EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
, 2000 by and between 724 Solutions Inc., a corporation amalgamated
under the laws of Ontario ("Parent"), each of the undersigned shareholders of
Parent, being the Founding Shareholder (as defined herein) and the Strategic
Partners (as defined herein), each of the undersigned shareholders of Tantau
Software, Inc. ("Tantau") (each, a "Tantau Shareholder" and collectively, the
"Tantau Shareholders") and each of the undersigned Affiliates (as defined
herein) of particular Strategic Partners (as defined herein).
RECITALS
A. This Agreement is entered into in connection with that certain Agreement
and Plan of Merger, dated as of November 29, 2000 among Parent, Tantau and
Saturn Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of
Parent ("Merger Sub") (as the same may be amended, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into Tantau. Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement.
B. Each Tantau Shareholder holds shares of Tantau Capital Stock or other
securities or contractual rights representing the right to acquire or subscribe
for, or which are exercisable for or convertible into or exchangeable for,
shares of Tantau Capital Stock (collectively, "Tantau Securities").
C. Pursuant to the Merger Agreement, at the Effective Time each outstanding
share of Tantau Capital Stock will be converted into the right to receive a
number of Parent Shares (as defined herein) based upon the provisions of
Section 2.01(c) of the Merger Agreement and cash in lieu of any fractional
shares thereof.
D. The Parent Shares issued to the Tantau Shareholders pursuant to the
Merger will be registered with the SEC on Form F-4 prior to Closing, but will be
subject to the transfer restrictions set forth in Resale Restriction Agreement
between Parent and each of the Tantau Shareholders (the "Resale Restriction
Agreement") and as provided under applicable law.
E. Parent, the Founding Shareholder (as defined herein), the Strategic
Partners (as defined herein), together with Financial Technology Ventures (Q),
L.P. ("FTVQ") and Financial Technology Ventures, L.P. ("FTV") are parties to an
Amended and Restated Unanimous Shareholders' Agreement dated as of October 26,
1999 (the "Unanimous Shareholders' Agreement").
F. Most of the provisions of the Unanimous Shareholders' Agreement were
terminated effective as of January 27, 2000, being the date of Parent's initial
public offering; Articles 13, 14 and 17 thereof, survived this termination, all
in accordance with Section 1.12(d) of the Unanimous Shareholders' Agreement.
G. Articles 13 and 14 of the Unanimous Shareholders' Agreement currently
govern the registration rights of the Founding Shareholder (as defined herein)
and the Strategic Partners (as defined herein).
H. FTVQ and FTV have distributed their Parent Shares to their respective
participants and general partners, and have advised Parent that: (i) they no
longer have any registration rights under the Unanimous Shareholders' Agreement
or otherwise at law with respect to Parent Shares; (ii) they no longer have any
other rights under, entitlement to or interest in the Unanimous Shareholders'
Agreement; and (iii) accordingly, any such registration rights and any such
other rights which they may
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previously have had under, and any and all entitlement to and interest in, the
Unanimous Shareholders' Agreement, have terminated.
I. Sonera Corporation was a holder of Parent Shares (as defined herein) at
the time the Unanimous Shareholders' Agreement was executed, but it has since
transferred its beneficial interest in such Parent Shares to Sonera
SmartTrust Ltd. For the purposes of this Agreement, Sonera SmartTrust Ltd. is a
Strategic Partner (as defined herein) and Sonera Corporation is not a Strategic
Partner (as defined herein).
J. Parent, the Founding Shareholder (as defined herein) and the Strategic
Partners (as defined herein) have agreed to terminate Articles 13, 14 and 17 of
the Unanimous Shareholders' Agreement effective as of the date hereof in
consideration of the mutual covenants contained herein.
K. Parent and the Shareholders that are parties hereto agree that this
Agreement shall govern the rights of the Shareholders that are parties hereto to
cause Parent to register such Shareholders' Parent Shares (as defined herein)
for distribution to the public.
L. Each Shareholder is entering into this Agreement as a material
inducement to, and in consideration of, Parent's willingness to consummate the
transactions contemplated by the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
mutually agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATIONS
1.1 DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(a) "1319079" -- has the meaning given to such term in
Section 1.1(p).
(b) "AFFILIATE" -- has the following meaning:
(i) one body corporate 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 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; and
(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
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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 organizational
documents of such specified person.
(c) "AGREEMENT" -- has the meaning given to such term in the
preamble.
(d) "BAC" -- has the meaning given to such term in Section 1.1(fff).
(e) "BLUE SKY" -- has the meaning given to such term in
Section 1.1(p).
(f) "BMO" -- has the meaning given to such term in Section 1.1(fff).
(g) "BODY CORPORATE" -- has the meaning given to such term in
Section 1.1(iii).
(h) "BUSINESS DAY" -- means any day other than a Saturday, Sunday or
statutory holiday in Toronto (Ontario), New York (New York) or
Helsinki (Finland).
(i) "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.
(j) "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.
(k) "COMPANY REGISTRATION" -- means an offering by Parent (on its
behalf or on behalf of the Founding Shareholder or any Strategic
Partner) 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 the Founding Shareholder or
any Strategic Partner pursuant to a Demand Registration, other
than a Shareholder contemplating exercising its Piggyback
Registration rights hereunder); provided, however, that a Company
Registration shall not include: (i) a registration relating
solely to participants in the Stock Option Plans or other
employee incentive or benefit plans of Parent or its
subsidiaries, such as a registration on Form X-0, Xxxx X-0 or on
similar forms that may be promulgated in the future; (ii) a
registration relating solely to transactions covered by Rule 145
under the SECURITIES ACT registered on Form F-4, Form S-4 or any
other form for a limited purpose, or similar forms currently
existing or that may be promulgated in the future; (iii) a
registration on any form for a limited purpose 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 Parent 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.
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(l) "CSTC" -- has the meaning given to such term in
Section 1.1(fff).
(m) "DEMAND REGISTRATION" -- means, individually or collectively, a
Founding Shareholder Demand Registration and/or a Strategic
Partner Demand Registration.
(n) "ETA" -- has the meaning given to such term in Section 11.5.
(o) "EXCHANGE ACT" -- means the SECURITIES EXCHANGE ACT OF 1934, as
amended from time to time.
(p) "FOUNDING SHAREHOLDER" -- means, collectively, Xxxx Xxxxxxx (the
principal of Blue Sky Capital Corporation ("Blue Sky")), Blue Sky
and 1319079 Ontario Inc. ("1319079"), Blue Sky and 1319079 each
being an undersigned shareholder of Parent, and any Subsidiary or
Affiliate of Blue Sky and 1319079, as the case may be, who
acquires, directly or indirectly, from Blue Sky or 1319079 any
Parent Shares together with an assignment of their Registration
Rights hereunder, provided that the provisions of this Agreement
permit the associated assignment of Blue Sky's and 1319079's
Registration Rights, and entities which become shareholders of
Parent 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 BONA
FIDE 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.
(q) "FOUNDING SHAREHOLDER DEMAND REGISTRATIONS" -- has the meaning
ascribed to it in Section 4.1(a).
(r) "FOUNDING SHAREHOLDER REGISTRATION REQUEST" -- has the meaning
ascribed to it in Section 4.1(a).
(s) "FTV" -- has the meaning given to such term in the Recitals.
(t) "FTVQ" -- has the meaning given to such term in the Recitals.
(u) "GST" -- has the meaning given to such term in Section 11.5.
(v) "HSBC" -- has the meaning given to such term in
Section 1.1(fff).
(w) "INDEMNIFIED PARTY" or "INDEMNIFYING PARTY" -- have the meaning
given to such terms in Section 11.3.
(x) "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).
(y) "LONG-FORM REGISTRATIONS" -- has the meaning given to such term
in Section 1.1(mm), including a long form prospectus under
Canadian Securities Laws.
(z) "MEMBER OF THE FOUNDING SHAREHOLDER" -- has the meaning given to
such term in Section 1.1(p).
(aa) "MINIMUM THRESHOLD" -- has the meaning given to such term in
Section 7.2(a).
(bb) "MERGER AGREEMENT" -- has the meaning given to such term in the
Recitals.
(cc) "MERGER SUB" -- has the meaning given to such term in the
Recitals.
(dd) "NOTICES" -- has the meaning given to such term in
Section 12.11.
(ee) "PAYMENT" -- has the meaning given to such term in Section 11.5.
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(ff) "PERSON" -- means an individual, partnership, unincorporated
association, organization, syndicate, corporation, trust and a
trustee, executor, administrator or other legal or personal
representative.
(gg) "PIGGYBACK REGISTRATION" -- has the meaning given to such term in
Section 4.2 and includes a reference to the equivalent rights
exercisable pursuant to Sections 5.2 and 6.1.
(hh) "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.
(ii) "REGISTRABLE SECURITIES" -- means any equity securities of
Parent.
(jj) "REGISTRATION EXPENSES" -- means any and all expenses incidental
to a Demand Registration or a Piggyback Registration, including
without limitation: (i) all registration, filing and
qualification 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 or "blue sky" Securities
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 Parent
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 Parent 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 Parent and of the
independent public accountants of Parent, 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 Shareholders (as a group); provided that
Registration Expenses shall not include Selling Expenses.
(kk) "REGISTRATION REQUEST" -- means, in the case of the Founding
Shareholder, a Founding Shareholder Registration Request, and in
the case of the Strategic Partners, a Strategic Partner
Registration Request.
(ll) "REGISTRATION RIGHTS" -- means (i) in the case of the Founding
Shareholder and the Strategic Partners, the ability to compel a
Demand Registration pursuant to Articles 4 and 5, respectively,
or a Short-Form Registration pursuant to Article 9; or (ii) in
the case of the Founding Shareholder, the Strategic Partners and
the Tantau Shareholders, the ability to effect a Piggyback
Registration pursuant to Articles 4, 5 and 6, as the case may
be.
(mm) "REGISTRATION STATEMENT" -- means a registration statement of
Parent: (I) on Form X-0, X-0 or any similar long-form registration
("Long-Form Registrations"); or (II) on Form F-2, F-3 or F-10 (or
X-0, X-0 or S-10) or any similar short-form registration
("Short-Form Registrations") if Parent qualifies to use such a
short form; or (III) (unless the context otherwise requires and
subject to subparagraphs (i) to (iii) below) a prospectus of
Parent (short-form or long-form) prepared in accordance with the
Canadian Securities Laws, together with, in each case, all
amendments and supplements to such document (including
post-effective amendments), and all exhibits thereto and all
materials incorporated by reference therein, and for the
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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.
(nn) "RESALE RESTRICTION AGREEMENT" -- has the meaning given to such
term in the Recitals.
(oo) "S-3 SELLER" -- has the meaning given to such term in
Section 9.1.
(pp) "PARENT" -- has the meaning given to such term in the preamble.
(qq) "PARENT ACTIVITY" -- has the meaning given to such term in
Section 10.9.
(rr) "PARENT SHARE" -- means a fully paid and non-assessable common
share, no par value, of Parent.
(ss) "SECURITIES ACT" -- means the SECURITIES ACT OF 1933, as amended
from time to time.
(tt) "SECURITIES ACT (ONTARIO)" -- means the SECURITIES ACT
(Ontario), as amended from time to time.
(uu) "SECURITIES LAWS" -- means Canadian Securities Laws and/or
U.S. Securities Laws.
(vv) "SECURITIES REGULATORS" -- means any Canadian Securities
Regulator and/or U.S. Securities Regulator.
(ww) "SELLING EXPENSES" -- means underwriting discounts and selling
commissions, fees and expenses and any transfer taxes in respect
of any Selling Shareholder's Registrable Securities incurred in
connection with any registration and sale of Registrable
Securities, but does not include fees and expenses of one United
States and one Canadian counsel to the Selling Shareholders (as a
group).
(xx) "SELLING SHAREHOLDERS" -- means each Shareholder participating in
a Registration effected pursuant to this Agreement such that all
or part of the Registrable Securities owned by the Shareholder
are included among the securities offered by the Registration
Statement.
(yy) "SHAREHOLDER" -- means any of the Founding Shareholder, a
Strategic Partner, a Tantau Shareholder and any other person who
becomes a shareholder of Parent and who holds or acquires
Registration Rights in accordance with and pursuant to the terms
hereof, in each case so long as they are shareholders of Parent
and hold such Registration Rights; and "SHAREHOLDERS" shall have
a corresponding meaning.
(zz) "SHARES" or "SECURITIES" or "EQUITY SHARES" or "EQUITY
SECURITIES" -- means all shares, options, warrants, interests,
participations or other equivalents (regardless of how
designated) of or in Parent, whether voting or non-voting or
participating or non-participating, including without limitation
Parent Shares, or any securities, bonds, notes, debentures or
other evidences of indebtedness that are convertible into or
exchangeable for any of the foregoing.
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(aaa) "SHORT-FORM OFFERINGS" -- has the meaning given to such term in
Section 9.1.
(bbb) "SHORT-FORM REGISTRATIONS" -- has the meaning given to such term
in Section 1.1(mm) and includes a short-form prospectus under
Canadian Securities Laws.
(ccc) "SMARTTRUST" -- has the meaning given to such term in
Section 1.1(fff).
(ddd) "SONERA" -- means Sonera Corporation.
(eee) "STOCK OPTION PLANS" -- means Parent's 1997 Canadian Stock Option
Plan, 1999 U.S. Stock Option Plan and Amended and Restated 2000
Stock Option Plan, the Xxxxxxx.xxx 1999 Stock Option Plan assumed
by Parent effective June 15, 2000 and the Tantau 1999 Stock Plan,
which will be assumed by Parent in accordance with the Merger
Agreement, and similar plans of Parent.
(fff) "STRATEGIC PARTNER" -- means, so long as they are a shareholder
of Parent and hold Registration Rights hereunder, each of Bank
of Montreal ("BMO"), Bank of America Corporation ("BAC"),
Citicorp Strategic Technology Corporation ("CSTC"), Sonera
SmartTrust Ltd. ("SmartTrust"), WFC Holdings Corporation ("WFC")
and HSBC Investment Bank plc ("HSBC").
(ggg) "STRATEGIC PARTNER DEMAND REGISTRATION" -- has the meaning
ascribed to it in Section 5.1(b).
(hhh) "STRATEGIC PARTNER REGISTRATION REQUEST" -- has the meaning
ascribed to it in Section 5.1(a).
(iii) "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(b)(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;
(jjj) "TANTAU" -- has the meaning given to such term in the preamble.
(kkk) "TANTAU QUALIFIED PARENT SHARES" -- has the meaning given to such
term in Section 6.1.
(lll) "TANTAU SECURITIES" -- has the meaning given to such term in the
Recitals.
(mmm) "TANTAU SHAREHOLDER" or "TANTAU SHAREHOLDERS" -- have the meaning
given to such terms in the preamble.
(nnn) "TRADING DAY" -- means any day that The Toronto Stock Exchange or
The NASDAQ National Market are open for trading.
(ooo) "UNANIMOUS SHAREHOLDERS' AGREEMENT" -- has the meaning given to
such term in the Recitals.
(ppp) "U.S. SECURITIES LAWS" -- means the Securities Act, the Exchange
Act and such other state or "blue sky" securities laws of the
states of the United States.
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(qqq) "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 that are applicable to
an offering of Registrable Securities hereunder.
(rrr) "WFC" -- has the meaning given to such term in
Section 1.1(fff).
ARTICLE 2
REPRESENTATIONS, WARRANTS AND COVENANTS
2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF TANTAU SHAREHOLDERS
Each Tantau Shareholder hereby severally, but not jointly, represents and
warrants (and acknowledges that Parent and the other Shareholders are
relying on such representations and warranties) that:
(a) RESALE RESTRICTION AGREEMENT
Such Tantau Shareholder understands that the Parent Shares issued to such
Tantau Shareholder (and securities of Tantau assumed by Parent) in
connection with the Merger, will be subject to contractual transfer
restrictions, including a lock-up, as provided in the Resale Restriction
Agreement and an escrow, as provided in the Escrow Agreement (as such
term is defined in the Merger Agreement); and
(b) MERGER AGREEMENT; DISCLOSURE DOCUMENT
Such Tantau Shareholder has received and has had the opportunity to
review copies of the Merger Agreement and the related agreements
contemplated by the Merger Agreement (including the Resale Restriction
Agreement and the Escrow Agreement), together with all exhibits and
schedules thereto, and has had the opportunity to discuss such Agreements
with counsel and other advisors.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS WHICH ARE CORPORATE OR
OTHER ENTITIES
Each Shareholder that is not an individual represents and warrants (and
acknowledges that the other Shareholders are relying upon such
representations and warranties in entering into this Agreement) that, at the
date hereof:
(a) the 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 organization;
(b) the 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 the 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 the Shareholder and constitutes a legal, valid and binding
obligation of the Shareholder enforceable against it in accordance with
its terms; and
(d) neither the execution and delivery of this Agreement by the 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 charter, by-laws or other
organizational documents of the Shareholder or of any agreement,
obligation, contract, commitment, law or regulation to which the
Shareholder is a party or by which it is bound.
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2.3 REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants (and acknowledges that the Shareholders are
relying upon such representations and warranties in entering into this
Agreement) that, at the date hereof:
(a) Parent is a corporation duly amalgamated and validly existing and in
good standing under the laws of the Province of Ontario;
(b) Parent 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 Parent 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 Parent and constitutes a legal, valid and binding obligation
of Parent enforceable against it in accordance with its terms; and
(d) neither the execution and delivery of this Agreement by Parent, 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 constituant documents or by-laws of Parent
or of any agreement, obligation, contract, commitment, law or regulation
to which Parent is a party or by which it is bound.
2.4 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.
2.5 COMPLIANCE WITH SECURITIES LAWS
Shareholder will observe and comply with the Securities Laws, as now in
effect and as from time to time amended, in connection with any offer, sale,
pledge, transfer or other disposition of the Parent Shares, including
without limitation, any Registration Statement delivery requirements.
ARTICLE 3
TERMINATION OF PRIOR AGREEMENTS
3.1 TERMINATION OF SURVIVING PROVISIONS OF UNANIMOUS SHAREHOLDERS' AGREEMENT
Articles 13, 14 and 17 of the Unanimous Shareholders' Agreement are hereby
terminated effective as of the date hereof. The parties hereto agree and confirm
that all other provisions of the Unanimous Shareholders' Agreement terminated
effective as of January 27, 2000, being the date of Parent's initial public
offering in accordance with Section 1.12(d) thereof.
3.2 TERMINATION OF FTVQ'S AND FTV'S RIGHTS UNDER, ENTITLEMENT TO AND INTEREST IN
THE UNANIMOUS SHAREHOLDERS' AGREEMENT
FTVQ and FTV have distributed their Parent Shares to their respective
participants and general partners, and, as such, have advised Parent in
written correspondence dated November 27, 2000, a copy of which is attached
hereto as Exhibits "3.2-A" and "3.2-B", that:
(a) FTVQ and FTV no longer have any Registration Rights under the Unanimous
Shareholders' Agreement or otherwise at law with respect to Parent
Shares;
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(b) FTVQ and FTV no longer have any other rights under, entitlement to or
interest in the Unanimous Shareholders' Agreement; and
(c) accordingly, any such Registration Rights and any such other rights
which they may previously have had under, and any and all entitlement to
and interest in, the Unanimous Shareholders' Agreement, have terminated.
3.3 CITICORP AND SONERA
Each of Citicorp, an Affiliate of CSTC, and Sonera, an Affiliate of
SmartTrust, each being an original party to the Unanimous Shareholders'
Agreement, is a party to this Agreement solely for the purposes of
acknowledging the termination of Articles 13, 14 and 17 of the Unanimous
Shareholders' Agreement in accordance with this Article 3.
ARTICLE 4
FOUNDING SHAREHOLDER REGISTRATION RIGHTS
4.1 DEMAND REGISTRATION
(a) Subject to subsection (c) of this Section 4.1 and Section 4.4 hereof,
the Founding Shareholder may at any time request in writing (such a
written request being referred to herein as a "Founding Shareholder
Registration Request") that Parent qualify a prospectus for, or effect
the registration of, all or a part of the Parent Shares owned by the
Founding Shareholder under, at the option of the Founding Shareholder,
the Securities Laws of one or more of the Provinces of Canada and/or the
United States. (All registrations pursuant to this Section 4.1 are
referred to herein as "Founding Shareholder Demand Registrations".)
(b) Upon receipt of a Founding Shareholder Registration Request, Parent
shall, as soon as practicable, but in any event no later than 25 days
prior to the filing of the applicable Registration Statement, give
written notice of such request to the Strategic Partners and the Tantau
Shareholders. Upon the written request of such Strategic Partners and/or
such Tantau Shareholders made to Parent within 15 business days after the
receipt of such notice from Parent, Parent shall use all reasonable
efforts to prepare, execute and file such Registration Statement or
Registration Statements as shall be necessary to effect such
qualification or registration and include in such qualification or
registration, as the case may be, the requested number of Parent Shares
held by such Strategic Partners and the requested number of Tantau
Qualified Parent Shares held by such Tantau Shareholders (pursuant to
their respective Piggyback Registration rights under Article 5 and
Article 6, respectively), all in accordance with and subject to the terms
of this Agreement.
(c) The Founding Shareholder may effect only two Founding Shareholder Demand
Registrations pursuant to this Agreement.
4.2 PIGGYBACK REGISTRATION
Whenever Parent proposes (other than pursuant to a Founding Shareholder
Demand Registration) to effect a Company Registration, Parent shall furnish
prompt (but in any event no later than 25 days prior to the filing of the
applicable Registration Statement) written notice to the Founding
Shareholder of its intention to effect such a Company Registration and the
intended method of distribution in connection therewith. Such notice shall
offer the Founding Shareholder the opportunity to qualify or register (on
the same terms and conditions) such number of Parent Shares owned by the
Founding Shareholder, as the Founding Shareholder may request (in this
Article 4, a "Piggyback Registration"). Upon the written request of the
Founding Shareholder made to Parent within 15 business days after the
receipt of such notice from Parent, Parent shall
10
include in such Company Registration the requested number of Parent Shares
held by the Founding Shareholder, all in accordance with and subject to the
terms of this Agreement.
4.3 SHORT-FORM PROSPECTUS REGISTRATIONS
In addition, the Founding Shareholder may request the registration or
qualification of its Parent Shares pursuant to a Short-Form Offering, as
defined in and in accordance with and subject to the terms of Article 9
hereof.
4.4 EXPIRY OF REGISTRATION RIGHTS
Notwithstanding any of the foregoing provisions, Parent 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 January 27, 2004, being the date which
is four years from Parent's initial public offering; or (II) if: (i) such
securities have become freely tradable pursuant to Rule 144 of the
Securities Act (i.e., are no longer subject to the volume and manner of sale
restrictions applicable to "affiliates" of Parent (as defined under United
States Securities Laws)), and have become freely tradable upon the
expiration of any otherwise applicable hold period under Canadian Securities
Laws (or any similar provision under other 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 (Ontario) (or equivalent provisions of the other Canadian
Securities Laws); and (iii) the Founding Shareholder holds less than 2.5% of
the issued and outstanding equity shares of Parent at the date of the
request (in the case of a Founding Shareholder Demand Registration) or less
than 300,000 Parent Shares (in the case of a Piggyback Registration of the
Founding Shareholder).
ARTICLE 5
REGISTRATION RIGHTS OF STRATEGIC PARTNERS
5.1 DEMAND REGISTRATION RIGHTS OF STRATEGIC PARTNERS
(a) Subject to subsection (c) of this Section 5.1 and Section 5.4 hereof,
the Strategic Partners, acting collectively as described below, may at
any time request in writing (such a written request being referred to
herein as a "Strategic Partner Registration Request") that Parent qualify
a prospectus for, or effect the registration of, all or a part of the
Parent Shares owned by such Strategic Partners (PRO RATA based upon the
number of Registrable Securities owned by such Strategic Partners who
wish to participate in such qualification or registration, or on such
other proportional basis or as otherwise allocated as such Strategic
Partners may otherwise agree) under, at the option of the Strategic
Partners, 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 (each such
exercise being referred to herein as a "Strategic Partner Demand
Registration") shall be implemented, governed by and otherwise subject to
the direction of those Strategic Partners that collectively hold a
majority of the Parent Shares owned by all Strategic Partners.
(b) Upon receipt of a Strategic Partner Registration Request, Parent shall,
as soon as practicable, but in any event no later than 25 days prior to
the filing of the applicable Registration Statement, deliver written
notice of such request to the Founding Shareholder and the Tantau
Shareholders. Upon the written request of the Founding Shareholder and/or
such Tantau Shareholders made to Parent within 15 business days after the
receipt of such notice from Parent, Parent shall use all reasonable
efforts to effect such qualification or registration and include in such
qualification or registration, as the case may be, the requested number
of Parent Shares held by the Founding Shareholder and the requested
number of Tantau
11
Qualified Parent Shares (as defined herein) held by such Tantau
Shareholders (pursuant to their respective Piggyback Registration rights
under Article 4 and Article 6, respectively) all in accordance with and
subject to the terms of this Agreement. (All registrations initiated
pursuant to this Section 5.1 are referred to herein as "Strategic Partner
Demand Registrations").
(c) The Strategic Partners may effect only two Strategic Partner Demand
Registrations.
5.2 PIGGYBACK REGISTRATION RIGHTS OF STRATEGIC PARTNERS
Whenever Parent proposes to effect a Company Registration (other than
pursuant to Section 5.1 hereof), Parent shall furnish prompt (but in any
event no later than 25 days prior to the filing of the applicable
Registration Statement) written notice to the Strategic Partners of its
intention to effect such a Company Registration and the intended method of
distribution in connection therewith. Such notice shall offer the Strategic
Partners the opportunity to qualify or register (on the same terms and
conditions) all or part of their Parent Shares or other equity shares,
subject to the provisions of this Agreement (in this Article 5, a "Piggyback
Registration"). Upon the written request of a Strategic Partner made to
Parent within 15 business days of the receipt of such notice from Parent,
Parent shall include in such Company Registration the requested number of
Parent Shares held by such Strategic Partner (complying with the provisions
of this Article 5) all in accordance with and subject to the terms of this
Agreement.
5.3 SHORT-FORM OFFERING REGISTRATIONS
In addition, the Strategic Partners, acting collectively as contemplated in
Section 5.1(a), may request the registration or qualification of their
Parent Shares pursuant to a Short-Form Offering as defined in and in
accordance with and subject to the terms of Article 9 hereof.
5.4 EXPIRY OF REGISTRATION RIGHTS
Notwithstanding any of the foregoing provisions, Parent shall not be
required to include securities in a Demand Registration or Piggyback
Registration, which a Strategic Partner has requested be included therein:
(I) if such request is made at any time after January 27, 2004, being the
day which is four years after Parent's initial public offering; or (II) if:
(i) such securities have become freely tradable pursuant to Rule 144 of the
SECURITIES ACT (i.e., are no longer subject to the volume and manner of sale
restrictions applicable to "affiliates" of Parent (as defined under United
States Securities Laws)), with respect to the Strategic Partner in question
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 (Ontario) (or
equivalent provisions of Canadian Securities Laws); and (iii) the Strategic
Partner in question then holds less than 2.5% of the issued and outstanding
equity shares of Parent at the date of the request (in the case of a
Strategic Partner Demand Registration) or less than 300,000 Parent Shares
(in the case of a Piggyback Registration of the Strategic Partners).
12
ARTICLE 6
TANTAU SHAREHOLDER REGISTRATION RIGHTS
6.1 PIGGYBACK REGISTRATION RIGHTS
(a) Subject to Section 6.1(c) and Section 6.2 hereof, whenever Parent
proposes to effect a Company Registration that is an underwritten
offering, and provided that either the Founding Shareholder or at least
one of the Strategic Partners has exercised its Registration Rights in
accordance with Article 4, Article 5 or Article 9 hereof, as the case may
be, to include Parent Shares in such Company Registration, Parent shall
furnish prompt (but in any event no later than 25 days prior to the
filing of the applicable Registration Statement) written notice to each
of the Tantau Shareholders of its intention to effect such a Company
Registration and the intended method of distribution in connection
therewith. Such notice shall offer the Tantau Shareholders the
opportunity to qualify or register (on the same terms and conditions) all
or part of the Parent Shares that were issued to each of them in
connection with the Merger (subject to Section 6.1(b)) the transfer of
which is not then prohibited by the Resale Restriction Agreement
(collectively, "Tantau Qualified Parent Shares"), subject to the
provisions of this Agreement (in this Article 6, a "Piggyback
Registration"). Upon the written request of a Tantau Shareholder made to
Parent within 15 business days after the receipt of such notice by
Parent, Parent shall include in such Company Registration the requested
number of Tantau Qualified Parent Shares, subject to the provisions
hereof and other customary terms, conditions and limitations relating to
the registration of securities generally.
(b) Notwithstanding the foregoing, Parent shall not be required to register
any Tantau Qualified Parent Shares the transfer of which is restricted by
the terms of the Resale Restriction Agreement, or that are held in escrow
in accordance with the Escrow Agreement (as that term is defined in the
Merger Agreement), provided however that, if a Company Registration is
effected prior to the day which is three months from the Effective Time
(as defined in the Merger Agreement), the Tantau Shareholders may request
that Parent include up to 15% of such Tantau Shareholder's Tantau
Qualified Parent Shares in such Company Registration. In the event that a
Tantau Shareholder makes such a request, the number of Tantau Qualified
Parent Shares that are ultimately included in such Company Registration
shall be deducted from the number of Tantau Qualified Parent Shares
released from the Resale Restriction (as defined in the Resale
Restriction Agreement) after the Three Month Reference Date (as defined
in and in accordance with Section 2(b)(i) of the Resale Restriction
Agreement).
(c) If, in the opinion of counsel to Parent, the Tantau Qualified Parent
Shares are not permitted to be included in a Company Registration in
accordance with Section 6.1(a) hereof, either because of the rules and
regulations of an applicable Securities Regulator, or because of written
or oral directives of an applicable Securities Regulator to such effect,
then Parent shall use reasonable efforts to cause the lead managing
underwriter(s) of the offering to offer and sell the Tantau Qualified
Parent Shares concurrently with, and at the same price and terms as
applicable to, the sale of Parent Shares by the Founding Shareholder
and/or Strategic Partner(s) that are participating in such Company
Registration. Parent shall not be deemed to breach this Agreement if it
effects such Registration notwithstanding the refusal of the lead
managing underwriter(s) of the offering to take the actions described in
the previous sentence. If an applicable Securities Regulator precludes or
imposes substantial disclosure requirements with respect to the inclusion
of the Tantau Qualified Parent Shares in such offering, then Parent will
be deemed to have used reasonable efforts without further requirement
that the Tantau Qualified Parent Shares be so included in the
underwritten offering.
(d) For the purposes of Section 6.1(c) hereof, the Tantau Shareholders shall
use the same underwriter used by Parent for the offering in question, and
shall cooperation and coordinate
13
their efforts in good faith with those of Parent with a view to avoiding
disruption or regulatory impediments to the Company Registration.
6.2 TERMINATION OF REGISTRATION RIGHTS
All rights granted to the Tantau Shareholders pursuant to Section 6.1 shall
terminate with respect to any Tantau Qualified Parent Shares held by a
Tantau Shareholder upon the earliest to occur of (i) January 27, 2004, being
the date which is four years from Parent's initial public offering;
(ii) the acquisition of the Tantau Qualified Parent Shares by any person
from a Tantau Shareholder in accordance with Section 12.2(c) hereof; or
(iii) the Tantau Shareholder in question then holds: (x) with respect to the
90 day period commencing on the date hereof, less than 50,000 Tantau
Qualified Parent Shares; or (y) with respect to the period thereafter, less
than 300,000 Tantau Qualified Parent Shares.
ARTICLE 7
RULES RELATING TO DEMAND REGISTRATION RIGHTS
7.1 CONTENTS OF DEMAND REGISTRATION REQUEST
(a) 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). Parent shall not be obligated to effect a
Demand Registration unless the Demand Registration is in respect of at
least the lesser of: (i) 1,000,000 Parent Shares; and (ii) 25% of the
Parent Shares then held by the Initiating Party(ies).
(b) A Demand Registration shall not require a shelf registration or a shelf
prospectus.
7.2 MINIMUM OFFERING SIZE FOR DEMAND REGISTRATION
Notwithstanding the initiation of a Demand Registration, and in addition to
the limitations set forth in Section 7.1(a), Parent shall not be obligated
to effect such Demand Registration if:
(a) Parent determines, after consultation with the proposed underwriters for
the offering, that the aggregate expected gross proceeds in respect of:
(i) the Parent Shares requested to be included in an offering pursuant to
a Registration Request; and (ii) the Parent Shares and/or the Tantau
Qualified Parent Shares requested to be included in such offering
pursuant to the exercise of Piggyback Registration rights under
Sections 4.2, 5.2 or 6.1 hereof, as the case may be, will be less than US
$20,000,000 (the "Minimum Threshold"), unless the Initiating Party(ies)
agree(s) to sell additional securities (to the extent that it retains any
securities of Parent) to make up the deficiency; or
(b) pursuant to the advisement of the lead managing underwriter(s) as
contemplated in Section 10.2(b), there is a reduction in the number of
Parent Shares (inclusive of all shares being sold in the offering by
Parent and the Shareholders) to be included in the offering such that the
reduced number of Parent Shares would not generate proceeds that are
equal to or that exceed the Minimum Threshold;
provided, however, that if the Initiating Party(ies) are proposing to sell
all of their remaining securities of Parent, the Minimum Threshold
requirement shall not apply. In addition, subject to the immediately
preceding sentence, 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 Agreement.
14
7.3 NO OBLIGATION TO EFFECT DEMAND REGISTRATION RIGHT
Notwithstanding anything to the contrary contained in this Agreement:
(a) Parent shall not be obligated to effect a Founding Shareholder Demand
Registration if, as of the date that such demand is delivered to the
Company, the Founding Shareholder had the opportunity to utilize its
Piggyback Registration rights in connection with a Registration of Parent
Shares that became effective 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 Parent Shares
(it being acknowledged that as a result of the priority allocation rules
contained herein, such request might not have been honored in full);
(b) Parent shall not be obligated to effect any Demand Registration: (i) if
Parent has, within the nine month period immediately preceding the
delivery of the Registration Request, already caused a Registration
Statement relating to a Demand Registration for the Initiating Party(ies)
to be declared effective; or (ii) in any jurisdiction in which Parent
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; and
(c) Parent 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 Parent'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 Parent 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
Parent Shares that may be distributed pursuant to a Short-Form Offering
pursuant to a request made pursuant to Article 9 hereof.
7.4 ABILITY OF PARENT TO SUSPEND A DEMAND REGISTRATION
In addition, if, in connection with a Registration Request, Parent shall, no
later than five days prior to the effectiveness of a Registration Statement,
furnish to the Initiating Party(ies), a certificate signed by the Chief
Financial Officer of Parent stating that, in the good faith judgment of the
Board of Directors of Parent, it would be seriously detrimental to Parent
and its shareholders to file a Registration Statement pursuant to such
Registration Request and it is therefore essential to defer the filing of
such Registration Statement, Parent 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 Parent 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.
7.5 ASSIGNMENT OF FOUNDING SHAREHOLDER AND STRATEGIC PARTNER REGISTRATION RIGHTS
(a) The Founding Shareholder shall be entitled to assign its Registration
Rights relating to any of its Parent Shares being sold to any person
(without prejudice to the Registration Rights attaching to the Parent
Shares that the Founding Shareholder continues to hold), provided,
however that:
(i) the Founding Shareholder Demand Registration rights under
Section 4.1 hereof 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;
(ii) the Founding Shareholder Piggyback Registration rights under
Section 4.2 hereof may only be assigned if the purchaser of its
Parent Shares acquires at least 5% of the issued and outstanding
equity shares of Parent at the date of the transaction pursuant to
which
15
such purchaser first becomes a Shareholder and such Piggyback
Registration rights may be exercised by such assignee as if it was
a member of the Founding Shareholder (including in conjunction with
the exercise of a Founding Shareholder Demand Registration);
(iii) Parent 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
(iv) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement.
For greater certainty, subject to Section 12.1(c) hereof, any assignee of
the Founding Shareholder Registration Rights under this Section 7.5(a)
shall have the same rights and benefits, and shall be subject to the same
limitations and restrictions, applicable to the Founding Shareholders
hereunder including, without limitation, Sections 4.4 and 9.4 hereof and
the 300,000 Parent Shares threshold below which the Founding
Shareholder's Piggyback Registration rights expire.
(b) Subject to Section 12.2 and this Section 7.5(b), 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 other person. Any person
who acquires from one or more Strategic Partners in a particular
transaction (or series of related transactions) at least 5% of the
outstanding equity shares of Parent at the date of such acquisition,
accompanied by an assignment of Registration Rights hereunder in
accordance with Section 12.2 hereof, shall be entitled to participate in
a Strategic Partner Demand Registration under Article 5 hereof and a
Short-Form Offering Registration initiated by a Strategic Partner under
Article 9, and to exercise the Piggyback Registration rights under
Article 5, as if it was a Strategic Partner (including in conjunction
with the exercise of a Strategic Partner Demand Registration), provided
that, subject to Section 12.1(c), any such person shall have the same
rights and benefits, and shall be subject to the same limitations and
restrictions applicable to Strategic Partners hereunder including,
without limitation, Sections 5.4 and 9.4 hereof and the 300,000 Parent
Shares threshold below which a Strategic Partner's Piggyback Registration
rights expire.
For greater certainty, subject to the provisions of the Agreement
(including, without limitation, Section 5.4 and 9.4 hereof), the
Registration Rights of a Strategic Partner hereunder shall remain unaffected
and in full force and effect with respect to such Strategic Partner's
remaining Parent Shares in the event of such an acquisition by a person of
at least 5% of the outstanding equity shares of Parent.
ARTICLE 8
PRIORITIES RELATING TO REGISTRATION RIGHTS
8.1 PRIORITIES FOR OFFERINGS INITIATED BY PARENT
If a proposed Piggyback Registration relates to an underwritten primary
registration on behalf of Parent and the lead managing underwriter(s)
advises Parent in writing that, in its opinion, the number of Registrable
Securities requested to be included in the Registration (inclusive of the
securities proposed to be sold by Parent) exceeds the number which can be
sold in such offering without adversely affecting the price of the
Registrable Securities to be sold, then Parent shall include in such
Registration, in order of priority: (i) first, the securities Parent
proposes to sell; (ii) second, all (or a portion, as the case may be) of the
Registrable Securities requested to be included in such Piggyback
Registration by the Founding Shareholder, the Strategic Partners and the
Tantau Shareholders, PRO RATA based upon the number of Registrable
Securities requested by
16
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
Parent requested to be included in such Registration.
8.2 PRIORITIES FOR OFFERINGS INITIATED BY THE FOUNDING SHAREHOLDER OR THE
STRATEGIC PARTNERS
If a Demand Registration relates to an underwritten offering and the lead
managing underwriter(s) advise(s) Parent in writing that, in its opinion,
the number of Registrable Securities requested to be included in such
Registration (inclusive of all proposed Piggyback Registrations) exceeds the
number which can be sold in such offering without adversely affecting the
price of the Registrable Securities to be sold, then Parent shall include in
such Registration, in order of priority: (i) first, securities Parent wishes
to sell, to the extent of gross proceeds of US$25,000,000; (ii) second, all
or a portion (as the case may be) of the Registrable Securities requested to
be included in such offering by the Founding Shareholder and the Strategic
Partners (whether pursuant to their Demand Registration Rights or their
Piggyback Registration rights) and the Tantau Shareholders (pursuant to
their Piggyback Registration rights), PRO RATA based upon the number of
Registrable Securities requested by them to be included in such
Registration, except to the extent any of them may agree to a lower
priority; (iii) third, the balance of the securities Parent proposes to
sell, if any; and (iv) fourth, other securities of Parent requested to be
included in such Registration; provided, however, that if Parent's exercise
of its priority causes the number of shares registrable by the Initiating
Party(ies) to be reduced by more than 25%, then such Registration shall not
be counted as a Registration for purposes of Sections 4.1, 5.1 or 9.3, as
the case may be, and the Initiating Party(ies) shall retain its/their rights
with respect to such Demand Registration.
8.3 PRIORITIES FOR OFFERINGS INITIATED BY A THIRD PARTY
If a Piggyback Registration relates to an underwritten secondary offering on
behalf of holders of Parent Shares (other than the Founding Shareholder
under Article 4 or the Strategic Partners under Article 5 or the Tantau
Shareholders under Article 6) and the lead managing underwriter(s) advise(s)
Parent in writing that, in its opinion, the number of Registrable Securities
requested to be included in such Registration (inclusive of all proposed
Piggyback Registrations) exceeds the number which can be sold in such
offering without adversely affecting the price of the Registrable Securities
to be sold, then Parent shall include in such Registration, in order of
priority: (i) first, securities Parent wishes to sell, to the extent of
gross proceeds of US$25,000,000; (ii) second, the securities proposed to be
sold by the sellers on whose behalf the offering was initiated;
(iii) third, all or a portion (as the case may be) of the Registrable
Securities requested to be included in such offering by the Founding
Shareholder, the Strategic Partners and the Tantau Shareholders PRO RATA
based upon the number of Registrable Securities requested by them to be
included in such Registration, except to the extent any of them may agree to
a lower priority; (iv) fourth, the balance of the securities Parent proposes
to sell, if any; and (v) fifth, other securities of Parent requested to be
included in such Registration.
ARTICLE 9
FORM X-0, X-0, XXXXX-XXXX F-10, FORM S-10
AND SHORT-FORM PROSPECTUS REGISTRATIONS
9.1 PARENT'S OBLIGATIONS
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 Parent 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 and Form S-10 or other similar
17
simplified offering documents under the applicable U.S. Securities Laws or
the benefits of a short-form prospectus or similar simplified offering
document pursuant to the National Policy No. 47 "Prompt Offering
Qualification System" and, once in force, National Instrument 44-101 and
analogous rules and policies applicable under Canadian Securities Laws
(collectively, "Short-Form Offerings"), Parent agrees to:
(a) make and keep public information available and current, as those terms
are understood and defined in Rule 144(c) promulgated under the
Securities Act, at all times that any party hereto may still exercise its
registration rights hereunder;
(b) take such action, including the filing of such reports and other
documents as may be required under Section 12 of the Exchange Act, as is
necessary to enable the S-3 Sellers to utilize Short-Form Offerings for
the sale of Parent Shares, such action to be taken as soon as practicable
after December 31, 2000 (the end of the fiscal year in which the first
Registration Statement filed by Parent for the offering of its securities
to the general public in the United States was declared effective);
(c) file with the U.S. Securities Regulator in a timely manner all reports
and other documents required to be filed by Parent under Sections 13, 14
or 15(d) under the Exchange Act;
(d) furnish to any S-3 Seller, so long as it owns any Parent Shares,
forthwith upon request: (i) a written statement by Parent that it has
complied with the reporting requirements of Rule 144(c) promulgated under
the Securities Act (at any time that any party hereto may still exercise
its Registration Rights hereunder) 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 Parent and such other
reports and documents so filed by Parent 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 Laws 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 Annual Information Form
under the "Prompt Offering Prospectus System" (and, once in force,
National Instrument 44-101) and thereafter file renewal Annual
Information Forms and all required continuous disclosure and other
documents required for Parent 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 Article 9 shall apply MUTATIS
MUTANDIS).
9.2 SHORT-FORM REGISTRATION
In case Parent shall receive from an S-3 Seller a written request or
requests that Parent 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 Parent Shares owned by the proposed S-3 Seller,
Parent will:
(a) promptly give written notice of the proposed Registration, and any
related qualification or compliance, to the Founding Shareholder, the
Strategic Partners and the Tantau Shareholders; 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 Parent Shares as are specified in
such request, together with all or such portion of the Parent Shares of
any other Shareholder joining in such request as are specified in a
written request given within 15 days after receipt of such written notice
from Parent.
18
9.3 LIMITS TO PARENT'S OBLIGATION TO EFFECT A SHORT-FORM REGISTRATION
Parent shall not be obligated to effect any such Registration pursuant to
this Article 9:
(a) if the initiating S-3 Seller is not eligible for a Short-Form Offering;
(b) if the initiating S-3 Seller, together with the holders of any other
equity securities of Parent entitled to inclusion in such Registration,
propose to sell Parent Shares at an aggregate price to the public (net of
any underwriters' discounts or commissions) of less than
U.S. $15,000,000;
(c) if Parent shall, no later than five days prior to the effectiveness of
such Registration, furnish to the initiating S-3 Seller a certificate
signed by the Chief Financial Officer of Parent stating that, in the good
faith judgement of the Board of Directors of Parent, it would be
seriously detrimental to Parent and its shareholders for such Short-Form
Offering Registration to be effected at such time, in which event Parent
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 Parent shall not utilize this right more than once in any 12 month
period;
(d) if Parent 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 declared
effective;
(e) in any particular jurisdiction in which Parent 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
(f) pursuant to a shelf registration or a shelf prospectus.
9.4 EXPIRY OF SHORT-FORM REGISTRATION RIGHTS
Notwithstanding any of the foregoing provisions, Parent shall not be
required to effect registration pursuant to this Article 9:
(a) if the request of the S-3 Seller is made at any time after January 27,
2004, being the date which is four years from Parent's initial public
offering; or
(b) if, with respect to S-3 Seller: (I) such securities have become freely
tradable pursuant to Rule 144 promulgated under the Securities Act
(i.e. are no longer subject to the volume and manner of sale restrictions
applicable to "affiliates" of Parent (within the meaning of the
U.S. Securities Laws), 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 (Ontario) (or equivalent provisions
of Canadian securities laws); and (III) the applicable S-3 Seller holds
less than 2.5% of the issued and outstanding equity shares of Parent at
the date of the request.
(c) Subject to the foregoing, Parent shall file a Registration Statement
covering the Parent Shares 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 Article 9, 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 Parent, but excluding any underwriters' discounts or
commissions associated with such disposition of Parent Shares, shall be
paid by Parent.
The provisions of Articles 7, 8, 10, and 11 shall apply, MUTATIS MUTANDIS,
to such Short Form Offerings.
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ARTICLE 10
GENERAL PROVISIONS RELATING TO REGISTRATION RIGHTS
10.1 CONDITIONS PRECEDENT TO PARENT'S OBLIGATIONS
It shall be a condition precedent to the obligation of Parent to include any
Registrable Securities in a Registration Statement pursuant this Agreement
that a Selling Shareholder shall furnish to Parent such information
regarding itself, the Registrable Securities held by it, and the intended
method of disposition of such securities as shall be reasonably requested in
writing by Parent and required pursuant to the Securities Laws to effect the
Registration of the Registrable Securities held by such Selling Shareholder.
Any such information, or any comments on any such information included in a
draft of a Registration Statement provided to such Selling Shareholder for
its comment, shall be provided to Parent within any reasonable time period
requested by Parent.
10.2 PARTICIPATION IN UNDERWRITTEN REGISTRATION
(a) A Selling Shareholder shall not participate in any underwritten
Registration hereunder and Parent shall not be required to register any
of Shareholder's Registrable Securities in connection with such an
underwritten Registration unless such Selling Shareholder: (i) agrees to
sell such Selling Shareholder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the person or
persons entitled hereunder to approve such arrangements; (ii) accepts the
underwriters selected by Parent; (iii) subject to sections 10.5 and 10.6
below, executes an underwriting agreement with such underwriters
containing provisions that are customary in an underwritten Registration
(including a market stand-off agreement consistent with, and subject to
the restrictions applicable to, the terms of Section 10.11 hereof, if
required by such underwriters) that includes Parent Shares held by a
Shareholder; and (ii) completes and executes all questionnaires, powers
of attorney, indemnities, escrow agreements and other documents
reasonably required and which are acceptable to such Selling Shareholder
acting reasonably and in good faith under the terms of such underwriting
arrangements and consistent with the provisions of this Agreement.
(b) Registrable Securities shall be sold in such underwritten Registration
only in such quantity as the lead managing underwriter(s) determine(s),
in its sole discretion, will not jeopardize the success of the offering
by Parent. To the extent that the lead managing underwriter(s) advised
Parent in writing that, in its opinion, the number of securities proposed
to be included in the offering exceeds the number that can be sold in
such offering without adversely affecting the price of the securities to
be sold, then the securities to be included shall be apportioned in
accordance with the priorities described in Article 8. If a Selling
Shareholder disapproves of the terms of any such underwriting, such
Selling Shareholder may elect to withdraw therefrom by written notice to
Parent and the underwriter(s), delivered at least five business days
prior to the effective date of the Registration Statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall
be excluded and withdrawn from the Registration.
(c) If by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Shareholders may be included in such
Registration up to the maximum of any limitation imposed by the lead
managing underwriter(s), then Parent shall offer to all Shareholders who
have included Registrable Securities in the registration or to all, if
any, whose Parent Shares have been excluded from the registration by
Article 8 the right to include additional Registrable Securities in the
same proportion used in determining priorities under Article 8.
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10.3 REGISTRATION EXPENSES
(a) Unless prohibited by applicable law, all Registration Expenses will be
borne by Parent; provided, however, that Parent 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 particular Shareholder whose withdrawal resulted in the
withdrawal of the Registration Request shall reimburse Parent for all
such expenses, 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
Parent from that known to the Initiating Party at the time of the
Registration Request and provided that the Initiating Party withdraws the
request with reasonable promptness following disclosure by Parent of such
material adverse change (whereupon the Initiating Party shall not be
required to pay any of such Registration Expenses).
(b) All Selling Expenses will be borne by the Selling Shareholders PRO RATA
on the basis of the number of shares Registered.
10.4 PARENT'S OBLIGATIONS
If and whenever Parent is required to effect the Registration of any
Registrable Securities under the applicable Securities Laws pursuant to this
Agreement, Parent will, as expeditiously as possible:
(a) prepare and file with the Securities Regulators 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 Securities Regulators such amendments and
supplements to such Registration Statement as may be necessary to keep
such Registration Statement effective (subject to the provisions of
Section 7.1(b)) 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 Shareholders set forth
in such Registration Statement;
(c) furnish to each Selling Shareholder 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 Parent 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 Shareholder
may reasonably request;
(d) use its best efforts (x) to register or qualify all Registrable
Securities offered by such Registration Statement under such other state
or "blue sky" Securities Laws of such jurisdiction where an exemption is
not available and as any Selling Shareholder 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
Shareholders to consummate the disposition in such jurisdictions of the
Registrable Securities to be sold by such Selling Shareholders, except
that Parent 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
21
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 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 Parent and
counsel to the Selling Shareholders to enable the Selling Shareholders 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 Shareholder, and each Selling
Shareholder's underwriters, if any, a signed counterpart of:
(i) an opinion of counsel for Parent, 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 Parent'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 Shareholder 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
Parent 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 Shareholder 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 Shareholders, as soon as reasonably practicable, an
earnings statement covering the 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;
(i) permit any Selling Shareholder to participate in the preparation of such
Registration Statement and to include therein material, furnished to
Parent in writing, which in the reasonable judgement of the Selling
Shareholder should be included and which is reasonably acceptable to
Parent;
(j) if any proposed Registration Statement refers to a Selling Shareholder
by name or otherwise as the holder of any securities of Parent then:
(i) upon reasonable request Parent shall be
22
required to insert therein language, in form and substance reasonably
satisfactory to such Selling Shareholder, Parent and the lead managing
underwriter(s), to the effect that the ownership by such Selling
Shareholder of such securities is not to be construed as a recommendation
by such Selling Shareholder as to the investment quality of Parent's
securities offered thereby and that such ownership does not imply that
such Selling Shareholder will assist in meeting any future financial
requirements of Parent; or (ii) in the event that such reference to such
Selling Shareholder 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, Parent shall be required
at the request of such Selling Shareholder to delete the reference to
such Selling Shareholder;
(k) provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities offered by such Registration Statement; 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 Parent's Registrable Securities are then listed.
The Shareholders shall not have any right to obtain or seek an injunction
restraining or otherwise delaying any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 10.4.
10.5 DEMAND REGISTRATION -- UNDERWRITING AGREEMENT/REPRESENTATIONS AND
WARRANTIES
If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a Demand Registration, Parent 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 Parent, the Selling Shareholders and
the underwriters and to contain such representations and warranties by
Parent 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 Article 11 hereof. The Selling Shareholders will reasonably
cooperate with Parent in the negotiation of the underwriting agreement. Such
Selling Shareholders shall be parties to such underwriting agreement. All of
the representations and warranties by, and the other agreements on the part
of, Parent to and for the benefit of such underwriters shall also be made to
and for the benefit of such Selling Shareholders 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 Shareholders. No Selling Shareholder shall be required to
make any representations or warranties to or agreements with Parent other
than representations, warranties or agreements regarding such Selling
Shareholder, matters pertaining to the Selling Shareholder's contractual or
other arrangements with Parent, such Selling Shareholder's Registrable
Securities and such Selling Shareholder's intended method of distribution or
any other representations required by the applicable Securities Laws.
10.6 PIGGYBACK REGISTRATION -- UNDERWRITING AGREEMENT/REPRESENTATIONS AND
WARRANTIES
If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a Piggyback Registration, the Selling
Shareholders shall be parties to the underwriting agreement between Parent
and such underwriters. All of the representations and warranties by, and the
other agreements on the part of, Parent to and for the benefit of such
underwriters shall also be made to and for the benefit of the Selling
Shareholders, 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 Shareholders. No
Selling Shareholder shall be required
23
to make any representations and warranties to, or agreements with, Parent or
such underwriters other than those representations, warranties or agreements
regarding the Selling Shareholder, matters pertaining to the Selling
Shareholder's contractual or other arrangements with Parent, the Selling
Shareholder's Securities, the Selling Shareholder's intended method of
distribution and any other representations required by the applicable
Securities Laws.
10.7 ABILITY OF SELLING SHAREHOLDER TO PARTICIPATE IN DUE DILIGENCE
In connection with the preparation and filing of each Registration Statement
under the Securities Laws, Parent will give the Selling Shareholders,
provided such Selling Shareholder is not a Tantau Shareholder, 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 Securities Regulators, and
each amendment thereof or supplement thereto, and will give each of them
such reasonable access to the books and records of Parent and such
opportunities to discuss the business of Parent 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. Parent
shall promptly notify such holders and their counsel of any stop order
issued or threatened by the Securities Regulators and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
10.8 CONTINUOUS DISCLOSURE OBLIGATIONS OF PARENT
If Parent becomes subject to the reporting requirements of a jurisdiction
where the Registrable Securities become qualified, Parent will use its best
efforts to file with the applicable Securities Regulators such information
as the applicable Securities Regulators may require in a timely fashion; and
in such event, Parent 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. Parent shall furnish to the
Selling Shareholders forthwith upon request: (i) a written statement by
Parent as to its compliance with the reporting requirements of applicable
Securities Regulators; (ii) a copy of the most recent annual or quarterly
report of Parent as filed with the applicable Securities Regulators; and
(iii) such other reports and documents as the Selling Shareholders may
reasonably request in availing themselves of any rule or regulation of the
Securities Regulators allowing the Selling Shareholders to sell any such
Registrable Securities without qualifying a prospectus or completing a
registration.
10.9 RIGHT TO SUSPEND A REGISTRATION RIGHT
Parent may suspend a Registration Right at any time prior to such
Registration Statement becoming effective if Parent determines in good faith
(and, as soon as reasonably practicable, so certifies in writing to such
Selling Shareholder) that the public disclosure requirements imposed on
Parent under the applicable Securities Laws in connection with the
Registration Statement would require disclosure of any activity or
transaction or preparations or negotiations for any activity or transaction
(the "Parent Activity") that Parent in good faith desires to keep
confidential for business reasons, or during which there exists any other
material non-public information relating to Parent which Parent determines
in good faith should not be disclosed; provided that: (i) Parent shall use
commercially reasonable efforts to minimize the length of any such period of
suspension; and (ii) any such suspension shall be applied in the same manner
to all other security holders included in such Registration Statements and
to any other Registration Statement or proposed offering of Parent's
securities proposed or then in effect.
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10.10 SELLING SHAREHOLDER DUTY TO UPDATE
A Selling Shareholder shall notify Parent, at any time when a prospectus is
required to be delivered under applicable Securities Laws, of the happening
of any event as a result of which the prospectus included in the applicable
Registration Statement, as then in effect, with respect to information
provided or confirmed by such Shareholder in writing, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing. Such Selling Shareholder shall
immediately upon the occurrence of any such event cease using such
prospectus. If so requested by Parent, such Selling Shareholder shall
promptly return to Parent any copies of any prospectus in its possession
(other than permanent file copies) that contains an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and shall not sell any Parent Shares
pursuant to such Registration Statement until it receives from Parent a
Registration Statement that cures such untrue statement or omission.
10.11 MARKET STAND-OFF
(a) The Shareholders each hereby agree that, during the period of duration
specified in writing by the lead managing underwriter(s) of Parent
Shares, commencing two trading days prior to the establishment of the
proposed pricing range for the offering and following the effective date
of a Company Registration filed under applicable 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 Parent held by it at any time during such period
except Parent Shares included in such Registration; provided, however,
that:
(i) such agreement shall be applicable only to the first of such
underwritten Company Registrations; and
(ii) such agreement shall not apply unless Parent and, if requested by
the underwriter(s), all officers and directors of Parent and all
other persons with Registration Rights (whether or not pursuant to
this Agreement) enter into similar agreements;
(iii) such agreement shall not provide for a market stand-off time period
which exceeds 90 days from the effectiveness of the Registration
Statement; and
(iv) any such agreement shall be substantially in the form of the
lock-up undertaking delivered by the Strategic Partners at the time
of Parent's initial public offering.
Parent shall provide the Shareholders with reasonable notice of when the
establishment of the proposed pricing range for the offering is expected
to occur. In order to enforce the foregoing covenant, Parent may impose
stop-transfer instructions with respect to the Parent Shares of the
Founding Shareholder and the Strategic Partners and Tantau Shareholders
until the end of such period.
(b) Notwithstanding the provisions of Section 10.11(a) hereof, the
provisions of this Section 10.11 shall apply to a Selling Shareholder
each time such Selling Shareholder elects to participate in an
underwritten Registration hereunder and has complied with the
requirements of Section 10.2(a) hereof.
25
10.12 ABILITY OF PARENT TO GRANT ADDITIONAL REGISTRATION RIGHTS
(a) Parent may grant additional ranking or PARI PASSU registration rights
only with the prior written agreement of the Founding Shareholder and
each of the Strategic Partners whose Registration Rights have not expired
or terminated in accordance with the terms of this Agreement, provided
that such additional registration rights do not affect the Piggyback
Registration rights of the Tantau Shareholders under Section 6.1 hereof
in a manner different than the Piggyback Registration rights of the
Founding Shareholder and of the Strategic Partners under Sections 4.2 and
5.2 hereof, respectively. If the later proviso is not satisfied, then the
granting of such additional registration rights shall require the consent
of the Tantau Shareholders whose Registration Rights have not expired or
terminated in accordance with the terms of this Agreement and who hold
more than 50% of the Tantau Qualified Parent Shares held by all such
Tantau Shareholders.
(b) Notwithstanding the provisions of Section 10.12(a), Parent may grant
registration rights PARI PASSU to those granted to the Shareholders under
this Agreement to its directors and senior management and the directors
and senior management of its Subsidiaries with the consent of the
Founding Shareholder and each of the Strategic Partners.
(c) Notwithstanding the provisions of Section 10.12(a), Parent may, without
the consent of any of the Shareholders, grant ranking registration rights
in respect of equity securities issued on a private placement basis to
securityholders of a company or business acquired by Parent, where the
contractual right and entitlement to a distribution or registration on
From F-1 or F-3 (or Form S-1 or S-3, or similar short-form prospectus or
registration statement), is granted to such equity holders at the time
and in conjunction with such acquisition. For greater certainty, the
exercise of such ranking registration rights shall be considered to be a
Company Registration such that the Shareholders shall be entitled to
exercise their Piggyback Registration rights under Sections 4.2, 5.2 or
6.1, as the case may be, in connection therewith.
ARTICLE 11
INDEMNIFICATION PROVISIONS RELATING TO REGISTRATION RIGHTS
11.1 PARENT INDEMNITY OBLIGATION
In connection with any Registration, Parent agrees to indemnify, to the full
extent permitted by law, each Selling Shareholder, 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 Shareholder 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 Shareholder 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
(i) such untrue statement or omission is completely corrected in an
amendment or supplement to such Registration Statement prepared in a timely
fashion by Parent and Parent has furnished such Selling Shareholder (or
underwriter, if any) with a sufficient number of copies of the same, the
Selling Shareholder (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
26
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 (ii) such untrue
statement or omission is caused by or contained in any information with
respect to any Selling Shareholder which was furnished in writing to Parent
by the Selling Shareholder expressly for use therein, or caused by the
Selling Shareholder's failure to deliver (contrary to the requirements of
the applicable Securities Laws or contrary to an undertaking given by the
Selling Shareholder) 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 Shareholder or any such director, officer,
partner, employee, agent, Affiliate or controlling person and shall survive
the transfer of Registrable Securities by such Selling Shareholder (or
underwriter, if any).
11.2 SELLING SHAREHOLDER INDEMNITY OBLIGATION
Each Selling Shareholder agrees to indemnify, to the full extent permitted
by law, Parent, its directors and officers and each person who controls
Parent (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 with respect to such Selling
Shareholder so furnished in writing by such Selling Shareholder expressly
for use therein, provided, however, that (i) such Selling Shareholder shall
not be liable in any such case to the extent that any such statement or
omission is completely corrected in the final Registration Statement, in the
case of a preliminary Registration Statement, or in an amendment or
supplement to a Registration Statement or Registration Statement supplement
and (ii) the liability of such Selling Shareholder under this section shall
be limited to the amount of proceeds received by such Selling Shareholder 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 Parent or any such director, officer or controlling person and shall
survive the transfer of Registrable Securities by such Selling Shareholder.
11.3 INDEMNIFICATION -- PROCEDURES
Any person entitled to indemnification hereunder (the "Indemnified Party")
agrees to give prompt written notice to the indemnifying party as provided
at Section 12.11 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
27
Parties) may retain counsel and conduct the defence of the claim in good
faith and at the Indemnifying Party's cost and expense. Subject to the
provisions of the last sentence of this paragraph, 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.
11.4 CONTRIBUTION IN LIEU OF INDEMNITY
(a) If the indemnification provided for in this Article 11 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 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.
(b) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.4 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
Laws) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
11.5 TAXES APPLICABLE TO INDEMNIFICATION
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 Article 11, 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 Article 11 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, state 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.
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11.6 THIRD PARTY BENEFICIARIES
The Selling Shareholders 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.
11.7 SURVIVAL
The indemnification provisions of this Article 11, shall survive the
completion of any offering of Registrable Securities in a Registration
Statement and the termination of this Agreement.
11.8 CONFLICT WITH UNDERWRITING AGREEMENT
To the extent that the provisions on indemnification and contribution in the
underwriting agreement entered into in connection with an underwritten
public offering Registration pursuant to this Agreement, are in conflict
with this Article 11, the provisions of Article 11 shall prevail. Provided,
however that the provisions of this Section 11.8 only apply to the relative
rights of Parent and the Shareholders and shall not affect or amend the
provisions of the underlying underwriting agreement as they apply to the
underwriters.
ARTICLE 12
MISCELLANEOUS
12.1 AMENDMENT, MODIFICATION AND WAIVER
(a) Except as otherwise expressly provided, this Agreement may be amended or
modified only upon the written consent of the Founding Shareholder and
all the Strategic Partners, in each case, whose Registration Rights have
not expired or terminated in accordance with the terms of this Agreement.
Notwithstanding the foregoing, any amendment that would adversely affect
the Tantau Shareholders in a manner different than the Founding
Shareholder and the Strategic Partners shall require the written consent
of the Tantau Shareholders whose Registration rights have not expired or
terminated in accordance with the terms of this Agreement and who hold
more than 50% of the Tantau Qualified Parent Shares held by all such
Tantau Shareholders.
(b) Except as otherwise expressly provided herein, the obligations of Parent
and the rights of the Founding Shareholder and the Strategic Partners,
under this Agreement may be waived only with the written consent of the
Founding Shareholder and each Strategic Partner whose Registration Rights
have not expired or terminated in accordance with the terms of this
Agreement. Notwithstanding the foregoing, any waiver that would adversely
affect the Tantau Shareholders in a manner different than the Founding
Shareholder and the Strategic Partners shall require the written consent
of the Tantau Shareholders whose Registration Rights have not expired or
terminated in accordance with the terms of this Agreement and who hold
more than 50% of the Tantau Qualified Parent Shares held by all such
Tantau Shareholders.
(c) The Subject to Section 12.1(d) hereof, the consent of persons who have
purchased Parent Shares from the Founding Shareholder under
Section 7.5(a) hereof or from one or more Strategic Partners under
Section 7.5(b), accompanied by an assignment of Registration Rights
hereunder, (collectively, the "Assignee Shareholders"), shall not be
required to: (i) amend this Agreement in accordance with 12.1(a) hereof;
or (ii) waive the obligations of Parent and the rights of the Founding
Shareholder and the Strategic Partners in accordance with
Section 12.1(b) hereof or to otherwise consent to any matter with respect
to this Agreement. Notwithstanding the foregoing, any amendment,
modification or waiver, as the case may be,
29
that would adversely affect the Assignee Shareholders in a manner
different than the Founding Shareholder and the Strategic Partners shall
require written consent of the Assignee Shareholders whose Registration
Rights have not expired or terminated in accordance with this Agreement
and who hold more than 50% of the Parent Shares held by all such Assignee
Shareholders.
(d) In the event that the Founding Shareholder shall assign Registration
Rights in accordance with the provisions of this Agreement to an
Affiliate of Xxxxxxx Xxxxxxx, such Affiliate shall be treated in a manner
similar to the Founding Shareholder and the Strategic Partners for the
purposes of consents required for amendments, modifications and waivers
under this Section 12.1. Similarly, in the event that a Strategic Partner
shall assign Registration Rights in accordance with the provisions of
this Agreement to an Affiliate of such Strategic Partner, such Affiliate
shall be treated as a Strategic Partner for purposes of consents required
for amendments, modifications and waivers under this Section 12.1.
Provided, however, that the immediately preceding two sentences shall
apply only so long as the assignee remains an Affiliate of the assignor.
12.2 ASSIGNMENT
(a) This Agreement will be binding upon, and inure to the benefit of, the
persons or entities who are permitted, by the terms of this Agreement, to
be successors, assigns and personal representatives of the respective
parties hereto.
(b) If any person shall acquire Parent Shares from the Founding Shareholder
or a Strategic Partner, in any manner, whether by operation of law or
otherwise, accompanied by a purported assignment of Registration Rights
hereunder, such shares shall, subject to the provisions of Section 7.5
hereof, be held subject to all of the terms of this Agreement, and such
person shall be entitled to receive the benefits hereof, provided that
such person agrees in writing to be bound by and to perform all of the
terms and provisions of this Agreement.
(c) If any person shall acquire Tantau Qualified Parent Shares from a Tantau
Shareholder, in any manner, whether by operation of law or otherwise,
such shares shall cease to be subject to the terms of this Agreement and
all Registration Rights in respect of such shares shall terminate
effective on the date of such acquisition. The rights and obligations of
the Tantau Shareholders, under this Agreement are not assignable (whether
by operation of law or otherwise).
12.3 TERMINATION
This Agreement shall terminate upon:
(a) the written agreement of the Founding Shareholder and each of the
Strategic Partners whose Registration Rights have not expired or
terminated in accordance with the terms of this Agreement;
(b) the written agreement of the Tantau Shareholders whose Registration
Rights have not expired or terminated in accordance with the terms of
this Agreement, holding more than 50% of the Tantau Qualified Parent
Shares; and
(c) the expiry or termination of all the Shareholders' Registration Rights
hereunder in accordance with the terms of this Agreement.
30
12.4 RESOLUTION OF DISPUTES
(a) 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 Parent, the Board of Directors of Parent, the
Strategic Partners, the Founding Shareholder and the Tantau Shareholders
in writing of the nature of the dispute, with as much detail as possible
with respect thereto. Parent (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 Parent 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.
(b) 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, to arbitration in accordance with the provisions of
Schedule "12.4" hereto.
(c) 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 this Agreement. 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 "12.4".
12.5 COSTS OF ENFORCEMENT
If any party to this Agreement seeks to enforce its rights under this
Agreement by legal proceedings or otherwise, the non-prevailing party will
pay all costs and expenses incurred by the prevailing party, including,
without limitation, all reasonable attorneys' and experts' fees.
12.6 COUNTERPART EXECUTION; FACSIMILE DELIVERY
This Agreement may be executed in several counterparts and delivered by
facsimile, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
12.7 INTERPRETATION
Words importing the singular number shall include the plural and VICE VERSA
and words importing the use of any gender shall include all genders. The
division of this Agreement into paragraphs, subparagraphs, sections,
subsections, clauses and subclauses are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement.
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 paragraph, subparagraph, section,
subsection, clause or subclause in which such words appear. Time is of the
essence.
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12.8 ENTIRE AGREEMENT
This Agreement and the exhibits hereto contains the entire understanding of
the parties in respect of the subject matter hereof, and supersede all prior
negotiations and understandings between the parties with respect to such
subject matter.
12.9 FURTHER ASSURANCES
Shareholder agrees to execute and deliver, before or after the Effective
Time (as such term is defined in the Merger Agreement), any additional
documents reasonably necessary or desirable to carry out the purposes and
intent of this Agreement.
12.10 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein (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. Subject to the provisions of
Section 12.4 hereof, the parties hereto agree to submit to the exclusive
jurisdiction of the courts of the Province of Ontario. In any such dispute,
subject to the provisions of Section 12.4 hereof, 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. EACH
OF THE PARTIES IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE ENFORCEMENT OF
ANY PROVISION OF THIS AGREEMENT.
12.11 NOTICES.
All notices, requests, demands or other communications (collectively
"Notices") that are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by registered or certified mail, postage
prepaid, as follows:
If to the Shareholder, at the address set forth in Schedule "12.11" hereto,
with a copy to such Shareholder's counsel at the address set forth therein.
If to Parent:
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: Corporate Secretary
Fax: (000) 000-0000
Phone: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx
Xxxxx 0000, X.X. Xxx 000
Royal Trust Tower, TD Centre
Toronto, Ontario M5K 1H1
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
and
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Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
or to such other address as any party hereto may designate for itself by
notice given as herein provided.
All such Notices shall be deemed to have been received when delivered or
transmitted (or, if delivered or transmitted after 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.
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 Parent 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.
12.12 SEVERABILITY
If any provision of this Agreement is held to be unenforceable for any
reason, such provision and all other related provisions shall be modified
rather than voided, if possible, in order to achieve the intent of the
parties to this Agreement to the extent possible. In any event, all other
unrelated provisions of this Agreement shall be deemed valid and enforceable
to the full extent.
12.13 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF
The parties hereto acknowledge that Parent will be irreparably harmed and
that there will be no adequate remedy at law for a violation of any of the
covenants or agreements of Shareholder set forth herein. Therefore, it is
agreed that, in addition to any other remedies that maybe available to
Parent upon any such violation, Parent shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by
any other means available to Parent at law or in equity and the Shareholder
hereby waives any and all defenses which could exist in its favor in
connection with such enforcement and waives any requirement for the security
or posting of any bond in connection with such enforcement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
724 SOLUTIONS INC.
By: __________________________________
Its -
SHAREHOLDER:
______________________________________
Name: ________________________________
Address: _____________________________
______________________________________
______________________________________
Fax: _________________________________
[COUNTERPART SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
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SCHEDULE "12.4"
ARBITRATION PROCEDURES
1.1 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 12.4 of the
Agreement to which this Schedule 12.4 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.
1.2 EXCLUSIVE JURISDICTION
Subject to the provisions of Section 12.10 (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 12.4 of the Agreement has been pursued, that the settlement
procedure provided for in these Rules shall have been followed and
completed.
1.3 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 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 1.8 of this Schedule 12.4, the expenses of the
Arbitration Board shall be borne equally by the Parties.
1.4 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
35
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.
1.5 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.
1.6 MEETINGS AND HEARINGS
(a) The arbitration shall take place in the City of 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.
1.7 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;
36
(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.
1.8 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.
1.9 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
37
Arbitration Board lacks the power to give effective interim relief, such
Party may apply to any appropriate Court for such relief.
1.10 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.
38
