EXHIBIT 3.1
UNDERWRITING AGREEMENT
September 30,1999
▇▇▇.▇▇▇ International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇
Chairman
Dear Sirs:
Canaccord Capital Corporation (the "Underwriter") understands that
▇▇▇.▇▇▇ International Inc. (the "Corporation") proposes to create, issue and
sell a minimum of 810,811 and a maximum of 2,702,703 special warrants (the
"Special Warrants") at a price (the "Offering Price") of $9.25 per Special
Warrant for aggregate proceeds of a minimum of $7,500,001 and a maximum of
$25,000,002. The Underwriter hereby offers to purchase from the Corporation
810,811 Special Warrants and to act as the Corporation's exclusive agent to
assist the Corporation to offer for sale up to an additional 1,891,892 Special
Warrants (the "Agency Special Warrants"), subject to the terms and conditions
set forth below.
The Corporation understands that although the offer to purchase
810,811 Special Warrants is presented on behalf of the Underwriter as the
purchaser, the Underwriter will endeavour (if the Corporation accepts this
offer) to arrange for substituted purchasers (the "Substituted Purchasers") to
purchase the Special Warrants directly from the Corporation. It is further
agreed that, subject to the conditions referred to herein being satisfied, the
Underwriter is fully committed to purchase or cause to be purchased 810,811
Special Warrants with respect to which the Underwriter is not able to arrange
Substituted Purchasers and this commitment is not subject to the Underwriter
being able to arrange Substituted Purchasers subject to the terms and conditions
set forth below that allow the Underwriter to terminate its obligations
hereunder. The Underwriter's commitment to purchase Special Warrants shall be
reduced by the number of Special Warrants with respect to which Subscription
Agreements (defined below) are delivered to the Corporation on behalf of the
Substituted Purchasers by the Underwriter. Any reference to "Purchasers" herein
shall be a reference to the Underwriter as the initial purchaser of 810,811
Special Warrants, to the Substituted Purchasers, if any, and to the purchasers
of the Agency Special Warrants offered for sale by the Corporation.
The Underwriter may form and manage a group of investment dealers (the
"Dealers") to offer the Special Warrants for sale provided that any fees paid or
to be paid to members of such group of Dealers shall be for the account of and
paid by the Underwriter. The Corporation understands that the Underwriter is not
obliged under any circumstances to purchase any of the Agency Special Warrants,
but that the Underwriter or any Dealer may choose to do so in its sole
discretion.
Terms and Conditions
The terms and conditions relating to the purchase and sale of the
Special Warrants are as follows:
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1. Special Warrants - The material attributes and characteristics of the
Special Warrants shall be substantially as described herein and in the term
sheet attached hereto as Schedule "A".
Each Special Warrant will be exercisable, at the option of the holder,
into one unit (singularly, a "Unit" and collectively, the "Units") consisting of
one common share in the capital of the Corporation (singularly, a "Share" and
collectively, the "Shares") and one-half of one transferable common share
purchase warrant without additional payment. Each whole common share purchase
warrant (singularly, a "Purchase Warrant" and collectively, the "Purchase
Warrants") will entitle the holder thereof to purchase one Share for $12.00 at
any time on or before the date which is two years following the Closing Date
(defined below).
In the event that the Prospectus Qualification (defined below) has not
occurred prior to the date which is 90 days following the Closing Date (the
"Qualification Deadline"), each holder of Special Warrants shall receive 1.1
Units (in lieu of one Unit) upon the exercise of each Special Warrant.
The Special Warrants will be exercisable at any time on or before 5:00
p.m. (Toronto time) on the earlier of (the "Expiry Time"): (a) the date which is
12 months following the Closing Date; and (b) the date which is five Business
Days after the date of the receipt issued by the last of the securities
regulatory authorities in each of the provinces of Canada in which purchasers of
the Special Warrants reside (the "Qualifying Provinces") for a (final)
prospectus of the Corporation (the "Prospectus") qualifying the distribution of
the Shares and Purchase Warrants (the "Subject Securities") to be issued on the
exercise of the Special Warrants (the "Prospectus Qualification"). Any Special
Warrants not exercised on or before the Expiry Time will be exercised by the
Warrant Agent (defined below) by or on behalf of the holders thereof immediately
prior thereto without further action by the holder thereof. For the purpose of
this Agreement, "Business Day" shall mean any day except Saturday, Sunday or a
statutory holiday in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
The Special Warrants shall be issued pursuant to the provisions of a
warrant indenture (the "Special Warrant Indenture") to be entered into between
the Corporation and CIBC Mellon Trust Corporation as warrant agent (the "Warrant
Agent") and the Purchase Warrants shall be issued pursuant to the provisions of
a share purchase warrant indenture (the "Share Purchase Warrant Indenture") to
be entered into between the Corporation and the Warrant Agent. The terms and
conditions of the Special Warrant Indenture and the Share Purchase Warrant
Indenture shall be satisfactory to the Corporation and the Underwriter and
consistent with the terms of this Agreement.
The Corporation agrees to use its best efforts to file with all
relevant securities regulatory authorities in each Qualifying Province a
preliminary prospectus (the "Preliminary Prospectus") qualifying the
distribution of the Subject Securities within 45 days following the Closing
Date, and, upon resolution of all regulatory comments and deficiencies, to use
its best efforts to file the Prospectus and obtain receipts therefor by the
Qualification Deadline. The Corporation also agrees to cause the Shares
comprising the Units and issuable upon exercise of the Purchase Warrants and
Compensation Warrants (defined below) to be conditionally listed for trading on
The Toronto Stock Exchange (the "TSE") by the Closing Date.
2. Offering
(a) Sale on Exempt Basis - The Underwriter shall offer for sale and sell
the Special Warrants (the "Offering") in the Provinces of Ontario,
Alberta and British Columbia and such other provinces of Canada as may
be agreed to between the
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Corporation and the Underwriter and jurisdictions outside of Canada
(collectively, the "Selling Jurisdictions") in compliance with all
applicable securities laws. The sale of the Special Warrants to
Purchasers shall be effected in a manner exempt from the prospectus
and offering memorandum requirements of the Securities Act (Ontario)
and the Regulation and Rules thereunder and the analogous provisions
of securities legislation of any other Canadian provinces in which the
Underwriter may solicit offers to purchase Special Warrants. Each
Purchaser of the Special Warrants resident in Ontario and outside
Canada shall purchase under subsection 72(1)(a), (c) or (d) of the
Securities Act (Ontario) as qualified in the case of subsection
72(1)(d) by Rule 45-501 thereto, each Purchaser of Special Warrants
resident in British Columbia and outside Canada shall purchase under
subsection 74(2)(1), 74(2)(3) or 74(2)(4) of the Securities Act
(British Columbia), each Purchaser of Special Warrants resident in
Alberta shall purchase under subsection 107(1)(a), (c) or (d) of the
Securities Act (Alberta) and each Purchaser of Special Warrants
resident in any province of Canada other than Ontario, Alberta or
British Columbia shall purchase under the analogous provisions of
securities legislation of such province. All offers and sales of the
Special Warrants in the United States will be effected through
Canaccord Capital U.S.A., a division of Noram Investment, Inc. (the
"U.S. Agent") as subagent for Canaccord Capital Corporation pursuant
to the exemptions from the registration requirements of the United
States Securities Act of 1933, as amended (the "1933 Act") provided by
Section 4(2) of the 1933 Act ("Section 4(2)"), in accordance with
Schedule "D" hereto.
(b) Underwriting Fee - The Corporation agrees to pay to the Underwriter at
the Time of Closing (defined below) a fee of $0.4625 per Special
Warrant equal to 5% of the purchase price of the Special Warrants sold
(the "Underwriting Fee") in consideration of the services to be
rendered by the Underwriter in connection with the sale of the Special
Warrants (the "Offering"), which services shall include:
(i) endeavoring to arrange for Purchasers for the Special Warrants;
(ii) assisting in the preparation of the Prospectus and the
Preliminary Prospectus qualifying the distribution of the
Subject Securities, together with any documents supplemental
thereto or any amending or supplementary prospectus or other
supplemental documents or any similar document (collectively
the "Supplementary Material") required to be filed under the
legislation of any Qualifying Province;
(iii) advising the Corporation in respect of the Prospectus
Qualification;
(iv) assisting in the preparation of the form of subscription
agreements (the "Subscription Agreements") to be entered into
by the Purchasers of the Special Warrants;
(v) assisting in the preparation of the Special Warrant Indenture
and Share Purchase Warrant Indenture; and
(vi) otherwise advising the Corporation with respect to the
Offering.
In addition to the Underwriting Fee, as additional consideration for
the performance of its obligations hereunder, the Corporation shall
issue to the Underwriter at the Time of Closing, non-transferable
special brokers' warrants
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(the "Brokers' Warrants"), in form and substance satisfactory to the
Underwriter, entitling the holder thereof to acquire on or before the
Expiry Time, without additional consideration, compensation warrants
(the "Compensation Warrants"), which, in the aggregate, will entitle
the holder thereof to purchase, for a period of 24 months following
the Closing Date, that number of Units that is equal to 10% of the
number of Special Warrants issued at a price of $9.25 per Unit. The
distribution of the Compensation Warrants issuable pursuant to the
exercise of the Brokers' Warrants will, subject to regulatory
approval, be qualified by the Prospectus to the extent permitted under
applicable securities laws. The Brokers' Warrants will be deemed to be
exercised and converted by the Corporation into the Compensation
Warrants on behalf of the Underwriter, without any action on the part
of the Underwriter, immediately prior to the Expiry Time. As used
herein, "Subject Securities" includes the Compensation Warrants
issuable upon exercise of the Brokers' Warrants.
(d) Covenants of Underwriter - The Underwriter covenants, represents and
warrants to the Corporation that: (i) it will comply with all
applicable securities legislation in connection with the Offering and
the Prospectus Qualification; (ii) it will not offer or sell Special
Warrants so as to require registration thereof, filing of a prospectus
with respect thereto or require the Corporation to become subject to
ongoing reporting requirements under the laws of any jurisdiction
other than that of the Qualifying Provinces or those to which the
Corporation is already subject or as otherwise agreed with the
Corporation; (iii) it, or its duly appointed agents, are duly
qualified in the Qualifying Provinces in which it acts as Underwriter
for the Corporation in connection with the Offering and the Prospectus
Qualification; (iv) it will obtain from each Purchaser an executed
Subscription Agreement in the appropriate form agreed to by the
Corporation and the Underwriter together with all requisite forms,
undertakings and materials including, where applicable, certificate of
foreign portfolio manager, relating to the transactions herein
contemplated; (v) upon the Corporation obtaining the necessary
receipts for the Prospectus relating to the Prospectus Qualification
from the securities regulatory authorities in each of the Qualifying
Provinces, it will deliver one copy of the Prospectus to each
Purchaser of the Special Warrants; (vi) it will not solicit
subscriptions for Special Warrants or otherwise do any act in
furtherance of a trade of the Special Warrants outside the Selling
Jurisdictions; (vii) it will not make available to prospective
Purchasers of the Special Warrants any documents which would
constitute an offering memorandum as defined under the securities
legislation of the Qualifying Provinces and not advertise the proposed
sale of the Special Warrants in printed media of general and regular
paid circulation, radio or television or otherwise; (viii) it will not
make any representations or warranties in respect of the Corporation
as agents or otherwise except as permitted in writing by the
Corporation; (ix) it will not solicit subscriptions for Special
Warrants except in accordance with the terms and conditions of this
Agreement; and (x) it will offer and sell Special Warrants in the
United States in accordance with Schedule "D" hereto.
3. Representations of the Corporation - The Corporation represents and
warrants to the Underwriter and acknowledges that the Underwriter is relying
upon such representations and warranties, as follows:
(a) each of the Corporation and the Subsidiaries has been duly amalgamated
or incorporated, as the case may be, and organized and is validly
existing under the laws of the jurisdiction of its incorporation and
has all requisite corporate
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capacity, power and authority to carry on its business as now
conducted by it and as is presently proposed to be conducted by it and
to own, lease and operate its assets;
(b) each of the Corporation and the Subsidiaries is duly qualified to
carry on business under the laws of the jurisdictions in which it
carries on its business and is in good standing in each such
jurisdiction;
(c) the Corporation has (and, in the case of the Prospectus Qualification,
will have) full corporate power and authority to undertake the
Offering, the Prospectus Qualification and all other transactions
contemplated herein;
(d) each of the Corporation and the Subsidiaries is current and up-to-date
with all filings required to be made by it under the corporate laws of
its jurisdiction of incorporation and the securities laws of the
provinces of Canada where it is a reporting issuer or its equivalent,
as applicable;
(e) the Corporation is a reporting issuer not in default of its
obligations under the securities laws of British Columbia, Alberta and
Ontario and no material change relating to the Corporation has
occurred with respect to which the requisite material change report
has not been filed under the securities laws of British Columbia,
Alberta or Ontario and no such disclosure has been made on a
confidential basis;
(f) none of the materials filed by or on behalf of the Corporation with
the applicable securities commissions or the stock exchanges (the
"Public Record") contain a misrepresentation (as defined in the
Securities Act (Ontario)) as at the date of such filing which has not
been corrected;
(g) the authorized capital of the Corporation consists of an unlimited
number of Shares and an unlimited number of preference shares,
issuable in series, of which at the date hereof 50,605,444 Shares (and
no other shares) are issued and outstanding as fully paid and non-
assessable;
(h) except as set out in Schedule "B" hereto, the Corporation is not a
party to and has not granted any agreement, warrant, option or right
or privilege capable of becoming an agreement, for the purchase,
subscription or issuance of any Shares or securities convertible into
or exchangeable for Shares;
(i) each of this Agreement, the Subscription Agreements, the Special
Warrant Indenture, the Share Purchase Warrant Indenture, the Brokers'
Warrants and the Compensation Warrants has been, or will be upon
execution (and in the case of the Subscription Agreements, acceptance)
thereof, duly authorized, executed and delivered by the Corporation
and constitutes, or will constitute when executed, a legal, valid and
binding obligation of the Corporation enforceable in accordance with
their respective terms except that: (i) the enforcement thereof may be
limited by bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally, (ii) rights of indemnity,
contribution and waiver of contribution thereunder may be limited
under applicable law and (iii) equitable remedies, including, without
limitation, specific performance and injunctive relief, may be granted
only in the discretion of a court of competent jurisdiction;
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(j) the entering into of each of this Agreement, the Subscription
Agreements, the Special Warrant Indenture, the Share Purchase Warrant
Indenture, and the issuance of the Special Warrants, Purchase
Warrants, Brokers' Warrants, Compensation Warrants and the Shares
issuable upon exercise of the Special Warrants, Purchase Warrants and
Compensation Warrants and the performance of the transactions
contemplated hereby and thereby will not result in a breach of, and do
not create a state of facts which, after notice or lapse of time or
both, will result in a breach of, and do not and will not conflict
with, any of the terms, conditions or provisions of the constating
documents or by-laws of the Corporation (or any of the Subsidiaries)
or any material trust indenture, agreement or instrument to which the
Corporation (or any of the Subsidiaries) is a party or by which the
Corporation (or any of the Subsidiaries) is or will be contractually
bound as of the Time of Closing except in connection with, the right
of first refusal (the "Right of First Refusal") granted to Yorkton
Securities Inc. pursuant to Section 17 of the underwriting agreement
dated November 30, 1998 among the Corporation, 1184041 Ontario Inc.
and Yorkton Securities Inc., in which case the Corporation represents
as follows: (i) the Right of first Refusal does not contain a code of
conduct or procedure for its exercise (either express or implied,
either as a result of conduct by the parties or as a result of any
discussions or correspondence or pursuant to any agreement to which
the Corporation is bound or to which it is a party); (ii) Yorkton
Securities Inc. is aware of the Offering of securities contemplated
herein (the "Offering"); (iii) the Corporation has not received from
Yorkton Securities Inc. any notice or indication (verbal or written)
that it intends to exercise its rights pursuant to the Right of First
Refusal to act as lead or co-lead manager of the offering; and (iv)
the Corporation is of the view that the Right of First Refusal is not
enforceable by Yorkton Securities Inc. in all the circumstances.
(k) each of the Corporation and the Subsidiaries has conducted and is
conducting its business in compliance with all applicable laws, by-
laws, rules and regulations of each jurisdiction in which its business
is carried on and possesses all certificates, authority, permits or
licenses issued by the appropriate state, provincial, municipal or
federal regulatory agencies or bodies necessary to conduct the
business now operated by it and all such certificates, authorities,
permits and licenses are valid and subsisting and in good standing and
the Corporation has not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority,
permit or license which, if the subject of an unfavourable decision,
ruling or finding would adversely affect the conduct of the business,
operations, financial condition or income of the Corporation and the
Subsidiaries, taken as a whole;
(l) no legal or governmental proceedings are pending or, to the knowledge
of the Corporation, are contemplated or threatened to which the
Corporation and/or any of the Subsidiaries is a party or to which the
property of the Corporation and/or any of the Subsidiaries is subject
that would result individually or in the aggregate in any adverse
change in the operation, business or condition of the Corporation and
the Subsidiaries, taken as a whole, except as disclosed to the
Underwriter prior to the execution of this Agreement;
(m) the audited consolidated annual financial statements of the
Corporation and its Subsidiaries as at and for the year ended December
31, 1998 contained in the Corporation's annual report for the year
ended December 31, 1998:
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(i) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with those
of preceding fiscal periods;
(ii) represent fully, fairly and correctly the consolidated assets,
liabilities and financial condition of the Corporation as at
December 31, 1998 and the consolidated results of its
operations and the changes in its financial position for the
year then ended;
(iii) are in accordance with the books and records of the
Corporation; and
(iv) contain and reflect all necessary adjustments for the fair
presentation of the results of operations and the financial
condition of the business of the Corporation on a consolidated
basis for the period covered thereby,
and there has not been any material adverse change in the financial
position of the Corporation, or its business, assets, liabilities or
undertaking since December 31, 1998 other than as specified in the
Public Record;
(n) the unaudited consolidated interim financial statements of the
Corporation and its Subsidiaries as at and for the six months ended
June 30, 1999:
(i) have, to the best of the Corporation's knowledge, been prepared
in accordance with generally accepted accounting principles
applied on a basis consistent with those of preceding periods;
(ii) represent fully, fairly and correctly the consolidated assets,
liabilities and financial condition of the Corporation as at
June 30, 1999 and the consolidated results of its operations
and the changes in its financial position for the period then
ended;
(iii) are in accordance with the books and records of the
Corporation; and
(iv) contain and reflect all necessary adjustments for the fair
presentation of the results of operations and the financial
condition of the business of the Corporation on a consolidated
basis for the period covered thereby,
and there has not been any material adverse change in the financial
position of the Corporation, or its business, assets, liabilities or
undertaking since June 30, 1999 other than as specified in the Public
Record;
(o) the auditors of the Corporation who audited the consolidated financial
statements for the year ended December 31, 1998 and who provided their
audit report thereon are independent public accountants as required
under applicable Canadian securities laws;
(p) there has never been any reportable disagreement (within the meaning
of National Policy Statement No. 31) with the present or any former
auditors of the Corporation;
(q) each of the Corporation and the Subsidiaries has filed all necessary
tax returns and has paid all applicable taxes of whatever nature for
all tax years to the date hereof to the extent such taxes have become
due or have been alleged to be due and there
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are no tax deficiencies or interest or penalties accrued or accruing,
or alleged to be accrued or accruing, thereon with respect to the
Corporation or any of the Subsidiaries where, in any of the above
cases, it might reasonably be expected to result in an adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Corporation or the Subsidiaries,
taken as a whole;
(r) other than the Underwriter, there is no person, firm or corporation
acting or purporting to act at the request of the Corporation, who is
entitled to any brokerage or finder's fee in connection with the
transactions contemplated herein. In the event that any person, firm
or corporation acting or purporting to act for the Corporation
including, without limitation, Yorkton Securities Inc., establishes a
claim for any fee from the Underwriter, the Corporation covenants to
indemnify and hold harmless the Underwriter with respect thereto and
with respect to all costs reasonably incurred in the defence thereof;
(s) at the Time of Closing, the Shares will not constitute "foreign
property" within the meaning of the Income Tax Act (Canada), or any
amendments thereto publicly announced by the Minister of Finance prior
to that time;
(t) all of the Corporation's issued and outstanding Shares and Shares
reserved or allotted for issue (except for the Shares issuable upon
exercise of the Special Warrants, Purchase Warrants and Compensation
Warrants) are listed for trading on the TSE and listed for quotation
on NASDAQ;
(u) the only subsidiaries of the Corporation are Bid-Com U.S.A Inc.,
▇▇▇.▇▇▇ International Limited and Point2 Computing Systems Inc.
(collectively, the "Subsidiaries") and the Corporation, either
directly or indirectly, beneficially owns all of the issued and
outstanding shares of each such Subsidiary other than Point2 Computing
Systems Inc. and beneficially owns 51% of the issued and outstanding
shares of Point2 Computing Systems Inc. free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances,
claims or demands of any kind whatsoever, all of such shares have been
duly authorized and validly issued and are outstanding as fully paid
and non-assessable shares and no person has any right, agreement or
option, present or future, contingent or absolute, of any right
capable of becoming a right, agreement or option, for the purchase
from the Corporation of any interest in any of such shares or for the
issue or allotment of any unissued shares in the capital of the
Subsidiaries or any other security convertible into or exchangeable
for any such shares;
(v) the use of the business names, trademarks, service marks and other
industrial or intellectual property of the Corporation and the
Subsidiaries does not infringe upon or breach any business names,
trademarks, service marks and other intellectual property rights of
any other person and the Corporation has no knowledge of any
infringement or violation of any of its rights in such intellectual
property and is not aware of any state of facts that casts doubt on
the validity or enforceability of any of such intellectual property
rights;
(w) the Corporation owns or possesses adequate enforceable rights to use
all patents, patent applications, trademarks, service marks,
copyrights, software, source codes, trade secrets, processes,
formulations and other intellectual property used or proposed to be
used in the conduct of its business subject to the restrictions
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contained in the licence agreements under which the Corporation
licences various intellectual property;
(x) the Corporation has not withheld, and will not withhold, from the
Underwriter any facts relating to the Corporation or to the Offering
that would be material to a prospective purchaser of the Special
Warrants;
(y) except as disclosed in the Public Record or disclosed in writing to
the Underwriter prior to the execution of this Agreement, there are no
material contracts or arrangements to which the Corporation or any of
the Subsidiaries is a party or by which the Corporation or any of the
Subsidiaries is bound or to which the Corporation or any of the
Subsidiaries expects to become a party or bound before the Prospectus
Qualification other than the agreements relating to the Offering and
the Corporation and the Subsidiaries are in compliance in all respects
with all terms and provisions of all contracts, agreements,
indentures, leases, policies, instruments and licenses in connection
with the conduct of its business and all such contracts, agreements,
indentures, leases, policies, instruments and licenses are valid and
binding in accordance with their terms and in full force and effect,
and no breach or default by the Corporation or its Subsidiaries or
event which, with notice or lapse or both, could constitute a breach
or default by the Corporation or the Subsidiaries, exists with respect
thereto;
(z) no order ceasing or suspending trading in securities of the
Corporation or prohibiting the sale of securities by the Corporation
has been issued and, to the knowledge of the Corporation, no
proceedings for this purpose have been instituted, are pending,
contemplated or threatened;
(aa) the Corporation has not, directly or indirectly, declared or paid any
dividend or declared or made any other distribution on any of its
Shares or other securities or, directly or indirectly, redeemed,
purchased or otherwise acquired any of its Shares or other securities
or agreed to do any of the foregoing;
(bb) there is not in the constating documents of the Corporation or in any
agreement, mortgage, note, debenture, indenture or other instrument or
document to which the Corporation is a 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 Shares;
(cc) the Corporation does not owe any money to, nor has the Corporation any
present loans to, or borrowed any monies from, or is otherwise
indebted to any officer, director, employee, shareholder or any person
not dealing "arm's length" (as such term is defined in the Income Tax
Act (Canada) with the Corporation except for usual employee
reimbursements and compensation paid in the ordinary and normal course
of the business of the Corporation;
(dd) (i) the Corporation has adopted and is diligently implementing a Year
2000 compliance plan which plan accurately sets out the current
status of activities undertaken by the Corporation to prevent a
Year 2000 Problem (as defined below) and such plan includes an
analysis as to (A) which of the assets are, as of the date
hereof, are Year 2000 Compliant (as defined below), (B) which of
the assets are not Year 2000 Compliant as of the date hereof, and
(C) what third party remediation, testing and certification
efforts have been undertaken to date;
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(ii) (A) All required remediation, testing and certification will be
completed by no later than December 31, 1999, (B) the Year 2000
compliance plan, including the remediation efforts and
contingency plans therein, are reasonable and prudent in the
opinion of the Corporation, (C) all work undertaken or required
by the Year 2000 compliance plan will not require the
expenditure by the Corporation to third parties of any material
amount and (D) the Corporation will not be materially affected
by a change in the millennium;
(iii) all products and services supplied by the Corporation are Year
2000 Compliant; and
(iv) the representations, warranties, covenants and commitments
relating to the Year 2000 Problem or the products and services
of the Corporation being Year 2000 Compliant which have been
made or given by the Corporation to any person are true and
correct;
"Year 2000 Problem" means any failure of a computer system,
hardware, software, firmware, microchip, integrated circuit or
similar device to correctly: (i) process date and time related
data without causing any processing interruptions, abnormal
terminations, or changes in performance characteristics, and
(ii) process and manipulate all date and time related functions
correctly;
"Year 2000 Compliant" means, with respect to any of the assets
of the Corporation including without limitation all computer
systems, hardware, software, firmware, microchip, integrated
circuit or similar device, that such assets are in all material
respects able to correctly: (i) process date and time related
data without causing any processing interruptions, abnormal
terminations, or changes in performance characteristics, and
(ii) process and manipulate all date and time related
functions. Without limiting the generality of the foregoing,
the assets of the Corporation will correctly: (i) process date
and time related data before, during and after January 1, 2000,
including, but not limited to, accepting date and time input,
providing date and time output, and performing ongoing
operations on dates and times and portions of dates and times
including, but not limited to, calculating, comparing and
sequencing of dates and times (in both forward and backward
operations spanning century boundaries); (ii) process leap year
calculations including, but not limited to, identification of
leap years, interval calculations (in both forward and backward
operations spanning century boundaries), day-in-year
calculation, day-of-the-week calculations, and week-of-the-year
calculations; (iii) manipulate all date and time related input
in a manner that resolves ambiguity as to century; and (iv)
store, retrieve and provide output of date and time related
data in a matter that is unambiguous as to century;
(ee) the Warrant Agent, at its offices in Toronto, has been duly appointed
as the transfer agent and registrar for all of the outstanding Shares
and as at the Closing will have been duly appointed as warrant agent
in respect of the Special Warrants and Purchase Warrants;
-11-
(ff) the Corporation has obtained or at the Closing will have obtained
conditional listing approval from the TSE and shall have filed a
NASDAQ National Market Notification Form for Listing of Additional
Securities and paid the applicable fee therefor with and to NASDAQ
with respect to the Shares comprising the Units and the Shares
issuable upon exercise of the Purchase Warrants and the Compensation
Warrants; and
(gg) the Corporation has not received any verbal or written communication
from Yorkton Securities Inc. in respect of the Right of First Refusal.
4. Covenants of the Corporation - The Corporation hereby covenants to and
with the Underwriter that it will:
(a) fulfill all legal requirements to permit the creation, issuance,
offering and sale of the Special Warrants, the issuance of the Shares
comprising the Units, the creation and issuance of the Purchase
Warrants comprising the Units, the creation and issuance of the
Brokers' Warrants, the creation and issuance of the Compensation
Warrants and the issuance of the Shares issuable upon exercise of the
Purchase Warrants and Compensation Warrants including, without
limitation, compliance with all applicable securities legislation to
enable the Special Warrants to be offered for sale and sold without
the necessity of filing a prospectus to Purchasers in the Selling
Jurisdictions through, in the case of the Qualifying Provinces,
registrants registered under the applicable legislation of such
Qualifying Provinces who have complied with the relevant provisions of
such legislation;
(b) use its best efforts to obtain the necessary regulatory consents from
the TSE and NASDAQ to the Offering on such terms as are mutually
acceptable to the Underwriter and the Corporation, acting reasonably;
(c) use its best efforts to arrange for the conditional listing for
trading of the Shares issuable upon exercise of the Special Warrants,
the Purchase Warrants and the Compensation Warrants on the TSE and to
make all necessary filings and to pay all required fees as required by
NASDAQ before the Closing;
(d) use its best efforts to maintain the listing of the Shares on the TSE
and NASDAQ and its status as reporting issuer and its equivalent under
the securities legislation of the Qualifying Provinces until the
earlier of the date which is one year after the Expiry Time and the
date which is two years from the Closing Date;
(e) use its best efforts, to prepare and file in each of the Qualifying
Provinces the Preliminary Prospectus and other related documents
relating to the proposed distribution of Subject Securities to holders
of Special Warrants and of the Compensation Warrants to the
Underwriter within 45 days following the Closing Date;
(f) use its best efforts to obtain receipts for the Preliminary Prospectus
in each of the Qualifying Provinces as soon as reasonably practicable
after the filing thereof;
(g) resolve as soon as reasonably practicable any regulatory deficiencies
in respect of the Preliminary Prospectus on a basis acceptable to the
Underwriter, acting reasonably, and, as soon as reasonably practicable
after such deficiencies have been resolved or satisfied, prepare, file
and use its best efforts to obtain receipts
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under the applicable legislation of each of the Qualifying Provinces
for the Prospectus and take all other reasonable steps and proceedings
that may be necessary in order to complete the Prospectus
Qualification by the Qualification Deadline;
(h) prior to the Closing and prior to the filing of the Preliminary
Prospectus and thereafter and prior to the filing of the Prospectus
and any Supplementary Material, permit the Underwriter and its counsel
to participate fully in the preparation of such documents and allow
the Underwriter and its counsel to conduct all due diligence which the
Underwriter may reasonably require to conduct in order to fulfill
their obligations under applicable securities legislation and in order
to enable the Underwriter responsibly to execute any certificate
required to be executed by the Underwriter in connection with the
Preliminary Prospectus, the Prospectus or any Supplementary Material;
(i) ensure that at the respective times of filing and at all times
subsequent to the filing thereof until completion of the distribution
of the Subject Securities, the Preliminary Prospectus, Prospectus and
any Supplementary Material will fully comply with the requirements of
applicable securities legislation, provided that the foregoing shall
not apply with respect to statements contained in such documents
relating solely to or provided by the Underwriter;
(j) deliver in Toronto, within three (3) Business Days of the issue of a
receipt for the Preliminary Prospectus and the Prospectus, as the case
may be, and within three Business Days of execution of any
Supplementary Material, without charge to the Underwriter as many
copies of the Preliminary Prospectus, the Prospectus and any
Supplementary Material as the Underwriter may reasonably request for
the purposes contemplated hereunder and contemplated by the Securities
Act (Ontario), and such delivery shall constitute: (A) the consent of
the Corporation to use such documents in connection with the
distribution or the distribution to the public, as the case may be, of
the Subject Securities subject to the provisions of the securities
legislation of the Qualifying Provinces; and (B) the Corporation's
representation and warranty to the Underwriter that, at the time of
delivery, the information and statements contained therein (except
information and statements relating solely to or provided by the
Underwriter) contain no misrepresentation and constitute full, true
and plain disclosure of all material facts (as defined in the
Securities Act (Ontario)) relating to the Offering, the Corporation,
the Special Warrants and the Subject Securities;
(k) cause to be delivered to the Underwriter concurrently with the filing
of the Prospectus and any Supplementary Material, comfort letters of
the auditors of the Corporation in each case dated the date of the
Prospectus or the Supplementary Material to which such letter relates
(as the case may be) addressed to the Underwriter and to the directors
of the Corporation, in form and substance satisfactory to the
Underwriter acting reasonably, relating to the financial statements to
be included in the Prospectus and any Supplementary Material and
verifying in accordance with the Canadian Institute of Chartered
Accountants Handbook the financial information, accounting data and
other numerical data contained in the Prospectus or any Supplementary
Material and matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Prospectus on the Supplementary Material to a date not more
than two (2) Business Days prior to the date of such letter;
-13-
(l) not, without the prior written consent of the Underwriter, such
consent not to be unreasonably withheld, issue or announce the
issuance of any Shares or any securities convertible into or
exchangeable for or exercisable to acquire Shares during a period
commencing on September 15, 1999 and expiring 180 days following the
Closing Date, other than pursuant to:
(i) presently outstanding rights, including options, warrants and
other convertible securities and including any such rights which
have been granted or issued subject to regulatory approval;
(ii) options granted to officers, directors or employees of the
Corporation or any subsidiary thereof pursuant to existing stock
option plans; or
(iii) in connection with the acquisition by the Corporation of shares
or assets of an arm's length person to the Corporation.
(m) ensure that at Closing the Shares do not constitute "foreign property"
within the meaning of the Income Tax Act (Canada) or any amendments
thereto publicly announced by the Minister of Finance from time to
time;
(n) use the net proceeds of the Offering for general working capital
purposes and to pursue acquisition opportunities; and
(o) comply with the provisions of the term sheet attached hereto as
Schedule "A".
5. Conditions of Closing - The obligations of the Underwriter and the
Purchasers to complete the purchase of the Special Warrants contemplated hereby
shall be conditional upon the fulfillment at or before the Time of Closing (as
herein defined) of the following conditions:
(a) the Corporation having obtained all requisite regulatory approvals
required to be obtained by the Corporation in respect of the Offering
on terms mutually acceptable to the Corporation and the Underwriter,
acting reasonably;
(b) the Corporation and the Underwriter having complied fully with all
relevant statutory and regulatory requirements required to be complied
with prior to the Time of Closing (including without limitation those
of the TSE and NASDAQ in connection with the Offering);
(c) the Corporation having received the approval of the TSE to proceed
with the Offering and to conditionally list the Shares issuable upon
the exercise of the Special Warrants, the Purchase Warrants and the
Compensation Warrants subject to the usual conditions;
(d) the Corporation having taken all necessary corporate action to
authorize and approve this Agreement, the Subscription Agreements, the
Special Warrant Indenture, the Share Purchase Warrant Indenture, the
issuance of the Special Warrants, the Brokers' Warrants, the
Compensation Warrants, the Subject Securities and the Shares issuable
upon exercise of the Purchase Warrants and the Compensation Warrants
and all other matters relating thereto;
(e) the Underwriter having received a favourable legal opinion of the
Corporation's counsel or from counsel in appropriate jurisdictions
addressed to the Underwriter,
-14-
counsel to the Underwriters and the Purchasers, acceptable in all
reasonable respects to counsel to the Underwriter, with respect to the
matters set forth in Schedule "C" hereto;
In giving the opinions contemplated by Schedule "C", counsel to the
Corporation shall be entitled to rely, where appropriate, as to
matters of fact, upon the representations and warranties of Purchasers
contained in the executed Subscription Agreements and other support
documents, the representations, warranties and covenants of the
Underwriter as contained herein, a certificate of fact of the
Corporation signed by officers in a position to have knowledge of such
facts and their accuracy and certificates of such public officials and
other persons as are necessary or desirable;
(f) the Underwriter having received a favourable legal opinion of the
Subsidiaries' counsel addressed to the Underwriter, counsel to the
Underwriter and each of the Purchasers, acceptable in all reasonable
respects to counsel to the Underwriter, to the effect that:
(i) each of the Subsidiaries is a corporation validly existing under
the laws of its jurisdiction of incorporation and is qualified
to carry on business and own its assets under the laws of each
jurisdiction in which it carries on business and owns its
assets;
(ii) each of the Subsidiaries has all requisite corporate capacity,
power and authority to carry on its business as is now conducted
by it and to own its assets;
(iii) as to the authorized capital of each of the Subsidiaries; and
(iv) the registered holder of all of the issued and outstanding
shares in the capital of the Subsidiaries is the Corporation;
(g) the Underwriter shall have received a favourable legal opinion from
▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ counsel to the Corporation, such
opinion to be addressed to the Corporation, the counsel to the
Corporation, the Underwriter and counsel to the Underwriter, in form
and substance satisfactory to counsel to the Underwriter, to the
effect that the offer and sale to purchasers in the United States of
the Special Warrants, has been made in accordance with Section 4(2);
(h) the Underwriter and the Purchasers having received a certificate of
the Corporation signed by the Chief Executive Officer of the
Corporation and the Chief Financial Officer of the Corporation or by
such other officers acceptable to the Underwriter certifying as to
certain matters reasonably requested by the Underwriter including
certification that:
(i) the Corporation has complied with all covenants and satisfied all
terms and conditions of this Agreement on its part to be complied
with and satisfied up to the Time of Closing;
(ii) all of the representations and warranties contained in this
Agreement are true and correct as of the Closing Date with the
same force and effect as if made at and as of the Closing Date,
after giving effect to the transactions contemplated hereby;
-15-
(iii) since the date hereof, there has been no material adverse change
(actual, proposed or prospective, whether financial or
otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of the
Corporation and its Subsidiaries, taken as a whole;
(iv) no order, ruling or determination having the effect of ceasing
or suspending trading in any securities of the Corporation
(including the Special Warrants and the Subject Securities) has
been issued and no proceedings for such purposes are pending,
or, to the knowledge of such officers, pending, contemplated or
threatened; and
(v) the Corporation is a "reporting issuer" not in default under the
securities laws of each of the provinces in which it is a
reporting issuer and no material change relating to the
Corporation has occurred with respect to which the requisite
material change statement has not been filed unless the Offering
contemplated hereby constitutes a material change and currently
no disclosure of any material change has been made on a
confidential basis;
(i) the Corporation shall have delivered to the Underwriter a certificate
of CIBC Mellon Trust Corporation as registrar and transfer agent which
certifies the number of outstanding Shares as at the Closing Date;
(j) the Special Warrant Indenture and Share Purchase Warrant Indenture in
form acceptable to the Underwriter, acting reasonably, shall have been
executed and delivered by the Corporation and the Warrant Agent for
the holders of the Special Warrants and Purchase Warrants; and
(k) the Underwriter shall be satisfied in its sole discretion with such
due diligence of the Corporation as the Underwriter or its
representatives deem appropriate.
6. Closing - The purchase and sale of the Special Warrants (the
"Closing") shall be completed at the offices of the Corporation's counsel in
Toronto, Ontario, at 10:00 a.m. (Toronto time) (the "Time of Closing") on
September 30, 1999 or at such other time or on such other date as the
Corporation and the Underwriter may agree upon which, in no event, shall be
later than October 15, 1999 (the "Closing Date").
At or before the Time of Closing, the Corporation shall deliver to the
Underwriter:
(a) certificates representing the Special Warrants duly registered as the
Purchasers may direct;
(b) the requisite legal opinions and certificate as contemplated in
section 5 hereof; and
(c) such further documentation as may be contemplated herein or as counsel
to the Underwriter or the applicable regulatory authorities may
reasonably require;
against delivery by the Underwriter to the Corporation and the Warrant Agent of
certified cheques or bank drafts payable to the Corporation and the Warrant
Agent in an aggregate amount
-16-
representing $9.25 per Special Warrant (subject to deduction of the Underwriting
Fee and expenses as noted herein) and delivery by the Underwriter to the
Corporation of duly executed subscription agreements for acceptance by the
Corporation. The Underwriting Fee shall be deducted from the aggregate amount of
the proceeds of the Offering. Subject to timely advance notice from the
Underwriter, the Corporation further agrees that it shall provide to the
Underwriter at such addresses as it may specify certificates representing the
Special Warrants sufficiently in advance of the Closing, to be held in escrow by
the Underwriter pending the Closing, in order to allow the Underwriter to effect
proper delivery thereof to the Substituted Purchasers at the Time of Closing.
7. Expenses - Whether or not Closing occurs, the Corporation shall pay
all costs, fees and expenses of or incidental to the performance of the
obligations under this Agreement including, without limitation: (i) the cost of
qualifying the Subject Securities for distribution in the Qualifying Provinces,
(ii) the cost of printing the Preliminary Prospectus, the Prospectus, any
Supplementary Material and certificates for the Special Warrants, Brokers'
Warrants and the Subject Securities, (iii) registration, countersignature and
delivery of the Special Warrants and Subject Securities, (iv) the fees and
expenses of the Corporation's auditors, counsel and any local counsel, (v) the
reasonable fees and expenses of the Underwriter's counsel provided that fees
(exclusive of GST and disbursements) shall not exceed $50,000 without the
consent of the Corporation, such consent not to be unreasonably withheld, and
(vi) the Underwriter's reasonable out-of-pocket expenses (including marketing
expenses). Such amounts payable to the Underwriter shall be paid by the
Corporation at the Time of Closing to the Underwriter in respect of expenses and
fees incurred to such date and supported by invoices and as and when invoices
are rendered in respect of expenses and fees incurred after the Time of Closing.
8. Material Changes - If after the date hereof until the Expiry Time:
(a) there occurs any material change or material changes (actual, proposed
or prospective) in respect of the Corporation or any of the
Subsidiaries;
(b) there occurs any change in any material fact contained in the
Preliminary Prospectus, Prospectus or any Supplementary Material; or
(c) any new material fact arises which would, under the securities
legislation of any of the Qualifying Provinces, require an amendment
to the Preliminary Prospectus, Prospectus or any Supplementary
Material,
the Corporation shall:
(d) promptly notify the Underwriter, in writing, providing full
particulars of any such change;
(e) if required by applicable law, prepare and deliver to each Purchaser
an amendment to the Preliminary Prospectus or Prospectus, as the case
may be;
(f) file or cause to be filed with reasonable promptness, and in any event
within any statutory limitation period therefor, any document required
to be filed with any regulatory body having jurisdiction and comply
with all requirements of any applicable securities legislation of such
jurisdiction; and
-17-
(g) comply with all legal requirements necessary to continue to qualify
the Subject Securities for distribution in the Qualifying Provinces.
The Corporation shall in good faith discuss with the Underwriter any
change in circumstances (actual, proposed or prospective) in respect of which
there is reasonable doubt whether written notice should be given to the
Underwriter pursuant to this section and shall consult with the Underwriter with
respect to the form and content of any Supplementary Material proposed to be
issued or filed by the Corporation as a result of such change prior to the
issuance or filing thereof.
In this Agreement, the terms "material change", "material fact",
"misrepresentation" and "distribution" include the respective meanings ascribed
thereto in the Securities Act (Ontario).
9. Indemnities - The Corporation hereby covenants and agrees to protect,
indemnify and hold harmless the Underwriter and its directors, officers and
employees, solicitors and agents (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") from and against all losses (except for
loss of profits), claims, costs, damages or liabilities which they may suffer or
incur caused by or arising directly or indirectly by reason of:
(i) any information or statement (except any information or statement
relating solely to or provided by the Underwriter) contained in the
Preliminary Prospectus, Prospectus or any Supplementary Material
being or being alleged to be a misrepresentation;
(ii) the omission to state in the Preliminary Prospectus, Prospectus or
any Supplementary Material a material fact required to be stated
therein or necessary to make the statements therein not misleading
(except the omission to state a material fact relating solely to the
Underwriter);
(iii) the Corporation not complying with any requirement of any securities
legislation or regulatory requirements of any Qualifying Province in
connection with the Offering or the Prospectus Qualification;
(iv) any order made or any inquiry, investigation or proceeding commenced
or threatened by any regulatory authority based upon an allegation
that any untrue statement or alleged omission or any
misrepresentation or alleged misrepresentation in the Preliminary
Prospectus, the Prospectus or any Supplementary Material exists
(except any information or statement relating solely or provided by
to the Underwriter) which prevents or restricts the trading in or
distribution of the Special Warrants or the Subject Securities; or
(v) the Corporation's failure to comply with any of its obligations
hereunder.
If any action or claim shall be asserted against an Indemnified Party
in respect of which indemnity may be sought from the Corporation pursuant to the
provisions hereof, or if any potential claim contemplated by this section shall
come to the knowledge of an Indemnified Party, the Indemnified Party shall
promptly notify the Corporation in writing of the nature of such action or claim
(provided that any failure to so notify shall not affect the Corporation's
liability under this paragraph unless such delay has prejudiced the defence to
such claim). The Corporation shall be entitled but not obliged to participate in
or assume the defence thereof, provided, however that the defence shall be
through legal counsel acceptable to the Indemnified
-18-
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 fees and expenses of such counsel shall be borne by the
Indemnified Party, unless (i) the employment thereof has been specifically
authorized in writing by the Corporation; (ii) the Indemnified Party has been
advised by counsel acceptable to the Corporation, acting reasonably, 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 (iii) the Corporation has failed within a reasonable time after receipt
of such written notice to assume the defence of such action or claim. It is
understood and agreed that the Corporation shall not, in connection with any
suit in the same jurisdiction, be liable for the legal fees and expenses of more
than one separate legal firm to represent the Indemnified Parties. Neither party
shall effect any settlement of any such action or claim or make any admission of
liability without the written consent of the other party, such consent not to be
unreasonably withheld or delayed. 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 in this section obtained by the
Indemnified Party from any other person.
To the extent that any Indemnified Party is not a party to this
Agreement the Underwriter shall obtain and hold the right and benefit of this
section in trust for and on behalf of such Indemnified Party.
The Corporation hereby waives its right to recover contribution from
the Underwriter with respect to any liability of the Corporation by reason of or
arising out of any misrepresentation contained in the Preliminary Prospectus,
the Prospectus or in any Supplementary Material; provided, however, that such
waiver shall not apply in respect of liability caused or incurred by reason of
or arising out of any misrepresentation which is based upon or results from
information relating solely to and provided by the Underwriter contained in such
document.
The Corporation hereby consents to personal jurisdiction and service
and venue in any court in which any claim which is subject to indemnification
hereunder is brought against the Underwriter or any Indemnified Party and to the
assignment of the benefit of this section to any Indemnified Party for the
purpose of enforcement provided that nothing herein shall limit the
Corporation's right or ability to contest the appropriate jurisdiction or forum
for the determination of any such claims.
10. Contribution - In the event that, for any reason, the indemnity
provided for in section 9 hereof is illegal or unenforceable, the Underwriter
and the Corporation shall contribute to the aggregate of all losses, claims,
costs, damages, expenses or liabilities (except loss of profits in connection
with the sale of Special Warrants) of the nature provided for in section 9
hereof such that the Underwriter shall be responsible for that portion
represented by the percentage that the Underwriting Fee bears to the gross
proceeds from the Offering and the Corporation shall be responsible for the
balance. Notwithstanding the foregoing, a person guilty of fraudulent
misrepresentation shall not be entitled to contribution from any 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 another party or
parties under this section, notify such party or parties from whom contribution
may be sought. In no case shall such party from whom contribution may be sought
be liable under this contribution agreement unless such notice shall have 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
-19-
contribution provided in this section shall be in addition and not in derogation
of any other right to contribution which the Underwriter may have by statute or
otherwise by law.
11. Termination Rights - If any time prior to the Closing:
(i) there shall occur or come into effect any event, condition or
circumstance which, in the sole opinion of the Underwriter,
constitutes a material change, financial or otherwise, in the
business, affairs or condition of the Corporation and the
Subsidiaries, taken as a whole, or there arises or there is
disclosure of a material fact or a change in a material fact which in
the sole opinion of the Underwriter might be expected to prevent or
restrict the Offering or Prospectus Qualification; or would or could
materially and adversely affect the market price or value of the
Special Warrants or Subject Securities; or
(ii) any order or ruling is issued, any inquiry, investigation or other
proceeding (whether formal or informal) in relation to the
Corporation or any one of the officers or directors of the
Corporation or any of its principal shareholders is made, threatened
or announced by any officer or official of any stock exchange,
securities commission or other regulatory authority, or any law or
regulation is promulgated or changed which, in the sole opinion of
the Underwriter, would or could operate to prevent or restrict
trading in or the distribution of the Special Warrants or Subject
Securities or would or could adversely affect the marketability or
sale of the Special Warrants or Subject Securities as contemplated
hereby or the market price or value of the Special Warrants or
Subject Securities or would or could materially and adversely affect
the financial markets in Canada or elsewhere where the Special
Warrants are marketed or proposed to be marketed or the business of
the Corporation and the Subsidiaries, taken as a whole; or
(iii) the Underwriter is not satisfied in their sole discretion with their
due diligence review and investigations of the Corporation or any of
its officers, directors and principal shareholders; or
(iv) there should develop, occur or come into effect any occurrence,
catastrophe, crisis or accident of national or international
consequence or any other event, action, governmental regulation,
enquiry or other occurrence of any nature whatsoever including any
outbreak of war, rebellion or armed hostilities which, in the sole
opinion of the Underwriter, would or could adversely affect the
marketability or sale of the Special Warrants or Subject Securities,
the financial markets in Canada or elsewhere where the Special
Warrants are marketed or proposed to be marketed or the business of
the Corporation and the Subsidiaries, taken as a whole,
the Underwriter shall be entitled, at its option, to terminate its obligations
under this Agreement (and the obligations of the Purchasers) by written notice
to that effect given to the Corporation at any time prior to the Closing. In the
event of such termination by the Underwriter, there shall be no further
liability of the Corporation or the Underwriter to one another hereunder, except
in respect of any liability which may have arisen or may thereafter arise
pursuant to sections 7, 9 or 10.
The right of the Underwriter to terminate their obligations under
this Agreement is in addition to such other remedies as it may have in respect
of any default, act or failure to act of the Corporation in respect of any of
the matters contemplated by this Agreement.
-20-
12. Registration Rights - The Corporation agrees that, in the event it no
-------------------
longer qualifies as a "foreign issuer" as that term is defined in Rule 902(e)
promulgated by the U.S. Securities and Exchange Commission (the "SEC") pursuant
to the 1933 Act, then upon written request (the "Registration Request") of any
holder of (i) the Compensation Warrants and/or (ii) Purchase Warrants who in the
case of a holder of Purchase Warrants was a U.S. Person who purchased in the
United States, made at any time within the period commencing with the
Qualification Deadline and ending with the final expiration date of such
warrants, the Corporation will file a Registration Statement, and all
necessary amendments thereto, under the 1933 Act, as amended, registering or
qualifying, as the case may be, the Shares underlying all such warrants as may
be outstanding. Notwithstanding the foregoing, the Corporation shall not be
required to file a Registration Statement or comply with the other provisions of
this Section 12, if the Corporation delivers to the requesting warrantholder
within 10 business days of the receipt of the Registration Request an opinion of
counsel of the Corporation to the effect the sale of common shares underlying
the Compensation Warrants or Purchase Warrants, as the case may be, by such
holder is otherwise exempt from registration under the 1933 Act and the rules
and regulations, promulgated thereunder and that such underlying shares will be
free trading in the hands of the purchaser(s). The holder requesting such
registration rights, shall promptly provide the Corporation and such counsel,
all information which either of them may reasonably request in order to enable
such counsel to determine whether it will be able to deliver such opinion. The
Corporation agrees to use its best efforts to cause the above filing to become
effective in a timely manner and to thereafter remain effective for the life of
such warrants or until the earlier of the time when (i) the common shares which
may be issued upon exercise of such warrants shall have been first disposed of
in accordance with such registration statement, or (ii) all such securities may
be sold pursuant to Rule 144(b), Rule 144(k) or any other exemption as a result
of which the underlying shares will be free trading in the hands of the
purchaser(s), a new certificate or other evidence of ownership not bearing the
legend restricting further transfer shall have been delivered by the Corporation
and subsequent public distribution of such securities shall not require
registration under the 1933 Act.
In addition to the above, the Corporation understands and agrees that
if at any time it no longer qualifies as a "foreign issuer" (as defined above)
and should file a Registration Statement with the SEC pursuant to the 1933 Act,
regardless of whether some of the holder(s) of the Compensation Warrants or
Purchase Warrants shall have theretofore availed itself (themselves) of the
right above provided, the Corporation, at its own expense, will timely offer to
said holder(s) the opportunity to register or qualify the aforesaid Shares to be
issued upon the exercise of such warrants provided that such obligation shall be
subject to such restriction as the underwriter(s) may determine including, but
not limited to, a determination by the Underwriter that said Shares shall not be
included in such Registration Statement. This paragraph is not applicable to a
Registration Statement filed by the Corporation with the SEC on Form S-8, or any
other inappropriate form.
The Corporation shall bear all costs and expenses incident to the
registration, qualification, issuance, offer, sale and delivery of the Shares
underlying the said Compensation Warrants and Purchase Warrants, including the
costs and counsel fees of qualification under state securities laws, fees and
disbursements of counsel and accountants for the Corporation, costs for
preparing and printing the Registration Statement, and cost of printing as many
copies of the underwriting documents, Prospectuses and Preliminary Prospectuses
as the selling shareholder(s) may reasonably deem necessary and related
exhibits, including all amendments and supplements to the Registration
Statement. Notwithstanding the foregoing, the holders, and not the Corporation
shall be responsible for all selling discounts or selling commissions applicable
to the sale of any securities so registered, and shall bear all fees and
disbursements of counsel for such
-21-
holders (other than the cost of fees and expenses of counsel in connection with
the qualification under the state securities laws).
The provisions of Sections 9 and 10 above with respect to
indemnification and contribution shall apply with equal effect to any
liabilities arising out of or in relation to the filing of any Registration
Statement or Blue Sky qualification contemplated in this Section 12.
13. Breach of Agreement - Any breach of, or failure by the Corporation to
comply with, any term or condition of this Agreement shall entitle the
Underwriter, on behalf of itself and the Purchasers to terminate their
respective obligations to purchase the Special Warrants by notice to that effect
given to the Corporation prior to the Time of Closing. In the event of any such
termination, there shall be no further liability on the part of the Corporation
or such Underwriter except in respect of any liability which may have arisen or
may thereafter arise under sections 7, 9 or 10 hereof. The Underwriter may
waive, in whole or in part, or extend the time for compliance with, any terms
and conditions without prejudice to its rights in respect of any other terms and
conditions or any other or subsequent breach or non-compliance provided,
however, that any waiver or extension must be in writing and signed by the
Underwriter in order to be binding upon it.
14. Notices - Any notice under this Agreement shall be given in writing
and either delivered, telecopied or mailed by prepaid registered post to the
party to receive such notice at the address or telecopy numbers indicated below:
to the Corporation:
▇▇▇.▇▇▇ International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Gowling, Strathy & ▇▇▇▇▇▇▇▇▇
Barristers and Solicitors
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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to the Underwriter or any Indemnified Party:
Canaccord Capital Corporation
▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Barristers and Solicitors
Suite 2100, Scotia Plaza
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or telecopy number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; if such notice is telecopied (with receipt
confirmed), it shall be effective on the Business Day following the date such
notice is telecopied; if such notice is sent by mail, it shall be effective four
(4) Business Days following the date of mailing, excluding all days when normal
mail service is interrupted.
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15. Survival - All representations, warranties, and agreements of the
Corporation and the Underwriter contained herein or contained in any document
submitted pursuant to this Agreement or in connection with the purchase of the
Special Warrants shall survive the purchase of the Special Warrants by the
Purchasers and shall continue in full force and effect unaffected by any
subsequent disposition or exercise of the Special Warrants and the Subject
Securities, for a period of two (2) years from the Closing Date, and the
Corporation and the Underwriter shall not be limited or prejudiced by any
investigation made by or on behalf of the Corporation or the Underwriter in the
course of the preparation of the Preliminary Prospectus, the Prospectus or any
Supplementary Material or the distribution of the Special Warrants or the
Subject Securities.
16. Entire Agreement - The provisions herein contained constitute the
entire agreement between the parties hereto and supersede all previous
communications, representations, understandings and agreements between the
parties with respect to the subject matter hereof, whether verbal or written,
including without limitation the engagement letter between the Corporation and
Canaccord dated and accepted by the Corporation on September 15, 1999.
17. Counterparts - The execution of this Agreement may be executed in any
number of counterparts all of which when taken together shall be deemed to be
one and the same document and not withstanding their actual date of execution
shall be deemed to be dated as of the date first above written.
18. General - The Agreement shall be governed by and interpreted in
accordance with the laws of Ontario and the laws of Canada applicable therein
and time shall be of the essence hereof.
If the above is in accordance with your understanding, please sign and
return to the Underwriter a copy of this letter, whereupon this letter and your
acceptance shall constitute a binding agreement between the Corporation and the
Underwriter.
CANACCORD CAPITAL CORPORATION
Per: "▇▇▇▇▇ ▇▇▇▇▇ "
-------------------------------
The above offer is hereby accepted and agreed to as of the date first
above written.
▇▇▇.▇▇▇ INTERNATIONAL INC.
Per: "▇▇▇▇ ▇▇▇▇ "
-------------------------------
SCHEDULE "A"
TERM SHEET
Issuer: ▇▇▇.▇▇▇ International Inc. (the "Corporation").
Size of Offering: $7,500,001 - $25,000,002
Purchased Securities: A minimum of 810,811 and a maximum of 2,702,703 special
warrants to be sold by the Corporation. Subject to
adjustment in certain events, each Special Warrant
shall be exercisable, for no additional consideration,
to acquire one unit ("Unit"), each Unit consisting of
one common share ("Common Share") and one-half of one
Common Share purchase warrant ("Warrant") of the
Corporation.
Warrants: Each whole Warrant shall entitle the holder thereof to
acquire one Common Share at an exercise price of $12.00
per share for a period of 24 months from the Closing
Date.
Purchase Price: $9.25 per Special Warrant.
Underwriter: Canaccord Capital Corporation
Closing Date: September 30, 1999 or such other date as the
Underwriter and the Corporation may agree (the "Closing
Date").
Selling Jurisdictions: British Columbia, Alberta, Ontario and such other
provinces of Canada agree to by the Corporation and the
underwriter (the "Qualifying Jurisdictions"), offshore
and the United States pursuant to Rule 506 of
Regulation D of the United States Securities Act of
1933, as amended.
Special Warrant The Special Warrants shall be exercisable by the
Exercise: holders thereof at any time and will be automatically
exercised at 5:00 p.m. (Toronto time) on the earlier of
the following dates (such date being the "Expiry
Date"): (i) the fifth business day after a receipt is
issued by the last of the relevant securities
regulatory authorities in the Qualifying Jurisdictions
(the "Securities Regulators") for a (final) prospectus
(the "Final Prospectus") qualifying the Units issuable
on the exercise of the Special Warrants; and (ii) one
year after the Closing Date.
Penalty Events: In the event that the Final Prospectus has not been
filed and receipts issued therefor by the last of the
Securities Regulators on or prior to the date (such
date being hereinafter referred to as the
"Qualification Deadline") that is 90 days after the
Closing Date, each Special Warrant exercised or deemed
to be exercised thereafter shall entitle the holder to
receive 1.1 Units (in lieu of one Unit).
SCHEDULE "B"
OUTSTANDING CONVERTIBLE OR RESERVED SECURITIES
Reserved for Incentive Stock Options
------------------------------------
Total Reserved 4,539,000 shares
--------------
Reserved for Issue in Connection with Warrants Issued to pursuant to November
-----------------------------------------------------------------------------
1998 Special Warrant Financing
------------------------------
Total Reserved 140,496 shares
--------------
SCHEDULE "C"
OPINION OF THE CORPORATION'S COUNSEL
At the Time of Closing, the Underwriter shall receive a favourable
legal opinion from counsel for the Corporation addressed to the Underwriter,
counsel to the Underwriter and the Substituted Purchasers and the Corporation
dated the Closing Date, with respect to the following matters:
(a) the Corporation has been duly amalgamated and is existing under the
laws of the Province of Ontario and has not been dissolved;
(b) the Corporation has all necessary corporate capacity to own, lease and
operate its properties and assets and to conduct its business at and
in the places where such properties and assets are now owned, leased
or operated or such businesses are now conducted;
(c) the authorized capital of the Corporation consists of an unlimited
number of Shares and an unlimited number of Preference Shares,
issuable in series;
(d) the Shares have been allotted and reserved for issue pursuant to the
exercise of the exchange rights of the Special Warrants which when
issued shall be validly issued as fully paid and non-assessable;
(e) the Purchase Warrants have been validly created and allotted and
reserved for issue pursuant to the exercise of the exchange rights of
the Special Warrants which when issued shall be validly issued;
(f) the Shares issuable upon exercise of the Purchase Warrants have been
allotted and reserved for issue pursuant to the exercise of the
Purchase Warrants which when issued shall be validly issued as fully
paid and non-assessable;
(g) all necessary corporate action has been taken by the Corporation to
duly authorize the creation, issuance and sale of the Special Warrants
and the Brokers' Warrants and the Special Warrants and the Brokers'
Warrants have been validly created and issued;
(h) all necessary corporate action has been taken by the Corporation to
duly authorize the creation and issuance of the Compensation Warrants;
(i) the Shares issuable upon exercise of the Compensation Warrants have
been allotted and reserved for issue pursuant to the exercise of the
Compensation Warrants which when issued shall be validly issued as
fully paid and non-assessable;
(j) the form and terms of the definitive certificates representing the
Shares, the Special Warrants, the Purchase Warrants, the Brokers'
Warrants and the Compensation Warrants have been approved and adopted
by the directors of the Corporation and the Share certificates comply
with all legal requirements relating thereto;
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(k) the Underwriting Agreement, the Subscription Agreements, the Special
Warrant Indenture and the Purchase Warrant Indenture (the
"Agreements") have been duly authorized by all necessary corporate
action on the part of the Corporation, have been duly executed and
delivered by and on behalf of the Corporation and constitute legal,
valid and binding obligations of the Corporation enforceable in
accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, except that specific
performance and injunction are equitable remedies which may only be
granted in the discretion of a court of competent jurisdiction and
except as rights to indemnity, contribution and waiver of contribution
may be limited under applicable law and except as to other
qualifications as to enforceability as are agreed to by counsel to the
Underwriter;
(l) the execution and delivery of the Agreements, the fulfillment of the
terms hereof and the issuance and sale of the Special Warrants, the
issue of Shares and Purchase Warrants issuable upon exercise of the
exchange rights of the Special Warrants, the issue of the Shares upon
the due exercise of the Purchase Warrants, the issuance of the
Brokers' Warrant, the issuance of the Compensation Warrants upon
exercise of the Brokers' Warrant and the issue of the Shares upon the
due exercise of the Compensation Warrants does not and will not
conflict with and does not and will not result in a breach of, and
does not and will not create a state of facts which after notice or
lapse of time or both will conflict with or result in a breach of, any
of the terms, conditions or provisions of the constating documents or
by-laws of the Corporation or any resolution passed or consented to by
the directors or shareholders of any of them or any trust indenture,
agreement or instrument to which the Corporation is a party or by
which the Corporation is contractually bound including, without
limitation, the Right of First Refusal;
(m) the Warrant Agent at its principal offices in the City of Toronto has
been duly appointed the transfer agent and registrar for the Shares;
(n) the Warrant Agent at its principal office in the City of Toronto has
been duly appointed the warrant agent for the Special Warrants and the
Purchase Warrants;
(o) the issue of the Special Warrants and the Brokers' Warrant being
exempt from the prospectus and registration requirements of applicable
securities laws;
(p) the issuance of the Shares and Purchase Warrants issuable upon
exercise of the exchange rights of the Special Warrants, and the
issuance of the Compensation Warrants upon exercise of the Brokers'
Warrant, the issuance of the Shares upon exercise of the Purchase
Warrants and the Compensation Warrants is exempt from the prospectus
and registration requirements of applicable securities laws;
(q) the resale restrictions applicable to the first trade of the Shares
and Purchase Warrants issued upon exercise of the exchange rights of
the Special Warrants, the Shares issued upon exercise of the Purchase
Warrants and the Shares issued upon exercise of the Compensation
Warrants where the Shares, Purchase Warrants and Compensation Warrants
are qualified pursuant to the Prospectus;
(r) the resale restrictions applicable to the first trade of the Shares
and Purchase Warrants issued upon exercise of the exchange rights of
the Special Warrants, the Shares issued upon exercise of the Purchase
Warrants and the Shares issued upon exercise of the Compensation
Warrants where no Prospectus has been filed in connection therewith;
-3-
(s) as to such other matters as counsel to the Underwriter may request.
Any modifications of the foregoing shall be subject to the approval of
the Underwriter and its counsel acting reasonably. The delivery of a definitive
opinion at the Time of Closing accepted by the Underwriter and its such
modifications.
SCHEDULE "D"
UNITED STATES OFFER OF SALES
As used in this Schedule D, capitalized terms used herein and not defined
herein shall have the meaning ascribed thereto in the underwriter agreement to
which this Schedule is annexed and the following terms shall have the meanings
indicated:
(a) "Directed Selling Efforts" means directed selling efforts as that term
is defined in Regulation S. Without limiting the foregoing, but for
greater clarity in this Schedule, it means, subject to the exclusions
from the definition of directed selling efforts contained in
Regulation S, any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of, conditioning the
market in the United States for any of the Special Warrants and
includes the placement of any advertisement in a publication with a
general circulation in the United States that refers to the offering
of the Special Warrants;
(b) "Accredited Investor" means an accredited investor as that term is
defined in Rule 501(a) of Regulation D;
(c) "Regulation D" means Regulation D adopted by the SEC under the 1933
Act;
(d) "Regulation S" means Regulation S adopted by the SEC under the 1933
Act;
(e) "SEC" means the United States Securities and Exchange Commission;
(f) "Substantial U.S. Market Interest" means substantial U.S. market
interest as that term is defined in Regulation S;
(g) "1933 Act" means the United States Securities Act of 1933, as amended;
(h) "U.S. Exchange Act" means the United States Securities Exchange Act of
1934, as amended;
(i) "U.S. Person" means a U.S. person as that term is defined in
Regulation S; and
(j) "United States" means the United States of America, its territories
and possessions, any state of the United States, and the District of
Columbia.
Representations, Warranties and Covenants of the Underwriter
------------------------------------------------------------
The Underwriter acknowledges that the Special Warrants have not been and will
not be registered under the 1933 Act and may be offered and sold only in
transactions exempt from or not subject to the registration requirements of the
1933 Act. Accordingly, the Underwriter represents, warrants and covenants to
the Corporation that:
1. It has not offered and sold, and will not offer and sell, any Special
Warrants except (a) in an offshore transaction in accordance with Rule 903
of Regulation S or (b) within the United States as provided in paragraphs 2
through 9 below. Accordingly, neither the Underwriter, its affiliates nor
any persons acting on its or their behalf, has made or will make (except as
permitted in paragraphs 2 through 9 below) (i) any offer to sell or any
solicitation of an offer to buy, any Special Warrants to any U.S. Person or
any person in the United States, (ii) any sale of Special Warrants to any
purchaser unless, at the time the
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buy order was or will have been originated, the purchaser was outside the
United States, or such Underwriter, affiliate or person acting on behalf of
either reasonably believed that such purchaser was outside the United
States, or (iii) any Directed Selling Efforts in the United States with
respect to the Special Warrants. Terms used in this paragraph have the
meanings given to them by Regulation S.
2. It has not entered and will not enter into any contractual arrangement with
respect to the distribution of the Special Warrants, except with its
affiliates, any selling group members or with the prior written consent of
the Corporation. It shall require each selling group member to agree, for
the benefit of the Corporation, to comply with, and shall use its best
efforts to ensure that each selling group member complies with, the same
provisions of this Schedule as apply to such Underwriter as if such
provisions applied to such selling group member.
3. All offers and sales of Special Warrants in the United States shall be made
through the Underwriter's U.S. registered broker-dealer affiliate in
compliance with all U.S. federal and state broker-dealer requirements
applicable to the Underwriter and such affiliate in connection with such
offers and sales.
4. Offers and sales of Special Warrants in the United States shall not be made
(i) by any form of general solicitation or general advertising (as those
terms are used in Regulation D), including advertisements, articles,
notices or other communications published in any newspaper, magazine, or
similar media or broadcast over radio or television, or any seminar or
meeting whose attendees had been invited by general solicitation or general
advertising or (ii) in any manner involving a public offering within the
meaning of Section 4(2) of the 1933 Act.
5. Any offer, sale or solicitation of an offer to buy Special Warrants that
has been made or will be made in the United States was or will be made only
to Accredited Investors and in transactions that are exempt, from
registration under applicable state securities laws.
6. The Underwriter, acting through its U.S. broker-dealer affiliate, may offer
the Special Warrants in the United States only to offerees with respect to
which such Underwriter has reasonable grounds to believe are Accredited
Investors.
7. Prior to completion of any sale to the Time of Closing, it will provide the
transfer agent with a list of all purchasers of the Special Warrants in the
United States.
8. At least one business day prior to the Time of Closing, it will provide the
transfer agent with a list of all purchasers of the Special Warrants in the
United States.
9. At Closing, it together with its U.S. affiliate selling Special Warrants in
the United States, will provide a certificate, substantially in the form of
Appendix I to this Schedule, relating to the manner of the offer and sale
of the Special Warrants in the United States.
10. Each certificate evidencing a Special Warrant sold to a person in the
United States will contain a legend substantially to the effect that:
"The securities represented by this certificate and the securities which
may be issued upon exercise of this certificate have not been registered
under the Unites States Securities Act of 1933, as amended, or any other
state securities laws, may not be sold, pledged or hypothecated in the
absence of an effective registration statement under said act or such laws
or an opinion of counsel to the Company to the effect that such transfer is
exempt from registration under all applicable securities laws."
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Representations, Warranties and Covenants of the Corporation
------------------------------------------------------------
The Corporation represents, warrants, covenants and agrees that:
1. The Corporation is a "foreign issuer" with the meaning of Regulation S and
there is no Substantial U.S. Market Interest in the Special Warrants, the
Warrants or the Common Shares.
2. The Corporation (i) is not, and as a result of the sale of the Special
Warrants contemplated hereby will not be, an "investment company" as
defined in the United States Investment Company Act of 1940, as amended or
(ii) shall take all such reasonable steps to ensure that it is not an
"investment company".
3. Except with respect to offers and sales to Accredited Investors within the
United States in reliance upon any exemption from registration under
Section 4(2) of the 1933 Act and Rule 506 thereunder, neither the
Corporation nor any of its affiliates, nor any person acting on its behalf,
has made or will make: (A) any offer to sell, or any solicitation of an
offer to buy, any Special Warrants to a U.S. Person or a person in the
United States; or (B) any sale of Special Warrants unless, at the time the
buy order was or will have been originated, the purchaser is (i) outside
the United States or (ii) the Corporation, its affiliates, and any person
acting on their behalf reasonably believes that the purchaser is outside
the United States.
4. During the period in which the Special Warrants are offered for sale,
neither it nor any of its affiliates, nor any person acting on its or their
behalf (i) has made or will make any Directed Selling Efforts in the United
States, or (ii) has engaged in or will engage in any form of general
solicitation or general advertising (as those terms are used in Regulation
D) with respect to offers or sales of the Special Warrants in the United
States, including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media, or broadcast over
radio, or television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.
5. Except with respect to the offer and sale of the Special Warrants offered
hereby and offers and sales of common shares of the Corporation pursuant to
the Corporation's employee benefit plans, the Corporation has not, for a
period of six months prior to the date hereof sold, offered for sale or
solicited any offer to buy any of its securities in the United States.
APPENDIX I
TO SCHEDULE "D"
UNDERWRITERS' CERTIFICATE
In connection with the private placement in the United States of the
Special Warrants (the "Warrants") of ▇▇▇.▇▇▇ International Inc. (the
"Corporation") pursuant to the Underwriting Agreement, dated September 30, 1999
(the "Underwriting Agreement"), among the Corporation and Canaccord Capital
Corporation (the "Underwriter"), the undersigned does hereby certify as follows:
(i) the U.S. affiliate of the Underwriter who offered or sold Warrants in the
United States is a duly registered broker or dealer with the United States
Securities and Exchange Commission and is a member of and in good standing with
the National Association of Securities Dealers, Inc. on the date hereof and is
registered, qualified or otherwise exempt from registration or qualification as
a broker or dealer in each state in which Warrants have been or will be offered
or sold;
(ii) immediately prior to offering Warrants to such offerees, we had reasonable
grounds to believe and did believe that each offeree was an "accredited
investor" as defined in Rule 501(a)of Regulation D (an "Accredited Investor")
under the Securities Act of 1933, as amended (the "1933 Act"), and, on the date
hereof, we continue to believe that each U.S. person purchasing Warrants is an
Accredited Investor;
(iii) no form of general solicitation or general advertising (as those terms are
used in Regulation D under the ▇▇▇▇ ▇▇▇) was used by us, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or television, or
any seminar or meeting whose attendees had been invited by general solicitation
or general advertising, in connection with the offer or sale of the Warrants in
the United States;
(iv) the offering of the Warrants in the United States has been conducted by us
through our U.S. affiliate in accordance with the terms of the Underwriting
Agreement; and
(v) prior to any sale of Warrants in the United States pursuant to Section
4(2) and Rule 506 thereunder, we caused each U.S. purchaser to execute a U.S.
Subscription Agreement.
Terms used in this certificate have the meanings given to them in the
Underwriting Agreement unless otherwise defined herein.
Dated this day of September, 1999.
CANACCORD CAPITAL CORPORATION
on behalf of itself and its U.S. affiliate
By:________________________________
Name:
Title: