4838-2039-9394\3

Fundamentals of U.S. Securities Law: What Canadian Lawyers Need to Know

Thursday, March 26, 2015

U.S. LISTING

AND

CONTINUOUS REPORTING

Reporting Under the Securities Exchange Act of 1934

DORSEY & WHITNEY LLP

U.S. & Canadian Cross-border Practice Group www.dorsey.com

Kenneth Sam Partner

Dorsey & Whitney LLP

1400 Wewatta Street, Suite 400 Denver, CO 80202

Phone: (303) 629-3445 sam.kenneth@dorsey.com

i 4838-2039-9394\3

Table of Contents

Page

Chapter 1. LEVELS OF SECURITIES REGULATION ................................................................................. 1

Section 1.01 Federal Regulation of Securities and Certain Federal Statutes ............................ 1 Section 1.02 State Regulation..................................................................................................... 2 Section 1.03 Integrated Disclosure System ................................................................................ 3 Section 1.04 Special Issuer Categories ...................................................................................... 3

Chapter 2. THE U.S. TRADING MARKETS ................................................................................................. 8

Section 2.01 The National Securities Exchanges ....................................................................... 8 Section 2.02 Over-the-Counter Markets ..................................................................................... 8 Section 2.03 Penny Stock Rules ................................................................................................. 9

Chapter 3. EXCHANGE ACT REGISTRATION AND DEREGISTRATION FOR CANADIAN ISSUERS ....................................................................................................................................... 11

Section 3.01 Exchange- and OTC-Traded Issuers ................................................................... 11 Section 3.02 Requirement to Register ...................................................................................... 11 Section 3.03 Exemptions From Exchange Act Registration for Securities of Foreign

Private Issuers .................................................................................................................. 11 Section 3.04 Successor Registration ........................................................................................ 12 Section 3.05 Exiting the Sec Reporting System ....................................................................... 13

Chapter 4. EXCHANGE ACT REGISTRATION AND REPORTING FOR CANADIAN FOREIGN PRIVATE ISSUERS ....................................................................................................................... 17

Section 4.01 Registration and Reporting on Form 20-F ........................................................... 17 Section 4.02 Registration and Reporting on Form 40-F ........................................................... 24 Section 4.03 Registration on Form 10 and Reporting on Form 10-K ....................................... 27 Section 4.04 Current Reports .................................................................................................... 28 Section 4.05 SOX Certifications ................................................................................................ 29 Section 4.06 Other Reporting Requirements ............................................................................ 31 Section 4.07 Beneficial Ownership Reporting Requirements ................................................... 32 Section 4.08 NYSE, NASDAQ, NYSE-MKT ............................................................................. 33

Chapter 5. CORPORATE GOVERNANCE ................................................................................................. 39

Section 5.01 The Sarbanes-Oxley Act ...................................................................................... 39 Section 5.02 Dodd-Frank Wall Street Reform and Consumer Protection Act .......................... 56

Chapter 6. FAIR DISCLOSURE & LIABILITY ............................................................................................. 61

Section 6.01 Selective Disclosure and Regulation FD ............................................................. 61 Section 6.02 Disclosure Policies ............................................................................................... 63 Section 6.03 Disclosure Related to Cybersecurity .................................................................... 64 Section 6.04 Liability ................................................................................................................. 65

1

4838-2039-9394\3

INTRODUCTION

Material content used in this paper has been prepared by member attorneys of the U.S. & Canada Cross-border Practice Group of Dorsey & Whitney LLP and edited by Kenneth Sam, a partner and co-chair of Dorsey’s Mining Industry Group, for this presentation. The U.S. & Canada Cross-border Practice Group of Dorsey & Whitney LLP represents issuers, investment banks, institutional investors and their advisors on United States legal matters.

This paper is intended as a general summary for use by Canadian issuers and their advisors in understanding the registration and reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and on-going listing requirements of NYSE, NASDAQ and NYSE-MKT. It is not intended as a definitive treatment of the statutes and regulations described, and should not be relied on in determining the application of the statutes and regulations to particular circumstances without reference to the particular provisions involved. This paper covers the principal statutes and regulations of interest to the Canadian issuers of securities and their reporting obligations under the Exchange Act. It does not cover statutes or regulations principally involving the offer or sale of securities under the Securities Act of 1933, as amended (the “Securities Act”), or the financial services industry such as the regulation of investment companies, investment advisors or securities broker dealers.

About Kenneth Sam

Kenneth Sam is a partner in the Denver office of Dorsey & Whitney and a member of the firm’s U.S. & Canada Cross-border Practice Group. Ken was resident in the firm’s Seattle office from 1999-2005, the firm’s Denver office from 2005-2009 and Partner-in-Charge of Dorsey’s Toronto office from 2009-2012 before rejoining the Denver office in 2012. Ken is a leading international corporate finance attorney who represents companies, underwriters, agents and investors on U.S. legal matters, including SEC registration, securities offerings, debt offerings, SEC reporting, mergers and acquisitions, takeover defense and other related issues. Ken has significant experience in the Mining and Natural Resources Industry and serves as co-chair to the firm’s Mining Industry Group. Ken holds a B.S. (Business Administration) and M.S. (Marketing) from the University of Colorado-Denver and a J.D. from the University of Seattle School of Law. He is a member of the Washington State Bar and Colorado Bar and qualified Foreign Legal Consultant, Law Society of Upper Canada. Ken can be contacted at (303) 629-3445 or sam.kenneth@dorsey.com.

1

4838-2039-9394\3

CHAPTER 1. LEVELS OF SECURITIES REGULATION

Section 1.01 FEDERAL REGULATION OF SECURITIES AND CERTAIN FEDERAL STATUTES

(a) The Securities Act of 1933

The Securities Act of 1933, as amended (the “Securities Act”), regulates the distribution of securities to the public, directly or indirectly, by an issuer and/or its affiliates. All sales of securities by or to any person whatsoever in the United States require “registration” under the Securities Act, unless an exemption is available thereunder. There are broad exemptions, which cover bona fide market trades by persons who are not affiliates of the issuer. However, an issuer and its officers, directors, or significant shareholders, or a person who has purchased shares from any of them, should carefully consider whether an exemption from the registration requirements of the Securities Act is available before securities are offered or sold.

In Canada, any distribution of securities (whether to the public or not) is subject to the prospectus requirements of the relevant Canadian provincial and territorial securities acts, unless an exemption is available. Accordingly, an issuer proposing a sale of securities in the U.S. will have to consider whether the sale is subject to the registration requirements of the Securities Act. In addition, the issuer will have to consider whether the sale in the U.S. (in and of itself or together with any sale in Canada) may also be a distribution of securities subject to Canadian securities laws.

This paper does not cover the registration requirements or exemptions available under the Securities Act in connection with the offer and sale of securities.

(b) The Securities Exchange Act of 1934

The Securities Exchange Act of 1934, as amended (the “Exchange Act”), is intended to regulate the trading markets for securities. Among other things, the Exchange Act:

• establishes a system of continuous reporting and disclosure for public comparables to provide for the availability of information to support the public trading markets;

• regulates the process and disclosure involved in tender offers and proxy solicitation;

• regulates securities brokers and dealers and securities professionals; and

• regulates stock exchanges and trading markets.

This paper addresses the continuous reporting and disclosure system and the regulation of tender offer and proxy solicitation, but does not address broker-dealer regulation or the regulation of stock exchanges and the like.

To facilitate the availability of information to support the public trading markets, the Exchange Act requires “registration” (not to be confused with “registration” under the Securities Act) of any class of securities which:

• is traded on a U.S. securities exchange, or

• is a class of equity security of an issuer with $10,000,0001 in assets which is held by 2,000 or more holders of record or 500 or more holders of record that are not “accredited investors”.

In order to have a class of securities listed on a U.S. stock exchange, including the New York Stock Exchange (“NYSE”), Nasdaq, NYSE-MKT or the OTC Bulletin Board2, a Canadian issuer must register the class under the Exchange Act.

1 All dollar amounts are in U.S. dollars unless otherwise indicated.

2

4838-2039-9394\3

In addition, Section 15(d) of the Exchange Act requires issuers that have offered securities pursuant to a registration statement under the Securities Act to file reports under the Exchange Act, but not necessarily to “register” the class of securities under the Exchange Act.

Note that the Exchange Act does not limit the requirement for Exchange Act registration to U.S-incorporated issuers or specify where the assets or holders of record are located. Thus, any company, U.S. or foreign, with $10,000,000 in assets and a class of equity securities with 2,000 or more holders of record, or 500 or more holders of record that are not “accredited investors” must address questions of Exchange Act registration. There are exemptions for non-U.S. companies that do not wish to have a U.S. trading market or to register or report under the Exchange Act.

(c) Distinction between Securities Act Registration and Exchange Act Registration

Initially, it is necessary to distinguish between registration under the Securities Act and registration under the Exchange Act. Registration under the Securities Act arises from an offering of securities being made by or on behalf of an issuer (or persons controlling an issuer) and involves the filing of a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) and the distribution of a prospectus to persons to whom the offer is being made.

Registration of a class of securities under the Exchange Act, on the other hand, is not triggered by an offering of securities but is required of all securities listed on a U.S. national securities exchange (including NYSE, Nasdaq and NYSE-MKT) or quoted on the OTC Bulletin Board and, subject to certain exemptions for non-U.S. issuers, of any class of equity securities with 2,000 or more holders of record worldwide or 500 or more holders that are not accredited investors, in each case issued by an issuer with $10,000,000 in assets.

Although there are procedures available that permit simplification in the registration process under certain circumstances if a security has been previously registered under the other Act, the two registrations are separate and distinct and registration under one does not constitute registration under the other.

Section 1.02 STATE REGULATION

Each state has its own securities or “blue sky” laws governing the offer and sale of securities within that state. The vast majority of these laws require “registration” of the securities offered and sold in the state, unless an exemption is available. Accordingly, when securities are offered in the U.S., the blue-sky laws of the states involved must be consulted.

Likewise, when a secondary trading market develops in the U.S., it is necessary to verify that exemptions exist under the applicable states’ blue sky laws to permit secondary trades of the securities in question.

State securities laws also typically require registration with the state securities regulatory authorities of broker-dealers doing business with investors in the state.

In October 1996, Congress adopted the National Securities Market Improvement Act, also known as “NSMIA,” which “preempts” (i.e., nullifies) the state securities laws as they apply to certain transactions. In particular, certain private placements to accredited investors and sales of securities listed on U.S. national stock exchanges are not subject to complex state qualification or exemption requirements, although notice filings and the payment of fees are still required in some cases.

2 The OTC Bulletin Board (or OTCBB) is an interdealer quotation system that is used by subscribing Financial Industry Regulatory Authority (“FINRA”) members to reflect market making interest in OTCBB-eligible securities. FINRA is in the process of winding down the OTCBB.

3

4838-2039-9394\3

Section 1.03 INTEGRATED DISCLOSURE SYSTEM

(a) Regulation S-K and Regulation S-X

Disclosure related to an issuer’s reporting and registration of securities under the Securities Act and Exchange Act is dictated by the requirements of an “integrated disclosure system.” The integrated disclosure system is a set of rules and regulations that govern general disclosure in Securities Act and Exchange Act filings to ensure the disclosures required by one Act are, to the extent reasonably possible, the same as those required by the other. Regulation S-K contains the disclosure requirements related to non-financial disclosures and Regulation S-X contains the disclosure requirements for financial disclosure.

The integrated disclosure system permits an issuer to take disclosure prepared under one Act and use it to help satisfy the requirements imposed by the other. In addition, many of the registration and reporting forms under the Securities Act and the Exchange Act permit an issuer to incorporate by reference information contained in another registration statement or report filed with the SEC. It should be noted that many of the forms foreign private issuers (as defined below) have stand-alone line item disclosure and instructions that may vary from those required in Regulation S-K and Regulation S-X.

(b) EDGAR Filing System

SEC rules require public companies to file virtually all documents required under the Securities Act and Exchange Act, including amendments and exhibits thereto and all correspondence and related supplemental information, with the SEC through EDGAR. EDGAR is the SEC’s Electronic Data Gathering, Analysis and Retrieval system, which permits submission of documents to the SEC in electronic format in accordance with Regulation S-T. The system is intended to provide time savings in document delivery and improve dissemination of information to the public through faster access. Documents filed with EDGAR are available through the SEC’s website at www.sec.gov.

The Securities and Exchange Commission has adopted rules that will require companies to provide their financial information in interactive data format using eXtensible Business Reporting Language (“XBRL”), a computer language that defines or “tags” data using certain standard definitions. The new format will allow readers to download financial information directly into spreadsheets which, according to the SEC, will facilitate the comparison of financial and business performance across companies, reporting periods and industries. Companies will be required to tag their financial statements and footnotes, as well as any applicable financial statement schedules.

Foreign private issuers that do not prepare their financial statements in accordance with U.S. GAAP or IFRS are not required to provide interactive data in XBRL format.

The SEC has not adopted a specified IFRS taxonomy. Until such time, foreign private issuers reporting in accordance with IFRS will not need to prepare and file interactive data files in XBRL format.

Section 1.04 SPECIAL ISSUER CATEGORIES

An issuer’s reporting obligations under the Exchange Act, including the use of forms, are determined in part by the characteristics of the issuer based on the size of the issuer, exposure to the U.S. markets and nexus to the United States.

(a) Foreign Private Issuer

The SEC has recognized that non-U.S. issuers must comply with laws and customs in their home jurisdictions, and that imposition of U.S. laws on these issuers can interfere with the opportunity of U.S. investors to trade in foreign stocks and can give rise to issues involving the interference with national sovereignty. On the other hand, the SEC believes application of U.S. laws to non-U.S. issuers is justified when those issuers seek access to the U.S. capital and trading markets. The SEC has resolved these

4

4838-2039-9394\3

issues by developing the concept of “foreign private issuer,” which is governed by somewhat less burdensome requirements than those imposed on U.S. issuers.

The first thing a company has to look at in assessing how the U.S. securities laws apply to its activities is whether it is a “foreign private issuer” as defined under the Securities Act and the Exchange Act.

A company cannot use the US-Canada Multi-Jurisdictional Disclosure System (“MJDS”) or forms reserved for foreign issuers unless it is a foreign private issuer. Exemptions that exclude non-U.S. issuers from the Exchange Act’s proxy rules and insider trading reporting and forfeiture provisions only apply to foreign private issuers. And compliance with the Regulation S safe harbors to avoid U.S. registration of offshore offers and sales is much more burdensome if a company is not a foreign private issuer, making it virtually impossible to do an offshore public offering without registration in the U.S.

The term “foreign private issuer” means any non-U.S. issuer (other than a foreign government) except any issuer meeting the following conditions as of the last day of its most recently completed second fiscal quarter:

• More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and

• any of the following:

• the majority of the executive officers or directors are United States citizens or residents,

• more than 50 percent of the assets of the issuer are located in the United States, or

• the business of the issuer is administered principally in the United States.

For purposes of the “foreign private issuer” test, the issuer is required to “look through” the record holder to its customers where securities are registered in the name of a bank, broker or depository that is located in

• the U.S.

• the issuer’s home jurisdiction, or

• the jurisdiction that is the primary market for the issuer’s voting securities, if different from the issuer’s home jurisdiction.

The issuer also must take into account information as to U.S. ownership that has been provided to the issuer or that appears in public filings.

For most purposes, the test is run as of the last day of the second quarter of an issuer’s fiscal year, but for the use of MJDS registration statement forms, it is run prior to filing the registration statement.

If the majority of the issuer’s officers and directors are not U.S. citizens or residents, the majority of its assets are outside the U.S. and its business is principally administered outside the U.S., it will remain a foreign private issuer even if U.S. ownership of its voting securities goes over 50%. On the other hand, for companies relying on the 50% test, and these companies should regularly review their U.S. ownership levels to confirm their status as foreign private issuers.

Issuers are only required to test their status as a foreign private issuer annually on the last business day of their second fiscal quarter. An issuer that no longer qualifies as a foreign private issuers on the last business day of its second fiscal quarter is required to comply with the reporting requirements for

5

4838-2039-9394\3

U.S. domestic companies beginning on the first day of the fiscal year following the determination of change in status. For example, an issuer with a December 31 year–end that ceased to qualify as a foreign private issuer as of the end of its second fiscal quarter in 2014 would be required to file a Form 10-K in 2015 for its 2014 fiscal year. Also, as of January 1, 2015, the issuer would also be subject to the U.S. proxy rules, and its insiders would become subject to short swing trade reporting and forfeiture processions of Section 16 of the Exchange Act. An issuer that has been treated as a U.S. domestic issuer under the definition qualifies as a foreign private issuer on the last day of its second fiscal quarter, it is able to immediately use the foreign private issuer forms and follow the reporting requirements applicable to foreign private issuers, beginning on the determination date on which it establishes its eligibility as a foreign private issuer.

Be particularly careful to notify directors, executive officers and 10% shareholders well in advance if there is a change in the issuer’s status, because they will become subject to the Exchange Act’s short swing trading reporting and forfeiture provisions, and could make embarrassing and expensive mistakes if they trade in the issuer’s securities while unaware of the change. Issuers reporting under the Exchange Act that do not qualify as foreign private issuers are ineligible to use the “F” series forms under the Exchange Act or the Securities Act and are required to file their Exchange Act reports on the domestic forms (Form 10-K, Form 10-Q and Form 8-K), become subject to the proxy rules and the requirements of Regulation FD.

(b) Large Accelerated Filer

A “large accelerated filer” means an issuer after it first meets the following conditions as of the end of its fiscal year:

• An aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $700 million or more, as of the last business day of the issuer’s most recently completed second fiscal quarter;

• The issuer has been subject to the reporting requirements of section 13(a) or 15(d) of the Exchange Act for a period of at least twelve calendar months;

• The issuer has filed at least one annual report pursuant to section 13(a) or 15(d) of the Exchange Act; and

• The issuer is not eligible to use the requirements for smaller reporting companies (discussed below) for its annual and quarterly reports.

Once an issuer becomes a large accelerated filer, it will remain a large accelerated filer unless the issuer determines at the end of a fiscal year that the aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of the issuers was less than $500 million, as of the last business day of the issuer’s most recently completed second fiscal quarter. If the issuer’s aggregate worldwide market value was $50 million or more, but less than $500 million, as of the last business day of the issuer’s most recently completed second fiscal quarter, the issuer becomes an accelerated filer. If the issuer’s aggregate worldwide market value was less than $50 million, as of the last business day of the issuer’s most recently completed second fiscal quarter, the issuer becomes a non-accelerated filer.

(c) Accelerated Filer

An “accelerated filer” means an issuer after it first meets the following conditions as of the end of its fiscal year:

• An aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more, but less than $700 million, as of the last business day of the issuer’s most recently completed second fiscal quarter;

6

4838-2039-9394\3

• The issuer has been subject to the requirements of section 13(a) or 15(d) of the Exchange Act for a period of at least twelve calendar months;

• The issuer has filed at least one annual report pursuant to section 13(a) or 15(d) of the Exchange Act; and

• The issuer is not eligible to use the requirements for smaller reporting companies (discussed below) for its annual and quarterly reports.

Once an issuer becomes an accelerated filer, it will remain an accelerated filer unless the issuer determines at the end of a fiscal year that the aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of the issuer was less than $50 million, as of the last business day of the issuer’s most recently completed second fiscal quarter.

(d) Smaller Reporting Companies

Under the SEC’s disclosure regime “smaller reporting companies” have disclosure requirements that are scaled to reflect the characteristics and needs of smaller companies and their investors. Generally, the “smaller reporting company” category includes most companies that qualify as “non-accelerated filers.”

A “smaller reporting company” means an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:

• Had a public non-affiliate float in its common equity of less than $75 million as of the last business day of its most recently completed second fiscal quarter;

• In the case of an initial registration statement under the Securities Act, or the Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or

• In the case of an issuer whose public float for common equity was zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.

Once an issuer fails to qualify for smaller reporting company status, it will remain unqualified unless it determines that its public float was less than $50 million as of the last business day of its second fiscal quarter or, if that calculation results in zero because the issuer had no public equity outstanding or no market price for its equity existed, if the issuer had annual revenues of less than $40 million during its previous fiscal year.

(e) Emerging Growth Company

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) creates “emerging growth companies” as another category of issuer eligible for favorable treatment under certain circumstances. An “emerging growth company” is a company with annual gross revenues of less than $1 billion during its most recent fiscal year. A company retains emerging growth company status until the earliest of:

• The end of the fiscal year in which its annual revenues exceed $1 billion.

• The end of the fiscal year in which the fifth anniversary of its IPO occurred. For example, if a company with a December 31 fiscal year-end completed its IPO on March 1, 2014, it would cease to be an emerging growth company by December 31, 2019.

7

4838-2039-9394\3

• The date on which the company has, during the previous three-year period, issued more than $1 billion in non-convertible debt.

• The date on which the company qualifies as a large accelerated filer.

A company cannot be an emerging growth company if it completed its IPO or issued securities under a Securities Act Registration Statement on or before December 8, 2011. Emerging growth companies are entitled to reduced regulatory and reporting requirements under the Exchange Act. The category of emerging growth company does not exclude foreign private issuers that otherwise meet the definition.

(f) MJDS Eligible - Multi-Jurisdictional Disclosure System

The U.S.-Canada Multi-Jurisdictional Disclosure System (“MJDS”) was developed in 1991 as a coordinated registration and reporting system for certain qualifying U.S. and Canadian companies. Canadian companies that meet certain eligibility criteria are able to use less burdensome MJDS forms for registration and reporting under the Exchange Act, Form 40-F, and registration under the Securities Act, including Form F-7, F-8, F-10 or F-80.

Form 40-F is an MJDS form and may be used to register securities of certain “substantial” Canadian issuers under Section 12 of the Exchange Act or to file Exchange Act annual reports. To qualify for use of Form 40-F as an Exchange Act registration statement or annual report, an issuer must:

• be a foreign private issuer or crown corporation organized under the laws of Canada or any province or territory thereof;

• have been subject to the periodic reporting requirements of any securities commission or stock exchange in Canada for a period of at least 12 calendar months and be in compliance with those requirements; and

• have outstanding equity shares held by non-affiliates with an aggregate market value of at least $75 million.

Any person who owns directly or indirectly, or exercises control or direction over more than ten percent of the outstanding equity shares of an issuer at the end of the previous fiscal year is deemed to be an “affiliate” for the purpose of Form 40-F. “Equity shares” include common shares, non-voting equity shares and subordinate or restricted voting equity shares, but not preferred shares. The market value of shares held by non-affiliates is determined as of a date (chosen by the issuer) within 60 days prior to filing the registration statement or report. Note that “affiliate” status is determined for this purpose at the end of the last fiscal year – a holder that climbs above the ten percent threshold after year end is not an affiliate for the purpose of the market value calculation, and its shares are included when calculating shares held by non-affiliates, but a ten percent holder that drops below the ten percent threshold after year end remains an “affiliate,” and its shares are excluded from the calculation.

8

4838-2039-9394\3

CHAPTER 2. THE U.S. TRADING MARKETS

Section 2.01 THE NATIONAL SECURITIES EXCHANGES

The principal markets on which securities are traded in the U.S. are the New York Stock Exchange (“NYSE”), the NYSE-MKT (formerly the American Stock Exchange) and the Nasdaq Stock Market (“Nasdaq”), each qualifies as a national securities exchange. Section 12(b) of the Exchange Act requires registration under the Exchange Act of all classes of securities listed on any of the national securities exchanges and certain “regional” stock exchanges. Securities of issuers not listed on the NYSE, NYSE-MKT, Nasdaq or these other exchanges may be traded in the over-the-counter (“OTC”) market.

Section 2.02 OVER-THE-COUNTER MARKETS

A security may be traded in the over-the-counter market through the electronic OTC Bulletin Board service of the Financial Industry Regulatory Authority (“FINRA”) or on the various market tiers of the OTC Markets Group Inc. (the “OTC Markets Group”).

The OTC Bulletin Board is available to FINRA member firms on the Nasdaq computer system, and bid and asked quotes are updated continuously throughout the day. Registration under the Exchange Act is required to qualify for quotation on the OTC Bulletin Board.

OTC Markets Group provides electronic quoting and trading technology for the U.S. OTC market. OTC Markets Group’s inter-dealer quotation system – OTC Link – is used by broker-dealers to quote and trade OTC securities. OTC Markets Group’s OTC Link system and the OTC Bulletin Board are competing inter-dealer quotation systems for OTC securities. The OTC Bulletin Board does not support electronic trading which is available through the OTC Link system.

OTC Markets Group has three primary markets – OTCQX, OTCQB, and OTC Pink (formerly known as the “Pink Sheets”). The OTCQX marketplace is the premier tier of the OTC Markets Group and lists companies that meet the certain financial standards and undergo a qualitative review. The OTCQB is the next tier of the OTC Markets Group and lists companies that report with the SEC (either pursuant to registration under the Exchange Act or pursuant to ongoing reporting obligations under Section 15(d) of the Exchange Act) or a U.S. banking regulator. There are no financial or qualitative standards for the OTCQB. The OTC Pink is the bottom tier of the OTC Market Group and provides quotations for companies for which a market maker has submitted an application to FINRA to publish quotations on OTC Link. OTC Pink does not have any qualitative or reporting standards and is a highly speculative market. The OTC Pink is further divided into tiers based on the currency of information the quoted company has made available to the public.

In recent years, there has been a growth in the popularity of the OTC Markets Group’s OTCQX and OTCQB market tiers. These tiers have largely eclipsed the OTC Bulletin Board as the preferred markets to quote and trade OTC securities with approximately 95% of all OTC market quotes being published on OTC Link and approximately 5% being quoted on the OTC Bulletin Board. The OTCQX has seen rapid growth in the past few years with many well-respected foreign private issuers listing on the International Premier tier of this market.

The OTCQX market is divided into U.S. and International tiers, which list US domestic companies and international companies, respectively. Both the U.S. and International markets are divided into standard and premier tiers. Registration under the Exchange Act is not required to list on the OTCQX, but for companies that are not filing reports with the SEC there are ongoing annual and quarterly financial reporting obligations on OTCQX.com.

Among other requirements, to list on the OTCQX U.S. domestic companies must satisfy the following criteria: (i) ongoing operations (no shells, blank check or special purpose acquisition companies); (ii) a minimum bid price of $0.10 (for preceding 90 business days); (iii) at least 50 beneficial shareholders, each owning at least 100 shares of the Company’s common stock; and (iv) $2 million in total assets. In

9

4838-2039-9394\3

addition, for the most recent fiscal year, companies must have at least one of the following: (a) $2 million in revenue, (b) $1 million in net tangible assets, (c) $500,000 in net income, or (d) a market value of at least $5 million of listed securities.

OTCQX U.S. Premier is designed to identify issuers that are of the size and quality to list on a national stock exchange. The requirements for listing on OTCQX U.S. Premier incorporate the financial qualifications of the NASDAQ Capital Market Continued Listing Standards.

International exchange listed companies may qualify to list on one of the OTCQX international tiers if they are listed on a qualified foreign exchange, such as the Toronto Stock Exchange or the TSX Venture Exchange, for at least 40 days. Companies must either have a class of securities registered under Section 12(g) of the Exchange Act (and be current and compliant with its SEC reporting obligations) or be eligible to rely on the exemption from SEC registration provided by Exchange Act Rule 12g3-2(b). International companies relying on the exemption under Section 12g3-2(b) should monitor their primary trading market status once the Company’s shares are being traded in the U.S.

In addition to being listed on a qualified foreign exchange, among other requirements, to list on the OTCQX International companies must satisfy the following criteria: (i) $2 million in total assets, and (ii) for the most recent fiscal year, companies must have at least one of the following: (a) $2 million in revenue, (b) $1 million in net tangible assets, (c) $500,000 in net income, or (d) a global market cap of at least $5 million. To qualify for listing on the OTCQX International Premier market a company must meet the qualifications for listing securities under the financial standards of the Worldwide (Non-U.S.) Listing Standards of the New York Stock Exchange, except that the company is not required to have a class of securities registered under Section 12 of the Exchange Act or meet the bid price of such qualifications.

The OTCQB marketplace is the second tier of the marketplaces operated by OTC Markets Group, below OTCQX and above OTC Pink. The OTCQB marketplace permits Canadian and other international companies to join even if they are not SEC Reporting Companies. Unlike the OTCQX marketplace, there are no minimum financial standards on the OTCQB marketplace other than a US$0.01 minimum bid price.

The rules of the SEC under the Exchange Act impose information requirements on brokers who publish quotations on the OTC Bulletin Board or on the OTC Link, which covers the OTCQX, OTCQB, and OTC Pink. Rule 15c2-11 provides that it is unlawful for a broker or dealer to publish any quotation for a security or, directly or indirectly, to submit any quotation for publication in any quotation medium unless it has certain information in its files. If a security is registered under the Exchange Act, copies of the issuer’s mandatory Exchange Act filings satisfy this requirement. Alternatively, Rule 15c2-11(a)(5) permits OTC Link quotations by a broker or dealer if it has and makes reasonably available upon request to any person expressing an interest in a proposed transaction in the security, a rather lengthy and detailed list of items of information about the issuer.

Rule 15c2-11 provides as another alternative that, a broker or dealer may issue quotes on OTC Link for a security of a “foreign private issuer” exempted from Exchange Act registration by Rule 12g3-2(b) if the broker has the information that the issuer was required to furnish to the SEC pursuant to that rule. Accordingly, many small Canadian issuers seeking to have U.S. broker-dealers issue quotations for their shares on OTC Link voluntarily seek the Rule 12g3-2(b) exemption. Given the burdensome nature of the information requirement of Rule 15c2-11(a)(5), many broker-dealers will not issue quotations in reliance upon it.

Any broker electing to publish quotations for an issuer on the OTC Bulletin Board must submit an application to FINRA. A similar application process must be completed by a broker electing to publish quotations on OTC Link, except that the application is initially made to the OTC Markets Group.

Section 2.03 PENNY STOCK RULES

Rules 15g-1 through 15g-9 under the Exchange Act impose additional requirements on broker-dealers who deal in or recommend purchases of low-priced over-the-counter securities of small issuers. Prior to

10

4838-2039-9394\3

effecting transactions in these securities, a broker-dealer must, among other things, make a documented determination that the investment is suitable for the purchaser and obtain from the purchaser a written agreement to the transaction.

The broker-dealer must disclose certain information to the customer, including the compensation of the broker and any affiliated persons in connection with the transaction and current price quotations for the security. In addition, brokers are required to provide to the customer a standardized disclosure document explaining the risks of investing in penny stocks.

In general, the “penny stock” rules are not applicable to transactions in securities that (i) are registered, or approved for registration, on an exchange, (ii) are authorized, or approved for authorization, for listing on Nasdaq, (iii) are issued by a registered investment company or the Options Clearing Corporation, (iv) are issued by an issuer having net tangible assets in excess of $2,000,000 if the issuer has been in continuous operation for three years (otherwise $5,000,000), or average revenue of $6,000,000 for the last three years or (v) have a price of $5.00 or more.

A number of reputable brokerage firms will not, as a matter of policy, trade in “penny stocks” (as defined by the SEC) as a result of concern about liability for inadvertent violation of these rules.

11

4838-2039-9394\3

CHAPTER 3. EXCHANGE ACT REGISTRATION AND DEREGISTRATION FOR CANADIAN ISSUERS

Section 3.01 EXCHANGE- AND OTC-TRADED ISSUERS

All Canadian issuers with a class of securities traded on a U.S. stock exchange or quoted on the OTC Bulletin Board must register the class of securities under the Exchange Act.

Section 3.02 REQUIREMENT TO REGISTER

Subject to the exceptions for “foreign private issuers” described below, a Canadian issuer will also be required to register a class of equity securities under the Exchange Act if, on the last day of any fiscal year, it has:

• total assets exceeding US$10,000,000; and

• a class of equity securities held of record by either 2,000 or more persons worldwide, or 500 or more persons worldwide who are not “accredited investors” as defined in Regulation D.

In determining the number of record holders an issuer may exclude persons who acquired their securities through employee benefit plans in transactions that were exempt form regulation under the Securities Act

The holder of record of a security will generally be the person whose name appears in the record of security holders maintained by or on behalf of the issuer; however, in the case of a commercial depositary such as CDS & Co. or Cede & Co., each account for which the commercial depositary holds securities must be treated as a separate record holder.

Section 3.03 EXEMPTIONS FROM EXCHANGE ACT REGISTRATION FOR SECURITIES OF FOREIGN

PRIVATE ISSUERS

(a) Exchange Act Rule 12g3-2(a)

Exchange Act Rule 12g3-2(a) exempts from registration under the Exchange Act any class of security of a foreign private issuer not listed on a U.S. stock exchange or quoted on the OTC Bulletin Board, with fewer than 300 beneficial holders (as opposed to shareholders of record) resident in the U.S. The issuer does not have to take any action to qualify for the exemption. Note that, as stated earlier, all issuers with a class of equity securities held of record by fewer than 2,000 persons worldwide, or 500 or more persons worldwide who are not “accredited investors” as defined in Regulation D are automatically exemption from Exchange Act registration requirements.

(b) Exchange Act Rule 12g3-2(b)

Exchange Act Rule 12g3-2(b) exempts securities of foreign private issuers (including Canadian foreign private issuers) that qualify for the rule from registration under the Exchange Act.

Under recently adopted amendments to Rule 12g3-2(b), a foreign private issuer may claim the Rule 12g3-2(b) exemption without having to submit a written application to the SEC, if:

• the issuer currently maintains a listing of the subject class of securities on one or more exchanges in its primary trading market, which is defined to mean that:

• at least 55 percent of the trading in the subject class of securities on a worldwide basis took place in, on or through the facilities of a securities market or markets in a single foreign jurisdiction or in no more than two foreign jurisdictions during the issuer’s most recently completed fiscal year; and

12

4838-2039-9394\3

• if a foreign private issuer aggregates the trading of its subject class of securities in two foreign jurisdictions, the trading for the issuer’s securities in at least one of the two foreign jurisdictions is greater than trading in the United States for the same class of the issuer’s securities;

• the issuer is not required to file reports under Section 13(a) or 15(d) of the Exchange Act; and

• the issuer has published English-language versions of the applicable documents from the first day of its most recently completed fiscal year, on its website or through an electronic information delivery system generally available to the public in its primary trading market (unless claiming the exemption upon or following Exchange Act deregistration). The documents that must be may available include all material information that the issuer:

• made, or was required to make, public pursuant to the laws of the country of its domicile or in which it was incorporated or organized;

• filed or was required to file with a stock exchange on which its securities are traded and which was made public by such exchange; and

• distributed or was required to distribute to its security holders.

To maintain the Rule 12g3-2(b) exemption, an issuer must continue to publish electronically, on its website or through an electronic information delivery system in its primary trading market such as SEDAR, the information listed above. An issuer need only furnish such information that is material to an investment decision.

A foreign private issuer meeting the requirements of the amended Rule 12g3-2(b) exemption will maintain the exemption until:

• the issuer ceases to be a foreign private issuer;

• the issuer no longer electronically publishes the information listed above required to maintain the exemption;

• the issuer no longer maintains a listing for the subject class of securities on a non-U.S. securities market;

• the United States becomes the largest trading market for the securities or trading in the United States exceeds 45% of worldwide trading during a fiscal year (see the definition of “primary trading market” above); or

• the issuer registers a class of securities under Section 12 of the Exchange Act or incurs SEC reporting obligations, for example by conducting a U.S. public offering, listing on a U.S. stock exchange or acquiring an Exchange Act registered company in a share-for-share transaction.

Because the definition of “primary trading market” uses a trading volume standard for the issuer’s most recently completed fiscal year, a foreign private issuer will have to reevaluate its relative U.S. and foreign trading volumes annually to determine whether it still falls within the terms of the amended rule.

Section 3.04 SUCCESSOR REGISTRATION

Under the SEC’s successor reporting rules, a Canadian issuer may have a class of its securities deemed to be registered under the Exchange Act if it issues securities of that class to the shareholders of an Exchange Act registered company in connection with the acquisition of the Exchange Act registered company. An exception to this rule exists under MJDS, when the issuer complies with the Rule 12g3-2(b)

13

4838-2039-9394\3

exemption prior to the acquisition, the target company is a qualifying Canadian foreign private issuer, and the acquisition transaction is registered with the SEC on MJDS Forms F-8 or F-80.

A Canadian issuer whose securities are deemed registered under the Exchange Act may, in certain circumstances, be eligible to immediately deregister its securities.

Section 3.05 EXITING THE SEC REPORTING SYSTEM

(a) Deregistration on Form 15

The reporting requirements of Section 13(a) of the Exchange Act continue until terminated or suspended in accordance with the rules promulgated by the SEC. In general, there are two alternatives for termination that may be available to the issuer:

• filing a Form 15 under Rule 12g-4 under the Exchange Act; or

• filing a Form 15F under Rule 12h-6 under the Exchange Act.

The issuer need only satisfy one of these alternatives in order to terminate its Exchange Act reporting obligations; however, if it satisfies the requirements for both alternatives, only one of the alternatives may be followed. In most cases, filing a Form 15F is preferable when both forms are available.

(i) Conditions

Pursuant to Rule 12g-4, an issuer may affect termination if the registered class of securities is held of record by either (i) less than 300 persons on a worldwide-basis, or (ii) less than 500 persons on a worldwide-basis, where the total assets of the issuer have not exceeded $10 million on the last day of each of the issuer’s most recent three fiscal years.

The term “holders of record” is defined by Rule 12g5-1. Generally speaking, each holder identified on the record of security holders counts as one record holder. This includes a broker-dealer holding the securities in street name for a number of clients. Institutional custodians, however, such as CDS, Cede & Co. and other commercial depositories, do not count as one record holder. Instead, the issuer must look through one level of ownership for securities held by a depository by obtaining the list of accounts for which the securities are held by the depository and treating each of the accounts as a separate record holder. No further look-through of the beneficial ownership of the depository’s accounts are required.

(ii) Deregistration Process

Termination of a registered class of securities will take effect 90 days, or such shorter period as the SEC may determine, after the issuer certifies to the SEC on Form 15 that the registered class of securities satisfies either (i) or (ii) above. During this 90-day period, the issuer’s Section 13(a) reporting requirements are suspended. However, if the Form 15 is withdrawn or denied prior to the effective date, all reports that would have been required to be filed, absent the suspension, must be filed within 60 days of the withdrawal or denial of the Form 15. During this 90-day period, other reporting requirements, such as the requirements of Section 13(d) (beneficial ownership reports) continue in effect.

(iii) 12g3-2(b) Exemption

A foreign private issuer that has filed a Form 15 may claim a Rule 12g3-2(b) exemption if: (i) the issuer furnishes the SEC with a list of information which it is required to file or make public under the laws of its domicile or regulations of its non-U.S. exchanges or which it has distributed to its security holders generally (collectively, “home country disclosures”), copies of all such information published since the beginning of the issuer’s last completed fiscal year and certain other information concerning the extent of U.S. holdings of its securities; and (ii) the issuer either designates to the SEC a website where all future home country disclosures will be posted and made available to the public, or furnishes copies of such home country disclosures to the SEC as and when disclosed.

14

4838-2039-9394\3

However, the Rule 12g3-2(b) exemption is not available until 18 months after the issuer’s Section 12 registration and/or its Section 15(d) reporting obligation is terminated. Accordingly, the issuer must wait 18 months and, only if it qualifies after such time may it claim the exemption.

(b) Deregistration on Form 15F

Pursuant to Rule 12h-6, a foreign private issuer must satisfy several conditions to effect termination on Form 15F.

(i) Condition One

An issuer may meet the first condition by satisfying either one of two alternatives, each of which is discussed below.

Alternative 1: The 5% Average Daily Trading Volume Test

Equity securities will be eligible for deregistration if the average daily trading volume (“ADTV”) of that class of securities during a recent 12-month period in the United States has been 5% or less of the ADTV of those same securities on a world-wide basis. In order to calculate the percentage of U.S. ADTV, the numerator consists of U.S. ADTV, which includes both on-exchange and off-exchange transactions. The denominator consists of U.S. ADTV and on-exchange transactions outside the United States and may include off-exchange transactions outside the United States. Off-exchange transactions outside the United States may include transactions conducted through alternative trading systems, provided that the issuer has obtained the information concerning the off-exchange transactions from publicly available sources or third-party information service providers, upon which the issuer has reasonably relied in good faith and the off-market transaction information does not duplicate any other trading volume information obtained. Lastly, trading volume related to equity-linked securities, such as convertible debt securities, options and warrants, should be excluded when calculating ADTV.

Alternative 2: The 300 Holder Test

Alternatively, an issuer may deregister if, on a date within 120 days before the filing date of the Form 15F, the issuer has less than (i) 300 record holders on a worldwide-basis, using the test described above, or (ii) 300 record holders who are U.S. residents. Under the counting method for U.S. residents, an issuer need only “look through” the accounts of brokers, banks and other nominees located in the United States, the jurisdiction in which the issuer is organized and, if different, the jurisdiction of its primary trading market to make this calculation. Additionally, if an issuer aggregates the trading volume in two jurisdictions for purposes of determining its primary trading market, it must look through nominee accounts in both jurisdictions for purposes of calculating the number of U.S. holders. In undertaking this analysis, the issuer will be able to rely on an “independent information services provider.” If, after reasonable inquiry, an issuer is unable without unreasonable effort to obtain information concerning the amount of securities held by nominees for the accounts of customers resident in the United States, the issuer may assume that the customers are residents of the jurisdiction in which the nominee has its principal place of business.

When publicly filed reports of beneficial ownership or other reliable information that is provided to the issuer indicates that the securities are held by U.S. residents, the issuer must count the securities as held by U.S. holders.

(ii) Additional Conditions

In addition to satisfying one of the foregoing alternatives, the issuer must satisfy all of the following three conditions:

• The issuer must have at least twelve months of Exchange Act reporting history, including having filed at least one Exchange Act annual report, and the issuer must have filed all reports required to have been filed.

15

4838-2039-9394\3

• Subject to limited exceptions, the equity securities that the issuer seeks to deregister must not have been sold through a registered public offering under the Securities Act during the twelve months leading up to the attempted deregistration. Securities sold via an exemption to the Securities Act are not subject to this limitation. As a result, Rule 144A or Rule 506 offerings, among other registration exemptions, that took place within the previous year will not prevent deregistration.

• An issuer seeking to deregister must have had that class of securities listed on an exchange in the issuer’s “primary trading market” for at least twelve months preceding the deregistration filing in the United States.

(iii) Deregistration Process

Form 15F Disclosure

An issuer must file a Form 15F with the SEC on EDGAR to commence the deregistration process for a class of securities. The filing of a Form 15F will immediately suspend an issuer’s Exchange Act reporting obligations, and an issuer will have no further duty to conduct inquiries regarding its eligibility to remain deregistered. However, an issuer who has filed Form 15F must withdraw its filing if it becomes aware that any of its material submissions no longer hold true as at the date of the original Form 15F filing.

By filing a Form 15F, the issuer certifies that: (i) it meets all of the conditions for terminating its Exchange Act reporting obligations specified in Rule 12h-6; and (ii) there are no classes of securities other than those that are the subject of its Form 15F filing for which the issuer has Exchange Act reporting obligations. Form 15F will also require the issuer to provide information that it relied upon in reaching its decision to cease its reporting obligations. This may include disclosure of its reporting history, its last sale of registered securities and, whichever applies, the primary trading market, trading volume data or number of record holders of the subject class of securities.

Post-Filing Waiting Period

Once the issuer files its Form 15F, the SEC will have 90 days to make any objections to the filing. If the SEC has no objections, the class of securities will automatically become deregistered and the related Exchange Act reporting obligations will cease. On the other hand, if the SEC denies the Form 15F or the issuer withdraws it, the issuer will then have 60 days to file with the SEC all reports that would have been required had the issuer not filed the Form 15F.

Public Notice Period

To alert U.S. investors about the issuer’s intended withdrawal, an issuer must: (i) publish, either before or on the date that it files its Form 15F, a notice in the United States asserting its intent to terminate obligations; (ii) publish such notice through means reasonably designed to provide broad dissemination to the public in the United States; and (iii) submit to the SEC a copy of the notice, either as an exhibit to the Form 15F, or by means of a Form 6-K that is filed before or at the time of filing of the Form 15F.

12g3-2(b) Exemption

A foreign private issuer that has filed a Form 15F may claim a Rule 12g3-2(b) exemption in the same manner as an issuer that has filed a Form 15, except that an issuer that has filed a Form 15F may claim the Rule 12g3-2(b) exemption immediately, and need not wait 18 months.

(c) U.S. Trading After Exiting

If the issuer deregisters, its common shares will no longer be eligible for trading on the OTC Bulletin Board. The issuer’s common shares, may, however, be eligible for trading on the “OTCQX” or “OTCQB,” markets maintained by the OTC, Markets Group. However, all trades will be subject to compliance with

16

4838-2039-9394\3

U.S. states securities laws. In order to facilitate OTCQX or OTCQB trading, some companies will obtain a listing in a securities manual, which qualifies the common shares for secondary trading in most (but not all) of the U.S. states.

17

4838-2039-9394\3

CHAPTER 4. EXCHANGE ACT REGISTRATION AND REPORTING FOR CANADIAN FOREIGN PRIVATE ISSUERS

A Canadian foreign private issuer has several choices of Exchange Act forms available to use for registration statements and annual reports:

• Form 20-F The standard form for Exchange Act registration statements and annual reports by foreign private issuers.

• Form 40-F The MJDS Form for Exchange Act registration statements and annual reports by qualifying Canadian foreign private issuers.

• Form 10 and Form 10-K The forms for Exchange Act registration statements (Form 10) and annual reports (Form 10-K) available to all issuers and normally used by U.S. domestic issuers.

The following summary describes registration and reporting for Canadian issuers that qualify as foreign private issuers. You should consult your Dorsey & Whitney contact for guidance with respect to registration and reporting requirements for your specific circumstances.

In addition to filing annual reports Canadian issuers filing annual reports on Form 20-F and Form 40-F are required to furnish current reports on Form 6-K. Canadian issuers filing annual reports on Form 10-K are required to file current reports on Form 8-K. See, “Current Reports,” below.

Section 4.01 REGISTRATION AND REPORTING ON FORM 20-F

Form 20-F may be used by foreign private issuers both as an initial registration statement under the Exchange Act and as an annual report. Form 20-F requires somewhat less detail than the Form 10 registration statement and Form 10-K annual reports required of issuers that do not qualify for Form 20-F.

The annual report on Form 20-F must be filed within four months after the end of each fiscal year. Note that if the foreign private issuer maintains a shelf registration statement under the Securities Act, the annual report on Form 20-F must be filed within 90 days after the end of each fiscal year to maintain its ability to offer securities under the shelf due to the financial statement requirements.

(a) Financial Statement Requirements

An Exchange Act registration statement or annual report on Form 20-F must contain audited consolidated statements of income and cash flow for the issuer’s three most recently completed fiscal years and balance sheets as of the end of the two most recently completed fiscal years.

The financial statements must be prepared either (i) in accordance with or reconciled to U.S. GAAP or (ii) in accordance with IFRS as issued by the International Accounting Standards Board (IASB), in which case no U.S. GAAP reconciliation is required.

(i) U.S. GAAP Reconciliation

When a Form 20-F is used for an Exchange Act registration statement (as opposed to an annual report) and is filed more than nine months after the end of the last fiscal year for which audited financial statements are included, the registration statement must also include interim financial statements (which need not be audited but must be reconciled to U.S. GAAP) covering at least the first six months of the fiscal year.

18

4838-2039-9394\3

When Form 20-F is used for an Exchange Act registration statement which becomes effective within three months after the end of a fiscal year, that year’s audited statements need not be included if they are not available.

Financial statements included in a Form 20-F registration statement or annual report may be prepared in accordance with U.S. GAAP, IFRS or GAAP of an appropriate foreign country. If prepared in accordance with other than U.S. GAAP or IFRS, the annual and interim financial statements included in the filing must be reconciled to U.S. GAAP. The reconciliation of the income statement of the earliest of the three fiscal years presented may be omitted if the information has not previously been included in a SEC filing. This exclusion normally occurs when Form 20-F is used as an Exchange Act registration statement.

(ii) International Financial Reporting Standards (IFRS)

Financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) by foreign private issuers may be filed on Form 20-F without requiring any reconciliation to U.S. GAAP. This means that no US GAAP reconciliation will be required for a company’s annual audited financial statements or its interim financial statements if a company files its audited financial statements in accordance with IFRS. IFRS is used by most Canadian issuers filing reports in Canada.

U.S. auditor independence standards apply to accountants whose opinions are included in an annual report filed with the SEC. In addition, the Sarbanes-Oxley imposes additional requirements on independent auditors and Exchange Act registered companies. Furthermore, the auditor must be registered with the Public Company Accounting Oversight Board (“PCAOB”) and comply with PCAOB’s audit standards.

(b) Form and Content

The Form 20-F requires substantive prospectus level disclosure items, including:

Selected Financial Data. A company must provide selected historical financial data table for its five most recent fiscal years or such shorter period that the company has been in operation. The data must be presented in the same currency as used in the company’s financial statements.

Risk Factors. A company shall prominently disclose risk factors that are specific to the company or its industry. Companies should list the risk factors in the order of their priority to the company.

History and Development of the Company. The following information should be disclosed under this sub-heading: (i) the legal and commercial name of the company; (ii) the date of incorporation; (iii) its domicile and legal form, country of incorporation, legislation under which it operates and address and telephone number of its registered office or principal place of business if different from its registered office, and the name and address of the company’s agent in the United States, if any; (iv) important events in the development of the company in the last fiscal year; (v) a description, including the amount invested, of the company’s principal capital expenditures and divestitures in the last three financial years; (vi) information concerning the principal capital expenditures and divestitures currently in progress; and (vii) an indication of any public takeovers offered by third parties or by the company in respect of other companies which have occurred during the last and current fiscal year.

Business Overview. The following information should be disclosed under this sub-heading and should be presented on the same basis as that used to determine the company’s business segments under the body of accounting principles used in preparing the financial statements (i.e., U.S. GAAP or IFRS): (i) a description of the nature of the company’s operations and its principal activities stating the main categories of products and/or services performed for each of the last three fiscal years, (ii) a description of the principal markets in which the company competes, including a breakdown of total revenues by category of activity and geographic market for each of the last three fiscal years, (iii) a description of the seasonality of the company’s main business, (iv) a description of the sources and availability of raw materials, including a description of whether prices are volatile, (v) a description of the

19

4838-2039-9394\3

marketing channels used by the company, (vi) summary information regarding the extent to which the company is dependent on patents or licenses, industrial, commercial or financial contracts, (vii) the basis for any statements made by the company regarding its competitive positions and, (viii) a description of the material effects of government regulations on the company’s business.

Organizational Structure. A company should provide a listing of its significant subsidiaries, including name, country of incorporation and proportion of ownership. If the company is part of a group, it should include a brief description of the group including its position within the group.

Property, Plants and Equipment. A company should provide information regarding any material tangible fixed assets, including leased properties, and any major encumbrances thereon, including a description of the size and uses of the property, productive capacity and extent of utilization of the company’s facilities, the location of the assets, how the assets are held and how the products are produced.

Unresolved SEC Staff Comments. Large accelerated filers and accelerated filers must disclose the substance of any unresolved written comments that the issuer believes is material regarding its periodic reporting received more than 180 days before the end of the fiscal year.

Management’s Discussing and Analysis of Financial Results. A company must provide management’s explanation of factors that have affected the company’s financial condition and results of operations for the historical periods covered by the financial statements, and the management’s assessment of factors and trends which are anticipated to have a material effect on the company’s financial condition and results of operations in future periods.

Off-Balance Sheet Arrangements. The rules require disclosure of off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future effect on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Disclosure of Contractual Obligations. Form 20 F requires disclosure, in tabular format, of the amounts of the issuer’s contractual obligations, in order to present a meaningful snapshot of cash requirements arising from contractual payment obligations, including long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations and other long-term liabilities reflected on the company’s balance sheet under GAAP. The table would aggregate contractual obligations by type and cover total contractual obligations, as well as contractual obligations during the following periods of less than one year, one to three years, three to five years, and more than five years. “The purpose of the contractual obligations table is to provide aggregated information about contractual obligations and contingent liabilities and commitment in a single location so as to improve transparency of a registrant’s short term and long term liquidity and capital resources needs” and to provide context relative to off balance sheet arrangements.

Directors, Senior Management Experience and Compensation. A company must disclose the for each director and executive their business experience, functions and areas of expertise in the company; principal business activities performed outside the company; date of birth or age; the nature of any family relationship with any other person listed under this sub-heading and any arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any person was selected as a director or member of senior management. A company must also disclose the amount of compensation paid and benefits in kind granted during the company’s last completed fiscal year to the company’s directors and member of its administrative, supervisory or management bodies and the total amounts set aside or accrued by the company or its subsidiaries to provide pension, retirement or similar benefits.

Board Policies. A company must disclose the date of expiration of the current term of office and details of service contracts for the company’s directors and member of its administrative, supervisory or management bodies and details relating to the company’s audit committee and remuneration committee for the company’s last fiscal year. If the company’s entire board of directors acts as the company’s audit

20

4838-2039-9394\3

committee then this must be stated or if the company has a board of auditors or similar body as described in Exchange Act Rule 10A-3(c)(3), then the disclosure for this section can relate to such board.

Directors, Senior Management Share Ownership. Describe share ownership and options granted in the company as of the most recent practicable date for the company’s directors and member of its administrative, supervisory or management bodies. Information regarding options shall include: the title, and amount of securities held for options, the exercise price, the purchase price (if any), and the expiration date. If the individual owns less than 1%, and this has yet to be disclosed in public filings, then the filing may simply state the individual’s name with a footnote stating the individual owns less than 1%.

Employees. The number of employees at the end of the company’s last fiscal year or average number of employees for each of the company’s last three fiscal years, and where possible a breakdown of persons employed by main category of activity and geographic location, and disclose any significant change in the number of employees; information regarding the relationship with any labor unions; and the number of any significant number of temporary employees on average during the most recent fiscal year.

Major Shareholders – The names of shareholders owning 5% or more of each class of the company’s voting securities as of the most recent practicable date, any significant change in percentage of ownership during the company’s last three fiscal years and an indication of whether such shareholders have different voting rights. Also describe whether the company is directly or indirectly controlled by another corporation, by a foreign government or any other natural person, and if so give the names of such entity or person and describe the nature of the control. In addition, describe any arrangement known to the company, the operation of which may result in a change in control of the company.

Related Party Transactions – For the period commencing as of the beginning of the company’s last fiscal year up to the latest practicable date, describe transactions or loans between the company and (i) enterprises that are controlled by the company, (ii) associates, (iii) individuals owning voting power in the company that gives them significant influence over the company, (iv) key management personnel and (v) enterprises in which a substantial interest in voting power is owned by any person described in (iii) or (iv).

Listing Details – Disclose information regarding the high and low market price of the company’s stock for each of the company’s five most recent fiscal years, the high and low market price for each quarterly period within the last two fiscal years and the high and low market price for each month in the most recent six months.

Markets – Disclose all stock exchanges and other regulated markets on which the company’s securities are listed for trading, if applying for admission to any exchange or regulated market, this must be mentioned and any date when the company will be listed if known.

Memorandum and Articles of Incorporation – If this information has previously been reported in a registration statement, the information may be incorporated in the annual report by a specific reference to the registration statement containing such information.

Material Contracts – A summary of each material contract, other than those entered into in the ordinary course of business, to which the company is a party and entered into during the preceding two years. The summary should include: dates, parties, general nature of the contracts, terms and conditions, and amount of any consideration passing to or from the company.

Exchange Controls – Any governmental laws, decrees, regulations or other legislation of the home country which may affect the import or export capital of the company or the remittance of dividends, interest or other payments to nonresident holders of the company’s securities.

Taxation – Information regarding taxation to which shareholders in the United States may be subject. Information should include whether the company assumes responsibility for the withholding of tax and the applicable provisions of any reciprocal tax treaties.

21

4838-2039-9394\3

Documents on Display – Information on where documents referred to in the annual report can be viewed.

Subsidiary Information – Information relating to the company’s subsidiaries, if the information is not called for the by the body of generally accepted accounting principles used in preparing the financial statements.

Quantitative and Qualitative Disclosure about Market Risk. A company must provide, in its reporting currency, quantitative information about market risk as of the end of its latest fiscal year in accordance with one of three disclosure alternatives. A company must also provide qualitative information about market risk, including primary market risk exposure, how such exposure is managed and changes expected to occur in future reporting periods. Primary market risk includes interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks. An issuer is required to include derivative financial instruments, other financial instruments and derivative commodity instruments. Including the information in the MD&A section with proper cross-referencing is acceptable.

Defaults, Dividend Arrearages and Delinquencies. A company must disclose (i) any material default in the payment of principal or interest or any other material default not cured within 30 days related to the indebtedness of the company or any of its significant subsidiaries, and if the amount of indebtedness exceeds 5% of the company’s total assets on a consolidated basis, identify the indebtedness and state the nature of the default and (ii) any arrearage in the payment of dividends or any other material delinquency relating to any class of registered preferred stock or any class of preferred stock of a significant subsidiary which is not cured within 30 days. If this information has previously been reported on Form 6-K, a company may incorporate the information by specifically referring in its annual report to the relevant Form 6-K.

Material Modifications to the Rights of Security Holders and Use of Proceeds. A company must disclose any material modification to the instruments defining the rights of holders of any class of its registered securities. The disclosure must include the identity of the class of securities and general effect of the modification. A company must disclose the use of proceeds of a prior offering in its annual report until the later of the date that the application of all offering proceeds is disclosed or the date that the termination of the offering is disclosed. If this information has previously been reported on Form 6-K, a company may incorporate the information by specifically referring in its annual report to the relevant Form 6-K.

Disclosure Control and Procedures. The company’s principal executive and principal financial officers, or persons performing similar functions, report regarding the effectiveness of the company’s disclosure controls and procedures, which are designed to ensure that information which is required to be disclosed in annual and quarterly reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Report on Internal Control over Financial Reporting. Management’s report on “internal control over financial reporting,” which focus on a company’s financial reporting mechanisms to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All SEC reporting companies are required to maintain internal control over financial reporting under the Exchange Act and include an internal control report by management in each annual report filed with the SEC. The internal control report must include a statement of management’s responsibilities for establishing and maintaining adequate internal control over financial reporting; a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of the company’s internal control over financial reporting; and management’s conclusions regarding the effectiveness of the internal control over financial reporting as of the end of the company’s most recent fiscal year. In addition, issuers must evaluate any changes to internal control over financial reporting that occurred during the period covered by the annual report that have materially affected or are reasonably likely to affect the issuers’ internal control over financial reporting.

22

4838-2039-9394\3

Auditor Attestation. The independent auditor of “large accelerated filers” and “accelerated filers” are required to attest to and report separately on management’s evaluation of the company’s internal control over financial reporting for annual reports on Form 20-F. The attestation is required to be included in the annual reports of large accelerated filers and accelerated filers and must state the auditor’s opinion as to the effectiveness of the issuer’s internal control over financial reporting and if an opinion cannot be expressed, the reason why. Emerging Growth Companies and smaller reporting companies are exempted from this requirement. Most issuers that do not qualify to use Form 40-F as an annual report are not “large accelerated filers” or “accelerated filers” and are exempt from the requirements to provide an auditor attestation in Form 20-F.

Audit Committee Financial Expert. If the audit committee has a financial expert then the issuer must disclose the name of the expert and whether the expert is independent. The issuer must also disclose whether or not a financial expert is “independent” under the rules of a U.S. national exchange (including NYSE, NYSE MKT or NASDAQ rules) and if not, why not. If a reporting company does not have any financial experts, as defined by the SEC, on its audit committee, it must explain the reasons why it does not have a financial expert. Note that SEC Rule 10A-3 requires U.S. national exchanges to adopt minimal audit committee requirements for issuers to qualify for listing.

Code of Ethics. Companies are required to disclose whether they have adopted a code of conduct and ethics applicable to the principal executive officer, the principal financial officer, the principal accounting officer or controller, or any person performing similar functions. If the issuer has not adopted a code of ethics, the issuer must state the reason why in their Form 20-F. A copy of the code of ethics is required to be filed with the SEC as an exhibit to Form 20-F. A foreign private issuer that reports on Form 20-F is required to disclose any modification, “waiver”3 or “implicit waiver”4 of the company’s code of ethics in its annual report on Form 20-F. Alternatively, a foreign private issuer could, and is strongly encouraged to do so earlier on a Form 6-K or within five business days on its website. The information must remain on the website for at least 12 months.

Principal Accountant Fees and Services. All SEC reporting companies (including foreign private issuers) to disclose in their proxy statements, or annual reports, fees paid to their auditors for the following:

• Audit Fees – aggregate fees for the past two fiscal years for professional services rendered by the principal accountant for the audit of financial statements or services normally provided in connection with statutory or regulatory filing;

• Audit-Related Fees – aggregate fees for the last two fiscal years by the principal accountant for assurance and related services not part of “Audit Fees;”

• Tax Fees – aggregate fees for the last two fiscal years for professional services rendered by the principal account for tax compliance, tax advice, and tax planning; and

• All Other Fees – aggregate fees of the last two fiscal years by the principal accountant for services not listed above.

In addition, issuers are required to describe in subcategories the nature of the services that are categorized as audit-related services and all other services. The rules also provide disclosure requirements related to audit committee pre-approval policies and procedures for audit and non-audit services and the percentage of reported fees that were pre-approved, subject to certain de minimis exceptions.

Exemptions from the Listing Standards for Audit Committees. Issuers listed on the NYSE, NASDAQ, or NYSE MKT must comply with Rule 10A-3 and the additional audit committee requirements

3 A “waiver” means the issuer approved a material departure from a provision of the code of ethics. 4 An “implicit waiver” means the issuer failed to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer.

23

4838-2039-9394\3

of the NYSE MKT. If the issuer is relying on an exemption from the requirements of Rule 10A-3 as provided therein, the issuer must disclose the exemption in this section. Issuers that are not listed on the national exchanges (e.g., NYSE, NASDAQ, or NYSE MKT) are not required to comply with the requirements of Rule 10A-3 and disclosure of an exemption is not required for OTCQX and OTCQB quoted issuers.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers. An issuer must provide information, presented in a tabular format, with respect to any purchase of shares or other units of any class of the issuer’s equity securities made by or on behalf of the issuer or any “affiliated purchaser.”

Change in Registrants Certifying Accountant. If during the issuer’s two most recent fiscal years or any subsequent interim period, an independent accountant, who was previously engaged as the principal accountant to audit the issuer’s financial statements, has resigned or was dismissed, then the issuer must state whether: (i) the former accountant resigned, declined to stand for re-election or was dismissed; (ii) the principal accountant’s report on the financial statements of the previous two years contained an adverse opinion, a disclaimer, or was qualified or uncertain; (iii) the decision to change accountants was recommend or approved by the audit committee, a similar committee, or the board of directors; and (iv) there were any disagreements with the former accountant regarding accounting principles or practices, financial statement disclosure or audit scope or procedure and describe the events surround each disagreement. If a new independent accountant was hired within the most recent two fiscal years and the issuer consulted with the new accountant about an event that occurred with the former accountant, disclose the issues that were discussed and the view of the current and former accountants.

Exhibits. A company must list all exhibits filed as part of the annual report, including exhibits incorporated by reference. Previously filed exhibits may be incorporated by reference. If any previously filed exhibits have been amended or modified, copies of the amendment or modification or copies of the entire exhibit as amended or modified must be filed. An exhibit index immediately preceding the exhibits must be included. If an exhibit is incorporated by reference that fact must be noted in the exhibit index.

Notice Required by Regulation BTR. Any notice required by Rule 104 of Regulation BTR (for “Blackout Trading Restriction”) sent during the past fiscal year to directors and executive officers concerning any equity security subject to a blackout period must be attached as an exhibit unless the notice was already provided to the SEC in a report on Form 6-K and then it should be properly referenced within the Form 20-F filing.

SOX Certifications. Sarbanes-Oxley requires Section 906 and Section 302 certifications to be filed with annual reports on Form 20-F. See, “SOX Certifications,” below.

(c) SEC Review and Effectiveness

Registration statements on Form 20-F are reviewed by the SEC staff. In most cases, revenues are reviewed very thoroughly and numerous comments may be expected. Normally the staff tries to issue initial comments within 30 days after filing, but delays are frequent, particularly when Securities Act filings are plentiful due to an active financing market. The timing of review of responses to comments varies widely depending on the nature of the comments and staff workload.

Exchange Act registration statements filed under Section 12(b) of the Exchange Act (i.e., those filed in connection with a stock exchange listing) are declared “effective” by the SEC when the comment and listing process is complete.

Registration statements filed under Section 12(g) of the Exchange Act (i.e., those filed in connection with OTC Bulletin Board listing or because the issuer has 2,000 shareholders of record or 500 shareholder of record that are not accredited investors, and $10,000,000 in assets and is not otherwise exempt) become “effective” automatically after 60 days. Note that once its registration statement is effective, a foreign private issuer may not be able to terminate its Exchange Act reporting obligations by withdrawing from stock exchange listing or the OTC Bulletin Board, even if its original filing was made only to qualify for the

24

4838-2039-9394\3

listing and was not otherwise required. The SEC staff also normally will permit a foreign private issuer to furnish a draft registration statement for review and comment without a formal filing. The 60-day period does not begin to run until the registration statement is formally “filed.” An issuer that has “filed” an Exchange Act registration statement under section 12(g) but runs into difficulties with the SEC comment process should consider withdrawing the registration statement and refiling to start the 60-day effectiveness clock running again. The SEC staff normally has permitted this without affecting the time of the review.

Annual reports on Form 20-F are subject to review by the SEC staff. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) mandates that the SEC staff review all reporting issuer’s reports at least every three years, and the staff has tried hard to satisfy this requirement, but many periodic reviews of reporting companies’ filings are much less detailed than the typical review of the initial Exchange Act registration statement. Annual reports also may be reviewed when they are incorporated by reference into a Securities Act registration statement in connection with the registration of securities in a financing or acquisition transaction.

Some Canadian issuers fie their Form 20-F annual reports in Canada in lieu of filing an annual information form.

Section 4.02 REGISTRATION AND REPORTING ON FORM 40-F

Form 40-F is an MJDS form and may be used to register securities of certain “substantial” Canadian issuers under Section 12 of the Exchange Act or to file Exchange Act annual reports. See, “MJDS - Multi-Jurisdictional Disclosure System,” above.

For an issuer that is the successor to a business combination that occurred within the previous 12 months to be eligible, the issuer and predecessors that contributed 80 percent of assets and gross revenues from continuing operations must together satisfy the 12-month reporting requirement. Form 40-F also may be used as an annual report filed pursuant to Section 15(d) of the Exchange Act for issuers who are required to report solely as a result of having filed a Securities Act registration statement under the MJDS on Form F-7, F-8, F-10 or F-80.

(a) Form 40-F Due Date and Content

Form 40-F consists largely of disclosure documents and other information that the issuer is required to prepare by the laws of its home jurisdiction or the Canadian securities exchange upon which its securities are listed. An annual report on Form 40-F must include the annual information form required under Canadian law (“AIF”). If an issuer is not required to file an AIF in Canada (such as issuers listed on the TSX Venture Exchange), the issuer must voluntarily file an AIF in Canada to qualify to use Form 40-F as a registration statement or an annual report in the United States.

An annual report on Form 40-F or any amendment thereto is due the same day as the issuer’s AIF is due to be filed with any securities commission or equivalent regulatory authority in Canada.

Annual Information Form. As indicated above, Form 40-F consists largely of disclosure documents and other information that the issuer is required to prepare by the laws of its home jurisdiction or the Canadian securities exchange upon which its securities are listed. An annual report on Form 40-F must include the issuer’s AIF, which must be in English. The French translation may be attached as an exhibit. To the extent not previously furnished to the SEC on Form 6-K, all information material to an investment decision, that the issuer:

• makes or is required to make public pursuant to the law of the jurisdiction of its domicile,

• files or is required to file with a stock exchange on which its securities are traded, or

• distributes or is required to distribute to its security holders should be furnished to the SEC under cover of Form 6-K prior to filing the issuer’s annual report on Form 40-F.

25

4838-2039-9394\3

These materials may include material change reports, quarterly and interim reports, management’s discussion and analysis, management information circulars and proxy statements, technical reports, material agreements, press releases, earnings reports and other documents filed or disseminated to the public or the issuer’s shareholders. Reporting issuers are required to furnish such material to the SEC on Form 6-K promptly when the material is filed in Canada or disseminated.

Audited Financial Statements. An annual report on Form 40-F must include the issuer’s audited annual financial statements. Financial statements included in a Form 40-F annual report may be prepared in accordance with U.S. GAAP or IFRS. Issuers who have prepared annual audited financial statements in accordance with IFRS do not need to provide a U.S. GAAP reconciliation.

U.S. auditor independence standards apply to accountants whose opinions are included in an annual report filed with the SEC. In addition, the Sarbanes-Oxley imposes additional requirements on independent auditors and Exchange Act registered companies. Furthermore, the auditor must be registered with the Public Company Accounting Oversight Board (“PCAOB”) and comply with PCAOB’s audit standards.

Management’s Discussing and Analysis of Financial Results. A company must provide management’s explanation of factors that have affected the company’s financial condition and results of operations for the historical periods covered by the financial statements, and the management’s assessment of factors and trends which are anticipated to have a material effect on the company’s financial condition and results of operations in future periods.

Off-Balance Sheet Arrangements. The rules require disclosure of off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future effect on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Disclosure of Contractual Obligations. Form 40-F requires disclosure, in tabular format, of the amounts of the issuer’s contractual obligations, in order to present a meaningful snapshot of cash requirements arising from contractual payment obligations, including long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations and other long-term liabilities reflected on the company’s balance sheet under GAAP. The table would aggregate contractual obligations by type and cover total contractual obligations, as well as contractual obligations during the following periods of less than one year, one to three years, three to five years, and more than five years. “The purpose of the contractual obligations table is to provide aggregated information about contractual obligations and contingent liabilities and commitment in a single location so as to improve transparency of a registrant’s short term and long term liquidity and capital resources needs” and to provide context relative to off balance sheet arrangements.

Disclosure Control and Procedures. The company’s principal executive and principal financial officers, or persons performing similar functions, report regarding the effectiveness of the Company’s disclosure controls and procedures, which are designed to ensure that information which is required to be disclosed in annual and quarterly reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Report on Internal Control over Financial Reporting. Management’s report on “internal control over financial reporting,” which focus on a company’s financial reporting mechanisms to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All SEC reporting companies are required to maintain internal control over financial reporting under the Exchange Act and include an internal control report by management in each annual report filed with the SEC. The internal control report must include a statement of management’s responsibilities for establishing and maintaining adequate internal control over financial reporting; a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of the company’s internal control over financial reporting; and management’s conclusions regarding the effectiveness of the

26

4838-2039-9394\3

internal control over financial reporting as of the end of the company’s most recent fiscal year. In addition, issuers must evaluate any changes to internal control over financial reporting that occurred during the period covered by the annual report that have materially affected or are reasonably likely to affect the issuers’ internal control over financial reporting.

Auditor Attestation. The independent auditor of “large accelerated filers” and “accelerated filers” are required to attest to and report separately on management’s evaluation of the company’s internal control over financial reporting for annual reports. The attestation is required to be included in the annual reports of large accelerated filers and accelerated filers and must state the auditor’s opinion as to the effectiveness of the issuer’s internal control over financial reporting and if an opinion cannot be expressed, the reason why. Emerging Growth Companies and smaller reporting companies are exempted from this requirement. Most issuers that qualify to use Form 40-F are required to provide an auditor attestation.

Audit Committee Financial Expert. If the audit committee has a financial expert then the issuer must disclose the name of the expert and whether the expert is independent. The issuer must also disclose whether or not a financial expert is “independent” under the rules of a U.S. national exchange (including NYSE, NYSE MKT or NASDAQ rules) and if not, why not. If a reporting company does not have any financial experts, as defined by the SEC, on its audit committee, it must explain the reasons why it does not have a financial expert. Note that SEC Rule 10A-3 requires U.S. national exchanges to adopt minimal audit committee requirements for issuers to qualify for listing.

Code of Ethics. Companies are required to disclose whether they have adopted a code of conduct and ethics applicable to the principal executive officer, the principal financial officer, the principal accounting officer or controller, or any person performing similar functions. If the issuer has not adopted a code of ethics, the issuer must state the reason why in their Form 40-F. A copy of the code of ethics is required to be filed with the SEC as an exhibit to Form 40-F. A foreign private issuer that reports on Form 20-F is required to disclose any modification, “waiver” or “implicit waiver” of the company’s code of ethics in its annual report on Form 40-F. Alternatively, a foreign private issuer could, and is strongly encouraged to do so earlier on a Form 6-K or within five business days on its website. The information must remain on the website for at least 12 months.

Principal Accountant Fees and Services. All SEC reporting companies (including foreign private issuers) to disclose in their proxy statements, or annual reports, fees paid to their auditors for the following:

• Audit Fees – aggregate fees for the past two fiscal years for professional services rendered by the principal accountant for the audit of financial statements or services normally provided in connection with statutory or regulatory filing;

• Audit-Related Fees – aggregate fees for the last two fiscal years by the principal accountant for assurance and related services not part of “Audit Fees;”

• Tax Fees – aggregate fees for the last two fiscal years for professional services rendered by the principal account for tax compliance, tax advice, and tax planning; and

• All Other Fees – aggregate fees of the last two fiscal years by the principal accountant for services not listed above.

In addition, issuers are required to describe in subcategories the nature of the services that are categorized as audit-related services and all other services. The rules also provide disclosure requirements related to audit committee pre-approval policies and procedures for audit and non-audit services and the percentage of reported fees that were pre-approved, subject to certain de minimis exceptions.

Exemptions from the Listing Standards for Audit Committees. Issuers listed on the NYSE, NASDAQ, or NYSE MKT must comply with Rule 10A-3 and the additional audit committee requirements

27

4838-2039-9394\3

of the NYSE MKT. If the issuer is relying on an exemption from the requirements of Rule 10A-3 as provided therein, the issuer must disclose the exemption in this section. Issuers that are not listed on the national exchanges (e.g., NYSE, NASDAQ, or NYSE MKT) are not required to comply with the requirements of Rule 10A-3 and disclosure of an exemption is not required for OTCQX and OTCQB quoted issuers.

Notice Required by Regulation BTR. Any notice required by Rule 104 of Regulation BTR (for “Blackout Trading Restriction”) sent during the past fiscal year to directors and executive officers concerning any equity security subject to a blackout period must be attached as an exhibit unless the notice was already provided to the SEC in a report on Form 6-K and then it should be properly referenced within the Form 40-F filing.

Consents of Auditors and Experts. Form 40-F requires that the issuer file as an exhibit the manually signed written consent of any accountant, engineer or appraiser or any person; (i) whose profession gives authority to a statement made by him; (ii) who is named as having prepared or certified any part of the annual report; or (iii) who is named as having certified a report used in connection with the annual report. Note that these consents should cover any document incorporated by reference into an annual report on Form 40-F and any registration statement (such as Form S-8, Form F-10, Form F-3, etc.) that the annual report on Form 40-F is incorporated by reference into.

Exhibits. A company must list all exhibits filed as part of the annual report, including exhibits incorporated by reference. Previously filed exhibits may be incorporated by reference. If any previously filed exhibits have been amended or modified, copies of the amendment or modification or copies of the entire exhibit as amended or modified must be filed. An exhibit index immediately preceding the exhibits must be included. If an exhibit is incorporated by reference that fact must be noted in the exhibit index.

Other Material Information. Rule 12b-20 under the Exchange Act provides that in addition to information expressly required to be included in an Exchange Act report, there shall be added such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading. Issuers should carefully evaluate the information provided in its Form 40-F annual report, including information incorporated by reference, to determine if additional disclosure is required to satisfy the requirements under Rule 12b-20.

SOX Certifications. Sarbanes-Oxley requires Section 906 and Section 302 certifications to be filed with annual reports on Form 40-F. See, “SOX Certifications,” below.

(b) SEC Review

Unlike other Exchange Act registration statements, Form 40-F registration statements are only minimally reviewed by the SEC’s staff. Annual reports on Form 40-F are subject to review on the three-year cycle mandated by the Sarbanes-Oxley Act. These reviews vary greatly in scope and intensity. Although frequently few comments or no comments are received, the SEC has been reviewing Form 40-F for form and disclosure requirements, including issuer compliance with NI 43-101 disclosure standards.

Section 4.03 REGISTRATION ON FORM 10 AND REPORTING ON FORM 10-K

(a) Voluntary Use of Domestic Forms

Some Canadian issuers eligible to use Form 40-F or Form 20-F voluntarily elect to file more burdensome Form 10 for Exchange Act registration (due 120 days after the first fiscal year-end at which the registration criteria are met) and Forms 10-K and 10-Q in order to conform to disclosure formats familiar to U.S. securities analysts and institutional investors. This is particularly true of technology companies with heavy U.S. market interest. These issuers frequently comply with the provincial securities commissions annual information form requirements by filing their U.S. Form 10-K with the provincial commissions.

28

4838-2039-9394\3

Companies that are eligible to report on Form 40-F or Form 20-F (i.e., foreign private issuers) do not become subject to the U.S. proxy rules or Section 16 of the Exchange Act merely by electing to use Form 10-K.

(b) Annual Reports on Form 10-K

Form 10-K is the annual report used by U.S. domestic issuers. Annual reports on Form 10-K are due for filling as follows:

“large accelerated filers”: 60 days after fiscal year-end

“accelerated filers”: 75 days after fiscal year-end

others: 90 days after fiscal year-end

A detailed summary of the contents of an annual report on Form 10-K is beyond the scope of this paper, but generally Form 10-K includes full prospectus level disclosure regarding description of business, financial data about segments and geographic areas, management’s discussion and analysis of financial condition and results of operations, description of properties, risk factors, legal proceedings, market for equity securities, unregistered sales and equity repurchases, quantitative and qualitative disclosures about market risk, auditor changes and disagreements, directors and executive officers and corporate governance matters, directors and executive officers and corporate governance matters, executive compensation, security ownership of certain beneficial owners and management, related party transactions, disclosure controls, internal financial controls, Section 906 and Section 302 certifications, unresolved SEC comments, exhibits and other material information.

Financial statements included in annual reports on Form 10-K must be audited and prepared in accordance with U.S. GAAP.

(c) Quarterly Reports on Form 10-Q

Form 10-Q is the quarterly report used by U.S. domestic issuers. Quarterly reports are filed for each of first three quarters of fiscal year, and include unaudited balance sheet as at the end of the quarter and income statements for the quarter and year-to-date and for comparable periods in the prior fiscal year, and management’s discussion and analysis of these statements. In addition, Form 10-Q has other line item disclosure requirements and require Section 906 and Section 302 certification.

Reports on Form 10-Q are due for filling as follows:

“large accelerated filers” and “accelerated filers”: 40 days after quarter-end

others: 45 days after quarter-end

Section 4.04 CURRENT REPORTS

In addition to filing annual reports Canadian issuers filing annual reports on Form 20-F and Form 40-F are required to furnish current reports on Form 6-K. Canadian issuers filing annual reports on Form 10-K are required to file current reports on Form 8-K.

(a) Current Reports on Form 6-K

An issuer filing annual reports on Form 20-F or Form 40-F must furnish current reports on Form 6-K, enclosing all information which the issuer:

• is required to make public in its domicile pursuant to the law of its home country;

29

4838-2039-9394\3

• files with a non-U.S. stock exchange, which information is made public by the exchange; or

• distributes to its security holders.

The information required to be furnished pursuant to Form 6-K is that which is material with respect to the issuer and its subsidiaries, such as changes in management or control, acquisitions or dispositions of assets, bankruptcy or receivership, changes in registrant’s certifying accountants, the financial condition and results of operations, material legal proceedings, changes in securities or in the security for registered securities, defaults upon senior securities, material increases or decreases in the amount outstanding of securities or indebtedness, the results of the submissions of matters to a vote of security holders, and any other information which the issuer deems of material importance to security holders.

In general, for Canadian issuers, the information that must be filed with Form 6-K includes press releases, reports and other information filed with Canadian provincial securities commissions and stock exchanges and annual and other shareholder mailings.

Form 6-K does not require that the issuer’s filings or reports take any particular form or disclose any particular information, but general antifraud principles of U.S. law will apply. Normally Form 6-K reports are simply a cover page that encloses the document or press release being submitted, but some issuers include explanatory narrative disclosure in Form 6-K reports.

A Form 6-K report is required to be filed promptly after the material contained in the report is made public. In general, Form 6-K reports must be filed electronically on EDGAR, however, a Form 6-K may be filed either electronically or on paper if the sole purpose of the Form 6-K is to submit (1) an annual report to shareholders or (2) a “statutory” home country report (required to be made public pursuant to the law of the jurisdiction of the issuer’s domicile or incorporation or rules of the issuer’s home country exchange) as long as the report or other document (a) is not a press release, (b) is not required to be and has not been distributed to the foreign issuer’s security holders, and (c) if discussing a material event, including disclosure of annual audited or interim consolidated financial results, has already been the subject of a Form 6-K submission or other SEC filing on EDGAR.

(b) Current Reports on Form 8-K

Issuers reporting on Form 10-K and 10-Q must file current reports on Form 8-K. Current reports on Form 8-K are normally due within four business days after the occurrence of a change of control, acquisition or disposition of material assets or businesses, entry into or termination of a material agreement, bankruptcy or receivership, the determination to change its fiscal year-end changes in accountants, certain changes in directors or executive officers or their compensation arrangements, amendments to or waiver of a company’s code of ethics or earnings releases or other results of operations and certain other specified events, as well as events or conditions that the issuer chooses to report. Temporary suspension of trading under a company employee benefit plan is also reported on Form 8-K. In the case of material acquisitions or dispositions, financial statements of acquired businesses and pro forma financial statements must be filed as required by Items 3.05 and 11 of Regulation S-X.

Section 4.05 SOX CERTIFICATIONS

Sarbanes-Oxley requires Section 906 and Section 302 certifications to be filed with annual reports on Form 20-F, 40-F and 10-K and quarterly reports on Form 10-Q that contain financial statements. See, “Corporate Governance,” below.

Section 906: Section 906 of Sarbanes-Oxley requires that each periodic report filed by an issuer pursuant to Section 13(a) or 15(d) of the Exchange Act that contains financial statements be accompanied by a written statement by the chief executive officer (“CEO”) and the chief financial officer (“CFO”) of the issuer certifying that:

30

4838-2039-9394\3

1. the report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

The Section 906 certifications are not required on reports on Form 6-K that include interim financial statements.

Section 906 of Sarbanes-Oxley is a criminal statute, and CEOs and CFOs who knowingly provide a false certification are liable for a fine of up to $1 million and/or a prison term of up to 10 years. The penalty is increased to a fine of up to $5 million and/or a prison term of up to 20 years if the violation is willful.

Section 302: Pursuant to Section 302 of Sarbanes-Oxley, requires that each periodic report filed by an issuer pursuant to Section 13(a) or 15(d) of the Exchange Act that contains financial statements be accompanied by a written statement by the CEO and CFO, certifying that:

1. the officer has reviewed the report;

2. based on the officer’s knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. based on the officer’s knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods covered in the report;

4. the certifying officers are responsible for establishing and maintaining disclosure controls and procedures for the company and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which the report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in the report their conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the report based on such evaluation; and

(d) disclosed in the report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. the certifying officers have disclosed, based on their most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

31

4838-2039-9394\3

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Each certification must be made separately by the CEO and CFO in the exact form specified by the SEC. Each person required to give the Section 302 certification must personally sign the report. Signatures under a power of attorney are expressly prohibited.

Of particular importance, Section 302 requires CEO and CFO certifications related to the issuer’s internal accounting control in their annual reports. Such certifications require the issuer’s CEO and CFO to certify that they are responsible for establishing and maintaining internal control over financial reporting for the company and have designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Section 4.06 OTHER REPORTING REQUIREMENTS

(a) Schedule 14A Proxy Rules

Issuers reporting on Form 10-K and 10-Q (and not otherwise eligible to report on Form 20-F or Form 40-F) must comply with Section 14(a) of Exchange Act and SEC rules thereunder in connection with the solicitation of proxies in connection with shareholder meetings. Preliminary proxy materials on Schedule 14A must be submitted for SEC review at least 10 calendar days in advance of the filing of a definitive proxy statement and mailing in connection with non-routine shareholder matters. Routine shareholder matters include the election of directors, approval of compensatory plans and ratification of auditors.

Issuers eligible to report on Form 20-F or Form 40-F are not subject to the proxy solicitation requirements under Section 14(a) of the Exchange Act and would follow their home country jurisdiction requirements in connection with the solicitation of proxies. Proxy statements should be filed under cover of Form 6-K.

(b) Rule 10b-17

Issuers reporting on Form 20-F must also give notices pursuant to Rule 10b-17 relating to record dates for dividends, stock splits, reverse stock splits, rights offerings, etc.

(c) Tender Offer Rules

Tender offers for classes of securities registered under the Exchange Act must be conducted in accordance with Section 14(d) of the Exchange Act and the SEC rules thereunder. Going private transactions and repurchase programs by issuers and their affiliates must comply with Section 13(e) and SEC rules thereunder. These requirements also apply to issuers eligible to use Form 20-F and Form 40-F, subject to certain exemptions available under the MJDS.

(d) U.S. Foreign Corrupt Practices Act and Foreign Government Disclosures

Issuers that have a class of securities registered pursuant to the Exchange Act are subject to certain provisions of the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”). In general the FCPA

• Imposes requirements as to record-keeping and internal accounting controls to assure that transactions will be properly recorded in the issuer’s financial records, and

32

4838-2039-9394\3

• Prohibits payments to non-U.S. government officials for the purpose of obtaining or maintaining business or influencing performance of official functions.

Foreign private issuers that report on Form 20-F or Form 40-F are subject to the FCPA and U.S. regulatory authorities have brought enforcement actions against non-U.S. companies for violating the FCPA. Issuers that report under the Exchange Act should take steps to assure itself that the activities of its agents and employees are consistent with the requirements of the FCPA even if they engage in no business activities in the U.S.

The Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), added new disclosure requirements for reporting companies in annual and quarterly reports filed with the SEC. ITRA added section 13(r) to the Exchange Act, which requires disclosure of certain Iran-related activities of the issuer or its affiliates, which generally include dealings with:

• the government of Iran;

• entities owned or controlled by the government of Iran;

• persons designated on the OFAC Specially Designated Nationals (SDN) list as representatives of the government of Iran;

• persons and entities identified on the SDN list as supporters of terrorism or proliferators of weapons of mass destruction;

• financial institutions that facilitated a transaction for any person or on the SDN list whose property is blocked in connection with certain terrorist-related activities; or

• the Iranian oil industry.

The requirements are very broad, covering a wide variety of activities. There is no materiality threshold, so even the smallest activity falling within the definitions of reportable activity must be reported.

Domestic issuers must report their Iran-related activities in their annual reports on Form 10-K and their quarterly reports on Form 10-Q. Because only the annual reports of foreign private issuers are deemed “filed” with the SEC, foreign private issuers need only include the required disclosure in their annual reports.

Section 4.07 BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS

(a) Schedule 13D and 13G.

Beneficial owners of five percent or more of a class of equity securities of an issuer reporting (including foreign private issuers) must comply with the beneficial ownership reporting requirements of Section 13(d) of the Exchange Act and Schedules 13D and 13G. In general, once a company becomes subject to the ongoing reporting requirements of the Exchange Act, any person who acquires more than five percent (5%) of a class of registered securities must file a “long form” Schedule 13D disclosure statement within 10 days following the acquisition. There are three exemptions from the obligation to file a Schedule 13D. Where an exemption is available, the acquiring person is required, or, in certain circumstances, permitted to file a “short form” disclosure statement on Schedule 13G. Persons exempt from filing a “long form” Schedule 13D include:

• Any person who is the beneficial owner of more than five percent (5%) of a class of an issuer’s securities prior to and after the effective date of a company’s Exchange Act registration statement, and who does not thereafter make an acquisition of the issuer’s securities subject to Section 13(d) of the Exchange Act;

• Certain qualified institutional investors; and

33

4838-2039-9394\3

• Investors owning less than twenty percent (20%) of an outstanding class of registered securities and that have not acquired and do not hold the securities with the purpose or effect of changing or influencing the control of the issuer (“passive investors”).

Passive investors choosing to report ownership on Schedule 13G must file that schedule within ten calendar days after acquiring beneficial ownership of more than five percent of an outstanding class of the issuer’s registered securities and must certify that they do not have a disqualifying purpose or effect with respect to the acquisition of the securities. All Schedule 13G filers must file a Schedule 13G annual report on February 14 of each year.

(b) Section 16

Certain affiliate shareholders of issuers reporting on Form 10-K and 10-Q (and not otherwise eligible to report on Form 20-F or Form 40-F) must comply with the requirements of Section 16 of the Exchange Act. Section 16 of the Exchange Act provides that an executive officer, director or beneficial owner of 10 percent of any class of equity securities registered under the Exchange Act:

• must report initial ownership at the time of registration or becoming an officer, director or 10 percent holder on Form 3;

• must report transactions in any equity securities of the issuer on Form 4 within 2 days of occurrence;

• must file a summary report on Form 5 annually concerning securities transactions; and

• are liable under Section 16(b) of the Exchange Act to forfeit to the issuer any profit made from any non-exempt purchase and sale or non-exempt sale and purchase of equity securities of the issuer within any six month period.

Section 16 is very complex. Errors are easily made through inadvertence or misunderstanding and the consequences of error are severe. Profits required to be disgorged due to a violation of Section 16 are calculated so as to maximize the amount disgorged.

Section 4.08 NYSE, NASDAQ, NYSE-MKT

Each of NYSE, NASDAQ and NYSE-MKT has specific exchange notice and reporting requires, including changes to directions and executive officers, corporate changes and other information requirements for continued listing. Below is a summary of some, but not all, notice and reporting requirements of NYSE, NASDAQ and NYSE-MKT.

(a) NYSE, NYSE-MKT and NASDAQ - News Releases

Each of NYSE, NASDAQ and NYSE-MKT requires a listed issuer to quickly release to the public any news or information which might reasonably be expected to materially affect the market for its securities.

NYSE and NYSE-MKT

NYSE and NYSE-MKT listed companies must notify the NYSE by phone at least ten minutes prior to the dissemination of such news. The Company must call the Market Watch Group at 877.NYX.ALRT (877.699.2578 or 212.656.5414) when releasing news during market hours. In advance of the issuance, the Company must also email nyxalert@nyx.com with the text of the announcement. Outside of market hours, the Company is not required to call the NYSE in advance of issuing news although the Company should still provide a copy of the material news to the NYSE once it is disclosed (email nyxalert@nyx.com or submit via egovdirect.com).

34

4838-2039-9394\3

NASDAQ

NASDAQ listed companies are required to provide notification of certain material news announcements to MarketWatch. This notification must be provided at least ten minutes before the release of the information to the public when the public release of the information is made during NASDAQ market hours (7:00 a.m. to 8:00 p.m. ET). If the public release of the material information is made outside of NASDAQ market hours, companies must notify MarketWatch of the material information prior to 6:50 a.m. ET. The company’s material news notification must be provided to MarketWatch via the Electronic Disclosure Submission System.

(b) NYSE, NASDAQ and NYSE-MKT – Additional Listings

NYSE and NYSE-MKT

Additional share issuances are not permitted until the NYSE/NYSE-MKT approves the Supplemental Listing Application. The application must be submitted at least two weeks prior to the issuance of additional shares. Actions that require an application include:

• Issuance of additional shares regardless of whether the additional securities are intended for distribution in the United States;

• Issuance of additional shares that are issuable upon conversion of another security, whether or not the convertible security is listed on the NYSE/NYSE-MKT

• Issuance of a new security;

• Stock splits or stock dividends; and

• Changes in the corporate name, ADR ratio or par value.

If the Company receives authorization to list additional securities but the listing is later cancelled, the Company should inform the NYSE/NYSE-MKT once the determination to cancel the listing has been made.

NASDAQ

A NASDAQ listed issuer must complete the “Listing of Additional Shares” form and provide notification to NASDAQ at least 15 calendar days in advance of the following actions that could result in additional share issuances:

• establishing, or materially amending, a stock option plan, purchase plan or other equity compensation arrangement, pursuant to which stock may be acquired by officers, directors, employees or consultants unless the listed company obtains shareholder approval5;

• an issuance or potential issuance that will result in a change of control of the issuer;

• issuing any common stock, or security convertible into common stock, in connection with the acquisition of the stock or assets of another company, if any officer or director or substantial shareholder of the listed issuer has a 5% or greater interest (or if such persons collectively have a 10% or greater interest) in the company to be acquired or in the consideration to be paid; or

5 However, when a listed company makes an equity grant to induce an individual to accept employment, NASDAQ requires notification to be filed no later than the earlier of (i) five calendar days after entering into the agreement to issue the securities; or (ii) the date the listed company discloses the material terms of the grant in a press release.

35

4838-2039-9394\3

issuing any common stock, or any security convertible into common stock in a transaction that may result in the potential issuance of common stock, greater than 10% of either the total shares outstanding or the voting power outstanding on a pre-transaction basis.

(c) NYSE and NYSE-MKT – Annual and Interim Affirmations

NYSE

Annual Affirmation

A NYSE listed foreign private issuer must complete the Foreign Private Issuer Section 303A Annual Written Affirmation (the “Annual Affirmation”) and certify that: (i) it complies with the NYSE corporate governance requirements set forth in Section 303A.06 of the New York Stock Exchange Listed Company Manual (the “Company Manual”); or (ii) it is relying on exemptions from Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company must disclose in the Annual Affirmation the significant ways in which the Company’s corporate governance practices differ from those followed by domestic companies under Section 303A of the Company Manual. The NYSE domestic corporate governance requirements are outlined below. The Company must also specify in the Annual Affirmation where the disclosure regarding significant differences is located. The disclosure must be included in either the Company’s annual report filed with the Securities and Exchange Commission (the “SEC”) or made available on the Company’s website. The Annual Affirmation is required to be submitted to the NYSE within 30 days of the Company’s submission of its annual report to shareholders. The Company must use the Annual Affirmation form provided by the NYSE and may not make any modifications.

Interim Affirmation

A NYSE listed foreign private issuer must submit a Foreign Private Issuer Section 303A Written Affirmation within five business days of the following: (i) an audit committee member who was deemed independent is no longer independent; (ii) a member has been added to the audit committee; (iii) the Company or a member of its audit committee is eligible to rely on and is choosing to rely on an exemption from the audit committee independence requirements pursuant to Rule 10A-3 under the Exchange Act; (iv) the Company or a member of its audit committee is no longer eligible to rely on or is choosing to no longer rely on a previously applicable Rule 10A-3 exemption; (v) a member has been removed from the Company’s audit committee resulting in the Company no longer having a Rule 10A-3 compliant audit committee; and (vi) the Company determined that it no longer qualifies as a foreign private issuer and will be considered a domestic company under Section 303A of the Company Manual.

NYSE-MKT

Annual Affirmation

A company must certify annually that it complies, and will continue to comply, with the NYSE MKT corporate governance requirements set forth in the NYSE MKT LLC Company, including compliance with the requirements regarding (a) audit committees, (b) board of director (the “Board”) independence, (c) the Board nomination process, (d) executive compensation, (e) codes of conduct and ethics, (f) meetings of independent directors, and (g) notification regarding non-compliance with any of the foregoing. The annual certification is required to be submitted to the NYSE MKT within 30 days of the Company’s annual meeting.

Interim Affirmation

A company must file an Interim Affirmation within five business days after the occurrence of certain triggering events. The list of triggering events that give rise to the obligation to file an Interim Affirmation are specified on that form and include, among other things, a change in the composition of the company’s Board or certain committees thereof.

36

4838-2039-9394\3

CEO Certification

The CEO will be required to certify to the NYSE MKT each year that he or she is not aware of any violation by the listed company of the NYSE MKT corporate governance listing standards. The CEO Certification must be submitted simultaneously with the Annual Affirmation.

(d) NASDAQ – Other Notifications

A NASDAQ listed issuer must notify NASDAQ in advance of the following corporate actions:

• any non-cash distribution (e.g., forward stock splits, dividends or other distributions and rights offerings) by using the Non-Cash Dividend/Distribution form a minimum of ten calendar days prior to the record date;

• reverse stock splits by using the Substitution Listing Event form a minimum of 15 calendar days prior to the record date;

• cash dividends by using the Cash Dividend/Distribution form a minimum of ten calendar days in advance of the record date;

• increases or decreases in the number of shares outstanding of the Company by more than 5% by using the Change in Number of Shares Outstanding form no later than ten days after the occurrence; and

• a change in the Company’s name by using the Change in Company Record and Listing agreement no later than ten days after the change, however, NASDAQ prefers at least two business days advance notice of the change.

A NASDAQ listed issuer must notify NASDAQ promptly after an executive officer becomes aware of any non-compliance with NASDAQ’s corporate governance requirements.

(e) NYSE, NYSE-MKT and NASDAQ – Foreign Issuer Exemptions

NYSE and NYSE-MKT

NYSE and NYSE-MKT each provides exemptions to foreign issuers from compliance with certain obligations applicable to U.S. domestic companies. These exemptions permit foreign private issuers to follow home country compliance instead of corporate governance practices required of U.S. domestic companies which may not be consistent with the home country laws or practices of non-U.S. companies, including those which address the structure and composition of the Board, shareholder approval, quorum requirements for shareholders’ meetings and related continued listing criteria.

The Company must disclose such differing practices in the Annual Affirmation and also post the use of such exemption on its website or include such disclosure in its annual report. If the disclosure is only available on the Company’s website, then the Company’s annual report to shareholders must provide the website where the information can be obtained.

NASDAQ

Under NASDAQ Stock Market Rule 5615(a)(3), a company that qualifies as a foreign private issuer may follow its home country practice in lieu of NASDAQ governance requirements, provided however, that the company complies with the following requirements:

• the company must provide NASDAQ with prompt notification after an executive officer of the company becomes aware of any material noncompliance with the requirements of Rule 5625;

37

4838-2039-9394\3

• the company has an audit committee that satisfies Rule 5605(c)(3) and the audit committee must have the responsibilities and authority required by, and its members must satisfy the independence requirement of, Rule 10A-3 of the Exchange Act;

• the company must comply with Rules 5210(c) and 5255 (Direct Registration Program) unless prohibited from complying by a law or regulation in its home country; and

• the company must comply with Rule 5640 (Voting Rights) which prohibits disparately reducing or restricting voting rights of shareholders through any corporate action or issuances, unless prohibited from complying by a law or regulation in its home country.

A foreign private issuer that follows a home country practice in lieu of one or more provisions of Rule 5600 Series, Rule 5250(d), and Rules 5210(c) and 5255 must disclose in its annual reports filed with the SEC or on its website each requirement that it does not follow and describe the home country practice followed by the issuer in lieu of NASDAQ requirements. The Company must also submit to NASDAQ a written statement from independent counsel in such company’s home country certifying that the Company’s non-complying practices are not prohibited by its home country’s laws.

(f) NYSE, NYSE-MKT and NASDAQ – Annual Reports, Proxy Materials and Record Dates

NYSE and NYSE-MKT

Annual Reports

Annual filings must be posted simultaneously on a company’s website when filed on EDGAR. The Company must post a statement on its website that a hard copy of the Company’s audited financial statements will be provided to shareholders free of charge on request. Annual reports must be submitted to shareholders and filed with the NYSE MKT at least ten days before the annual meeting of shareholders, and not later than four months after the close of the last preceding fiscal year of the company.

If a company does not provide its audited financial statements to beneficial shareholders in a manner that is consistent with the physical or electronic delivery requirements set forth in Rules 14a-3 and 14a-16 of the Exchange Act, then the Company must also issue a press release, stating (i) that its annual report on 20-F or 40-F has been filed with the SEC; (ii) the location of the Company’s website; and (iii) that shareholders can receive a free hard copy of the company’s audited financial statements upon request.

Record Date

NYSE/NYSE-MKT require at least ten calendar days prior notice of a record date for any purpose including dividends, shareholder meetings, corporate action events, etc. Any change in a record date requires another advance notice of at least ten calendar days. A record date cannot be set on a Saturday, Sunday or NYSE MKT holiday.

Proxy Materials

Companies are encouraged to consult with the NYSE/NYSE-MKT, on a confidential basis, in advance of any corporate action. The Company should also submit preliminary proxy materials for review by the NYSE/NYSE-MKT. This will enable the NYSE/NYSE-MKT staff to provide a preliminary, confidential ruling (subject to a final review upon receipt of definitive materials) on the permissibility of broker voting on each of the proposals included in the preliminary proxy statement

38

4838-2039-9394\3

NASDAQ

Annual Reports

Annual filings must be posted simultaneously on a company’s website when filed on EDGAR. The Company must post a statement on its website that a hard copy of the Company’s audited financial statements will be provided to shareholders free of charge on request.

Proxy Materials

Each NASDAQ listed issuer is required to solicit proxies and provide proxy statements for all meetings of shareholders and must provide copies of such proxy solicitation to NASDAQ.

39

4838-2039-9394\3

CHAPTER 5. CORPORATE GOVERNANCE

SEC reporting issuers must all comply with a set of corporate governance requirements that were adopted as part of or pursuant to Sarbanes-Oxley and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

Section 5.01 THE SARBANES-OXLEY ACT

Sarbanes-Oxley Act brought some of the most sweeping changes to corporate governance to the federal securities laws. Foreign private issuers must comply with most of the corporate governance provisions of Sarbanes-Oxley Act, which created a significant, oversight and regulatory regime over the public accounting industry and imposed many important and potentially far-reaching reforms in public company governance and disclosure requirements. It also dramatically increased criminal penalties for federal mail, wire and securities fraud, created new criminal penalties for document and record destruction in connection with federal investigations and lengthened the statute of limitations for private securities claims.

(a) Establishment of Disclosure Controls and Procedures

All reporting companies (including foreign private issuers, but excluding issuers of asset-backed securities) are required to establish and maintain “disclosure controls and procedures” designed to ensure that information which is required to be disclosed in annual and quarterly reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Section 302 of Sarbanes-Oxley requires that each periodic report filed by an issuer pursuant to Section 13(a) or 15(d) of the Exchange Act that contains financial statements be accompanied by a written statement by the CEO and CFO, certifying the adequacy of the issuer’s disclosure controls and procedures. Sarbanes-Oxley provides that CEOs and CFOs that knowingly provide false certifications under Section 302 face personal civil and criminal liability.

We recommend that each company form a disclosure committee with responsibility for evaluating the materiality of information and determining disclosure obligations on a timely basis. The committee would report to senior management, including those persons who will be making the certifications, and generally would be comprised of officers and employees with appropriate interest and expertise in the issues (such as the principal accounting officer, general counsel, principal risk management officer and chief investor relations officer).

(b) Management’s Internal Control Report

All reporting issuers are required to maintain “internal controls,” which generally refers to a company’s financial reporting mechanisms to provide reasonable assurances that:

• transactions are executed in accordance with management’s general or specific authorization;

• transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with general accepted accounting principles or any other criteria applicable to such statements, and (ii) to maintain accountability for assets;

• access to assets is permitted only in accordance with management’s general or specific authorization; and

40

4838-2039-9394\3

• the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

“Internal control over financial reporting” includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

All issuers filing an annual report on Form 10-K, 20-F or 40-F (other than an issuer of asset-backed securities) are required to include in its annual report an internal control report of management that contains:

• a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the company;

• a statement identifying the framework used by the management to conduct the required evaluation of the effectiveness of the company’s internal control over financial reporting;

• management’s assessment of the effectiveness of the company’s internal control over financial reporting as of the end of the most recent fiscal year, including a statement as to whether or not the company’s internal control over financial reporting is effective; and

• a statement that the registered public accounting firm that audited the financial statements included in the annual report has issued an attestation report on management’s assessment of the registrant’s internal control over financial reporting.

The internal control report must be based on an evaluation by the company’s management, with the involvement of the company’s CEO and CFO, of the effectiveness of the company’s internal control over financial reporting as of the end of the most recent fiscal year. Management’s assessment must be based on a suitable, recognized control framework that is established by a body or group that has followed due-process procedures, including the broad distribution of the framework for public comment.

Management’s assessment must include disclosure of any “material weaknesses” in the company’s internal control over financial reporting identified by management. Management is not permitted to conclude that the company’s internal control over financial reporting is effective if there are one or more material weaknesses in the company’s internal control over financial reporting.

The SEC has identified the following controls as among those being subject to assessment: controls over initiating, recording, processing and reconciling account balances, classes of transactions and disclosure and related assertions included in the financial statements; controls relating to transactions; controls related to the selection and application of appropriate accounting policies; and controls relating to the prevention, identification and detection of fraud. While the SEC has recognized that management’s evaluation and assessment procedures will vary from company to company, the SEC has stated that inquiry alone generally will not provide an adequate basis for management’s assessment of internal control over financial reporting. Management must therefore test the operating effectiveness of the company’s internal control over financial reporting, in addition to assessing its design.

41

4838-2039-9394\3

The SEC has stated, further, that a company must maintain evidential matter, including documentation, to provide reasonable support for management’s assessment of the effectiveness of the company’s internal control over financial reporting. While management and the company’s auditor will need to coordinate their process of documenting and testing the internal controls over financial reporting, the SEC’s rules on auditor independence prohibit an auditor from providing certain nonaudit services to an audit client. Management must, therefore, be actively involved in the process and may not delegate its responsibility to assess its internal controls over financial reporting to the auditor.

Section 906 of Sarbanes-Oxley requires that each periodic report filed by an issuer pursuant to Section 13(a) or 15(d) of the Exchange Act that contains financial statements be accompanied by a written statement by the CEO and CFO of the issuer certifying issuer’s report on internal controls. See, “SOX Certifications,” above. Section 906 of Sarbanes-Oxley is a criminal statute, and CEOs and CFOs who knowingly provide a false certification are liable for a fine of up to $1 million and/or a prison term of up to 10 years. The penalty is increased to a fine of up to $5 million and/or a prison term of up to 20 years if the violation is willful.

(c) Auditor’s Attestation Report

Under Sarbanes-Oxley all reporting companies are required to evaluate the company’s internal control over financial reporting on an annual basis, and to include in each annual report filed with the SEC a management report on the company’s internal control over financial reporting and an attestation of the company’s auditors regarding the company’s internal control over financial reporting.

“Accelerated filers” and “large accelerated filers” are required to include both a management internal control report and an auditor attestation with their annual reports on Form 10 K, 20-F or 40-F. For other issuers, known as “non-accelerated filers”, the Dodd-Frank Act eliminated the auditor’s attestation requirement. Newly-public companies are not required to include a management internal control report or an auditor attestation in their first annual report filed with the SEC. “Emerging growth companies”, as defined in the JOBS Act have received a dispensation from the auditor attestation requirement pursuant to the JOBS Act. Emerging growth companies are not subject to the Section 404 auditor attestation requirement, though they must establish internal controls and provide the management internal control report.

An “attestation report” is defined as a report in which the auditor express an opinion, either unqualified, adverse or disclaimed, that the issuer maintained, in all material respects, effective internal control over financial reporting. The applicable standard for attestation by auditors of internal control over financial reporting is set forth in Auditing Standard No. 5 as adopted by the PCAOB and approved by the SEC.

Because management’s report on internal controls must be attested upon by the auditor, companies and their auditors will be required to work together to develop mutually satisfactory processes governing internal controls and the evaluation of internal controls. Companies and their auditors will require time to develop these processes and to train personnel to perform the required analysis and backup prior to filing the company’s first annual report required to include reports on internal controls. Management should consult with their auditors to address the timing and scope of the required tasks.

Auditor attestation is considered by many as one of the more burdensome and expensive aspects of Sarbanes-Oxley.

(d) Audit Committee Financial Expert

An SEC reporting company, including foreign private issuers reporting on Form 20-F or 40-F, are required to disclose in its annual reports whether it has at least one “audit committee financial expert” serving on its audit committee, and if so, the name of the expert and whether the expert is independent of management. If a company does not have any financial expert on its audit committee, it must explain this absence. The final rules permit, but do not require, a company to disclose that it has more than one such expert.

42

4838-2039-9394\3

(i) GAAP Standard.

The final rules clarify that, with respect to foreign private issuers, the requisite understanding of GAAP need not be of U.S. GAAP. Instead, an audit committee financial expert of such an issuer must have an understanding of the principles used to prepare the issuer’s primary financial statements filed with the SEC.

(ii) Definition of “Audit Committee Financial Expert.”

Under the rules, an “audit committee financial expert” is a person who has all of the following attributes:

• an understanding of GAAP and financial statements,

• an ability to assess the general application of GAAP in connection with the accounting for estimates, accruals and reserves,

• experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and level of complexity of issues that can reasonably be expected to be raised by the company’s financial statements, or experience actively supervising a person in such activities,

• an understanding of internal controls and procedures for financial reporting, and

• an understanding of audit committee functions.

The rules provide that a person must have acquired these five necessary attributes through any one or more of the following means:

• education and experience as a principal financial or accounting officer, public accountant or auditor or a position involving the performance of similar functions,

• experience “actively supervising” a person in such a position,

• experience overseeing or assessing the preparation, auditing or evaluation of financial statements, or

• “other relevant experience.”

If a person qualifies as an expert by virtue of possessing “other relevant experience,” the company’s disclosure must briefly list that person’s experience.

The final rules also:

• clarify that a person need not have previous experience with financial statements of another company in the same industry as the company or with another company subject to SEC reporting requirements, by requiring only that their experience have been with financial statements that “present a breadth and level of complexity of accounting issues that are generally comparable” to the company’s, and

• permit individuals with experience “actively supervising” the preparation, auditing, analysis or evaluation of financial statements to qualify.

The SEC cautions, however, that the mere existence of a traditional hierarchical reporting relationship will be insufficient to satisfy the supervisory standard. Instead, the supervisor’s experience must involve active participation in and contribution to the process of addressing financial and accounting issues. The supervisor must have general expertise in this area that is at least comparable to the general expertise of those being supervised.

43

4838-2039-9394\3

(iii) Determination of Who Qualifies.

Ultimately, the board of directors must independently evaluate each potential audit committee financial expert and determine whether he or she possesses all of the attributes required to satisfy the SEC definition as finally adopted.

(iv) Disclosure Obligation Only.

As adopted, the rules do not require that a financial expert be placed on each company’s audit committee—the rules impose a disclosure obligation only. Until a company is able to identify a financial expert within the SEC’s definition, it may have no choice but to disclose the absence of a financial expert on its audit committee, the reasons for this absence and its plans, if any, for finding a director with such qualifications in the future. The SEC noted that, if a company does not have a director who satisfies all of the requirements of an audit committee financial expert, it would be appropriate for a company to explain the aspects of the definition that various committee members do satisfy.

Companies listed on NASDAQ, the NYSE or other securities exchanges must continue to comply with the applicable listing requirements concerning audit committees.

(v) Codification of Safe Harbor from Liability.

The rules include a safe harbor, clarifying that an audit committee financial expert will not be deemed an “expert” for any purpose, including under Section 11 of the Securities Act of 1933. In addition, the safe harbor provides that designation of an individual as an audit committee financial expert will not impose any duties, obligations or liability on that individual beyond those imposed on audit committee members generally, nor will it affect the duties, obligations or liability of any other member of the audit committee or board. This safe harbor is only effective at the federal level, and therefore, it is unclear how the identification of, and potential reliance by the board of directors on, such expertise may augment the duties and liabilities of such an expert imposed by state corporation law.

(e) Audit Committee Listing Standards

Each national securities exchange (including NYSE, Nasdaq and NYSE-MKT) have adopted listing requirements to comply with Rule 10A-3 adopted under Sarbanes-Oxley. Rule 10A-3 sets minimum standards for national securities exchange listing requirements relating to the independence of directors serving on the audit committee and the audit committee’s responsibilities and oversight role.

(i) Minimum Listing Standards

In order to be eligible for listing on a national securities exchange (NYSE, NASDAQ or NYSE-MKT), Rule 10A-3 requires an issuer to meet the following audit committee requirements:

• Independence: Each audit committee member must meet two independence criteria:

• No compensation other than director fees. Rule 10A-3 provides that a member of the audit committee is not independent if he or she accepts any consulting, advisory or other compensatory fee from the issuer other than director or committee fees (including equity-based fees for director services). This proscription extends to indirect payments made to spouses and family members, as well as to payments for services to law firms, accounting firms, consulting firms and investment banks for which the director is a partner, member, managing director or executive. There is no de minimis exception. Ordinary course commercial business relationships between an issuer and an entity with which a director has a relationship generally will not affect independence under the rule, although such relationships may affect independence under exchange or NASDAQ standards. In addition, the final rule permits audit committee members to receive fixed amounts under a retirement plan (including deferred

44

4838-2039-9394\3

compensation) for prior service. While Rule 10A-3 does not “look back” to compensation arrangements existing before appointment to the audit committee, such relationships may preclude independence under exchange rules.

• Not an “affiliate” of the listed company. Under Rule 10A-3, a member of the audit committee also is not independent if he or she is an “affiliated person” of the listed company or any subsidiary. A person is an “affiliated person” under the rule if he or she, directly or indirectly, controls, is controlled by or is under common control with the issuer under a traditional securities law analysis. The rule provides a “safe harbor” under which a person who is not an executive officer or owner of more than 10% of a class of voting equity securities of the issuer is deemed not to control the issuer. A director that does not meet the safe harbor is not presumed to be an affiliate, however, and a determination of independence will be based on the particular facts and circumstances (although some exchanges have more specific requirements). The rule specifies that an executive officer, employee-director, general partner or a managing partner of any affiliate of the listed company will also be deemed to be an affiliate of that company. The rule exempts from this criteria an audit committee member who sits on the board of directors of both a listed company and its affiliate, if the committee member otherwise meets the independence requirements.

• Responsibilities of Independent Auditors. The audit committee must be directly responsible for the appointment, compensation, retention, termination and oversight of the work of the issuer’s independent auditors and the independent auditors must report directly to the audit committee. The audit committee will also be responsible for resolving disagreements between the auditors and management.

• Accounting Matter Complaints. The audit committee will be responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal financial controls or auditing matters. These procedures are required to include procedures for confidential, anonymous submissions by employees related to questionable accounting or auditing matters.

• Advisor Engagements and Funding. The audit committee must have the authority to engage independent legal counsel and other advisors that it determines are necessary to carry out its duties. In addition, the rules would require the issuer to provide appropriate funding to the audit committee to pay auditors and any advisors.

(ii) Limited Exemptions for Foreign Private Issuers

Although Rule 10A-3 applies to foreign private issuers, the SEC has provided for limited exemptions to address specific home country requirements:

• allowing a non-management employee representative to serve on the audit committee if elected as required by home country legal or listing requirements;

• allowing one non-voting member of the audit committee to be a shareholder, or representative of a shareholder (or group), owning more than 50% of the voting securities of the foreign private issuer shareholder, if the “no compensation” prong of the independence requirement is satisfied and the member is not an executive officer of the issuer;

• allowing one member of the audit committee to be a representative of a foreign government or foreign governmental entity if the “no compensation” prong of the independence requirement is satisfied and the member is not an executive officer of the issuer; and

45

4838-2039-9394\3

• allowing statutory auditors or “board of auditors” or similar systems if it operates under a legal or listing standard intended to provide oversight of outside auditors that is independent from management and excludes executive officers.

(iii) Limited Exemption for New Public Companies

New public companies are not required to have a fully independent audit committee until one year after the effective date of their initial listing or IPO registration statement. However, these companies must have at least one independent member at effectiveness and a majority of independent audit committee members within 90 days of effectiveness.

(iv) Disclosure Requirements

Listed issuers are required to include or incorporate by reference disclosure identifying the members of their audit committee in their annual reports filed with the SEC. In the absence of an audit committee, the entire board of directors will be considered to be the audit committee of the listed issuer, and the issuer will be required to disclose that the entire board of directors is acting as such.

In addition, issuers taking advantage of the rule’s exemptions for new public companies, foreign private issuers or audit committee members who cease to be independent for reasons outside of their control will be required to disclose in their annual reports filed with the SEC their reliance on the exemption, and their assessment of whether such reliance would “materially adversely affect the ability of the audit committee to act independently and to satisfy the other requirements” of Rule 10A-3. For domestic issuers subject to the SEC’s proxy rules, this disclosure would also be required in proxy or information statements relating to the election of directors.

(v) NYSE, NASDAQ and NYSE-MKT Requirements.

NYSE, NASDAQ and NYSE-MKT require each audit committee member to be financially literate (subject to certain relief for foreign private issuers), as determined by the board of directors in its business judgment, or to become financially literate within a reasonable period of time after appointment to the audit committee.

NYSE, NASDAQ and NYSE-MKT each require an issuer’s audit committee adopt a written audit committee charter that addresses its duties and responsibilities. The audit committee charter is required to be posted on the issuer’s website and the posting must be disclosed in the issuer’s annual report.

(f) Code of Ethics

SEC reporting companies are required to disclose in their annual reports whether they have adopted a code of ethics for their CEO, CFO, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics must be filed as an exhibit to the annual report or made available on the company’s website or the company must undertake in its annual report to provide a copy without charge. If a company has not adopted a code of ethics, it must explain the reasons it has not done so.

(i) Content Requirements.

The code of ethics contemplated by the rules is a codification of standards reasonably designed to deter wrongdoing and to promote:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships,

• full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the SEC and in other public communications made by the company,

• compliance with applicable governmental laws, rules and regulations,

46

4838-2039-9394\3

• the prompt internal reporting of code violations to an appropriate person or persons identified in the code, and

• accountability for adherence to the code.

Other than these general topics, the rules do not address the content of a code of ethics. The SEC believes that the details, such as particular standards of conduct, compliance procedures and disciplinary measures, are best left to each company to determine. The SEC also noted that a company may have separate codes of ethics for different types of officers and that the required code of ethics may be part of a broader code that addresses additional issues or applies to additional persons. In those instances, a company can comply by disclosing those portions of the code of ethics that apply to the officers and address the elements covered by the rule.

(ii) Applicability to Foreign Private Issuers.

Like a domestic issuer, a foreign private issuer will have to provide the new code of ethics disclosure in its Exchange Act annual report on Form 20-F or 40-F. A foreign private issuer is required to disclose any change to or waiver from the code of ethics obligations of its senior officers on an exhibit to its Form 20-F or 40-F, however, the SEC encourages such issuers to do so earlier on a Form 6-K or on its website.

(iii) Disclosure Obligation Only.

As with the financial expert rules, the code of ethics rules are disclosure-oriented only. They do not require an SEC reporting company to adopt a code of ethics.

(iv) NYSE, NASDAQ and NYSE-MKT Requirements.

NYSE, NASDAQ and NYSE-MKT have adopted rules that require each listed company (other than foreign private issuers) to adopt a code of business conduct and ethics for its directors and all of its employees, including senior management.

(g) Insider Trading During Benefit Plan Blackout Periods

The Sarbanes-Oxley Act generally prohibits directors and executive officers of SEC reporting companies (including foreign private issuers) from buying or selling their company’s equity securities at times when plan participants are precluded from doing so under certain company pension plans, including 401(k) plans, profit-sharing plans, stock bonus plans and money purchase pension plans.

The SEC rules under this Section, Regulation BTR (for “Blackout Trading Restriction”), clarifies the scope and operation of the trading prohibitions, establishes exceptions, delineates remedies for violations (including a specific calculation method for determining the amount of profits that may be recovered in a private action) and details the application of Regulation BTR to foreign private issuers. Regulation BTR also specifies the content and delivery requirements for the notice that a company must provide its directors and executive officers and to the SEC on Form 8-K, or Form 6-K, in advance of any blackout period.

(i) “Blackout Period” Defined

Foreign private issuers. Regulation BTR defines a “blackout period” for foreign private issuers to occur when (1) at least 50% of the participants located in the United States are subject to the trading suspension and (2) U.S. plan participants either total 50,000 or account for 15% of all participants worldwide.

Exclusions from definition. A “blackout period” does not include:

• regularly scheduled suspensions that are described in the plan documents and disclosed to an employee before, or within 30 days after, enrolling in the plan; and

47

4838-2039-9394\3

• suspensions for the principal purpose of enabling employees of an acquired or divested business to become or cease to be plan participants following the acquisition or divestiture.

The Department of Labor definition, under its Section 306(b) rules, of a blackout period for pension plans is significantly broader than the defined term in Regulation BTR. The DOL regulations define blackout periods without regard to the percentage of participants affected and are not limited to plans that permit participants to acquire or hold employer securities. As a result, some plan blackouts will require notice to participants under DOL regulations but will not require directors and executive officers to refrain from trading under Regulation BTR.

(ii) Scope of Trading Prohibition

The trading prohibition applies only to an equity security acquired in connection with service or employment as an executive director. Equity securities, for purposes of the prohibition, include options and other derivative securities as defined in SEC rules under Section 16 of the Securities Exchange Act of 1934 and, with respect to foreign private issuers, depository shares evidenced by American Depository Receipts.

Regulation BTR defines equity securities “acquired in connection with service or employment as a director or executive officer” to include those acquired:

• under a compensatory plan or arrangement (whether or not set forth in any formal plan document) of the reporting company or one of its affiliates, at a time when the individual was a director or executive officer;

• as a result of certain transactions or business relationships between the individual and the company;

• as director’s qualifying shares or to satisfy a company’s minimum securities ownership guidelines for directors or executive officers, at a time when the individual is a director or executive officer; or

• as a direct or indirect inducement to service or employment as a director or executive officer with the company or one of its affiliates.

Regulation BTR permits directors and executive officers to establish an affirmative defense that the securities were not “acquired in connection” by tracing the origin of the actual securities transferred and demonstrating that this origin is consistent for all purposes related to the transaction (such as tax reporting and applicable disclosure and reporting requirements).

(iii) Transactions Exempt from Trading Prohibition

Regulation BTR exempts:

• acquisitions under broad-based and non-discriminatory dividend or interest reinvestment plans;

• purchases or sales under Rule 10b5-1(c) trading plans (as long as the plan was not made or modified during the blackout period or at the time the director or executive officer was aware of the actual or approximate beginning or ending dates of the impending blackout);

• purchases or sales of equity securities pursuant to certain tax-qualified employee benefit plans (including those of foreign private issuers), such as a qualified employee stock purchase plan, other than discretionary transactions (as defined in the Section 16 rules);

48

4838-2039-9394\3

• stock splits, stock dividends or pro rata rights distributions;

• compensatory grants and awards of equity securities pursuant to a plan that, by its terms, permits directors or executive officers to receive grants or awards, provides for grants or awards to occur automatically, and specifies the terms and conditions of the grants or awards;

• exercises, conversions or terminations of derivative securities that were not written or acquired by a director or executive officer during the blackout or while aware of the actual or approximate beginning or ending dates of the blackout period (subject to certain conditions);

• acquisitions or dispositions of equity securities involving a bona fide gift or a transfer by will or the laws of descent and distribution;

• acquisitions or dispositions of equity securities pursuant to a domestic relations order;

• sales or other dispositions of equity securities compelled by the laws or other requirements of an applicable jurisdiction; and

• acquisitions or dispositions of equity securities in connection with a merger, acquisition, divestiture or similar transaction occurring by operation of law.

(iv) Remedies

Under Sarbanes-Oxley and Regulation BTR, a company, or a security holder on behalf of the company, may bring an action (within two years of the violation) for disgorgement of profits realized by a director or executive officer in violation of the trading prohibition. Where a transaction involves a transfer of an equity security registered under the Exchange Act and traded on a national securities exchange or NASDAQ, profit is to be measured by comparing the difference between the amount paid or received for the security on the date of the transaction during the blackout and the average market price of the equity security calculated over the first three trading days after the blackout ends. In all other cases (for derivative securities or securities of an issuer that has filed a registration statement for an initial public offering that is not yet effective, for example), profit is to be measured in a manner that is inconsistent with the objective of identifying the amount of any gain realized or loss avoided as a result of the transaction taking place during the blackout period” rather than outside of the blackout.

In addition, individuals violating the trading prohibition are subject to action by the SEC, including civil injunctive actions, penalties and cease and desist proceedings, as well as possible criminal liability.

(v) Notice of Blackout Periods

Notice to directors and executive officers. Companies are required to provide notice to directors and executive officers no later than five business days after the company receives from the pension plan administrator the notice required by the DOL rules adopted under Section 306(b) of Sarbanes-Oxley. The company’s notice must describe: (1) the reasons for the blackout; (2) the plan transactions to be suspended or affected; (3) the class of equity securities subject to the blackout; (4) the beginning and ending dates of the blackout period; and (5) contact information for the person designated to respond to related inquiries.

Notice to the SEC. Foreign private issuers must file as an exhibit to their annual reports on Form 20-F or 40-F a copy of each notice provided to directors and executive officers during the most recently completed fiscal year, unless the notice was already provided to the SEC in a report on Form 6-K.

Notice to plan participants. DOL regulations require plan administrators to notify plan participants in writing at least 30 but not more than 60 calendar days before the last date rights may be exercised by a plan participant immediately before commencement of the blackout period. The required content is

49

4838-2039-9394\3

similar to the notice to directors and executive officers, except that if investments are affected by the blackout, the notice must also advise participants to evaluate whether their investments are appropriate in light of their inability to direct or diversify assets during the blackout period.

(h) Non-GAAP Financial Measures

Many companies include non-GAAP financial measures in earnings releases, press releases and analyst conference calls. Such “pro forma” information often includes “EBITDA” and operating income data that excludes expense or revenue items identified as “non-recurring.” SEC rules impact how companies may use non-GAAP financial measures.

(i) Regulation G – Regulates Non-GAAP Disclosures

Regulation G requires any company which publicly discloses material information that includes a non-GAAP financial measure to:

• present the most directly comparable financial measure calculated and presented in accordance with GAAP; and

• provide a reconciliation (by schedule or other clearly understandable method) of the differences between the non-GAAP financial measure and the most directly comparable financial measure calculated and presented in accordance with GAAP.

The required reconciliation must be quantitative for both historical non-GAAP financial measures and, to the extent available without unreasonable efforts, for forward looking non-GAAP financial measures. If a non-GAAP financial measure is made public orally, telephonically, by webcast, by broadcast or by similar means, the rules allow a company to satisfy the requirements of Regulation G by posting the information required by Regulation G on its website at the time the non-GAAP financial measure is made public and disclosing the location and availability of this information during its presentation.

Definition of Non-GAAP Financial Measures. Under Regulation G, a “non-GAAP financial measure” is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that:

• excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the company’s financial statements; or

• includes amounts or is subject to adjustments that have the effect of including amounts that are excluded from the most directly comparable measure so calculated and presented.

Regulation G does not apply to non-GAAP financial measures such as pro forma combined presentations that are included in disclosures relating to a proposed business combination, if such disclosure is contained in a communication that is subject to the SEC’s proxy, tender offer and Regulation M-A rules applicable to business combination transactions.

Liability for Misuse of Non-GAAP Financial Measures. The new rules prohibit companies, or persons acting on their behalf, from publicly disclosing a non-GAAP financial measure that, taken together with the information accompanying that measure, contains an untrue statement of a material fact or is misleadingly incomplete in a material way.

Companies should be aware that even if they comply with the requirements of Regulation G, they may still be subject to liability under Section 10(b) of the Securities Exchange Act or Rule 10b-5 thereunder. In its release accompanying these new rules, the SEC noted that, in certain circumstances, disclosure of non-GAAP financial measures can be misleading even if the disclosure is made in compliance with Regulation G.

50

4838-2039-9394\3

(ii) Regulation S-K.

Requirements for Use of Non-GAAP Financial Measures in SEC Filings. Regulation S-K requires companies that use non-GAAP financial measures in reports and other filings with the SEC to provide in the filing:

• a presentation, with equal or greater prominence, of the most directly comparable GAAP financial measure; and

• a reconciliation of the differences between the two measures.

In addition, Regulation S-K requires a statement disclosing the reasons why management believes the presentation of the non-GAAP financial measure provides useful information to investors regarding the company’s financial condition and results of operations and, to the extent material, a statement disclosing the additional purposes, if any, for which management uses the non-GAAP financial measure. The SEC indicated these statements must be particular to the company making the disclosure and should not be “boilerplate.”

Prohibited Uses of Non-GAAP Financial Measures in SEC Filings. Under the final rules a company will not be allowed in its SEC filings to:

• exclude charges or liabilities that required, or will require, cash settlement, or would have required cash settlement absent an ability to settle in another manner, from non-GAAP liquidity measures (although companies can use EBIT and EBITDA),

• adjust a non-GAAP performance measure to eliminate or smooth items that are identified as non-recurring, infrequent or unusual when the nature of the charge or gain is such that it is reasonably likely to recur within two years, or there was a similar charge or gain within the prior two years,

• present non-GAAP financial measures in the company’s financial statements prepared in accordance with GAAP or in the accompanying notes, or

• use titles or descriptions of non-GAAP financial measures that are confusingly similar to titles and descriptions used for GAAP measures.

(iii) Application to Foreign Private Issuers

Non-GAAP Financial Measures. The requirements of Regulation G generally apply to foreign private issuers. There is a limited exception, however, if:

• the securities of the issuer are listed or quoted outside the United States;

• the non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with U.S. GAAP; and

• the disclosure is made by or on behalf of the issuer outside the United States, or is included in a written communication that is released by or on behalf of the issuer outside the United States.

It should be noted that although Regulation G disclosure would not be required for foreign reports of foreign private issuers filed outside the United States, if such report is incorporated by reference in an SEC filing, Regulation G disclosure would be required to the extent the report contains non-GAAP financial measures. For example, a Canadian issuer reporting on Form 40-F that incorporates by reference its Annual Information Form containing non-GAAP financial measures in its Form 40-F will be required to add Regulation G disclosure to its Form 40-F, to the extent it is not contained in the Annual Information Form.

51

4838-2039-9394\3

In addition, issuers filing periodic reports on Form 10-K, 10-Q, or Form 20-F must include additional disclosure in their periodic reports if the disclosure contains non GAAP financial measures. These additional disclosure requirements are in addition to the requirements set forth in Regulation G and require issuers to, among other things, present, with greater or equal prominence, the most directly comparable financial measure calculated and presented in accordance with GAAP, to provide a reconciliation of the non-GAAP financial measure to GAAP, and to provide the reasons why management believes the non GAAP financial measure presented provides useful information to investors.

(i) Disclosure of Off-Balance Sheet Arrangements

All SEC reporting issuers are required to disclose off-balance sheet arrangements and contractual obligations. The new rules require companies to provide in the management’s discussion and analysis (MD&A) section of their annual reports, in-depth disclosure of off-balance sheet arrangements with unconsolidated entities or other persons that have, or are reasonably likely to have, a current or future effect on the company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

(i) Off-Balance Sheet Arrangements

A SEC reporting issuer is required to disclose, in a separately-captioned section of MD&A, “off-balance sheet arrangements” that either have, or are reasonably likely to have, a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. If MD&A disclosure of an off-balance sheet arrangement is required, a company must provide, among other things:

• the nature and business purpose of the off-balance sheet arrangement;

• the importance of the arrangement to the company for liquidity, capital resources, market risk, credit risk support or other benefits;

• the overall magnitude of the company’s off-balance sheet arrangements; the specific material impact of each arrangement in terms of revenue, expense and cash flow; the obligations and liabilities arising from such arrangements and the triggering events or circumstances that could cause them to arise;

• the known events, demands, commitments, trends or uncertainties that implicate, or are reasonably likely to implicate, the company’s ability to benefit from the off-balance sheet arrangements; and

• such other information the company believes is necessary for an understanding of the off-balance sheet arrangement and its material effects.

Disclosure regarding off-balance sheet arrangements should generally cover arrangements entered into in the most recent fiscal year. The disclosure, however, should also address changes in arrangements entered into in prior years, to the extent necessary to permit an understanding of the arrangement.

“Off-balance sheet arrangements” are broadly defined as any transaction, agreement or other contractual arrangement to which an entity that is not consolidated with the company is a party, under which the issuer has:

• any obligation under a guarantee contract that has any of the characteristics identified in FASB Interpretation No. 45;

• a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets;

52

4838-2039-9394\3

• any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, except that it is both indexed to the company’s own stock and classified in stockholders’ equity in the company’s statement of financial position, and therefore excluded from the scope of FASB Statement of Financial Accounting Standards No. 133; or

• any obligation, including a contingent obligation, arising out of a variable interest (as referenced in FASB Interpretation No. 46) in an unconsolidated entity that is held by, and material to, the company, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with, the company.

(ii) Safe Harbor for Disclosure of Off-Balance Sheet Arrangements

The statutory Safe Harbor protections of the Private Securities Litigation Reform Act of 1995 apply to forward-looking information regarding off-balance sheet arrangements. The Safe Harbor would apply to all information disclosed pursuant to these rules, except for historical facts. The Safe Harbor provides that statements will be insulated from any private action that is based on an untrue statement of a material fact or material omission if the statements are forward-looking, are identified as such, and are accompanied by meaningful, cautionary statements identifying important risk factors that could cause actual results to vary materially from those in the forward-looking statements. Companies that comply with all of the requirements set forth in the new rules will be deemed to have satisfied the Safe Harbor’s requirement to provide meaningful cautionary statements.

(iii) Application to Foreign Private Issuers

The MD&A disclosure requirements concerning off-balance sheet arrangements apply to foreign private issuers that file annual reports on Form 20-F or on Form 40-F. The references to U.S. GAAP (e.g., in defining off-balance sheet transactions) apply regardless of the particular accounting principles under which a foreign private issuer presents its primary financial statements.

(j) Disclosure of Contractual Obligations

All SEC reporting issuers (other than small business issuers) are required to provide in tabular format a summary of payments due under certain categories of contractual obligations. The categories of contractual obligations are defined with reference to U.S. GAAP and include:

• long-term debt;

• capital lease obligations;

• operating leases;

• purchase obligations; and

• other long-term liabilities reflected on a company’s balance sheet.

The rules require each category to be divided into payments due: (i) within one year; (ii) between one to three years; (iii) between three to five years; and (iv) for a period of time greater than five years.

The statutory Safe Harbor protections of the Private Securities Litigation Reform Act of 1995 apply to forward-looking information regarding disclosure of contractual obligations.

(k) Auditor Independence Rules

Sarbanes-Oxley imposed rigorous standards of independence for the external auditors of SEC reporting companies (including foreign private issuers).

53

4838-2039-9394\3

(i) Prohibited Non-Audit Services

Sarbanes-Oxley mandated rule changes to expand the scope of non-audit services that an independent auditor is prohibited from providing to an audit client. Whether or not specifically enumerated by the rules, services are prohibited if they: (1) result in an auditor auditing its own work, (2) create a mutual or conflicting interest between auditor and client, (3) result in an auditor performing management functions or (4) place the auditor in a position of advocating for a client. Accounting firms are not prevented under the rules from providing a full range of non-audit services to an SEC reporting company for which they do not act as the independent auditor.

Treatment of Tax Services. In adopting the final rules, the SEC backed away from its controversial proposal suggesting that certain tax services might be prohibited. The adopting release affirms that independent auditors can provide tax services, such as tax compliance, tax planning and tax advice, to their audit clients without impairing their independence. The release cautions, however, that some services, such as representing an audit client before a tax court or promoting a novel tax avoidance (i.e., “tax shelter”) transaction, would or could impair an auditor’s independence.

Prohibited Services. The new rules enumerate ten categories of non-audit services that an independent auditor may not provide to an audit client, including bookkeeping and related services, financial systems design and implementation services, appraisal or valuation services, actuarial services, internal audit outsourcing and human resources and other managerial services.

(ii) Partner Rotation

Lead and Concurring Partners. Sarbanes-Oxley and the implementing rules provide that an accounting firm will not be independent if either the lead audit partner or the concurring partner perform audit services for more than five consecutive fiscal years of an audit client. Extending beyond the mandate of Section 203, the final rules also require a five-year “time-out” period before a partner may return to a particular audit engagement.

Other Audit Partners. The rules also require partner rotation for “audit partners,” which is a new defined term. Audit partners, other than the lead and concurring partners, must rotate off an audit engagement after seven years and are subject to a two-year time-out period. As defined by the rules, an “audit partner” is any partner on the audit engagement team with responsibility for decision-making on any significant audit, accounting or reporting matters affecting the company’s financial statements or who maintains regular contact with management and the audit committee of the audit client. Audit partners also include all partners who provide more than 10 hours of audit services during a fiscal year to the parent public company, or lead partners on the audit of the company’s subsidiaries whose assets or revenues account for 20% or more of the company’s consolidated assets or revenues. The definition of audit partner excludes “specialty” partners who consult on technical or industry-specific issues, the lead partners on subsidiaries below the 20% threshold and partners assigned to “national office” duties who may be consulted on specific accounting issues related to an audit client.

Small Firm Exemption. The rules contain an exception to partner rotation for firms with no more than five public company audit clients and fewer than ten partners.

(iii) Conflicts of Interest Resulting from Employment Relationships

The rules prohibit the employment by an SEC reporting company of the former employees of its independent auditor. Under the rules, an accounting firm will not be independent if a person who was a member of the firm’s “audit engagement team” is employed by the audit client in a “financial reporting oversight role” before the company has completed a full one-year audit cycle after such person was no longer a member of the audit engagement team.

The term “audit engagement team” means the lead and concurring partners and any other member of the team providing over 10 hours of audit services to the client during an audit cycle. The term “financial reporting oversight role” refers to any position that has direct oversight responsibility for the preparation of

54

4838-2039-9394\3

a company’s financial statements and related information, such as the MD&A, included in filings with the SEC. The term covers the chief executive officer, chief financial officer, chief accounting officer, controller and other key positions, such as members of the board of directors. The final rules provide an exception for conflicts that are created through merger or acquisition, as long as the audit committee is aware of the conflict.

(iv) Audit Committee Pre-Approval of Audit and Non-Audit Services

The rules require audit committee pre-approval of all audit, review or attest engagements and all engagements for permissible non-audit services for an SEC reporting company. The rules permit engagements entered into pursuant to pre-approval policies and procedures established by the audit committee, provided that (1) the policies and procedures are detailed as to the particular services covered by the polices, (2) the audit committee is informed of each service performed pursuant to this form of approval and (3) such policies and procedures do not include delegation of the audit committee’s responsibility to management.

The rules provide a de minimis exemption from the pre-approval requirements for non-audit services totaling less than five percent of the aggregate fees paid to the auditor in the fiscal year, so long as the services were not identified as non-audit services at the time of engagement and the audit committee is promptly notified and approves them before fiscal year-end.

(v) Audit Partner Compensation

An accounting firm will not be independent if, during its engagement period, any audit partner earns or receives compensation based on the act of selling non-audit services to an audit client. The rules do not preclude an audit partner from sharing in the profits of the firm’s audit practice and the profits of the overall accounting firm.

(vi) Communication With Audit Committees

The rules require that an independent auditor communicate specified information to the audit committee of its audit client. Specifically, the rules require that independent auditors report to audit committees in the following three categories prior to any filing of an audit report with the SEC pursuant to applicable securities laws:

• Critical Accounting Policies. The discussion with the audit committee of critical accounting policies should include the reasons for determining if a policy is critical and how current and anticipated future events impact those determinations. In addition, the communication should include the auditor’s assessment of management’s disclosures of critical accounting policies along with any significant modifications proposed by the accountants that were not included in such disclosures.

• Alternative GAAP Treatments. The communication should discuss the effect that alternative treatments within GAAP for material items would have on the company’s financial statements and identify the treatments preferred by the accounting firm. The communications should focus on the initial selection of, and changes in, significant accounting policies and should address how management’s judgments and accounting estimates impact the financial statements. The report to the audit committee should also cover the auditor’s judgment about the quality of the company’s accounting principles. If an existing accounting policy is being modified, then the reasons for the change also should be communicated.

• Material Communications. The independent auditor must report on all material written communications between the auditor and management. These written communications include: management letters, management representation letters, reports and recommendations on internal controls, schedule of unadjusted audit differences, engagement letters and independence letters.

55

4838-2039-9394\3

The rules do not specify the form of the communication. However, the communication will need to be documented in some fashion by the independent auditor and the audit committee and, as a practical matter, a written record of the communication will need to be preserved by both parties. These communications will occur prior to the filing of annual reports on Form 10-K, 20-F or 40-F, and proxy statements, as well as prior to filing registration statements or current reports on Form 8-K in which audit reports are included. The rules also cover filings in which the audit report is incorporated by reference, such as registration statements on Forms S-3 and S-8.

(vii) Audit Fee Disclosure

An SEC reporting issuer is required to disclose fees paid to its independent auditor for both audit and non-audit services. In addition, the new rules require a company to describe the services provided by its independent auditor within each non-audit service category for which fees are reported. Fees must be reported in four categories: (1) audit fees, (2) audit-related fees, (3) tax fees and (4) all other fees. The audit fees category includes all services necessary to perform an audit in accordance with GAAP, services provided in connection with statutory and regulatory filings or engagements and other services generally provided by independent auditors, such as comfort letters, statutory audits, attest services, consents and assistance with, and review of, documents filed with the SEC. In general, the audit-related fees category covers assurance and due diligence services, including, employee benefit plan audits, due diligence related to mergers and acquisitions, consultations and audits in connection with acquisitions, internal control reviews and consultations concerning financial accounting and reporting standards. The tax fee category captures services performed by a professional staff in the accounting firm’s tax division, except those services related to the audit. These fees would include tax compliance, tax planning and tax advice. The category of all other fees would remain the same as preexisting rules, except to include financial information systems implementation and design.

The required disclosure must be included in the reporting company’s annual report on Form 10-K, 20-F or 40-F and its proxy statement. U.S. reporting companies may incorporate the required disclosure from the proxy statement into its annual report. The disclosure must include information on fees paid for the last two fiscal years in order to provide investors with comparative information. The company must also provide “clear, concise and understandable” descriptions of the audit committee’s pre-approval policies and procedures. As an alternative, companies may attach a copy of the policies and procedures to its annual report or proxy statement. In addition, if a company uses the de minimis exception to audit committee pre-approval of non-audit services, it must disclose the percentage of total fees paid to the independent auditor under that exception by fee category.

(l) Public Company Accounting Oversight Board

The PCAOB was established under the Sarbanes-Oxley Act to oversee audits and other matters related to financial reporting by public companies that are subject to the U.S. securities laws.

Sarbanes-Oxley prohibits accounting firms that are not registered with the PCAOB from preparing or issuing audit reports on SEC reporting companies or from participating in these activities. Sarbanes-Oxley extends the PCAOB’s rules regarding U.S. public accounting firms to any non-U.S. or foreign public accounting firm that prepares or furnishes an audit report with respect to any SEC reporting company. Sarbanes-Oxley further authorizes the PCAOB to require foreign public accounting firms that do not issue, but play a substantial role in the preparation of, audit reports to register with the PCAOB.

Any public accounting firm that prepares or issues any audit report or “plays a substantial role in the preparation or furnishing of an audit report” with respect to any public company must be registered with the PCAOB. All public accounting firms, including foreign firms, must be registered with the PCAOB if they wish to prepare or issue audit reports on financial statements filed with the SEC, or to play a substantial role in the preparation or issuance of such reports.

56

4838-2039-9394\3

(m) Additional Provisions of Sarbanes-Oxley

(i) Potential Forfeiture of Incentive Compensation by CEOs and CFOs

CEOs and CFOs are subject to the possibility of a statutory “clawback” of all bonus and stock option exercise profits received in the 12 months following the first publication or filing with the SEC of financials subject to a restatement. These provisions apply to any U.S. or foreign reporting company and to any private company that is in SEC registration for an IPO. If any such company is required to prepare an accounting restatement due to “the material noncompliance of the issuer, as a result of misconduct, with any financial reporting requirement,” then the CEO and CFO will be required to forfeit any incentive or equity-based compensation received from the company, and the profit on any sales of issuer securities, during the 12-month period following release of the financial statements to be restated.

(ii) Statute of Limitations

Sarbanes-Oxley extended the statute of limitations for securities fraud to the earlier of two years from discovery or five years from the fraud.

(iii) Whistleblower Protection

Sarbanes-Oxley prohibits U.S. and foreign reporting companies (and their officers, employees, contractors, subcontractors and agents) from taking any retaliatory action against an employee for commencing or participating in a legal proceeding based on, or providing information or assistance to supervisors, federal agencies or Congress with respect to an investigation of, conduct the employee reasonable believes violates U.S. securities or antifraud laws.

(iv) Officer and Director Bars

Sarbanes-Oxley gives the SEC explicit authority in administrative cease and desist proceedings to bar an individual who has violated the antifraud provisions of the federal securities laws from acting as an officer or director of a reporting company if the person’s conduct demonstrated unfitness to serve as an officer or director of a public company. In addition, Sarbanes-Oxley modified the standard governing imposition of officer and director bars by a court (in actions brought by the SEC) by modifying the previous “substantial unfitness” standard to simple “unfitness.”

Section 5.02 DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT

The Dodd-Frank Act involved a comprehensive and far reaching reform of the regulation of the financial services industry. The Dodd-Frank Act contains a number of corporate governance and other provisions that will affect public companies, including provisions requiring say-on-pay and golden parachute shareholder votes, shoring up the SEC’s authority to adopt shareholder access rules, mandating additional public company disclosures and more.

(a) Shareholder Approval of Executive Compensation – “Say on pay”

The Dodd-Frank Act requires companies that provide executive compensation disclosure under the SEC’s proxy rules to include nonbinding “say-on-pay” proposals in their proxy statements at least once every three years, and nonbinding proposals to approve any “golden parachute” arrangement in all proxy statements relating to business combinations.

The SEC’s say on pay regulations require companies to include two matters in the first proxy statement that contains executive compensation disclosure for a: (1) a nonbinding resolution for shareholder approval of executive compensation as disclosed in the proxy statement, and (2) a nonbinding proposal to determine whether this “say-on-pay vote” should occur once every one, two, or three years. The say-on-pay proposal must be submitted to shareholders at least once every three years and the proposal to consider the frequency of the say-on-pay proposal must be submitted to shareholders at least once every six years.

57

4838-2039-9394\3

Pursuant to the JOBS Act, emerging growth companies are exempt from the SEC’s say on pay rules.

The SEC’s say on pay rules do not apply to foreign private issuers.

(b) Golden Parachute Approval

The Dodd-Frank Act and the implementing rules require companies to include in any proxy statement subject to the SEC’s proxy rules at which shareholders are asked to approve a merger or other business combination transaction:

• disclosure “in a clear and simple form in accordance with regulations promulgated by the [SEC]” of agreements or understandings with named executive officers under which the officers will receive any payments as a result of the transaction; and

• a nonbinding resolution to approve the payments to the named executive officers.

Section 14A will also require institutional investment managers that are subject to Section 13(f) of the Exchange Act to annually report how they vote on all say-on-pay and golden parachute proposals.

Like the say on pay requirements, “Say on Golden Parachutes” does not apply to “emerging growth companies” as defined in the JOBS Act or to foreign private issuers.

(c) Broker Discretionary Votes

Although separate from the corporate governance provisions, the Dodd-Frank Act prohibits brokers from voting on matters related to the election of directors, executive compensation or other significant matters as determined by the SEC, unless the broker has received voting instructions from the beneficial owner.

(d) Executive Compensation Disclosure

(i) Pay versus Performance.

The Dodd-Frank Act requires companies that provide executive compensation disclosure under the SEC’s proxy rules to disclose the relationship between the amount of executive compensation actually paid to executive officers and the financial performance of the company. An issuer may present this information graphically:

• median total annual compensation paid to all employees other than the chief executive officer;

• the total annual compensation paid to the chief executive officer; and

• the ratio between these two amounts.

In what may create a burden for smaller companies that do not have computerized compensation records or that have broad-based equity compensation plans, the Dodd-Frank Act requires that total compensation both for purposes of executive compensation and for purposes of median employee compensation be computed in the same manner as total compensation is computed for executives in the summary compensation table.

(ii) Proxy Access

The Dodd-Frank Act gives the SEC explicit authority to issue rules permitting shareholder access to the issuer’s proxy materials in order to nominate candidates to the Board of Directors. The SEC adopted proxy access rules that would have given holders or groups of holders that have held 3 percent of an issuers voting stock for in excess of 3 years the right to have their nominees included in the issuer’s proxy statement. These rules were struck down by an appeals court that held that the SEC did not properly evaluate the costs and benefits of the rules when if adopted them. The SEC will not appeal the decision.

58

4838-2039-9394\3

Other SEC rules permit shareholders to propose proxy access bylaws amendments for consideration at shareholders’ meeting.

(iii) Leadership Structure

The Dodd-Frank Act and rules promulgated by the SEC requires disclosure in proxy statements an explanation of reasons why the same person or different persons serve as the Chairman of the Board and the Chief Executive Officer. The change does not apply to foreign private issuers.

(iv) Disclosure of Hedging Policies

The Dodd-Frank Act required the SEC to issue rules requiring public companies to disclose in their proxy statements whether directors and employees are permitted to hedge the value of equity securities held directly or indirectly by the director or employee. On February 9 2015, the SEC published proposed rules which are subject to public comment.

(e) Additional Requirements for Listed Companies

The Dodd-Frank Act required issuers listed on national securities exchanges to have independent compensation committees and clawback policies.

(i) Compensation Committee Independence

The NYSE, Nasdaq, and NYSE-MKT require independence of compensation committee members, or for decision making on executive compensation by disinterested members of the board. The compensation committee is required to adopt a written charter, which is required to be posted on the issuer’s website and disclosed in the issuer’s annual report. The rule does not apply to foreign private issuers that provide disclosures of the reasons that they do not have independent compensation committees.

Independence of Compensation Committee Advisers. The compensation committee independence rules also require the compensation committee of a listed issuer to have authority to retain independent compensation consultants, legal counsel and other advisors, each of whom will report directly to, and be compensated by, the compensation committee. Issuers must disclose whether the compensation committee has retained a compensation consultant and whether any conflicts of interest exist with respect to the compensation consultant. The same requirement does not apply as to legal counsel or other advisers.

(ii) Clawback of Executive Compensation

The Dodd-Frank Act prohibited the listing on a national securities exchange of any issuer that has not adopted a clawback policy. The clawback policy requires the issuer to recover from any current or former executive officer any incentive compensation that was paid during the three years preceding any accounting restatement due to material noncompliance with reporting requirements, to the extent in excess of the compensation that would have been paid based on the restatement. Importantly, unlike Section 304 of Sarbanes-Oxley, the clawback policies under the Dodd-Frank Act apply (1) regardless of the misconduct of the officer receiving incentive compensation, and regardless of misconduct by the issuer, (2) to all incentive compensation paid during the three year period preceding the restatement, rather than the 12 months following publication of the erroneous report, and (3) to all executive officers, not just the Chief Executive Officer and Chief Financial Officer.

(f) Additional Disclosure Requirements

The Dodd-Frank Act contains provisions mandating specific disclosures by reporting issuers.

(i) Reporting of Payments by Natural Resource Issuers

The Dodd-Frank Act required rules for natural resource companies that engage in the commercial development of oil, natural gas or minerals to disclose in their SEC annual report payments to the

59

4838-2039-9394\3

U.S. government or foreign governments for the purpose of the commercial development of oil, natural gas, or minerals. Required disclosures include the type and total amount of payments made for each project of the issuer relating to the commercial development of oil, natural gas or minerals; and the type and total amount of the payments made to each government.

The term “payments” is quite broad. It excludes de minimis amounts but includes taxes, royalties, fees (including license fees), production entitlements, bonuses and other material benefits consistent, to the extent practicable, with the guidelines of the Extractive Industries Transparency Initiative that the SEC determines are part of the commonly recognized revenue stream for the commercial development of oil, natural gas or minerals.

The Dodd-Frank Act requires that this information be provided in “interactive data format,” which includes electronic tags identifying:

• the total amounts of the payments, by category;

• the currency used to make the payments;

• the financial period in which the payments were made;

• the business segment of the resource extraction issuer that made the payments;

• the government that received the payments, and the country in which the government is located;

• the project of the resource extraction issuer to which the payments relate; and

• such other information as the SEC may determine is necessary or appropriate in the public interest or for the protection of investors.

The SEC adopted rules mandating those disclosures, but the rules were struck down by a federal appeals court, and no replacement for them has been proposed by the SEC.

(ii) Reporting Regarding Conflict Minerals

In response to the extreme levels of violence in the eastern Democratic Republic of the Congo, which Congress felt was financed in part by the trade of “conflict minerals,”6 Congress adopted disclosure rules as part of the Dodd-Frank Act. The SEC adopted regulations requiring additional disclosure by SEC reporting companies for whom “conflict minerals” are necessary to the functionality or production of a product manufactured by the company.

• the measures taken by the person to exercise due diligence on the source and chain of custody of such minerals, which measures shall include an independent private sector audit of such report;

• the products manufactured or contracted to be manufactured that are not conflict free;

• the entity that conducted the independent private sector audit;

• the facilities used to process the conflict minerals;

• the country of origin of the conflict minerals; and

• the efforts to determine the mine or location of origin with the greatest possible specificity.

6 “Conflict minerals” are defined as columbite-tantalite (coltan, from which tantalum is derived), cassiterite (from which tin is derived), gold, wolframite (from which tungsten is derived), or their derivatives; or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

60

4838-2039-9394\3

The SEC adopted regulations implementing the conflict minerals reporting requirements of the Dodd-Frank Act.

The rules require that reporting companies (including foreign private issuers) determine whether conflict minerals are necessary “to the functionality of a product manufactured or contracted” to be manufactured by the issuer. If not, no further action is required. Note that mining itself is not manufacturing for the purpose of the rules, so mining companies generally need not report.

If conflict minerals are determined to be necessary to the functionality of the manufactured product, the issue must conduct an inquiry to determine if the minerals originated in the DRC or adjoining countries, or are from scrap or recycled sources. As a result of its inquiry, the issuer knows that either the minerals did not originate in the DRC or adjoining countries, or that they originated form scrap or recycled sources, or has no reason to believe that the minerals may have originated from the DRC or adjoining countries or may not be from scrap or recycled sources, the issuer’s obligation is limited to a description of its country of origin inquiry.

If the country of origin inquiring indicates that the minerals may have originated from the DRC and may not be from scraps or recycled sources, however, the rules as adopted obligated an issuer to exercise due diligence to determine the source and chain of custody of the minerals in accordance with a nationally or internationally recognized due diligence framework, and in the basis of that inquiry, issuers were required to file a Conflict Minerals Report that among other things characterize their products as

• “DRC conflict free” if they verify that any conflict minerals did not finance or benefit armed groups in the DRC or adjoining countries;

• “Not found to be DRC conflict free”; or

• “DRC conflict undeterminable,” which could be used in lieu of “found to be DRC conflict free” for the first two years of reporting (four years for smaller reporting companies) if the issuer is unable to determine whether the minerals and “DRC Conflict Free”

The rule required that a finding that the Conflict Mineral Report be supported by an audit by an independent third party.

The rules provide that issuers make the required disclosure on SEC Form SD.

The conflict mineral rules were controversial and burdensome. The SEC itself estimated that the initial year of compliance would cost industry from $3 billion to $4 billion, and industry sources suggest that the estimate was far too low.

In April 2014, a federal appeals court held that the requirement to describe products as being, or not being “DRC conflict free” violated issuers’ free speech rights’ and invalidated that requirement, but upheld the remainder of the rules.

The SEC has slightly amended the rule to delete the requirement to state whether products are “DRC conflict free” but to continues to require companies to determine whether any conflict minerals in their products originated in the DRC, and if so, to include a Conflict Mineral Report disclosing the sources of the minerals the country of origin, the facilities used to produce the minerals, and the issuer’s efforts to determine the mine or other location of origin of the minerals. No third party audit will be required unless an issuer voluntarily characterized its products as “DRC conflict free.”

(iii) Reporting Regarding Coal or Other Mine Safety

The Dodd-Frank Act created additional disclosure obligations for any SEC reporting company that is an operator, or that has a subsidiary that is an operator, of a “coal or other mine”.7 Many of the required

7 “Coal or other mine” means (A) an area of land from which minerals are extracted in nonliquid form or, if in liquid form, are extracted with workers underground, (B) private ways and roads appurtenant to such area, and (C) lands, excavations, underground

61

4838-2039-9394\3

disclosures relate only to mines that are subject to the Federal Mine Safety and Health Act of 1977 (the “MSHA”).

SEC reporting companies are required to file a Form 8-K with the SEC disclosing receipt of imminent danger orders issued under the MSHA or written notice from the Mine Safety and Health Administration that the mine has a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards, or the potential to have such a pattern. This Section 1503(b) specifically requires reporting on Form 8-K. For issuers who report on Form 20-F or 40-F and Form 6-K, the applicability of this section is unclear. However, we note that in the past when Form 8-K reporting has been mandated, the SEC required foreign private issuers who report on Form 20-F or 40-F and Form 6-K to include the required information in their annual report on Form 20-F or 40-F.

Mine operators and their subsidiaries must include in each periodic report filed with the SEC the following information for the period covered by that report for each mine:

the total number of violations of mandatory health and safety standards under the MSHA for which citations were received from the Mine Safety and Health Administration;

the total number of closure orders issued under Section 104(b) of the MSHA;

the total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety violations under the MSHA;

the total number of flagrant violations under Section 110(b)(2) of the MSHA;

the total dollar value of proposed assessments under the MSHA; and

the total number of mining-related fatalities.

In addition, the issuer must provide a list of mines that receive written notice from the Mine Safety and Health Administration of a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards, or the potential to have such a pattern, and any pending legal action before the Federal Mine Safety and Health Review Commission involving the company’s mine.

The Dodd-Frank Act’s requirements apply by their terms only to mining activities in the United States. However, issues with activities in other locations should consider disclosure of mine safety issues in other jurisdictions.

CHAPTER 6. FAIR DISCLOSURE & LIABILITY

Section 6.01 SELECTIVE DISCLOSURE AND REGULATION FD

Regulation FD (for “Fair Disclosure”) bans U.S. public companies from selectively disclosing material nonpublic information to securities analysts, certain other market professionals or existing shareholders (where it is foreseeable that the shareholder will trade on the information). Regulation FD requires that an issuer making an “intentional” disclosure of material, nonpublic information to such persons do so in a manner that provides simultaneous disclosure of the information to the general public.

If a “non-intentional” selective disclosure of material information is made, the issuer must “promptly” (generally within 24 hours after a senior official of the issuer knows, or is reckless in not knowing, of the selective disclosure) make public disclosure. passageways, shafts, slopes, tunnels and workings, structures, facilities, equipment, machines, tools, or other property including impoundments, retention dams, and tailings ponds, on the surface or underground, used in, or to be used in, or resulting from, the work of extracting such minerals from their natural deposits in nonliquid form, or if in liquid form, with workers underground, or used in, or to be used in, the milling of such minerals, or the work of preparing coal or other minerals, and includes custom coal preparation facilities.

62

4838-2039-9394\3

Public disclosure under Regulation FD requires either inclusion of information in a Form 8-K or dissemination by press release or other means of broad, non-exclusionary distribution to the public. Posting of information on the Internet or providing open access to a Webcast or telephone conference will generally not, by itself, suffice as public disclosure for purposes of Regulation FD, but these techniques may be used in combination with a previous press release, “push technology” e-mail alert or other means of communication that gives the public and media notice of availability of the posting or access to achieve sufficient public disclosure.

Failure to comply with Regulation FD may result in SEC enforcement proceedings (leading to cease-and-desist orders, injunctions or fines), but not in private liability claims.

Regulation FD does not apply to foreign private issuers. However, Regulation FD has changed the ground rules in dealing with analysts and investors, and has significantly influenced the way U.S. companies deal with the dissemination of information. Canadian companies with a significant U.S. market presence should understand the way these rules operate and consider whether they want to comply voluntarily.

One-on-one and limited access meetings, telephone conferences, webcasts and visits are not prohibited under Regulation FD, but they will involve considerable risks and, in general, companies have eliminated or greatly reduced this sort of activity since the adoption of Regulation FD.

(a) Designated spokespersons and disciplined procedures

It is more important than ever to designate specific personnel to communicate with analysts, other enumerated professionals and shareholders and to keep a record of the designated personnel. Designated spokespersons must be fully instructed on company policy regarding one-on-one and limited access contact and regarding the obligation to ensure “prompt” public disclosure if mistakes are made. Spokespersons must have access to legal counsel and must be prepared to hold analysts at arm’s-length until judgment calls on materiality are made if companies are continuing to engage in one-on-ones and limited access contacts. To the extent possible, impromptu contact should be avoided. Company spokespersons should attempt to schedule and structure contact ahead of time and obtain some advance indication of scope of inquiry in order to permit consideration of materiality issues. Spokespersons should also keep records of what they say and when they say it. Such records should be made continually available to other designated spokespersons, senior management and counsel so they can review and assess for consistency and for selective disclosure issues.

(b) “Guidance” on earnings in one-on-one or limited access settings has been singled out by the SEC as involving an especially high degree of risk under Regulation FD

This is a clear indication that the SEC intends to take an aggressive enforcement posture on this type of disclosure. Already a high-wire act before Regulation FD, giving guidance on analyst projections will now take on even greater risk unless done in open-access settings.

(c) The SEC model: press release/notice and open access, “live” conferences or Webcasts

The trend of U.S. public companies toward open-access, real-time telephone conferences or Webcasts as a means of communicating with analysts following press releases has become the rule. The SEC has endorsed this model. The crucial components are to lead with a press release covering the information. The press release should include notice of the time, date and access instructions for the conference. Web posting or “push technology” e-mail alerts with instructions regarding the open-access conference may supplement the release. Access to the conference or Webcast must be “live” but may be listen-only for participants other than the analysts and market professionals. Although this model may not supplant all contact with analysts for many public companies, it should become the standard approach for dissemination and follow-up on earnings information, M&A-related information and information regarding new products or discoveries or developments regarding customers or suppliers (e.g., acquisition or loss of

63

4838-2039-9394\3

a material contract) and other news in the categories outlined by the SEC in the Regulation FD adopting release as having high materiality potential.

(d) Form 8-K filings

Many public companies already file Form 8-K’s voluntarily for each press release they issue. This approach is advisable for smaller public companies. Foreign private issuers that report on Form 20-F or Form 40-F are required to file all material press releases on Form 6-K so their filing practices relating to press release have remained unchanged.

(e) Websites and Social Media

Many U.S. issuers post material information on their websites as a method of public communication. However, website posting may not constitute adequate public distribution under Regulation FD. Factors considered are whether:

• the website is a recognized channel of distribution;

• the website posting disseminates the information in a manner making it available to the marketplace; and

• is there a reasonable waiting period for the market to react to the information.

In 2013, the SEC issued a release that the same general considerations applicable to websites apply to social media networks (such as Twitter and Facebook) when considering whether a posting constitutes adequate public distribution under Regulation FD.

(f) Confidentiality agreements

Public companies engaged in registered and unregistered financing transactions should confer with counsel regarding use of confidentiality agreements with investors or market professionals to whom confidential information or projections are disclosed to avoid the need to make Regulation FD public disclosures that could violate the Securities Act or destroy exemptions or safe harbors. Any financing transaction must be viewed by public companies and their counsel through the lens of Regulation FD.

(g) Disproportionate impact on small public companies

There is little doubt that smaller public companies have more difficulty finding a new equilibrium under Regulation FD than large companies. The realm of the clearly immaterial is even more elusive for small companies, and they have fewer analysts following them and a greater concern about driving analysts away by being dilatory and unresponsive. Smaller companies also may not have in-house counsel and trained investor relations personnel to help determine what is material. Ironically, companies with the thinnest markets for their securities, the greatest potential for stock volatility and the least ability to say “no” to one-on-one and limited access communications are probably also the least equipped to manage the tightrope walk entailed in continuing such communications under Regulation FD.

The SEC has pursued several enforcement actions based in Regulation FD.

Section 6.02 DISCLOSURE POLICIES

(a) Disclosure Policies

The U.S. securities laws are based on disclosure principles for adequate, full and fair disclosure to stakeholders and the marketplace. Adequate corporate disclosure takes into consideration the materiality of qualitative and quantitative information as part of an overall corporate communication strategy. Factors to consider whether information needs to be disclosed, include whether the information is:

• mandated to be disclosed under the law or by SEC forms or rules;

64

4838-2039-9394\3

• in connection with an offer and sale of securities, material non-public information a reasonable investor would attach significance in connection with an investment decision;

• required to correct previous statements that the company discovers are incorrect and could be materially misleading;

• required to update previous statements by the company that become incorrect due to changes in circumstances; and

• required to address the leak of material non-public information.

We recommend that companies maintain a consistent disclosure policy in each jurisdiction in which it reports or maintains an active trading market for its securities.

(b) Websites and Social Media

Websites and social media play an increasingly important role in public company communications. In 2013, the SEC clarified its position that its policy with respect to the use of social media to disclose information is the same as with respect to websites. Companies should be aware that any information it posts on its website or on any social media network, blogs, discussion forums or other public electronic communications may be construed as corporate communication in which investment decisions can be made and giving rise to potential liability. Statements of third parties may also be attributed to a company if the company endorses the statements through quotation or republishes or hyper-links to the third party statements. The SEC has indicated that anti-fraud and anti-manipulation provisions in the U.S. securities law may apply to internet activities of a company. Accordingly, a company should consider general disclosure principles for adequate, full and fair disclosure in internet and social media communications.

Section 6.03 DISCLOSURE RELATED TO CYBERSECURITY

The SEC issued guidance regarding disclosure obligations relating to cybersecurity risks and cyber incidents. The guidance provides an overview of specific disclosure that should be discussed and the appropriate sections where it should be disclosed.

Risk factors – Issuers should disclose the risk of cyber incidents if the risk is a significant factor that makes an investment in the issuer speculative or risky. Issuers should evaluate their cybersecurity risks and take into account all available relevant information, including prior cyber incidents and the severity and frequency of those incidents. As part of this evaluation, issuers should consider the probability of cyber incidents occurring and the quantitative and qualitative magnitude of those risks, including the potential costs and other consequences resulting from misappropriation of assets or sensitive information, corruption of data or operational disruption.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Issuers should address cybersecurity risks and cyber incidents in their MD&A if the costs or other consequences associated with one or more known incidents or the risk of potential incidents represent a material event, trend, or uncertainty that is reasonably likely to have a material effect on the registrant’s results of operations, liquidity, or financial condition or would cause reported financial information not to be necessarily indicative of future operating results or financial condition.

Description of Business – If one or more cyber incidents materially affect the issuer’s products, services, relationships with customers or suppliers, or competitive conditions, the issuer should provide disclosure in the section describing the issuer’s business. In determining whether to include disclosure, issuers should consider the impact on each of their reportable business segments.

Legal Proceedings – If a material pending legal proceeding to which an issuer or any of its subsidiaries is a party involves a cyber-incident, the issuer may need to disclose information

65

4838-2039-9394\3

regarding this litigation in its legal proceedings disclosure. For example, if a significant amount of customer information is stolen, resulting in material litigation, the issuer should disclose the name of the court in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the litigation, and the relief sought.

Financial Statement Disclosures – Cybersecurity risks and cyber incidents may have a broad impact on an issuer’s financial statements, depending on the nature and severity of the potential or actual incident. Prior to a cyber-incident an issuer may incur substantial costs to prevent cyber incidents. During and after a cyber-incident, issuers may seek to mitigate damages from a cyber-incident by providing customers with incentives to maintain the business relationship. To the extent a cyber-incident is discovered after the balance sheet date but before the issuance of financial statements, issuers should consider whether disclosure of a recognized or nonrecognized subsequent event is necessary. If the incident constitutes a material nonrecognized subsequent event, the financial statements should disclose the nature of the incident and an estimate of its financial effect, or a statement that such an estimate cannot be made.

Disclosure Controls and Procedures – Issuers are required to disclose conclusions on the effectiveness of disclosure controls and procedures. To the extent cyber incidents pose a risk to an issuer’s ability to record, process, summarize, and report information that is required to be disclosed in SEC filings, management should also consider whether there are any deficiencies in its disclosure controls and procedures that would render them ineffective. For example, if it is reasonably possible that information would not be recorded properly due to a cyber-incident affecting the issuer’s information systems, the issuer may conclude that its disclosure controls and procedures are ineffective.

In January 2015, President Obama made clear that cybersecurity continues to be a concern, and he and the administration are increasing their focus on the issue. In a speech at the Federal Trade Commission on January 12, 2015, he articulated a series of major privacy and cybersecurity initiatives being planned by the administration. These proposed changes follow recent large-scale data breaches at several major retailers and destructive cyberattacks on other U.S.-based entities and include the creation of a single national data breach notification law that would be significantly stricter than today’s patchwork of state laws, and proposed legislation that would enable cybersecurity information-sharing in the private sector and between the private sector and the government.

Section 6.04 LIABILITY

Issuers publicly traded in the United States and their directors, officers and controlling shareholders can be liable for damages or disgorgement of proceeds in civil actions by shareholders as well as by the SEC. In addition to actions that may be brought under federal securities laws mentioned earlier and certain comparable provisions of state securities law, some sources of potential liability are as follows:

(a) Exchange Act

Section 10(b) and Rule 10b-5 provide for general anti-fraud liability in connection with the purchase and sale of securities. Liability generally will not be found based solely on status as a director or officer; some involvement in the conduct giving rise to the liability must be shown. Also, knowledge of the misstatement or omission or recklessness with respect to the accuracy and completeness of disclosure is required for liability.

Section 18 provides for liability for any person who “shall make or cause to be made” a false or misleading statement in an SEC report to any person who traded in reliance on the statement. The issuer itself or officers, directors or others can be liable under Section 18. The defendant has a defense if he can prove that “he acted in good faith” and had no knowledge that the statement was false or misleading.

66

4838-2039-9394\3

Section 20(a) provides that every person who directly or indirectly controls a person liable under any provision of the Exchange Act is jointly and severally liable for a violation by that person, unless the controlling person acted in good faith and did not directly or indirectly induce the acts constituting the violation. In certain circumstances, directors and officers have been held liable as controlling persons of companies or their employees or agents.

Section 21(A) provides for severe civil monetary penalties in a civil action brought by the SEC for trading while in possession of nonpublic information and for control persons who are on notice that such trading may occur by those under their control, and do not take appropriate steps to prevent it.

(b) Securities Act

Section 11 makes the issuer, officers who sign a Securities Act registration statement and directors liable for damages with respect to sales of securities made under a Securities Act registration statement that contains a material misstatement or omission. A director or officer (but not the issuer) can establish a defense if he can prove that after reasonable investigation he had reasonable grounds to believe, and did believe, that there was not misstatement or omission of material fact. Director liability is imposed whether or not the director signed the registration statement.

Section 12 provides that any person who offers and sells a security in violation of the registration provisions of the Securities Act or by means of a communication that contains a misstatement or omission of a material fact is liable to the buyer for rescission or damages. Section 12 actions based on registration violations impose absolute liability. Section 12 actions for misstatements and omissions permit the seller to avoid liability if he can prove that he did not know, and in the exercise of reasonable care could not have known, of the misstatement or omission. Issuers as well as the directors or officers with involvement in the offering may be deemed to be “sellers” for purposes of Section 12. Note that the registration provisions apply to offers and sales of securities in the United States whether or not the issuer’s securities are publicly traded in the U.S. or registered under the Exchange Act.

Section 15 provides that any person who controls a person liable under Section 11 or Section 12 shall be jointly and severally liable to the same extent, unless the controlling person had no knowledge of or reasonable ground to know of the facts by virtue of which the liability of the controlled person is alleged to exist.

The practical interpretation of such terms as “control person” in Section 20(a) of the Exchange Act and Section 15 of the Securities Act and “seller” in Section 12 of the Securities Act is somewhat elastic, and, in some circumstances, such terms have been given broad interpretation to include persons who were not intimately involved in the violation. Standards of inquiry and care imposed on persons with a “due diligence” defense tend to be fairly strict.

A person whose profession confers the authority to prepare that part of a registration statement or report prepared by him or her, and (in the case of registration statements under the Securities Act) who consents to being named as an expert therein, may be held liable for the inclusion of any false or misleading information, or the omission of material information, in the portion of the registration statement or report which purports to have been prepared or certified by such person.

Under the Securities Act, an expert may avoid potential liability by establishing that he or she made a reasonable investigation and, after reasonable investigation, believed and had reason to believe that the information in question was true and not misleading. If the claim is an anti-fraud claim under Rule 10b-5 of the Exchange Act, the plaintiff must prove that the expert acted with scienter, i.e., with intent to deceive, manipulate or defraud.