724 SOLUTIONS INC.
INITIAL PUBLIC OFFERING OF COMMON SHARES
CANADIAN UNDERWRITING AGREEMENT
- , 2000
▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc.
RBC Dominion Securities Inc.
Credit Suisse First Boston Securities Canada Inc.
Ladies and Gentlemen:
724 Solutions Inc. (the "CORPORATION"), a corporation incorporated
under the laws of the Province of Ontario, proposes, subject to the terms and
conditions stated in this Agreement, to issue and sell Common Shares of the
Corporation in an offering to be conducted in Canada and the United States. The
Corporation proposes to issue and sell an aggregate of - Common Shares (the
"CANADIAN FIRM SHARES") in Canada to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., RBC Dominion Securities
Inc. and Credit Suisse First Boston Securities Canada Inc. (collectively, the
"CANADIAN UNDERWRITERS"), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. is acting as Canadian
representative (the "CANADIAN REPRESENTATIVE") and, at the election of the
Canadian Underwriters, to issue and sell up to - additional Common Shares (the
"ADDITIONAL CANADIAN SHARES") to the Canadian Underwriters for the purpose of
covering over-allotments, if any, made in connection with the offering. The
Canadian Firm Shares and the Additional Canadian Shares, if any, are referred to
herein collectively as the "CANADIAN SHARES" and the offering of the Canadian
Shares is referred to herein as the "CANADIAN OFFERING".
The parties hereto acknowledge that the Corporation is concurrently
entering into an agreement dated the date hereof (the "U.S. UNDERWRITING
AGREEMENT") pursuant to which the Corporation proposes to issue and sell an
aggregate of - Common Shares (THE "U.S. FIRM SHARES") in the United States to
Credit Suisse First Boston Corporation, FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. and
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC (collectively, the "U.S. UNDERWRITERS"), for whom
Credit Suisse First Boston Corporation is acting as U.S. representative (the
"U.S. REPRESENTATIVE") and, at the election of the U.S. Underwriters, up to -
additional Common Shares (the "ADDITIONAL U.S. SHARES") for the purpose of
covering over-allotments, if any, made in connection with the offering. The U.S.
Firm Shares and the Additional U.S. Shares, if any, are referred to herein
collectively as the "U.S. SHARES" and the offering of the U.S. Shares is
referred to herein as the "U.S. OFFERING".
The Corporation understands that the Canadian Underwriters will
simultaneously enter into an agreement with the U.S. Underwriters dated the date
hereof (THE "INTER-SYNDICATE AGREEMENT") providing for, among other things, the
coordination of certain transactions among the Canadian Underwriters and the
U.S. Underwriters.
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ARTICLE 1
DEFINITIONS
1.1 IN THIS AGREEMENT:
"1933 ACT" means the UNITED STATES SECURITIES ACT OF 1933, as amended;
"1934 ACT" means the United States Securities Exchange Act of 1934, as
amended;
"ADDITIONAL CANADIAN SHARES" has the meaning given to such term above;
"ADDITIONAL U.S. SHARES" has the meaning given to such term above;
"ADDITIONAL SHARES" means the Additional Canadian Shares together with
the Additional U.S. Shares;
"AFFILIATE", "DISTRIBUTION", "MATERIAL CHANGE", "MATERIAL FACT",
"MISREPRESENTATION", and "SUBSIDIARY" when used in connection with
the Canadian Final Prospectus or any Prospectus Amendment thereto
shall have the respective meanings given to them in the SECURITIES
ACT (Ontario) and when used in connection with the U.S. Registration
Statement, U.S. Preliminary Prospectus, U.S. Final Prospectus or any
Prospectus Amendment thereto shall have the meaning (to the extent
applicable) under the U.S. Securities Laws including judicial and
administrative interpretations thereof;
"AGREEMENT" means this agreement;
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a
statutory or civic holiday in the City of Toronto, Canada;
"CANADIAN FINAL PROSPECTUS" means the final long form prospectus of
the Corporation relating to the distribution of the Canadian Shares,
prepared and filed with the Canadian Securities Regulators in
accordance with Canadian Securities Laws;
"CANADIAN FIRM SHARES" has the meaning given to such term above;
"CANADIAN GAAP" means accounting principles generally accepted in
Canada;
"CANADIAN OFFERING" has the meaning given to such term above;
"CANADIAN PRELIMINARY PROSPECTUS" means, collectively, the
preliminary long form prospectus of the Corporation dated -, 1999
and the Amended Preliminary Prospectus dated January 12, 2000
relating to the distribution of the Canadian Shares and prepared and
filed with the Canadian Securities Regulators in accordance with
Canadian Securities Laws;
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"CANADIAN PRICING PROSPECTUS" means the supplemented Canadian Final
Prospectus, incorporating the PREP Information, to be dated January
-, 2000 (in both the English and French languages unless the context
indicates otherwise) used in Canada.
"CANADIAN REPRESENTATIVE" has the meaning given to such term above;
"CANADIAN SECURITIES LAWS" means all applicable securities laws in
each of the Qualifying Provinces and the respective regulations and
rules under such laws together with applicable published policy
statements of the Canadian Securities Administrators and the
Canadian Securities Regulators;
"CANADIAN SECURITIES REGULATORS" means the applicable securities
commission or regulatory authority in each of the Qualifying
Provinces;
"CANADIAN SHARES" has the meaning given to such term above;
"CANADIAN UNDERWRITERS" has the meaning given to such term above, and
"CANADIAN UNDERWRITER" means any one of them;
"CLAIM" has the meaning given to it in Section 12.3 of this Agreement;
"CLOSING DATE" means the date of the First Time of Delivery;
"COMMON SHARES" means the common shares in the capital of the
Corporation;
"CORPORATION" means 724 Solutions Inc.;
"CORPORATION'S CANADIAN COUNSEL" means the law firm of ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇;
"CORPORATION'S U.S. COUNSEL" means the law firm of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP;
"DIRECTED SHARE PROGRAM" means the issuance by the U.S. Underwriters
and Canadian Underwriters of up to 10% of the Shares to the
Corporation's employees, directors and certain other persons
associated with the Corporation who have expressed an interest in
purchasing Common Shares in the U.S. Offering or the Canadian
Offering at the public offering price for such Shares;
"FINANCIAL INFORMATION" means the Consolidated Financial Statements
of the Corporation included in the Prospectus, together with the
reports of KPMG on such financial statements as at and for the
periods included in the Prospectus and including the notes with
respect to such financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included
in the Prospectus;
"FINAL PROSPECTUS DATE" means the date of the Canadian Final
Prospectus, being the date of this Agreement;
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"FIRM SHARES" means the Canadian Firm Shares together with the U.S.
Firm Shares;
"FIRST TIME OF DELIVERY" means the time and date of delivery of the
Firm Shares and the closing of the sale and purchase thereof, that
being -, Toronto time, on -, 2000 or such other time and date as the
Representatives and the Corporation may agree upon in writing;
"INDEMNIFIED PARTY" has the meaning given to it in Section 12.3
hereof;
"INDEMNIFYING PARTY" has the meaning given to it in Section 12.3
hereof;
"KPMG" means KPMG LLP, the auditors of the Corporation;
"MATERIAL ADVERSE EFFECT" has the meaning given to it in Section
2.3(a) hereof;
"NASDAQ" means The Nasdaq Stock Market;
"NOTICE" has the meaning given to it in Section 14.5 hereof;
"OBCA" means the BUSINESS CORPORATIONS ACT (Ontario);
"PREP EXEMPTION ORDERS" means the exemption orders or rulings issued
by the Canadian Securities Regulators permitting the Corporation to
use the PREP Procedures in connection with the distribution of
Shares in Canada;
"PREP INFORMATION" means the information, if any, included in the
Canadian Pricing Prospectus that is omitted from the Canadian Final
Prospectus in accordance with the PREP Procedures and the PREP
Exemption Orders but that is deemed under the PREP Procedures and the
PREP Exemption Orders to be incorporated by reference into the Canadian
Final Prospectus as of the date of the Canadian Pricing Prospectus;
"PREP PROCEDURES" means the rules and procedures established pursuant
to the Canadian Securities Laws for the pricing of securities after the
final receipt for a prospectus has been obtained;
"PROSPECTUS" means, collectively, the Canadian Preliminary Prospectus,
the Canadian Final Prospectus and the U.S. Prospectus and any
Prospectus Amendment;
"PROSPECTUS AMENDMENT" means any amendment or supplement to the
Canadian Final Prospectus or the U.S. Final Prospectus, including the
Canadian Pricing Prospectus, or any amended and restated Canadian
Final Prospectus or U.S. Final Prospectus;
"PURCHASE PRICE" means the amount of Cdn. $- per Common Share, being
the equivalent of the purchase price for Shares sold in the U.S. based
on the noon buying rate in New York City for cable transfers in
Canadian dollars as of the date of the Canadian Pricing Prospectus;
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"QUALIFYING PROVINCES" means each of the provinces of Canada;
"SEC" means the United States Securities and Exchange Commission;
"SECOND TIME OF DELIVERY" means the time and date of delivery of the
Additional Canadian Shares and the closing of the sale and purchase
thereof, that being 8:30 a.m., Toronto time, on the date specified by
the Canadian Representative in the written notice given by it of the
Canadian Underwriters' election to purchase such Additional Canadian
Shares, or such other time and date as they and the Corporation may
agree upon in writing;
"SHARES" means the Canadian Shares together with the U.S. Shares;
"TIME OF DELIVERY" means the First Time of Delivery or the Second Time
of Delivery (or 8:30 a.m. on any other date specified by the Canadian
Representative in the written notice given by it of the Canadian
Underwriters' election to purchase Additional Canadian Shares), as the
case may be;
"TRUST COMPANY" means Montreal Trust at its principal office in
Toronto, Ontario;
"TSE" means The Toronto Stock Exchange;
"UNDERWRITERS' CANADIAN COUNSEL" means the law firm of Osler, ▇▇▇▇▇▇ &
Harcourt LLP;
"UNDERWRITERS' U.S. COUNSEL" means the law firm of Shearman & Sterling;
"UNDERWRITING FEE" means the amount of Cdn. $- per Share being the
equivalent of the underwriting fee for Shares sold in the U.S. based
on noon buying rate in New York City for cable transfers in Canadian
dollars as of the date of the Canadian Pricing Prospectus;
"U.S. FINAL PROSPECTUS" means the final prospectus forming part of the
U.S. Registration Statement;
"U.S. FIRM SHARES" has the meaning given to such term above;
"U.S. OFFERING" has the meaning given to such term above;
"U.S. PRELIMINARY PROSPECTUS" means any preliminary prospectus
included in the U.S. Registration Statement filed with the SEC
pursuant to the 1933 Act;
"U.S. PROSPECTUS" means the prospectus relating to the U.S. Shares
included in the U.S. Registration Statement;
"U.S. REGISTRATION STATEMENT" means the registration statement on Form
F-1 relating to the registration of the Shares for distribution in the
United States and filed with the SEC pursuant to the 1933 Act, prepared
in compliance with U.S. Securities Laws, including all
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exhibits thereto and the information contained in the form of final
prospectus filed with the SEC and deemed to be part of the
registration statement at the time it was declared effective, and each
such part of a registration statement as amended as at the time such
part became effective;
"U.S. SECURITIES LAWS" means all applicable securities legislation in
the United States, including without limitation the 1933 Act and the
1934 Act and the rules and regulations promulgated thereunder;
"U.S. SHARES" has the meaning given to such term above;
"U.S. SUBSIDIARY" means 724 Solutions Corp., a corporation
incorporated under the laws of the State of Delaware;
"U.S. UNDERWRITERS" has the meaning given to such term above and "U.S.
UNDERWRITER" means any one of them; and
"U.S. UNDERWRITING AGREEMENT" has the meaning given to such term above.
Unless otherwise expressly provided in this Agreement, words importing
only the singular number include the plural and vice versa and words importing
gender include all genders.
ARTICLE 2
TERMS AND CONDITIONS
2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION
The Corporation represents and warrants to, and agrees with, each of the
Canadian Underwriters that:
2.2 COMPLIANCE WITH SECURITIES LAWS
(a) The Corporation shall fulfil and comply with, to the reasonable
satisfaction of the Canadian Underwriters, all Canadian
Securities Laws required to be fulfilled or complied with by the
Corporation to enable the Canadian Shares to be lawfully
distributed in the Qualifying Provinces through such of the
Canadian Underwriters as are duly registered to effect such
distribution, or any other investment dealers or brokers
registered as such in the Qualifying Provinces (or pursuant to
exemptions from the registration requirements of the Canadian
Securities Laws of such provinces). These requirements shall
include, without limitation, the filing of an English language
version and French language version of the Canadian Final
Prospectus, as appropriate, and the required related documents
with the Canadian Securities Regulators and obtaining a receipt
or similar corresponding document in respect thereof. Such
requirements shall be fulfilled within the times specified in
Section 5.7 hereof.
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(b) Until the distribution of the Shares shall have been completed,
the Corporation shall promptly take or cause to be taken all
additional steps and proceedings that from time to time may be
required under the Canadian Securities Laws to continue to
qualify the Shares for distribution in the Qualifying Provinces,
or in the event that the Shares have, for any reason, ceased to
so qualify, to again so qualify the Shares.
(c) All information and statements contained in the Canadian
Preliminary Prospectus, the Canadian Final Prospectus and any
Prospectus Amendment are true and correct in all material
respects and contain no misrepresentation and constitute full,
true and plain disclosure of all material facts relating to the
Corporation and the Canadian Shares, no material fact or
information has been omitted from such disclosure which is
required to be stated in such disclosure or is necessary to make
the statements or information contained in such disclosure not
misleading in light of the circumstances under which they were
made, and such documents comply fully with the requirements of
the Canadian Securities Laws.
(d) the Corporation (A) has obtained the PREP Exemption Orders; (B)
will have prepared and filed with the Canadian Securities
Regulators the Canadian Final Prospectus omitting the PREP
Information; and (C) will prepare and file the Canadian Pricing
Prospectus, promptly after pricing of the Shares, with each of
the Canadian Securities Regulators.
(e) The U.S. Registration Statement has either (i) become effective
under the 1933 Act and is not proposed to be amended, or (ii) is
proposed to be amended by amendment or post-effective amendment,
and the Corporation will comply with the terms of the U.S.
Underwriting Agreement to effect such amendment. No stop order
suspending the effectiveness of the U.S. Registration Statement
is in effect, and no proceedings for such purpose are pending
before or threatened by the SEC.
(f) (i) On the effective date of the U.S. Registration Statement,
it did not or will not contain and, as amended or
supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, (ii) the U.S. Registration
Statement and the U.S. Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material
respects with the 1933 Act and the applicable rules and
regulations of the SEC thereunder and (iii) the Prospectus
does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do
not apply to statements or omissions in the U.S. Registration
Statement or the Prospectus based upon information relating to
any Canadian Underwriter furnished to the Corporation in
writing by such Canadian Underwriter expressly for use therein.
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(g) The financial statements included in the U.S. Registration
Statement and the Prospectus present fairly the financial
position of the Corporation and its consolidated subsidiaries as
of the dates indicated and their results of operations and cash
flows for the periods specified, and except as otherwise
disclosed in the Prospectus such financial statements have been
prepared in conformity with Canadian GAAP, applied on a
consistent basis, and the supporting schedules included in the
U.S. Registration Statement present fairly the information stated
therein. The assumptions used in preparing the pro forma
financial statements included in the U.S. Registration Statement
and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or
events described therein; the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma
columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(h) Neither the issue and sale of the Shares to the Canadian
Underwriters and the U.S. Underwriters by the Corporation
pursuant to this Agreement, nor the compliance by the Corporation
with the other provisions of this Agreement and the U.S.
Underwriting Agreement and the consummation of the other
transactions contemplated by such agreements require the consent,
approval, authorization, registration, filing or qualification
under Canadian Securities Laws of or with any other governmental
authority except: (i) the filing of the Canadian Final Prospectus
with the Canadian Securities Regulators and obtaining receipts
with respect thereto and the filing of the Canadian Pricing
Prospectus; (ii) such as have been obtained or such as may be
required under state securities or Blue Sky laws of the states of
the United States of America; and (iii) such as have been
obtained under the 1933 Act and the 1934 Act.
2.3 CORPORATE MATTERS
(a) The Corporation has been duly incorporated and is an existing
corporation under the laws of Ontario, with the corporate power
and authority to own its property and conduct its business as
described in the Prospectus and is duly registered or qualified
to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing
of property requires such registration or qualification, except
where failure to be so registered or qualified would not have a
material adverse effect on the business or results of operations
of the Corporation and its subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(b) Each subsidiary of the Corporation has been duly incorporated and
is an existing corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority
to own its property and conduct its business and is duly
registered or qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
registration or qualification, except to the extent that the
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failure to be so registered or qualified or in good standing
would not have a Material Adverse Effect. All of the issued and
outstanding shares of each subsidiary of the Corporation has been
duly authorized and validly issued and is fully paid and
non-assessable, and the shares of each subsidiary owned by the
Corporation, directly or indirectly, are owned free and clear of
all liens, encumbrances, defects, or adverse claims or charges of
any type whatsoever.
(c) The Common Shares outstanding prior to the issuance of the Shares
have been duly authorized, validly issued and are fully paid and
non-assessable and conform, in all material respects to the
description of such shares in the Prospectus. There are no
outstanding securities convertible into or exchangeable for, or
warrants, rights or options to purchase from the Corporation, or
obligations of the Corporation to issue, any Common Shares or any
other class of shares in the capital of the Corporation, except
as set forth in the Prospectus.
(d) The Shares have been duly authorized and, when issued and
delivered and paid for in accordance with the terms of this
Agreement, will be validly issued and fully paid and
non-assessable and conform, in all material respects to the
description of such shares in the Prospectus. The issuance of the
Shares will not be subject to any pre-emptive or similar rights.
(e) Except as disclosed in the Prospectus and except for the
agreement between the Corporation and Coxwain Row Capital
Corporation dated August 18, 1999, there are no contracts,
agreements or understandings between the Corporation and any
person that would give rise to a valid claim against the
Corporation or any U.S. Underwriter or Canadian Underwriter for a
brokerage commission, finder's fee or other like payment in
connection with the Canadian Offering or the U.S. Offering.
(f) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Corporation and any
person granting such person the right to require the Corporation
to file a registration statement under the 1933 Act or to qualify
a prospectus under applicable Canadian Securities Laws with
respect to any securities of the Corporation owned or to be owned
by such person or to require the Corporation to include such
securities in the securities registered pursuant to any
registration statement filed by the Corporation under the 1933
Act or to qualify such securities under a prospectus filed under
Canadian Securities Laws.
(g) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement
or the U.S. Underwriting Agreement in connection with the
issuance and sale of the Shares by the Company, except such as
have been obtained and made under applicable Canadian Securities
Laws, the 1933 Act or the 1934, and the approval of the National
Association of Securities Dealers, Inc. with respect to its
review of the fairness of the underwriting arrangements
contemplated by this Agreement, and such as may be required
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under state or provincial securities laws and except for such
consents, approvals, authorizations, orders or filings the
failure of which to obtain would not have a Material Adverse
Effect.
(h) Except as disclosed in the Prospectus, under applicable laws and
regulations of Canada and any political subdivision thereof, all
dividends and other distributions declared and payable on the
Shares may be paid by the Corporation to the holder thereof in
United States dollars or Canadian dollars that may be converted
into foreign currency and freely transferred out of Canada and,
except as disclosed in the Prospectus, all such payments made to
holders thereof or therein who are non-residents of Canada will
not be subject to income, withholding or other taxes under laws
and regulations of Canada or any political subdivision or taxing
authority thereof or therein and will otherwise be free and clear
of any other tax, duty, withholding or deduction in Canada or any
political subdivision or taxing authority thereof or therein and
without the necessity of obtaining any governmental authorization
in Canada or any political subdivision or taxing authority
thereof or therein.
(i) The execution, delivery and performance of this Agreement and the
U.S. Underwriting Agreement, and the issuance and sale of the
Shares have been duly authorized by the Corporation, and this
Agreement and the U.S. Underwriting Agreement have been duly
executed and delivered by the Corporation and constitute legal,
valid and binding obligations of the Corporation enforceable
against the Corporation in accordance with its terms subject to:
(i) bankruptcy, insolvency, moratorium, reorganization and other
laws affecting enforcement of rights of creditors generally; (ii)
general principles of equity, including the qualification that
equitable remedies, including, without limitation, specific
performance and injunction, may be granted only in the discretion
of a court of competent jurisdiction; (iii) the statutory and
inherent powers of a court of competent jurisdiction to stay
proceedings before it and to grant relief from forfeiture; (iv)
the limitation that any judgment of a Canadian court for a
monetary amount will be given in Canadian currency; (v) the
limitation that the rights of indemnity, contribution and waiver
may be limited by applicable laws and (vi) judicial application
of foreign laws or foreign governmental actions affecting
creditors' rights.
(j) The execution, delivery and the performance of this Agreement and
the U.S. Underwriting Agreement will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under (i) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Corporation or any subsidiary of the
Corporation or any of their properties, or any provision of the
articles or by-laws of the Corporation, (ii) any material
agreement or other instrument binding on the Corporation or any
of its subsidiaries or to which the properties of the Corporation
or any such subsidiary is subject, except as would not have a
Material
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Adverse Effect. The Corporation has the power and authority to
authorize, issue and sell the Shares as contemplated by this
Agreement and the U.S. Underwriting Agreement.
(k) The registrar and transfer agent of the Canadian Shares of the
Corporation is Montreal Trust Company at its principal transfer
office in the city of Toronto.
(l) The form of certificate representing the Common Shares has been
approved by the Corporation and complies with the provisions of
the OBCA and the requirements of the TSE.
(m) The TSE and the Nasdaq have conditionally approved the listing
and posting for trading of the Common Shares, subject to the
Corporation fulfilling all of the requirements of each of the TSE
and the Nasdaq.
2.4 NO MATERIAL ADVERSE CHANGES; CERTAIN OTHER MATTERS
(a) Except as disclosed in the Prospectus, since the date of the last
audited financial statements included in the Prospectus there has
been no material adverse change, nor, to the Corporation's
knowledge, any development or event involving a prospective
material adverse change in the condition (financial or
otherwise), business, properties or results of operations of the
Corporation and its subsidiaries, taken as a whole, and except as
disclosed in or contemplated by the Prospectus, there has been no
dividend or distribution of any kind declared, paid or made by
the Corporation on any class of shares.
(b) There are no current or pending actions, suits or proceedings
against or, to Corporation's or knowledge, affecting the
Corporation, any of its subsidiaries or to any of their
respective properties that, if determined adversely to the
Corporation or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect, or would materially
and adversely affect the ability of the Corporation to perform
its obligations under this Agreement or the U.S. Underwriting
Agreement, or which are otherwise material in the context of the
sale of the Shares; and no such actions, suits or proceedings are
threatened or, to the Corporation's knowledge, threatened.
(c) The Corporation is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an
"investment company" as such term is defined in the U.S.
Investment Company Act of 1940, as amended.
(d) Subsequent to the respective dates as of which information is
given in the U.S. Registration Statement and the Prospectus, the
Corporation and its subsidiaries have not incurred any material
liability or obligation, direct or contingent, nor entered into
any material transaction not in the ordinary course of business.
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(e) Except as disclosed in the Prospectus, the Corporation and its
subsidiaries have good and marketable title in fee simple to all
real property all other properties and assets owned by them, in
each case free and clear of all liens, encumbrances and defects
of title that would materially affect the value thereof or
materially interfere with the use made or to be made by them, and
any real property and buildings held under lease by the
Corporation and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with no exceptions that would
materially interfere with the use made or to be made thereof by
them.
(f) Except as disclosed in the Prospectus, the Corporation and its
subsidiaries own or possess, or can acquire on reasonable terms,
trademarks, trade names and other rights to inventions, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
patents, patent rights, and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures
necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with
respect to any of the foregoing that, if determined adversely to
the Corporation or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect. The discoveries,
inventions, products or processes of the Corporation do not, to
the Corporation's knowledge, infringe or conflict with any
intellectual property right of any third party, where such
infringement or conflict could have a Material Adverse Effect.
(g) No labour dispute with the employees of the Corporation or any
subsidiary exists, or, to the knowledge of the Corporation, is
imminent, that might have a Material Adverse Effect.
(h) The Corporation and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as
is adequate for the conduct of their respective businesses and
the value of their respective properties.
(i) The Corporation and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
provincial, state or foreign regulatory authorities necessary to
conduct the businesses now operated by them, except for such
certificates, authorizations or permits the failure of which to
possess would not have a Material Adverse Effect, and have not
received notice of any proceedings relating to the revocation or
modification of any such certificate, authorization or permit
that, if determined adversely to the Corporation or any of its
subsidiaries, would individually or in the aggregate have a
Material Adverse Effect.
(j) The Corporation and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; and (ii)
transactions are recorded as necessary to permit preparation of
financial
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statements in conformity with generally accepted accounting
principles and to maintain accountability for assets.
(k) Neither the Corporation nor any of its affiliates does business
with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes and the Corporation agrees to comply with such section
if prior to the completion of the distribution of Shares it
commences doing such business.
(l) (i) the U.S. Registration Statement and the Prospectus comply,
and any further amendments or supplements thereto will comply,
with any applicable laws or regulations of foreign jurisdictions
in which the Prospectus as amended or supplemented, if
applicable, are distributed in connection with the Directed Share
Program, and that (ii) no authorization, approval, consent,
license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than
such as have been obtained, is necessary under the securities
laws and regulation of foreign jurisdictions in which the
Directed Shares are offered outside Canada and the United States.
(m) The Corporation has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or
operations of the Corporation or any of its subsidiaries will be
affected by the year 2000 problem (that is, any significant risk
that computer hardware or software applications used by the
Corporation and its subsidiaries will not, in the case of dates
or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000); as a result of such review,
the Corporation has no reason to believe, and does not believe,
that there are any issues related to the Corporation's
preparedness to address the year 2000 problem that are of a
character required to be described or referred to in the
Registration Statement or Prospectus which have not been
accurately described in the Registration Statement or Prospectus.
2.5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CANADIAN UNDERWRITERS
(a) Each of the Canadian Underwriters, severally and not jointly,
hereby represents and warrants to, and agrees with the other
parties hereto that:
(i) during the course of distribution of the Canadian Shares
to the public by or through the Canadian Underwriters,
such Canadian Underwriters will offer the Canadian Shares
for sale to the public and will sell the Canadian Shares
only in those jurisdictions where they may be lawfully
offered for sale or sold; and
(ii) such Canadian Underwriter will offer, sell and distribute
the Canadian Shares in compliance with all applicable
Canadian Securities Laws.
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(b) The Canadian Underwriters covenant and agree that they shall
offer the Canadian Shares for sale to the public in the
Qualifying Provinces in compliance with applicable laws. For the
purposes of this subparagraph 2.5(b), the Canadian Underwriters
shall be entitled to assume that Shares are qualified for
distribution in those Qualifying Provinces in which a receipt or
similar document for the Prospectus shall have been obtained from
the applicable Canadian Securities Regulator following the filing
of the Canadian Final Prospectus, as supplemented by the PREP
Information.
(c) The Canadian Underwriters covenant and agree that if they
offer to sell or sell any Shares in jurisdictions other than
the Qualifying Provinces, such offers or sales shall be
effected in compliance with the applicable laws of such
jurisdictions.
ARTICLE 3
PURCHASE AND SALE OF CANADIAN SHARES.
3.1 PURCHASE OF CANADIAN FIRM SHARES
Subject to the terms and conditions herein set forth, the Corporation agrees to
issue and sell to each of the Canadian Underwriters, and each of the Canadian
Underwriters agrees, severally and not jointly, to purchase from the
Corporation, at the Purchase Price per Common Share, the number of Canadian Firm
Shares set forth opposite the name of such Canadian Underwriter in Schedule I
hereto.
3.2 GRANT OF RIGHT TO PURCHASE ADDITIONAL CANADIAN SHARES
The Corporation hereby grants to the Underwriters the right to purchase at their
election up to - Additional Canadian Shares at the Purchase Price for the sole
purpose of covering over-allotments in the sale of the Canadian Firm Shares. Any
such election to purchase Additional Canadian Shares may be exercised only by
written notice from the Canadian Representative to the Corporation, given not
later than 30 days after the date of this Agreement and setting forth the
aggregate number of Additional Canadian Shares to be purchased and the date on
which such Additional Canadian Shares are to be delivered, as determined by the
Canadian Representative, but in no event earlier than the Closing Date or later
than ten Business Days after the date of such notice.
3.3 PURCHASE OF ADDITIONAL CANADIAN SHARES
In the event and to the extent that the Canadian Underwriters shall elect to
exercise the right to purchase Additional Canadian Shares, the Corporation
agrees to issue and sell to each of the Canadian Underwriters, and each of the
Canadian Underwriters agrees, severally and not jointly, to purchase from the
Corporation, at the Purchase Price, that portion of the number of Additional
Canadian Shares as to which such election shall have been exercised (to be
adjusted by the Canadian Underwriters so as to eliminate fractional shares) that
bears the same proportion to the total number of Additional Canadian Shares
which such Canadian Underwriter is entitled to
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purchase as the number of Canadian Firm Shares set forth opposite the name of
such Canadian Underwriter in Schedule I hereto bears to the total number of
Canadian Firm Shares.
ARTICLE 4
DELIVERY AND PAYMENT
4.1 DELIVERY OF CANADIAN SHARES
(a) The purchase and sale of the Canadian Firm Shares shall be
completed at the First Time of Delivery, and the completion of
the purchase and sale of any Canadian Additional Shares shall be
completed on the Second Time of Delivery or on the date specified
in the written notice provided to the Corporation pursuant to
Section 3.2. At the First Time of Delivery: (i) the Corporation
shall deliver to the Canadian Underwriters a definitive share
certificate representing the Canadian Firm Shares, registered in
the name of the Canadian Representative or in such other name or
names as the Canadian Underwriters may notify the Corporation in
writing not less than the day that is the Business Day prior to
such time, (ii) the Canadian Underwriters shall deliver by
certified cheque, bank draft or wire transfer to the Corporation
the aggregate Purchase Price for the Canadian Firm Shares and a
receipt signed by the Canadian Representative for the definitive
certificate delivered to the Canadian Underwriters; and (iii) the
Corporation shall deliver by certified cheque, bank draft, or
wire transfer payable to Canadian Representative, on behalf of
the Underwriters, the Underwriting Fee for the Canadian Firm
Shares.
(b) On any closing date with respect to the purchase and sale of any
Canadian Additional Shares: (i) the Corporation shall deliver to
the Canadian Underwriters a definitive share certificate
representing the number of Canadian Additional Shares being
purchased, registered in the name of the Canadian Representative
or in such other name or names as the Canadian Underwriters may
notify the Corporation in writing not less than the day that is
the Business Day prior to such exercise date, (ii) the Canadian
Underwriters shall deliver by certified cheque, bank draft or
wire transfer payable to the Corporation, the aggregate Purchase
Price for the applicable number of Additional Canadian Shares
together with a receipt signed by the Canadian Representative for
the definitive certificate representing such Additional Canadian
Shares, and (iii) the Corporation shall deliver by certified
cheque, bank draft, or wire transfer payable to the Canadian
Representative, on behalf of the Canadian Underwriters, the
Underwriting Fee for the Additional Canadian Shares purchased as
of such date.
(c) The Corporation shall, prior to the Closing Date or any date of
closing for the issuance of Additional Canadian Shares, make all
necessary arrangements for the exchange of the definitive
certificate representing the Shares, on the delivery date at the
principal offices of Montreal Trust Company in the City of
Toronto for certificates representing such number of Shares
registered in such names as shall be designated by the Canadian
Underwriters not less than 48 hours prior to the
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Closing Time. The Corporation shall pay all fees and expenses
payable to Montreal Trust Company in connection with the
preparation, delivery, certification and exchange of the Shares
and the fees and expenses payable to Montreal Trust Company in
connection with the initial or additional transfers as may be
required in the course of the distribution of the Shares.
4.2 PAYMENT OF UNDERWRITING FEE
As compensation to the Canadian Underwriters for their services hereunder, the
Corporation at each Time of Delivery will pay to -, for the accounts of the
Canadian Underwriters, the Underwriting Fee per Common Share in respect of the
Canadian Shares to be delivered by the Corporation hereunder at such Time of
Delivery. At each Time of Delivery, the Corporation will pay, or cause to be
paid, the aggregate Underwriting Fee payable at such Time of Delivery to the
Canadian Underwriters by certified or official bank cheque or cheques, payable
to the order of the Canadian Representatives, or by wire transfer, in same day
funds.
4.3 PLACE OF DELIVERY
The documents to be delivered at each Time of Delivery by or on behalf of the
parties hereto pursuant to this Article 4 and pursuant to Article 9 hereof,
including the receipts for the Canadian Shares and any additional documents
requested by the Canadian Underwriters pursuant to Section 9.1 hereof, will be
delivered at the offices of in each case at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or at such other place
as the Canadian Underwriters and the Corporation may agree upon.
ARTICLE 5
FURTHER AGREEMENTS OF THE CORPORATION
The Corporation agrees with each of the Canadian Underwriters that:
5.1 FURTHER ACTIONS TO QUALIFY SHARES
The Corporation will promptly from time to time take such further action as the
Canadian Underwriters may reasonably request to qualify the Shares for offering
and sale under the securities laws of such jurisdictions of Canada and the
United States as the Canadian Underwriters may reasonably request and to comply
with such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the distribution
of the Shares.
5.2 NOTIFICATION TO UNDERWRITERS
The Corporation will advise the Canadian Underwriters, promptly after receiving
notice or obtaining knowledge thereof, of: (i) the time when any amendment or
supplement to the Canadian Final Prospectus or U.S. Registration Statement has
been filed or becomes effective; (ii) the issuance by any Canadian Securities
Regulator or by the SEC of any cease trade order, stop order or any other order
preventing or suspending the trading of the Shares or the
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effectiveness of the U.S. Registration Statement or any amendment thereto or any
order preventing or suspending the use of the Canadian Final Prospectus, the
U.S. Final Prospectus or any amendment or supplement thereto; (iii) any request
made by a Canadian Securities Regulator or by the SEC for amending the
Prospectus or the U.S. Registration Statement, or for additional information;
(iv) the suspension of the qualification of the Shares for offering or sale in
any jurisdiction; or (v) the institution, threatening or contemplation of any
proceeding for any such purpose. The Corporation will use its best efforts to
prevent the issuance of any such order and, if any such order is issued, to
obtain the withdrawal thereof as promptly as possible.
5.3 RESTRICTION ON OTHER SALES
The Corporation shall not, without the prior written consent of the U.S.
Representative, during the period ending 180 days after the date of the Time of
First Delivery, (i) offer, issue, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any Common Shares or any securities convertible into
or exercisable or exchangeable for Common Shares, or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Shares. The foregoing sentence
shall not apply to: (a) the U.S. Shares to be sold under the U.S. Underwriting
Agreement or the Canadian Shares to be sold hereunder; (b) the issuance by the
Corporation of Common Shares pursuant to exercise of warrants or options, in
each case outstanding on the date of hereof, grants of employee stock options
pursuant to the terms of a plan in effect on the date hereof, and issuances of
Shares pursuant to the exercise of such options. Notwithstanding the foregoing,
the Corporation may file a registration statement on Form S-8 (or any successor
form) to register its Common Shares that are reserved for issuance under its
share option plans, and may issue shares in any bona fide acquisition
transaction involving the purchase of any company, business or technology.
5.4 RESTRICTION ON STABILIZATION AND OTHER ACTIVITIES
Neither the Corporation nor any subsidiary or other entity over which the
Corporation exercises control or significant influence, nor any of its or their
respective officers or directors, will, directly or indirectly, until the
completion of distribution: (i) take any action designed to cause or to result
in, or that constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Corporation to
facilitate the sale or resale of the Shares; (ii) sell, bid for, purchase, or
pay anyone any compensation for soliciting purchases of the Shares other than
the fees payable pursuant to the Canadian Underwriting Agreement or the U.S.
Underwriting Agreement or (iii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Corporation.
5.5 LISTING ON STOCK EXCHANGES
The Corporation will, on or prior to the First Time of Delivery, cause the
Common Shares to be duly listed and posted for trading on the TSE and the
Nasdaq, subject to official notice of issuance.
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ARTICLE 6
DELIVERY OF FINAL PROSPECTUS
6.1 COMMERCIAL COPIES
The Corporation will furnish the Canadian Underwriters, without charge, with
commercial copies of the English and French language versions of the Canadian
Pricing Prospectus in such quantities and at such cities as the Canadian
Representative may from time to time reasonably request by oral instructions to
the Corporation. Such delivery shall be effected as soon as possible and, in any
event, on or before 10:00 a.m. (Toronto time) in the cities of Toronto on the
Business Day following the date of this Agreement, and on or before 10:00 a.m.
(Toronto time) on the second Business Day following the date of this Agreement
elsewhere.
6.2 PROSPECTUS AMENDMENTS
The Corporation shall prepare and deliver promptly to the Canadian Underwriters
signed and certified copies of all Prospectus Amendments required under Canadian
Securities Laws, which shall be in form and substance satisfactory to the
Canadian Underwriters and Underwriters' Canadian Counsel, acting reasonably, and
accompanied by documents corresponding to those referred to in Sections 8.1(c),
8.1(d) and 8.1(e), and the comfort letter referred to in subsection 9.1(h). The
Corporation shall promptly furnish the Canadian Underwriters, without charge,
with commercial copies of the English and French language versions of such
amendment, in such quantities and at such cities as the Canadian Representative
may from time to time reasonably request.
6.3 REPRESENTATION AS TO PROSPECTUS AND PROSPECTUS AMENDMENTS
Delivery of the Canadian Final Prospectus and any Prospectus Amendment thereto
shall constitute a representation and warranty by the Corporation to the
Canadian Underwriters that (i) all information and statements (except
information and statements relating solely to the Canadian Underwriters and
provided by the Canadian Underwriters in writing expressly for inclusion
therein) contained therein are true and correct and contain no misrepresentation
and constitute full, true and plain disclosure of all material facts; (ii) no
material fact or information has been omitted from such disclosure which is
required to be stated in such disclosure or is necessary to make the statements
or information contained in such disclosure not misleading in light of the
circumstances under which they were made; and (iii) such documents comply fully
with the requirements of Canadian Securities Laws.
ARTICLE 7
EXPENSES
7.1 PAYMENT OF EXPENSES
Whether or not the transactions contemplated in this Agreement are consummated
or this Agreement is terminated, the Corporation covenants and agrees with the
Canadian Underwriters that it will pay or cause to be paid the following:
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(a) the fees, disbursements and expenses of the Corporation's
Canadian Counsel, the Corporation's U.S. Counsel and KPMG in
connection with qualification by prospectus of the distribution
of the Shares under Canadian Securities Laws and the registration
and delivery of the Shares under U.S. Securities Laws and all
other fees and expenses in connection with the preparation,
printing and filing of the Prospectus and the U.S. Registration
Statement and the mailing and delivering of copies thereof to the
Underwriters and dealers;
(b) all expenses in connection with the qualification of the Shares
for offering and sale in the Qualifying Provinces and in the U.S.
and the issuance of the Shares and all fees and expenses in
connection with listing the Common Shares on the TSE and the
Nasdaq;
(c) all expenses and taxes arising as a result of the sale and
delivery of the Shares to or for the account of the Underwriters,
of the sale and delivery of the Shares by the Underwriters to
each other, and to the initial purchasers thereof in the manner
contemplated under this Agreement, including, in any such case,
any transfer or other tax asserted against any Canadian
Underwriter by reason of the purchase and sale of a Share
pursuant to this Agreement;
(d) the cost and charges of Montreal Trust Company in connection with
its services as transfer agent or registrar for the Canadian
Shares;
(e) any costs and expenses associated with "road shows" and any
meetings with prospective purchasers of the Shares, all
out-of-pocket expenses of the Underwriters and any advertising
costs relating to the offering of the Shares;
(f) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically
provided for in this Article 7.
ARTICLE 8
DELIVERIES
8.1 CONCURRENT DELIVERIES
Concurrently with the execution and delivery of this Agreement, the Corporation
shall deliver to the Canadian Underwriters:
(a) a copy of each of the Canadian Preliminary Prospectus, the
Canadian Final Prospectus and the Canadian Pricing Prospectus in
the English language signed and certified as required by Canadian
Securities Laws;
(b) a copy of each of the Canadian Preliminary Prospectus, the
Canadian Final Prospectus and the Canadian Pricing Prospectus in
the French language signed and certified as required by Canadian
Securities Laws;
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(c) a copy of any other document required to be filed by the
Corporation under the laws of any of the Qualifying Provinces in
compliance with Canadian Securities Laws;
(d) legal opinions dated the date of the Canadian Pricing Prospectus,
in form and substance satisfactory to the Canadian Underwriters,
acting reasonably, addressed to the Canadian Underwriters, the
Corporation, their respective counsel and the directors of the
Corporation from Quebec counsel to the effect that the French
language version of the Canadian Pricing Prospectus, except for
the Financial Information, as to which no opinion need be
expressed by such counsel, is, in all material respects, a
complete and accurate translation of the English language version
thereof, and that the English and French language versions are
not susceptible of any materially different interpretation with
respect to any material matter contained therein; and
(e) opinions dated the date of the Canadian Preliminary Prospectus
and the Final Prospectus Date or, if applicable, the date of the
Canadian Pricing Prospectus, in form and substance satisfactory
to the Canadian Underwriters, acting reasonably, addressed to the
Canadian Underwriters, the Corporation, their respective counsel
and the directors of the Corporation from KPMG to the effect that
the French language version of the Financial Information
contained in the Canadian Preliminary Prospectus, the Canadian
Final Prospectus and, if applicable, the Canadian Pricing
Prospectus is, in all material respects, a complete and proper
translation of the English language version thereof.
ARTICLE 9
CONDITIONS
9.1 CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS
The obligations of the Corporation to sell the Canadian Firm Shares to the
Canadian Underwriters and the several obligations of the Canadian Underwriters
to purchase and pay for the Canadian Firm Shares on the Closing Date are subject
to the following conditions:
(a) The Canadian Final Prospectus shall have been filed with each of
the Canadian Securities Regulators and receipts obtained therefor
and the Canadian Pricing Prospectus shall have been filed with
each of the Canadian Securities Regulators, and all other steps
or proceedings shall have been taken that may be necessary in
order to qualify the Shares for distribution to the public in
each of the Qualifying Provinces.
(b) The Canadian Representative shall have received a letter, dated
the date of delivery thereof (which, if the effective time of the
initial U.S. Registration Statement is prior to the execution and
delivery of this Agreement, shall be on or prior to the date of
this Agreement or, if the Effective Time of the initial U.S.
Registration Statement is subsequent to the execution and
delivery of this
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Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the registration statement to be
filed shortly prior to such Effective Time), of KPMG, confirming
that they are independent public accountants within the meaning
of the 1933 Act and the applicable published Rules and
Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the U.S. Registration
Statement comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and
the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Corporation, inquiries of
officials of the Corporation who have responsibility for
financial and accounting matters and other specified
procedures, nothing came to their attention that caused them
to believe that:
(A) at the date of the latest available balance sheet read
by KPMG, or at a subsequent specified date not more
than three Business Days prior to the date of such
letter, there was any change in the capital stock or
any increase in short-term indebtedness or long-term
debt of the Corporation and its consolidated
subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any
decrease in consolidated net assets, as compared with
amounts shown on the latest balance sheet included in
the Prospectus;
(B) for the period from the closing date of the latest
income statement included in the Prospectus to the
closing date of the latest available income statement
read by such accountants there were any decreases, as
compared with the corresponding period of the previous
year and with the period of corresponding length ended
the date of the latest income statement included in the
Prospectus, in consolidated revenue, gross profit, or
in total or per share amounts of consolidated net
income (loss), except in all cases set forth in clause
(A) above for changes, increases or decreases which the
Prospectus disclose have occurred or may occur or which
are described in such letter;
(C) at the date of the latest available balance sheet read
by KPMG, or at a subsequent specified date not more
than three Business Days prior to the date of such
letter, there was any change in the capital stock or
any increase in short-term indebtedness or long-term
debt of the Corporation and its consolidated
subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any
decrease in consolidated net assets, as compared with
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amounts shown on the latest balance sheet included in
the Prospectus; or
(D) for the period from the closing date of the latest
income statement included in the Prospectus to the
closing date of the latest available income statement
read by KPMG there were any decreases, as compared with
the corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest income statement included in the Prospectus,
in consolidated revenue, gross profit, or in total or
per share amounts of consolidated net income (loss),
except in all cases set forth in clauses (A), (B) and
(C) above for changes, increases or decreases which the
U.S. Registration Statement and the Prospectus disclose
have occurred or may occur or which are described in
such letter;
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the U.S. Registration
Statement (in each case to the extent that such dollar
amounts, percentages and other financial information are
derived from the general accounting records of the
Corporation and its subsidiaries subject to the internal
controls of the Corporation's accounting system or are
derived directly from such records by analysis or
computation) with the results obtained from inquiries, a
reading of such general accounting records and other
procedures specified in such letter and have found such
dollar amounts, percentages and other financial
information to be in agreement with such results, except
as otherwise specified in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the U.S. Registration
Statement (in each case to the extent that such dollar
amounts, percentages and other financial information are
derived from the general accounting records of the
Corporation and its subsidiaries subject to the internal
controls of the Corporation's accounting system or are
derived directly from such records by analysis or
computation) with the results obtained from inquiries, a
reading of such general amounts, percentages and other
financial information to be in agreement with such
results, except as otherwise specified in such letter.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date there shall not have occurred any
change, or any development or event involving a prospective
change, in the condition, financial or otherwise, business,
properties or operations of the Corporation and its subsidiaries,
taken as one enterprise that is material and adverse and makes it
impractical to market the Shares on the terms and in the manner
contemplated by the Prospectus.
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(d) The Canadian Underwriters shall have received on the Closing Date
a certificate, dated the Closing Date and signed by an executive
officer of the Corporation, to the effect set forth in subsection
9.1(c) above and to the effect that the representations and
warranties of the Corporation contained in this Agreement are
true and correct as of the Closing Date and that the Corporation
has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on
or before the Closing Date.
(e) The Canadian Underwriters shall have received on the Closing Date
an opinion of the Corporation's Canadian Counsel, dated the
Closing Date, which counsel in turn may rely upon the opinions of
local counsel where they deem such reliance proper as to the laws
other than those of Canada or Ontario, to the effect that:
(i) the Corporation has been amalgamated and is an existing
corporation under the laws of the Province of Ontario, with
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly registered or qualified to transact business as an
extra-provincial corporation in each jurisdiction in Canada
in which the conduct of its business or ownership or leasing
of property requires such registration or qualification,
except to the extent that the failure to be so registered or
qualified or be in good standing would not have a Material
Adverse Effect;
(ii) The Shares delivered on such Closing Date and all other
outstanding Common Shares have been duly authorized and
validly issued, are fully paid and non-assessable and
conform, in all material respects, to the description
thereof contained in the Prospectus; and the shareholders of
the Corporation have no pre-emptive or similar rights
arising under (A) any Canadian or Province of Ontario
statute, rule or regulation with respect to the Securities
or (B) the articles, by-laws or agreement of the Corporation
once Common Shares have been issued pursuant to a final
prospectus for which a receipt is issued by a securities
commission or similar regulatory body in Canada and/or
pursuant to an effective registration statement filed with
the Commission;
(iii) The statements in the Prospectus under the captions and
Prospectus in "Risk Factors - Our product contains
encryption technology whose export is restricted by U.S.
and Canadian Law," "Certain Transactions," "Shares
Eligible for Future Sale - Canadian Resale Restrictions
and Escrowed Securities," "Income Tax Consequences -
Canadian Federal Income Tax Considerations" are accurate
in all material respects;
(iv) The Company holds all material licenses, certificates and
permits from federal governmental authorities in Canada and
provincial authorities in the Province of Ontario which are
necessary to the conduct of its business;
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(v) Except for those already obtained or completed, no consent,
approval, authorization or order of, or filing with, any
governmental agency or body or any court of Canada or the
Province of Ontario is required for the consummation of the
transactions contemplated by this Agreement in connection
with the issuance or sale of the Canadian Shares by the
Corporation;
(vi) The execution, delivery and performance of this Agreement
and the U.S. Underwriting Agreement and the issuance and
sale of the Shares will not result in a breach or violation
of any of the terms and provisions of, or constitute a
default under the articles or by-laws of the Corporation,
and the Company has the corporate power and authority to
authorize, issue and sell the Shares as contemplated by this
Agreement and the U.S. Underwriting Agreement;
(vii) to the best of such counsel's knowledge, there are no legal
or governmental proceedings in Canada pending or threatened
to which the Corporation or any of its subsidiaries is a
party or to which any of the properties of the Corporation
or any of its subsidiaries is subject that are required to
be described in the Prospectus and are not so described or
of any statutes, regulations, contracts or other documents
that are required to be described in the Prospectus;
(viii) This Agreement and the U.S. Underwriting Agreement has
been duly authorized, executed and delivered by the
Corporation and constitutes a legal, valid and binding
obligation of the Corporation;
(ix) the execution and delivery by the Corporation of, and the
performance by the Corporation of its obligations under,
this Agreement will not contravene any provision of
applicable laws of the Province of Ontario or any federal
laws of Canada applicable therein or the articles of
incorporation or bylaws of the Corporation
(x) the Canadian Shares are eligible investments under the
statutes listed under "Eligibility for Investment" in the
Canadian Final Prospectus; and
(xi) all documents have been filed and all requisite proceedings
have been taken and all approvals, permits, consents and
authorizations of the appropriate regulatory authorities
under the Canadian Securities Laws has been obtained by the
Corporation to qualify the Canadian Shares for distribution
or distribution to the public in each of the Qualifying
Provinces through investment dealers or brokers registered
under the applicable laws of the Qualifying Provinces, who
have complied with the relevant provisions of such
applicable laws.
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(f) The Canadian Underwriters shall have received on the Closing Date
an opinion of Corporation's U.S. Counsel, dated the Closing Date,
to the effect that:
(i) except as set forth in the U.S. Registration Statement and
the Prospectus, no holders of Common Shares or other
securities have registration rights with respect to
securities of the Corporation and, except as set forth in
the U.S. Registration Statement and the Prospectus, all
holders of securities of the Corporation having rights to
registration of such Common Shares or other securities
because of the filing of the Registration Statement by the
Corporation have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the
Corporation's intent to file the U.S. Registration
Statement;
(ii) the Corporation is not, and will not become, as a result of
the consummation of the transactions contemplated by this
Agreement and the U.S. Underwriting Agreement, and the
application of the net proceeds therefrom as described in
the Prospectus, an "investment company" within the meaning
of the U.S. Investment Company Act of 1940, as amended;
(iii) No authorization, approval, consent or order of, or filing
with, any governmental authority or agency or any court is
required in connection with the transactions contemplated by
this Agreement and the U.S. Underwriting Agreement, except
such as have been obtained and made under the 1933 Act and
such as may be required under state securities laws or "Blue
Sky" laws in connection with the purchase and distribution
of the Shares by the U.S. Underwriters;
(iv) the execution and delivery of this Agreement and the U.S.
Underwriting Agreement and the performance by the
Corporation of their terms do not violate or result in a
violation of any judgment, order or decree of any court or
arbiter, to which the Corporation is a party, and to our
knowledge after reasonably investigation, will not
constitute a material breach of the terms, conditions or
provisions of or constitute a default under any contract,
undertaking, indenture or other agreement by which the
Corporation is now bound or to which it is now a party that
is described in the certificate of an officer of the
Company, a copy of which is attached to such opinion;
(v) the U.S. Registration Statement has become effective under
the 1933 Act, and no stop order suspending the effectiveness
of the U.S. Registration Statement or any part thereof has
been issued or any proceedings for that purpose have been
instituted or are pending or contemplated under the 1933
Act;
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(vi) this Agreement and the U.S. Underwriting Agreement have been
duly executed and delivered by the Corporation;
(vii) the U.S. Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority
to conduct its business. The U.S Subsidiary is duly
qualified to transact business as a foreign corporation in
the State of California; all of the issued and outstanding
capital stock of the U.S Subsidiary is owned by the
Corporation, and to the best of such counsel's knowledge,
free and clear of any security interest, claim, lien,
encumbrance or adverse interest;
(viii) the execution and delivery by the Corporation of, and the
performance by the Corporation of its obligations under,
this Agreement will not contravene any provision of
applicable federal law of the United States or the laws of
the State of New York;
(ix) the information in the Prospectus under the captions
"Certain Transactions," "Shares Eligible for Future
Sale--U.S. Resale Restrictions," and "Consequences - U.S.
Federal Income Tax Considerations," "Consequences - Passive
Foreign Investment Companies"; "Risk Factors - Our
Technology Contains Encryption Technology Whose Export is
Restricted by U.S. and Canadian Law" to the extent that such
information constitutes matters of law or legal conclusions
is a fair summary in all material respects of such matters
and conclusions;
(x) to such counsel's knowledge, there are no material pending
or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator
involving the Corporation, other than such actions, suits or
proceedings as are described in the Prospectus. There is no
contract or other document known to such counsel of a
character required to be described in the Prospectus or to
be filed as an exhibit to the U.S. Registration Statement
that is not described or filed as required; and
(xi) such counsel shall state that it has participated in
conferences with the Underwriters' representatives and with
representatives of the Corporation and its accountants
concerning the U.S. Registration Statement and the
Prospectus and have considered the matters required to be
stated therein and the statements contained therein,
although it has not independently verified the accuracy,
completeness or fairness of such statements, and that, based
upon and subject to the foregoing, nothing has come to such
counsel's attention that leads such counsel to believe that
the U.S. Registration Statement, at the time it became
effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein
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not misleading, or that the Prospectus, at the time they
were filed with the SEC pursuant to Rule 424 (b) under the
1933 Act or as of the date of such opinion, contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading (it being
understood that such counsel shall not be required to make
any comment with respect to the financial statements,
supporting schedules, footnotes, and other financial
information contained in the Registration Statement or the
Prospectus).
In rendering such opinion, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP may rely as to
all matters governed by Canadian law upon the opinion of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇.
(g) The Canadian Underwriters shall have received on the Closing Date
an opinion of the Underwriters' Canadian Counsel, dated the
Closing Date, which counsel in turn may rely upon the opinions of
local counsel where they deem such reliance proper as to the laws
other than those of Canada and Ontario, covering the matters
referred to in Sections 9.1(e)(i), (ii) (but only with respect to
the Shares; (iii); (v); (vi); (viii); (ix); (x); and (xi). With
respect to Sections 9.1(d)(i); (ii); (vi) and (viii), the
Underwriters' Canadian Counsel shall be entitled to rely upon the
opinion of the Corporation's Canadian Counsel in rendering such
opinions.
(h) The Canadian Underwriters shall have received on the Closing Date
from Underwriters' U.S. Counsel such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the
Corporation, the validity of the U.S. Shares delivered on such
Closing Date, the U.S. Registration Statement, the Prospectus,
the matters set out in Section 9.1 (f) (ix) and other related
matters as the Canadian Representative may reasonably require,
and the Company shall have furnished to such counsel such
documents as they shall reasonably request for the purpose of
enabling them to pass upon such matters. In rendering such
opinion, Underwriters' U.S. Counsel may rely on all matters
governed by Canadian law upon the opinion of Underwriters'
Canadian Counsel referred to above
(i) The Canadian Underwriters shall have received, on each of the
date hereof and the Closing Date, letters dated the date hereof
in form and substance satisfactory to the Canadian Underwriters,
from KPMG, independent public accountants, containing statements
and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the
U.S. Registration Statement and the Prospectus.
(j) The U.S Representative shall have received the "lock-up"
agreements, each substantially in the form attached to the U.S.
Underwriting Agreement, from the holders of all of the
Corporation's outstanding Shares, and all securities convertible
into or exercisable or exchangeable for Shares.
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(k) The Shares shall have been conditionally approved for listing on
the TSE and the Nasdaq, subject to the Corporation fulfilling all
the requirements of such exchanges.
(l) Contemporaneously with the purchase by the Canadian Underwriters
of the Canadian Firm Shares under this Agreement (or the Canadian
Additional Shares, as the case may be), the U.S. Underwriters
shall have purchased the U.S. Firm Shares under the U.S.
Underwriting Agreement (or the U.S. Additional Shares, as the
case may be).
(m) On or before the Closing Date, the Canadian Underwriters shall
have received such further certificates, documents, opinions, and
other information as they may have reasonably requested.
(n) The several obligations of the Canadian Underwriters to purchase
Additional Canadian Shares hereunder are subject to the delivery
to the Canadian Representative at the Time of Delivery of such
documents as they may reasonably request with respect to the good
standing of the Corporation, the due authorization and issuance
of the Additional Shares and other matters related to the
issuance of the Additional Canadian Shares.
ARTICLE 10
RIGHTS OF TERMINATION
10.1 LITIGATION
If any enquiry, action, suit, investigation or other proceeding, whether formal
or informal, is instituted or threatened or any order is made by any Canadian or
U.S. federal, provincial, state or other governmental authority in relation to
the Corporation, which, in the reasonable opinion of any of the Canadian
Underwriters, operates to prevent or restrict the distribution or trading of the
Shares, any of the Canadian Underwriters shall be entitled, at their option and
in accordance with Section 10.5, to terminate their obligations under this
Agreement by notice to that effect given to the Corporation any time prior to
the First Time of Delivery.
10.2 MARKET OUT CLAUSE
If prior to the First Time of Delivery:
(a) there should develop, occur or come into effect or existence any
event, action, state, condition or major financial occurrence of
national or international consequence or any law or regulation,
which, in the opinion of any of the Canadian Underwriters,
seriously adversely affects or involves or will seriously
adversely affect or involve, the financial markets or the
business, operations or affairs of the Corporation and its
subsidiaries on a consolidated basis; or
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(b) the state of the financial markets in Canada or elsewhere where
it is planned to market the Canadian Shares is such that, in the
reasonable opinion of any of the Canadian Underwriters, the
Canadian Shares cannot be profitably marketed,
any of the Canadian Underwriters shall be entitled at their option, in
accordance with paragraph 10.5, to terminate their obligations under this
Agreement by written notice to that effect given to the Corporation prior to the
First Time of Delivery.
10.3 MATERIAL CHANGE
If prior to the First Time of Delivery there shall occur any material change or
a change in any material fact, which in the opinion of any of the Canadian
Underwriters, would be expected to have a significant adverse effect on the
market price or value of the Shares, any of the Canadian Underwriters shall be
entitled, at its option, in accordance with Section 10.5, to terminate its
obligations under this Agreement by written notice to that effect given to the
Corporation at or prior to the First Time of Delivery.
10.4 NON-COMPLIANCE WITH CONDITIONS
The Corporation agrees that all terms and conditions in Article 9 shall be
construed as conditions and complied with so far as they relate to acts to be
performed or caused to be performed by it, that it will use its reasonable best
efforts to cause such conditions to be complied with, and that any breach or
failure by the Corporation to comply with any such conditions shall entitle the
Canadian Representative on behalf of the Canadian Underwriters to terminate its
obligations to purchase the Shares by notice to that effect given to the
Corporation at or prior to the First Time of Delivery, unless otherwise
expressly provided in this Agreement. The Canadian Underwriters may waive, in
whole or in part, or extend the time for compliance with, any terms and
conditions without prejudice to their rights in respect of any other terms and
conditions or any other or subsequent breach or non-compliance, provided that
any such waiver or extension shall be binding upon the Canadian Underwriters
only if such waiver or extension is in writing and signed by all of the Canadian
Underwriters.
10.5 EXERCISE OF TERMINATION RIGHTS
The rights of termination contained in Sections 10.1, 10.2, 10.3 and 10.4 may be
exercised by any of the Canadian Underwriters and are in addition to any other
rights or remedies any of the Canadian Underwriters may have in respect of any
default, act or failure to act or non-compliance by the Corporation in respect
of any of the matters contemplated by this Agreement or otherwise. In the event
of any such termination, there shall be no further liability on the part of the
Canadian Underwriters so terminating to the Corporation or on the part of the
Corporation to such Canadian Underwriters except in respect of any liability
which may have arisen prior to or arise after such termination under Sections
7.1, 12.1 and 13.1. Subject to Section 14.1, a notice of termination given by
any Canadian Underwriter under Section 10.1, 10.2, 10.3 or 10.4 shall not be
binding upon any other Canadian Underwriter. Nothing in this Agreement shall
require the Corporation to sell less than all of the Shares.
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ARTICLE 11
MATERIAL CHANGE
11.1 MATERIAL CHANGE DURING DISTRIBUTION
During the period of distribution of the Shares under the Prospectus, the
Corporation shall promptly notify the Canadian Underwriters in writing of:
(a) any material change (actual, anticipated, contemplated or
threatened, financial or otherwise) in the business, affairs,
operations, assets, liabilities (contingent or otherwise) or
capital of the Corporation and its subsidiary taken as a whole;
(b) any material fact which has arisen or has been discovered and
would have been required to have been stated in the Canadian
Final Prospectus or the U.S. Final Prospectus had the fact arisen
or been discovered on, or prior to, the Final Prospectus Date;
and
(c) any change in any material fact contained in the Canadian Final
Prospectus or any Prospectus Amendment which change is, or may
be, of such a nature as to render any statement in the Canadian
Final Prospectus or the U.S. Final Prospectus or any Prospectus
Amendment misleading or untrue or which would result in a
misrepresentation in the Canadian Final Prospectus or the U.S.
Final Prospectus or any Prospectus Amendment or which would
result in the Canadian Final Prospectus or the U.S. Final
Prospectus or any Prospectus Amendment not complying (to the
extent that such compliance is required) with Canadian Securities
Laws or U.S. Securities Laws, as applicable.
The Corporation shall promptly, and in any event within any applicable time
limitation, comply, to the satisfaction of the Canadian Underwriters, acting
reasonably, with all applicable filings and other requirements under Canadian
Securities Laws and U.S. Securities Laws as a result of such fact or change;
provided that the Corporation shall not file any Prospectus Amendment or other
document without first obtaining the approval of the Canadian Representative on
behalf of the Canadian Underwriters, which approval will not be unreasonably
withheld. The Corporation shall in good faith discuss with the Canadian
Underwriters any fact or change in circumstances (actual, anticipated,
contemplated or threatened, financial or otherwise) which is of such a nature
that there is reasonable doubt whether written notice need be given under this
Article 11; and
11.2 CHANGE IN THE CANADIAN SECURITIES LAWS
If during the period of distribution of the Shares there shall be any change in
the Canadian Securities Laws which, in the opinion of the Canadian Underwriters,
requires the filing of a Prospectus Amendment, the Corporation shall, to the
satisfaction of the Canadian Underwriters, acting reasonably, promptly prepare
and file such Prospectus Amendment with the appropriate Canadian Securities
Regulators in each of the Qualifying Provinces where such filing is required and
with the SEC, as appropriate.
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ARTICLE 12
INDEMNITY
12.1 INDEMNIFICATION OF THE CANADIAN UNDERWRITERS
The Corporation agrees to indemnify and save harmless each of the Canadian
Underwriters and each of their respective affiliates, directors, officers,
employees and agents from and against all joint or several liabilities, claims,
losses (other than loss of profits), reasonable costs, damages and reasonable
expenses (including without limitation any legal fees or other expenses
reasonably incurred by any Canadian Underwriter in connection with defending or
investigating any such action or claim, and will reimburse each Canadian
Underwriter for any legal or other expenses reasonably incurred by such Canadian
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred) in any way caused by, or arising directly
or indirectly from, or in consequence of:
(a) any information or statement (except any statement relating
solely to the Canadian Underwriters and provided by or on behalf
of the Canadian Underwriters expressly for use therein) contained
in the Prospectus or the U.S. Registration Statement or in any
certificate of the Corporation delivered pursuant to this
Agreement which, at the time and in the light of the
circumstances under which it was made, contains or is alleged to
contain a misrepresentation;
(b) any omission or alleged omission to state in the Prospectus or
the U.S. Registration Statement any material fact (except facts
omitted on the basis of information or statements relating solely
to the Canadian Underwriters and provided by or on behalf of the
Canadian Underwriters expressly for such purpose) required to be
stated in such document or necessary to make any statement in
such document not misleading in light of the circumstances under
which it was made;
(c) any order made or enquiry, investigation or proceedings commenced
or threatened by any securities commission or other competent
authority based upon any untrue statement or omission or alleged
untrue statement or alleged omission or any misrepresentation or
alleged misrepresentation (except a statement or omission or
alleged statement or omission regarding facts relating solely to
the Canadian Underwriters and provided by or on behalf of the
Canadian Underwriters expressly for use therein) in the
Prospectus or the U.S. Registration Statement or based upon any
failure to comply with the Canadian Securities Laws or the U.S.
Securities Laws (other than any failure or alleged failure to
comply by the Canadian Underwriters), preventing or restricting
the trading in or the sale or distribution of the Shares in any
of the Qualifying Provinces or the United States; or
(d) the non-compliance or alleged non-compliance by the Corporation
with any of the Canadian Securities Laws or U.S. Securities Laws
including the Corporation's
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non-compliance with any statutory requirement to make any
document available for inspection.
12.2 INDEMNIFICATION OF THE CORPORATION
Each Canadian Underwriter agrees, severally and not jointly, to indemnify and
save harmless the Corporation and each of its directors, officers, employees and
agents from and against all joint or several liabilities, claims, losses (other
than loss of profits), reasonable costs, damages and reasonable expenses
(including without limitation any legal fees or other expenses reasonably
incurred by the Corporation in connection with defending or investigating any
such action or claim, and will reimburse the Corporation for any legal or other
expenses reasonably incurred by such Canadian Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred) in any way caused by, or arising directly or indirectly from, or in
consequence of any statement relating solely to the Canadian Underwriters and
provided by or on behalf of the Canadian Underwriters in writing expressly for
use therein contained in the Prospectus or the U.S. Registration Statement
which, at the time and in the light of the circumstances under which it was
made, contains or is alleged to contain a misrepresentation.
12.3 NOTIFICATION OF CLAIMS
If any matter or thing contemplated by Section 12.1 or 12.2 (any such matter or
thing being referred to as a "Claim") is asserted against any person or company
in respect of which indemnification is or might reasonably be considered to be
provided, such person or company (the "Indemnified Party") will notify the party
from which indemnification is being sought (the "Indemnifying Party") as soon as
possible of the nature of such Claim (but the failure so to notify the
Indemnifying Party of any potential Claim shall not relieve the Indemnifying
Party from any liability which it may have to any Indemnified Party and any
omission to so notify the Indemnifying Party of any actual claim shall affect
the Indemnifying Party's liability only to the extent that it is materially
prejudiced by that failure). The Indemnifying Party shall be entitled to
participate in and, to the extent that it shall wish, to assume the defence of
any suit brought to enforce such Claim; provided, however, that the defence
shall be conducted through legal counsel reasonably acceptable to the
Indemnified Party, that no settlement of any such Claim or admission of
liability may be made by the Indemnifying Party or the Indemnified Party without
the prior written consent of the other parties, acting reasonably, and the
Indemnifying Party shall not be liable for any settlement of any such Claim
unless it has consented in writing to such settlement or unless such settlement,
compromise or judgment (a) includes an unconditional release of the Indemnified
Party and the Indemnifying Party from all liability arising out of such action
or claim and (b) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any Indemnified Party or the
Indemnifying Party.
12.4 RIGHT OF INDEMNITY IN FAVOUR OF OTHERS
With respect to any Indemnified Party who is not a party to this Agreement, the
Indemnified Parties who are party to this Agreement shall obtain and hold the
rights and benefits of this Article 12 in trust for and on behalf of such
Indemnified Party.
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12.5 RETAINING COUNSEL
In any such Claim, the Indemnified Party shall have the right to retain other
counsel to act on his or its behalf, provided that the fees and disbursements of
such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying
Party fails to assume the defence of such suit on behalf of the Indemnified
Party within 10 days of receiving written notice of such suit; (ii) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of the other counsel; or (iii) the named parties to any such Claim
(including any added third or impleaded party) include both the Indemnified
Party and the Indemnifying Party, and the Indemnified Party and the Indemnifying
Party shall have been advised by counsel that the representation of both parties
by the same counsel would be inappropriate due to the actual or potential
differing interests between them. In no event shall the Indemnifying Party be
liable to pay the fees and disbursements of more than one firm of separate
counsel for all Indemnified Parties and, in addition, one firm of local counsel
in each applicable jurisdiction.
ARTICLE 13
CONTRIBUTION
13.1 CONTRIBUTION WHERE INDEMNIFICATION UNAVAILABLE
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in Article 12 is unavailable, in whole or
in part, for any reason to an Indemnified Party in respect of any losses,
claims, damages, liabilities, costs or expenses (or claims, actions, suits or
proceedings in respect thereof) referred to in Article 12, the Indemnifying
Party and the Indemnified Party shall contribute to the amount paid or payable
(or, if such indemnity is unavailable only in respect of a portion of the amount
so paid or payable, such portion of the amount so paid or payable) by the
Indemnifying Party as a result of such losses, claims, damages, expenses,
liabilities, costs or expenses (or claims, actions, suits or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Party on the other hand from the offering of the Shares or, if allocation in
such manner is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other hand in connection with the information, statement, omission,
misrepresentation, order, inquiry, investigation or other matter or thing
referred to in Article 12 which resulted in such losses, claims, damages,
liabilities, costs or expenses (or claims, actions, suits or proceedings in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Corporation on the one hand and the
Canadian Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering of the Shares (net of the fee payable to
the Canadian Underwriters but before deducting expenses) received by the
Corporation is to the fee received by the Canadian Underwriters, in each case as
set out in the table on the face page of the English language version of the
Canadian Final Prospectus. The relative fault of the Corporation on the one hand
and of the Canadian Underwriters on the other shall be determined by reference
to, among other things, whether the information, statement, omission,
misrepresentation, order, inquiry, investigation or other matter
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or thing referred to in Section 10 which resulted in such losses, claims,
damages, liabilities, costs or expenses (or claims, actions, suits or
proceedings in respect thereof) relates to information supplied by or steps or
actions taken or done by or on behalf of the Corporation or to information
supplied by or steps or actions taken or done by or on behalf of the Canadian
Underwriters and the relative intent, knowledge, access to information and
opportunity to correct or prevent such statement, omission, misrepresentation,
order, inquiry, investigation or other matter or thing referred to in Article
12. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, liabilities, costs or expenses (or claims, actions,
suits or proceedings in respect thereof) referred to above shall include any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such losses, claims, damages,
liabilities, costs or expenses (or claims, actions, suits or proceedings in
respect thereof), whether or not resulting in any such action, suit, proceeding
or claim. The Corporation and the Canadian Underwriters agree that it would not
be just and equitable if contribution pursuant to this Article 13 were
determined by any method of allocation which does not take into account the
equitable considerations referred to immediately above.
A person who is engaged in any fraud or fraudulent misrepresentation shall not,
to the extent that the claims, expenses, liabilities and losses were caused by
that activity, be entitled to claim contributions therefor from any person who
is not engaged in that fraud or fraudulent misrepresentation.
13.2 RIGHT OF CONTRIBUTION IN ADDITION TO OTHER RIGHTS
The rights to contribution provided in this Article 13 shall be in addition to
and not in derogation of any other right to contribution which the Canadian
Underwriters or the Corporation may have by statute or otherwise at law.
13.3 CALCULATION OF CONTRIBUTION
In the event that the Corporation may be held to be entitled to contribution
from a Canadian Underwriter under the provisions of any statute or at law, the
Corporation shall be limited to contribution in an amount not exceeding the
lesser of: (a) the portion of the full amount of the loss or liability giving
rise to such contribution for which such Canadian Underwriter is responsible, as
determined in Section 13.1; and (b) the amount by which the total price at which
the Shares underwritten by such Canadian Underwriter and distributed to the
public were offered to the public exceeds the amount of any damages which such
Canadian Underwriter has otherwise been required to pay by reason of any statute
or law.
13.4 NOTICE
If an Indemnified Party has reason to believe that a claim for contribution may
arise, it shall give the Indemnifying Party notice of such claim in writing, as
soon as reasonably possible, but failure to notify the Indemnifying Party shall
not relieve the Indemnifying Party of any obligation which it may have to the
Indemnified Party under this Article 13.
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13.5 RIGHT OF CONTRIBUTION IN FAVOUR OF OTHERS
The Corporation and the Canadian Underwriters hereby acknowledge and agree that
each is contracting, with respect to Article 13 hereof, on its own behalf and as
agents for its affiliates, directors, officers, employees and agents. In this
regard the Corporation and each of the Canadian Underwriters shall act as
trustee for such persons and the Corporation and the Canadian Underwriters
accept these trusts and shall hold and enforce the covenants contained in this
Section 13 on behalf of such persons.
ARTICLE 14
OBLIGATIONS OF CANADIAN UNDERWRITERS TO PURCHASE
14.1 FAILURE TO PURCHASE
The obligation of the Canadian Underwriters to purchase the Canadian Firm Shares
at the First Time of Delivery shall be several and not joint and several and,
except as set forth below, shall be limited to the number of Canadian Shares set
out opposite the name of each such Canadian Underwriter in Schedule I hereto.
If one or more of the Canadian Underwriters (the "Refusing Canadian
Underwriters") fails to purchase its applicable number of the Canadian Shares at
the First Time of Delivery (for greater certainty, whether as a result of the
exercise of the rights of termination set forth in Section 8 hereof or
otherwise) and such number of shares exceeds 10% of the total number of Canadian
Shares, then the rights and obligations of the Corporation and the Canadian
Underwriters shall terminate without further liability to any party except in
respect of any liability which may have arisen or may arise under Articles 7, 12
and 13. Nothing in this Article 14 shall relieve any Refusing Canadian
Underwriter from liability to the Corporation. If any one or more of the
Canadian Underwriters fails or refuses to purchase its or their applicable
number of the Canadian Shares, and the aggregate number of such Canadian Shares
is not more than 10% of the total number, the non-defaulting Canadian
Underwriters shall be obligated severally to purchase, pro rata in accordance
with the applicable proportions set out in Schedule I hereto or in such
proportions as the non-defaulting Canadian Underwriters may agree, the Canadian
Shares which such defaulting Canadian Underwriters agreed but failed or refused
to purchase at such time provided that the non-defaulting Canadian Underwriters
shall have the right to postpone the First Date of Delivery for such period, not
exceeding five Business Days, as they shall determine and notify the Corporation
in order that the required changes, if any, in the Prospectus and the U.S.
Registration Statement or in any other document or other arrangements may be
affected.
14.2 SURVIVAL
The respective indemnities, agreements, representations, warranties and other
statements of the Corporation and the several Canadian Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Canadian Underwriter or any controlling person of any Canadian
Underwriter, or the
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Corporation, or any officer or director or controlling person of the Corporation
and shall survive delivery of and payment for the Shares.
14.3 EXPENSES IN THE EVENT OF TERMINATION OR DEFAULT
If this Agreement shall be terminated for any reason, then in addition to
payment of the amounts contemplated in Section 7 hereof, the Corporation will
reimburse the Canadian Underwriters through the Canadian Representative for all
out-of-pocket expenses approved in writing by the Representative, including fees
and disbursements of counsel, reasonably incurred by the Canadian Underwriters
in making preparations for the purchase, sale and delivery of the Common Shares
not so delivered.
14.4 AUTHORITY OF REPRESENTATIVES
The Canadian Representative is hereby authorized by each of the other Canadian
Underwriters to act on their behalf and the Corporation shall be entitled to and
shall act on any notice given in accordance with Section 14.5 or agreement
entered into by or on behalf of the Canadian Underwriters by the Canadian
Representative which represent and warrant that it has irrevocable authority to
bind the Canadian Underwriters, except in respect of any consent to a settlement
pursuant to Section 12.2 which consent shall be given by the Indemnified Party,
a notice of termination pursuant to Article 10 which notice may be given by any
of the Canadian Underwriters, or any waiver pursuant to Section 10.4, which
waiver must be signed by all of the Canadian Underwriters. The Canadian
Representative shall consult with the other Canadian Underwriters concerning any
matter in respect of which it acts as representative of the Canadian
Underwriters. Furthermore, the Canadian Representative is hereby authorized by
each of the other Canadian Underwriters to execute and deliver the
Inter-Syndicate Agreement on their behalf.
14.5 DELIVERY OF NOTICES
All statements, requests, notices and agreements hereunder shall be in writing,
and if to the Canadian Underwriters shall be delivered or sent by mail or
facsimile transmission to the Representatives on behalf of the Canadian
Underwriters at ▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇.▇ ▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇, telephone ▇▇▇-▇▇▇-▇▇▇▇,
facsimile 359-5685 and if to the Corporation shall be delivered or sent by mail
or facsimile transmission to the address of the Corporation set forth in the
Prospectus, Attention: Secretary; provided, however, that any notice to an
Canadian Underwriter pursuant to Section 11 hereof shall be delivered or sent by
mail or facsimile transmission to such Canadian Underwriter at its address,
which address will be supplied to the Corporation by the Canadian Representative
upon request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
14.6 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
-37-
14.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein.
14.8 COUNTERPARTS
This Agreement may be executed by any one or more of the parties hereto in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign this
letter and return it to us, and upon the acceptance hereof by you this letter
and such acceptance hereof shall constitute a binding agreement among each of
the Canadian Underwriters and the Corporation.
Very truly yours,
724 SOLUTIONS INC.
Accepted as of the date hereof:
▇▇▇▇▇▇▇ ▇▇▇▇▇ INC.
RBC DOMINION SECURITIES INC.
CREDIT SUISSE FIRST BOSTON SECURITIES CANADA INC.
SCHEDULE I
---------------------------------------- -------------------------------------- --------------------------------------
NUMBER OF CANADIAN ADDITIONAL SHARES
TO BE PURCHASED IF MAXIMUM OPTION
TOTAL NUMBER OF CANADIAN FIRM SHARES EXERCISED
TO BE PURCHASED
UNDERWRITER
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. [- ] [- ]
---------------------------------------- -------------------------------------- --------------------------------------
RBC Dominion Securities Inc. [- ] [- ]
---------------------------------------- -------------------------------------- --------------------------------------
Credit Suisse First Boston Securities [- ] [- ]
Canada Inc.
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Total [- ] [- ]
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