the Unit Warrants issuable upon exercise of those Special Warrants). 7.4 Rights Offering If and whenever at any time during the Exercise Period, the Company shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or Convertible Securities) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the numerator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Company or any subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(ii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. 7.5 Special Distribution If and whenever at any time from the date hereof during the Exercise Period the Company issues or distributes to all or substantially all the holders of Common Shares: (a) shares of any class other than shares distributed to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of such shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares; (b) rights, options or warrants other than Unit Warrants and other than rights, options or warrants exercisable within 45 days from the date of issue thereof at a price, or at a conversion price, of at least 95% of the Current Market Price at the record date for such distribution; (c) evidences of indebtedness; or (d) any other assets including shares of other corporations (excluding cash dividends that Special Warrantholders receive under section 9.3) and that issuance or distribution does not constitute a Share Reorganization or a Rights Offering, (any of those events being a "Special Distribution"), the Exchange Number will be adjusted effective immediately after the record date at which the holders of Common Shares are determined for purposes of the Special Distribution to an Exchange Number that is the product of (1) the Exchange Number in effect on the record date and (2) a fraction: (e) the numerator of which will be the product of (A) the sum of the number of Common Shares outstanding on the record date plus the number of Common Shares which the Special Warrantholders would be entitled to receive upon exercise of all their outstanding Special Warrants and Unit Warrants if they were exercised on the record date and (B) the Current Market Price thereof on that date; and (f) the denominator of which will be the product of: (i) the sum of the number of Common Shares outstanding on the record date plus the number of Common Shares which the Special Warrantholders would be entitled to receive upon exercise of all their outstanding Special Warrants and Unit Warrants if they were exercised on the record date; and (ii) the Current Market Price thereof on that date, less the aggregate fair market value, as determined by the board, whose determination, absent manifest error, will be conclusive, of the shares, rights, options, warrants, evidences of indebtedness or other assets issued or distributed in the Special Distribution. Any Common Shares owned by or held for the account of the Company will be deemed not to be outstanding for the purpose of any such computation; to the extent that the distribution of shares, rights, options, warrants, evidences of indebtedness or assets is not so made or to the extent that any rights, options or warrants so distributed are not exercised, the Exchange Number will be readjusted to the Exchange Number that would then be in effect based upon shares, rights, options, warrants, evidences of indebtedness or assets actually distributed or based upon the number of Common Shares or Convertible Securities actually delivered upon the exercise of the rights, options or warrants, as the case may be, but subject to any other adjustment required hereunder by reason of any event arising after the record date. 7.6 Capital Reorganization If and whenever at any time from the date hereof during the Exercise Period there is a reorganization of the Company not otherwise provided for in section 7.3 or a consolidation or merger or amalgamation of the Company with or into another body corporate or other entity including a transaction whereby all or substantially all of the Company's undertaking and assets become the property of any other body corporate, trust, partnership or other entity (any such event being a "Capital Reorganization"), any Special Warrantholder who has not exercised his Special Warrants prior to the effective date of the Capital Reorganization will be entitled to receive and will accept, upon the exercise of his right at any time after the effective date of the Capital Reorganization, in lieu of the number of Securities to which he would have been entitled upon exercise of the Special Warrants, the aggregate number of shares or other securities or property of the Company, or the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization that the holder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, he had been the holder of the number of Securities to which immediately before the transaction he was entitled upon exercise of the Special Warrants; no Capital Reorganization will be carried into effect unless all necessary steps will have been taken so that the holders of Special Warrants will thereafter be entitled to receive the number of shares or other securities or property of the Company, or of the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in sections 7.2 to 7.8. If determined appropriate by the Trustee to give effect to or to evidence the provisions of this section 7.6, the Company, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such Capital Reorganization, enter into an agreement which shall provide, to the extent possible, for the application of the provisions set forth in this Special Warrant Agreement with respect to the rights and interests thereafter of the Special Warrantholders to the end that the provisions set forth in this Special Warrant Agreement shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Special Warrantholder is entitled on the exercise of its acquisition rights thereafter. Any agreement entered into between the Company and the Trustee pursuant to the provisions of this section 7.6 shall be a supplemental agreement entered into pursuant to the provisions of Article 12 hereof. Any agreement entered into between the Company, any successor to the Company or such purchasing body corporate, partnership, trust or other entity and the Trustee shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Article 7 and which shall apply to successive reclassifications, reorganizations, amalgamations, consolidations, mergers, sales or conveyances. 7.7 Reclassification of Common Shares If the Company reclassifies or otherwise change the outstanding Common Shares, the exercise right will be adjusted effective immediately upon the reclassification becoming effective so that holders of Special Warrants who exercise their rights thereafter will be entitled to receive such shares as they would have received had the Special Warrants been exercised immediately prior to the effective date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in sections 7.3 to 7.8. 7.8 Exercise Rights Adjustment Rules The following rules and procedures will be applicable to adjustments made pursuant to sections 7.3 to 7.7: (a) the adjustments and readjustments provided for in this Article 7 are cumulative and subject to subsection 7.8(b), will apply (without duplication) to successive issues subdivisions, combinations, consolidations, distributions and any other events that require adjustment of the Exchange Number or the number or kind of shares or securities to be issued upon exercise of the Special Warrants; (b) no adjustment in the Exchange Number will be required unless the adjustment would result in a change of at least 1% in the Exchange Number then in effect provided however, that any adjustments that, except for the provisions of this subsection 7.8(b) would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustment; (c) no adjustment in the Exchange Number will be made in respect of any event described in subsection 7.3(a) or sections 7.4 or 7.5 if the Special Warrantholders are entitled to participate in the event on the same terms mutatis mutandis as if they had exercised their Special Warrants immediately prior to the effective date or record date of the event; (d) no adjustment in the Exchange Number will be made pursuant to any of sections 7.3 to 7.7 in respect of the issue of Common Shares issuable from time to time as Dividends Paid in the Ordinary Course; (e) if a dispute arises with respect to adjustments of the Exchange Number, the dispute will be conclusively determined by the auditors of the Company or, if they are unable or unwilling to act, by such firm of independent chartered accountants as may be selected by the directors of the Company and any such determination, absent manifest error, will be binding upon the Company, the Trustee and all Special Warrantholders; (f) if during the Exercise Period the Company takes any action affecting the Common Shares, other than actions described in this Article, which in the opinion of the board of directors of the Company would materially affect the rights of the Holder, the Exchange Number will be adjusted in such manner, if any, and at such time, by action by the directors of the Company in such manner as they may reasonably determine to be equitable in the circumstances but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Company so as to provide for an adjustment on or prior to the effective date of any action by the Company affecting the Common Shares will be conclusive evidence that the board of directors of the Company has determined that it is equitable to make no adjustment in the circumstances; and (g) if the Company sets a record date to determine the holders of Common Shares for the purpose of entitling them to receive any dividend or distribution or any subscription or purchase rights and thereafter legally abandons its plans to pay or deliver the dividend, distribution or subscription or purchase rights then no adjustment in the Exchange Number will be required by reason of the setting of the record date. 7.9 Postponement of Subscription In any case where the application of any of sections 7.3 to 7.7 results in an increase of the Exchange Number taking effect immediately after the record date for or occurrence of a specific event, if any Special Warrants are exercised after that record date or occurrence and prior to completion of the event or of the period for which a calculation is required to be made, the Company may postpone the issuance, to the Holder, of the Securities to which the Holder is entitled by reason of the increase of the Exchange Number but the Securities will be so issued and delivered to that holder upon completion of that event or period, with the number of those Securities calculated on the basis of the Exchange Number on the Exercise Date adjusted for completion of that event or period, and the Company will forthwith after the Exercise Date deliver to the person or persons in whose name or names the Securities are to be issued an appropriate instrument evidencing the person's or persons' right to receive the Securities. 7.10 Notice of Certain Events Upon the occurrence of any event referred to in sections 7.3 to 7.8 that requires an adjustment or readjustment in the Exchange Number, the Company will promptly thereafter: (a) file with the Trustee a certificate of the Company specifying the particulars of the event giving rise to the adjustment or readjustment and, if determinable, the adjustment and setting forth in reasonable detail a computation of the adjustment including the method of computation and which certificate shall be supported by a certificate of the Company's auditors verifying such calculation; and (b) give notice to the Special Warrantholders of the particulars of the event and, if determinable, the adjustment. If notice has been given under this section 7.10 and the adjustment is not then determinable, the Company will promptly after the adjustment is determinable: (c) file with the Trustee a computation of the adjustment together with a certificate of the Company's auditors verifying such calculation; and (d) give notice to the Special Warrantholders of the adjustment. 7.11 Protection of Trustee The Trustee (a) will not at any time be under any duty or responsibility to any Special Warrantholder to determine whether any facts exist which may require any adjustment contemplated by sections 7.3 to 7.7, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment; (b) is not accountable with respect to the validity or value (or the kind or amount) of any shares or other securities or property which may at any time be issued or delivered upon the exercise of the rights attaching to any Special Warrant; (c) is not responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver Common Shares or certificates for the same upon the surrender of any Special Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article 7; and (d) will not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Company of any of the representations, warranties or covenants in this Agreement contained or any acts of the agents or servants of the Company. 7.12 Entitlement to Common Shares on Exercise of Special Warrant All shares of any class or other securities which a Special Warrantholder is at the time in question entitled to receive on the exercise of its Special Warrant, whether or not as a result of adjustments made pursuant to this section, shall, for the purposes of the interpretation of this Agreement be deemed to be shares which such Special Warrantholder is entitled to acquire pursuant to such Special Warrant. 7.13 Proceedings Prior to Any Action Requiring Adjustment As a condition precedent to the taking of any action which would require an adjustment in any of the acquisition rights pursuant to any of the Special Warrants, including the number of Unit Shares which are to be received upon the exercise thereof, the Company shall take any corporate action which may, in the opinion of counsel, be necessary in order that the Company has unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares which the holders of such Special Warrants are entitled to receive on the full exercise thereof in accordance with the provisions hereof. 7.14 Notice of Special Matters The Company covenants with the Trustee that, so long as any Special Warrant remains outstanding, it will give notice to the Trustee and to the Special Warrantholders of its intention to fix the record date for any event referred to in Article 7 which may give rise to any adjustment in the Exchange Number. Such notice shall specify the particulars of such event, to the extent determinable, any adjustment required and the computation of such adjustment and the record date for such event, provided that the Company shall only be required to specify in the notice such particulars of the event as shall have been fixed and determined on the date on which the notice is given. The notice shall be given in each cash not less than fourteen days prior to such applicable record date. If any adjustment for which notice is given is not then determinable, the Company shall, promptly after such adjustment is determinable, give notice. ARTICLE 8 ADJUSTMENT OF NUMBER OF SECURITIES 8.1 Adjustment of Number of Securities In the event that the Qualification Date has not occurred by the Qualification Deadline, the Special Warrantholder shall be entitled, upon exercise of the Special Warrant, to acquire 1.1 Unit Shares (rather than one Unit Share) and 0.55 Unit Warrants (rather than one-half of one Unit Warrant) for no additional consideration. ARTICLE 9 RIGHTS AND COVENANTS 9.1 General Covenants of the Company The Company covenants with the Trustee that so long as any Special Warrants remain outstanding and may be exchanged for the Securities: (a) the Company will at all times maintain its corporate existence; (b) the Company will reserve and keep available out of its authorized common stock a sufficient number of Common Shares for issuance upon the exercise of all outstanding Special Warrants and the exercise of all outstanding Unit Warrants including with respect to any adjustments required pursuant to Article 8; (c) the Company will cause the Special Warrants and the Securities and the certificates representing the Special Warrants and the Securities to be duly issued in accordance with the Special Warrant Certificate and the terms of this Agreement; (d) all Common Shares that will be issued by the Company upon exercise of the rights provided for in this Agreement will be issued as fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof and that upon issuance such shares shall be listed on each national securities exchange on which the other shares of outstanding common stock of the Company are then listed or shall be eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap Market if the other shares of outstanding common stock of the Company are so included; (e) the Company will use its best efforts to ensure that all Common Shares outstanding or issuable from time to time (including without limitation the Unit Shares and Warrant Shares) continue to be or are listed for trading on the Exchange and that it will use its commercial best efforts to list the Unit Shares, Warrant Shares and all other outstanding shares of its common stock on the NASDAQ National Market or if the Company does not meet the listing requirements of the NASDAQ National Market on the NASDAQ SmallCap Market as soon as possible after the Closing Date; (f) it will use its reasonable best efforts to have an Effective Registration and to have the Receipts issued by the Commissions on or before the Qualification Deadline and will, in the event that either an Effective Registration is not filed or the Receipts are not issued on or before the Qualification Deadline, continue to use its reasonable best efforts to file an Effective Registration and / or obtain the Receipts thereafter, as the case may be. Moreover, the Company covenants that if any securities to be reserved for the purpose of the exercise of the Special Warrants or the exercise of the Unit Warrants require registration with, or approval of, any governmental authority under any U.S. Securities Laws before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and expeditiously as reasonably possible to endeavour to secure such registration or approval. The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "Blue Sky" security laws as applicable; (g) the Company will maintain its status as a reporting issuer in the Qualifying Provinces and as a "reporting company" with a class of equity securities registered pursuant to section 12(g) of the United States Securities Act of 1934, as amended not in default of any reporting or filing requirements under U.S. Securities Laws; (h) the Company will send a written notice to the Trustee and to each Special Warrantholder at the address of such Holder appearing in the register of Special Warrants maintained pursuant to this Agreement, of the filing of an Effective Registration and the issuance of the Receipts, together with a commercial copy of the Prospectus for those Holders in the Qualifying Provinces, as soon as practicable but, in any event, not later than five business days after the filing of the Effective Registration or the issuance of such Receipts, as the case may be, together with confirmation of any adjustment to the number of securities issuable pursuant to Article 8); (i) the Company will generally well and truly perform and carry out all the acts or things to be done by it as provided in this Agreement or as the Trustee may reasonably require for the better accomplishing and effecting of the intentions and provisions of this Agreement; and (j) the Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of the Special Warrants or the issuance or delivery of any Common Shares or Unit Warrants upon the exercise of the Special Warrants. 9.2 Trustee's Remuneration and Expenses The Company covenants that it will pay to the Trustee from time to time reasonable remuneration for its services under this Agreement and will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in the administration or execution hereof (including the reasonable compensation and the disbursements of counsel and all other advisers and assistants not regularly in its employ), both before any default under this Agreement and thereafter until all duties of the Trustee under this Agreement will be finally and fully performed, except any expense, disbursement or advance as may arise from the negligence or wilful misconduct of the Trustee or of persons for whom the Trustee is responsible. 9.3 Right to Dividends or Distributions If the Company pays a dividend or makes any distribution to all or substantially all of the holders of Common Shares or if the Company declares any dividend, or provides for any distribution, payable to all or substantially all the holders of Common Shares of record during the Exercise Period, the Company agrees that it will pay the same amount of such dividend or make the same distribution of cash, property or securities as a deposit to the Trustee, as if the Holders were the holders of the number of Common Shares that they are entitled to receive upon the exercise of the Special Warrants, and such payments or distributions shall be held and dealt with by the Trustee in accordance with the provisions of this Agreement. 9.4 Performance of Covenants by Trustee If the Company fails to perform any of its covenants contained in this Agreement, the Trustee may notify the Special Warrantholders of the failure on the part of the Company or may itself perform any of the said covenants capable of being performed by it, but will be under no obligation to do so or to notify the Special Warrantholders. All sums expended or advanced by the Trustee in so doing will be repayable as provided in section 9.2. No performance, expenditure or advance by the Trustee will be deemed to relieve the Company of any default under this Agreement. 9.5 Certificate of the Company The Company will deliver to the Trustee, on the same date that it delivers the notice referred to in section 6.2 to the Trustee, or on the last day of the Exercise Period if the Qualification Date does not occur during the Exercise Period, a certificate indicating the Exchange Number as at that date and whether or not any dividends or distributions referred to in section 9.3 have been made. 9.6 Securities Qualification Requirements (a) If, in the opinion of counsel, any instrument (not including a prospectus) is required to be filed with, or any permission is required to be obtained from any governmental authority in Canada or any other step is required under any federal or provincial law of Canada before any Securities which a Special Warrantholder is entitled to acquire pursuant to the exercise of any Special Warrant may properly and legally be issued upon due exercise thereof and thereafter traded, without further formality or restriction, the Company covenants that it will take such required action. (b) The Company or, if required by the Company, the Trustee will give notice of the issue of Securities pursuant to the exercise of Special Warrants, in such detail as may be required, to each securities commission or similar regulatory authority in each jurisdiction in Canada in which there is legislation or regulation permitting or requiring the giving of any such notice in order that such issue of Common Shares and the subsequent disposition of Securities so issued will not be subject to the prospectus qualification requirements of such legislation or regulation. ARTICLE 10 ENFORCEMENT 10.1 Suits by Special Warrantholders All or any of the rights conferred upon a Special Warrantholder by the terms of a Special Warrant or of this Agreement may be enforced by the holder by appropriate legal proceedings but without prejudice to the right that is hereby conferred upon the Trustee to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the holder of Special Warrants from time to time outstanding. 10.2 Immunity of Shareholders, Directors & Officers The Trustee, and by their acceptance of the Special Warrant Certificates and as part of the consideration for the issue of the Special Warrants, the Special Warrantholders, hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future shareholder, director, officer, employee or agent of the Company in their capacity as such, either directly or through the Company, relating to any obligations, representations, warranties and covenants under the Special Warrants or this Agreement, it being acknowledged that all such obligations, representations, warranties and covenants are solely those of the Company. Accordingly, the obligations under the Special Warrants and this Agreement are not personally binding upon, nor will resort hereunder be had to, the private property of any of the past, present or future directors, officers, shareholders, employees or agents of the Company but only the property of the Company (or any successor corporation) will be bound in respect hereof. The protection afforded under this paragraph shall not extend to misrepresentations knowingly made. 10.3 Waiver of Default Upon the happening of any default hereunder: (a) the holders of not less than 51% of the Special Warrants then outstanding shall have the power (in addition to the powers exercisable by extraordinary resolution) by requisition in writing to instruct the Trustee to waive any default hereunder and the Trustee shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or (b) the Trustee shall have the power to waive any default hereunder upon such terms and conditions as the Trustee may deem advisable if, in the Trustee's opinion, the same shall have been cured or adequate provision made therefor; provided that no delay or omission of the Trustee or of the Special Warrantholders to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein and provided further that no act or omission either of the Trustee or of the Special Warrantholders in the premises shall extend to or be taken in any manner whatsoever to affect any subsequent default hereunder of the rights resulting therefrom. ARTICLE 11 MEETINGS OF SPECIAL WARRANTHOLDERS 11.1 Right to Convene Meetings The Trustee may at any time and from time to time and will, on receipt of a written request of the Company or of a Special Warrantholders' Request and upon being indemnified to its reasonable satisfaction by the Company or by the Special Warrantholders signing the Special Warrantholders' Request against the cost that may be incurred in connection with the calling and holding of the meeting, convene a meeting of the Special Warrantholders. If, within 21 days after receipt of the written request of the Company or Special Warrantholders' Request and such indemnity has been given, the Trustee fails to give notice convening a meeting, the Company or the Special Warrantholders, as the case may be, may convene the meeting. Every meeting will be held in the City of Vancouver or at such other place as may be approved or determined by the Trustee. 11.2 Notice At least 10 days' notice of any meeting will be given to the Special Warrantholders in the manner provided in section 14.2 and a copy of the notice will be sent by mail to the Trustee unless the meeting has been called by it, and to the Company unless the meeting has been called by it. Each notice will state the time when and the place where the meeting is to be held and will state briefly the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Special Warrantholders to make a reasoned decision on the matter but it will not be necessary for the notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 14. 11.3 Chairman A person, who need not be a Special Warrantholder, designated in writing by the Trustee will chair the meeting and if no person is so nominated, or if the person so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, the Special Warrantholders present in person or by proxy will choose a person present to chair the meeting. 11.4Quorum With respect to the quorum required for a meeting of Special Warrantholders: (a) at any meeting of the Special Warrantholders a quorum will consist of Special Warrantholders present in person or by proxy and entitled to acquire at least 20% of the aggregate number of Special Warrants then outstanding, provided at least two persons entitled to vote thereat are personally present; (b) if a quorum of the Special Warrantholders is not present within 30 minutes from the time fixed for holding any meeting, the meeting, if summoned by the Special Warrantholders or on a Special Warrantholders' Request, will be dissolved; but, subject to section 11.12(b), in any other case the meeting will be adjourned to the same day in the next week (unless that day is not a business day, in which event the meeting will be reconvened on the next day that is a business day) at the same time and place and no notice need be given; and (c) at the adjourned meeting, the Special Warrantholders present in person or by proxy will form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not hold at least 20% of the aggregate number of Special Warrants then outstanding. 11.5 Power to Adjourn The chairman of any meeting at which a quorum of the Special Warrantholders is present may, with the consent of the meeting, adjourn the meeting and no notice of the adjournment need be given except such notice, if any, as the meeting may prescribe. 11.6 Show of Hands Every question submitted to a meeting will be decided in the first place by a majority of the votes given on a show of hands except that votes on an Special Resolution will be given in the manner provided in section 11.12(c). At any meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority will be conclusive evidence of the fact. 11.7 Poll On every Special Resolution, and on any other question submitted to a meeting upon which a poll is directed by the chairman or requested by one or more of the Special Warrantholders acting in person or by proxy and representing in the aggregate at least 5% of the aggregate number of Special Warrants then outstanding, a poll will be taken in such manner as the chairman will direct. Questions other than an Special Resolution will be decided by a majority of the votes cast on a poll. 11.8 Voting On a show of hands every person who is present and entitled to vote, whether as a Special Warrantholder or as proxy for one or more absent Special Warrantholders or both, will have one vote. On a poll each Special Warrantholder present in person or represented by a proxy duly appointed by instrument in writing will be entitled to one vote in respect of each Special Warrant then held by him. A proxy need not be a Special Warrantholder. 11.9 Regulations The Trustee or the Company with the approval of the Trustee may from time to time make or vary such regulations as they will think fit: (a) the setting of the record date for a meeting for the purpose of determining Special Warrantholders entitled to receive notice of and to vote at the meeting; (b) for the issue of voting certificates by any bank, trust company or other depositary satisfactory to the Trustee stating that the Special Warrants specified therein have been deposited with the depository by a named person and will remain on deposit until after the meeting, which voting certificates will entitle the persons named therein to be present and vote at the meeting and at any adjournment thereof or to appoint a proxy or proxies to represent them and vote for them at that meeting and at any adjournment thereof in the same manner and with the same effect as though the persons so named in the voting certificates were the actual holders of the Special Warrants specified therein; (c) for the deposit of voting certificates and/or instruments appointing proxies at such place and time as the Trustee, the Company or the Special Warrantholders convening the meeting, as the case may be, may in the notice convening the meeting direct; (d) for the deposit of voting certificates and/or instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of the voting certificates and/or instruments appointing proxies to be sent by mail, cable, telex or other means of prepaid, transmitted, recorded communication before the meeting to the Company or to the Trustee at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting; (e) for the form of instrument appointing a proxy; and (f) generally for the calling of meetings of Special Warrantholders and the conduct of business thereat. Any regulations so made will be binding and effective and the votes given in accordance therewith will be valid and will be counted. Except as the regulations may provide, the only persons who will be recognized at any meeting as the holders of any Special Warrants, or as entitled to vote or, subject to section 11.10, be present at the meeting in respect thereof, will be persons who are the registered holders of Special Warrants or their duly appointed proxies. 11.10 Company and Trustee may be Represented The Company and the Trustee by their respective officers or directors, and the counsel to the Company and the Trustee may attend any meeting of the Special Warrantholders, but will have no vote as such. 11.11 Powers Exercisable by Special Resolution In addition to all other powers conferred upon them by any other provisions of this Agreement or by law the Special Warrantholders at a meeting will have the following powers exercisable from time to time by Special Resolution: (a) power to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Special Warrantholders and/or the Trustee in its capacity as trustee under this Agreement or on behalf of the Special Warrantholders against the Company, whether those rights arise under this Agreement or the Special Warrant certificates; (b) power to direct or authorize the Trustee to enforce any of the covenants on the part of the Company contained in this Agreement or the Special Warrants or to enforce any of the rights of the Special Warrantholders in any manner specified in the Special Resolution or to refrain from enforcing any such covenant or right; (c) power to restrain any Special Warrantholder from taking or instituting any suit, action or proceeding against the Company for the enforcement of any of the covenants on the part of the Company contained in this Agreement or the Special Warrants or to enforce any of the rights of the Special Warrantholders except for a suit or action against the Company to compel payment to a Special Warrantholder in respect of monies owing to him in accordance with the provisions of section 9.3; (d) power to direct any Special Warrantholder who, as such, has brought any suit, action or proceeding to stay or discontinue or otherwise deal with the same upon payment of the costs, charges and expenses reasonably and properly incurred by the Special Warrantholder in connection therewith; (e) power from time to time and at any time to remove the Trustee and appoint a successor trustee; (f) power to amend, alter or repeal any special resolution previously passed or sanctioned by the Special Warrantholders; and (g) power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other securities of the Company. 11.12 Meaning of "Special Resolution (a) The expression "Special Resolution" when used in this Agreement means, subject to the provisions in this subsection 11.12(b) and 11.12(c) and in sections 11.15 and 11.16 provided, a resolution proposed at a meeting of the Special Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 11 at which there are present in person or by proxy Special Warrantholders holding at least 20% of the aggregate number of Special Warrants then outstanding and passed by the affirmative votes of Special Warrantholders holding not less than two-thirds of the aggregate number of Special Warrants represented at the meeting. (b) If, at any meeting called for the purpose of passing a Special Resolution, Special Warrantholders entitled to acquire at least 20% of the aggregate number of Special Warrants then outstanding are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by Special Warrantholders or on a Special Warrantholders' Request, will be dissolved; but in any other case it will stand adjourned to such day, being not less than 15 or more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days' notice will be given of the time and place of the adjourned meeting in the manner provided in section 14.2. The notice will state that at the adjourned meeting the Special Warrantholders present in person or by proxy will form a quorum but it will not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting the Special Warrantholders present in person or by proxy will form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at the adjourned meeting and passed by the requisite vote as provided in subsection 11.12(a) will be a Special Resolution within the meaning of this Agreement notwithstanding that Special Warrantholders entitled to acquire at least 20% of the aggregate number of Special Warrants then outstanding are not present in person or by proxy at the adjourned meeting. (c) Votes on a Special Resolution will always be given on a poll and no demand for a poll on a Special Resolution will be necessary. 11.13Powers Cumulative It is hereby declared and agreed that any one or more of the powers or any combination of the powers in this Agreement stated to be exercisable by the Special Warrantholders by Special Resolution or otherwise may be exercised from time to time and the exercise of any one or more of the powers or any combination of the powers from time to time will not be deemed to exhaust the right of the Special Warrantholders to exercise that power or those powers or combination of powers then or any other power or powers or combination of powers thereafter from time to time. 11.14 Minutes Minutes of all resolutions and proceedings at every meeting of Special Warrantholders convened and held pursuant to this Article 11 will be made and duly entered in books to be provided for that purpose by the Trustee at the expense of the Company, and any such minutes, if signed by the chairman of the meeting at which resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Special Warrantholders, will be prima facie evidence of the matters as stated in the minutes and, until the contrary is proved, every meeting, in respect of the proceedings of which minutes will have been made, will be deemed to have been duly convened and held, and all resolutions passed thereat or proceedings taken, to have been duly passed and taken. 11.15 Instruments in Writing All actions that may be taken and all powers that may be exercised by the Special Warrantholders at a meeting held as provided in this Article 11 may also be taken and exercised by Special Warrantholders holding not less than two-thirds of the aggregate number of Special Warrants then outstanding by an instrument in writing signed in one or more counterparts by Special Warrantholders in person or by attorney duly appointed in writing and the expression "Special Resolution" when used in this Agreement will include an instrument so signed. 11.16Binding Effect of Resolutions Every resolution and every Special Resolution passed in accordance with the provisions of this Article 11 at a meeting of Special Warrantholders will be binding upon all the Special Warrantholders, whether present at or absent from the meeting, and every instrument in writing signed by Special Warrantholders in accordance with section 11.15 will be binding upon all the Special Warrantholders, whether signatories thereto or not, and each and every Special Warrantholder and the Trustee (subject to the provisions for its indemnity herein contained) will be bound to give effect accordingly to every resolution and instrument in writing passed or executed in accordance with these provisions. 11.17 Holdings by Company Disregarded In determining whether the requisite number of Special Warrantholders are present for the purpose of obtaining a quorum or have voted or consented to any resolution, Special Resolution, consent, waiver, Special Warrantholders' Request or other action under this Agreement, Special Warrants owned by the Company or any subsidiary of the Company will be deemed to be not outstanding. ARTICLE 12 SUPPLEMENTAL AGREEMENTS AND SUCCESSOR COMPANIES 12.1 Provision for Supplemental Agreements for Certain Purposes From time to time the Company (when authorized by action of the directors) and the Trustee may, subject to the provisions hereof, and they will, when so directed hereby, execute and deliver by their proper officers, agreements or instruments supplemental to this Agreement, which thereafter will form part of this Agreement, for any one or more or all of the following purposes: (a) setting forth any adjustments resulting from the application of the provisions of Article 7; (b) adding to the provisions of this Agreement such additional covenants and enforcement provisions as, in the opinion of counsel, are necessary or advisable, provided that the same are not in the opinion of counsel to the Trustee prejudicial to the interest of the Special Warrantholders as a group; (c) giving effect to any Special Resolution passed as provided in Article 11; (d) making provisions not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions arising under this Agreement provided that the provisions are not, in the opinion of counsel to the Trustee, prejudicial to the interests of the Special Warrantholders as a group; (e) adding to or altering the provisions of this Agreement in respect of the transfer of Special Warrants, making provision for the exchange of Special Warrants, and making any modification in the form of the Special Warrants that does not affect the substance of the Special Warrants; (f) modifying any of the provisions of this Agreement or relieving the Company from any of the obligations, conditions or restrictions contained in this Agreement, provided that no such modification or relief will be or become operative or effective if in the opinion of counsel to the Trustee the modification or relief impairs any of the rights of the Special Warrantholders, as a group, or of the Trustee, and provided that the Trustee may in its uncontrolled discretion decline to enter into any supplemental agreement which in its opinion may not afford adequate protection to the Trustee when the such supplemental agreement becomes operative; and (g) for any other purpose not inconsistent with the terms of this Agreement, including the correction or rectification of any ambiguities, defective provisions, errors or omissions in this Agreement, provided that in the opinion of counsel to the Trustee the rights of the Trustee and the Special Warrantholders, as a group, are in no way prejudiced thereby. 12.2 Successor Companies In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation ("successor corporation"), the successor corporation resulting from the consolidation, amalgamation, merger or transfer (if not the Company) will be bound by the provisions of this Agreement and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this Agreement to be performed by the Company and, if requested by the Trustee, the successor corporation will, by supplemental agreement satisfactory in form to the Trustee and executed and delivered to the Trustee, expressly assume those obligations. ARTICLE 13 CONCERNING THE TRUSTEE 13.1 Trust Agreement Legislation If and to the extent that any provision of this Agreement limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, the mandatory requirement will prevail. The Company and the Trustee agree that each will at all times, in relation to this Agreement and any action to be taken under this Agreement, observe and comply with and be entitled to the benefits of Applicable Legislation. 13.2 Rights and Duties of Trustee The rights and duties of the Trustee are as follows: (a) in the exercise of the rights and duties prescribed or conferred by the terms of this Agreement, the Trustee will act honestly and in good faith with a view to the best interests of the Special Warrantholders and will exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. In the absence of negligence or fraud, the Company shall indemnify and save harmless the Trustee from all loss, costs or damages it may suffer in administering the trusts of this Agreement. No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own negligence or fraud; (b) the obligation of the Trustee to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Trustee or the Special Warrantholders under this Agreement will be conditional upon the Special Warrantholders furnishing, when required by notice in writing by the Trustee, sufficient funds to commence or continue the act, action or proceeding and indemnity reasonably satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Agreement will require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as required in this subsection 13.2(b); (c) The Trustee may, before commencing action or proceeding, or at any time during the continuance thereof, require the Special Warrantholders at whose instance it is acting to deposit with the Trustee the Special Warrant Certificates held by them, for which Special Warrant Certificates the Trustee will issue receipts; and (d) Every provision of this Agreement that by its terms relieves the Trustee of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of the Applicable Legislation, of this section 13.2 and of section 13.3. 13.3 Evidence, Experts and Advisers (a) In addition to the reports, certificates, opinions and other evidence required by this Agreement, the Company will furnish to the Trustee such additional evidence of compliance with any provision of this Agreement, and in such form, as may be prescribed by Applicable Legislation or as the Trustee may reasonably require by written notice to the Company. (b) In the exercise of its rights and duties, the Trustee may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, certificates or other evidence furnished to the Trustee pursuant to any provision of this Agreement or of Applicable Legislation or pursuant to a request of the Trustee provided that the Trustee examines the evidence and determines that the evidence complies with the applicable requirements of this Agreement. (c) Whenever Applicable Legislation requires that evidence referred to in subsection 13.3(a) be in the form of a statutory declaration, the Trustee may accept a statutory declaration in lieu of a certificate of the Company required by any provision of this Agreement. Any such statutory declaration may be made by one or more of the officers or directors of the Company. (d) The Trustee may employ or retain such counsel, accountants, engineers, appraisers, or other experts or advisers as it may reasonably require for the purpose of discharging its duties under this Agreement and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any counsel, and will not be responsible for any misconduct on the part of any of them. (e) The Trustee may, as a condition precedent to any action to be taken by it under this Agreement, require such opinions, statutory declarations, reports, certificates or other evidence as it, acting reasonably, considers necessary or advisable in the circumstances. (f) Proof of the execution of an instrument in writing, including a Special Warrantholders' Request, by any Special Warrantholder may be made by the certificate of a notary public, or other officer with similar powers, that the person signing such instrument acknowledges to the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Trustee may consider adequate. 13.4 Securities, Documents and Monies Held by Trustee Any securities, documents of title or other instruments that may at any time be held by the Trustee subject to the trusts hereof may be placed in the deposit vaults of the Trustee or of any of the Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, The Toronto-Dominion Bank, the Royal Bank of Canada and the Hongkong Bank of Canada or deposited for safekeeping with any of those Canadian chartered banks. Unless otherwise expressly provided in this Agreement, any monies held pending the application or withdrawal thereof under any provision of this Agreement, may be deposited in the name of the Trustee in any of the foregoing Canadian chartered banks at the rate of interest then current on similar deposits or, with the consent of the Company may be (i) deposited in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of Canada or a province thereof whose short term debt obligations or deposits have a rating of at least R1 as rated by Dominion Bond Rating Service, or (ii) invested in securities issued or guaranteed by the Government of Canada or a province thereof or in obligations, maturing not more than one year from the date of investment, of or guaranteed by any of the foregoing Canadian chartered banks or loan or trust companies. All interest or other income received by the Trustee in respect of such deposits and investments will belong to the Company. 13.5 Action by Trustee to Protect Interests The Trustee will have power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the holders of Special Warrants. 13.6 Trustee not Required to Give Security The Trustee will not be required to give any bond or security in respect of the execution of the trusts and powers of this Agreement or otherwise in respect of the premises. 13.7 Protection of Trustee By way of supplement to the provisions of any law for the time being relating to trustees, it is expressly declared and agreed as follows: (a) the Trustee will not be liable for or by reason of any representations, statements of fact or recitals in this Agreement or in the Special Warrants (except the representation contained in section 13.9 or in the certificate of the Trustee on the Special Warrants) or required to verify the same, but all those statements or recitals are and will be deemed to be made by the Company; (b) nothing in this Agreement will impose any obligation on the Trustee to see to or to require evidence of the registration (or filing or renewal thereof) of this Agreement or any instrument ancillary or supplemental to this Agreement; (c) the Trustee will not be bound to give notice to any person or persons of the execution of this Agreement; (d) the Trustee shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Company of any of the covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Company; and (e) the Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless it shall have been required to do so under the terms hereof; nor shall the Trustee be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default desired to be brought to the attention of the Trustee and in the absence of any such notice the Trustee may for all purposes of this Agreement conclusively assume that no default has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given to the Trustee to determine whether or not the Trustee shall take action with respect to any default. 13.8 Replacement of Trustee (a) The Trustee may resign its trust and be discharged from all further duties and liabilities under this Agreement by giving to the Company not less than 90 days' notice in writing or such shorter notice as the Company may accept as sufficient. The Special Warrantholders by Special Resolution will have power at any time to remove the Trustee and to appoint a new Trustee. In the event of the Trustee resigning or being removed as pursuant to this subsection 13.8(a) or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting under this Agreement, the Company will forthwith appoint a new Trustee unless a new Trustee has already been appointed by the Special Warrantholders; failing that appointment by the Company the retiring Trustee or any Special Warrantholder may apply to a Justice of the Supreme Court of British Columbia, on such notice as the Justice may direct, for the appointment of a new Trustee; but any new Trustee so appointed the Company or by the Court will be subject to removal as aforesaid by the Special Warrantholders. Any new Trustee appointed under any provision of this section 13.8 will be a corporation authorized to carry on the business of a trust company in the Province of British Columbia and, if required by the Applicable Legislation of any other Province, in that other Province. On any appointment the new Trustee will be vested with the same powers, rights, duties and responsibilities as if it had been originally named in this Agreement as Trustee without any further assurance, conveyance, act or deed; but there will be immediately executed, at the expense of the Company, all such conveyances or other instruments as may, in the opinion of counsel, be necessary or advisable for the purpose of assuring the same of the new Trustee. (b) Upon the appointment of a new Trustee, the Company will promptly give notice to the Special Warrantholders of the new Trustee. (c) Any corporation into or with which the Trustee may be merged or consolidated or amalgamated, or any corporation succeeding to the trust business of the Trustee will be the successor to the Trustee under this Agreement without any further act on its part or any of the parties hereto provided that the corporation would be eligible for appointment as a new Trustee under subsection 13.8(a). (d) Any Special Warrants certified but not delivered by a predecessor Trustee may be certified by the new or successor Trustee in the name of the predecessor or new or successor Trustee. 13.9 Conflict of Interest (a) The Trustee represents to the Company that at the time of the execution and delivery of this Agreement no material conflict of interest exists in the Trustee's role as a fiduciary under this Agreement and agrees that in the event of a material conflict of interest it will, within 90 days after ascertaining that it has a material conflict of interest, either eliminate the same or resign its trust under this Agreement to a successor trustee approved by the Company and meeting the requirements set forth in section 13.8. Notwithstanding the foregoing provisions of this section 13.9(a), if any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Agreement and the Special Warrant Certificate shall not be affected in any manner whatsoever by reason thereof. (b) Subject to subsection 13.9(a), the Trustee, in its personal or any other capacity may buy, lend upon and deal in securities of the Company, may act as registrar and transfer agent for the Common Shares and trustee for the Unit Warrants under the Unit Warrant Agreement, and generally may contract and enter into financial transactions with the Company or any subsidiary of the Company, all without being liable to account for any profit made thereby. 13.10 Acceptance of Trust The Trustee hereby accepts the trusts declared and provided for in this Agreement, agrees to perform the same upon the terms and conditions set out in this Agreement and agrees to hold all rights, interests and benefits contained in this Agreement for and on behalf of those persons who become holders of Special Warrants from time to time issued pursuant to this Agreement. 13.11 Indemnity Without limiting any protection or indemnity of the Trustee under any other provisions hereof, or otherwise at law, the Company hereby agrees to indemnify and hold harmless the Trustee from and against any and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including reasonable legal or advisor fees and disbursements, of whatever kind and nature which may at any time be imposed on, incurred by or asserted against the Trustee in connection with the performance of its duties and obligations hereunder, other than such liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements arising by reason of the negligence or fraud of the Trustee. This provision shall survive the resignation or removal of the Trustee, or the termination of the Agreement. The Trustee shall not be under any obligation to prosecute or to defend any action or suit in respect of the relationship which, in the opinion of its counsel, may involve it in expense or liability, unless the Company shall, so often as required, furnish the Trustee with satisfactory indemnity and funding against such expense or liability. 13.12 Survival on Termination The indemnity of the Trustee provided for herein shall survive the termination of this Agreement and the rights and obligations of the parties hereunder. 13.13 Special Warrants Owned by the Company or its Subsidiaries For the purpose of disregarding any Special Warrants owned legally or beneficially by the Company or any Subsidiary of the Company in Section 7.4, the Company shall provide to the Trustee, from time to time, a certificate of the Company setting forth as at the date of such certificate: (a) the names (other than the name of the Company) of the registered holders of Special Warrants which, to the knowledge of the Company, are owned by or held for the account of the Company or any Subsidiary of the Company; and (b) the number of Special Warrants owned legally or beneficially by the Company or any Subsidiary of the Company, and the Trustee, in making the computations in Section 7.4, shall be entitled to rely on such certificate without any additional evidence. ARTICLE 14 GENERAL 14.1 Notice to Company and Trustee (a) Unless otherwise expressly provided in this Agreement, any notice to be given under this Agreement to the Company or the Trustee will be deemed to be validly given if delivered or if sent by registered letter, postage prepaid or if transmitted by telecopy: (i) if to the Company: Urbana.ca, Inc. 22 Haddington Street Cambridge, Ontario N1R 2B9 Attention: Jason Cassis Telephone: (519) 740-1343 Fax: (519) 740-1190 with a copy to: Maitland & Company Barristers and Solicitors 700 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: Christopher D. Farber Telephone: (604) 681 -7474 Fax: (604) 681 -3896 (ii) if to the Trustee: Pacific Corporate Trust Company #830-625 Howe Street Vancouver, B.C. V6C 3B8 Attention: Manager, Corporate Trust Department Telephone: (604) 689-9853 Fax: (604) 689-8144 and any notice given in accordance with the foregoing will be deemed to have been received on the date of delivery or, if mailed, on the fifth business day following the day of the mailing of the notice or, if transmitted by fax, at the time of transmission. (b) The Company or the Trustee, as the case may be, may from time to time notify the other, in the manner provided above, of a change of address which, from the effective date of the notice and until changed by like notice, will be the address of the Company or the Trustee, as the case may be, for all purposes of this Agreement. (c) If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Trustee or to the Company under this Agreement could reasonably be considered unlikely to reach its destination, the notice will be valid and effective only if it is delivered to an officer of the party to which it is addressed or if it is delivered to that party at the appropriate address provided above by mail or by fax and any notice delivered in accordance with the foregoing will be deemed to have been received on the date of delivery to the officer or if delivered by mail or by fax on the first business day following the date of the sending of the notice by the person giving the notice. 14.2 Notice to Special Warrantholders (a) Unless otherwise expressly provided in this Agreement, any notice to be given under this Agreement to Special Warrantholders will be deemed to be validly given if the notice is sent by prepaid mail, addressed to the holder or delivered by hand or transmitted by fax (or so mailed to certain holders and so delivered to other holders and so faxed to other holders) at their respective addresses and fax number appearing on the register maintained by the Trustee and if in the case of joint holders of any Special Warrants more than one address or fax number appears on the register in respect of that joint holding, the notice will be addressed or delivered, as the case may be, only to the first address or fax number, as the case may be so appearing. The Trustee will give, in the same manner as for Special Warrantholders set out above, a copy of each such notice to Maitland & Company, Barristers & Solicitors, 700 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (Fax No.: (604) 681-3896) (Attention: Christopher D. Farber). Any notice so given will be deemed to have been given and received on the day of delivery by hand or fax, or on the next business day if delivered by mail. (b) If, by reason of strike, lock-out or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Special Warrantholders could reasonably be considered unlikely to reach its destination, the notice may be published or distributed once in The Globe and Mail newspaper, or, in the event of a disruption in the circulation of that newspaper, once in the National Post, provided that in the case of a notice convening a meeting of the holders of Special Warrants, the Trustee may require such additional publications of that notice, in the same or in other cities or both, as it may deem necessary for the reasonable protection of the holders of Special Warrants or to comply with any applicable requirement of law or any stock exchange. Any notice so given will be deemed to have been given on the day on which it has been published in all of the cities in which publication was required (or first published in a city if more than one publication in that city is required). In determining, under any provision of this Agreement, the date when notice of any meeting or other event must be given, the date of giving notice will be included and the date of the meeting or other event will be excluded. 14.3 Satisfaction and Discharge of Agreement Upon the date which there shall have been delivered to the Trustee for exercise all Special Warrant Certificates certified hereunder and if all certificates representing Units will have been delivered to Special Warrantholders to the full extent of the rights attached to all Special Warrants theretofore certified under this Agreement and the monies to be paid under this Agreement have been paid, this Agreement will cease to be of further effect and the Trustee, on demand of and at the cost and expense of the Company and upon delivery to the Trustee of a certificate of the Company stating that all conditions precedent to the satisfaction and discharge of this Agreement have been complied with and upon payment to the Trustee of the fees and other remuneration payable to the Trustee, the parties hereto will execute proper instruments acknowledging satisfaction of and discharging this Agreement. Notwithstanding the foregoing, the indemnities provided to the Trustee by the Company shall remain in full force and effect and survive the termination of this Agreement. 14.4 Sole Benefit of Parties and Special Warrantholders Nothing in this Agreement or in the Special Warrants, expressed or implied, will give or be construed to give to any person other than the parties hereto and the Special Warrantholders any legal or equitable right, remedy or claim under this Agreement, or under any covenant or provision therein contained, all such covenants and provisions being for the sole benefit of the parties hereto and the Special Warrantholders. 14.5 Counterparts and Formal Date This Agreement may be simultaneously executed in several counterparts, each of which when so executed will be deemed to be an original and the counterparts together will constitute one and the same instrument and notwithstanding their date of execution will be deemed to bear the date as of April 27, 2000. 14.6 Successors This Agreement shall enure to the benefit of, and be binding upon, the Company and the Trustee and their respective successors (including successors by reason of amalgamation, merger, business combination or arrangement) and legal representatives and nothing expresses or mentioned in this Agreement is intended and shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their proper officers in that behalf. URBANA.CA, INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer PACIFIC CORPORATE TRUST COMPANY By: /s/ John Halse John Halse, President By: /s/ Marc Castonguay Marc Castonguay, Vice President EX-10.15 17 0017.txt SHARE PURCHASE WARRANT AGREEMENT SHARE PURCHASE WARRANT AGREEMENT THIS SHARE PURCHASE WARRANT AGREEMENT is dated as of April 27, 2000 BETWEEN: URBANA.CA, INC., a body corporate incorporated in the State of Nevada, having an office at 22 Haddington Street, Cambridge, Ontario, N1R 1B9, (the "Company"); A N D: PACIFIC CORPORATE TRUST COMPANY, a Canadian trust company incorporated under the laws of British Columbia, located at 830-625 Howe Street, Vancouver, British Columbia, V6C 3B8, (the "Trustee"); WHEREAS: A. Pursuant to the Agency Agreement (hereinafter defined), and in accordance with the provisions of the Special Warrant Agreement (hereinafter defined), the Company proposes to issue, upon the exercise or deemed exercise of the Special Warrants (hereinafter defined), share purchase warrants ("Unit Warrants") each exercisable by the holder on the terms set out in this Agreement into securities of the Company as described in this Agreement; B. All acts and deeds necessary have been done and performed to make the Unit Warrants, when issued as provided in this Agreement, legal, valid and binding upon the Company with the benefits and subject to the terms of this Agreement; and C. The foregoing recitals are made as representations and statements of fact by the Company and not by the Trustee; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants herein, the parties agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Agreement, unless otherwise specified: (a) "Agency Agreement" means the agency agreement dated as of April 10, 2000, between the Company and the Agent relating to the offering of Special Warrants; (b) "Agent" means Groome Capital.com Inc.; (c) "Applicable Legislation" means the provisions of the Company Act (British Columbia) as from time to time amended, and any statute of Canada or its provinces and the regulations under those statutes relating to trust agreements or the rights, duties or obligations of corporations and trustees under trust agreements as are from time to time in force and applicable to this Agreement; (d) "Applicable Securities Laws" means, collectively, the applicable securities laws of the Qualifying Provinces, the regulations, rules, rulings and orders made thereunder, the applicable policy statements issued by the Commissions and the securities legislation and policies of each other relevant jurisdiction in Canada, US Securities Laws and the applicable rules, regulations and policies of the Exchange; (e) "business day" means a day that is not a Saturday, Sunday, or civic or statutory holiday in British Columbia; (f) "Closing" means the closing of the Private Placement; (g) "Closing Date" means April 27, 2000, or such other day as may be mutually agreed upon between the Company and the Agent; (h) "Commissions" means the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission, and the Commission de valeurs mobilie du Quebec (Quebec Securities Commission); (i) "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Company; provided that if the exercise rights are subsequently adjusted or altered pursuant to section 7.7 or 7.8, "Common Shares" will thereafter mean the shares or other securities or property that a Warrantholder is entitled to on an exchange after the adjustment; (j) "Company's auditors" means such firm of chartered accountants as may be duly appointed as the auditors of the Company. (k) "Convertible Security" means a security of the Company (other than the Special Warrants or Unit Warrants) convertible into or exchangeable for or otherwise carrying the right to acquire Common Shares; (l) "Current Market Price" at any date means the average of the closing prices of the Common Shares at which the Common Shares have traded on the Exchange, or, if the Common Shares in respect of which a determination of current market price is being made are not listed on the Exchange, on such stock exchange on which such shares are listed as may be selected for such purpose by the directors and approved by the Trustee, or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market, during the 20 consecutive trading days (on each of which at least 500 Common Shares are traded in board lots) ending on the third trading day prior to such date, and the weighted average price will be determined by dividing the aggregate sale price of all Common Shares sold in board lots on the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold, or in the event that at any date the Common Shares are not listed on any exchange or on the over-the-counter market, the current market price shall be as determined by the directors and approved by the Trustee; (m) "director" means a director of the Company for the time being, and unless otherwise specified herein, "by the directors" means action by the directors of the Company as a board or, whenever duly empowered, action by any committee of such board; (n) "Dividends Paid in the Ordinary Course" means dividends paid in any financial year of the Company, whether in (i) cash, (ii) shares of the Company, (iii) warrants or similar rights to purchase any shares of the Company or property or other assets purchasable as of the date of distribution of such warrants or similar rights, or (iv) property or other assets of the Company, as the case may be, as determined by action by the directors except that, in the case of warrants or similar rights to purchase Common Shares or securities convertible into or exchangeable for Common Shares, such fair market value of the warrants or similar rights shall be equal to the number of Common Shares which may be purchased thereby (or the number of Common Shares issuable upon conversion or exchange) as of the date of distribution of such warrants or similar rights, multiplied by the Current Market Price of the Common Shares on the date of such distribution, provided that the value of such dividends does not in such financial year exceed the greater of: (i) the lesser of 50% of the retaining earnings of the Company as at the end of the immediately preceding financial year and 200% of the aggregate amount of dividends paid by the Company on the Common Shares in the 12 month period ending immediately prior to the first day of such financial year; and (ii) 100% of the consolidated net earnings from continuing operations of the Company, before any extraordinary items, for the 12 month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada consistent with those applied in the preparation of the most recent audited financial statements of the Company); (o) "Effective Date" means the date of this Warrant Agreement; (p) "Exchange" means the Over the Counter Bulletin Board in the United States; (q) "Exchange Number" means the number of Warrant Shares to be received by a Holder upon exercise of the Unit Warrants, as may be adjusted under the provisions of this Agreement; (r) "Exercise Period" means the period during which a Unit Warrant may be exercised, commencing on the date of issuance of the Unit Warrant and ending at 4:30 p.m. (Toronto time) on the day which is 24 months from the Closing Date; (s) "person" means an individual, a corporation, a partnership, trust, trustee, executor, administrator, legal representative or any unincorporated organization and words importing persons have a similar meaning; (t) "Private Placement" means the offering of the Special Warrants pursuant to the Agency Agreement; (u) "Qualifying Provinces" means the Provinces of Alberta, British Columbia, Ontario and Quebec; (v) "Regulatory Authorities" means the Exchange and the Commissions; (w) "SEC" means the United States Securities and Exchange Commission; (x) "shareholder" means a holder of record or one or more Common Shares; (y) "Special Resolution" has the meaning given in sections 10.12 and 10.15; (z) "Special Warrants" means the special warrants authorized to be created by the Company and issued and certified under the Special Warrant Agreement entitling the holder to acquire one Unit; (aa) "Special Warrant Agreement" means the special warrant agreement, dated for reference April 27, 2000, entered into between the Company and the Trustee governing the Special Warrants; (ab) "trading day" with respect to a stock exchange means a day on which the stock exchange is open for business; (ac) "Trustee" means Pacific Corporate Trust Company, or any lawful successor thereto including through the operation of section 12.8; (ad) "Unit" means a unit of the Company issuable, for no additional consideration, upon the exercise or deemed exercise of the Special Warrants, each consisting of one Unit Share and one-half of one Unit Warrant, subject to adjustment as provided under Article 7; (ae) "Unit Warrants" means the share purchase warrants of the Company to be issued as part of the Units upon the exercise or deemed exercise of the Special Warrants, with each whole Unit Warrant entitling the holder to purchase one additional Common Share, at a price of US$5.00 per Common Share, at any time up to 5:00 p.m. (Toronto time) on the day which is 24 months from the Closing Date; (af) "U.S. Securities Laws" means, collectively, all applicable federal and state laws in the United States, including all "Blue Sky" laws, and all regulations and forms prescribed thereunder, together with all applicable published policy statements, releases, and rulings of the SEC and any applicable state securities regulatory authorities; (ag) "Warrant Certificates" means the certificates evidencing the Unit Warrants, substantially in the form attached as Schedule "A" to this Agreement, or such other form as may be approved under section 2.4; (ah) "Warrant Exercise Date" with respect to any Unit Warrant means the date of exercise of the Unit Warrants pursuant to section 6.3; (ai) "Warrant Share" means a Common Share issuable upon the exercise of one Unit Warrant, subject to adjustment as provided in Article 7; (aj) "Warrant Share Certificates" means the certificates evidencing the Warrant Shares; (ak) "Warrant Share Purchase Price" means US$5.00 per Warrant Share; (al) "Warrantholders" or "Holders" means the registered holders of Unit Warrants for the time being; (am) "Warrantholders' Request" means an instrument signed in one or more counterparts by Warrantholders holding, in the aggregate, not less than 25% of the aggregate number of Unit Warrants then outstanding, requesting the Trustee to take some action or proceeding specified therein; and (an) "written request of the Company" and "certificate of the Company" mean respectively a written request and certificate signed in the name of the Company by any one director or officer and may consist of one or more instruments so executed. 1.2 Interpretation For the purposes of this Agreement and unless otherwise provided or unless the context otherwise requires: (a) "this Agreement", "this Warrant Agreement", "herein", "hereby" and similar expressions mean or refer to this Warrant Agreement and any agreement, deed or instrument supplemental or ancillary hereto; and the expressions "Article", "section" or "subsection" followed by a number or letter mean and refer to the specified Article, section or subsection of this Agreement; (b) words importing the singular include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders; (c) the division of this Agreement into Articles, sections, subsections and paragraphs, the provision of a table of contents and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation of this Agreement; (d) the word "including", when following any general statement, term or matter, is not to be construed to limit such general statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto but rather refers to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter; (e) any reference to a statute includes and, unless otherwise specified herein, is a reference to such statute and to the regulations made pursuant thereto, with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which has the effect of supplementing or superseding such statute or such regulation; (f) any capitalized term in this Agreement which is not defined in section 1.1 will have the meanings ascribed elsewhere in this Agreement; and (g) in the event that any day on which the Exercise Period expires or on or before which any action is required to be taken hereunder is not a business day, then the Exercise Period will expire on or the action will be required to be taken on or before the next succeeding day that is a business day. 1.3 Schedule The schedule attached to this Agreement is incorporated herein by reference. 1.4 Time of the Essence Time is of the essence in this Agreement. 1.5 Applicable Law This Agreement and the Warrant Certificates will be construed and enforced in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein, and will be treated in all respects as British Columbia contracts. 1.6 Currency Except as otherwise stated, all dollar amounts herein are expressed in U.S. dollars. ARTICLE 2 ISSUE OF UNIT WARRANTS 2.1 Issue of Unit Warrants A total of up to <> whole Unit Warrants, each of which entitles the holder to acquire one Common Share, at a price of US$5.00 each, are hereby created and authorized to be issued. Subject to section 2.2 and Articles 5 and 6, upon receipt by the Company of notice of exercise or deemed exercise of the Special Warrants in accordance with the provisions of the Special Warrant Agreement, the Company will execute and the Trustee will certify up to <> Unit Warrants. Notwithstanding the foregoing, if the penalty provisions of Article 8 of the Special Warrant Agreement are effected, then the number of whole Unit Warrants referred to in this section 2.1 shall be deemed to be <> (rather than <>). 2.2 Terms of Unit Warrants Subject to the provisions of Articles 5 and 6, each whole Unit Warrant will entitle the holder thereof, upon exercise at any time during the Exercise Period and payment to the Issuer of the Warrant Share Purchase Price by way of certified cheque or bank draft, to be issued, subject to adjustment in accordance with Article 7, one Warrant Share. 2.3 Fractional Unit Warrants Notwithstanding any adjustments provided for in this Agreement, the Company shall not be required upon the exercise of any Unit Warrants to issue fractional Warrant Shares in satisfaction of its obligations hereunder. Where a fractional Warrant Share, but for this section 2.3, would have been issued upon exercise of a Unit Warrant, in lieu thereof there shall be paid to the holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the Current Market Price at the date of delivery of each respective Warrant Certificate, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Company shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 2.4 Form of Warrant Certificates Unit Warrants will be issued in registered form only and will be evidenced only by Warrant Certificates, which will be substantially in the form attached as Schedule "A" or in such other form as may be approved by the Company, the Agent and the Trustee, will be dated as of the Exercise Date (as defined in the Special Warrant Agreement), regardless of their actual dates of issue, and will bear such distinguishing letters and numbers as the Company will prescribe with the approval of the Trustee and will bear such legends as may be required under the Applicable Securities Laws and shall be issuable in any denomination excluding fractions. 2.5 Delivery of Warrant Certificates The Warrant Certificates will be delivered to the Warrantholders in accordance with the provisions of the Special Warrant Agreement. 2.6 Issue in Substitution of Unit Warrants If any of the Warrant Certificates becomes mutilated, lost, destroyed or stolen (the "Old Certificate"), the Company, subject to applicable law and to section 2.7, will issue and the Trustee will certify and deliver a new Warrant Certificate of like date and tenor as the Old Certificate, upon surrender of, in place of and upon cancellation of the mutilated Old Certificate or in substitution for the lost, destroyed or stolen Old Certificate, and the substituted Warrant Certificate will be in a form approved by the Trustee and will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrant Certificates issued or to be issued under this Agreement. 2.7 Conditions for Replacement of Unit Warrants The applicant for the issue of a new Warrant Certificate pursuant to section 2.6 will bear the cost of the issue thereof and in case of loss, destruction or theft will, as a condition precedent to the issue thereof furnish to the Company and to the Trustee such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company and to the Trustee in their discretion and the applicant may also be required to furnish an indemnity and surety bond or such security in amount and form satisfactory to them in their discretion, and will pay the reasonable charges of the Company and the Trustee in connection with the issue of the new Warrant Certificate. 2.8 Warrantholder not a Shareholder Nothing in this Agreement or in the holding of a Unit Warrant evidenced by a Warrant Certificate, or otherwise, will be construed as conferring upon a Warrantholder any right or interest whatsoever as a shareholder, including but not limited to the right to vote at, to receive notice of, or to attend meetings of shareholders or any other proceedings of the Company or the right to receive any dividend and other distribution. 2.9 Unit Warrants to Rank Pari Passu Each Unit Warrant will rank pari passu with all other Unit Warrants, whatever may be the actual date of issue. 2.10 Signing of Unit Warrants The Warrant Certificates will be signed by any one of the directors or officers of the Company and need not be under the seal of the Company. The signatures of any of these directors or officers may be mechanically reproduced in facsimile and Warrant Certificates bearing those facsimile signatures will be binding upon the Company as if they had been manually signed by the directors or officers. Notwithstanding that any of the persons whose manual or facsimile signature appears on any Warrant Certificate as a director or officer may no longer hold office at the date of the Warrant Certificate or at the date of certification or delivery thereof, any Warrant Certificate signed as aforesaid will, subject to section 2.11, be valid and binding upon the Company. 2.11 Certification by the Trustee No Warrant Certificate will be issued or, if issued, will be valid for any purpose or entitle the Holder to the benefit hereof until it has been certified by manual signature by or on behalf of the Trustee in the form of the certificate set out in Schedule "A" hereto, and the certification by the Trustee upon any Warrant Certificate will be conclusive evidence as against the Company that the Warrant Certificate so certified has been duly issued under this Agreement and that the Holder is entitled to the benefit of this Agreement. 2.12 Certification Not a Representation or Warranty The certification of the Trustee on Warrant Certificates issued under this Agreement will not be construed as a representation or warranty by the Trustee as to the validity of this Agreement or of the Warrant Certificates (except the due certification thereof) and the Trustee will in no respect be liable or answerable for the use made of the Unit Warrants or any of them or of the consideration therefor, except as otherwise specified in this Agreement. ARTICLE 3 EXCHANGE AND OWNERSHIP OF UNIT WARRANTS 3.1 Exchange of Warrant Certificates Any Warrant Certificate representing a certain number of Unit Warrants may, upon compliance with the reasonable requirements of the Trustee, be exchanged for one or more Warrant Certificates representing an equal aggregate number of Unit Warrants. 3.2 Place for Exchange of Warrant Certificates Unit Warrants may be exchanged only at the principal transfer office of the Trustee in the city of Vancouver, Canada or at any other place that is designated by the Company with the Trustee's approval. Any Unit Warrants tendered for exchange will be surrendered to the Trustee and canceled. The Company will sign all Warrant Certificates necessary to carry out exchanges as aforesaid and those Warrant Certificates will be certified by or on behalf of the Trustee. 3.3 Charges for Exchange For each Warrant Certificate exchanged, the Trustee, except as otherwise herein provided, will charge if required by the Company a reasonable sum for each new Warrant Certificate issued. The party requesting the exchange, as a condition precedent to such exchange, will pay such charges and will pay or reimburse the Trustee or the Company for all exigible transfer taxes or governmental or other similar transfer charges required to be paid in connection with such exchange. 3.4 Ownership of Unit Warrants The Company and the Trustee and their respective agents may deem and treat the holder of any Unit Warrant as the absolute owner of that Unit Warrant for all purposes, and the Company and the Trustee and their respective agents will not be affected by any notice or knowledge to the contrary except where so required by court order or by statute, concerning which the Company and the Trustee shall be entitled to rely upon advice from legal counsel. Subject to the provisions of this Agreement and applicable law, the holder of any Unit Warrant will be entitled to the rights evidenced by that Unit Warrant free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof and all persons may act accordingly and the receipt from any Holder for the Warrant Shares or monies obtainable pursuant thereto will be a good discharge to the Company and the Trustee for the same and neither the Company nor the Trustee will be bound to inquire into the title of any Holder except where so required by court order or by statute, concerning which the Company and the Trustee shall be entitled to rely upon advice from legal counsel. ARTICLE 4 REGISTRAR AND TRANSFER AGENCIES 4.1 Appointment of Trustee as Registrar The Company hereby appoints the Trustee as registrar of the Unit Warrants. The Company may hereafter with the consent of the Trustee, appoint one or more other additional registrars of the Unit Warrants. 4.2 Register The Trustee shall maintain a register, at its principal transfer office in the city of Vancouver, in which will be entered the names and addresses of the Warrantholders and other particulars of the Unit Warrants held by each of them respectively and of all transfers of Unit Warrants permitted by this Agreement. 4.3 Register to be Open for Inspection The register referred to in section 4.2 will at all reasonable times be open for inspection by the Company by the Trustee and by any Warrantholder. The register required to be kept at the city of Vancouver will not be closed at any time. 4.4 List of Warrantholders The Trustee will, when requested so to do by the Company, furnish the Company with a list of names and addresses of the Warrantholders showing the number of Unit Warrants held by each Warrantholder. 4.5 Obligations of Trustee Except as required by law, neither the Trustee nor any other registrar nor the Company will be charged with notice of or be bound to see to the execution of any trust, whether express, implied or constructive, in respect of any Unit Warrant. ARTICLE 5 TRANSFER OF SPECIAL WARRANT CERTIFICATES 5.1 Transfer of Warrant Certificates Subject to compliance with all applicable securities laws and requirements of regulatory authorities, including without limitation, any undertaking required to be given to the Exchange by the transferor and transferee, the holder of a Unit Warrant may at any time and from time to time have the Unit Warrants transferred by the Trustee in accordance with the conditions herein and such reasonable requirements as the Trustee may prescribe. Any such transfer shall be duly noted in the register of Unit Warrants maintained by the Trustee. Upon compliance with the foregoing requirements, the Trustee shall issue to the transferee a Warrant Certificate representing the Unit Warrants transferred. Compliance with all applicable securities laws and requirements of regulatory authorities shall be the Holder's responsibility and not that of the Trustee. 5.2 Validity of Transfer No transfer of Unit Warrants will be valid unless made by the Holder or the Holder's executors or administrators or other legal representatives or the Holder's attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the registrar, and upon compliance with such requirements as the registrar may prescribe. ARTICLE 6 EXERCISE OF UNIT WARRANTS 6.1 Exercise During Exercise Period The holder of a Warrant Certificate may exercise the Unit Warrants represented by the Warrant Certificate at any time and from time to time in whole or in part during the Exercise Period. Any such exercise will be subject to the Holder providing such assurances and executing such documents as may, in the reasonable opinion of the Company or the Trustee, be required to ensure compliance with Applicable Securities Laws. 6.2 Method of Exercise of Unit Warrants A Warrantholder may, during the Exercise Period, exercise the right under a Unit Warrant to acquire a Warrant Share by surrendering to the Trustee at its principal transfer office in the city of Vancouver or at any other place or places that may be designated by the Company with the approval of the Trustee, a certificate or certificates representing one whole Unit Warrant for each whole Unit Warrant exercised, together with the full Warrant Share Purchase Price payable and a fully completed and duly executed exercise form in the form attached to the Unit Warrant Certificate. 6.3 Surrender of Unit Warrants The Unit Warrants will only be deemed to have been surrendered upon personal delivery of the applicable Warrant Certificate(s) and accompanying documents to, or if sent by mail or other means of transmission, upon actual receipt thereof by the Trustee. 6.4 Completion and Execution of Exercise Form Any exercise form referred to in section 6.3 will be signed by the Warrantholder or the Warrantholder's executors or administrators, successors or other legal representatives or an attorney of the Warrantholder duly appointed by an instrument in writing satisfactory to the Trustee. The exercise form attached to the Warrant Certificate will be completed to specify the number of Unit Warrants being exercised and the address to which the Warrant Share Certificates should be delivered if different from that appearing on the Warrant Certificate surrendered. If any of the Warrant Shares to be acquired are to be issued to a person or persons other than the Warrantholder, the Warrantholder will pay, as a condition to the issue and delivery of the certificates evidencing the Warrant Shares, to the Trustee or to its agent, on behalf of the Company, all exigible transfer taxes or governmental or other charges required to be paid in respect of the transfer of the Unit Warrants or Warrant Shares. 6.5 Resale Restriction Legends If, at the time of exercise of the Unit Warrants, there remain restrictions on resale under applicable securities legislation on the Warrant Shares acquired, the Company may, on the advice of counsel, endorse the certificates representing the Warrant Shares with respect to those restrictions, and prior to the issuance of any such certificates the Trustee shall consult with the Company to determine whether such endorsing or legending is required. 6.6Effect of Exercise of Unit Warrants Upon exercise of the Unit Warrants and compliance by the Warrantholder with sections 6.4 and 6.5 subject to sections 6.9, 6.10 and 7.9, the holder of the Unit Warrants will be entitled to receive, upon payment of the Warrant Share Purchase Price, one Warrant Share for each whole Unit Warrant exercised, subject to adjustment as provided in this Agreement, and the Trustee will cause the holder thereof to be entered forthwith on its register of shareholders as the holder of the Warrant Shares on the Warrant Exercise Date. 6.7 Delivery of Warrant Share Certificates Upon the due exercise of the Unit Warrants as described in this Article 6, the Company will, within five business days after the Warrant Exercise Date, without charge therefor except as provided in section 6.5, forthwith cause to be mailed to Holders at such person's address specified in the exercise form, or if not specified in the exercise form, then at the address recorded in the register of Unit Warrants, certificates for the appropriate number of Warrant Shares to which the Holder is entitled. 6.8 No Fractional Warrant Shares Notwithstanding any adjustments provided for in this Agreement, the Company shall not be required upon the exercise of the Unit Warrants to issue fractional Warrant Shares in satisfaction of its obligations hereunder. Where a fractional Warrant Share, but for this section 6.9, would have been issued upon the exercise of a Unit Warrant, in lieu thereof, there shall be paid to the holder an amount equal (rounded to the nearest $0.01) to the product obtained by multiplying such fractional share interest by the closing price of the Common Shares on the Exchange (or if the Common Shares are not then listed thereon on such other exchange on which the Common Shares are then listed, or, if not listed on, in the over-the-counter market as designated by the directors) for the last trading day prior to the Warrant Exercise Date at the date of delivery of each respective certificate, which payment shall be made within ten business days of such delivery. Notwithstanding the foregoing, the Company shall not be required to make any payment, calculated as aforesaid, that is less than $5.00. 6.9 Expiration of Unit Warrants The Unit Warrants and the rights thereunder shall terminate and be of no further effect upon their exercise and all rights under any Unit Warrant which have not been exercised prior to the expiry of the Exercise Period will cease and terminate and the Unit Warrant will be void and of no effect. 6.10 Accounting and Recording The Trustee will promptly notify the Company in writing with respect to Unit Warrants exercised. The Trustee will, within five business days of each Warrant Exercise Date, specify the particulars of the Unit Warrants exercised which will include the names and addresses of the Holders whose Unit Warrants have been exercised and the Warrant Exercise Date, and will deliver to the Company the Warrant Share Purchase Price. 6.11 Cancellation of Surrendered Unit Warrants All Warrant Certificates surrendered to the Trustee in accordance with the provisions of this Agreement will be canceled by the Trustee and upon request therefor of the Company, the Trustee will furnish the Company with written confirmation of the Warrant Certificates so canceled and the number of Warrant Shares which could have been acquired pursuant to each. ARTICLE 7 ADJUSTMENT OF EXCHANGE NUMBER 7.1 Definitions In this Article the terms "record date" and "effective date" means the close of business on the relevant date. 7.2 Adjustment of Exchange Number The Exchange Number (or the number and kind of shares or securities to be received upon exercise in the case of sections 7.6 and 7.7) will be subject to adjustment from time to time in the events and in the manner provided in this Article. 7.3 Share Reorganization If and whenever at any time from the date of issuance of the Unit Warrants during the Exercise Period the Company: (a) issues to all or substantially all the holders of the Common Shares, by way of a stock dividend or other distribution, other than Dividends Paid in the Ordinary Course, Common Shares or Convertible Securities; or (b) subdivides, redivides or changes its outstanding Common Shares into a greater number of shares; or (c) combines, consolidates or reduces its outstanding Common Shares into a smaller number of shares, (any of those events being a "Share Reorganization"), the Exchange Number will be adjusted effective immediately after the record date at which the holders of Common Shares are determined for the purposes of the Share Reorganization to a number that is the product of (1) the Exchange Number in effect on the record date and (2) a fraction: (d) the numerator of which will be the number of Common Shares outstanding after giving effect to the Share Reorganization; and (e) the denominator of which will be the number of Common Shares outstanding on the record date before giving effect to the Share Reorganization. For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this section 7.3 there will be included that number of Common Shares which would have resulted from the conversion at that time of all outstanding Convertible Securities (which, for greater certainty, includes the Warrant Shares issuable upon exercise of the Unit Warrants then outstanding). 7.4 Rights Offering If and whenever at any time during the Exercise Period, the Company shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or Convertible Securities) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exchange Number will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Number in effect on such record date by a fraction, of which the denominator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the numerator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Company or any subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 2.1(b)(ii) are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exchange Number will then be readjusted to the Exchange Number which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. 7.5 Special Distribution If and whenever at any time from the date of issuance of the Unit Warrants during the Exercise Period the Company will issue or distribute to all or substantially all the holders of Common Shares: (a) shares of any class other than shares distributed to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of such shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares; (b) rights, options or warrants other than Unit Warrants and other than rights, options or warrants exercisable within 45 days from the date of issue thereof at a price, or at a conversion price, of at least 95% of the Current Market Price at the record date for such distribution; (c) evidences of indebtedness; or (d) any other assets including shares of other corporations (excluding cash dividends that Warrantholders receive under section 8.3) and that issuance or distribution does not constitute a Share Reorganization or a Rights Offering, (any of those events being a "Special Distribution"), the Exchange Number will be adjusted effective immediately after the record date at which the holders of Common Shares are determined for purposes of the Special Distribution to an Exchange Number that is the product of (1) the Exchange Number in effect on the record date and (2) a fraction: (e) the numerator of which will be the product of (A) the sum of the number of Common Shares outstanding on the record date plus the number of Common Shares which the Warrantholders would be entitled to receive upon exercise of all their outstanding Unit Warrants if they were exercised on the record date and (B) the Current Market Price thereof on that date; and (f) the denominator of which will be the product of: (i) the sum of the number of Common Shares outstanding on the record date plus the number of Common Shares which the Special Warrantholders would be entitled to receive upon exercise of all their outstanding Special Warrants if they were exercised on the record date; and (ii) the Current Market Price thereof on that date, less the aggregate fair market value, as determined by the board, whose determination, absent manifest error, will be conclusive, of the shares, rights, options, warrants, evidences of indebtedness or other assets issued or distributed in the Special Distribution. Any Common Shares owned by or held for the account of the Company will be deemed not to be outstanding for the purpose of any such computation; to the extent that the distribution of shares, rights, options, warrants, evidences of indebtedness or assets is not so made or to the extent that any rights, options or warrants so distributed are not exercised, the Exchange Number will be readjusted to the Exchange Number that would then be in effect based upon shares, rights, options, warrants, evidences of indebtedness or assets actually distributed or based upon the number of Common Shares or Convertible Securities actually delivered upon the exercise of the rights, options or warrants, as the case may be, but subject to any other adjustment required hereunder by reason of any event arising after the record date. 7.6 Capital Reorganization If and whenever at any time from the date of issuance of the Unit Warrants during the Exercise Period there is a reorganization of the Company not otherwise provided for in section 7.3 or a consolidation or merger or amalgamation of the Company with or into another body corporate or other entity including a transaction whereby all or substantially all of the Company's undertaking and assets become the property of any other body corporate, trust, partnership or other entity (any such event being a "Capital Reorganization"), any Warrantholder who has not exercised his Unit Warrants prior to the effective date of the Capital Reorganization will be entitled to receive and will accept, upon the exercise of his right at any time after the effective date of the Capital Reorganization, in lieu of the number of Warrant Shares to which he would have been entitled upon exercise of the Unit Warrants, the aggregate number of shares or other securities or property of the Company, or the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization that the holder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, he had been the holder of the number of Warrant Shares to which immediately before the transaction he was entitled upon exercise of the Unit Warrants; no Capital Reorganization will be carried into effect unless all necessary steps will have been taken so that the holders of Unit Warrants will thereafter be entitled to receive the number of shares or other securities or property of the Company, or of the continuing, successor or purchasing body corporate, trust, partnership or other entity, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in sections 7.2 to 7.8. If determined appropriate by the Trustee to give effect to or to evidence the provisions of this section 7.6, the Company, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such Capital Reorganization, enter into an agreement which shall provide, to the extent possible, for the application of the provisions set forth in this Agreement with respect to the rights and interests thereafter of the Warrantholders to the end that the provisions set forth in this Agreement shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Warrantholder is entitled on the exercise of its acquisition rights thereafter. Any agreement entered into between the Company and the Trustee pursuant to the provisions of this section 7.6 shall be a supplemental agreement entered into pursuant to the provisions of Article 11 hereof. Any agreement entered into between the Company, any successor to the Company or such purchasing body corporate, partnership, trust or other entity and the Trustee shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Article 7 and which shall apply to successive reclassifications, reorganizations, amalgamations, consolidations, mergers, sales or conveyances. 7.7 Reclassification of Common Shares If the Company reclassifies or otherwise changes the outstanding Common Shares, the exercise right will be adjusted effective immediately upon the reclassification becoming effective so that holders of Unit Warrants who exercise their rights thereafter will be entitled to receive such shares as they would have received had the Unit Warrants been exercised immediately prior to the effective date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in sections 7.3 to 7.8. 7.8 Subscription Rights Adjustment Rules The following rules and procedures will be applicable to adjustments made pursuant to sections 7.3 to 7.7: (a) the adjustments and readjustments provided for in this Article 7 are cumulative and subject to subsection 7.8(b), will apply (without duplication) to successive issues subdivisions, combinations, consolidations, distributions and any other events that require adjustment of the Exchange Number or the number or kind of shares or securities to be issued upon exercise of the Unit Warrants; (b) no adjustment in the Exchange Number will be required unless the adjustment would result in a change of at least 1% in the Exchange Number then in effect provided however, that any adjustments that, except for the provisions of this subsection 7.8(b) would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustment; (c) no adjustment in the Exchange Number will be made in respect of any event described in subsection 7.3(a) or sections 7.4 or 7.5 if the Warrantholders are entitled to participate in the event on the same terms mutatis mutandis as if they had exercised their Unit Warrants immediately prior to the effective date or record date of the event; (d) no adjustment in the Exchange Number will be made pursuant to any of sections 7.3 to 7.7 in respect of the issue of Warrant Shares issuable from time to time as Dividends Paid in the Ordinary Course; (e) if a dispute arises with respect to adjustments of the Exchange Number, the dispute will be conclusively determined by the auditors of the Company or, if they are unable or unwilling to act, by such firm of independent chartered accountants as may be selected by the directors of the Company and any such determination, absent manifest error, will be binding upon the Company, the Trustee and all Warrantholders; (f) if and whenever at any time from the date hereof during the Exercise Period the Company takes any action affecting the Common Shares, other than actions described in this Article, which in the opinion of the board of directors of the Company would materially affect the rights of the Holder, the Exchange Number will be adjusted in such manner, if any, and at such time, by action by the directors of the Company in such manner as they may reasonably determine to be equitable in the circumstances but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Company so as to provide for an adjustment on or prior to the effective date of any action by the Company affecting the Common Shares will be conclusive evidence that the board of directors of the Company has determined that it is equitable to make no adjustment in the circumstances; and (g) if the Company sets a record date to determine the holders of Common Shares for the purpose of entitling them to receive any dividend or distribution or any subscription or purchase rights and thereafter legally abandons its plans to pay or deliver the dividend, distribution or subscription or purchase rights then no adjustment in the Exchange Number will be required by reason of the setting of the record date. 7.9 Postponement of Subscription In any case where the application of any of sections 7.3 to 7.7 results in an increase of the Exchange Number taking effect immediately after the record date for or occurrence of a specific event, if any Unit Warrants are exercised after that record date or occurrence and prior to completion of the event or of the period for which a calculation is required to be made, the Company may postpone the issuance, to the Holder, of the Warrant Shares to which the Holder is entitled by reason of the increase of the Exchange Number but the Warrant Shares will be so issued and delivered to that holder upon completion of that event or period, with the number of those Warrant Shares calculated on the basis of the Exchange Number on the Warrant Exercise Date adjusted for completion of that event or period, and the Company will forthwith after the Warrant Exercise Date deliver to the person or persons in whose name or names the Warrant Shares are to be issued an appropriate instrument evidencing the person's or persons' right to receive the Warrant Shares. 7.10 Notice of Certain Events Upon the occurrence of any event referred to in sections 7.3 to 7.8 that requires an adjustment or readjustment in the Exchange Number, the Company will promptly thereafter: (a) file with the Trustee a certificate of the Company specifying the particulars of the event giving rise to the adjustment or readjustment and, if determinable, the adjustment and setting forth in reasonable detail a computation of the adjustment including the method of computation and which certificate shall be supported by a certificate of the Company's auditors verifying such calculation; and (b) give notice to the Warrantholders of the particulars of the event and, if determinable, the adjustment. If notice has been given under this section 7.10 and the adjustment is not then determinable, the Company will promptly after the adjustment is determinable: (c) file with the Trustee a computation of the adjustment together with a certificate of the Company's auditors verifying such calculation; and (d) give notice to the Warrantholders of the adjustment. 7.11 Protection of Trustee The Trustee: (a) will not at any time be under any duty or responsibility to any Warrantholder to determine whether any facts exist which may require any adjustment contemplated by sections 7.3 to 7.7, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment; (b) is not accountable with respect to the validity or value (or the kind or amount) of any shares or other securities or property which may at any time be issued or delivered upon the exercise of the rights attaching to any Unit Warrant; (c) is not responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver Common Shares or certificates for the same upon the surrender of any Unit Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article 7; and (d) will not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Company of any of the representations, warranties or covenants in this Agreement contained or any acts of the agents or servants of the Company. 7.12 Entitlement to Common Shares on Exercise of Unit Warrant All shares of any class or other securities which a Warrantholder is at the time in question entitled to receive on the exercise of its Unit Warrant, whether or not as a result of adjustments made pursuant to this section, shall, for the purposes of the interpretation of this Agreement be deemed to be shares which such Warrantholder is entitled to acquire pursuant to such Warrant. 7.13 Proceedings Prior to Any Action Requiring Adjustment As a condition precedent to the taking of any action which would require an adjustment in any of the acquisition rights pursuant to any of the Unit Warrants, including the number of Warrant Shares which are to be received upon the exercise thereof, the Company shall take any corporate action which may, in the opinion of counsel, be necessary in order that the Company has unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares which the Warrantholders are entitled to receive on the full exercise thereof in accordance with the provisions hereof. 7.14 Notice of Special Matters The Company covenants with the Trustee that, so long as any Unit Warrant remains outstanding, it will give notice to the Trustee and to the Warrantholders of its intention to fix the record date for any event referred to in Article 7 which may give rise to an adjustment in the Exchange Number. Such notice shall specify the particulars of such event, to the extent determinable, any adjustment required and the computation of such adjustment and the record date for such event, provided that the Company shall only be required to specify in the notice such particulars of the event as shall have been fixed and determined on the date on which the notice is given. The notice shall be given in each cash not less than fourteen days prior to such applicable record date. If any adjustment for which notice is given is not then determinable, the Company shall, promptly after such adjustment is determinable, give notice. ARTICLE 8 RIGHTS AND COVENANTS 8.1 General Covenants of the Company The Company covenants with the Trustee that so long as any Unit Warrants remain outstanding and may be exchanged for the Warrant Shares: (a) the Company will at all times maintain its corporate existence; (b) the Company will reserve and keep available out of its authorized common stock a sufficient number of Warrant Shares for issuance upon the exercise of all outstanding Unit Warrants including with respect to any adjustments required pursuant to Article 7; (c) the Company will cause the Warrant Shares and the certificates representing the Warrant Shares to be duly issued in accordance with the Warrant Certificate and the terms of this Agreement; (d) all Warrant Shares that will be issued by the Company upon exercise of the rights provided for in this Agreement will be issued as fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof and that upon issuance such shares shall be listed on each national securities exchange on which the other shares of outstanding common stock of the Company are then listed or shall be eligible for inclusion in the Nasdaq National Market or the Nasdaq SmallCap Market if the other shares of outstanding common stock of the Company are so included; (e) the Company will use its best efforts to ensure that all Common Shares outstanding or issuable from time to time (including without limitation the Warrant Shares) continue to be or are listed for trading on the Exchange and that it will use its commercial best efforts to list the Warrant Shares and all other outstanding shares of its common stock on the NASDAQ NATIONAL MARKET or if the Company does not meet the listing requirements of the NASDAQ National Market on the NASDAQ SmallCap Market as soon as possible after the Closing Date; (f) the Company will maintain its status as a reporting issuer in the Qualifying Provinces and as a "reporting company" with a class of equity securities registered pursuant to section 12(g) of the United States Securities Act of 1934, as amended not in default of any reporting or filing requirements under U.S. Securities Laws; (g) the Company will generally well and truly perform and carry out all the acts or things to be done by it as provided in this Agreement or as the Trustee may reasonably require for the better accomplishing and effecting of the intentions and provisions of this Agreement; and (h) the Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of the Special Warrants or the issuance or delivery of any Common Shares or Unit Warrants upon the exercise of the Special Warrants. 8.2 Trustee's Remuneration and Expenses The Company covenants that it will pay to the Trustee from time to time reasonable remuneration for its services under this Agreement and will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in the administration or execution hereof (including the reasonable compensation and the disbursements of counsel and all other advisers and assistants not regularly in its employ), both before any default under this Agreement and thereafter until all duties of the Trustee under this Agreement will be finally and fully performed, except any expense, disbursement or advance as may arise from the negligence or willful misconduct of the Trustee or of persons for whom the Trustee is responsible. 8.3 Right to Dividends or Distributions If the Company pays a dividend or makes any distribution to all or substantially all of the holders of Common Shares or if the Company declares any dividend, or provides for any distribution, payable to all or substantially all the holders of Common Shares of record the Exercise Period, the Company agrees that it will pay the same amount of such dividend of make same distribution of cash, property or securities as a deposit to the Trustee, as if the Holders were the holders of the number of Common Shares that they are entitled to receive upon exercise of the Unit Warrants, and such payments or distributions shall be held and dealt with by the Trustee in accordance with the provisions of this Agreement. 8.4 Performance of Covenants by Trustee If the Company fails to perform any of its covenants contained in this Agreement, the Trustee may notify the Warrantholders of the failure on the part of the Company or may itself perform any of the said covenants capable of being performed by it, but will be under no obligation to do so or to notify the Warrantholders. All sums expended or advanced by the Trustee in so doing will be repayable as provided in section 8.2. No performance, expenditure or advance by the Trustee will be deemed to relieve the Company of any default under this Agreement. 8.5 Securities Qualification Requirements (a) If, in the opinion of counsel, any instrument (not including a prospectus) is required to be filed with, or any permission is required to be obtained from any governmental authority in Canada or any other step is required under any federal or provincial law of Canada before any Warrant Shares which a Warrantholder is entitled to acquire pursuant to the exercise of any Unit Warrant may properly and legally be issued upon due exercise thereof and thereafter traded, without further formality or restriction, the Company covenants that it will take such required action. (b) The Company or, if required by the Company, the Trustee will give notice of the issue of Warrant Shares pursuant to the exercise of Unit Warrants, in such detail as may be required, to each securities commission or similar regulatory authority in each jurisdiction in Canada in which there is legislation or regulation permitting or requiring the giving of any such notice in order that such issue and subsequent disposition of Warrant Shares so issued will not be subject to the prospectus qualification requirements of such legislation or regulation. ARTICLE 9 ENFORCEMENT 9.1 Suits by Warrantholders All or any of the rights conferred upon a Warrantholder by the terms of a Unit Warrant or of this Agreement may be enforced by the holder by appropriate legal proceedings but without prejudice to the right that is hereby conferred upon the Trustee to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the holder of Unit Warrants from time to time outstanding. 9.2 Immunity of Shareholders, Officers & Directors The Trustee, and by their acceptance of the Warrant Certificates and as part of the consideration for the issue of the Unit Warrants, the Warrantholders, hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future shareholder, director, officer, employee or agent of the Company in their capacity as such, either directly or through the Company, relating to any obligations, representations, warranties and covenants under the Unit Warrants or this Agreement, it being acknowledged that all such obligations, representations, warranties and covenants are solely those of the Company. Accordingly, the obligations under the Unit Warrants and this Agreement are not personally binding upon, nor will resort hereunder be had to, the private properly of any of the past, present or future directors, officers, shareholders, employees or agents of the Company but only the property of the Company (or any successor corporation) will be bound in respect hereof. The protection afforded under this paragraph shall not extend to misrepresentations knowingly made. 9.3 Waiver of Default Upon the happening of any default hereunder: (a) the holders of not less than 51% of the Unit Warrants then outstanding shall have the power (in addition to the powers exercisable by extraordinary resolution) by requisition in writing to instruct the Trustee to waive any default hereunder and the Trustee shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or (b) the Trustee shall have the power to waive any default hereunder upon such terms and conditions as the Trustee may deem advisable if, in the Trustee's opinion, the same shall have been cured or adequate provision made therefor; provided that no delay or omission of the Trustee or of the Warrantholders to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein and provided further that no act or omission either of the Trustee or of the Warrantholders in the premises shall extend to or be taken in any manner whatsoever to affect any subsequent default hereunder of the rights resulting therefrom. ARTICLE 10 MEETINGS OF WARRANTHOLDERS 10.1 Right to Convene Meetings The Trustee may at any time and from time to time and will, on receipt of a written request of the Company or of a Warrantholders' Request and upon being indemnified to its reasonable satisfaction by the Company or by the Warrantholders signing the Warrantholders' Request against the cost that may be incurred in connection with the calling and holding of the meeting, convene a meeting of the Warrantholders. If, within 21 days after receipt of the written request of the Company or Warrantholders' Request and such indemnity has been given, the Trustee fails to give notice convening a meeting, the Company or the Warrantholders, as the case may be, may convene the meeting. Every meeting will be held in the City of Vancouver or at such other place as may be approved or determined by the Trustee. 10.2 Notice At least 10 days' notice of any meeting will be given to the Warrantholders in the manner provided in section 13.2 and a copy of the notice will be sent by mail to the Trustee unless the meeting has been called by it, and to the Company unless the meeting has been called by it. Each notice will state the time when and the place where the meeting is to be held and will state briefly the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Warrantholders to make a reasoned decision on the matter but it will not be necessary for the notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 10. 10.3 Chairman A person, who need not be a Warrantholder, designated in writing by the Trustee will chair the meeting and if no person is so nominated, or if the person so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, the Warrantholders present in person or by proxy will choose a person present to chair the meeting. 10.4 With respect to the quorum required for a meeting of Warrantholders: (a) subject to the provisions of section 10.12, at any meeting of the Warrantholders a quorum will consist of Warrantholders present in person or by proxy constituting at least 20% of the aggregate number of Unit Warrants then outstanding, provided at least two persons entitled to vote thereat are personally present; (b) if a quorum of the Warrantholders is not present within 30 minutes from the time fixed for holding any meeting, the meeting, if summoned by the Warrantholders or on a Warrantholders' Request, will be dissolved; but, subject to section 10.12, in any other case the meeting will be adjourned to the same day in the next week (unless that day is not a business day, in which event the meeting will be reconvened on the next day that is a business day) at the same time and place and no notice need be given; and (c) at the adjourned meeting, the Warrantholders present in person or by proxy will form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not hold at least 20% of the aggregate number of Unit Warrants then outstanding. 10.5 Power to Adjourn The chairman of any meeting at which a quorum of the Warrantholders is present may, with the consent of the meeting, adjourn the meeting and no notice of the adjournment need be given except such notice, if any, as the meeting may prescribe. 10.6 Show of Hands Every question submitted to a meeting will be decided in the first place by a majority of the votes given on a show of hands except that votes on an Special Resolution will be given in the manner provided in section 10.12. At any meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority will be conclusive evidence of the fact. 10.7 Poll On every Special Resolution, and on any other question submitted to a meeting upon which a poll is directed by the chairman or requested by one or more of the Warrantholders acting in person or by proxy and representing in the aggregate at least 5% of the aggregate number of Unit Warrants then outstanding, a poll will be taken in such manner as the chairman will direct. Questions other than an Special Resolution will be decided by a majority of the votes cast on a poll. 10.8 Voting On a show of hands every person who is present and entitled to vote, whether as a Warrantholder or as proxy for one or more absent Warrantholders or both, will have one vote. On a poll each Warrantholder present in person or represented by a proxy duly appointed by instrument in writing will be entitled to one vote in respect of each Unit Warrant then held by him. A proxy need not be a Warrantholder. 10.9 Regulations The Trustee or the Company with the approval of the Trustee may from time to time make or vary such regulations as they will think fit: (a) the setting of the record date for a meeting for the purpose of determining Warrantholders entitled to receive notice of and to vote at the meeting; (b) for the issue of voting certificates by any bank, trust company or other depositary satisfactory to the Trustee stating that the Unit Warrants specified therein have been deposited with the depository by a named person and will remain on deposit until after the meeting, which voting certificates will entitle the persons named therein to be present and vote at the meeting and at any adjournment thereof or to appoint a proxy or proxies to represent them and vote for them at that meeting and at any adjournment thereof in the same manner and with the same effect as though the persons so named in the voting certificates were the actual holders of the Unit Warrants specified therein; (c) for the deposit of voting certificates and/or instruments appointing proxies at such place and time as the Trustee, the Company or the Warrantholders convening the meeting, as the case may be, may in the notice convening the meeting direct; (d) for the deposit of voting certificates and/or instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of the voting certificates and/or instruments appointing proxies to be sent by mail, cable, fax or other means of prepaid, transmitted, recorded communication before the meeting to the Company or to the Trustee at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting; (e) for the form of instrument appointing a proxy; and (f) generally for the calling of meetings of Warrantholders and the conduct of business thereat. Any regulations so made will be binding and effective and the votes given in accordance therewith will be valid and will be counted. Except as the regulations may provide, the only persons who will be recognized at any meeting as the holders of any Special Warrants, or as entitled to vote or, subject to section 10.10, be present at the meeting in respect thereof, will be persons who are the registered holders of Unit Warrants or their duly appointed proxies. 10.10 Company and Trustee may be Represented The Company and the Trustee by their respective officers or directors, and the counsel to the Company and the Trustee may attend any meeting of the Warrantholders, but will have no vote as such. 10.11 Powers Exercisable by Special Resolution In addition to all other powers conferred upon them by any other provisions of this Agreement or by law the Warrantholders at a meeting will have the following powers exercisable from time to time by Special Resolution: (a) power to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Warrantholders and/or the Trustee in its capacity as trustee under this Agreement or on behalf of the Warrantholders against the Company, whether those rights arise under this Agreement or the Unit Warrant certificates; (b) power to direct or authorize the Trustee to enforce any of the covenants on the part of the Company contained in this Agreement or the Unit Warrants or to enforce any of the rights of the Warrantholders in any manner specified in the Special Resolution or to refrain from enforcing any such covenant or right; (c) power to restrain any Warrantholder from taking or instituting any suit, action or proceeding against the Company for the enforcement of any of the covenants on the part of the Company contained in this Agreement or the Unit Warrants or to enforce any of the rights of the Warrantholders except for a suit or action against the Company to compel payment to a Warrantholder in respect of monies owing to him in accordance with the provisions of section 8.3; (d) power to direct any Warrantholder who, as such, has brought any suit, action or proceeding to stay or discontinue or otherwise deal with the same upon payment of the costs, charges and expenses reasonably and properly incurred by the Warrantholder in connection therewith; (e) power from time to time and at any time to remove the Trustee and appoint a successor trustee; (f) power to amend, alter or repeal any special resolution previously passed or sanctioned by the Warrantholders; and (g) power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other securities of the Company. 10.12 Meaning of "Special Resolution" (a) The expression "Special Resolution" when used in this Agreement means, subject to the provisions in this subsection 10.12(b) and 10.12(c) and in sections 10.15 and 10.16 provided, a resolution proposed at a meeting of the Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 10 at which there are present in person or by proxy Warrantholders holding at least 20% of the aggregate of the Unit Warrants then outstanding and passed by the affirmative votes of Warrantholders holding not less than two-thirds of the aggregate number of Unit Warrants represented at the meeting and voted on the poll upon the resolution. (b) If, at any meeting called for the purpose of passing a Special Resolution, Warrantholders entitled to acquire 51% of the aggregate number of Unit Warrants then outstanding are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by Warrantholders or on a Warrantholders' Request, will be dissolved; but in any other case it will stand adjourned to such day, being not less than 15 or more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days' notice will be given of the time and place of the adjourned meeting in the manner provided in section 13.2. The notice will state that at the adjourned meeting the Warrantholders present in person or by proxy will form a quorum but it will not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting the Warrantholders present in person or by proxy will form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at the adjourned meeting and passed by the requisite vote as provided in subsection 10.12(a) will be a Special Resolution within the meaning of this Agreement notwithstanding that Warrantholders holding at least 20% of the aggregate number of Unit Warrants then outstanding are not present in person or by proxy at the adjourned meeting. (c) Votes on a Special Resolution will always be given on a poll and no demand for a poll on a Special Resolution will be necessary. 10.13 Powers Cumulative It is hereby declared and agreed that any one or more of the powers or any combination of the powers in this Agreement stated to be exercisable by the Warrantholders by Special Resolution or otherwise may be exercised from time to time and the exercise of any one or more of the powers or any combination of the powers from time to time will not be deemed to exhaust the right of the Warrantholders to exercise that power or those powers or combination of powers then or any other power or powers or combination of powers thereafter from time to time. 10.14 Minutes Minutes of all resolutions and proceedings at every meeting of Warrantholders convened and held pursuant to this Article 10 will be made and duly entered in books to be provided for that purpose by the Trustee at the expense of the Company, and any such minutes, if signed by the chairman of the meeting at which resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Warrantholders, will be prima facie evidence of the matters as stated in the minutes and, until the contrary is proved, every meeting, in respect of the proceedings of which minutes will have been made, will be deemed to have been duly convened and held, and all resolutions passed thereat or proceedings taken, to have been duly passed and taken. 10.15 Instruments in Writing All actions that may be taken and all powers that may be exercised by the Warrantholders at a meeting held as provided in this Article 10 may also be taken and exercised by Warrantholders holding not less than two-thirds of the aggregate number of Unit Warrants then outstanding by an instrument in writing signed in one or more counterparts by Warrantholders in person or by attorney duly appointed in writing and the expression "Special Resolution" when used in this Agreement will include an instrument so signed. 10.16 Binding Effect of Resolutions Every resolution and every Special Resolution passed in accordance with the provisions of this Article 10 at a meeting of Warrantholders will be binding upon all the Warrantholders, whether present at or absent from the meeting, and every instrument in writing signed by Warrantholders in accordance with section 10.15 will be binding upon all the Warrantholders, whether signatories thereto or not, and each and every Warrantholder and the Trustee (subject to the provisions for its indemnity herein contained) will be bound to give effect accordingly to every resolution and instrument in writing passed or executed in accordance with these provisions. 10.17 Holdings by Company Disregarded In determining whether the requisite number of Warrantholders are present for the purpose of obtaining a quorum or have voted or consented to any resolution, Special Resolution, consent, waiver, Warrantholders' Request or other action under this Agreement, Unit Warrants owned by the Company or any subsidiary of the Company will be deemed to be not outstanding. ARTICLE 11 SUPPLEMENTAL AGREEMENTS AND SUCCESSOR COMPANIES 11.1 Provision for Supplemental Agreements for Certain Purposes From time to time the Company (when authorized by action of the directors) and the Trustee may, subject to the provisions hereof, and they will, when so directed hereby, execute and deliver by their proper officers, agreements or instruments supplemental to this Agreement, which thereafter will form part of this Agreement, for any one or more or all of the following purposes: (a) setting forth any adjustments resulting from the application of the provisions of Article 7; (b) adding to the provisions of this Agreement such additional covenants and enforcement provisions as, in the opinion of counsel, are necessary or advisable, provided that the same are not in the opinion of counsel to the Trustee prejudicial to the interest of the Warrantholders as a group; (c) giving effect to any Special Resolution passed as provided in Article 10; (d) making provisions not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions arising under this Agreement provided that the provisions are not, in the opinion of counsel to the Trustee, prejudicial to the interests of the Warrantholders as a group; (e) adding to or altering the provisions of this Agreement in respect of the transfer of Unit Warrants, making provision for the exchange of Unit Warrants, and making any modification in the form of the Unit Warrants that does not affect the substance of the Unit Warrants; (f) modifying any of the provisions of this Agreement or relieving the Company from any of the obligations, conditions or restrictions contained in this Agreement, provided that no such modification or relief will be or become operative or effective if in the opinion of counsel to the Trustee the modification or relief impairs any of the rights of the Warrantholders, as a group, or of the Trustee, and provided that the Trustee may in its uncontrolled discretion decline to enter into any supplemental agreement which in its opinion may not afford adequate protection to the Trustee when the such supplemental agreement becomes operative; and (g) for any other purpose not inconsistent with the terms of this Agreement, including the correction or rectification of any ambiguities, defective provisions, errors or omissions in this Agreement, provided that in the opinion of counsel to the Trustee the rights of the Trustee and the Warrantholders, as a group, are in no way prejudiced thereby. 11.2 Successor Companies In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation ("successor corporation"), the successor corporation resulting from the consolidation, amalgamation, merger or transfer (if not the Company) will be bound by the provisions of this Agreement and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this Agreement to be performed by the Company and, if requested by the Trustee, the successor corporation will, by supplemental agreement satisfactory in form to the Trustee and executed and delivered to the Trustee, expressly assume those obligations. ARTICLE 12 CONCERNING THE TRUSTEE 12.1 Trust Agreement Legislation If and to the extent that any provision of this Agreement limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, the mandatory requirement will prevail. The Company and the Trustee agree that each will at all times, in relation to this Agreement and any action to be taken under this Agreement, observe and comply with and be entitled to the benefits of Applicable Legislation. 12.2 Rights and Duties of Trustee The rights and duties of the Trustee are as follows: (a) In the exercise of the rights and duties prescribed or conferred by the terms of this Agreement, the Trustee will act honestly and in good faith with a view to the best interests of the Warrantholders and will exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. In the absence of negligence or fraud, the Company shall indemnify and save harmless the Trustee from all loss, costs or damages it may suffer in administering the trusts of this Agreement. No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own negligence or fraud; (b) The obligation of the Trustee to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Trustee or the Warrantholders under this Agreement will be conditional upon the Warrantholders furnishing, when required by notice in writing by the Trustee, sufficient funds to commence or continue the act, action or proceeding and indemnity reasonably satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Agreement will require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as required in this subsection 12.2(b); (c) The Trustee may, before commencing action or proceeding, or at any time during the continuance thereof, require the Warrantholders at whose instance it is acting to deposit with the Trustee the Warrant Certificates held by them, for which Warrant Certificates the Trustee will issue receipts; and (d) Every provision of this Agreement that by its terms relieves the Trustee of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of the Applicable Legislation, of this section 12.2 and of section 12.4. 12.3 Evidence, Experts and Advisers (a) In addition to the reports, certificates, opinions and other evidence required by this Agreement, the Company will furnish to the Trustee such additional evidence of compliance with any provision of this Agreement, and in such form, as may be prescribed by Applicable Legislation or as the Trustee may reasonably require by written notice to the Company. (b) In the exercise of its rights and duties, the Trustee may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, certificates or other evidence furnished to the Trustee pursuant to any provision of this Agreement or of Applicable Legislation or pursuant to a request of the Trustee, provided that the Trustee examines the evidence and determines that the evidence complies with the applicable requirements of this Agreement. (c) Whenever Applicable Legislation requires that evidence referred to in subsection 12.3(a) be in the form of a statutory declaration, the Trustee may accept a statutory declaration in lieu of a certificate of the Company required by any provision of this Agreement. Any such statutory declaration may be made by one or more of the officers of the Company. (d) The Trustee may employ or retain such counsel, accountants, engineers, appraisers, or other experts or advisers as it may reasonably require for the purpose of discharging its duties under this Agreement and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any counsel, and will not be responsible for any misconduct on the part of any of them. (e) The Trustee may, as a condition precedent to any action to be taken by it under this Agreement, require such opinions, statutory declarations, reports, certificates or other evidence as it, acting reasonably, considers necessary or advisable in the circumstances. (f) Proof of the execution of an instrument in writing, including a Warrantholder's Request, by any Warrantholder may be made by the certificate of a notary public, or other officer with similar powers, that the person signing such instrument acknowledges to the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Trustee may consider adequate. 12.4 Securities, Documents and Monies Held by Trustee Any securities, documents of title or other instruments that may at any time be held by the Trustee subject to the trusts hereof may be placed in the deposit vaults of the Trustee or of any of the Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, The Toronto-Dominion Bank, the Royal Bank of Canada and the Hongkong Bank of Canada or deposited for safekeeping with any of those Canadian chartered banks. Unless otherwise expressly provided in this Agreement, any monies held pending the application or withdrawal thereof under any provision of this Agreement, may be deposited in the name of the Trustee in any of the foregoing Canadian chartered banks at the rate of interest then current on similar deposits or, with the consent of the Company may be (i) deposited in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of Canada or a province thereof whose short term debt obligations or deposits have a rating of at least R1 as rated by Dominion Bond Rating Service, or (ii) invested in securities issued or guaranteed by the Government of Canada or a province thereof or in obligations, maturing not more than one year from the date of investment, of or guaranteed by any of the foregoing Canadian chartered banks or loan or trust companies. All interest or other income received by the Trustee in respect of such deposits and investments will belong to the Company. 12.5 Action by Trustee to Protect Interests The Trustee will have power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the holders of Unit Warrants. 12.6 Trustee not Required to Give Security The Trustee will not be required to give any bond or security in respect of the execution of the trusts and powers of this Agreement or otherwise in respect of the premises. 12.7 Protection of Trustee By way of supplement to the provisions of any law for the time being relating to trustees, it is expressly declared and agreed as follows: (a) the Trustee will not be liable for or by reason of any representations, statements of fact or recitals in this Agreement or in the Unit Warrants (except the representation contained in section 12.9 or in the certificate of the Trustee on the Unit Warrants) or required to verify the same, but all those statements or recitals are and will be deemed to be made by the Company; (b) nothing in this Agreement will impose any obligation on the Trustee to see to or to require evidence of the registration (or filing or renewal thereof) of this Agreement or any instrument ancillary or supplemental to this Agreement; (c) the Trustee will not be bound to give notice to any person or persons of the execution of this Agreement; (d) the Trustee shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Company of any of the covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Company; and (e) the Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless it shall have been required to do so under the terms hereof; nor shall the Trustee be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default desired to be brought to the attention of the Trustee and in the absence of any such notice the Trustee may for all purposes of this Agreement conclusively assume that no default has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given to the Trustee to determine whether or not the Trustee shall take action with respect to any default. 12.8 Replacement of Trustee (a) The Trustee may resign its trust and be discharged from all further duties and liabilities under this Agreement by giving to the Company not less than 90 days' notice in writing or such shorter notice as the Company may accept as sufficient. The Warrantholders by Special Resolution will have power at any time to remove the Trustee and to appoint a new Trustee. In the event of the Trustee resigning or being removed as pursuant to this subsection 12.8(a) or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting under this Agreement, the Company will forthwith appoint a new Trustee unless a new Trustee has already been appointed by the Warrantholders; failing that appointment by the Company the retiring Trustee or any Warrantholder may apply to a Justice of the Supreme Court of British Columbia, on such notice as the Justice may direct, for the appointment of a new Trustee; but any new Trustee so appointed the Company or by the Court will be subject to removal as aforesaid by the Warrantholders. Any new Trustee appointed under any provision of this section 12.8 will be a corporation authorized to carry on the business of a trust company in the Province of British Columbia and, if required by the Applicable Legislation of any other Province, in that other Province. On any appointment the new Trustee will be vested with the same powers, rights, duties and responsibilities as if it had been originally named in this Agreement as Trustee without any further assurance, conveyance, act or deed; but there will be immediately executed, at the expense of the Company, all such conveyances or other instruments as may, in the opinion of counsel, be necessary or advisable for the purpose of assuring the same of the new Trustee. (b) Upon the appointment of a new Trustee, the Company will promptly give notice to the Warrantholders of the new Trustee. (c) Any corporation into or with which the Trustee may be merged or consolidated or amalgamated, or any corporation succeeding to the trust business of the Trustee will be the successor to the Trustee under this Agreement without any further act on its part or any of the parties hereto provided that the corporation would be eligible for appointment as a new Trustee under subsection 12.8(a). (d) Any Unit Warrants certified but not delivered by a predecessor Trustee may be certified by the new or successor Trustee in the name of the predecessor or new or successor Trustee. 12.9 Conflict of Interest (a) The Trustee represents to the Company that at the time of the execution and delivery of this Agreement no material conflict of interest exists in the Trustee's role as a fiduciary under this Agreement and agrees that in the event of a material conflict of interest it will, within 90 days after ascertaining that it has a material conflict of interest, either eliminate the same or resign its trust under this Agreement to a successor trustee approved by the Company and meeting the requirements set forth in section 12.8. Notwithstanding the foregoing provisions of this section 12.9(a), if any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Agreement and the Warrant Certificate shall not be affected in any manner whatsoever by reason thereof. (b) Subject to subsection 12.9(a), the Trustee, in its personal or any other capacity may buy, lend upon and deal in securities of the Company, may act as registrar and transfer agent for the Common Shares and trustee for the Special Warrants under the Special Warrant Agreement, and generally may contract and enter into financial transactions with the Company or any subsidiary of the Company, all without being liable to account for any profit made thereby. 12.10Acceptance of Trust The Trustee hereby accepts the trusts declared and provided for in this Agreement, agrees to perform the same upon the terms and conditions set out in this Agreement and agrees to hold all rights, interests and benefits contained in this Agreement for and on behalf of those persons who become holders of Unit Warrants from time to time issued pursuant to this Agreement. 12.11 Indemnity Without limiting any protection or indemnity of the Trustee under any other provisions hereof, or otherwise at law, the Company hereby agrees to indemnify and hold harmless the Trustee from and against any and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including reasonable legal or advisor fees and disbursements, of whatever kind and nature which may at any time be imposed on, incurred by or asserted against the Trustee in connection with the performance of its duties and obligations hereunder, other than such liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements arising by reason of the negligence or fraud of the Trustee. This provision shall survive the resignation or removal of the Trustee, or the termination of the Agreement. The Trustee shall not be under any obligation to prosecute or to defend any action or suit in respect of the relationship which, in the opinion of its counsel, may involve it in expense or liability, unless the Company shall, so often as required, furnish the Trustee with satisfactory indemnity and funding against such expense or liability. 12.12 Survival on Termination The indemnity of the Trustee provided for herein shall survive the termination of this Agreement and the rights and obligations of the parties hereunder. 12.13 Unit Warrants Owned by the Company or its Subsidiaries For the purpose of disregarding any Unit Warrants owned legally or beneficially by the Company or any Subsidiary of the Company in Section 7.4, the Company shall provide to the Trustee, from time to time, a certificate of the Company setting forth as at the date of such certificate: (a) the names (other than the name of the Company) of the registered holders of Unit Warrants which, to the knowledge of the Company, are owned by or held for the account of the Company or any Subsidiary of the Company; and (b) the number of Unit Warrants owned legally or beneficially by the Company or any Subsidiary of the Company, and the Trustee, in making the computations in Section 7.4, shall be entitled to rely on such certificate without any additional evidence. ARTICLE 13 GENERAL 13.1 Notice to Company and Trustee (a) Unless otherwise expressly provided in this Agreement, any notice to be given under this Agreement to the Company or the Trustee will be deemed to be validly given if delivered or if sent by registered letter, postage prepaid or if transmitted by fax: (i) if to the Company: Urbana.ca, Inc. 22 Haddington Street Cambridge, Ontario N1R 1B9 Attention: Jason Cassis Telephone: (519) 740-1343 Fax: (519) 740-1190 with a copy to: Maitland & Company Barristers and Solicitors 700 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: ristopher D. Farber Telephone: (604) 681 -7474 Fax: (604) 681 -3896 (ii) if to the Trustee: Pacific Corporate Trust Company 830-625 Howe Street Vancouver, B.C. V6C 3B8 Attention: Marc Castonguay Telephone: (604) 689-9853 Fax: (604) 689-8144 and any notice given in accordance with the foregoing will be deemed to have been received on the date of delivery or, if mailed, on the fifth business day following the day of the mailing of the notice or, if transmitted by fax, at the time of transmission. (b) The Company or the Trustee, as the case may be, may from time to time notify the other, in the manner provided above, of a change of address which, from the effective date of the notice and until changed by like notice, will be the address of the Company or the Trustee, as the case may be, for all purposes of this Agreement. (c) If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Trustee or to the Company under this Agreement could reasonably be considered unlikely to reach its destination, the notice will be valid and effective only if it is delivered to an officer of the party to which it is addressed or if it is delivered to that party at the appropriate address provided above by cable, telegram, telex, fax or other means of prepaid, transmitted, or recorded communication and any notice delivered in accordance with the foregoing will be deemed to have been received on the date of delivery to the officer or if delivered by cable, telegram, telex, fax or other means of prepaid, transmitted, recorded communication, on the first business day following the date of the sending of the notice by the person giving the notice. 13.2 Notice to Warrantholders (a) Unless otherwise expressly provided in this Agreement, any notice to be given under this Agreement to Warrantholders will be deemed to be validly given if the notice is sent by prepaid mail, addressed to the holder or delivered by hand or transmitted by fax (or so mailed to certain holders and so delivered to other holders and so faxed to other holders) at their respective addresses and fax number appearing on the register maintained by the Trustee and if in the case of joint holders of any Unit Warrants more than one address or fax number appears on the register in respect of that joint holding, the notice will be addressed or delivered, as the case may be, only to the first address or fax number, as the case may be so appearing. The Trustee will give, in the same manner as for Warrantholders set out above, a copy of each such notice to Maitland & Company, Barristers & Solicitors, 700 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (fax no.: (604) 681-3896) (Attention: Christopher D. Farber). Any notice so given will be deemed to have been given and received on the day of delivery by hand or fax, or on the next business day if delivered by mail. (b) If, by reason of strike, lock-out or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrantholders could reasonably be considered unlikely to reach its destination, the notice may be published or distributed once in The Globe and Mail newspaper, or, in the event of a disruption in the circulation of that newspaper, once in the National Post provided that in the case of a notice convening a meeting of the holders of Unit Warrants, the Trustee may require such additional publications of that notice, in the same or in other cities or both, as it may deem necessary for the reasonable protection of the holders of Unit Warrants or to comply with any applicable requirement of law or any stock exchange. Any notice so given will be deemed to have been given on the day on which it has been published in all of the cities in which publication was required (or first published in a city if more than one publication in that city is required). In determining, under any provision of this Agreement, the date when notice of any meeting or other event must be given, the date of giving notice will be included and the date of the meeting or other event will be excluded. 13.3 Satisfaction and Discharge of Agreement Upon the date which there shall have been delivered to the Trustee for exercise all Unit Warrant Certificates certified hereunder and if all certificates representing Warrant Shares will have been delivered to Warrantholders to the full extent of the rights attached to all Unit Warrants theretofore certified under this Agreement and the monies to be paid under this Agreement have been paid, this Agreement will cease to be of further effect and the Trustee, on demand of and at the cost and expense of the Company and upon delivery to the Trustee of a certificate of the Company stating that all conditions precedent to the satisfaction and discharge of this Agreement have been complied with and upon payment to the Trustee of the fees and other remuneration payable to the Trustee, the parties hereto will execute proper instruments acknowledging satisfaction of and discharging this Agreement. Notwithstanding the foregoing, the indemnities provided to the Trustee by the Company shall remain in full force and effect and survive the termination of this Agreement. 13.4 Sole Benefit of Parties and Warrantholders Nothing in this Agreement or in the Unit Warrants, expressed or implied, will give or be construed to give to any person other than the parties hereto and the Warrantholders any legal or equitable right, remedy or claim under this Agreement, or under any covenant or provision therein contained, all such covenants and provisions being for the sole benefit of the parties hereto and the Warrantholders. 13.5 Counterparts and Formal Date This Agreement may be simultaneously executed in several counterparts, each of which when so executed will be deemed to be an original and the counterparts together will constitute one and the same instrument and notwithstanding their date of execution will be deemed to bear the date as of April 27, 2000. 13.6 Successors This Agreement shall enure to the benefit of, and be binding upon, the Company and the Trustee and their respective successors (including successors by reason of amalgamation, merger, business combination or arrangement) and legal representatives and nothing expresses or mentioned in this Agreement is intended and shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their proper officers in that behalf. URBANA.CA, INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer PACIFIC CORPORATE TRUST COMPANY By: /s/ John Halse John Halse, President By: /s/ Marc Castonguay Marc Castonguay, Vice President EX-10.16 18 0018.txt ESCROW AGREEMENT ESCROW AGREEMENT THIS ESCROW AGREEMENT made as of the 27th day of April, 2000. Between: URBANA.CA, INC., of 22 Haddington Street, Cambridge, Ontario, N1R 2B9 And GROOME CAPITAL.COM INC., of 900-20 Toronto Street, Toronto, Ontario, M5C 2B8 And PACIFIC CORPORATE TRUST COMPANY, of 625 Howe Street, Suite 830, Vancouver, British Columbia V6C 3B8 WHEREAS: A. The Company and the Agent wish to close the Offering and require in connection with such closing that 15% of the gross proceeds received from Canadian subscribers be placed in escrow and have requested the Trustee to act as the escrow agent; B. The Agency Agreement requires that 15% of the gross proceeds received from non U.S. subscribers in the Offering are to be held by the Trustee on the terms and conditions of this Agreement as the same may be amended or supplemented from time-to-time; and C. The Trustee has agreed to act as escrow agent and trustee under this Agreement; THIS AGREEMENT WITNESSES THAT, in consideration of the mutual covenants contained herein, the parties agree as follows: Article 1 Interpretation 1.1 Definitions As used in this Agreement, including in the recitals, the following terms have the following meanings: "Agency Agreement" means the agreement dated effective April 10, 2000 made between the Company and the Agent relating to the Offering; "Agent" means Groome Capital.com Inc.; "Closing Date" means the first closing date of the issuance of the Special Warrants to be conducted as on one or more closings, the first at which shall be on April 27, 2000 or such other day as may be agreed between the Company and the Agent; "Commissions" means the Securities Commissions of British Columbia, Alberta, Ontario and Quebec; "Company" means Urbana.ca, Inc.; "Common Shares" means fully paid and non-assessable common shares with a par value of $0.001 per share in the capital of the Company; "Distribution" means the issuance of Unit Shares and Warrants to the holders of Special Warrants on the exercise or deemed exercise of the Special Warrants; "Effective Registration" means the registration of the resale of the Unit Shares and the Common Shares issuable upon the exercise of the Warrants pursuant to a Registration Statement filed in compliance with the United States Securities Act of 1933, as amended and the declaration or ordering of the effectiveness of such Registration Statement (the "Confirmation") by the United States Securities and Exchange Commission. "Escrowed Funds" means the Holdback and all proceeds of investment and reinvestment thereof from time-to-time; "Holdback" means 15% of the gross proceeds received from non U.S. subscribers in the Offering on the Closing Date as set out in Schedule "A" hereto, being the sum of $158,997.94; "Offering" means the Company's sale of up to 20,000,000 Special Warrants to be effected through one or more closings; "Prospectus" means, a prospectus, including any amendments thereto, which upon issuance of a receipt by each at the Commissions for the final prospectus will qualify the Distribution; "Qualified Investments" means those investments in which the Escrowed Funds may be invested and reinvested in accordance with this Agreement, being short-term interest-bearing or discount obligations issued or guaranteed by the Government of Canada or other short-term investment- grade debt obligations as may be agreed to from time-to-time by the Company and the Agent in writing; "Registration Statement" means a registration statement of the Company under the United States Securities Act of 1933, as amended; "Special Warrants" means special warrants issued by the Company pursuant to the Offering; "Trustee" means Pacific Corporate Trust Company; "Underlying Securities" means the Unit Shares and Warrants issuable on the exercise of the Special Warrants; "Unit Shares" means the Common Shares issued by the Company on the exercise of the Special Warrants; "Warrants" mean the whole common share purchase warrants to be issued by the Company on the exercise of the Special Warrants. 1.2 Headings The division of this Agreement into Articles and paragraphs and the provision of headings therefor are for convenience of reference only and do not affect or limit its construction or interpretation. 1.3 Gender and Number References to gender include all genders and, except where the context otherwise requires, the singular includes the plural and vice-versa. 1.3 Business Day Any action or payment required or permitted to be taken or made hereunder on a day that is not a business day in Vancouver, British Columbia may be taken or made on the next succeeding business day. 1.5 Dollar Amounts Unless otherwise herein specially provided all references herein to dollar amounts are references to U.S. currency. Article 2 Closing in Escrow 2.1 Delivery to Trustee Subject to the provisions of section 4.1 hereof, the Company and the Agent agree that the Escrowed Funds shall be held by the Trustee in escrow in accordance with the terms of this Agreement until the earlier to occur (the "Escrow Expiry") of:\ (a) 4:30 p.m. on April 26, 2001; and (b) the date on which the Trustee receives written notice from the Agent that both a receipt for the final Prospectus has been issued by each of the Commissions where qualification is required and the Confirmation has been received. Article 3 Deposit of Holdback, Qualified Investments 3.1 Deposit of Holdback with Trustee The Company hereby deposits the Holdback in the amount of $158,997.94 and the Trustee hereby acknowledges receipt of the same with the Trustee on the terms and conditions of this Agreement. 3.2 Qualified Investments Pending distribution of all of the Escrowed Funds in accordance with Article 4, the Trustee will hold, invest and reinvest the balance of the Escrowed Funds held by it from time-to-time, in Qualified Investments at the written direction of the Company. Pending receipt by the Trustee of such written direction, the Trustee will place and deposit, as soon as practicable, the Escrowed Funds in interest-bearing accounts of a Canadian Schedule I chartered bank or other senior Canadian financial institution (the "Deposit Account") at the then current rate of interest on similar deposits. Such written direction will specify the maturity dates of such Qualified Investments so as to allow the Trustee to comply with its obligations under Article 4 but in no event shall the Qualified Investments have a maturity date in excess of 60 days. Such written direction, to be effective, will be given on a business day, provided that if such direction is given after 11:00 a.m. (Vancouver time) on any business day it will be effective on the next succeeding business day. Such written direction may also direct the Trustee to realize on all or a portion of the Qualified Investments in anticipation of the distribution of the Escrowed Funds pursuant to Article 4. In the event the Trustee is unable to invest the Escrow Funds in Qualified Investments with the maturity dates specified in any written direction to the Trustee, the Trustee shall maintain the Escrow Funds in the Deposit Account. All Qualified Investments will be registered in the name of the Trustee and will be retained by the Trustee either through Canadian Depository for Securities Limited or in safekeeping in the City of Vancouver and, for such purpose, may be placed in the vaults of the Trustee or any Canadian chartered bank or trust company, or deposited for safekeeping with such bank or trust company. Article 4 Distribution of Escrowed Funds 4.1 Release of Escrowed Funds Subject to paragraph 4.2, the Trustee will release the Escrowed Funds to the Company on the earlier of: (a) the dates on which holders convert, from time-to-time, their Special Warrants into the Underlying Securities, with respect only to the Escrowed Funds pertaining to the Special Warrants so converted and subject to the Company providing the Trustee with written evidence of such conversion by the holder or by direct receipt from the holder of a duly completed and signed Exercise and Subscription Form in the form attached as a Schedule to the Special Warrant Certificate evidencing the Special Warrants; and (b) the Escrow Expiry. For the purposes of clause 4.1(a) "Escrow Funds pertaining to the Special Warrants converted" shall mean 15% of the gross proceeds paid by the holder for that number of Special warrants which have been converted by such holder plus the proceeds of investment and reinvestment attributable to such amount. 4.2 Notice of Release to Agent and to Company The Trustee shall, concurrently with each release of Escrowed Funds from time-to-time, give written notice to the Agent and the Company of the same. 4.3 Method of Distribution and Delivery (a) All distributions of money will be made by cheque drawn upon a Canadian Schedule I chartered bank made payable to or to the order of the Company. (b) The delivery of a cheque by the Trustee as required hereunder will satisfy and discharge the liability for any amounts due to the extent of the sum or sums represented thereby, unless such cheque is not honoured on presentation; provided that in the event of the non-receipt of such cheque by the payee, or the loss or destruction thereof, the Trustee, upon being furnished with reasonable evidence of such non-receipt, loss or destruction and an indemnity reasonably satisfactory to it, will issue to such payee a replacement cheque for the amount of such cheque. Article 5 Concerning the Trustee 5.1 Remuneration and Expenses The Company covenants that it will pay to the Trustee the fees agreed to by the Company and the Trustee from time-to-time for its services hereunder and will pay or reimburse the Trustee upon its request for all reasonable expenses and distributions of the Trustee in the administration or execution of the trusts hereby created (including the reasonable compensation and the disbursements of its legal counsel and all other advisers, experts, accountants and assistants not regularly in its employ) until all duties of the Trustee hereunder have been finally and fully performed, except any such expense or disbursements in connection with or related to or required to be made as a result of the negligence, wilful misconduct or bad faith of the Trustee. 5.2 Resignation and Replacement The Trustee may resign its position hereunder and be discharged from all further duties and liabilities hereunder after giving not less than 90 days' notice in writing to the Company and the Agent; provided that such shorter notice may be given as the Company and Agent will accept as sufficient. In the event that the office of trustee becomes vacant by resignation or incapacity to act or otherwise, the Company and Agent will appoint in writing a new trustee in place of the trustee vacating office. If the Company and Agent fail for a period of 10 days to make such appointment, then the retiring or former trustee may apply to a Judge of the Supreme Court of British Columbia, at the expense of the Company, for the appointment of a new trustee after such notification to the Company as such Judge may order. On any new appointment and upon payment to the Trustee vacating office of any amounts owing to it hereunder, the former trustee will transfer to the new trustee all the Escrowed Funds (whether in the form of cash or Qualified Investments) and the new trustee will be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Trustee hereunder without any further assurance, conveyance, act or deed; but if for any reason it becomes necessary or expedient to execute any further deed or assurance the same will be done at the expense of the Company and may and will be legally and validly executed by the former Trustee. 5.3 Reliance The Trustee will be entitled to take legal or other advice and employ such assistance as in its judgment, acting reasonably, may be necessary for the proper discharge of its duties and the determination of its rights hereunder and, if acting in good faith, may act and rely upon the opinion, information or advice of counsel or any other independent expert or adviser retained by it, and the Trustee may act on and rely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, certificates, notices, statements, directions, instruments or other evidence furnished to the Trustee pursuant to any provision hereof and the Trustee will not be responsible for any loss resulting from any action or inaction taken in good faith in reliance upon such opinion, information or advice. 5.4 Disagreements In the event of any disagreement arising regarding the terms of this Agreement, the Trustee will be entitled, at its option, to refuse to comply with any or all demands whatsoever until the dispute is settled either by agreement in writing between the parties, by arbitration or mediation or by a court of competent jurisdiction. 5.5 Accounting The Trustee will maintain accurate books, records and accounts of the transactions effected or controlled by the Trustee hereunder and the receipt, investment, reinvestment and distribution of the Escrowed Funds and will provide to the Company and the Agent records and statements thereof upon request. 5.6 Standard of Care In the exercise and discharge of its rights and duties hereunder, the Trustee will act honestly and in good faith with a view to the best interests of the persons having an interest in the Escrowed Funds and will exercise that degree of care, diligence and skill that a reasonably prudent professional trustee would exercise in comparable circumstances. 5.7 Acceptance of Trust The Trustee hereby accepts the covenants, trusts and obligations of this Agreement declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth and to hold and exercise the rights, privileges and benefits conferred upon it hereby in trust for and on behalf of the persons having an interest in the Escrowed Funds. 5.8 Indemnity Except for acts of negligence, wilful misconduct or bad faith, the Trustee will not be liable for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, and the Company hereby indemnifies and saves harmless the Trustee and its officers from and against all claims, demands, actions, suits, liabilities or other proceedings by whomsoever made, prosecuted or brought and from all losses (other than loss of the Trustee's profits), costs, damages and expenses (including legal and advisory expenses) in any manner based upon, occasioned by or attributable to any act of the Trustee in the execution of its duties hereunder. It is understood and agreed that this indemnification will survive the termination or resignation of the Trustee hereunder. 5.9 Indemnification for Withholding Tax Liability The Company will indemnify the Trustee in respect of any obligation to withhold any monies to be remitted to Revenue Canada, Taxation. The Trustee also will not be obligated to account to Revenue Canada, Taxation with respect to any taxes accruing as a result of either the deposit or distribution of any funds hereunder. 5.10 Miscellaneous (a) The Trustee will not be liable for any loss of the Escrowed Funds due to the insolvency, negligence or malfeasance of any financial institution with whom the Escrowed Funds have been deposited or in whose securities the same have been invested in accordance with this Agreement. (b) The Trustee will be protected in acting upon any written notice, request, waiver, consent, certificate, receipt, statutory declaration or other paper or document furnished to it in accordance with the terms of this Agreement, not only as to its due execution and the validity and effectiveness of its provisions but also as to the truth and acceptability of any information therein contained which it in good faith believes to be genuine and what it purports to be. (c) The Trustee will disburse monies according to this Agreement only to the extent that monies have been deposited with it. 5.11 Completion of Trustees Obligations Upon payment of the entire amount of the Escrow Funds to or to the order of the Company in accordance with the terms of this Agreement, as the same may be amended or supplemented from time-to-time, the Trustee shall have no further duties or obligations hereunder and shall be released from any further duties or obligations hereunder. Article 6 General 6.1 Amendment This Agreement may be amended, with or without the approval of the Trustee, for the purposes of evidencing the succession to the Trustee or another trustee and the transfer to and assumption by any such successor of the rights, privileges and obligations of the Trustee hereunder. In addition, to the extent that there are one or more closings in respect to the issuance of Special Warrants which occur after the Closing Date and prior to the Escrow Expiry (the "Subsequent Closings"), then the parties shall either amend this Agreement to reflect the additional Holdback and Escrow Funds to be maintained by the Trustee or shall enter into a new agreement with respect to Holdback required in respect of the Subsequent Closings on substantially the same terms and conditions as contained in this Agreement. 6.2 Assignment This Agreement may not be assigned by any party without the consent in writing of the other parties. This Agreement will enure to and bind the parties and their lawful successors and permitted assigns. 6.3 Waiver No act, omission, delay, acquiescence or course of conduct on the part of any party, other than a specific written instrument, will constitute a waiver of or consent to any breach or default by any other party hereto, or affect or limit the right of any party to insist on strict or timely performance of the obligations of any other party. 6.4 Severability The invalidity or unenforceability of any particular provision of this Agreement will not affect or limit the validity or enforceability of the remaining provisions of this Agreement. 6.5 Notices (a) Unless otherwise expressly provided in this Agreement, any notice to be given under this Agreement by a party to another will be deemed to be validly given if delivered or if transmitted by fax: (i) if to the Company: Urbana.ca Inc.. 22 Haddington Street Cambridge, ON N1R 2B9 Attn: Mr. Jason Cassis Fax: (519) 740-1190 with a copy to: Maitland & Company 625 Howe Street, Suite 700 Vancouver, B.C. V6C 2T6 Attn: Mr. Christopher D. Farber Fax: (604) 681-3896 (ii) if to the Agent: Groome Capital.com Inc. 20 Toronto Street, Suite 900 Toronto, ON M5C 2B8 Attn: Mr. Gordon Larock Fax: (416) 861-9992 with a copy to: Fraser Milner 1 First Canadian Place 100 King Street West Toronto, ON M5X 1B2 Attn: Mr. Rubin Rapuch Fax: (416) 863-4592 (iii) if to the Trustee: Pacific Corporate Trust Company Suite 830, 625 Howe Street Vancouver, B.C. V6C 3B8 Attn: Mr. Marc Castonguay Fax: (604) 689-8144 and any notice given in accordance with the foregoing will be deemed to have been received on the date of delivery or, if transmitted by fax, on the first business day following the date of transmission. (b) The parties may, from time-to-time, notify the others, in the manner provided above, of a change of address which, from the effective date of the notice and until changed by like notice, will be the address of such party for all purposes of this Agreement. 6.6 Further Assurances Each of the parties will do or cause to be done all such acts and things and will execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement. 6.7 Counterpart Execution and Fax Delivery This Agreement may be executed in any number of counterparts, all of which taken together will form one and the same instrument and each of which will be deemed to be an original. This Agreement may be delivered by fax. 6.8 Governing Law This Agreement and the rights and obligations of the parties hereunder will be governed by and interpreted exclusively in accordance with the laws of British Columbia and the laws of Canada applicable therein. IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written notwithstanding its actual date of execution. URBANA.CA INC. By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer GROOME CAPITAL.COM INC. By: /s/ Donald Page Donald Page, Vice President PACIFIC CORPORATE TRUST COMPANY By: /s/ John Halse John Halse, President By: /s/ Marc Castonguay Marc Castonguay, Vice President EX-10.17 19 0019.txt LETTER AGREEMENT LADENBURG THALMANN & CO. INC. June 15, 2000 Jason Cassis Director & Chief Executive Officer URBANA.CA INC. 22 Haddington Street Cambridge, Ontario Canada N1R 3P9 Dear Mr. Cassis: The purpose of this letter agreement (the "Agreement") is to set forth the terms and conditions pursuant to which Ladenburg Thalmann & Co. Inc. ("LTCO") shall serve as exclusive placement agent in connection with the proposed private offering (the "Offering") of securities (the "Securities") of URBANA.CA INC. (the "Company"). The gross proceeds from the Offering will be up to $3,500,000. All references to dollars shall be to U.S. dollars. The terms of such Offering and the Securities shall be substantially in the form set forth in Exhibit E hereto, which exhibit is incorporated by reference herein. Upon the terms and subject to the conditions of this Agreement, the parties hereto agree as follows: 1. Appointment. (a) Subject to the terms and conditions of this Agreement hereinafter set forth, the Company hereby retains LTCO, and LTCO hereby agrees to act as the Company's exclusive placement agent and financial advisor in connection with the Offering, effective as of the date hereof. The Company expressly acknowledges and agrees that LTCO's obligations hereunder are on a reasonable best efforts basis only and that the execution of this Agreement does not constitute a commitment by LTCO to purchase the Securities and does not ensure the successful placement of the Securities or any portion thereof or the success of LTCO with respect to securing any other financing on behalf of the Company. (b) Except as set forth below in this Section 1, during the effectiveness of this Agreement, neither the Company nor any of its subsidiaries or affiliates shall, directly or indirectly, through any officer, director, employee, agent or otherwise (including, without limitation, through any placement agent, broker, investment banker, attorney or accountant retained by the Company or any of its subsidiaries or affiliates), solicit, initiate or encourage the submission of any proposal or offer (an "Investment Proposal") from any person or entity (including any of such person's or entity's officers, directors, employees, agents and other representatives) relating to any issuance of the Company's or any of its subsidiaries' equity securities (including debt securities with any equity feature) or relating to any other transaction having a similar effect or result on the Company's or any of its subsidiaries' capitalization, or participate in any discussions or negotiations regarding, or furnish to any other person or entity any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage any effort or attempt by any other person or entity to do or seek to do any of the foregoing. The Company shall immediately cease and cause to be terminated any and all contacts, discussions and negotiations with third parties regarding any Investment Proposal. The Company shall promptly notify LTCO if any such Investment Proposal, or any inquiry or contact with any person or entity with respect thereto, is made. The Company shall not provide or release any information with respect to this Agreement or the Offering, including any press release, except as required by law. 2. Fees and Compensation. In consideration of the services rendered by LTCO in connection with the Offering, the Company agrees to pay LTCO the following fees and other compensation: A cash fee payable immediately upon the closing of any portion of the Offering and equal to 6% of the aggregate capital raised. 6% warrant coverage on the total amount of the Offering, payable at the first closing. Such warrants shall be in the form of Exhibit D. $35,000 non-accountable expense allowance, payable at the first closing. Upon the exercise of investor warrants, if any, by a holder thereof, the Company shall promptly notify LTCO of such exercise, and shall pay to LTCO an amount equal to 6% of the gross dollar amount received by the Company in connection with such exercise of the warrants. All amounts payable hereunder shall be paid to LTCO out of an attorney escrow account at the closing or by such other means acceptable to LTCO. Should LTCO provide a qualified institutional investor(s) ) within 60 days after the date hereof, reasonably acceptable to the Company and such investor(s) is willing to invest in the Offering on substantially the same terms as outlined in the term sheet marked Exhibit E, and the Company declines to enter into definitive agreements with such investor(s) to consummate the Offering, for reasons other than a breach of this Agreement by LTCO, the Company will pay $200,000 to LTCO as a "break-up" fee. 3. Terms of Retention. (a) Unless extended or terminated in writing by the parties hereto by written notice to the other in accordance with the provisions hereof, this Agreement shall remain in effect until the Termination Date of August 15, 2000. (b) Notwithstanding anything herein to the contrary, the obligation to pay the Fees and Compensation and Expenses described in Section 2, if any, and paragraphs 2, 5, and 8 of Exhibit A and all of Exhibit B and Exhibit C attached hereto, each of which exhibits is incorporated herein by reference, shall survive any termination or expiration of the Agreement. It is expressly understood and agreed by the parties hereto that any private financing of equity or debt or other capital raising activity of the Company within 24 months of the termination or expiration of this Agreement, with any investors or lenders to whom the Company was introduced by LTCO or who was contacted by LTCO while this Agreement was in effect and disclosed to the Company in writing, shall result in such fees and compensation due and payable by the Company to LTCO under the same terms of Section 2 above. Upon completion of the Offering, any future renegotiation, restructuring, revision or other amendment of such Offering by and between the Company and the investors in such Offering which results in the receipt of any net new funds by the Company from such investor(s) shall be deemed to be a new financing and shall result in additional fees and compensation due and payable by the Company to LTCO under the terms of Section 2 above. 4. Right of First Refusal. Upon completion of the Offering, LTCO shall have an irrevocable right of first refusal for a period of one year to provide all private financing arrangements for the Company (other than conventional banking arrangements, borrowing and commercial debt financing and discrete unrelated transactions of not more than $250,000 where no investment banking fee is being paid). LTCO shall exercise such right in writing within five (5) business days of receipt of a written term sheet describing such proposed transaction in reasonable detail. 5. Information. The Company recognizes and confirms that in completing its engagement hereunder, LTCO will be using and relying solely on publicly available information and on data, material and other information furnished to LTCO by the Company or the Company's affiliates and agents. It is understood and agreed that in performing under this engagement, LTCO will rely upon the accuracy and completeness of, and is not assuming any responsibility for independent verification of, such publicly available information and the other information so furnished. 6. Offers and Sales Only to Institutional Accredited Investors. Offers and sales of the Securities will be made only to qualified institutional buyers (as defined in Rule 144A) and to "accredited investors" as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the "Securities Act"). 7. No General Solicitation. The Securities will be offered only by approaching prospective purchasers on an individual basis. No general solicitation or general advertising in any form will be used in connection with the offering of the Securities. From and after the execution of this Agreement until the completion of the Offering, the Company shall pre-clear any proposed press release which mentions this Agreement or the Offering with LTCO. 8. Miscellaneous. This Agreement, together with the attached Exhibits A though E constitutes the entire understanding and agreement between the parties with respect to its subject matter and there are no agreements or understandings with respect to the subject matter hereof which are not contained in this Agreement. This Agreement may be modified only in writing signed by the party to be charged hereunder. If the foregoing correctly sets forth our agreement, please confirm this by signing and returning to us the duplicate copy of this letter. We appreciate this opportunity to be of service and are looking forward to working with you on this matter. Very truly yours, LADENBURG THALMANN & CO. INC. By: /s/ Robert J. Kropp Name: Robert J. Kropp Title: Director of I.B. Agreed to and accepted as of the date first written above: URBANA.CA INC. By: /s/ Jason Cassis Name: Jason Cassis Title: Chief Executive Officer By: /s/ Robert Tyson Name: Robert Tyson Title: Secretary EXHIBIT A STANDARD TERMS AND CONDITIONS 1. The Company shall promptly provide LTCO with all relevant information about the Company (to the extent available to the Company in the case of parties other than the Company) that shall be reasonably requested or required by LTCO, which information shall be complete and accurate in all material respects at the time furnished. 2. LTCO shall keep all information obtained from the Company strictly confidential except: (a) information which is otherwise publicly available, or previously known to, or obtained by LTCO independently of the Company and without breach of LTCO's agreement with the Company; (b) LTCO may disclose such information to its employees and attorneys, and to its other advisors and financial sources on a need to know basis only and shall use best efforts to ensure that all such employees, attorneys, advisors and financial sources will keep such information strictly confidential; and (c) pursuant to any order of a court of competent jurisdiction or other governmental body (including any subpena) or as may otherwise be required by law. 3. The Company recognizes that in order for LTCO to perform properly its obligations in a professional manner, it is necessary that LTCO be informed of and, to the extent practicable, participate in meetings and discussions between the Company and any third party, including, without limitation, any prospective purchaser of the securities, relating to the matters covered by the terms of LTCO's engagement. 4. The Company agrees that any report or opinion, oral or written, delivered to it by LTCO is prepared solely for its confidential use and shall not be reproduced, summarized, or referred to in any public document or given or otherwise divulged to any other person without LTCO's prior written consent, except as may be required by applicable law or regulation. 5. No fee payable to LTCO pursuant to any other agreement with the Company or payable by the Company to any agent, lender or investor shall reduce or otherwise affect any fee payable by the Company to LTCO hereunder. If LTCO engages any other broker-dealer or other finder to assist LTCO in the placement of the Offering, then the fees of such other broker-dealer or finder shall be paid by LTCO. 6. The Company represents and warrants that: (a) it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (b) this Agreement has been duly authorized and executed by and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms; and (c) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not conflict with or result in a breach of (i) the Company's certificate of incorporation or by-laws or (ii) any agreement to which the Company is a party or by which any of its property or assets is bound. 7. Nothing contained in this Agreement shall be construed to place LTCO and the Company in the relationship of partners or joint venturers. Neither LTCO nor the Company shall represent itself as the agent or legal representative of the other for any purpose whatsoever nor shall either have the power to obligate or bind the other in any manner whatsoever. LTCO, in performing its services hereunder, shall at all times be an independent contractor. 8. This Agreement has been and is made solely for the benefit of LTCO and the Company and each of the persons, agents, employees, officers, directors and controlling persons referred to in Exhibit B and their respective heirs, executors, personal representatives, successors and assigns, and nothing contained in this Agreement shall confer any rights upon, nor shall this Agreement be construed to create any rights in, any person who is not party to such Agreement, other than as set forth in this paragraph. 9. The rights and obligations of either party under this Agreement may not be assigned without the prior written consent of the other party hereto and any other purported assignment shall be null and void. 10. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and shall be mailed, hand delivered, sent by a recognized overnight courier service such as Federal Express, or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing: To the Company: Jason Cassis URBANA.CA INC. 22 Haddington Street Cambridge, Ontario Canada N1R 3P9 Telephone: (519) 740-1343 Facsimile: (519) 740-1190 To LTCO: Ladenburg Thalmann & Co., Inc. 590 Madison Avenue ew York, NY 10022 Attention: Robert J. Kropp Telephone: (212) 409-2000 Facsimile: (212) 409-2169 All notices hereunder shall be effective upon receipt by the party to which it is addressed. EXHIBIT B INDEMNIFICATION The Company agrees that it shall indemnify and hold harmless, LTCO, its stockholders, directors, officers, employees, agents, affiliates and controlling persons within the meaning of Section 20 of the Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933, each as amended (any and all of whom are referred to as an "Indemnified Party"), from and against any and all losses, claims, damages, liabilities, or expenses, and all actions in respect thereof (including, but not limited to, all legal or other expenses reasonably incurred by an Indemnified Party in connection with the investigation, preparation, defense or settlement of any claim, action or proceeding, whether or not resulting in any liability), incurred by an Indemnified Party: (a) arising out of, or in connection with, any actions taken or omitted to be taken by the Company, its affiliates, employees or agents, or any untrue statement or alleged untrue statement of a material fact contained in any of the financial or other information furnished to LTCO by or on behalf of the Company or the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (b) with respect to, caused by, or otherwise arising out of any transaction contemplated by the Agreement or LTCO's performing the services contemplated hereunder; provided, however, the Company will not be liable under clause (b) hereof to the extent, and only to the extent, that any loss, claim, damage, liability or expense is finally judicially determined to have resulted primarily from LTCO's gross negligence or bad faith in performing such services. If the indemnification provided for herein is conclusively determined (by an entry of final judgment by a court of competent jurisdiction and the expiration of the time or denial of the right to appeal) to be unavailable or insufficient to hold any Indemnified Party harmless in respect to any losses, claims, damages, liabilities or expenses referred to herein, then the Company shall contribute to the amounts paid or payable by such Indemnified Party in such proportion as is appropriate and equitable under all circumstances taking into account the relative benefits received by the Company on the one hand and LTCO on the other, from the transaction or proposed transaction under the Agreement or, if allocation on that basis is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and LTCO on the other, but also the relative fault of the Company and LTCO; provided, however, in no event shall the aggregate contribution of LTCO and/or any Indemnified Party be in excess of the net compensation actually received by LTCO and/or such Indemnified Party pursuant to this Agreement. The Company shall not settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in which any Indemnified Party is or could be a party and as to which indemnification or contribution could have been sought by such Indemnified Party hereunder (whether or not such Indemnified Party is a party thereto), unless such consent or termination includes an express unconditional release of such Indemnified Party, reasonably satisfactory in form and substance to such Indemnified Party, from all losses, claims, damages, liabilities or expenses arising out of such action, claim, suit or proceeding. In the event any Indemnified Party shall incur any expenses covered by this Exhibit B, the Company shall reimburse the Indemnified Party for such covered expenses within ten (10) business days of the Indemnified Party's delivery to the Company of an invoice therefor, with receipts attached. Such obligation of the Company to so advance funds may be conditioned upon the Company's receipt of a written undertaking from the Indemnified Party to repay such amounts within ten (10) business days after a final, non-appealable judicial determination that such Indemnified Party was not entitled to indemnification hereunder. The foregoing indemnification and contribution provisions are not in lieu of, but in addition to, any rights which any Indemnified Party may have at common law hereunder or otherwise, and shall remain in full force and effect following the expiration or termination of LTCO's engagement and shall be binding on any successors or assigns of the Company and successors or assigns to all or substantially all of the Company's business or assets. EXHIBIT C JURISDICTION The Company and LTCO each hereby irrevocably: (a) submits to the jurisdiction of any court of the State of New York or any federal court sitting in the State of New York for the purposes of any suit, action or other proceeding arising out of the Agreement between the Company and LTCO which is brought by or against the Company or LTCO; (b) agrees that all claims in respect of any suit, action or proceeding may be heard and determined in any such court; and (c) to the extent that the Company or LTCO has acquired, or hereafter may acquire, any immunity from jurisdiction of any such court or from any legal process therein, the Company an LTCO each hereby waives, to the fullest extent permitted by law, such immunity. The prevailing party in any litigation respecting this Agreement shall be entitled to an award of its costs, including reasonable attorneys' fees, in connection therewith. The Company and LTCO each waives, and agrees not to assert in any such suit, action or proceeding, in each case, to the fullest extent permitted by applicable law, any claim that: (a) it is not personally subject to the jurisdiction of any such court; (b) it is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment in the aid of execution, execution or otherwise) with respect to it or its property; (c) any such suit, action or proceeding is brought in an inconvenient forum; (d) the venue of any such suit, action or proceeding is improper; or (e) this Agreement may not be enforced in or by any such court. Any process against the Company or LTCO in, or in connection with, any suit, action or proceeding filed in the United States District Court for the Southern District of New York or any other court of the State of New York, arising out of or relating to this Agreement or any transaction or agreement contemplated hereby, may be served personally, or by first class mail or overnight courier (with the same effect as though served personally) addressed to the party being served at the address set forth in the Agreement between the Company and LTCO. Nothing in these provisions shall affect any party's right to serve process in any manner permitted by law or limit its rights to bring a proceeding in the competent courts of any jurisdiction or jurisdictions or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles. EXHIBIT D FORM OF WARRANT EXHIBIT E URBANA.CA INC Ticker: URBA Exchange: OTC BB Proposed Private Placement Term Sheet Up to $3,500,000 Regulation D Offering of Common Stock and Warrants Pricing: The common stock initially issued to the investors (the "Initial Common Stock") shall be priced at 90% of the closing bid price of the Company's Common Stock on the day (the "Initial Closing Date") of the initial closing (the "Initial Closing Price"), as quoted by OTC BB. Use of Proceeds: Working capital. Conversion: Up to 33% of the Initial Common Stock held by investor(s) can be repriced and sold every 30 days after the 90-day restrictive period. If the registration statement is declared effective prior to the 90th day, the investor(s) may sell any part of its/their Initial Common Stock position, but without any re-pricing rights. Schedule of Re-pricing Events: Investor(s) must notify the Company within 24 hours of the last day of the re-pricing period regarding the amount of the Initial Common Stock to be re-priced for that period. Day 91 to Day 120: 115% Re-pricing Event (first 33%): If the average closing bid price for the Company's common stock for a period of any 5 business days out of 20 consecutive business days (the "Re-pricing Price") is not equal to or greater than 115% of the Initial Closing Price, then the Company shall be obligated to issue additional shares of common stock (the "Re-Pricing Stock") to investor(s) according to the following formula: ((1.15*Initial Closing Price) - Re-pricing Price)*(# of Shares) The re-pricing obligation for this re-pricing period may be paid in cash or in common stock at the option of the Company. Day 131 to Day 160: 120% Re-pricing Event (second 33%): If the average closing bid price for the Company's common stock for a period of any 5 business days out of 20 consecutive business days (the "Re-pricing Price") is not equal to or greater than 120% of the Initial Closing Price, then the Company shall be obligated to issue Re-Pricing Stock to investor(s) according to the following formula: ((1.20*Initial Closing Price) - Re-pricing Price)*(# of Shares) The re-pricing obligation for this re-pricing period may be paid in cash or in common stock at the option of the Company. Day 171 to Day 200: 123% Re-pricing Event (third 33%): If the average closing bid price for the Company's common stock for a period of any 5 business days out of 20 consecutive business days (the "Re-pricing Price") is not equal to or greater than 123% of the Initial Closing Price, then the Company shall be obligated to issue Re-Pricing Stock to investor(s) according to the following formula: ((1.23*Initial Closing Price) - Re-pricing Price)*(# of Shares) / Re- pricing Price. The re-pricing obligation for this re-pricing period may be paid in cash or in common stock at the option of the Company. Investor Warrants: Warrant Coverage: 15% warrant coverage Term: 4-year life. Strike Price of Warrants: 110% of the Closing Bid Price of the Company's Common Stock on the Initial Closing Date. Limitation on Short Sales: The investors will agree not to enter into a "short sale" (as such term is defined in Rule 3b-3 of the 1934 Act) of the Company's Common Stock during any Re-pricing Event valuation period until such time as such investors no longer hold any of the Company's Common Stock that is subject to re-pricing. Redemption: The Company shall have a right to redeem upon a 30-day written notice any portion of the Initial Common Stock that has not been re-priced and that is not subject of an initiated Re-pricing Event valuation period. The redemption price shall be as set forth below: For the period from Day 1 - 90: 110% Registration of Common Stock: The Company will agree to file a registration statement under the Securities Act of 1933 with respect to the shares of Common Stock and the Warrants within 60 days of the Closing. The Company will cause the registration statement to become effective on the date (the "SEC Effective Date") which will be within the earlier of 105 days of such Closing or within five days of SEC clearance to request acceleration of effectiveness. The Company will maintain the effectiveness of such registration statement for a minimum of four years. Registration Penalty: If the registration statement is not effective by the negotiated date, the Company will pay investors in cash 2.0% per month (of invested funds) pro rated for periods of less than 30 days. EX-23.1 20 0020.txt CONSENT OF ACCOUNTANTS LaBonte & Co. Chartered Accountant 1095 West Pender Street, Suite 1205 Vancouver, British Columbia V6E 2M6 (604) 682-2778 November 27, 2000 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Urbana.ca, Inc. - Form SB-2/A Dear Sir/Madame: As Chartered Accountants, we hereby consent to the incorporation by reference in this Form SB-2 Registration Statement of our report dated February 23, 2000 in Urbana.ca, Inc.'s Form 10-KSB for the fiscal year ended December 31, 1999, and to all references to our firm included in this Registration Statement. Sincerely, /s/ LaBonte & Co. LaBonte & Co. EX-23.2 21 0021.txt CONSENT OF ACCOUNTANTS U.S.Securities and Exchange Commission Division of Corporation Finance 450 fifth Street, N.W. Washington, D.C. 20549 Re: Urbana.ca,Inc. - Form SB-2/A Independent Auditors' Consent We consent to the use in this Registration Statement of Urbana.ca,Inc. on Form SB-2/A of our report dated March 17, 1999 appearing in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Vancouver, B.C. Canada December 5, 2000 EX-23.3 22 0022.txt CONSENT OF COUNSEL Brian F. Faulkner Attorney at Law 3900 Birch Street, Suite 113 Newport Beach, California 92660 (949) 975-0544 November 27, 2000 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Urbana.ca, Inc. - Form SB-2 Dear Sir/Madame: I have acted as counsel to Urbana.ca, Inc., a Nevada corporation ("Company"), in connection with its Registration Statement on Form SB-2 relating to the registration of 43,641,090 shares of its common stock ("Shares"), $0.001 par value per Share. I hereby consent to all references to my firm included in this Registration Statement, including the opinion of legality. Sincerely, /s/ Brian F. Faulkner Brian F. Faulkner, Esq. EX-27 23 0023.txt FINANCIAL DATA SCHEDULES WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED FINANCIAL STATEMENTS CONTAINED IN THIS FORM SB-2 FOR THE PERIOD ENDED DECEMBER 31, 1999 AND THE UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THIS FORM SB-2 FOR THE SIX MONTHS ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 YEAR 9 MONTHS DEC-31-1999 DEC-31-2000 JAN-01-1999 JAN-01-2000 DEC-31-1999 SEP-30-2000 535 0 0 0 0 0 0 0 0 0 8,202 282,245 0 189,329 0 38,864 72,239 3,522,869 204,187 1,680,648 0 0 0 0 0 0 11,082 11,588 (131,948) 1,809,065 72,239 3,522,869 0 0 0 4,024 0 0 0 0 568,750 2,246,283 0 0 0 67,193 (568,750) (2,309,452) 0 0 (568,750) (2,309,452) 0 0 0 0 0 0 (568,750) (2,309,452) (.06) (.20) (.06) (.20)
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