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Exhibit 10.2
AGENCY AGREEMENT
June 24 1999
Delano Technology Corporation
40 West Wilmot Street
Richmond Hill, Ontario
L4B 1H8
Attention: Mr. John Foresi, President and Chief Executive Officer
Dear Sir:
The undersigned, Griffiths McBurney & Partners ("GMP"), First Marathon
Securities Limited ("FM") and Charles Schwab Canada Co. ("CS") (collectively,
the "Agents"), understand that Delano Technology Corporation (the "Company")
proposes to create, issue and sell up to a maximum of 4,326,924 special
warrants (the "Special Warrants") of the Company (the "Offering") at a price of
$5.20 per Special Warrant (the "Offering Price"). Upon and subject to the
terms and conditions set forth herein, the Company hereby appoints the Agents
to act as the Company's exclusive agents to effect the sale of the Special
Warrants for an aggregate purchase price of $22,500,004.80 and the Agents
hereby agree to act as the agents of the Company for such purposes and to
effect such sale of the Special Warrants on the Company's behalf on a best
efforts basis only to persons resident in the Qualifying Provinces (as
hereinafter defined) (or in those jurisdictions outside of Canada where the
Special Warrants may be lawfully sold provided that such purchase transactions
do not give rise to a prospectus, registration statement or similar filing or
continuous disclosure obligations on behalf of the Company) pursuant to the
terms and conditions hereof. It is understood and agreed that the Agents are
under no obligation to purchase any of the Special Warrants, although the
Agents may subscribe for Special Warrants if they so desire.
Subject to the provisions hereof and of the special warrant indenture (the
"Special Warrant Indenture") to be entered into between the Company and The
Trust Company of Bank of Montreal, as warrant agent, the Special Warrants shall
be exercisable by the holders thereof at any time prior to the Expiry Date (as
hereinafter defined) and will be automatically exercised (without further act
on the part of the holder) at 5:00 p.m. (Toronto time) on the earlier of the
following dates (which date is hereinafter referred to as the "Expiry Date"):
(i) the fifth business day after the date on which a receipt has been issued by
the last of the Securities Regulators (as hereinafter defined) in each
Qualifying Province in which Purchasers of Special Warrants are resident for
the Final Prospectus (as hereinafter defined) qualifying the distribution of
the Class C Preferred Shares (the "Class C Shares") or common shares (the
"Common Shares") of the Company, as the case may be (the "Underlying Shares"),
to be issued upon exercise of the Special Warrants; and (ii) the date which is
12 months after the Closing Date (as hereinafter defined) (subject to the
rights of the individual holders of the Special Warrants to exercise such
Special Warrants at any time prior to the Expiry Date provided that exemptions
are available to
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permit such exercise in compliance with the Canadian Securities Laws (as
hereinafter defined). The specific attributes of the Special Warrants shall be
set forth in the Special Warrant Indenture, which shall provide, among other
things, that the holders of Special Warrants shall be entitled to receive, upon
the exercise thereof and without payment of any consideration in addition to
the purchase price therefor, one Underlying Share for each Special Warrant
held.
The Special Warrants shall be exchangeable for Class C Shares unless all of the
issued and outstanding Class A Preferred shares and Class B Preferred shares of
the Corporation have been converted into Common Shares in accordance with their
terms, in which case each Special Warrant shall be exchangeable for that number
of Common Shares as is equal to the number of Common Shares each Class C Share
may be converted into in accordance with the articles of the Corporation, as
amended.
The purchase of the Special Warrants shall take place at a closing to be held
on June 24, 1999 or such other dates as the Agents and the Company may agree
(the "Closing Date") at 10:00 a.m. (Toronto time) or such other time as the
Agents and the Company may agree (the "Closing Time").
The Company shall use its commercially reasonable best efforts to prepare and
file, in accordance herewith and subject to the terms hereof, the Preliminary
Prospectus (as hereinafter defined) and the Final Prospectus in order to
qualify the Underlying Shares issuable on the exercise of the Special Warrants
for distribution in each of the Qualifying Provinces.
In consideration of the services to be rendered and the costs to be borne
by the Agents in connection with the purchase and sale of the Special
Warrants, including assisting in the preparation of the Prospectus and all
other matters in connection with the issue and sale of the Special Warrants
and the issue of the Underlying Shares, the Company shall pay to the Agents
a fee equal to 6.0% of the gross proceeds realized by the Company in
respect of the sale of the Special Warrants, being a fee of $0.312 per
Special Warrant (the "Commission"). The obligation of the Company to pay
the Commission shall arise at the Closing Time (as hereinafter defined) and
the Commission shall be fully earned and payment to the Agents of the
Commission and the Agents' out-of-pocket, including legal, expenses shall
be made by the Company at that time. Notwithstanding anything to the
contrary contained herein, the Company shall not be obligated to pay the
Agents the Commission in respect of any Special Warrants purchased by XDL
Delano Holdings Inc. ("XDL") and the group of firms or individuals
associated with XDL (collectively, the "XDL Associates"). If receipts for
the Final Prospectus qualifying the Underlying Shares to be issued upon
exercise of the Special Warrants sold to the XDL Associates are issued by
securities regulatory authorities in the Qualifying Provinces, the Company
shall pay a fee of 2% of the gross proceeds of the Special Warrants sold to
the XDL Associates by the Agents (but no fee shall be payable in connection
with the Special Warrants sold to XDL). Such fee shall be payable on the
date the first of such receipts is issued, but shall only be payable if GMP
has executed the underwriter's certificate in the Final Prospectus.
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The Company and each of the Agents agree that all offers and sales of Special
Warrants to U.S. Persons or persons within the United States (as such
terms are defined in paragraph 20 hereof) shall be made in accordance with
paragraph 20 hereof.
DEFINITIONS
In this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:
"AGENTS" means collectively and individually, Griffiths McBurney & Partners,
First Marathon Securities Limited and Charles Schwab Canada Co., and "AGENT"
means one of them;
"AGREEMENT" means the agreement resulting from the acceptance by the Company of
the offer made by the Agents in this letter;
"BUSINESS DAY" means a day which is not a Saturday, Sunday or statutory or
civic holiday in the City of Toronto;
"CANADIAN SECURITIES LAWS" means all applicable securities laws in each of the
Qualifying Provinces and the respective regulations and rules made thereunder,
together with applicable published fee schedules, prescribed forms, policy
statements, orders, blanket rulings and other regulatory instruments of the
securities regulatory authorities in such provinces;
"CLAIM" has the meaning ascribed thereto in subparagraph 14(b);
"CLASS C SHARES" means the Class C Preferred Shares in the capital of the
Company,
"CLOSING DATE" means June 24, 1999 or such earlier or later date as the
Agents and the Company may in writing agree;
"CLOSING TIME" means 10:00 a.m. (Toronto time) on the Closing Date or such
other time on the Closing Date as the Company and the Agents may agree;
"COMMON SHARE" means the common shares in the capital of the Company;
"COMPANY'S AUDITORS" means PriceWaterhouseCoopers, Chartered Accountants,
or such other firm of chartered accountants as the Company may from time to
time appoint as auditors of the Company;
"FINAL PROSPECTUS" has the meaning ascribed thereto in subparagraph 2(b);
"FINANCIAL INFORMATION" means the Company's unaudited financial statements
as at and for the fiscal year ended March 31, 1999 together with the notes
thereto and any other financial statements or information to be contained in
the Preliminary Prospectus or Final Prospectus;
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"INDEMNIFIED PARTY" has the meaning ascribed to it in subparagraph 14(b);
"MISREPRESENTATION", "MATERIAL FACT", "MATERIAL CHANGE", "PERSON",
"SUBSIDIARY", "AFFILIATE", "ASSOCIATE", and "DISTRIBUTION" have the respective
meanings ascribed thereto in the Securities Act (Ontario);
"PRELIMINARY PROSPECTUS" has the meaning ascribed thereto in subparagraph
2(a);
"PROSPECTUS" means, collectively, the Preliminary Prospectus and the Final
Prospectus;
"PURCHASERS" means the persons (which may include the Agents) who as
purchasers acquire Special Warrants by duly completing, executing and
delivering a Subscription Agreement;
"QUALIFICATION DATE" means the date upon which a receipt has been issued
by the last of the Securities Regulators in each Qualifying Province in which
Purchasers are resident for the Final Prospectus qualifying the distribution of
the Underlying Shares;
"QUALIFICATION DEADLINE" has the meaning ascribed thereto in paragraph 3;
"QUALIFICATION DEFAULT" has the meaning ascribed thereto in paragraph 3;
"QUALIFYING PROVINCES" means the Provinces of Canada in which Purchasers
who acquire Special Warrants at the Special Warrant Closing are resident on the
Closing Date;
"RESTRICTED SECURITIES" means securities the purchase or resale of which
is restricted or limited by means of an undertaking, agreement or statute by or
in respect of the purchaser of such securities;
"RIGHTS AGREEMENT" has the meaning ascribed thereto in subparagraph
6(b)(x);
"SHAREHOLDERS AGREEMENT" means the amended and restated shareholders
agreement of the Company dated as of January 27, 1999;
"SPECIAL WARRANT CLOSING" means the completion of the issue and sale by
the Company of the Special Warrants offered hereunder and the purchase by the
Purchasers of the Special Warrants pursuant to the Subscription Agreements;
"SPECIAL WARRANT INDENTURE" means a special warrant indenture to be dated
as of the Closing Date between the Company and The Trust Company of Bank of
Montreal, as trustee and special warrant agent (in such capacity, the "WARRANT
AGENT"), providing for the issue of the Special Warrants and in a form to be
agreed upon between the Company and the Agents, each acting reasonably;
"SUBSCRIPTION AGREEMENT" means a subscription agreement in the form agreed
upon by the Agents and the Company pursuant to which Purchasers agree to
subscribe for and purchase the
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Special Warrants herein contemplated and shall include, for greater
certainty, all schedules thereto;
"SUBSIDIARY" has the meaning ascribed thereto in the Business Corporations
Act (Ontario);
"SUPPLEMENTARY MATERIAL" has the meaning ascribed thereto in subparagraph
4(b);
"TIME OF EXPIRY" means 5:00 p.m. (Toronto time) on the Expiry Date;
"TO THE BEST OF ITS KNOWLEDGE, INFORMATION AND BELIEF", with respect to
any party, means that no information has come to such party's attention which
has given such party actual knowledge of the facts or circumstances referred
to. However, such party has not undertaken any special or independent
investigation to determine the existence or absence of such facts or
circumstances; and
"UNDERLYING SHARES" means the Class C Shares or Common Shares, as the case
may be, issuable on exercise of the Special Warrants.
TERMS AND CONDITIONS
1. (a) SALE ON EXEMPT BASIS. The Agents shall offer for sale on behalf of the
Company the Special Warrants:
(i) in the Qualifying Provinces and foreign
jurisdictions, as agreed to by the Company, acting reasonably
in compliance with all applicable Canadian Securities Laws and
the applicable securities laws of such other jurisdictions;
and
(ii) only to such Purchasers and in such manner so
that, pursuant to the provisions of applicable Canadian
Securities Laws or the securities laws of such other
jurisdictions, no prospectus, offering memorandum or other
similar document need be filed or delivered in connection
therewith and no continuous disclosure obligations arise on
behalf of the Company.
(b) COMPANY FILINGS. The Company undertakes to file or cause to be filed
all forms or undertakings required to be filed by the Company in connection
with the purchase and sale of the Special Warrants so that the distribution of
the Special Warrants may lawfully occur without the necessity of filing a
prospectus or an offering memorandum in the Qualifying Provinces (but on terms
that will permit the Underlying Shares acquired by the Purchasers in the
Qualifying Provinces to be sold by such Purchasers at any time in the
Qualifying Provinces subject to applicable Canadian Securities Laws), and the
Agents undertake to use their commercially reasonable best efforts to cause
Purchasers of Special Warrants to complete any forms required by Canadian
Securities Laws. All fees payable in connection with such filings shall be at
the
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expense of the Company. No provision of this Agreement shall be construed to
require the Company to register or qualify Underlying Shares for resale under
United States federal or state securities laws.
(c) NO OFFERING MEMORANDUM. None of the Company nor the Agents shall (i)
provide to prospective purchasers any document or other material that would
constitute an offering memorandum within the meaning of Canadian Securities
Laws; or (ii) cause the sale of the Special Warrants to be advertised in
printed, public media, radio, television or telecommunications, including
electronic display.
2. (a) PRELIMINARY PROSPECTUS. The Company shall use its commercially
reasonable best efforts from the date hereof until December 15, 1999 and from
June 15, 2000 going forward, to prepare and file and use all commercially
reasonable efforts to obtain receipts for a preliminary prospectus (the
"Preliminary Prospectus") in form and substance satisfactory to the Company and
the Agents, each acting reasonably, and other related documents relating to the
proposed distribution of the Underlying Shares under applicable Canadian
Securities Laws of each of the Qualifying Provinces and promptly resolve all
comments received or deficiencies raised by the Securities Regulators.
(b) FINAL PROSPECTUS. The Company shall, as soon as practicable after all
comments of the Securities Commissions have been satisfied with respect to the
Preliminary Prospectus, prepare, file and use all commercially reasonable best
efforts to obtain receipts therefor under applicable Canadian Securities Laws,
a (final) prospectus in form and substance satisfactory to the Company and the
Agents (the "Final Prospectus"), each acting reasonably, and fulfil and comply
with, to the satisfaction of the Agents' counsel, acting reasonably, all
applicable Canadian Securities Laws to be fulfilled or complied with by the
Company to enable the Underlying Shares to be lawfully distributed to the
public or the Agents (as the case may be) in the Qualifying Provinces in
connection with the exercise of the Special Warrants through the Agents or any
other investment dealer or broker registered as such in the Qualifying
Provinces in compliance with Canadian Securities Laws.
3. ADDITIONAL RIGHTS AND PROTECTION TO THE PURCHASERS. The Company recognizes
that it is fundamental to Purchasers of the Special Warrants that the
distribution of Underlying Shares be qualified under a prospectus in the
Qualifying Provinces within the time periods contemplated by this Agreement so
that the Underlying Shares will be freely tradeable in such Qualifying
Provinces without the necessity of the holder thereof filing a prospectus or
effecting the trade in a manner which falls within one of the various
prospectus exemptions under applicable Canadian Securities Laws (unless such a
trade is a "distribution" by virtue of subparagraph (c) of the definition
thereof set forth in the Securities Act (Ontario) or similar legislation). The
Company acknowledges that it is for this reason that the Company has agreed to
use its commercially reasonable best efforts to ensure that the Preliminary
Prospectus and the Final Prospectus are to be filed with all relevant
securities regulatory authorities in the Qualifying Provinces and receipts are
to be obtained therefor within the time periods contemplated by this Agreement.
Accordingly, if a Qualification Date has not occurred in a Qualifying
Province on or before December 15, 1999 (the "Qualification Deadline"), the
Special Warrants exercised after the
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Qualification Deadline shall entitle such holders resident in such Qualifying
Province to receive 1.1 Underlying Shares (in lieu of one Underlying Share)
without payment of any additional consideration for each Special Warrant held.
Unless exercised earlier by the Purchaser thereof, the Special Warrants will be
and will be deemed to have been exercised immediately prior to 5:00 p.m.
(Toronto time) on the earlier of: (i) the fifth Business Day after the
Qualification Date; and (ii) the date which is twelve months after the Closing
Date.
4. (a) DELIVERIES AT TIME OF FILING. The Company shall deliver to the Agents
contemporaneously with or prior to the filing with the Securities Regulators of
the Preliminary Prospectus or the Final Prospectus, as the case may be:
(i) an executed copy of the Preliminary Prospectus or the Final
Prospectus, as the case may be;
(ii) executed copies of any other document required to be filed by
the Company at such time under the laws of each of the Qualifying
Provinces in compliance with Canadian Securities Laws applicable
therein; and
(iii) (iii) in the case of the Final Prospectus, a letter of the
Company's Auditors dated the date of the Final Prospectus addressed
to the Agents and the board of directors of the Company, in form and
substance satisfactory to the Agents, with respect to certain
financial and accounting information relating to the Company in the
Final Prospectus and which shall be based on procedures carried out
by the Company's Auditors to a date not more than two Business Days
prior to the date of the Final Prospectus and which letter shall be
in addition to the Company's Auditors' report contained in the Final
Prospectus.
(b) SUPPLEMENTARY MATERIAL. The Company shall also prepare and deliver
promptly to the Agents duly signed copies of all amended or supplementary
prospectuses or supplemental statements and related documents required to be
filed by the Company under the laws of any Qualifying Province or by Canadian
Securities Laws and of any amendment to the Preliminary Prospectus or the Final
Prospectus or other document required to be filed under paragraph 7 of this
Agreement (collectively, the "Supplementary Material"). The Preliminary
Prospectus, the Final Prospectus and the Supplementary Material shall be in
form and substance satisfactory to the Agents, acting reasonably.
(c) COPIES. The Company shall cause copies of the Preliminary Prospectus
and the Final Prospectus in the English language and, if required, French
language, to be delivered to the Agents without charge, in such numbers and in
such cities in the Qualifying Provinces as the Agents may reasonably request.
Such delivery shall be effected as soon as practicable and, in any event, on or
before a date two Business Days after the filing thereof with the Securities
Regulators of the Qualifying Provinces. The Company shall similarly cause to be
delivered copies of any Supplementary Material. The Agents shall cause to be
delivered to holders of Special Warrants copies of the Final Prospectus and any
required Supplementary Materials.
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5. REPRESENTATION AS TO PROSPECTUS AND SUPPLEMENTARY MATERIAL. Delivery of the
Prospectus and any Supplementary Material shall constitute a representation and
warranty by the Company to the Agents, the Purchasers and their permitted
assigns that all information and statements (except information and statements
relating solely to or provided solely by the Agents) contained in the
Prospectus and Supplementary Material are true and correct in all material
respects at the time of delivery thereof and contain no misrepresentations and
constitute full, true and plain disclosure of all material facts relating to
the Company and the Underlying Shares and that no material fact or information
has been omitted therefrom (except facts or information relating solely to the
Agents) which is required to be stated therein or is necessary to make the
statements or information contained therein not misleading in light of the
circumstances under which they were made. Such delivery shall also constitute
the Company's consent to the Agents' use of the Preliminary Prospectus, Final
Prospectus, any Supplementary Material and any other public documents supplied
to the Agents by the Company for the distribution of the Underlying Shares in
the Qualifying Provinces in compliance with the provisions of this Agreement
and Canadian Securities Laws.
6. COVENANTS. (a) The Company covenants to the Agents, the Purchasers and
their permitted assigns that the Company shall at all times prior to the date
of the Final Prospectus allow the Agents and their representatives to conduct
all due diligence which the Agents may reasonably require to be conducted to
fulfil their obligations as agents under Canadian Securities Laws and in order
to enable the Agents responsibly to execute any certificate required to be
executed by the Agents in connection with a Prospectus, and it shall be a
condition precedent to the Agent's execution of any certificate in any
Prospectus that they be satisfied, acting reasonably, as to the form and
content of each Prospectus.
(b) The Company hereby covenants to the Agents, the Purchasers and their
permitted assigns that it shall:
(i) duly execute and deliver the Special Warrant
Indenture, the Subscription Agreements and the Special
Warrants at the Closing Time, and comply with and satisfy all
material terms, conditions and covenants therein contained to
be complied with or satisfied by the Company;
(ii) use its commercially reasonable best efforts to
fulfil, to the extent within its control, at or prior to the
Closing Date, each of the conditions set out in paragraph 10;
(iii) ensure that the Special Warrants shall be duly
and validly created, authorized and issued on payment of the
Offering Price therefor, and shall have attributes
corresponding in all material respects to the description
thereof set forth in this Agreement and the Subscription
Agreements;
(iv) ensure that the Underlying Shares shall, upon
issuance, be duly issued as fully paid and non-assessable
securities in the capital of the Company, and shall have
attributes corresponding in all material respects to the
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description thereof set forth in this Agreement and the
Subscription Agreements;
(v) maintain the Warrant Agent or a substitute
licensed trust company as special warrant agent in respect of
the Special Warrants;
(vi) not, for a period of six months following the
Closing Date, issue or announce the issuance of, without the
prior written consent of GMP, such consent not to be
unreasonably withheld or delayed, any Common Shares,
securities convertible or exchangeable into Common Shares or
rights to acquire any of the foregoing at a purchase price
that implies a fully-diluted pre-offering valuation of the
Company of less than U.S. $65 million, other than (a) Common
Shares issued upon exercise or conversion of currently
outstanding securities, (b) Common Shares and options issued
to certain persons pursuant to the stock option plan of the
Company; and (c) Common Shares issued in connection with, or
issuable upon the exercise or conversion of, securities in
connection with any acquisition or strategic partnering
transactions effected by the Company;
(vii) in the event that the Company files a prospectus
(the "IPO Prospectus") with any of the Securities Regulators
in Canada in respect of an initial public offering of any
class of securities of the Company, the IPO Prospectus shall
qualify the Underlying Shares to be issued upon exercise of
the Special Warrants to the extent possible in accordance with
applicable Canadian Securities Laws. Provided that the Company
has not previously filed the IPO Prospectus with any of the
Securities Regulators in Canada, in the event that the Company
files a registration statement (the "Registration Statement")
in the United States in respect of an initial public offering
of any class of securities of the Company, the Registration
Statement shall register the resale, from time to time, of the
Underlying Shares, and shall be kept effective under the U.S.
Securities Act until such time as all Underlying Shares to be
issued upon exercise of the Special Warrants may be resold by
the holders pursuant to Rule 144(k) under the U.S. Securities
Act (as such term is defined in paragraph 20 hereof);
(viii) not, from the Closing Date until the Special Warrants are
exercised in accordance with the provisions of the Special
Warrant Indenture, declare any dividends on any issued and
outstanding shares of the Company or to redeem, retract or
otherwise purchase for cancellation any of the issued and
outstanding Class A Preferred shares or Class B Preferred
shares;
(ix) ensure that GMP, as agent of the Purchasers,
shall be entitled to nominate one independent director to the
Board of Directors of the Company on behalf of all of the
shareholders of the Company. A committee of the Board of
Directors, comprised of Bahman Koohestani, John Foresi and
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Dennis Bennie, shall have the right, at its sole discretion,
to accept or reject such nominee;
(x) on the Closing Date, enter into an agreement (the
"Rights Agreement") with GMP as agent for the Purchasers, in a
form that is acceptable to GMP and the Company, each acting
reasonably, to record the Purchasers agreement as to the
manner in which the Company's affairs shall be conducted and
which shall provide the Purchasers with certain rights and
obligations similar to those set out in the amended and
restated shareholders' agreement dated January 27, 1999
relating to the Company. These rights and obligations shall
include: (i) certain restrictions on dealing with the Special
Warrants and/or the Underlying Shares received upon exercise
of the Special Warrants (including, without limitation,
restrictions on transfer, rights of first refusal,
piggyback/tag-along rights, pre-emptive rights and drag-along
rights); and (ii) confidentiality obligations;
(xi) accept the appointment of GMP by the Purchasers
to be the attorney of the Purchasers to act on their behalf
with the power and authority in their names, places and
steads, to enter into the Rights Agreement; and
(xii) provide copies of its interim or unaudited
annual financial statements, as the case may be, to GMP on
behalf of the Purchasers within 45 days of the end of each
quarter until the Time of Expiry.
(c) AGENTS' OBLIGATION. Each of the Agents covenants with the Company that:
(i) it will execute any certificate or deliver any
documents pertaining to either the Preliminary Prospectus or
the Final Prospectus, which delivery shall be conditional upon
compliance by the Company to the date of such execution and
delivery with each of its covenants contained in this
Agreement to be complied with prior to the filing of the
Preliminary Prospectus or the Final Prospectus, as the case
may be;
(ii) it will offer the Special Warrants for sale on
behalf of the Company only to Purchasers in the Qualifying
Provinces who will purchase such Special Warrants in
compliance with all applicable Canadian Securities Laws or to
Purchasers in jurisdictions outside of Canada but only in
compliance with all applicable laws of such jurisdiction;
(iii) it will not offer the Special Warrants for sale
on behalf of the Company to Purchasers resident in the
Province of Quebec;
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(iv) it will conduct activities in connection with the
Offering for sale on behalf of the Company of the Special
Warrants in compliance with all applicable Canadian Securities
Laws and, without limitation, agrees that it has and will only
deliver to prospective Purchasers any documents or materials
that do not constitute an offering memorandum for the purposes
of the Canadian Securities Laws of the Qualifying Provinces
and that are not otherwise prohibited thereby;
(v) it will obtain from each Purchaser of Special
Warrants for acceptance by the Company an executed
Subscription Agreement for the purchase of the Special
Warrants together with the purchase price therefor;
(vi) upon the Company obtaining receipts therefor from
the Securities Regulators in the Qualifying Provinces and
delivering copies of the Final Prospectus to the Agents, one
copy of the Final Prospectus will be delivered to each
Purchaser of Special Warrants; and
(vii) it will not make any representations or
warranties with respect to the Company, the Special Warrants
or the Underlying Shares other than as set forth in this
Agreement, the Subscription Agreements or the Prospectus.
7. (a) MATERIAL CHANGES DURING DISTRIBUTION. During the period from the date
hereof to the completion of distribution of the Underlying Shares, the Company
shall promptly notify the Agents (and, if requested by the Agents, confirm such
notification in writing) of:
(i) any material adverse change (actual, anticipated, contemplated
or threatened, financial or otherwise) in the business, affairs,
operations, assets, liabilities (contingent or otherwise) or capital
of the Company;
(ii) any material adverse fact which has arisen and would have been
required to have been stated in the Final Prospectus had the fact
arisen on, or prior to, the date of the Final Prospectus; and
(iii) any change in any material adverse fact contained in the Final
Prospectus or the Supplementary Material or any amendments or
supplements thereto which change is, or may be, of such a nature as
to render any material statement in the Final Prospectus or any
Supplementary Material misleading or untrue or which would result in
a misrepresentation in the Final Prospectus or Supplementary Material
or which would result in the Final Prospectus or Supplementary
Material not materially complying (to the extent that such compliance
is required) with the Canadian Securities Laws or which would
reasonably be expected to have a significant effect on the market
price or value of the Underlying Shares.
During the period from the date hereof to the completion of distribution of the
Underlying Shares, the Company shall promptly and, in any event, within any
applicable time limitation,
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comply with all applicable filing and other requirements under Canadian
Securities Laws as a result of such change; provided that the Company shall not
file any Supplementary Material or other document without first obtaining
approval of the Agents, after consultation with the Agents with respect to the
form and content thereof, which approval shall not be unreasonably withheld or
delayed. The Company shall in good faith discuss with the Agents any fact or
change in circumstances (actual, anticipated, contemplated or threatened, and
financial or otherwise) which is of such a nature that there is reasonable
doubt as to whether notice in writing need be given to the Agents pursuant to
this paragraph 7.
(b) CHANGE IN CANADIAN SECURITIES LAWS. If during the period of
distribution to the public of the Underlying Shares, there shall be any change
in Canadian Securities Laws which in the opinion of counsel to the Company or
counsel to the Agents requires the filing of Supplementary Material, the
Company shall, to the satisfaction of its counsel and the Agents' counsel,
acting reasonably, promptly prepare and file such Supplementary Material with
the appropriate Securities Regulators in each of the Qualifying Provinces where
such filing is required.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
represents and warrants to the Agents, the Purchasers and their permitted
assigns, and acknowledges that each of them is relying upon such
representations and warranties in purchasing Special Warrants, that:
(i) the Company has been duly incorporated and is validly
existing under the laws of the Province of Ontario, has all
requisite power and authority and is duly qualified to carry on its
business as now conducted and to own its properties and assets and
the Company has all requisite power and authority to carry out its
obligations under this Agreement, the Subscription Agreements, the
Special Warrants and the Special Warrant Indenture;
(ii) the Company has no material subsidiaries nor any investment
in any person which is or would be material to the business and
affairs of the Company on a consolidated basis;
(iii) all consents, approvals, permits, authorizations or filings
as may be required under Canadian Securities Laws necessary for the
execution and delivery of and the performance by the Company of its
obligations under this Agreement, the Subscription Agreements, the
Special Warrants, the Special Warrant Indenture and the Rights
Agreement have been made or obtained, as applicable;
(iv) each of the execution and delivery of this Agreement, the
Rights Agreement, the Subscription Agreements, the Special Warrants
or the Special Warrant Indenture, the performance by the Company of
its obligations hereunder or thereunder, the sale of the Special
Warrants hereunder and the consummation of the transactions
contemplated in this Agreement, including the issuance and delivery
of the Underlying Shares upon the exercise of the Special Warrants,
do not and will not
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conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, (whether
after notice or lapse of time or both), (A) , any statute, rule or
regulation applicable to the Company including, without limitation,
Canadian Securities Laws; (B) the constating documents, by-laws or
resolutions of the Company which are in effect at the date hereof;
(C) any material mortgage, note, indenture, contract, agreement,
instrument, lease or other document to which the Company is a party
or by which it is bound; or (D) any judgment, decree or order
binding the Company or the property or assets of the Company or its
subsidiaries, which breach, violation or default or the
consequences thereof, individually or in the aggregate, would have
a materially adverse effect on the Company;
(v) there has not occurred any material adverse change, financial
or otherwise, in the assets, liabilities (contingent or otherwise),
business, financial condition, capital or prospects of the Company,
on a consolidated basis, since the effective date of the Financial
Information, and no transaction has been entered into by the Company
(other than in the ordinary course of business) which is or would be
material to the Company;
(vi) the Financial Information and any interim financial
statements for any subsequent financial period have been prepared in
accordance with generally accepted accounting principles and present
fully, fairly and correctly the financial position of the Company as
at the dates thereof and the results of its operations and the
changes in the financial position of the Company for the periods
then ended;
(vii) as at the Closing Date, except as contemplated by this
Agreement, or in respect of which waivers have been obtained and
delivered to the Agents, no holder of outstanding shares in the
capital of the Company will be entitled to any pre-emptive or any
similar rights to subscribe for any of the Class C Shares or other
securities of the Company and, other than stock options which have
been granted in the ordinary course in accordance with the Company's
stock option plan and the securities which have been reserved by the
Company for issuance (directly or through options, warrants or other
arrangements) to senior management, consultants and key employees of
the Company and except as disclosed in Schedule "A" hereto, no
rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares in the capital of the Company
are outstanding;
(viii) no legal or governmental proceedings have been commenced or are
pending to which the Company is a party or to which its property is
subject that would result individually or in the aggregate in any
material adverse change in the operation, business or condition of
the Company on a consolidated basis and, to the knowledge of the
Company, no such proceedings have been threatened against or are
contemplated with respect to the Company, on a consolidated basis,
or with respect to any of its properties;
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(ix) the Company has conducted and is conducting its business in
compliance in all material respects with all applicable laws and
regulations of each jurisdiction in which it carries on business
and has not received a notice of non-compliance, or knows of, or
has reasonable grounds to know of, any facts that could give rise
to a notice of non-compliance with any such laws or regulations
which would have a material adverse effect on the Company on a
consolidated basis;
(x) the Company has all licences, leases, permits, authorizations
and other approvals necessary to permit it to conduct its business
as currently conducted, except where the failure to do so would not
have a material adverse effect on the Company on a consolidated
basis;
(xi) at the Closing Time, each of the Subscription Agreements, the
Rights Agreement, the Special Warrant Indenture and the Special
Warrants shall have been duly authorized and duly executed and
delivered by the Company and upon such execution and delivery each
shall constitute a valid and binding obligation of the Company and
each shall be enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting the rights of creditors generally and except as limited by
the application of equitable principles when equitable remedies are
sought, and by the fact that rights to indemnity, contribution and
waiver, and the ability to sever unenforceable terms, may be limited
by applicable law;
(xii) at the Closing Time, all necessary corporate action will
have been taken by the Company to allot and authorize the issuance
of the Underlying Shares, and upon due exercise of the Special
Warrants in accordance with the provisions thereof, such Underlying
Shares will be validly issued as fully paid and non-assessable
securities in the capital of the Company;
(xiii) the authorized capital of the Company consists of an unlimited
number of common shares, an unlimited number of Class A Preferred
shares, an unlimited number of Class B Preferred shares and an
unlimited number of Class C Preferred Shares, of which 4,000,000
common shares, 4,000,000 Class A Preferred Shares, 3,789,396 Class B
Preferred Shares and no Class C Shares are issued and outstanding as
fully paid and non-assessable as at the date hereof;
(xiv) the Company has timely filed all necessary federal,
provincial, state, local and foreign tax returns and notices and has
paid or made provision for all applicable taxes of whatever nature
for all tax years to the date hereof to the extent such taxes have
become due or have been alleged to be due and, to the knowledge of
the Company, there are no material tax deficiencies or material
interest or penalties accrued or accruing, or alleged to be accrued
or accruing thereon which have not otherwise been provided for by
the Company;
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(xv) to the best of its knowledge, after due enquiry, none of the
directors, officers or principal shareholders of the Company (or
such shareholders respective principals) is or has ever been
subject to prior regulatory, criminal or bankruptcy proceeding in
Canada or elsewhere;
(xvi) with respect to each premises which is material to the
Company and which the Company or a subsidiary occupies as tenant
(the "Material Leased Premises"), the Company or a subsidiary
occupies the Material Leased Premises and has the exclusive right to
occupy and use the Material Leased Premises;
(xvii) each of the leases pursuant to which the Company occupies the
Material Leased Premises is in good standing and in full force and
effect, and neither the Company nor a subsidiary nor, to the best of
the knowledge, information and belief of the Company, after due
enquiry, any other party thereto is in breach of any material
covenants, conditions or obligations contained therein;
(xviii) The Trust Company of Bank of Montreal, at its principal office in
the City of Toronto, has been duly appointed trustee and as Warrant
Agent in respect of the Special Warrants;
(xix) other than the Agents, there is no person acting or
purporting to act at the request or on behalf of the Company who is
entitled to any brokerage or finder's fee in connection with the
transactions contemplated by this Agreement;
(xx) the Company is not aware of a claim of any infringement or
breach by the Company or any of its subsidiaries of any industrial
or intellectual property rights of any other person, nor has the
Company or any of its subsidiaries received any notice nor is the
Company or any of its subsidiaries otherwise aware that the use of
the business names, trademarks, service marks and other industrial
or intellectual property of the Company infringes upon or breaches
any industrial or intellectual property rights of any other person
and the Company has no knowledge of any infringement or violation of
any of its rights in such intellectual and industrial property and
is not aware of any state of facts that casts doubt on the validity
or enforceability of any such intellectual or industrial property
rights;
(xxi) the Company owns or possesses adequate enforceable rights to
use all patents, patent applications, trademarks, service marks,
copyrights, trade secrets, processes or formulations used or
proposed to be used in the conduct of its business;
(xxii) other than the usual customary health benefit plan for all
employees or as otherwise disclosed to the Agents (including those
listed in Schedule "A" hereto), there is presently no material plan
in place for retirement bonus, stock option (other than the
securities reserved by the Company for issuance (directly or through
options, warrants or other arrangements) to directors, senior
management
16
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and key employees of the Company), deferred compensation, severance
or termination pay, insurance, medical, hospital, dental, vision
care, drug, sick leave, disability, salary continuation, legal
benefits, unemployment benefits, vacation, incentive or otherwise
contributed to or required to be contributed to, by the Company for
the benefit of any current or former director, officer, employee or
consultant of the Company and, to the extent that any such employee
benefit plan is in place, each such employee plan has been
maintained in compliance with its terms and with the requirements
by any and all statutes, orders, rules and regulations that are
applicable to each such employee plan; the Company does not
currently have and has not had any pension plan;
(xxiii) except as disclosed in writing to the Agents, the Company does
not owe any money to, nor has the Company any present loans to, or
borrowed any monies from, is or otherwise indebted to any officer,
director, employee, shareholder or any person not dealing at "arms
length" (as such term is defined in the Income Tax Act (Canada))
with the Company except for usual employee reimbursements and
compensation paid in the ordinary and normal course of the business
of the Company, other than as has been disclosed to the Agents;
(xxiv) to the knowledge of the Company, after due enquiry, except as
disclosed to the Agents and as disclosed in Schedule "A" hereto, the
Company is not a party to any contract, agreement or understanding
with any officer, director, employee, shareholder or any other
person not dealing at "arm's length" (as such term is defined in the
Income Tax Act (Canada)) with the Company;
(xxv) except as disclosed to the Agents, to the knowledge of the
Company, after due enquiry, no officer, director or shareholder of
the Company and no entity which is an affiliate or associate or any
one or more the foregoing owns, directly or indirectly, any interest
(except for shares representing less than 5% of the outstanding
shares of any class or series of any publicly traded company), or is
an officer, director, employee or consultant of, any person which
is, or is engaged in, a business competitive with the Company;
(xxvi) except as disclosed to the Agents, to the best knowledge of the
Company, after due enquiry, no present or former officer, director
or shareholder of the Company has any cause of action, or other
claim whatsoever, against, or owes any amount to, the Company in
connection with the Company and except for any liabilities reflected
in the Financial Information and claims in the ordinary and normal
course of the business of the Company such as for accrued vacation
pay and accrued benefits under any employee plans the particulars of
which have been described to the Agents;
(xxvii) all material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan premiums,
accrued wages, salaries and
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commissions and employee benefit plan payments have been reflected
in the books and records of the Company;
(xxviii) the Company has not used or permitted to be used any of the
Material Leased Premises or any other premises which the Company or
a subsidiary occupies as tenant (the Material Leased Premises and
such other premises being, collectively, the "Leased Premises") or
any of its owned properties or facilities to generate, manufacture,
process, distribute, use, treat, store, dispose of, transport or
handle any pollutants, contaminants, chemicals or industrial toxic
or hazardous wastes or substances ("Hazardous Substances");
(xxix) the Company has not made any contracts with any labour union or
employee association nor made commitments to or conducted
negotiations with any labour union or employee association with
respect to any future agreement and the Company is not aware of any
current attempts to organize or establish any labour union or
employee association nor is there any certification of any such
union with regard to a bargaining unit;
(xxx) there has not been and there is not currently any material
disagreements or other difficulties with any of the Company's
employees which is adversely affecting or could reasonably adversely
affect, in a material manner, the carrying on of the Company's
business; and
(xxxi) the Company has established a comprehensive plan which includes
appropriate contingency measures and has taken all commercially
reasonable steps to ensure that the Company's business, systems,
processes, products and services to the extent that they are in the
Company's control will operate, in all material respects, prior to,
during and after the calendar year 2000 without any change in
operations associated with the advent of the new century, and all
components of same will function, both separately and as a whole in
conjunction with each other, without material error or delay
resulting from the advent of the new century and in substantially
the same manner before, during and after January 1, 2000; provided,
however, that the Company makes no representation and warranty in
respect of the year 2000 compliance of any third party products,
equipment, services or facilities which interconnect with or which
are used in combination with the Company's systems and software and
that the Company makes no representation and warranty in respect of
the whether or not the Company's systems and software are year 2000
compliant except as specifically set out in this paragraph.
9. SPECIAL WARRANT CLOSING DELIVERIES. The purchase and sale of the Special
Warrants shall be completed at the Closing Time at the offices of Osler, Hoskin
& Harcourt, Toronto, or at such other place as the Agents and the Company may
agree upon. At or prior to the Closing Time, the Company shall duly and validly
deliver to the Agents certificates in definitive form representing Special
Warrants registered in the names of such Purchasers or as indicated on their
respective Subscription Agreements, against payment at the direction of the
Company, to the
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- 18 -
Company or as it may otherwise direct, of the subscription price therefor in
lawful money of Canada by certified cheque or banker's draft payable at par in
the City of Toronto. In full satisfaction of the Agents' obligations in
respect of the aggregate subscription price for the Special Warrants and the
Company's obligations in respect of the Commission and the costs and expenses
of the Agents and their counsel as of the Closing Date, upon the mutual
agreement of the Company and the Agents, the Agents may deliver certified
cheques or banker's drafts in the amount of such aggregate subscription price
less such Commission and costs and expenses (together with the Agents' receipt
therefor) against delivery of the certificates in definitive form representing
the Special Warrants and receipts of the Company for the aggregate subscription
price for the Special Warrants.
10. SPECIAL WARRANT CLOSING CONDITIONS. Each Purchaser's obligation to purchase
the Special Warrants at the Closing Time shall be conditional upon the
fulfilment at or before the Closing Time of the following conditions:
(a) the Agents shall have received a certificate, dated as of the Closing
Date, signed by the Chief Executive Officer (or such other officer of the
Company as the Agents may agree), certifying for and on behalf of the
Company, to the best of the knowledge, information and belief of the
persons so signing, that:
(i) since March 31, 1999 (A) there has been no material adverse
change (actual, anticipated, contemplated or threatened, whether
financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise) or capital of the
Company; and (B) no transaction has been entered into by the Company
which is or would be material to the Company on a consolidated
basis, or which is other than in the ordinary course of business,
except as has been disclosed to the Agents;
(ii) the Company has duly complied with all the terms, covenants
and conditions of this Agreement on its part to be complied with up
to the Closing Time;
(iii) the representations and warranties of the Company contained
in this Agreement are true and correct as of the Closing Time with
the same force and effect as if made at and as of the Closing Time
after giving effect to the transactions contemplated by this
Agreement; and
(v) such other matters as the Agents may reasonably request;
(b) the Agents shall have received at the Closing Time certificates dated the
Closing Date, signed by appropriate officers of the Company and addressed
to the Agents and their counsel, with respect to the articles and by-laws
of the Company, all resolutions of the Company's board of directors
relating to this Agreement, the Subscription Agreements, the Special
Warrant Indenture, the Special Warrants and the transactions contemplated
hereby and thereby, the incumbency and specimen signatures of signing
officers, and such other matters as the Agents may reasonably request;
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(c) the Special Warrant Indenture, the Subscription Agreements and the
certificates representing the Special Warrants shall have been executed
and delivered by the parties thereto in form and substance satisfactory to
the Agents and their counsel, acting reasonably;
(d) the Agents shall have received favourable legal opinions addressed to the
Agents and counsel to the Agents, in form and substance satisfactory to
the Agents' counsel, dated the Closing Date, from Osler, Hoskin &
Harcourt, Toronto, counsel for the Company as to the laws of Canada and
the Qualifying Provinces, 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 the Province of Ontario and, as to matters of
fact, on certificates of auditors, public officials and officers of the
Company, with respect to the following matters:
(i) as to the incorporation and subsistence of the Company under
the laws of its jurisdiction of incorporation;
(ii) as to the authorized and issued capital of the Company;
(iii) there are no restrictions on the Company's corporate power and
authority under the laws of its jurisdiction of incorporation
to carry on business, to own its properties and to carry out
its obligations and the transactions contemplated by this
Agreement, the Rights Agreement, the Subscription Agreements
and the Special Warrant Indenture and to issue the Special
Warrants and the Underlying Shares issuable upon exercise of
the Special Warrants;
(iv) none of the execution and delivery of this Agreement, the
Rights Agreement, the Subscription Agreements and the Special
Warrant Indenture, the performance by the Company of its
obligations hereunder and thereunder, the creation, sale or
issuance of the Special Warrants or the issuance of the
Underlying Shares upon the exercise of the Special Warrants,
will conflict with or result in any breach of the constating
documents or by-laws of the Company or the Shareholders
Agreement;
(v) each of this Agreement, the Rights Agreement, the Subscription
Agreements, the Special Warrants and the Special Warrant
Indenture has been duly authorized by the Company and duly
executed by the Company and constitutes a valid and legally
binding agreement of the Company enforceable against it in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, liquidation, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and except as limited by the application of equitable
principles when equitable remedies are sought, and the
qualification that the
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enforceability of rights of indemnity, contribution and
waiver and the ability to sever unenforceable terms, may be
limited by applicable law;
(vi) the Underlying Shares have been authorized for
issuance to the holders of the Special Warrants, and, upon the
exercise thereof in accordance with the provisions of the
Special Warrant Indenture, such Underlying Shares will be
validly issued as fully paid and non-assessable;
(vii) the Special Warrants (A) have been validly
created and issued by the Company; (B) have been duly executed
and delivered by the Company; and (C) are valid, legal and
binding obligations of the Company enforceable in accordance
with their terms subject to qualifications as in subclause (v)
above;
(viii) the issuance and sale of the Special Warrants by the Company
to the Purchasers is exempt from the prospectus requirements
of Canadian Securities Laws of the Qualifying Provinces and no
documents are required to be filed (other than specified forms
accompanied by requisite filing fees), proceedings taken or
approvals, permits, consents or authorizations obtained under
the Canadian Securities Laws of any of the Qualifying
Provinces to permit such issuance and sale and the issuance of
the Underlying Shares upon the exercise of the Special
Warrants are exempt from the prospectus and registration
requirements of Canadian Securities Laws of any of the
Qualifying Provinces, subject to certain provisos and
specified resale restrictions and the first trade of such
Underlying Shares in such Qualifying Provinces will be a
distribution subject to the registration and prospectus
requirements of the applicable Canadian Securities Laws unless
otherwise exempted under such Canadian Securities Laws and
specified resale restrictions;
(ix) upon the filing of the Final Prospectus and the
issuance of receipts therefor under Canadian Securities Laws,
(A) all legal requirements will have been fulfilled by the
Company under the Canadian Securities Laws to qualify, without
resort to the prospectus exemption provisions of such
applicable Canadian Securities Laws, the distribution of the
Underlying Shares in each of the Qualifying Provinces upon the
exercise of the Special Warrants; (B) the issuance of the
Underlying Shares in the Qualifying Provinces by the Company,
upon such exercise of the Special Warrants, will be exempt
from the registration requirements of such applicable Canadian
Securities Laws subject to certain provisos; and (C) the
Underlying Shares will not be subject to any statutory hold
period and no other documents will be required to be filed,
proceedings taken, or approvals, permits, consents, or
authorizations obtained under the Canadian Securities Laws to
permit the trading of such Underlying Shares in the Qualifying
Provinces, through registrants registered under
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applicable laws who have complied with such applicable
Canadian Securities Laws or in circumstances in which there
is an exemption from the registration requirements of such
applicable Canadian Securities Laws, subject to usual
exceptions;
(x) The Trust Company of Bank of Montreal has been
duly appointed by the Company as warrant agent in respect of
the Special Warrants; and
(xi) such other matters as the Agents or their counsel
may reasonably request;
(e) the Agents shall have received a favourable United States legal opinion
to be delivered by United States counsel to the Company, addressed to the
Agents and the Company; and
(f) the Agents shall have received certificates of status or similar
certificates with respect to each jurisdiction in which the Company is
required to be licensed to carry on a material part of its business.
11. RIGHTS OF TERMINATION
(a) 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 federal, provincial or other governmental authority in relation
to a material portion of the business and affairs of the Company or any of the
officers or directors of the Company or any of its principal shareholders,
except for any such enquiry, action, suit, investigation or other proceeding
based upon the activities or the alleged activities of the Agents and not the
Company, which, in the reasonable opinion of the Agents or either of them,
operates to prevent or materially restrict the distribution or trading of the
Special Warrants or the Underlying Shares, any of the Agents shall be entitled,
at its option and in accordance with subparagraph 11(f) of this Agreement, to
terminate its obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase Special Warrants) by notice to that
effect given to the Company any time prior to the Closing Time.
(b) DISASTER OUT CLAUSE. In the event that prior to the Closing Time
there should develop, occur or come into effect any occurrence of national or
international consequence or any event, action, condition, law, governmental
regulation, inquiry or other occurrence of any nature whatsoever which, in the
reasonable opinion of any of the Agents, materially adversely affects or
involves, or will materially adversely affect or involve, the Canadian
financial markets or the business, operations or affairs of the Company on a
consolidated basis, any of the Agents shall be entitled at its option, in
accordance with subparagraph 11(f) of this Agreement, to terminate its
obligations under this Agreement (and the obligations of the Purchasers
arranged by it to purchase Special Warrants) by written notice to that effect
given to the Company prior to the Closing Time.
(c) MARKET OUT CLAUSE. If, prior to the Closing Time, the state of the
financial markets becomes such that the Special Warrants cannot, in the
reasonable opinion of the Agents,
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be profitably marketed, the Agents shall be entitled at their option, in
accordance with subparagraph 11(f) of this Agreement, to terminate their
obligations under this Agreement (and the obligations of the Purchasers
arranged by them to purchase Special Warrants) by written notice to that effect
given to the Company prior to the Closing Time.
(d) CHANGE IN MATERIAL FACT. In the event that prior to the Closing Time
there should occur any material change, there should be discovered any
previously undisclosed material fact, or there should occur a change in any
material fact such as is contemplated by subparagraph 7(a), which results or,
in the reasonable opinion of any of the Agents, could reasonably be expected to
result, in the Purchasers of a material number of Special Warrants exercising
their contractual right of rescission granted to the Purchasers in respect of
the Special Warrants or the rights of rescission or damages under section 130
of the Securities Act (Ontario) or the corresponding provisions of applicable
securities legislation in the other Qualifying Provinces or, in the reasonable
opinion of any of the Agents, has or could reasonably be expected to have a
material adverse effect on the market price or value of the Special Warrants or
the Underlying Shares, any of the Agents shall be entitled, at its option, in
accordance with subparagraph 11(f), to terminate its obligations under this
Agreement (and the obligations of the Purchasers arranged by it to purchase
Special Warrants) by written notice to that effect given to the Company prior
to the Closing Time.
(e) NON-COMPLIANCE WITH CONDITIONS. The Company agrees that all terms and
condition in this Agreement shall be construed as conditions and complied with
so far as the same relate to acts to be performed or caused to be performed by
the Company, that it will use its commercially reasonable best efforts (or all
commercially reasonable efforts, as applicable) to cause such conditions to be
complied with, and any material breach or failure by the Company to comply with
any of such conditions shall entitle the Agents, or any of them, at their
option in accordance with subparagraph 11(f), to terminate their obligations
under this Agreement (and the obligations of the Purchasers arranged by them to
purchase Special Warrants) by notice to that effect given to the Company at or
prior to the Closing Time. The Agents 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 of such terms and conditions or any
other or subsequent breach or non-compliance, provided that any such waiver or
extension shall be binding upon the Agents only if the same is in writing and
signed by all of the Agents.
(f) EXERCISE OF TERMINATION RIGHTS. The rights of termination contained in
subparagraphs 11(a), (b), (c), (d) and (e) may be exercised by any of the
Agents and are in addition to any other rights or remedies the Agents or any of
them may have in respect of any default, act or failure to act or
non-compliance by the Company 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 Agents to the Company or on the part
of the Company to the Agents except in respect of any liability which may have
arisen or may arise after such termination in respect of acts or omissions
prior to such termination under paragraphs 12, 14 and 15. A notice of
termination given by an Agent under subparagraphs 11(a), (b), (c), (d) and (e)
shall not be binding upon the other Agents.
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12. EXPENSES. Whether or not the sale of the Special Warrants or the issuance
of the Underlying Shares upon exchange of such Special Warrants shall be
completed, all reasonable expenses of or incidental to the issue and delivery
of such Special Warrants and Underlying Shares and/or incidental to all matters
in connection with the transactions herein set out shall be borne by the
Company including, without limitation, expenses in connection with the issuance
and sale of the Special Warrants, all private placement fees required under
Canadian Securities Laws, the qualification of the Underlying Shares for
distribution to the public, the fees and expenses of counsel to the Company and
all local counsel selected by the Company, the reasonable fees and expenses of
counsel to the Agents (plus reasonable disbursements and applicable GST), the
fees and expenses of the Special Warrant Agent, all reasonable out-of-pocket
expenses of the Agents, and all costs incurred in connection with the
preparation and printing of the Preliminary Prospectus, the Final Prospectus
and any Supplementary Material. All reasonable fees and expenses incurred by
the Agents or on their behalf shall be payable by the Company immediately upon
receiving an invoice therefor from the Agents, and shall be payable whether or
not the offering of Special Warrants contemplated by this Agreement is
completed. Such fees and expenses, both actual and estimated, will be deducted
from the gross proceeds otherwise payable to the Company at the Special Warrant
Closing.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All warranties,
representations, covenants and agreements herein contained or contained in any
documents submitted pursuant to this Agreement and in connection with the
transactions herein contemplated shall survive the purchase and sale of the
Special Warrants and the exchange of such Special Warrants for the Underlying
Shares by the Purchasers and continue in full force and effect for the benefit
of the Agents, Purchasers and the Company for a period of three years from the
Closing Date and shall not be limited or prejudiced by any investigation made
by or on behalf of the Agents or the Company in connection with the purchase
and sale of the Special Warrants or the preparation of the Preliminary
Prospectus, the Final Prospectus or otherwise.
14. (a) INDEMNITY. The Company shall indemnify and save harmless each of the
Agents and each of their directors, officers, employees and agents from and
against all liabilities, claims, actions, suits, proceedings, losses (other
than loss of profits), costs, damages and expenses in any way caused by, or
arising directly or indirectly from, or in consequence of:
(i) any misrepresentation or alleged misrepresentation (as such
term is defined in the Securities Act (Ontario)) of the Company
contained herein or in any material change report or public document
filed or issued by the Company or on its behalf prior to the date of
the Final Prospectus;
(ii) any information or statement (except any information or
statement relating solely to the Agents) contained in the Prospectus
or any Supplementary Material or in any certificate of the Company
delivered under this Agreement or 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 of the
Company;
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(iii) any omission or alleged omission of the Company to state in
the Prospectus, any Supplementary Material or any certificate of the
Company delivered under this Agreement or pursuant to this Agreement
any fact (except facts relating solely to the Agents), whether
material or not, 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;
(iv) 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 of
the Company or alleged untrue statement or alleged omission of the
Company or any misrepresentation or alleged misrepresentation of the
Company (except a statement or omission or alleged statement or
omission relating solely to the Agents) in the Prospectus or any
Supplementary Material or based upon any failure to comply with
Canadian Securities Laws (other than any failure or alleged failure
to comply by the Agents), preventing or restricting the trading in
or the sale or distribution of the Special Warrants or the
Underlying Shares in any of the Qualifying Provinces; or
(v) the non-compliance or alleged non-compliance by the Company
with any of the Canadian Securities Laws, including the Company's
non-compliance with any statutory requirement to make any document
available for inspection.
(b) NOTIFICATION OF CLAIMS. If any matter or thing contemplated by this
paragraph (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 Company as soon as possible of the nature
of such Claim and the Company shall be entitled (but not required) to assume
the defence of any suit brought to enforce such Claim; provided, however, that
the defence shall be conducted through legal counsel acceptable to the
Indemnified Party acting reasonably and that no settlement of any such Claim
may be made by the Company or the Indemnified Party without the prior written
consent of the other party.
(c) RIGHT OF INDEMNITY IN FAVOUR OF OTHERS. With respect to any
Indemnified Party who is not a party to this Agreement, the Agents shall obtain
and hold the rights and benefits of this paragraph and paragraph 15 in trust
for and on behalf of such Indemnified Party.
(d) RETAINING COUNSEL. In any such Claim, the Indemnified Party shall
have the right to retain other counsel to act on his or its behalf and to
participate in the defence thereof, provided that the fees and disbursements of
such counsel shall be paid by the Indemnified Party unless: (i) the Company and
the Indemnified Party shall have mutually agreed to the retention of the other
counsel; (ii) the Company fails to assume the defence of such Claim on behalf
of the Indemnified Party within ten days of receiving notice of such Claim; or
(iii) the named parties to any such Claim (including any added third party)
include both the Indemnified Party and the Company and the Indemnified Party
shall have been advised by counsel that representation of the Indemnified Party
by counsel for the Company is inappropriate as a result of potential or actual
25
- 25 -
differing interests of those represented; in each of which cases the Company
shall not have the right to assume the defence of such Claim on behalf of the
Indemnified Party but the Company shall be liable to pay the reasonable fees
and disbursements of counsel to the Indemnified Party, provided that in no
event shall the Company be responsible for the fees and expenses of more than
two separate legal counsel in respect of all Indemnified Parties.
(e) EXCEPTIONS TO INDEMNITY. The rights of indemnity contained in this
paragraph shall not enure to the benefit of the Agents if the Company has
complied with the provisions of paragraph 7 hereof and the person asserting any
Claim contemplated by this paragraph was not provided with a copy of any
Supplemental Material or other document which corrects any untrue statement or
omission or alleged omission which is the basis of such Claim and which is
required, under applicable Canadian Securities Laws, to be delivered to such
person by the Agents.
15. (a) CONTRIBUTION. In order to provide for a just and equitable
contribution in circumstances in which the indemnity provided in paragraph 14
would otherwise be available in accordance with its terms but is, for any
reason, held to be unavailable to or unenforceable by the Agents or enforceable
otherwise than in accordance with its terms, subject to the restrictions and
limitations referred to herein, the Company and the Agents shall severally
contribute to the aggregate of all claims, expenses, costs and liabilities and
all losses (other than loss of profits) of a nature contemplated in paragraph
14 in such proportions so that the Agents are responsible for the portion
represented by the percentage that the aggregate fee payable by the Company to
the Agents bears to the aggregate offering price of the Special Warrants and
the Company is responsible for the balance, whether or not they have been sued
together or sued separately. The Agents shall not in any event be liable to
contribute, in the aggregate, any amounts in excess of such aggregate fee or
any portion of such fee actually received. However, no party who has engaged in
any fraud, fraudulent misrepresentation or gross negligence shall be entitled
to claim contribution from any person who has not engaged in such fraud,
fraudulent misrepresentation or gross negligence.
(b) ADMISSION OF LIABILITY. No admission of liability shall be made by an
Indemnified Party without the consent of the Company and it shall not be made
liable for any settlement of any Claim made without its consent.
(c) RIGHT OF CONTRIBUTION IN ADDITION TO OTHER RIGHTS. The rights to
contribution provided in this paragraph 15 shall be in addition to and not in
derogation of any other right to contribution which the Agents may have by
statute or otherwise at law.
(d) CALCULATION OF CONTRIBUTION. In the event that the Company may be
held to be entitled to contribution from the Agents under the provisions of any
statute or at law, the Company shall be limited to contribution in an amount
not exceeding the lesser of:
(i) the portion of the full amount of the loss or liability
giving rise to such contribution for which the Agents are
responsible, as determined in subparagraph 15(a) above; and
26
- 26 -
(ii) the amount of the aggregate fee actually received by the
Agents from the Company under this Agreement.
(e) NOTICE. If the Agents have reason to believe that a claim for
contribution may arise, they shall give the Company notice of such claim in
writing, as soon as reasonably possible, but failure to notify the Company
shall not relieve the Company of any obligation which it may have to the Agents
under this paragraph.
16. AGENTS' OBLIGATIONS. The Agents' obligations under this Agreement shall be
several and not joint, and the Agents' respective obligations and rights and
benefits hereunder shall be as to the following percentage:
GMP - 70 %
FM - 15 %
CS - 15 %
In the event that any of the Agents shall fail to purchase or arrange for the
purchase of the number of Special Warrants allocated to such Agent hereunder,
the other Agents shall have the right but shall not be obligated to purchase or
arrange for the purchase of all of such Special Warrants which would otherwise
have been allocated to the Agent in default. In the event that one but not all
of the Agents shall exercise its rights of termination under paragraph 11, the
other Agents shall have the right, but shall not be obligated, to purchase or
arrange for the purchase of all of the percentage of the Special Warrants which
would otherwise have been allocated to the Agent which has so exercised its
rights of termination.
17. AGENTS' AUTHORITY. The Company shall be entitled to and shall act on any
notice, request, direction, consent, waiver, extension and other communication
given or agreement entered into by or on behalf of the Agents by GMP who shall
represent the Agents and have authority to bind the Agents hereunder except in
respect of a notice of termination pursuant to paragraph 11, indemnity
provisions in paragraph 14, contribution provisions in paragraph 15.
18. ADVERTISEMENTS. The Company acknowledges that the Agents shall have the
right, subject always to clauses 1(a) and (c) and paragraph 8 of this
Agreement, at their own expense, to place such advertisement or advertisements
relating to the sale of the Special Warrants or the Underlying Shares
contemplated herein as the Agents may consider desirable or appropriate and as
may be permitted by applicable laws. The Company and the Agents each agree
that they will not make or publish any advertisement in any media whatsoever
relating to, or otherwise publicize, the transaction provided for herein so as
to result in any exemption from the prospectus and registration requirements of
Canadian securities laws being unavailable in respect of the sale of the
Special Warrants to prospective Purchasers.
19. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. As part of the Subscription
Agreements, the Company has delivered, and shall be deemed to have delivered,
to the Purchasers (including
27
- 27 -
the Agents) contractual rights of action for rescission at the Special Warrant
Closing Time or subsequent thereto.
20. UNITED STATES OFFERS AND SALES. (a) As used in this paragraph 20, the
following terms shall have the meanings indicated:
(i) "Accredited Investor" means an accredited investor as that term is
defined in Rule 501(a) of Regulation D;
(ii) "Directed Selling Efforts" means directed selling efforts as that
term is defined in Regulation S. Without limiting the foregoing, but
for greater clarity herein, it means, subject to the exclusions from
the definition of directed selling efforts contained in Regulation S,
any activity undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the
United States for any of the Special Warrants or the Underlying
Shares and includes the placement of any advertisement in a
publication with a general circulation in the United States that
refers to the offering of the Special Warrants or the Underlying
Shares;
(iii) "Regulation D" means Regulation D adopted by the SEC under the 1933
Act;
(iv) "Regulation S" means Regulation S adopted by the SEC under the 1933
Act;
(v) "SEC" means the United States Securities and Exchange Commission;
(vi) "Substantial U.S. Market Interest" means substantial U.S. market
interest as that term is defined in Regulation S;
(vii) "U.S. Exchange Act" means the United States Securities Exchange Act
of 1934, as amended;
(viii) "U.S. Person" means a U.S. person as that term is defined in
Regulation S;
(ix) "U.S. Securities Act" means the United States Securities Act of 1933,
as amended; and
(x) "United States" means the United States of America, its territories
and possessions, any state of the United States, and the District of
Columbia.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENT. The Agents
acknowledge that the Special Warrants and the Underlying Shares have not been
registered under the U.S. Securities Act and may be offered and sold only in
transactions exempt from or not subject to the registration requirements of the
U.S. Securities Act. Accordingly, each of the Agents represents, warrants and
covenants to the Company that:
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- 28 -
(i) it has not offered and sold, and will not offer and sell, any
Special Warrants except (A) in an offshore transaction in accordance
with Rule 903 of Regulation S or (B) within the United States as
provided in subparagraphs (ii) through (viii) below. Accordingly,
neither the Agents, their affiliates nor any persons acting on their
behalf, has made or will make (except as permitted in subparagraphs
(ii) through (viii) below) (a) any offer to sell or any solicitation
of an offer to buy, any Special Warrants to any U.S. Person or any
person in the United States, (b) any sale of Special Warrants to any
purchaser unless, at the time the buy order was or will have been
originated, the purchaser was outside the United States, or such
Agent, affiliate or person acting on behalf of either reasonably
believed that such purchaser was outside the United States, or (c)
any Directed Selling Efforts in the United States with respect to
the Special Warrants. Terms used in this subparagraph have the
meanings given to them by Regulation S;
(ii) it has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Special
Warrants, except with its affiliates, any selling group members or
with the prior written consent of the Company. It shall require
each selling group member to agree, for the benefit of the Company,
to comply with, and shall use its best efforts to ensure that each
selling group member complies with, the same provisions of this
paragraph 20 as apply to such Agent as if such provisions applied to
such selling group member;
(iii) all offers and sales of Special Warrants in the United
States shall be made through the Agents' U.S. registered
broker-dealer affiliates in compliance with all applicable U.S.
broker-dealer requirements;
(iv) offers and sales of Special Warrants in the United States
shall not be made (A) by any form of general solicitation or general
advertising (as those terms are used in Regulation D), including
advertisements, articles, notices or other communications published
in any newspaper, magazine, or similar media or broadcast over radio
or television, or any seminar or meeting whose attendees had been
invited by general solicitation or general advertising or (B) in any
manner involving a public offering within the meaning of Section
4(2) of the U.S. Securities Act;
(v) any offer, sale or solicitation of an offer to buy Special
Warrants that has been made or will be made in the United States was
or will be made only to Accredited Investors that are exempt, or in
transactions that are exempt, from registration under applicable
state securities laws;
(vi) the Agents, acting through their U.S. broker-dealer
affiliates, may offer the Special Warrants in the United States only
to offerees with respect to which such Agents have a pre-existing
relationship and have reasonable grounds to believe are Accredited
Investors;
29
- 29 -
(vii) prior to completion of any sale of Special Warrants pursuant
to this Section 20, each U.S. purchaser will be required to execute
a Subscription Agreement for U.S. Purchasers and an Investors'
Questionnaire in the form attached hereto as Schedule "C";
(viii) at least one business day prior to the Closing Time, it will
provide the Warrant Agent with a list of all purchasers of the
Special Warrants in the United States; and
(ix) at Closing, the Agents together with their U.S. affiliates
selling Special Warrants in the United States, will provide a
certificate, substantially in the form of Schedule "B" hereto,
relating to the manner of the offer and sale of the Special Warrants
in the United States.
(c) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
represents, warrants, covenants and agrees that:
(i) the Company is a "foreign issuer" with the meaning of
Regulation S and reasonably believes that there is no Substantial
U.S. Market Interest in the Special Warrants or the Underlying
Shares;
(ii) the Company is not, and as a result of the sale of the
Special Warrants contemplated hereby will not be, an "investment
company" as defined in the United States Investment Company Act of
1940, as amended;
(iii) except with respect to offers and sales to Accredited
Investors within the United States in reliance upon any exemption
from registration under Section 4(2) of the U.S. Securities Act,
neither the Company nor any of its affiliates, nor any person acting
on its behalf, has made or will make: (A) any offer to sell, or any
solicitation of an offer to buy, any Special Warrants to a U.S.
Person or a person in the United States; or (B) any sale of Special
Warrants unless, at the time the buy order was or will have been
originated, the purchaser is (i) outside the United States or (ii)
the Company, its affiliates, and any person acting on their behalf
reasonably believes that the purchaser is outside the United States;
(iv) during the period in which the Special Warrants are offered
for sale, neither it nor any of its affiliates, nor any person
acting on its or their behalf (i) has made or will make any Directed
Selling Efforts in the United States, or (ii) has engaged in or will
engage in any form of general solicitation or general advertising
(as those terms are used in Regulation D) with respect to offers or
sales of the Special Warrants in the United States, including
advertisements, articles, notices or other communications published
in any newspaper, magazine or similar media, or broadcast over
radio, or television, or any seminar or meeting whose attendees have
been invited by general solicitation or general advertising; and
30
- 30 -
(v) except with respect to the offer and sale of the Special
Warrants offered hereby and offers and sales of shares of the
Company pursuant to the Company's employee benefit plans, the
Company has not, for a period of six months prior to the date hereof
sold, offered for sale or solicited any offer to buy any of its
securities in the United States.
21. NOTICES. Unless otherwise expressly provided in this Agreement, any notice
or other communication to be given under this Agreement (a "notice") shall be
in writing addressed as follows:
If to the Company, to it at:
40 West Wilmot Street
Richmond Hill, Ontario
L4B 1H8
Attention: John Foresi, President, Chief Executive Officer
Telecopier: (905) 764-7445
with a copy to:
Osler, Hoskin & Harcourt
P.O. Box 50
1 First Canadian Place
Toronto, Ontario
M5X 1B8
Attention: Richard J. Nathan
Telecopier: (416) 862-6666
If to Griffiths McBurney & Partners, to it at:
145 King Street West
Suite 1100
Toronto, Ontario
M5H 1J8
Attention: Rob Fraser
Telecopier: (416) 943-6160
31
- 31 -
If to First Marathon Securities Limited, to it at:
Exchange Tower
130 King Street West
Suite 3200
Toronto, Ontario
M5X 1J9
Attention: Owen Mitchell
Telecopier: (416) 869-6411
If to Charles Schwab Canada Co., to it at:
79 Wellington Street West
Suite 1207, P.O. Box 183
Aetna Tower, TD Centre
Toronto, Ontario
M5K 1H6
Attention: Charles Taerk
Telecopier: (416) 361-1099
With a copy to:
Wildeboer Rand Thomson Apps & Dellelce
1 First Canadian Place
Suite 810
Toronto, Ontario
M5X 1A9
Attention: Robert P. Wildeboer
Telecopier: (416) 361-1790
or to such other address as any of the parties may designate by notice given to
the others.
Each notice shall be personally delivered to the addressee or sent by telex or
facsimile transmission to the addressee and (i) a notice which is personally
delivered shall, if delivered on a Business Day, be deemed to be given and
received on that day and, in any other case, be deemed to be given and received
on the first Business Day following the day on which it is delivered; and (ii)
a notice which is sent by telex or facsimile transmission shall be deemed to be
given and received on the first Business Day following the day on which it is
sent.
22. TIME OF THE ESSENCE. Time shall, in all respects, be of the essence hereof.
32
- 32 -
23. CANADIAN DOLLARS. All references herein to dollar amounts are to lawful
money of Canada.
24. HEADINGS. The headings contained herein are for convenience only and shall
not affect the meaning or interpretation hereof.
25. SINGULAR AND PLURAL, ETC. Where the context so requires, words importing
the singular number include the plural and vice versa, and words importing
gender shall include the masculine, feminine and neuter genders.
26. ENTIRE AGREEMENT. This Agreement constitutes the only agreement between the
parties with respect to the subject matter hereof and shall supersede any and
all prior negotiations and understandings, including the letter agreements
dated January 6, 1999 and January 14, 1999 between the Company and GMP. This
Agreement may be amended or modified in any respect by written instrument only.
27. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect or limit the validity or
enforceability of the remaining provisions of this Agreement.
28. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
29. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement shall be
binding upon and enure to the benefit of the Company, the Agents and the
Purchasers and their respective successors and permitted assigns; provided
that, except as provided herein or in the Subscription Agreements, this
Agreement shall not be assignable by any party without the written consent of
the others.
30. FURTHER ASSURANCES. Each of the parties hereto shall do or cause to be done
all such acts and things and shall execute or cause to be executed all such
documents, agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out the provisions and intent of this
Agreement.
31. EFFECTIVE DATE. This Agreement is intended to and shall take effect as of
the date first set forth above, notwithstanding its actual date of execution or
delivery.
32. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in any
number of counterparts, which taken together shall form one and the same
agreement, and may be executed and delivered by telecopier or facsimile
transmission, which shall be binding on the parties as though originally
executed and delivered.
33. ENGLISH LANGUAGE. The parties hereby acknowledge that they have consented
and requested that all documents evidencing or relating in any way to the sale
of the Special Warrants be drawn up in the English language only.
33
- 33 -
Nous, soussignes, reconnaissons par les presentes avoir consenti et
demande que tous les documents faisant foi ou se rapportant de quelque maniere
a la vente de ces bons de souscription achets soient redigis en anglais
seulement.
34
- 34 -
If the Company is in agreement with the foregoing terms and conditions, please
so indicate by executing a copy of this letter where indicated below and
delivering the same to Griffiths McBurney & Partners on behalf of the Agents.
Yours very truly,
GRIFFITHS MCBURNEY & PARTNERS
Per: "Daniel Bruno"
Authorized Signing Officer
FIRST MARATHON SECURITIES LIMITED
Per: "Owen Mitchell"
Authorized Signing Officer
CHARLES SCHWAB CANADA CO.
Per: "Charles Taerk"
Authorized Signing Officer
The foregoing is hereby accepted on the terms and conditions therein set forth.
DATED effective as of the date and year first above written.
DELANO TECHNOLOGY CORPORATION.
Per: "David Latner"
David Latner,
Secretary
35
- 35 -
SCHEDULE "A"
Outstanding options, warrants and other convertible securities of the Company.
The existing shareholders of the Company have certain pre-emptive rights
pursuant to the Shareholders Agreement (as such term is defined herein).
Options have been granted by the Company since April 30, 1999 but have not yet
been ratified by the Board of Directors of the Company.
John Foresi currently possesses a warrant to acquire 263,000 Common Shares of
the Company.
Albert Amato and Ian Giffen are directors of the Company and are also option
holders. David Latner is an officer of the Company and also holds options.
Bahman Koohestani, John Foresi and Tony Davis currently have employment
agreements with the Company.
36
SCHEDULE "B"
AGENTS' CERTIFICATE
In connection with the private placement in the United States of the Special
Warrants (the "Special Warrants") of Delano Technology Corporation (the
"Company") pursuant to the Agency Agreement, dated June 24, 1999 (the "Agency
Agreement"), among the Company and Griffiths McBurney & Partners, First
Marathon Securities Limited and Charles Schwab Canada Co. (collectively, the
"Agents" and each an "Agent"), the undersigned does hereby certify as follows:
(i) each U.S. affiliate of each Agent who offered or sold Special Warrants in
the United States is a duly registered broker or dealer with the United States
Securities and Exchange Commission and is a member of and in good standing with
the National Association of Securities Dealers, Inc. on the date hereof;
(ii) immediately prior to offering Special Warrants to such offerees, we had
reasonable grounds to believe and did believe that each offeree was an
"accredited investor" as defined in Rule 501(a)of Regulation D (an "Accredited
Investor") under the Securities Act of 1933, as amended (the "1933 Act"), and,
on the date hereof, we continue to believe that each U.S. person purchasing
Special Warrants is an Accredited Investor;
(iii) no form of general solicitation or general advertising (as those terms
are used in Regulation D under the 1933 Act) was used by us, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or television, or
any seminar or meeting whose attendees had been invited by general solicitation
or general advertising, in connection with the offer or sale of the Special
Warrants in the United States;
(iv) the offering of the Special Warrants in the United States has been
conducted by us through our U.S. affiliate in accordance with the terms of the
Agency Agreement; and
(v) prior to any sale of Special Warrants in the United States pursuant to
Section 4(2), we caused each U.S. purchaser to execute a Subscription Agreement
and an Investor Questionnaire in the form attached as Schedule "C" to the
Agency Agreement.
Terms used in this certificate have the meanings given to them in the
Agency Agreement unless otherwise defined herein.
Dated this __ day of June, 1999.
GRIFFITHS MCBURNEY & PARTNERS
on behalf of the Agents and their U.S.
affiliates
Per:__________________________________
Authorized Signing Officer
37
- 1 -
SCHEDULE "C"
INVESTOR QUESTIONNAIRE
(ALL INFORMATION HEREIN WILL BE TREATED
CONFIDENTIALLY)
TO: DELANO TECHNOLOGY CORPORATION
Re: PRIVATE PLACEMENT OF SPECIAL WARRANTS
Ladies and Gentlemen:
The information in this questionnaire is being furnished to Delano
Technology Corporation (the "Company") to enable the Company to determine
whether the undersigned's Subscription Agreement to purchase Special Warrants
(the "Special Warrants") of the Company, may be accepted in light of the
requirements of the United States Securities Act of 1933 (the "Act"),
Regulation D promulgated thereunder, any applicable state securities law and
the suitability requirements for an investment in Special Warrants that the
Company has established. The undersigned understands that (a) the Company will
rely on the information contained herein for purposes of such determination,
(b) the Special Warrants will not be registered under the Act in reliance upon
an exemption from registration afforded by the Act and Regulation D, and (c)
this questionnaire is not an offer of Special Warrants or any other securities
to the undersigned.
In accordance with the foregoing, the undersigned makes the
following representations:
REPRESENTATION NO. 1
I am willing and able to bear the economic risk of
an investment in the Special Warrants in an amount equal to
the amount I have subscribed to purchase. In making this
statement, I have considered whether I could afford to hold
the Special Warrants for an indefinite period and whether, at
this time, I could afford a complete loss of my investment in
the Special Warrants.
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- 2 -
REPRESENTATION NO. 2
Except as indicated below, the purchase of Special Warrants will be
solely for the account of the undersigned and not for the account
of any other person.
State "No Exceptions" or set forth exceptions and give complete
details. Attach additional pages if necessary.
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
REPRESENTATION NO. 3
The undersigned represents to you that it (please initial the
applicable alternative in the box provided) is an Accredited
Investor (as that term is defined in Rule 501 of Regulation D under
the Act), as evidenced by meeting at least one of the following
standards:
[ ] (i) I am an individual and had income in excess of
$200,000 in the last two prior years and
reasonably expect to have income in excess of
$200,000 in the current year or along with my
spouse we had income in excess of $300,000 for
the last two prior years and reasonably expect to
have income in excess of $300,000 in the current
year. For purposes of this Questionnaire,
"Income" is my adjusted gross income as
determined for Federal income tax purposes (not
including my spouse's income unless she is a
co-purchaser), plus any deductions for long-term
capital gains under Section 1202 of the Internal
Revenue Code (the "Code"), any deduction for
depletion under Section 611 and related sections
of the Code, any exclusion for interest under
Section 103 of the Code or any partnership losses
allocated to me on Schedule E of Form 1040;
[ ] (ii) I am an individual and my net worth (i.e., excess
of total assets over total liabilities), either
individually or together with my spouse, is at
least $1,000,000.
[ ] (iii) I am an individual and a director or executive
officer of the Company;
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- 3 -
[ ] (iv) the undersigned is a corporation, a partnership,
a limited liability company, a Massachusetts or
similar business trust or an organization
described in Section 501(c)(3) of the Code; and
the undersigned has total assets in excess of
$5,000,000 and was not formed for the specific
purpose of acquiring the Special Warrants;
[ ] (v) the undersigned is a trust, not formed for the
specific purpose of acquiring the securities
offered, with total assets in excess of
$5,000,000 and whose purchase is directed by a
sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
[ ] (vi) the undersigned is an entity in which all of the
equity owners meet the standards set forth in
either of the immediately preceding
subparagraphs. (Please have each equity owner
(or, in the case of a trust, each income
beneficiary) complete this Questionnaire.).
REPRESENTATION NO. 4
I represent to you that (a) the information contained herein is
complete and accurate and may be relied upon by you and (b) I will
notify you immediately of any material change in any of such
information occurring prior to the date of the effectiveness of the
purchase of Special Warrants by me.
40
- 4 -
INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR
1. Name:______________________ Birth Date:________________
2. Permanent Residence Address (other than Post Office Box),
including Telephone Number:_____________________________
________________________________________________________
________________________________________________________
3. Name of Current business, Business Address and Telephone
Number:
________________________________________________________
________________________________________________________
________________________________________________________
Type of Current Business:_______________________________
________________________________________________________
Position and Number of Years Employed in Position:______
________________________________________________________
________________________________________________________
________________________________________________________
4. Name and Type of Business of Employer(s) during Past Five
Years and Dates of Employment:__________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
Position(s) Held during the Past Five Years at Above-named
Employers:______________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
Responsibilities Involved in Above-named Positions:_____
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
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- 5 -
5. Send correspondence to: Home:______________________________
Office:__________________________________________________
Other:___________________________________________________
Account Numbers
6. Bank:________________________ Checking:____________
Telephone Number:_____________ Savings:_____________
Address:______________________ Other:_______________
Person Familiar with your Account:___________________________
Bank:________________________ Checking:____________
Telephone Number:_____________ Savings:_____________
Address:______________________ Other:_______________
Person Familiar with your Account:___________________________
It is understood and agreed that verification of bank reference(s)
can and may be conducted.
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7. Business or Professional Education and the Degrees Received
are as follows:
Year
School Degree Received
_________________________ __________________ _________
_________________________ __________________ _________
_________________________ __________________ _________
_________________________ __________________ _________
8. Please provide the following information regarding actual or
projected gross income (check one category for each year):
Individual [ ] Joint Income With Spouse [ ]
Gross Income 1996 1997 1998 1999
------------ ------- ------- ------- -------
Under $80,000 [ ] [ ] [ ] [ ]
$80,000-$100,000 [ ] [ ] [ ] [ ]
$100,000-$125,000 [ ] [ ] [ ] [ ]
$125,000-$150,000 [ ] [ ] [ ] [ ]
$150,000-$200,000 [ ] [ ] [ ] [ ]
$200,000-$225,000 [ ] [ ] [ ] [ ]
$225,000-$250,000 [ ] [ ] [ ] [ ]
$250,000-$300,000 [ ] [ ] [ ] [ ]
$300,000-over [ ] [ ] [ ] [ ]
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9. Please provide the following information regarding actual or
projected taxable income (check one category for each year):
Individual [ ] Joint Income with Spouse [ ]
Taxable Income 1996 1997 1998 1999
-------------- ------- ------- ------- -------
Under $80,000 [ ] [ ] [ ] [ ]
$80,000-$100,000 [ ] [ ] [ ] [ ]
$100,000-$125,000 [ ] [ ] [ ] [ ]
$125,000-$150,000 [ ] [ ] [ ] [ ]
$150,000-$200,000 [ ] [ ] [ ] [ ]
$200,000-$225,000 [ ] [ ] [ ] [ ]
$225,000-$250,000 [ ] [ ] [ ] [ ]
$250,000-$300,000 [ ] [ ] [ ] [ ]
$300,000-over [ ] [ ] [ ] [ ]
10. Please provide the approximate percentage of your current
income by source:
Salary _______%
Bonus and Commissions _______%
Dividends and Interest _______%
Real Estate Income _______%
Other Income _______%
100%
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11. Please provide the following information about securities
held.
Securities (Stocks and Bonds)
Number of Shares or Name of Market Amount(1)
Bonds Security Cost Value Unpaid
___________ ____________________ $_____ $_____ $________
___________ ____________________ _____ _____ ________
___________ ____________________ _____ _____ ________
___________ ____________________ _____ _____ ________
___________ ____________________ _____ _____ ________
___________ ____________________ _____ _____ ________
Total $_____ $________
Less Amount Unpaid ($_____ )
Net Investment in Securities $
- -----------------------
(1) That portion of the securities' cost which has not been paid; e.g., if
100 shares were purchased at $10 cost on a 40% margin, $400 is the amount
unpaid.
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- 9 -
Real Estate (excluding home)
Description Cost and Year
and Location Title Holder Purchased Market Value Mortgage Mortgage Holder
________________ ______ ________ $_____ $_______ ________
________________ ______ ________ _____ _______ ________
________________ ______ ________ _____ _______ ________
________________ ______ ________ _____ _______ ________
________________ ______ ________ _____ _______ ________
________________ ______ ________ _____ _______ ________
Total $_____ $__________________
Less Mortgages ($_____)
Less Mortgages ($_____)
Net Investment in Real Estate $
=
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Notes Payable by the undersigned (including obligations in connection with
tax sheltered investments).
Date Due Amount Due
(including due dates of any (including amounts of any
Holder of Note installment payments) installment payments)
____________________ ____________________ $___________________
____________________ ____________________ ___________________
____________________ ____________________ ___________________
____________________ ____________________ ___________________
____________________ ____________________ ___________________
____________________ ____________________ ___________________
Total: $___________________
Other than those encumbrances indicated in the balance sheet below and
supporting schedules, have you pledged, assigned, hypothecated, mortgaged, or
transferred as collateral or otherwise, any assets?
Yes [ ] No [ ]
If yes, please provide details:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________
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12. The following information must be fully completed. Please
provide the following information (if married couples are the
investors include assets and liabilities of both):
Date of Balance Sheet:___________________________________
ASSETS LIABILITIES
Cash on Hand and in Notes Payable to
Banks: $__________ Banks-Secured: ____________
Net Investment in Notes Payable to
Securities: __________ Banks-Unsecured: ____________
Investment in Own
Company at Fair
Market Value: __________ Notes Payable to Others: ____________
Pension and Profit
Sharing (vested
portion) __________ Other Current Liabilities: ____________
Home Mortgage Payable
Net Investment in (Original Mortgage Balance:
Real Estate: __________ $_______) ____________
Market Value of Home
(Original Cost of
Home plus cost of
improvements): __________ Other Long-Term Liabilities: ____________
Personal Property: __________ TOTAL LIABILITIES: $___________
TOTAL WORTH:
Cash Value in Life (Total Assets minus Total
Insurance: __________ Liabilities): $___________
Accounts and Notes
Receivable: __________
Other Assets: __________
TOTAL ASSETS $__________
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13. Are there any significant contingent liabilities (e.g.,
guarantees, pending law suits) for which you may be obligated? Yes
_________ No __________ If yes, please indicate type and amount.
14. Have you ever been subject to bankruptcy, reorganization or
debt restructuring? Yes _________ No __________ If yes, please
provide complete details.
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IN WITNESS WHEREOF, I have executed this Investor Questionnaire this
_______ day of ____________, 199___ and declare that it is truthful and
correct.
(Check One)
_______ Individually ___________________________
Signature of Prospective Investor
Joint tenants with
_______ right of survivorship
Tenants in common ___________________________
_______ PRINT Investor Name
_______ In partnership*
As custodian, Trustee
or agent for
_______ _____________** ___________________________
Title, if corporation or trust
_______ Corporation***
_________________________
Signature of Prospective Co-Investor
__________________________
PRINT Co-Investor Name
__________________________
Title, if corporation or trust
* If a partnership, please include a copy of partnership
agreement and certificate authorizing investment.
** If a custodian, trustee or agent, please include trust,
agency or other agreement and certificate authorizing
investment.
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*** If a corporation, please include certified corporate resolution or
other document authorizing investment, certificate of incumbency of
officers and certified or audited financial statements for the
preceding three fiscal years.