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Going Public in Canada Accessing North American Capital Markets

Going Public in Canada Accessing North American Capital Markets. Going Public Abroad Conference – June 28, 2010. Jeffrey Singer David Wismer Raymond King Stikeman Elliott LLP BMO Capital Markets TMX Group Inc. Agenda. Introductions

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Going Public in Canada Accessing North American Capital Markets

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  1. Going Public in CanadaAccessing North American Capital Markets Going Public Abroad Conference – June 28, 2010 Jeffrey Singer David Wismer Raymond KingStikeman Elliott LLP BMO Capital Markets TMX Group Inc.

  2. Agenda Introductions A Capital Opportunity for Israeli Growth Companies Going Public in Canada The IPO Process and Regulatory Regime

  3. Introductions

  4. TMX Group - Global Leader in Equities 8th largest exchange group By domestic market cap1 6th 1stin North America 2ndglobally largest exchange group By equity capitalraised2 By number of issuers1 1Issuers on TSX and TSXV (WFE, Dec 2009) 2(WFE and Capital IQ, Dec 2009) 3

  5. BMO Financial Group and BMO Capital Markets BMO Financial Group Global Banking Operations HIGHLIGHTS • 209 equity transactions totalling over $40 billion in 2009 • 62 M&A transactions totalling over $15 billion in 2009 Organization • Canada's first bank established in 1817 • Offers broad range of retail banking, wealth management and investment banking services • One of the largest diversified financial services providers in North America EUROPE DUBLIN | LONDON | ZURICH | PARIS Key Operating Data Market Cap US$35 billion Total Assets US$372 billion 2009 Revenue US$8.1 billion Employees 36,200 Tier 1 Capital Ratio 12.5% Note: BMO financials as at January 31st, 2010; Market capitalization as at June 15th, 2010 BMO Capital Markets’ Capabilities ADVISORY SERVICES • Mergers & Acquisitions • Strategic Advisory • Fairness Opinions • Takeover Defense • Share Buybacks • Valuation Analysis CORPORATE FINANCE • Initial Public Offerings • Follow-on Offerings • Convertible Securities • Mezzanine Lending • High-Yield Debt • Investment-Grade Debt • Corporate Lending • Securitization • Private Placements DISTRIBUTION & TRADING • Institutional Sales • Trading • Equity Research • Fixed Income Research • Investor Marketing • Investor Conferences • Account Sponsorship • Retail Distribution TREASURY SERVICES • Cash Management • Risk Management • Asset Management • Foreign Exchange • Trade Finance

  6. Stikeman Elliott Number of Lawyers: Over 500 Offices: 8 Founded: 1952 Major Practice Areas:M&A •Securities/Corporate Finance •Tax •BankingInsolvency/Restructuring •Structured Finance •Energy Corporate/Commercial •Real Estate •Project FinanceInfrastructure • Mining •Competition/AntitrustIntellectual Property •Insurance • Employment Technology/Outsourcing • Business Litigation • Involved in 9 of the Top 10 Corporate Deals in Canada for 2009, more than any other firm (selected by Lexpert) • #1 in Bloomberg’s league tables for Canadian equity offerings (2005-2009), debt offerings and global bond offerings (2009) • #1 in the Financial Post’s league tables for Canadian equity offerings and debt offerings (2009) • Top-ranked firm in corporate finance, capital markets and M&A practice in International Financial Law Review, Chambers Global and PLC Which Lawyer?

  7. A Capital Opportunity for Israeli Growth Companies Raymond D. King, MBA Senior Manager, Global Diversified IndustrialsListings Business Development TMX Group Inc.

  8. Understanding the North American Stock Markets Continuum NYSE • Senior listing standards NASDAQ • Disclosure rules • Junior listing standards OTCBB CNQ • Minimal/No listing standards OTC - Pink Sheets

  9. Market Comparison: TMX Group, AIM, NASDAQ Market Data for 2009 (C$) As at December 31, 2009 Source: TSX/TSXV Market Intelligence Group, AIM and Nasdaq Websites, WFE, Capital IQ

  10. TMX Group Serves Companies at all Stages of Growth Market capitalization Toronto Stock Exchange and TSX Venture Exchange Unique feeder system As at December 31, 2009 451 graduates + 73 M&A* 512 Issuers 478 Issuers 15 Issuers 2036 Issuers 472 Issuers 127 *From January 1, 2000 – December 31, 2009 Toronto Stock Exchange issuer base: 1,462 issuers, ~$1.8 trillion market cap TSX Venture Exchange issuer base (excludes NEX): 2,178 issuers, ~$35.8 billion market cap

  11. 25 International Brokers including Barclays Capital Citigroup CSFB Deutsche Bank Goldman Sachs HSBC JP Morgan Macquarie Capital Markets Merrill Lynch Morgan Stanley Raymond James Thomas Weisel State Street UBS 80 Canadian Brokers including: BMO Nesbitt Burns Canaccord CIBC World Markets GMP Securities RBC DS Scotia Capital Markets TD Securities National Bank Financial International Investment Community Tradeson Toronto Stock Exchange TSX Average Daily Volume (Millions of Shares Traded) ~35% of TSX daily trading originates from International brokers for their institutional and retail clients

  12. Access to Capital: All time record year for financing on TSX despite global market challenges Equity Financing on Toronto Stock Exchange and TSX Venture Exchange 1997 to 2009 ($ Billions) *TSX Venture Exchange commenced operations on November 29 1999

  13. Canadian equity marketplace ideal for small to mid-cap IPOs Total IPOs in Canada and U.S. • Average amount raised during IPO (2009) • U.S. markets: US$396.8 million • TSX: US$69.5 million • TSX Venture: US$4.0 million Source: Hoovers IPO Central

  14. TSX and TSX Venture Exchange have shown consistent growth in liquidity TSX Venture Exchange Volume of Shares Traded Toronto Stock Exchange Volume of Shares Traded Billions of Shares Billions of Shares

  15. TMX Group Global Leadership Strengths 236 issuers 2nd in the world by number of companies 8 new listings in 2009 $0.698 B equity raised $46.9 B value traded Technology 136 issuers 7 new listings in 2009 $0.367 B equity raised $6.6 B value traded 3640 issuers 302 new listings in 2009 $64.9 B equity raised Average Financing: TSX $73.7 M TSXV $2.2 M Life Sciences 123 issuers 11 new listings in 2009 $1.8 B equity raised $6.5 B value traded Clean Technology All data is as of or YTD Dec. 31, 2009. All amounts are in Canadian dollars.

  16. Diversified Industries Sector includesa broad range of companies 1038 issuers $940 B Market Cap 81 new listings in 2009 $27.5 B equity raised Number of Companies by Diversified Industries Sector

  17. Advantages of Listing on TSX and TSX Venture • Canada is the market of choice for SME companies • Diverse cross-section of listed companies in a variety of sectors • Sustained access to capital – steady growth of capital investment over past 5 years • Access to US capital without the higher cost of regulatory compliance • Ease of access to US market with Multijurisdictional program • Companies have recognized the benefits of listing or interlisting on TSX such as analyst coverage, access to institutional and retail investors, liquidity and an active secondary financing market • Strong trading liquidity – value traded has more than doubled over the past 5 years • Lower trading impact costs on TSX • Strong equity culture – 50% of Canadians hold equities • Analyst coverage typically seen at an earlier stage • Canadian regulatory commissions and exchanges are customer-focused • Standards-based exchanges that promote integrity for public SMEs • Access to specialized products for TSX/TSXV listing (eg. Capital Pool Company Program) • TSX provides listed companies unparalleled product and service support

  18. Going Public in Canada David Wismer Managing Director & Head of Technology Investment and Corporate Banking BMO Capital Markets

  19. Market Analysis 5 Year Index Performance Composition of Canadian IPO’s – Last 5 Years By Value By Number Source: Bloomberg Source: BMO Capital Markets TSX has outperformed major global indices over past 5 years; IPO activity focused on Mining and Energy sectors

  20. TSX Equity Issuance Breakdown IPO vs. Follow-on Offerings ($ Value) (1) • 3,310 transactions in past 5 years raising over $226 billion • 3,639 transactions including structured products raising over $248 billion • 223 IPOs completed in past 5 years raising over $21 billion (excluding structured products) 1. Excludes structured products. Bought vs. Marketed ($ Value) (1) Type of Security ($ Value) Source: BMO Capital Markets Note: Transactions from 2005-Present 1. Excludes structured products 1. Includes Flow-Through Shares. TSX provides issuers with access to various types of capital post-IPO; Follow-on bought deals provide issuers with pricing and execution certainty

  21. Overview of Market Participants in Canadian Equity Capital Markets 2009 Market Share (based on $ volume, new equity and equity-linked issuances) Canadian bank-owned dealers have significant market share

  22. Key IPO Considerations • Investment Thesis • Comparables • Price • IPO Discount • Market tone generally • Flow of funds • Perception of sector • IPO activity and after-market performance Market Environment Valuation DEMAND • Offering size • Use of proceeds • Treasury vs. secondary • Governance • Capitalization • Lock-ups • U.S. and / or Canada • SEC-registered vs. 144A • Listing venue(s) • Distribution strategy • Syndicate structure Investor Base Structure Success of offering dependent on a balance of several factors

  23. IPO Sizing Considerations IPO - Size of Offerings – TSX Issuers (1) • Issuers requires sufficient public float to: • provide appropriate share trading liquidity • maximize demand on the offering by appealing to largest group of investors • attract research analyst coverage • optimize valuation • Treasury versus secondary components to consider • Average IPO size on TSX over past 5 years is ~$95 million while median is ~$60 million(1) • Most IPOs sell approximately 25% to 50% of their market capitalization IPO Size as Percentage of Market Capitalization – TSX Issuers (1) Source: Dealogic 1. IPOs with market capitalization between $50MM – 1.0Bln, from 2005 - Present Appropriate IPO sizing required to successfully launch offering

  24. Listing Considerations Issues Conclusion Considerations • Short and defined regulatory review process (~3 months) • Access to U.S. investors via private placements with qualified institutional buyers (governed by SEC Rule 144A) • Qualified issuers can use Multijurisdictional Disclosure System for future offerings; allows Canadian issuers to avoid SEC filings by using existing Canadian public disclosure documents to issue securities to the public in the U.S. • Quick on-going access to capital via bought deals • Expenses: ~US$1.0 - 2.0MM (excluding underwriting fees) • Limited access to U.S. investor base due to SEC Rule 144A • Greater exposure and coverage following IPO for small and mid-cap issuers • A viable alternative given timing, cost and size considerations TSX Listing • Optimizes North American demand • Maximizes research coverage • Expenses: ~US$2.5 - 3.0MM (excluding underwriting fees) • Cumbersome and lengthy SEC regulatory process (approximately12-14 weeks once filed) • SOX compliance • Cost of managing and coordinating two listings • Incremental benefits of dual listing but with additional costs and uncertain timetable • Issuer has to be sufficiently large to justify dual listing Dual-ListedCross-Border Offering Choice of listing will depend on numerous variables and considerations

  25. Indicative Distribution Strategy Distribution Strategy Allocation • Marketed to all major investors in North America, and key European investors • Allocation of shares based on quality of orders • Generate maximum institutional and retail demand through focused, comprehensive marketing schedule • Comprehensive coverage through coordinated marketing by bookrunners • Position IPO’s as a compelling investment opportunity and differentiate from comparable public companies • Build deal tension to maximize demand Institutional Investors: • Approximately 80%-90% of offering • Institutions form the foundation of demand and will drive pricing • North American geographic concentration Retail Investors: • Approximately 10%-20% of offering • Generate secondary market trading and liquidity, creating positive pricing tension 4 - 5 days 3 - 4 days (if desired) 4 - 5 days TSX IPO’s are marketed internationally, shares allocated seamlessly based on quality of demand

  26. Key Investors in Canadian Technology Companies Note: Canadian technology companies includes 20-20 Technologies, Aastra Technologies, Absolute Software, Axia NetMedia, Ballard Power Systems, Bridgewater Systems, CAE, CalianTechnologies, Celestica, CGI, COM DEV, Computer Modelling Group, Constellation Software, Cortex Business Solutions, Descartes Systems Group, DragonWave, Dynex Power, Electrovaya, Enghouse Systems, Evertz Technologies, EXFO, Fluid Music, Gennum, GuestLogix, Intermap Technologies, Macdonald Dettwiler & Associates, March Networks, Mediagrif Interactive Technologies, Miranda Technologies, MKS, MOSAID Technologies, Open Text, Peer 1 Network Enterprises, PNI Digital Media, Pure Technologies, Redknee Solutions, Research In Motion, RuggedCom, Sandvine, SENSIO Technologies, Sierra Wireless, SXC Health Solutions, Tranzeo Wireless Technologies, Vecima Networks, Webtech Wireless, Wi-LAN and Zarlink Semiconductor Source: Thomson, Capital IQ A global investor base, led by U.S. institutions

  27. Accessing Nasdaq Subsequent to a TSX IPO Select Share Price Performance – 5-Years Post Listing 1. Share price performance is from time of listing to June 15, 2010. Several successful companies have gone public on the TSX and subsequently listed on Nasdaq

  28. Research Analyst Coverage on the TSX Average Number of Analysts - TSX Source: Bloomberg TSX-listed companies enjoy strong research coverage, irrespective of company size

  29. The IPO Process and Regulatory Regime Jeff Singer Partner Stikeman Elliott

  30. The Decision To Go Public • Typically common equity capital at more attractive multiples than private equity • Liquidity for existing shareholders • Improved opportunities for future equity financings • Equity represents liquid acquisition currency • Broader opportunities for management equity incentive arrangements • Enhanced public profile

  31. Methods for Going Public on Toronto Stock Exchange or TSX Venture Exchange

  32. Securities Regulation in Canada • Regulation matter of provincial and territorial jurisdiction, although highly harmonized • Securities Acts & Regulations • National Policies • National Instruments • Multilateral Policies & Instruments • Ability for Israeli company to choose "principal regulator" • Passport System • Offerings in Quebec may be subject to certain additional requirements, most notably French translation of offering documents

  33. Offering Process

  34. The IPO Process InvestmentDealerEngagement File PreliminaryProspectus Pricing & FileFinal Prospectus Deliver Funds Week 0 Week 6 Week 10 Week 12 CompanyPreparation PublicCompany Preparation Marketing Closing • Prepare prospectus • Due diligence • Tax/structuring • Financial statement preparation and analysis • Capital structure • Prepare marketing materials • Syndication • Roadshow • Prepare underwriting agreement • Settle comments with Securities Commissions • TSX conditional listing • Sign underwriting agreement • Finalize legal documents • Transfer of funds Process can be as fast as 12 – 13 weeksLargely depends on level of preparedness of issuer

  35. The Prospectus • Principal disclosure document • Must contain all material information concerning the business and securities offered • Financial information • Audited financial statements • 2 years of balance sheets • 3 years of income statements, statements of retained earnings and statements of changes in financial position • Stub period unaudited interim financial statements • Management's Discussion & Analysis • Significant Acquisition Disclosure

  36. On-going Disclosure Obligations • Financial Reporting • Annual audited financial statements (90 days TSX / 120 days TSXV) • Interim unaudited financial statements (45 days TSX / 60 days TSXV) • Management's discussion and analysis (MD&A) • CEO / CFO certification • Audit committee disclosure • Annual Information Forms • Annual Meetings, Management Proxy Circulars & Corporate Governance Disclosure • Material Change Reports • Business Acquisition Reports • Documents Affecting Rights of Securityholders • Material Contracts • TSX Filings

  37. QUESTIONS & ANSWERS Jeffrey Singer, Partner Stikeman Elliott LLP Tel: +1 416 869 5656   jsinger@stikeman.com David Wismer, Managing Director BMO Capital Markets Corp. Tel: +1 416 359 8088   david.wismer@bmo.com Raymond King, Senior Manager TMX Group Inc. Tel: +1 416 947 4675   raymond.king@tsx.com

  38. Appendix

  39. TSX Original Listing Requirements Source: Stikeman Elliot LLP, “Going Public in Canada: Issues and Considerations Associated with an Initial Public Offering,” June 2009

  40. IPO Treasury vs. Secondary Mix Select Canadian Technology IPOs – Treasury/Secondary Select US IPOs – Treasury/Secondary Meaningful amount of secondary offering possible to increase float / liquidity for investors

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