January 21, 2000
Brocker Technology Group Ltd.
1103 Toronto Dominion Tower
10088 - 102 Avenue
Edmonton, Alberta
T5J 2Z1
Attention: Mr. Casey J. O'Byrne
Chairman
Dear Mr. O'Byrne:
Thomson Kernaghan & Co. Limited (the "Agent") understands that Brocker
Technology Group Ltd. (the "Corporation") proposes to issue up to 1,800,000
special warrants (the "Special Warrants") at a price of $6.25 per Special
Warrant (the "Special Warrant Price") for maximum aggregate proceeds of
$11,250,000 (the "Offering"). We understand further that the Corporation has
subscribers for 872,000 of such Special Warrants (the "President's Warrants")
representing an aggregate subscription price therefore of $5,450,000 (the
"President's Offering"). The difference between the Special Warrants and the
President's Warrants, being 928,000 special warrants, shall be deemed to be the
"TK Warrants". The difference between the Offering and the President's Offering,
being $5,800,000, shall be deemed to be the "TK Offering".
Subject to the terms and conditions set forth below, the Corporation hereby
appoints the Agent as the sole and exclusive agent of the Corporation to
solicit, on a best efforts basis, the TK Warrants, and the Agent hereby agrees
to act as such agent. The Corporation agrees that the Agent is under no
obligation to purchase any Special Warrants.
Terms and Conditions
The terms and conditions relating to the purchase and sale of the TK
Warrants are as follows:
Section 1 Special Warrants.
(1) The material attributes and characteristics of the Special Warrants shall
be substantially as described herein and shall be issued pursuant to an
indenture (the "Special Warrant Indenture") to be entered into between the
Corporation and Montreal Trust Company of Canada (the "Trustee").
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(2) Subject to the qualification below, each Special Warrant will entitle the
holder thereof to acquire, without additional payment upon exercise of the
Special Warrants, one common share in the capital of the Corporation. The
common shares in the capital of the Corporation are herein referred to as
"Shares", the Shares issuable upon exercise of the Special Warrants are
referred to herein as "Underlying Common Shares".
(3) The Special Warrants will be exercisable at any time prior to the expiry
time (the "Expiry Time"), being the earlier of (i) 4:00 p.m. (Edmonton
time) on the first anniversary of the Closing Date (the "Anniversary Date")
and 4:00 p.m. (Edmonton time) on the fifth Business Day (defined below)
after the day (the "Qualification Date") on which the receipts
(collectively, the "Receipts") have been issued by all of the applicable
securities commissions (collectively, the "Commissions") for the final
prospectus (the "Prospectus") to qualify, among other securities, the
issuance of the Underlying Common Shares on exercise of the Special
Warrants. For the purpose hereof, "Business Day" means any day except
Saturday, Sunday or a statutory holiday in Edmonton, Alberta.
(4) In the event that the Qualification Date has not occurred by 4:00 p.m.
(Edmonton time) on the day that is 120 days from the Closing Date (the
"Qualification Deadline"), each holder of Special Warrants shall, upon the
voluntary or deemed exercise of the Special Warrants, receive 1.1
Underlying Common Shares for each Special Warrant so exercised.
(5) If the Qualification Date has not occurred prior to the Qualification
Deadline, the Corporation will continue to use its best efforts to obtain
the Receipts as soon as possible thereafter.
(6) Any Special Warrants which have not been exercised by the Expiry Time will
be deemed to be exercised immediately prior to the Expiry Time without
further action by the holder thereof.
Section 2 Subscription Amounts.
At the Time of Closing (defined below), the proceeds of the issue of the
Special Warrants net of the Agent's aggregate commission payable hereunder and
Agent's counsel's legal fees (the "Net Proceeds") will be delivered to the
Corporation by the Agent by cheque payable in accordance with the direction of
the Corporation of even date herewith.
Section 3 TK Offering.
(1) The Agent shall offer for sale and sell the TK Warrants to purchasers of
Special Warrants ("Purchasers") in Ontario and such jurisdictions outside
of Ontario in which the Special Warrants may be lawfully effected and sold
(collectively the "Qualifying Jurisdictions") in compliance with all
applicable securities laws and in such a manner so as not to require
registration thereof or filing of a prospectus or offering memorandum with
respect thereto under such laws.
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If, in the opinion of the Agent, it is necessary, the Agent will form,
manage and participate in a group of sub-agents to offer and sell the TK
Warrants as provided for hereunder. Each sub-agent shall be appropriately
registered under the applicable securities laws of the Qualifying
Jurisdiction in which such sub-agent offers and sells the TK Warrants so as
to permit it to lawfully offer and sell the TK Warrants in such
jurisdiction. In the event that a selling group is formed, the Agent will:
(a) Manage the selling group as and to the extent customary in the
securities industry in Canada; and
(b) Require each member of the selling group to offer and sell the TK
Warrants on the terms set forth in this Agreement.
(2) The Corporation agrees to pay to the Agent a commission (the "Agent's
Commission") equal to 7% of the gross aggregate proceeds of the TK Offering
and 3.5% of the President's Offering. Additionally, the Corporation shall
issue to the Agent an option (the "Agent's Special Option") in
substantially the form attached as Schedule 3(2)(a) hereto to acquire, for
no additional consideration, a further option (the "Agent's Option")
substantially in the form attached as Schedule 3(2)(b). The Agent's Option
will entitle the Agent to acquire 200,000 Shares (each an "Agent's Share",
collectively the "Agent's Shares") at an exercise price of $6.25 per Share
for a period of two years from the Closing Date. The Agent's Commission is
payable and the Agent's Special Option is to be issued by the Corporation
at the Time of Closing in consideration of the services to be rendered by
the Agent in connection with the Offering, which services shall include:
(a) Acting as agent of the Corporation to solicit, on a best efforts
basis, offers to purchase the TK Warrants;
(b) Assisting in the preparation of the preliminary prospectus in respect
of the Underlying Common Shares and the Agent's Option (the
"Preliminary Prospectus") and the Prospectus, together with any
documents supplemental thereto or any amending or supplementary
prospectus or other supplemental documents or any similar document
(collectively the "Supplementary Material") required to be filed under
the legislation of any Qualifying Jurisdiction;
(c) Assisting in the preparation of the form of Subscription Agreements to
be entered into by the Corporation and each of the Purchasers; and
(d) Advising the Corporation with respect to the private placement of the
Special Warrants.
The Corporation hereby agrees to qualify the issue of the Agent's Option in the
Prospectus.
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Section 4 Representations of the Corporation.
The Corporation represents and warrants to the Agent and the Purchasers,
and acknowledges that the Agent and the Purchasers are relying upon such
representations and warranties, as follows:
(a) The Corporation is, and will at the Time of Closing be, a reporting
issuer in good standing under the securities laws of Ontario and
Alberta and is in compliance with the by-laws, rules and regulation of
The Toronto Stock Exchange (the "Exchange") and no material change
relating to the Corporation has occurred within the past 24 months
with respect to which the requisite material change report has not
been filed and no such disclosure has been made on a confidential
basis;
(b) The Corporation has full corporate power and authority to undertake
the Offering, to obtain the Receipts and carry out all other
transactions contemplated herein, in the Special Warrant Indenture,
Special Warrants, the Subscription Agreements, the Agent's Special
Option and the Agent's Option (collectively, the "Documents");
(c) As at January 21, 2000 the authorized capital of the Corporation
consists of an unlimited number of Shares and an unlimited number of
preferred shares issuable in series, of which 15,137,467 Shares have
been duly authorized and issued and are outstanding as fully paid and
non-assessable at the date hereof;
(d) The Corporation has no associates (as defined in the Securities Act
(Ontario) (the "Ontario Act") or subsidiaries ("Subsidiaries") other
than as set out in Schedule 4(b);
(e) The Corporation is the direct or indirect legal, beneficial and
registered holder of all of the issued and outstanding shares of all
of the Subsidiaries, except as otherwise set out in Schedule 4(b),
free and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances, claims or demands and no person has any
agreement or option or right or privilege (whether pre-emptive or
contractual) capable of becoming an agreement for the purchase of all
or any part of such securities, and all such securities have been
validly issued and are outstanding as fully paid and non-assessable.
(f) The Corporation and each of the Subsidiaries possess and will possess
all material certificates, authority, permits and licenses issued by
the appropriate state, provincial, municipal or federal regulatory
agencies or bodies necessary to conduct the business now operated by
such entity and such entity has not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority, permit or license which, if unfavourably decided, would
materially and adversely affect the conduct of the business,
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operations, financial condition, income or future prospects of the
Corporation taken as a whole;
(g) All press releases, material change reports and other documents filed
by or on behalf of the Corporation within the past 24 months with the
Commissions or the Exchange were true and correct in all material
respects and did not contain any misrepresentation, as at the
respective dates of such filings;
(h) The Corporation is not party to and has not granted any agreement,
warrant, option or right or privilege capable of becoming an
agreement, for the purchase, subscription or issuance of any Shares or
preferred shares or securities convertible into or exchangeable for
Shares or preferred shares, other than agreements, warrants and
options disclosed in the Financial Statements (as defined below) or as
set out in Schedule 4(h);
(i) Each of the Documents has been, or will at the Time of Closing be,
duly authorized, and with respect to each of the Documents duly
executed, delivered by the Corporation and enforceable against the
Corporation in accordance with its terms;
(j) The entering into of and the performance of the transactions
contemplated herein and in the other Documents, including but not
limited to, the offering and sale in the Qualifying Jurisdictions of
the Special Warrants and the Underlying Common Shares and the granting
of the Agent's Special Option and the Agent's Option:
(i) does not require the consent, approval, authorization,
registration or qualification of or with any governmental
entity, stock exchange, securities regulatory authority or
other third party, except (a) such as have been obtained,
and (b) such as may be required (and shall be obtained as
provided in this Agreement) under applicable securities
legislation; or
(ii) Will not contravene any statute or regulation of any
governmental authority which is binding on the Corporation
or any Subsidiary; and
(iii) Will not result in the breach of, or be in conflict with, or
constitute a default under, or create a state of facts
which, after notice or lapse of time, or both, would
constitute a default under (a) any indenture, mortgage, deed
of trust, lease, other agreement or instrument to which the
Corporation, any of its Subsidiaries or any of their
properties is bound, (b) the constating documents of the
Corporation or any of its Subsidiaries, (c) any statute, any
judgment, decree, order, rule or regulation of any court or
other governmental entity or any arbitrator, stock exchange
or securities regulatory authority applicable to the
Corporation or any of its Subsidiaries or (d) any of its or
its
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Subsidiaries properties or assets, which could have a
material adverse effect on the condition (financial or
otherwise), business, properties, net worth or results of
the Corporation;
(k) There are no actions, suits, proceedings, inquiries or investigations
pending or, to the best of the knowledge, information and belief of
the senior officers of the Corporation, threatened against or
affecting the Corporation or any of its Subsidiaries at law or in
equity or before or by any United States, New Zealand, Australian,
Canadian or other federal, state, provincial, municipal or other
governmental department, commission, board, agency or instrumentality,
domestic or foreign, which may in any way materially affect the
business, properties or assets of the Corporation;
(l) The audited annual consolidated financial statements of the
Corporation as at and for the 12 month period ended March 31, 1999 and
the unaudited financial statements of the Corporation as at and for
the six month period ended September 30, 1999, complete and accurate
copies of which are attached hereto as Schedule 4(1), (collectively,
the "Financial Statements"), have been prepared in accordance with
generally accepted accounting principles in Canada ("GAAP"), present
fairly, the financial position of the Corporation as at March 31, 1999
and September 30, 1999, respectively, and do not contain any direct or
implied statement of a material fact which is untrue on the dates of
such financial statements and do not omit to state any material fact
that is required by GAAP or by applicable law to be stated or
reflected therein or which is necessary to make the statements
contained therein not misleading;
(m) Other than the Agent and those persons listed in Schedule 4(m) who
have acted as agents for the Corporation in respect of the President's
Warrants, there is no person, firm or corporation acting or purporting
to act at the request of the Corporation, who is entitled to any
brokerage or finder's fee in connection with the transactions
contemplated herein;
(n) The Corporation and each Subsidiary is duly incorporated and validly
existing under the laws of its jurisdiction of incorporation and is
current and up-to-date with all filings required to be made by it and
has all requisite corporate capacity, power and authority to carry on
its business as now conducted by it and as is presently proposed to be
conducted by it and to own, lease and operate its properties and
assets and, in the case of the Corporation, to execute, deliver and
perform its obligations under the provisions of the Documents and the
transactions contemplated thereunder;
(o) The Corporation and each of the Subsidiaries has filed all tax returns
required to be filed by it, has paid all taxes currently due and
payable by it and has paid all assessments and re-assessments and all
other governmental charges, penalties, interest and other fines, if
any, currently due and payable by it and
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which are claimed by any governmental entity to be currently due and
owing and adequate provisions have been made for taxes payable for any
fiscal period ended for which tax returns are not yet required to be
filed; there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing of any
tax return or payment of any tax, governmental charge or deficiency by
the Corporation or any of the Subsidiaries and there are no actions,
suits, proceedings, investigations or claims threatened or pending
against the Corporation or any of the Subsidiaries in respect of
taxes, governmental charges or assessments.
(p) The Corporation and each Subsidiary has conducted and is conducting
its respective businesses in compliance with all applicable laws,
rules and regulations of each jurisdiction in which it carries on
business and possess all material certificates, authorities, permits
or licences issued by the appropriate provincial, state, municipal,
federal or other regulatory agency or body necessary to carry on the
business currently carried on by it, is in compliance in all material
respects with such certificates, authorities, permits and licences and
with all laws, regulations, tariffs, rules, orders and directives
material to is operation and neither the Corporation nor any of the
Subsidiaries has received any notice of proceedings relating to or
notice of the revocation or modification of any such certificates,
authorities, permits or licences which, singly or in the aggregate, if
the subject of an unfavourable decision, order, ruling or finding,
would materially and adversely affect the conduct of the business,
operations, financial condition or income of the Corporation or any
Subsidiary on a consolidated basis;
(q) Other than as disclosed in the Financial Statements, the Corporation
and each of the Subsidiaries is the absolute legal and beneficial
owner of, and has good and marketable title to, all of the material
assets of the Corporation and such Subsidiary, as the case may be,
free of all mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands whatsoever. No other rights are
necessary for the conduct of the Corporation's or the Subsidiaries'
business. There are no restrictions on the ability of the Corporation
or the Subsidiaries to use, transfer or otherwise exploit any such
rights, and neither the Corporation, nor the Subsidiaries know of any
claim or basis for a claim that may affect such rights;
(r) Except as disclosed otherwise in the Financial Statements:
(i) any and all agreements pursuant to which the Corporation and
the Subsidiaries hold their assets are valid and subsisting
agreements in full force and effect, enforceable in
accordance with their respective terms;
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(ii) the Corporation and the Subsidiaries are not in default of
any of the provisions of any such agreements nor has any
such default been alleged and such assets are in good
standing under the applicable statutes and regulations of
the jurisdictions in which they are situate;
(iii) all leases pursuant to which the Corporation or the
Subsidiaries derive their interest in such assets are in
good standing and there has been no default under any such
leases; and
(iv) all material real or other property taxes required to be
paid with respect to such assets to the date hereof have
been paid;
(s) Neither the Corporation nor any of the Subsidiaries has any
responsibility or obligation to pay any commission, royalty or similar
payment to any person with respect to their rights;
(t) No order, ruling or determination having the effect of or suspending
the sale or ceasing the trading of securities of the Corporation has
been issued and no proceedings for this purpose have been instituted
or are pending, contemplated or threatened;
(u) Except as otherwise disclosed in the Financial Statements:
(i) the Corporation has not paid or declared any dividends or
incurred any material capital expenditure or made any
commitment therefor;
(ii) neither the Corporation nor any of the Subsidiaries has
incurred any obligation or liability, direct or indirect,
contingent or otherwise, except in the ordinary course of
business and which is not material; and
(iii) neither the Corporation nor any of the Subsidiaries has
entered into any material transaction;
(v) There is not, in the constating documents of the Corporation or in any
agreement, mortgage, note, debenture, indenture or other instrument or
document to which the Corporation is a party, any restriction upon or
impediment to the issuance of the Special Warrants, the allotment and
issuance of the Underlying Shares, the granting of the Agent's Special
Option, the Agent's Option and the allotment and issuance of the
Agent's Shares, the declaration or payment of dividends by the
directors of the Corporation or the payment of dividends by the
Corporation to the holders of its Shares;
(w) Montreal Trust Company of Canada, at its offices in Calgary has been
duly appointed as the transfer agent and registrar for the Special
Warrants and the Shares;
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(x) The Corporation has not withheld, and will not withhold from the Agent
any material facts or material changes relating to the Corporation;
(y) The Corporation proposes to use the net proceeds of the Offering for
working capital and general corporate purposes;
(z) At the Time of Closing, the Special Warrants to be issued and the
Agent's Special Option to be granted will have been validly issued and
granted by the Corporation and upon the exercise of the Special
Warrants and the Agent's Special Option, the Underlying Common Shares
and the Agent's Option to be issued and granted, respectively, will
have been validly issued and granted, respectively as fully paid and
non-assessable by the Corporation;
(aa) The Corporation has no contingent liabilities out of the ordinary
course of business which are material to it, except as disclosed in
the Financial Statements;
(bb) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the sale and delivery of the Special Warrants, the
granting of the Agent's Special Option and the Agent's Option or the
consummation by the Corporation of its respective obligations under
this Agreement, except those which shall have been obtained prior to
the closing of the Special Warrants;
(cc) Other than as disclosed in the Financial Statements, neither the
Corporation nor any of the Subsidiaries has approved, is
contemplating, has entered into any agreement in respect of, and has
knowledge of:
(i) the purchase of any property or interest therein, the sale,
transfer or other disposition of any of the properties or
any interest therein currently owned, directly or
indirectly, by the Corporation or such Subsidiary whether by
asset sale, transfer of shares, or otherwise, except in the
ordinary course of business;
(ii) the change of control (by sale or transfer of shares or sale
of all or substantially all of the assets of the
Corporation) or otherwise; or
(iii) a proposed or planned disposition of shares by any
shareholder who owns, directly or indirectly, 10% or more of
the issued and outstanding shares of the Corporation; and
(dd) All necessary corporate action has been taken or will be taken by the
Corporation prior to the Time of Closing to duly authorize the
creation, issuance and sale of the Special Warrants and Underlying
Common Shares and the granting of the Agent's Special Option, the
Agent's Option and the Agent's Shares, and provided that the
Corporation shall have received
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payment of the requisite consideration for, such Special Warrants and
Underlying Common Shares and Agent's Special Option, Agent's Option
and Agent's Shares will be duly and validly authorized, allotted,
issued and outstanding as fully paid and non-assessable shares in the
capital of the Corporation;
(ee) The TSE has conditionally approved the listing and posting of the
Underlying Common Shares and the Agent's Shares for trading on the TSE
as of Closing, subject only to the usual conditions relating to the
filing of certain documentation on or before a date specified by the
TSE, distribution of the Special Warrants and Common Shares to a
minimum number of public holders and the payment of certain filing
fees;
(ff) Attached as Schedule 4(ff) is a complete and accurate list of all
registered intellectual property and any application therefor used in
connection with the business of the Corporation and/or the
Subsidiaries (the "Intellectual Property"). The Intellectual Property
is all the registered intellectual property of the Corporation and its
Subsidiaries. Schedule 4(ff) lists the registered name, nature of
intellectual property, registration number, date of registration,
expiry date (if any) and the jurisdiction of registration;
(gg) None of the Subsidiaries may incur or agree to incur any liability or
obligation or series of obligations which individually or in the
aggregate exceed NZ$100,000 without first obtaining the approval by
resolution of the Board of Directors of the Corporation.
Section 5 Covenants of the Corporation.
The Corporation hereby covenants to the Agent and the Purchasers that it
will:
(a) Fulfil all legal requirements to permit the creation, issuance,
offering and sale of the Special Warrants, the Underlying Common
Shares, the Agent's Special Option, the Agent's Option, the Agent's
Shares, and to enable the Special Warrants to be offered for sale and
sold and the Agent's Special Option granted, without the necessity of
filing a prospectus or an offering memorandum under the applicable
securities laws of the Qualifying Jurisdictions, to Purchasers through
investment dealers or brokers registered under the applicable
securities laws of the applicable Qualifying Jurisdictions who have
complied with the relevant provisions of such laws;
(b) Obtain the necessary regulatory consents from the Exchange to the
Offering on such terms as are mutually acceptable to the Agent and the
Corporation, acting reasonably;
(c) Maintain the listing of the Shares, including the Underlying Common
Shares, the Agent's Options and the Agent's Shares on the Exchange and
to maintain
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its status as a reporting issuer in each Qualifying Jurisdiction for a
period of three years from the Closing Date;
(d) During the period from the date hereof to the day that is 90 days
after the Qualification Date, the Corporation shall not amend the
terms and conditions of the Shares or issue any additional Shares or
any options warrants or contractual rights which may result in the
issue of Shares, other than (i) pursuant to the exercise of securities
outstanding on the date hereof, and (ii) pursuant to director or
employee stock option plans established on the date hereof, without
the prior written consent of the Agent, such consent not to be
unreasonably withheld;
(e) Prepare and file the Preliminary Prospectus and the Prospectus and
other related documents relating to the proposed distribution of the
Underlying Common Shares and the Agent's Options as required in each
Qualifying Jurisdiction and use its reasonable best efforts to obtain
a receipt for the Preliminary Prospectus and the Prospectus no later
than the 120 days after the Closing Date in the Qualifying
Jurisdictions or as the Agent and the Corporation may otherwise agree;
(f) Resolve as soon as reasonably practicable any regulatory deficiencies
in respect of the Preliminary Prospectus on a basis acceptable to the
Agent and prepare, file and use its reasonable best efforts to obtain
the Receipts and take all other reasonable steps and proceedings that
may be necessary in order to qualify the Underlying Common Shares and
the Agent's Options for distribution to the public in each Qualifying
Jurisdiction as soon as possible after such regulatory comments and
deficiencies have been resolved;
(g) Prior to the filing of the Preliminary Prospectus, and prior to the
filing of the Prospectus and any Supplementary Material, permit the
Agent and its counsel to participate fully in the preparation of such
documents and allow the Agent and its counsel to conduct all due
diligence which the Agent may reasonably require to be conducted in
order to fulfil its obligations under applicable securities
legislation and in order to enable the Agent to execute, in an
informed and responsible manner, any certificate required to be
executed by the Agent in connection with the Preliminary Prospectus,
the Prospectus or any Supplementary Material;
(h) Ensure that at the time of filing of each of the Preliminary
Prospectus, the Prospectus and any Supplementary Material, and at all
times subsequent thereto until completion of the distribution of the
Underlying Common Shares and the Agent's Options, the Preliminary
Prospectus, Prospectus and any Supplementary Material fully comply
with the requirements of the applicable securities laws, provided that
the foregoing shall not apply with respect to statements contained in
such documents relating solely to the Agent;
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(i) Deliver in Toronto, within three Business Days after the issuance of a
receipt for the Preliminary Prospectus and the Prospectus, as the case
may be, and within three Business Days after execution of any
Supplementary Material, without charge to the Agent, as many copies of
the Preliminary Prospectus, the Prospectus and any Supplementary
Material as the Agent may request for the purposes contemplated
hereunder and contemplated by applicable securities laws, and such
delivery shall constitute: (A) the consent of the Corporation for the
Agent and other appropriately registered investment dealers to use
such documents in connection with the distribution to the Purchasers
or the distribution to the public, as the case may be, of the
Underlying Common Shares and the Agent's Options, subject to the
provisions of applicable securities laws; and (B) the Corporation's
representation and warranty to the Agent and the Purchasers that, at
the time of delivery, the information and statements contained therein
(except information and statements relating solely to or solely
provided by the Agent) contain no misrepresentation and constitute
full, true and plain disclosure of all material facts relating to the
Offering, the Corporation, the Subsidiaries, the Special Warrants, the
Underlying Common Shares and the Agent's Options;
(j) Cause to be delivered to the Agent concurrently with the filing of the
Prospectus and any Supplementary Material, comfort letters of the
auditors of the Corporation, in each case dated the date of the
Prospectus or the Supplementary Material to which such letter relates,
addressed to the Agent and to the directors of the Corporation, in
form and substance satisfactory to the Agent relating to the financial
statements to be included in the Prospectus and any Supplementary
Material and verifying in accordance with the Canadian Institute of
Chartered Accountants Handbook the financial information, accounting
data and other numerical data contained in the Prospectus or any
Supplementary Material and matters involving changes or developments
since the respective dates as of which specified financial information
is given in the Prospectus to a date not more than two Business Days
prior to the date of such letter;
(k) Immediately after the Time of Closing, file such documents as may be
required under applicable securities laws relating to the private
placement of the Special Warrants and the Agent's Options which,
without limiting the generality of the foregoing, shall include a Form
45-501F1 as prescribed by Rule 45-501 made under the Ontario Act;
(l) Other than a potential initial public offering in the United States
for approximately US$40 million, the Corporation and/or each
Subsidiary, as the case may be, shall not (i) issue or sell any Shares
or financial instruments convertible or exchangeable into Shares of
the Corporation and/or each Subsidiary, as the case may be, other than
for purposes of employee stock
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options, or (ii) sell or agree to sell or otherwise dispose of all or
substantially all of the assets of the Corporation or any of the
Subsidiaries for a period of six months from the Closing of the
Offering, without the prior consent of the Agent, such consent not to
be unreasonably withheld;
(m) In the event of any breach of the foregoing through the sale of
securities or assets of the Corporation or any of the Subsidiaries to
one or more buyers, the Corporation agrees to pay to the Agent
forthwith following the completion of any such transaction the
aggregate amount, without set off or deduction, of (a) if the
Preliminary Prospectus relating to the Offering has not yet been
filed, the Agents' reasonable expenses, (b) if the Preliminary
Prospectus relating to the Offering has been filed, Cdn$500,000; and
(c) if the Prospectus relating to the Offering has been filed, an
amount equal to 7% of the maximum gross proceeds from the TK Offering
and 3.5% of the President's Offering plus the Agent's expenses, in
full satisfaction of all claims against the Corporation in this
regard.
Section 6 Conditions of Closing.
The obligations of the Agent and the Purchasers to complete the purchase of
the Special Warrants shall be subject to the fulfilment before the Time of
Closing of the following conditions:
(a) The Corporation shall have obtained all requisite regulatory approvals
required to be obtained by the Corporation in respect of the Offering;
(b) The Corporation shall have fully complied with all relevant statutory
and regulatory requirements required to be complied with prior to the
Time of Closing (including, without limitation, the regulatory
requirements of the Exchange) in connection with the Offering;
(c) The Corporation shall have received the final approval of the Exchange
to proceed with the Offering and to issue the Special Warrants and the
Agent's Special Option;
(d) The Corporation shall have taken all necessary corporate action to
authorize and approve the Documents, the issuance of the Special
Warrants, the Underlying Common Shares, the Agent's Special Option,
the Agent's Option, the Agent's Shares and all other matters relating
thereto;
(e) The Agent and the Purchasers shall have received at the Time of
Closing a favourable legal opinion of Chamberlain Hutchison, counsel
to the Corporation, or any sub-agents as applicable addressed to the
Agent and each of the Purchasers, acceptable to counsel to the Agent,
acting reasonably, to the effect that:
<PAGE>
-14-
(i) The Corporation is a corporation validly existing under the
laws of the jurisdiction of its incorporation and is
qualified to carry on business and own its assets under the
laws of its jurisdiction of incorporation;
(ii) The Corporation has all requisite corporate capacity, power
and authority to carry on its business as now conducted by
it, to own its assets and the Corporation has all requisite
capacity, power and authority to execute and deliver the
Documents and to perform all transactions contemplated
hereby and thereby;
(iii) The authorized capital of the Corporation consists of an
unlimited number of Shares and an unlimited number of
preferred shares issuable in series of which 15,137,467
Shares are issued and outstanding as fully paid and
non-assessable;
(iv) Each of the Documents other than the Agent's Option has been
duly authorized, executed and delivered by the Corporation
and constitutes a legal, valid and binding obligation of the
Corporation, enforceable in accordance with its terms and
the Agent's Option has been duly authorized and when
executed and delivered by the Corporation will constitute a
legal, valid and binding obligation of the Corporation and
will be enforceable in accordance with its terms;
(v) All necessary corporate action has been taken by the
Corporation to authorize the creation and issuance of the
Special Warrants, the Agent's Special Option and the Agent's
Option;
(vi) The Special Warrants have been authorized, executed and
issued by the Corporation and certified and delivered in
accordance with the provisions of the Special Warrant
Indenture and the Special Warrants constitute legal, valid
and binding obligations of the Corporation enforceable in
accordance with their terms, and are entitled to the benefit
of the Special Warrant Indenture;
(vii) The Underlying Common Shares have been allotted and reserved
for issuance to the holders of the Special Warrants and upon
the exercise of the Special Warrants in accordance with the
terms of the Special Warrant, the Underlying Common Shares
will be validly issued as fully-paid and non-assessable
Shares, to the holders thereof without additional payment;
(viii) The Agent's Special Option has been validly issued and the
Agent's Option to be issued upon the exercise of the Agent's
Special Option will, when issued upon the exercise of the
Agent's Special Option in accordance with its terms, be
validly issued to the Agent without additional payment;
<PAGE>
-15-
(ix) The Agent's Shares have been allotted and reserved for
issuance to the holder of the Agent's Option and upon the
exercise of the Agent's Option, the Agent's Shares will be
validly issued as fully-paid and non-assessable Shares, to
the holders thereof;
(x) The issuance and sale of the Special Warrants are exempt,
either by statute or regulation or order, from the
prospectus and registration requirements of the applicable
Qualifying Jurisdiction, subject to the filing of all
necessary reports, certificates or undertakings and fees
required to be filed under the applicable securities
legislation;
(xi) Upon the issuance of the Receipts prior to the exercise of
the Special Warrants by a Purchaser, the Underlying Common
Shares will not be subject to any statutory hold period
under the laws of the applicable Qualifying Jurisdiction and
no other documents are required to be filed, proceedings
taken or approvals, permits, consents, orders or
authorizations of regulatory authorities required to be
obtained under the laws of the applicable Qualifying
Jurisdiction, in connection with the first trade by the
holder of the Underlying Common Shares;
(xii) In the event that a Receipt is not issued prior to the
exercise of the Special Warrants by a holder thereof, then
the issue of the Underlying Common Shares will be exempt
from the registration and prospectus requirements of the
laws of the applicable Qualifying Jurisdiction and that such
Underlying Common Shares will be subject to a statutory hold
period of twelve months in Ontario and Alberta and otherwise
in accordance with applicable securities legislation in the
other Qualifying Jurisdictions as set forth in the opinion
of local counsel therein commencing from the Closing Date;
(xiii) In the event that issue of the Agent's Option is qualified
by the Prospectus, the Agent's Shares issuable to the holder
of the Agent's Option upon exercise of the Agent's Option
will not be subject to any statutory hold period under the
laws of the applicable Qualifying Jurisdiction and no other
documents are required to be filed, proceedings taken or
approvals, permits, consents, orders or authorizations of
regulatory authorities required to be obtained under the
laws of the applicable Qualifying Jurisdiction, in
connection with the first trade by the holder of the Agent's
Shares;
(xiv) The execution and delivery of the Documents and the
performance of the transactions contemplated thereby
(including the issuance and sale of the Special Warrants,
the Underlying Common Shares, the Agent's Special Option,
the Agent's Option, the Agent's Shares do not and will not
result in a breach of, and do not create a state of facts
which, after
<PAGE>
-16-
notice or lapse of time or both, will result in a breach of
and do not and will not conflict with, any of the terms,
conditions or provisions of the constating documents of the
Corporation;
(xv) The form of share certificate for the Shares conforms with
all applicable corporate legislation and Exchange
requirements and have been approved by the directors of the
Corporation;
(xvi) The Corporation is a reporting issuer in good standing in
Ontario and Alberta; and
(xvii) Such other matters as the Agent may request in connection
with the Offering;
and in giving the opinions contemplated above, counsel to the
Corporation shall be entitled to deliver opinions of local counsel in
the Qualifying Jurisdiction, and counsel to the Corporation shall be
entitled, as to matters of fact, to rely upon the representations and
warranties of Purchasers contained in the Subscription Agreements, a
certificate of fact of the Corporation signed by officers of the
Corporation in positions to have knowledge of such facts and their
accuracy and certificates of such public officials and other persons
as are necessary or desirable, certificates of the Corporation's
registrar and transfer agent as to the number of Shares issued and
outstanding;
(f) The Corporation has delivered to the Agent a certificate of Montreal
Trust of Canada, as registrar and transfer agent of the Shares, which
certifies the number of Shares issued and outstanding on the date
prior to the Closing Date;
(g) If any Special Warrants are sold in the United States, the Agent shall
have received at the Time of Closing a favourable legal opinion
addressed to the Agent dated the Closing Date, from U.S. counsel to
the Corporation, which counsel may rely upon the covenants,
representations and warranties of the Corporation and the Agent set
forth in this Agreement and upon the covenants, representations and
warranties of any Purchasers in the United States set forth in the
Subscription Agreement applicable to U.S. Purchasers (the "U.S.
Purchasers"), that no registration of the Special Warrants is required
under the United States Securities Act of 1933 in connection with the
issuance and sale of the Special Warrants to the U.S. Purchasers; and
(h) The Corporation shall deliver to the Agent the documents required for
delivery as set out in the closing agenda amended hereto as Schedule
6(h).
Section 7 Closing.
(1) The purchase and sale of the Special Warrants shall be completed at the
offices of Stikeman, Elliott, Commerce Court West, P.O. Box 85, Suite 5300,
Toronto, Ontario, at 10:00 a.m. (Toronto time) (the "Time of Closing") on
January 21, 2000 or at such
<PAGE>
-17-
other time or on such other date as the Corporation and the Agent may agree
(the "Closing Date").
(2) At the Time of Closing, the Corporation shall deliver to the Agent on its
own behalf and on behalf of the Purchasers:
(a) The requisite legal opinions and certificates as contemplated in
Section 6 hereof; and
(b) Such further documentation as may be contemplated herein or as counsel
to the Agent or the applicable regulatory authorities may require;
against receipt of the Net Proceeds. Certificates representing the Special
Warrants purchased by the Purchasers will be delivered by the Trustee as
directed by the Purchasers.
Section 8 Expenses.
Whether or not the transactions provided for herein are completed, the
Corporation shall pay all reasonable costs, fees and expenses related to the
Offering of or incidental to the performance of the obligations under this
Agreement including, without limitation: (i) the reasonable fees and expenses
(including taxes) of the Agent's counsel, Stikeman, Elliott to a maximum of
$60,000 and (ii) the Agent's reasonable out-of-pocket expenses. Such amounts
payable to the Agent under this Section shall be paid by the Corporation upon
release of the Net Proceeds.
Section 9 Material Changes.
(1) If after the date hereof until completion of the distribution of the
Underlying Common Shares and Agent's Option:
(a) There occurs any material change or material changes (actual, proposed
or prospective) in respect of the Corporation;
(b) There occurs any change in any material fact contained in the
Preliminary Prospectus, Prospectus or any Supplementary Material; or
(c) Any new material fact arises which would, under the applicable
securities legislation, require an amendment to the Preliminary
Prospectus, Prospectus or any Supplementary Material,
the Corporation shall:
(d) Promptly notify the Agent, in writing, providing full particulars of
any such change;
(e) If required by applicable law, prepare and deliver to each Purchaser
an amendment to the Preliminary Prospectus or Prospectus, as the case
may be;
<PAGE>
-18-
(f) File or cause to be filed with reasonable promptness, and in any event
within any statutory limitation period therefor, any document required
to be filed with any regulatory body having jurisdiction, and comply
with all requirements of any applicable securities legislation of such
jurisdiction; and
(g) Comply with all legal requirements necessary to continue to qualify
the Underlying Common Shares and the Agent's Option for distribution
in each Qualifying Jurisdiction.
(2) The Corporation shall after the date hereof until completion of the
distribution of the Underlying Common Shares and the Agent's Option in good
faith discuss with the Agent any change in circumstances (actual, proposed
or prospective) in respect of which there is reasonable doubt whether
written notice should be given to the Agent pursuant to this section and
shall consult the Agent with respect to the form and content of any
Supplementary Material proposed to be issued or filed by the Corporation as
a result of such change prior to the issuance or filing thereof.
(3) In this Agreement, the terms "material change", "material fact",
"misrepresentation" and "distribution" shall have the respective meanings
ascribed thereto in the Ontario Act.
Section 10 Indemnities.
(1) The Corporation on behalf of itself and each of the Subsidiaries hereby
covenants and agrees to protect, indemnify and hold harmless each of the
Agent and its affiliates and their directors, officers, employees,
solicitors and agents (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") from and against any and all
expenses, losses (except for loss of profits), claims, costs, damages or
liabilities which they may suffer or incur caused by or arising directly or
indirectly by reason of:
(a) Any representation or warranty made by the Corporation to the Agent or
the Purchasers not being true;
(b) Any information or statement (except any information or statement
relating solely to the Agent) contained in the Preliminary Prospectus,
Prospectus or any Supplementary Material being or being alleged to be
a misrepresentation;
(c) The omission to state in the Preliminary Prospectus, Prospectus or any
Supplementary Material a material fact required to be stated therein
or necessary to make the statements therein not misleading (except the
omission to state a material fact relating solely to the Agent);
(d) The Corporation's failure to comply with any requirement of any
securities legislation or regulatory requirements of the Qualifying
Jurisdictions in connection with the Offering;
<PAGE>
-19-
(e) Any order made or any inquiry, investigation or proceeding commenced
or threatened by any regulatory authority based upon an allegation
that any untrue statement or alleged omission or any misrepresentation
or alleged misrepresentation in the Preliminary Prospectus, the
Prospectus or any Supplementary Material exists (except information
and statements relating solely to the Agent) which prevents or
restricts the trading in or distribution of the Special Warrants or
the Underlying Common Shares, the Agent's Special Option, the Agent's
Option or the Agent's Shares;
(f) The Corporation's failure to comply with any of its obligations
hereunder; or
(g) The performance of services rendered to the Corporation by the Agent
and the Indemnified Parties hereunder or otherwise in connection with
the matters referred to in this Agreement.
(2) If any action or claim shall be asserted against an Indemnified Party in
respect of which indemnity may be sought from the Corporation pursuant to
the provisions hereof, or if any potential claim contemplated by this
section shall come to the knowledge of an Indemnified Party, the
Indemnified Party shall promptly notify the Corporation in writing of the
nature of such action or claim (provided that any failure to so notify
shall not affect the Corporation's liability under this paragraph unless
such delay has prejudiced the defence to such claim). The Corporation shall
be entitled but not obliged to participate in or assume the defence
thereof, provided, however that the defence shall be through legal counsel
acceptable to the Indemnified Party, acting reasonably. In addition, the
Indemnified Party shall also have the right to employ separate counsel in
any such action and participate in the defence thereof, and the fees and
expense of such counsel shall be paid by the Indemnified Party unless (i)
the employment thereof has been specifically authorized in writing by the
Corporation; (ii) the Indemnified Party has been advised by counsel, that
representation of the Corporation and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing
interests between them; or (iii) the Corporation has failed within a
reasonable time after receipt of such written notice to assume the defence
of such action or claim. Neither party shall effect any settlement of any
such action or claim or make any admission of liability without the written
consent of the other party, such consent not to be unreasonably withheld or
delayed. The indemnity hereby provided for shall remain in full force and
effect and shall not be limited to or affected by any other indemnity in
respect of any matters specified in this section obtained by the
Indemnified Party from any other person.
(3) To the extent that any Indemnified Party is not a party to this Agreement
the Agent shall obtain and hold the right and benefit of this section in
trust for and on behalf of such Indemnified Party.
(4) The Corporation hereby waives its right to recover contribution from the
Agent with respect to any liability of the Corporation by reason of or
arising out of any
<PAGE>
-20-
misrepresentation contained in the Preliminary Prospectus, the Prospectus
or in any Supplementary Material; provided, however, that such waiver shall
not apply in respect of liability caused or incurred by reason of or
arising out of any misrepresentation which is based upon or results from
information relating solely to the Agent contained in such document.
(5) The Corporation hereby consents to personal jurisdiction and service and
venue in any court in which any claim which is subject to indemnification
hereunder is brought against the Agent or any Indemnified Party and to the
assignment of the benefit of this section to any Indemnified Party for the
purpose of enforcement provided that nothing herein shall limit the
Corporation's right or ability to contest the appropriate jurisdiction or
forum for the determination of any such claims.
Section 11 Contribution.
If, for any reason, the indemnity provided for in Section 11 hereof is
illegal or unenforceable or insufficient, the Corporation shall contribute to
the amount paid or payable by the Agent as a result of all losses, claims,
costs, damages, expenses or liabilities (except loss of profits in connection
with the sale of Special Warrants). Notwithstanding the foregoing, a person
guilty of fraudulent misrepresentation shall not be entitled to contribution
from any other party. The Agent will, promptly after receiving notice of
commencement of any claim, action, suit or proceeding against such party in
respect of which a claim for contribution may be made against the Corporation
under this section, notify the Corporation that contribution may be sought. In
no case shall such party from whom contribution may be sought be liable under
this contribution agreement unless such notice shall have been provided, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any other obligation it may have otherwise than
under this section. The right to contribution provided in this section shall be
in addition and not in derogation of any other right to contribution which the
Agent may have by statute or otherwise by law.
Section 12 Termination Rights.
(1) The Agent shall be entitled, at its option, to terminate all of its
obligations under this Agreement, and the obligations of any person from
whom the Agent has solicited an order to purchase the Special Warrants that
has executed a Subscription Agreement, by notice to that effect delivered
to the Corporation prior to the Time of Closing if:
(a) An adverse material change in the business or affairs of the
Corporation or any of its Subsidiaries occurs or is announced by the
Corporation;
(b) There is an event, accident, governmental law or regulation or other
occurrence of any nature which, in the opinion of the Agent, seriously
affects or will seriously affect the financial markets, or the
business of the Corporation or its Subsidiaries or the ability of the
Agent to perform its obligations under this Agreement, or an
investor's decision to purchase the Special Warrants;
<PAGE>
-21-
(c) Following a consideration of the history, business, products, property
or affairs of the Corporation, its Subsidiaries or its principals, or
of the state of the financial markets in general, or the state of the
market for the Corporation's securities in particular, the Agent
determines, in its sole discretion, that it is not in the interest of
the Purchasers to complete the purchase and sale of the Special
Warrants;
(d) Any order to cease trading (including communicating with persons in
order to obtain expressions of interest) in the securities of the
Corporation is made by a competent regulatory authority and that order
is still in effect;
(e) The Corporation is in breach of any term of this Agreement; or
(f) The Agent determines that any of the representations or warranties
made by the Corporation in this Agreement is false or has become
false.
(2) If the Agent terminates this Agreement pursuant to this section, there
shall be no further liability on the part of the Agent or of the
Corporation to the Agent except in respect of any liability which may have
arisen or may thereafter arise under Section 3(2), Section 8, Section 10 or
Section 11 hereof.
(3) The right of the Agent to terminate its obligations under this Agreement is
in addition to such other remedies as they may have or have in respect of
any default, act or failure to act of the Corporation in respect of any of
the matters contemplated by this Agreement.
Section 13 Breach of Agreement.
Any breach of, or failure by the Corporation to comply with, any term or
condition of this Agreement shall entitle the Agent, on behalf of the Purchasers
of the Special Warrants, to terminate their respective obligations to purchase
the Special Warrants by notice to that effect given to the Corporation prior to
the Time of Closing, and there shall be no further liability on the part of the
Corporation or such Agent except in respect of any liability which may have
arisen or may thereafter arise under Section 3(2), Section 8, Section 10 or
Section 11Section 11 hereof. The Agent may waive, in whole or in part, or extend
the time for compliance with, any terms and conditions without prejudice to its
rights in respect of any other terms and conditions or any other or subsequent
breach or non-compliance provided, however, that any waiver or extension must be
in writing and signed by the Agent in order to be binding upon them.
Section 14 Right of First Refusal.
The Corporation hereby grants to the Agent a right (the "First Right") to
act as the Corporation's exclusive agent in connection with any equity offering
of securities (including an offering of special warrants) of the Corporation or
in connection with a sale or proposed sale by the Corporation of all or
substantially all of the Corporation's assets or the entering into of any
business combination by the Corporation, including any merger or acquisition,
<PAGE>
-22-
during the one year period commencing on the date hereof. The First Right shall
be exercisable during a period of ten Business Days after receipt by the Agent
from the Corporation of a notice outlining the proposed terms of a transaction.
The terms and conditions of any retainer will be subject to separate good faith
negotiations between the Corporation and the Agent, such fees to be in
accordance with North American industry standards for transactions of a similar
nature.
Section 15 Notices.
Any notice under this Agreement shall be given in writing and either
delivered, faxed or mailed by prepaid registered post to the party to receive
such notice at the address or facsimile numbers indicated below:
(a) to the Corporation at:
Brocker Technology Group Ltd.
2150 Scotia One
10060 Jasper Avenue
Edmonton, Alberta
T5J 3R8
Attention: Mr. Casey J. O'Byrne
Chairman
Facsimile: (780) 429-0101
(b) to the Agent or any Indemnified Party at:
Thomson Kernaghan & Co. Limited
365 Bay Street
9th Floor
Toronto, Ontario M5H 2V2
Attention: Mr. Lionel Conacher
Facsimile: 416-367-8055
or such other address or facsimile number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; if such notice is faxed (with receipt
confirmed), it shall be effective on the Business Day following the date such
notice is faxed; if such notice is sent by mail, it shall be effective four
Business Days following the date of mailing, excluding all days when normal mail
service is interrupted.
<PAGE>
-23-
Section 16 Survival.
All representations, warranties, and agreements of the Corporation
contained herein or contained in any document submitted pursuant to this
Agreement or in connection with the purchase of the Special Warrants shall
survive the purchase of the Special Warrants and the Agent's Special Option for
a period of two years from the Time of Closing by the Purchasers and shall
continue in full force and effect unaffected by any subsequent disposition or
conversion of the Special Warrants and the Agent's Special Option and the Agent
shall not be limited or prejudiced by any investigation made by or on behalf of
the Agent in the course of the preparation of the Preliminary Prospectus, the
Prospectus or any Supplementary Material or the distribution of the Special
Warrants.
Section 17 Entire Agreement.
The provisions herein contained and all agreements, instruments or other
documents referred to herein constitute the entire agreement between the parties
hereto and supersede all previous communications, representations,
understandings and agreements between the parties with respect to the subject
matter hereof whether verbal or written.
Section 18 Counterparts.
This Agreement may be executed in any number of counterparts and may be
executed by facsimile, all of which when taken together shall be deemed to be
one and the same document and not withstanding the actual date of execution of
each counterpart, this Agreement shall be deemed to be dated as of the date
first above written.
Section 19 General.
This Agreement shall be governed by and interpreted in accordance with the
laws of Alberta and the laws of Canada applicable therein and time shall be of
the essence hereof.
Section 20 Severability.
If any provision of this Agreement, or the application of such provision to
any person or circumstance, shall be held invalid or unenforceable, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
<PAGE>
-24-
If the above is in accordance with your understanding, please sign and
return to the Agent a copy of this letter, whereupon this letter and your
acceptance shall constitute a binding agreement between the Corporation and the
Agent.
THOMSON KERNAGHAN & CO. Limited
By:
-------------------------------------
Authorized Signing Officer
The above offer is hereby accepted and agreed to as of the date first above
written.
BROCKER TECHNOLOGY GROUP LTD.
By:
-------------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE 3(2)(a)
FORM OF AGENT'S SPECIAL OPTION
AGENT'S SPECIAL OPTION TO ACQUIRE
AGENT'S OPTION
OF
BROCKER TECHNOLOGY GROUP LTD.
(incorporated under the Business Corporations Act (Alberta))
THIS CERTIFIES that, for value received, Thomson Kernaghan & Co. Limited
(the "Agent") is the registered holder of an agent's special option (the
"Agent's Special Option") granted by Brocker Technology Group Ltd. (the
"Corporation") which entitles the Agent, subject to the terms and conditions set
forth in this certificate, to acquire from the Corporation an option (the
"Agent's Option"), for no additional consideration, at any time prior to the
Time of Expiry (defined below). The Agent's Option shall entitle the Agent to
acquire 200,000 fully paid and non-assessable common shares of the Corporation
(each, a "Share", collectively, the "Shares") commencing on the date of issuance
of the Agent's Option and continuing up to 4:00 p.m. (Edmonton time) on January
21, 2002 on payment of $6.25 per Share (the "Exercise Price"). The Agent's
Option shall be in the form attached as Schedule "B" hereto. This Agent's
Special Option is being issued as partial compensation to the Agent for its or
its affiliates services pursuant to an agency agreement dated January 21, 2000
between the Corporation and the Agent in connection with the issue and sale of
special warrants (the "Special Warrants") of the Corporation. The Agent's
Special Option will be deemed to be exercised by the Agent without any action on
the part of the Agent upon the earlier of the (i) the first anniversary of the
Closing Date (defined below) and (ii) the fifth business day (defined below)
after the day on which all receipts have been issued by the securities
regulatory authorities in the Provinces of Canada in which purchasers of Special
Warrants are resident (the "Qualifying Provinces") for the final prospectus (the
"Prospectus") to qualify the distribution of common shares of the Corporation
and, to the extent possible, the distribution of the Agent's Option issuable
upon the exercise of the Agent's Special Option (in either case the "Time of
Expiry"). For the purposes hereof, "business day" means any day except Saturday,
Sunday or statutory holiday in Edmonton, Alberta.
Section 1 Exercise of Agent's Special Option:
(1) Exercise. The Agent may at any time prior to the Time of Expiry exercise
the Agent's Special Option by means of the completion and delivery to the
Corporation, at the offices of Chamberlain Hutchison, 1103 Toronto Dominion
Tower, 10088-102 Avenue, Edmonton Alberta T5J 2Z1, Attention: Andrew J.
Chamberlain, of the Exercise Form in the form attached as Schedule "A"
hereto. If the Agent's Special Option has not been exercised in full prior
to the Time of Expiry, the unexercised portion of the Agent's Special
Option will be deemed exercised by the holder thereof immediately prior to
the Time of Expiry. Notwithstanding the date of exercise or deemed exercise
of the Agent's Special Option, the Agent's Option shall be in respect
<PAGE>
-25-
of the Shares as constituted on January 21, 2000 (the "Closing Date") in
order to ensure that the Agent's Option is subject to the adjustment
provisions contained in the certificate representing the Agent's Option
from the date hereof.
(2) Shares to be Reserved. The Corporation will at all times keep available,
and reserve if necessary under applicable law, out of its authorized common
shares, solely for the purpose of issue upon the exercise of the Agent's
Option, such number of Shares as shall then be issuable upon the exercise
of the Agent's Option. The Corporation covenants and agrees that all Shares
which shall be so issuable will, upon issuance, be duly authorized and be
issued as fully paid and non-assessable. The Corporation will take such
actions as may be reasonably necessary and as are within its power to
ensure that all such Shares may be so issued without violation of any
applicable law or applicable requirements of any exchange upon which the
common shares of the Corporation may be listed or in respect of which the
common shares of the Corporation are qualified for unlisted trading
privileges.
(3) Qualification. The Corporation will use its reasonable best efforts to
promptly finalize and obtain all receipts for the Prospectus from the
securities regulatory authorities in the Qualifying Provinces as soon as
reasonably practicable.
Section 2 No Transfer.
The Agent's Special Option evidenced hereby is non-assignable,
non-transferable and non-negotiable and may not be exercised by or for the
benefit of any person other than the Agent.
Section 3 Replacement.
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of this certificate and, if requested by the
Corporation, upon delivery of a bond of indemnity satisfactory to the
Corporation (or, in the case of mutilation, upon surrender of this certificate),
the Corporation will issue to the Agent a replacement certificate (containing
the same terms and conditions as this certificate).
Section 4 Governing Law.
The laws of the Province of Alberta and the laws of Canada applicable
therein shall govern the Agent's Special Option.
Section 5 Successor Agent.
This Certificate shall enure to the benefit of and shall be binding upon
the Agent and the Corporation and their respective successors.
Section 6 General.
This certificate is not valid for any purpose whatsoever unless and until
it has been signed by or on behalf of the Corporation. The holding of the
Agent's Special Option evidenced by this certificate shall not constitute the
holder a shareholder of the Corporation
<PAGE>
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or entitle the holder to any right or interest in respect thereof except as
expressly provided in this certificate.
IN WITNESS WHEREOF the Corporation has caused this certificate to be signed
by its duly authorized officers and its corporate seal hereto affixed.
DATED as of the _____ day of January, 2000.
BROCKER TECHNOLOGY GROUP
LTD.
By:
-------------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE "A"
EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the Agent's Special
Option granted by Brocker Technology Group Ltd. (the "Corporation") set out
below for an Agent's Option (or other property or securities subject thereto) to
acquire ___________ common shares in the capital of the Corporation and directs
such Agent's Option to be registered and a certificate therefor to be issued and
delivered as directed below.
DATED this ____ day of _________________, _____
THOMSON KERNAGHAN & CO.
LIMITED
By:
-------------------------------------
Authorized Signing Officer
Direction as to Registration:
Name of Registered Holder: -------------------------------------
Address of Registered Holder -------------------------------------
-------------------------------------
-------------------------------------
Direction as to Delivery:
Name of Contact: -------------------------------------
Address of Contact: -------------------------------------
-------------------------------------
-------------------------------------
<PAGE>
SCHEDULE "B"
FORM OF AGENT'S OPTION TO PURCHASE SHARES OF
BROCKER TECHNOLOGY GROUP LTD.
(incorporated under the Business Corporation Act (Alberta))
THIS CERTIFIES that, for value received, Thomson Kernaghan & Co. Limited
(the "Agent") is the registered holder of an Agent's Option (the "Agent's
Option") which entitles the holder, subject to the terms and conditions set
forth in this Certificate, to purchase from Brocker Technology Group Ltd. (the
"Corporation") up to 200,000 fully paid and non-assessable common shares of the
Corporation (the "Shares") at any time commencing on the date hereof and
continuing up to 4:00 p.m. (Edmonton time) on January 21, 2002 (the "Time of
Expiry") on payment of $6.25 per Share (the "Exercise Price"). The number of
Shares that the Agent is entitled to acquire upon exercise of the Agent's Option
and payment of the Exercise Price are subject to adjustment as hereinafter
provided.
Section 1 Exercise of Agent's Option.
(1) Election to Purchase. The rights evidenced by this certificate may be
exercised by the Agent in whole or in part and in accordance with the
provisions hereof by delivery of an Election to Exercise in substantially
the form attached hereto as Exhibit "1", properly completed and executed,
together with payment of the Exercise Price for the number of Shares
specified in the Election to Exercise to the Corporation at the offices of
Chamberlain Hutchison, 1103 Toronto Dominion Tower, 10088-102 Avenue,
Edmonton, Alberta T5J 2Z1, Attention: Andrew J. Chamberlain, or such other
address in Canada as may be notified in writing by the Corporation. In the
event that the rights evidenced by this certificate are exercised in part,
the Corporation shall, contemporaneously with the issuance of the Shares
issuable on the exercise of the Agent's Option so exercised, issue to the
Agent, an Agent's Option on identical terms in respect of that number of
Shares in respect of which the Agent has not exercised the rights evidenced
by this certificate.
(2) Exercise. The Corporation shall, on the date it receives a duly executed
Election to Exercise and the Exercise Price for the number of shares
specified in the Election to Exercise (the "Exercise Date"), issue that
number of Shares specified in the Election to Exercise as fully paid and
non-assessable Shares of the Corporation.
(3) Certificate. As promptly as practicable after the Exercise Date and, in any
event, within five business days of receipt of the Election to Exercise,
the Corporation shall issue and deliver to the Agent, registered in such
name or names as the Agent may direct or if no such direction has been
given, in the name of the Agent, certificate(s) for the number of Shares
specified in the Election to Exercise. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the close of business
on the Exercise Date, and at such time the rights of the Agent with respect
to the number of Shares in respect of which the Agent's Option has been
exercised shall
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cease, and the person or persons in whose name or names any certificate(s)
for Shares shall then be issuable upon such exercise shall be deemed to
have become the holder or holders of record of the Shares represented
thereby.
(4) Fractional Shares. Fractional shares shall not be issued and the holder
shall not be entitled to any compensation or other right in lieu of
fractional Shares.
(5) Corporate Changes. Subject to Section 5 hereof, if the Corporation shall be
a party to any reorganization, merger, dissolution or sale of all or
substantially all of its assets, whether or not the Corporation is the
surviving entity, the Agent's Option evidenced by this certificate shall be
adjusted so as to apply to the securities to which the holder of that
number of Shares subject to the unexercised Agent's Option would have been
entitled by reason of such reorganization, merger, dissolution or sale of
all or substantially all of its assets (the "Event"), and the Exercise
Price shall be adjusted to be the amount determined by multiplying the
Exercise Price in effect immediately prior to the Event by the number of
Shares subject to the unexercised Agent's Option immediately prior to the
Event, and dividing the product thereof by the number of securities to
which the holder of that number of Shares subject to the unexercised
Agent's Option would have been entitled to by reason of such Event.
(6) Subdivision or Consolidation of Shares:
(a) In the event the Corporation shall subdivide its outstanding common
shares into a greater number of common shares, the Exercise Price in
effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding common shares of the
Corporation shall be consolidated into a smaller number of shares, the
Exercise Price in effect immediately prior to such consolidation shall
be proportionately increased (such subdivision or consolidation being
hereinafter referred to as a "Capital Reorganization").
(b) Upon each adjustment of the Exercise Price as provided herein, the
Agent shall thereafter be entitled to acquire, at the Exercise Price
resulting from such adjustment, in lieu of the number of Shares which
the Agent would have been previously entitled to acquire, the number
of Shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Shares that may
be acquired hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(7) Change or Reclassification of Shares. In the event the Corporation shall
change or reclassify its outstanding common shares into a different class
of securities, the rights evidenced by the Agent's Option shall be adjusted
as follows so as to apply to the successor class of securities:
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(a) the number of the successor class of securities which the Agent shall
be entitled to acquire shall be that number of the successor class of
securities which a holder of that number of Shares subject to the
unexercised Agent's Option immediately prior to the change or
reclassification would have been entitled to by reason of such change
or reclassification; and
(b) the Exercise Price shall be determined by multiplying the Exercise
Price in effect immediately prior to the change or reclassification by
the number of Shares subject to the unexercised Agent's Option
immediately prior to the change or reclassification, and dividing the
product thereof by the number of successor securities determined in
Section 1(7)(a) hereof.
(8) Offering to Shareholder. If and whenever at any time prior to the Time of
Expiry, the Corporation shall fix a record date or if a date of entitlement
to receive is otherwise established (any such date being hereinafter
referred to in this Section 1(8) as the "record date") for the issuance of
rights, options or warrants to all or substantially all the holders or the
outstanding common shares of the Corporation entitling them, for a period
expiring not more than 45 days after such record date (any such event
hereinafter being referred to as a "Rights Offering"), to subscribe for or
purchase common shares of the Corporation or securities convertible into or
exchangeable for common shares at a price per common share or, as the case
may be, having a conversion or exchange price per common share less than
95% of the Current Market Value (as defined below) on such record date, the
Exercise Price shall be adjusted immediately after such record date so that
it shall equal the price determined by multiplying the Exercise Price in
effect on such record date by a fraction, (i) the numerator of which shall
be the aggregate of (A) the number of common shares outstanding on such
record date and (B) a number equal to the number arrived at by dividing the
product of the number of common shares that may be purchased or subscribed
for (or into which they may be converted or exchanged) multiplied by the
subscription or purchase price of the common shares offered for purchase or
subscription (or the conversion or exchange price of the convertible or
exchangeable securities so offered) by such Current Market Value, and (ii)
the denominator of which shall be the aggregate of (X) the number of common
shares outstanding on such record date and (Y) the number of additional
common shares so offered (or into which the convertible or exchangeable
securities so offered are convertible or exchangeable). Common shares owned
by or held for the account of the Corporation or any subsidiary of the
Corporation shall be deemed not to be outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such
a record date is fixed. To the extent that any rights or warrants are not
so issued or any such rights or warrants are not exercised prior to the
expiration thereof, the Exercise Price shall then be readjusted to the
Exercise Price that would then be in effect if such record date had not
been fixed or to the Exercise Price that would then be in effect based upon
the number of common shares or conversion or exchange rights contained in
convertible or exchangeable securities actually issued upon the exercise of
such rights or warrants, as the case may be.
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(9) Special Distribution. If and whenever at any time prior to the Time of
Expiry, the Corporation shall fix a record date for the distribution to all
or substantially all the holders of common shares of:
(a) shares of any class, whether of the Corporation or any other
corporation;
(b) rights, options or warrants;
(c) evidences or indebtedness; or
(d) other assets or property;
and if such distribution does not constitute a Capital Reorganization or a
Rights Offering or does not consist of rights, options or warrants
entitling the holders of common shares of the Corporation to subscribe for
or purchase common shares of the Corporation for a period expiring not more
than 45 days after such record date and at a price per share (or having a
conversion or exchange price per share) of at least 95% of the Current
Market Value of the common shares of the Corporation on such record date
(any such non-excluded event being hereinafter referred to as a "Special
Distribution") the Exercise Price shall be adjusted immediately after such
record date so that it shall equal the price determined by multiplying the
Exercise Price in effect on such record date by a fraction: (A) the
numerator of which shall be the amount by which (1) the amount obtained by
multiplying the number of common shares of the Corporation outstanding on
such record date by the Current Market Value of the common shares of the
Corporation on such record date, exceeds (2) the fair market value (as
reasonably determined by the directors of the Corporation in good faith,
which determination shall be conclusive) to the holders of such shares of
such Special Distribution; and (B) the denominator of which shall be the
total number of common shares of the Corporation outstanding on such record
date multiplied by such Current Market Value. Any common shares of the
Corporation owned by or held for the account of the Corporation shall be
deemed not to be outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed.
To the extent that such Special Distribution is not so made or any such
rights, options or warrants are not exercised prior to the expiration
thereof, the Exercise Price shall then be readjusted to the Exercise Price
which would then be in effect if such record date had not been fixed or if
such expired rights, options or warrants had not been issued.
(10) Carry Over of Adjustments. No adjustment of the Exercise Price shall be
made if the amount of such adjustment shall be less than 1% of the Exercise
Price in effect immediately prior to the event giving rise to the
adjustment, provided, however, that in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least
1% of the Exercise Price.
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(11) Notice of Adjustment. Upon any adjustment of the number of Shares and upon
any adjustment of the Exercise Price, then and in each such case the
Corporation shall give written notice thereof to the Agent, which notice
shall state the Exercise Price and the number of Shares subject to the
unexercised Agent's Option resulting from such adjustment, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Upon the request of the Agent there shall
be transmitted promptly to the Agent a statement of the firm of independent
chartered accountants retained to audit the financial statements of the
Corporation to the effect that such firm concurs in the Corporation's
calculation of the change.
(12) Other Notice. In case at any time:
(a) the Corporation shall declare any dividend upon its common shares
payable in common shares;
(b) the Corporation shall offer for subscription pro rata to the holders
of its common shares any additional shares of any class or other
rights;
(c) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or consolidation, amalgamation or
merger of the Corporation with, or sale of all or substantially all of
its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, in any one or more of such cases, the Corporation shall give to the
Agent (A) at least 10 days' prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, amalgamation,
sale, dissolution, liquidation or winding-up and (B) in the case of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, at least 10 days prior written
notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of
any such dividend, distribution or subscription rights, the date on which
the holders of Shares shall be entitled thereto, and such notice in
accordance with the foregoing clause (B) shall also specify the date on
which the holders of Shares shall be entitled to exchange their Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation, sale, dissolution,
liquidation or winding-up, as the case may be.
(13) Shares to be Reserved. The Corporation will at all times keep available,
and reserve if necessary under Canadian law, out of its authorized common
shares, solely for the purpose of issue upon the exercise of the Agent's
Option, such number of Shares as shall then be issuable upon the exercise
of the Agent's Option, as the case may be. The Corporation covenants and
agrees that all Shares that shall be so issuable will,
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upon issuance, be duly authorized and, in respect of the Shares, be issued
as fully paid and non-assessable. The Corporation will take such actions as
may be reasonably necessary and as are within its power to ensure that all
such Shares may be so issued without violation of any applicable laws or
the applicable requirements of any exchange upon which the common shares of
the Corporation may be listed or in respect of which such shares are
qualified for unlisted trading privileges.
(14) Current Market Value. For the purposes of any computation hereunder, the
"Current Market Value" at any date shall be the weighted average sale price
per share for the common shares of the Corporation for the 20 consecutive
trading days immediately before such date on such principal stock exchange
or over-the-counter market as the common shares of the Corporation may then
be listed or quoted (as the case may be), or, if the shares in respect of
which a determination of Current Market Value is being made are not listed
on any stock exchange or quoted for trading by a recognized
over-the-counter market, the Current Market Value shall be determined by
the firm of independent chartered accountants retained to audit the
financial statements of the Corporation, which determination shall be
conclusive. The weighted average price shall be determined by dividing the
aggregate sale price of all such shares sold on the said exchange during
the said 20 consecutive trading days by the total number of such shares so
sold.
Section 2 Replacement.
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of this Agent's Option Certificate and, if
requested by the Corporation, upon delivery of a bond of indemnity satisfactory
to the Corporation (or, in the case of mutilation, upon surrender of this
Agent's Option Certificate), the Corporation will issue to the Agent a
replacement certificate (containing the same terms and conditions as this
Agent's Option Certificate).
Section 3 No Transfer of Option.
The Agent's Option evidenced hereby are non-assignable, non-transferable
and non-negotiable and may not be exercised by or for the benefit of any person
other than the Agent.
Section 4 Expiry Date.
The Agent's Option shall expire and all rights to purchase Shares hereunder
shall cease and become null and void at 4:00 p.m. (Edmonton time) on January 21,
2002.
Section 5 Inability to Deliver Shares.
If for any reason, other than the failure or default of the Agent, the
Corporation is unable to issue and deliver the Shares or other securities as
contemplated herein to the Agent upon the proper exercise by the Agent of the
right to purchase any of the Shares covered by this Agent's Option Certificate,
the Corporation may pay, at its option and in complete satisfaction of its
obligations hereunder, to the Agent, in cash, an amount equal to the difference
between the Exercise Price and the fair market value (as reasonably determined
by
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the directors of the Corporation in good faith, which determination shall be
conclusive) of such Shares or other securities on the Exercise Date.
Section 6 Governing Law.
The laws of the Province of Alberta and the laws of Canada applicable
therein shall govern the Agent's Option.
Section 7 Successor.
This certificate shall enure to the benefit of and shall be binding upon
the Agent and the Corporation and their respective successors.
Section 8 General.
The holding of the Agent's Option evidenced by this certificate shall not
constitute the holder a shareholder of the Corporation or entitle the holder to
any right or interest in respect thereof except as expressly provided in this
certificate.
IN WITNESS WHEREOF the Corporation has caused this Agent's Option
Certificate to be signed by its duly authorized officers and its corporate seal
hereto affixed.
DATED as of the _____ day of _____________________, _______.
BROCKER TECHNOLOGY GROUP
LTD.
By:
-------------------------------------
Authorized Signing Officer
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EXHIBIT 1
Election to Exercise
The undersigned hereby irrevocably elects to exercise the Agent's Option
granted by Brocker Technology Group Ltd. for the number of Shares (or other
property or securities subject thereto) as set forth below:
(a) Number of Shares to be Acquired: ________________
(b) Exercise Price per Share: _________________
(c) Aggregate Purchase Price [(a) multiplied by (b)] $_________________
and hereby tenders a certified cheque, bank draft or cash for such aggregate
purchase price, and directs such Shares to be registered and a certificate
therefor to be issued and delivered as directed below.
DATED this _____ day of ___________________, _______.
THOMSON KERNAGHAN & CO.
LIMITED
By:
-------------------------------------
Authorized Signing Officer
Direction as to Registration:
Name of Registered Holder: -------------------------------------
Address of Registered Holder -------------------------------------
-------------------------------------
-------------------------------------
Direction as to Delivery:
Name of Contact: -------------------------------------
Address of Contact: -------------------------------------
-------------------------------------
-------------------------------------
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SCHEDULE 3(2)(b)
FORM OF AGENT'S OPTION
AGENT'S OPTION TO PURCHASE SHARES OF
BROCKER TECHNOLOGY GROUP LTD.
(incorporated under the Business Corporation Act (Alberta))
THIS CERTIFIES that, for value received, Thomson Kernaghan & Co. Limited
(the "Agent") is the registered holder of an Agent's Option (the "Agent's
Option") which entitles the holder, subject to the terms and conditions set
forth in this Certificate, to purchase from Brocker Technology Group Ltd. (the
"Corporation") up to 200,000 fully paid and non-assessable common shares of the
Corporation (the "Shares") at any time commencing on the date hereof and
continuing up to 4:00 p.m. (Edmonton time) on January 21, 2002 (the "Time of
Expiry") on payment of $6.25 per Share (the "Exercise Price"). The number of
Shares that the Agent is entitled to acquire upon exercise of the Agent's Option
and payment of the Exercise Price are subject to adjustment as hereinafter
provided.
Section 9 Exercise of Agent's Option.
(1) Election to Purchase. The rights evidenced by this certificate may be
exercised by the Agent in whole or in part and in accordance with the
provisions hereof by delivery of an Election to Exercise in substantially
the form attached hereto as Exhibit "1", properly completed and executed,
together with payment of the Exercise Price for the number of Shares
specified in the Election to Exercise to the Corporation at the offices of
Chamberlain Hutchison, 1103 Toronto Dominion Tower, 10088-102 Avenue,
Edmonton, Alberta T5J 2Z1, Attention: Andrew J. Chamberlain, or such other
address in Canada as may be notified in writing by the Corporation. In the
event that the rights evidenced by this certificate are exercised in part,
the Corporation shall, contemporaneously with the issuance of the Shares
issuable on the exercise of the Agent's Option so exercised, issue to the
Agent, an Agent's Option on identical terms in respect of that number of
Shares in respect of which the Agent has not exercised the rights evidenced
by this certificate.
(2) Exercise. The Corporation shall, on the date it receives a duly executed
Election to Exercise and the Exercise Price for the number of shares
specified in the Election to Exercise (the "Exercise Date"), issue that
number of Shares specified in the Election to Exercise as fully paid and
non-assessable Shares of the Corporation.
(3) Certificate. As promptly as practicable after the Exercise Date and, in any
event, within five business days of receipt of the Election to Exercise,
the Corporation shall issue and deliver to the Agent, registered in such
name or names as the Agent may direct or if no such direction has been
given, in the name of the Agent, certificate(s) for the number of Shares
specified in the Election to Exercise. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the close of business
on the Exercise Date, and at such time the rights of the Agent with respect
to
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the number of Shares in respect of which the Agent's Option has been
exercised shall cease, and the person or persons in whose name or names any
certificate(s) for Shares shall then be issuable upon such exercise shall
be deemed to have become the holder or holders of record of the Shares
represented thereby.
(4) Fractional Shares. Fractional shares shall not be issued and the holder
shall not be entitled to any compensation or other right in lieu of
fractional Shares.
(5) Corporate Changes. Subject to Section 5 hereof, if the Corporation shall be
a party to any reorganization, merger, dissolution or sale of all or
substantially all of its assets, whether or not the Corporation is the
surviving entity, the Agent's Option evidenced by this certificate shall be
adjusted so as to apply to the securities to which the holder of that
number of Shares subject to the unexercised Agent's Option would have been
entitled by reason of such reorganization, merger, dissolution or sale of
all or substantially all of its assets (the "Event"), and the Exercise
Price shall be adjusted to be the amount determined by multiplying the
Exercise Price in effect immediately prior to the Event by the number of
Shares subject to the unexercised Agent's Option immediately prior to the
Event, and dividing the product thereof by the number of securities to
which the holder of that number of Shares subject to the unexercised
Agent's Option would have been entitled to by reason of such Event.
(6) Subdivision or Consolidation of Shares:
(a) In the event the Corporation shall subdivide its outstanding common
shares into a greater number of common shares, the Exercise Price in
effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding common shares of the
Corporation shall be consolidated into a smaller number of shares, the
Exercise Price in effect immediately prior to such consolidation shall
be proportionately increased (such subdivision or consolidation being
hereinafter referred to as a "Capital Reorganization").
(b) Upon each adjustment of the Exercise Price as provided herein, the
Agent shall thereafter be entitled to acquire, at the Exercise Price
resulting from such adjustment, in lieu of the number of Shares which
the Agent would have been previously entitled to acquire, the number
of Shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Shares that may
be acquired hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(7) Change or Reclassification of Shares. In the event the Corporation shall
change or reclassify its outstanding common shares into a different class
of securities, the rights evidenced by the Agent's Option shall be adjusted
as follows so as to apply to the successor class of securities:
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(a) the number of the successor class of securities which the Agent shall
be entitled to acquire shall be that number of the successor class of
securities which a holder of that number of Shares subject to the
unexercised Agent's Option immediately prior to the change or
reclassification would have been entitled to by reason of such change
or reclassification; and
(b) the Exercise Price shall be determined by multiplying the Exercise
Price in effect immediately prior to the change or reclassification by
the number of Shares subject to the unexercised Agent's Option
immediately prior to the change or reclassification, and dividing the
product thereof by the number of successor securities determined in
Section 1(7)(a) hereof.
(8) Offering to Shareholder. If and whenever at any time prior to the Time of
Expiry, the Corporation shall fix a record date or if a date of entitlement
to receive is otherwise established (any such date being hereinafter
referred to in this Section 1(8) as the "record date") for the issuance of
rights, options or warrants to all or substantially all the holders or the
outstanding common shares of the Corporation entitling them, for a period
expiring not more than 45 days after such record date (any such event
hereinafter being referred to as a "Rights Offering"), to subscribe for or
purchase common shares of the Corporation or securities convertible into or
exchangeable for common shares at a price per common share or, as the case
may be, having a conversion or exchange price per common share less than
95% of the Current Market Value (as defined below) on such record date, the
Exercise Price shall be adjusted immediately after such record date so that
it shall equal the price determined by multiplying the Exercise Price in
effect on such record date by a fraction, (i) the numerator of which shall
be the aggregate of (A) the number of common shares outstanding on such
record date and (B) a number equal to the number arrived at by dividing the
product of the number of common shares that may be purchased or subscribed
for (or into which they may be converted or exchanged) multiplied by the
subscription or purchase price of the common shares offered for purchase or
subscription (or the conversion or exchange price of the convertible or
exchangeable securities so offered) by such Current Market Value, and (ii)
the denominator of which shall be the aggregate of (X) the number of common
shares outstanding on such record date and (Y) the number of additional
common shares so offered (or into which the convertible or exchangeable
securities so offered are convertible or exchangeable). Common shares owned
by or held for the account of the Corporation or any subsidiary of the
Corporation shall be deemed not to be outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such
a record date is fixed. To the extent that any rights or warrants are not
so issued or any such rights or warrants are not exercised prior to the
expiration thereof, the Exercise Price shall then be readjusted to the
Exercise Price that would then be in effect if such record date had not
been fixed or to the Exercise Price that would then be in effect based upon
the number of common shares or conversion or exchange rights contained in
convertible or exchangeable securities actually issued upon the exercise of
such rights or warrants, as the case may be.
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(9) Special Distribution. If and whenever at any time prior to the Time of
Expiry, the Corporation shall fix a record date for the distribution to all
or substantially all the holders of common shares of:
(a) shares of any class, whether of the Corporation or any other
corporation;
(b) rights, options or warrants;
(c) evidences or indebtedness; or
(d) other assets or property;
and if such distribution does not constitute a Capital Reorganization or a
Rights Offering or does not consist of rights, options or warrants
entitling the holders of common shares of the Corporation to subscribe for
or purchase common shares of the Corporation for a period expiring not more
than 45 days after such record date and at a price per share (or having a
conversion or exchange price per share) of at least 95% of the Current
Market Value of the common shares of the Corporation on such record date
(any such non-excluded event being hereinafter referred to as a "Special
Distribution") the Exercise Price shall be adjusted immediately after such
record date so that it shall equal the price determined by multiplying the
Exercise Price in effect on such record date by a fraction: (A) the
numerator of which shall be the amount by which (1) the amount obtained by
multiplying the number of common shares of the Corporation outstanding on
such record date by the Current Market Value of the common shares of the
Corporation on such record date, exceeds (2) the fair market value (as
reasonably determined by the directors of the Corporation in good faith,
which determination shall be conclusive) to the holders of such shares of
such Special Distribution; and (B) the denominator of which shall be the
total number of common shares of the Corporation outstanding on such record
date multiplied by such Current Market Value. Any common shares of the
Corporation owned by or held for the account of the Corporation shall be
deemed not to be outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed.
To the extent that such Special Distribution is not so made or any such
rights, options or warrants are not exercised prior to the expiration
thereof, the Exercise Price shall then be readjusted to the Exercise Price
which would then be in effect if such record date had not been fixed or if
such expired rights, options or warrants had not been issued.
(10) Carry Over of Adjustments. No adjustment of the Exercise Price shall be
made if the amount of such adjustment shall be less than 1% of the Exercise
Price in effect immediately prior to the event giving rise to the
adjustment, provided, however, that in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least
1% of the Exercise Price.
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(11) Notice of Adjustment. Upon any adjustment of the number of Shares and upon
any adjustment of the Exercise Price, then and in each such case the
Corporation shall give written notice thereof to the Agent, which notice
shall state the Exercise Price and the number of Shares subject to the
unexercised Agent's Option resulting from such adjustment, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Upon the request of the Agent there shall
be transmitted promptly to the Agent a statement of the firm of independent
chartered accountants retained to audit the financial statements of the
Corporation to the effect that such firm concurs in the Corporation's
calculation of the change.
(12) Other Notice. In case at any time:
(a) the Corporation shall declare any dividend upon its common shares
payable in common shares;
(b) the Corporation shall offer for subscription pro rata to the holders
of its common shares any additional shares of any class or other
rights;
(c) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or consolidation, amalgamation or
merger of the Corporation with, or sale of all or substantially all of
its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, in any one or more of such cases, the Corporation shall give to the
Agent (A) at least 10 days' prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, amalgamation,
sale, dissolution, liquidation or winding-up and (B) in the case of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, at least 10 days prior written
notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of
any such dividend, distribution or subscription rights, the date on which
the holders of Shares shall be entitled thereto, and such notice in
accordance with the foregoing clause (B) shall also specify the date on
which the holders of Shares shall be entitled to exchange their Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation, sale, dissolution,
liquidation or winding-up, as the case may be.
(13) Shares to be Reserved. The Corporation will at all times keep available,
and reserve if necessary under Canadian law, out of its authorized common
shares, solely for the purpose of issue upon the exercise of the Agent's
Option, such number of Shares as shall then be issuable upon the exercise
of the Agent's Option, as the case may be. The Corporation covenants and
agrees that all Shares that shall be so issuable will,
<PAGE>
-6-
upon issuance, be duly authorized and, in respect of the Shares, be issued
as fully paid and non-assessable. The Corporation will take such actions as
may be reasonably necessary and as are within its power to ensure that all
such Shares may be so issued without violation of any applicable laws or
the applicable requirements of any exchange upon which the common shares of
the Corporation may be listed or in respect of which such shares are
qualified for unlisted trading privileges.
(14) Current Market Value. For the purposes of any computation hereunder, the
"Current Market Value" at any date shall be the weighted average sale price
per share for the common shares of the Corporation for the 20 consecutive
trading days immediately before such date on such principal stock exchange
or over-the-counter market as the common shares of the Corporation may then
be listed or quoted (as the case may be), or, if the shares in respect of
which a determination of Current Market Value is being made are not listed
on any stock exchange or quoted for trading by a recognized
over-the-counter market, the Current Market Value shall be determined by
the firm of independent chartered accountants retained to audit the
financial statements of the Corporation, which determination shall be
conclusive. The weighted average price shall be determined by dividing the
aggregate sale price of all such shares sold on the said exchange during
the said 20 consecutive trading days by the total number of such shares so
sold.
Section 10 Replacement.
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of this Agent's Option Certificate and, if
requested by the Corporation, upon delivery of a bond of indemnity satisfactory
to the Corporation (or, in the case of mutilation, upon surrender of this
Agent's Option Certificate), the Corporation will issue to the Agent a
replacement certificate (containing the same terms and conditions as this
Agent's Option Certificate).
Section 11 No Transfer of Option.
The Agent's Option evidenced hereby are non-assignable, non-transferable
and non-negotiable and may not be exercised by or for the benefit of any person
other than the Agent.
Section 12 Expiry Date.
The Agent's Option shall expire and all rights to purchase Shares hereunder
shall cease and become null and void at 4:00 p.m. (Edmonton time) on January 21,
2002.
Section 13 Inability to Deliver Shares.
If for any reason, other than the failure or default of the Agent, the
Corporation is unable to issue and deliver the Shares or other securities as
contemplated herein to the Agent upon the proper exercise by the Agent of the
right to purchase any of the Shares covered by this Agent's Option Certificate,
the Corporation may pay, at its option and in complete satisfaction of its
obligations hereunder, to the Agent, in cash, an amount equal to the difference
between the Exercise Price and the fair market value (as reasonably determined
by
<PAGE>
-7-
the directors of the Corporation in good faith, which determination shall be
conclusive) of such Shares or other securities on the Exercise Date.
Section 14 Governing Law.
The laws of the Province of Alberta and the laws of Canada applicable
therein shall govern the Agent's Option.
Section 15 Successor.
This certificate shall enure to the benefit of and shall be binding upon
the Agent and the Corporation and their respective successors.
Section 16 General.
The holding of the Agent's Option evidenced by this certificate shall not
constitute the holder a shareholder of the Corporation or entitle the holder to
any right or interest in respect thereof except as expressly provided in this
certificate.
IN WITNESS WHEREOF the Corporation has caused this Agent's Option
Certificate to be signed by its duly authorized officers and its corporate seal
hereto affixed.
DATED as of the _____ day of _____________________, _______.
BROCKER TECHNOLOGY GROUP
LTD.
By:
-------------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE 3(3)
FORM OF SUBSCRIPTION AGREEMENT
Issue of up to 1,800,000 Special Warrants of Brocker Technology Group Ltd. at a
Subscription Price of $6.25 per Special Warrant as described in the attached
Term Sheet. Each Special Warrant shall entitle the holder to acquire, at no
additional cost, one (1) common share, with an attributed value of $6.25 per
share.
TO: Brocker Technology Group Ltd.
(the "Corporation")
2150 Scotia One
10060 Jasper Avenue
Edmonton, Alberta
T5J 3R8
1. Subscription: The Subscriber hereby subscribes for and agrees to purchase
__________ Special Warrants of the Corporation at a price of $6.25 per
Special Warrant for an aggregate subscription price of $____________ upon
the terms and conditions set out herein.
2. Acknowledgement: In subscribing for the Special Warrants of the
Corporation, the Subscriber hereby irrevocably represents and acknowledges
that:
(a) in subscribing for the Special Warrants, I am purchasing as principal
the said Special Warrants pursuant to Section 107(1)(d) of the
Securities Act (Alberta) or 72(1)(d) of The Securities Act (Ontario)
and that the said purchase has an aggregate acquisition cost to me of
not less than $97,000 if a resident of Alberta, British Columbia or
Manitoba, $100,000 if a resident of Newfoundland and $150,000 if a
resident of Ontario or Quebec; and
(b) the Corporation and its counsel are relying upon the foregoing
representation and acknowledgement.
3. Representations, Warranties and Covenants: By executing this Subscription
Agreement, the Subscriber represents, warrants and covenants to the
Corporation (and acknowledges that the Corporation and its counsel are
relying thereon) that:
(a) it has been independently advised as to restrictions with respect to
trading in the Special Warrants (which for purposes of this section
include the Common Shares issuable upon the exercise of the Special
Warrants) imposed by applicable securities legislation in the
jurisdiction in which it resides, confirms that no representation has
been made to it by or on behalf of the Corporation with respect
thereto, acknowledges that it is aware of the characteristics of the
Special Warrants, the risks relating to an investment therein and of
the fact that it may not be able to resell the Special Warrants except
in accordance
<PAGE>
-2-
with limited exemptions under applicable securities legislation and
regulatory policy.
(b) the sale of the Special Warrants has not been qualified under the
securities legislation of any province by way of prospectus, that it
is purchasing the Special Warrants pursuant to an exemption contained
in the securities legislation of the Province of Alberta, such
exemption will exempt the Corporation from certain of the obligations
of such securities legislation, and that the Special Warrants will be
subject to certain restrictions on resale;
(c) except for the Term Sheet and publicly available information, it has
not received, nor has it requested, nor does it have any need to
receive, any offering memorandum, or any other document describing the
business and affairs of the Corporation which has been prepared for
delivery to, and reviewed by, prospective purchasers in order to
assist it in making an investment decision in respect of the Special
Warrants and it has not become aware of any advertisement in printed
media of general and regular paid circulation, radio or television
with respect to the distribution of the Special Warrants or any other
advertisement;
(d) if an individual, he/she is of the full age of majority and is legally
competent to execute this Subscription Agreement and take all actions
pursuant hereto;
(e) this Subscription Agreement has been duly and validly authorized,
executed and delivered by and constitutes a legal, valid, binding and
enforceable obligation of the Subscriber;
(f) it has such knowledge in financial and business affairs as to be
capable of evaluating the merits and risks of its investment and is
able to bear the economic risk of loss of its investment;
(g) if required by applicable securities legislation, policy or order or
securities commission, stock exchange or other regulatory authority,
the Subscriber will execute, deliver, file and otherwise assist the
Corporation in filing such reports, undertakings and other documents
with respect to the issue of the Special Warrants (including without
limitation, any undertaking required by The Toronto Stock Exchange) as
may be required; and
(h) if the Subscriber is a corporation, partnership or syndicate, it has
not been created solely to permit a purchase of the Special Warrants
without a prospectus by groups of individuals whose individual share
of the aggregate acquisition cost of the Special Warrants is less than
sufficient to ensure the availability of an exemption from prospectus
requirement of applicable securities legislation, and it is an entity
which pre-existed the offering of the Special Warrants with a bona
fide purpose other than investment in the Special Warrants.
<PAGE>
-3-
The representations, warranties and covenants of the Subscriber shall survive
the purchase by the Subscriber of the Special Warrants, without limit as to
time.
4. Acceptance: The Subscriber understands that this Subscription may not be
accepted by the Corporation, or may be accepted in whole or in part by the
Corporation, as it may in its discretion determine.
5. Release of Funds: The subscriber acknowledges and agrees that,
notwithstanding that such acceptance is conditional upon receipt of
regulatory approval, upon the Corporation's acceptance of this subscription
it shall be entitled to the immediate release and use of the subscriptions
funds.
6. Terms of Special Warrants: The Special Warrants shall have the following
terms:
(a) Each Special Warrant shall, upon its exercise, entitle the holder to
acquire one Common Share of the Corporation prior to 4:00 p.m.
(Edmonton time) on the earlier of:
(i) within 5 days of the date (the "Qualification Date"), if any,
that the Corporation receives a receipt for the filing of a final
prospectus that qualifies for distribution the common shares
issuable upon the exercise of the Special Warrants; or
(ii) twelve months from the date of issuance of the Special Warrants;
the earlier of such dates being herein referred to as the "Expiry
Date";
(b) Any Special Warrants not exercised prior to 4:00 p.m. (Edmonton time)
on the Expiry Date shall be deemed to have been exercised as at that
time, without any further action on the part of the holder;
(c) By its acceptance of this subscription the Corporation undertakes to
file, within 120 days of issuance of the Special Warrants, a
preliminary prospectus to qualify the distribution of the Common
Shares issuable upon the exercise of the Special Warrants and to
obtain, within 150 days of issuance of the Special Warrants, a receipt
for the filing of a final prospectus, provided that the Corporation
reserves the right to postpone the filing of a preliminary prospectus
or final prospectus if it considers it, in its unfettered discretion,
in the best interests of the Corporation to do so as a result of other
financings or transactions that may be carried out or contemplated by
the Corporation.
(d) If the Corporation has not filed a prospectus within 120 days of
issuance of the Special Warrants, each special warrants shall upon its
exercise thereafter, entitle the holder to acquire 1.1 common share of
the Corporation prior to the Expiry Date.
<PAGE>
-4-
In the event of any inconsistency or conflict between the terms of the Special
Warrants set out in this Subscription Agreement and Acknowledgement and the Term
Sheet attached hereto, the terms of this Subscription Agreement and
Acknowledgement shall prevail.
7. Enurement: Once accepted by the Corporation, this agreement shall enure to
the benefit of and be binding upon each of the Subscriber and the
Corporation and their respective heirs, executors, administrators, legal
representatives and successors.
8. Governing Law: This Subscription Agreement shall be governed by and
construed in accordance with the laws of the Province of Alberta.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement and Acknowledgement as of the date specified below.
----------------------------------- --------------------------------------
Number of Special Warrants Name of Subscriber (please print)
By:
----------------------------------- -----------------------------------------
Aggregate Purchase Price (Signature of or on behalf of Subscriber)
($6.25 per Special Warrant)
Dated Name & Title: (if not an individual)
----------------------------------- -----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Registration Instructions:
Name:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Delivery Instructions:
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Contact
-----------------------------------------
<PAGE>
-5-
Phone No. and Area Code:
--------------------------------------
Social Insurance Number:
--------------------------------------
ACCEPTED AND AGREED:
BROCKER TECHNOLOGY GROUP LTD.
By:
-----------------------------------------
Dated:
-----------------------------------------
Note: Special Warrants issued will be registered in the manner indicated
above under the heading "Registration Instructions" or if same is left blank, in
the manner in which the Subscriber's name and address appear hereon. Any change
of Subscriber's address will be effective upon receipt of written notice thereof
by the Corporation.
<PAGE>
SCHEDULE 4 (b)
Brocker Technology Group (NZ) Limited (formerly Brocker Investments (NZ)
limited)
Brocker Investments (Austalia) Pty Limited
Brocker Financial Limited
Sealcorp Computer Products Limited ("Sealcorp Computer Products")
Sealcorp Telecommunications Group Limited ("Sealcorp Technologies Group")
Sealcorp Australia Pty Limited ("Sealcorp Pty Ltd. (Australia)")
Easy PC Computer Rentals Limited ("Easy PC Computer Rentals")
Image Craft Limited ("Imagecraft")
Image Craft Australia Pty Limited (formerly Parilott Pty Limited)
Industrial Communications Service Limited ("Industrial Communications Ltd.")
Photo Magic Limited ("Photo Magic")
Powercall Technologies Limited
Powercall Technologies Australia Pty Ltd.
Pritech Corporation Limited ("Pritech Corporation")
Pritech Australia Pty Limited ("Pritech Corporation Australia Pty Ltd.")
Northmark Technologies Limited
1 World Systems Limited (formerly Microchannel Limited)("1 World Systems")
Tech Support Limited
Beachlands Holdings Limited (Non-trading)("Beachland Holdings")
Candia Holdings Limited (Non-trading)("Candia Holdings")
Brocker Properties Limited (Non-trading)("Brocker Properties")
Technologis Financial Limited (Non-trading)("Technologis Finance Ltd.")
Highway Technologies Limited (20%)("Highway Technologies")
Eftpos Corporation Limited (40%)("Eftpos Corp.")
<PAGE>
Legal Organisational Chart
Brocker Technology Group
[ORGANIZATIONAL CHART OMITTED]
<PAGE>
Schedule 4(h)
Options/Warrants/Special Warrants/Escrow
Options (unexercised) 1,048,000
(see attached list for details)
Warrants 1,000,000
- July 1999 (@ $1.25)
Special Warrants
- December 1999 1,800,000
- attached half warrants 900,000
- compensation warrants 486,000
Escrowed Shares 963,602
(see below for details)
Escrowed Shares
We have outstanding 963,602 shares of our common stock held in escrow, which
shares are subject to the terms of the following issued and escrow arrangements:
(a) Pursuant to an Escrow Agreement dated March 31, 1997 (the "ICS Escrow
Agreement"), a total of 760,500 shares of our common stock have been
deposited in escrow with Montreal Trust Company of Canada. The ICS Escrow
Agreement provides that such shares may be released at the rate of one
share for each $1.65 of cash generated by or from Industrial Communications
Service Ltd., subject to a maximum of one-third of such shares being
released each year. To date there have been no releases pursuant to the ICS
Escrow Agreement.
(b) Pursuant to an Escrow Agreement dated April 1, 1997, the shares of our
common stock purchased pursuant to the acquisition of the shares of commmon
stock of Powercall are to be deposited in escrow. As of September 29, 1999,
there are 186,317 shares of our common stock deposited in escrow to be
released based on the cumulative cash generated by Powercall, using the
share price at March 31, 1998.
<PAGE>
-2-
(c) Pursuant to an Escrow Agreement dated December 24, 1997, the shares to be
issued pursuant to the acquisition of NZ Online (currently Image Craft) are
to be deposited in escrow. Once deposited, such shares are to be released
based on cash generated by NZ Online for the years ended March 31, 1999 and
March 31, 2000, using the share price as at March 31, 1998.
(d) Of the shares issued pursuant to the acquisition of Easy PC Computer
Rentals Limited, 16,785 common shares are subject to escrow conditions
based on cash flow generated by Easy PC Computer Rentals.
<PAGE>
OPTIONS
-------
AS AT JANUARY 21, 2000
--------------------------------------------------------------------------------
DATE OF GRANT NAME NUMBER PRICE EXPIRY DATE
--------------------------------------------------------------------------------
July 6, 1999 Richard Justice 118,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Hal Linstrom 50,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Steve Hassall 50,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Mike O'Brien 50,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Chris Spring 31,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Richard MacLean 31,000 $1.41 07/02/04
--------------------------------------------------------------------------------
July 6, 1999 Roger Carter 16,000 $1.41 07/02/04
--------------------------------------------------------------------------------
November 30, 1998 Julia Clarkson 50,000 $1.50 11/30/03
--------------------------------------------------------------------------------
January 26, 1998 Dan Hachey 50,000 $1.99 01/26/03
--------------------------------------------------------------------------------
November 20, 1997 Hal Linstrom 70,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Steve Hassall 70,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 M. O'Brien 70,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Gilliam Morgan 20,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Nigel Guthrie 20,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Chris Spring 50,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Josephine James 15,000 $1.90 11/20/02
--------------------------------------------------------------------------------
November 20, 1997 Michael Ridgway 30,000 $1.90 11/20/02
--------------------------------------------------------------------------------
December, 1996 Lori Mitchell 15,000 $1.18 01/12/01
--------------------------------------------------------------------------------
December, 1996 Gillian Morgan 25,000 $1.18 01/12/01
--------------------------------------------------------------------------------
December, 1996 Richard Preston 15,000 $1.18 01/12/01
--------------------------------------------------------------------------------
December, 1996 Casey O'Byrne 57,000 $1.31 01/12/01
--------------------------------------------------------------------------------
December, 1996 Casey O'Byrne 145,000 $1.18 01/12/01
--------------------------------------------------------------------------------
1,048,000
=========
--------------------------------------------------------------------------------
<PAGE>
Schedule 4(l)
BROCKER TECHNOLOGY GROUP LTD
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
INDEX
Index Page 1
Auditors' Report Page 2
Consolidated Balance Sheets Page 3
Consolidated Statements of Earnings Page 4
Consolidated Statements of Retained Earnings Page 5
Consolidated Statements of Cash Flows Page 6
Notes to Consolidated Financial Statements Page 7
Page 1
<PAGE>
Auditors' report to the shareholders
We have audited the consolidated balance sheets of Brocker Technology Group Ltd
as at March 31, 1999 and 1998 and the consolidated statements of earnings,
retained earnings and cash flows for the YEARS then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1999
and 1998 and the results of its operations and the changes in its cash flows
cash flows for the YEARS then ended in accordance with generally accepted
accounting principles.
Chartered Accountants
/s/ KMPG Auckland, New Zealand
August 18, 1999
Page 2
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Note 1999 1998
$ $
<S> <C> <C> <C>
ASSETS
Current Assets
Cash -- 205,365
Accounts receivable 22,909,294 13,915,450
Other receivables 11 1,435,325 1,636,758
Inventories 15,276,865 9,673,446
Prepaid expenses and deposits 917,009 538,610
Income taxes recoverable 554,538 403,334
Deferred tax asset 310,270 214,231
------------ ------------
41,403,301 26,587,194
Deferred Development Costs 5 1,252,368 490,513
Capital Assets 4 5,551,068 3,679,572
Investment in Associated Company 6 604,433 263,113
Goodwill (Net of accumulated amortisation 1,876,325 1,478,779
of $1,036,327; 1998 $779,583) ------------ ------------
$ 50,687,495 $ 32,499,171
============ ============
LIABILITIES
Current Liabilities
Bank Overdraft 55,433 --
Accounts payable 36,648,724 17,422,333
Accrued liabilities 1,596,241 1,387,512
Rental finance liability 7&8 -- 1,094,464
Financing facility 8 3,213,122 5,827,883
Current portion of long-term debt 8 220,028 44,303
------------ ------------
41,733,548 25,776,495
Long-Term Debt 8 2,284,578 881,070
------------ ------------
44,018,126 26,657,565
------------ ------------
SHAREHOLDERS' EQUITY
Share Capital 9 5,761,721 5,367,730
Foreign Currency Translation Reserve (799,084) (881,364)
Retained Earnings 1,706,732 1,355,240
------------ ------------
6,669,369 5,841,606
------------ ------------
$ 50,687,495 $ 32,499,171
============ ============
Deferred Development Costs 5
Investment in Associated Company 6
Commitments 16
Contingencies 17
Subsequent Events 18
</TABLE>
Page 3
<PAGE>
Signed on behalf of the Board
/s/ Michael Ridgway /s/ Richard Justice
--------------------------------- ---------------------------------------
Director Director
Date: August 18, 1999
Page 4
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Note 1999 1998
$ $
<S> <C> <C> <C>
Revenue
Sales 133,302,640 70,811,220
Cost of Goods Sold 115,611,548 56,410,370
------------ ------------
Gross Margin 17,691,092 14,400,850
------------ ------------
Operating Expenses
Depreciation and amortisation 2,010,703 1,692,585
Net interest expense 1,409,187 668,845
Salaries and commissions 6,348,910 6,431,431
Other operating expenses 7,043,157 4,225,153
------------ ------------
Total operating expenses 16,811,957 13,018,014
------------ ------------
Operating Income 879,135 1,382,836
Equity accounted losses of associated company 6 91,330 79,953
------------ ------------
Income before Income Tax Provision 787,805 1,302,883
Income Tax Provision 10 272,991 506,067
------------ ------------
Net Earnings for the year $ 514,814 $ 796,816
============ ============
Earnings Per Common Share 9 (d) $ 0.03 $ 0.06
============ ============
</TABLE>
Page 5
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1999 1998
$ $
Retained Earnings, Beginning of the year 1,355,240 703,424
Net Earnings for the year 514,814 796,816
Discount on redemption of preferred shares -- 50,000
Preferred dividends paid (163,322) (195,000)
----------- -----------
Retained Earnings, End of the year $ 1,706,732 $ 1,355,240
=========== ===========
Page 6
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
MOVEMENTS IN FOREIGN CURRENCY TRANSLATION RESERVE
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1999 1998
$ $
Beginning of the year (881,364) (82,609)
Difference arising on the translation of
foreign operations 82,280 (798,755)
--------- ---------
End of the year $(799,084) $(881,364)
========= =========
Page 7
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Note 1999 1998
$ $
<S> <C> <C> <C>
Cash flows from operating activities
Receipts from customers 124,528,860 62,560,393
Payments to suppliers and employees (119,790,928) (59,656,639)
Interest paid (1,338,547) (463,756)
Taxation paid (417,742) (970,979)
------------- -------------
Cash flows from operating activities 14 2,981,643 1,469,019
Cash flows from investing activities
Proceeds from the sale of capital assets 51,597 56,814
Purchase of capital assets (4,673,881) (1,045,119)
Investment in associated company (428,440) (343,066)
Purchase of subsidiaries (412,566) (523,181)
------------- -------------
Cash flows from investing activities (5,463,290) (1,854,552)
Cash flows from financing activities
Proceeds from share options exercised 29,500 130,900
Proceeds from share warrants exercised -- 495,000
Proceeds from mortgage finance raised 2,428,692 --
Redemption of preferred shares -- (543,049)
Repayment of mortgage finance (70,745) --
Payment of dividend on preferred shares (163,322) (195,000)
------------- -------------
Cash flows from financing activities 2,224,125 (112,149)
------------- -------------
Net decrease in cash equivalents (257,522) (497,682)
Cash at Beginning of the year 205,365 602,233
Translation of cash equivalents to
reporting currency (3,286) 100,814
------------- -------------
Cash/(Overdraft) at End of the year $ (55,433) 205,365
============= =============
</TABLE>
Page 8
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1. BASIS OF PRESENTATION
Brocker Technology Group Ltd, the Company, was incorporated under the
Business Corporation Act (Alberta) on November 25, 1993, and obtained its
listing on the Alberta Stock Exchange on April 14, 1994.
On February 28, 1998 the Company transferred its listing to the Toronto
Stock Exchange.
These financial statements have been prepared in accordance with the
generally accepted accounting principles of Canada.
Brocker Technology Group Limited has chosen to adopt the changes to the
accounting standards, regarding reporting of Cash Flow Statements, in these
financial statements. The prior period has been restated on a comparable
basis.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements include the financial statements
of the Company and all of its subsidiary companies since the dates of
their acquisition. Its wholly owned subsidiaries, all of which are
consolidated using the purchase method, are as follows:
Brocker Technology Group (NZ) Limited
(formerly Brocker Investments (NZ) Limited)
Brocker Investments (Australia) Pty Limited
Sealcorp Computer Products Limited
Sealcorp Telecommunications Group Limited
Sealcorp Australia Pty Limited
Easy PC Computer Rentals Limited
Image Craft Limited
Image Craft Australia Pty Limited (formerly Parilott Pty Limited)
Industrial Communications Service Limited
Photo Magic Limited
Powercall Technologies Limited
Pritech Corporation Limited
Pritech Australia Pty Limited
Northmark Technologies Limited
1 World Systems Limited (formerly Microchannel Limited)
During 1998 Brocker Technology Group Ltd took a 20% founding
shareholding in Highway Technologies Limited. This investment has been
recorded using the equity method.
b) Goodwill
The excess of cost over the fair value of identifiable net assets of
subsidiaries acquired is recorded as goodwill and is amortised on a
straight-line basis over its estimated useful life, considered to be
five to ten YEARS. On an ongoing basis, management reviews the
valuation and amortisation of goodwill taking into consideration any
events and circumstances which might have impaired the fair value.
Where an acquisition price is contingent on a future event or events,
no additional goodwill is recognised until the final acquisition price
can be reasonably determined.
Page 9
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Foreign Currency
Foreign currency transactions are recorded at the exchange rates in
effect at the date of settlement. Monetary assets and liabilities
arising from trading are translated at closing rates. Gains and losses
due to currency fluctuations on these items are included in the
statement of earnings.
The financial statements of foreign operations are translated to
Canadian dollars using weighted average exchange rates for the year
for items included in the statement of earnings, year end rates for
assets and liabilities included in the balance sheet and historical
rates for equity transactions. The cumulative translation adjustment
represents the deferred foreign exchange gain or loss on the
translation of the financial statements.
The following rates were used in the preparation of the financial
statements:
----------------------------------------------------------------------
New Zealand dollar Average rate Rate at March 31
----------------------------------------------------------------------
1999 0.7862 0.7976
----------------------------------------------------------------------
1998 0.8833 0.7816
----------------------------------------------------------------------
----------------------------------------------------------------------
Australian dollar Average rate Rate at March 31
----------------------------------------------------------------------
1999 0.9318 0.9455
----------------------------------------------------------------------
1998 1.0055 0.9408
----------------------------------------------------------------------
d) Inventories
Inventories principally comprise finished goods and are carried at the
lower of cost and net realisable value. Cost is determined on a
weighted average or first in first out basis.
e) Capital Assets
Capital assets are recorded at cost. Depreciation is calculated on a
declining balance basis (except for leasehold improvements where a
straight line basis is used) using the following rates:
Land 0%
Buildings 2%
Office equipment 20%
Vehicles 20 and 26%
Furniture and fixtures 20%
Computer hardware 20 to 30%
Computer software 30 to 40%
Plant and Equipment 20 to 26%
Leasehold improvements 1 to 4 YEARS
Computer hardware held for rental 2 to 3 YEARS
f) Revenue recognition
The Company earns substantially all of its revenue from the sale and
delivery of products to its customers. Revenue is recorded when the
products are shipped to customers.
Page 10
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Research and development expenditures
Research costs, other than capital expenditures, are expensed as
incurred. Development costs are expensed as incurred unless they meet
the criteria under generally accepted accounting principles for
deferral and amortisation. Deferred development costs are amortised
over the expected life of the developed product, currently a maximum
of three YEARS.
h) Deferred Income Taxes
The Company follows the deferral method of income tax allocation such
that deferred income taxes are recognised when income and expense
items are reported for income tax purposes in YEARS different from
those in which they are recorded for financial reporting purposes.
i) Earnings Per Share
Earnings per share have been calculated based on the weighted average
number of common shares outstanding. The fully diluted earnings per
share have been calculated based on the assumption that all vested
options would have been exercised.
In both cases, common shares to be issued, or held in escrow, in
respect of the settlement of earn-out consideration in relation to
acquisitions are only taken into account in the calculation of
earnings per share once the number of shares can be reasonably
determined.
j) Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Page 11
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
3. ACQUISITIONS
1999 Acquisitions
Pritech Corporation Limited
On May 15, 1998 Brocker Technology Group (NZ) Limited acquired Pritech
Corporation Limited for an initial cash consideration of NZ$265,620.
Pritech Corporation Limited is principally involved with software
consultation and knowledge management. Pritech is a Lotus Premium Partner
whose target market is enterprise and government customers in New Zealand
and Australia.
The maximum purchase price payable is based on the profit earned by the
company for the year ended September 30, 1998 at a four times multiple.
Additional consideration, however, is only payable based on the cash earned
by the company for the YEARS ended September 30, 1999 to 2000, being the
earn out period. That is the maximum price must be subsequently earned by
the company, during the earn out period, before it is payable.
Any additional consideration will be satisfied by the issue of common
shares which will be held in escrow until the earn out criteria are met.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1999
$
Net current assets 472,515
Capital assets 51,987
Net current liabilities (316,893)
Goodwill attributed --
--------
Consideration paid 207,609
Additional future consideration will be added to goodwill when it
becomes determinable.
1 World Systems Limited (formerly Microchannel Limited)
On June 16, 1998 Brocker Technology Group (NZ) Limited acquired 1 World
Systems Limited for an initial consideration of NZ$103,750. 1 World Systems
Limited is principally involved with the distribution, implementation and
support of accounting software.
The maximum purchase price payable is based on the profit earned by the
company for the year ended March 31, 1999 at a four times multiple.
Additional consideration, however, is only payable based on the cash earned
by the company for the YEARS ended March 31, 2000 to 2001, being the earn
out period. That is the maximum price must be subsequently earned by the
company, during the earn out period, before it is payable.
Any additional consideration will be satisfied by the issue of common
shares which will be held in escrow until the earn out criteria are met.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1999
$
Net current assets 281,790
Capital assets 43,341
Net current liabilities (182,365)
Term liabilities (61,675)
Goodwill attributed --
--------
Consideration paid 81,091
Additional future consideration will be added to goodwill when it becomes
determinable.
Page 12
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
3. ACQUISITIONS (Continued)
QSoft Pty Limited
On February 8, 1999 Sealcorp Australia acquired the net assets of QSoft Pty
Limited for a cash consideration of AUD$150,000. QSoft is a Software
Distribution company based in Brisbane Australia.
The net assets acquired were valued at their fair value, and as a result no
goodwill arose on acquisition.
Motorola Service Contract
During March 1999 Industrial Communications Service Limited acquired the
net assets of a division of Hart Candy in order to fulfil the requirements
of the Motorola Service contract awarded to the company.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1999
$
Net current assets 8,774
Capital assets 55,677
Net current liabilities (16,595)
Goodwill attributed 47,856
--------
Consideration paid 95,712
1998 Acquisitions
Powercall Technologies Limited
On May 10, 1997 Brocker Technology Group (NZ) Limited acquired the net
assets of Powercall Limited and Powercall Services Limited for an initial
cash consideration of NZ$4,948 and 27,440 common shares. Powercall
Technologies Limited is principally involved with the design and
development of telecommunication systems.
Total purchase price of the entity is based on the lesser of a four times
multiple of the cumulative cash earned by the company for the YEARS ended
March 31, 1998 to 2001 or a twelve times multiple of the profit for the
year ended March 31, 2001. The purchase price is limited to a maximum of
NZ$20m. An additional one year is then allowed for this price to be earned
out by the company. That is the maximum price must be subsequently earned
by the company, during the earn out period, before it is payable.
Any additional consideration will be satisfied by the issue of common
shares which will be held in escrow until the earn out criteria are met.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1998
$
Capital assets 180,582
Net current liabilities (124,556)
Goodwill attributed 7,535
----------
Consideration paid 63,561
On November 30, 1998 an additional 98,416 shares were issued in relation to
the acquisition of Powercall, with an attributable value of $172,228.
Additional future consideration will be added to goodwill when it becomes
determinable.
Page 13
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
3. ACQUISITIONS (Continued)
Easy PC Computer Rentals Limited
On July 10, 1997 Brocker Technology Group (NZ) Limited acquired Easy PC Computer
Rentals Limited for an initial cash consideration of NZ$71,183 and 8,128 common
shares. In addition an advance on the final price was paid to the previous
shareholders of NZ$150,000. This amount is repayable to the Company based on the
earn out details below, and is included within prepaid expenses and deposits.
Easy PC Computer Rentals Limited is involved in the rental of computer
equipment.
The maximum purchase price payable is based on the profit earned by the company
for the year ended March 31, 1998 at a four times multiple. Additional
consideration, however, is only payable based on the cash earned by the company
for the years ended March 31, 1999 to 2000, being the earn out period. That is
the maximum price must be subsequently earned by the company, during the earn
out period, before it is payable.
Any additional consideration will be satisfied by the issue of common shares
which will be held in escrow until the earn out criteria are met.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1998
$
Capital assets 248,576
Rental assets, externally financed (Note 7) 1,452,174
Rental finance liability (Note 7) (1,452,174)
Net current liabilities (253,602)
Goodwill attributed 73,846
------------
Consideration paid 68,820
On December 31, 1998 an additional 94,782 shares were issued in relation to
the acquisition of Easy-PC Computer Rentals Limited, with an attributable
value of $165,869.
Additional future consideration will be added to goodwill when it becomes
determinable.
Image Craft Limited
On December 24, 1997 Brocker Technology Group (NZ) Limited acquired Image Craft
Limited and its subsidiary company Parrilott Pty Limited for an initial cash
consideration of NZ$500,000.
Image Craft Limited and Parrilott Pty Limited are principally involved in the
design and implementation of image processing and storage equipment for the
photographic industry.
This acquisition was accounted for using the purchase method. Net assets
acquired and consideration paid were as follows:
1998
$
Net current assets 65,648
Capital assets 278,372
Goodwill attributed 46,780
--------
Consideration paid 390,800
The maximum purchase price payable was to be based on the profit earned by
the company for the year ended March 31, 1998 at a four times multiple.
However, during the current year an additional consideration of NZ$159,036
was accrued in relation to the final settlement.
Page 14
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
4. CAPITAL ASSETS
1999
------------------------------------------
Accumulated Net Book
Cost Depreciation Value
Land (Note 8a) 622,128 -- 622,128
Buildings (Note 8a) 2,684,411 37,860 2,646,551
Office equipment
- leased 72,260 31,036 41,224
- non-leased 368,147 184,704 183,443
Vehicles
- leased 105,285 69,380 35,905
- non-leased 107,222 45,302 61,920
Furniture and fixtures
- leased 37,456 8,317 29,139
- non-leased 464,038 172,221 291,817
Computer hardware
- non-leased 1,750,998 901,607 849,391
- held for rental 830,688 369,218 461,470
Computer software 156,292 88,467 67,825
Plant and Equipment 316,838 161,297 155,541
Leasehold improvements 147,402 42,688 104,714
------------------------------------------
$7,663,165 $2,112,097 $5,551,068
==========================================
Page 15
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
4. CAPITAL ASSETS (Continued)
1998
------------------------------------------
Accumulated Net Book
Cost Depreciation Value
Office equipment
- leased 29,598 14,039 15,559
- non-leased 218,228 82,476 135,752
Vehicles
- leased 69,718 24,871 44,847
- non-leased 138,823 74,633 64,190
Furniture and fixtures
- leased 35,598 4,041 31,557
- non-leased 349,516 118,955 230,561
Computer hardware
- leased 15,659 2,349 13,310
- non-leased 1,243,415 562,767 680,648
- held for rental 360,951 75,233 285,718
Computer software 119,265 52,745 66,520
Plant and Equipment 247,240 150,947 96,293
Leasehold improvements 126,156 26,851 99,305
------------------------------------------
2,954,167 1,189,907 1,764,260
Computer hardware held for rental,
externally financed (Note 7) 2,786,167 870,855 1,915,312
------------------------------------------
$5,740,334 $2,060,762 $3,679,572
==========================================
5. DEFERRED DEVELOPMENT COSTS
1999 1998
$ $
Development costs deferred as at March 31, 521,428 --
Development costs deferred during the year 883,295 521,428
---------- ----------
1,404,723 521,428
Amortised as at March 31, (152,355) (30,915)
---------- -----------
Development costs deferred as at March, 31 1,252,368 490,513
========== ==========
Development costs deferred principally relate to the development of
software applications.
Management has reviewed the status of the projects to which deferred
development costs relate and are satisfied that the recovery of such costs
is reasonably assured. However the eventual recovery of these costs is
ultimately dependent on actual sales volumes being achieved in subsequent
periods and as such recovery is not certain.
Page 16
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
6. INVESTMENTS
INVESTMENT IN ASSOCIATED COMPANY
During 1998 Brocker Technology Group (NZ) Limited took a 20% founding
shareholding in Highway Technologies Limited. This company has developed
new technology capable of providing transport and highway management,
operation and funding solutions. The Board of Highway Technologies Limited
has identified other sources of revenue in order to reduce the amount owing
to Brocker Technology Group Limited. These sources include the provision of
financial and technical consulting services to parties external to the
Group.
In addition to the investment, Brocker Technology Group (NZ) Limited has
entered an agreement to loan Highway Technologies Limited funds during the
company's establishment phase up to a maximum of NZ$1.5m. Interest is
payable on these funds at 30% per annum. As at March 31, 1999 amounts
advanced to Highway Technologies Limited amounted to NZ$820,220
(NZ$327,151, 1998). No interest has been accrued on the loan for the
current year (NZ$60,735, 1998).
1999 1998
Carrying value of investment $ $
Initial cost of investment 87,366 87,366
Amounts owing from associate 689,523 255,700
Equity accounted losses to date (172,456) (79,953)
--------- ---------
604,433 263,113
========= =======
The financial position of Highway
Technologies Limited as at
March 31, 1999 is represented
as follows:
Net Current Assets* 3,718
Net Current Liabilities (including amounts
owing to Brocker Technology Group Limited
of ($789,045, inclusive of accrued interest) (803,523)
--------
Net Liabilities (799,805)
========
* All research and development expenditure has been expensed.
Management has assessed the recoverability of the funding loan to Highway
Technologies Limited, which is ultimately dependent on the future revenue
stream of the software technology under development and the revenue stream
from consultancy services, and are satisfied on the basis of the current
status of the projects concerned that no impairment provision is required
as at March 31, 1999. Management will continue to assess the need for an
impairment provision in light of the actual revenues generated.
OTHER INVESTMENTS
During 1999 Industrial Communications Service Limited, a subsidiary of
Brocker Technology Group (NZ) Limited, took a 40% shareholding in Eftpos
Corporation Limited for a consideration of NZ$5,000. Eftpos Corporation
Limited is a manufacturer of mobile electronic payment devices utilising
cellular technology.
Industrial Communications Service Limited has an obligation to acquire an
additional 20% shareholding for a consideration of NZ$85,000 in the event
profit targets, for the year ended 31 October 1999, are achieved.
The results of this company for the year ended March 31, 1999 are not
material to the Group.
Page 17
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
7. RENTAL FINANCE LIABILITY
Easy PC Computer Rentals Limited, a subsidiary of Brocker Technology Group
(NZ) Limited, acts as an intermediary between an independent finance
company, which arranges finance for the purchase of equipment, and its
customers.
During March 1999 Easy PC Computer Rentals Limited renegotiated its Rental
Recourse Dealer Deed, with the independent finance company, to ensure that
all significant risk of recourse from the individual finance agreements was
transferred to the independent finance company. The result of this
renegotiation was to enable the company, in accordance with generally
accepted accounting principles, to treat these as off-balance sheet
arrangements.
Due to the renegotiation the Group risk of recourse is limited to $167,245.
Included within the financial statements is revenue of $910,550
($1,075,944, 1998) in relation to income earned on these leases during the
year up to the date of the renegotiation with a corresponding depreciation
expense of $736,995 ($870,855, 1998) and interest charges of $173,555
($205,089, 1998).
Page 18
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
8. INDEBTEDNESS
<TABLE>
<CAPTION>
1999 1998
a) Long Term Debt $ $
<S> <C> <C>
Mortgage finance liability, payable in New Zealand 2,357,142 --
Dollars, with a current interest rate of 6.73%, collateralised
by land and buildings situated at 17 Kahika Road,
Beachaven, Auckland, payable over 10 Years
Less: Current portion (183,352) --
----------- ----------
2,173,790 --
Rental finance liability, payable in New Zealand
dollars, with an interest rate of 16.1% per
annum (Note 7) -- 1,915,312
Less: Current portion -- (1,094,464)
----------- ----------
Rental finance liability payable over 1 year -- 820,848
Capital lease obligations payable in New
Zealand dollars, with interest rates ranging from
6.6% to 14.5% per annum, collateralised by related
assets, payable over 1 to 3 years 91,632 49,813
Less: Current portion (36,676) (44,303)
----------- ----------
Capital lease obligations payable over 1 year 54,956 5,510
Unsecured Term Liability, repayable in NZ$ 55,832 54,712
----------- ----------
$ 2,284,578 $ 881,070
=========== ==========
</TABLE>
The total interest expense for the year in relation to long term debt, was
$258,957 ($207,048, 1998).
Capital lease obligations are repayable as follows:
2000 36,676
2001 36,821
2002 18,135
------
91,632
======
b) Mortgage Finance Liability $2,357,142 $ --
========== ==========
On October 1, 1998 Brocker Technology Group (NZ) Limited purchased new
premises in Auckland, New Zealand. The purchase price of NZ$3,400,000 was
financed by mortgage finance of NZ$3,045,000. As at March 31, 1999 the
amount remaining outstanding was $NZ 2,955,293, and is repayable as
follows:
Page 19
<PAGE>
NZ$
In less than 1 year 229,880
1 to 2 years 245,837
2 to 3 years 262,902
3 to 4 years 281,152
4 to 5 year 300,668
5 years and over 1,634,854
---------
2,955,293
=========
Page 20
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
8. INDEBTEDNESS (Continued)
c) Financing Facility $3,213,122 $5,827,883
========== ==========
Sealcorp Computer Products Limited, Sealcorp Telecommunications Group
Limited and Sealcorp Australia Pty Limited (all subsidiaries of the
Company) have entered into a financing facility agreement secured by a
registered first debenture over the assets and undertakings of all
Group companies. As at March 31, 1999 $3,213,122 ($5,827,883, 1998)
was outstanding under this AUD$ 16.0m facility (approximately
C$15.0m). Interest rates on financing facilities have ranged from
9.95% to 13.43% during the year.
As discussed in Note 18, subsequent to year end a new facility has been
negotiated.
9. SHARE CAPITAL
a) Authorised
Unlimited number of common shares
Unlimited number of Preferred Shares
10,000,000 Series A Preferred Shares
6 1/2% cumulative
Issued and outstanding 1999 1998
$ $
Common shares 3,353,490 2,959,499
Series A Preferred 2,450,000 2,450,000
Less: Share issue costs (41,769) (41,769)
----------- -----------
$ 5,761,721 $ 5,367,730
=========== ===========
As at March 31, 1999 963,602 shares were being held in escrow pursuant to
Escrow Agreements which provide for the release of such shares on a
performance basis. In the prior year 760,500 shares were held in escrow.
Page 21
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
9. SHARE CAPITAL (Continued)
b) Share Transactions
<TABLE>
<CAPTION>
1999 1998
Common Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares outstanding - at March 31, 11,704,554 4,214,324 10,315,486 2,262,460
Issue of shares for acquisition of
Industrial Communications (Note (i)) -- -- 760,500 1,254,825
Issue of shares for acquisition of
Powercall Technologies Limited (Note (ii)) 284,733 498,283 27,440 54,880
Issue of shares for acquisition of Easy PC
Computer Rentals Limited (Note (iii)) 111,567 195,258 8,128 16,259
Exercise of share warrants 25,000 29,500 450,000 495,000
Exercise of stock options -- -- 143,000 130,900
---------------------------------------------------------
Shares issued - at March 31, 1998
12,125,854 4,937,365 11,704,545 4,214,324
Acquisition shares held in escrow (Note(i)
and (iii)) (963,602) (1,583,875) (760,500) (1,254,825)
---------------------------------------------------------
Shares outstanding - at March 31, 11,162,252 $3,353,490 10,944,045 $ 2,959,499
=========================================================
</TABLE>
(i) During 1998 share script was issued in respect of the
acquisition of Industrial Communications Service Limited.
These shares (760,500) are currently held in escrow and are
only released as earn-out provisions are achieved. These will
be issued at $1.65 per share but as at March 31, 1999 no
earn-out amounts have been determined, resulting in a
prescribed value of nil.
(ii) During the year shares were issued, at $1.75, in relation to
the acquisition of Powercall Technologies Limited in respect
to earn-out targets that were achieved. (Note 3).
As at March 31, 1999 186,317 of these shares were being held
in escrow.
(iii) Also during the year additional shares were issued, at $1.75
in relation to the acquisition of Easy PC Computer Rentals
Limited in respect to earn-out targets that were achieved.
(Note 3)
As at March 31, 1999 16,785 of these shares were being held in
escrow.
Page 22
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
9. SHARE CAPITAL (Continued)
<TABLE>
<CAPTION>
1999 1998
Preferred Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Series A shares outstanding at March 31, 2,450,000 2,450,000 3,043,049 3,043,049
Redeemed at $1.00 -- -- (593,049) (593,049)
----------------------------------------------------------
Series A shares outstanding at March 31, 2,450,000 $ 2,450,000 2,450,000 $ 2,450,000
==========================================================
</TABLE>
In 1995 the Company acquired Brocker Investment (NZ) Limited and a
liability was established in the accounts for the purchase
consideration. In 1996 the liability was satisfied by the issuance of
Series A preferred shares.
No transactions, involving Preferred Shares, were conducted during the
year. During 1998 593,049 shares were redeemed at $1.00 per share.
During the year a dividend was paid at 6.5% of preferred shares
outstanding at September 30, 1998.
Any holder of preferred shares may convert their shares to fully paid
common shares at the following conversion prices, which are dependent
upon when the date of notice to convert is received by the Company:
----------------------------------------------------------------------
Date notice received Conversion rate
----------------------------------------------------------------------
After March 31, 1998 and on Market value of common shares at
or before March 31, 2000 April 1, 1998 ($1.75)
----------------------------------------------------------------------
After March 31, 2000 and Market value of common shares at
on or before March 31, 2001 April 1, 2000
----------------------------------------------------------------------
Page 23
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
9.9 SHARE CAPITAL (Continued)
c) Unexercised Options
There are a total of 889,000 outstanding and unexercised stock options
(934,000, 1998).
Options held by the Directors of the Company (287,000, 1998) are as
follows:
----------------------------------------------------------------
Number of options Exercise price Expiry date
----------------------------------------------------------------
57,000 $1.31 November 1, 2001
----------------------------------------------------------------
100,000 $1.50 November 30, 2003
----------------------------------------------------------------
150,000 $1.18 November 1, 2001
----------------------------------------------------------------
30,000 $1.90 November 1, 2002
----------------------------------------------------------------
50,000 $1.99 January 26, 2003
----------------------------------------------------------------
Options are held by employees of the Group as follows (647,000 -
1998):
----------------------------------------------------------------------
Number of options Exercise price Expiry date
----------------------------------------------------------------------
12,000 $0.30 December 31, 1999
----------------------------------------------------------------------
135,000 $1.18 November 1, 2001
----------------------------------------------------------------------
20,000 $1.52 April 17, 2000
----------------------------------------------------------------------
335,000 $1.90 November 1, 2002
----------------------------------------------------------------------
d) Earnings Per Common Share
Earnings per share has been calculated on the basis of the weighted
average number of common shares outstanding for the year. Net income
has been adjusted for dividends paid on preferred shares of $163,322
($195,000, 1998).
1999 1998
--------------------------------------------------------------------------------
Weighted average number of shares 11,012,887 10,516,318
Net income attributable to shareholders after
deduction of preference dividends 351,492 $601,816
Basic earnings per share $0.03 $0.06
--------------------------------------------------------------------------------
For the current, and previous, financial year the effect on earnings
per share of the exercise of outstanding options and conversion of
preferred shares, for the calculation of fully diluted earnings per
share, is anti-dilutive.
Page 24
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
10. INCOME TAX
1999 1998
$ $
Expected income tax expense
calculated at the Statutory Rate
on Earnings before Taxation 346,635 583,691
Adjusted for the tax effect of:
Amortisation of goodwill 114,487 95,497
Canadian parent Company losses not
available for offset with foreign income -- 14,784
Adjustment for foreign tax rates (109,765) (203,896)
Other (78,366) 15,991
-------- --------
Income tax expense 272,991 506,067
========
Total income tax expense is made up of:
Current taxation 180,380 648,116
Deferred taxation 92,611 (142,049)
-------- --------
272,991 506,067
========
11. RELATED PARTY TRANSACTIONS
a) During the year, the Group provided an interest free short-term
advance to the Chief Executive Officer of the Company. The balance
outstanding at March 31, 1999 was $4,663 ($5,778, 1998). This balance
is included in other receivables.
The Chief Executive Officer has also borrowed $26,371 from the Group.
Interest is currently charged on this amount at 6.5% and the loan is
unsecured and is repayable on demand. The maximum amount outstanding
during the year in respect of this loan was $94,817, and interest
charged amounted to $7,725.
b) The Chief Executive Officer of the Company, as at March 31, 1999, held
923,453 (1,148,453, 1998) preferred shares on which a dividend of
$60,783 was paid during the year.
c) Directors of the Company have exercised stock options. The funds
required to exercise these options have been loaned to the Directors
by Brocker Technology Group (NZ) Limited.
As at March 31, 1999 the amount outstanding was $749,375 ($715,801,
1998). The current market value of the shares, held as security over
these loans is in excess of $1.6m. Interest of $16,692 was charged
during the year. This balance is included in other receivables. The
maximum amount outstanding during the year in respect of these loans
was $749,375.
The loan to each Director is repayable on demand or within 30 days of
the individual ceasing to be a Director of the Company or one of its
subsidiaries. The beneficial ownership of the shares are held as
security over the loan, and the Company retains the right to either
sell or cancel the shares to settle any outstanding amounts and the
employee may not sell or transfer the shares prior to settlement of
the amounts outstanding.
Page 25
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
11.9 RELATED PARTY TRANSACTIONS
a) Directors, of various subsidiary companies, have advances owing to the
Group as at March 31, 1999 totalling $193,124, including the
NZ$150,000 advance referred to in Note 3. In all cases these Directors
were shareholders of the subsidiary prior to acquisition by Brocker
Technology Group (NZ) Limited. No interest is charged on the amounts
outstanding and the balance is included in other receivables.
b) A number of Group companies transact business with each other on a
regular basis. These transactions are entered into on normal
commercial terms and are eliminated on consolidation. See Note 13 for
Intersegment revenues.
Unless otherwise stated the maximum amount outstanding during the year was
the higher of the balance at March 31, 1999 or March 31, 1998.
12. EMPLOYEE SHARE OWNERSHIP PLAN
In November 1996 the Company established a plan to enable a number of
senior management employees to acquire stock options in the Company.
Brocker Technology Group (NZ) Limited has provided financial assistance to
some of these employees to exercise the options offered.
The loan to each employee is repayable on demand or within 30 days of the
individual ceasing to be an employee of the Company or one of its
subsidiaries. The beneficial ownership of the shares are held as security
over the loan, and the Company retains the right to either sell or cancel
the shares to settle any outstanding amounts and the employee may not sell
or transfer the shares prior to settlement of the amounts outstanding.
As at March 31, 1999 the amounts outstanding in respect of these shares
amounted to $84,297 ($130,855, 1998) and is included within other
receivables. Interest of $13,729 was charged on these loans during the
year. The current market value of the shares held as security is in excess
of $600,000.
The maximum amount outstanding during the year was $130,855.
Page 26
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
13. SEGMENTED OPERATIONS
The Group operates in two geographical segments, New Zealand and Australia.
The Canadian operations shown relate to administrative items only.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1999 ($) Canada New Zealand Australia Total
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales -- 109,887,630 23,415,010 133,302,640
--------------------------------------------------------------------------------------------------------------------
Intersegment revenue -- 18,058 (18,058) --
--------------------------------------------------------------------------------------------------------------------
Net profit/(loss) -- 204,103 310,711 514,814
--------------------------------------------------------------------------------------------------------------------
Depreciation and amortisation -- 1,894,449 116,254 2,010,703
--------------------------------------------------------------------------------------------------------------------
Net interest expense -- 1,270,935 138,252 1,409,187
--------------------------------------------------------------------------------------------------------------------
Identifiable assets -- 41,417,762 9,269,733 50,687,495
--------------------------------------------------------------------------------------------------------------------
Capital asset expenditure -- 4,439,113 324,768 4,673,881
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 ($) Canada New Zealand Australia Total
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales -- 57,281,846 13,529,374 70,811,220
--------------------------------------------------------------------------------------------------------------------
Intersegment revenue -- -- -- --
--------------------------------------------------------------------------------------------------------------------
Net profit/(loss) (33,001) 1,208,407 (378,590) 796,816
--------------------------------------------------------------------------------------------------------------------
Depreciation and amortisation -- 1,629,985 62,600 1,692,585
--------------------------------------------------------------------------------------------------------------------
Net interest expense -- 584,070 84,775 668,845
--------------------------------------------------------------------------------------------------------------------
Identifiable assets -- 29,923,977 2,575,194 32,499,171
--------------------------------------------------------------------------------------------------------------------
Capital asset expenditure -- 1,007,960 37,159 1,045,119
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The Group principally operates in four industry segments, being the
divisions by which the Group is managed, as follows:
o Distribution and sale of computer and telecommunications hardware
and software ("Sales and Distribution");
o Technical support and services for the Technology Industry
("Technical Services");
o Software application design and development ("Application
Development"); and
o Provision of professional consulting services ("Professional
Services").
The corporate services operation shown relates to the Group's
administrative functions in New Zealand, Australia, and Canada.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Sales & Technical Application Professional Corporate
1999 ($) Distribution Services Development Services Services Total
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 124,995,192 2,661,745 2,124,378 3,519,855 1,470 133,302,640
----------------------------------------------------------------------------------------------------------------------------------
Intersegment revenue 465,306 (38,691) (62,525) (364,090) -- --
----------------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) 3,137,297 54,278 (407,056) (65,010) (2,204,695) 514,814
----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortisation 1,257,971 82,843 330,630 37,252 302,007 2,010,703
----------------------------------------------------------------------------------------------------------------------------------
Net interest expense 1,206,905 33,225 126,465 8,651 33,941 1,409,187
----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 49,731,409 532,667 189,390 1,100,084 (866,055) 50,687,495
----------------------------------------------------------------------------------------------------------------------------------
Capital asset expenditure 835,810 185,184 170,388 170,388 3,355,565 4,673,881
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 27
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
13. SEGMENTED OPERATIONS (Continued)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Sales & Technical Application Professional Corporate
1998 ($) Distribution Services Development Services Services Total
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 67,856,803 2,331,371 623,046 -- -- 70,811,220
---------------------------------------------------------------------------------------------------------------------------------
Intersegment revenue 178,283 (12,632) (165,651) -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) 2,555,089 (28,671) 96,344 -- (1,825,946) 796,816
---------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortisation 1,470,999 90,513 87,274 -- 43,799 1,692,585
---------------------------------------------------------------------------------------------------------------------------------
Net interest expense 540,396 70,030 2,541 -- 55,878 668,845
---------------------------------------------------------------------------------------------------------------------------------
Identifiable assets 33,281,993 441,775 306,213 -- (1,530,810) 32,499,171
---------------------------------------------------------------------------------------------------------------------------------
Capital asset expenditure 598,923 66,128 250,293 -- 129,775 1,045,119
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During 1999 the group conducted business with a single customer that
accounted for revenue of $23,792,150. This revenue was generated in New
Zealand by the Distribution Services segment. There were no such customers
during the 1998 year.
14. NOTES TO CASH FLOWS STATEMENT
a) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with
banks, and investments in money market instruments. Cash and cash
equivalents included in the cash flow statement are comprised solely
of balances with banks.
b) Reconciliation of net profit and cash flow from operating activities
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C> <C>
Net Earnings for the year Note 514,814 796,816
Add/(Less) non cash items:
Depreciation and amortisation 1,273,748 821,730
Depreciation on rental finance liability 7 736,955 870,855
Interest on rental finance liability 7 173,555 205,089
Income on rental finance liability 7 (910,550) (1,075,944)
Loss of associated company 91,330 79,953
Loss on sale of fixed assets 78,808 17,550
Deferred taxation 92,611 154,132
Unrealised exchange (gain)/loss (22,665) 46,558
Impact of changes in working capital items:
Increase in accounts receivable and prepayments (8,913,357) (8,565,305)
Increase in taxation receivable (456,569) (983,360)
Increase in inventories (5,448,644) (4,577,815)
Increase in accounts payable and accrued liabilities 15,771,607 13,678,760
----------- -----------
Net cash flow from operating activities 2,981,643 1,469,019
=========== ===========
</TABLE>
Page 28
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
15. FINANCIAL INSTRUMENTS
Currency Risk
The nature of activities and management policies with respect to financial
instruments are as follows:
i) Currency
The Group uses a very limited number of forward exchange contracts and
currency options to hedge purchases of inventory in foreign
currencies. The Group's exchange rate commitments are intended to
minimise the exposure to exchange rate movement risk on the cost of
the Group's products and on the price it is able to sell those
products to its customers. The Group does not use foreign exchange
instruments for trading or any other purpose.
No forward exchange contracts were entered into during the current
financial year. During the previous financial year the average value
of these contracts amounted to $1,232,000 and were entered as a hedge
against New Zealand purchases made in Australian dollars.
ii) Concentration of credit risk
In the normal course of business, the Group incurs credit risk from
trade debtors and transactions with financial institutions. The Group
has a credit policy which is used to manage the risk. As part of this
policy, limits on exposure with counterparties have been set and are
monitored on a regular basis. Anticipated bad debt losses have been
provided for in the allowance for doubtful accounts.
The Group has no significant concentrations of credit risk. The Group
does not consider that they require any collateral or security to
support financial instruments due to the quality of financial
institutions and trade debtors.
iii) Interest Rate Risk
The Group has adopted a policy of ensuring that its exposure to
changes in interest rates is on a floating rate basis.
iv) Fair Values
The fair values of the Group's cash accounts and other receivables,
bank, indebtedness, accounts payable, accrued liabilities and lease
obligations approximate their carrying values given their short term
nature. The carrying value of the demand debenture and capital leases,
as disclosed in note 8, also approximate their fair value as do
amounts owing by shareholders.
16. COMMITMENTS
a) Brocker Technology Group (NZ) Limited has entered into a number of
acquisitions where the final acquisition price is dependent on the
occurrence of future events. This contingent purchase price is
calculated based on cash flow earned for a given period, and is
settled by way of shares issued but held in escrow.
Shares are released from escrow based on cash flows, as defined with
each party, earned by the subsidiary over a varying number of years
following acquisition, being the "earn-out" period.
Page 29
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
16. COMMITMENTS (Continued)
As at March 31, 1999 the following earn-outs were in existence.
Subsidiary Acquisition price and earn-out
provisions
-----------------------------------------------------------------
Industrial Communications
Service Limited Maximum purchase price
established and shares issued
and held in escrow (refer Note
9)
Earn-out based on defined cash
flow earned in financial years
ended March 31, 1998 - 1999
-----------------------------------------------------------------
Powercall Technologies Limited Shares to be held in escrow
based on the lessor of four
times the cumulative cash flow
earned for the years ended
March 31, 1998 to 2001 or
twelve times profit for the
year ended March 31, 2001,
limited to NZ$20m. Earn-out
based on defined cash flow
earned in financial years
ended March 31, 1998 - 2002
(Note 3).
-----------------------------------------------------------------
Easy PC Computer Rentals Limited Shares to be held in escrow
based on cash flow earned for
the year ended March 31, 1998.
Earn-out based on defined cash
flow earned in financial years
ended March 31, 1999 - 2000
(Note 3).
-----------------------------------------------------------------
Pritech Corporation Limited Shares to be held in escrow
based on cash flow earned for
the year ended September 30,
1998. Earn-out based on
defined cash flow earned in
financial years ended
September 30, 1999 - 2000
(Note 3).
-----------------------------------------------------------------
1 World Systems Limited Shares to be held in escrow
based on cash flow earned for
the year ended March 31, 1999.
Earn-out based on defined cash
flow earned in financial years
ended March 31, 2001 - 2002
(Note 3).
-----------------------------------------------------------------
b) Industrial Communications Service Limited has an obligation to acquire
an additional 20% shareholding of Eftpos Corporation Limited for a
consideration of NZ$85,000 in the event that profit targets, for the
year ended 31 October 1999, are achieved.
Page 30
<PAGE>
c) Group companies operate from leased premises and have other
obligations under operating leases requiring annual repayments as
follows:
2000 $467,652
2001 $382,624
2002 $309,829
2003 $150,140
Thereafter --
Page 31
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
17. CONTINGENT LIABILITIES
In the general course of business disputes may arise with customers and
other third parties. The Directors consider adequate provision has been
made for all such instances.
18. SUBSEQUENT EVENTS
a) Subsequent to the year end, the company has successfully renegotiated
its financing arrangements with the National Bank of New Zealand. This
increased NZ$20m facility provides the Group's New Zealand and
Australian operations greater access to funds at a lower net cost.
This facility will be secured over the Group's assets.
b) Also subsequent to year end the Group acquired Tech Support Limited.
No cash consideration has been paid, to date, the maximum of which is
limited to NZ$45,000.
c) Also subsequent to March 31, 1999 the Company completed a fully
subscribed private placement of 1,000,000 units to raise proceeds of
$1,070,000. Each unit is comprised of one common share and one
non-transferable share purchase warrant entitling the purchase of one
additional common share at a price of $1.25 until January 16, 2002.
19. UNCERTAINTY DUE TO YEAR 2000 ISSUE
The year 2000 Issue arises because many computerised systems use two digits
rather that four to identify a year. Date-sensitive systems may recognise
the year 2000 as 1900 or as some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant system failures which could affect the
Company's ability to conduct normal business operations. It is not possible
to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers or
other third parties, will be fully resolved.
Page 32
<PAGE>
Schedule 4(l)
BROCKER TECHNOLOGY GROUP LTD
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 1999 AND 1998
1999 1998
$ $
ASSETS
Current Assets
Cash 194,753 1,283,039
Other receivables 21,401,823 16,861,428
Inventories 1,798,862 1,754,405
Prepaid expenses and deposits 1,056,381 545,940
Income taxes recoverable 643,366 265,469
Deferred tax asset 314,162 222,516
----------- -----------
45,645,817 31,723,106
Deferred Development Costs 1,144,474 632,251
Capital Assets 5,255,550 7,038,578
Investment in Associated Company 678,128 447,556
Goodwill 1,635,115 1,230,486
----------- -----------
54,359,084 41,071,977
=========== ===========
LIABILITIES
Current Liabilities
Accounts payable 35,761,670 22,200,451
Accrued liabilities 1,939,153 1,264,920
Finance facility 7,028,684 7,294,423
Rental finance liability -- 1,075,428
Current portion of long-term debt 198,353 363,913
----------- -----------
Long-Term Debt 2,070,224 2,826,840
----------- -----------
46,998,084 35,025,975
SHAREHOLDERS' EQUITY
Share Capital 6,906,721 5,367,730
Foreign Currency Translation Reserve (1,104,541) (1,177,105)
Retained Earnings 1,558,820 1,855,377
----------- -----------
7,361,000 6,046,002
----------- -----------
54,359,084 41,071,977
=========== ===========
Signed on behalf of the Board
------------------------- -------------------------
Director Director
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENT OF EARNINGS
AS AT SEPTEMBER 30, 1999 AND 1998
1999 1998
$ $
Revenue 74,233,131 64,099,951
Cost of Goods Sold 64,667,335 55,915,355
----------- -----------
Gross Margin 9,565,796 8,184,596
Operating Expenses
Depreciation and amortisation 765,675 818,103
Net income expense 544,347 580,390
Salaries and commissions 4,950,463 3,390,896
Other operating expenses 3,384,553 2,532,250
----------- -----------
Total operating expenses 9,645,038 7,321,639
----------- -----------
Operating Income (79,242) 862,957
Equity accounted losses of associated company 45,720 59,680
----------- -----------
Income before Income Tax Provision (124,962) 803,277
Income Tax Provision 22,950 303,140
----------- -----------
Net Earnings for the period (147,912) 500,137
=========== ===========
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
AS AT SEPTEMBER 30, 1999 AND 1998
1999 1998
$ $
Retained Earnings, Beginning of the period 1,706,732 1,355,240
Net Earnings for the period (147,912) 500,137
Discount on redemption of preferred shares -- --
Preferred dividends paid -- --
---------- ----------
Retained Earnings, End of the period 1,558,820 1,855,377
========== ==========
BROCKER TECHNOLOGY GROUP LTD
MOVEMENTS IN FOREIGN CURRENCY TRANSLATION RESERVE
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
$ $
Beginning of the period (799,084) (881,364)
Difference arising on the translation of
foreign operations (305,457) (295,741)
---------- ----------
End of the period (1,104,541) (1,177,105)
========== ==========
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Cash flows from operating activities
Receipts from customers 74,299,551 60,882,946
Payments to suppliers and employees (73,795,105) (36,721,438)
Interest paid (544,347) (865,714)
Taxation paid (155,278) (191,346)
----------- -----------
Cash flows from operating activities (195,179) 3,104,448
Cash flows from investing activities
Purchase of capital assets (396,978) (3,723,298)
Investment in associated company (147,098) (251,701)
Acquisition of subsidiaries (33,831) (288,700)
----------- -----------
Cash flows from investing activities (577,907) (4,263,699)
Cash flows from financing activities
Proceeds from the issue of share capital 1,145,000 --
Proceeds from mortgage finance raised -- 2,230,356
Repayment of mortgage principle (124,267) --
----------- -----------
Cash flows from financing activities 1,020,733 2,230,356
----------- -----------
Net Increase in cash equivalents 247,647 1,071,105
Cash at the beginning of the year (55,433) 205,365
Translation of cash equivalents to reporting currency 2,539 6,569
----------- -----------
Cash at the End of the period 194,753 1,283,039
=========== ===========
</TABLE>
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1 BASIS OF PRESENTATION
Brocker Technology Group Ltd, the Company, was incorporated under the
Business Corporation Act (Alberta) on November 25, 1993, and obtained its
listing on the Alberta Stock Exchange on April 14, 1994.
On February 28, 1998 the Company transferred its listing to the Toronto
Stock Exchange.
These financial statements have been prepared in accordance with the
generally accepted accounting principles of Canada.
2 SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements include the financial statements of
the Company and all of its subsidiary companies since the dates of their
acquisition. Its wholly owned subsidiaries, all of which are consolidated
using the purchase method, are as follows:
Brocker Investments (Australia) Pty Limited
Brocker Technology Group (NZ) Limited
Easy PC Computer Rentals Limited
Image Craft Australia Pty Limited
Image Craft Limited (formerly NZ Online Limited)
Industrial Communications Service Limited
Northmark Technologies Limited
Photo Magic Limited
Powercall Technologies Limited
Pritech Australia Pty Limited
Pritech Corporation Limited
Sealcorp Australia Pty Limited (formerly TGE Pty Limited)
Sealcorp Computer Products Limited
Sealcorp Telecommunications Group Limited
Tech Support Limited
1 World Systems Limited (formerly Microchannel Limited)
During the 1998 Brocker Technology Group (NZ) Ltd took a 20% founding
shareholding in Highway Technologies Limited. This investment has been
recorded using the equity method.
During 1999 Industrial Communications Service Limited took a 40%
shareholding in Eftpos Corporation Limited. The results of this company are
not material to the Group.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Goodwill
The excess of cost over the fair value of identifiable net assets of
subsidiaries acquired is recorded as goodwill and is amortised on a
straight-line basis over its estimated useful life, considered to be five
to ten years. On an ongoing basis, management reviews the valuation and
amortisation of goodwill taking into consideration any events and
circumstances which might have impaired the fair value.
Where an acquisition price is contingent on a future event or events, no
goodwill is recognised until the final acquisition price can be reasonably
determined.
c) Foreign Currency
Foreign currency transactions are recorded in the exchange rates in effect
at the date of settlement.
The financial statements of foreign operations are translated to Canadian
dollars using weighted average exchange rates for the period for items
included in the statement of earnings, period end rates for assets and
liabilities included in the balance sheet and historical rates for equity
transactions. The cumulative translation adjustment represents the deferred
foreign exchange gain or loss on the translation of the financial
statements.
d) Inventories
Inventories principally comprise finished goods and are carried at the
lower of cost and net realisable value. Cost is determined on a weighted
average or first in first out basis.
e) Capital Assets
Capital assets are recorded at cost. Depreciation is calculated on a
declining balance basis (except for leasehold improvements where a straight
line basis is used) using the following rates:
Land 0%
Buildings 2%
Office equipment 20%
Vehicles 20 and 26%
Furniture and fixtures 20%
Computer hardware 20 to 30%
Computer software 30 - 40%
Plant and Equipment 20 - 26%
Leasehold improvements 1 to 4 years
Computer hardware held for rental 2 to 3 years
f) Revenue recognition
The Company earns substantially all of its revenue for the sale and
delivery of products to its customers. Revenue is recorded when the
products are shipped to customers.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Research and development expenditures
Research costs, other than capital expenditures, are expensed as incurred.
Development costs are expended as incurred unless they meet the criteria
under generally accepted accounting principles for deferral and
amortisation. Deferred development costs are amortised over the life of the
developed product, currently a maximum of three years.
h) Deferred Income Taxes
The Company follows the deferral method of income tax allocation such that
deferred income taxes are recognised when income and expense items are
reported for income tax purposes in years different from those in which
they are recorded for financial reporting purposes.
i) Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
3 ACQUISITIONS
During the six months to September 30, 1999 Brocker Technology Group (NZ)
Limited acquired the net assets of Tech Support Limited for a total cash
consideration of NZ$45,000. Tech Support Limited offers technical support
and advise to a wide range of customers in Auckland, New Zealand.
No additional amounts are payable in respect to this acquisition. The
purchase price may, however, be reduced in the event certain warranties
made be the Vendors do not eventuate.
The acquisition has been accounted for using the purchase method. Net
assets acquired and consideration paid are as follows:
Net current assets 37,470
Capital assets 9,555
Net current liabilities (22,822)
Goodwill attributed 9,628
-------
Consideration paid 33,831
4 CAPITAL ASSETS
During the 1998 Brocker Technology Group (NZ) Limited have acquired new
premises in Auckland, New Zealand. The $2.6M purchase price of this
property has been acquired by way of mortgage finance of $2,292,000.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
5 DEFERRED DEVELOPMENT COSTS
As at September 30, 1999 development costs of $1,144,474 had been
capitalised. These costs principally relate to the development of software
applications.
6 INVESTMENT IN ASSOCIATED COMPANY
During 1998 Brocker Technology Group (NZ) Limited took a 20% founding
shareholding on Highway Technologies Limited. This Company has developed
new technology capable of providing transport and highway management,
operation and funding solutions.
In addition to the investment, Brocker Technology Group (NZ) Limited has
entered an agreement to loan Highway Technologies Limited funds during the
Company's establishment phase up to a maximum of NZ$1.5M. Interest is
payable on these funds at 30% per annum. As at September 30, 1999 amounts
advanced to Highway Technologies Limited amounted to NZ$963,172.
7 INDEBTEDNESS
(a) The components of indebtedness are follows:
Mortgage finance liability 2,139,237
Less current portion (184,821)
---------
1,954,416
Capital lease obligations payable in New Zealand
dollars, with interest rates ranging from 6.6% to
14.5% per annum, collateralised by related assets,
payable over 1 to 3 years 76,715
Less current portion (13,532)
---------
63,183
An unsecured term liability repayable in NZ$ 52,625
---------
2,070,224
=========
(b) Since the year end Sealcorp Computer Products Limited, Sealcorp
Telecommunications Group Limited and Sealcorp Australia Pty Limited (all
subsidiaries of the Company) have successfully renegotiated their financing
arrangements. A new NZ$20M financing facility, secured by a registered
first debenture over the assets and undertakings of these companies,
replaces the previous facility, of similar terms, which was terminated
during the period.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
SHARE CAPITAL
Authorised
Unlimited number of common shares
Unlimited number of Preferred Shares
10,000,000 Series A Preferred Shares 6 1/2% cumulative
Issued and outstanding 1999 1998
$ $
Common shares 5,339,125 1,890,548
Series A Preferred 1,609,365 3,043,049
Less: Share issue costs (41,769) (41,769)
--------- ---------
6,906,721 4,891,828
As at September 30, 1999 there were 1,583,875 shares are being held in escrow
pursuant to Escrow Agreement which provide for the release of such shares on a
performance basis.
<PAGE>
SCHEDULE 4(m)
AGENTS FOR THE CORPORATION
AGENT COMMISSION OPTIONS
----- ---------- -------
HSBC SECURITIES (CANADA) INC. $21,875.00 10,000
GOEPEL McDERMID INC. $7,000.00 3,200
MERRILL LYNCH CANADA INC. $3,500.00 1,600
SCOTIA McLEOD INC. $14,000.00 6,400
NATIONAL BANK FINANCIAL $3,500.00 1,600
WOOD GUNDY $5,250.00 2,400
RBC DOMINION SECURITIES $7,000.00 3,200
GARY COOPER $15,750.00 --
MORTEN BORCH $109,375.00 --
------------ ------
$187,250,000 28,400
============ ======
<PAGE>
SCHEDULE 4(ff)
Intellectual [LOGO]
Property Office
of New Zealand
To [ILLEGIBLE]
CERTIFICATE OF TRADE MARK REGISTRATION
Number 310570
[LOGO]
Telco
(II) proposed to be used by the proprietor(s), (being the applicant)
310570: Filed in New Zealand 4 June 1999. Class 9: cellular accessories.
SEALCORP TELECOMMUNICATIONS GROUP LTD, Brocker Technology Park, 17 Kahika
Road, Beach Haven, (PO Box 99-222), Auckland, New Zealand, Address for
Service: Brocker Technology Park, 17 Kahika Road, Beach Haven, (PO Box
99-222), Auckland, NZ
I hereby certify that, pursuant to the New Zealand Trade Marks Act 1953, that
this Trade Mark No. 310570 was advertised in Journal No. 1443 issued on 30
August 1999 and has been registered in Part A, on 20 December 1999 with effect
from 4 June 1999.
<PAGE>
SCHEDULE 6(h)
BROCKER TRECHNOLOGY GROUP LTD.
Public Offering of 1,800,000 Special Warrants
CLOSING AGENDA
PRE-CLOSING 5:00 p.m. (Toronto time) January 20, 2000
CLOSING TIME: 10:00 a.m. (Toronto time) January 21, 2000
PLACE: Stikeman Elliott
Suite 5300 Commerce Court West
Toronto, Ontario
PARTIES: Brocker Technology Group Limited ("Corportion")
represented by:
Michael Ridgway
Thomson Kernaghan & Co. Limited ("Thomson Kernaghan")
represented by:
Lionel Conacher
Darren Wallace
Montreal Trust Company of Canada ("Montreal Trust")
represented by:
Tina Vitali
Donata Konigsberg
Chamberlain Hutchison ("Chamberlain")
represented by:
Andrew J. Chamberlain
Stikeman Elliott ("Stikeman")
represented by:
Daniel H. Thomson
DEFINE TERMS
Any term not otherwise defined herein shall have the menaing attributed thereto
in the Agency Agreement dated January 21, 2000 between the Corporation, and
Thomson Kernaghan.
ESCROW
All deliveries and all payments described below in the Section entitled
"Closing" shall be held in escrow
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2
until: (a) all such deliveries and payments have been delivered and made to the
satisfaction of the parties to whom the deliveries or payments are to be
deliverd or made; and (b) all parties have agreed to terminate the escrow. Upon
both of such events occurring, the documents and payments shall be deemed to be
released in the order, in the manner and to the parties as set forth in this
Closing Agenda. In the event that the conditions specified in clauses (a) and
(b) above are not met on or before 4:30 p.m. (Toronto time) on the Closing Date,
or as such other time as the parties may agree, all deliveries and payments
shall be returned to the party tabling the same.
The docments noted below will be made available at Closing in the appropriate
number of counterparts or copies for Standard Delivery. The term "Standard
Delivery" indicates that an original of the document shall be delivered to all
parties involved. Certain of the documents have been delived to the Corporation,
Thomas Kernaghan, Chamberlain Hutchison, Stikeman Elliott and any other personal
party thereto
DOCUMENT TABLED BY DELIVERED TO
A. Pre-Closing
A-1 Engagement Letter between the Chamberlain Standard Delivery
Corporaiton and Thomson Kernaghan
including the Term Sheet
A-2 Copies of correspondence to Chamberlain Standard Delivery
the TSE seeking conditional
listing
A-3 Copies of TSE price protection Chamberlain Standard Delivery
and conditional listing approval
B. Closing
I Corporate Authority
B-1 Certified Copy of Directors' Corporation Standard Delivery
Resolution authorizing, among other
things, Agency Agreement, Special
Warant Indenture, Special Warrants;
agent's special option, agent's
option, allotment of underlying
Common Shares (including penalty
shares); appointment of Special
Warrants Trustee; TSE listing
applicaitons; execution of
documentation
B-2 Certified Copy of Articles and Corporation Standard Delivery
By-laws of the Corporation
B-3 Certificate of Incumbency Corporation Standard Delivery
B-4 Certificate of Status for Corporation Standard Delivery
Corporation
B-5 Certificate of the Corporation Corporation Standard Delivery
as a reporting issuer not in
default pursuant to Securities
Acts of Alberta and Ontario
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3
B-6 Confirmation by Montreal Trust Montreal Trust Thomsan Kernaghan
of outstanding shares and other Standard Delivery
rights as of the close of
business on the Closing Date
II Special Warrant Trustee
B-7 Certified copies of By-laws and Montreal Trust Standard Delivery
resolutions Montreal Trust of
Montreal Trust with respect to
signing and certifying authority
together with specimen signatures
B-8 Special Warrant Indenture Corporation Standard Delivery
B-9 Specimen Special Warrant Corporation Standard Delivery
Certificate
III Opinions and Supporting Documents
B-10 Officer's Certificate Corporation Standard Delivery
B-11 Opinion of Chamberlain addressed Chamberlain Standard Delivery
to Thomson Kernaghan and each of
the Purchasers
B-12 Opinion of local counsel addressed Local counsel Standard Delivery
to Thomason Kernaghan and each of
the Purchasers in:
a)B.C.
b)Ontario
c)Newfoundland
d)California
B-12A Opinion of Chamberlain to MTCC Chamberlain Original to MTCC
Standard Delivery
of Copies
IV Purchase of Special Warrants
B-13 Executed Agency Agreement, Thomson Kernaghan Standard Delivery
together with form of Agent's
Special Option certificate and
Agent's Option certificate
B-14 Executed Subscription Agreements Thomson Kernaghan Standard Delivery
and private placement Corporation
questionnaries and undertakings
B-15 List of Purchasers together with Thomson Kernaghan Standard Delivery
registration details from Thomson Chamberlain
Kernaghan and Chamberlain
Hutchison
B-16 Direction form the Corporation Corporation Standard Delivery
to pay gross proceeds of the
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Offering received from Thomson
Kernaghan subscribers (plus 6
others) less commission and
Stikeman legal fees
B-17 Cheque for net proceeds realized Thomson Kernaghan Standard Delivery
from the sale of Special Warrants
B-18 Receipt of Corporation of net Corporation Thomson Kernaghan
proceeds to Thomson Kernaghan (originals)
Standard Delivery
(copies)
B-19 Receipt of Thomson Kernaghan Thomson Kernaghan Corporation
for commissions (original)
Standard Delivery
(copies)
B-20 Acknowledgement of Corporation Corporation Standard Delivery
to Thomson Kernaghan of all
Thomson Kernaghan subscribers
for Special Warrants paid in full
B-21 Intentionally Deleted
B-22 Intentionally Deleted
B-23 Direction of Corporation as to Corporation Montreal Trust
registration of all Special (originals)
Warrant Certificates Standard Delivery
(copies)
B-24 Special Warrant Certificates Corporation Thomson Kernaghan
registered in the name of each Montreal Trust (originals)
Subscriber Standard Delivery
(copies)
B-25 Receipt of Corporation on behalf Corporation Montreal Trust
of Presidents' list subscribers (orignals)
for Special Warrant Certificates Standard Delivery
relating to the President's List (copies)
Subscriptions
B-26 Receipt of Thomson Kernaghan on Thomson Kernaghan Montreal Trust
behalf of the Thomson Kernaghan (original)
Purchasers for Special Warrant Standard Delivery
Certificates (copies)
B-27 Executed Agent's Special Option Corporation Thomson Kernaghan
Certificate in favour of Thomson (originals)
Kernaghan Standard Delivery
(copies)
B-28 Receipt for Executed Agent's Thomson Kernaghan Thomson Kernaghan
Special Option Certificate (originals)
Standard Delivery
(copies)
B-29 Undertaking of Corporation to Corporation Thomson Kernaghan
deliver Agent's Options to (originals)
sub-agents responsible for President's Standard Delivery
Warrant subscriptions (copies)
C. Matters to be compedted after Closing
C-1 Press Release Corporation Standard Delivery
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5
C-2 Material Change Reports for Corporation Standard Delivery
Ontario and Alberta
C-3 Notice of Closing to TSE Corporation Standard Delivery
- covering letter
- corporation's confirmation
- special warrant indenture
- special warrant certificate
- sample subscription agreement
- executed Questionnaires and Undertakings
- opinion
- executed agency agreement
- listing fee $5911.95 including GST
C-4 Filing of Form 20 or equivalent Corporation Standard Delivery
in each Qualifying Province and
payment of relevant fees
C-5 Preparation and filing of Corporation Standard Delivery
Prospectus
C-6 Evidence of Payment of Corporation Standard Delivery
Corporation to each sub-agent's
commission
C-7 Copy of executed special option Corporation Standard Delivery
certificate in favour of each
sub-agent up to an aggregate total of
options to ultimately acquire
30,000 common shares
C-8 Receipt from each sub-agent re: Corporation Standard Delivery
commission and special option
certificate
