UNANIMOUS SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made as of the 26th day of October, 1999.
A M O N G:
724 SOLUTIONS INC., a corporation amalgamated under the laws of
Ontario, having its principal place of business at 0000 Xxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (the
"CORPORATION")
-AND-
BLUE SKY CAPITAL CORPORATION, a corporation incorporated under the
laws of Ontario, having its principal place of business at 000 Xxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 ("BLUE SKY")
-AND-
1319079 ONTARIO INC., a corporation incorporated under the laws of
Ontario, having its principal place of business at 000 Xxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 ("1319079")
-AND-
BANK OF MONTREAL, a chartered Canadian bank, having an office at
00 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
("BMO")
-AND-
BANK OF AMERICA CORPORATION, a corporation incorporated under the
laws of Delaware, having a place of business at Bank of America
Corporate Center, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx, X.X.X. 00000 ("BAC")
-AND-
CITICORP STRATEGIC TECHNOLOGY CORPORATION, a corporation
incorporated under the laws of Delaware, having a place of
business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, X.X.X. 00000
("CSTC")
-AND-
CITICORP, a corporation incorporated under the laws of Delaware,
having a place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
X.X.X. 00000 ("CITICORP")
- 2 -
-AND-
SONERA CORPORATION, a corporation incorporated under the laws of
Finland, having a place of business at Fin-00051, Xxxxxx,
Xxxxxxxxxxxxxx 00, XXX-00000-Xxxxxxxx, Xxxxxxx ("SONERA")
-AND-
WFC HOLDINGS CORPORATION, a corporation formed under the laws of
the State of Delaware, having an office at 000 Xxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx, X.X.X. 00000 ("WFC")
-AND-
FINANCIAL TECHNOLOGY VENTURES (Q), L.P., a limited partnership
established under the laws of the State of Delaware, having a
principal office at 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxxxx, XX 00000 ("FTV1")
-AND-
FINANCIAL TECHNOLOGY VENTURES, L.P., a limited partnership
established under the laws of the State of Delaware, having a
principal office at 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxxxx, XX 00000 ("FTV2")
(FTV1 and FTV2 shall hereinafter be referred to as "FTV")
-AND-
HSBC INVESTMENT BANK PLC., a company duly organized and existing
under the laws of England, having a registered office at Thames
Exchange, 00 Xxxxx Xxxxxx Xxxxx, Xxxxxx, Xxxxxxx, XX0X 0XX
("HSBC")
WHEREAS, as at the date hereof, there are 14,701,213 issued and
outstanding Common Shares and securities representing the right to subscribe for
333,334 Common Shares, in each case, registered and beneficially owned as
follows:
Blue Sky 2,000,000
1319079 2,000,000
BMO 1,714,285
BAC 1,600,000
CSTC 3,200,000
Sonera 3,200,000
WFC 392,157
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FTV1 252,105
FTV2 9,333
HSBC 333,333
and the HSBC Warrant to
purchase, pursuant to and in
accordance with the provisions
thereof, 333,334 Common Shares
AND WHEREAS the parties wish to enter into this Agreement to amend
and restate the provisions of the October 19, 1999 Unanimous Shareholders'
Agreement as herein provided for the purposes of, among other things,
recognising HSBC as a Strategic Partner, and in order to make arrangements
regarding the organization and affairs of the Corporation and the transfer of
their securities of the Corporation under certain circumstances;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the mutual covenants herein contained and other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged), the parties
covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS.
As used in this Agreement, the following words and phrases shall
have the following meanings, respectively:
(a) "1933 ACT" - means the UNITED STATES SECURITIES ACT OF 1933, as
amended;
(b) "ACT" - means the BUSINESS CORPORATIONS ACT (Ontario);
(c) "AFFILIATE" - has the following meaning:
(i) one body corporate (as defined in Section 1.1(eee)) shall
be affiliated with another body corporate if, but only
if, one of them is the Subsidiary of the other or both
are Subsidiaries of the same body corporate or each of
them is controlled by the same person;
(ii) for the purposes of the definition of "Affiliate" and
"Subsidiary", a body corporate shall be considered to be
controlled by a person or by two or more bodies corporate
if, but only if:
(A) voting securities of the first-mentioned body
corporate carrying more than 50% of the votes for
the election of directors are held, other than by
way of security only, by or for the benefit of
such
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other person or by or for the benefit of such
other bodies corporate; and
(B) the votes carried by such securities are
sufficient, if exercised, to elect a majority of
the board of directors of the first-mentioned body
corporate;
(iii) an "Affiliate" of a specified person that is not a body
corporate is a person that directly, or indirectly
through one or more intermediaries, controls, or is
controlled by, or is under common control with, the
person specified. In this case, "control" (including the
terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the
power to elect a majority of such specified person's
board of directors or similar governing body, or
otherwise having the power to direct the business and
policies of such specified person pursuant to the terms
of the organisational documents of such specified person.
(d) "APPLICABLE LAW" - means, with respect to any person, property,
transaction, event or other matter, any law, rule, statute,
regulation, order, judgment, decree, treaty or other requirement
having the force of law (collectively, the "Law") relating or
applicable to such person, property, transaction, event or other
matter. Applicable Law also includes, where appropriate, any
interpretation of the Law (or any part) by any person having
jurisdiction over it, or charged with its administration or
interpretation;
(e) "APRIL 1998 UNANIMOUS SHAREHOLDERS' AGREEMENT" - means that
certain unanimous shareholders' agreement between the Corporation,
BMO and Blue Sky dated as of April 30, 1998 concerning the
Corporation, which agreement was terminated and replaced by the
original version of the October 19, 1999 Unanimous Shareholders'
Agreement;
(f) "ARM'S LENGTH" - has the meaning given to such term in Schedule
"1.1(f)";
(g) "ARTICLES" - means the original or restated articles of
incorporation, certificate of incorporation, articles of
amalgamation, articles of arrangement, articles of continuance,
articles of reorganization, articles of revival, letters patent,
memorandum of agreement, special act or statute and any other
instrument or constating document by or pursuant to which a
corporation is incorporated or comes into existence;
(h) "ASSOCIATE" - where used to indicate a relationship with any
person or company means:
(i) any company of which such person or company beneficially
owns, directly or indirectly, voting securities carrying
more than 10% of the voting rights attached to all voting
securities of the company for the time being outstanding;
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(ii) any partner of that person or company;
(iii) any trust or estate in which such person or company has a
substantial beneficial interest or as to which such
person or company serves as trustee or in a similar
capacity;
(iv) any relative of that person who resides in the same home
as that person;
(v) any person of the opposite sex who resides in the same
home as that person and to whom that person is married or
with whom that person is living in a conjugal
relationship outside marriage, or
(vi) any relative of a person mentioned in clause (v) who has
the same home as that person;
(i) "BAC" - means Bank of America Corporation, a corporation
incorporated under the laws of the State of Delaware, the shares
of common stock of which are listed on the New York Stock
Exchange;
(j) "BANK ACT" - means the BANK ACT (Canada);
(k) "BMO CONTINUING ALLIANCE" - means the continuing alliance between
the Corporation and BMO pursuant to which BMO may continue as a
development partner with the Corporation to license the
Corporation's technology after the BMO Second Anniversary pursuant
to and in accordance with the provisions of the BMO Technology
License Agreement;
(l) "BMO SECOND ANNIVERSARY" - means March 1, 2000 or, if extended by
BMO in accordance with Section 2.3.1 of the BMO Subscription
Agreement, June 1, 2000, as the case may be;
(m) "BMO SUBSCRIPTION AGREEMENT" - means that certain share
subscription agreement between Blue Sky, BMO and the Corporation
dated April 30, 1998, as amended by an amending agreement dated as
of October 15, 1998;
(n) "BMO TECHNOLOGY LICENSE AGREEMENT" - means that certain technology
license agreement between the Corporation and BMO dated April 30,
1998, as amended by letter agreements dated November 27, 1998 and
July 26, 1999;
(o) "BOARD OF DIRECTORS" - the board of directors of the Corporation
from time to time;
(p) "BOFA TECHNOLOGY LICENSE AGREEMENT" - means that certain
technology license agreement between the Corporation and Bank of
America National Trust & Savings Association, an Affiliate of BAC,
dated June 1, 1999;
(q) "BUSINESS" - means the business of the Corporation, being the
business of researching, designing, developing, marketing,
licensing, supporting, advising on
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and operating technology that provides both consumers and
businesses (in Canada, the United States of America and
globally) with access to electronic banking, brokerage,
payment, content, e-commerce and other applications (including
similar and complementary applications) over a variety of
access platforms, such as Internet-enabled devices, and which
business (A) is carried on by the Corporation in a meaningful
manner in Canada, the United States of America and globally,
and (B) includes an emphasis on financial transactions;
(r) "BUSINESS DAY" - means any day other than a Saturday, Sunday or
statutory holiday in Toronto (Ontario), New York (NY) or
Helsinki (Finland);
(s) "COMMON SHARE" or "EQUITY SHARE" or "EQUITY SECURITY" - means a
common share in the capital of the Corporation and includes
other fully-participating equity shares (whether or not
entitled to voting rights) in the capital of the Corporation
which, if any, are issued pursuant to the Stock Option Plan;
provided however that, subject to Applicable Law, with respect
to those matters or actions contemplated herein which, to be
implemented or to effect the implementation thereof, require an
approval, a consent or an authorization which is based on
achieving or exceeding a certain threshold level of the votes
cast by one or more holders of Common Shares, the term "Common
Shares" shall only refer to the common shares in the capital of
the Corporation;
(t) "COMPANY REGISTRATION" - means an offering by the Corporation
(on its behalf or on behalf of any selling Shareholder) of any
of its equity shares or other securities to the public solely
for cash proceeds pursuant to a prospectus or registration
statement under the securities laws of one or more Provinces of
Canada and/or of the United States (including, without
limitation, for the purpose of qualification or registration of
securities held by shareholders other than a shareholder
contemplating exercising its Piggyback Registration Rights);
provided, however, that a Company Registration shall not
include: (i) a registration relating solely to participants in
the Stock Option Plan or other employee incentive or benefit
plans; (ii) a registration relating solely to transactions
covered by Rule 145 under the 1933 Act registered on Form S-4
or similar form that may be promulgated in the future; (iii) a
registration relating solely to a matter which does not require
a prospectus or registration statement to include (explicitly
or through incorporation by reference) substantially the same
information as would be required to be included in a
registration statement covering the sale to the public of
Common Shares held by the Founding Shareholder or the Strategic
Partners; and (iv) a registration in which the only equity
securities being registered are those issuable upon conversion
of debt securities which are also being registered;
(u) "COMPETITOR" - means any person or entity which, directly or
indirectly through any Affiliate or Associate of such person or
entity: (i) carries on the Business; and (ii) competes
materially with the Corporation as determined by the Board of
Directors acting reasonably;
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(v) "COMPETITOR OF BMO" - means any financial institution or any
Affiliate or Subsidiary thereof (other than the Strategic
Partners who are Shareholders as at the date hereof or their
respective Affiliates and Subsidiaries) that: (a) provides
personal or commercial deposit services in Canada, or (b) is
engaged in the provision of full or discount brokerage services
in Canada, where, in either case, the consolidated deposits and
brokerage assets under management or administration in Canada
of such institution, its Affiliates and Subsidiaries is greater
than CDN $20 billion;
(w) "CONFIDENTIAL INFORMATION" - means in this Agreement (and, for
greater certainty, without prejudice to those matters governed
by any other contract between a Shareholder, or an Affiliate or
Subsidiary thereof, and the Corporation), all information
(including the terms and provisions hereof) concerning the
business and affairs of the Corporation or any of its
Affiliates or Subsidiaries of a confidential, non-public or
proprietary nature (which information shall include, without
limitation, trade secrets, know-how, intellectual property,
marketing plans, cost figures, client lists, names and
addresses of suppliers and customers, business contracts,
software and operating systems, and information relating to
employees and other persons in a contractual relationship with
the Corporation or any of its Affiliates and Subsidiaries),
obtained, made available or disclosed in circumstances where
the recipient (the "Recipient") ought reasonably to know that
such information obtained directly or indirectly from, made
available or disclosed by or on behalf of the Corporation or
any Affiliate or Subsidiary thereof (the "Disclosing Party"),
was obtained directly or indirectly from, made available or
disclosed with an expectation on the part of the Corporation
and/or the Disclosing Party that such information would be held
in confidence by the Recipient and its employees, officers,
agents or advisors. Confidential Information does not include
any such information which: (i) at the time of its disclosure
is publicly available through no fault of any person owing a
duty of confidentiality to the Corporation or its Affiliate or
Subsidiary; (ii) after disclosure, is released to the public by
the Disclosing Party without restriction or otherwise properly
becomes part of the public domain through no fault or action of
the Recipient (but only after it is released or otherwise
becomes part of the public domain); (iii) the Recipient can
demonstrate was known to the Recipient or was in its possession
at the time of disclosure and which was not acquired by such
party directly or indirectly under any obligation of confidence
to the Corporation or its Affiliates or Subsidiaries or from a
person who, to the knowledge of the Recipient after exercising
due diligence, owed an obligation of confidentiality to the
Corporation or its Affiliates or Subsidiaries with regard to
such information (for the purposes of this subsection (iii)
information shall also be treated as confidential after the
Disclosing Party shall have demonstrated to the Recipient that,
notwithstanding its due diligence at the time of disclosure,
the source of the information was in fact under a duty of
confidentiality to the Corporation or its Affiliates or
Subsidiaries with regard to such information - the Recipient
shall not be liable for having acted in good faith that such
information was not confidential until so informed); or (iv)
the Recipient can demonstrate was independently
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developed by such Party without reference to or any use of the
Confidential Information of the Disclosing Party;
(x) "CONSTATING DOCUMENTS" - means, with respect to a corporation,
its Articles and its by-laws, all as amended from time to time;
(y) "CSTC SHARES" - has the meaning ascribed to it in the recitals;
(z) "CSTC SUBSCRIPTION AGREEMENT" means that certain share
subscription agreement between the Corporation, Citicorp and
CSTC made as of July 23, 1999;
(aa) "DEMAND REGISTRATION" - means, individually or collectively, a
Founding Shareholder Demand Registration and/or a Strategic
Partner Demand Registration;
(bb) "EMPLOYEE SHAREHOLDERS" - means, so long as they are
Shareholders, any employee of the Corporation or its
Subsidiaries to whom, or to a member of whose Immediate Family,
Common Shares may be issued or transferred from time to time
and who become parties hereto and, for greater certainty,
excludes Xxxx Xxxxxxx, the Founding Shareholder (including the
members thereof), the Strategic Partners, the Management
Shareholders and the Non-Employee Directors;
(cc) "FOUNDING SHAREHOLDER" - means collectively Xxxx Xxxxxxx, Blue
Sky, 1319079 and their respective Permitted Transferees and
entities which become Shareholders in respect of which Xxxx
Xxxxxxx holds a material interest; and for the purposes of this
definition, a material interest shall be deemed to be held by
Xxxx Xxxxxxx if he directly or indirectly owns or holds a
majority of the voting rights in such entity; and a "MEMBER OF
THE FOUNDING SHAREHOLDER" means any person contemplated by this
definition of Founding Shareholder;
(dd) "FOUNDING SHAREHOLDER DEMAND REGISTRATION" - has the meaning
ascribed to it in Section 13.1(b) and "Founding Shareholder
Registration Request" has the meaning ascribed to it in Section
13.1;
(ee) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" - means
the current accounting principles recommended by the Canadian
Institute of Chartered Accountants in the "CICA Handbook" at
the relevant time, or in the event that the matter is not
covered in the CICA Handbook, principles having general
acceptance among accounting professionals in Canada at the
particular time; and, for greater certainty, the expensing of
all development costs in the year they are incurred shall, to
the extent not specifically prohibited by the CICA Handbook, be
deemed to be in accordance with GAAP;
(ff) "GOVERNMENTAL AUTHORITY" - means any governmental or
quasi-governmental authority including any federal, state,
provincial, territorial, county, municipal or other
governmental or quasi-governmental agency, board, parliament,
legislature,
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regulatory authority, agency, tribunal, commission, branch,
bureau, commission, court, department or other law, regulation
or rule-making entity (including a Minister of the Crown) or
other instrumentality or political unit or subdivision having
or purporting to have jurisdiction on behalf of any nation,
state, province, municipality, district or any subdivision
thereof;
(gg) "HSBC WARRANT" - means that certain warrant to purchase Common
Shares of the Corporation at U.S. $15.00 per Common Share dated
as of October 26, 1999 and identified by Serial No. W-1 issued
and granted by the Corporation to and in favour of HSBC
wherein, in general, the Corporation has granted to HSBC the
right to subscribe for or to purchase from the Corporation
333,334 Common Shares at a price of U.S. $15.00 per Common
Share, a copy of which is attached hereto as Schedule 1.1(gg),
which Schedule is incorporated herein by reference and deemed
to be part hereof, as such warrant may be amended, supplemented
or otherwise modified from time to time pursuant to and in
accordance with Section 1.20(c);
(hh) "IMMEDIATE FAMILY" - means, with respect to an individual
Shareholder or Principal, as the case may be:
(i) the spouse or issue of that Shareholder or Principal;
(ii) a corporation which has no registered or beneficial
shareholders other than the following (a "Permitted
Shareholder" for the purposes of this first paragraph of
this Section 1.1(hh)):
(A) that Shareholder or Principal; or
(B) the spouse and/or issue of that Shareholder or
Principal, as the case may be; or
(C) any trust or trusts described in paragraph (iii)
below,
provided that the issued and outstanding shares of such
corporation are free and clear of all claims, liens and
encumbrances whatsoever and no person other than a
Permitted Shareholder has any agreement or option or any
right capable of becoming an agreement for the purchase
of any of such shares and provided that the registered
and beneficial shareholders of such corporation shall
have executed and delivered to the other parties hereto
an agreement substantially in the form annexed hereto as
Schedule "6.2" and all share certificates of such
corporation shall at all relevant times during the term
of this Agreement have the legend set out in Section 19.1
endorsed thereon; or
(iii) a trust which has no trustees or beneficiaries (vested,
contingent or otherwise) other than that Shareholder
and/or Principal and/or the spouse and/or issue of that
Shareholder or Principal, as the case may be;
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and means with respect to a corporate Shareholder:
(i) the Principal and/or the spouse and/or issue of the
Principal of that Shareholder;
(ii) a corporation which has no registered or beneficial
shareholders other than the following (a "Permitted
Shareholder" for the purposes of this second paragraph of
this Section 1.1(hh)):
(A) the Principal of that Shareholder; or
(B) the spouse and/or issue of the Principal; or
(C) any trust or trusts described in paragraph (iii)
below,
provided that the issued and outstanding shares of such
corporation are free and clear of all claims, liens and
encumbrances whatsoever and no person, other than a
Permitted Shareholder, has any agreement or option or any
right capable of becoming an agreement for the purchase
of any of such shares and provided that the registered
and beneficial shareholders of such corporation shall
have agreed in writing with the parties hereto not to
enter into an agreement or option to sell, transfer,
assign, pledge, mortgage, charge, create a security
interest in, hypothecate or otherwise dispose of,
encumber or deal with, whether by will or otherwise, the
shares of such corporation or permit such corporation to
issue shares or grant options or rights in respect of the
shares of such corporation except to any member of the
Immediate Family of that Shareholder who shall have
executed and delivered a similar agreement, without the
prior written consent of the other Shareholders first had
and obtained, and all share certificates of such
corporation shall at all relevant times during the term
of this Agreement have the legend set out in Section 19.1
hereof endorsed thereon; or
(iii) a trust which has a majority of trustees who are the
Principal of the Shareholder or the spouse and/or issue
of such Principal and has no beneficiaries (vested,
contingent or otherwise) other than the Principal of
that Shareholder or the spouse and/or issue of such
Principal, as the case may be;
(ii) "INDEPENDENT DIRECTOR" - means an individual who is
independent of management of the Corporation, and each and
every one of the Strategic Partners, and is free from any
interest in any business or other relationship which could, or
could reasonably be perceived to, materially interfere with the
individual's ability to act as a director of the Corporation
with a view to the best interests of the Corporation, other
than interests in relationships arising from shareholdings;
(jj) "INITIAL PUBLIC OFFERING" - means the issue of shares (or
securities convertible into or exchangeable for shares of the
Corporation) by the Corporation pursuant to
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a final prospectus for which a receipt is issued by a
securities commission or similar regulatory body in Canada,
and/or pursuant to an effective registration statement filed
with the United States Securities and Exchange Commission to
enable the sale of such securities to members of the public, or
the issue of any shares to the Shareholders by a corporation
which is a reporting issuer in a Province of Canada or public
company in any jurisdiction, pursuant to a reverse take-over
bid, statutory amalgamation, statutory arrangement or similar
transaction involving the Corporation and, in all cases, which
results in a class of Common Shares (or the securities of a
successor issuer) being listed and posted for trading on a
recognised stock exchange in Canada or the United States or
quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or the Canadian Dealing
Network Inc. ("CDN");
(kk) "MANAGEMENT SHAREHOLDERS" - means, so long as they are
Shareholders, those officers and senior employees of the
Corporation or its Subsidiaries who become, or a member of
whose Immediate Family become, Shareholders and parties hereto
and who are designated as "Management Shareholders" by the
Board of Directors for the purposes of this Agreement and, for
greater certainty, excludes Xxxx Xxxxxxx, the Founding
Shareholder (including the members thereof), the Strategic
Partners, the Non-Employee Directors and the Employee
Shareholders;
(ll) "MANAGEMENT TEAM" - means those officers or senior employees of
the Corporation or its Subsidiaries who are designated as
described in Section 5.1;
(mm) "MATERIAL DECISION" - means any decision involving a matter
contemplated by either: (I) Section 1.1(mm)(i) (a "Category 1
Material Decision"); (II) Sections 1.1(mm)(ii) to, and
including, 1.1(mm)(xii) (individually, a "Category 2 Material
Decision"); (III) Sections 1.1(mm)(xiii) to, and including,
1.1(mm)(xxiv) (individually, a "Category 3 Material Decision");
and (IV) Section 1.1(mm)(xxv) (a "Category 4 Material
Decision"), as provided below:
CATEGORY 1 MATERIAL DECISION
(i) the taking of any action which may lead to or result in a
material change in the nature of the Business presently
contemplated to be carried on by the Corporation, or in
the discontinuance or termination of the Business of the
Corporation;
CATEGORY 2 MATERIAL DECISIONS
(ii) the redemption, purchase for cancellation, purchase or
other acquisition for value by the Corporation, directly
or indirectly, of any outstanding Common Shares, but
excluding purchases of Common Shares contemplated or
provided for pursuant to the terms of this Agreement;
(iii) the amendment of the provisions of the Corporation's
Constating Documents;
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(iv) any proposal to amalgamate or to effect a corporate
reorganization, arrangement, continuation, liquidation,
dissolution or winding-up of the Corporation or any other
transaction pursuant to which all or substantially all of
the assets of the Corporation would become the property
of another person;
(v) the conversion, exchange, reclassification,
redesignation, subdivision or consolidation of the Common
Shares or the amendment of the rights, privileges,
restrictions and conditions attaching to any Common
Shares or other change of or to any Common Shares;
(vi) the declaration or payment or setting aside for payment
of any dividends or any other distribution in respect of
any equity securities of the Corporation (save and except
for the payment of principal or interest with respect to
convertible debt or similar obligations which constitute
"equity" securities under GAAP);
(vii) changing the size of the Board of Directors (except
for: (I) decreases related to the loss of a Strategic
Partner's entitlement to a nominee; or (II) increases
related to the admission of a new Strategic Partner; or
(III) the minimum increases required, from time to
time, as a consequence of the appointment of additional
non-resident directors as a result of the admission of
new Strategic Partners, to allow the Founding
Shareholder to appoint additional Canadian-resident
directors from the Management Team pursuant to Section
4.2(a)(i)(C) so that the Corporation remains in
compliance with the provisions of the Act requiring a
majority of Canadian-resident directors);
(viii) removing any Independent Director appointed pursuant to
Section 4.2(a)(i)(B);
(ix) sale of any asset, otherwise than to an Affiliate or a
Subsidiary of the Corporation, which includes
intellectual property rights that are material to the
core functionality of the Corporation's products or
services;
(x) the removal of Xxxx Xxxxxxx as Chairman or CEO of the
Corporation or any diminution of the nature or status of
his responsibilities or authority to act as Chairman and
CEO, or any change in his reporting relationship, from
that enjoyed as at July 1, 1999;
(xi) the subscription for or other agreement by the
Corporation to hold, take, purchase or acquire shares in
the capital of any other corporation for a subscription
price in excess of US$5 million;
(xii) the entering into of any exclusive licensing agreements
by the Corporation with respect to the Business
(excluding, however, exclusive licensing of technology
that is commissioned or requested by or for a particular
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licensee or which is a work paid for outside of the
Corporation's normal licensing arrangements);
CATEGORY 3 MATERIAL DECISIONS
(xiii) effecting any acquisition having a transaction value
(including all cash and non-cash consideration paid,
liabilities assumed, the maximum present value of any
deferred payment or earn-out obligations and any
consideration payable under any related non-compete,
consulting or management services or similar
arrangements, excluding bona fide employment or
management arrangements) equal to or greater than
U.S.$10,000,000 or, in the event of transactions that
might be viewed as linked or part of a related series of
transactions, an aggregate of U.S.$20,000,000;
(xiv) the subscription for or other agreement by the
Corporation to hold, take, purchase or acquire shares in
the capital of any other corporation for a subscription
price that is less than or equal to US$5 million;
(xv) the implementation of a decision to commercialize a
category of access platforms for the Corporation's
internet-based and e-commerce applications, other than
the personal computer, mobile/wireless, set-top and
gaming categories or the implementation of a decision to
re-prioritise the Corporation's focus between categories
of access platforms previously approved for
commercialisation (for greater certainty, the undertaking
of research and development activities with respect to
potential new categories of access platforms shall NOT
constitute a "Material Decision" provided that research
and development activities, generally, are anticipated in
the then current business plan);
(xvi) except in the ordinary course of business, the entering
into by the Corporation of a partnership or any
arrangement for the sharing of profits, union of
interests, joint venture or reciprocal concession
arrangement with any person;
(xvii) the establishment or amendment or modification of any
employee stock plan (including the Stock Option Plan);
(xviii) effecting any sale of assets of the Corporation having a
transaction value equal to or greater than $250,000;
(xix) approving any budgets or business plans of the
Corporation;
(xx) except in the ordinary course of business, the making,
directly or indirectly, of loans or advances to, or
investment in, or the giving of security for, or the
guarantee of the indebtedness of, any person;
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(xxi) except in the ordinary course of business, the
hypothecation, pledge, mortgage, charge or other
encumbrance by the Corporation of the whole of its
assets or any part thereof;
(xxii) any investment of funds of the Corporation in, or any
contract entered into by the Corporation with, any
person who does not deal at arm's length with the
officers of the Corporation as appointed by the Board
of Directors (for greater certainty, excluding
investments in or contracts with Subsidiaries of the
Corporation);
(xxiii) causing the Corporation to pursue and, if possible,
complete an Initial Public Offering (other than as
contemplated in Article 13 or Article 15);
(xxiv) the borrowing of funds (whether or not on the security
of the assets of the Corporation) in excess of
U.S.$10,000,000; and
CATEGORY 4 MATERIAL DECISION
(xxv) the proposed issuance of Common Shares to a new
Strategic Partner in accordance with Section 4.2(e)(i);
(nn) "NON-EMPLOYEE DIRECTORS" - means, so long as they are
Shareholders, those individuals who are members of the Board of
Directors and who become, or a member of whose Immediate Family
become, Shareholders and parties hereto and, for greater
certainty, excludes Xxxx Xxxxxxx, the Management Shareholders and
the Employee Shareholders;
(oo) "NOTICE" - has the meaning given to such term in Section 19.2;
(pp) "OCTOBER 19, 1999 UNANIMOUS SHAREHOLDERS' AGREEMENT" - means that
certain unanimous shareholders' agreement originally executed June
1, 1999 and amended and restated as of August 2, 1999 and as of
October 19, 1999, among the Corporation, Blue Sky, 1319079, BMO,
BAC, Citicorp, CSTC, Sonera, WFC, FTVI and FTV2, which agreement
is further amended and restated by this Agreement;
(qq) "OPTIONS" - means options to acquire Common Shares granted
pursuant to the Stock Option Plan;
(rr) "OSFI" - means the Office of the Superintendent of Financial
Institutions or such replacement supervisory or administrative
body or Governmental Authority as may be established pursuant to
the Bank Act;
(ss) "PERMITTED TRANSFEREE" - means:
(i) with respect to any Shareholder other than a Strategic
Partner, a member of the Immediate Family of the
Shareholder, provided that such member
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of the Immediate Family of the Shareholder is not a
Competitor or a Competitor of BMO;
(ii) with respect to the Founding Shareholder, any of its
Affiliates or Subsidiaries, provided that such Affiliate
or Subsidiary is not a Competitor or a Competitor of BMO;
(iii) with respect to BMO or BAC, any of their respective
Affiliates or Subsidiaries, provided that: (I) such
Affiliate or Subsidiary, if not wholly-owned directly
or indirectly by BMO or BAC, as the case may be, is not
a Competitor; (II) in the case of BMO or any subsequent
assignee of its interest, if the Affiliate or
Subsidiary to which shares of the Corporation are being
transferred is a non-Canadian entity, then if the
Corporation or the Founding Shareholder objectively
demonstrate at any time or from time to time after such
transfer that, in the particular circumstances then
applicable, BMO holding its interest in the Corporation
through such non-Canadian entity would subject a
particular transaction to foreign-investment review
pursuant to Applicable Law in Canada or result in
additional costs or significant impediments or
significant loss of benefits to either the Corporation
or the Founding Shareholder pursuant to applicable
taxation or securities laws, then BMO will cause such
shareholding to be transferred to a Canadian Affiliate
or Subsidiary of BMO; and (III) in the case of BAC or
any subsequent assignee of its interest, the Affiliate
or Subsidiary to which shares of the Corporation are
being transferred shall be a resident of Canada or the
United States for purposes of applicable taxation and
securities laws;
(iv) with respect to CSTC or Sonera, any of their respective
Affiliates or Subsidiaries, provided that:
(A) such Affiliate or Subsidiary, if not wholly-owned
directly or indirectly by the transferor, is not a
Competitor; and
(B) in the case of CSTC or any subsequent assignee of
its interests, the Affiliate or Subsidiary to
which shares of the Corporation are being
transferred shall be a resident of Canada, the
United States or the United Kingdom for the
purposes of applicable taxation and securities
laws; and
(C) in the case of Sonera or any subsequent assignee
of its interests, the Affiliate or Subsidiary to
which shares of the Corporation are being
transferred shall be a resident of Canada,
Finland, Belgium, Holland or the United Kingdom
for the purposes of applicable taxation and
securities laws;
(v) with respect to WFC, any of its Affiliates or
Subsidiaries, provided that:
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(A) such Affiliate or Subsidiary, if not wholly-owned
directly or indirectly by the transferor, is not a
Competitor; and
(B) in the case of WFC or any subsequent assignee of
its interest, the Affiliate or Subsidiary to which
shares of the Corporation are being transferred
shall be a resident of Canada or the United States
for purposes of applicable taxation and securities
laws;
(vi) with respect to FTV1 and FTV2;
(A) any of their respective Affiliates which is
controlled by FTV1 or FTV2, as the case may be and
excluding Affiliates that control FTV1 or FTV2,
provided that such Affiliate is not a Competitor;
or
(B) a liquidating trust for the benefit of the
partners of the particular limited partnership,
provided that the trustee(s) are not affiliated in
any way with a Competitor and provided that the
sole beneficiaries of such liquidating trust are
the partners of the limited partnership being
dissolved; and
(vii) with respect to HSBC, any of its Affiliates or
Subsidiaries, provided that:
(A) such Affiliate or Subsidiary, if not wholly-owned
directly or indirectly by the transferor, is not a
Competitor; and
(B) in the case of HSBC or any subsequent assignee of
its interest, the Affiliate or Subsidiary to which
shares of the Corporation are being transferred
shall be a resident of Canada, the Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx, Xxxxxxx, Xxxx Xxxx or the United
Kingdom for purposes of applicable taxation and
securities laws; and
(tt) "PERSON" - means an individual, partnership, unincorporated
association, organization, syndicate, corporation, trust and a
trustee, executor, administrator or other legal or personal
representative;
(uu) "PIGGYBACK REGISTRATION" - has the meaning given to such term in
Section 13.2 and in Section 14.2;
(vv) "PLACE OF CLOSING" - means the offices of the solicitors for the
purchaser in the subject transaction or such other place as may be
agreed to in writing by the vendor and the purchaser in the
subject transaction;
(ww) "PRINCIPAL" - means: (i) with respect to any Shareholder which is
not an individual or a Strategic Partner or the Founding
Shareholder, the employee, director or officer of the Corporation
or its Subsidiaries who (together with his or her Immediate
Family) controls the Shareholder; and (ii) with respect to those
Affiliates and Subsidiaries of the following Shareholders to which
securities of the Corporation are issued or transferred from time
to time, the particular
- 17 -
Shareholder of which the subscriber or transferee is the
Affiliate or Subsidiary: the Founding Shareholder, BMO, BAC,
CSTC, Sonera, WFC, FTV1, FTV2 and HSBC; and, for greater
certainty, Citicorp is the Principal of CSTC;
(xx) "PRIME BANK RATE" - the commercial lending rate of interest,
expressed as an annual rate, which Bank of Montreal quotes in
Toronto as the reference rate of interest from time to time
(commonly known as "prime") for the purpose of determining the
rate of interest that it charges to its commercial customers for
loans in Canadian funds;
(yy) "SECURITIES ACT" - means the SECURITIES ACT (Ontario);
(zz) "SHAREHOLDER" - means the Founding Shareholder, BMO, BAC, CSTC,
Sonera, WFC, FTV1, FTV2 and HSBC, the Management Shareholders,
Non-Employee Directors and the Employee Shareholders and any other
person who becomes a shareholder of the Corporation and whose
holding is permitted in accordance with the terms hereof, in each
case so long as they are shareholders of the Corporation; and
"SHAREHOLDERS" shall have a corresponding meaning;
(aaa) "SHARES" or "SECURITIES" - means all shares, options (including
without limitation the Options) warrants, interests,
participations or other equivalents (regardless of how
designated) of or in a corporation, unlimited liability
company, partnership, limited partnership or equivalent entity,
whether voting or non-voting or participating or
non-participating, or any securities, bonds, notes, debentures
or other evidences of indebtedness that are convertible into or
exchangeable for any of the foregoing;
(bbb) "STOCK OPTION PLAN" - means the stock option plan of the
Corporation adopted as of September 15, 1997, as amended or
replaced from time to time in accordance with the provisions
hereof, which currently provides for the granting of options to
acquire up to 1,000,000 Common Shares (subject to adjustment in
accordance with the terms thereof), and in respect of which the
Board of Directors has authorized an amendment or supplementary
plan in respect of 250,000 equity shares;
(ccc) "STRATEGIC PARTNER" - means, so long as they or any of their
Permitted Transferees is a Shareholder, each of BMO, BAC, CSTC,
Sonera, WFC, FTV, HSBC and such other persons as may become
Shareholders from time to time in accordance with the provisions
of Section 4.2(e) (not to exceed three of such additional
Strategic Partners) provided that such other entity or
organization has a significant customer base to which the products
and/or services of the Business or any part thereof could be
marketed or such entity or organization provides products and/or
services which are within the scope of the Business or
complementary thereto, all in the opinion of the Board of
Directors, acting reasonably and in good faith having regard to
the best interests of the Corporation;
- 18 -
(ddd) "STRATEGIC PARTNER DEMAND REGISTRATION" - has the meaning ascribed
to it in Section 14.1;
(eee) "SUBSIDIARY" - means an incorporated body wherever or however
incorporated (a "body corporate") that is a "SUBSIDIARY" of
another body corporate. A body corporate shall be considered a
subsidiary of another body corporate if, but only if:
(i) it is controlled (as defined in Section 1.1(c)(ii)) by:
(A) that other body corporate, or
(B) that other body corporate and one or more bodies
corporate each of which is controlled by that
other body corporate, or
(C) two or more bodies corporate each of which is
controlled by that other body corporate; or
(ii) it is a subsidiary of a body corporate that is a
subsidiary of that other body corporate;
(fff) "TIME OF CLOSING" - means the time of day agreed to in writing by
the vendor and the purchaser in the subject transaction on the
date established for completing the subject transaction in
accordance with the provisions of this Agreement; and
(ggg) "VOTING SECURITIES" - means securities, other than debt
securities, carrying a voting right to elect directors generally
either under all circumstances or under stated circumstances that
have occurred and are continuing.
1.2 CURRENCY.
Unless otherwise provided for herein, all dollar amounts referred
to or payments contemplated herein are stated in or shall be paid in Canadian
funds (as the case may be). Payments contemplated herein shall be in cash or by
certified cheque or bank draft drawn on a reputable financial institution or by
wire transfer.
1.3 INTERPRETATION.
The division of this Agreement into articles and sections is for
convenience of reference only and shall not affect the interpretation or
construction of this Agreement.
The word "including" used in this Agreement means "including
without limitation" and the word "includes" used in this Agreement means
"includes, without limitation". Expressions such as "hereof", "herein",
"hereto", "hereunder", "hereby" and similar expressions shall be construed as
referring to this Agreement in its entirety and not only to the particular
Article, Section, Subsection or clause in which such word or words appear.
Unless something in the subject matter or context is inconsistent therewith,
references herein to Articles, Sections, Subsections and clauses are to
Articles, Sections, Subsections and clauses of this Agreement.
- 19 -
1.4 GOVERNING LAW/SUBMISSION TO JURISDICTION.
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the federal laws of Canada
applicable therein (excluding any conflict of laws rule or principles that
might refer such construction to the laws of another jurisdiction) and shall
be treated, in all respects, as an Ontario contract. The parties hereto
submit to the exclusive jurisdiction of the courts of the Province of
Ontario. In any such dispute, subject to the provisions of Section 4.9, the
parties shall act reasonably and in good faith with a view to having such
dispute heard by a judge of the Commercial List of the Ontario Superior Court
of Justice.
1.5 NUMBER AND GENDER.
In this Agreement, the use of the singular number shall include
the plural and vice versa, the use of gender shall include the masculine,
feminine and neuter genders.
1.6 COMPUTATION OF TIME.
When calculating the period of time within which or following
which any act is required or permitted to be done, notice given or step taken
pursuant to this Agreement, the date which is the reference date in
calculating such period shall be excluded. If the last day of such period is
a non-business day, the period in question shall end on the next following
business day.
1.7 STATUTORY REFERENCES.
Unless otherwise indicated, any references herein to any law,
by-law, rule, regulation, order or act of any government, governmental body
or other regulatory body shall be construed as a reference thereto as amended
or re-enacted from time to time or as a reference to any successor thereto
and all rules and regulations promulgated thereunder.
1.8 EFFECT ON MANAGEMENT.
To the extent that this Agreement specifies that any matters
may only be or shall solely be dealt with or approved by or shall solely
require action by the Shareholders, the discretion and powers of the
directors of the Corporation to manage and to supervise the management of the
business and affairs of the Corporation with respect to such matters are
correspondingly restricted.
1.9 RIGHTS AND OBLIGATIONS OF TRANSFEREES.
If shares of the Corporation are transferred by a Shareholder
to one or more Permitted Transferees, such transferee(s) together with the
original Shareholder (should it or he retain any Common Shares), acting
unanimously, shall be entitled to exercise all rights of such Shareholder
hereunder, subject to the direction of the original Shareholder. For greater
certainty, any provision of this Agreement referring to or contemplating
shares held by, or the number of shares held by, a Shareholder shall (without
duplication) be deemed to include a reference to shares held by, or the
aggregate number of shares held by, the particular Shareholder and the
members of its Immediate Family (or, in the case of BMO, BAC, CSTC, Sonera,
WFC, FTV1,
- 20 -
FTV2 or HSBC, their respective Permitted Transferees), or in the case of the
Founding Shareholder, all of its Permitted Transferees together with all of
the members of the Founding Shareholder (and, to the extent applicable, their
respective Permitted Transferees) in each case who are Shareholders, and for
further certainty such aggregation shall apply for purposes of matters
dealing with rights and obligations to vote, purchase or sell shares as
contemplated herein.
1.10 SHARE REFERENCES.
Any reference to shares of the Corporation means shares in the
capital of the Corporation, as such shares exist at the close of business on
the date of execution and delivery of this Agreement and any additional
shares of the Corporation which may hereafter be created or issued; provided
that in the event of a subdivision, redivision, reduction, combination or
consolidation of the shares of the Corporation, then a reference to shares of
the Corporation shall thereafter mean the shares resulting from such
subdivision, redivision, reduction, combination or consolidation.
1.11 SEVERABILITY.
If any Article, Section or any portion of any Section of this
Agreement is determined to be unenforceable or invalid for any reason
whatsoever, that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and
such unenforceable or invalid Article, Section or portion thereof shall be
severed from the remainder of this Agreement.
1.12 TERMINATION.
This Agreement shall terminate upon:
(a) the written agreement of each of the Founding Shareholder, the
Strategic Partners and, if such termination would reasonably be
expected to have a material adverse effect on them, the Management
Shareholders;
(b) the dissolution or bankruptcy of the Corporation or the making by
the Corporation of an assignment or the commencing of a proceeding
by the Corporation under the provisions of the BANKRUPTCY AND
INSOLVENCY ACT (Canada), the COMPANIES CREDITORS' ARRANGEMENT ACT
(Canada) or any similar legislation related to bankruptcy,
insolvency or other relief for debtors applicable in Canada,
provided that the provisions of Article 17 of this Agreement shall
survive any termination of this Agreement pursuant to this Section
1.12(b);
(c) one person becoming the beneficial owner of all of the outstanding
Common Shares and securities convertible into or exercisable for
Common Shares, provided that the provisions of Article 17 shall
survive any termination of this Agreement pursuant to this Section
1.12(c) resulting from a transaction pursuant to Article 8,
Article 10 and Article 15; or
- 21 -
(d) an Initial Public Offering, provided that the provisions of
Article 13, Article 14 and Article 17 of this Agreement shall
survive any termination of this Agreement pursuant to this
Section 1.12(d).
1.13 AMENDMENTS AND WAIVERS.
This Agreement may be amended with the prior consent in
writing, duly executed, of: (i) the Founding Shareholder; (ii) each of the
Strategic Partners; and (iii) if such amendment would reasonably be expected
to prejudice their rights hereunder, the Management Shareholders.
Notwithstanding the immediately preceding paragraph, this
Agreement may also be amended for the purposes of reflecting the admission of
a new Strategic Partner as a Shareholder of the Corporation (for greater
certainty, pursuant to Section 1.18 or where such admission has been duly
approved in accordance with the provisions of Sections 4.2(d)(iv) and 4.2(e)).
The settlement of the required amendments to this Agreement in
this regard shall take place in accordance with the following provisions and
shall require the written consent of those Strategic Partners and, if
applicable, the Founding Shareholder, as shall have approved the admission of
the incoming Strategic Partner, or in the case of Section 1.18, by the
Founding Shareholder together with a majority in number of the Strategic
Partners (in each case, collectively, the "Admitting Parties"), provided,
however, that any amendments to this Agreement that are not Consequential
Amendments (as defined below) shall require approval in accordance with the
first paragraph of this Section 1.13.
In this regard, amendments to this Agreement may be made: (i)
to afford the new Strategic Partner with rights and subject it to obligations
comparable in all material respects with those applicable generally to the
existing Strategic Partners; or (ii) which are consequential to the admission
of a new Strategic Partner; or (iii) to reflect then existing rights and
obligations provided specifically for the benefit for (and subject to waiver
by) a particular Strategic Partner (such as, for example, the ability to
restrict transfers and issuances of Common Shares to competitors of the
particular Strategic Partner). In addition, changes may be made at the
request of the proposed new Strategic Partner which are non-material and
which cannot reasonably be considered adverse to the interests of the
Founding Shareholder and the existing Strategic Partners. The amendments
contemplated by this paragraph are referred to, collectively, as the
"Consequential Amendments".
Any such Consequential Amendments to the Agreement shall be
prepared by the Founding Shareholder and circulated in draft to each of the
Strategic Partners for their review and comment and such parties shall work
together and use all reasonable commercial efforts, acting reasonably and in
good faith, to settle the form and substance of the amended and restated
Agreement so that the final form thereof accommodating the entry of the new
Strategic Partner can be delivered by the Founding Shareholder to each of the
Strategic Partners and, if required, to the other Shareholders (other than
Employee Shareholders) and the voting trustee for the Employee Shareholders
for their execution by no later than the 15th business day after the
circulation of the preliminary draft thereof. In the event that any such
Shareholder (other than
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those Strategic Partners who have approved the admission of such new
Strategic Partner) fails to sign and return to the Founding Shareholder the
final form of amended and restated Shareholders' Agreement by no later than
the 15th business day after the delivery thereof, then, without prejudice to
any other rights which it may have, the Admitting Parties (or their
designated representative) shall be deemed to have been irrevocably appointed
by such Shareholders which shall not have signed and returned their
Agreements as their attorney in that behalf in accordance with the POWERS OF
ATTORNEY ACT (Ontario). The parties hereto acknowledge and agree that such
power of attorney is a power coupled with an interest, given for
consideration, and cannot be revoked without the consent of the other parties
hereto. For greater certainty, the parties hereto acknowledge and agree that
such power of attorney does not apply to and is not applicable to those
Strategic Partners which approved the admission of the new Strategic Partner.
With respect to any provision of this Agreement prohibiting the
transfer or issuance of shares to a particular person in the circumstances
solely because such person is a "Competitor of BMO", a written waiver from
BMO shall be sufficient to permit the particular transaction and such waiver
shall be binding on the parties hereto. Further, if at any time none of BMO
or its Affiliates or Subsidiaries are Shareholders, all references to
"Competitor of BMO" herein shall be deleted and this Agreement shall be
deemed to have been duly amended and restated to reflect such deletions.
1.14 ACCOUNTING AND AUDITING.
Subject to the provision of Section 5.2, all accounting and
financial records of the Corporation shall be prepared in accordance with
GAAP applied consistently during the periods covered thereby. The accounting
and financial records of the Corporation shall be kept in Canada. The
Corporation also agrees to make available to any Governmental Authority
entitled thereto, including OSFI, at all times, the accounting and financial
records of the Corporation.
1.15 SHAREHOLDER REGULATORY REQUIREMENTS.
The parties hereto desire to at all times comply in all
respects with all Applicable Law, including the requirements of Applicable
Law that apply specifically to a particular Shareholder as a result of the
nature of its business or the governmental licenses or permits that it holds
to carry on such business (for greater certainty and for purposes of
illustrative example, including the Bank Act and the regulations thereunder
as well as the applicable guidelines, recommendations and directions of OSFI,
as these relate to BMO). Also, for greater certainty, the parties hereto
shall cause the Corporation to carry on primary activities consistent with an
"information services corporation" (within the meaning given to such term in
the Bank Act) until such time as the characterisation of the Corporation as
an "information services corporation" is no longer required as a prerequisite
for any Shareholder, that is subject to the Bank Act, to hold the number of
Common Shares that it holds directly or indirectly.
In the event of: (i) a change in Applicable Law or the
application thereof by the applicable Governmental Authority; or (ii) a
change in the nature or geographic extent of the Corporation's business as
then carried on or proposed to be carried on; or (iii) a change or proposed
change in the identity of one or more of the Shareholders; or (iv) such other
facts
- 23 -
concerning the Corporation exist (including, without limitation, any proposed
action on the part of the Corporation), in any case such that the Founding
Shareholder, BMO, BAC, CSTC, Sonera, WFC, FTV1, FTV2 or HSBC would no longer
be permitted, pursuant to Applicable Law, to maintain all or part of their
respective shareholdings in the Corporation (directly or through their
respective Affiliates or Subsidiaries), the Corporation and the affected
Shareholder shall meet to consider whether the indicated Applicable Law would
in fact apply to the proposed course of action, to consider the impact of
such Applicable Law to the Corporation and to the affected Shareholder and to
consider whether there are any reasonable alternatives to the proposed course
of action available (and whether these can be implemented in a timely fashion
having regard to the needs of the Corporation and the affected Shareholder).
In this regard, the affected Shareholder shall be obligated to
pursue in good faith, using commercially reasonable efforts and on a timely
basis and at its sole expense, all reasonable alternatives and potential
solutions available to it, including, without limitation: (i) restructuring
the manner in which its interest in the Corporation is held; (ii) seeking to
obtain all necessary licenses, permits, consents, notices, approvals,
filings, certificates, registrations and/or authorizations of, by and/or with
any Governmental Authority necessary and/or required to be obtained by, or
issued or granted to, such Shareholder and seeking other regulatory
approvals and/or guidance; and (iii) seeking the assistance of other members
of its corporate group.
If, notwithstanding the foregoing, the affected Shareholder
determines, acting reasonably and in good faith and otherwise in accordance
with this Section 1.15, that the action in question cannot be implemented in
a manner that results in the affected Shareholder remaining in compliance
with Applicable Law, then the Corporation shall not pursue the action in
question unless and until the required regulatory approval is obtained or the
action can otherwise be implemented in accordance with the requirements of
Applicable Law.
In this regard, the parties hereto covenant and agree to act in
good faith in attempting to find a mutually acceptable solution (including,
if applicable, making such additions or changes to the rights and obligations
of the parties pursuant to this Agreement as shall result in an equitable
treatment of all parties having regard to their relative rights and
obligations as of the date hereof).
Each Shareholder shall be solely responsible for monitoring
legal developments specifically applicable to the operation of its business,
interpreting Applicable Law, determining the requirements for compliance with
such Applicable Law and identifying changes thereto. Further, each
Shareholder covenants and agrees to respond, on a timely basis having regard
to the Corporation's needs, to inquiries from the Corporation as to the
ability of the Corporation to pursue a specified action in light of the
requirements of Applicable Law as it relates to the particular Shareholder.
In this regard such Shareholders shall, upon request by the Corporation,
provide the Corporation with designated contact officers who possess or have
direct access to the expertise and internal authority required for the
purposes of this Section 1.15.
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1.16 REFERENCES TO AGREEMENTS.
Unless otherwise indicated, all references herein to any
agreement or instrument mean such agreement or instrument as amended,
modified, varied, restated or replaced from time to time with the written
agreement of the parties thereto.
1.17 SPECIAL PROVISIONS RELATING TO THE FOUNDING SHAREHOLDER
(a) EFFECT OF TERMINATION OF EMPLOYMENT OF XXXX XXXXXXX.
Notwithstanding anything to the contrary in this Agreement, if
the Strategic Partners elect to approve of Material Decision
1.1(mm)(x), or if the employment of Xxxx Xxxxxxx as Chairman
and Chief Executive Officer of the Corporation terminates as a
result of his voluntary resignation or his death or otherwise,
then the following provisions shall apply to the unique rights
held by the Founding Shareholder:
(i) the Founding Shareholder shall be entitled to nominate
a member of the Board of Directors in accordance with
Section 4.2(a)(i)(A)(1), until the Founding Shareholder
has disposed of all of its Common Shares;
(ii) the Founding Shareholder shall CEASE to be entitled to
nominate members of the Board of Directors in
accordance with Section 4.2(a)(i)(C), and thereafter
the Shareholders shall appoint such directors by a
majority vote, provided that such directors shall be
Independent Directors;
(iii) Xxxx Xxxxxxx shall CEASE to be entitled to exercise his
authority to select the senior management team of the
Corporation and its Subsidiaries and Affiliates, to set
their compensation, or to be included in and to
designate any member of the Compensation Committee, in
each case as contemplated by and in accordance with
Section 5.1; and thereafter, the Board of Directors
shall have all such authority;
(iv) The Founding Shareholder shall CEASE to be entitled to
select candidates for nomination as Independent
Directors pursuant to Section 4.2(a)(i)(B), instead the
candidates for nomination as Independent Directors
shall be selected by a majority of the Strategic
Partners;
(v) Category 3 Material Decisions shall no longer be
subject to the approval mechanism set out in Section
4.2(d)(iii), and thereafter, such Material Decisions
shall be implemented with the approval by majority vote
at a duly convened meeting of the Board of Directors
and the written consent of Shareholders holding more
than 50% of the issued and outstanding Common Shares,
subject to proviso (B) of the last sentence of such
Section 4.2(d)(iii), which shall remain applicable;
(vi) any reference to the Founding Shareholder in Section
4.2(e)(i) (bringing in a new Strategic Partner) shall
be replaced by a reference to the Board of Directors;
and
- 25 -
(vii) as provided in Section 15.4 ("Termination of Employment
of Xxxx Xxxxxxx"), there shall be no restriction on the
time before which the Founding Shareholder may pursue
the sale of its shares, and there shall be no "drag
along rights" for the Founding Shareholder or "tag
along rights" for the benefit of the other Shareholders
(pursuant to Article 8 or Article 10).
All other rights hereunder of the Founding Shareholder and Xxxx
Xxxxxxx personally, including, without limitation: (a) the
Founding Shareholder's right to vote the Common Shares held by
Employee Shareholders; (b) the Founding Shareholder's right to
pledge, transfer or otherwise deal with its Common Shares; and
(c) the Founding Shareholder's rights as a Shareholder,
including its pre-emptive rights and registration rights, shall
remain unchanged.
(b) FOUNDING SHAREHOLDER HOLDS LESS THAN 800,000 COMMON SHARES.
Notwithstanding anything to the contrary in this Agreement, in
the event that the Founding Shareholder and each Permitted
Transferee thereof, ceases to hold at least 800,000 equity
shares of the Corporation:
(i) the right of the Founding Shareholder to vote the
Common Shares of the Employee Shareholders provided for
in Section 4.7 shall be terminated and each Shareholder
shall be entitled to vote the shares registered in
his/her name; and
(ii) the Agreement shall be deemed to have been amended to
provide that the amendments contemplated in Paragraph
1.17(a)(v) shall also apply.
(c) FOUNDING SHAREHOLDER NO LONGER HOLDS ANY COMMON SHARES.
Notwithstanding anything to the contrary in this Agreement, in
the event that the Founding Shareholder and each Permitted
Transferee thereof, ceases to hold any equity securities of the
Corporation, all of the provisions hereof conferring unique
rights upon the Founding Shareholder and/or Xxxx Xxxxxxx
personally, shall be deemed to be amended to delete such rights
and any reference to the Founding Shareholder. However, for
greater certainty, any rights that have accrued in favour of
the Founding Shareholder or Xxxx Xxxxxxx immediately prior to
or upon such final disposition (for example, rights to
reimbursement of expenses and rights to indemnification) and
any rights in respect of a breach or non-compliance with the
provisions hereof shall continue in favour of the Founding
Shareholder and Xxxx Xxxxxxx. In replacement for such Founding
Shareholder powers, the Agreement shall be deemed to have been
amended to provide that the amendments contemplated in
Paragraph 1.17(a) shall also apply.
1.18 SPECIAL PROVISIONS RELATING TO THE RIGHTS ATTACHING TO THE COMMON
SHARES SOLD BY THE FOUNDING SHAREHOLDER
In the event that the Founding Shareholder sells any of the equity
securities of the Corporation to a Person (including, for greater certainty, a
Strategic Partner) that is not a member of the Founding Shareholder (the
"Purchaser"), no unique rights of the Founding Shareholder, as
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provided in this Agreement, shall be conferred upon such Purchaser, except
that the Founding Shareholder shall be entitled to assign its registration
rights relating to the shares of the Corporation being sold (without
prejudice to the registration rights attaching to the shares that the
Founding Shareholder continues to hold), provided, however, that the Founding
Shareholder Demand Registration rights may only be assigned in whole, and not
in part, and the Founding Shareholder shall not retain any part of the
Founding Shareholder Demand Registration rights once they have been assigned.
The Purchaser shall, for the purposes hereof, be deemed to be,
and shall otherwise be treated as, a Strategic Partner if it acquires at
least 5% of the issued and outstanding Common Shares in the transaction or
series of related transactions pursuant to which such Purchaser first becomes
a Shareholder (inclusive of all of the Common Shares acquired from other
Shareholders). For greater certainty, the Purchaser shall be treated as a
new Strategic Partner for purposes of any right to nominate a director of the
Corporation as such right exists on the date of the acquisition which makes
the Purchaser a new Strategic Partner (I.E. as at August 2, 1999, the
Purchaser shall be entitled to appoint a nominee to the Board of Directors if
it holds no less than 10% of the issued and outstanding Common Shares). If
the Purchaser does not acquire at least 5% of the issued and outstanding
Common Shares, as contemplated above, then the Purchaser shall, for the
purposes hereof, be treated as if it is a Management Shareholder.
1.19 SPECIAL PROVISIONS RELATING TO FTV
(a) The parties hereto acknowledge and agree that for all purposes
herein, FTV1 and FTV2 shall, collectively, be considered to be
a single Strategic Partner and shall be jointly and severally
liable for their compliance with the terms hereof.
(b) For purposes of simplifying the administration of the
Corporation and to enable the other Shareholders to deal with
FTV1 and FTV2 collectively with respect to those provisions
hereof contemplating or allowing for the approval, consent,
waiver or other exercise of rights by FTV as a Strategic
Partner, or by FTV1 or FTV2 in its capacity as a Shareholder or
for purposes of the delivery of Notices to or by FTV (or either
of FTV1 or FTV2):
(i) each of FTV1 and FTV2 hereby appoints Financial
Technology Management, L.L.C. as its voting trustee in
respect of all of the Common Shares (the "Subject
Shares") which are now owned by either FTV1 or FTV2 or
are acquired by either of them from time to time
hereafter. Financial Technology Management, L.L.C.
shall be entitled, by its authorized representative,
proxy or attorney to exercise all voting rights
pertaining to the Subject Shares and to otherwise
represent FTV (including the members thereof) in
connection with initiating, taking part and consenting
to any action of the Corporation or other matter
concerning the Subject Shares contemplated hereunder or
any matter for which the waiver, consent, approval or
other action on the part of FTV (including any member
thereof) is required or permitted or otherwise
contemplated herein and shall be entitled, in its sole
and unfettered discretion, to make all decisions
relating to the business and affairs of the Corporation
and to
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communicate to the other Shareholders its' decisions
on behalf of FTV (including any member thereof);
(ii) the Shareholders, other than FTV1 and FTV2, may rely
on, and accept any decisions and/or instructions
communicated verbally or in any other manner whatsoever
by Financial Technology Management, L.L.C. on behalf of
FTV, without further inquiry with FTV1 and FTV2;
(iii) in furtherance of the foregoing, FTV1 and FTV2 shall
from time to time and at all times during the term of
this Agreement (including upon a replacement of their
voting trustee as contemplated by Section 1.19(b)(iv))
put in place voting trusts and other arrangements as
shall be reasonably requested by the Corporation,
including the execution and delivery of appropriate
instruments of proxy or powers of attorney, to enable
or facilitate the exercise of any and all such powers
given to the Financial Technology Management, L.L.C.
under this Section 1.19 or otherwise for purposes of
enabling the collective administration of the aggregate
shareholding of FTV with respect to the Corporation, as
contemplated herein; and
(iv) FTV1 and FTV2 may collectively designate by notice in
writing to the other Shareholders and the Corporation a
replacement for Financial Technology Management, L.L.C.
as its voting trustee and the other Shareholders and
the Corporation shall be entitled to rely upon and
accept any decisions and/or instructions communicated
verbally or in any other manner whatsoever by such
replacement (at any time after the effective date of
such notice).
For purposes of any provision herein pursuant to which FTV is offered the right
or is subjected to the obligation to subscribe for shares or other securities of
the Corporation, the following provisions shall be applicable:
(i) unless otherwise allocated among FTV1 and FTV2 by
agreement between them prior to the time fixed for
closing, they shall purchase and the Corporation shall
issue or the Shareholder in question shall sell to FTV1
and FTV2, such shares or other securities at the
relevant time in the ratio of 27.0122 to one; and
(ii) for purposes of any provision of this Agreement
referring to the number of shares or other securities
of the Corporation held by FTV, the respective holdings
of FTV1 and FTV2 (together with the holdings of their
respective Permitted Transferees) shall be aggregated
for purposes of such reference.
Notwithstanding anything to the contrary contained in this Agreement, all
notices, consents, waivers, communications or other documents or instruments
required or permitted by the terms hereof to be given by the Corporation or
any other Shareholder to FTV1 and/or FTV2 shall be deemed to be properly
given and binding on them if the Notice is given to Financial Technology
- 28 -
Management, L.L.C. (or any replacement voting trustee, as applicable) in
accordance with Section 19.2. Any Notice to be given by one or more of FTV1
and FTV2 to the Corporation or to one or more of the other Shareholders shall
be deemed to be properly given and binding on such Shareholder if the Notice
is given by Financial Technology Management, L.L.C. on behalf of such
Shareholder in accordance with Section 19.2.
1.20 SPECIAL PROVISIONS RELATING TO THE HSBC WARRANT
(a) For the purposes of Article 6 (Restrictions on Transfers of
Shares) and Article 7 (Restrictions on Indirect Transfers of the
Corporation), any reference to HSBC's shares or securities of the
Corporation shall be deemed to include the HSBC Warrant or the
Common Shares issuable under the HSBC Warrant.
(b) For the purposes of those provisions in this Agreement not
contained in Article 6 and Article 7, any reference to HSBC's
shares or securities of the Corporation shall be deemed not to
include the HSBC Warrant or the Common Shares issuable under the
HSBC Warrant unless and until the HSBC Warrant has been exercised
and the underlying Common Shares thereunder have been issued to
HSBC.
(c) Notwithstanding any of the provisions of the HSBC Warrant, the
parties hereto covenant and agree that any waiver of any term or
provision of the HSBC Warrant or any amendment, supplement or
other modification of or to the HSBC Warrant, shall only be made
with the prior written consent of the Corporation and all of the
Strategic Partners together with the Founding Shareholder and
until such written consent is obtained, any such waiver,
amendment, supplement or other modification shall be of no force
or effect. Notwithstanding the general provisions of this Section
1.20(c), the decision to extend the term of the HSBC Warrant shall
be a Category 3 Material Decision provided that: (i) if such term
extends or could extend (including as a result of subsequent
events) beyond the date which is 10 business days prior to the
time or period in or under which BMO has the entitlement, or is
entitled, to exercise its rights pursuant to Section 11.5 hereof
(Special Provisions Relating to BMO's Pre-Emptive Right), then any
such extension shall, in addition, require the implementation of
binding contractual arrangements in favour of BMO which protect
and maintain BMO's rights pursuant to Section 11.5 that would or
could be prejudiced by such extension; and (ii) if such term
extends beyond March 31, 2000 then any such extension shall
require the prior written consent of the Founding Shareholder and
all Strategic Partners. Any such extension shall not be effective
and shall have no force or effect until such required arrangements
are entered into or consent is obtained. The Corporation
covenants and agrees that following the exercise of HSBC's rights
under the HSBC Warrant, it shall give written notice in this
regard forthwith to BMO.
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ARTICLE 2
TERMINATION OF PRIOR AGREEMENTS
2.1 AMENDMENT AND RESTATEMENT OF OCTOBER 19, 1999 UNANIMOUS
SHAREHOLDERS' AGREEMENT/TERMINATION OF PRIOR AGREEMENTS.
This Agreement amends and restates the October 19, 1999
Unanimous Shareholders' Agreement. All prior agreements among some or all of
the parties hereto regarding the organization and affairs of the Corporation
and/or the sale of any Shareholder's Common Shares or securities of the
Corporation under certain circumstances, whether written or oral, are hereby
terminated including, without limitation, the letter of intent between the
Corporation, Blue Sky and BMO dated March 9, 1998, the letter of intent
between the Corporation and Bank of America National Trust & Savings
Association dated December 21, 1998, the Confidential Term Sheet among the
Corporation, CSTC and Sonera dated June 24, 1999, the Confidential Term Sheet
between the corporation and an Affiliate of WFC dated September 28, 1999, as
well as the April 1998 Unanimous Shareholders' Agreement.
ARTICLE 3
WARRANTIES
3.1 SHAREHOLDERS.
Each Shareholder warrants that, as at the date hereof, and
acknowledges that the other Shareholders are relying upon such warranties in
entering into this Agreement:
(a) such Shareholder is the registered and beneficial owner of that
number of issued and outstanding Common Shares or securities
representing the right to acquire Common Shares as set out in
Appendix "A" to this Agreement;
(b) except as provided in this Agreement, the Common Shares legally
and beneficially owned by such Shareholder are free and clear
of all claims, liens, security interests and encumbrances
whatsoever and, except as provided pursuant to the Stock Option
Plan and, except as provided in this Agreement (including
Appendix "A" hereto), such Shareholder has not entered into, or
become bound by, any other agreement or option or right capable
of becoming an agreement for the purchase of any shares;
(c) except for BAC, CSTC, Sonera, WFC, FTV and HSBC such
Shareholder is not a non-Canadian within the meaning of the
INVESTMENT CANADA ACT (Canada); and
(d) except for BAC, CSTC, Sonera, WFC, FTV and HSBC such
Shareholder is not a non-resident of Canada within the meaning
of the INCOME TAX ACT (Canada).
Each Shareholder covenants and agrees that if, in connection
with the business of the Corporation, or in connection with a share
transaction permitted by this Agreement, the Corporation or a Shareholder,
acting reasonably, so requests, the Shareholders will deliver written updates
of such representations (including with respect to BAC, CSTC, Sonera, WFC,
FTV and HSBC as to their status under the INVESTMENT CANADA ACT, or any other
statute).
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Citicorp hereby represents and warrants and acknowledges that
the other Shareholders are relying upon such representation and warranty in
entering into this Agreement, that as at the date hereof CSTC is an indirect
wholly-owned Subsidiary and that Citicorp is contracting herein: (I) as the
Principal of CSTC (and as the Principal of any other Affiliate of Subsidiary
of Citicorp or CSTC to which shares of the Corporation may subsequently be
issued or transferred); and (II) for the purposes contemplated in Article 18.
3.2 SHAREHOLDERS WHICH ARE CORPORATE OR OTHER ENTITIES.
Each Shareholder which is not an individual further warrants
that, at the date hereof, and acknowledges that the other Shareholders are
relying upon such warranties in entering into this Agreement:
(a) such Shareholder is a corporation duly incorporated, or
partnership or other entity duly formed, and in any case
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is qualified to do
business and is in good standing in each jurisdiction in which
it carries on business;
(b) such Shareholder has all necessary power, authority and
approval to enter into this Agreement and to perform its
obligations hereunder;
(c) all necessary action has been taken by such Shareholder to
authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder, and this Agreement
has been duly executed and delivered by such Shareholder and
constitutes a legal, valid and binding obligation of such
Shareholder enforceable against it in accordance with its
terms; and
(d) neither the execution and delivery of this Agreement by such
Shareholder, nor the performance of its obligations hereunder,
will conflict with or result in the violation, contravention or
breach of, or any default under, any of the terms or provisions
of the constating documents or by-laws of such Shareholder or
of any agreement, obligation, contract, commitment, law or
regulation to which such Shareholder is a party or by which it
is bound.
3.3 THE CORPORATION.
The Corporation warrants and acknowledges that the Shareholders
are relying upon such warranties in entering into this Agreement that, as at
the date hereof:
(a) the Common Shares and other securities of the Corporation
listed in Appendix "A" hereto are the only issued and
outstanding Common Shares or securities of the Corporation;
(b) except for the Options and except as otherwise provided in this
Agreement or the HSBC Warrant no person has any agreement or
option or right capable of becoming an agreement for the
purchase, subscription or issuance of any of the unissued
Common Shares or any other securities of the Corporation;
- 31 -
(c) the Corporation has all necessary corporate power, authority
and approval to enter into this Agreement and to perform its
obligations hereunder;
(d) all necessary corporate action has been taken by the
Corporation to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder and
this Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid and binding
obligation of the Corporation enforceable against it in
accordance with its terms; and
(e) neither the execution and delivery of this Agreement by the
Corporation, nor the performance of its obligations hereunder,
will conflict with or result in the violation, contravention or
breach of, or any default under, any of the terms or provisions
of the constating documents or by-laws of the Corporation or of
any agreement, obligation, contract, commitment, law or
regulation to which the Corporation is a party or by which it
is bound.
3.4 QUALIFICATION OF REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made by a party hereto as to the
enforceability of any agreement against such party is subject to the following
qualifications:
(a) specific performance, injunction and other equitable remedies
are discretionary and, in particular, may not be available
where damages are considered an adequate remedy; and
(b) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other laws
generally affecting enforceability of creditors' rights.
ARTICLE 4
PROVISIONS FOR CONTROL
4.1 UNANIMOUS SHAREHOLDERS' AGREEMENT.
It is the intention of the Shareholders that this Agreement
operate, constitute and be construed as a "unanimous shareholders' agreement"
for purposes of the Act, and the Shareholders agree that they shall be
accorded, and be subject to, all rights and obligations attendant upon
entering into such a "unanimous shareholders' agreement". Each of the
Shareholders agrees to vote and act at all times as a shareholder of the
Corporation, and in all respects to use its best efforts to take all such
steps as may be reasonably within its power so as to cause the Corporation to
act, in the manner contemplated by the provisions of this Agreement and to
implement, to their full extent, the provisions of this Agreement and, to the
extent permitted by Applicable Law, to cause its respective nominees as a
director of the Corporation to so act. Each party hereby acknowledges that
all acts taken by any director of the Corporation which accords with the
intent of this Agreement shall be considered by the parties hereto to be acts
undertaken in the best interests of the Corporation.
- 32 -
4.2 CORPORATE GOVERNANCE MATTERS.
The Shareholders shall cause such meetings of the Corporation
to be held, votes cast, resolutions passed, by-laws enacted, documents
executed and all things and acts done to ensure the following continuing
arrangements with respect to the operation and control of the Corporation:
(a) (i) Prior to an Initial Public Offering, the affairs of the
Corporation shall be managed by a Board of Directors
(the size of which is currently 11, but is subject to
change in the circumstances described in Section
1.1(mm)(vii), and otherwise in accordance with the
provisions of Section 4.2(d)(ii)) which shall at all
times consist of:
(A) One nominee of each of:
(1) subject to the provisions of Section 1.17,
the Founding Shareholder (regardless of the
level of its shareholdings in the
Corporation),
(2) those of the Strategic Partners as at August
2, 1999 which hold at the relevant time at
least 4% of the issued and outstanding Common
Shares, or 3% for those Strategic Partners as
at August 2, 1999 who have never sold or
otherwise disposed of any Common Shares
(other than to a Permitted Transferee), and
(3) those of the Strategic Partners which became
or become Strategic Partners after August 2,
1999 and which hold at the relevant time at
least 10% of the issued and outstanding
Common Shares;
(B) two directors selected by a majority of the
Strategic Partners from a list of five potential
candidates proposed in good faith by the
Founding Shareholder on the basis that they
would be Independent Directors; and
(C) the balance of the number of directors from time
to time shall be selected by the Founding
Shareholder from members of the Management Team.
For greater certainty, all of the Shareholders covenant
and agree to vote their shares of the Corporation for the
election of the nominees of each of the Strategic
Partners and the Founding Shareholder as contemplated
above.
(ii) Should any vacancy occur on the Board of Directors, the
Shareholders shall be given prompt notice of such event
by the General Counsel of the Corporation, in
accordance with the notice provisions herein, and such
- 33 -
vacancy shall be filled forthwith by the appointment of
a nominee or nominees by the Shareholder(s) who shall
have appointed the former director who was not
re-elected or whose resignation or removal caused the
vacancy. Until such vacancy is filled, the Board of
Directors shall not transact any business or exercise
any of its powers or functions, save and except as may
be necessary to appoint such new director(s) and/or
preserve the business and assets of the Corporation.
Provided that if a replacement director is not
appointed as aforesaid within 15 days of the date of
the General Counsel's notice of such vacancy occurring,
thereafter the directors then in office shall be
entitled to transact business and exercise all of the
powers and functions of the Board of Directors and,
further, for the purposes of this Agreement, the
unanimous decision of the directors then in office
shall constitute the unanimous decision of all of the
directors of the Corporation until such time as the
replacement director(s) is properly appointed and a
decision of a majority (or specified supermajority) of
the directors then in office shall constitute a
majority (or specified supermajority) decision of all
of the directors of the Corporation until such time as
the replacement director(s) is properly appointed.
(iii) For greater certainty and notwithstanding any provision
of the By-laws of the Corporation to the contrary, no
director or directors who are nominees of a Strategic
Partner or of the Founding Shareholder, as the case may
be (as provided in Section 4.2(a)(i)), may be removed
from the Board of Directors except in compliance the
provisions of Section 4.2(a)(i) or, if otherwise, with
the consent of the Shareholder(s) which shall have so
nominated them. Shareholder(s) shall replace the
nominee(s) they are entitled to appoint if such
nominees are no longer eligible to serve as a director
pursuant to the Act or other Applicable Law. Provided,
however, that if a Shareholder shall cease to be
entitled to appoint one or more nominees who are then
members of the Board of Directors, it shall forthwith
cause the resignation or removal of such nominee(s) to
which it is no longer entitled.
(iv) The Corporation shall at all times comply with Section
118(3) of the Act, to the extent that such section is
applicable to the Corporation, which requires that a
majority of the directors of the Corporation shall be
resident Canadians; and in furtherance thereof, each of
the Founding Shareholder and BMO agrees that its
nominee on the Board of Directors shall at all times be
a resident Canadian. In the event that any of such
nominees is no longer a resident Canadian, then the
Founding Shareholder or BMO, as the case may be, shall
forthwith cause its nominee on the Board of Directors
to resign and nominate a director who is a resident
Canadian. If the Founding Shareholder or BMO, as the
case may be, does not appoint a resident Canadian as a
replacement nominee director within 15 business days,
the Shareholders shall be entitled to temporarily
appoint a resident Canadian director, from a list of
nominees tabled by the Founding Shareholder, until such
time as the Founding Shareholder or BMO, as the
- 34 -
case may be, nominates a resident Canadian as its
representative on the Board of Directors and the
Shareholders appoint such nominee to the Board of
Directors.
(b) The officers of the Corporation, until changed in accordance
with Section 5.1, shall be:
Chairman of the Board and Xxxxxxx Xxxxxxx
Chief Executive Officer
President, General Counsel Xxxxxxxxxxx Xxxxxxxx
and Secretary
Chief Operating Officer & Xxxxx XxXxxxxx
Executive Vice-President,
Strategy
Chief Technology Officer Xxxxx Xxxxxx
Chief Financial Officer Xxxxx Xxxxxx
and such additional officers as Xxxx Xxxxxxx may determine from
time to time in accordance with Section 5.1. Notwithstanding
the foregoing, if an above-named officer resigns his office, a
replacement shall be named in accordance with Section 5.1.
(c) A quorum for meetings of the Board of Directors shall consist
of 75% of the members of the Board. In the event that a quorum
is not present at the time appointed for a meeting, or within
such reasonable time thereafter as the directors present may
determine, the meeting shall be adjourned to a fixed time and
place (provided that at least 48 hours' notice (excluding
Saturdays, Sundays and holidays) is given to all of the
directors), and no further business shall be conducted at the
adjourned meeting. At the reconvened meeting, the quorum shall
be a majority of the number of directors.
(d) Subject to the provisions of Section 1.15 hereof, the
implementation of any matter that constitutes a Material
Decision shall require the following approvals. For greater
certainty, a proposed decision, action or transaction which
constitutes (or parts of which constitute) a Material Decision
for which more than one approval requirement is specified shall
be governed by the more rigorous approval requirement; and a
matter specifically authorized in a duly approved
budget/business plan that, when implemented, would otherwise
have constituted an additional Category 3 Material Decision,
need not be re-approved:
(i) for a CATEGORY 1 MATERIAL DECISION, (in each case, even
if the matter is contemplated in an approved budget or
business plan), approval by majority vote at a duly
convened meeting of the Board of Directors and the
written consent of Shareholders holding at least 90% of
the issued and outstanding Common Shares of the
Corporation;
- 35 -
(ii) for CATEGORY 2 MATERIAL DECISIONS, (in each case, even
if the matter is contemplated in an approved budget or
business plan), approval by majority vote at a duly
convened meeting of the Board of Directors and the
written consent of Shareholders holding at least 66
2/3rd% of the issued and outstanding Common Shares,
PROVIDED THAT:
(A) any Material Decision described in Section
1.1(mm)(ix) that is approved in accordance with
this paragraph must also require that the
proposed sale price of the relevant asset was no
less than the price determined by an independent
valuation performed by a valuator selected by
the Board of Directors;
(B) the Material Decision described in Section
1.1(mm)(x) that is approved in accordance with
this paragraph would trigger the events and
rights described in Section 15.4; and
(C) the vote of a Strategic Partner which would,
directly or indirectly, (including through its
Affiliates and Associates) be the recipient of
the license contemplated in Section 1.1(mm)(xii)
shall not be counted for purposes of determining
whether the required approval of that matter has
been obtained;
(iii) for CATEGORY 3 MATERIAL DECISIONS, approval by majority
vote at a duly convened meeting of the Board of
Directors and the written consent of Shareholders
holding: (A) more than 50% of the issued and
outstanding Common Shares (provided that the Founding
Shareholder has voted its shares as part of such
majority); or (B) 66 2/3rd% of the issued and
outstanding Common Shares (if the Founding Shareholder
has not voted its shares as part of such special
majority). If the Founding Shareholder does not vote
in favour of the proposed Material Decision, but the
written consent of Shareholders holding more than 50%
but less than 66 2/3rd% of the issued and outstanding
Common Shares has been obtained, then the following
procedure will be implemented: (A) a special committee
of the Board of Directors of the Corporation (the
"Special Committee") consisting of one of the directors
appointed to the Board of Directors by the Founding
Shareholder, the nominees on the Board of Directors
appointed by the Strategic Partners, together with the
Independent Directors, will be formed; (B) the Special
Committee will consider the merits of the proposed
Material Decision; and (C) if a majority of the members
of the Special Committee vote to approve the proposed
Material Decision, then the Material Decision will be
implemented, notwithstanding the objection of the
Founding Shareholder. Conversely, if less than a
majority of the members of the Special Committee vote
in favour of the proposed Material Decision, then the
proposed Material Decision will not be implemented.
NOTWITHSTANDING THE FOREGOING:
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(A) subject to the provisions of Article 15, if the
proposed decision is that contemplated by Section
1.1(mm)(xxiii) (an Initial Public Offering), then
it shall be required that the Founding Shareholder
be part of the requisite majority; and
(B) the approval of a Material Decision described in
1.1(mm)(xv) (access platforms) shall require that
at least one Strategic Partner that is a financial
institution votes in favour of such Material
Decision; and
(iv) for a CATEGORY 4 MATERIAL DECISION, approval by a
majority vote at a duly convened meeting of the Board of
Directors and the written consent of Shareholders holding
at least 71% of the issued and outstanding Common Shares.
The Founding Shareholder and each of the Strategic Partners
covenants and agrees that if its consent (or a waiver of its
rights herein) is requested, it will act without undue delay.
Each of the Strategic Partners further covenants and agrees that
any Permitted Transferee of its shares of the Corporation shall
not bind its discretion with respect to the voting of its shares
of the Corporation (or with respect to requests for consents and
waivers by the Corporation) in favour of any third party
(including, in particular, such third parties as may hold an
interest in Permitted Transferees not wholly-owned (directly or
indirectly) by the Strategic Partners, as the case may be).
(e) The issuance of Common Shares or securities convertible into or
exchangeable for Common Shares or any equity securities or any
securities carrying rights, options or warrants to acquire such
securities or Common Shares (except pursuant to the Stock Option
Plan) shall require the following approvals and be subject to the
following terms:
(i) If the proposed subscriber for such proposed issuance is
a new Strategic Partner, the necessary approvals shall
have been obtained in accordance with Section 4.2(d)(iv)
and the provisions of Article 11 hereof (Pre-emptive
Rights) shall not be applicable (with the exception of
Sections 11.5, 11.6 and 11.7, to the extent applicable in
the circumstances). The Founding Shareholder shall be
entitled to commence discussions with potential Strategic
Partners on a preliminary basis in order to ascertain
their interest in and the relative merits of, subscribing
for an interest in the Corporation as a Strategic
Partner. The Founding Shareholder shall, at the earliest
moment practicable in the circumstances (bearing in mind
the disruption to the Strategic Partners of premature
discussions with them, on the one hand, and the needs of
the Corporation to maintain confidentiality and avoid
creating expectations on the part of the potential
Strategic Partner which might not meet with the approval
of the then existing Strategic Partners, on the other
hand) make a formal presentation to the Board of
Directors concerning the proposed transaction
-37-
and, in particular, the reasons why the proposed
Shareholder meets the definition of "Strategic Partner"
herein and the relative advantages and disadvantages of
accepting such investor as a Strategic Partner. After
approval of the proposed transaction by the Board of
Directors, the Founding Shareholder shall have a
reasonable period of time during which to attempt to
xxxxxx the required support. If the required written
approvals are not obtained within 120 days of the Board
of Directors' approval, any such transaction must be
resubmitted to the Board of Directors for discussion
and re-approval. The proposed new Strategic Partner
shall be required to enter into this Agreement on
substantially the same terms as are applicable to the
then existing Strategic Partners and the preparation,
settlement and execution of the amended and restated
Agreement reflecting such new Strategic Partner shall
be conducted in accordance with the procedures set out
in Section 1.13 hereof; and
(ii) If the proposed issuance is to any person other than a
new Strategic Partner, such securities to be offered
shall (unless the transaction is specified to be exempt
from the application of Sections 11.1, 11.2, and 11.3
pursuant to Section 11.4) first be offered to the
Founding Shareholder together with the then existing
Strategic Partners on a PRO RATA basis in accordance
with the provisions of Article 11. If the amount of
capital desired to be raised by the Board of Directors
has not been fully subscribed for by the Founding
Shareholder and the then existing Strategic Partners
(or any combination thereof) in accordance with the
preceding sentence: (I) the subscribing Shareholders
shall be offered the ability to subscribe for
additional securities on the same terms (PRO RATA to
their respective ownership of equity securities of the
Corporation immediately prior to the proposed
issuance), in one or more rounds as required until the
Corporation's capital requirement is satisfied or the
subscribing Shareholders are unwilling to subscribe for
additional equity; and (II) then, and only then, will
the Corporation be permitted to issue securities to the
proposed third party subscriber (provided that the
Corporation complies with the provisions of the second
paragraph of Section 11.2 hereof, which shall be deemed
to apply MUTATIS MUTANDIS), and then only to the extent
of the balance of the funds required. Further, if the
combined effect of any such share issuances results in
the circumstances contemplated by Sections 11.5, 11.6
or 11.7, additional issuances of Common Shares shall be
made to BMO and/or BAC and/or CSTC and/or Sonera and/or
the Founding Shareholder, as the case may be, pursuant
to and in accordance with the provisions of such
Sections.
(f) So long as at least one Strategic Partner is a Shareholder, the
external accountants of the Corporation shall be any of one of the
following accounting firms recognised as KPMG Inc.,
PricewaterhouseCoopers, Xxxxxx Xxxxxxxx, Deloitte & Touche or
Ernst & Young, or any successor thereto.
-38-
(g) Notwithstanding any by-law, resolution, determination, statutory
rule or rule of procedure to the contrary, the chairman at any
meeting of the Board of Directors or at any meeting of the
Shareholders shall not be entitled to a second, extra or casting
vote in the case of a tie vote at any such meeting.
(h) Notwithstanding any provision to the contrary in the Constating
Documents of the Corporation, any or all of the directors or
Shareholders may participate in meetings of the Board of
Directors, of a committee of the Board of Directors, or of the
Shareholders by means of such telephone, electronic or other
communication facilities as permit all persons participating in
the meeting to communicate with each other, simultaneously and
instantaneously, and any director, committee member or
Shareholder participating in such meeting by such means is
deemed to be present at the meeting (except to the extent that
the particular individual is participating by means of such
telephone, electronic or other communication facilities solely
for the purpose of objecting to the meeting being held on the
basis that it has not been properly convened). The
Shareholders shall, if requested by the Corporation, provide
written proxies and arrange for a physical quorum to be present
at a particular location, and/or circulate for execution
written resolutions, if required for the business conducted at
the meeting to comply with the Act or other Applicable Law.
(i) No director who attends a meeting of the Board of Directors by
means of such telephone, electronic or other communication
facilities shall be permitted to, directly or indirectly,
record, transcribe or otherwise reproduce or store such
proceedings by any electronic or other means without the
express, prior consent of all of the other directors attending
such meeting, nor shall such director by any act or omission
permit any other person to make such record, and any director
who participates in the making of any such recording shall be
deemed not to have acted honestly and in good faith with a view
to the best interests of the Corporation. The provisions of
this Section 4.2(i) shall apply MUTATIS MUTANDIS to meetings of
the Shareholders.
(j) The By-laws of the Corporation shall provide for written notice
to be delivered to each member of the Board of Directors: (a)
not less than ten business days before the time the meeting is
to be held if the notice is mailed; or (b) not less than seven
days before the time the meeting is to be held if the notice is
given personally or is delivered or is sent by any means of
transmitted or recorded communication, unless such notice is
waived by the directors. The Board of Directors shall hold
regularly scheduled meetings at the head office of the
Corporation at least quarterly, for which advance written
notice shall be required.
(k) Independent Directors, directors that are members of the
Management Team, and the nominee director of the Founding
Shareholder shall be entitled to be reimbursed by the Corporation
for their reasonable expenses incurred in attending meetings of
the Board of Directors or committees of the Board of Directors
(including travel, telephone, video conference and related
expenses).
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(l) The Board of Directors may from time to time resolve to pay
reasonable directors' fees, however only to Independent
Directors.
(m) The parties hereto acknowledge and agree that Common Shares or
other equity or voting securities acquired pursuant to the
exercise of Options granted under the Stock Option Plan
(including for greater certainty any approved supplemental
incentive compensation plan) shall be registered in the name of
the Designated Representative (within the meaning given to such
term in the Stock Option Plan) and held for safekeeping on his
behalf by the Corporation's counsel, all as contemplated by the
Stock Option Plan and, if applicable, any voting and deposit
agreement entered into in connection therewith. Further, such
Common Shares held on behalf of Employee Shareholders shall be
subject to the provisions of Section 4.7 of this Agreement.
4.3 LIMITATIONS ON LIABILITY/SHAREHOLDER PERSONAL INTEREST.
No director or officer shall be liable for the acts, receipts,
neglects or defaults of any other director, officer, employee, or agent, or for
joining in any receipt or other act for conformity, or for any loss, damage or
expense happening to the Corporation through the insufficiency or deficiency of
title to any property acquired for or on behalf of the Corporation, or for the
insufficiency or deficiency of any security in or upon which any of the moneys
of the Corporation shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency or tortious acts of any person with whom any of the
moneys, securities or effects of the Corporation shall be deposited, or for any
loss occasioned by any error of judgement or oversight on his part, or for any
other loss, damage or misfortune whatever which shall happen in the execution of
the duties of his office or in relation thereto, unless the same are occasioned
by his own wilful misfeasance.
It is expressly agreed that Shareholders are permitted to
consider and pursue their own personal interests when acting as Shareholders,
except as required by Applicable Law or as contemplated herein. Further,
except as required by Applicable Law and except as may be contemplated in any
contract, agreement or other commitment between the Shareholder and the
Corporation (or any Affiliate or Subsidiary or Associate thereof), no
Shareholder shall be personally liable for any debt, obligation or liability
of the Corporation (including, without limitation, any transaction risk or
liability arising from the Business or the business of any other
Shareholder), except as may be imposed by Applicable Law, PROVIDED that this
sentence is not intended to limit or restrict any obligation of, or
undertaking given by, any Shareholder (or Affiliate or Subsidiary or
Associate thereof) under any other contract, agreement or other commitment
with the Corporation. No individual trustee, officer, director, stockholder,
member, partner, employee or agent of any Shareholder, in his or her
individual capacity as such, shall have any personal liability for any
failure by such Shareholder to perform, satisfy or discharge any obligation
or liability under this Agreement.
The parties expressly acknowledge and agree that any person
appointed to the Board of Directors by a Strategic Partner, or the Founding
Shareholder, as the case may be, pursuant to Section 4.2(a) (a "Nominee") may
be an employee or officer of such Shareholder(s) or one or more of the
Affiliates thereof, or otherwise may not be independent from such persons.
-40-
In the event that during any discussions with any member of the
senior management of the Corporation or in connection with, for the purposes
of, and/or concerning the business to be transacted at, a meeting of the
Board of Directors, such Nominee is aware of information which may be
relevant, pertinent or of interest to, the Business or to the Corporation
(the "Subject Matter") which information (the "Conflicting Information"):
(I) if disclosed to the Corporation would result:
(a) in a breach or contravention of a fiduciary duty owed by
such Nominee to such Shareholder(s) or to one or more of
the Affiliates thereof, or would otherwise result in such
Nominee, or such Shareholder(s) or one or more of the
Affiliates thereof, being in breach or contravention of,
or in default under, Applicable Law; or
(b) in a breach or contravention of, or default under, any
term or provision of any agreement or commitment to which
such Nominee, or such Shareholder(s) or one or more of
Affiliates thereof, is a party or by which any such
person(s) is bound which specifically prohibits such
disclosure to be made; or
(II) constitutes trade secrets, strategic information, know-how,
marketing plans, client lists or other proprietary information of
such Shareholder(s) or any of its Affiliates,
then such Nominee shall, if such Conflicting Information is immediately
pertinent to the Subject Matter at the time of such discussion or meeting:
(i) disclose to such member of senior management of the Corporation in the
case of such discussion, or to the Chairman or the President of the
Corporation in the case of such meeting of the Board of Directors, the fact
that he/she is aware of such Conflicting Information, and at such time
describe in reasonable detail the general nature of such Conflicting
Information (provided, for greater certainty, that such description need not
contain any such detail which would result in a breach of the conflicting
duty); and (ii) excuse himself/herself from such discussion, or, in the case
of such meeting of the Board of Directors, from such meeting until such time
that the remaining members of the Board of Directors at such meeting have
fully and completely discussed the Subject Matter and have either reached a
resolution regarding the same or have adjourned any further discussion of the
Subject Matter until a future time and place, at which time the foregoing
provisions shall again apply (and so on from time to time; provided, for
greater certainty, that such Nominee may attend any such subsequent meeting
of the Board of Directors for the purposes of establishing a quorum).
If such Nominee satisfies the foregoing, each party hereto
expressly waives and releases any and all claims, in any form, which it may
have against such Nominee, such Shareholder and any of its Affiliates,
whether based on common law (including, without limitation, the laws of
equity) or statute, for such Nominee's failure to disclose the Conflicting
Information. The parties hereto acknowledge that the Shareholder who
nominated a Nominee to be a director of the Corporation holds the benefit of
the waiver, release and authorization
-41-
contained in this Section in trust for its own benefit and for the benefit of
such Nominee and its Affiliates from time to time.
The parties hereto further hereby acknowledge that each Nominee
shall be required to enter into a form of confidentiality and non-disclosure
agreement with the Corporation (in form and substance satisfactory to the
Corporation, such Nominee and the Shareholder(s) who has appointed such
Nominee, and their respective counsel, each acting reasonably and in good
faith) which, in general, shall provide that such Nominee shall not, without
the prior written consent of the Corporation, disclose to the Shareholder(s)
who has appointed such Nominee and to any of the Affiliates and Subsidiaries
thereof or to any of the other Shareholders or their Affiliates and
Subsidiaries or to any of its and their officers, directors, employees,
consultants, agents, advisors, accountants, lawyers, attorneys or other
representatives, any Confidential Information revealed to such Nominee in
his/her capacity, and during his/her tenure, as a director of the Corporation
which the Corporation determines, acting in good faith, would, if disclosed
to Competitors, place, or potentially place, the Corporation at a strategic
or competitive disadvantage to any such Competitor, provided that the
Corporation indicates to such Nominee that such information is Confidential
Information which is not to be disclosed to the Shareholders or other persons.
Provided, further, that the Nominee shall not be liable to the
Corporation or the other parties hereto if he acts in good faith in
discussing the information so obtained with representatives of, or advisors
to, the Shareholder which shall have appointed him to the Board of Directors
at any time prior to the Corporation indicating to such Nominee that such
information so disclosed is Confidential Information and is not to be
discussed with the Shareholders. After such indication is made by the
Corporation, the Nominee will conduct himself in accordance with the
Corporation's instructions in this regard and any Shareholder which shall
have received such information shall, for greater certainty, be bound by the
provisions of Section 17.2 hereof.
4.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As required or permitted by the Act, the Corporation shall
indemnify and save harmless every director or officer, every former director
or officer, and every person who acts or acted at the Corporation's request
as a director or officer of a body corporate of which the Corporation is or
was a shareholder or creditor (or a person who undertakes or has undertaken
any liability on behalf of the Corporation or any such body corporate) and
his heirs and legal representatives, from and against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a
judgement, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or such body
corporate, if:
(a) he acted honestly and in good faith with a view to the best
interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.
- 42 -
4.5 INSURANCE.
Subject to the limitations contained in the Act, the
Corporation may purchase and maintain such insurance for the benefit of any
director or officer, as the Board of Directors may from time to time
determine.
4.6 EFFECT OF ARTICLE 4.
The provisions of this Article 4 shall be in addition to and
not in substitution for any rights, immunities and protections to which every
director or officer, every former director or officer, and every person who
acts or acted at the Corporation's request as a director or officer of a body
corporate of which the Corporation is or was a shareholder or creditor (or a
person who undertakes or has undertaken any liability on behalf of the
Corporation or any such body corporate) and his heirs and legal
representatives, is otherwise entitled.
4.7 CERTAIN MATTERS PERTAINING TO EMPLOYEE SHAREHOLDERS AND
MANAGEMENT SHAREHOLDERS
Prior to an Initial Public Offering, any Employee Shareholder
shall vote or cause to be voted his Common Shares and any Common Shares held
by a Shareholder of which he is the Principal or held by a member of the
Immediate Family of such Employee Shareholder in the manner in which the
Founding Shareholder votes its Common Shares (either in favour or against
that particular matter) provided that any such vote:
(a) does not cause such Employee Shareholder (and/or the Shareholder
of which he is the Principal and/or his Immediate Family which is
the Shareholder) to be treated disproportionately with regard to
the Founding Shareholder in terms of the effect of such matter on
such parties' shareholdings in the Corporation;
(b) does not otherwise negatively impact or prejudice such Shareholder
disproportionately relative to the Founding Shareholder; or
(c) is not illegal or against public policy.
Prior to an Initial Public Offering, if any of the
circumstances contemplated by Section 18 of the Stock Option Plan (or
equivalent provisions of any supplementary incentive plan) become applicable,
then the Board of Directors, with appropriate notice and in a fair and
equitable manner, shall have the right and entitlement to cause the Employee
Shareholders and the Management Shareholders to tender, sell or escrow their
shares of the Corporation in the manner and on the terms contemplated by the
provisions of such Section 18. All determinations of the Board pursuant to
this Section 4.7 shall be conclusive and final.
4.8 CONFLICTS OF INTEREST.
In the event that one or more of the nominees of the Founding
Shareholder on the Board of Directors may be viewed as having a potential
conflict of interest in a decision to be made by the Board of Directors as a
result of being a member of, or related or connected to, a member of the
Founding Shareholder, the parties hereby agree to cause such matter to be
placed
- 43 -
before the Shareholders for their approval at a duly constituted meeting of
the Shareholders, notwithstanding that such matter would not ordinarily be a
matter to be dealt with by the Shareholders.
4.9 RESOLUTION OF DISPUTES.
The following procedure will be adhered to in all disputes
arising under this Agreement which the parties cannot resolve informally. An
aggrieved party shall notify the Corporation, the Strategic Partners, the
Board of Directors, the Management Shareholders and the voting trustee for
the Employee Shareholders in writing of the nature of the dispute, with as
much detail as possible with respect thereto. The Corporation (on behalf of
all of the parties hereto other than the aggrieved party), on the one hand,
and the aggrieved party, on the other, shall each appoint a representative to
meet (in person or by telephone) within seven days after the date of such
written notification, to attempt to reach an agreement about the nature of
the dispute and the corrective action to be taken by the respective parties.
Similarly, if the Corporation is the aggrieved party, then it, on the one
hand, and the particular Shareholder(s) in respect of which it has the
dispute, on the other hand, shall appoint representatives to meet. If the
respective representatives are unable to agree on corrective action, senior
executives of the parties to the dispute having authority to resolve the
dispute without the further consent of any other person shall meet or
otherwise act to facilitate an agreement within 14 days of such written
notification. If such senior executives cannot resolve the dispute or agree
upon a written plan of corrective action to do so within seven days after
their initial meeting or other action, or if the agreed-upon completion dates
in the written plan of corrective action are exceeded, either party may
request arbitration as provided for below. Except as otherwise specifically
provided, neither party to the dispute shall initiate arbitration unless and
until this dispute resolution procedure has been employed or waived.
Either party to the dispute shall submit any dispute arising
from or relating to this Agreement, including any failure to agree on a
matter requiring agreement, and any claim based on or arising from an alleged
tort (except improper use or disclosure of the Corporation's proprietary
technology source code or as to ownership of the Corporation's intellectual
property), to arbitration in accordance with the provisions of Schedule "4.9"
hereto.
No Shareholder shall have any right to obtain or seek an
injunction or otherwise delay any Company Registration or Demand Registration
as a result of any controversy that may arise with respect to the
interpretation or implementation of Article 13 or Article 14. Provided,
however, that the provisions of the immediately preceding sentence shall not
preclude any Shareholder from claiming damages for breach of the provisions
of this Agreement, provided that such Shareholder has otherwise complied with
the provisions of this Section 4.9.
ARTICLE 5
OPERATION AND FINANCING
5.1 COMPOSITION AND COMPENSATION OF MANAGEMENT TEAM
For so long as Xxxx Xxxxxxx holds the office of Chief Executive
Officer of the Corporation, he shall have the sole discretion and authority
to select the senior management team of the Corporation, and its Subsidiaries
and its Affiliates, including, but not limited to, the Chief
- 44 -
Operating Officer, President, General Counsel, Secretary, Chief Technology
Officer and Chief Financial Officer. Xxxx Xxxxxxx also has the sole
discretion and authority to propose the compensation of each of the
individual members of such management teams, including but not limited to
salaries, bonuses, stock option grants and other incentive compensation
arrangements, provided that: (i) the aggregate compensation of such
management teams shall not exceed the amount set in a budget approved in
accordance with the provisions of this Agreement; (ii) any stock option
grants or other incentive compensation arrangements involving the issuance of
securities are granted pursuant to the Stock Option Plan or other
arrangements approved in accordance with the terms hereof; and (iii) general
remuneration levels for designated management levels shall be set by a
Compensation Committee consisting of Xxxx Xxxxxxx and two other directors (of
which at least one must be a nominee of a Strategic Partner, and none shall
be Management Directors) that are designated by him from time to time.
5.2 ACCOUNTANTS.
The external accountants of the Corporation shall, at the
fiscal year end of the Corporation, prepare financial statements for such
fiscal year in accordance with GAAP (by no later than the 120th day after the
end of a fiscal year), including a balance sheet, a statement of earnings and
retained earnings and a statement of source and application of funds,
together with an audit report thereon. Such financial statements shall also
include a reconciliation to applicable United States accounting standards, as
requested by any Strategic Partner, acting reasonably. Unless otherwise
determined by the Board of Directors, but in any event so long as a Strategic
Partner (or its respective Affiliates or Subsidiaries) is a Shareholder, an
audit of the accounts of the Corporation shall be required. If the Board of
Directors so determines, the parties hereto irrevocably direct the proper
officers of the Corporation to sign formal waivers of any requirement for an
audit on their behalf pursuant to Section 148 of the Act and/or to apply for
any regulatory approvals or discretionary relief in relation thereto.
5.3 INTERIM FINANCIAL STATEMENTS.
The Corporation shall, in addition to the annual financial
statements contemplated by Section 5.2, prepare and distribute to the
Founding Shareholder, the Strategic Partners, the Management Shareholders and
the Non-Employee Directors interim unaudited (but full accrual) financial
statements for the first, second and third fiscal quarters of each fiscal
year, on or prior to the day which is 45 days after the day on which the
fiscal quarter ends. Such financial statements shall also include a
reconciliation to applicable United States accounting standards, as requested
by any Strategic Partner, acting reasonably. Management of the Corporation
may, but shall not be obligated to, retain the external accountants of the
Corporation to review or otherwise assist in the preparation of such interim
financial statements.
ARTICLE 6
RESTRICTIONS ON TRANSFERS OF SHARES
6.1 RESTRICTIONS ON TRANSFERS.
Prior to an Initial Public Offering, each of the Shareholders
covenants that he or it will not sell, assign, transfer, pledge, mortgage,
charge, create a security interest in, hypothecate, enter into any agreement
or option to or otherwise dispose of, encumber or deal with any of the
- 45 -
shares legally or beneficially owned by him, except in accordance with the
terms of this Agreement. The directors of the Corporation shall refuse to
permit the recording of a transfer of any shares which may have been
transferred otherwise than in accordance with the provisions of this
Agreement or if, as a result of such transfer, the number of Shareholders of
the Corporation (exclusive of persons who are in its employment and exclusive
of persons who having been formerly in the employment of the Corporation
were, while in that employment, and have continued after termination of their
employment to be, shareholders of the Corporation) would exceed 50 (two or
more persons who are the joint registered owners of one or more shares being
registered as one shareholder).
6.2 PERMITTED TRANSFERS
Notwithstanding Section 6.1 hereof, but subject to the
provisions of Section 7.4(f) hereof, any or all of the Common Shares owned by
any of the Shareholders may be transferred by the Shareholders to a Permitted
Transferee of a Shareholder provided that such Permitted Transferee executes
and delivers to the Corporation a written acknowledgement substantially in
the form annexed hereto as Schedule "6.2" and satisfactory to the Corporation
that such transfer is in accordance with and subject to the terms of this
Agreement. Notwithstanding any such disposition, as between the disposing
Shareholder and the other parties hereto the disposing Shareholder shall
remain liable as principal debtor under all covenants on his part contained
herein and the disposing Shareholder agrees to unconditionally guarantee to
the other parties hereto the due performance by the acquiror of all
obligations imposed upon him hereunder. The guarantee of the disposing
Shareholder is unconditional and may be enforced against him without
requiring the other parties hereto to first proceed against the acquiror or
to proceed against or exhaust any security held or to pursue any other remedy
whatsoever. The disposing Shareholder hereby authorizes the other parties
hereto to renew, compromise, extend, accelerate or otherwise change the time
for payment or any term relating to the performance of any such obligations
or to otherwise amend any provision hereof and hereby waives presentment,
protest, notice of protest, notice of dishonour, demand for performance and
notice of acceptance of this guarantee by the other parties hereto.
Provided, however, that notwithstanding anything to the contrary contained in
this Agreement, securities of the Corporation shall not be transferred if
such transfer would result in the Corporation ceasing to be a "private
company" (as defined in the Securities Act) or, if regulatory approval is
required, until all such approvals are received.
6.3 PERMITTED TRANSFERS FOR FOUNDING SHAREHOLDER.
Notwithstanding Section 6.1 hereof, any or all of the Common
Shares or any partial interest owned by a member of the Founding Shareholder
may be transferred by any member of the Founding Shareholder to a Permitted
Transferee of any such Shareholder or to another member of the Founding
Shareholder provided that any such Permitted Transferee or member of the
Founding Shareholder is not a Competitor or a Competitor of BMO and executes
and delivers to the Corporation a written acknowledgement substantially in
the form annexed hereto as Schedule "6.2" and satisfactory to the Corporation
that such transfer is in accordance with and subject to the terms of this
Agreement. Notwithstanding any such disposition to a Permitted Transferee or
to a member of the Founding Shareholder, as between the disposing Shareholder
and the other parties hereto, the disposing Shareholder shall remain liable
as principal debtor under all covenants on his part contained herein and the
disposing Shareholder
- 46 -
agrees to unconditionally guarantee to the other parties hereto the due
performance by the acquiror of all obligations imposed upon him hereunder.
The guarantee of the disposing Shareholder is unconditional and may be
enforced against him without requiring the other parties hereto to first
proceed against the acquiror or to proceed against or exhaust any security
held or to pursue any other remedy whatsoever. The disposing Shareholder
hereby authorizes the other parties hereto to renew, compromise, extend,
accelerate or otherwise change the time for payment or any term relating to
the performance of any such obligations or to otherwise amend any provision
hereof and hereby waives presentment, protest, notice of protest, notice of
dishonour, demand for performance and notice of acceptance of this guarantee
by the other parties hereto. Provided, however, that notwithstanding
anything to the contrary contained in this Section, securities of the
Corporation shall not be transferred if such transfer would result in the
Corporation ceasing to be a "private company" (as defined in the Securities
Act) or, if regulatory approval is required, until all such approvals are
received.
6.4 PLEDGE OF COMMON SHARES BY FOUNDING SHAREHOLDER.
Notwithstanding Section 6.1 hereof, the Common Shares owned by
the Founding Shareholder may be pledged to fund BONA FIDE capital
contributions or loans made to the Corporation, provided that prior to the
creation of any such pledge the pledgee executes and delivers to the
Corporation and to the other Shareholders a written agreement satisfactory to
the Corporation which is addressed to the Corporation and the other
Shareholders wherein the pledgee agrees to assume all of the obligations of
the Founding Shareholder under this Agreement (including, without limitation,
those contemplated by Section 8.3) as if it were the Founding Shareholder
(with the exception of any matters, events, causes or liabilities pertaining
to the period prior to the time the pledgee becomes a Shareholder following
the exercise of any of its enforcement remedies in respect of any of the
Common Shares under Applicable Law) and covenants and agrees to be bound by
and subject to the terms, restrictions, provisions and conditions hereof,
including such terms, provisions and conditions relating to the disposition
of such Common Shares; and provided further that the pledgee is not a
Competitor or a Competitor of BMO.
ARTICLE 7
RESTRICTIONS ON INDIRECT
TRANSFERS OF SHARES OF THE CORPORATION
7.1 MANAGEMENT AND EMPLOYEE SHAREHOLDERS - RESTRICTIONS ON TRANSFER.
Each Management Shareholder and Employee Shareholder covenants
that, prior to an Initial Public Offering, so long as the member of their
respective Immediate Family in respect of which they are the Principal is a
Shareholder, they will not, and they will cause all members of their
Immediate Family who have interests in such Shareholder not to, sell, assign,
transfer, pledge, mortgage, charge, create a security interest in,
hypothecate, enter into any agreement or option to or otherwise dispose of,
encumber or deal with any securities of or interests in such Shareholder,
except in accordance with the terms of this Agreement or except with the
prior written unanimous consent of the Board of Directors.
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7.2 MANAGEMENT AND EMPLOYEE SHAREHOLDERS - PERMITTED TRANSFERS.
Prior to an Initial Public Offering, each Management
Shareholder and Employee Shareholder covenants that, so long as the
Shareholder of which he is the Principal is a Shareholder, no additional
shares, or securities convertible into, or warrants or rights to acquire
additional shares or securities of such Shareholder or other interests in
such Shareholder will be issued or created without the prior written approval
of the Board of Directors, save and except to such Principal or to any member
of his Immediate Family (who is not a Competitor or a Competitor of BMO) in
accordance with the provisions of this Agreement, provided that such
Shareholder or member of his Immediate Family executes and delivers to the
Corporation a written acknowledgement substantially in the form annexed
hereto as Schedule "6.2" and satisfactory to the Corporation that such
transfer is in accordance with and subject to the terms of this Agreement.
No such issuance shall, however, be permitted or be valid or effective until
written notice thereof shall have been given by such Shareholder to the
Corporation and, where shares are issued to any member of the Immediate
Family of such Shareholder (who is not a Competitor or a Competitor of BMO),
until the acquiror of those shares shall have entered into a written
agreement with the parties hereto agreeing not to sell, assign, transfer,
pledge, encumber, mortgage, charge, create a security interest in,
hypothecate, enter into any agreement or option to or otherwise dispose of or
deal with any of the said shares except to the Shareholder, the Principal or
the Immediate Family of such Principal, provided that the provisions of this
Article are complied with, MUTATIS MUTANDIS, by the acquiror thereof. Each
Shareholder and Principal in question agrees to unconditionally guarantee to
the other parties bound hereby the due performance by the acquiror of all of
the obligations imposed upon him hereunder. The guarantee of such
Shareholder and Principal is unconditional and may be enforced against either
one or both of such Shareholder and Principal without requiring the other
parties first to proceed against the acquiror or to proceed or exhaust any
security held or to pursue any other remedy whatsoever. Each Shareholder and
Principal hereby authorizes the other parties bound hereby to renew,
compromise, extend, accelerate or otherwise change the time for payment or
any term relating to the performance of any such obligations or to otherwise
amend the provisions hereof and hereby waives presentment, protest, notice of
protest, notice of dishonour, demand for performance and notice of acceptance
of this guarantee by the other parties bound hereby.
7.3 MANAGEMENT AND EMPLOYEE SHAREHOLDERS - PROHIBITION TO AMALGAMATE,
MERGE, ETC.
Prior to an Initial Public Offering, each Management
Shareholder and Employee Shareholder covenants that, so long as the
Shareholder of which he is the Principal is a Shareholder, he shall not cause
or permit such Shareholder to take part in any amalgamation, merger,
reorganization or similar proceeding, the effect of which would result in the
Principal in question and his Immediate Family owning less than 100% of the
issued shares or other interests of the resulting Shareholder from time to
time outstanding.
7.4 BMO, BAC, CSTC, SONERA, WFC, FTV AND HSBC - RESTRICTIONS ON
TRANSFER AND PERMITTED TRANSFERS.
(a) The provisions of Section 7.1 and, except as provided in Section
7.6 below, Sections 7.2 and 7.3 shall apply to BMO, MUTATIS
MUTANDIS (including, for greater
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certainty, with references to "Immediate Family" changed to
read "Permitted Transferees"), with respect to any Affiliates
or Subsidiaries thereof to which shares of the Corporation
shall be transferred by BMO or to which shares of the
Corporation shall be issued and in respect of which BMO is the
Principal.
(b) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 shall apply to BAC,
MUTATIS MUTANDIS (including, for greater certainty, with
references to "Immediate Family" changed to read "Permitted
Transferees"), with respect to any Affiliates or Subsidiaries
thereof to which shares of the Corporation shall be transferred
by BAC or to which shares of the Corporation shall be issued
and in respect of which BAC is the Principal.
(c) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 shall apply to Citicorp
with respect to CSTC and to CSTC, MUTATIS MUTANDIS (including,
for greater certainty, with references to "Immediate Family"
changed to read "Permitted Transferees"), with respect to any
Affiliates or Subsidiaries thereof to which shares of the
Corporation shall be transferred by CSTC or to which shares of
the Corporation shall be issued and in respect of all of which
Citicorp is the Principal.
(d) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 shall apply to Sonera,
MUTATIS MUTANDIS (including, for greater certainty, with
references to "Immediate Family" changed to read "Permitted
Transferees"), with respect to any Affiliates or Subsidiaries
thereof to which shares of the Corporation shall be transferred
by Sonera or to which shares of the Corporation shall be issued
and in respect of which Sonera is the Principal.
(e) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 shall apply to WFC,
MUTATIS MUTANDIS (including, for greater certainty, with
references to "Immediate Family" changed to read "Permitted
Transferees"), with respect to any Affiliates or Subsidiaries
thereof to which shares of the Corporation shall be transferred
by WFC or to which shares of the Corporation shall be issued
and in respect of which WFC is the Principal.
(f) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 hereof shall apply
MUTATIS MUTANDIS, to FTV1 and FTV2 with respect to their
respective Permitted Transferees to which shares of the
Corporation shall be transferred by FTV1 and FTV2 or to which
shares of the Corporation shall be issued and in respect of
which FTV is the Principal.
(g) The provisions of Section 7.1 and, except as provided in
Section 7.6 below, Sections 7.2 and 7.3 shall apply to HSBC,
MUTATIS MUTANDIS (including, for greater certainty, with
references to "Immediate Family" changed to read "Permitted
Transferees"), with respect to any Affiliates or Subsidiaries
thereof to which shares of the Corporation shall be transferred
by HSBC or to which shares of the Corporation shall be issued
and in respect of which HSBC is the Principal.
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(h) For greater certainty, each of BMO, BAC, CSTC, Sonera, WFC, FTV
and HSBC may cause their directly or indirectly held
shareholding in the Corporation to be transferred among their
respective Affiliates or Subsidiaries, as the case may be as
contemplated herein, subject only to: (i) the assignee being a
"Permitted Transferee"; (ii) the assignee executing and
delivering to the Corporation the written acknowledgement
contemplated by Schedule "6.2"; (iii) the assignor
acknowledging that it remains liable hereunder; and (iv) the
assignor and assignee covenanting in favour of the Corporation
and the other Shareholders that if the assignee might at any
time thereafter cease to be a "Permitted Transferee", the
shares of the Corporation held by the assignee shall be
transferred (in accordance with the provisions of this
Agreement) to some other affiliated entity which is a
"Permitted Transferee" and in respect of all of which the
original Shareholder (i.e., BMO, BAC, CSTC, Sonera, WFC, FTV
and HSBC) shall remain liable hereunder as Principal. For
greater certainty, Citicorp shall, notwithstanding any such
direct or indirect transfer, remain obligated as Principal of
CSTC and of Permitted Transferees of CSTC as well.
7.5 FOUNDING SHAREHOLDER - RESTRICTIONS ON TRANSFER AND PERMITTED
TRANSFERS.
The provisions of Sections 7.1 and 7.2 and, except as provided
in Section 7.6 below, Section 7.3 hereof shall apply, MUTATIS MUTANDIS, to
each member of the Founding Shareholder with respect to their respective
Affiliates and Subsidiaries. The members of the Founding Shareholder hereby
acknowledge and agree that notwithstanding that there is no restriction on
transfer of the shares of the Strategic Partners, the Founding Shareholder
shall not permit a transfer of the outstanding shares of the companies
forming part of the Founding Shareholder, except in compliance with the terms
hereof as if such transfer was a direct transfer of the Common Shares held by
the Founding Shareholder.
7.6 PERMISSIBLE INDIRECT TRANSFERS AND PERMISSIBLE AMALGAMATIONS FOR
THE FOUNDING SHAREHOLDER AND THE STRATEGIC PARTNERS.
For purposes of the application of Sections 7.2 and 7.3 to
Sections 7.4 and 7.5, a permissible amalgamation or a permissible issuance or
transfer of shares of an Affiliate or Subsidiary is one which results in the
successor Shareholder remaining an Affiliate or Permitted Transferee of the
Founding Shareholder or the Strategic Partner in question and in respect of
which such party remains the "Principal".
ARTICLE 8
DRAG-ALONG RIGHTS
8.1 APPLICATION.
The provisions of this Article 8 shall apply prior to an
Initial Public Offering. Notwithstanding the foregoing, the Founding
Shareholder may not exercise its right under this Article 8 at any time
before August 2, 2001 (i.e., the provisions of this Article 8 will not, prior
to such time, constitute an exception to the restrictions on transfer
provided by Article 6), without the express consent of all the Strategic
Partners then entitled to nominate a representative on the Board of Directors
pursuant to Article 4.
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8.2 RIGHT OF FIRST OFFER
Notwithstanding the provisions of Article 6 but subject to the
provisions of Section 8.1, in the event that the Founding Shareholder wishes to
sell all or any part of its Common Shares, it may pursue such sale or sales
provided that it observes the following rules and procedures (the "Right of
First Offer"):
(a) The Founding Shareholder may research the market for the shares
that it proposes to sell in order to determine a fair market value
for such shares and whether market conditions are optimal for such
sale. In pursuing such investigation, the Founding Shareholder
shall comply with the procedures stated in Section 15.2. The
Founding Shareholder shall also be permitted to discuss its
proposed sale and its opinions as to fair market value with the
Strategic Partners and to gauge their views and interest in
purchasing such shares. The Founding Shareholder need not obtain
an offer from a third party prior to implementing the following
procedures.
(b) If, having completed its review, the Founding Shareholder decides
to pursue such sale, it shall, by notice in writing (in this
Section 8.2, the "Offer"), offer to sell such number of Common
Shares desired to be sold (in this Section 8.2, the "Offered
Shares"), to the Strategic Partners, (the "Eligible Strategic
Partner(s)") at a specified price, which must be paid in cash
(unless otherwise specified by the Founding Shareholder), and upon
specified terms and conditions as set out in the Offer (in this
Section 8.2, the "Offer Price"). The Offer shall be open for
acceptance by written notice delivered to the Founding Shareholder
for a period of 15 business days, or if participation in the
transaction requires approval of the board of directors of any
Strategic Partner, up to 30 business days (in this Section 8.2,
the "Notice Period"). If the Offer is accepted by at least one of
the Eligible Strategic Partners during the Notice Period, then the
Founding Shareholder shall sell, and those of the Eligible
Strategic Partners which accepted the Offer (in this Section 8.2,
the "Purchaser(s)") shall purchase all, but not less than all, of
the Offered Shares at the Offer Price. If more than one of the
Eligible Strategic Partners has elected to purchase the Offered
Shares, the Offered Shares shall be allocated among the Purchasers
in proportion to their respective ownership of the Common Shares
as at the date of delivery of the Offer, calculated based on the
total number of Common Shares held by the Eligible Strategic
Partners. If, before the expiry of the Notice Period, none of the
Eligible Strategic Partners accept the Offer, then the Founding
Shareholder shall be entitled to seek or receive an offer from any
person dealing at arm's length with the Founding Shareholder for
the purchase of all or part of the Common Shares so offered for
sale.
8.3 RECEIPT OF THIRD PARTY WRITTEN OFFER.
If the Founding Shareholder has complied with the provisions of
Section 8.2 and receives a BONA FIDE written offer (in this Article 8, the
"Third Party Offer"), from any person dealing at arm's length with the Founding
Shareholder (in this Article 8, the "Offeror"), to purchase all or any part of
the Common Shares, which the Founding Shareholder wishes to
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accept, then, notwithstanding the provisions of Article 6, the Founding
Shareholder shall have the right, but not the obligation, exercisable within
30 business days following receipt by it of the Third Party Offer, to: (i)
sell such Common Shares pursuant to the Third Party Offer; and, at its
option, (ii) to cause the other Shareholders (other than the Strategic
Partners and subject to Sections 8.4 and 8.5, as the case may be) to sell a
PRO RATA number of Common Shares to the Offeror by delivering a written
notice (in this Article 8, the "Notice") to the other Shareholders indicating
that it wishes to accept the Third Party Offer (and, if applicable, the
maximum number of shares of the Corporation that the Founding Shareholder
proposes to sell), together with a copy of the Third Party Offer, and that it
intends to exercise its drag-along rights hereunder. Notwithstanding the
foregoing, the Founding Shareholder shall not be entitled to accept the Third
Party Offer unless (a) the proposed purchase price per Common Share is equal
to or greater than the Offer Price, as defined in Section 8.2; (b) the Third
Party Offer is received by the Founding Shareholder within 120 days following
the expiry of the Notice Period; and (c) the proposed purchase is completed
within 60 days from the end of such 120 day period, failing which the
provisions of Section 8.2 shall apply again, and so on from time to time.
The Strategic Partners shall be entitled to require the Founding Shareholder
to provide sufficient information to them concerning such transaction for
them to determine that the Founding Shareholder has complied with its
obligations pursuant to Sections 8.2 and 8.3.
8.4 OFFER FOR ALL, OR ANY AND ALL, COMMON SHARES.
In the event that the Third Party Offer is for the purchase of all
(or any and all) of the Common Shares and the Founding Shareholder elects to
exercise its drag-along rights by delivering the Notice to the other
Shareholders within the aforementioned period, all of the Shareholders shall,
subject to the provisions of this Article 8, do all things necessary and sign
such documents as are required to cause the Third Party Offer to be accepted
and: (i) as to the Common Shares held by the Strategic Partners and their
respective Affiliates and Subsidiaries, such Shareholders shall have the right,
but not the obligation, by written notice to the Corporation, the Offeror and
the Founding Shareholder, within 25 business days following receipt of the
Notice, to elect to sell all or part of their Common Shares under the Third
Party Offer; and (ii) as to the other Shareholders, such Shareholders shall sell
all of the Common Shares legally or beneficially owned by them to the Offeror.
Provided, however, that if the Founding Shareholder tenders less than all of the
Common Shares held by it to the Third Party Offer, the other Shareholders
required or electing to sell, as the case may be, shall only be compelled to
sell a PRO RATA portion of their Common Shares but shall remain entitled to
choose to sell a greater number of Common Shares pursuant to the Third Party
Offer. In the event a Shareholder does not fulfil his obligation to sell as
provided for herein, such Shareholder hereby irrevocably appoints the Chief
Executive Officer of the Corporation, from time to time, as his attorney, in
accordance with the POWERS OF ATTORNEY ACT (Ontario), to execute all such
documents and to do all such things as may be necessary to accept the Offer and
to complete such transaction.
8.5 OFFER FOR LESS THAN ALL COMMON SHARES.
In the event the Third Party Offer is to purchase less than all of
the Common Shares, the Founding Shareholder shall have the right, but not the
obligation, exercisable within 30 business days following receipt by it of the
Third Party Offer to deliver a written notice to the
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other Shareholders indicating that it wishes to accept the Third Party Offer
and, if elected by the Founding Shareholder, to cause all other Shareholders
(other than the Strategic Partners and their respective Affiliates and
Subsidiaries) to accept the Third Party Offer on a PRO RATA basis with the
Founding Shareholder.
The Strategic Partners shall have the right, but not the
obligation, to participate in the Third Party Offer with the Founding
Shareholder in the proposed transaction in accordance with the following
provisions. Each Strategic Partner that desires to participate in such
transaction may do so by delivery of written notice (in this Section 8.5, a "Tag
Along Notice") to the Founding Shareholder indicating a desire to participate in
the Third Party Offer and specifying a maximum number of shares desired to be
sold, which shall not be greater than their pro-rata entitlement calculated in
the manner set forth in the fourth paragraph of this Section 8.5, and indicating
whether it desires to participate in the "Second Round" contemplated below on or
prior to the date which is ten business days after the date of delivery of the
Third Party Offer by the Founding Shareholder.
All Shareholders participating in the transaction contemplated by
the Third Party Offer shall participate simultaneously with and conditional upon
the completion of the transaction of purchase and sale contemplated therein and
for the same consideration per share and otherwise on the same terms and
conditions as stated in the Third Party Offer.
All of the Shareholders (including the Strategic Partners and the
Founding Shareholder, but only to the extent of the maximum number of shares
specified by them, respectively) who accept (either voluntarily or otherwise)
the Third Party Offer shall thereupon be obligated to sell that number of one or
more classes of shares of the Corporation held by them determined as follows:
each Shareholder shall sell that number of shares of a particular class of
shares of the Corporation which is the subject of the Third Party Offer as is
equal to the product obtained by multiplying: (a) the number of shares of such
class which is the subject of the Third Party Offer, by (b) a fraction, the
numerator of which is the number of shares of such class held by the Shareholder
and the denominator of which is the aggregate number of outstanding shares of
such class, all determined as at the date of the Third Party Offer.
In the event a Shareholder does not fulfil his obligation to sell
as provided for herein, such Shareholder hereby irrevocably appoints the Chief
Executive Officer of the Corporation, from time to time, as his attorney, in
accordance with the POWERS OF ATTORNEY ACT (Ontario), to execute all such
documents and to do all such things as may be necessary to accept the Third
Party Offer and to complete such transaction. Furthermore, in such event, the
provisions of Article 10 of this Agreement shall not apply.
If the Third Party Offer contemplated by this Section 8.5 requires
the delivery of a number of Common Shares in excess of the number of Common
Shares to be sold as determined by the fourth paragraph of this Section 8.5
(such excess of Common Shares referred to in this Section 8.5 as the
"Unallocated Shares"), the Founding Shareholder shall give notice to those
Strategic Partners which have elected to participate in the Third Party Offer
(the "Unallocated Share Notice"), specifying such excess number of Common Shares
and the Strategic Partners who elected to participate in the Second Round (as
defined below) and whether the Founding Shareholder desires to participate in
the Second Round, and the following provisions shall apply:
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(a) Each of the Founding Shareholder and those of the Strategic
Partners which shall have elected to participate in the Third
Party Offer (in this Section 8.5, collectively, the "Sellers") and
which shall have elected to participate in the Third Party Offer
to the fullest extent of their PRO-RATA entitlement (i.e. they
have not limited their participation to a number of shares less
than they would have been entitled to sell pursuant to the
application of the numerical formula outlined above) and, in the
case of the Strategic Partners which have indicated an intention
to participate in the "Second Round" (as defined below) in their
tag-along notice (collectively with the Founding Shareholder if it
desires to participate in the Second Round, the "Second Round
Sellers"), shall be entitled, by delivery of written notice (the
"Participation Notice") to the Founding Shareholder within five
business days following the delivery of the Unallocated Share
Notice indicating that a Second Round allocation is required, to
sell additional shares to the Offeror (such process hereinafter in
this Section 8.5 referred to as the "Second Round").
(b) The Participation Notice shall specify a number of additional
Common Shares that the particular Strategic Partner wishes to sell
on the terms specified in the Third Party Offer.
(c) The number of additional Common Shares that each of the Second
Round Sellers shall sell pursuant to the Third Party Offer shall
be determined as follows:
(i) Each such Second Round Seller shall sell a number of
additional Common Shares equal to the lesser of: (I) its
PRO RATA share of the number of Unallocated Shares
(calculated with reference to the relative holdings of
equity shares of the Corporation as at the date of the
Third Party Offer represented by the Second Round
Sellers); and (II) the maximum number of shares specified
in the applicable Participation Notice (or, in the case
of the Founding Shareholder, since it does not deliver a
Participating Notice, such maximum number of shares that
it may determine);
(ii) The remaining Unallocated Shares, if any, shall be
allocated among those Second Round Sellers which shall
not yet have been allocated the maximum number of shares
that they desire to sell, by one or more repetitions of
the Second Round procedures outlined above, until the
first to occur of: (I) the full allocation of the
Unallocated Shares; or (II) all Second Round Shareholders
having been allocated the maximum number of Common Shares
specified by them. In the latter case, any remaining
Unallocated Shares may be sold by the Founding
Shareholder, should it determine that the third party
purchaser is unwilling to complete the transaction unless
all Unallocated Shares are made available for sale.
8.6 TERMS OF SALE BY SHAREHOLDERS.
In the event that the other Shareholders become obligated or elect
(as the case may be) to sell all or part of their Common Shares pursuant to the
operation of this Article 8, the
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completion of such transaction(s) shall be conditional upon the completion of
the purchase and sale contemplated in the Third Party Offer and upon each
such Shareholder selling such shares on the same terms and receiving the same
consideration per share as the Founding Shareholder is receiving under the
Third Party Offer. For greater certainty, on a sale of shares pursuant to
this Article 8, each Shareholder selling shares shall provide the Offeror
with such reasonable and customary covenants, representations and warranties
relating to the shares being sold by the particular Shareholder as well as
the nature and status of, and the substance of any default under, the
contractual arrangements between the particular Shareholder and the
Corporation or their respective Affiliates and Subsidiaries as shall be
generally consistent with those equivalent representations, warranties and
covenants given by the Founding Shareholder to the Offeror. Such
representations, warranties and covenants shall be given on a several basis,
and not jointly or jointly and severally.
8.7 APPLICABILITY OF TAG-ALONG RIGHTS.
In the event a Third Party Offer is received by the Founding
Shareholder and the Founding Shareholder elects to sell the Common Shares which
are the subject matter of such Third Party Offer and does not elect to exercise
its drag-along rights hereunder, the provisions of Article 10 shall apply.
8.8 SALES TO COMPETITORS.
Notwithstanding any other provision of this Article 8, no sale of
less than all of the then issued and outstanding shares of the Corporation shall
be permitted to be made pursuant to this Article 8: (a) to a Competitor or a
Competitor of BMO; and (b) unless the Offeror executes and delivers to the
Corporation a written acknowledgement substantially in the form annexed hereto
as Schedule "6.2" and satisfactory to the Corporation that such transfer is in
accordance with the terms of this Agreement.
8.9 APPLICATION OF ARTICLE 8 TO STRATEGIC PARTNERS.
For greater certainty, the Offeror shall have no right under this
Article 8 to require the Strategic Partners or any of their respective Permitted
Transferees to sell any shares, including Common Shares, held by such Persons
pursuant to any Third Party Offer. Also, for greater certainty, any sale of
Common Shares pursuant to this Article 8 to any Strategic Partner shall be
subject to the restrictions and limitations set forth in Section 1.17(b).
ARTICLE 9
RIGHT OF FIRST REFUSAL ON SHARES HELD BY
MANAGEMENT SHAREHOLDERS, EMPLOYEE SHAREHOLDERS
AND NON-EMPLOYEE DIRECTORS
9.1 APPLICATION.
The provisions of this Article 9 shall apply prior to an Initial
Public Offering. For greater certainty, transactions of purchase and sale of
the Purchased Shares contemplated by this Article 9 shall be permitted
notwithstanding the provisions of Article 6 hereof.
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9.2 OFFER TO FOUNDING SHAREHOLDER AND THE STRATEGIC PARTNERS.
If any Shareholder other than the Founding Shareholder and the
Strategic Partners (hereinafter in this Article 9 referred to as the "Offeror")
receives a BONA FIDE cash offer (hereinafter in this Article 9 called the
"Offer") from a Management Shareholder, Non-Employee Director or Employee
Shareholder to purchase all, or any part of, the Common Shares beneficially
owned by him, which is acceptable to him, he shall, by notice in writing
(hereinafter in this Article 9 called the "Second Offer"), offer to sell such
Common Shares (hereinafter in this Article 9 called the "Purchased Shares") to
the Founding Shareholder and to the Strategic Partners at the same price, which
must be paid in cash, and upon the same terms and conditions as are contained in
the Offer. Such notice shall be accompanied by a true copy of the Offer and an
affidavit of the Offeror attesting whether, and if so to what extent, there are
commissions or other similar fees that may be or may become due and payable to
any broker, agent or other intermediary in connection with the sale of the
Purchased Shares pursuant to the Offer and, if applicable, stating the amount
thereof. The Second Offer shall not be revocable except with the written
consent of the Founding Shareholder and the Strategic Partners and shall be open
for acceptance by written notice delivered by the Founding Shareholder, and/or
one or more of the Strategic Partners, as the case may be, for a period of 15
business days from the date upon which the Second Offer was given to the
Founding Shareholder and the Strategic Partners by the Offeror. Notwithstanding
anything to the contrary herein contained, the terms and conditions contained in
the Second Offer shall be amended so that there shall be deducted from the
purchase price for the Purchased Shares payable pursuant to the Offer the amount
of any commission or other similar fee that would otherwise have been payable to
any broker, agent or other intermediary in connection with the sale of the
Purchased Shares pursuant to the Offer.
9.3 PURCHASE OF SHARES BY FOUNDING SHAREHOLDER AND THE STRATEGIC
PARTNERS.
If the Second Offer is accepted by at least one of the Founding
Shareholder and/or the Strategic Partners, as the case may be, then the Offeror
(hereinafter in this Article 9 called the "Vendor") shall sell, and those of the
Founding Shareholder and the Strategic Partners which shall have accepted the
Second Offer, as the case may be, (hereinafter in this Article 9, the
"Purchaser(s)"), shall purchase, all, and not less than all, of the Purchased
Shares (if more than one of the Strategic Partners and the Founding Shareholder
have elected to purchase, the Purchased Shares shall be allocated PRO RATA to
their respective beneficial ownership of Common Shares as at the date of
delivery of the Second Offer) upon the terms and conditions contained in the
Second Offer. Unless otherwise agreed by them, the members of the Founding
Shareholder shall purchase the Purchased Shares to be purchased by them pro rata
to their respective beneficial ownership of Common Shares at the date of
delivery of the Second Offer.
9.4 SALE PURSUANT TO ORIGINAL OFFER.
If, during the time limited therefor, none of the Founding
Shareholder and the Strategic Partners, as the case may be, shall have accepted
the Second Offer, then the Offeror shall be entitled to sell the Purchased
Shares in accordance with the Offer. The Board of Directors before consenting
to the transfer of the Purchased Shares shall be entitled to require proof that
the sale took place in accordance with the Offer (except as to the date of
closing which, subject to the provisions of Section 9.5 hereof, may be varied).
The directors of the
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Corporation shall refuse to permit the recording of the transfer of the
Purchased Shares which may have been sold otherwise than in accordance with
the provisions of this Agreement.
9.5 REVIVAL OF RIGHT OF FIRST REFUSAL.
If a sale of the Purchased Shares pursuant to the Offer is not
completed within 60 days from the delivery of the Second Offer to the Founding
Shareholder and the Strategic Partners, as aforementioned, no sale of the
Purchased Shares pursuant to the Offer shall be made without again complying
with the terms of this Article 9, and so on from time to time.
9.6 CLOSING.
The closing of the transaction of purchase and sale pursuant to
the Second Offer shall take place at the Place of Closing at the Time of Closing
on the date (hereinafter in this Article 9 called the "Date of Closing") which
is 15 days after the acceptance of the Second Offer by the Founding Shareholder
and the Strategic Partners, as the case may be.
9.7 PROHIBITED SALES.
Notwithstanding any other provision of this Article 9, no sale of
Common Shares shall be permitted to be made pursuant to this Article 9:
(a) if such sale and subsequent transfer would result in the
Corporation ceasing to be a "private company" (as defined in the
Securities Act) or, if regulatory approval is required, until all
such approvals are received;
(b) to a Competitor or a Competitor of BMO; and
(c) unless the Purchaser executes and delivers to the Corporation a
written acknowledgement substantially in the form annexed hereto
as Schedule "6.2" and satisfactory to the Corporation that such
transfer is in accordance with and subject to the terms of this
Agreement.
ARTICLE 10
TAG-ALONG RIGHTS
10.1 APPLICATION.
The provisions of this Article 10 shall apply prior to an Initial
Public Offering, but shall not apply: (i) to a sale by the Founding Shareholder
in the circumstances contemplated by Article 8 (except pursuant to Section 8.7),
because the "tag-along rights" contemplated by Section 8.5 will apply; or
(ii) in the circumstances contemplated by Article 15 of this Agreement.
10.2 TAG-ALONG RIGHT.
Notwithstanding the provisions of Article 6, but subject to the
provisions of Sections 8.1, 8.2 and Section 10.3, the Founding Shareholder or
any member of the Founding Shareholder shall have the right to sell Common
Shares to any arm's length third party which is
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not a Competitor or a Competitor of BMO, provided that such arm's length
third party (in this Article, the "Offeror") executes and delivers to the
Corporation a written acknowledgement substantially in the form annexed
hereto as Schedule "6.2" and satisfactory to the Corporation that such
transfer is in accordance with and subject to the terms of this Agreement and
provided further that if the Founding Shareholder or any member of the
Founding Shareholder proposes to sell all or any portion of its Common Shares
pursuant to this Section 10.2, the proposed vendor shall, at least 25
business days prior to the date specified for completion of the transaction
of purchase and sale (in this Article 10, the "Offer"), give written notice
(in this Article 10, called a "Disposition Notice") to the other
Shareholder(s), exclusive of the Employee Shareholders, (in this Article 10,
the "Remaining Shareholder(s)") stating the nature and terms of the proposed
transaction, the maximum and/or minimum (as applicable) number of shares of a
particular class desired or required by the proposed purchaser and the
consideration for such sale in reasonable detail together with a statement of
the maximum number of shares that the Founding Shareholder proposes to sell
and stating that each Remaining Shareholder has (and the Remaining
Shareholder(s) shall then have) the option to participate with the Founding
Shareholder in the transaction contemplated by the Offer in accordance with
the following provisions.
Each Remaining Shareholder that desires to participate in the
Offer may do so by delivery of written notice (in this Article 10, a "Tag-Along
Notice") to the Founding Shareholder indicating a desire to participate in the
Offer and specifying a maximum number of shares desired to be sold, and
indicating whether it desires to participate in the "Second Round" contemplated
below, on or prior to the date which is ten business days after the date of
delivery of the Disposition Notice by the Founding Shareholder. All
Shareholders (including the Founding Shareholder) participating in the Offer (in
this Article 10, the "Sellers") shall participate simultaneously with and
conditional upon the completion of the transaction of purchase and sale
contemplated in the Offer and for the same consideration per share and otherwise
on the same terms and conditions as stated in the Offer.
Each Seller shall initially be entitled (and obligated) to sell up
to such number of shares of a particular class as is determined based on their
respective PRO RATA ownership of equity shares of the Corporation in accordance
with the following calculation, not to exceed the maximum number of shares of
the particular class specified in their Tag-Along Notice.
For the purposes of the immediately preceding paragraph, the PRO
RATA SALE entitlement of a particular Seller shall be calculated as follows.
Each Seller shall be allocated that number of shares of a particular class of
shares of the Corporation which is the subject of the Offer as is equal to the
product obtained by multiplying: (a) the number of shares of such class which is
the subject of the Offer by (b) a fraction, the numerator of which is the number
of shares of such class held by the Seller and the denominator of which is the
aggregate number of outstanding shares of such class, all determined as at the
date of the Offer. In the event a Seller does not fulfil its obligation to sell
as provided for herein, such Shareholder hereby irrevocably appoints the Chief
Executive Officer of the Corporation, from time to time, as its attorney, in
accordance with the POWERS OF ATTORNEY ACT (Ontario), to execute all such
documents and to do all such things as may be necessary to accept the Offer and
to complete such transaction.
If the Offer contemplated by this Article 10 requires the delivery
of a number of shares in excess of the number of shares to be sold as determined
by the immediately preceding
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paragraph (such excess number of shares referred to in this Section 10.2 as
the "Unallocated Shares"), the Founding Shareholder shall give notice to
those Sellers which have elected to participate in the transaction
contemplated by the Offer (in this Section, the "Unallocated Share Notice"),
specifying such excess number of Common Shares and those Strategic Partners
who elect to participate in the Second Round (as defined below) and whether
the Founding Shareholder desires to participate in the Second Round. The
following provisions shall apply to the Unallocated Shares:
(a) Each of the Sellers which shall have elected to participate in the
Offer to the fullest extent of their PRO RATA entitlement (I.E.
they have not limited their participation to a number of shares
less than they would have been entitled to sell pursuant to the
application of the numerical formula outlined above), as outlined
above, and which have (other than the Founding Shareholder)
indicated an intention to participate in the "Second Round" (as
defined below) in their Tag-Along Notice (inclusive of the
Founding Shareholder should it elect to participate in the Second
Round, collectively referred to as the "Second Round Sellers")
shall be entitled, by delivery of written notice (the
"Participation Notice") to the Founding Shareholder within five
business days following the delivery of the Unallocated Share
Notice, to sell additional shares to the Offeror (such process
hereinafter in this Section 10.2 referred to as the "Second
Round").
(b) The Participation Notice shall specify a number of additional
shares of each class that the particular Second Round Seller
wishes to sell on the terms specified in the Offer.
(c) The number of additional shares that the Founding Shareholder
(should it so desire to participate in the Second Round) and each
other Second Round Seller that shall have delivered a
Participation Notice shall sell pursuant to the Offer shall be
determined as follows:
(i) Each such Second Round Seller shall sell a number of
additional shares equal to the lesser of: (I) its PRO
RATA share of the number of Unallocated Shares
(calculated with reference to the relative holdings of
equity shares of the Corporation as at the date of the
Offer representing the Second Round Sellers); and (II)
the maximum number of shares specified in the applicable
Participation Notice (or, in the case of the Founding
Shareholder, since it does not deliver a Participation
Notice, such maximum number of shares that it may
determine);
(ii) The remaining Unallocated Shares, if any, shall be
allocated among those Second Round Sellers which shall
not yet have been allocated the maximum number of shares
that they desire to sell, by one or more repetitions of
the Second Round procedures outlined above, until the
first to occur of: (I) the full allocation of the
Unallocated Shares; or (II) all Second Round Shareholders
having been allocated the maximum number of shares
specified by them. In the latter case, any remaining
Unallocated Shares may be sold by the Founding
Shareholder, should it determine that
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the Offeror is unwilling to complete the transaction
unless all Unallocated Shares are made available for sale.
10.3 EFFECT OF EXERCISE OF TAG-ALONG RIGHT.
For greater certainty, if a Remaining Shareholder gives a
Tag-Along Notice, then:
(a) he or it shall be obligated to sell the shares specified in his
Tag-Along Notice (and Participation Notice, if applicable) upon
the terms specified in the Offer to the proposed purchaser under
the Offer, conditional upon and contemporaneously with the
completion of the transaction of purchase and sale contemplated in
the Offer; and
(b) the Founding Shareholder agrees with the Remaining Shareholder(s)
that it shall not sell any of its shares under such Offer unless
payment for the shares of each of the Remaining Shareholders who
gave a Tag-Along Notice (and Participation Notice, if applicable)
which are to be included in such sale is made in accordance with
the terms of the Offer.
10.4 TERMS OF SALE BY SHAREHOLDERS
On any sale of shares pursuant to this Article 10, each
Shareholder selling shares shall provide the third party purchaser under the
Offer with such reasonable and customary covenants, representations and
warranties relating to the shares being sold by the particular Shareholder as
well as the nature and status of, and the substance of any default under, the
contractual arrangements between the particular Shareholder and the Corporation
or their respective Affiliates and Subsidiaries as shall be generally consistent
with the covenants, representations and warranties given by the Founding
Shareholder to such third party subscriber. Such representations, warranties
and covenants shall be given on a several basis, and not jointly or jointly and
severally.
ARTICLE 11
PRE-EMPTIVE RIGHTS
11.1 PRE-EMPTIVE RIGHT.
Subject to the provisions of this Agreement, if the Corporation
desires to issue any Common Shares or securities convertible into or
exchangeable for Common Shares or any other equity securities or other
securities carrying rights, options or warrants to acquire such securities or
shares (in this Article 11, the "Offered Securities"), it shall offer, by
written notice (in this Article 11, an "Offer") to each of the Founding
Shareholder and the Strategic Partners (in this Article 11, an "Offeree") the
number and type of securities (in this Article 11, the "Offered Securities")
which the Corporation desires to issue (the "Proposed Issuance") and the cash
price which the Corporation desires to receive per Offered Security (in this
Article 11, the "Offered Price").
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11.2 OFFER TO THE FOUNDING SHAREHOLDER AND THE STRATEGIC PARTNERS.
The number of Offered Securities which shall be offered to each of
the Founding Shareholder and the Strategic Partners, as the case may be, for
purchase at the Offered Price shall be the number of Offered Securities which,
if purchased by the particular Shareholder, would maintain its proportionate
equity ownership interest in the Corporation as at the date of the Offer
(calculated on a fully-diluted basis). The Offer shall set out the aggregate
number of Common Shares, securities convertible into or exchangeable for Common
Shares, or any other equity securities carrying rights, options or warrants to
acquire such securities or shares outstanding at the close of business on the
date of the Offer and the number of Offered Securities available for purchase by
the Offeree, shall limit the time within which the Offer may be accepted (which
time shall not be less than 20 business days from the date of the Offer) and
shall limit the time within which any purchase resulting from acceptance of the
Offer must be completed (which time shall not be less than 35 business days nor
more than 60 business days after the date of the Offer) and shall fix the time,
date and place for completion of any purchase resulting from acceptance of the
Offer.
If an Offeree does not accept the Offer, or accepts it in respect
of less than its prescribed share of the Offered Securities: (i) the unclaimed
Offered Securities shall be first offered, for a period of 15 business days, in
the same relative proportions as the initial allocations referred to above, to
those of the Founding Shareholder and the Strategic Partners who shall have
subscribed for the full amount of the Offered Securities to which they were
entitled; and (ii) the balance of the unclaimed Offered Securities may then be
offered to such third-party persons (acting at arm's length with the Founding
Shareholder and the Strategic Partners and provided that any such third-party
person is not directly, or indirectly through its Affiliates and Subsidiaries, a
Competitor or a Competitor of BMO) as may be determined by the Board of
Directors at prices and on terms no less favourable to the Corporation than the
Offer; provided, however, that such third-party persons become subject to the
Shareholders' Agreement (including, without limitation, by delivering a written
acknowledgement substantially in the form annexed hereto as Schedule "11.4") on
terms substantially equivalent to the rights and obligations of the Management
Shareholders (i.e. they should not be afforded the governance powers of the
Strategic Partners). The provisions of Section 1.13 shall apply to the
amendment and restatement of the Shareholders' Agreement to reflect such
additional Shareholder, MUTATIS MUTANDIS. Any such issuances to such third
party subscriber shall be completed within 60 days of the determination of the
number of securities to be offered to the third party subscriber, failing which
the provisions of Sections 11.1 and 11.2 shall again apply thereto and so on
from time to time.
11.3 PURCHASE BY OFFEREE.
If the Offeree accepts the Offer in accordance with the terms
hereof, it shall be bound to purchase, take up and pay for, and the
Corporation shall be bound to issue, the Offered Securities to be purchased
by the Offeree in accordance with the foregoing provisions hereof, and the
Corporation shall promptly advise the Offeree of the number of the Offered
Securities to be purchased by the Offeree, whereupon the Corporation shall be
obliged to deliver to the Offeree at the time, date and place set out in the
Offer, certificates representing the Offered Securities registered in the
Offeree's name in a number equal to the number of the Offered
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Securities to be purchased by it against payment made in full in cash of the
aggregate consideration therefor. Unless otherwise agreed by them, the
members of the Founding Shareholder shall purchase the Offered Securities to
be purchased by them PRO RATA to their respective beneficial ownership of
Common Shares at the date of delivery of the Offer.
11.4 APPLICATION.
The provisions of this Article 11 shall apply only prior to an
Initial Public Offering and, except as provided in Sections 11.5, 11.6 and 11.7,
shall not apply in respect of any of the following:
(a) Offered Securities declared and/or paid by the Corporation as
dividends or distributions on its outstanding securities;
(b) Offered Securities of the Corporation issued as consideration for
the purchase by the Corporation of property (whether tangible or
intangible) in an arm's length transaction, provided that the
person to whom securities of the Corporation are so issued
executes and delivers to the Corporation a written acknowledgement
substantially in the form annexed hereto as Schedule "11.4";
(c) Offered Securities issued or granted by the Corporation in the
ordinary and normal course of business to any eligible person
pursuant to the Stock Option Plan (including the issuance of
Common Shares or other equity securities upon the exercise of
stock options issued thereunder) (including, in each case, the
issuance of Common Shares pursuant to the exercise of the
subscription options or commitments contemplated therein),
provided that such person, if not already a party hereto, executes
and delivers to the Corporation a written acknowledgement
substantially in the form annexed hereto as Schedule "11.4", as
amended to reflect the status of the subscriber as a Non-Employee
Director, Management Shareholder, Employee Shareholder or
Strategic Partner (subject to Section 1.13), as the case may be;
(d) Offered Securities issued to another Shareholder pursuant to the
exercise of their subscription right contemplated in Sections
11.1, 11.2, 11.5, 11.6 or 11.7;
(e) securities of the Corporation issued upon the exchange or
conversion of exchangeable or convertible securities of the
Corporation or upon the exercise of rights, options or warrants of
the Corporation (collectively, "Convertible Securities"), in each
case in respect of which the provisions of this Article 11 applied
at the time of the issuance of such Convertible Securities; and
(f) Offered Securities issued to a new Strategic Partner.
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11.5 SPECIAL PROVISIONS RELATING TO BMO'S PRE-EMPTIVE RIGHT.
BASIC PRE-EMPTIVE RIGHT
BMO shall have the benefit of the pre-emptive right contemplated
by Sections 11.1 and 11.2 (the "Basic Pre-emptive Right") (subject to the
provisions of Section 11.4) during the period commencing on the date hereof and
terminating on the earliest to occur of: (i) an Initial Public Offering; and
(ii) the date (in this Section 11.5, the "Termination Date") which is the later
of the BMO Secondary Anniversary and the termination of the BMO Continuing
Alliance. The Basic Pre-emptive Right shall apply notwithstanding any dilution
in the equity ownership interest in the Corporation maintained by BMO from time
to time.
AMENDED BASIC PRE-EMPTIVE RIGHT
From and after the Termination Date (but, for greater certainty,
only prior to an Initial Public Offering), BMO shall continue to benefit from
the provisions of Sections 11.1 and 11.2; however, such provisions shall, for
purposes of BMO's rights thereunder, be subject to the following amendments
(such amended subscription rights are hereby referred to as the "Amended Basic
Pre-emptive Right"):
(i) the right of BMO to subscribe for securities of the
Corporation shall be triggered only by the issuance of
equity shares of the Corporation (whether directly or
upon the conversion, exchange or exercise of Convertible
Securities constituting such equity shares) which would
result in a dilution of BMO's holdings of Common Shares
below 11.6% of the number of issued and outstanding
equity shares of the Corporation;
(ii) the number of Common Shares which BMO would be entitled
to purchase shall be such number of Common Shares not to
exceed that number which would result in BMO holding
11.6% of the total number of issued and outstanding
equity shares after the subject transaction is completed;
(iii) the Common Shares purchased by BMO pursuant to this
Section 11.5 shall be issued at the price per Common
Share (the "Designated Price") that the Common Shares are
issued or subscribed for pursuant to the subject
transaction (if applicable) unless the subject
transaction is the exchange, conversion or exercise of a
Convertible Security to which the provisions of Sections
11.1 and 11.2 hereof applied at the time of issuance
thereof; in which case the Designated Price shall be the
fair market value of the Common Shares at such time, as
determined by the Board of Directors acting reasonably;
(iv) the Amended Basic Pre-emptive Right shall apply with
respect to a Proposed Issuance contemplated by Section
11.1 notwithstanding the provisions of Sections 11.4(d),
(e) and (f) (however, for greater certainty, the Amended
Basic Pre-emptive Right shall not apply in the
circumstances contemplated by Sections 11.4(a), (b) and
(c)); and
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(v) the Amended Basic Pre-emptive Right shall terminate and
shall thereafter cease and be of no further effect if BMO
does not purchase the maximum number of Common Shares
purchasable by it so as to maintain a proportional
holding of 11.6% of the number of issued and outstanding
equity shares of the Corporation.
SUPPLEMENTAL SUBSCRIPTION RIGHT
During the term of the BMO Continuing Alliance (but prior to an
Initial Public Offering), without duplication of the Basic Pre-emptive Right or
the Amended Basic Pre-emptive Right, BMO shall have an additional right to
subscribe for Common Shares of the Corporation (the "Supplemental Subscription
Right"). The Supplemental Subscription Right shall apply so as to enable BMO to
maintain a holding of 11.6% of the then issued and outstanding equity shares of
the Corporation during the BMO Continuing Alliance (the Amended Basic
Pre-emptive Right has the same effect thereafter). Pursuant to the Supplemental
Subscription Right: (i) if the Corporation issues Offered Securities; and (ii)
if applicable, BMO subscribes for the maximum number of Offered Securities
available to it in accordance with the provisions of Sections 11.1 and 11.2; and
(iii) the result of such transaction(s) (if applicable, in conjunction with
other issuances pursuant to Sections 11.1, 11.2, 11.6 and 11.7) is that BMO's
relative shareholding is diluted below 11.6% of the number of issued and
outstanding equity shares of the Corporation, then BMO shall be entitled, by
delivery of written notice to the Corporation by no later than 15th business day
after notice of the issuance of the Offered Securities in question is delivered
by the Corporation to BMO, to acquire that number of Common Shares of the
Corporation which is sufficient to maintain BMO's relative shareholding at 11.6%
of the number of issued and outstanding equity shares of the Corporation for a
subscription price per share equal to the Designated Price.
BMO's Supplemental Subscription Right shall apply notwithstanding
the provisions of Sections 11.4(d), (e) and (f) but shall not apply in the
circumstances contemplated by Sections 11.4(a), (b) and (c).
BOARD REPRESENTATION PRE-EMPTIVE RIGHT
In addition to (but without duplication of) BMO's Basic
Pre-emptive Right, Amended Basic Pre-emptive Right and Supplemental Subscription
Right, if, at any time prior to an Initial Public Offering, as a result of any
issuance of equity shares by the Corporation (including pursuant to ANY of the
events that would otherwise be excluded by Section 11.4), BMO would cease to be
entitled to nominate a member of the Board of Directors in accordance with
Article 4 hereof (i.e., BMO would cease to hold at least 4% (or 3%, as the case
may be) of the issued and outstanding Common Shares), then BMO shall have the
right to subscribe (the "Board Representation Pre-emptive Right"), during such
reasonable period of time, not to exceed 30 days, thereafter as the Board of
Directors shall prescribe, for such number of Common Shares sufficient to enable
it to retain its right of nomination, at a price per Common Share equal to the
Designated Price.
The Board Representation Pre-emptive Right shall terminate and be
of no further effect if at any time BMO ceases to be entitled to nominate a
member of the Board of Directors
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in accordance with the provisions of Article 4 and fails to exercise its
Board Representation Pre-emptive Right so as to retain its board nominee.
EFFECT OF MERGERS AND SIMILAR TRANSACTIONS
BMO acknowledges and agrees that its rights under this Section
11.5, described under the headings "Amended Basic Pre-emptive Right" and
"Supplemental Subscription Right", shall terminate immediately upon the
completion of the merger of BMO and one or more entities which together result
in a person with more than 2 times the assets of BMO immediately prior to such
transaction, or series of transactions which effect such merger, provided
however, that such termination of rights shall not apply to, and shall not be
applicable in the context of, the merger of BMO as aforesaid with any bank
listed in Schedule I of the Bank Act as at August 2, 1999.
CALCULATING PERCENTAGE OWNERSHIP
For the purposes of determining BMO's subscription entitlement
from time to time pursuant to this Section 11.5, as described under the headings
"Amended Basic Pre-emptive Right" and "Supplemental Subscription Right", BMO's
percentage holding of equity shares of the Corporation (both before and after
the pre-emptive right is exercised) shall be calculated by excluding from the
issued and outstanding capital of the Corporation the aggregate number of Common
Shares previously issued in the circumstances contemplated by Sections 11.4(a),
11.4(b), and 11.4(c). For greater certainty, shares of the Corporation issued
pursuant to the Stock Option Plan shall not attract pre-emptive rights (other
than the Board Representation Pre-emptive Rights) and, for purposes of this
Article 11 only, such shares shall not be recognized for purposes of calculating
relative shareholding either before or after the transaction.
11.6 SPECIAL PROVISIONS RELATING TO BAC'S PRE-EMPTIVE RIGHT.
BASIC PRE-EMPTIVE RIGHT
BAC shall have the benefit of the Basic Pre-emptive Right
contemplated by Sections 11.1 and 11.2 at all times until the earliest of: (i)
an Initial Public Offering; and (ii) the date (the "BAC Termination Date") which
is the later of: (a) February 1, 2001; and (b) the termination of the Continuing
Alliance (as defined in the BAC Technology License Agreement - hereinafter
referred to as the "BAC Continuing Alliance"). BAC's Basic Pre-emptive Right
shall apply regardless of its relative ownership of shares of the Corporation.
AMENDED BASIC PRE-EMPTIVE RIGHT
From and after the BAC Termination Date but prior to an Initial
Public Offering, provided that BAC shall have purchased the BAC Option Shares
BAC shall, in lieu of its Basic Pre-emptive Right, have the benefit of an
Amended Basic Pre-emptive Right on the same terms and conditions as apply to BMO
pursuant to Section 11.5, MUTATIS MUTANDIS, except that the proportional holding
that BAC shall be entitled to maintain shall be only 8.5% of the issued and
outstanding equity shares of the Corporation.
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SUPPLEMENTAL SUBSCRIPTION RIGHT
During the term of the BAC Continuing Alliance (but prior to an
Initial Public Offering), provided that BAC shall have purchased the BAC Option
Shares, without duplication of the Basic Pre-emptive Right or the Amended Basic
Pre-emptive Right, BAC shall have a Supplemental Subscription Right on the same
terms and conditions as apply to BMO pursuant to Section 11.5, MUTATIS MUTANDIS,
except that BAC shall be entitled to maintain a holding of only 8.5% of the
issued and outstanding equity shares of the Corporation.
BOARD REPRESENTATION PRE-EMPTIVE RIGHT
In addition to (but without duplication of) BAC's Basic
Pre-emptive Right, Amended Basic Pre-emptive Right and Supplemental Subscription
Right, if, at any time prior to an Initial Public Offering, as a result of any
issuance of equity shares by the Corporation (including pursuant to ANY of the
events that would otherwise be excluded by Section 11.4), BAC would cease to be
entitled to nominate a member of the Board of Directors in accordance with
Article 4 hereof (i.e. BAC would cease to hold at least 4% (or 3%, as the case
may be) of the issued and outstanding Common Shares), then BAC shall have a
Board Representation Pre-emptive Right on the same terms and conditions as apply
to BMO pursuant to Section 11.5, MUTATIS MUTANDIS.
The Board Representation Pre-emptive Right shall terminate and be
of no further effect if at any time BAC ceases to be entitled to nominate a
member of the Board of Directors in accordance with the provisions of Article 4
and fails to exercise its Board Representation Pre-emptive Right so as to retain
its board nominee.
EFFECT OF MERGERS AND SIMILAR TRANSACTIONS
The provisions of Section 11.5 "Effect of Mergers and Similar
Transaction" shall apply to BAC MUTATIS MUTANDIS, without regard to the
exception relating to mergers with a bank listed in Schedule I of the Bank Act.
CALCULATING PERCENTAGE OWNERSHIP
For the purposes of determining BAC's subscription entitlement
from time to time pursuant to this Section 11.6, as described under the headings
"Amended Basic Pre-emptive Right" and "Supplemental Subscription Right", BAC's
percentage holding of equity shares of the Corporation (both before and after
the pre-emptive right is exercised) shall be calculated by excluding from the
issued and outstanding capital of the Corporation the aggregate number of Common
Shares previously issued in the circumstances contemplated by Sections 11.4(a),
11.4(b), and 11.4(c). For greater certainty, shares of the Corporation, issued
pursuant to the Stock Option Plan shall not attract pre-emptive rights (other
than the Board Representation Pre-emptive Rights) and, for purposes of this
Article 11 only, such shares shall not be recognized for purposes of calculating
relative shareholding either before or after the transaction.
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11.7 SPECIAL PROVISIONS RELATING TO THE FOUNDING SHAREHOLDER'S, CSTC'S
AND SONERA'S PRE-EMPTIVE RIGHTS
BASIC PRE-EMPTIVE RIGHT
Each of the Founding Shareholder, CSTC and Sonera shall be
entitled to an equivalent Basic Pre-emptive Right pursuant to the provisions of
Sections 11.1 and 11.2 hereof at all times prior to an Initial Public Offering
and regardless of the level to which their respective ownership of equity shares
of the Corporation has declined.
SUPPLEMENTAL SUBSCRIPTION RIGHT
At all times prior to an Initial Public Offering, each of the
Founding Shareholder, CSTC and Sonera shall have a Supplemental Subscription
Right on the terms and conditions applicable to the Supplemental Subscription
Right to which BMO is entitled pursuant to Section 11.5 hereof, MUTATIS
MUTANDIS; provided, however, that the respective relative ownership levels of
equity shares of the Corporation to which such Supplemental Subscription Rights
shall apply shall be as follows:
(i) the Founding Shareholder: 18.7%;
(ii) CSTC: 15%; and
(iii) Sonera: 15%.
BOARD REPRESENTATION PRE-EMPTIVE RIGHT
In addition to (but without duplication of) their respective Basic
Pre-emptive Right, Amended Basic Pre-emptive Right and Supplemental Subscription
Right, if, at any time prior to an Initial Public Offering, as a result of any
issuance of equity shares by the Corporation (including pursuant to ANY of the
events that would otherwise be excluded by Section 11.4), either CSTC or Sonera
would cease to be entitled to nominate a member of the Board of Directors in
accordance with Article 4 hereof, (i.e., CSTC or Sonera would cease to hold at
least 4% (or 3%, as the case may be) of the issued and outstanding Common
Shares) then such Shareholder shall have a Board Representation Pre-emptive
Right on the same terms and conditions as apply to BMO pursuant to Section 11.5,
MUTATIS MUTANDIS. For greater certainty, the Founding Shareholder does not have
a "Board Representation Pre-emptive Right" as it is entitled to nominate a
director until it no longer holds any Common Shares, as provided in
Section 1.17.
The Board Representation Pre-emptive Right shall terminate and be
of no further effect if at any time the particular Shareholder ceases to be
entitled to nominate a member of the Board of Directors in accordance with the
provisions of Article 4 and fails to exercise its Board Representation
Pre-emptive Right so as to retain its board nominee.
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EFFECT OF MERGERS AND SIMILAR TRANSACTIONS
The provisions of Section 11.5 "Effect of Mergers and Similar
Transaction" shall apply to the Founding Shareholder, Citicorp (with respect to
CSTC's pre-emptive rights) and Sonera, MUTATIS MUTANDIS; provided, however,
that: (i) such provision shall be read without reference to the exception
relating to mergers with a bank listed in Schedule I of the Bank Act; and (ii)
in the case of Citicorp/CSTC, the relevant merger threshold shall be calculated
with respect to the assets of Citigroup Inc.
CALCULATING PERCENTAGE OWNERSHIP
For the purposes of determining the Founding Shareholder's, CSTC's
and Sonera's subscription entitlement from time to time pursuant to this Section
11.7, as described under the headings "Amended Basic Pre-emptive Right" and
"Supplemental Subscription Right", the Founding Shareholder's, Citicorp's and
Sonera's percentage holding (directly or indirectly) of equity shares of the
Corporation (both before and after the pre-emptive right is exercised) shall be
calculated by excluding from the issued and outstanding capital of the
Corporation the aggregate number of Common Shares previously issued in the
circumstances contemplated by Sections 11.4(a), 11.4(b), and 11.4(c). For
greater certainty, shares of the Corporation, issued pursuant to the Stock
Option Plan shall not attract pre-emptive rights (other than the Board
Representation Pre-emptive Rights) and, for purposes of this Article 11 only,
such shares shall not be recognized for purposes of calculating relative
shareholding either before or after the transaction.
11.8 SUBSCRIPTION REPRESENTATIONS
The Corporation shall be entitled, in connection with any
subscription for securities of the Corporation pursuant to Article 11, to
require the subscribing Shareholder to provide to the Corporation, in
writing, customary and typical representations as to the subscribing
Shareholder acting as principal, its investment intent and such other matters
as may be required by applicable securities laws.
11.9 EFFECT OF SHARE SALES ON SPECIAL PRE-EMPTIVE RIGHTS
The references in Sections 11.5, 11.6 and 11.7 to the
numerically-specified relative shareholdings that each of BMO, BAC, CSTC,
Sonera and the Founding Shareholder are entitled to maintain pursuant to
their respective rights under the headings "Amended Basic Subscription
Rights" and "Supplemental Subscription Rights" (as applicable) shall be
deemed to be adjusted downward to the actual relative shareholding of any
such Shareholder in the event that such shareholder ever sells Common Shares,
such adjustment to be calculated immediately after the sale in question and
to apply perpetually thereafter.
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ARTICLE 12
CALL RIGHT CONCERNING MANAGEMENT,
NON-EMPLOYEE DIRECTORS AND EMPLOYEE SHAREHOLDERS
12.1 CALL RIGHT.
Prior to an Initial Public Offering, if a Management
Shareholder, a Non-Employee Director or an Employee Shareholder (in this
Section, the "Departing Employee") shall for any reason cease to be an
employee of, or consultant to the Corporation and/or its Affiliates, the
Corporation (in this Section 12.1 called the "Purchaser") shall at any time
thereafter be entitled to send a notice in writing to the Departing Employee
requiring the sale of all of the shares of the Corporation beneficially owned
by the Departing Employee and any member of his Immediate Family (in this
Section 12.1, the "Purchased Shares") and on receipt of such notice, the
Departing Employee and his Immediate Family (collectively, in this Section
12.1, the "Vendor") shall sell to the Purchaser and the Purchaser shall
purchase for cancellation from the Vendor the Purchased Shares, upon the
terms and conditions hereinafter set forth. If the Corporation shall be
prohibited pursuant to any contract or by Applicable Law (not entered into
with a view to affording the Founding Shareholder and the Strategic Partners
the right to exercise the Corporation's purchase rights pursuant to this
Section 12.1) to which it is a party or by which it is bound or pursuant to
the Act or Applicable Law from purchasing shares in its capital, or would
otherwise pursuant to such contractual arrangements be prohibited from
completing such transaction, the Founding Shareholder and the Strategic
Partners shall be entitled, but not obligated, to exercise the Corporation's
purchase rights pursuant to this Section 12.1 (and if more than one of such
Shareholders elect to participate they shall purchase on a basis pro rata to
their respective beneficial ownership of Common Shares as at the date of
delivery of such notice). The members of the Founding Shareholder shall
purchase the Purchased Shares to be purchased by them pro rata to their
respective beneficial ownership of Common Shares at the date of delivery of
the Second Offer. The Corporation or the purchasing Shareholder(s), as the
case may be, which is to purchase the Purchased Shares is referred to
hereafter as the "Purchaser".
12.2 CALCULATION OF PURCHASE PRICE.
For the purposes of any transaction of purchase and sale
contemplated by this Article 12, the purchase price for the Purchased Shares
shall be the fair market value thereof determined effective as at the Date of
Closing of the transaction in question by the Board of Directors in good
faith and in consultation with professional advisers taking into
consideration such factors such as goodwill, cash flow, book value and recent
or anticipated material changes in the affairs of the Corporation. The
parties hereto acknowledge that the Board of Directors shall initially
determine fair market value as being the greater of 1 times sales or 1.5
times book value and the parties hereto further acknowledge that such
determination by the Board of Directors shall, for the purposes of this
Agreement, be final and binding and no appeal shall lie therefrom.
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12.3 CLOSING.
The closing of the transaction of purchase and sale herein
contemplated shall take place at the Place of Closing at the Time of Closing
on the date (in this Article 12, the "Date of Closing") which is the later of
(i) the date which is 15 days after receipt by the Departing Employee of the
notice contemplated in Section 12.1; and (ii) the date which is 15 days after
the purchase price for the Purchased Shares is finally determined in
accordance with the provisions of this Article 12.
ARTICLE 13
FOUNDING SHAREHOLDER REGISTRATION RIGHTS
13.1 DEMAND REGISTRATION.
(a) At any time after the earlier of: (I) the day which is nine months
after an Initial Public Offering; and (II) June 1, 2004, the
Founding Shareholder may (notwithstanding the provisions of
Article 4 hereof) request in writing (a "Founding Shareholder
Registration Request") that the Corporation qualify a prospectus
for, or effect the registration of, all or a part of the
securities of the Corporation owned by such Shareholder(s) under
the securities laws of one or more of the Provinces of Canada
and/or the United States. Provided, however, that no Founding
Shareholder Registration Request may be delivered after the fourth
anniversary of the Corporation's Initial Public Offering.
Provided, further, that if the inclusion in such offering of
shares to be issued by the Corporation would result in such
offering being the Corporation's Initial Public Offering, then the
Corporation may include such number of shares in the offering as
is considered advisable by the Board of Directors and the priority
rules of Section 4(a) of Schedule "13.1" shall be applicable to
the offering. The Founding Shareholder may effect only two
Founding Shareholder Demand Registrations (exclusive of any such
Founding Shareholder Demand Registration which results in the
Corporation's Initial Public Offering).
(b) Upon receipt of a Founding Shareholder Registration Request, the
Corporation shall: (i) as soon as practicable, but in any event
within five business days after receipt of such request, give
written notice of such request to the Strategic Partners, the
Management Shareholders and the Non-Employee Directors; and (ii)
thereafter use all reasonable efforts to effect such qualification
or registration, including therein securities with respect to
which the Corporation has received written requests for inclusion
therein from such other Shareholders (pursuant to their Piggyback
Registration rights under Article 14) within 30 days after the
receipt of the Corporation's notice, all in accordance with and
subject to the provisions of Schedule "13.1". (All registrations
pursuant to this Section 13.1 are referred to herein as "Founding
Shareholder Demand Registrations".)
13.2 PIGGYBACK REGISTRATION.
Whenever the Corporation proposes (other than pursuant to a
Founding Shareholder Demand Registration) to effect a Company Registration,
the Corporation will, no
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later than five business days after the decision is made to proceed or
receipt of a Registration Request (as defined in Schedule "13.1") by another
holder of securities, give written notice to the Founding Shareholder of its
intention to effect such a registration, and such notice shall offer the
Founding Shareholder the opportunity to qualify or register (on the same
terms and conditions) such number of securities owned by such Shareholder(s),
as such Shareholder(s) may request (in this Article 13, a "Piggyback
Registration"). The Corporation will include in such Company Registration
securities with respect to which the Corporation has received a written
request for the inclusion therein from the Founding Shareholder within 30
days after the receipt of the Corporation's notice, all in accordance with
and subject to the provisions of Schedule "13.1".
Notwithstanding the foregoing, the obligations described in this
Section 13.2 shall not apply to a Company Registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms which may be
promulgated under U.S. Securities Laws (as defined in Schedule 13.1) in the
future, or a registration relating solely to a transaction covered by Rule 145
under the 1933 Act registered on Form S-4 or similar form which may be
promulgated in the future.
13.3 EXPIRY OF REGISTRATION RIGHTS.
Notwithstanding any of the foregoing provisions, the
Corporation shall not be required to effect a Founding Shareholder Demand
Registration or include in a Piggyback Registration securities which the
Founding Shareholder has requested be included therein: (I) if the request of
the Founding Shareholder is made at any time after the date which is four
years from the Corporation's Initial Public Offering; or (II) if: (i) such
securities have ceased to be "restricted securities" pursuant to Rule 144 of
the 1933 Act and have become freely tradable upon the expiration of any
otherwise applicable hold period under Canadian securities laws (or any
similar provision under applicable securities laws); and (ii) an offering of
such securities would not be deemed to constitute a "distribution" within the
meaning of clause (c) of Subsection 1(1) of the Securities Act (or equivalent
provisions of Canadian securities laws); and (iii) the Founding Shareholder
holds less than 5% of the issued and outstanding equity shares of the
Corporation at the date of the request.
13.4 SHORT-FORM PROSPECTUS REGISTRATIONS
In addition, the Founding Shareholder may request the registration
or qualification of its Common Shares or other equity shares of the Corporation
pursuant to a Short-Form Offering, as defined in and in accordance with and
subject to the terms of Section 3 of Schedule "13.1".
ARTICLE 14
REGISTRATION RIGHTS OF STRATEGIC PARTNERS, MANAGEMENT
SHAREHOLDERS AND NON-EMPLOYEE DIRECTORS
14.1 DEMAND REGISTRATION RIGHTS OF STRATEGIC PARTNERS
(a) Subject to the provisions of Article 15, at any time after the day
which is nine months after an Initial Public Offering, the
Strategic Partners, acting collectively as described below, may
(notwithstanding the provisions of Article 4 hereof)
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request in writing (a "Strategic Partner Registration Request")
the Corporation to qualify a prospectus for, or effect the
registration of, all or a part of the Common Shares or other
equity shares of the Corporation owned by such Shareholder(s)
(on a PRO RATA basis to those Strategic Partners who wish to
participate in such qualification or registration or on such
other proportional basis as such Strategic Partners may
otherwise agree) under the securities laws of one or more of
the provinces of Canada and/or of the United States. Subject
to the preceding sentence, the exercise of any such collective
demand registration rights (the "Strategic Partner Demand
Registration") shall be implemented, governed by and otherwise
subject to the direction of those members of such group of
Strategic Partners which collectively holds a majority of the
Common Shares owned by all Strategic Partners. Provided,
however, that no Strategic Partner Registration Request may be
delivered after the fourth anniversary of the Corporation's
Initial Public Offering. The Strategic Partners may effect
only two Strategic Partner Demand Registrations (exclusive of
their rights pursuant to Article 15 to cause an Initial Public
Offering).
(b) After the Initial Public Offering, any person which acquires from
the then existing Strategic Partners in a particular transaction
(or series of related transactions) at least 5% of the outstanding
Common Shares shall be entitled to participate in the group
Strategic Partner Demand Registration rights, the group Short Form
Offering Registration rights and the Piggyback Registration rights
contemplated by this Article 14 as if it were a Strategic Partner.
(c) Upon receipt of a Strategic Partner Registration Request, the
Corporation shall: (i) as soon as practicable, but in any event
within five business days after receipt of such request, give
written notice of such request to the Founding Shareholder, the
Management Shareholders and the Non-Employee Directors; and
(ii) thereafter use all reasonable efforts to effect such
qualification or registration, including therein securities with
respect to which the Corporation has received written request for
inclusion therein from such other Shareholders (pursuant to their
Piggyback Registration rights under Article 13 and Article 14
hereof) within 30 days after the receipt of the Corporation's
notice, all in accordance with and subject to the provisions of
Schedule "13.1". (All registrations pursuant to this Section 14.1
are referred to herein as "Strategic Partner Demand
Registrations").
14.2 PIGGYBACK REGISTRATION RIGHTS OF STRATEGIC PARTNERS, MANAGEMENT
SHAREHOLDERS AND NON-EMPLOYEE DIRECTORS
Whenever the Corporation proposes to effect a Company
Registration, the Corporation will, no later than five business days after
the decision is made to proceed or receipt of a Registration Request by
another holder of securities, give written notice to the Strategic Partners,
the Management Shareholders and the Non-Employee Directors of its intention
to effect such a registration, and such notice shall offer such Shareholders
(exclusive of the Strategic Partners where such Company Registration results
from a Strategic Partner Demand Registration) the opportunity to qualify or
register (on the same terms and conditions) all or part of their Common
Shares, subject to the provisions of this Article 14 and Schedule "13.1". The
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Corporation will include in such Company Registration securities with respect
to which the Corporation has received written requests for the inclusion
therein from such Shareholders (complying with the provisions of this Article
14) within 30 days after the receipt of the Corporation's notice, all in
accordance with and subject to the provisions of Schedule "13.1".
Notwithstanding the foregoing, the obligations described in
this Section 14.2 shall not apply to a Company Registration relating solely
to employee benefit plans on Form S-1 or Form S-8 or similar forms which may
be promulgated under U.S. Securities Laws (as defined in Schedule 13.1) in
the future, or a Registration relating solely to a transaction covered by
Rule 145 under the 1933 Act registered on Form S-4 or similar form which may
be promulgated in the future.
14.3 EXPIRY OF REGISTRATION RIGHTS.
Notwithstanding any of the foregoing provisions, the
Corporation shall not be required to include securities in a Demand
Registration or Piggyback Registration which a Strategic Partner, a
Management Shareholder or a Non-Employee Director has requested be included
therein: (I) if such request is made at any time after the day which four
years after the Corporation's Initial Public Offering; or (II) if: (i) such
securities have ceased to be "restricted securities" pursuant to Rule 144 of
the 1933 Act with respect to such Shareholder and have become freely tradable
upon the expiration of any otherwise applicable hold period under Canadian
securities laws (or any similar provision under applicable securities laws);
(ii) an offering of such securities would not be deemed to constitute a
"distribution" within the meaning of clause (c) of Subsection 1(1) of the
Securities Act (or equivalent provisions of Canadian securities laws); and
(iii) the Shareholder in question then holds less than 5% of the issued and
outstanding equity shares of the Corporation.
14.4 SHORT-FORM OFFERING REGISTRATIONS
In addition, the Strategic Partners, acting collectively as
contemplated in Section 14.1(a), may request the registration or
qualification of their Common Shares or other equity shares of the
Corporation pursuant to a Short-Form Offering as defined in and in accordance
with and subject to the terms of Section 3 of Schedule "13.1".
ARTICLE 15
EXIT OPTIONS
15.1 STRATEGIC PARTNERS' ABILITY TO CAUSE AN INITIAL PUBLIC OFFERING.
If an Initial Public Offering has not occurred by June 1, 2004,
then, provided that a written notice invoking this Section 15.1 addressed to
the Corporation and signed by such number of Strategic Partners as is
required to represent a majority of the issued and outstanding Common Shares
and other equity securities of the Corporation, is delivered to the
Corporation, the Strategic Partners, the Management Shareholders and the
Non-Employee Directors, then the Strategic Partners which shall have executed
such notice (the "Exiting Partners"), acting jointly and with mutual consent,
shall be entitled, on behalf of the Corporation, to enter into discussions
with one or more securities dealers of recognised standing in Canada and/or
the United States with a view to obtaining a written representation (in this
Article 15, a "Representation")
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addressed to such Exiting Partners and to the Corporation stating that such
securities dealer(s) is highly confident that it could at that time form and
lead a syndicate of underwriters to complete an Initial Public Offering which
would give rise to gross proceeds from the offering (inclusive of proceeds to
the Corporation and the Shareholders) in excess of US$20 million. For
greater certainty, the allocation of available investor demand in the
offering between the shares that the Corporation desires to issue and sell,
on the one hand, and the shares which the Shareholders entitled to Piggyback
Registration rights desire to sell, on the other hand, shall be determined in
accordance with the priority rules of Section 4(a) of Schedule "13.1". In
the event that such a Representation is obtained, then the Corporation will,
in co-operation with the Strategic Partners and the Founding Shareholder,
forthwith take all reasonable steps to implement and give effect to an
Initial Public Offering as contemplated by the Representation. In this
regard, the Strategic Partners shall form a steering committee to act as a
point of contact for the Corporation to facilitate the co-operative process
by which the Corporation will conduct itself in pursuing the Initial Public
Offering initiated by the Exiting Partners. Management of the Corporation
will be directed to ensure that such steering committee is consulted and kept
informed on a regular basis.
15.2 SOLICITATION OF OFFERS FOR ALL OUTSTANDING COMMON SHARES.
In the event that the Exiting Partners are unable to obtain a
Representation after having made such reasonable inquiries and having taken
such reasonable steps to obtain same in the United States and/or Canada, then
the Exiting Partners shall be permitted to solicit offers for the purchase of
all of the issued and outstanding Common Shares from third parties who are at
arm's length to the Strategic Partners and who are not, directly or
indirectly, Competitors (in this Article 15, a "Third Party"). However, if
the Exiting Partners together with any additional Strategic Partners (also
considered to be included as "Exiting Partners") deliver to the Corporation,
the Strategic Partners, the Management Shareholders and the Non-Employee
Directors a further written notice addressed to the Corporation invoking this
Section 15.2 and signed by such number of Strategic Partners which represent
66 2/3rd% of the issued and outstanding Common Shares and other equity
securities of the Corporation, then the Exiting Partners shall be entitled to
solicit offers from Third Parties that are Competitors (provided that such
third parties are at arm's length with the Strategic Partners).
If the Exiting Partners receive a bona fide written cash offer
(in this Article 15, the "Offer") from a Third Party to purchase all of the
outstanding Common Shares and other equity securities of the Corporation,
which the Exiting Partners wish to accept, the Exiting Partners shall deliver
written notice of the Offer, together with a true copy thereof, to the
Corporation and to each of the other Shareholders indicating that they wish
to accept the Offer (or in the event of Offers which the Exiting Partners do
not wish to accept, they shall only deliver notice and a copy of the Offer).
The Founding Shareholder and the Strategic Partner, if any, which shall have
disagreed with the proposed course of action by the Exiting Partners(s) shall
have 20 business days from the receipt of the notice from the Exiting
Partners to decide whether to sell all of their Common Shares and other
equity securities of the Corporation to the Third Party pursuant to the Offer
together with the Exiting Partners or to purchase all of the Common Shares
and other equity securities of the Corporation of the Exiting Partners for
the same price per share and otherwise on the same terms (as between the
Founding Shareholder and the Strategic Partner(s) which shall not be an
Exiting Partner, such purchases shall take place on a several basis PRO RATA
to their respective ownership of Common Shares and other equity
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securities of the Corporation). The Founding Shareholder and the non-Exiting
Strategic Partner(s) shall make their decision known by written notice to the
Strategic Partners and each of the other Shareholders and to the Corporation
delivered on or prior to the 20th business day following receipt of the
Exiting Partners' notice, failing which the Founding Shareholder and the
non-Exiting Strategic Partner(s) shall be deemed to have elected to sell to
the Third Party. If the Founding Shareholder together with the non-Exiting
Strategic Partner(s) elect or are deemed to have elected to sell to the Third
Party, then all Shareholders shall do all things necessary and sign such
documents as are required to cause the Offer to be accepted and to cause all
of the outstanding Common Shares and other equity securities of the
Corporation, to be sold to the Third Party in accordance with the terms of
the Offer (and to cause the acceleration of the vesting and expiry dates of
all outstanding Options pursuant to the Stock Option Plan so that the holders
thereof can and shall be compelled to tender to the Offer in the same
manner). If any Shareholder fails to tender his or her Common Shares and
other equity securities of the Corporation, they shall be deemed to have
irrevocably appointed the Chief Executive Officer of the Corporation as their
lawful attorney in accordance with the POWERS OF ATTORNEY ACT (Ontario) to
execute all such documents and to do all such things as may be necessary to
cause the Offer to be accepted and to complete such transaction.
If the Founding Shareholder and/or the non-Exiting Strategic
Partner(s) shall have elected to purchase the shares of the Exiting Partners,
then the Offer shall not be accepted and instead the Exiting Partners and
their respective Affiliates and Subsidiaries which are then Shareholders (in
this Article, collectively called the "Vendor") shall sell to the Founding
Shareholder together with, if applicable, the non-Exiting Strategic
Partner(s) (in this Article, collectively called the "Purchaser") and the
Purchaser shall purchase from the Vendor all of the Vendor's Common Shares
and other equity securities of the Corporation, (in this Article, the
"Purchased Shares") for the cash price per share set out in the Offer and
such transaction of purchase and sale shall take place at the Place of
Closing at the Time of Closing on the date (in this Article, the "Date of
Closing") which is 20 days following the delivery of the written notice by
the Purchaser electing to purchase the Vendor's shares. If both the Founding
Shareholder and one or more non-Exiting Strategic Partner(s) elect to
purchase Common Shares, the Exiting Partners shall sell to them on a several
basis in proportion to the Purchaser's relative holdings of Common Shares and
other equity securities of the Corporation.
15.3 STRATEGIC PARTNER OFFER TO FOUNDING SHAREHOLDER AND OTHER
STRATEGIC PARTNERS.
The provisions of this Section 15.3 shall apply prior to an
Initial Public Offering. In the event that a Strategic Partner wishes to sell
all, but not less than all, of its Common Shares (in this Section 15.3, the
"Exiting Strategic Partner"), it shall, by notice in writing (in this Section
15.3, the "Offer"), offer to sell such Common Shares (in this Section 15.3,
collectively the "Offered Shares"), to the Founding Shareholder and the other
Strategic Partners (in this Section 15.3, the "Offerees") at a specified price,
which must be paid in cash (in this Section 15.3, the "Offer Price"). The Offer
shall be open for acceptance by written notice (in this Section 15.3, the
"Notice") delivered to the Exiting Strategic Partner specifying a number of
Common Shares desired to be purchased (which number shall not exceed the number
of Common Shares which is equal to the product obtained when: (1) the number of
Common Shares to be sold by the Exiting Strategic Partner is multiplied by (2) a
fraction the numerator of which is the number of
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Common Shares held by the particular Offeree at the date of Offer and the
denominator of which is the aggregate number of Common Shares held by all of
the Offerees as at the date of the Offer) for a period of 15 business days
after receipt by the Offerees of the Offer (in this Section 15.3, the "Notice
Period"). In the event that, prior to the expiry of the Notice Period, no
Offeree specifies that it wishes to purchase any of the Exiting Strategic
Partner's Common Shares, the Exiting Strategic Partner shall not be permitted
to sell any of its Common Shares under this Section 15.3 pursuant to the
Offer. If the Offer is accepted by at least one of the Offerees on or before
the expiry of the Notice Period (in this Section 15.3, the "First
Purchaser(s)"), then the Exiting Strategic Partner shall, by notice in
writing (in this Section 15.3, the "Second Offer"), offer those Common
Shares which have not yet been accepted by the Offeree(s) under the Offer (in
this Section 15.3, the "Remaining Common Shares"), to the First Purchaser(s)
only, at the same Offer Price. The Second Offer shall be open for acceptance
by written notice (in this Section 15.3, the "Second Notice") delivered to
the Exiting Strategic Partner for a period of 15 business days after receipt
by the First Purchaser(s) of the Second Offer (in this Section 15.3, the
"Second Notice Period"). Notwithstanding anything herein to the contrary,
the terms and conditions of the Second Offer shall be amended so that any
Offeree may purchase more than its PRO RATA portion of the Remaining Common
Shares. If, under the Second Offer, an Offeree wishes to purchase more than
its PRO RATA portion of the Remaining Common Shares, it shall state, in its
acceptance of the Second Offer, the number of Remaining Common Shares it so
wishes to purchase. In the event that, on or before the expiry of the Second
Notice Period, the Offerees under the Second Offer specify that they wish to
purchase, in the aggregate, all or more than all of the Exiting Strategic
Partner's Remaining Common Shares (in this Section 15.3, the "Second
Purchaser(s)"), then each Second Purchaser shall purchase its PRO RATA
portion of the Remaining Common Shares (based on the number of Common Shares
owned by the Second Purchasers as at the date of the Offer). The purchase by
the Purchaser(s) and the Second Purchaser(s) of the Exiting Strategic
Partner's Common Shares shall take place at the Place of Closing at the Time
of Closing on the date (in this Section 15.3, the "Date of Closing") which is
20 days following the delivery of the later of the Notice or Second Notice,
if required, to the Exiting Strategic Partner. Notwithstanding the
foregoing, in the event that, on or before the expiry of the Second Notice
Period, the Offerees do not specify that they wish to purchase, in the
aggregate, all of the Exiting Strategic Partner's Common Shares, then the
Exiting Strategic Partner shall not be permitted to sell any of its Common
Shares under this Section 15.3. Each Strategic Partner may only initiate the
provisions of this Section 15.3 once in any period of six consecutive months.
15.4 TERMINATION OF EMPLOYMENT OF XXXX XXXXXXX
In the event that the Material Decision contemplated by Section
1.1(mm)(x) is implemented (or if Xxxx Xxxxxxx resigns from the office of
Chairman and Chief Executive Officer for health reasons or dies), then,
notwithstanding anything to the contrary in this Agreement, the Founding
Shareholder shall thereafter have the right, but not the obligation, to
pursue the marketing and sale of all or part of its shares of the Corporation
in accordance with the Right of First Offer Procedures contemplated in
Sections 8.2 and 8.3. The balance of Article 8 shall not apply. For example,
there shall be no restriction on the time before which such sales can occur,
and there shall be no "drag along rights" for the Founding Shareholder or
"tag along rights" for the benefit of the other Shareholders (pursuant to
Article 8 or Article 10).
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However, the Founding Shareholder shall be prohibited from selling any of such
Common Shares to a Competitor of BMO.
15.5 GENERAL RULES, RIGHTS AND OBLIGATIONS PERTAINING TO EXIT OPTIONS.
With respect to the ability of the Founding Shareholder to
solicit offers from time to time for all or a portion of the outstanding
Common Shares of the Corporation in accordance with Articles 8, 10 and 13
hereof, and for the purposes of the rights of the Founding Shareholder and
the Strategic Partners pursuant to this Article 15, each of the parties
hereto acknowledges and agrees and consents to the following arrangements:
(a) The soliciting Shareholder shall, provided that it acts in good
faith with a view to protecting the interests of the Corporation,
not be liable (and its agents and nominees similarly not liable)
for breach of duty of confidentiality or other rights in favour of
the Corporation or the other Shareholders as a result of such
solicitations, provided that appropriate confidentiality
undertakings and other reasonably prudent measures are put in
place.
(b) The Corporation shall provide reasonable assistance at its cost to
facilitate such solicitations, provided that appropriate
confidentiality undertakings and other reasonably prudent measures
are put in place. Such assistance by the Corporation shall
include the provision of information and documentation reasonably
necessary to obtain bona fide offers for the purchase of the
business of the Corporation as a going concern in a timely
fashion, which sale may be by way of all or substantially all of
the outstanding shares or sale of all or substantially all of the
property, assets and undertaking of the Corporation.
(c) With respect to the pursuit of an Initial Public Offering as a
result of the Founding Shareholder exercising its rights pursuant
to Article 13 or pursuant to the exercise of the rights of the
Strategic Partners under this Article 15, the Corporation and the
Shareholders shall act reasonably and in good faith with a view to
assisting the implementation and completion of such a transaction
and covenant and agree to enter into such undertakings, to deliver
such representations and to place such shares into regulatory or
contractual escrows as may be reasonably required in the
circumstances. Each of the Shareholders hereby constitutes and
appoints the Chief Executive Officer of the Corporation from time
to time as his lawful attorney in fact pursuant to the POWERS OF
ATTORNEY ACT (Ontario) in connection with the taking of such steps
and the signing of all applicable documentation. If,
notwithstanding the foregoing, an Initial Public Offering cannot
be implemented or proceeded with as a result of the refusal of one
or more Shareholders to agree, consent, perform a step or deliver
a document or otherwise or if any other impediment shall arise
with respect to the completion of such a transaction, the parties
hereto shall cause the Corporation to pursue, in a reasonable
manner, an alternative transaction pursuant to which all or
substantially all of the property, assets and undertaking of the
Corporation are distributed to a Subsidiary of the Corporation and
shares of such Subsidiary are qualified for distribution pursuant
to the Initial Public Offering.
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(d) In connection with any such exit options, all reasonable expenses
of or incidental to such transaction shall be borne by the
Corporation (provided that reasonable notification of significant
expenditures is given to the Corporation and its consent is
obtained) unless prohibited by Applicable Law, including the
policies and rules of securities regulators. Each of the parties
hereto covenants and agrees to act reasonably and in good faith
with a view to co-ordinating all activities in respect of exit
options with a view to minimising expenses, avoiding duplicate
effort and avoiding conflicting or inconsistent marketing and
business strategies.
ARTICLE 16
GENERAL SALE PROVISIONS
16.1 APPLICATION.
Except as may otherwise be provided in this Agreement, the
provisions of this Article 16 shall apply to any purchase for cancellation of
Common Shares or the purchase by any Shareholder of the shares of any other
Shareholder pursuant to the provisions of Articles 8, 9, 10, 12 or 15,
MUTATIS MUTANDIS.
Notwithstanding the foregoing:
(i) the provisions of Section 16.3(a) shall only apply to a
Strategic Partner selling all of its remaining shares of
the Corporation; and
(ii) the provisions of Section 16.3(d) and Section 16.3(f)
shall only apply to transactions pursuant to Article 9 or
Article 12.
16.2 DEFINED TERMS.
For the purpose of this Article 16, the terms "Vendor", "Date
of Closing" and "Purchased Shares" or similar phrases shall have the meanings
attributed thereto in Articles 8, 9, 10, 12 or 15 hereof, as the case may be,
and the term "Purchaser" shall mean the Corporation or the Shareholder(s) who
are purchasing the Purchased Shares, as the case may be.
16.3 CLOSING.
At the Time of Closing, the Vendor shall:
(a) if requested by the Corporation, deliver to the Corporation signed
resignations of the Vendor, its Principal and his nominees, if
any, as directors, officers and employees of the Corporation, as
the case may be;
(b) assign and transfer to the Purchaser the Purchased Shares being
purchased and shall deliver the required share certificate(s) duly
endorsed for transfer;
(c) do all other things required in order to deliver good and
marketable title to the Purchased Shares to the Purchaser free and
clear of any claims, liens and encumbrances whatsoever including,
without limitation, the delivery of any
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governmental releases and declarations of transmission.
Provided that if, at the Time of Closing, the Purchased Shares
are not free and clear of all claims, liens and encumbrances
whatsoever, the Purchaser may, without prejudice to any other
rights which it may have, purchase the Purchased Shares subject
to such claims, liens and encumbrances. In that event, the
Purchaser shall, at the Time of Closing, assume all obligations
and liabilities with respect to such claims, liens and
encumbrances and the purchase price payable by the Purchaser
for the Purchased Shares shall be satisfied, in whole or in
part, as the case may be, by such assumption;
(d) if all the shares of the Corporation held by the Vendor are being
sold, deliver to the Corporation and each of its directors a
release by each of the Vendor, its Principal, and his nominees, if
any, of all his claims against the Corporation and each of its
officers and directors with respect to any matter or thing up to
and including the Time of Closing which the Vendor, its Principal
or any such nominee knew or reasonably ought to have known as of
the Time of Closing in his capacity as a director, officer,
shareholder, employee or creditor of the Corporation or as a party
to this Agreement, as the case may be, except for (i) any claims
relating to indebtedness owing to or by the Corporation, (ii) any
claims for termination pay or damages in lieu of notice of
termination (unless otherwise specifically provided for in any
written employment or consulting agreement entered into by the
Vendor and the Corporation), (iii) any claims for accrued and
unpaid salary, expenses, pension or other employee benefits,
(iv) any claims relating to a written contract to which the
Corporation or any of its officers or directors and the Vendor are
parties which shall survive the sale of the shares of the
Corporation held by the Vendor, or (v) any claims which might
arise out of the transactions of purchase and sale herein
contemplated (provided, however, that the Vendor, its Principal
and their nominees shall continue to be entitled to the benefit of
Sections 4.3, 4.4 and 4.5 hereof, notwithstanding such sale of
shares);
(e) either provide the Purchaser with evidence reasonably satisfactory
to the Purchaser that the Vendor is not then a "non-resident" of
Canada within the meaning of the INCOME TAX ACT (Canada) or
provide the Purchaser with a certificate pursuant to Subsection
116(2) of the INCOME TAX ACT (Canada) with a certificate limit in
an amount not less than the purchase price for the Purchased
Shares; provided that if such evidence or certificate is not
forthcoming, the Purchaser shall be entitled to make the payment
of tax required under the INCOME TAX ACT (Canada) and to deduct
such payment from the purchase price for the Purchased Shares; and
(f) if all the shares of the Corporation held by the Vendor are being
sold, deliver to the other Shareholders, their Principals and
nominees, if any and the other parties hereto (other than the
Corporation) (collectively, the "Releasees") a release which shall
be executed and delivered by the Vendor and its Principal, and
each of his nominees, if any (collectively, the "Releasors") in
his capacity as a director, officer and shareholder of the
Corporation in respect of all of his claims against
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each Releasee in their capacity as a shareholder, director or
officer of the Corporation, which the Releasors knew or
reasonably ought to have known in their capacities as
aforesaid, except for any claims which might arise out of the
transaction of purchase and sale herein contemplated or any
claims concerning indebtedness or obligations owing to the
Vendor or its Principal or nominees pursuant to this Agreement
(including Section 16.4).
16.4 INDEMNITIES.
If all the shares of the Corporation held by the Vendor are being
sold and, at the Time of Closing, the Vendor, or any person for or on behalf of
the Vendor (inclusive of its Principals and nominees), shall have any
guarantees, securities or covenants lodged with any person to secure any
indebtedness, liability or obligation of the Corporation, and/or the other
Shareholder(s), their Principals and nominees, in connection with the
Corporation then the other Shareholder(s) and the Corporation shall use their
reasonable best efforts to deliver up or cause to be delivered up to the Vendor
or cancel or cause to be cancelled such guarantees, securities and covenants at
the Time of Closing. If, notwithstanding such reasonable best efforts, the
delivery up or cancellation of any such guarantee, security or covenant is not
obtained, the remaining Shareholder(s) (other than the Management Shareholders,
the Non-Employee Directors and the Employee Shareholders, and the members of
their Immediate Family who are then Shareholders) and the Corporation shall
deliver to the Vendor and, if applicable, to the person who shall have provided
such guarantee, security or covenant, an indemnity in writing, in form
reasonably satisfactory to counsel for the Vendor, indemnifying them against any
and all claims, demands, costs, expenses, damages, liabilities and suits, which
may be or which shall have been paid, suffered or incurred by them with respect
to the said guarantee, security or covenant.
16.5 REPAYMENT OF INDEBTEDNESS BY CORPORATION.
If all the shares of the Corporation held by the Vendor are being
sold and, at the Time of Closing, the Corporation is indebted to the Vendor in
an amount recorded on the books of the Corporation and verified by the
accountants of the Corporation, the Corporation shall, subject to any rights of
set-off, repay such amount to the Vendor at the Time of Closing.
16.6 REPAYMENT OF INDEBTEDNESS BY VENDOR.
If all the shares of the Corporation held by the Vendor are being
sold and, at the Time of Closing, the Vendor is indebted to the Corporation in
an amount recorded on the books of the Corporation and verified by the
accountants of the Corporation: (i) if the Corporation is the Purchaser, the
Corporation shall have the right to set-off such amount from the purchase price
for the Purchased Shares and from the amount of the indebtedness, if any, of the
Corporation to the Vendor, provided that if such indebtedness exceeds the
aggregate of the said purchase price for the Purchased Shares and the amount of
the indebtedness of the Corporation to the Vendor, the Vendor shall pay such
excess to the Corporation at the Time of Closing; and (ii) if one or more
Shareholder(s) is the Purchaser, the Vendor shall pay such indebtedness to the
Corporation at the Time of Closing.
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16.7 POWER OF ATTORNEY.
If, at the Time of Closing, the Vendor fails to complete the
subject transaction of purchase and sale, the Purchaser shall have the right, if
not in default under this Agreement, without prejudice to any other rights which
it may have, upon payment of the purchase price payable to the Vendor at the
Time of Closing (net of such amounts as may be payable to the Corporation
pursuant to this Article 16, in respect of which the Vendor irrevocably directs
the Purchaser to make payment to the Corporation) to the credit of the Vendor in
the main branch of the Corporation's bankers in the City of Toronto, to execute
and deliver, on behalf of and in the name of the Vendor, such deeds, transfers,
share certificates, resignations or other documents that may be necessary to
complete the subject transaction and the Vendor hereby irrevocably appoints the
Purchaser his attorney in that behalf in accordance with the POWERS OF ATTORNEY
ACT (Ontario). The parties hereto acknowledge and agree that such power of
attorney is a power coupled with an interest, given for consideration, and
cannot be revoked without the consent of the other parties hereto.
16.8 NO JOINT LIABILITY FOR PURCHASERS.
For greater certainty, the parties hereto, acknowledge and agree
that, where there is more than one Purchaser, the Purchasers in any transaction
of purchase and sale contemplated in this Agreement are not jointly liable for
the payment of the purchase price for the Purchased Shares and, if applicable,
any indebtedness being purchased hereunder, or for the covenants being given
hereunder to the Vendor (unless they themselves breached or acquiesced in the
breach) but are only liable for their proportionate share of the said purchase
price.
ARTICLE 17
RESTRICTIVE COVENANTS
17.1 MANAGEMENT, NON-EMPLOYEE DIRECTORS AND EMPLOYEE SHAREHOLDERS.
(a) Each Management Shareholder, Non-Employee Director and Employee
Shareholder and each Principal thereof shall not, while he or any
member of his Immediate Family (collectively, the "Departing
Shareholder") is a Shareholder of the Corporation or holds shares
of a Shareholder of the Corporation, as the case may be, directly
or indirectly, either individually or in partnership or in
conjunction in any way with any person or persons, whether as
principal, agent, consultant, shareholder, guarantor, creditor or
in any other manner whatsoever:
(i) solicit, interfere with or endeavour to entice away from
the Corporation or its Affiliates, accept any business
from or the patronage of or render any service to, sell
to or contract or attempt to contract with any person,
firm or corporation who was a client, customer or
supplier of the Corporation, its Affiliates or Associates
or a prospective client, customer or supplier of the
Corporation, its Affiliates or Associates with whom the
Corporation, its Affiliates or Associates have or have
had any dealing during the 12-month period immediately
preceding the date upon which the Departing Shareholder
ceases to be a Shareholder of the Corporation (to the
extent that such business, patronage, service, or
contract is competitive with the
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Business of the Corporation and its Subsidiaries or any
additional businesses from time to time carried on by
the Corporation and its Subsidiaries, collectively, a
"Competitive Business");
(ii) offer employment to or endeavour to entice away from the
Corporation or its Subsidiaries or Affiliates, any person
employed (or retained as a consultant) by the Corporation
or its Subsidiaries or Affiliates at the date of his
ceasing to be a Shareholder, or who was so employed or
retained at any time during the previous one-year period
or interfere in any way with the employment relationship
between any such employee (or consultant) and the
Corporation, its Affiliates or Subsidiaries; or
(iii) engage in, carry on or otherwise be concerned with or
have any interest in, or advise, lend money to, guarantee
the debts or obligations of, permit his name, or any part
thereof, to be used or employed by any person, firm,
association, syndicate or corporation engaged in or
concerned with or having any interest in a business (in
any form) competitive to the Business carried on in any
country where the Corporation and its Affiliates or
Subsidiaries have sold or licensed products or services
during the 12-month period immediately preceding the
Departing Shareholder ceasing to be a Shareholder of the
Corporation.
(b) The Shareholders have or will have specific knowledge of the
affairs of the Corporation, its Affiliates and Subsidiaries and
their business. Therefore, the Shareholders hereby acknowledge
and agree that all covenants, provisions and restrictions
contained in this Section 17.1 are reasonable and valid in the
circumstances of this Agreement, and all defences to the strict
enforcement thereof by the Corporation (and its Affiliates and
Subsidiaries, in respect of which the Corporation is contracting
herein as agent) are hereby waived.
If the provisions of this Section 17.1 are ever adjudicated to exceed the
limitations on time or geographic scope permitted by Applicable Law, then such
provisions shall be deemed reformed to the maximum time or geographic scope
permitted by Applicable Law. For greater certainty, this Section 17.1 shall not
be applicable to the Founding Shareholder, the Strategic Partners or their
respective Subsidiaries or Affiliates.
17.2 CONFIDENTIAL INFORMATION.
(a) The Shareholders and Principals acknowledge that in the course of
being, or associated with, a Shareholder, the Shareholders will
have access to and will be entrusted with Confidential
Information.
(b) The Shareholders and Principals acknowledge and agree that the
Confidential Information is the exclusive property of the
Corporation and its Affiliates and Subsidiaries. Except as may be
required as a Shareholder and subject to Applicable Law, and
except as permitted hereunder, each Shareholder and Principal
covenants and agrees that it will not disclose (directly or
indirectly), any of the Confidential Information to any person,
other than to its directors, officers,
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employees, agents or professional advisors that have a need to
know such information, nor shall the Shareholder or Principal
use or exploit (directly or indirectly), such information for
any purpose other than for the benefit of the Corporation, nor
will it disclose for any purpose other than for the benefit of
the Corporation the private affairs of the Corporation and its
Affiliates and Subsidiaries or any other information which it
may acquire during its tenure as a Shareholder with respect to
the business and affairs of the Corporation and its Affiliates
and Subsidiaries.
(c) Notwithstanding all of the foregoing, a Shareholder shall be
entitled to disclose such Confidential Information if such
disclosure is required pursuant to Applicable Law or pursuant to a
subpoena, order, recommendation or direction issued by a court,
arbitrator or any Governmental Authority (including OSFI),
provided that the Shareholder shall first have:
(i) properly notified the Corporation;
(ii) consulted with the Corporation, at the Corporation's sole
expense, on the advisability of taking steps to resist
such requirements; and
(iii) if the disclosure is required or deemed advisable,
co-operate with the Corporation, at the Corporation's
sole expense, in an attempt to obtain an order or other
assurance that such information will be accorded
confidential treatment.
(d) Nothing in this Section 17.2 or in Section 17.3 shall be construed
as limiting or impairing in any way any of the rights of the
Corporation and its Affiliates and Subsidiaries whether at law, in
equity or otherwise against the Shareholder with respect to the
disclosure, use or exploitation in any manner whatsoever to any
person or for any purpose, as the case may be, of any of the
Confidential Information. Provided that, for greater certainty,
the Shareholders shall be entitled to consult with their
professional advisors and agents for purposes of obtaining advice
with respect to the Corporation or for purposes of performing
duties to the Corporation provided that the disclosing Shareholder
directs such professional advisors or agents as the case may be to
hold such information in confidence and the Shareholder agrees to
indemnify the Corporation in the event of breach of confidence by
such persons.
(e) For greater certainty, nothing in this Section 17.2 or in Section
17.3 shall be construed as limiting or impairing in any way any of
the rights which may have been granted to the Strategic Partners
by the Corporation from time to time under a license or licenses
to use the software and operating systems developed by the
Corporation when such use is in accordance with the terms of such
license or licenses.
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17.3 NON-SOLICITATION OBLIGATION OF STRATEGIC PARTNERS AND THE FOUNDING
SHAREHOLDER.
Each Strategic Partner and the Founding Shareholder covenants and
agrees that, while it is a Shareholder and for the one year period immediately
following it ceasing to be a Shareholder, either directly or indirectly through
Affiliates or Subsidiaries, it shall not, directly or indirectly, either
individually or in partnership or in conjunction in any way with any person or
persons, whether as principal, agent, consultant, shareholder, guarantor,
creditor or in any other manner whatsoever offer employment to or endeavour to
entice away from the Corporation or its Subsidiaries or Affiliates, any person
employed (or retained as a consultant) by the Corporation or its Subsidiaries or
Affiliates as at the date of such Strategic Partner or Founding Shareholder
ceasing to be a Shareholder, or who was so employed or retained at any time
during the previous one-year period or interfere in any way with the
relationship between any such employee (or consultant) and the Corporation, its
Affiliates or Subsidiaries. Provided, however, that the provisions of this
Section 17.3 shall not apply to newspaper and other generally available or
disseminated recruiting activities conducted by a Strategic Partner or the
Founding Shareholder; provided that they do not expressly address or direct any
such recruiting activities at the employees or consultants of the Corporation
(or of the Subsidiaries or Affiliates thereof). The Strategic Partners and the
Founding Shareholder have or will have specific knowledge of the affairs of the
Corporation, its Affiliates and Subsidiaries and their business. Therefore,
such Shareholders hereby acknowledge and agree that all covenants, provisions
and restrictions contained in this Section 17.3 are reasonable and valid in the
circumstances of this Agreement, and all defences to the strict enforcement
thereof by the Corporation (and its Affiliates and Subsidiaries, in respect to
which the Corporation is contracting herein as agent) on the basis that such
covenants, provisions and restrictions are not reasonable or valid or otherwise
against public policy are hereby waived. Notwithstanding the foregoing, the
parties hereto covenant and agree that the restrictive covenants set forth in
this Section 17.3 apply only to the business group(s) within the affiliated
organization of each Strategic Partner that work directly with the Corporation,
and do not apply generally to any Strategic Partner, its Affiliates and
Subsidiaries and in the case of FTV, shall apply only to FTV and shall not apply
to its unitholders or to any entity in which FTV holds an equity investment.
17.4 ACKNOWLEDGEMENT OF REASONABLENESS.
The covenants in Sections 17.1, 17.2 and 17.3 are given by the
Shareholder and Principal acknowledging that the Corporation and its Affiliates
and Subsidiaries carry on, or will carry on, business initially throughout North
America, that he will have significant responsibilities in connection with the
Corporation and its Business and affairs, and that he either has or will have
specific knowledge of the private affairs and business of the Corporation and
its Affiliates and Subsidiaries. Therefore, the parties hereby agree that all
restrictions contained in Sections 17.1, 17.2 and 17.3 are reasonable, necessary
and fundamental to the protection of the Corporation, its Affiliates and
Subsidiaries and their businesses and that a breach by the Shareholder would
result in immediate and irreparable damages to the Corporation that could not
adequately be compensated for by monetary award. Accordingly, it is expressly
agreed by each Shareholder and its respective Principal, if any, that, in
addition to all other remedies available to it, the Corporation shall be
entitled to the immediate remedy of an interim, interlocutory and
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permanent injunction as well as an accounting of all profits arising out of
any breach by the Shareholder or the Principal or nominees thereof.
17.5 SURVIVAL.
The provisions of this Article 17 shall survive the termination of
this Agreement.
ARTICLE 18
GUARANTEE
18.1 GUARANTEE OF PRINCIPAL.
Each Principal hereby unconditionally guarantees that the
Shareholder of which he is the Principal will duly and punctually observe and
perform all of the covenants and obligations on its part to be observed and
performed pursuant to the provisions of this Agreement or pursuant to any
instrument or agreement delivered pursuant to or contemplated by this Agreement
and hereby undertakes and agrees to indemnify and save harmless the Corporation
and the other Shareholders and Principals from and against all liability, harm,
loss, costs, charges, damages and expenses of any nature whatsoever (including
legal fees on a solicitor and client basis) occasioned by any act or default of
the Shareholder of which he is the Principal contrary to such covenants and
obligations or which may be incurred, suffered or sustained by reason of any
failure to observe and perform all or any of such covenants and obligations.
18.2 NATURE OF GUARANTEE.
This guarantee shall be continuing, unconditional and
irrevocable and a fresh cause of action shall be deemed to arise in respect
of each such default. Without limiting the generality of the foregoing, the
obligations of each Principal hereunder shall not be released, discharged,
impaired or in any way affected by any extensions of time, indulgences or
modifications granted by any party in favour of another, to enforce any of
the terms or provisions of this Agreement (or by any amendment of the terms
of this Agreement) or by the bankruptcy, insolvency, dissolution,
amalgamation, winding-up or reorganization of the Corporation, or the
Shareholder of which he is the Principal or by any other act or proceeding in
relation to the Corporation, the Shareholder of which he is the Principal or
this Agreement whereby the Principal might otherwise be released or
exonerated, and each Principal hereby waives any right to require the
Shareholders and Principals to exercise or exhaust any action or recourse
against any other party before requiring performance by such Principal
pursuant to this guarantee.
18.3 GRANT OF EXTENSIONS, ETC.
The other parties hereto may grant extensions of time or other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Shareholder of which the Principal
is the Principal as they may see fit and may apply all monies received from
such Shareholder or others, or from securities, upon such part of the
Shareholder's liability as they may think best, without prejudice to or in
any way limiting or lessening the liability of the Principal in question
under this guarantee.
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18.4 NOT BOUND TO EXHAUST RECOURSES.
The other parties hereto shall not be bound to exhaust their
recourses against the Shareholder of which the Principal is the Principal or
the securities they may hold or to value such securities before requiring
payment or performance from the Principal in question.
ARTICLE 19
GENERAL CONTRACT PROVISIONS
19.1 SHARE CERTIFICATE LEGEND.
All share certificates of the Corporation shall have the
following legend endorsed thereon forthwith after the execution of this
Agreement and from time to time thereafter:
"The transfer of Common Shares represented by this
certificate is subject to a unanimous shareholders'
agreement dated October 26, 1999, as amended,
supplemented, restated, replaced or otherwise modified from
time to time, made between 724 Solutions Inc. and all of
its shareholders."
19.2 NOTICES.
All notices, requests, demands or other communications
(collectively, "Notices") by the terms hereof required or permitted to be
given by one party to any other party, or to any other person shall be given
in writing by personal delivery or by registered mail, postage prepaid, or by
facsimile transmission to such other party as follows:
(a) to the Founding Shareholder at:
c/o Blue Sky Capital Corporation
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx Xxxxxxx
Telecopier: (000) 000-0000
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(b) to BMO at:
Bank of Montreal
00 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxxxxxx
Chief Technology Officer
Telecopier: (000) 000-0000
with a copy to:
Bank of Montreal
Law Department
21st Floor
First Canadian Place
Toronto, Ontario
M5X 1A1
Attention: Vice-President, Law
Telecopier: (000) 000-0000
(c) to Bank of America at:
Bank of America
Interactive Banking Division Administration #10308
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Executive Vice President
Telecopier: (000) 000-0000
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with a copy to:
Bank of America
Office of the General Counsel
Bank of America Corporate Center
000 Xxxxx Xxxxx Xxxxxx
XX0-000-00-00
Xxxxxxxxx, Xxxxx Xxxxxxxx
00000
Attention: Xxxxxx X. Xxxxx, Associate General Counsel
Telecopier: (000) 000-0000
(d) to CSTC and Citicorp at:
Citicorp Strategic Technology Corporation
c/o Citicorp
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, X.X.
00000 X.X.X.
Attention: Xxxxxxx Xxxxxx and Xxxx Xxxxx
Telecopier: (000) 000-0000 and
(000) 000-0000
with a copy to:
Citigroup Inc.
Corporate Law Department
000 Xxxx Xxxxxx
Xxx Xxxx, X.X.
00000 X.X.X.
Attention: Xxxxxxx Xxxxx and Xxxxx Xxxxxx
Telecopier: (000) 000-0000
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(e) to Sonera at:
Sonera Corporation
P. O. Box 106, FIN-00051 Sonera
Xxxxxxxxxxxxxx 00
XXX-00000
Xxxxxxxx, Xxxxxxx
Attention: Xxxx Xxxxxxx
Telecopier: x000 (0) 0000 00000
(f) to WFC at:
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX
00xx Xxxxx
Xxx Xxxxxxxxx, XX
X.X.X. 00000
Attention: Xxxxxx Xxxxxxxxx
Telecopier: (000) 000-0000
(g) with a copy to WFC at:
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX
0xx Xxxxx
Xxx Xxxxxxxxx, XX
X.X.X. 00000
Attention: Xxxxxx Xxxxx
Telecopier: (000) 000-0000
(h) to FTV at:
Financial Technology Ventures, L.P.
Financial Technology Ventures (Q), L.P.
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx
X.X.X. 00000
Attention: Xxxxxxx Xxxxxx
Telecopier: (000) 000-0000
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(i) to HSBC at:
HSBC Investment Bank plc
Vinters Place
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxx
XX0X 0XX
Attention: Xxx Xxxxxxxxxx
Telecopier: 011 44 20 7 336 3344
with a copy to:
HSBC Securities (Canada) Inc.
Xxx 00, Xxxxx 0000
Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxx
Telecopier: (000) 000-0000
(j) to the Management Shareholders: at their respective addresses
listed in the records of the Corporation;
(k) to the Non-Employee Directors: at their respective addresses
listed in the records of the Corporation;
(l) to the Employee Shareholders: at their respective addresses
listed the records of the Corporation;
(m) to the Corporation at:
724 Solutions Inc.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxxxxxx Xxxxxxxx, President
Telecopier: (000) 000-0000
with a copy to:
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Xxxxxxx Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxx
Telecopier: (000) 000-0000
or at such other address as may be given by such person to the other parties
hereto in writing from time to time. If any party bound hereby or any
Permitted Transferee of shares hereunder shall not have given the parties
hereto notice setting forth an address for the giving of Notices, the Notice
for such person shall be deemed to have been properly given if given in
accordance with the terms hereof as if given to the transferor(s) of such
shares.
All such Notices shall be deemed to have been received when
delivered or transmitted (or, if not delivered or transmitted during regular
business hours in Toronto on a business day, then on the next succeeding
business day) or, if mailed, 72 hours after 12:01 a.m. on the day following
the day of the mailing thereof. If any Notice shall have been mailed and if
regular mail service shall be interrupted by strikes or other irregularities,
such Notice shall be deemed to have been received 72 hours after 12:01 a.m.
on the day following the resumption of normal mail service, provided that
during the period that regular mail service shall be interrupted, all Notices
shall be given by personal delivery or by facsimile transmission.
19.3 DEEMED ADEQUATE NOTICE.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any Notice to be given by one or more members of the
Founding Shareholder to the other Shareholders or the
Corporation shall be deemed to be properly given and binding if
the Notice is given on behalf of the members of the Founding
Shareholder by a duly appointed representative of the Founding
Shareholder. For greater certainty, it is acknowledged by all
parties to this Agreement that this mechanism is to facilitate
the giving of Notices and the members of the Founding
Shareholder are not jointly and severally liable for any
obligations incurred by other members of the Founding
Shareholder unless expressly provided by this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, any notice to be delivered to or consent to be
provided by the Employee Shareholders shall be satisfied by
delivery of notice to the Designated Representative (as
contemplated by the Stock Option Plan) or by the attaining of
the appropriate approval or consent or election from the
Designated Representative on behalf of such Employee
Shareholders (subject to the provisions of Section 4.7 hereof).
19.4 FURTHER ACTS.
The parties shall sign such further and other documents, cause
such meetings to be held, resolutions passed and by-laws enacted, exercise their
vote and influence, do and
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perform and cause to be done and performed such further and other acts and
things as may be necessary or desirable in order to give full effect to this
Agreement and every part hereof.
19.5 TIME.
Time shall be of the essence of this Agreement and of every
part hereof and no extension or variation of this Agreement shall operate as
a waiver of this provision.
19.6 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
parties with respect to all of the matters herein, amending and restating the
October 19, 1999 Unanimous Shareholders' Agreement, and its execution has not
been induced by, nor do any of the parties rely upon or regard as material,
any representations or writings whatever not incorporated herein and made a
part hereof and may not be amended or modified in any respect except as
contemplated by Section 1.13 hereof or otherwise with the written consent of
the parties hereto. The Schedules referred to herein are incorporated herein
by reference and form part of this Agreement.
19.7 COUNTERPARTS.
This Agreement may be signed in counterparts (and sent by fax)
and each of such counterparts shall constitute an original document and such
counterparts, taken together, shall constitute one and the same instrument
and, notwithstanding their respective dates of execution, shall be deemed to
be executed as of October 26, 1999.
19.8 ENUREMENT.
This Agreement shall enure to the benefit of and be binding
upon the parties and their respective heirs, executors, administrators,
successors, legal representatives and permitted assigns.
19.9 LANGUAGE.
The parties hereto have required that this Agreement and all
documents and notices related thereto and/or resulting therefrom be drawn up
in English. Les parties aux presentes ont exige que la presente convention
ainsi que tous les documents et avis qui s'y rattachent et/ou qui en
decouleront soient rediges en langue anglaise.
DATED as of the 26th day of October, 1999.
724 SOLUTIONS INC.
PER: /s/ Xxxxxxx Xxxxxxx
-----------------------------
BLUE SKY CAPITAL CORPORATION 119079 ONTARIO INC.
PER: /s/ Xxxxxxx Xxxxxxx PER: /s/ Xxxxxxx Xxxxxxx
------------------------------ --------------------------
PER: ______________________________ PER: __________________________
BANK OF MONTREAL BANK OF AMERICA CORPORATION
PER: [illegible] PER: [illegible]
------------------------------ --------------------------
PER: __________________________
CITICORP STRATEGIC CITICORP
TECHNOLOGY CORPORATION
PER: /s/ Xxxxxxx X. Xxxxxx PER: /s/ Xxxxxxx X. Xxxxxx
------------------------------ --------------------------
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
PER: ______________________________ PER: __________________________
SONERA CORPORATION WFC HOLDINGS CORPORATION
PER: [illegible] PER: [illegible]
------------------------------ ---------------------------
NAME:
TITLE:
PER: _____________________________
FINANCIAL TECHNOLOGY FINANCIAL TECHNOLOGY VENTURES, L.P.,
VENTURES (Q), L.P., A DELAWARE LIMITED PARTNERSHIP
A DELAWARE LIMITED PARTNERSHIP
BY: BY:
FINANCIAL TECHNOLOGY FINANCIAL TECHNOLOGY
MANAGEMENT, L.L.C., MANAGEMENT, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY A DELAWARE LIMITED LIABILITY COMPANY
BY: /s/ XXXXXX XXXXX BY: /s/ XXXXXX XXXXX
------------------------------ -----------------------------
NAME: XXXXXX XXXXX NAME: XXXXXX XXXXX
TITLE: MANAGING MEMBER TITLE: MANAGING MEMBER
HSBC INVESTMENT BANK PLC.
PER: [illegible]
-------------------------------
PER: _______________________________
SCHEDULE "1.1(f)"
DEFINITION OF ARM'S LENGTH
1. ARM'S LENGTH - For the purposes of this Agreement:
(a) "related persons" (as defined below) shall be deemed NOT to deal
with each other at arm's length; and
(b) it is a question of fact whether persons not related to each other
were at a particular time dealing with each other at arm's length.
2. DEFINITION OF "RELATED PERSONS" - For the purpose of this Schedule,
"related persons", or persons related to each other, are
(a) individuals connected by blood relationship, marriage or adoption;
(b) a corporation and
(i) a person who controls the corporation, if it is
"controlled" (as defined below) by one person,
(ii) a person who is a member of "related group" (as defined
below) that controls the corporation, or
(iii) any person related to a person described in
subparagraph (i) or (ii), and
(c) any two corporations
(i) if they are controlled by the same person or group of
persons,
(ii) if each of the corporations is controlled by one person
and the person who controls one of the corporations is
related to the person who controls the other corporation,
(iii) if one of the corporations is controlled by one person
and that person is related to any member of a related
group that controls the other corporation,
(iv) if one of the corporations is controlled by one person
and that person is related to each member of an unrelated
group that controls the other corporation,
(v) if any member of a related group that controls one of the
corporations is related to each member of an unrelated
group that controls the other corporation, or
(d) if each member of an unrelated group that controls one of the
corporations is related to at least one member of an unrelated
group that controls the other corporation.
- 2 -
3. CORPORATIONS RELATED THROUGH A THIRD CORPORATION - Where two corporations
are related to the same corporation, be deemed to be related to each
other
4. RELATION WHERE AMALGAMATION OR MERGER - Where there has been an
amalgamation or merger of two or more corporations and the new
corporation formed as a result of the amalgamation or merger and any
predecessor corporation would have been related immediately before the
amalgamation or merger if the new corporation were in existence at that
time, and if the persons who were the shareholders of the new corporation
immediately after the amalgamation or merger were the shareholders of the
new corporation at that time, the new corporation and any such
predecessor corporation shall be deemed to have been related persons.
5. AMALGAMATION OF RELATED CORPORATIONS - Where there has been an
amalgamation or merger of 2 or more corporations each of which was
related (otherwise than because of a right referred to in
paragraph (5)(b)) to each other immediately before the amalgamation or
merger, the new corporation formed as a result of the amalgamation or
merger and each of the predecessor corporation is deemed to have been
related to each other.
6. DEFINITIONS CONCERNING GROUPS - In this Schedule,
"RELATED GROUP" means a group of persons each member of which is related
to every other member of the group;
"UNRELATED GROUP" means a group of persons that is not a related group.
7. CONTROL BY RELATED GROUPS, OPTIONS, ETC. - For the purposes of this
Schedule,
(a) where a related group is in a position to control a corporation,
it shall be deemed to be a related group that controls the
corporation, whether or not it is part of a larger group by which
the corporation is in fact controlled;
(b) where at any time a person has a right under a contract, in equity
or otherwise, either immediately or in the future and either
absolutely or contingently:
(i) to, or to acquire, shares of the capital stock of a
corporation or to control the voting rights of such
shares, the person shall, except where the right is not
exercisable at that time because the exercise thereof is
contingent on the death, bankruptcy or permanent
disability of an individual, be deemed to have the same
position in relation to the control of the corporation as
if the person owned the shares at that time,
(ii) to cause a corporation to redeem, acquire or cancel any
shares of its capital stock owned by other shareholders
of the corporation, the person shall, except where the
right is not exercisable at that time because the
exercise thereof is contingent on the death, bankruptcy
or permanent disability of an individual, be deemed to
have the same position in relation to the control of the
corporation as if the shares were so redeemed, acquired
or cancelled by the corporation at that time,
- 3 -
(iii) to, or to acquire or control, voting rights in respect of
shares of the capital stock of a corporation, the person
is, except where the right is not exercisable at that
time because its exercise is contingent on the death,
bankruptcy or permanent disability of an individual,
deemed to have the same position in relation to the
control of the corporation as if the person could
exercise the voting rights at that time, or
(iv) to cause the reduction of voting rights in respect of
shares owned by other shareholders, of the capital stock
of a corporation, the person is, except where the right
is not exercisable at that time because its exercise is
contingent on the death, bankruptcy or permanent
disability of an individual, deemed to have the same
position in relation to the control of the corporation as
if the voting rights were so reduced at that time; and
(c) where a person owns shares in two or more corporations, the person
shall as shareholder of one of the corporations be deemed to be
related to himself, herself or itself as shareholder of each of
the other corporations.
8. BLOOD RELATIONSHIP, ETC. - For the purposes of this Schedule, persons are
connected by
(a) blood relationship if one is the child or other descendant of the
other or one is the brother or sister of the other;
(b) marriage if one is married to the other or to a person who is so
connected by blood relationship to the other; and
(c) adoption if one has been adopted, either legally or in fact, as
the child of the other or as the child of a person who is so
connected by blood relationship (otherwise than as a brother or
sister) to the other.
9. EXTENDED MEANING OF "CHILD" - In this Schedule, words referring to a
child of a person include:
(a) a person of whom the individual is the natural parent, whether the
person was born within or outside marriage;
(b) a person who is wholly dependent on the individual for support and
of whom the individual has, or immediately before the person
attained the age of 19 years had, in law or in fact, the custody
and control;
(c) a child of the individual's spouse;
(d) an adopted child of the individual; and
(e) a spouse of a child of the individual.
- 4 -
10. RELATIONSHIPS - In this Schedule, words referring to
(a) a parent of an individual include a person
(i) whose child the individual is,
(ii) whose child the individual had previously been, or
(iii) who is a parent of the individual's spouse;
(b) a brother of an individual includes a person who is
(i) the brother of the individual's spouse, or
(ii) the spouse of the individual's sister;
(c) a sister of an individual includes a person who is
(i) the sister of the individual's spouse, or
(ii) the spouse of the individual's brother;
(d) a grandparent of an individual includes a person who is
(i) the grandfather or grandmother of the individual's
spouse, or
(ii) the spouse of the individual's grandfather or
grandmother;
(e) an aunt or great-aunt of an individual includes the spouse of the
individual's uncle or great-uncle, as the case may be;
(f) an uncle or great-uncle of an individual includes the spouse of
the individual's aunt or great-aunt, as the case may be; and
(g) a niece or nephew of an individual includes the niece or nephew,
as the case may be, of the individual's spouse.
11. CONTROL IN FACT - For the purposes of this Schedule, where the expression
"controlled, directly or indirectly in any manner whatever," is used, a
corporation shall be considered to be so controlled by another
corporation, person or group of persons (in this Section referred to as
the "controller") at any time where, at that time, the controller has any
direct or indirect influence that, if exercised, would result in control
in fact of the corporation, except that, where the corporation and the
controller are dealing with each other at arm's length and the influence
is derived from a franchise, licence, lease, distribution, supply or
management agreement or other similar agreement or arrangement, the main
purpose of which is to govern the relationship between the corporation
and the controller regarding the manner in which a business carried on by
the corporation is to be conducted, the corporation shall not be
considered to be controlled,
- 5 -
directly or indirectly in any manner whatever, by the controller
by reason only of that agreement or arrangement.
12. EXCEPTION TO CONTROL IN FACT - For the purposes of this Schedule, where a
corporation (in this subsection referred to as the "controlled
corporation") would, but for this subsection, be regarded as having been
controlled or controlled, directly or indirectly in any manner whatever,
by a person or partnership (in this subsection referred to as the
"controller") at a particular time and it is established that
(a) there was in effect at the particular time an agreement or
arrangement enforceable according to the terms thereof, under
which, on the satisfaction of a condition or the happening of an
event that it is reasonable to expect will be satisfied or happen,
the controlled corporation will
(i) cease to be controlled, or controlled, directly or
indirectly in any manner whatever, as the case may be, by
the controller, and
(ii) be or become controlled, or controlled, directly or
indirectly in any manner whatever, as the case may be, by
a person or group of persons, with whom or with each of
the members of which, as the case may be, the controller
was at the particular time dealing at arm's length, and
(b) the purpose for which the controlled corporation was at the
particular time so controlled, or controlled, directly or
indirectly in any manner whatever, as the case may be, was the
safeguarding of rights or interests of the controller in respect
of:
(i) any indebtedness owing to the controller the whole or any
part of the principal amount of which was outstanding at
the particular time, or
(ii) any shares of the capital stock of the controlled
corporation that were owned by the controller at the
particular time and that were, under the agreement or
arrangement, to be redeemed by the controlled corporation
or purchased by the person or group of persons referred
to in subparagraph 12(a)(ii),
the controlled corporation is deemed not to have been controlled
by the controller at the particular time.
SCHEDULE "1.1(gg)"
SERIAL NO: W-1 WARRANT TO PURCHASE
333,334 COMMON SHARES
WARRANT TO PURCHASE 333,334 COMMON SHARES OF
724 SOLUTIONS INC.
AT U.S. $15.00 PER COMMON SHARE
THIS IS TO CERTIFY THAT, for value received, HSBC Investment Bank plc.
(the "Holder") is entitled to purchase from 724 Solutions Inc., a corporation
amalgamated under the laws of the Province of Ontario (the "Company"), at any
time or from time to time after the Commencement Date (as defined in the
Terms and Conditions attached hereto) and prior to 4:00 p.m. (Toronto time)
on the Expiry Date (as defined in such Terms and Conditions) at its offices
at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, Xxxxxx, X0X 0X0, 333,334
common shares in the capital of the Company ("Common Shares") at a purchase
price of U.S. $15.00 per Common Share, upon and in accordance with the Terms
and Conditions attached hereto.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed by
its duly authorized officer in that behalf as of the 26th day of October,
1999.
724 SOLUTIONS INC.
Per:___________________________________
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
NOTE: THIS SHARE PURCHASE WARRANT WILL BE VOID AND OF NO VALUE UNLESS
EXERCISED ON OR BEFORE THE EXPIRY DATE PROVIDED FOR IN PARAGRAPH 3.2 OF THE
TERMS AND CONDITIONS ATTACHED HERETO.
ARTICLE 1 - TERMS AND CONDITIONS
1.1 EXERCISE OF WARRANT
Subject to the provisions of Article 3 hereof, to exercise this Warrant
("Warrant"), the Holder shall deliver to the Company at its aforementioned
office:
(a) mthis Warrant;
(b) a written notice, in substantially the form of the subscription
notice attached as an exhibit hereto (the "Subscription Notice") of
the Holder's election to exercise this Warrant in whole;
(c) cash, a certified cheque, money order or wire payable to the Company
in the amount of the purchase price of the Common Shares so purchased;
and
(d) evidence reasonably satisfactory to the Company that the Warrant is
being exercised by the Holder.
The Company shall, as soon as practicable and in any event within 14
days thereafter, execute and deliver or cause to be delivered a certificate
representing the aggregate number of Common Shares specified in the
Subscription Notice. The share certificates so delivered shall be issued in
the name of the Holder or its affiliate, subject to the terms and provisions
of that certain amended and restated Shareholders' Agreement dated October
26, 1999 among 724 and its shareholders (the "U.S.A."). Such certificates
shall be deemed to have been issued and the Holder, or other person
designated, shall be deemed for all purposes to have become the holder of
record of the Common Shares as of the date of receipt by the Company of the
Subscription Notice and purchase price thereof. For greater certainty, any
person designated by the Holder to be the holder of record of the Common
Shares issued upon the exercise of rights of the Holder hereunder must be a
Permitted Transferee of the Holder (as such term is defined in the U.S.A.).
1.2 COMMON SHARES PURCHASABLE
The number of Common Shares purchasable under this Warrant shall be
333,334 Common Shares.
The Common Shares issued upon the exercise of this Warrant shall, upon
payment in full therefor being made, be validly issued as fully paid and
non-assessable.
1.3 NO PARTIAL EXERCISE
If the Holder elects to exercise this Warrant, the Holder must exercise
the Warrant in full by electing to purchase not less than 333,334 Common
Shares in accordance with these Terms and Conditions.
1.4 STOCK SPLITS
In the event of any subdivision, redivision or change of the Common
Shares of the Company into a greater number of Common Shares at any time
while this Warrant is outstanding, the Company shall thereafter deliver, at
the time of purchase of the Common Shares pursuant to the terms of the
Warrant, in lieu of the number of Common Shares in respect of
- 2 -
which the right to purchase is then being exercised, such greater number of
Common Shares of the Company as would result from said subdivision,
redivision or change had the right of purchase been exercised before such
subdivision, redivision or change.
1.5 STOCK CONSOLIDATIONS
In the event of any consolidation of the Common Shares of the Company
into a lesser number of Common Shares at any time while this Warrant is
outstanding, the Company shall thereafter deliver and the Holder shall
accept, at the time of purchase of the Common Shares pursuant to the terms of
the Warrant, in lieu of the number of Common Shares in respect of which the
right to purchase is then being exercised, such lesser number of Common
Shares of the Company as would result from such consolidation had the right
of purchase been exercised before such consolidation.
1.6 RECLASSIFICATIONS
In the event of any reclassification of the Common Shares of the Company
resulting from, but not being limited to, the payment of a stock dividend
other than dividends in the ordinary course, a capital reorganization or
amalgamation of the Company with another corporation, at any time while this
Warrant is outstanding, the Company shall thereafter deliver at the time of
purchase of Common Shares pursuant to the terms of the Warrant the number of
Common Shares of the Company or of the appropriate class or classes resulting
from such reclassification as the Holder would have been entitled to receive
in lieu of the number of Common Shares in respect of which the right of
purchase is then being exercised, such number and class of securities as
would have been issued to the Holder upon such reclassification had the right
of purchase been exercised before such reclassification.
1.7 PRICE ADJUSTMENT
(a) If an event occurs which would require an adjustment or
readjustment as prescribed in sections 1.4 to 1.6 (inclusive)
hereof, the purchase price per Common Share or per security of
another class shall be adjusted so that the total purchase price of
all shares or securities which may be purchased pursuant to this
Warrant would equal the total purchase price of the Common Shares
which have been purchased pursuant to this Warrant prior to the
occurrence of such event.
(b) All rights and readjustments prescribed in sections 1.4 to 1.6
(inclusive) hereof shall be cumulative.
ARTICLE 2 - MISCELLANEOUS PROVISIONS
2.1 TRANSFER
This Warrant may not be transferred, assigned or a security interest
granted therein. This Warrant may be exercised only by the named Holder on
the face page of the Warrant. Notwithstanding the foregoing, this Warrant may
be transferred to an affiliate of Holder to the extent and in the manner
permitted by the U.S.A.
- 3 -
2.2 REGULATORY REQUIREMENTS
If the exercise of, existence of, or any terms or conditions of this
Warrant would conflict with any applicable regulatory requirements pertaining
to any public offering of the Company's securities, (including a refusal of
the United States Securities and Exchange Commission, The Toronto Stock
Exchange or the NASDAQ to permit the timely completion of such public
offering or the listing of such securities) then the Holder agrees to work
with the Company and such regulator in good faith to resolve the concerns
raised, including, as and if required, by amending any terms or conditions of
this Warrant so as to permit such offering or listing to be completed on a
timely basis. Nothing in this section shall require the Holder to amend the
purchase price or the number of Common Shares purchasable under this Warrant.
The Company further agrees to use its best efforts to resolve any such
concerns with such regulator through means other than by amending the terms
or conditions of this Warrant.
ARTICLE 3 - TERM OF THE WARRANT
3.1 COMMENCEMENT OF EXERCISE RIGHTS
All rights of subscription under this Warrant shall apply only from and,
subject to Section 3.2 hereof, after the date on which a technology license
agreement or a letter of intent with respect thereto has been entered into,
upon mutually acceptable terms, between the Company and the Holder (or its
affiliate) pursuant to which the Holder (or its affiliate) will license, or
agree to license, the Company's banking and brokerage technology
applications. For greater certainty, neither the Company nor HSBC shall be
obligated to compromise its economic or other requirements concerning such
technology license agreement, notwithstanding that this Warrant may be "in
the money".
3.2 EXPIRY OF RIGHTS
Unless otherwise agreed to in writing by the Company pursuant to section
1.20 of the U.S.A., after 4:00 p.m. (Toronto time) on December 31,
1999 (the "Expiry Date") all rights under this Warrant shall wholly
cease and determine and this Warrant shall be wholly void and of no
value or effect.
ARTICLE 4 - GENERAL CONTRACT PROVISIONS
4.1 ENTIRE AGREEMENT
This Warrant and the subscription agreement entered into between the
Company and the Holder dated as of the date hereof pursuant to which the
Company issued this Warrant, contains the entire agreement between the Holder
and the Company with respect to the subject matter hereof and supersedes all
prior arrangements or understandings with respect thereto.
4.2 GOVERNING LAW
This Warrant shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
- 4 -
4.3 WAIVER AND AMENDMENT
Subject to the provisions of the U.S.A., any term or provision of this
Warrant may be waived at any time by the party entitled to the benefits
thereof and any term or provision of this Warrant may be amended or
supplemented at any time by agreement of the Holder and the Company, except
that any waiver of any term or condition, or any amendment or supplementation
of this Warrant, must be in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Warrant shall not, in any way,
affect or limit or act as a waiver of the parties' rights hereunder at any
time to enforce strict compliance thereafter with any term or condition of
this Warrant.
4.4 FILING OF WARRANT
A copy of this Warrant shall be filed in the minute book and among the
records of the Company.
4.5 LOSS, DESTRUCTION, ETC. OF WARRANT
Upon receipt of evidence satisfactory to the Company of loss, theft,
mutilation or destruction of this Warrant and, in the case of any such loss,
theft or destruction, upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company or, in the event of
such mutilation, upon surrender and cancellation of the Warrant, the Company
will make and deliver a new Warrant of like tenor in lieu of such lost,
stolen, mutilated or destroyed Warrant.
EXHIBIT
SUBSCRIPTION NOTICE
SHARE PURCHASE WARRANT
724 SOLUTIONS INC.
The undersigned holder of a Share Purchase Warrant issued by 724
Solutions Inc. (the "Company") dated as of October 26, 1999 (the "Warrant"),
hereby elects to purchase Common Shares of the Company (the "Purchased Common
Shares") at the subscription price and upon the terms and conditions provided
therein. The undersigned has returned the Warrant to the Company, and has
tendered cash, a certified cheque or a money order in the amount of
US$5,000,000.00 payable to the Company or wired such amount to the Company in
respect of the Purchased Common Shares and hereby instructs the Company to
issue the certificate representing the Common Shares in the name of the
undersigned at the address below.
DATED the ____________ day of ____________________________ 1999.
_______________________________________
(signature of holder)
_______________________________________
Name of Holder (please print)
Address
_______________________________________
_______________________________________
_______________________________________
SCHEDULE "4.9"
ARBITRATION PROCEDURES
----------------------
1.0 DISPUTES COVERED BY THESE RULES. The disputes to be covered by the
provisions of these Rules of Procedures (the "Rules") are those disputes
referred to in Section 4.9 of the Agreement to which this Schedule "4.9" is
attached and which arise out of or relate to or are in connection with any of
the formation, interpretation, application, operation, and enforcement of the
Agreement.
1.1 EXCLUSIVE JURISDICTION. Subject to the provisions of Section 1.4
(Governing Law) of the Agreement, it shall be a condition precedent to the
bringing of any legal proceedings with respect to any dispute arising out of,
or relating to, or in connection with, any of the formation, interpretation,
application, operation and enforcement of the Agreement and provided that the
settlement procedures set forth in Section 4.9 of the Agreement has been
pursued, that the settlement procedure provided for in these Rules shall have
been followed and completed.
1.2 APPOINTMENT OF ARBITRATION BOARD
(a) If any party to the Agreement (a "Party") wishes to have any matter
under this Agreement arbitrated in accordance with the provisions of
this Agreement, it shall give notice ("Arbitration Notice") to the
other Parties specifying particulars of the matter or matters in
dispute and proposing the name of its nominee.
(b) Arbitration shall be carried out by an Arbitration Board of three
persons. If the Parties agree in writing, the Arbitration Board may be
composed of a single arbitrator.
(c) Each side to the dispute being arbitrated in accordance with these
procedures, shall select an independent arbitrator as selected in
accordance with paragraph (d), and then each of the two arbitrators
shall select a third independent arbitrator. If the two arbitrators
cannot agree to a mutually acceptable third independent arbitrator,
who is willing to act, within 15 days of the giving of the Arbitration
Notice, either Party may request an Ontario court of competent
jurisdiction to do so. Any Party may request that such court, before
making such appointment, consult with the President of the Computer
Law Association as to the identity of suitable nominees as Arbitration
Board.
(d) No member of the Arbitration Board may be a director, officer, an
employee or shareholder of any Party or of any affiliate or associate of
such Party or any associate of any such director, officer, employee or
shareholder or any other person who has a direct financial interest in
such Party or in any associate or affiliate of such Party or of a
director, officer, employee, or shareholder of such Party or who has a
direct financial interest in the matter in dispute. The terms
"associate" and "affiliate" shall have the respective meanings ascribed
to such terms by the BUSINESS CORPORATIONS ACT (Ontario) on the date
hereof.
(e) Subject to Section 1.7, the expenses of the Arbitration Board shall be
borne equally by the Parties.
1.3 QUALIFICATIONS OF ARBITRATION BOARD. The Arbitration Board shall
consist of three individuals, one of which shall have not less than 10 years
experience as a licensed practising corporate or securities lawyer, and one
of which shall have not less than 10 years experience in or with investment
or merchant banking for the computer software industry. If the Arbitration
Board consists of only one person, as agreed by the Parties, then the sole
arbitrator shall have not less than 10 years experience in or with corporate
or securities law with significant exposure to the computer software industry
during the previous 5 years and must have acted as an arbitrator or mediator
within the previous 5 years. Without limiting the generality of the
foregoing, the Arbitration Board shall be at arm's length from both Parties
and no member of the Arbitration Board shall be a member of the audit or
legal firm or firms who advise either Party, nor shall he/she be a person who
is otherwise regularly retained by such Parties.
1.4 SUBMISSION OF WRITTEN STATEMENTS
(a) Within 20 days of the appointment of the Arbitration Board, the Party
initiating the arbitration (the "Claimant") shall send the other Parties
(collectively, the "Respondent") a Statement of Claim setting out in
sufficient detail the facts and any contentions of law on which it
relies, and the relief that it claims.
(b) Within 20 days of the receipt of the Statement of Claim, the Respondent
shall send the Claimant a Statement of Defence stating in sufficient
detail which of the facts and contentions of law in the Statement of
Claim it admits or denies, on what grounds, and on what other facts and
contentions of law he relies.
(c) Within 20 days of receipt of the Statement of Defence, the Claimant may
send the Respondent a Statement of Reply.
(d) All Statements of Claim, Defence and Reply shall be accompanied by
copies (or, if they are especially voluminous, lists) of all essential
documents on which the Party concerned relies and which have not
previously been submitted by any Party, and (where practicable) by any
relevant samples.
(e) After submission of all the Statements, the Arbitration Board will give
directions for the further conduct of the arbitration.
1.5 MEETINGS AND HEARINGS
(a) The arbitration shall take place in the Municipality of Metropolitan
Toronto, Ontario or in such other place as the Claimant and the
Respondent shall agree upon in writing. The arbitration shall be
conducted in English unless otherwise agreed by such Parties and the
Arbitration Board. Subject to any adjournments which the Arbitration
Board allows, the final hearing will be continued on successive working
days until it is concluded.
(b) All meetings and hearings will be in private unless the Parties
otherwise agree.
(c) Any Party may be represented at any meetings or hearings by legal
counsel.
(d) Each Party may examine, cross-examine and re-examine all witnesses at
the arbitration.
1.6 POWERS OF ARBITRATOR. By submitting a dispute to settlement under
these Rules, the Parties shall be taken to have conferred on the Arbitration
Board the following jurisdiction and powers, to be exercised by the
Arbitration Board so far as the relevant law allows, and in its absolute and
unfettered discretion, if the Arbitration Board shall judge it to be
expedient for the purpose of ensuring the just, expeditious, economical and
final determination of the dispute. The Arbitration Board shall have
jurisdiction to:
(a) determine any question of fact and law;
(b) determine any question as to its own jurisdiction;
(c) determine any question of good faith, dishonesty or fraud arising in the
dispute;
(d) order any Party to furnish such further details of the Party's case, in
fact or in law, as it may require;
(e) proceed notwithstanding the failure or refusal of any Party to comply
with these Rules or with its orders or directions, or to attend any
meeting or hearing, but only after giving that Party written notice that
it intends to do so;
(f) order the Parties to produce to the Arbitration Board, and to each
other for inspection, and to supply copies of, any documents in their
possession or power which it determines to be relevant.
Notwithstanding the foregoing, the Arbitration Board shall allow
discovery only to the extent of a single request for production of
documents; oral depositions or other discovery requests shall not be
permitted unless the Arbitration Board finds and informs the Parties
that denial of such requests would be manifestly unjust;
(g) receive and take into account such written or oral evidence as it shall
determine to be relevant, whether or not strictly admissible in law;
(h) hold meetings and hearings (at which the Parties may be represented by
legal counsel) and consider written and oral evidence and make his/her
award (including any interim award considered necessary by the
Arbitration Board, and the final award) in Ontario, and, with the
concurrence of the Parties thereto, elsewhere; and
(i) make any other interim or final orders which it considers to be
appropriate in all the circumstances for any of the above purposes.
In addition, the Arbitration Board shall have such further jurisdiction and
powers as may be allowed to it by the INTERNATIONAL COMMERCIAL ARBITRATIONS ACT
(Ontario), the Agreement, the specific submission referred to herein, the Rules
of the Institute and the arbitral laws of any place in which it holds hearings
or in which witnesses attend, and of any place in which it gives any directions
or makes any orders or any award.
1.7 THE AWARD. The Arbitration Board shall include in its award an order as
to the payment of the costs of the proceedings and reasonable counsel fees, and,
subject to the discretion of the Arbitration Board, costs will follow success
unless, in the opinion of the Arbitration Board, there
is a compelling reason to depart from such result. Any Party ordered to pay
costs may avail itself of any procedure for the taxing of costs, provided,
however, that the Parties specifically agreed that the officer taxing such
costs need not be bound by any statutory scale of costs.
The Arbitration Board will make its decision in writing and, unless the
Parties otherwise agree, the Arbitration Board's reasons will be set out in
the award. The Arbitration Board will send such award to the Parties as soon
as practicable after the conclusion of the proceedings. The award shall be
final and binding on the Parties and shall not be subject to any appeal or
review procedure whatsoever, provided that the Arbitration Board followed the
Rules in good faith. The Arbitration Board shall reconsider its findings
once at the request and expense of a Party, but in such event shall limit the
Parties to a single memorandum stating any relevant new evidence, points and
authorities, unless doing so would be manifestly unjust.
1.8 ACCESS TO COURTS FOR ENFORCEMENT AND INTERIM REMEDIES. The Parties
consent to the award of the Arbitration Board being entered in any Court
having jurisdiction for the purposes of enforcement. In addition, if it
appears to any Party that the Arbitration Board lacks the power to give
effective interim relief, such Party may apply to any appropriate Court for
such relief.
1.9 CONFIDENTIALITY. All meetings and hearings of or by the Arbitration
Board shall be in private. All matters in dispute, all claims, submissions,
evidence and findings, and the award itself (collectively, the "Information")
shall be kept confidential by the Arbitration Board, and no information
regarding any of the foregoing will be released to any third party or
otherwise made public without the written consent of the Parties, except as
otherwise contemplated herein and except for such information which is not
Confidential Information.
SCHEDULE "6.2"
ACKNOWLEDGEMENT OF ASSUMPTION OF OBLIGATIONS
--------------------------------------------
TO: 724 Solutions Inc. (the "Corporation")
AND TO: [LIST OF PERSONS BOUND BY SHAREHOLDERS' AGREEMENT] (the
"Parties")
RE: Unanimous Shareholders' Agreement dated as of October 26, 1999
(the "Shareholders' Agreement") concerning 724 Solutions Inc.
(the "Corporation")
WHEREAS pursuant to the terms of the Shareholders' Agreement
there can be no transfer of any of the shares of the Corporation except in
certain circumstances and unless the transferee of such shares first enters
into this Assumption Agreement;
AND WHEREAS [-] (the "Transferor") proposes to transfer [-]
shares of the Corporation (the "Shares") to [-] (the "Transferee");
AND WHEREAS the Transferee has agreed to observe and to be
bound by the terms of the Shareholders' Agreement so that the provisions
thereof will govern the rights and obligations among the Parties and the
parties hereto regarding the organization and affairs of the Corporation and
the sale of shares of the Corporation under certain circumstances and the
Transferor has agreed to guarantee the due performance by the Transferee of
all obligations imposed on the Transferor or Transferee pursuant to the
Shareholders' Agreement and to remain liable as principal debtor in respect
of all such obligations;
NOW THEREFORE for good and valuable consideration, the receipt
and sufficiency of which is hereby irrevocably acknowledged, the undersigned,
intending to be legally bound hereby, hereby covenants and agrees as follows:
1. The Transferee acknowledges that the foregoing recitals are
true and correct and acknowledges having received and reviewed a copy of the
Shareholders' Agreement.
2. The Transferee covenants and agrees to be bound by the terms of
the Shareholders' Agreement in the same manner as if the Transferee had been
an original party thereto and to the same extent as the Transferor.
3. The Transferee hereby represents and warrants that he is
purchasing the Shares as principal, for his own account and not as agent,
trustee or representative for any other person, except as may be disclosed in
Section 5 below.
4. If the Transferee is a corporation, the Transferee hereby
covenants, represents and warrants as follows:
(a) the Transferee is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation and is qualified to
do business and is in good standing in each jurisdiction in
which it carries on business;
(b) the Transferee has all necessary corporate power, authority and
approval to enter into this Assumption Agreement and to perform
its obligations hereunder;
(c) all necessary corporate action has been taken by the Transferee
to authorize the execution and delivery of this Assumption
Agreement and the performance of its obligations hereunder, and
this Assumption Agreement has been duly executed and delivered
by the Transferee and constitutes a legal, valid and binding
obligation of the Transferee enforceable against it in
accordance with its terms and the terms of the Shareholders'
Agreement; and
(d) neither the execution and delivery of this Assumption Agreement
by the Transferee, nor the performance of its obligations
hereunder, will conflict with or result in the violation,
contravention or breach of, or any default under, any of the
terms or provisions of the constating documents or by-laws of
the Transferee or of any agreement, obligation, contract,
commitment, law or regulation to which the Transferee is a
party or by which it is bound.
(e) (i) the shares and securities in its capital listed below
are the only issued and outstanding shares and
securities convertible into shares in its capital, all
of which are free and clear of all claims, liens and
encumbrances whatsoever (except as permitted by the
Shareholders' Agreement):
SECURITYHOLDER NUMBER AND CLASS OF
SHARES OR SECURITIES
CONVERTIBLE INTO SHARES
--------------------- -----------------------
- -
and
(ii) no person has any agreement or option or right capable of
becoming an agreement for the purchase of any such
outstanding shares or securities;
(f) the aforementioned shareholders or security holders are,
[EXCEPT AS INDICATED BELOW], the legal and beneficial owners of
the number and class of shares and/or securities indicated
opposite their respective names;
(g) no person has any agreement or option or right capable of
becoming an agreement for the purchase, subscription or
issuance of any of the unissued shares in its capital or any
securities convertible into shares in its capital;
(h) [NOT APPLICABLE TO THE FOUNDING SHAREHOLDER, OR THE STRATEGIC
PARTNERS] the Transferee is not a non-Canadian within the meaning
of the INVESTMENT CANADA ACT, S.C. 1985, c. 20, as amended; and
(i) each of the undersigned who are shareholders or security holders
of the Transferee acknowledges and agrees that he shall be bound
by the Shareholders' Agreement as if he had been an original
signatory thereto.
5. If the Transferee is a trust, the Transferee hereby represents
and warrants that the current trustees and vested beneficiaries of the
Transferee (the "Trust") are as follows:
(a) [-] [LIST OF TRUSTEES AND BENEFICIARIES];
(b) annexed hereto is a true copy of the Declaration of Trust
establishing the Trust and such document has not been amended or
superseded since the establishment of the Trust [EXCEPT AS
INDICATED BELOW]; and
(c) [NOT APPLICABLE TO THE FOUNDING SHAREHOLDER, OR THE STRATEGIC
PARTNERS] neither the Transferee nor each of the undersigned
other than the Transferee is a non-Canadian within the meaning
of the INVESTMENT CANADA ACT, S.C. 1985, c. 20 as amended.
6. In consideration of the transfer of the Shares, the Transferee hereby
irrevocably appoints [INSERT NAME OF TRANSFEROR OR, IF SUCH TRANSFEROR WAS NOT
AN ORIGINAL SIGNATORY OF THE SHAREHOLDERS' AGREEMENT, THEN INSERT NAME OF
FORMER HOLDER OF THE SHARES WHO WAS AN ORIGINAL SIGNATORY] (the "Attorney") its
attorney in accordance with the POWERS OF ATTORNEY ACT (Ontario), with full
power of substitution, to do certain acts and execute certain instruments as
hereinafter set out:
(a) to represent and vote all of the Shares now or hereafter
registered in its name on the books of the Corporation on any and
all matters in respect of which a holder of the Shares shall have
the right to vote and which may properly come before any annual
and/or special meetings of shareholders of the Corporation
including, without limitation, any meetings of the holders of a
class of shares in the capital of the Corporation, or any
adjournment of any such meeting, and for that purpose to sign and
execute proxies or other instruments in its name or on its behalf;
and
(b) in respect of the Shares, to consent in writing in its name and
on its behalf to all proposed shareholders' resolutions and
actions or any by-law of the Corporation to be passed by
consent in writing by the Shareholders of the Corporation,
whether or not in lieu of a meeting.
Such power of attorney is acknowledged to be a power coupled with an interest,
given for consideration and cannot be revoked without the consent of the
Attorney. The Transferee further irrevocably undertakes to ratify and confirm
all that the Attorney (or any substitute therefor) may do by virtue of this
power of attorney, provided that the Attorney (or substitute) acts within the
authority hereby conferred.
7. All notices, requests, demands or other communications
(collectively, "Notices") by the terms of the Shareholders' Agreement required
or permitted to be given by one party to any other shall be given to the
Transferee in accordance with the terms of the Shareholders' Agreement, at:
[NAME OF PARTY] at:
Telecopier Number:
8. Unless specifically defined herein or unless the context
otherwise requires, terms used herein which are defined in the Shareholders'
Agreement shall have the meanings ascribed to such terms in the Shareholders'
Agreement.
9. 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 and shall be binding upon the undersigned and their heirs, executors,
administrators, successors, permitted assigns and legal representatives. The
undersigned hereby submit to the exclusive jurisdiction of the Courts of the
Province of Ontario in connection with this Acknowledgement, on the terms set
out in Section 1.4 of the Shareholders' Agreement.
IN WITNESS WHEREOF the undersigned has duly executed this
Assumption Agreement [AS OF] the - day of -, 199-.
SIGNED, SEALED AND DELIVERED ) [SIGNATURE OF INDIVIDUAL TRANSFEREE, DULY
) AUTHORIZED OFFICER OF CORPORATE TRANSFEREE
in the presence of ) OR TRUSTEE(S) OF TRANSFEREE TRUST
)
________________________________ ) _________________________________________
(SIGNATURE OF WITNESS) )
)
)
) [SIGNATURES OF SHAREHOLDERS AND SECURITY
) HOLDERS OF CORPORATE TRANSFEREE
)
)
________________________________ ) _________________________________________
(NAME OF WITNESS) )
) [SEAL REQUIRED DUE TO POWER OF ATTORNEY]
- PLEASE PRINT) )
)
)
)
________________________________ ) _________________________________________
(ADDRESS OF WITNESS) )
)
SCHEDULE "11.4"
ACKNOWLEDGEMENT OF ASSUMPTION OF OBLIGATIONS
TO: 724 Solutions Inc. (the "Corporation")
AND TO: [LIST OF PERSONS BOUND BY SHAREHOLDERS' AGREEMENT] (the "Parties")
RE: Unanimous Shareholders' Agreement dated as of October 26, 1999
(the "Shareholders' Agreement") concerning 724 Solutions Inc. (the
"Corporation")
WHEREAS pursuant to the terms of the Shareholders' Agreement there
can be no issuance of any securities of the Corporation except in certain
circumstances and unless the person to whom securities are to be issued first
enters into this Assumption Agreement;
AND WHEREAS the Corporation proposes to issue [-] [SECURITIES] of
the Corporation (the "Securities") to [-] (the "New Shareholder");
AND WHEREAS the New Shareholder has agreed to observe and to be
bound by the terms of the Shareholders' Agreement so that the provisions thereof
will govern the rights and obligations among the Parties and the parties hereto
regarding the organization and affairs of the Corporation and the sale of
securities of the Corporation under certain circumstances;
NOW THEREFORE for good and valuable consideration, the receipt and
sufficiency of which is hereby irrevocably acknowledged, the undersigned,
intending to be legally bound hereby, hereby covenants and agrees as follows:
1. The New Shareholder acknowledges that the foregoing recitals are
true and correct and acknowledges having received and reviewed a copy of the
Shareholders' Agreement.
2. The New Shareholder covenants and agrees to be bound by the terms
of the Shareholders' Agreement in the same manner as if the New Shareholder had
been an original party thereto.
3. The New Shareholder hereby represents and warrants that he is
purchasing the Securities as principal, for his own account and not as agent,
trustee or representative for any other person, except as may be disclosed in
section 5 below.
4. If the New Shareholder is a corporation, and acknowledges that the
other parties to the Shareholders Agreement are and shall be entitled to
continue to rely upon such representations and warranties:
(a) the New Shareholder is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation and is qualified to do business and is in
good standing in each jurisdiction in which it carries on
business;
(b) the New Shareholder has all necessary corporate power, authority
and approval to enter into this Agreement and to perform its
obligations hereunder;
(c) all necessary corporate action has been taken by the New
Shareholder to authorize the execution and delivery of this
Assumption Agreement and the performance of its obligations
hereunder, and this Assumption Agreement has been duly executed
and delivered by the New Shareholder and constitutes a legal,
valid and binding obligation of the New Shareholder enforceable
against it in accordance with its terms and the terms of the
Shareholders' Agreement; and
(d) neither the execution and delivery of this Assumption Agreement by
the New Shareholder, nor the performance of its obligations
hereunder, will conflict with or result in the violation,
contravention or breach of, or any default under, any of the terms
or provisions of the constating documents or by laws of the New
Shareholders or of any agreement, obligation, contract,
commitment, law or regulation to which the New Shareholder is a
party or by which it is bound.
(e) (i) the shares and securities in its capital listed below are
the only issued and outstanding shares and securities
convertible into shares in its capital, all of which
are free and clear of all claims, liens and
encumbrances whatsoever (except as permitted by the
Shareholders' Agreement):
SECURITYHOLDER NUMBER AND CLASS OF
SHARES OR
SECURITIES
CONVERTIBLE INTO
SHARES
----------------------- ---------------------
- -
and
(ii) no person has any agreement or option or right capable of
becoming an agreement for the purchase of any such
outstanding shares or securities;
(f) the aforementioned shareholders or securityholders are, [EXCEPT AS
INDICATED BELOW], the legal and beneficial owners of the number
and class of shares and/or securities indicated opposite their
respective names;
(g) no person has any agreement or option or right capable of becoming
an agreement for the purchase, subscription or issuance of any of
the unissued shares in its capital or any securities convertible
into shares in its capital;
(h) [EXCEPT IN THE CASE OF THE FOUNDING SHAREHOLDER, AND THE STRATEGIC
PARTNERS] the New Shareholder is not a non-Canadian within the
meaning of the INVESTMENT CANADA ACT, S.C. 1985, c. 20, as
amended; and
(i) each of the undersigned who are shareholders or security holders
of the New Shareholder acknowledges and agrees that he shall be
bound by the Shareholders' Agreement as if he had been an original
signatory thereto.
5. If the New Shareholder is a trust, the New Shareholder hereby
represents and warrants that the current trustees and vested beneficiaries of
the New Shareholder (the "Trust") are as follows:
(a) [-] [LIST OF TRUSTEES AND BENEFICIARIES];
(b) annexed hereto is a true copy of the Declaration of Trust
establishing the Trust and such document has not been amended or
superseded since the establishment of the Trust [EXCEPT AS
INDICATED BELOW]; and
(c) [EXCEPT IN THE CASE OF THE FOUNDING SHAREHOLDER, AND THE STRATEGIC
PARTNERS] neither the New Shareholder nor each of the undersigned
other than the New Shareholder is a non-Canadian within the
meaning of the INVESTMENT CANADA ACT, S.C. 1985, c. 20 as amended.
6. All notices, requests, demands or other communications
(collectively, "Notices") by the terms of the Shareholders' Agreement required
or permitted to be given by one party to any other shall be given to the New
Shareholder, in accordance with the terms of the Shareholders Agreement, at:
[NAME OF PARTY] at:
Telecopier Number:
7. Unless specifically defined herein or unless the context otherwise
requires, terms used herein which are defined in the Shareholders' Agreement
shall have the meanings ascribed to such terms in the Shareholders' Agreement.
8. 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 and
shall be binding upon the undersigned and their heirs, executors,
administrators, successors, permitted assigns and legal representatives. The
undersigned hereby submit to the exclusive jurisdiction of the Courts of the
Province of Ontario in connection with this Acknowledgement, on the terms set
out in Section 1.4 of the Shareholders' Agreement.
IN WITNESS WHEREOF the undersigned has duly executed this
Assumption Agreement [AS OF] the [-] day of [-], 199-.
SIGNED, SEALED AND DELIVERED ) [SIGNATURE OF INDIVIDUAL TRANSFEREE, DULY
in the presence of ) AUTHORIZED OFFICER OF CORPORATE
) TRANSFEREE
) OR TRUSTEE(S) OF TRANSFEREE TRUST
------------------------------- ) ------------------------------------------
(SIGNATURE OF WITNESS) )
)
)
) [SIGNATURES OF SHAREHOLDERS AND SECURITY
) HOLDERS OF CORPORATE TRANSFEREE
)
)
)
------------------------------- ) ------------------------------------------
(NAME OF WITNESS) )
- PLEASE PRINT) ) [SEAL REQUIRED DUE TO POWER OF ATTORNEY]
)
)
)
)
------------------------------- )
(ADDRESS OF WITNESS) )
)
SCHEDULE "13.1"
REGISTRATION RIGHTS
1. DEFINITIONS
The following capitalised terms, when used in this Schedule, have
the respective meanings set forth below (such definitions to be equally
applicable to both singular and plural forms of the terms defined). Any upper
case terms not defined in this Schedule have the meanings given to such terms in
the Shareholders' Agreement.
"CANADIAN SECURITIES LAWS" means the securities laws, regulations
and rules of the provinces of Canada, the policy statements and companion
policies of or administered by the Canadian Securities Regulators, and
discretionary rulings or orders issued by the Canadian Securities Regulators
pursuant to such laws, regulations, rules and policy statements, all as amended
and in effect from time to time.
"CANADIAN SECURITIES REGULATORS" means the British Columbia
Securities Commission; the Alberta Securities Commission; the Saskatchewan
Securities Commission; the Manitoba Securities Commission; the Ontario
Securities Commission; the Commission des valeurs mobilieres du Quebec; the Nova
Scotia Securities Commission; the Director of Securities, Department of Justice,
Newfoundland; the Office of the Administrator, New Brunswick; the Registrar of
Securities, Xxxxxx Xxxxxx Island; and any other person performing similar
functions under Canadian Securities Laws.
"COMPANY REGISTRATION" has the meaning given to such term in
Section 1.1 of the Shareholders' Agreement.
"DEMAND REGISTRATION" has the meaning given to such term in
Section 1.1 of the Shareholders' Agreement.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as
amended from time to time.
"INITIATING PARTY(ies)" means the Founding Shareholder (in the
case of a Founding Shareholder Demand Registration) and the Strategic Partners
(in the case of a Strategic Partner Demand Registration).
"PIGGYBACK REGISTRATION" has the meaning given to such term in
Section 13.2 and includes a reference to the equivalent rights exercisable
pursuant to Section 14.2.
"REGISTER", "REGISTERED" and "REGISTRATION" means a registration
of Registrable Securities or qualification of a prospectus in respect of the
issuance or sale of Registrable Securities effected by preparing and filing a
Registration Statement in compliance with applicable Securities Laws and the
declaration or ordering of the effectiveness of such Registration Statement by
the appropriate Securities Regulators.
- 2 -
"REGISTRABLE SECURITIES" means any equity securities of the
Corporation.
"REGISTRATION EXPENSES" means any and all expenses incidental to a
Demand Registration or a Piggyback Registration, including without limitation:
(i) all registration and filing fees of the Securities Regulators, the National
Association of Securities Dealers, Inc. and other similar persons, (ii) all fees
and expenses incurred in connection with compliance with provincial and state
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with the "blue sky" qualification of any of the
Registrable Securities), (iii) all expenses incurred by the Corporation in
preparing, printing and distributing any Registration Statement, any prospectus,
any amendments or supplements thereto or other documents incorporated by
reference therein, and other documents relating to the Demand Registration or
Piggyback Registration, (iv) all fees and expenses incurred by the Corporation
in connection with the listing, if any, of the Registrable Securities on any
securities exchange or quotation system, (v) the fees and disbursements of
counsel for the Corporation and of the independent public accountants of the
Corporation, including the expenses of any special audits or "cold comfort"
letters required by or incidental to such performance and compliance, and
(vi) the fees and expenses of one United States and one Canadian counsel to the
Selling Holders; provided that underwriting discounts and selling commissions,
fees and expenses and any transfer taxes in respect of any Selling Holder's
Registrable Securities incurred in connection with any registration and sale of
Registrable Securities shall not be Registration Expenses.
"REGISTRATION REQUEST" means a written notice to the Corporation
requesting a Demand Registration.
"REGISTRATION STATEMENTS" means a registration statement of the
Corporation (i) on Form F-1 or any similar long-form registration ("Long-Form
Registrations"); or (ii) on Form F-2, F-3 or F-10 or any similar short-form
registration ("Short-Form Registrations") if the Corporation qualifies to use
such a short form and (unless the context otherwise requires and subject to
subparagraphs (i) to (iii) below) a prospectus of the Corporation prepared in
accordance with the Canadian Securities Laws, and all amendments and supplements
to such document (including post-effective amendments), in each case including
all exhibits thereto and all materials incorporated by reference therein, and
for the purposes of this Agreement: (i) filing a preliminary prospectus prepared
in accordance with the Canadian Securities Laws and obtaining a receipt therefor
from each of the applicable Canadian Securities Regulators shall be deemed to
constitute filing a Registration Statement under the Canadian Securities Laws;
(ii) filing a (final) prospectus prepared in accordance with the Canadian
Securities Laws and obtaining a receipt therefor from each of the applicable
Canadian Securities Regulators shall be deemed to constitute causing a
Registration Statement to be declared effective under the Canadian Securities
Laws; and (iii) amending or supplementing a prospectus to the extent required by
the Canadian Securities Laws during the period in which securities are being
distributed pursuant to such prospectus shall be deemed to constitute
maintaining the effectiveness of a Registration Statement under the Canadian
Securities Laws.
"SECURITIES ACT" means the UNITED STATES SECURITIES ACT OF 1933,
as amended from time to time.
"SECURITIES LAWS" means Canadian Securities Laws and/or U.S.
Securities Laws.
- 3 -
"SECURITIES REGULATORS" means any Canadian Securities Regulator
and/or U.S. Securities Regulator.
"SELLING HOLDERS" means each securityholder participating in a
Registration effected pursuant to Article 13 or Article 14 of the Unanimous
Shareholders' Agreement dated as of October 26, 1999 (the "Shareholders'
Agreement") concerning 724 Solutions Inc. (the "Corporation") such that all or
part of the Registrable Securities owned by the securityholder are included
among the securities offered by the Registration Statement.
"U.S. SECURITIES LAWS" means the Securities Act, the Exchange Act
and such other securities or blue sky laws of the states of the United States.
"U.S. SECURITIES REGULATOR" means the United States Securities and
Exchange Commission, and any other person performing similar functions under the
U.S. Securities Laws or under such other securities or blue sky laws of the
states of the United States that are applicable to an offering of Registrable
Securities hereunder.
2. RULES RELATING TO DEMAND REGISTRATION RIGHTS
Any request for a Demand Registration shall specify the number of
securities proposed to be sold by the Initiating Party(ies) and the intended
method of disposition thereof (i.e. registration only, "best efforts" or firm
underwriting). The Corporation shall not be obligated to effect a Demand
Registration in respect of less than such number of equity shares of the
Corporation as is equal to or greater than the lesser of: (I) 1,000,000 shares;
and (II) 25% of the equity shares of the Corporation then held by the Initiating
Party(ies).
Notwithstanding the initiation of a Demand Registration, if the
Corporation determines, after consultation with the proposed underwriters for
the offering, that the expected gross proceeds in the offering (inclusive of all
shares being sold in the offering by the Corporation and the Shareholders) is
less than $20,000,000 (the "Minimum Threshold"), the Corporation shall not be
obligated to effect such Demand Registration unless the Initiating Party(ies)
agree(s) to sell additional securities (to the extent that it retains any
securities of the Corporation) to make up the deficiency. For greater
certainty, if the Initiating Party(ies) are proposing to sell all of their
remaining securities of the Corporation, the Minimum Threshold requirement shall
not apply. In addition, for greater certainty, if a Demand Registration is not
implemented because the Minimum Threshold has not been met, the Initiating
Party(ies) shall be entitled to re-initiate such requested Demand Registration
at a later time in accordance with the provisions of this Schedule "13.1".
A Demand Registration may not require a shelf registration or a
shelf prospectus.
Notwithstanding anything to the contrary contained in this
Agreement, the Corporation shall not be obligated to effect a Founding
Shareholder Demand Registration if the Founding Shareholder had the opportunity
to utilize its Piggyback Registration rights within the immediately preceding
six month period and did not at that time exercise such rights by a request to
have included in such Piggyback Registration at least 100,000 equity shares of
the Corporation (it being acknowledged that as a result of the priority
allocation rules contained herein such request might not have been honoured in
full).
- 4 -
In addition, the Corporation shall not be obligated to effect
any Demand Registration if: (i) the Corporation has, within the nine month
period immediately preceding the delivery of the Registration Request,
already effected a Demand Registration; or (ii) in any particular
jurisdiction in which the Corporation would be required to qualify generally
to do business or to execute a general consent to service of process in
effecting such Registration, except to the extent required by Applicable Law
of Canada, the United States or a political subdivision thereof in connection
with the particular offering.
In addition, if the Corporation shall furnish to the Initiating
Party(ies), a certificate signed by the Chief Financial Officer of the
Corporation stating that, in the good faith judgment of the Board of
Directors of the Corporation, it would be seriously detrimental to the
Corporation and its shareholders for such Registration Statement to be filed
and it is therefore essential to defer the filing of such Registration
Statement, the Corporation shall have the right to defer taking action with
respect to such filing for a period of not more than 120 days after receipt
of the Registration Request of the Initiating Party(ies); provided, however,
that the Corporation may utilize this right only once in respect of a
Founding Shareholder Demand Registration and only once in respect of a
Strategic Partner Demand Registration.
In addition, the Corporation shall not be obligated to effect,
or to take any action to effect, any Demand Registration: (i) during the
period starting with the date 60 days prior to the Corporation's good faith
estimate of the date of filing of, and ending on a date 180 days after the
effective date of, a Company Registration; provided that the Corporation is
actively employing in good faith all reasonable efforts to cause such
Registration Statement to become effective; or (ii) if the Initiating
Party(ies) proposes to dispose of Common Shares or other equity shares that
may be distributed pursuant to a Short-Form Offering pursuant to a request
made pursuant to Section 3 below .
The Founding Shareholder's Demand Registration rights may be
assigned, subject to the provisions of Section 1.19 hereof and the following
provisions of this Section 2. Subject to the last sentence of this
paragraph, the Strategic Partner Demand Registration rights are meant to be
exercised, collectively, by all Strategic Partners from time to time and no
interest therein may accrue to the benefit of or be exercised by any Person
other than a Strategic Partner (or its Permitted Transferee). The Founding
Shareholder's Demand Registration rights may be so assigned, provided: (a)
the Corporation is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned; and (b) such transferee or assignee agrees in writing to be bound
by and subject to the terms and conditions of this Agreement. For greater
certainty, the provisions of Section 13.3 shall apply to any such assignee of
the Founding Shareholder Demand Registration rights. After the Initial Public
Offering, any person which acquires from the then existing Strategic Partners
in a particular transaction (or series of related transactions) at least 5%
of the outstanding Common Shares shall be entitled to participate in the
group Strategic Partner Demand Registration rights, the group Short Form
Offering Registration rights and the Piggyback Registration rights
contemplated by Article 14 as if it were a Strategic Partner.
The Founding Shareholder and the Strategic Partners hereby
agree that, during the period of duration specified by the underwriter(s) of
Common Shares or other securities of the
- 5 -
Corporation, following the effective date of a Company Registration filed
under applicable Canadian and/or U.S. securities laws, each of them shall
not, to the extent requested by such underwriter(s), directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any
short sale), grant any option to purchase or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any securities of the
Corporation held by it at any time during such period except Common Shares or
other equity shares included in such Registration; provided, however, that:
(i) such agreement shall be applicable only to the first two
such Underwritten Company Registrations; and
(ii) such agreement shall not apply unless the Corporation
and, if requested by the underwriter(s), all officers and
directors of the Corporation and all other persons with
Registration Rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(iii) except in connection with the Corporation's Initial
Public Offering, such agreement shall not provide for a
market stand-off time period which exceeds 180 days.
In order to enforce the foregoing covenant, the Corporation may
impose stop-transfer instructions with respect to the Common Shares and other
equity shares of the Founding Shareholder and the Strategic Partners until
the end of such period.
3. FORM X-0, X-0, XXXXX-XXXX F-10 AND SHORT-FORM PROSPECTUS REGISTRATIONS
With a view to making available to the Founding Shareholder and
the Strategic Partners acting collectively (each an "S-3 Seller") the
benefits of Rule 144 promulgated under the Securities Act and any other rule
or regulation of the U.S. Securities Regulator that may at any time permit an
S-3 Seller to sell securities of the Corporation to the public without
registration or pursuant to a registration on Form S-3, Form F-3, a
short-form prospectus using Form F-10 or other similar simplified offering
documents under the applicable U.S. Securities Law or the benefits of a
short-form prospectus or similar simplified offering document pursuant to the
National Policy No. 47 "Prompt Offering Prospectus System" applicable under
Canadian Securities Law (collectively, "Short-Form Offerings"), the
Corporation agrees to:
(a) make and keep public information available and current, as those
terms are understood and defined in Rule 144 promulgated under the
Securities Act, at all times after 90 days after the effective
date of the first Registration Statement filed by the Corporation
for the offering of its securities to the general public in the
United States;
(b) take such action, including the voluntary registration of its
Common Shares and/or other equity shares under Section 12 of the
Exchange Act, as is necessary to enable the S-3 Sellers to utilise
Short-Form Offerings for the sale of its Common Shares or other
equity shares, such action to be taken as soon as practicable
after the end of the fiscal year in which the first Registration
- 6 -
Statement filed by the Corporation for the offering of its
securities to the general public in the United States is declared
effective;
(c) file with the U.S. Securities Regulator in a timely manner all
reports and other documents required of the Corporation under the
Securities Act and the Exchange Act;
(d) furnish to any S-3 Seller, so long as it owns any Common Shares,
forthwith upon request: (i) a written statement by the Corporation
that it has complied with the reporting requirements of Rule 144
promulgated under the Securities Act (at any time after the day
which is 90 days after the effective date of the first
Registration Statement filed by the Corporation in the United
States), the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold
pursuant to a Short-Form Offering (at any time after it so
qualifies); (ii) a copy of the most recent annual or quarterly
report of the Corporation and such other reports and documents so
filed by the Corporation pursuant to the Exchange Act; and
(iii) such other information as may be reasonably requested in
availing any S-3 Seller of any rule or regulation of the U.S.
Securities Regulator or U.S. Securities Law which permits the
selling of any such securities without registration or pursuant to
such simplified Registration Statements; and
(e) file with the Canadian Securities Regulators an initial Annual
Information Form under the "Prompt Offering Prospectus System" (an
"AIF") and thereafter file renewal AIF's and all required
continuous disclosure and other documents required for the
Corporation to make use of the "Prompt Offering Qualification
System" as soon as it is otherwise eligible to do so (in which
case the provisions of this Section 3 shall apply MUTATIS
MUTANDIS.
In case the Corporation shall receive from an S-3 Seller a
proper written request or requests that the Corporation effect the
qualification of, or registration for, a Short Form Offering and any related
qualification or compliance with respect to all or a portion of the Common
Shares or other equity shares of the Corporation owned by the proposed S-3
Seller, the Corporation will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to the Founding Shareholder,
the Strategic Partners, the Management Shareholders and the
Non-Employee Directors; and
(b) as soon as practicable, effect such qualification or registration
and all such qualifications and compliance as may be so requested
and as would permit or facilitate the sale and distribution of all
or such portion of the proposed S-3 Seller's Common Shares or
other equity shares as are specified in such request, together
with all or such portion of the Common Shares or other equity
shares of any other Shareholder (excluding the Employee
Shareholders) joining in such request as are specified in a
written request given within 30 days after receipt of such written
notice from the Corporation; provided, however, that the
Corporation
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shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 3:
(1) if a Short Form Offering is not available for such
offering by the initiating S-3 Seller; (2) if the initiating S-3
Seller, together with the holders of any other equity securities
of the Corporation entitled to inclusion in such Registration,
proposes to sell Common Shares and such other equity securities
(if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $15,000,000
(3) if the Corporation shall furnish to the initiating S-3 Seller
a certificate signed by the Chief Financial Officer of the
Corporation stating that, in the good faith judgement of the Board
of Directors of the Corporation, it would be seriously detrimental
to the Corporation and its Shareholders for such Short-Form
Offering Registration to be effected at such time, in which event
the Corporation shall have the right to defer the filing of the
Short-Form Offering Registration Statement for a period of not
more than 60 days after receipt of the request of the initiating
S-3 Seller; provided, however, that the Corporation shall not
utilize this right more than once in any 12 month period; (4) if
the Corporation has, within the 180 day period immediately
preceding the request of the initiating S-3 Seller, caused a
Registration Statement (for greater certainty including a
Short-Form Offering) to be made effective; (5) in any particular
jurisdiction in which the Corporation would be required to qualify
to do business or to execute a general consent to service of
process in effecting such registration, qualification or
compliance except to the extent required by Applicable Law of
Canada, the United States or a political subdivision thereof in
connection with the particular offering; or (6) pursuant to a
shelf registration; or (7):
(i) if the request of the S-3 Seller is made at any time
after the date which is four years from the Corporation's
Initial Public Offering; or
(ii) if: (I) such securities have ceased to be "restricted
securities" pursuant to Rule 144 promulgated under the
Securities Act and have become freely tradable upon the
expiration of any otherwise applicable hold period under
Canadian securities laws (or any similar provision under
applicable securities laws); and (II) an offering of such
securities would not be deemed to constitute a
"distribution" within the meaning of clause (c) of
Subsection 1(1) of the Securities Act (or equivalent
provisions of Canadian securities laws); and (III) the
S-3 Seller holds less than 5% of the issued and
outstanding equity shares of the Corporation at the date
of the request.
(c) Subject to the foregoing, the Corporation shall file a
Registration Statement covering the Common Shares and other equity
securities of the Corporation so requested as soon as practicable
after receipt of the request of the initiating S-3 Seller. All
Registration Expenses incurred in connection with a registration
requested pursuant to this Section 3, including (without
limitation) all registration, filing, qualification, printer's and
accounting fees and the reasonable fees and disbursements of one
United States and one Canadian counsel for the initiating S-3
Seller or other selling Shareholder(s) in addition to counsel
for the
- 8 -
Corporation, but excluding any underwriters' discounts or
commissions associated with such disposition of Common Shares
and other equity securities, shall be paid by the Corporation.
The balance of the provisions of this Schedule "13.1" shall
apply, MUTATIS MUTANDIS, to such Short Form Offerings.
4. PRIORITIES RELATING TO REGISTRATION RIGHTS
(a) If a Piggyback Registration is an underwritten primary
registration on behalf of the Corporation, or if the offering in
question is the Corporation's Initial Public Offering, and the
managing underwriter advises the Corporation in writing that, in
its opinion, the number of Registrable Securities requested to be
included in such Piggyback Registration exceeds the number which
can be sold in such offering without adversely affecting the price
of the Registrable Securities to be sold, then the Corporation
shall include in such offering: (i) first, the securities the
Corporation proposes to sell; (ii) second, the Registrable
Securities requested to be included in such Piggyback Registration
by the Founding Shareholder, the Strategic Partners, the
Management Shareholders and the Non-Employee Directors, provided
that, if the managing underwriter in good faith determines that a
lower number of Registrable Securities should be included, then
the Corporation shall be required to include in such Piggyback
Registration only that lower number of Registrable Securities, and
the Founding Shareholder, the Strategic Partners, the Management
Shareholders and the Non-Employee Directors shall participate in
the Piggyback Registration pro rata based upon the number of
Registrable Securities requested by them to be included in such
Piggyback Registration, except to the extent any of them may agree
to a lower priority; and (iii) third, other securities of the
Corporation requested to be included in such Piggyback
Registration.
(b) If a Demand Registration is an underwritten offering and the
managing underwriter advises the Corporation in writing that, in
its opinion, the number of Registrable Securities requested to be
included in such Demand Registration exceeds the number which can
be sold in such offering without adversely affecting the price of
the Registrable Securities to be sold, then the Corporation shall
include in such offering: (i) first, the Registrable Securities
requested to be included in such offering by the Founding
Shareholder, the Strategic Partners, the Management Shareholders
and the Non-Employee Directors (whether pursuant to their Demand
Registration rights or their Piggyback Registration rights),
provided that, if the managing underwriter in good faith
determines that a lower number of Registrable Securities should be
included, then the Corporation shall be required to include in
such Demand Registration only that lower number of Registrable
Securities, and the Founding Shareholder, the Strategic Partners,
the Management Shareholders and the Non-Employee Directors shall
participate in the Demand Registration pro rata based upon the
number of Registrable Securities requested by them to be included
in such Demand Registration, except to the extent any of them may
agree to a lower priority; (ii) second, the securities the
Corporation
- 9 -
proposes to sell; and (iii) third, other securities of
the Corporation requested to be included in such Demand
Registration.
(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Corporation's securities
(other than the Founding Shareholder under Section 13.2 or the
Strategic Partners under Section 14.2) and the managing
underwriter advises the Corporation in writing that, in its
opinion, the number of Registrable Securities requested to be
included in such offering exceeds the number which can be sold in
such offering without adversely affecting the price of the
Registrable Securities to be sold, then the Corporation shall
include in such offering: (i) first, the securities proposed to be
sold by the sellers on whose behalf the offering was initiated;
second, the Registrable Securities requested to be included in
such offering by the Founding Shareholder, the Strategic Partners,
the Management Shareholders and the Non-Employee Directors,
provided that, if the managing underwriter, in good faith,
determines that a lower number of Registrable Securities should be
included, then the Corporation shall be required to include in
such Piggyback Registration only that lower number of Registrable
Securities, and the Founding Shareholder, the Strategic Partners,
the Management Shareholders and the Non-Employee Directors shall
participate in the Piggyback Registration pro rata based upon the
number of Registrable Securities requested by them to be included
in such Piggyback Registration, except to the extent any of them
may agree to a lower priority; (iii) third, the securities the
Corporation proposes to sell; and (iv) fourth, other securities of
the Corporation requested to be included in such Piggyback
Registration.
5. GENERAL PROVISIONS RELATING TO REGISTRATION RIGHTS
Each Selling Holder shall furnish the Corporation such information
regarding such Selling Holder and the distribution of its Registrable Securities
as the Corporation may from time to time reasonably request in writing in
connection with the Registration Statement.
A Selling Holder may only participate in any underwritten
registration hereunder if such Selling Holder: (i) agrees to sell such Selling
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the person or persons entitled hereunder to approve
such arrangements; and (ii) complete and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, escrow agreements and other
documents reasonably required and which are acceptable to such Selling Holder
acting reasonably and in good faith under the terms of such underwriting
arrangements and consistent with the provisions of this Schedule.
All Registration Expenses will be borne by the Corporation;
provided, however, that the Corporation shall not be required to pay for any
expenses of any registration or prospectus process initiated pursuant to a
Demand Registration if the registration request is subsequently withdrawn at the
request of the initiating party, in which case, the initiating party shall bear
such expense, unless at the time of such withdrawal the initiating party
indicates that since the date of the registration request, it has learned of a
material adverse change of the condition, business or prospects of the
Corporation from that known to the initiating party at the
- 10 -
time of the registration request and provided that the initiating party
withdraws the request with reasonable promptness following disclosure by the
Corporation of such material adverse change (whereupon the initiating party
shall not be required to pay any of such expenses and shall retain its rights
with respect to the abandoned Demand Registration).
If and whenever the Corporation is required to effect the
Registration of any Registrable Securities under the Securities Laws pursuant to
Article 13 or Article 14, the Corporation will, as expeditiously as possible:
(a) prepare and file with the Regulatory Authorities the requisite
Registration Statement to effect such Registration and thereafter
use its best efforts to cause such Registration Statement to
become effective;
(b) prepare and file with the Regulatory Authorities such amendments
and supplements to such Registration Statement as may be necessary
to keep such Registration Statement effective and to comply with
the provisions of the applicable Securities Laws with respect to
the disposition of all Registrable Securities offered by such
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended
methods of disposition by the Selling Holders set forth in such
Registration Statement;
(c) furnish to each Selling Holder such number of conformed copies of
such Registration Statement and of each such amendment and
supplement thereto (in each case including all exhibits and
documents incorporated by reference, appropriately legended in the
case of those exhibits filed on a confidential basis), and, so
long as the Corporation is required to keep such Registration
Statement effective pursuant to paragraph (b) above, such number
of copies of the prospectus contained in such Registration
Statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed pursuant to the
applicable Securities Laws, in conformity with the requirements of
the applicable Securities Laws, and such other documents, as such
Selling Holder may reasonably request;
(d) use its best efforts (x) to register or qualify all Registrable
Securities offered by such Registration Statement under such other
securities or blue sky laws of such jurisdiction where an
exemption is not available and as any Selling Holder shall
reasonably request, (y) to keep such registration or qualification
in effect for so long as such Registration Statement remains in
effect and (z) to take any other action that may be necessary or
advisable to enable such Selling Holders to consummate the
disposition in such jurisdictions of the Registrable Securities to
be sold by such Selling Holders, except that the Corporation shall
not for any such purpose be required to (i) qualify generally to
do business as a foreign corporation in any jurisdiction wherein
it would not, but for the requirements of this paragraph, be
obligated to be so qualified, (ii) become subject to taxation in
any jurisdiction where it would not then be so subject or
(iii) take any action that would subject it to general service of
process in any such jurisdiction (except to
- 11 -
the extent required by the Applicable Laws of a particular
jurisdiction in connection with the particular offering);
(e) use its reasonable best efforts to cause all Registrable
Securities offered by such Registration Statement to be registered
with or approved by such other federal, provincial or state
governmental agencies or authorities as may be necessary in the
opinion of counsel to the Corporation and counsel to the Selling
Holders to enable the Selling Holders to consummate the
disposition of such Registrable Securities;
(f) furnish at the effective date of such Registration Statement and
the date of closing of the sale of the Registrable Securities
(whether or not such sale is underwritten), to each Selling
Holder, and each Selling Holder's underwriters, if any, a signed
counterpart of:
(i) an opinion of counsel for the Corporation, dated the
effective date of such Registration Statement (or such
date of closing, as applicable), and
(ii) a "comfort" letter signed by the independent public
accountants who have certified the Corporation's
financial statements included or incorporated by
reference in such Registration Statement,
covering substantially the same matters with respect to such
Registration Statement (and the prospectus included therein) and,
in the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities;
(g) notify each Selling Holder at any time when a prospectus relating
to the Registration is required to be delivered under the
Securities Laws, upon discovery that, or upon the happening of any
event known to the Corporation as a result of which, the
prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in the
light of the circumstances under which they were made, and
promptly prepare and furnish to each Selling Holder a reasonable
number of copies of a supplement to or any amendment of such
prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the
circumstances under which they were made;
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities Laws and, if
required, make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the
- 12 -
period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the
effective date of such Registration Statement, which earnings
statement shall satisfy the provisions of Securities Laws, and
promptly furnish to each such Selling Holder a copy of any
amendment or supplement to such Registration Statement;
(i) permit any Selling Holder to participate in the preparation of
such Registration Statement and to include therein material,
furnished to the Corporation in writing, which in the reasonable
judgement of the Selling Holder should be included and which is
reasonably acceptable to the Corporation;
(j) if any proposed Registration Statement refers to a Selling Holder
by name or otherwise as the holder of any securities of the
Corporation then: (i) the Corporation shall be required to insert
therein language, in form and substance reasonably satisfactory to
such Selling Holder, the Corporation and the managing underwriter,
to the effect that the ownership by such Selling Holder of such
securities is not to be construed as a recommendation by such
Selling Holder as to the investment quality of the Corporation's
securities offered thereby and that such ownership does not imply
that such Selling Holder will assist in meeting any future
financial requirements of the Corporation; or (ii) in the event
that such reference to such Selling Holder by name or otherwise is
not required by the applicable Securities Laws, any similar
federal, provincial or state statute, or any rule or regulation of
any other regulatory body having jurisdiction over the offering,
then in force, the Corporation shall be required at the request of
such Selling Holder to delete the reference to such Selling
Holder;
(k) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities offered by such Registration
Statement from and after a date not later than the Effective Date;
and
(l) use its best efforts to list all Registrable Securities covered by
such Registration Statement on any securities exchange or trading
market on which the Corporation's Registrable Securities are then
listed.
If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a Demand Registration, the Corporation
will use all reasonable efforts to enter into an underwriting agreement with
such underwriters for such Demand Registration, such agreement to be
reasonably satisfactory in substance and form to the Corporation, the Selling
Holders and the underwriters and to contain such representations and
warranties by the Corporation and such other terms as are customary in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in paragraph 6 hereof. The Selling Holders
will reasonably cooperate with the Corporation in the negotiation of the
underwriting agreement. Such Selling Holders shall be parties to such
underwriting agreement. All of the representations and warranties by, and
the other agreements on the part of, the Corporation to and for the benefit
of such underwriters shall also be made to and for the benefit of such
Selling Holders and any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement shall also be
conditions precedent to the obligations of such Selling
- 13 -
Holders. No Selling Holder shall be required to make any representations or
warranties to or agreements with the Corporation other than representations,
warranties or agreements regarding such Selling Holder, matters pertaining to
the Selling Holder's contractual or other arrangements with the Corporation,
such Selling Holder's Registrable Securities and such Selling Holder's
intended method of distribution or any other representations required by the
applicable Securities Laws.
If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a Piggyback Registration, the Selling
Holders shall be parties to the underwriting agreement between the
Corporation and such underwriters. All of the representations and warranties
by, and the other agreements on the part of, the Corporation to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Selling Holders, and any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement shall also
be conditions precedent to the obligations of the Selling Holders. No
Selling Holder shall be required to make any representations and warranties
to, or agreements with, the Corporation or such underwriters other than those
representations, warranties or agreements regarding the Selling Holder,
matters pertaining to the Selling Holder's contractual or other arrangements
with the Corporation, the Selling Holder's Securities, the Selling Holder's
intended method of distribution and any other representations required by the
applicable Securities Laws.
In connection with the preparation and filing of each
Registration Statement under the Securities Laws, the Corporation will give
the Selling Holders, their underwriters, if any, and their respective counsel
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein or filed with the Regulatory
Authorities, and each amendment thereof or supplement thereto, and will give
each of them such reasonable access to the books and records of the
Corporation and such opportunities to discuss the business of the Corporation
with its officers and the independent public accountants who have certified
its financial statements as shall be necessary, in the opinion of such
holders, and such underwriters and their respective counsel, to conduct a
reasonable investigation. The Corporation shall promptly notify such holders
and their counsel of any stop order issued or threatened by the Regulatory
Authorities and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
If the Corporation becomes subject to the reporting
requirements of a jurisdiction where the Registrable Securities become
qualified, the Corporation will use its best efforts to file with the
applicable Regulatory Authorities such information as the applicable
Regulatory Authorities may require in a timely fashion; and in such event,
the Corporation shall use its best efforts to take all action as may be
required in order to maintain the registration of such Registrable Securities
in good standing and not in default. The Corporation shall furnish to the
Selling Holders forthwith upon request (i) a written statement by the
Corporation as to its compliance with the reporting requirements of
applicable Regulatory Authorities, (ii) a copy of the most recent annual or
quarterly report of the Corporation as filed with the applicable Regulatory
Authorities, and (iii) such other reports and documents as the Selling
Holders may reasonably request in availing themselves of any rule or
regulation of the Regulatory Authorities allowing the Selling Holders to sell
any such Registrable Securities without qualifying a prospectus or completing
a registration.
- 14 -
6. INDEMNIFICATION PROVISIONS RELATING TO REGISTRATION RIGHTS
In connection with any Registration, the Corporation agrees to
indemnify, to the full extent permitted by law, each Selling Holder, each
other person or entity which participates as an underwriter in the offering
or sale of such Registrable Securities and each other person or entity which
controls such Selling Holder or any such underwriter, and their respective
directors, officers, partners, agents and affiliates, against all losses,
claims, damages, liabilities and expenses (including legal fees and
disbursements on a solicitor and client basis) to which such Selling Holder
or underwriter or any such director, officer, partner, agent, affiliate or
controlling person or entity may become subject under applicable law or
otherwise, insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment or supplement
thereto) or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as the same are caused by any untrue statement or alleged
untrue statement or any such omission or alleged omission if (x) such untrue
statement or omission is completely corrected in an amendment or supplement
to such Registration Statement prepared in a timely fashion by the
Corporation and the Corporation has furnished such Selling Holder (or
underwriter, if any) with a sufficient number of copies of the same, the
Selling Holder (or underwriter, if any) having an obligation under the
Securities Laws to deliver a prospectus or prospectus supplement in
connection with such sale of Registrable Securities thereafter fails to
deliver such prospectus or prospectus supplement as so amended or
supplemented prior to or concurrently with the sale of Registrable Securities
to the person asserting such loss, claim, damage or liability, or (y)such
untrue statement or omission is caused by or contained in any information
with respect to any Selling Holder which was furnished in writing to the
Corporation by the Selling Holder expressly for use therein, or caused by the
Selling Holder's failure to deliver (contrary to the requirements of the
applicable Securities Laws or contrary to an undertaking given by the Selling
Holder) to a prospective purchaser a copy of the Registration Statement or
any amendment or supplement thereto. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Selling Holder or any such director, officer, partner, employee, agent,
affiliate or controlling person and shall survive the transfer of Registrable
Securities by such Selling Holder (or underwriter, if any).
In connection with any offering in which the Selling Holders
are participating, each Selling Holder will furnish to the Corporation in
writing such information with respect to it as the Corporation reasonably
requests for use in connection with any such Registration Statement. Each
Selling Holder agrees to indemnify, to the full extent permitted by law, the
Corporation, its directors and officers and each person who controls the
Corporation (within the meaning of the Securities Laws) and, in connection
with an underwritten offering, each underwriter and each person who controls
the underwriters (within the meaning of the Securities Laws) against any
losses, claims, damages, liabilities and expenses (including attorneys' fees
and disbursements) caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, to the extent, but
only to the extent, that such untrue statement or omission is in conformity
with and contained in any information
- 15 -
with respect to any Selling Holder so furnished in writing by the Selling
Holder expressly for use therein, provided, however, that (x) the Selling
Holder shall not be liable in any such case to the extent that any such
statement or omission is completely corrected in the final prospectus, in the
case of a preliminary prospectus, or in an amendment or supplement to a
prospectus or prospectus supplement and (y) the liability of such Selling
Holder under this section shall be limited to the amount of proceeds received
by such Selling Holder in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Corporation or any such director,
officer or controlling person and shall survive the transfer of Registrable
Securities by such Selling Holder.
Any person entitled to indemnification hereunder (the
"Indemnified Party") agrees to give prompt written notice to the indemnifying
party as provided at paragraph 5 hereof (the "Indemnifying Party") after the
receipt by such person of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in writing
for which such person will claim indemnification or contribution pursuant to
this Agreement (provided, however, that the failure of any Indemnified Party
to give such notice shall not relieve the Indemnifying Party of its
obligations except to the extent that the Indemnifying Party is materially
prejudiced by such failure to give notice) and, unless in the reasonable
judgement of such Indemnified Party a conflict of interest may exist between
such Indemnified Party and the Indemnifying Party with respect to such claim,
permit the Indemnifying Party to assume the defence of such claim with
counsel reasonably satisfactory to such Indemnified Party. Provided,
however, that if the Indemnifying Party does not inform the Indemnified Party
of its decision to defend the claim within five business days after receipt
of notice of the claim from the Indemnified Party (and as soon as practicable
thereafter the identity of counsel retained for the defence), or thereafter
abandons the defence or fails to pursue the defence in good faith, then the
Indemnified Party (in conjunction with all other Indemnified Parties) may
retain counsel and conduct the defence of the claim in good faith and at the
Indemnifying Party's cost and expense . In such circumstances the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party (unless and until the Indemnifying Party shall thereafter request to
participate in the defence of the claim, after which the parties shall
jointly conduct the defence of the claim). If the Indemnifying Party is not
entitled to, or elects not to, assume the defence of a claim (or thereafter
abandons such defence or does not pursue such defence in good faith), it will
not be obligated to pay the fees and expenses of more than one counsel with
respect to such claim, unless in the reasonable judgement of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other of such Indemnified Parties with respect to such claim, in which event
the Indemnifying Party shall be obligated to pay the fees and expenses of
such additional counsel or counsels. The Indemnifying Party will not be
subject to any liability for any settlement made without its written consent,
which consent shall not be unreasonably withheld or delayed.
If the indemnification provided for in this section from an
Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute, subject to the same restrictions and
limitations applicable to such indemnification to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with
- 16 -
the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such Indemnifying Party or Indemnified
Party, and the party's' relative intent, knowledge, access to information and
opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in this section, any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. If an Indemnified Party,
acting reasonably, determines that any payment in respect of indemnification
or contribution (the "Payment") made pursuant to this Schedule "13.1" is
subject to taxes payable under the EXCISE TAX ACT (Canada) ("GST") or under
any provincial or other legislation similar to the EXCISE TAX ACT, or under
any successor legislation of like or similar effect (collectively, the
"ETA"), or if any sales or similar tax under any provincial or other
legislation not substantially harmonised with the ETA is applicable to such
Payment, the amount of the Payment shall be increased by the amount of all
applicable taxes to the extent necessary to compensate the Indemnified party
for any net GST or similar tax cost not recoverable as input tax credit or
similar tax recoveries.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this section were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. No person guilty of
fraudulent misrepresentation (as defined in the applicable securities
legislation) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this section, the
Indemnifying Parties shall indemnify the Indemnified Parties to the full
extent provided in this Section.
The Selling Holders shall be deemed to be acting as agent and attorney herein
for their respective controlling persons or entities, their respective
underwriters (and persons or entities which control such underwriters) and
the respective directors, officers, partners, agents and affiliates thereof
with respect to the rights of indemnification and contribution herein
contained.
APPENDIX "A"
-----------------------------------------------------------------------------
NAME OF SHAREHOLDERS NUMBER OF COMMON SHARES
-----------------------------------------------------------------------------
Blue Sky Capital Corporation 2,000,000
-----------------------------------------------------------------------------
1319079 Ontario Inc. 2,000,000
-----------------------------------------------------------------------------
Bank of Montreal 1,714,285
-----------------------------------------------------------------------------
Bank of America Corporation 1,600,000
-----------------------------------------------------------------------------
CSTC 3,200,000
-----------------------------------------------------------------------------
Sonera Corporation 3,200,000
-----------------------------------------------------------------------------
WFC Holdings Corporation 392,157
-----------------------------------------------------------------------------
Financial Technology Ventures (Q), L.P. 252,105
-----------------------------------------------------------------------------
Financial Technology Ventures, L.P. 9,333
-----------------------------------------------------------------------------
HSBC Investment Bank plc. 333,333
Common Shares and the HSBC Warrant in
respect of 333,334 Common Shares
-----------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE NO.
ARTICLE 1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . .3
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.2 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.3 Interpretation.. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.4 Governing Law/Submission to Jurisdiction.. . . . . . . . . . . . . . 19
1.5 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.6 Computation of Time. . . . . . . . . . . . . . . . . . . . . . . . . 19
1.7 Statutory References.. . . . . . . . . . . . . . . . . . . . . . . . 19
1.8 Effect on Management.. . . . . . . . . . . . . . . . . . . . . . . . 19
1.9 Rights and Obligations of Transferees. . . . . . . . . . . . . . . . 19
1.10 Share References.. . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.11 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.12 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.13 Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . . . . 21
1.14 Accounting and Auditing. . . . . . . . . . . . . . . . . . . . . . . 22
1.15 Shareholder Regulatory Requirements. . . . . . . . . . . . . . . . . 22
1.16 References to Agreements.. . . . . . . . . . . . . . . . . . . . . . 24
1.17 Special Provisions Relating to the Founding Shareholder. . . . . . . 24
1.18 Special Provisions Relating to the Rights Attaching to the
Common Shares Sold by the Founding Shareholder. . . . . . . . . . . . . . . 25
1.19 Special Provisions Relating to FTV . . . . . . . . . . . . . . . . . 26
1.20 Special Provisions Relating to the HSBC Warrant. . . . . . . . . . . 28
ARTICLE 2 TERMINATION OF PRIOR AGREEMENTS 29
2.1 Amendment and Restatement of October 19, 1999 Unanimous
Shareholders' Agreement/Termination of Prior Agreements. . . . . . . . . . 29
ARTICLE 3 WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1 Shareholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 Shareholders Which are Corporate or Other Entities.. . . . . . . . . 30
3.3 The Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.4 Qualification of Representations and Warranties. . . . . . . . . . . 31
ARTICLE 4 PROVISIONS FOR CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1 Unanimous Shareholders' Agreement. . . . . . . . . . . . . . . . . . 31
4.2 Corporate Governance Matters.. . . . . . . . . . . . . . . . . . . . 32
4.3 Limitations on Liability/Shareholder Personal Interest.. . . . . . . 39
4.4 Indemnification of Directors and Officers. . . . . . . . . . . . . . 41
4.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.6 Effect of Article 4. . . . . . . . . . . . . . . . . . . . . . . . . 42
4.7 Certain Matters Pertaining to Employee Shareholders and
Management Shareholders. . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . . 42
4.9 Resolution of Disputes.. . . . . . . . . . . . . . . . . . . . . . . 43
(i)
PAGE NO.
ARTICLE 5 OPERATION AND FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Composition and Compensation of Management Team. . . . . . . . . . . 43
5.2 Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Interim Financial Statements.. . . . . . . . . . . . . . . . . . . . 44
ARTICLE 6 RESTRICTIONS ON TRANSFERS OF SHARES. . . . . . . . . . . . . . . . . . . 44
6.1 Restrictions on Transfers. . . . . . . . . . . . . . . . . . . . . . 44
6.2 Permitted Transfers. . . . . . . . . . . . . . . . . . . . . . . . . 45
6.3 Permitted Transfers for Founding Shareholder.. . . . . . . . . . . . 45
6.4 Pledge of Common Shares by Founding Shareholder. . . . . . . . . . . 46
ARTICLE 7 RESTRICTIONS ON INDIRECT TRANSFERS OF SHARES OF THE CORPORATION. . . . . 46
7.1 Management and Employee Shareholders - Restrictions on
Transfer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Management and Employee Shareholders - Permitted Transfers.. . . . . 47
7.3 Management and Employee Shareholders - Prohibition to
Amalgamate, Merge, etc.. . . . . . . . . . . . . . . . . . . . . . . 47
7.4 BMO, BAC, CSTC, Sonera, WFC, FTV and HSBC - Restrictions on
Transfer and Permitted Transfers.. . . . . . . . . . . . . . . . . . 47
7.5 Founding Shareholder - Restrictions on Transfer and Permitted
Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.6 Permissible Indirect Transfers and Permissible Amalgamations for
the Founding Shareholder and the Strategic Partners. . . . . . . . . . . . 49
ARTICLE 8 DRAG-ALONG RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.1 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.2 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Receipt of Third Party Written Offer.. . . . . . . . . . . . . . . . 50
8.4 Offer for All, or Any and All, Common Shares.. . . . . . . . . . . . 51
8.5 Offer for Less Than All Common Shares. . . . . . . . . . . . . . . . 51
8.6 Terms of Sale by Shareholders. . . . . . . . . . . . . . . . . . . . 53
8.7 Applicability of Tag-Along Rights. . . . . . . . . . . . . . . . . . 54
8.8 Sales to Competitors.. . . . . . . . . . . . . . . . . . . . . . . . 54
8.9 Application of Article 8 to Strategic Partners.. . . . . . . . . . . 54
ARTICLE 9 RIGHT OF FIRST REFUSAL ON SHARES HELD BY MANAGEMENT SHAREHOLDERS,
EMPLOYEE SHAREHOLDERS AND NON-EMPLOYEE DIRECTORS . . . . . . . . . . . . . . . . . 54
9.1 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Offer to Founding Shareholder and the Strategic Partners.. . . . . . 55
9.3 Purchase of Shares by Founding Shareholder and the Strategic
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.4 Sale Pursuant to Original Offer. . . . . . . . . . . . . . . . . . . 55
9.5 Revival of Right of First Refusal. . . . . . . . . . . . . . . . . . 56
9.6 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.7 Prohibited Sales.. . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 10 TAG-ALONG RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.1 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.2 Tag-Along Right. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.3 Effect of Exercise of Tag-Along Right. . . . . . . . . . . . . . . . 59
10.4 Terms of Sale by Shareholders. . . . . . . . . . . . . . . . . . . . 59
ARTICLE 11 PRE-EMPTIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Pre-emptive Right. . . . . . . . . . . . . . . . . . . . . . . . . . 59
(ii)
PAGE NO.
11.2 Offer to the Founding Shareholder and the Strategic Partners . . . . 60
11.3 Purchase by Offeree. . . . . . . . . . . . . . . . . . . . . . . . . 60
11.4 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.5 Special Provisions Relating to BMO's Pre-emptive Right.. . . . . . . 62
11.6 Special Provisions Relating to BAC's Pre-emptive Right.. . . . . . . 64
11.7 Special Provisions Relating to the Founding Shareholder's, CSTC's
and Sonera's Pre-emptive Rights . . . . . . . . . . . . . . . . . . . . . . 66
11.8 Subscription Representations . . . . . . . . . . . . . . . . . . . . 67
11.9 Effect of Share Sales on Special Pre-emptive Rights. . . . . . . . . 67
ARTICLE 12 CALL RIGHT CONCERNING MANAGEMENT, NON-EMPLOYEE DIRECTORS AND EMPLOYEE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.1 Call Right.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.2 Calculation of Purchase Price. . . . . . . . . . . . . . . . . . . . 68
12.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 13 FOUNDING SHAREHOLDER REGISTRATION RIGHTS. . . . . . . . . . . . . . . . 69
13.1 Demand Registration. . . . . . . . . . . . . . . . . . . . . . . . . 69
13.2 Piggyback Registration.. . . . . . . . . . . . . . . . . . . . . . . 69
13.3 Expiry of Registration Rights. . . . . . . . . . . . . . . . . . . . 70
13.4 Short-Form Prospectus Registrations. . . . . . . . . . . . . . . . . 70
ARTICLE 14 REGISTRATION RIGHTS OF STRATEGIC PARTNERS, MANAGEMENT SHAREHOLDERS
AND NON-EMPLOYEE DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
14.1 Demand Registration Rights of Strategic Partners . . . . . . . . . . 70
14.2 Piggyback Registration Rights of Strategic Partners, Management
Shareholders and Non-employee Directors . . . . . . . . . . . . . . . . . . 71
14.3 Expiry of Registration Rights. . . . . . . . . . . . . . . . . . . . 72
14.4 Short-Form Offering Registrations. . . . . . . . . . . . . . . . . . 72
ARTICLE 15 EXIT OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.1 Strategic Partners' Ability to Cause an Initial Public Offering. . . 72
15.2 Solicitation of Offers for All Outstanding Common Shares.. . . . . . 73
15.3 Strategic Partner Offer to Founding Shareholder and Other
Strategic Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
15.4 Termination of Employment of Xxxx Xxxxxxx. . . . . . . . . . . . . . 75
15.5 General Rules, Rights and Obligations Pertaining to Exit Options.. . 76
ARTICLE 16 GENERAL SALE PROVISIONS 77
16.1 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
16.2 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
16.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
16.4 Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
16.5 Repayment of Indebtedness by Corporation.. . . . . . . . . . . . . . 79
16.6 Repayment of Indebtedness by Vendor. . . . . . . . . . . . . . . . . 79
16.7 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . 80
16.8 No Joint Liability for Purchasers. . . . . . . . . . . . . . . . . . 80
ARTICLE 17 RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 80
17.1 Management, Non-Employee Directors and Employee Shareholders.. . . . 80
17.2 Confidential Information.. . . . . . . . . . . . . . . . . . . . . . 81
17.3 Non-Solicitation Obligation of Strategic Partners and the Founding
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
17.4 Acknowledgement of Reasonableness. . . . . . . . . . . . . . . . . . 83
(iii)
PAGE NO.
17.5 Survival.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 18 GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
18.1 Guarantee of Principal.. . . . . . . . . . . . . . . . . . . . . . . 84
18.2 Nature of Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . 84
18.3 Grant of Extensions, etc.. . . . . . . . . . . . . . . . . . . . . . 84
18.4 Not Bound to Exhaust Recourses.. . . . . . . . . . . . . . . . . . . 85
ARTICLE 19 GENERAL CONTRACT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 85
19.1 Share Certificate Legend.. . . . . . . . . . . . . . . . . . . . . . 85
19.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
19.3 Deemed Adequate Notice.. . . . . . . . . . . . . . . . . . . . . . . 90
19.4 Further Acts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
19.5 Time.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
19.6 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . 91
19.7 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
19.8 Enurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
19.9 Language.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SCHEDULE "1.1(F)" - DEFINITION OF ARM'S LENGTH
SCHEDULE "1.1(GG)" - FORM OF HSBC WARRANT
SCHEDULE "4.9" - ARBITRATION PROCEDURES
SCHEDULE "6.2" - ACKNOWLEDGMENT OF ASSUMPTION OF OBLIGATIONS
SCHEDULE "11.4" - ACKNOWLEDGMENT OF ASSUMPTION OF OBLIGATIONS
SCHEDULE "13.1" - REGISTRATION RIGHTS
APPENDIX "A"
(iv)
HSBC INVESTMENT BANK PLC.
AND
THE DIRECTORS, OFFICERS AND EMPLOYEES OF 724 SOLUTIONS INC.
WHO BECOME SHAREHOLDERS FROM TIME TO TIME
AMENDED AND RESTATED UNANIMOUS SHAREHOLDERS'
AGREEMENT
October 26, 1999
724 SOLUTIONS INC.
AND
BLUE SKY CAPITAL CORPORATION
AND
1319079 ONTARIO INC.
AND
BANK OF MONTREAL
AND
BANK OF AMERICA CORPORATION
AND
CITICORP
AND
CITICORP STRATEGIC TECHNOLOGY CORPORATION
AND
SONERA CORPORATION
AND
WFC HOLDINGS CORPORATION
AND
FINANCIAL TECHNOLOGY VENTURES (Q), L.P.
AND
FINANCIAL TECHNOLOGY VENTURES, L.P.
AND
