EXHIBIT 2.1
ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT dated as of July 26, 0000,
X X X X X X X:
RADISYS CANADA INC., a corporation incorporated under the laws of Canada
(the "PURCHASER")
- and -
CONVEDIA CORPORATION, a corporation incorporated under the laws of Canada
(the "COMPANY")
- and -
RADISYS CORPORATION, a corporation incorporated under the laws of Oregon
(the "PARENT")
WHEREAS the Parent, the Purchaser and the Company wish to propose a
transaction involving themselves and the holders of all the issued and
outstanding shares in the capital of the Company and all Company Options by way
of the Plan of Arrangement under the provisions of the Canada Business
Corporations Act (the "ARRANGEMENT").
AND WHEREAS contemporaneously with the execution and delivery of this
Agreement, the principal Company Securityholders, representing not less than (i)
75% of the issued and outstanding Common Shares and Common Shares issuable upon
exercise of the Company Options (on an as-if exercised basis), and (ii) not less
than 95% of the issued and outstanding Preference Shares in the capital of the
Company have each entered into a voting agreement with the Purchaser and the
Parent each in a form acceptable to the Parent and the Purchaser (collectively,
the "VOTING AGREEMENTS") evidencing, among other things, their agreement to vote
their shares in favour of the Arrangement and the transactions contemplated
hereby.
AND WHEREAS contemporaneously with the execution and delivery of this
Agreement, the Company, the Purchaser, the Parent, Computershare Trust Company
of Canada, as escrow agent, Computershare Investor Services Inc., as depositary,
and the Representative (as defined herein) have entered into an indemnification
and escrow agreement (the "INDEMNIFICATION AND ESCROW AGREEMENT"), and, pursuant
to the operation of the Plan of Arrangement, each of the Company Securityholders
will become a party thereto effective at the Effective Time. The Indemnification
and Escrow Agreement is attached hereto as Schedule A.
AND WHEREAS contemporaneously with and as a condition of Closing, each of
the individuals set forth on Schedule B attached hereto shall be required to
enter into an employment agreement in a form acceptable to the Purchaser and the
Parent (collectively, the "KEY EMPLOYEE AGREEMENTS").
AND WHEREAS the Parties have entered into this Agreement to provide for
the matters referred to in the foregoing recitals and for certain other matters
relating to the Arrangement.
NOW, THEREFORE, intending to be legally bound and in consideration of the
mutual provisions set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Agreement:
"ACCOUNTS RECEIVABLE" means all accounts receivable, bills receivable,
trade accounts, book debts and insurance claims due to the Acquired
Companies, or any of them, resulting from the sale of goods or services in
the ordinary course of business of the Acquired Companies and recorded as
receivable on the books of the Acquired Companies, or any of them, as the
case may be, and any refunds and rebates receivable and GST Receivable,
but excluding any accounts receivable, bills receivable, trade accounts,
book debts and insurance claims resulting from the sale of goods and
services not in the ordinary course of business of the Acquired Companies.
"ACQUIRED COMPANIES" means, collectively, the Company and its
Subsidiaries, and each an "ACQUIRED COMPANY".
"ACQUISITION PROPOSAL" means, any proposal or offer (written or oral)
relating to any merger, consolidation, amalgamation, take-over bid, tender
offer, arrangement, recapitalization, liquidation, dissolution, share
exchange, sale of assets representing 20% or more of the assets or
generating 20% or more of the revenue or income of the Company and its
Subsidiaries, taken as a whole (or any lease, license, joint venture,
long-term supply agreement or other arrangement having the same economic
effect as a sale of assets representing 20% or more of the assets or
generating 20% or more of the revenue or income of the Company and its
Subsidiaries, taken as a whole), any purchase or sale of shares or other
securities of the Company or any of its Subsidiaries or rights or
interests therein or thereto representing 20% or more of the voting power
of the capital of the Company or any of its Subsidiaries or which upon the
exercise or exchange of any convertible or exchangeable securities or the
exercise of any option, right or warrant to acquire voting securities
would represent 20% or more of the voting power of the capital of the
Company or any of its Subsidiaries, or similar transactions involving the
Company and/or such Subsidiaries, including a tender or exchange offer,
excluding the Arrangement and the transactions contemplated by this
Agreement.
"AFFILIATE" has the meaning ascribed thereto in the Securities Act.
"AGGREGATE PREFERENCE AMOUNT" shall mean the product of the number of
Preference Shares issued and outstanding on the Closing Date multiplied by
the Per Share Preference Amount.
"AGREEMENT" means this Arrangement Agreement as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"ANCILLARY AGREEMENTS" means, collectively, the Indemnification and Escrow
Agreement and the Voting Agreements.
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"ARRANGEMENT" means an arrangement under section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 8.3 of this Agreement or Article 6 of the Plan of Arrangement or
made at the direction of the Court in the Final Order.
"ARRANGEMENT RESOLUTION" means the special resolution of the Company
Securityholders entitled to vote thereon approving the Plan of
Arrangement, substantially in the form attached as Schedule C to this
Agreement.
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of the Company
in respect of the Arrangement that are required by the CBCA to be sent to
the Director after the Final Order is made in order for the Arrangement to
become effective.
"AUDITED FINANCIAL STATEMENTS" means the audited consolidated financial
statements of the Company and its Subsidiaries for the fiscal years ended
March 31, 2005 and March 31, 2006, consisting of balance sheets and
statements of loss, changes in shareholders' equity and cash flows and all
notes thereto as reported on by the auditors of the Company.
"BALANCE SHEET" means the balance sheet of the Company as at June 30,
2006, forming part of the Financial Statements.
"BUSINESS" means the business of the Acquired Companies as is currently
conducted and as is currently proposed to be conducted, including without
limitation, the development and sale of VoIP and IMS compliant IP media
processing products and technologies.
"BUSINESS DAY" means a day of the year in which banks are not required or
authorized to be closed in the City of Portland, Oregon or the City of
Vancouver, British Columbia.
"CANADIAN TAX ACT" means the Income Tax Act (Canada), as amended, and the
regulations promulgated thereunder.
"CBCA" means the Canada Business Corporations Act, as amended, and the
regulations made thereunder, as promulgated or amended from time to time.
"CERTIFICATE" means the certificate of arrangement giving effect to the
Arrangement, issued pursuant to subsection 192(7) of the CBCA upon the
Articles of Arrangement having been received by the Director.
"CIRCULAR" means the notice of the Company Meeting and accompanying
management information circular of the Company, including all appendices
thereto, to be sent to Company Securityholders entitled to receive the
same in connection with the Company Meeting.
"CLASS A COMMON SHARES" means the Class A Voting Common Shares of the
Company.
"CLASS B COMMON SHARES" means the Class B Non-Voting Common Shares of the
Company.
"CLOSING" is defined in Section 2.3.
"CLOSING DATE" is defined in Section 2.3.
"CLOSING DATE TRANSACTION EXPENSES" is defined in the Plan or Arrangement.
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"CODE" means the U.S. Internal Revenue Code of 1986.
"COMMERCIALIZE" or "COMMERCIALIZATION" means to make and have made, use,
copy, reproduce, sell, import, export, offer for sale and license.
"COMMON SHARES" means, collectively, the Class A Common Shares and the
Class B Common Shares.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule delivered
pursuant to Article 3 by the Company to the Purchaser and the Parent
concurrently with the execution and delivery of this Agreement and which
is attached to this Agreement as Schedule D.
"COMPANY INDEMNIFIED PARTIES" is defined in Section 7.6(a).
"COMPANY IP" means the Owned IP and the Licensed IP.
"COMPANY MATERIAL ADVERSE EFFECT" means any material adverse change,
event, circumstance or development with respect to, or material adverse
effect on, the business, assets, properties, condition (financial or
otherwise), results of operations of the Acquired Companies, taken as a
whole, that has occurred; provided, however, that the following shall not
be taken into account in determining whether there has been a Company
Material Adverse Effect: (i) any adverse change, effect, event or
circumstance relating to general economic conditions in North America,
Europe or Asia; (ii) any adverse change, effect, event or circumstance
relating to conditions generally affecting the industry in which the
Acquired Companies, or any of them, operate, and not affecting them in a
disproportionate manner; (iii) any adverse change, effect, event or
circumstance resulting from taking an action required by this Agreement;
(iv) the termination of any Contract listed on Section 3.14(a) of the
Company Disclosure Schedule by a customer of any of the Acquired Companies
solely due to the announcement or pendency of the transactions
contemplated by this Agreement; or (v) any adverse change, effect, event
or circumstance caused by or resulting from any actions taken by the
Purchaser or the Parent with respect to the Business or the Acquired
Companies on or after the Effective Date.
"COMPANY MEETING" means the special meeting of the Company
Securityholders, including any adjournment or postponement thereof, to be
called and held in accordance with the Interim Order to consider the
Arrangement Resolution.
"COMPANY OPTIONS" means all options to purchase Class A Common Shares
granted under the Company Stock Option Plan.
"COMPANY PLANS" means all health, welfare, dental, legal, disability,
hospitalization or other medical benefits, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement, and each other employee benefit
plan, program, policy, practice, agreement or arrangement, (whether oral
or written, formal or informal, funded or unfunded, insured or
self-insured, registered or unregistered, contractual or statutory)
sponsored, maintained or contributed to or required to be contributed to
by the Acquired Companies or to which an Acquired Company is a party or by
which an Acquired Company is bound or which have any application to or are
for the benefit of any of any Acquired Company's current or former
employees, directors or consultants including, without limitation, any
employee benefit plan for the benefit of any current or former director,
officer, employee or consultant of any Acquired Company, or with respect
to which any Acquired Company has or
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may have any Liability, including any Pension Plan, any Multiemployer Plan
and any other written or oral plan, Contract or arrangement involving
direct or indirect compensation or benefits to directors, officers,
employees or consultants of the Acquired Companies generally, including
insurance coverage, termination notice, severance or other termination pay
or benefits, change in control, retention, performance, holiday pay,
vacation pay, fringe benefits, disability benefits, pension, retirement
plans, profit sharing, deferred compensation, bonuses, incentive
compensation, stock options, share purchase, restricted share or share
units, phantom shares, share appreciation or other forms of incentive
compensation or post-retirement compensation, maintained or contributed to
by any Acquired Company (or that has been maintained or contributed to in
the last four years by any Acquired Company) for the benefit of any
current or former director, officer, employee or consultant of any
Acquired Company, or with respect to which any Acquired Company has or may
have any Liability.
"COMPANY SECURITYHOLDERS" means, collectively, the holders of all Shares
and the holders of all options to purchase Class A Common Shares granted
under the Company Stock Option Plan.
"COMPANY SHAREHOLDERS" means, collectively, the holders of all issued and
outstanding Shares.
"COMPANY STOCK OPTION PLAN" means the Convedia Corporation Stock Option
Plan dated September 17, 2001, as amended.
"COMPANY TECHNOLOGY" means the Owned Technology and the Licensed
Technology.
"CONFIDENTIALITY AGREEMENT" is defined in Section 5.8.
"CONTRACT" means any contract, agreement, lease, license, commitment,
understanding, franchise, warranty, guaranty, mortgage, note, bond,
option, warrant, right or other instrument or consensual obligation
(whether written or oral) to which the Acquired Companies, or any of them,
is a party or which is legally binding on the Acquired Companies, or any
of them.
"CORE TECHNOLOGY" means the products listed in Schedule E including all
versions thereof.
"COSTS" is defined in Section 7.6(a).
"COURT" means the Supreme Court of British Columbia.
"CRA" means Canada Revenue Agency.
"DEPOSITARY" means Computershare Investor Services Inc., in its capacity
as depositary under the Indemnification and Escrow Agreement, or such
other Person as is appointed to act as depositary in accordance with and
for purposes of the Indemnification and Escrow Agreement.
"DERIVATIVE WORK" means, in respect of any prior work, a work that
incorporates or reproduces the prior work or any substantial part thereof,
including without limitation a translation of the prior work.
"DEVELOPERS" is defined in Section 3.13(o).
"DIRECTOR" means the Director appointed pursuant to section 260 of the
CBCA.
"EFFECTIVE DATE" means the date shown on the Certificate.
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"EFFECTIVE TIME" is defined in the Plan of Arrangement.
"ENCRYPTION FUNCTIONALITY" is defined in Section 3.13(ii).
"ENCUMBRANCE" means pledges, liens, charges, security interests, leases,
title retention agreements, mortgages, restrictions, development or
similar agreements, title defects, options, rights of first offer or
rights of first refusal, adverse claims, restrictive covenants, joint use
agreements, demands and equities of any kind or nature whatsoever or
howsoever arising and any rights or privileges capable of becoming any of
the foregoing.
"ENVIRONMENT" means the natural environment (including, soil, land surface
or subsurface strata, surface waters, groundwater, sediment, ambient air
(including all layers of the atmosphere)), organic and inorganic matter
and living organisms, and any other environmental medium or natural
resource and all sewer systems.
"ENVIRONMENTAL LAWS" means all applicable Laws relating to public health
and safety, noise control, pollution or the protection of the Environment
or to the generation, production, installation, use, storage, treatment,
transportation, Release or threatened Release of Hazardous Materials,
including civil responsibility for acts or omissions with respect to the
Environment, and all Governmental Authorizations issued pursuant to such
Laws.
"EXERCISE PRICE" means the applicable option exercise price in respect of
an option to purchase Class A Common Shares granted under the Company
Stock Option Plan.
"FAIRNESS OPINION" means a written opinion of the Financial Advisor to the
board of directors of the Company relating to the consideration to be paid
to the holders of Common Shares under the Arrangement being fair from a
financial point of view.
"FINAL CONSIDERATION" is defined in the Plan of Arrangement.
"FINAL ORDER" means the final order of the Court approving the
Arrangement, as such order may be amended by the Court at any time prior
to the Effective Date or, if appealed, then, unless such appeal is
withdrawn or denied, as affirmed or amended on appeal.
"FINANCIAL ADVISOR" means Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated.
"FINANCIAL STATEMENTS" means, collectively, the Audited Financial
Statements and the Unaudited Financial Statements.
"FUNDED DEBT" is defined in the Plan of Arrangement.
"GOVERNMENTAL AUTHORITY" means:
(a) any multinational, federal, provincial, state, regional, municipal,
local or other government, governmental or public department,
ministry, central bank, court, tribunal, arbitral body, commission,
board, bureau or agency, domestic or foreign;
(b) any subdivision, agent or authority of any of the foregoing; or
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(c) any quasi-governmental or private body, including any tribunal,
commission, regulatory agency or self-regulatory organization,
exercising any regulatory, expropriation or taxing authority under
or for the account of any of the foregoing.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, ratification,
waiver, license, permit, registration or other authorization issued,
granted, given or otherwise made available by or under the authority of
any Governmental Authority or pursuant to any Law.
"GST" means the goods and services tax payable pursuant to Part IX of the
Excise Tax Act (Canada) R.S. 1985, C.E-15, as amended.
"GST RECEIVABLE" means any refunds of GST recorded as receivable in the
books of the Company, excluding any refunds that are being disputed or
questioned by any applicable taxation authorities or any refunds that have
been outstanding for more than 120 days.
"HAZARDOUS MATERIAL" means any substance or material that is prohibited,
controlled or regulated by any Governmental Authority pursuant to
Environmental Laws, including pollutants, contaminants, dangerous goods or
substances, toxic, deleterious or hazardous substances or materials,
wastes (including solid non hazardous wastes and subject wastes),
petroleum and its derivatives and by products and other hydrocarbons, all
as regulated under, governed by or defined in or pursuant to any
Environmental Law.
"INFORMATION" is defined in the Confidentiality Agreement.
"INITIAL CONSIDERATION" is defined in the Plan of Arrangement.
"INTELLECTUAL PROPERTY RIGHTS" means:
(d) any and all worldwide proprietary rights provided under:
(i) patent Law;
(ii) copyright Law;
(iii) trade xxxx Law;
(iv) design patent or industrial design Law;
(v) semi-conductor chip or mask work Law; or
(vi) any other applicable statutory provision or common Law
principle, including trade secret law, that may provide a
right in ideas, formulae, algorithms, concepts, inventions
(whether patentable or not), works, or know-how, or the
expression or use thereof, and including all past, present,
and future causes of action, rights of recovery, and claims
for damage, accounting for profits, royalties, or other relief
relating, referring, or pertaining to any of the foregoing;
and
(e) any and all applications, registrations, licenses, sublicenses,
agreements, or any other evidence of a right in any of the
foregoing.
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"INTERIM ORDER" means the interim order of the Court, as the same may be
amended by the Court (with the consent of the Company, the Purchaser and
the Parent, each acting reasonably), in respect of the Arrangement, as
contemplated by Section 2.2.
"JUDGMENT" means any order, injunction, judgment, decree, ruling or
assessment or arbitration award of any Governmental Authority or
arbitrator.
"KNOWLEDGE" is defined in Section 1.4.
"LAW" means all laws (including common law), by-laws, statutes, rules,
regulations, principles of law and equity, orders, rulings, ordinances,
judgments, injunctions, determinations, awards, decrees or other
requirements, whether domestic or foreign, and the terms and conditions of
any grant of approval, permission, authority or license of any
Governmental Authority or self-regulatory authority, and the term
"APPLICABLE" with respect to such Laws and in a context that refers to one
or more Persons, means such Laws as are applicable to such Person or
Persons or such Person or Persons business, undertaking, property or
securities and emanate from a Governmental Authority or self-regulatory
authority having jurisdiction over such Person or Persons or such Person
or Persons business, undertaking, property or securities.
"LEASED REAL PROPERTY" is defined in Section 3.12(b).
"LIABILITY" means liabilities, debts or other financial obligations of any
nature, whether absolute, accrued, contingent, liquidated, unliquidated or
otherwise, due or to become due or otherwise, and whether or not required
to be reflected on a balance sheet prepared in accordance with U.S. GAAP.
"LICENSED IP" means all Intellectual Property Rights, other than Owned IP,
that are either used in the Business or licensed to any of the Acquired
Companies.
"LICENSED TECHNOLOGY" means all Technology, other than Owned Technology,
that is either used in the Business or licensed to any of the Acquired
Companies.
"LOSS" means any loss, damage, fine, penalty, expense (including
reasonable attorneys' or other professional fees and expenses and court
costs), injury, diminution of value, Liability, Tax, Encumbrance or other
cost, expense or adverse effect whatsoever, whether or not involving a
third party claim, Proceeding or Judgment.
"MANAGEMENT PLAN" means the amended management plan of the Company dated
July 24, 2006 (8:34am)
"MAXIMUM PREMIUM" is defined in Section 7.6(b).
"MULTIEMPLOYER PLAN" means a plan (i) to which more than one employer is
required to contribute, and (ii) which is maintained pursuant to one or
more collective bargaining or other agreements between one or more
employee organizations and more than one employer.
"NET WORKING CAPITAL" means the value of (i) the total assets (excluding
plant and equipment), minus (ii) total liabilities (excluding items to the
extent included in Funded Debt, and excluding any liabilities relating to
the treatment of Preference Shares under U.S. GAAP) as the terms "total
assets" and "total liabilities" are used in the Balance Sheet and as are
determined in accordance
8
with U.S. GAAP applied on a basis consistent with the Financial Statements
and in a manner consistent with the preparation of the Balance Sheet in
each case calculated as of the close of business on the Closing Date.
"NON-RESIDENT HOLDER" is defined in Section 9.5.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Law designed to provide
safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (such
as those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"OPEN SOURCE MATERIALS" means software or other material:
(f) that is distributed as "free software", "open source software" or
under a similar licensing or distribution model (including but not
limited to the GNU General Public License (GPL), GNU Lesser General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses,
the Artistic License, the Netscape Public License, the Sun Community
Source License (SCSL), the Sun Industry Standards License (SISL) and
the Apache License); or
(g) that require that Software incorporated into, derived from or
distributed with such material be:
(i) disclosed or distributed in source code form;
(ii) be licensed for the purpose of making Derivative Works;
(iii) be redistributable at no charge; or
(iv) distributed in a manner so as to permit reverse engineering or
other access to the Source Code of Software.
"OWNED IP" means all Intellectual Property Rights owned by any of the
Acquired Companies.
"OWNED TECHNOLOGY" means all Technology owned by any of the Acquired
Companies.
"PARTIES" means the Company, the Purchaser and the Parent, and "PARTY"
means any one of them.
"PENSION PLAN" means all plans, arrangements, agreements, programs,
policies or practices (whether oral or written, formal or informal, funded
or unfunded, insured or self-insured, registered or unregistered) to which
an Acquired Company is a party or by which an Acquired Company is bound or
under which an Acquired Company has any liability or contingent liability
or which have any application to an Acquired Company's employees
(including all current, retired and former directors, officers, employees,
individuals working on contract with the Corporation or other individuals
providing services to the Corporation of a kind normally provided by
employees) or their dependants or beneficiaries and consisting of or
relating to, as the case may be, any one or more retirement savings or
pensions, including any defined benefit
9
pension plan, defined contribution pension plan, group registered
retirement savings plan, or supplemental pension or retirement plan.
"PERMITTED ENCUMBRANCES" means:
(a) easements, rights of way, servitude, and similar rights in land for
sewers, drains, gas and oil pipelines, gas and water mains,
telephone or cable television conduits;
(b) rights reserved to or vested in any Governmental Authority by the
term of any lease, licence, franchise, grant or permit pursuant to
applicable Laws;
(c) the right of any Governmental Authority to levy Taxes;
(d) liens for Taxes, assessments or governmental charges that are not
due and are in respect of Taxes;
(e) liens incurred, created and granted in the ordinary course of
business to a public utility, municipality or Governmental Authority
in connection with the Business or the operations of the Acquired
Companies;
(f) rights of lessors under leases in respect of office equipment and
other minor equipment entered into in the ordinary course of
business; and
(g) any privilege in favour of any lessor, licensor or permitter for
rent to become due or for other obligations or acts, the performance
of which is required under Contracts so long as the payment of such
or the performance of such other obligation or act is not delinquent
as at the Effective Date and provided that such liens or privileges
do not cause a Company Material Adverse Effect.
"PER SHARE PREFERENCE AMOUNT" means $0.675 per Preference Share.
"PERSON" means any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company, unlimited liability company or joint stock company),
firm, enterprise, association, organization or any other entity, including
a Governmental Authority.
"PLAN OF ARRANGEMENT" means the plan of arrangement, substantially in the
form of Schedule F attached hereto, and any amendments or variations
thereto made in accordance with Section 8.3 of this Agreement or Article 6
of the Plan of Arrangement or made at the direction of the Court in the
Final Order.
"POST-CLOSING TRANSACTION EXPENSES" is defined in the Plan of Arrangement.
"PRE-CLOSING RETURNS" has the meaning ascribed thereto in Section 9.1(a).
"PREFERENCE SHARES" means the Series 1 Preference Shares of the Company.
"PROCEEDING" means any action, arbitration, claim, charge, audit,
examination, investigation, hearing, litigation or suit (whether civil,
criminal, administrative, judicial or investigative,
10
whether formal or informal, and whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator.
"PURCHASE PRICE" means the sum of the Initial Consideration, the Aggregate
Preference Amount and the Final Consideration, if any.
"PURCHASER DISCLOSURE SCHEDULE" means the disclosure schedule delivered
pursuant to Article 4 by the Purchaser and the Parent to the Company
concurrently with the execution and delivery of this Agreement, and which
is attached to this Agreement as Schedule G.
"REGULATORY APPROVALS" means those sanctions, rulings, consents, orders,
exemptions, permits, Government Authorizations and other approvals
(including the lapse, without objection, of a prescribed time under a
statute or regulation that states that a transaction may be implemented if
a prescribed time lapses following the giving of notice without an
objection being made) of Governmental Authorities required to consummate
the Plan of Arrangement and the transactions contemplated hereby and
thereby.
"RELEASE" has the meaning prescribed in any Environmental Law and includes
any sudden, intermittent or gradual release, spill, leak, pumping,
addition, pouring, emission, emptying, discharge, migration, injection,
escape, leaching, disposal, dumping, deposit, spraying, burial,
abandonment, incineration, seepage, placement or introduction of a
Hazardous Material, whether accidental or intentional, into the
Environment.
"REPRESENTATIVE" means Xxxxxx Xxxxxxx, the representative designated and
appointed as such by the Company Securityholders pursuant to the operation
of the Indemnification and Escrow Agreement.
"REQUIRED VOTE" is defined in Section 2.2(b).
"SECURITIES ACT" means the Securities Act (British Columbia) and the
rules, regulations and published policies made thereunder, as now in
effect and as they may be promulgated or amended from time to time.
"SECURITIES LAWS" means the Securities Act, all other applicable
provincial and United States federal and state securities Laws and
published policies made thereunder.
"SHARES" means, collectively, the issued and outstanding Common Shares and
Preference Shares.
"SOFTWARE" means any computer program, operating system, applications
system, firmware, software, including all object code, source code,
program files, data files, computer related data, field and data
definitions and relationships, data definition specifications, data
models, databases, program and system logic, interfaces, program modules,
routines, sub-routines, algorithms, program architecture, design concepts,
system designs, program structure, sequence and organization, screen
displays and report layouts, whether in machine-readable form, programming
language or any other language or symbols, and whether stored, encoded,
recorded or written on disk, tape, film, memory, device, paper or other
media of any nature.
"SOURCE CODE" means the human-readable form of a computer instruction,
including related system documentation, applicable comments and procedural
codes such as job control language.
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"SOURCE MATERIALS" means, in relation to items of Software, supporting
materials that would enable a reasonably skilled programmer to compile,
debug and support and/or make improvements to such Software in a
commercially reasonable manner including:
(a) any Source Code related thereto, reasonably annotated;
(b) technical and system documentation including detailed design,
functional, operational, and technical documentation, flow charts,
diagrams, file layouts, report layouts, screen layouts, business
rules, data and database models and structures, working papers and
reasonably related notes and memoranda in electronic or written
format, which were made or obtained in relation to the design and
development of such Software and compilation instructions related to
such Software;
(c) listing by name, version and vendor of relevant third Persons'
compilers, utilities and other Software that are necessary for
normal operation of such Software to which the Source Materials
related including sufficient information to procure a license from
such vendors;
(d) a reasonably detailed listing of relevant equipment and information
necessary for normal operation of such Software; and
(e) all other information reasonably necessary to rebuild, install, and
otherwise implement the Software in the context of the applicable
system(s) including, without limitation, all relevant tools,
programs, files, encryptions keys, make files, installation
instructions, systems settings, and database settings.
"SUBSIDIARY" means, with respect to a specified Person, any corporation or
other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person
(other than securities or other interests having such power only upon the
happening of a contingency that has not occurred) are held by the
specified Person or one or more of its Subsidiaries. When used in this
Agreement without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"TAX" or "TAXES" means:
(a) any federal, provincial, state, local, foreign and other tax,
charge, fee, duty (including customs duty), levy or assessment,
including any income, gross receipts, net proceeds, alternative or
add-on minimum, corporation, ad valorem, turnover, real and personal
property (tangible and intangible), sales, goods and services,
alternative or add-on minimum taxes, use, franchise, excise, value
added, stamp, leasing, lease, user, transfer, fuel, excess profits,
profits, escheat, occupational, premium, interest equalization,
windfall profits, severance, license, registration, payroll,
environmental (including taxes under Section 59A of the Code), share
capital, capital duty, disability, estimated, gains, wealth,
welfare, withholding tax (including any withholding for employee's
income tax and other payroll deductions, and deductions and
withholdings of tax from payments to non-residents and other third
parties), Canada or Quebec Pension Plan premiums, workers
compensation premiums, employment insurance, unemployment and social
security or other tax of whatever kind (including any fee,
assessment and other charges in the nature of or in lieu of any tax)
that is imposed by any Governmental Authority;
12
(b) any interest, fines, penalties or additions resulting from,
attributable to, or incurred in connection with any items described
in this paragraph or any related contest or dispute; and
(c) any items described in this paragraph that are attributable to
another Person but that any Acquired Company is liable to pay by
Law, by Contract or otherwise, whether or not disputed.
"TAX RETURN" means any report, return, declaration, claim for refund, or
information return or statement related to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
"TECHNOLOGY" means:
(a) Software, Source Code and Source Materials;
(b) business names, trade names, domain names, trading styles, logos,
trade secrets, industrial designs and copyrights;
(c) inventions (whether patentable or not), formulae, product
formulations, processes and processing methods, technology and
techniques;
(d) know-how, trade secrets, research and technical data; and
(e) software, studies, findings, algorithms, instructions, guides,
manuals and designs.
"UNAUDITED FINANCIAL STATEMENTS" means the Balance Sheet and accompanying
statements of earnings, retained earnings and changes in financial
position, including any notes thereto, for the three (3) month period
ended June 30, 2006, a copy of which are attached as part of Section 3.5
of the Company Disclosure Schedule.
"U.S. GAAP" means generally accepted accounting principles for financial
reporting in the United States, as in effect as of the date of this
Agreement.
1.2 ADDITIONAL DEFINED TERMS.
For purposes of this Agreement and the Ancillary Agreements, the following
terms have the meanings specified in the indicated Section of this Agreement:
DEFINED TERM SECTION
------------------------------------ --------
Estimated Closing Balance Sheet 7.4
Estimated Net Working Capital 7.4(a)
Indemnification and Escrow Agreement Recitals
Key Employee Agreements Recitals
Post-Closing Tax Period 9.6
Pre-Closing Returns 9.1(a)
Pre-Closing Tax Period 9.6
Straddle Period 9.6
Unaudited Monthly Statements 5.11
Voting Agreements Recitals
13
1.3 CONSTRUCTION.
Any reference in this Agreement to an "Article," "Section" or "Schedule"
refers to the corresponding Article, Section or Schedule of or to this
Agreement, unless the context indicates otherwise. The table of contents and the
headings of Articles and Sections are provided for convenience only and are not
intended to affect the construction or interpretation of this Agreement. All
words used in this Agreement should be construed to be of such gender or number
as the circumstances require. Each reference to "Dollars" or "$" in this
Agreement refers to the lawful currency of the United States of America, except
as otherwise indicated. The term "including" means "including without
limitation" and is intended by way of example and not limitation. Any reference
to a statute refers to the statute, any amendments or successor legislation, and
all regulations promulgated under or implementing the statute, as in effect at
the relevant time. Any reference to a Contract or other document as of a given
date means the Contract or other document as amended, supplemented and modified
from time to time through such date.
1.4 KNOWLEDGE
(a) Any reference to the "KNOWLEDGE" of a Party other than the Company
or any of the Subsidiaries shall mean, unless otherwise specified,
the actual knowledge of such Party.
(b) Any reference to the "KNOWLEDGE" of the Company or any of the other
Acquired Companies shall mean to the actual knowledge of Xxxxx
Xxxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxxxx and Xxx Xx after a
reasonable enquiry by such individuals regarding the relevant
matter; provided that, for the purpose of Section 3.13 and the
representations and warranties made therein, any reference to the
Knowledge of the Company or any of the other Acquired Companies
shall be deemed to be a reference to the actual knowledge of Xxxxx
Xxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxx Xxxxxxx and Xxxxxxx
Xxxxxxxx, after reasonable enquiry by such individuals, but
expressly without the requirement on the part of any of such
individuals to conduct or cause to be conducted any availability,
freedom to use or infringement searches, or any other searches of
external sources beyond those that have already been conducted.
1.5 SCHEDULES
The following Schedules are annexed to this Agreement and are incorporated
by reference into this Agreement and form a part hereof:
Schedule A - Indemnification and Escrow Agreement
Schedule B - List of Key Employees
Schedule C - Arrangement Resolution
Schedule D - Company Disclosure Schedule
Schedule E - Products List - Core Technology
Schedule F - Plan of Arrangement
Schedule G - Purchaser Disclosure Schedule
Schedule H - Company Bring Down Certificate
Schedule I - Company Officer's Certificate Re: Transaction Expenses
Schedule J - Purchaser Bring Down Certificate
14
ARTICLE 2
THE ARRANGEMENT
2.1 IMPLEMENTATION STEPS BY THE COMPANY
The Company covenants in favour of the Purchaser and the Parent that the
Company shall:
(a) subject to the terms of this Agreement, as soon as reasonably
practicable apply in a manner reasonably acceptable to the Purchaser
and the Parent under section 192 of the CBCA for the Interim Order
and thereafter proceed with and diligently seek the Interim Order;
(b) subject to terms of this Agreement and in accordance with the
Interim Order, as promptly as practicable, and in no event later
than twenty (20) days after the Interim Order is issued, convene and
hold the Company Meeting for the purpose of considering the
Arrangement Resolution;
(c) subject to Section 7.1, not postpone or adjourn (other than a
postponement or adjournment not exceeding five Business Days) or
cancel the Company Meeting without the Purchaser's prior written
consent except as required for quorum purposes, to comply with
requirements of applicable Law or imposed by the Court or by the
Company Securityholders;
(d) subject to compliance with fiduciary duties and obtaining such
approvals as are required by the Interim Order (including the
approval of the Arrangement Resolution by the Required Vote),
proceed with and diligently pursue the application to the Court for
the Final Order;
(e) subject to obtaining the Final Order and in accordance with Section
2.3, send to the Director, for endorsement and filing by the
Director, the Articles of Arrangement and such other documents as
may be required in connection therewith under the CBCA to give
effect to the Arrangement;
(f) instruct counsel acting for it to bring the applications and make
the filings referred to in this Article 2 in co-operation with
counsel to the Purchaser; and
(g) not file any material with the Court in connection with the
Arrangement or serve any such material, and not agree to modify or
amend materials so filed or served, except as contemplated hereby or
with the prior written consent of the Purchaser, such consent not to
be unreasonably withheld or delayed.
2.2 INTERIM AND FINAL ORDERS
The notice of motion for the application referred to in Section 2.1(a)
shall request that the Interim Order provide, among other things as consented to
by the Purchaser:
(a) for the class of persons to whom notice is to be provided in respect
of the Arrangement and the Company Meeting and for the manner in
which such notice is to be provided;
15
(b) that, subject to the approval of the Court, the requisite approval
for the Arrangement Resolution shall be (1) 66?% of the votes cast
on the Arrangement Resolution by holders of Preference Shares
present in person or represented by proxy at the Company Meeting;
and (2) 66?% of the votes cast on the Arrangement Resolution by
holders of Common Shares and the holders of all options to purchase
Class A Common Shares granted under the Company Stock Option Plan
(voting together as a single class) present in person or represented
by proxy at the Company Meeting on the following basis: (A) each
holder of Company Options is entitled to such number of votes as is
equal to the number of Common Shares issuable upon exercise of their
Company Options, and (B) each holder of Class A Common Shares is
entitled, for each Class A Common Share held, to one vote (such
approval described in this Section 2.2(b), the "REQUIRED VOTE");
(c) that the terms, restrictions and conditions of the by-laws and
articles of the Company, including quorum requirements and all other
matters, shall apply in respect of the Company Meeting;
(d) that dissent rights shall not be applicable in connection with the
Arrangement; and
(e) for the notice requirements with respect to the presentation of the
application to the Court for a Final Order.
and that the Final Order provide, among other things as consented to by the
Purchaser:
(f) that, at the Effective Time, each Company Securityholder shall be
deemed to be a party to and bound by the provisions set forth in the
Indemnification and Escrow Agreement; and
(g) that all rights to purchase Common Shares under any securities of
the Company (including the Company Options) shall be terminated.
2.3 ARTICLES OF ARRANGEMENT; CLOSING
The Articles of Arrangement shall implement the Plan of Arrangement.
Subject to the satisfaction or waiver of the conditions set forth in Article 6
hereof, on the Business Day immediately after the Final Order is obtained or
such other date as the parties may agree or as the Court may prescribe in the
Final Order (the "CLOSING DATE"), the Articles of Arrangement in the form and
executed as required under the CBCA shall be sent to the Director together with
documents required by sections 19 and 113 of the CBCA, if applicable, in a
manner and in compliance with the CBCA so as to cause the Director to issue the
Certificate.
At the Effective Time (i) each Share outstanding immediately prior to the
Effective Time will be transferred as provided in the Plan of Arrangement, (ii)
all Company Options outstanding immediately prior to the Effective Time will be
deemed to have expired and been terminated as provided in the Plan of
Arrangement, and (iii) the Arrangement will, from and after the Effective Time,
have all of the effects provided by applicable Laws, including the CBCA. The
closing of the transactions contemplated hereby and by the Arrangement will take
place at the Vancouver, British Columbia offices of XxXxxxxx Xxxxxxxx LLP on the
Closing Date (the "CLOSING").
16
2.4 CIRCULAR
Subject to compliance with Section 2.5, as promptly as reasonably
practicable after the execution and delivery of this Agreement, and in no event
later than ten (10) days after the date hereof, the Company shall complete the
Circular together with any other documents required by the CBCA, Securities Laws
or other applicable Laws in connection with the Company Meeting required to be
prepared by the Company, and as promptly as is reasonably practicable after the
execution and delivery of this Agreement and in no event later than five days
after the Interim Order is issued, the Company shall, unless otherwise agreed by
the Parties, cause the Circular and other documentation required in connection
with the Company Meeting to be sent to Company Securityholders and filed as
required by the Interim Order and applicable Laws. The Circular shall include
(i) the recommendation of the Company's board of directors that Company
Securityholders vote in favour of the Arrangement Resolution; and (ii) a copy of
the Fairness Opinion.
2.5 PREPARATION OF FILINGS
(a) The Parent, the Purchaser and the Company shall co-operate in the
preparation of any application for the Regulatory Approvals and any
other orders, registrations, consents, filings, rulings, exemptions,
no-action letters and approvals and the preparation of any documents
reasonably deemed by any of the Parties to be necessary to discharge
its respective obligations or otherwise advisable under applicable
Laws in connection with the Arrangement and this Agreement as
promptly as practicable hereafter.
(b) The Parent, the Purchaser and the Company shall co-operate in the
preparation, filing and mailing of the Circular. The Company shall
provide the Purchaser and the Parent with a reasonable opportunity,
and in no event less than three (3) days, to review and comment on
the Circular, including by providing on a timely basis any
information required to be supplied by the Purchaser and the Parent,
prior to its mailing to Company Shareholders and filing in
accordance with the Interim Order and applicable Laws.
(c) The Company shall ensure that the Circular complies with the Interim
Order and all applicable Laws and, without limiting the generality
of the foregoing, that the Circular does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances in
which they are made (other than with respect to any information
relating to and provided by the Parent or the Purchaser).
(d) The Parent and the Purchaser shall ensure that the information to be
supplied by either of them for inclusion in the Circular will, at
the time of the mailing of the Circular, not contain any material
misstatement, untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(e) Each of the Company, the Parent and the Purchaser shall promptly
notify each of the other Parties if at any time before the Effective
Time it becomes aware that the Circular, an application for a
Regulatory Approval or any other order, registration, consent,
ruling, exemption, no-action letter or approval, or any circular or
other filing under applicable Laws contains an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein
not misleading in light of the circumstances in which they are made,
or that otherwise is
17
erroneous or requires an amendment or supplement to the Circular,
such application, circular or filing, and the Parties shall
co-operate in the preparation of such amendment or supplement as
required.
2.6 SHAREHOLDER COMMUNICATIONS
The Parties agree to co-operate in the preparation of presentations, if
any, to Company Securityholders regarding the Arrangement, and no Party shall
issue any press release or otherwise make public statements with respect to the
Arrangement, this Agreement or the transactions contemplated hereby, without the
consent of the other Parties and the Company shall not make any filing with any
Governmental Authority with respect thereto without prior consultation with the
Parent and the Purchaser and neither the Parent nor the Purchaser shall make any
filing with any Governmental Authority without prior consultation with the
Company; provided, however, that the foregoing shall be subject to the Parent's
overriding obligation to make any disclosure or filing required under applicable
Laws and listing requirements, and the Party making such disclosure or filing
shall use all commercially reasonable efforts to give prior oral and written
notice to the other Party and reasonable opportunity to review or comment on the
disclosure or filing (other than with respect to confidential information
contained in such disclosure or filing), and if such prior notice is not
possible, to give such notice immediately following the making of such
disclosure or filing.
2.7 CLOSING DELIVERIES
(a) At the Closing, the Company will deliver or cause to be delivered to
the Purchaser:
(i) a certificate substantially in the form of Schedule H, dated
as of the Closing Date, executed by an officer of the Company
confirming the satisfaction of the conditions specified in
Sections 6.1(a) and 6.1(b);
(ii) resignations effective as of the Closing Date of each director
and officer (or equivalent thereof) of each Acquired Company
(solely with respect to their officer and director designation
(or equivalent thereof), but not from employment by any of the
Acquired Companies) as may be requested by the Purchaser; and
(iii) all such other closing certificates, documents or instruments
reasonably required by the Purchaser in connection with the
Closing, including a certificate substantially in the form of
Schedule I, dated as of the Closing Date, executed by an
officer of the Company as specified in Section 7.4.
(b) At the Closing, the Purchaser will deliver or cause to be delivered
to the Company a certificate substantially in the form of Schedule
J, dated as of the Closing Date, executed by the Purchaser
confirming the satisfaction of the conditions specified in Sections
6.2(a) and 6.2(b).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that except as set
forth on the Company Disclosure Schedule:
18
3.1 ORGANIZATION AND GOOD STANDING.
Each Acquired Company is a corporation duly incorporated, validly existing
and in good standing (in all material respects) under the Laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
the Business as presently conducted. Each Acquired Company is duly qualified or
licensed to do business and, where applicable as a legal concept, is in good
standing as an extra-provincial or foreign corporation in each jurisdiction in
which the character of the properties it owns, operates or leases or the nature
of its activities makes such qualification or licensure necessary, except for
such failures to be so qualified that, individually or in the aggregate, have
not had, and may not reasonably be expected to have, a Company Material Adverse
Effect. Section 3.1 of the Company Disclosure Schedule sets forth an accurate
and complete list of each Acquired Company's jurisdiction of incorporation and
the other jurisdictions in which it is registered, licensed or other qualified
to do business and a complete, and accurate list of the current directors and
officers of each Acquired Company. The Company has delivered or made available
to the Purchaser accurate and complete copies of the articles of incorporation
and by-laws of the Company and the articles of incorporation and by-laws or
other comparable charter or organizational documents of each Subsidiary, as
currently in effect, and no Acquired Company is in default under or in violation
of any provision thereof in any material respect.
3.2 AUTHORITY AND ENFORCEABILITY.
(a) The board of directors of the Company has determined as of the date
hereof that the Arrangement is fair to the Company Securityholders
and is in the best interests of the Company, and has determined to
recommend that the Company Securityholders vote in favour of the
Arrangement Resolution. The Company's directors have advised the
Company that, as of the date hereof, they intend to vote any Shares
and any Company Options held by them on the date of the Company
Meeting in favour of the Arrangement Resolution and will so
represent in the Circular. The board of directors of the Company has
approved the execution and performance of this Agreement and
received a draft of the Fairness Opinion from the Financial Advisor
and an oral report from the Financial Advisor concerning the
Fairness Opinion. Prior to the date of the application for the
Interim Order, the board of directors of the Company will have
received the Fairness Opinion from the Financial Advisor.
(b) The only vote of holders of securities of the Company necessary to
approve the Arrangement is, subject to any requirements of the
Interim Order, the Required Vote.
(c) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and each of the Ancillary
Agreements to which the Company is a party and to perform the
Company's obligations under this Agreement and each such Ancillary
Agreement. The execution, delivery and performance of this Agreement
and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles. Upon the execution and delivery by the Company of (i)
the Ancillary Agreements to which the Company is a party and (ii)
the Key Employment Agreements, such Ancillary
19
Agreements and the Key Employment Agreements will constitute the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
(d) The holders of a sufficient number of Shares and Company Options
necessary to obtain the Required Vote have entered into Voting
Agreements dated as of the date hereof.
3.3 NO CONFLICT.
Except for those Governmental Authorizations and Contracts that require
consent to their assignment or transfer upon or in connection with a change of
control of the Company, each of which are listed in Section 3.3 of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company, nor the consummation or performance by it of the transactions
contemplated by this Agreement, will:
(a) directly or indirectly (with or without notice, lapse of time or
both) conflict with, result in a breach or violation of, constitute
a default (or give rise to any right of termination, cancellation,
acceleration, suspension or modification of any obligation or loss
of any benefit) under, constitute a change in control under, result
in any payment becoming due under the terms of, result in the
imposition of any Encumbrances on any of the Shares or any of the
properties or assets of any Acquired Company under, or otherwise
give rise to any right on the part of any Person to exercise any
remedy or obtain any relief under:
(i) the articles of incorporation or by-laws of the Company, or
the articles of incorporation or by-laws or other comparable
charter or organizational documents of any Subsidiary, or any
resolution adopted by the board of directors of any Acquired
Company;
(ii) any Governmental Authorization or Contract to which any
Acquired Company is a party or by which any Acquired Company
is bound or to which any of their respective properties or
assets is subject; or
(iii) any Law or Judgment applicable to any Acquired Company or any
of their respective properties or assets, or
(b) except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, require any Acquired Company to obtain any consent,
waiver, approval, ratification, permit, license, Governmental
Authorization or other authorization of, give any notice to, or make
any filing or registration with, any Governmental Authority or other
Person.
3.4 CAPITALIZATION AND OWNERSHIP.
(a) The authorized share capital of the Company and each of the
Subsidiaries is set forth in Section 3.4(a) of the Company
Disclosure Schedule. The Shares represent all of the issued and
outstanding shares in the capital of the Company and each
Subsidiary. Section 3.4(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of all Company Shareholders as of
the date hereof and the number and type of Shares held by each. All
of the outstanding securities of each Subsidiary are owned of record
20
and beneficially by one or more of the Acquired Companies, free and
clear of all Encumbrances other than Permitted Encumbrances. Neither
the Company nor any of the Subsidiaries has any other equity
securities issued or outstanding, except the Company Options. Except
as set forth in Section 3.4(a) of the Company Disclosure Schedule,
prior to and as of the date of this Agreement, no dividends have
been declared, reserved or set aside with respect to any Shares. The
Conversion Rate (as defined in the restated articles of the Company)
with respect to the Preference Shares is one.
(b) Section 3.4(b) of the Company Disclosure Schedule sets forth for
each Subsidiary:
(i) its current and prior name and jurisdiction of incorporation
or organization;
(ii) its authorized share capital; and
(iii) the number of issued and outstanding shares of its authorized
share capital and the record and beneficial owners thereof.
(c) No Acquired Company owns, controls or has any rights to acquire,
directly or indirectly, any shares or other securities of any
Person, except for the Subsidiaries.
(d) The Company Stock Option Plan is the only stock option or equity
related plan, program or agreement maintained by the Company or to
which the Company is a party. Section 3.4(d) of the Company
Disclosure Schedule sets forth a complete and accurate list, as of
the date specified therein, of the number and class of Common Shares
subject to outstanding Company Options. There are currently
20,216,252 Class A Common Shares reserved for issuance under the
Company Stock Option Plan and Section 3.4(d) of the Company
Disclosure Schedule sets forth a list of all Company Options granted
to date under the Company Stock Option Plan and, with respect to
each Company Option, the name of the holder thereof, the number of
Class A Common Shares subject to such Company Option, the Exercise
Price, the date of grant, the exercise period and the vesting
schedule. The Company has delivered or made available to the
Purchaser and the Parent complete and accurate copies of all Company
Stock Plans and the form of option agreement evidencing Company
Options and any other agreements relating to other equity based
awards.
(e) Except as set forth in this Section 3.4 or as set forth in Sections
3.4(e)(i) through (v) of the Company Disclosure Schedule:
(i) there are no equity securities of any class of any Acquired
Company, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or
outstanding;
(ii) there are no options, warrants, equity securities, calls,
rights or other Contracts to which any Acquired Company is a
party or by which any Acquired Company is bound obligating any
Acquired Company to issue, exchange, transfer, deliver or
sell, or cause to be issued, exchanged, transferred, delivered
or sold, additional shares or other equity interests of any
Acquired Company or any security or rights convertible into or
exchangeable or exercisable for any such shares or other
equity interests, or obligating any Acquired Company to grant,
extend,
21
accelerate the vesting of, otherwise modify or amend or enter
into any such option, warrant, equity security, call, right,
or Contract;
(iii) there are no Contracts to which any Acquired Company or, to
the Knowledge of the Company, any Company Securityholder, is a
party or by which any Acquired Company or, to the Knowledge of
the Company, any Company Securityholder is bound with respect
to the voting (including voting trusts or proxies),
registration under any Securities Law (including the
qualification of a prospectus under Canadian Securities Law),
or the sale or transfer (including Contracts imposing transfer
restrictions) of any shares or other equity interests of any
Acquired Company;
(iv) the Company does not have any outstanding share appreciation
rights, phantom shares, performance based rights or similar
rights or obligations; and
(v) no holder of indebtedness of any Acquired Company has any
right to convert or exchange such indebtedness for any equity
securities or other securities of any Acquired Company, and no
holders of outstanding indebtedness of any Acquired Company
have any rights to vote for the election of directors of any
Acquired Company or to vote on any other matter.
(f) All of the Shares and all of the issued and outstanding equity
securities of each Subsidiary have been duly authorized, validly
issued and are outstanding as fully paid and non-assessable shares
in the capital of the Company or the Subsidiaries, as the case may
be. The Shares and the issued and outstanding equity securities of
each Subsidiary are not subject to, and were not issued in violation
of, any purchase option, right of first refusal, pre-emptive right,
subscription right or any similar right and were issued in
compliance with all applicable Laws, except as disclosed in Section
3.4(f) of the Company Disclosure Schedule.
(g) There are no obligations, contingent or otherwise, of any Acquired
Company to repurchase, redeem or otherwise acquire any shares or
other equity interests of any Acquired Company. No Acquired Company
is subject to any obligation or requirement to provide funds to or
make any investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other Person. Except to the
extent arising pursuant to applicable take-over or similar Laws,
there is no rights agreement, "poison pill" anti-take-over plan or
other similar agreement or understanding to which any of the
Acquired Companies is a party or by which it or they are bound with
respect to any equity security of any class of any Acquired Company.
3.5 FINANCIAL STATEMENTS.
(a) Attached as Section 3.5 of the Company Disclosure Schedule are the
Financial Statements.
(b) The Financial Statements (including the notes thereto) are correct
and complete in all material respects, are consistent with the books
and records of the Acquired Companies and have been prepared in
accordance with U.S. GAAP, consistently applied throughout the
periods involved. The Financial Statements fairly present in all
material respects the financial position and the results of
operations and changes in shareholders' equity of the
22
Acquired Companies as of the respective dates and for the periods
indicated therein, all in accordance with U.S. GAAP; provided,
however, that the Unaudited Financial Statements (i) do not contain
all notes that may be required under U.S. GAAP, and (B) are subject
to normal year-end audit adjustments, which individually or in the
aggregate would not be reasonably expected to be material to a buyer
contemplating the purchase of shares of the Company. No financial
statements of any Person other than the Acquired Companies are
required by U.S. GAAP to be included in the financial statements of
the Company.
(c) The Acquired Companies maintain a system of internal accounting
controls sufficient to provide reasonable assurance that:
(i) all material transactions are executed in accordance with
management's general or specific authorizations;
(ii) all material transactions are recorded as necessary to permit
the preparation of financial statements in conformity with
U.S. GAAP and to maintain proper accountability for assets;
and
(iii) access to assets is permitted only in accordance with
management's general or specific authorization;
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
The Acquired Companies maintain a process for internal control over
financial reporting sufficient to provide reasonable assurance
regarding the reliability of financial reporting in the preparation
of the Financial Statements in accordance with U.S. GAAP and
includes those policies and procedures that (x) pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of
the Acquired Companies, (y) provide reasonable assurance that all
material transactions are recorded as necessary to permit
preparation of the Financial Statements in accordance with U.S. GAAP
and that all material receipts and expenditures of the Acquired
Companies are being made only in accordance with authorizations of
the management of the Acquired Companies and (z) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Acquired Companies' assets
that could have a material effect on the Financial Statements.
3.6 BOOKS AND RECORDS.
The books of account, financial records, minute books, securities
registers and other records of the Acquired Companies, all of which have been
made available to the Purchaser and the Parent, are accurate and complete in all
material respects and have been maintained in accordance with sound business
practices and an adequate system of internal controls. Such books and records
are in such form and contain such information as will enable the Taxes of the
Acquired Companies to be determined and include documents containing complete
and accurate descriptions of all transactions between the Acquired Companies,
including those relating to the determination of any transfer prices. At the
time of the Closing, all of such books and records will be in the possession of
the respective Acquired Company.
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Except as disclosed in Section 3.6 of the Company Disclosure Schedule, the
minute books of each Acquired Company contain, in all material respects,
accurate and complete records of all meetings held of, and corporate action
taken by, the Acquired Company's shareholders, directors and directors'
committees, and no such meeting has been held for which minutes have not been
prepared and are not contained in such minute books.
3.7 ACCOUNTS RECEIVABLE.
All Accounts Receivable are reflected properly on the Balance Sheet or the
accounting records of the Acquired Companies as of the Closing Date and
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Except as set
forth in Section 3.7 of the Company Disclosure Schedule, such Accounts
Receivable will as of the Closing Date be good and collectible, net of the
respective reserve shown in the corresponding line items on the Balance Sheet or
on the accounting records of the Acquired Companies as of the Closing Date, as
the case may be. Except as set forth in Section 3.7 of the Company Disclosure
Schedule, to the Knowledge of the Acquired Companies, there is no contest,
claim, defence or right of setoff, other than returns in the ordinary course of
business, relating to the amount or validity of such Accounts Receivable. An
accurate and complete list and the aging of all Accounts Receivable as of the
date of the Balance Sheet has been provided or made available to the Purchaser.
3.8 INVENTORIES.
All inventories of the Acquired Companies are of a quality and quantity
usable and, with respect to finished goods, saleable in the ordinary course of
business. None of such inventory is slow-moving, obsolete, damaged, defective or
of below-standard quality, and all of which has been or will be written off or
written down to net realizable value on the Balance Sheet or the accounting
records of the appropriate Acquired Company as of the Closing Date in accordance
with the past custom and practice of the Acquired Companies, subject only to the
reserve for inventory write-down set forth in the corresponding line item on the
Balance Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Acquired Companies. The
values at which inventories are carried reflect the inventory valuation policy
of the Company, which is in accordance with U.S. GAAP. No Acquired Company has
any commitments to purchase inventory, other than in the ordinary course of
business.
3.9 NO UNDISCLOSED LIABILITIES.
No Acquired Company has any Liability that is material (individually or in
the aggregate) and which continues to be outstanding, except for:
(a) Liabilities accrued or expressly reserved for in line items on the
Balance Sheet;
(b) Liabilities disclosed in Section 3.9 of the Company Disclosure
Schedule; and
(c) Liabilities incurred in the ordinary course of business and in a
manner consistent with past practice after the date of the Balance
Sheet and which do not individually exceed $50,000.
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3.10 ABSENCE OF CERTAIN CHANGES AND EVENTS.
Except as set forth in Section 3.10 of the Company Disclosure Schedule and
except as expressly contemplated and permitted by this Agreement, since the date
of the Balance Sheet, each Acquired Company has conducted its business only in
the ordinary course of business and there has not been any change or event that
has had or could reasonably be expected to have a Company Material Adverse
Effect. Without limiting the generality of the foregoing, except as set forth in
Section 3.10 of the Company Disclosure Schedule and except as expressly
contemplated and permitted by this Agreement, since the date of the Balance
Sheet there has not been with respect to any Acquired Company any:
(a) amendment to its articles of incorporation or by-laws or other
comparable charter or organizational documents;
(b) change in its authorized or issued share capital, or issuance, sale,
grant, repurchase, redemption, pledge or other disposition of or
Encumbrance on any of its share capital or other voting securities
or any securities convertible, exchangeable or redeemable for, or
any options, warrants or other rights to acquire, any such
securities (other than (i) the exercise of outstanding Company
Options, and (ii) the granting prior to the date hereof of options
to purchase Class A Common Shares under the Company Stock Option
Plan);
(c) split, combination or reclassification of any of its share capital;
(d) declaration, setting aside or payment of any dividend or other
distribution (whether in cash, securities or other property) in
respect of its share capital (other than dividends and distributions
by a direct or indirect wholly-owned Subsidiary of the Company to
its parent);
(e) incurrence of any indebtedness for borrowed money or guarantee of
any such indebtedness of another Person (other than in connection
with the financing of trade receivables in the ordinary course of
business, letters of credit or similar arrangements issued to or for
the benefit of suppliers and manufacturers in the ordinary course of
business and pursuant to existing credit facilities in the ordinary
course of business);
(f) issuance, sale or amendment of any of its debt securities or
warrants or other rights to acquire any of its debt securities,
guarantee of any debt securities of another Person, entry into any
"keep well" or other Contract to maintain any financial statement
condition of another Person or entry into any arrangement having the
economic effect of any of the foregoing;
(g) loans, advances (other than routine advances to its employees in the
ordinary course of business) or capital contributions to, or
investment in, any other Person, other than the Company or any of
its wholly-owned Subsidiaries;
(h) entry into any hedging Contract or other financial agreement or
arrangement designed to protect any Acquired Company against
fluctuations in commodities prices or exchange rates;
(i) sale, lease, license, pledge or other disposition of or Encumbrance
on any of its properties or assets (other than in the ordinary
course of business and in a manner consistent with past practice);
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(j) acquisition (i) by merger or consolidation with, or by purchase of
all or a substantial portion of the assets or any shares of, or by
any other manner, any business or Person; or (ii) of any assets that
are material to any Acquired Company individually or in the
aggregate, except purchases of inventory and raw materials in the
ordinary course of business;
(k) damage to, or destruction or loss of, any of its assets or
properties with an aggregate value to any Acquired Company in excess
of $150,000, whether or not covered by insurance;
(l) entry into, modification, acceleration, cancellation or termination
of or receipt of notice of termination of, any Contract (or series
of related Contracts) which involves a total remaining commitment by
or to any Acquired Company of at least $150,000 or otherwise outside
the ordinary course of business;
(m) except as required by Law, adoption, entry into, termination or
amendment of any Company Plan, collective bargaining agreement or
material employment, severance or similar Contract;
(n) increase in the compensation or fringe benefits of, or payment of
any bonus to, any director, officer, employee or consultant or other
independent contractor (other than under existing Company Plans);
(o) amendment or acceleration of the payment, right to payment or
vesting of any compensation or benefits, including but not limited
to Company Options (other than vesting of Company Options in
accordance with the terms of grant in respect of such options and
the Company Stock Option Plan);
(p) payment of any benefit not provided for as of the date of this
Agreement under any Company Plan;
(q) grant of any cash awards under any bonus, incentive, performance or
other compensation plan or arrangement or benefit plan, including
the grant of stock options (other than options to purchase Class A
Common Shares granted prior to the date hereof under the Company
Stock Option Plan), share appreciation rights, share based or share
related awards, performance units or restricted shares, or the
removal of existing restrictions in any Company Plans or Contracts
or awards made thereunder;
(r) any action other than in the ordinary course of business to fund or
in any other way secure the payment of compensation or benefits
under any Company Plan;
(s) cancellation, compromise, release or waiver of any claims or rights
(or series of related claims or rights) with a value exceeding
$150,000 or otherwise outside the ordinary course of business;
(t) settlement or compromise in connection with any Proceeding;
(u) capital expenditure or other expenditure with respect to property,
plant or equipment in excess of $150,000 in the aggregate for the
Acquired Companies taken as a whole;
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(v) change in accounting principles, methods or practices or investment
practices, including any changes as were necessary to conform with
U.S. GAAP;
(w) change in payment or processing practices or policies regarding
inter-company transactions;
(x) acceleration or delay in the payment of accounts payable or other
Liabilities or in the collection of notes or accounts receivable
outside the ordinary course of business and other than in a manner
consistent with past practices; or
(y) authorization of or Contract by any Acquired Company to take any of
the actions described in this Section 3.10.
3.11 ASSETS.
Except as expressly identified elsewhere in this Agreement or as set forth
in Section 3.11 of the Company Disclosure Schedule, each of the Acquired
Companies is the sole legal and beneficial owner and, where its interests are
registrable, the sole registered owner of its assets with good and valid title,
free and clear of all Encumbrances other than the Permitted Encumbrances and is
exclusively entitled to possess and dispose of same. Each Acquired Company owns
or leases all tangible personal property used in the conduct of its business.
There has been no assignment, subletting or granting of any licence (of
occupation or otherwise) of or in respect of any of the assets of any of the
Acquired Companies or any granting of any agreement or right capable of becoming
an agreement or option for the purchase of any of the assets of any of the
Acquired Companies other than pursuant to the provisions of, or as expressly
disclosed in, this Agreement or pursuant to purchase orders or customer
agreements accepted by any of the Acquired Companies in the ordinary course of
business and in a manner consistent with past practice. The assets of the
Acquired Companies are in good condition, repair and (where applicable) proper
working order having regard to their use and age, reasonable wear and tear
excepted, and to the Knowledge of the Company such assets have been properly and
regularly maintained in accordance with normal industry practice. The
representations and warranties contained in this Section 3.11 in relation to the
assets, properties and rights owned, held or used by the Acquired Companies, or
any of them, are not intended to and shall not include any assets, properties or
rights that are included in the definition of Company IP or Company Technology.
For greater certainty, the representations and warranties relating to Company IP
or Company Technology are set forth in and qualified by Section 3.13.
3.12 LEASED REAL PROPERTY.
(a) No Acquired Company owns any real property, nor has any Acquired
Company ever owned any real property.
(b) Section 3.12(b) of the Company Disclosure Schedule sets forth an
accurate and complete description (by subject leased real property,
the date and term of the lease, sublease or other occupancy right,
the name of the parties thereto, each amendment thereto and the
aggregate annual rent payable thereunder) of all real property in
which any Acquired Company has a leasehold or sub-leasehold estate
or other right to use or occupy (collectively, the "LEASED REAL
PROPERTY"). The Company has delivered or made available to the
Purchaser accurate and complete copies of all leases and other
Contracts granting a right in or relating to the Leased Real
Property and all Contracts and other documents evidencing, creating
or constituting Encumbrances, other than Permitted Encumbrances,
upon or rights in the Leased Real Property.
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(c) Each Acquired Company holds valid leasehold interests in its Leased
Real Property, free and clear of any Encumbrances other than
Permitted Encumbrances.
(d) No Person other than an Acquired Company is in possession of any
portion of the Leased Real Property. No Acquired Company has granted
to any Person the right to use or occupy any portion of the Leased
Real Property, and no Acquired Company has received notice, and the
Company has no Knowledge, of any claim of any Person to the
contrary.
(e) The Leased Real Property constitutes all such real property used in
or necessary to conduct the businesses of the Acquired Companies as
conducted and as currently planned to be conducted by the Acquired
Companies.
3.13 INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 3.13 of the Company Disclosure
Schedule:
(i) the Owned Technology (including without limitation any
component of the Software) does not include, and is not a
Derivative Work of, any third party Technology;
(ii) the Acquired Companies hold all right, title and interest to
the Owned IP;
(iii) none of the Owned IP or the Owned Technology is owned by or
registered in the name of any current or former owner,
shareholder, partner, director, executive, officer, employee,
salesman, agent, customer, representative or contractor or
other party nor does any such Person have any interest therein
or right thereto, including but not limited to the right to
royalty payments or moral rights that have not been waived in
writing in favour of the Acquired Companies, except for any
such interest therein or right thereto that may not reasonably
be expected to have a Company Material Adverse Effect;
(iv) neither the Owned IP nor the Owned Technology nor the
Commercialization thereof in the Business (i) infringes or
misappropriates any trade secret, confidential information, or
copyright owned by any third party, or (ii) to the Knowledge
of the Acquired Companies, infringes any patent rights,
trade-xxxx rights, or other Intellectual Property Rights of
any third party;
(v) the Acquired Companies have the right to assign all or any
portion of the Owned IP or the Owned Technology to any third
party without consent, waiver or payment to any Person and
without triggering any additional obligations or liabilities
of the Acquired Companies or any encumbrance on the Owned IP
or the Owned Technology;
(vi) the Acquired Companies have not granted to any Person any
exclusive rights in respect of the Owned IP or the Core
Technology; and
(vii) the Acquired Companies are not a party to any contract or
commitment or under any obligation to pay any royalty, licence
or other fee with respect to the use of Owned IP or the Core
Technology.
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(b) The Intellectual Property Rights listed on Section 3.13(b) of the
Company Disclosure Schedule include all of the registered Owned IP
and, for greater certainty, include all:
(i) patents or patent applications;
(ii) registered copyrights;
(iii) registered or applied for trade-marks; and
(iv) domain names, including account IDs,
used in the Core Technology.
(c) Section 3.13(c) of the Company Disclosure Schedule lists all the
Acquired Companies' patents or filed patent applications or draft
patent applications and all inventors in respect thereof that (i)
relate to the Core Technology, or (ii) constitute Owned IP.
(d) [INTENTIONALLY DELETED.]
(e) the Acquired Companies are not in breach in any material respect of
any terms and conditions of any Contract or license in respect of
the Licensed IP.
(f) Except as set forth in Section 3.13(f) of the Company Disclosure
Schedule, the transactions contemplated by this Agreement,
including, without limitation, the change of control of the Acquired
Companies' shareholding, shall not affect the Acquired Companies'
rights, or trigger any additional obligations or liabilities of the
Acquired Companies under any Contract pursuant to which Licensed
Technology or Licensed IP is licensed to the Acquired Companies.
(g) The Licensed IP and Licensed Technology listed in Section 3.13(g) of
the Company Disclosure Schedule is an accurate and complete list, in
all material respects, of all Licensed IP and Licensed Technology
used in or relating to the Core Technology or otherwise material to
the operation of the Business (but excluding Software licensed to an
Acquired Company under generally available retail shrinkwrap or
clickwrap licences and used in the Acquired Companies' Business, but
not incorporated into Software, products or services licensed or
sold, or anticipated to be licensed or sold , by any Acquired
Company to customers or end users or otherwise resold or distributed
by any Acquired Company).
(h) Except as set forth in Section 3.13(h) of the Company Disclosure
Schedule, none of the Licensed IP identified in Section 3.13(g) of
the Company Disclosure Schedule is licensed to the Acquired
Companies on an exclusive basis.
(i) Except as set forth in Section 3.13(i) of the Company Disclosure
Schedule, the Acquired Companies are under no obligation, and the
transactions contemplated by this Agreement, including, without
limitation, the change of control of the Acquired Companies'
shareholding, shall not create any obligation, that would require
the Owned IP or any Owned Technology to be licensed to or licensed
back to any third party (excluding any obligation arising solely as
a result of Contract arrangements between Purchaser or Purchaser's
Affiliates and a third party).
29
(j) Except as set forth in Section 3.13(j) of the Company Disclosure
Schedule, the Owned Technology, the Owned IP, the Licensed
Technology and the Licensed IP are all of the material Technology
and Intellectual Property Rights used by the Acquired Companies in
the Commercialization of the Core Technology in the Business.
(k) Except as set forth in Section 3.13(k) of the Company Disclosure
Schedule, the Acquired Companies have not received and are unaware
of any notices, demands or statements (either written or oral) of
any claim, pending or threatened claim, proceeding, dispute, action,
or other matter in respect of a claim that:
(i) the Acquired Companies are not the sole owners of the Owned IP
or Owned Technology;
(ii) the Acquired Companies do not have the right to use and
exploit, including to Commercialize, Company IP or Company
Technology as used in the Business or for the unrestricted
Commercialization of the Owned IP or Owned Technology; or
(iii) the Licensed IP or Licensed Technology infringes, misuses,
misappropriates or otherwise violates the Intellectual
Property Rights of any third party.
(l) Except as set forth in Section 3.13(l) of the Company Disclosure
Schedule, the Acquired Companies have not received any offers of or
invitations from a third party to obtain a license to such third
party's Intellectual Property Rights for use in or by the Core
Technology or the Owned IP in circumstances where a lawyer (with
experience in law relating to Intellectual Property Rights), after
reviewing, investigating, and analyzing such offer or invitation,
would conclude that such third party suggests or claims, the absence
of such license will violate its Intellectual Property Rights.
(m) Except as set forth in Section 3.13(m) of the Company Disclosure
Schedule, to the Knowledge of the Acquired Companies, (i) no other
Person has infringed, misused or misappropriated Owned IP, Owned
Technology or the Core Technology and (ii) no Person is infringing,
misusing or misappropriating Owned IP, Owned Technology or the Core
Technology.
(n) Except as set forth in Section 3.13(n) of the Company Disclosure
Schedule, the Acquired Companies are not obligated to provide, and
have not entered into any other agreements or transactions that are
conditional upon providing future enhancements, features not
presently available on, or other enhancements in respect of its Core
Technology or other product of the Acquired Companies.
(o) Except as set forth in Section 3.13(o) of the Company Disclosure
Schedule, all individuals who developed, invented, or created Owned
IP or Owned Technology ("DEVELOPERS") were, at the time they
developed, invented, or created the Owned IP or Owned Technology,
either employees of the Acquired Companies and who validly assigned
their Intellectual Property Rights (and assigned or waived all
related rights) in the Owned IP or Owned Technology to the Acquired
Companies pursuant to written and signed agreements or were
contractors who assigned their Intellectual Property Rights (and
assigned or waived all related rights) in the Owned IP or Owned
Technology to the
30
Acquired Companies pursuant to written agreements, and copies of all
such written agreements are in the possession of the Acquired
Companies.
(p) Except as set forth in Section 3.13(p) of the Company Disclosure
Schedule, all Developers have, prior to providing services to the
Acquired Companies, executed non-disclosure and confidentiality
agreements substantially in the form delivered or made available to
the Purchaser or in a form containing terms that are reasonably
protective of the confidential information of the Acquired
Companies.
(q) Except as set forth in Section 3.13(q) of the Company Disclosure
Schedule the Core Technology neither contains nor embodies nor uses
third party software (including development tools and utilities).
(r) Except as set forth in Section 3.13(r) of the Company Disclosure
Schedule, the Acquired Companies have not: (i) incorporated Open
Source Materials into the Core Technology; (ii) distributed Open
Source Materials; or (iii) used Open Source Materials in the
development of the Core Technology.
(s) Except as set forth in Section 3.13(s) of the Company Disclosure
Schedule, none of the Open Source Materials listed on Section
3.13(s) of the Company Disclosure Schedule are dynamically link to,
are compiled together with, or are otherwise used by or incorporated
into the Core Technology other than Licensed Technology portions
thereof that constitute Open Source Materials (the "PROPRIETARY
Technology") in a manner that would require any portion of the
Proprietary Technology incorporated into, derived from or
distributed with such material to be: (i) disclosed or distributed
in source code form; (ii) licensed for the purpose of making
Derivative Works; (iii) redistributable at no charge; or (iv)
distributed in a manner so as to permit reverse engineering or other
access to the Source Code of the Proprietary Technology.
(t) To the Knowledge of the Acquired Companies (i) object code versions
of Software included in the Core Technology have been provided by
the Acquired Companies only to customers and end users in the
ordinary course of the Business and (ii) all such customers have
agreed to license terms governing the use of such Software.
(u) Except as set forth in Section 3.13(u) of the Company Disclosure
Schedule, the Source Code for any Software included in the Core
Technology has not been delivered or made available to any Person
and the Acquired Companies have not agreed to or undertaken to
provide such Source Code to any Person.
(v) Except as set forth in Section 3.13(v) of the Company Disclosure
Schedule, there are no customers, distributors or any other third
parties entitled to (i) be enrolled as a beneficiary under a
technology escrow arrangement or otherwise with respect to the
Source Code versions of any Software included in the Core
Technology, or (ii) receive the Source Code versions of any Software
included in the Core Technology (including receiving such Source
Code as a result of an event (including a change of control of
ownership of the Acquired Companies, bankruptcy of the Acquired
Companies, failure to provide support or maintenance, or fulfillment
of other conditions, upon request or otherwise) under an escrow
arrangement or otherwise.
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(w) No third party shall become entitled to the Source Code of the
Acquired Companies as a result of this Agreement or the other
transactions contemplated by this Agreement (excluding any
obligation arising solely as a result of Contract arrangements
between Purchaser or Purchaser's Affiliates and a third party).
(x) All Persons listed in Section 3.13(v) of the Company Disclosure
Schedule have either (i) never requested that the Acquired Company
enrol such Person as an escrow beneficiary or (ii) never enforced
such request.
(y) The Acquired Companies have taken reasonable commercial steps in
accordance with industry practice to maintain the security and
confidentiality of the Source Code comprising or relating to the
Core Technology comprised of Software. To the Knowledge of the
Acquired Companies, there has been no unauthorized use or disclosure
of the Source Code comprising or relating to the Core Technology
comprised of Software.
(z) Section 3.13(z)(i) of the Company Disclosure Schedule lists
agreements covering all substantive use or evaluation of the Core
Technology by third parties permitted by the Acquired Companies,
agreements covering all material outbound development, all reseller,
distribution, VAR, OEM, sales agency, and material maintenance,
support, and services agreements (other than any non-binding
requests for proposals and proposals which are referred to in such
agreements) relating to the Core Technology and to which the
Acquired Companies are a party (the "OUTBOUND AGREEMENTS"), copies
of each of which have been made available to the Purchaser, and
except as set out in Section 3.13(z)(ii) of the Company Disclosure
Schedule, the Acquired Companies are not obligated to provide
material consulting, professional, or other services to any Person
other than as required pursuant to the Outbound Agreements.
(aa) The Acquired Companies are not in breach of any of their material
obligations under the Outbound Agreements.
(bb) Section 3.13(bb) of the Company Disclosure Schedule sets forth a
summary of all known material bugs, errors and defects in the Core
Technology.
(cc) Except as set forth in Section 3.13(cc) of the Company Disclosure
Schedule, the Acquired Companies have fully resolved all mission
critical, top severity maintenance and support issues and the
Acquired Companies are not in breach in any material respect of any
material maintenance or support obligation to any Person.
(dd) Except as set forth in Section 3.13(dd) of the Company Disclosure
Schedule, no custom Software code developed for any third party,
pursuant to a services engagement or installation of Core
Technology, has been incorporated into the Core Technology and the
Company's current development plans for the Core Technology do not
include the incorporation of any custom Software code developed by
or for any third party.
(ee) The Acquired Companies have taken reasonable commercial steps in
accordance with industry standards to maintain all trade secret
rights in the Core Technology and Owned IP and have taken reasonable
commercial steps to maintain the confidentiality of all portions of
the Core Technology and Owned IP that are not patented.
32
(ff) The Acquired Companies are current on all accounts in all material
respects in the ordinary course of their business and in accordance
with past practices, and are not currently involved in fee disputes,
with any independent contractors or other consulting services
providers performing services for the Acquired Companies.
(gg) The Acquired Companies are not in breach of any of the
non-disclosure and confidentiality agreements to which they are
party, other than any breach that may not reasonably be expected to
have a Company Material Adverse Effect.
(hh) Except as set forth in Section 3.13(hh)(A) of the Company Disclosure
Schedule, no (i) government funding, (ii) facilities of a
university, college, other educational institution or research
center, or (iii) funding from any Person (other than funds received
in consideration for shares in the capital of the Acquired
Companies) was used in the development of the Owned IP or Owned
Technology.
(ii) Except as set forth in Section 3.13(ii) of the Company Disclosure
Schedule, the Core Technology does not include any encryption
software, algorithms, hardware or technology (whether used for
confidentiality, authentication or any other purpose) (collectively,
"ENCRYPTION FUNCTIONALITY") or make any function or interface calls
to Encryption Functionality provided by external software or
hardware.
(jj) The Acquired Companies have obtained all approvals required to be
obtained by the Acquired Companies in respect of the international
export and import of the Company's products as exported and imported
prior to the Closing Date and all such approvals remain outstanding
and valid as of the Closing Date and, to the Knowledge of the
Acquired Companies, no permit or authorization is required for the
export of the Core Technology from the United States or Canada to
destinations other than those destinations for which permits or
authorizations are required under United States, Canadian or
European law.
(kk) The Acquired Companies have not licenced or sold a standalone
Software product other than Core Technology that would perform or
replicate the functionality of the Core Technology.
3.14 CONTRACTS.
(a) Section 3.14(a) of the Company Disclosure Schedule sets forth an
accurate and complete list of each Contract (or group of related
Contracts) to which any Acquired Company is a party, by which any
Acquired Company is bound or pursuant to which any Acquired Company
is an obligor or a beneficiary, which:
(i) involves performance of services or delivery of goods or
materials, the performance of which extends over a period of
more than one year or that otherwise involves an amount or
value in excess of $150,000;
(ii) is for capital expenditures in excess of $150,000;
(iii) is a mortgage, indenture, guarantee, loan or credit agreement,
security agreement or other Contract relating to the borrowing
of money or extension of credit, other than accounts
receivables and payables in the ordinary course of business;
33
(iv) is a lease or sublease of any real or personal property, or
that otherwise affects the ownership of, leasing of, title to,
or use of, any real or personal property (except personal
property leases and conditional sales agreements having a
value per item or aggregate payments of less than $150,000 and
a term of less than one year);
(v) is a license or other Contract under which any Acquired
Company has licensed or otherwise granted rights in any
Company IP to any Person (except for licenses implied by the
sale of a product to customers in the ordinary course of
business) or any third party has licensed or sublicensed to
any Acquired Company, or otherwise authorized any Acquired
Company to use, any third party Technology (except for
Software licensed to an Acquired Company under generally
available retail shrinkwrap or clickwrap licenses and used in
the Acquired Company's business, but not incorporated into
software, products or services licensed or sold, or
anticipated to be licensed or sold, by any Acquired Company to
customers or otherwise resold or distributed by any Acquired
Company);
(vi) is for the employment of, or receipt of any services from, any
director or officer of an Acquired Company or any other Person
on a full-time, part-time, consulting or other basis, in any
such case providing annual compensation in excess of $100,000;
(vii) provides for severance, termination or similar pay to any of
the Acquired Companies' current or former directors, officers,
employees or consultants or other independent contractors;
(viii) provides for a loan or advance of any amount to any director
or officer of any Acquired Company, other than advances for
travel and other appropriate business expenses in the ordinary
course of business;
(ix) licenses any third party to manufacture or reproduce any of
Company IP, including any of the Acquired Companies' products,
services or Technology, or any Contract to sell or distribute
any of Company IP, including any of the Acquired Companies'
products, services or Technology;
(x) is a joint venture, partnership or other Contract involving
any joint conduct or sharing of any business, venture or
enterprise, or a sharing of profits or losses or pursuant to
which any Acquired Company has any ownership interest in any
other Person or business enterprise other than the Company's
Subsidiaries;
(xi) contains any covenant limiting the right of any Acquired
Company to engage in any line of business or to compete
(geographically or otherwise) with any Person, granting any
exclusive rights to make, sell or distribute any Acquired
Company's products, granting any "most favoured nations" or
similar rights or otherwise prohibiting or limiting the right
of any Acquired Company to make, sell or distribute any
products or services;
(xii) contains any covenant or obligation to maintain the
confidentiality of any information of any Person other than in
the ordinary course of business;
34
(xiii) involves payments based, in whole or in part, on profits,
revenues, fee income or other financial performance measures
of any Acquired Company;
(xiv) is a power of attorney granted by or on behalf of any Acquired
Company;
(xv) is a written warranty, guaranty or other similar undertaking
with respect to contractual performance extended by an
Acquired Company other than in the ordinary course of
business;
(xvi) is a settlement agreement with respect to any pending or
threatened Proceeding entered into within three years prior to
the date of this Agreement, other than (A) releases immaterial
in nature or amount entered into with former employees or
independent contractors of any Acquired Company in the
ordinary course of business in connection with routine
cessation of such employee's or independent contractor's
employment or engagement with any Acquired Company or (B)
settlement agreements for cash only (which has been paid) and
does not exceed $50,000 as to such settlement;
(xvii) was entered into other than in the ordinary course of
business and that involves an amount or value in excess of
$150,000;
(xviii) is a Contract to provide source code to any third party for
all or any portion of any Core Technology that is material to
the Acquired Companies taken as a whole;
(xix) is a Contract to license any third party to manufacture,
reproduce, develop or modify any of the Acquired Company's
products, services or technology or any Contract to sell or
distribute any of the Acquired Company's products, services or
technology, except (A) agreements with distributors, sales
representatives or other resellers in the ordinary course of
business, or (B) agreements allowing internal backup copies
made or to be made by end-user customers in the ordinary
course of business;
(xx) is a Contract between an Acquired Company and any of the top
10 current customers and suppliers of the Acquired Companies
(measured in each case by dollar volume of purchases or sales
during the most recently completed fiscal year of the
Company);
(xxi) is a Contract which contains a "change in control," "potential
change in control" or similar provision, and the consummation
of the transactions contemplated by this Agreement will not by
the express terms of such Contract result in any payment
(whether of severance pay or otherwise) becoming due from the
Purchaser or any Acquired Company to any Person; or
(xxii) is otherwise material to the business, properties or assets
of any Acquired Company or under which the consequences of a
default or termination could have a Company Material Adverse
Effect.
(b) The Company has delivered or made available to the Purchaser and the
Parent an accurate and complete copy (in the case of each written
Contract) or an accurate and
35
complete written summary (in the case of each oral Contract) of each
of the Contracts required to be listed in Section 3.14(a) of the
Company Disclosure Schedule. With respect to each such Contract
required to be listed, except as set forth in Section 3.14(b) of the
Company Disclosure Schedule:
(i) the Contract is legal, valid, binding, enforceable and in full
force and effect except to the extent it has previously
expired in accordance with its terms, and except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general
equitable principles;
(ii) the Acquired Companies and, to the Company's Knowledge, the
other parties to the Contract have performed or are in the
process of performing all of their respective obligations
currently required to be performed under the Contract;
(iii) no Acquired Company nor, to the Company's Knowledge, any other
party to the Contract is in breach or default under the
Contract and no event has occurred or circumstance exists that
(with or without notice, lapse of time or both) would
constitute a breach or default by any Acquired Company or, to
the Company's Knowledge, by any such other party (other than,
in any such case, a breach or default that does not have and
would not reasonably be expected to have a Company Material
Adverse Effect) or that would permit termination,
cancellation, acceleration, suspension or modification of any
obligation, or loss of any benefit under, result in any
payment becoming due under, result in the imposition of any
Encumbrances other than Permitted Encumbrances on any of the
Shares or any of the properties or assets of any Acquired
Company under, or otherwise give rise to any right on the part
of any Person to exercise any remedy or obtain any relief
under, the Contract, nor has any Acquired Company given or
received notice or other communication alleging the same; and
(iv) the Contract is not under renegotiation (nor has written
demand for any renegotiation been made), no party has
repudiated any portion of the Contract and the Company has no
Knowledge that any party to the Contract does not intend to
renew it at the end of its current term.
(c) Except as set forth in Section 3.14(c) of the Company Disclosure
Schedule, to the Company's Knowledge no director, agent, employee or
consultant or other independent contractor of any Acquired Company
is a party to, or is otherwise bound by, any Contract, including any
confidentiality, non-competition or proprietary rights agreement,
with any other Person that in any way adversely affects or will
affect:
(i) the performance of his or her duties for the Acquired
Companies;
(ii) his or her ability to assign to any Acquired Company rights to
any invention, improvement, discovery or information relating
to the business of the Acquired Companies; or
(iii) the ability of any Acquired Company to conduct its business.
36
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, none of the Acquired Companies are, and none of the
Acquired Companies at any time within the past five years have been,
parties to any Contract with:
(i) any Governmental Authority;
(ii) any prime contractor to any Governmental Authority; or
(iii) any subcontractor with respect to any Contract described in
clause (i) or (ii).
3.15 TAX MATTERS.
(a) Except as set forth in Section 3.15(a) of the Company Disclosure
Schedule, all Tax Returns of the Acquired Companies required to be
filed on or before the Closing Date have been timely filed in
accordance with applicable Laws, and each such Tax Return is
accurate and complete in all material respects. Except as set forth
in Section 3.15(a) of the Company Disclosure Schedule, true and
complete copies of all such Tax Returns of the Acquired Companies
have been provided by the Company to the Purchaser. Each Acquired
Company has timely paid all Taxes due with respect to the taxable
periods covered by such Tax Returns and all other Taxes (whether or
not shown on any Tax Return). No claim has ever been made by a
Governmental Authority in a jurisdiction where an Acquired Company
does not file a Tax Return that it is or may be subject to taxation
by that jurisdiction except for those claims which, individually or
in the aggregate, have not had, and may not reasonably be expected
to have, a Company Material Adverse Effect. Except as set forth in
Section 3.15(a) of the Company Disclosure Schedule, the Acquired
Companies have not requested an extension of time within which to
file any Tax Return which has not since been filed.
(b) For Taxes where a Governmental Authority is required to issue an
assessment or other similar notice (including, without limitation,
income Tax and corporation capital Tax), Tax assessments by relevant
Governmental Authorities have been issued to the Acquired Companies
and any predecessor entities covering all past taxation years and
all Taxes owing in respect of all such assessments have been paid.
There are no currently outstanding reassessments or questions that
have been issued or raised by any Governmental Authority relating to
any Tax Returns of any of the Acquired Companies.
(c) The Acquired Companies have and will have no Liability for Taxes for
any period on or before the Closing Date, other than those reflected
as Liabilities in line items on the Balance Sheet. The amounts
reflected as Liabilities in line items on the Balance Sheet for all
Taxes are adequate to cover all unpaid Liabilities for all Taxes,
whether or not disputed, that have accrued with respect to, or are
applicable to, periods ending on or before the Closing Date. Since
the date of the Balance Sheet, no Acquired Company has incurred any
Liability for Taxes arising from extraordinary gains or losses, as
that term is used in U.S. GAAP.
(d) All Taxes that each Acquired Company is required by Law to deduct,
withhold or collect, including sales and use Taxes and amounts
required to be withheld or collected in connection with any amount
paid, credited or owing to any non resident, or any employee,
independent contractor, creditor, or other third party, have been
duly deducted, withheld or collected. To the extent required by
applicable Law, all such amounts have
37
been remitted or paid over to the proper Governmental Authority or,
to the extent not yet due and payable, are held in separate bank
accounts for such purpose and designated as such. Without limiting
the generality of Section 3.15(a), all Tax Returns in respect of
such Taxes have been filed in accordance with applicable Laws.
(e) No Acquired Company or director or officer (or employee responsible
for Tax matters) of any Acquired Company expects any Governmental
Authority to assess any additional Taxes for any period for which
Tax Returns have been filed. No federal, provincial, state, local or
foreign audits or other Proceedings are, to the Knowledge of the
Acquired Companies, pending or being conducted, nor has any Acquired
Company received any:
(i) notice from any Governmental Authority that any such audit or
other Proceeding is pending, threatened or contemplated;
(ii) ruling, subpoena, request for ruling, request for subpoena or
other request for information related to Tax matters; or
(iii) notice of deficiency or proposed adjustment for any amount of
Tax proposed, asserted or assessed by any Governmental
Authority against any Acquired Company, with respect to any
Taxes due from or with respect to any Acquired Company or any
Tax Return filed by or with respect to any Acquired Company.
(f) The Acquired Companies have not granted or been requested to grant
any waiver of any period for reassessment or of any statutes of
limitations applicable to any claim for Taxes or with respect to any
Tax assessment or deficiency.
(g) All material Tax deficiencies that have been claimed, proposed or
asserted in writing against any Acquired Company have been fully
paid or finally settled, and no issue has been raised in writing in
any examination which, by application of similar principles, could
be expected to result in the proposal or assertion of a Tax
deficiency for any other year not so examined.
(h) No position has been taken on any Tax Return with respect to the
business or operations of any Acquired Company for a taxable period
for which the normal reassessment period or the statute of
limitations for the assessment of any Taxes with respect thereto has
not expired that is contrary to any publicly announced position of a
taxing authority or that is substantially similar to any position
which a taxing authority has successfully challenged in the course
of an examination of a Tax Return of any Acquired Company. Each of
the Acquired Companies has disclosed on their federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of income Tax under Section 6662 of the
Code.
(i) None of the Acquired Companies is a party to or bound by any Tax
sharing agreement, Tax allocation agreement, Tax indemnity
obligation or similar Contract or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other
Contract relating to Taxes with any Governmental Authority).
(j) Except as set forth in Section 3.15(j) of the Company Disclosure
Schedule, none of the Acquired Companies is or has been a member of
an affiliated group within the meaning of Section 1504(a) of the
Code (or any similar group defined under a similar provision of
38
foreign, state or local Law), other than a group of which the
Company is the common parent. None of the Acquired Companies
has any Liability for Taxes of any other Person whether
pursuant to Section 1.1502-6 of the Treasury Regulations (or
any similar provision of foreign, state or local Law) or
Section 160 of the Canadian Tax Act or otherwise as a
transferee or successor, by Contract or otherwise.
(k) None of the Acquired Companies is or has been a United States
real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(l) There are no Encumbrances for Taxes upon any properties or
assets of any Acquired Company (other than Encumbrances
relating to Taxes not yet due and payable and for which
adequate reserves have been recorded in line items on the
Balance Sheet).
(m) Except as set forth in Section 3.15(m) of the Company
Disclosure Schedule, none of the Acquired Companies has made,
revoked or rescinded any Tax election, or made, revoked or
rescinded any settlement or compromise of any Liability with
respect to Taxes, or amended or refiled any Tax Return.
(n) Except as set forth in Section 3.15(n) of the Company
Disclosure Schedule, to the Knowledge of the Company each
Company Securityholder is resident of Canada within the
meaning of the Canadian Tax Act and is not a non-resident of
Canada for purposes of section 116 of such Act.
(o) The residence of each Acquired Company for Tax purposes is set
out below:
(i) the Company is resident in Canada;
(ii) Convedia Inc. is resident in Delaware; and
(iii) Convedia Ltd. is resident in England and Wales.
(p) The tax accounts of the Acquired Companies, as disclosed in
Section 3.15(p) of the Company Disclosure Schedule are true
and complete in all respects.
(q) All Company Plans have been duly registered where required by,
and are in good standing in all material respects under, all
applicable Laws including, without limiting the generality of
the foregoing, the Canadian Tax Act and all required employer
contributions under any such Company Plans have been made and
the applicable funds have been funded in accordance with the
terms thereof and no past service funding liabilities exist
thereunder.
(r) None of the Acquired Companies has participated in any listed
or reportable transaction under Section 6011 of the Code, or
any similar provision of state, local or foreign Laws.
(s) The Company has been a Canadian-controlled private corporation
(as defined in the Canadian Tax Act) at all times since its
incorporation through until March 31, 2006.
39
3.16 EMPLOYEE BENEFIT MATTERS.
(a) Section 3.16(a) of the Company Disclosure Schedule sets forth an
accurate and complete list of all Company Plans and identifies each
such Company Plan that provides for the deferral of compensation.
(b) The Company has delivered to or made available the Purchaser and the
Parent an accurate and complete copy of:
(i) each writing that sets forth the terms of each Company Plan,
including plan documents, plan amendments, any related trusts,
all summary plan descriptions and other summaries and
descriptions furnished to participants and beneficiaries or
prospective participants and beneficiaries;
(ii) all personnel, payroll and employment manuals and policies of
each Acquired Company;
(iii) a written description of any Company Plan that is not
otherwise in writing;
(iv) all registration statements filed with respect to any Company
Plan;
(v) all insurance policies purchased by or to provide benefits
under any Company Plan
(vi) all reports submitted since March 31, 2003 by third-party
administrators, actuaries, investment managers, trustees,
consultants or other independent contractors with respect to
any Company Plan and financial statements disclosing Liability
for any and all obligations owed under any Company Plan;
(vii) all notices that were given by any Acquired Company or any
Company Plan to CRA, any federal or provincial ministry
responsible for labour or employment, any worker's
compensation or insurance board or agency, or any participant
or beneficiary or prospective participant or beneficiary,
pursuant to statute, since March 31, 2003;
(viii) all notices that were given by CRA or any federal or
provincial ministry responsible for labour or employment, any
worker's compensation or insurance board or agency to any
Acquired Company or any Company Plan since March 31, 2003;
(ix) with respect to any Pension Plan, the most recent
determination letter issued by any trustee, auditor or
Governmental Authority; and
(x) copies of any written report of any analysis performed with
respect to any Company Plan and, if no such written report
exists, a written description of any such analysis that has
been performed.
(c) No Acquired Company has ever established, maintained or contributed
to, or had an obligation to maintain or contribute to, any:
40
(i) Multiemployer Plan;
(ii) Pension Plan;
(iii) voluntary employees' beneficiary association;
(iv) welfare benefit fund;
(v) self-insured plan (including any plan pursuant to which a
stop-loss policy or contract applies); or
(vi) a Company Plan that is a multiple employer welfare arrangement
that has two or more contributing sponsors at least two of
which are not under common control.
(d) No Acquired Company provides health or welfare benefits for any
retired or former employee, or their beneficiaries or dependents,
nor is any Acquired Company obligated to provide health or welfare
benefits to any active employee following such employee's retirement
or other termination of service.
(e) Each Company Plan is and at all times has been maintained, funded,
operated and administered, and the Acquired Companies have performed
all of their obligations under each Company Plan, in each case in
accordance with the terms of such Company Plan and in compliance in
all material respects with all applicable Laws. Each Company Plan
that provides deferred compensation is in compliance in all material
respects with applicable Laws in form and operation. All Company
Options were granted at an Exercise Price of not less than the fair
market value of the underlying shares, which fair market value was
determined at the time of grant by the board of directors in
accordance with the terms of the Company Stock Option Plan. All
contributions required to be made to any Company Plan by applicable
Law and the terms of such Company Plan, and all premiums due or
payable with respect to insurance policies funding any Company Plan,
for any period through the Closing Date, have been timely made or
paid in full or, to the extent not required to be made or paid on or
before the Closing Date, have been fully reflected in line items on
the Balance Sheet. All returns, reports and filings required by any
Governmental Authority or which must be furnished to any Person with
respect to each Company Plan have been filed or furnished.
(f) No Acquired Company has any Liability to CRA with respect to any
Company Plan, including any Liability imposed by statute. All
contributions and payments made or accrued with respect to all
Company Plans are deductible. There is no unfunded Liability under
any Company Plan. No event has occurred or circumstance exists, to
the Company's Knowledge, that may result:
(i) in an increase in premium costs of any Company Plan that is
insured; or
(ii) an increase in the cost of any Company Plan that is
self-insured.
(iii) Other than routine claims for benefits submitted by
participants or beneficiaries, no claim against, or Proceeding
involving, any Company Plan or any fiduciary thereof is
pending or, to the Company's Knowledge, is threatened, which
could reasonably be expected to result in any Liability,
directly or indirectly (by
41
indemnification or otherwise) of any Acquired Company to
any government ministry responsible for labour or
employment, CRA or any Person, and no event has occurred
or circumstance exists that may give rise to any such
Liability. No Proceeding has been concluded that
resulted in any Liability of any Acquired Company or
that has not been fully discharged. No Contract or
settlement with any Governmental Authority is being or
has been negotiated with respect to any Company Plan.
(g) Except as set forth in Section 3.16(g) of the Company
Disclosure Schedule, each Acquired Company has the right to
modify and terminate benefits (other than pensions) with
respect to both retired and active employees. Each Company
Plan sponsored by each Acquired Company permits assumption
thereof by the Purchaser or its Subsidiaries upon the Closing
without the consent of the participants or any other Person.
(h) Except as set forth in Section 3.16(h) of the Company
Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement (either alone or in conjunction
with any other event) will not cause accelerated vesting,
payment or delivery of, or increase the amount or value of any
payment or benefit under or in connection with any Company
Plan or constitute a "deemed severance" or "deemed
termination" under any Company Plan otherwise with respect to,
any director, officer, employee, or former director, former
officer or former employee of any Acquired Company. No
Acquired Company has made or has become obligated to make, and
no Acquired Company will as a result of the consummation of
the transactions contemplated by this Agreement become
obligated to make, any payments that could be non-deductible
by reason of Section 280G of the Code (without regard to
subsection (b)(4) thereof) or Section 162(m) of the Code (or
any corresponding provision of foreign, state or local Law),
nor will any Acquired Company be required to "gross up" or
otherwise compensate any individual because of the imposition
of any excise Tax on such a payment to the individual.
3.17 EMPLOYMENT AND LABOUR MATTERS.
(a) Section 3.17(a) of the Company Disclosure Schedule sets forth an
accurate and complete list of all employees and independent
contractors currently performing services for any Acquired Company,
including each employee on leave of absence or layoff status, along
with the position, date of hire or engagement, compensation and
benefits, scheduled increases in compensation, scheduled promotions,
accrued but unused sick, overtime and vacation pay and service
credited for purposes of vesting and eligibility to participate
under any Company Plan with respect to such Persons. To the
Company's Knowledge, no director, officer, key employee or group of
employees of any Acquired Company intends to terminate his, her or
their employment with the Acquired Companies within the 12-month
period following the Closing Date.
(b) No trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent:
(i) holds or has previously held bargaining rights with respect to
any employees of the Acquired Companies by way of
certification, interim certification, voluntary recognition,
designation or successor rights;
42
(ii) to the Company's Knowledge, has applied to be certified as the
bargaining agent of any employees of an Acquired Company or to
have an Acquired Company declared a related employer, common
employer or successor employer pursuant to applicable labour
legislation; or
(iii) to the Company's Knowledge, has initiated an organizing or
certification campaign in respect of any employees of any
Acquired Company.
(c) Since March 31, 2003, no Acquired Company has experienced any labour
strike, picketing, slowdown, material lockout, unfair labour
practice complaint, labour board proceeding, employee grievance
process or other work stoppage or labour dispute, nor to the
Company's Knowledge is any such action threatened.
(d) Each Acquired Company has complied in all material respects with all
applicable Laws and its own policies relating to labour and
employment matters, including fair employment practices, terms and
conditions of employment, equal employment opportunity,
non-discrimination, immigration, wages, hours, benefits, statutory
employment standards, workers' compensation, the payment of social
insurance premiums and employment-related Taxes, occupational health
and safety, and plant closing.
(e) Except as set forth in Section 3.17(e) of the Company Disclosure
Schedule, there is no Proceeding pending or, to the Company's
Knowledge, threatened against or affecting any Acquired Company
relating to the alleged violation by any Acquired Company (or its
directors or officers) of any Law pertaining to labour relations or
employment matters. No Acquired Company has committed any unfair
labour practice, nor has there has been any charge or complaint of
unfair labour practice filed or, to the Company's Knowledge,
threatened against any Acquired Company before any labour relations
board or any other Governmental Authority. There has been no
complaint or charge of discrimination filed or, to the Company's
Knowledge, threatened, against any Acquired Company with any human
rights commission or tribunal or any other Governmental Authority.
(f) Since March 31, 2003, no Acquired Company has implemented any plant
closing or layoff of employees that could implicate any applicable
employment standards or labour relations legislation, or any similar
foreign, state or local Law, and no such action will be implemented
without advance notification to the Purchaser. Section 3.17(f) of
the Company Disclosure Schedule sets forth an accurate and complete
list of all individuals whose employment with the Acquired Companies
has terminated during the 90-day period prior to the date of this
Agreement.
3.18 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
(a) Each Acquired Company is, and for the last five years has been, in
compliance in all material respects with all, and not subject to any
material Liability under any, Environmental Laws and Occupational
Safety and Health Laws. Without limiting the generality of the
foregoing, each Acquired Company and its respective Affiliates have
obtained and complied in all material respects with all Governmental
Authorizations that are required pursuant to Environmental Laws and
Occupational Safety and Health Laws for the occupation of their
facilities and the operation of their businesses. An accurate
43
and complete list of all such Governmental Authorizations is set
forth in Section 3.18(a) of the Company Disclosure Schedule.
(b) No Acquired Company has received any notice, report or other written
communication or information regarding:
(i) any actual, alleged or potential material violation of, or
failure to comply in any material respect with, any
Environmental Law or Occupational Safety and Health Law; or
(ii) any material Liability or potential material Liability,
including any investigatory, remedial or corrective
obligation, relating to any Acquired Company or any Leased
Real Property or other property or facility currently or
previously owned, leased, operated or controlled by any
Acquired Company arising under any Environmental Law or
Occupational Safety and Health Law.
(c) To the Knowledge of the Company, no Hazardous Material,
contamination, landfill, surface impoundment, disposal area or
underground storage tank is present or has ever been present at any
Leased Real Property or other real property or facility currently
owned or leased by any Acquired Company.
(d) No Acquired Company has treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled or released any
Hazardous Material, or owned or operated any property or facility,
in a manner that has given rise to any material Liability, including
any material Liability for response costs, corrective costs,
personal injury, property damage, natural resources damage or
attorneys' fees, pursuant to any Environmental Law or Occupational
Safety and Health Law.
(e) No Acquired Company has, either expressly or by operation of law,
assumed or undertaken any material Liability, including any
obligation for corrective or remedial action, of any other Person
relating to any Environmental Law.
(f) To the Knowledge of the Company, no event or circumstance relating
to the operations of, or the properties or facilities currently
owned or leased by, any Acquired Company is reasonably likely:
(i) to prevent, hinder or limit continued compliance in all
material respects with any Environmental Law or Occupational
Safety and Health Law;
(ii) to give rise to any investigatory, remedial or corrective
obligations pursuant to any Environmental Law or Occupational
Safety and Health Law that may be material to the Acquired
Companies; or
(iii) to give rise to any other material Liability pursuant to any
Environmental Law or Occupational Safety and Health Law,
including any material Liability relating to onsite or offsite
releases of Hazardous Materials, personal injury, property
damage or natural resources damage.
(g) Section 3.18(g) of the Company Disclosure Schedule sets forth an
accurate and complete list of, and the Company has delivered or made
available to the Purchaser and the Parent
44
accurate and complete copies of, all environmental reports,
investigations and audits possessed or initiated by any Acquired
Company that were obtained from, or conducted by or on behalf of any
Acquired Company, any Governmental Authority or any other third
party during the past five years and relating to properties and
facilities currently or previously owned, leased, operated or
controlled by any Acquired Company.
(h) Neither this Agreement, nor the consummation of any of the
transactions contemplated by this Agreement, will result in:
(i) any obligation for site investigation, cleanup or remediation
pursuant to any applicable Environmental Laws; or
(ii) any notification to or consent of any Governmental Authority
or other third party pursuant to any applicable Environmental
Laws.
3.19 COMPLIANCE WITH LAWS, JUDGMENTS AND GOVERNMENTAL AUTHORIZATIONS.
(a) Without limiting the scope of any other representation in this
Agreement, each Acquired Company has complied with all, and no
Acquired Company has violated any, Laws, Judgments and Governmental
Authorizations applicable to it or to the conduct of its business or
the ownership or use of any of its properties or assets, except in
each case for those violations and failures to comply which,
individually or in the aggregate, have not had, and may not
reasonably be expected to have, a Company Material Adverse Effect.
No Acquired Company has received at any time since March 31, 2003
any written or, to the knowledge of such Acquired Company, oral
notice or other communication from any Governmental Authority or any
other Person regarding any actual, alleged or potential material
violation of, or failure to comply in any material respect with, any
Law, Judgment or Governmental Authorization, or any actual, alleged
or potential obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Section 3.19(b) of the Company Disclosure Schedule sets forth an
accurate and complete list of each material Governmental
Authorization that is held by each Acquired Company or that
otherwise relates to the business of, or any of the assets owned or
used by, any Acquired Company, all of which are valid and in full
force and effect and will remain so immediately following the
Closing. The Governmental Authorizations listed in Section 3.19(b)
of the Company Disclosure Schedule collectively constitute all of
the material Governmental Authorizations necessary to permit the
Acquired Companies to conduct their businesses lawfully in the
manner in which they currently conduct such businesses and to permit
the Acquired Companies to own and use their assets in the manner in
which they currently own and use such assets.
(c) Section 3.19(c) of the Company Disclosure Schedule sets forth an
accurate and complete list of each Judgment to which any Acquired
Company, or any of the assets owned or used by any Acquired Company,
is or has been subject within the past five years, as well as each
Judgment to which any Acquired Company, or any of the assets owned
or used by any Acquired Company, is or has been subject which
continues in force regardless of the date such Judgment was issued.
45
3.20 LEGAL PROCEEDINGS.
Section 3.20 of the Company Disclosure Schedule sets forth an accurate and
complete list of all pending Proceedings:
(a) by or against any Acquired Company or that, to the Knowledge of the
Company, otherwise relate to or may directly affect the business of
any Acquired Company or any of the properties or assets owned,
leased or operated by any Acquired Company;
(b) to the Company's Knowledge, by or against any of the directors or
officers of the Acquired Companies in their capacities as such; or
(c) that challenge, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement.
To the Company's Knowledge, no other such Proceeding has been threatened,
and no event has occurred or circumstance exists that is reasonably likely to
give rise to or serve as a basis for the commencement of any such Proceeding.
The Company has delivered or made available to the Purchaser and the Parent
accurate and complete copies of all pleadings, correspondence, audit response
letters and other documents relating to such Proceedings. Such Proceedings may
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.21 CUSTOMERS AND SUPPLIERS.
Section 3.21 of the Company Disclosure Schedule lists the Acquired
Companies' ten (10) largest customers and ten (10) largest suppliers (measured
in each case by dollar volume of purchases or sales during the most recently
completed fiscal year of the Company), the dollar amount of purchases or sales
and any agreed upon discounts which each listed customer or supplier represented
during such fiscal year and identifies each material supplier to the Acquired
Company that is the sole supplier. Except as set forth in Section 3.21 of the
Company Disclosure Schedule, no customer or supplier so listed has indicated
within the past 12 months that it will stop or decrease the rate of its
transactions, or otherwise materially and adversely change its business
relationship, with any Acquired Company.
3.22 PRODUCT WARRANTY.
Accurate and complete copies of the standard terms and conditions of sale
or lease for each Acquired Company (containing applicable guaranty, warranty and
indemnity provisions) have been made available to the Purchaser and the Parent.
Except as set forth in Section 3.22 of the Company Disclosure Schedule, no
product manufactured, sold, leased or delivered by any Acquired Company is
subject to any guaranty, warranty or other indemnity that extends beyond five
(5) years from the date of granting the applicable guaranty, warranty or other
indemnity. Each product manufactured, sold, leased or delivered by any Acquired
Company at all times has been in conformity in all material respects with all
applicable contractual commitments and all express and implied warranties, and
no Acquired Company has any Liability (and, to the Knowledge of the Company, no
facts or circumstances exist that could reasonably be expected to give rise to
any Proceeding, or material claim or demand against any of them giving rise to
any Liability) for replacement or repair thereof or other material damages in
connection therewith, subject only to the reserve for product warranty claims
set forth in the corresponding line item on the Balance Sheet, as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Acquired Companies.
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3.23 PRODUCT LIABILITY.
No Acquired Company has any Liability (and, to the Knowledge of the
Company, no facts or circumstances exist that could reasonably be expected to
give rise to any Proceeding, or material claim or demand against any of them
giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession or use of any product
manufactured, sold, leased or delivered by any Acquired Company.
3.24 INSURANCE.
Section 3.24 of the Company Disclosure Schedule sets forth an accurate and
complete list of all insurance policies maintained by any Acquired Company, or
under which any Acquired Company has been the beneficiary of coverage at any
time within the past five years. Section 3.24 of the Company Disclosure Schedule
further sets forth an accurate and complete list of all claims asserted by the
Acquired Companies pursuant to any such insurance policies since March 31, 2003.
No Acquired Company has failed to give in a timely manner any notice of any
claim that may be insured under any certificate of insurance, binder or policy
and there are no outstanding claims which have been denied or disputed by the
insurer. The insurance policies listed in Section 3.24 of the Company Disclosure
Schedule (taken together) are appropriate to the Acquired Companies' operations,
properties and assets, in such amounts and against such risks as a customarily
carried and insured against by owners of comparable businesses, properties and
assets. No Acquired Company has ever maintained, established, sponsored,
participated in or contributed to any self-insurance program, retrospective
premium program or captive insurance program.
3.25 BROKERS OR FINDERS.
Except as set forth in Section 3.25 of the Company Disclosure Schedule, no
Acquired Company or any Person acting on behalf of any Acquired Company has
incurred any Liability to any Person for brokerage or finders' fees or agents'
commissions or other similar payment in connection with any of the transactions
contemplated by this Agreement.
3.26 COMPETITION ACT ASSETS AND REVENUES.
For the purposes of determining the application of the pre-merger filing
requirements of the Competition Act (Canada) to the transactions contemplated
hereby, as of March 31, 2006 the aggregate value of the assets in Canada of the
Company and the gross revenues from sales in and from Canada generated from
those assets determined in each case as prescribed in the Competition Act
(Canada) do not exceed $11,300,000 and $13,700,000 respectively.
3.27 INVESTMENT CANADA ACT ASSETS AND ACTIVITIES.
For the purposes of determining whether the transactions contemplated
hereby are reviewable under the Investment Canada Act (Canada), the aggregate
value of the assets of the Acquired Companies taken as a whole, determined as
prescribed in the Investment Canada Act (Canada), does not exceed $250 million
(CDN). None of the Acquired Companies is engaged in sensitive sector activity
identified in section 14.1(5) of the Investment Canada Act (Canada).
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3.28 DISCLOSURE.
No representation or warranty of the Company in this Agreement and no
statement in the Company Disclosure Schedule contains any material untrue
statement or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading. No notice given pursuant to Section 5.7 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading. The Company has no Knowledge of any fact that has specific
application to any Acquired Company (other than general economic or industry
conditions) and that may reasonably be expected to have a Company Material
Adverse Effect that has not been set forth in this Agreement, the Company
Disclosure Schedule or otherwise in writing to the Purchaser or the Parent.
3.29 DISCLOSURE SCHEDULE
The purpose of the Company Disclosure Schedule is to disclose matters that
may be relevant to the representations and warranties of the Company set forth
in this Article 3. The disclosure in any section or paragraph of the Company
Disclosure Schedule or the Purchaser Disclosure Schedule qualifies other
sections and paragraphs in this Agreement only to the extent it is clear by
appropriate cross-references that a given disclosure is applicable to such other
sections and paragraphs.
References to specific dollar amounts in this Article 3 are for
convenience of disclosure only and do not establish or imply a standard of
materiality or a standard for what is or is not in the usual and ordinary course
of business or any other standard for disclosure set forth in this Agreement. No
implication shall be drawn that any condition, set of facts or other disclosure
set forth in the Company Disclosure Schedule is necessarily material or is
otherwise required to be disclosed or that the inclusion of such disclosure
establishes or implies a standard of materiality, a standard for what is or is
not in the usual and ordinary course of business or any other standard for
disclosure set forth in this Agreement or has resulted in or would be reasonably
expected to result in a Company Material Adverse Effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT
The Purchaser and the Parent jointly and severally represent and warrant
to the Company that except as set forth on the Purchaser Disclosure Schedule:
4.1 ORGANIZATION AND GOOD STANDING.
Each of the Purchaser and the Parent is a corporation duly incorporated,
validly existing and in good standing under the Laws of its jurisdiction of
organization.
4.2 AUTHORITY AND ENFORCEABILITY.
Each of the Purchaser and the Parent has all requisite corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which the Purchaser or the Parent, as the case may be, is a party
and to perform their respective obligations under this Agreement and each such
Ancillary Agreement. The execution, delivery and performance of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of each of the Purchaser and the Parent. This
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Agreement has been duly executed and delivered by the Purchaser and constitutes
the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally and by general
equitable principles. Upon the execution and delivery by the Purchaser of the
Ancillary Agreements to which the Purchaser is a party, such Ancillary
Agreements will constitute the legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their terms.
This Agreement has been duly executed and delivered by the Parent and
constitutes the legal, valid and binding obligation of the Parent, enforceable
against the Parent in accordance with its terms. Upon the execution and delivery
by the Parent of the Ancillary Agreements to which the Parent is a party, such
Ancillary Agreements will constitute the legal, valid and binding obligations of
the Parent, enforceable against the Parent in accordance with their terms.
4.3 NO CONFLICT.
Neither the execution, delivery and performance of this Agreement by the
Purchaser or by the Parent, nor the consummation by the Purchaser or the Parent
of the transactions contemplated by this Agreement, will:
(a) directly or indirectly (with or without notice, lapse of time or
both), conflict with, result in a breach or violation of, constitute
a default (or give rise to any right of termination, cancellation,
acceleration, suspension or modification of any obligation or loss
of any benefit) under, constitute a change in control under, result
in any payment becoming due under, or result in the imposition of
any Encumbrance on any of the properties or assets of the Purchaser
or the Parent under:
(i) the certificate of incorporation or by-laws of the Purchaser
or the Parent or any resolution adopted by the stockholders or
board of directors of the Purchaser or the Parent;
(ii) any Governmental Authorization or Contract to which the
Purchaser or the Parent is a party or by which the Purchaser
or the Parent is bound or to which any of their respective
properties or assets is subject; or
(iii) any Law or Judgment applicable to the Purchaser or the Parent
or any of their respective properties or assets; or
(iv) require the Purchaser or the Parent to obtain any consent,
waiver, approval, ratification, permit, license, Governmental
Authorization or other authorization of, give any notice to,
or make any filing or registration with, any Governmental
Authority or other Person.
4.4 LEGAL PROCEEDINGS.
There is no pending Proceeding that has been commenced against the
Purchaser or the Parent and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the Knowledge of the Purchaser
and the Parent, no such Proceeding has been threatened.
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4.5 PAYMENT OF PURCHASE PRICE.
The Purchaser has or will have, at the applicable time, sufficient cash to
enable it to pay the Purchase Price as contemplated in this Agreement. The
Parent shall take all necessary steps to ensure that the Purchaser has or will
have, at the applicable time, sufficient cash to enable it to pay the Purchase
Price and the Parent shall cause the Purchaser to pay the Purchase Price in
accordance with the terms of this Agreement, the Plan of Arrangement and the
Indemnification and Escrow Agreement.
4.6 OWNERSHIP OF THE PURCHASER.
The Parent is an Affiliate of the Purchaser.
4.7 WTO INVESTOR.
The Purchaser and the Parent are each a "WTO Investor" within the meaning
of the Investment Canada Act (Canada).
4.8 BROKERS OR FINDERS.
Except as set forth in Section 4.8 of the Purchaser Disclosure Schedule,
neither the Purchaser, the Parent nor any Person acting on its or their behalf
has incurred any Liability to any Person for brokerage or finders' fees or
agents' commissions or other similar payment in connection with any of the
transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS
5.1 ACCESS AND INVESTIGATION.
From the date of this Agreement until the Effective Time or the
termination of this Agreement in accordance with its terms, and upon reasonable
advance notice from the Purchaser, the Company will and will cause each of its
Subsidiaries to permit the Purchaser and the Parent and their respective
representatives, without interference to the ordinary conduct of business, to
have reasonable access during normal business hours to all of its properties,
books, Contracts, personnel and records as the Purchaser or the Parent may
reasonably request (subject to any confidentiality agreements or covenants
relating to any such books, Contracts and records). The Company shall furnish to
the Purchaser and the Parent and their respective representatives all other
information concerning its business, properties, assets and personnel as the
Purchaser or the Parent may reasonably request (subject to any confidentiality
agreements or covenants relating to any such other information). Notwithstanding
the foregoing, the Acquired Companies shall not be required to disclose any
information, records, files or other data to the Purchaser and the Parent and
their respective representatives where prohibited by applicable Laws.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES.
(a) From the date of this Agreement until the Closing or the termination
of this Agreement in accordance with its terms, except with the
prior written consent of the Purchaser to any deviation therefrom or
with respect to any transactions or other events expressly required,
contemplated or permitted by this Agreement or the Plan of
Arrangement, the Company will, and will cause each of its
Subsidiaries to:
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(i) conduct its business only in the ordinary course of business
consistent with past practice;
(ii) use its reasonable best efforts to preserve and protect its
present business organization, assets, employment
relationships, and relationships with customers, strategic
partners, suppliers, distributors, landlords and others doing
business with it;
(iii) confer with representatives of the Purchaser concerning
operational matters of a material nature; and
(iv) otherwise report periodically to representatives of the
Purchaser concerning the status of its business, operations
and finances.
(b) Without limiting the generality of Section 5.2(a), except with the
prior written consent of the Purchaser, not to be unreasonably
withheld, or except as otherwise expressly required, contemplated or
permitted by this Agreement or the Plan of Arrangement, the Company
will not, and will not cause or permit any of its Subsidiaries to:
(i) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or other property) in respect of
its capital shares (other than dividends and distributions by
a direct or indirect wholly-owned Subsidiary of the Company to
its parent);
(ii) split, combine or reclassify its capital or issue or authorize
the issuance of any securities in respect of, in lieu of or in
substitution for its shares or any of its other
securities(other than in connection with the exercise of
Company Options);
(iii) purchase, redeem or otherwise acquire any of its shares or any
other securities or any options, warrants or other rights to
acquire any such shares or securities;
(iv) otherwise engage in any practice, take any action, or enter
into any transaction of the type described in Section 3.10
(except for any such practice, action or transaction which is
in the ordinary course of business, is consistent with past
practice and does not involve an amount over $50,000) ; or
(v) purchase any insurance in excess of such insurance policies
held by the Acquired Companies on the date hereof.
(c) Without limiting the generality of Section 5.2(a) and 5.2(b), the
Company will not, and will not cause or permit any of its
Subsidiaries (to the extent that it has the power to do so) to,
accelerate the timing of any new releases for existing products or
engage in any activity of the type sometimes referred to as "trade
loading" or "channel stuffing" or engage in any other activity that
reasonably could be expected to result in an increase, temporary or
otherwise, in the demand for the products offered by the Acquired
Companies prior to the Closing Date, including sales of a product:
(i) with payment terms longer than terms customarily offered by an
Acquired Company for such product;
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(ii) at a greater discount from listed prices than customarily offered
for such product, other than pursuant to a promotion of a nature
previously used in the ordinary course of business of an Acquired
Company for such product;
(iii) at a price that does not give effect to any general increase in the
list price for such product publicly announced prior to the date of
the Agreement;
(iv) with shipment terms more favourable to the customer than shipment
terms customarily offered by an Acquired Company for such product to
such customer; or
(v) in conjunction with other material benefits to the customer not
previously offered in the ordinary course of business to such
customer.
5.3 CONSENTS AND FILINGS; REASONABLE EFFORTS.
Each of the Parties will, and the Company will cause (to the extent
permitted by applicable Laws) each of its Subsidiaries to, use their respective
reasonable best efforts:
(a) to take promptly, or cause to be taken, all such actions (including
actions after the Closing) and to do promptly, or cause to be done,
all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement; and
(b) as promptly as practicable after the date of this Agreement, to seek
all Governmental Authorizations from, give all notices to, and make
all filings with, all Governmental Authorities, and to seek all such
other consents, waivers, approvals and other authorizations from,
and give all other notices to, all other third parties, that are
necessary or advisable in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, including those
disclosed or required to be disclosed as exceptions to Section
3.3(b) on the Company Disclosure Schedule and Section 4.3(a) on the
Purchaser Disclosure Schedule.
5.4 COVENANTS OF THE COMPANY REGARDING THE ARRANGEMENT
The Company shall, and shall (to the extent permitted by applicable Laws)
cause its Subsidiaries to, perform all obligations necessary to be performed by
the Company or any of its Subsidiaries under this Agreement, co-operate with
Purchaser in connection therewith, and do all such other acts and things as may
be necessary, proper or advisable in order to consummate and make effective, as
soon as reasonably practicable, the transactions contemplated in this Agreement
and, without limiting the generality of the foregoing, the Company shall and
shall, where appropriate and to the extent permitted by applicable Laws, cause
its Subsidiaries to:
(a) use commercially reasonable efforts to obtain all necessary waivers,
consents and approvals required to be obtained by the Company or any
of the Subsidiaries (including consents listed in Section 3.3 of the
Company Disclosure Schedule) in connection with the Arrangement and
any bona fide restructuring or reorganization of the Parent, the
Purchaser and/or any of the Acquired Companies, including but not
limited to (i) an amalgamation of the Purchaser and the Company, and
(ii) an assignment of any Company
52
IP or Company Technology to an Affiliate of the Purchaser or the
Parent after the Effective Time; provided that, in connection with
obtaining any such waiver, consent or approval from any Person
(other than a Governmental Authority) with respect to any
transaction contemplated by this Agreement or any bona fide
restructuring or reorganization of the Parent, the Purchaser and/or
any of the Acquired Companies, including but not limited to (i) an
amalgamation of the Purchaser and the Company, and (ii) an
assignment of any Company IP or Company Technology to an Affiliate
of the Purchaser or the Parent after the Effective Time (1) without
the prior written consent of the Purchaser none of the Company or
any of its Subsidiaries shall pay or commit to pay to such Person
whose approval or consent is being solicited any cash or other
consideration to obtain such approval or consent or make any
commitment or incur any liability or other obligation due to such
Person in connection therewith and (2) none of Purchaser, the Parent
or their respective Affiliates shall be required to pay or commit to
pay to such Person whose approval or consent is being solicited any
cash or other consideration to obtain such approval or consent or
make any commitment or incur any liability or other obligation;
(b) use commercially reasonable efforts to effect all necessary
registrations, filings and submissions of information required by
Governmental Authorities from the Company or any of its Subsidiaries
relating to the Arrangement;
(c) seek all Regulatory Approvals relating to the Company or any of its
Subsidiaries which are necessary, proper or advisable under
applicable Law or required to be taken by any Governmental Authority
and, in doing so, keep the Purchaser reasonably informed as to the
nature of any application or submission proposed to be made and the
status of the Proceedings related to obtaining the Regulatory
Approvals, including providing the Purchaser with copies of all
related applications and notifications (other than confidential
information contained in such applications and notifications), in
draft form, in order for the Purchaser to provide its reasonable
comments thereon;
(d) use commercially reasonable efforts to defend all Proceedings
against the Company challenging or affecting this Agreement or the
consummation of the transactions contemplated hereby, provided
however that the Company shall not enter into any settlement, or
consent to any Judgment in respect of any such Proceeding without
the prior written consent of the Purchaser;
(e) with respect to the Technology Partnerships Canada Contribution
Agreement (Project No. 721 452407) between the Company and Her
Majesty the Queen in Right of Canada, as represented by the Minister
of Industry (the "Ministry"), dated July 2, 1997, as amended, (the
"TPC AGREEMENT") (i) at the direction of Purchaser, use commercially
reasonable efforts to obtain the consent of the Ministry under
subsection 2.3(a) of the TPC Agreement to the transactions
contemplated by this Agreement in a form reasonably satisfactory to
the Purchaser; (ii) at the direction of Purchaser, use commercially
reasonable efforts to obtain reasonable, demonstrable assurances
from the Ministry that prompt repayment following Closing of all
contribution amounts owing to the Ministry under the TPC Agreement
will result in a full release from the Ministry of any and all
claims against the Company, whether in respect of the TPC Agreement
or otherwise; and (iii) at the direction of Purchaser, use
commercially reasonable efforts to obtain the consent of the
Ministry to any bona fide restructuring or reorganization of the
Parent, the Purchaser and/or any of the Acquired Companies,
including but not limited to (1) an
53
amalgamation of the Purchaser and the Company, and (2) an assignment
of any Company IP or Company Technology to an Affiliate of the
Purchaser or the Parent after the Effective Time; and
(f) not less than two (2) Business Days prior to the Closing Date,
provide the Purchaser with any additions to Schedule C to the
Indemnification and Escrow Agreement, to reflect any additional
Exercising Shareholders (as defined in the Indemnification and
Escrow Agreement).
5.5 COVENANTS OF THE PURCHASER AND THE PARENT REGARDING THE PERFORMANCE OF
OBLIGATIONS
The Purchaser and the Parent shall, and shall cause their respective
Subsidiaries to, perform all obligations required or desirable to be performed
by the Purchaser, the Parent or any of the Purchaser's or the Parent'
Subsidiaries under this Agreement, co-operate with the Company in connection
therewith, and do all such other acts and things as may be necessary or
desirable in order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated in this Agreement and, without
limiting the generality of the foregoing, the Purchaser and the Parent shall and
where appropriate shall cause their respective Subsidiaries to:
(a) seek all Regulatory Approvals relating to the Purchaser, the Parent
or any of their respective Subsidiaries which are necessary, proper
or advisable under applicable Law or required to be taken by any
Governmental Authority and, in doing so, keep the Company reasonably
informed as to the status of the Proceedings related to obtaining
the Regulatory Approvals, including providing the Company with
copies of all related applications and notifications in draft form
(other than confidential information contained in such applications
and notifications), in order for the Company to provide its
reasonable comments thereon;
(b) use commercially reasonable efforts to effect all necessary
registrations, filings and submissions of information required by
Governmental Authorities from the Purchaser, the Parent or any of
their respective Subsidiaries relating to the Arrangement;
(c) use commercially reasonable efforts to defend all Proceedings
against the Purchaser or the Parent challenging or affecting this
Agreement or the consummation of the transactions contemplated
hereby; and
(d) provide all such information and documentation relating to the
Purchaser and the Parent as may be reasonably requested by the
Company in connection with, and solely for the purpose of, the
preparation of the Circular.
Furthermore, without limiting the generality of the foregoing, the Parent
covenants to the Company that it will cause the Purchaser to perform and observe
all obligations required to be performed or observed by the Purchaser under this
Agreement and the transactions contemplated herein.
5.6 MUTUAL COVENANTS
Each of the Parties covenants and agrees that, except as otherwise
contemplated in this Agreement, during the period from the date of this
Agreement until the earlier of the Effective Time and the time that this
Agreement is terminated in accordance with its terms:
54
(a) it shall, and shall cause its Subsidiaries to, use reasonable best
efforts to satisfy (or cause the satisfaction of) the conditions
precedent to its obligations hereunder as set forth in Article 6 to
the extent the same is within its control and to take, or cause to
be taken, all other action and to do, or cause to be done, all other
things necessary, proper or advisable under all applicable Laws to
consummate the Arrangement and the transactions contemplated hereby
and thereby, including using its reasonable best efforts to: (i)
oppose, lift or rescind any injunction or restraining order against
it or other order or action against it seeking to stop, or otherwise
adversely affecting its ability to complete the Arrangement; and
(ii) co-operate with the other Party in connection with the
performance by it and its Subsidiaries of their obligations
hereunder. Subject to the terms and conditions herein provided, none
of the Parties shall knowingly take or cause to be taken any action
which would reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated hereby or
materially change the business operations or financial condition of
the Company (other than such actions as are specifically
contemplated under or permitted by this Agreement or the Plan of
Arrangement); and
(b) it shall not take any action, refrain from taking any commercially
reasonable action, or permit any action to be taken or not taken,
which is inconsistent with this Agreement or which would reasonably
be expected to significantly impede the consummation of the
Arrangement except as permitted by this Agreement.
5.7 NOTIFICATION.
From the date of this Agreement until the Closing, each of the Parties
will give prompt notice to the other Parties of:
(a) the occurrence, or non-occurrence, of any event, the occurrence or
non-occurrence of which would reasonably be expected to cause any
representation or warranty of such Party contained in this Agreement
to be untrue or inaccurate, in each case at any time from and after
the date of this Agreement until the Closing; and
(b) any failure to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such Party under this
Agreement.
From the date of this Agreement until the Closing, the Company will give
prompt notice to the Purchaser and the Parent upon the occurrence of any
circumstance giving rise to a Company Material Adverse Effect. No notification
pursuant to this Section 5.7 will be deemed to amend or supplement the Company
Disclosure Schedule or Purchaser Disclosure Schedule, as the case may be,
prevent or cure any misrepresentation, breach of warranty or breach of covenant,
or limit or otherwise affect any rights or remedies available to the Party
receiving notice, including pursuant to Section 8.2 or Article 10 or
indemnification pursuant to the Indemnification and Escrow Agreement.
5.8 CONFIDENTIALITY.
From the date of this Agreement until the Closing, the Parties agree to be
bound by and comply with the provisions set forth in the Confidentiality
Agreement between the Company and the Purchaser dated April 3, 2006 (the
"CONFIDENTIALITY AGREEMENT"). From and after the Closing, the confidentiality
obligations of the Purchaser and the Parent under the Confidentiality Agreement
will terminate with respect to all Information.
55
5.9 PUBLIC ANNOUNCEMENTS.
Subject to Section 2.6, any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated by this Agreement
will be issued at such time and in such manner as the Purchaser determines after
consultation with the Company. The Purchaser and the Company will consult with
each other concerning the timing and manner by which the employees, customers,
suppliers and others having dealings with the Acquired Companies will be
informed of the transactions contemplated by this Agreement, and the Purchaser
has the right to be present for any such communication.
5.10 RESTRICTED STOCK AND OPTIONS.
On the Closing Date, and subject to complying with all applicable Laws,
the Parent shall grant to the employees of the Company listed on Section 5.10 of
the Purchaser Disclosure Schedule, restricted stock units and/or options, in
accordance with the Parent's Stock Option Plan for Convedia Employees (the
"AWARDS"). The aggregate value of the restricted stock units and/or options
granted to employees of the Company listed on Section 5.10 of the Purchaser's
Disclosure Schedule shall be no less than $5,000,000 based on the Black-Scholes
valuation (using the assumptions generally used by the Parent to value its
options) of the options five trading days prior to the Closing Date and based on
the closing price of the Parent's common stock on the NASDAQ Global Select
Market on the fifth trading day prior to the Closing Date. The options granted
to such employees shall be at an exercise price equal to the closing price of
the common stock of the Parent last reported on the NASDAQ Global Select Market
on the Closing Date. With respect to any options granted to such employees, one
third of the total option shares subject to the option shall vest and first
become exercisable on the first anniversary of the Closing Date, and thereafter
an additional 1/36th of the total option shares subject to the option shall vest
and become exercisable in equal monthly increments over the next 24 months, with
all option shares subject to the option becoming fully exercisable on the third
anniversary of the Closing Date. With respect to any restricted stock units
granted to such employees, the restrictions associated with the right to receive
one third of the number of shares of common stock of the Parent subject to such
grant of restricted stock units shall lapse on the first anniversary of the
Closing Date, and the restrictions associated with the right to receive an
additional one third of the number of shares of common stock of the Parent
subject to such grant of restricted stock units shall lapse on each succeeding
anniversary thereof such that all restrictions relating to such rights to
receive shares of common stock of Ranger are fully lapsed on the third
anniversary of the Closing Date.
5.11 UNAUDITED MONTHLY STATEMENTS.
Until the Effective Time, the Company will cause to be prepared (and
furnish to the Purchaser and the Parent) as promptly as possible (and in any
event before the 15th day of the following month) on a monthly basis unaudited
consolidated balance sheets as of the end of the previous calendar month, and
the related unaudited consolidated statements of operations, statements of
shareholders' equity and statements of cash flows for the respective one-month
periods (such balance sheets, and related statements being collectively referred
to in this Agreement as the "UNAUDITED MONTHLY STATEMENTS"). The Unaudited
Monthly Statements will be prepared from the books and records of the Company
and will fairly present, in all material respects, the consolidated financial
position, results of operations and changes in cash flows of the Company and its
consolidated Subsidiaries as of and for the respective time periods in
accordance with internal Company accounting methods and standards currently
used.
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5.12 STRUCTURE CHANGES.
In the event that the Court issues any order (including the Interim Order
or Final Order), ruling, decision or decree, or takes any action of any kind
whatsoever, or refuses to take any action which is contemplated by this
Agreement to be taken by it in connection with the implementation of the
transactions contemplated hereby, which is inconsistent with the structure of
the transactions contemplated hereby or is not in accordance with the terms set
forth in this Agreement or the Plan of Arrangement, the Purchaser shall have the
right to propose an alternative structure for the acquisition of all of the
outstanding Shares, Company Options and other securities of the Company which
will result in all of the Company Securityholders being, as nearly as
practicable and in all material respects, in the same economic position, or in
better economic positions, as they would have been if the structure provided
herein for the transactions contemplated hereby had been implemented, and which
shall not be materially detrimental to the Company, and the Parties shall amend
this Agreement and the Plan of Arrangement to the extent necessary to reflect
such changes in the proposed structure, and to implement the transactions
contemplated hereby as so amended. For greater certainty, any amendment of this
Agreement or the Plan of Arrangement which provides any additional right to any
Company Securityholder, including but not limited to (a) the provision of
dissent rights to any or all Company Securityholders; (b) the provision of
notice with respect to the Company Meeting which is in excess of the notice
requirements in the articles and bylaws of the Company; (c) the extension of the
time period for the extinction of rights of any holder of Shares or Company
Options under Section 5.3 of the Plan of Arrangement; and (d) the provision of
class voting rights to any group of Company Securityholders, shall be deemed to
result in all of the Company Securityholders being, as nearly as practicable and
in all material respects, in the same economic position, or in better economic
positions, as they would have been if the structure provided herein for the
transactions contemplated hereby had been implemented, and shall be deemed to
not be materially detrimental to the Company.
5.13 FURTHER ACTIONS.
Subject to the other express provisions of this Agreement, upon the
reasonably request of any Party, the other Parties will:
(a) furnish to the requesting Party any additional information;
(b) execute and deliver, at their own expense, any other documents; and
(c) take any other actions,
as may be necessary or as the requesting Party may reasonably require to more
effectively carry out the intent of this Agreement and the transactions
contemplated by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO THE OBLIGATION OF THE PURCHASER.
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of or compliance
with, on or before the Effective Time, of each of the following conditions (any
of which may be waived by the Purchaser, in whole or in part):
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(a) all of the Company's representations and warranties set forth in
this Agreement must have been true and correct in all material
respects as of the date of this Agreement and must be true and
correct in all respects as of the Closing as though made on the
Closing, except (i) to the extent representations and warranties are
specifically made as of a particular date, in which case those
representations and warranties must be true and correct as of the
specified date, (ii) as such representations and warranties may be
affected by the taking of any action required by this Agreement, and
(iii) for inaccuracies in such representations or warranties the
circumstances giving rise to which, individually or in the
aggregate, do not constitute and could not reasonably be expected to
have a Company Material Adverse Effect (disregarding any materiality
or Company Material Adverse Effect qualification contained in any
such representation or warranty), and except for the representations
and warranties set forth in Sections 3.2, 3.4 and 3.5, each of which
must have been true and correct in all respects as of the date of
this Agreement and must be true and correct in all respects as of
the Closing as though made on the Closing;
(b) all of the covenants and obligations that the Acquired Companies are
required to perform or comply with under this Agreement on or before
the Closing Date must have been duly performed and complied with in
all material respects (with materiality being measured individually
and on an aggregate basis with respect to all breaches of covenants
and obligations);
(c) each of the Governmental Authorizations and consents identified in
Section 3.3 of the Company Disclosure Schedule as a Governmental
Authorization or consent must have been obtained and must be in full
force and effect.
(d) there must not be in effect, published, introduced or otherwise
formally proposed any Law or Judgment, and there must not be pending
or have been commenced or threatened any Proceeding, that in any
case could:
(i) challenge or seek to prohibit, prevent, make illegal, delay or
otherwise interfere with the actions, steps or proceedings in
or the consummation of any of the transactions contemplated by
this Agreement or any of the Ancillary Agreements;
(ii) cause any of the transactions contemplated by this Agreement
or any of the Ancillary Agreements to be rescinded following
consummation; or
(iii) affect adversely the right of the Purchaser to own the Shares
or to control the Company and its Subsidiaries;
(e) since the date of this Agreement, there must not have been any
change, occurrence or event that has had or could reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect;
(f) the Company must have delivered or caused to be delivered:
(i) each document that Section 2.7(a) requires it to deliver;
(ii) an opinion of Gowling Xxxxxxx Xxxxxxxxx LLP, counsel to the
Company, dated the Closing Date in a form satisfactory to the
Purchaser acting reasonably; and
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(iii) such other documents, instruments and certificates as the
Purchaser may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement;
(g) the Arrangement shall have been approved at the Company Meeting by
not less than the Required Vote;
(h) the Company shall have:
(i) repaid all amounts outstanding, together with any accrued and
unpaid interest, under the Loan Agreement between the Company
and Comerica Bank dated May 12, 2005; and
(ii) delivered evidence reasonably satisfactory to the Purchaser
that the general security interest granted to Comerica Bank
under the General Security Agreement between the Company and
Comerica Bank dated May 12, 2005 has been or will be
discharged;
(i) each of individuals set forth on Schedule B attached hereto shall
have entered into a Key Employee Agreement with the Company; and
(j) the Interim Order and the Final Order shall each have been obtained
in form and on terms reasonably satisfactory to the Purchaser, and
shall not have been set aside or modified in a manner unacceptable
to the Purchaser except as permitted under Section 5.12 of this
Agreement or Article 6 of the Plan of Arrangement.
6.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY.
Subject to Section 5.12, the obligation of the Company to consummate the
transactions contemplated by this Agreement is subject to the satisfaction of or
compliance with, on or before the Effective Time, of each of the following
conditions (any of which may be waived by the Company, in whole or in part):
(a) all of the Purchaser's and the Parent's representations and
warranties set forth in this Agreement must have been true and
correct in all material respects as of the date of this Agreement
and must be true and correct in all respects as of the Closing as
though made on the Closing, except (i) to the extent representations
and warranties are specifically made as of a particular date, in
which case those representations and warranties must be true and
correct as of the specified date, (ii) as such representations and
warranties may be affected by the taking of any action required by
this Agreement, and (iii) for inaccuracies in such representations
or warranties the circumstances giving rise to which, individually
or in the aggregate, do not constitute and could not reasonably be
expected to have or result in any material adverse change, event,
circumstance or development with respect to, or material adverse
effect on, the business, assets, properties, condition (financial or
otherwise), results of operations or business prospects of the
Purchaser or the Parent, or that affect the Purchaser's or the
Parent's ability to operate the business of the Purchaser and the
Parent from and after the Closing Date, that has occurred or is
reasonably likely to occur (a "PURCHASER MATERIAL ADVERSE EFFECT")
(disregarding any Purchaser Material Adverse Effect qualification
contained in any such representation or warranty), and except for
the representations and warranties set forth in Sections 4.2 and
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4.5, each of which must have been true and correct in all respects
as of the date of this Agreement and must be true and correct in all
respects as of the Closing as though made on the Closing;
(b) all of the covenants and obligations that the Purchaser or the
Parent are required to perform or comply with under this Agreement
on or before the Closing Date must have been duly performed and
complied with in all material respects (with materiality being
measured individually and on an aggregate basis with respect to all
breaches of covenants and obligations);
(c) each of the Governmental Authorizations identified in Section 3.3 of
the Company Disclosure Schedule as a Governmental Authorization must
have been obtained and must be in full force and effect.
(d) there must not be (i) in effect, published, introduced or otherwise
formally proposed any Law that could challenge or seek to prohibit,
prevent, make illegal, or otherwise interfere with the actions,
steps or proceedings in or the consummation of any of the
transactions contemplated by this Agreement or any of the Ancillary
Agreements; or (ii) in effect any Judgment that would prohibit or
make illegal, the consummation of any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements;
(e) the Purchaser and the Parent must have delivered or caused to be
delivered to the Company:
(i) each document that Section 2.7(b) requires it to deliver; and
(ii) such other documents, instruments and certificates as the
Company may reasonably request for the purpose of consummating
the transactions contemplated by this Agreement;
(f) the Arrangement shall have been approved at the Company Meeting by
not less than the Required Vote; and
(g) the Interim Order and the Final Order shall each have been obtained
in form and on terms reasonably satisfactory to the Company, and
shall not have been set aside or modified in a manner unacceptable
to the Company except as permitted under Section 5.12 of this
Agreement or Article 6 of the Plan of Arrangement.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 NOTICE AND CURE PROVISIONS
(a) Each Party will give prompt notice to the other Parties of the
occurrence, or failure to occur, at any time from the date hereof
until the earlier to occur of the termination of this Agreement and
the Effective Time of any event or state of facts which would
require notice under Section 5.7.
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(b) No Party may elect not to complete the transactions contemplated
hereby pursuant to the conditions set forth in Section 6.1 or 6.2 or
exercise any termination right arising therefrom unless forthwith
and in any event prior to the Effective Time, the Party intending to
rely thereon has delivered a written notice to the other Party
specifying in reasonable detail all breaches of covenants,
representations and warranties or other matters which the Party
delivering such notice is asserting as the basis for the
non-fulfillment or the applicable condition or termination right, as
the case may be. If any such notice is delivered, provided that a
Party is proceeding diligently to cure such matter and such matter
is capable of being cured (except matters arising out of the failure
of the Company to make appropriate disclosure), no Party may
terminate this Agreement until the expiration of a period of 5
Business Days from such notice, if such matter has not been cured by
such date. If such notice has been delivered prior to the date of
the Company Meeting, such meeting shall, unless the Parties agree
otherwise, be postponed or adjourned until the expiry of such
period. If such notice has been delivered prior to the filing of the
Articles of Arrangement with the Director, such filing shall be
postponed until two Business Days after the expiry of such period.
(c) Each Party shall promptly notify the other party of (i) any
communication from any Person alleging that the consent of such
Person (or another Person) is or may be required in connection with
the transactions contemplated by this Agreement (and the response
thereto from such Party, its Subsidiaries or its representatives),
(ii) any material communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement (and
the response thereto from such Party, its Subsidiaries or its
representatives), and (iii) any material Proceedings threatened or
commenced against or otherwise affecting such Party or any of its
Subsidiaries that are related to the transactions contemplated by
the Agreement.
7.2 NON-SOLICITATION
During the term of this Agreement, the Company shall not, directly or
indirectly, and shall not authorize, permit or condone any officer, director,
employee, representative or agent of the Company or any of its Subsidiaries
directly or indirectly to (i) solicit, initiate, induce, facilitate or encourage
(including by way of furnishing information or entering into any form of
agreement, arrangement or understanding) the initiation of any inquiries or
making of any proposals or announcements regarding an Acquisition Proposal, (ii)
participate in any discussions or negotiations with any Person (other than the
Parent, the Purchaser and their respective Affiliates and representatives)
regarding an Acquisition Proposal, (iii) withdraw, amend or modify in a manner
adverse to the Purchaser, the approval of the board of directors of the Company
of the Arrangement, (iv) approve, endorse or recommend, or propose publicly to
approve, endorse or recommend, any Acquisition Proposal, or (v) accept or enter
into any agreement, understanding, arrangement or Contract in respect of an
Acquisition Proposal. The Company shall, and shall cause the officers,
directors, employees, representatives and agents of the Company and its
Subsidiaries to, immediately terminate any existing solicitations, discussions
or negotiations with any Person (other than the Purchaser and the Parent) that
has made, indicated any interest to make or may reasonably be expected to make,
an Acquisition Proposal.
The Company shall promptly (and in any event within 48 hours of receipt by
the Company) notify the Parent, immediately orally and thereafter in writing, of
any Acquisition Proposal or inquiry received after the date hereof (whether or
not relating to any Acquisition Proposal or inquiry received prior to the date
hereof) that could reasonably be expected to lead to an Acquisition Proposal, in
each case received after the date hereof, of which any of its directors,
officers, Financial Advisor or other agents are
61
or become aware, or any amendments to the foregoing, or any request for
non-public information relating to the Company or any of its Subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any of its Subsidiaries by any Person in connection
with an Acquisition Proposal and a description of the material terms and
conditions of any such Acquisition Proposal or inquiry. The Company shall keep
the Parent informed of any change to the material terms of any such Acquisition
Proposal or inquiry.
7.3 RIGHT TO MATCH
(a) The Company covenants and agrees that for a period of six (6) months
after the termination of this Agreement pursuant to Section 8.2(b)
or 8.2(c) it will not accept, approve, recommend or enter into any
agreement, understanding, arrangement or Contract in respect of an
Acquisition Proposal unless:
(i) the Company has promptly (and in any event within 48 hours of
receipt by the Company) notified the Parent, orally and
thereafter in writing, of any Acquisition Proposal or inquiry
received (whether or not relating to any Acquisition Proposal
or inquiry received) that could reasonably be expected to lead
to an Acquisition Proposal, of which any of its directors,
officers, Financial Advisor or other agents are or become
aware, or any amendments to the foregoing, or any request for
non-public information relating to the Company or any of its
Subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or
any of its Subsidiaries by any Person in connection with an
Acquisition Proposal and a description of the material terms
and conditions of any such Acquisition Proposal or inquiry,
and thereafter the Company shall keep the Parent informed of
any change to the material terms of any such Acquisition
Proposal or inquiry; and
(ii) a period (the "RESPONSE PERIOD") of ten (10) Business Days
shall have elapsed from the date on which the Parent received
written notice from the board of directors of the Company that
the board of directors of the Company determined, subject only
to compliance with this Section 7.3, to accept, approve,
recommend or enter into a binding agreement to proceed with
the Acquisition Proposal.
(b) During the Response Period, the Purchaser and the Parent will have
right, but not the obligation, to offer to match the terms of the
Acquisition Proposal (the "MATCHING PROPOSAL"). The Company shall
enter into an agreement with the Purchaser and/or the Parent
implementing the Matching Proposal as soon as reasonably practicable
after the Company's receipt from the Purchaser or Parent of such
Matching Proposal.
(c) Each successive amendment to any Acquisition Proposal that results
in an increase in, or modification of, the consideration (or value
of such consideration) to be received by the holders of securities
of the Company shall constitute a new Acquisition Proposal for the
purposes of this Section 7.3 and the Purchaser and the Parent shall
be afforded a new Response Period in respect of each such
Acquisition Proposal.
7.4 TRANSACTION EXPENSES; ESTIMATED CLOSING BALANCE SHEET.
(a) Not less than three (3) Business Days prior to the Closing, the
Company shall prepare and deliver to the Purchaser and the Parent a
good faith written estimate of the Closing Date
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Transaction Expenses incurred (whether or not paid) by the Acquired
Companies as of the Closing Date, which shall indicate for each cost
or expense itemized therein the payee thereof. An invoice or account
from each applicable payee shall accompany the estimate, together
with a written statement that such Closing Date Transaction Expenses
are all of the Closing Date Transaction Expenses such third party
reasonably expects to be incurred by the Acquired Companies in
connection with the transactions contemplated by this Agreement;
provided that, notwithstanding the foregoing, the Closing Date
Transaction Expenses shall not include any fees or expenses incurred
by and that may become payable by the Company to the Financial
Advisor in respect of the payment of the Final Consideration.
(b) The Company shall also prepare and deliver to the Purchaser and the
Parent at least three (3) Business Days before the Closing Date an
unaudited consolidated balance sheet of the Acquired Companies
prepared on an estimated basis as of the close of business on the
Closing Date (the "ESTIMATED CLOSING BALANCE SHEET"). The Estimated
Closing Balance Sheet will be prepared in accordance with U.S. GAAP
in a manner consistent with the methods and practices used to
prepare the Balance Sheet. The Company will deliver with the
Estimated Closing Balance Sheet:
(i) a statement setting forth the Company's calculation of the Net
Working Capital on an estimated basis as of the close of
business on the Closing Date, based on the Estimated Closing
Balance Sheet (the "ESTIMATED NET WORKING CAPITAL"); and
(ii) a certification that the Estimated Closing Balance Sheet is
being delivered in good faith and pursuant to this Section 7.4
and fairly presents the Estimated Net Working Capital of the
Acquired Companies as of the Closing Date.
The statement setting forth the Company's calculation of the
Estimated Net Working Capital shall be acceptable to the Purchaser
and the Parent, acting reasonably.
7.5 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INJUNCTIVE
RELIEF
(a) All representations, warranties and covenants contained in this
Agreement on the part of each of the Parties shall survive the
Closing, the Effective Time and the payment of the Purchase Price.
There shall be no merger of any representation, warranty or covenant
set forth herein with any of the documents, instruments or
certificates required to be delivered at Closing or deemed to be
transferred pursuant to the Plan of Arrangement.
(b) The Parties agree that following Closing the sole and exclusive
remedy of any Party in respect of any misrepresentation,
incorrectness in or breach of any representation or warranty, or
breach of any covenant, by another Party or Parties shall be under
the Indemnification and Escrow Agreement.
(c) Nothing contained herein shall preclude a Party from seeking
injunctive relief to restrain any breach or threatened breach of the
covenants or agreements set forth in this Agreement or the
Confidentiality Agreement or otherwise to obtain specific
performance of any of such acts, covenants or agreements, without
the necessity of posting a bond or security in connection therewith.
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7.6 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
(a) From the Closing Date through the sixth anniversary of the Closing
Date, the Purchaser and the Parent shall cause the Company to
indemnify and hold harmless each Person who has been at any time
prior to the Closing Date, a director or officer of the Company or
any of its Subsidiaries (collectively, the "COMPANY INDEMNIFIED
PARTIES"), against all claims, losses, liabilities, damages,
judgments, fines and reasonable fees, costs and expenses, including
attorneys' fees and disbursements (collectively, "COSTS", incurred
in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the fact that the
Company Indemnified Party is or was an officer or director of the
Company or any of its Subsidiaries, whether asserted or claimed
prior to, at or after the Closing Date, to the fullest extent
permitted under the CBCA for officers and directors of such
corporations and to the extent required under the constating
documents of such company (or applicable legislation with respect to
any subsidiary).
(b) Subject to the next sentence, the Purchaser and the Parent shall
cause the Company to maintain, at no expense to the beneficiaries,
in effect for three years from the Closing Date the current policies
of the directors' and officers' liability insurance maintained by
the Company with respect to matters existing or occurring at or
prior to the Closing Date so long as the annual premium therefor
would not be in excess of 150% of the annual premium paid by the
Company in its most recent fiscal year, which premium is set forth
in Section 7.6(b) of the Company Disclosure Schedule (150% of such
annual premium, the "MAXIMUM PREMIUM"). If the Company's existing
insurance expires, is terminated or cancelled or cannot be renewed
during such three-year period or the annual premium therefor exceeds
the Maximum Premium, the Purchaser and the Parent shall cause the
Company to obtain such directors' and officers' liability insurance
as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on such
terms and conditions no less advantageous to the Company Indemnified
Parties than the Company's existing directors' and officers'
liability insurance or as favourable as is then available. The
provisions of this Section 7.6(b) shall be deemed to have been
satisfied if the Purchaser and the Parent, with the cooperation of
the Company, or the Company obtains an extension of the existing
policy, a run-off endorsement or other prepaid policies prior to the
Closing for purposes of this Section 7.6. Notwithstanding any other
provision of this Agreement or the Plan of Arrangement, any expenses
and premiums relating to the foregoing insurance policy or policies
(including any extension of the existing directors' and officers'
liability insurance policy, a run-off endorsement or other prepaid
policies obtained prior to the Closing as contemplated above) shall
not be treated as a Closing Date Transaction Expense or Post-Closing
Transaction Expense, to the extent previously approved by the
Purchaser.
7.7 POST-CLOSING COVENANTS
(a) Following the completion of the transactions contemplated by the
Arrangement Agreement and until the Final Consideration, if any, is
paid to the Company Securityholders in accordance with the Plan of
Arrangement and the Indemnification and Escrow Agreement (the
"EARN-OUT PERIOD"), the Purchaser and the Parent covenant and agree
to operate the business of the Acquired Companies in a manner
consistent with the
64
Purchaser's and the Parent's reasonable business judgment, but not
inconsistent with the covenants and agreements contained in this
Agreement.
(b) During the Earn-Out Period, the Purchaser and the Parent will act in
good faith in connection with the operation of the business of the
Acquired Companies. In that regard, the Purchaser and the Parent
will:
(i) keep books and records in relation to the business of the
Acquired Companies which are accurate and complete in all
material respects, so as to allow for the calculation and
verification of Actual Gross Profit Dollars (as such term is
defined in the Plan of Arrangement); and
(ii) consult in good faith with management of the business of the
Acquired Companies in connection with the development of an
amended management plan based on the Management Plan of the
Acquired Companies, but with all such revisions which may be
reasonably necessary or desirable so as to leverage the
combination of the business of the Acquired Companies with the
businesses of the Parent and its Affiliates and to realize
potential efficiencies that arise therefrom, with a view to
achieving the amount of Final Consideration.
(c) The Parties agree that any changes in the U.S. GAAP accounting rules
after the Effective Date shall not affect the calculation of the
amount of the Actual Gross Profit Dollars or Final Consideration
and, for greater certainty, the calculation of the Actual Gross
Profit Dollars and Final Consideration shall be made in accordance
with the U.S. GAAP accounting rules, regulations and standards in
effect on the Effective Date applied in a manner consistent with the
past practice of the Acquired Companies.
(d) In the event of a Sale of the Parent, the Purchaser and/or any of
the Acquired Companies during the Earn-Out Period, the Parent and
the Purchaser agree that, at the discretion of the Representative,
the Final Consideration shall be deemed to equal $10,000,000 and
upon the closing of such Sale transaction or at any time thereafter
the Representative may declare the Final Consideration to be
immediately due and payable, and such amount shall forthwith become
due and payable in accordance with the payment regime set forth in
the Indemnification and Escrow Agreement. For purposes of the
foregoing, "SALE" shall mean, in respect of any one or more of the
Parent, the Purchaser and/or any of the Acquired Companies: (i) a
voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of the relevant corporation; or (ii) the sale of all or
substantially all of the corporation's property and assets or the
acquisition of the corporation by another entity (including, without
limitation, any reorganization, merger, amalgamation, arrangement or
consolidation) resulting in the exchange of all of the outstanding
shares of the corporation for securities issued or other
consideration paid, by the acquiring entity or any affiliate thereof
in a single transaction or a series of related transactions (except
for a transaction or series of related transactions after the
consummation of which the shareholders of the corporation own at
least 51% of the voting securities of the surviving corporation or
its parent corporation or a subsidiary thereof). For greater
certainty, a "Sale" shall not include any bona fide restructuring or
reorganization of the Parent, the Purchaser and/or any of the
Acquired Companies, including but not limited to an amalgamation of
the Purchaser and the Company after the Effective Time.
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ARTICLE 8
TERM, TERMINATION, AMENDMENT AND WAIVER
8.1 TERM
This Agreement shall be effective from the date hereof until the
termination of this Agreement in accordance with its terms.
8.2 TERMINATION
(a) Termination By Mutual Consent. This Agreement maybe terminated at
any time prior to the Effective Time by written consent of the
Parties.
(b) Termination By Any Party. This Agreement may be terminated by any
Party at any time prior to the Effective Time:
(i) if the Required Vote is not obtained at the Company Meeting
(or any adjournment or postponement thereof), except that the
right to terminate this Agreement under this clause (ii) shall
not be available to the Company if its failure to fulfill any
of its obligations under this Agreement has been the cause of,
or resulted in, the failure of the Required Vote to be
obtained at the Company Meeting; or
(ii) if any Law makes the consummation of the Arrangement or the
transactions contemplated by this Agreement illegal or
otherwise prohibited, and such Law has become final and
nonappealable.
(c) Termination By the Purchaser and the Parent. This Agreement may be
terminated by the Purchaser or the Parent at any time prior to the
Effective Time:
(i) if (A) the board of directors of the Company shall have
withdrawn, amended or modified in a manner adverse to the
Purchaser and the Parent its approval or recommendation of the
Arrangement, or (B) any Person (other than the Purchaser or
any of its Affiliates or any existing Company Shareholder), or
group of Persons acting together in concert, shall have become
the beneficial owner of 33-1/3% or more of the outstanding
Shares (either on a primary or diluted basis);
(ii) subject to compliance with Section 7.1, if Purchaser and the
Parent are not in material breach of their respective
obligations under this Agreement and the Company breaches any
of its representations, warranties, covenants or agreements
contained in this Agreement, which breach would give rise to
the failure of a condition set forth in Section 6.1(a) or
Section 6.1(b);
(iii) if the Company Meeting is cancelled, adjourned or postponed
except as expressly permitted by this Agreement or agreed to
by the Purchaser in writing; or
(iv) if there has been any Company Material Adverse Change.
(d) Termination By the Company. This Agreement may be terminated by the
Company at any time prior to the Effective Time, subject to
compliance with Section 7.1, if the Company is not in material
breach of its obligations under this Agreement and the Purchaser or
the Parent
66
breaches any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would give rise
to the failure of a condition set forth in Section 6.2(a) or Section
6.2(b).
(e) Effect of Termination. If this Agreement is terminated in accordance
with the foregoing provisions of this Section 8.2, this Agreement
shall forthwith become void and of no further force or effect and no
Party shall have any further obligations hereunder except as
provided in Article 10, Section 5.12, Section 7.3, Section 7.5 and
in this Section 8.2(e) or under the Confidentiality Agreement or as
otherwise expressly contemplated hereby, and further provided that
neither the termination of this Agreement nor anything contained in
this Section 8.2 shall relieve any Party from any liability for any
fraud or willful misconduct. If this Agreement is terminated by a
Party because of the breach of this Agreement by another Party or
because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of the
other Party's failure to comply with its obligations under this
Agreement, the terminating Party's right to pursue all legal
remedies will survive such termination unimpaired.
(f) Automatic Termination. If the Effective Time has not occurred prior
to 5:00 p.m. (Vancouver time) on October 31, 2006, this Agreement
shall automatically terminate at 5:00 p.m. (Vancouver time) on
October 31, 2006, without any further act or formality required on
the part of any Person.
8.3 AMENDMENT
This Agreement and the Plan of Arrangement may, at any time and from time
to time before or after the holding of the Company Meeting but not later than
the Effective Time, be amended by mutual written agreement of the Parties. In
addition, the Plan of Arrangement may be amended as provided for therein. For
greater certainty, nothing in this Section 8.3 or in the Plan of Arrangement
shall affect or hinder the operation of Section 5.12 of this Agreement.
8.4 WAIVER
The Purchaser or the Parent may (i) extend the time for the performance of
any of the obligations or acts of the Company, (ii) waive compliance, except as
provided herein, with any of the Company's agreements or the fulfillment of any
conditions to its own obligations contained herein, or (iii) waive inaccuracies
in any of the Company's representations or warranties contained herein or in any
document delivered by the Company; provided, however, that any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of the Purchaser or the Parent and, unless otherwise provided in the
written waiver, will be limited to the specific breach or condition waived.
The Company may (i) extend the time for the performance of any of the
obligations or acts of the Purchaser or the Parent, (ii) waive compliance,
except as provided herein, with any of the Purchaser's or the Parent's
agreements or the fulfillment of any conditions to its own obligations contained
herein, or (iii) waive inaccuracies in any of the Purchaser's or the Parent's
representations or warranties contained herein or in any document delivered by
the Purchaser or the Parent; provided, however, that any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of the Company and, unless otherwise provided in the written waiver, will
be limited to the specific breach or condition waived.
67
No failure or delay by any party in exercising any right or remedy under
this Agreement or any of the documents delivered pursuant to this Agreement, and
no course of dealing between the parties, operates as a waiver of such right or
remedy, and no single or partial exercise of any such right or remedy precludes
any other or further exercise of such right or remedy or the exercise of any
other right or remedy.
ARTICLE 9
CERTAIN TAX MATTERS
9.1 TAX MATTERS
During the period from the date of this Agreement to the Effective Time,
the Company and its Subsidiaries shall:
(a) prepare and timely file all material Tax Returns required to be
filed by them before the Effective Time ("PRE-CLOSING Returns") in a
manner consistent, in all material respects, with past practice,
except as otherwise required by applicable Laws;
(b) fully and timely pay all Taxes due and payable in respect of such
Pre-Closing Returns that are so filed; and
(c) properly reserve (and reflect such reserve in their books and
records and financial statements) or pay any instalment or deposit
required, for all Taxes payable by them for which no Pre-Closing
Return is due prior to the Effective Time in a manner consistent
with past practice.
9.2 TAX ELECTIONS.
The Company will not, and will not cause or permit any Acquired Company
to, without the prior written consent of the Purchaser (which consent will not
be unreasonably withheld or delayed), make or revoke, or cause or permit to be
made or revoked, any Tax election pertaining to any Acquired Company or the
ownership of the Shares.
9.3 TRANSACTIONAL TAXES.
Notwithstanding any other provision of this Agreement, all transfer,
documentary, recording, notarial, sales, use, registration, stamp and other
similar Taxes or fees imposed by any taxing authority in connection with the
transactions contemplated by this Agreement will be borne by the Company
Securityholders. All necessary Tax Returns and other documentation with respect
to all such Taxes will be the responsibility of the Company Securityholders and
will be prepared and filed at their own expense and, if required by applicable
Law, the Purchaser will, and will cause its Affiliates to, join in the execution
of any such Tax Returns or other documentation.
9.4 CLEARANCE CERTIFICATES.
The Company will use commercially reasonable efforts to facilitate Company
Securityholders who are non-residents of Canada for purposes of the Canadian Tax
Act to obtain appropriate clearance certificates pursuant to Section 116 of the
Canadian Tax Act.
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9.5 WITHHOLDING TAX.
Notwithstanding any provision to the contrary contained herein, the
Company, the Purchaser, the Parent and the Depositary shall be entitled to
deduct and withhold from any consideration otherwise payable to any Company
Securityholder, such amounts as the Company, the Purchaser, the Parent or the
Depositary is required to deduct and withhold with respect to such payment under
the Canadian Tax Act, the Code or any provision of federal, provincial, state,
local or foreign tax Laws, in each case, as amended or succeeded. To the extent
that amounts are so withheld, such withheld amounts shall be treated for all
purposes as having been paid to the Company Securityholder in respect of which
such deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority.
The Purchaser and the Company Securityholders shall use commercially
reasonable efforts to as soon as reasonably practicable provide to the Escrow
Agent (as defined in the Indemnification and Escrow Agreement) or Depositary, as
applicable, such information or tax forms as the Escrow Agent or Depositary
reasonably requests in connection with its obligations under the appropriate tax
laws and/or regulations applicable in respect of withholding, backup withholding
and information reporting including, without limitation, tax identification
numbers (if any) for any Purchaser Indemnified Party (as defined in the
Indemnification and Escrow Agreement), the Representative and each of the
Company Securityholders and Forms W-9 or W-8. Any amount deducted or withheld
pursuant to section 116 of the Canadian Tax Act from any Company Securityholder
who is a non-resident of Canada or has not certified that he is resident in
Canada for income tax purposes (a "NON-RESIDENT HOLDER") shall be remitted
either (a) to the relevant taxing authority on the last business day of the
period within which remittance is required or (b) to such Non-Resident Holder
upon delivery by such Non-Resident Holder to the Purchaser of a clearance
certificate acceptable to the Purchaser, acting reasonably, issued pursuant to
section 116 of the Canadian Tax Act having a certificate limit not less than the
full amount of the consideration to be paid to such Non-Resident Holder pursuant
to the terms hereof, whichever shall first occur. Notwithstanding that the time
for remittance of amounts deducted or withheld in respect of any such
Non-Resident Holder has occurred without an acceptable clearance certificate
being provided to the Purchaser, if the Purchaser is provided with a letter
acceptable to the Purchaser, acting reasonably, from CRA advising that all or
any portion (the "PORTION") of the amounts deducted or withheld pursuant to
section 116 of the Canadian Tax Act in respect of such Non-Resident Holder is
not required to be remitted at that time, such Portion will continue to be held
in accordance with that letter until such a clearance certificate is provided or
until CRA requires the Portion to be remitted, whichever shall first occur.
9.6 TAX RETURNS
The Purchaser shall prepare and file all Tax Returns relating to the
Acquired Companies for Tax Periods ending after the Effective Time.
In the case of any Tax imposed upon or measured by income or receipts, to
the extent required, Taxes shall be apportioned between taxable periods ending
on or before the Effective Date and the portion of any Straddle Period (as
defined below) ending on the Effective Date (a "PRE-CLOSING TAX PERIOD") and
taxable periods beginning after the Effective Date and the portion of any
Straddle Period beginning after the Effective Date (a "POST-CLOSING TAX PERIOD")
on the basis of a closing of the books using the Company's and its Subsidiaries'
normal methods of accounting as determined under section 446 of the Code.
69
In the case of any Tax for any taxable period beginning before and ending
after the Effective Date (the "STRADDLE PERIOD") which is not imposed upon or
measured by income or receipts, to the extent required, the amount of such Tax
which is allocable to a Pre-Closing Tax Period shall be the amount of such Tax
for the entire taxable period multiplied by a fraction, the numerator of which
is the number of days in the portion of such taxable period ending on the
Effective Date and the denominator of which is the number of days in the entire
taxable period. The amount of such Tax which is allocable to the portion of the
tax period beginning after the Effective Date shall be the amount of Tax for the
entire taxable period less the amount of such Tax which is allocable to a
Pre-closing Tax Period.
The Purchaser shall prepare all U.S. Tax Returns consistent with the
proration of Taxes in this Section 9.6.
9.7 CLOSING DATE TAX RETURNS
For greater certainty, no Tax Return for any Acquired Company for any Tax
Period ending on or before the Effective Time which is not required to be filed
until after the Effective Time will be prepared or filed without the prior
written approval of the Purchaser and the Parent.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES
All notices and other communications under this Agreement must be in
writing and are deemed duly delivered when (a) delivered if delivered personally
or by nationally recognized overnight courier service (costs prepaid), (b) sent
by facsimile with confirmation of transmission by the transmitting equipment
(or, the first Business Day following such transmission if the date of
transmission is not a Business Day) or (c) received or rejected by the
addressee, if sent by certified mail, return receipt requested; in each case to
the following addresses or facsimile numbers and marked to the attention of the
individual (by name or title) designated below (or to such other address,
facsimile number or individual as a Party may designate by notice to the other
Parties):
If to the Company:
Convedia Corporation
0000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx, President
Fax No.: (000) 000-0000
with a copy (which will not constitute notice) to:
Gowling Xxxxxxx Xxxxxxxxx XXX
Xxxxx 000, Xxxxx X
000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx
00
Xxxxxx X0X 0X0
Attention: Xxxxx X. Xxxx
Fax No.: (000) 000-0000
If to the Purchaser or the Parent:
RadiSys Corporation
0000 XX Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx
00000 XXX
Attention: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
with a copy (which will not constitute notice) to:
Xxxxx & XxXxxxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telecopy: (000) 000-0000
XxXxxxxx Xxxxxxxx XXX
X.X. Xxx 00000, Xxxxxxx Xxxxxx
Suite 1300, 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: Xxx Xxxxxxx
Telecopy: (000) 000-0000
10.2 GOVERNING LAW; WAIVER OF JURY TRIAL
This Agreement shall be governed, including as to validity, interpretation
and effect, by the laws of the Province of British Columbia and the laws of
Canada applicable therein, and shall be construed and treated in all respects as
a British Columbia contract. Each of the Parties hereby irrevocably attorns to
the non-exclusive jurisdiction of the courts of the Province of British Columbia
in respect of all matters arising under and in relation to this Agreement and
the Arrangement. Each Party to this Agreement hereby waives any right to trial
by jury in any action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this Agreement or the
transactions contemplated hereby or the actions of the Parties in the
negotiation, administration, performance and enforcement of this Agreement.
71
10.3 INJUNCTIVE RELIEF
The Parties agree that irreparable harm would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached for which money damages would not be
an adequate remedy at law. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions and other equitable relief to prevent
breaches of this Agreement, any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or other equitable
relief hereby being waived.
10.4 TIME OF ESSENCE
Time shall be of the essence in this Agreement.
10.5 ENTIRE AGREEMENT, BINDING EFFECT AND ASSIGNMENT
Neither this Agreement nor any rights or obligations under this Agreement
shall be assignable by operation of law, amalgamation or otherwise by any Party
without the prior written consent of each of the other Parties, except that the
Purchaser may assign, without being required to obtain consent of the Company,
all or part of its rights or obligations hereunder, including the rights to
acquire the Shares, without reducing its own obligations hereunder, to one or
more direct or indirect wholly-owned Subsidiaries of the Parent provided such
Subsidiary delivers to the Company an instrument in writing executed by the
Subsidiary confirming that it is bound by and shall perform all of the
obligations of the Purchaser under this Agreement as if it were an original
signatory. Subject thereto, this Agreement shall enure to the benefit of and be
binding upon the Parties and their respective successors and permitted assigns.
No third party shall have any rights hereunder unless expressly stated to the
contrary.
This Agreement and the Confidentiality Agreement, together with the
agreements, instruments and other documents required to be delivered pursuant to
this Agreement, constitute the entire agreement between the Parties and set out
all the covenants, promises, warranties, representations, conditions,
understandings and agreements between the Parties pertaining to the subject
matter of this Agreement and the Confidentiality Agreement, and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, including the letter of intent dated June 2, 2006, as amended, between
the Company and the Parent. No reliance has been made or will be placed upon any
covenant, promise, warranty, representation, opinion, advice or assertion of
fact made either prior to, contemporaneously with, or after entering into this
Agreement or any amendment or supplement thereto, by any Party to this Agreement
or its directors, officers, employees or agents, to any other Party to this
Agreement or its directors, officers, employees or agents, except to the extent
that the same has been reduced to writing and included as a term of this
Agreement or the agreements, instruments and other documents required to be
delivered pursuant to this Agreement, and none of the Parties to this Agreement
has been induced to enter into this Agreement or any amendment or supplement by
reason of any such warranty, representation, opinion, advice or assertion of
fact (except those forming part of this Agreement or the Confidentiality
Agreement or forming part of any agreement, instrument or other document
delivered hereunder or thereunder). Accordingly, there shall be no liability,
either in tort or in contract, assessed in relation to any such warranty,
representation, opinion, advice or assertion of fact, except to the extent
contemplated herein.
10.6 SEVERABILITY.
If any provision of this Agreement is held invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement are not affected or impaired in any way
72
and the parties agree to negotiate in good faith to replace such invalid,
illegal and unenforceable provision with a valid, legal and enforceable
provision that achieves, to the greatest lawful extent under this Agreement, the
economic, business and other purposes of such invalid, illegal or unenforceable
provision.
10.7 SCHEDULES.
The Schedules to this Agreement are incorporated herein by reference and
made a part of this Agreement. The Company Disclosure Schedule and the Purchaser
Disclosure Schedule are arranged in sections and paragraphs corresponding to the
numbered and lettered sections and paragraphs of Article 3 and Article 4, as
applicable.
10.8 NO THIRD PARTY BENEFICIARIES
Except for (i) the rights of the Company Shareholders to receive the
consideration for their Shares pursuant to the Arrangement and (i) the rights of
the holders of Company Options to receive the consideration in respect of their
Company Options pursuant to the Arrangement, which rights are hereby
acknowledged and agreed by the Purchaser and the Parent, this Agreement is not
intended to confer any rights or remedies upon any Person other than the Parties
to this Agreement.
10.9 INTERPRETATION.
The language used in this Agreement is the language chosen by the parties
to express their mutual intent, and no provision of this Agreement will be
interpreted for or against any party because that party or its attorney drafted
the provision.
10.10 COUNTERPARTS.
The Parties may execute this Agreement in multiple counterparts, each of
which constitutes an original as against the Party that signed it, and all of
which together constitute one agreement. This Agreement is effective upon
delivery of one executed counterpart from each Party to the other Parties. The
signatures of all Parties need not appear on the same counterpart. The delivery
of signed counterparts by facsimile or email transmission that includes a copy
of the sending Party's signature is as effective as signing and delivering the
counterpart in person.
[SIGNATURE PAGE FOLLOWS]
73
IN WITNESS WHEREOF the Purchaser, the Parent and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
RADISYS CANADA INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: President
CONVEDIA CORPORATION
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
Title: President and Chief
Executive Officer
RADISYS CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Executive Officer
SCHEDULE "A"
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (the "AGREEMENt") dated as of
the 26th day of July, 2006.
AMONG:
RADISYS CANADA INC., a corporation incorporated under the laws of
Canada (the "PURCHASER")
AND:
RADISYS CORPORATION, a corporation incorporated under the laws of
the State of Oregon (the "PARENT")
AND:
CONVEDIA CORPORATION, a corporation incorporated under the laws of
Canada (the "COMPANY")
AND:
XXXXXX XXXXXXX, an individual residing in the State of California,
in her capacity as representative of the Company Securityholders
(the "REPRESENTATIVE")
AND:
COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company licensed to
carry on business in all Provinces in Canada (the "ESCROW AGENT")
AND:
COMPUTERSHARE INVESTOR SERVICES INC., a corporation incorporated
under the laws of Canada (the "DEPOSITARY")
AND:
by virtue of the operation of the Plan of Arrangement (as defined
herein), the holders of all of the issued and outstanding shares in
the capital of the Company and the holders of all outstanding
options to purchase shares in the capital of the Company
(collectively, the "COMPANY SECURITYHOLDERS")
WHEREAS the Parent, the Purchaser and the Company are parties to an
arrangement agreement (the "ARRANGEMENT AGREEMENT") made as of July 26, 2006,
pursuant to which the Parent, the Purchaser, the Company and the Company
Securityholders will participate in a plan of arrangement (the "PLAN OF
ARRANGEMENT") under the Canada Business Corporations Act that, when effected,
will result, among other
things, in the acquisition by the Purchaser of all of the issued and outstanding
shares in the capital of the Company;
AND WHEREAS pursuant to the terms of the Arrangement Agreement, the
parties thereto have agreed, as a condition to the consummation of the Plan of
Arrangement and transactions contemplated under the Arrangement Agreement, to
enter into this Agreement;
AND WHEREAS pursuant to the Plan of Arrangement, and provided that the
Plan of Arrangement is approved by the Company Securityholders in the manner set
out in the interim order of the Supreme Court of British Columbia (the "COURT")
issued in connection with the transactions contemplated by the Arrangement
Agreement and is subsequently approved by the Court in a final order issued in
connection with the Plan of Arrangement, each of the Company Securityholders
will be deemed to become a party to this Agreement at and as of the Effective
Time;
AND WHEREAS this Agreement, among other things, provides for the
appointment of the Representative to act on behalf of the Company
Securityholders and sets out the arrangements among the parties with respect to
indemnification;
AND WHEREAS in order to secure the indemnification obligations of the
Company Securityholders under this Agreement, an aggregate amount of $12,000,000
(the "AGGREGATE ESCROW AMOUNT") of the purchase price payable to the Company
Securityholders pursuant to the Plan of Arrangement shall be deposited in escrow
and held and released by the Escrow Agent pursuant to the terms of this
Agreement;
AND WHEREAS for purposes of employee retention following the Effective
Time, an amount equal to the Aggregate Holdback Amount (as defined in Section
7(b)) will be deposited with and held and released by the Escrow Agent pursuant
to the terms of this Agreement;
NOW THEREFORE the parties hereto agree as follows:
1. DEFINITIONS
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Plan of Arrangement, unless a contrary intention appears.
2. INDEMNIFICATION
2.1 Indemnification by the Company Securityholders
Subject to the limitations expressly set forth in Sections 2.5, 2.6 and 2.7,
from and after the Effective Date the Company Securityholders, severally, and
not jointly and severally, will indemnify and hold harmless the Purchaser, each
of the Purchaser's Affiliates, each of the Acquired Companies and each of their
respective directors, officers and employees (collectively, the "PURCHASER
INDEMNIFIED PARTIES") from and against, and will pay to the applicable Purchaser
Indemnified Parties the monetary value of, any and all Losses (as defined in the
Arrangement Agreement) incurred or suffered by such Purchaser Indemnified
Parties directly or indirectly arising out of, relating to or resulting from any
of the following:
2
(a) any inaccuracy in or breach of any representation or warranty of the
Company contained in the Arrangement Agreement or in any
certificate, instrument or document delivered by the Company or the
Company Securityholders in connection with the Arrangement
Agreement;
(b) any breach of any covenant of the Company contained in the
Arrangement Agreement to be satisfied prior to the Effective Time;
(c) any Closing Date Excess Transaction Expenses not being included in
the determination of the Purchase Price by reason of any difference
between the Closing Date Transaction Expenses estimated by the
Company under Section 7.4 (Transaction Expenses; Estimated Closing
Balance Sheet) of the Arrangement Agreement and the actual Closing
Date Transaction Expenses incurred by the Company; and
(d) any Proceedings, demands or assessments incidental to any of the
matters set forth in clauses (a) through (c) above.
For purposes of determining under this Section 2.1 whether there is any
inaccuracy in, or whether any of the Acquired Companies has breached, any such
representation, warranty or covenant, and the amount of any Losses associated
therewith, the parties agree:
(a) that all references to "material," "materially" or "materiality," or
to whether a breach would have a material adverse effect, Company
Material Adverse Effect, or result in a material adverse change,
will be disregarded; and
(b) that the representations, warranties and covenants are made for
purposes of this Section 2.1 as if those disregarded words were not
included.
2.2 Indemnification by the Purchaser and Parent
Subject to the limitations expressly set forth in Sections 2.5, 2.6 and 2.7,
from and after the Effective Date the Purchaser and Parent will jointly and
severally indemnify and hold harmless the Company Securityholders from and
against, and will pay to the Company Securityholders the monetary value of, any
and all Losses incurred or suffered by the Company Securityholders directly or
indirectly arising out of, relating to or resulting from any of the following:
(a) any inaccuracy in or breach of any representation or warranty of the
Purchaser or Parent contained in the Arrangement Agreement or in any
certificate, instrument or document delivered by the Purchaser or
Parent in connection with the Arrangement Agreement;
(b) any breach of any covenant of the Purchaser or Parent set forth in
the Arrangement Agreement; and
(c) any Proceedings, demands or assessments incidental to any of the
matters set forth in clauses (a) or (b) above.
For purposes of determining under this Section 2.2 whether there is any
inaccuracy in, or whether the Purchaser or Parent has breached, any such
representation, warranty or covenant, and the amount of any Losses associated
therewith, the parties agree:
3
(a) that all references to "material," "materially" or "materiality," or
to whether a breach would have a material adverse effect, Purchaser
Material Adverse Effect, or result in a material adverse change,
will be disregarded; and
(b) that the representations, warranties and covenants are made for
purposes of this Section 2.2 as if those disregarded words were not
included.
2.3 Claim Procedure
(a) Notwithstanding anything else in this Section 2, if the Indemnified
Party is a Purchaser Indemnified Party and the payment for such
indemnification is sought against the Escrow Fund at any time or
times before the Second Release Time (as defined in Section 6(c)),
then the parties shall comply with Section 9 rather than this
Section 2.3.
(b) A party that seeks indemnity under this Section 2 (an "INDEMNIFIED
PARTY") will give written notice (a "CLAIM NOTICE") to the party
from whom indemnification is sought (an "INDEMNIFYING PARTY")
containing:
(i) a description and, if known, the estimated amount of any
Losses incurred or reasonably expected to be incurred by the
Indemnified Party;
(ii) a reasonable explanation of the basis for the Claim Notice to
the extent of the facts then known by the Indemnified Party;
and
(iii) a demand for payment of such Losses.
(c) Within thirty (30) days after receipt of a Claim Notice, the
Indemnifying Party will deliver to the Indemnified Party a written
response in which the Indemnifying Party will either:
(i) agree that the Indemnified Party is entitled to receive
indemnification for all of the Losses at issue in the Claim
Notice; or
(ii) dispute in good faith the Indemnified Party's entitlement to
indemnification by delivering to the Indemnified Party a
written notice (an "OBJECTION NOTICE") setting forth in
reasonable detail each disputed item and the basis for
disputing each such item.
(d) If the Indemnifying Party fails to take either of the actions set
forth in Section 2.3(c) above within thirty (30) days after receipt
of the Claim Notice, then the Indemnifying Party will be deemed to
have irrevocably accepted the Claim Notice and the Indemnifying
Party will be deemed to have irrevocably agreed to pay the
Indemnified Party the amount of all Losses claimed in the Claim
Notice.
(e) If the Indemnifying Party delivers an Objection Notice to the
Indemnified Party within thirty (30) days after receipt of the Claim
Notice, then the dispute may be resolved by any legally available
means consistent with the provisions of Section 16(d).
(f) Subject to Section 2.3(g), any indemnification of the Purchaser
Indemnified Parties pursuant to this Agreement will be effected by
certified cheque or wire transfer of immediately available funds to
an account designated by the relevant Purchaser Indemnified Parties.
Any
4
indemnification of the Company Securityholders pursuant to this
Agreement will be effected by certified cheque or wire transfer of
immediately available funds to an account designated by the
Representative for delivery to the Company Securityholders. All
indemnification payments to be paid by the Company Securityholders
in accordance with this Agreement will be allocated among the
Company Securityholders pro rata in accordance with the percentage
allocations as set forth in Schedule "H". All indemnification
payments to be received by the Company Securityholders in accordance
with this Agreement will be allocated among the Company
Securityholders pro rata in accordance with the percentage
allocations as set forth in Schedule "G".
(g) Payment in respect of indemnification in accordance with this
Section 2 will be made within five (5) Business Days after the date
on which:
(i) the amount of such payments are determined by mutual agreement
of the Indemnified Parties and the Indemnifying Parties;
(ii) if an Objection Notice has not been timely delivered in
accordance with Section 2.3(c), the amount of such payments
are determined pursuant to Section 2.3(d); or
(iii) a written decision of any court of competent jurisdiction has
been rendered in relation to the disputed claim (which
decision may include an order for costs).
(h) For purposes of this Section 2.3 and Section 2.4, if the Company
Securityholders comprise the Indemnifying Party:
(i) any references to the Indemnifying Party (except provisions
relating to an obligation to make or a right to receive any
payments) will be deemed to refer to the Representative; and
(ii) any references to the Indemnified Party (except provisions
relating to an obligation to make or a right to receive any
payments) will be deemed to refer to the Representative.
2.4 Third Party Claims
(a) Without limiting the general application of the other provisions of
this Agreement, if a claim is made by a Person not a party to the
Arrangement Agreement (other than a Company Securityholder) against
an Indemnified Party alleging Losses in connection with or arising
out of a matter for which the Indemnified Party is entitled to be
indemnified pursuant to this Section 2 (a "THIRD PARTY CLAIM"), the
Indemnified Party will be entitled to indemnification for those
Losses arising out of the Third Party Claim under, pursuant to and
subject to the limitations contained in this Agreement, including,
without limitation, the limitations contained in Sections 2.5, 2.6
and 2.7. If the Indemnified Party seeks indemnification pursuant to
this Agreement in connection with a Third Party Claim, the
Indemnified Party will include in the applicable Claim Notice or
Escrow Claim Notice (as defined in Section 9(b)), as the case may
be, delivered to the Indemnifying Party notice, to the extent known,
of the basis of and the amount of damages claimed in such Third
Party Claim within thirty (30) days after the Indemnified Party has
received written notice of such Third Party Claim. Notwithstanding
the foregoing, no delay or deficiency on the part of the Indemnified
5
Party in so notifying the Indemnifying Party will relieve the
Indemnifying Party of any Liability (as defined in the Arrangement
Agreement) or obligation under this Agreement except to the extent
the Indemnifying Party has suffered actual Losses directly caused by
the delay or other deficiency.
(b) Where the Company Securityholders comprise the Indemnifying Parties,
the Representative shall be entitled, at the expense of the Company
Securityholders, to participate in any defence of such Third Party
Claim. The Purchaser shall have the right to control the defence and
shall have the right in its sole discretion to settle any such
claim; provided, however, that except with the consent of the
Representative, the settlement of a Third Party Claim shall not be
determinative of the amount of any claim against the Escrow Fund. In
the event that the Representative has consented to any such
settlement and acknowledged that the claim is a valid claim against
the Escrow Fund, the Representative shall have no power or authority
to object under any provision of this Agreement to the amount of any
claim by a Purchaser Indemnified Party against the Escrow Fund with
respect to such settlement, and amounts paid or payable under such
settlement shall be Losses that the Indemnifying Party owes to the
Indemnified Party under this Agreement. The Indemnifying Party will
not agree to any compromise or settlement of, or the entry of any
Judgment (as defined in the Arrangement Agreement) arising from, any
Third Party Claim without the prior written consent of the
Indemnified Party, which consent the Indemnified Party will not
unreasonably withhold or delay. The Indemnified Party will have no
Liability with respect to any compromise or settlement of, or the
entry of any Judgment arising from, any Third Party Claim effected
without its consent. The Indemnifying Party agrees to pay to the
Indemnified Party promptly upon demand from time to time all
reasonable attorneys' fees and other costs and expenses of defence.
(c) Where the Company Securityholders comprise the Indemnifying Parties,
the Purchaser will reasonably advise the Representative of the
status of any Third Party Claim and the defence thereof and will
consider in good faith recommendations made by the Representative.
The Representative and the Company Securityholders will furnish the
Purchaser with such information as it or they may have with respect
to such Third Party Claim (including copies of any summons,
complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document
evidencing or asserting the same) and will otherwise cooperate,
acting reasonably, with and at the request of the Purchaser assist
the Purchaser in the defence of such Third Party Claim, at the
expense of the Purchaser.
(d) Subject to Section 2.6(a) but notwithstanding any other provisions
of this Agreement, if a Person not a party to the Arrangement
Agreement (other than a Company Securityholder) asserts that a
Purchaser Indemnified Party is liable to such third party for a
monetary or other obligation which individually may constitute or
result in Losses not to exceed $50,000 for which the Purchaser
Indemnified Party is entitled to indemnification pursuant to this
Agreement, and such Purchaser Indemnified Party reasonably
determines that it has a valid business reason to fulfill such
obligation, then:
(i) the Purchaser Indemnified Party will be entitled to satisfy
such obligation, without prior notice to or consent from the
Indemnifying Party;
(ii) the Purchaser Indemnified Party may subsequently make a claim
for indemnification in accordance with the provisions of this
Agreement; and
6
(iii) the Purchaser Indemnified Party will be reimbursed, in
accordance with the provisions of this Agreement, for any such
Losses for which it is entitled to indemnification pursuant to
this Agreement, subject to the right of the Indemnifying Party
to dispute the Purchaser Indemnified Party's entitlement to
indemnification, or the amount for which it is entitled to
indemnification, under the provisions of this Agreement.
This Section 2.4(d) is not applicable to payments which aggregate
more than $250,000.
(e) Notwithstanding the provisions of Section 16(d), the Company
Securityholders consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought by any third party against
any Purchaser Indemnified Party for purposes of any indemnification
claim that a Purchaser Indemnified Party may have arising under the
Arrangement Agreement with respect to such Proceeding or the matters
alleged therein.
2.5 Limitation of Indemnification Period
The obligations of indemnification set forth in this Section 2 shall be subject
to the following limitations as to time:
(a) General - Subject to Sections 2.5(b) and 2.5(c), the obligations of
the Indemnifying Parties under this Section 2 shall terminate on the
date which is the eighteen (18) month anniversary of the Closing
Date (the "GENERAL INDEMNIFICATION DEADLINE"), except with respect
to any claim for indemnification hereunder for which a Claim Notice
or Escrow Claim Notice, as the case may be, has been delivered to
the Indemnifying Parties prior to the General Indemnification
Deadline.
(b) Tax Claims - The indemnification obligations of the Company
Securityholders in respect of any claim for indemnification
hereunder relating to the representations and warranties of the
Company set out in Section 3.15 (Tax Matters) of the Arrangement
Agreement, arising in or with respect to a particular period ending
on or before the Closing Date, shall terminate on the date that is
ninety (90) days after the relevant Governmental Authority shall no
longer be entitled to assess or reassess liability for Taxes against
any Acquired Company for that particular period (having regard to
any waivers given by the Acquired Company in respect of any taxation
year) (the "TAX INDEMNIFICATION DEADLINE"), except with respect to
any claim for indemnification hereunder for which a Claim Notice or
Escrow Claim Notice, as the case may be, has been delivered to the
Indemnifying Parties prior to the Tax Indemnification Deadline.
(c) Other Exceptions - The indemnification obligations of the Company
Securityholders in respect of any claim for indemnification
hereunder relating to the representations and warranties of the
Company set out in Sections 3.2(c) (Authority and Enforceability)
and 3.4 (Capitalization and Ownership) of the Arrangement Agreement
shall terminate on the date which is the three (3) year anniversary
of the Closing Date.
2.6 Limitations on Liability
(a) Except for claims for indemnification described under Section
2.6(c), an Indemnified Party will not be entitled to any claim for
indemnification under this Agreement unless and until the aggregate
amount of all Losses claimed under this Agreement is equal to or
greater than
7
$750,000; it being understood, however, that after the aggregate
Losses so claimed exceed $750,000, a claim for indemnification can
be made for the entire amount of such Losses.
(b) Except as provided in Sections 2.6(c) and 2.7 below:
(i) at no time shall the aggregate liability of a Company
Securityholder in connection with or arising out of any and
all matters for which the Purchaser Indemnified Parties are
entitled to be indemnified pursuant to this Section 2, or
otherwise in connection with this Agreement, the Arrangement
Agreement or the transactions or other agreements contemplated
in the Arrangement Agreement, exceed such Company
Securityholder's pro rata portion of the amount then remaining
in the Escrow Fund in accordance with the percentage
allocations as set forth in Schedule "H"; and
(ii) the Purchaser Indemnified Parties' sole and exclusive recourse
for purposes of satisfying any indemnification obligations of
the Company Securityholders under this Agreement, the
Arrangement Agreement or the transactions or other agreements
contemplated in the Arrangement Agreement shall be to the
Escrow Fund.
(c) With respect to any claim for indemnification hereunder relating to
the representations and warranties of the Company set out in
Sections 3.2(c) (Authority and Enforceability), 3.4 (Capitalization
and Ownership) or 3.15 (Tax Matters) of the Arrangement Agreement,
or that is based on the fraud, intentional misrepresentation or
wilful misconduct of the Company or any of its officers, directors
or employees, the indemnification obligations of the Company
Securityholders hereunder shall be on a several, and not joint and
several, basis, and the maximum liability of an individual Company
Securityholder shall not exceed the Company Securityholder's pro
rata portion of the Purchase Price received by such Company
Securityholder (including, for greater certainty, amounts deemed
paid by that Company Securityholder pursuant to this Section 2 from
any portion of the Escrow Fund).
(d) Notwithstanding anything else in this Agreement, an Indemnified
Party will not be entitled to any claim for indemnification under
this Agreement for any special, indirect, consequential, punitive or
aggravated damages, including damages for loss of profit.
2.7 Exclusive Remedies
(a) The parties agree that from and after the Effective Time the rights
of indemnity set forth in Sections 2 and 9 are the sole and
exclusive remedy of the parties to this Agreement in respect any
claims for indemnification or any other Liabilities arising out of
this Agreement, the Arrangement Agreement or the transactions or
other agreements contemplated in the Arrangement Agreement, and that
this Section 2 sets out the sole and exclusive manner by which such
parties, or any of them, may seek monetary compensation for any
matter in respect of which such parties may make a claim for
indemnification. For greater certainty, except as provided in this
Section 2, no Company Securityholder shall have any liability to the
Purchaser Indemnified Parties, or any of them, for or in respect of
any claims for indemnification or any other Liabilities arising out
of this Agreement, the Arrangement Agreement or the transactions or
other agreements contemplated in the Arrangement Agreement.
8
(b) If the outstanding claims for indemnification of the Purchaser
Indemnified Parties under Sections 2.3 and 9 exceed, in the
aggregate, the amount then remaining in the Escrow Fund as of the
date on which the Purchaser is required to deliver the Final
Consideration, or cause the Final Consideration to be delivered, to
the Depositary in accordance with Section 3.2 of the Plan of
Arrangement, the Purchaser may, upon written notice to the
Representative, withhold and set off against the amount of the
Remaining Set Off Amount equal to the amount by which such
outstanding claims in the aggregate exceed the amount then remaining
in the Escrow Fund (the "SET OFF HOLDBACK"). For so long as any
funds remain in the Escrow Fund, the indemnification obligations of
the Company Securityholders shall first be discharged by the release
of funds from the Escrow Fund in accordance with Section 9.
Thereafter, the indemnification obligations of the Company
Securityholders will be discharged out of the Set Off Holdback.
After all outstanding claims of the Purchaser Indemnified Parties
have been resolved in accordance with Sections 2.3(g) or 9(e), as
the case maybe, the remaining portion of the Set Off Holdback will
be distributed to the Company Securityholders in the manner set
forth in Section 3.2 of the Plan of Arrangement.
(c) For purposes of the foregoing, "REMAINING SET OFF AMOUNT" shall mean
the aggregate amount, if any, that remains payable by the Purchaser
under Section 3.2 (Final Consideration) of the Plan of Arrangement
after the Company Securityholders receive or are entitled to receive
thereunder equals $5,000,000 in the aggregate. For greater
certainty, the Purchaser shall not be entitled to set off any Losses
under Section 2.7(b) unless the Company Securityholders are entitled
under Section 3.2 (Final Consideration) of the Plan of Arrangement
to receive an aggregate amount of at least $5,000,000.
2.8 Insurance
To the extent that any Loss in respect of which a Purchaser Indemnified Party is
entitled to an indemnity payment under this Agreement is covered by insurance
proceeds from any insurance policy owned and paid for by the Acquired Companies
prior to the Closing Date (a "COMPANY POLICY"), the amount of such payment shall
be net of the Net Proceeds paid to any of the Acquired Companies with respect to
such Loss. For purposes of this Section 2.8, "NET PROCEEDS" shall mean the
proceeds actually received by the applicable Acquired Companies, less any
expenses (including Taxes) of recovery, deductibles and/or co-payments. If the
amount of any Loss in respect of which a Purchaser Indemnified Party has
previously received an indemnity payment is subsequently covered, in whole or in
part, by insurance proceeds from a Company Policy, the Purchaser Indemnified
Party shall reimburse the Indemnifying Parties in an amount equal to the Net
Proceeds of such recovery.
3. APPOINTMENT OF ESCROW AGENT
(a) The Purchaser and the Representative hereby appoint the Escrow
Agent, and the Escrow Agent hereby accepts such appointment and
agrees to act, as escrow agent in accordance with the terms and
conditions of this Agreement.
(b) The Purchaser shall notify the Escrow Agent of the Closing Date and
the Effective Time as soon as reasonably practical and, in any
event, no later than three (3) Business Days prior to the Closing
Date.
9
(c) In the event that the Plan of Arrangement is amended subsequent to
the date hereof, the Purchaser shall promptly deliver a copy of the
Plan of Arrangement, as amended, to the Escrow Agent.
4. ESTABLISHMENT OF ESCROW FUND AND REPRESENTATIVE HOLDBACK FUND
(a) Pursuant to the Plan of Arrangement, at or prior to the Effective
Time, the Purchaser will deliver or cause to be delivered by wire
transfer to the Depositary payment in the amount of: (i) the Initial
Consideration; and (ii) the Aggregate Preference Amount. From the
Initial Consideration, the Depositary shall forthwith deliver to the
Escrow Agent:
(i) the Pro Rata Escrow Amount, to be held in escrow as part of
the Aggregate Escrow Amount and released in accordance with
this Agreement;
(ii) the Preference Share Escrow Amount, to be held in escrow as
part of the Aggregate Escrow Amount and released in accordance
with this Agreement; and
(iii) $100,000 (the "REPRESENTATIVE EXPENSE AMOUNT"), to be held in
escrow and released in accordance with this Agreement.
Upon receipt of the Aggregate Escrow Amount, the Escrow Agent shall
deliver a written notice to the Purchaser and the Representative
acknowledging receipt of the Aggregate Escrow Amount.
(b) The Escrow Agent will record the Aggregate Escrow Amount in a
separate trust account comprising, at any time, the Aggregate Escrow
Amount at such time, and any income earned thereon, less any
payments or deductions therefrom (the "ESCROW FUND").
(c) The Escrow Agent will record the Representative Expense Amount in a
separate trust account comprising, at any time, the Representative
Expense Amount at such time, and any income earned thereon, less any
payments or deductions therefrom (the "REPRESENTATIVE EXPENSE
FUND").
(d) The Escrow Agent hereby agrees to hold, safeguard, invest and
release the Escrow Fund as provided in this Agreement. The Escrow
Agent is hereby authorized to release funds out of monies
constituting the Escrow Fund only in accordance with the express
terms of this Agreement.
5. INVESTMENT OF AGGREGATE ESCROW AMOUNT AND REPRESENTATIVE EXPENSE AMOUNT
(a) Until the release of all or any part of the Escrow Fund or
Representative Expense Fund, as the case may be, in accordance with
the terms of this Agreement, the Escrow Fund or any remaining
portion thereof and the Representative Expense Fund or any remaining
portion thereof shall be kept segregated and shall be deposited in
an interest bearing cash account to be held by the Escrow Agent at a
bank listed in Schedule I of the Bank Act (Canada).
(b) All earnings received from the investment of the Aggregate Escrow
Amount (or part thereof) shall be credited to, and shall become a
part of, the Escrow Fund and all earnings received
10
from the investment of the Representative Expense Amount (or part
thereof) shall be credited to, and shall become part of, the
Representative Expense Fund. Neither the Escrow Agent, the
Representative, the Parent nor the Purchaser shall have any
responsibility or liability for any diminution of the Escrow Fund or
Representative Expense Fund that may result from any investment made
pursuant to this Section 5, including any losses on any investment
required to be liquidated prior to maturity in order to make a
payment required hereunder.
6. RELEASE TERMS
(a) Subject to and in accordance with the provisions of Section 9, the
relevant amount of the Escrow Fund may be released to a Purchaser
Indemnified Party from time to time in respect of any Escrow Claim
Satisfaction Amount (as defined in Section 9(a)(ii)) for any claim
for indemnification against the Escrow Fund (an "ESCROW CLAIM") made
prior to the Second Release Time (as defined in Section 6(c) below)
by a Purchaser Indemnified Party against any of the Company
Securityholders pursuant to this Agreement.
(b) At 10:00 a.m. (PST) on the first anniversary of the Closing Date
(the "FIRST RELEASE TIME"), to the extent that the aggregate of any
Escrow Claims made prior to the First Release Time has not resulted
in fifty percent (50%) or more of the initial Aggregate Escrow
Amount having previously been released to the Purchaser Indemnified
Parties, or any of them, the balance of such amount up to fifty
percent (50%) of the initial Aggregate Escrow Amount then remaining
in escrow and any interest or other income or gains accrued or
earned thereon (the "FIRST ESCROW RELEASE AMOUNT") shall be released
and delivered to the Depositary in accordance with a written
direction from the Representative to the Escrow Agent substantially
in the form of Schedule "E"; provided, however, that if one or more
Escrow Claims have been made by the Purchaser Indemnified Parties,
or any of them, before the First Release Time but have not been
resolved, or have been resolved but not yet satisfied in accordance
with the provisions hereof as of the First Release Time, and which
involves an aggregate Escrow Claim Amount (as defined in Section
9(a)(i)) which is greater than the First Escrow Release Amount, no
amount shall be released hereunder by the Escrow Agent until such
Escrow Claims have been resolved or satisfied in accordance with the
provisions of this Agreement. If the aggregate Escrow Claim Amount
arising from such Escrow Claims is less than the First Escrow
Release Amount, the amount by which the First Escrow Release Amount
exceeds the aggregate Escrow Claim Amount of such Escrow Claims and
any interest or other income or gains accrued or earned on such
excess amount shall be released and delivered by the Escrow Agent to
the Depositary in accordance with a written direction from the
Representative to the Escrow Agent substantially in the form of
Schedule "E".
(c) At 10:00 a.m. (PST) on the date eighteen (18) months following the
Closing Date (the "SECOND RELEASE TIME"), to the extent that the
aggregate of any Escrow Claims made prior to the Second Release Time
has not resulted in the entire remaining amount in the Escrow Fund
having previously been released to the Purchaser Indemnified
Parties, or any of them, the balance of the amount in the Escrow
Fund then remaining and any interest or other income or gains
accrued or earned thereon, shall be released and delivered to the
Depositary in accordance with a written direction from the
Representative to the Escrow Agent substantially in the form of
Schedule "E"; provided, however, that, if one or more Escrow Claims
have been made by the Purchaser Indemnified Parties, or any of them,
before the Second Release Time but have not been resolved, or have
been resolved but not yet satisfied in accordance with the
provisions hereof as of the Second Release Time, and which involves
11
an aggregate Escrow Claim Amount which is greater than the balance
of the Escrow Fund then remaining, no amount of the remaining Escrow
Fund shall be released hereunder by the Escrow Agent until such
Escrow Claims have been resolved or satisfied in accordance with the
provisions of this Agreement. If the aggregate Escrow Claim Amount
arising from such Escrow Claims is less than the balance of the
Escrow Fund then remaining, the amount by which the balance of the
Escrow Fund exceeds the aggregate Escrow Claim Amount of such Escrow
Claims shall be released and delivered by the Escrow Agent to the
Depositary for distribution to the Company Securityholders in
accordance with the written direction of the Representative pursuant
to Section 11.5. Where, in accordance with the foregoing, the
balance of the Escrow Fund has not been released as a result of an
Escrow Claim not having been fully resolved or satisfied, forthwith
upon the resolution or satisfaction of such Escrow Claim in whole or
in part, that portion of the balance of the Escrow Fund which is no
longer subject to an unresolved or unsatisfied Escrow Claim and any
interest or other income or gains accrued or earned thereon shall be
released and delivered by the Escrow Agent to the Depositary, for
distribution to the Company Securityholders in accordance with a
written direction from the Representative to the Escrow Agent
substantially in the form of Schedule "E".
(d) Each time that the Escrow Agent releases any portion of the Escrow
Fund to the Purchaser Indemnified Parties, or any of them, the
Escrow Agent shall notify the Representative in accordance with
Section 16(a).
(e) Notwithstanding anything to the contrary in this Agreement, the
Escrow Agent is authorized and directed to deliver any or all of the
Escrow Fund as directed from time to time in joint written
instructions signed by or on behalf of the Purchaser and the
Representative.
(f) The Escrow Agent's trust account containing the Escrow Fund shall be
in existence on the date the Escrow Agent receives the Aggregate
Escrow Amount and shall terminate at 5:00 p.m. (PST) on the date the
entire Escrow Fund has been distributed to the Purchaser, the
Purchaser Indemnified Parties, or any of them, and/or the Depositary
for distribution to the Company Securityholders, as the case may be,
in accordance with the terms of this Agreement.
(g) Upon receipt of an invoice from the Representative in respect of
expenses incurred in her capacity as Representative under this
Agreement, the Escrow Agent shall within thirty (30) Business Days
deliver by cheque from the Representative Expense Fund to an address
specified by the Representative an amount equal to the amount set
forth in such invoice.
(h) At such time as the Representative has no further responsibilities
under this Agreement, the Representative shall deliver a written
instruction substantially in the form of Schedule "E" instructing
the Escrow Agent to deliver all amounts remaining in the
Representative Expense Fund to the Depositary.
(i) The Escrow Agent's trust account containing the Representative
Expense Fund shall be in existence on the date the Escrow Agent
receives the Representative Expense Amount and shall terminate on
the date the entire Representative Expense Fund has been distributed
to the Representative or the Representative instructs the Escrow
Agent to release the amount remaining in the Representative Expense
Fund to the Depositary in accordance with Section 6(h) above.
12
7. OPTIONEE AND EXERCISING SHAREHOLDER ESCROW
(a) Pursuant to the Plan of Arrangement, at the Effective Time, the
Purchaser will deliver or cause to be delivered by wire transfer to
the Depositary payment in an amount equal to the Initial
Consideration. At or prior to the Effective Time, the Representative
will deliver a written direction in the form of Schedule "A"
directing the Depositary to deliver to the Escrow Agent from such
amount :
(i) in respect of each holder of Company Options identified as a
"HOLDBACK OPTIONEE" on Schedule "C" hereto (as updated by the
Company in accordance with Section 5.4(f) of the Arrangement
Agreement), an amount (the "OPTION HOLDBACK AMOUNT") equal to
25% of the Initial Per Share Consideration in respect of each
Company Option held by such Holdback Optionee immediately
prior to the Effective Time, and the aggregate of all such
Option Holdback Amounts (the "TOTAL OPTION HOLDBACK AMOUNT")
shall be held and released by the Escrow Agent in accordance
with this Agreement; and
(ii) in respect of each Exercising Shareholder (as defined below),
an amount (the "EXERCISING SHAREHOLDER HOLDBACK AMOUNT") equal
to 25% of the Initial Per Share Consideration in respect of
each Option Share (as defined below) held by such Exercising
Shareholder immediately prior to the Effective Time, and the
aggregate of all such Exercising Shareholder Holdback Amounts
(the "TOTAL EXERCISING SHAREHOLDER HOLDBACK AMOUNT") shall be
held and released by the Escrow Agent in accordance with this
Agreement.
The term "EXERCISING SHAREHOLDER" means a Company Shareholder,
identified as such on Schedule "C" hereto (as updated by the Company
in accordance with Section 5.4(f) of the Arrangement Agreement), who
holds Option Shares. The term "OPTION SHARES" means Common Shares
issued by the Company after June 30, 2006 as a result of the
exercise of Company Options by the holder thereof.
(b) Upon receipt of the Total Option Holdback Amount and Total
Exercising Shareholder Holdback Amount (together, the "AGGREGATE
HOLDBACK AMOUNT"), the Escrow Agent shall deliver a written notice
to the Purchaser and the Representative acknowledging receipt of
such amounts.
(c) The Escrow Agent shall hold the Aggregate Holdback Amount and any
interest or other income or gains accrued or earned thereon (the
"ACCRUED INTEREST") in escrow until released by the Escrow Agent to
the Depositary in accordance with Section 7(h).
(d) The Escrow Agent hereby agrees to hold, safeguard, invest and
release the Aggregate Holdback Amount and all Accrued Interest
thereon as provided in this Agreement. The Escrow Agent is hereby
authorized to release funds out of monies constituting the Aggregate
Holdback Amount and Accrued Interest thereon only in accordance with
the express terms of this Agreement.
(e) Until the release of the Aggregate Holdback Amount and all Accrued
Interest on such amount in accordance with the terms of this
Agreement, the Aggregate Holdback Amount and all Accrued Interest on
such amount shall be kept segregated and shall be deposited in an
interest bearing cash account to be held by the Escrow Agent at a
bank listed in Schedule I of
00
xxx Xxxx Xxx (Xxxxxx). All Accrued Interest received from the
investment of the Aggregate Holdback Amount shall be credited to,
and shall become a part of, the Aggregate Holdback Amount. The
Escrow Agent shall have no responsibility or liability for any
diminution of the Aggregate Holdback Amount that may result from any
investment made pursuant to this Section 7.
(f) Within five (5) Business Days after the First Release Time, the
Purchaser shall deliver to the Escrow Agent and the Depositary, with
a copy to the Representative, a list certified by an officer of the
Purchaser (the "HOLDBACK RELEASE LIST") setting forth those Holdback
Optionees and Exercising Shareholders: (i) who have remained
employed by the Purchaser, the Parent or any of the Acquired
Companies (or any of their successors) from the Effective Date
through to the First Release Time; (ii) who have suffered a
Permanent Disability or died prior to the First Release Time; or
(iii) who have ceased to be employed by the Purchaser, the Parent or
any of the Acquired Companies prior to the First Release Time for
any reason other than Permanent Disability, death, voluntary
resignation by such Holdback Optionee or Exercising Shareholder, as
the case may be, or the termination of such Holdback Optionee's or
Exercising Shareholder's employment for cause (the "REMAINING
EMPLOYEES") and Company Securityholders other than Company
Securityholders who were Holdback Optionees or Exercising
Shareholders as of the date of this Agreement but who are not
Remaining Employees as of the First Release Time (the "REMAINING
SECURITYHOLDERS"). For purposes of this Section 7(f), "PERMANENT
Disability" means an employee's absence from his or her duties for
more than three (3) consecutive months as a result of such
employee's incapacity due to physical or mental illness.
(g) The Holdback Release List shall specify (as applicable): (i) the
portion of the Total Option Holdback Amount, together with the
Accrued Interest thereon, less applicable withholding taxes, to be
distributed to each Remaining Employee; (ii) the portion of the
Total Exercising Shareholder Holdback Amount, together with the
Accrued Interest thereon, less applicable withholding taxes, to be
distributed to each Remaining Employee; (iii) the portion of the
remainder of the Aggregate Holdback Amount, together with the
Accrued Interest thereon (collectively, the "REMAINING HOLDBACK
AMOUNT"), less applicable withholding taxes, to be distributed to
each Remaining Securityholder (as defined below); and (iv) the
amount of withholding taxes payable in respect of the portion of the
Total Option Holdback Amount, the Total Exercising Shareholder
Holdback Amount and the Remaining Holdback Amount. The Remaining
Holdback Amount shall be allocated among all Remaining
Securityholders. For purposes of determining the amount that a
particular Remaining Securityholder is entitled to receive pursuant
to the foregoing, "pro rata" shall be determined by reference by the
total number of Shares and Company Options held by the particular
Remaining Securityholder at the last moment in time prior to the
Effective Time as compared to the total number of Shares and Company
Options held by all Remaining Securityholders entitled to receive a
portion of the Remaining Holdback Amount.
(h) Within three (3) Business Days after receipt of the Holdback Release
List, the Escrow Agent shall release the Aggregate Holdback Amount
and any Accrued Interest thereon to the Depositary, together with a
written instruction from the Escrow Agent specifying the amount of
Accrued Interest payable: (i) to each Remaining Employee in respect
of his or her portion of the Total Option Holdback Amount and/or
Total Exercising Shareholder Holdback Amount; and (ii) to each
Remaining Securityholder in respect of his or her portion of the
Remaining Holdback Amount.
14
8. ESCROW AGENT
The acceptance by the Escrow Agent of its duties and obligations under this
Agreement is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the Escrow
Agent's rights, duties, liabilities and immunities:
(a) Except for acts of gross negligence or wilful misconduct, the Escrow
Agent shall not be liable for any action taken or omitted to be
taken by it or on its behalf in good faith and in the exercise of
its reasonable judgment and any act done or omitted by it. The
Escrow Agent may at any time consult with independent legal counsel
of its own choice in any such matters, shall have full and complete
authorization and protection from any action taken or omitted by it
hereunder in accordance with the advice of such legal counsel on its
part and shall incur no liability for any delay reasonably required
to obtain the advice of any such legal counsel. The Escrow Agent
shall not be answerable for the default or misconduct of any agent
or legal counsel employed or appointed, at its discretion, by it if
such agent or legal counsel shall have been selected with reasonable
care;
(b) The Company, the Company Securityholders (including the
Representative), the Purchaser and the Parent shall indemnify and
hold harmless the Escrow Agent and its employees, directors and
officers from and against any and all liabilities, losses, costs,
claims, actions or demands whatsoever which may be brought against
the Escrow Agent or which it may suffer or incur as a result of or
arising out of the performance of its duties and obligations under
this Agreement, save only in the event of the gross negligence or
the wilful misconduct of the Escrow Agent. It is understood and
agreed that this indemnification shall survive the termination or
discharge of this Agreement or the resignation of the Escrow Agent;
(c) The Escrow Agent and its partners, employees, agents, successors and
assigns shall not be liable for any damage, loss or destruction of
any of the documents held hereunder due to fire, flood, tornado, act
of God, theft, or any other similar causes not resulting from the
gross negligence or wilful misconduct of the Escrow Agent or its
employees, agents, successors and assigns;
(d) The Escrow Agent and its employees, agents, successors and assigns
shall have no duty to know or determine the performance or
non-performance of any provision of this Agreement or any other
agreement except as expressly required or contemplated in the
performance by the Escrow Agent of the functions contemplated to be
performed by it under this Agreement. The Escrow Agent may act in
reliance upon any instrument or signature believed by it to be
genuine and may assume that the person purporting to give receipt or
advice or make any statement or execute any document in connection
with the provisions hereof has been duly authorized to do so. The
duties and responsibilities of the Escrow Agent are purely
administrative in nature and are limited to those expressly stated
herein;
(e) The provisions of this Agreement are not intended to and shall not
restrict or remove any other rights which the Escrow Agent may have
at law or in equity to seek relief or direction from any court of
competent jurisdiction in addition to such as are expressly set
forth herein;
(f) Except as otherwise expressly provided herein, the Escrow Agent is
hereby authorized to disregard any and all notices or warnings,
other than written notices given by or on behalf of both the
Purchaser and the Representative or their respective counsel, and is
hereby expressly authorized to comply with and obey any and all
processes, orders, judgments or
15
decrees of any court having jurisdiction as permitted by Section
16(d). If the Escrow Agent obeys or complies with any such process,
order, judgment, or decree of such a court from which all rights of
appeal have expired, the Escrow Agent and its partners, employees,
agents, successors and assigns shall not be liable to any of the
other parties hereto or anyone else by reason of such compliance,
notwithstanding any such process, order, judgment, or decree be
subsequently reversed, modified, annulled, set aside, or vacated, or
be subsequently found to have been issued or entered into without
jurisdiction;
(g) The Escrow Agent shall be under no duty or obligation to ascertain
the identity, authority, or rights of the parties (or their agents)
executing or delivering or purporting to execute or deliver this
Agreement, or any instruments, documents, or paper related hereto or
properties deposited or called for hereunder;
(h) The Escrow Agent shall be entitled to be paid its usual fees for the
performance of its duties hereunder and to be reimbursed for any
disbursements incurred in connection with the performance of its
duties hereunder (collectively, the "ESCROW AGENT FEES"). The
Purchaser and the Parent shall be jointly and severally liable for
all Escrow Agent Fees and the Purchaser shall be invoiced for
payment of the Escrow Agent Fees, on its own behalf and on behalf of
the Parent, and failing the receipt of payment from the Purchaser
the Escrow Agent may request payment from the Parent;
(i) The Escrow Agent may resign from its position at any time upon
thirty (30) days prior written notice to the Purchaser and the
Representative. In addition, the Purchaser and the Representative
may jointly remove the Escrow Agent at any time without cause, by an
instrument given to the Escrow Agent, which instrument shall
designate the effective date of such removal. Upon such resignation
or removal, the Escrow Agent shall take such steps as are necessary
to transfer any property held in escrow to a successor escrow agent
agreed to by the Purchaser and the Representative, and, where such
agreement is not obtained within seven (7) Business Days after the
Escrow Agent's resignation or removal, then to any court of
competent jurisdiction. Upon such resignation or removal, the Escrow
Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement other than to
retain and safeguard the Escrow Fund and the Representative Expense
Fund then in its possession until receipt of a designation of
successor escrow agent or a joint written disposition instruction by
or on behalf of the Purchaser and the Representative or a final
non-appealable order of a court of competent jurisdiction;
(j) Nothing contained in this Agreement shall require the Escrow Agent
to expend its own funds or otherwise incur financial liability in
the performance of any of its duties or in the exercise of any of
its rights or powers, or do anything not expressly provided for
herein, except in relation to acts of gross negligence or wilful
misconduct of the Escrow Agent or its employees, agents, successors
and assigns; and
(k) In the event of any disagreement between or among any or all of the
Purchaser, the Company Securityholders or the Representative
resulting in adverse claims or demands being made in connection with
the Escrow Fund or in the event that the Escrow Agent is in doubt as
to what action it should take hereunder, the Escrow Agent, in its
discretion, shall be entitled to retain the Escrow Fund until the
Escrow Agent shall have received (i) joint written instructions of
or on behalf of the Purchaser and the Representative directing
delivery of the Escrow Fund, or (ii) a written decision of any court
of competent jurisdiction from which all rights of appeal have
expired directing delivery of the Escrow Fund, in which event the
Escrow Agent
16
shall disburse the Escrow Fund in accordance with such instructions
or decision. The Escrow Agent shall act on such instructions or
decision without further question.
9. CLAIMS
(a) For purposes of this Agreement:
(i) "ESCROW CLAIM AMOUNT" shall mean the amount specified by the
Purchaser Indemnified Parties, or any of them, in an Escrow
Claim Notice (estimated on information then available) for
which the Purchaser Indemnified Parties, or any of them, is
making an Escrow Claim pursuant to and in accordance with
Section 6(a) of this Agreement; and
(ii) "ESCROW CLAIM SATISFACTION AMOUNT" shall mean the final amount
determined for satisfaction of any Escrow Claim by the
applicable Purchaser Indemnified Parties in accordance with
the provisions of this Agreement.
(b) Subject to the terms of this Agreement, at any time or times before
the Second Release Time, the Purchaser Indemnified Parties, or any
of them, may make Escrow Claims against the Escrow Fund for amounts
due for indemnification pursuant to and in accordance with this
Agreement by notifying the Representative and the Escrow Agent in
writing of the Escrow Claim, including a brief description (based on
information then available) of the nature of the Escrow Claim and
the estimated amount of the Escrow Claim (in each case, an "ESCROW
CLAIM NOTICE").
(c) To dispute any Escrow Claim, the Representative shall give written
notice of such dispute (in each case, an "ESCROW DISPUTE NOTICE") to
the applicable Purchaser Indemnified Parties and the Escrow Agent
within forty-five (45) days after receipt of an Escrow Claim Notice.
The Escrow Dispute Notice shall include a summary describing in
reasonable detail the good faith basis on which the Escrow Claim is
being disputed by the Representative. If the Escrow Agent does not
receive an Escrow Dispute Notice from or on behalf of the
Representative within forty-five (45) days after receipt by the
Escrow Agent of the Escrow Claim Notice, the Escrow Claim and Escrow
Claim Amount shall be deemed be acknowledged and agreed upon by the
Representative, the Escrow Claim Satisfaction Amount shall be deemed
to be equal to the Escrow Claim Amount specified in the Escrow Claim
Notice and the deemed Escrow Claim Satisfaction Amount shall be
deliverable to the applicable Purchaser Indemnified Parties.
(d) If the Representative delivers an Escrow Dispute Notice in
accordance with Section 9(c), then the dispute may be resolved by
any legally available means consistent with the provisions of
Section 16(d).
(e) If the Representative delivers an Escrow Dispute Notice in
accordance with Section 9(c), except as provided below the Escrow
Agent shall not release or deliver to the Representative any of the
Escrow Fund at the First Release Time, if such date has not passed,
or the Second Release Time, if such date has not passed, and shall
not release or deliver to a Purchaser Indemnified Party any of the
Escrow Fund in connection with such disputed Escrow Claim unless and
until either:
17
(i) a direction to release and deliver the Escrow Fund in
connection with such Escrow Claim has been executed jointly by
the Purchaser and the Representative; or
(ii) a written decision of any court of competent jurisdiction has
been rendered in relation to the disputed Escrow Claim (which
decision may include an order for costs) from which all rights
of appeal have expired.
Notwithstanding anything contained herein to the contrary, if at any
time, there shall exist an outstanding dispute concerning an Escrow
Claim in respect of which an Escrow Dispute Notice has been properly
delivered by the Representative in accordance with Section 9(c), the
Escrow Agent shall still distribute from the Escrow Fund: (i) to the
Purchaser, that portion of such Escrow Claim which has not been
disputed by the Representative within five (5) Business Days of the
Escrow Agent receiving the applicable Escrow Dispute Notice and/or
(ii) to the Depositary, on the date of the First Release Time or
Second Release Time, as the case may be, any portion of the Escrow
Fund which is not subject to an Escrow Claim and is otherwise
required to be distributed to the Depositary on such date.
(f) Upon resolution of any Escrow Claim that permits recovery against
the Escrow Fund in accordance with Section 9(e) above, the Purchaser
shall give written notice of such resolution (the "RELEASE NOTICE")
to the Escrow Agent, with a copy to the Representative. Such Release
Notice shall specify the Escrow Claim Satisfaction Amount and shall
be accompanied: (i) in the case of an Escrow Claim where the
Representative is deemed to have agreed to an Escrow Claim because
the Representative has not objected to such Escrow Claim by giving
an Escrow Dispute Notice in the manner and within the time set forth
in Section 9(c) above, by an officer's certificate from the
Purchaser certifying that notice of such Escrow Claim was given in
accordance with Section 9(b) above and that the time period in
Section 9(c) above has expired and that the Representative did not
dispute such Escrow Claim within such time period; (ii) in the case
of an Escrow Claim settled by written agreement between the
Purchaser and the Representative, by a copy of the written direction
under Section 9(e)(i) specifying the amount of such recovery; and
(iii) in the case of an Escrow Claim resolved by a court of
competent jurisdiction, by a copy of the written decision of such
court, from which all rights of appeal have expired (as certified in
writing by an officer of the Purchaser), specifying the amount of
such recovery. With respect to clauses (ii) and (iii) in this
Section 9(f), if the Purchaser fails to provide the Release Notice
to the Escrow Agent within fifteen (15) days after resolution of
such Escrow Claim, the Representative may do so. The Escrow Agent
shall pay the applicable Escrow Claim Satisfaction Amount within
five (5) Business Days after it receives the relevant Release
Notice. In no event shall the Escrow Agent pay any amounts to a
Purchaser Indemnified Party in respect of an Escrow Claim if it has
not received a Release Notice and the other written instruments
required to accompany such Release Notice.
(g) If any Escrow Claims timely delivered in accordance with this
Agreement have not been resolved as of the Second Release Time, the
portion of the Escrow Fund having an aggregate value equal to the
amount subject to such unresolved Escrow Claims shall be retained in
escrow by the Escrow Agent until such Escrow Claims have been
resolved in the manner provided in this Agreement, whereupon any
remaining amount of the Escrow Fund shall be distributed to the
Depositary, to be disbursed to the Company Securityholders at the
direction of the Representative in accordance with this Agreement.
18
10. REPRESENTATIVE
(a) Each Company Securityholder designates and appoints the
Representative (including any replacement or successor appointed in
accordance with Section 10(i)) as such Company Securityholder's
agent and attorney-in-fact with full power and authority to act for
and on behalf of each Company Securityholder:
(i) to give and receive notices and communications on behalf of
the Company Securityholders that may be given pursuant to this
Agreement and the Arrangement Agreement, including to accept
service of process on behalf of the Company Securityholders;
(ii) to authorize and agree to the Final Consideration under the
Plan of Arrangement;
(iii) to dispute, agree to, negotiate, enter into settlements and
compromises of, and comply with Judgments of courts or other
Governmental Authorities, with respect to, any claims by any
Purchaser Indemnified Party against the Company Securityholder
or by the Company Securityholder against any Purchaser
Indemnified Party, or any other dispute between any Purchaser
Indemnified Party and the Company Securityholder;
(iv) to authorize delivery to the Purchaser Indemnified Parties, or
any of them, of cash from the Escrow Fund in satisfaction of
indemnification claims pursuant to this Agreement;
(v) to institute any and all proceedings on behalf of the Company
Securityholder in any relevant jurisdiction in respect of any
dispute with the Purchaser, the Parent or any other Person
arising out of or in connection with the transactions
contemplated by this Agreement or the Arrangement Agreement;
(vi) to provide any waiver hereunder on behalf of the Company
Securityholders or any of them or to agree to any amendment of
this Agreement, the Plan of Agreement or the Arrangement
Agreement on behalf of the Company Securityholders; and
(vii) to take all actions that are either (A) necessary or desirable
in the sole judgment of the Representative for the
accomplishment of the foregoing or (B) specifically mandated
by the terms of this Agreement, the Plan of Agreement or the
Arrangement Agreement.
(b) The Escrow Agent and the Purchaser Indemnified Parties shall deal
solely with the Representative, on behalf of the Company
Securityholders, in connection with all matters pertaining to or
arising out of this Agreement, the Plan of Arrangement and the
Arrangement Agreement. The Representative shall keep the Company
Securityholders informed of all matters that are determined by the
Representative in her sole discretion to be material relating to
this Agreement, the Plan of Arrangement and the Arrangement
Agreement and all written notices or other communications in
connection therewith determined by the Representative in her sole
discretion to be material ("MATERIAL SECURITYHOLDER MATTERS") shall
be sent to the Company Shareholders by the Representative in
accordance with Section 10(j). For greater certainty, the receipt by
the Representative of an Escrow Claim Notice in respect of an Escrow
Claim amount in excess of $50,000 shall be deemed to be a Material
19
Shareholder Matter, and any such Escrow Claim Notice must therefore
be provided to the Company Securityholders by the Representative.
Notices or communications to or from the Representative constitute
notice to or from each of the Company Securityholders for all
purposes under the Arrangement Agreement and this Agreement.
(c) The Representative may delegate all or part of her authority as
Representative to any one or more of the Company Securityholders who
agree to such delegation for a fixed or indeterminate period of time
upon not less than ten (10) Business Days' prior written notice to
the Purchaser and the Escrow Agent in accordance with this
Agreement. In the event of the death or incapacity of the
Representative, a successor Representative will be elected promptly
by Company Securityholders holding not less than 60% of the Fully
Diluted Shares as of the Closing Date and such Company
Securityholders will so notify the Purchaser and the Escrow Agent.
Each successor Representative has all of the power, authority,
rights, privileges and obligations conferred by the Arrangement
Agreement and this Agreement upon the original Representative, and
the term "REPRESENTATIVE" as used in the Arrangement Agreement, the
Plan of Arrangement and this Agreement includes any successor
Representative.
(d) A decision, act, consent or instruction of the Representative
constitutes a decision of all the Company Securityholders and is
final, binding and conclusive upon the Company Securityholders, and
the Purchaser, the Parent, the Escrow Agent and any Indemnified
Party may rely upon any such decision, act, consent or instruction
of the Representative as being the decision, act, consent or
instruction of the Company Securityholders. The Escrow Agent, the
Purchaser and the Parent are hereby relieved from any Liability to
any Person, except for any act or omission constituting fraud or
wilful misconduct by the Escrow Agent, the Purchaser or the Parent,
for any acts done or omissions by the Escrow Agent, the Purchaser or
the Parent in accordance with such decision, act, consent or
instruction of the Representative. Without limiting the generality
of the foregoing, the Escrow Agent and the Purchaser are entitled to
rely, without inquiry, upon any document delivered by the
Representative as being genuine and correct and having been duly
signed or sent by the Representative.
(e) Neither the Representative nor any delegate under paragraph (c)
above will have any Liability to any Person for any act done or
omitted by the Representative or delegate, as the case may be, or on
his or her behalf, under this Agreement, the Plan of Agreement, the
Arrangement Agreement or other agreements contemplated under the
Arrangement Agreement, as may be amended, as the Representative
while acting in good faith and not in a manner constituting gross
negligence or wilful misconduct, and any act done or omitted
pursuant to the advice of counsel will be conclusive evidence of
such good faith. The Company Securityholders will severally, and not
jointly and severally, indemnify the Representative in proportion to
their interest in the Initial Consideration and hold the
Representative harmless from and against any Losses she may suffer
as a result of any such action or omission. In no event will a
Company Securityholder be obliged to indemnify the Representative in
an amount exceeding their portion of the Purchase Price actually
received.
(f) The Representative will receive no compensation for services as the
Representative and no bond shall be required of the Representative.
The Company Securityholders will reimburse, on a pro rata basis in
proportion to their interest in the Initial Consideration, the
Representative for professional fees and expenses of any attorney,
accountant or other advisors retained by the Representative and
other reasonable out-of-pocket expenses incurred
20
by the Representative in connection with the performance of the
Representative's duties under the Arrangement Agreement and this
Agreement.
(g) The appointment and grant of power and authority by the Company
Securityholders to the Representative pursuant to this Section 10 is
coupled with an interest, is in consideration of the mutual
covenants made in this Agreement, is irrevocable and may not be
terminated by the act of any Company Securityholder or by operation
of law, whether upon the death or incapacity of any Company
Securityholder, or by the occurrence of any other event, and the
indemnity provided to the Representative pursuant to paragraph (e)
above shall survive the termination of this Agreement.
(h) The Representative shall keep confidential and shall not disclose
any information disclosed or released to her in her capacity as
Representative unless, in her reasonable opinion, she is required to
disclose such information under any applicable Laws, Judgment or
administrative directions or as is reasonably necessary in order for
her to effect her duties as the Representative.
(i) The Representative may resign from her position on giving not less
than thirty (30) days prior written notice to the Purchaser, the
Escrow Agent and the Depositary. In addition, the Company
Securityholders may jointly remove the Representative at any time,
without cause, by delivering a written instrument signed by Company
Securityholders holding not less than 60% of the Fully Diluted
Shares as of the Closing Date to the Representative (with a copy to
the Purchaser), which instrument shall designate the effective date
of such removal. In the event of the resignation or removal of the
Representative, a successor Representative will be elected promptly
by Company Securityholders holding not less than 60% of the Fully
Diluted Shares as of the Closing Date and such Company
Securityholders will so notify the Purchaser, the Escrow Agent and
the Depositary. Upon such resignation or removal, the Representative
shall be discharged of and from any and all further obligations
arising in connection with this Agreement.
(j) As soon as reasonably practicable after receipt by the
Representative of an Escrow Claim Notice in respect of an Escrow
Claim amount in excess of $50,000 or any other written notices or
other communications in connection with a Material Shareholder
Matter, the Representative shall forward a notice (the
"REPRESENTATIVE ESCROW CLAIM NOTICE") to each of the Company
Securityholders, which notice shall include: (i) a copy of such
Escrow Claim Notice or other written notices or other communications
in connection with a Material Shareholder Matter; and (ii) a
statement as to whether or not the Representative intends to dispute
the Escrow Claim Notice or other written notices or other
communications in connection with a Material Shareholder Matter,
where applicable. Upon receipt of any such notices or other
communications in connection with a Material Shareholder Matter, a
Company Securityholder may, at such Company Securityholder's option,
contact the Representative to discuss the applicable Shareholder
Material Matter and the Representative will use commercially
reasonable efforts to discuss the Shareholder Material Matter and
the Representative's proposed response to such matter, notice or
other communication with the Company Securityholder. Notwithstanding
the foregoing, the Representative shall be entitled to respond to
and otherwise deal with the Escrow Claim Notice in her sole
discretion, in accordance with her duties and obligations under this
Agreement.
(k) Neither the Representative, any delegate under paragraph (c) above,
the Company, the Purchaser nor the Parent will have any obligation
to notify any Company Securityholder of
21
the deadline for the delivery of the documents required to be
delivered to the Depositary under section 5.3 (Extinction of Rights)
of the Plan of Arrangement. In addition, neither the Representative,
any such delegate, the Company, the Purchaser nor the Parent will be
obliged to take any action or provide any notice to any Company
Securityholder in connection with the Company Securityholders'
obligation to deliver certificate(s) and/or agreement(s) to the
Depositary under Article 11 of this Agreement.
(l) The parties to this Agreement acknowledge and agree that the
Representative shall have no obligations to any Person under the
terms of this Agreement until the Effective Date.
11. DEPOSITARY
11.1 Appointment of Depositary.
(a) Computershare Investor Services Inc. is hereby appointed to act as
the Depositary in connection with the Plan of Arrangement on the
terms and conditions set forth in this Agreement, and hereby accepts
such appointment on such terms and conditions. The Depositary shall
have no duties or obligations other than those set forth herein or
as may subsequently be agreed to by the Depositary.
(b) The Purchaser shall notify the Depositary of the Closing Date and
the Effective Time as soon as reasonably practical and, in any
event, no later than three (3) Business Days prior to the Closing
Date.
(c) In the event that the Plan of Arrangement is amended subsequent to
the date hereof, the Purchaser shall promptly deliver a copy of the
Plan of Arrangement, as amended, to the Depositary.
11.2 Delivery of Initial Consideration and Aggregate Preference Amount.
(a) Pursuant to the Plan of Arrangement, at or prior to the Effective
Time, the Purchaser will deliver or cause to be delivered to the
Depositary by wire transfer of immediately available funds an amount
equal to the aggregate of: (i) the Initial Consideration; and (ii)
the Aggregate Preference Amount.
(b) The Initial Consideration and the Aggregate Preference Amount shall
be held in a non-interest bearing account by the Depositary until
such funds are disbursed in accordance with the terms and conditions
of this Agreement.
11.3 Disbursement of Initial Consideration and Aggregate Preference Amount
(a) At or prior to the Effective Time, the Representative shall deliver
a written instruction to the Depositary and the Escrow Agent
substantially in the form of Schedule "A" (the "CLOSING DATE PAYMENT
DIRECTION") and the Purchaser shall deliver a written instruction to
the Depositary and the Escrow Agent specifying the amount of
applicable withholding taxes payable in respect of the portion of
the Aggregate Preference Amount and Initial Consideration payable to
the Company Securityholders (as applicable) (the "CLOSING DATE TAX
DIRECTION"). Forthwith upon receipt of the Initial Consideration,
the Depositary shall,
22
in accordance with the Closing Date Payment Direction and Closing
Date Tax Direction, deliver:
(i) the Pro Rata Escrow Amount and Preference Share Escrow Amount
to the Escrow Agent in accordance with Section 4(a);
(ii) the Total Option Holdback Amount and the Total Exercising
Shareholder Holdback Amount to the Escrow Agent in accordance
with Section 7(a);
(iii) the Representative Expense Amount to the Escrow Agent in
accordance with Section 4(a);
(iv) to each Company Securityholder listed in Schedule "B" who held
Preference Shares immediately prior to the Effective Time, the
amount set forth opposite such payee's name in Schedule "B"
less any applicable withholding taxes (including amounts
withheld under Section 116 of the Canadian Tax Act) in respect
of the Aggregate Preference Amount specified in the Closing
Date Tax Direction;
(v) to the Company Securityholders listed in Schedule "C" who held
Common Shares or Company Options immediately prior to the
Effective Time, the amount set forth opposite such payee's
name in Schedule "C" less any applicable withholding taxes in
respect of the Initial Consideration specified in the Closing
Date Tax Direction; and
(vi) to an account specified by the Company, an amount equal to the
aggregate amount of withholding taxes specified in the Closing
Date Tax Direction,
in each case, within three (3) Business Days after receiving such
funds together with the Closing Date Payment Direction and the
Closing Date Tax Direction; provided, however, that in no event
shall the Depositary disburse funds to a Company Securityholder
until such Company Securityholder has deposited with the Depositary
certificate(s) and/or agreement(s), as applicable, representing the
Shares and/or Company Options held by such Company Securityholder,
which are accompanied by a signed and completed Letter of
Transmittal substantially in the form attached as Schedule "D"
hereto, as applicable.
(b) Unless otherwise specified in the Closing Date Payment Direction,
the amounts paid to the Company Securityholders pursuant to Sections
11.3(a)(iv) and (v) shall correspond to the amount set forth
opposite each payee's name on Schedule "B" and/or Schedule "C" (less
any applicable withholding taxes specified in the Closing Date Tax
Direction). The Depositary shall pay such amounts by forwarding a
cheque by first class mail (postage paid) to each such payee at the
address specified in the Letter of Transmittal delivered by such
payee to the Depositary.
(c) The Depositary will direct any Company Securityholders whose
certificate(s) and/or agreement(s) representing such Company
Securityholder's Shares and/or Company Options have been lost or
destroyed to submit a Letter of Transmittal completed to the best of
such Company Securityholder's ability and to submit a letter
describing the loss. Upon receipt of such statement of loss or
destruction, the Depositary shall provide a copy of such statement
23
to the Purchaser, which shall notify the affected Company
Securityholder as to its replacement requirements.
(d) If a Letter of Transmittal or other required document has been
improperly completed or signed, or the certificate(s) representing
Shares accompanying a Letter of Transmittal are not in proper form
for transfer to the Purchaser, or some other irregularity in
connection with a deposit exists, the Depositary will make
reasonable efforts to contact such Company Securityholder to cause
such irregularity to be corrected.
(e) In the event of any doubt on the part of the Depositary as to
whether any certificate(s) and/or agreement(s) representing Shares
or Company Options have been properly deposited, the Depositary will
seek the advice of the Purchaser and its legal counsel as to the
acceptability of the deposit. If reasonable efforts to correct an
improper deposit prove to be unsuccessful, the Depositary will seek
the advice of the Purchaser and its legal counsel with respect to
the procedures to be followed. The Depositary will reject any
deposit if, in the opinion of the Purchaser's legal counsel, the
deposit has been made improperly and the Depositary will take such
action with respect to such improper deposit as directed by the
Purchaser or the Purchaser's legal counsel, acting reasonably.
(f) Notwithstanding any other provision of this Agreement, in the case
of the loss, theft or destruction of a certificate and/or agreement
representing Shares or Company Options, the holder of such
certificate and/or agreement must: (i) deliver a properly completed
Letter of Transmittal together with a letter stating the loss, theft
or destruction of such certificate and/or agreement; and (ii) comply
with the Purchaser's replacement requirements, before receiving
payment hereunder in respect of such Shares or Company Options. The
Depositary shall not be required to release any amounts in respect
of any Company Shares and/or Company Options in respect of which the
certificate(s) and/or agreement(s) representing such Company Shares
and/or Company Options have been lost or damaged unless and until it
receives confirmation from the Purchaser that the affected Company
Securityholders have complied with the Purchaser's replacement
requirements and that the Depositary is therefore authorized and
instructed to release the authorized amounts.
(g) Upon compliance with the provisions of this Section 11.3 and Article
5 of the Plan of Arrangement, the Depositary will disburse the
applicable funds, less any applicable withholding tax, to each
Company Securityholder listed on Schedule "B" and Schedule "C", as
the case may be, in accordance with section 5.1(d) of the Plan of
Arrangement.
11.4 First Escrow Release Amount
(a) Upon the release by the Escrow Agent of the First Escrow Release
Amount, if any, from the Escrow Fund to the Depositary at the First
Release Time in accordance with Section 6(b), the Representative
shall deliver a written instruction to the Depositary substantially
in the form attached as Schedule "F" (the "FIRST ESCROW RELEASE
PAYMENT DIRECTION") and the Purchaser shall deliver a written
instruction to the Depositary specifying the amount of applicable
withholding taxes payable in respect of each Company Securityholder
(the "FIRST ESCROW RELEASE TAX DIRECTION").
(b) Unless otherwise specified in the First Escrow Release Payment
Direction, the Depositary shall upon receipt of the First Escrow
Release Amount:
24
(i) disburse to each Company Securityholder listed in Schedule
"H", a percentage of the First Escrow Release Amount
calculated in accordance with the percentage allocations set
forth opposite such payee's name in Schedule "H" less any
applicable withholding taxes specified in the written
instructions delivered by the Purchaser pursuant to Section
11.4(a) above; and
(ii) deliver to an account specified by the Company, an amount
equal to the aggregate amount of withholding taxes specified
in the written instructions delivered by the Purchaser
pursuant to Section 11.4(a) above.
(c) The Depositary will disburse the funds referred to in Section
11.4(b)(i) above by forwarding a cheque by first class mail (postage
paid) to each Company Securityholder listed in Schedule "H" within
three (3) Business Days after receiving the applicable funds, in
each case in accordance with the signed First Escrow Release Payment
Direction; provided, however, that the Depositary shall disburse
funds to a Company Securityholder only if such Company
Securityholder has deposited with the Depositary, in compliance with
Section 11.3 above and Article 5 of the Plan of Arrangement,
certificate(s) and/or agreement(s), instruments or agreements, as
applicable, representing the Shares and/or Company Options held by
such Company Securityholder or otherwise provided evidence
satisfactory to the Depositary and the Purchaser of the loss, theft
or destruction of such certificate(s) and/or agreement(s)
accompanied by a signed and completed Letter of Transmittal and
otherwise complied with Section 11.3 and Article 5 of the Plan of
Arrangement.
11.5 Release of Balance of Escrow Fund
(a) Upon the release by the Escrow Agent of the balance of the Escrow
Funds, if any, to the Depositary at the Second Release Time in
accordance with Section 6(c), the Representative shall deliver a
written instruction to the Depositary substantially in the form
attached as Schedule "F" (the "SECOND ESCROW RELEASE PAYMENT
DIRECTION") and the Purchaser shall deliver a written instruction to
the Depositary specifying the amount of applicable withholding taxes
payable in respect of each Company Securityholder (the "SECOND
ESCROW RELEASE TAX DIRECTION").
(b) Unless otherwise specified in the Second Escrow Release Payment
Direction, the Depositary shall upon receipt of the Second Escrow
Release Amount:
(i) disburse to each Company Securityholder listed in Schedule
"H", a percentage of the Second Escrow Release Amount
calculated in accordance with the percentage allocations set
forth opposite such payee's name in Schedule "H" less any
applicable withholding taxes specified in the written
instructions delivered by the Purchaser pursuant to Section
11.5(a) above; and
(ii) deliver to an account specified by the Company, an amount
equal to the aggregate amount of withholding taxes specified
in the written instructions delivered by the Purchaser
pursuant to Section 11.5(a) above.
(c) The Depositary will disburse the funds referred to in Section
11.5(b)(i) by forwarding a cheque by first class mail (postage paid)
to each Company Securityholder listed in Schedule "H" within three
(3) Business Days after receiving the applicable funds, in each case
in accordance with the signed Second Escrow Release Payment
Direction; provided,
25
however, that the Depositary shall disburse funds to a Company
Securityholder only if such Company Securityholder has deposited
with the Depositary, in compliance with Section 11.3 above and
Article 5 of the Plan of Arrangement, certificate(s) and/or
agreement(s), as applicable, representing the Shares and/or Company
Options held by such Company Securityholder or otherwise provided
evidence satisfactory to the Depositary and the Purchaser of the
loss, theft or destruction of such certificate(s) and/or
agreement(s) accompanied by a signed and completed Letter of
Transmittal and otherwise complied with Section 11.3 above and
Article 5 of the Plan of Arrangement.
11.6 Option and Exercising Shareholder Holdback
(a) Upon receipt by the Depositary, pursuant to Sections 7(f) and 7(h),
of the Holdback Release List and the Aggregate Holdback Amount,
together with the applicable Accrued Interest thereon, the
Depositary shall, within three (3) Business Days of receipt of such
list and amount, disburse:
(i) to each Remaining Employee who was originally a Holdback
Optionee, the portion of the Option Holdback Amount set forth
opposite such payee's name in the Holdback Release List, and
the applicable Accrued Interest thereon, less any applicable
withholding tax, by forwarding a cheque by first class mail
(postage paid) to each such Remaining Employee at such
Remaining Employee's address as set forth in Schedule "H";
(ii) to each Remaining Employee who was originally an Exercising
Shareholder, the portion of the Exercising Shareholder
Holdback Amount set forth opposite such payee's name in the
Holdback Release List, and the applicable Accrued Interest
thereon, less any applicable withholding tax, by forwarding a
cheque by first class mail (postage paid) to each such
Remaining Employee at such Remaining Employee's address as set
forth in Schedule "H";
(iii) to each Remaining Securityholder, the portion of the Remaining
Holdback Amount set forth opposite such payee's name in the
Holdback Release List, and the applicable Accrued Interest
thereon, less any applicable withholding tax, by forwarding a
cheque by first class mail (postage paid) to each such
Remaining Employee at such Remaining Employee's address as set
forth in Schedule "H";
(iv) to an account specified by the Company, an amount equal to the
aggregate amount of withholding taxes specified in the
Holdback Release List.
11.7 Final Consideration
(a) Upon the receipt by the Depositary of the Final Consideration from
the Purchaser pursuant to the Plan of Arrangement, the
Representative shall deliver a written instruction to the Depositary
substantially in the form attached as Schedule "F" (the "FINAL
CONSIDERATION PAYMENT DIRECTION") and the Purchaser shall deliver a
written instruction to the Depositary specifying the amount of
applicable withholding taxes payable in respect of each Company
Securityholder (the "FINAL CONSIDERATION TAX DIRECTION").
(b) Unless otherwise specified in the Final Consideration Payment
Direction, the Depositary shall upon receipt of the Final
Consideration deliver:
26
(i) to each Company Securityholder listed in Schedule "G", a
percentage of the Final Consideration calculated in accordance
with the percentage allocations set forth opposite such
payee's name in Schedule "G" less any applicable withholding
taxes specified in the Final Consideration Tax Direction;
(ii) to an account specified by the Company, an amount equal to the
aggregate amount of withholding taxes specified in the Final
Consideration Tax Direction,
(c) The Depositary will disburse such funds by forwarding a cheque by
first class mail (postage paid) to each Company Securityholder
listed in Schedule "G", in each case in accordance with the signed
Final Consideration Payment Direction; provided, however, that the
Depositary shall disburse funds to a Company Securityholder only if
such Company Securityholder has deposited with the Depositary, in
compliance with Section 11.3 above and Article 5 of the Plan of
Arrangement, certificate(s) and/or agreement(s), as applicable,
representing the Shares or Company Options held by such Company
Securityholder or otherwise provided evidence satisfactory to the
Depositary and the Purchaser of the loss, theft or destruction of
such certificate(s) and/or agreement(s), accompanied by a signed and
completed Letter of Transmittal and otherwise complied with Section
11.3 above and Article 5 of the Plan of Arrangement.
11.8 Release of Balance of Representative Expense Fund
(a) Upon the release of the balance of the Representative Expense Fund
to the Depositary in accordance with Section 6(h), the
Representative shall deliver a written instruction to the Depositary
substantially in the form attached as Schedule "F" (the "EXPENSE
RELEASE PAYMENT DIRECTION") and the Purchaser shall deliver a
written instruction to the Depositary specifying the amount of
applicable withholding taxes payable in respect of each Company
Securityholder (the "EXPENSE RELEASE TAX DIRECTION").
(b) Unless otherwise specified in the Expense Release Payment Direction,
the Depositary shall deliver:
(i) to each Company Securityholder listed in Schedule "G", a
percentage of the balance of the Representative Expense Fund
calculated in accordance with the percentage allocations set
forth opposite such payee's name in Schedule "G" less any
applicable withholding taxes specified in the Expense Release
Tax Direction;
(ii) to an account specified by the Company, an amount equal to the
aggregate amount of withholding taxes specified in the Expense
Release Tax Direction,
(c) The Depositary will disburse such funds by forwarding a cheque by
first class mail (postage paid) to each Company Securityholder
listed in Schedule "G", in each case in accordance with the signed
Expense Release Payment Direction; provided, however, that the
Depositary shall disburse funds to a Company Securityholder only if
such Company Securityholder has deposited with the Depositary, in
compliance with Section 11.3 above and Article 5 of the Plan of
Arrangement, certificate(s) and/or agreement(s), as applicable,
representing the Shares or Company Options held by such Company
Securityholder or otherwise provided evidence satisfactory to the
Depositary and the Purchaser of the loss, theft or destruction of
such certificate(s), accompanied by a signed and completed Letter of
Transmittal and otherwise complied with Section 11.3 above and
Article 5 of the Plan of Arrangement.
27
11.9 Depositary Fees
The Depositary shall be entitled to be paid its usual fees for its services
hereunder, and all costs and expenses reasonably incurred by the Depositary in
connection with the performance or observance of its duties, including without
limitation, all out-of-pocket expenses and disbursements incurred or made by the
Depositary in the administration of such services and duties (including the
reasonable fees and disbursements of legal counsel and other outside advisors
required for discharge of its duties hereunder or other wise in connection with
this Agreement) (collectively, the "DEPOSITARY FEES"). The Depositary shall
provide an invoice with respect to Depositary Fees to the Representative and the
Representative shall direct that such Depositary Fees be paid out of the Escrow
Fund prior to the release of any amounts from the Escrow Fund to the Company
Securityholders. All Depositary Fees and out-of pocket expenses will be paid
within thirty days from the date of invoice. Late payments may be subject to
interest charges as indicated on the invoice. The parties acknowledge and agree
that the fees of the Depositary are confidential information. As such, the
parties agree not to disclose any such fees to any third party without the
Depositary's prior written consent, save and except for disclosure: (i) to the
parties' professional advisors, held to strict confidence; and (ii) as required
or otherwise compelled by law.
11.10 Depositary Liability.
The acceptance by the Depositary of its duties under this Agreement is subject
to the following terms and conditions which shall govern and control the rights,
duties, liabilities and immunities of the Depositary:
(a) The Depositary is not a party to and is not bound by any agreement
which may be evidenced by, or which may arise out of, the foregoing
instructions other than as expressly set forth in this Agreement.
(b) The Depositary shall not be liable for any action taken or omitted
by the Depositary pursuant to or in connection with this Agreement,
other than as a result of its own gross negligence or wilful
misconduct, or that of its officers, directors, representatives or
employees.
(c) Notwithstanding any other provision of this Agreement, the
Depositary shall not be liable under any circumstances whatsoever
for any special, indirect, consequential, punitive or aggravated
damages, including damages for loss of profit, arising from any
action taken or omitted under this Agreement.
(d) Notwithstanding any other provision of this Agreement, the liability
of the Depositary under this Agreement shall be limited, in the
aggregate, to the amount of Depositary Fees paid to the Depositary
in respect of the twelve (12) month period ending on the date on
which a party to this Agreement first brings or commences a claim,
action or proceeding against the Depositary.
(e) In addition to and without limiting any other protection of the
Depositary hereunder or otherwise by law, the Company, the Purchaser
and the Parent shall jointly and severally indemnify and hold the
Depositary and its directors, officers and employees harmless from
and against any and all liabilities, losses, claims, damages,
penalties, actions, suits, demands, levies, costs, expenses and
disbursements including any and all reasonable legal and adviser
fees and disbursements of whatever kind or nature which may at any
time be suffered by, imposed on, incurred by or asserted against the
Depositary, whether groundless or otherwise, howsoever arising from
or out of any act, omission or error of the Depositary in connection
28
with its acting as Depositary hereunder unless arising from the
gross negligence or wilful misconduct of the Depositary, or that of
its officers, directors, representatives or employees.
Notwithstanding any other provision hereof, this indemnity shall
survive the removal, or resignation of the Depositary, and
termination of this Agreement.
(f) In the event of any claim, action or proceeding brought or commenced
against the Depositary, the Depositary shall notify the
Representative as soon as practicable after it receives written
notice of such claim or has been served with a summons or other
legal process, which notice will attach such claim, action or
proceeding or provide information as to the nature and basis of such
claim, action or proceeding. The Representative shall, upon the
prior written direction and consent of the Depositary, undertake the
investigation and defence of any such claim, action or proceeding.
Notwithstanding the foregoing, the Depositary shall have the right
to retain other counsel to act on its behalf if the Depositary
reasonably determines that a conflict of interest or other
circumstance in which its best interests would not adequately be
represented exists that would make representation by counsel chosen
by the Representative inadvisable.
(g) If at any time in the performance of its duties under this Agreement
it shall be necessary for the Depositary to receive, accept, act or
rely upon any certificate, notice, request, waiver, consent,
receipt, direction, affidavit or other paper, writing or document
furnished to it and purporting to have been executed or issued by
the Representative, the Depositary may rely upon any instructions,
instrument, certificate, report or paper believed by the Depositary
to be genuine and to have been signed or presented by the proper
person(s) and shall be under no duty to make any investigation or
inquiry as to any signature or statement contained therein, but may
accept the same as having been properly given and as conclusive
evidence of the truth and accuracy of any statements therein
contained.
(h) None of the provisions contained in this Agreement or any supplement
shall require the Depositary to expend or risk its own funds or
otherwise incur financial liability in performing its duties or in
the exercise of any of its rights or powers. The Depositary shall
not be required to make any payment or disburse any funds unless and
until it has received the necessary funds to make such payment or
disbursement.
(i) The Depositary shall have the right to disclose any information
disclosed or released to it if in the opinion of the Depositary, or
its legal counsel, it is required to disclose such information under
any applicable Laws, Judgment or administrative directions. The
Depositary shall not be responsible or liable to any person for any
loss or damage arising out of or in any way sustained or incurred or
in any way relating to such disclosure.
(j) The Depositary may appoint such agents and employ or retain such
counsel, accountants, engineers, appraisers or other experts or
advisers as it may reasonably require for the purpose of discharging
its duties hereunder or otherwise in connection with this Agreement
and shall not be responsible for any misconduct on the part of any
of them. The Depositary may pay remuneration for all services
performed for it in the discharge of its duties hereunder without
taxation for costs or fees of any counsel, solicitor or attorney.
The advice or opinion of any legal counsel so retained by the
Depositary shall be full and complete authorization and protection
in respect of any action or omission taken in good faith by the
Depositary in reliance upon such advice or opinion.
29
(k) The Depositary may act and rely and shall be protected in acting and
relying on in good faith on the opinion or advice of or information
obtained from any agent, counsel, accountant, engineer, appraiser or
other expert or adviser, whether retained or employed by the
Representative or the Depositary, in relation to any matter arising
in the performance of its duties under this Agreement.
(l) In the event of any disagreement between any of the parties hereto
resulting in adverse claims or demands with respect to the Escrow
Fund, the Aggregate Holdback Amount, the Remaining Holdback Amount
and/or any interest or earnings on any of such amounts
(collectively, the "TRANSACTION FUNDS") or any portion thereof, the
Depositary shall be entitled, at its option, to refuse to comply
with any claims or demands on it with respect thereto as long as
such disagreement shall continue, and in so refusing, the Depositary
may elect to make no delivery of the Transaction Funds or any
portion thereof held by it. In so doing, the Depositary shall not be
or become liable in any way to the parties hereto (including the
Company Securityholders) for its failure or refusal to comply with
such claims or demands. The Depositary shall be entitled to refrain
from acting until such claims or demands:
(i) shall have been finally determined in a court of competent
jurisdiction; or
(ii) shall have been settled by agreement and the Depositary shall
have been so notified thereof by the Representative and the
Purchaser in writing.
(m) The Depositary may pay the Transaction Funds into a court of
competent jurisdiction for a determination by such court as to the
entitlement to the Transaction Funds at any time and shall thereupon
be released from any obligation hereunder.
(n) Upon the Depositary's delivery or deposit of the full amount of the
Transaction Funds in accordance with the provisions of this
Agreement, the Depositary shall be automatically and immediately
released from all obligations under this Agreement to any party
hereto and to any other Person with respect to the Transaction Funds
or any portion thereof.
(o) The Depositary shall not be liable, or held in breach of this
Agreement, if prevented, hindered, or delayed in the performance or
observance of any provision contained herein by reason of any act of
God, riot, terrorism, act of war, epidemic, governmental action,
judicial order, earthquake, power failure, sabotage, explosion,
civil commotion, strike or industrial action of any kind,
unavailability of any system, or any other similar cause beyond its
reasonable control (including, but not limited to, mechanical,
electronic or communication interruptions, disruptions or failures).
Performance times under this Agreement shall be extended for a
period of time equivalent or reasonably related to the time lost
because of any delay that is excusable under this section
11.11 Resignation or Removal of the Depositary
The Depositary may resign from its position at any time upon thirty (30) days
prior written notice to the Representative. In addition, the Purchaser and the
Representative may jointly remove the Depositary at any time without cause, by
an instrument given to the Depositary, which instrument shall designate the
effective date of such removal. Upon such resignation or removal, the Depositary
shall take such steps as are necessary to transfer any Transaction Funds and any
documentation related thereto deposited with it to a successor depositary as
selected by the Representative and agreed to by the Purchaser, acting
reasonably, and, where
30
such successor depositary is not so selected within seven (7) Business Days of
the Depositary's resignation or removal, then to any court of competent
jurisdiction. Upon such resignation or removal, the Depositary shall be
discharged of and from any and all further obligations arising in connection
with this Agreement other than to retain and safeguard the Transaction Funds and
any documentation then in its possession until receipt of a designation of
successor depositary or a joint written disposition instruction by or on behalf
of the Purchaser and the Representative or a final non-appealable order of a
court of competent jurisdiction.
12. ANTI-MONEY LAUNDERING/ANTI-TERRORIST LEGISLATION
Each of the Company (without making any inquiry of the Company Securityholders),
the Purchaser and the Parent hereby represents and covenants to the Escrow Agent
and the Depositary in respect of any account to be opened by, or interest to be
held by, the Escrow Agent or the Depositary in connection with this Agreement,
for or to the credit of such party, that either: (i) such account is not
intended to be used by or on behalf of any third party; or (ii) if such account
is intended to be used by or on behalf of a third party, the Company, the
Purchaser, the Parent and the Representative, as applicable, will complete and
execute forthwith a declaration in the Escrow Agent's prescribed form as to the
particulars of such third party.
Each of the Escrow Agent and the Depositary shall retain the right not to act
and shall not be liable for refusing to act if, due to a lack of information or
for any other reason whatsoever, the Escrow Agent or the Depositary, as the case
may be, in its sole judgment, determines that such act might cause it to be in
non-compliance with any applicable anti-money laundering or anti-terrorist
legislation, regulation or guideline. Further, should either of the Escrow Agent
or the Depositary, in its sole judgment, determine at any time that its acting
under this Agreement has resulted in its being in non-compliance with any
applicable anti-money laundering or anti-terrorist legislation, regulation or
guideline, then it shall have the right to resign on ten (10) days written
notice to the Representative and the Purchaser, provided that:
(a) the written notice of the Escrow Agent or the Depositary, as the
case may be, describes the circumstances of such non-compliance; and
(b) if such circumstances are rectified to the satisfaction of the
Escrow Agent or Depositary, as the case may be, within such ten (10)
day period, then such resignation shall not be effective.
13. INTEREST
(a) The Company Securityholders will be treated as the owners of the
Escrow Fund for purposes of any taxes based on income. The Company
Securityholders will report all income, if any, that is earned on,
or derived from, the Escrow Fund as income in the taxable year or
years in which such income is properly includable and pay any taxes
attributable thereto.
(b) Each Remaining Employee will be treated as the owner of his or her
applicable portion of the Aggregate Holdback Amount in respect of
such Remaining Employee for purposes of any taxes based on income.
The Remaining Employees will report all income, if any, that is
earned on, or derived from, the applicable Aggregate Holdback Amount
as income in the taxable year or years in which such income is
properly includable and pay any taxes attributable thereto.
(c) Each Remaining Securityholder will be treated as the owner of the
applicable portion of the Remaining Holdback Amount in respect of
such Remaining Securityholder for purposes of
31
any taxes based on income. The Remaining Securityholders will report
all income, if any, that is earned on, or derived from, the
applicable Remaining Holdback Amount as income in the taxable year
or years in which such income is properly includable and pay any
taxes attributable thereto.
14. WITHHOLDING TAX MATTERS
(a) Notwithstanding any provision to the contrary contained herein, the
Escrow Agent and the Depositary shall be entitled to deduct and
withhold from any amount otherwise payable to any Purchaser
Indemnified Party or Company Securityholder pursuant to this
Agreement such amounts as the Escrow Agent or the Depositary, as the
case may be, is required to deduct and withhold with respect to such
payment under the Canadian Tax Act, the Code or any provision of
federal, provincial, state, local or foreign tax laws, in each case,
as amended or succeeded. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes as having
been paid to the applicable Purchaser Indemnified Parties or Company
Securityholders in respect of which such deduction and withholding
was made, provided that such withheld amounts are actually remitted
to the appropriate taxing authority. The Purchaser and the Company
Securityholders shall use commercially reasonable efforts as soon as
reasonably practicable provide to the Escrow Agent or Depositary, as
applicable, such information or tax forms as the Escrow Agent or
Depositary reasonably requests in connection with its obligations
under the appropriate tax laws and/or regulations applicable in
respect of withholding, backup withholding and information reporting
including, without limitation, tax identification numbers (if any)
for any Purchaser Indemnified Party, the Representative and each of
the Company Securityholders and Forms W-9 or W-8. Any amount
deducted or withheld pursuant to section 116 of the Canadian Tax Act
from any Purchaser Indemnified Party or Company Securityholder who
is a non-resident of Canada or has not certified that it is resident
in Canada for income tax purposes (a "NON-RESIDENT HOLDER") shall be
remitted either (a) to the relevant taxing authority on the last
business day of the period within which remittance is required or
(b) to such Non-Resident Holder upon delivery by such Non-Resident
Holder to the Purchaser of a clearance certificate acceptable to the
Purchaser, acting reasonably, issued pursuant to section 116 of the
Canadian Tax Act having a certificate limit not less than the full
amount of the consideration to be paid to such Non-Resident Holder
pursuant to the terms hereof, whichever shall first occur.
Notwithstanding that the time for remittance of amounts deducted or
withheld in respect of any such Non-Resident Holder has occurred
without an acceptable clearance certificate being provided, if the
Purchaser is provided with a letter acceptable to the Purchaser from
CRA advising that all or any portion (the "PORTION") of the amounts
deducted or withheld pursuant to section 116 of the Canadian Tax Act
in respect of such Non-Resident Holder is not required to be
remitted at that time, such amounts will continue to be held in
accordance with that letter until such a clearance certificate is
provided or until CRA requires the Portion to be remitted, whichever
shall first occur.
(b) Notwithstanding the generality of the foregoing, the Depositary
shall not be responsible for any tax processing relating to or
arising from the duties or actions contemplated by this Agreement,
including evaluation, reporting, remittance, filing, and issuance of
tax slips, summaries and reports, except as is specifically
delegated to the Depositary pursuant to this Agreement or as may be
subsequently agreed by the parties. The Depositary shall be entitled
to rely upon and assume, without further inquiry or verification,
the accuracy and
32
completeness of any tax processing information, documentation or
instructions received by Depositary, directly or indirectly, from
the Purchaser or the Company.
15. INTERPLEADER
Notwithstanding any other provision of this Agreement, the Escrow Agent shall
have the right at any time to interplead the parties and deposit the Escrow Fund
or any other document or monies deposited with it with any court of competent
jurisdiction in the event of any dispute as to, or if the Escrow Agent in its
sole discretion shall conclude that there is, a bona fide question, confusion or
dispute in respect of or as to any matter under this Agreement including,
without limitation, the holding or delivery of the Escrow Fund, the duties of
the Escrow Agent in respect of any other matter arising hereunder or the
validity, enforceability, extent of enforceability or meaning of any provision
of this Agreement and any such deposit shall wholly discharge the obligations of
the Escrow Agent under this Agreement in respect of the Escrow Fund and any such
other document or monies, and shall for all purposes hereof be deemed good and
sufficient fulfilment by the Escrow Agent of all of its obligations hereunder.
16. MISCELLANEOUS
(a) All notices and other communications under this Agreement must be in
writing and are deemed duly delivered when (i) delivered, if
delivered personally or by nationally recognized overnight courier
service (costs prepaid), (ii) upon confirmation of transmission by
the transmitting equipment (or, the first Business Day following
such transmission if the date of transmission is not a Business
Day), if sent by facsimile, or (iii) received or rejected by the
addressee, if sent by certified mail, return receipt requested; in
each case to the following addresses or facsimile numbers and marked
to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number or individual as a
party may designate by notice to the other parties):
IF TO THE PURCHASER AND/OR THE PARENT:
RadiSys Corporation
0000 XX Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx
00000 XXX
Attention: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
WITH A COPY TO:
Xxxxx & XxXxxxxx LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attn.: Xxxx Xxxxxxxx
Fax No.: (000) 000-0000
33
- and -
XxXxxxxx Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxx Xxxxxxx
Fax No.: (000) 000-0000
IF TO THE COMPANY SECURITYHOLDERS OR THE REPRESENTATIVE:
c/x Xxxxxxxx Funds
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx
X.X.X. 00000
Attention: Xxxxxx Xxxxxxx
Fax No.: (000) 000-0000
WITH A COPY TO:
Gowling Xxxxxxx Xxxxxxxxx LLP
000 Xxxxxx Xxxxx
Xxxxx X, Xxxxx 000
Xxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxx X. Xxxx
Fax No.: (000) 000-0000
IF TO THE ESCROW AGENT:
Computershare Trust Company of Canada
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Manager, Corporate Trust
Fax No.: (000) 000-0000
IF TO THE DEPOSITARY:
Computershare Investor Services Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
(b) Apart from notices to be delivered by the Representative, all
notices and other communication to be delivered to the Company
Securityholders shall be deemed to have been delivered to the
Company Securityholders if delivered to the Representative, and all
notices and other communications to be delivered by the Company
Securityholders shall be
34
deemed to have been delivered by the Company Securityholders if
delivered by the Representative. Any notice required to be delivered
by the Representative to a Company Securityholder shall be deemed to
have been delivered if sent by first class post to the address set
forth opposite the Company Securityholder's name in Schedule "C".
(c) This Agreement may be amended or cancelled by mutual written
agreement of the Company, the Purchaser, the Parent and the
Representative and upon written notice to the Escrow Agent and the
Depositary; provided, however, the rights, duties, responsibilities,
liabilities and immunities of the Escrow Agent, the Depositary or
the Representative may not be amended without the prior written
consent of the Escrow Agent, the Depositary or the Representative,
as applicable.
(d) This Agreement shall be governed, including as to validity,
interpretation and effect, by the laws of the Province of British
Columbia and the laws of Canada applicable therein, and shall be
construed and treated in all respects as a British Columbia
contract. Each of the parties hereby irrevocably attorns to the
non-exclusive jurisdiction of the courts of the Province of British
Columbia in respect of all matters arising under and in relation to
this Agreement. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
(e) The parties shall execute all documents and do all such acts and
things as may be reasonably necessary to give effect to the intents
and purposes of the parties under this Agreement.
(f) This Agreement may be executed and delivered by facsimile
transmission and such facsimile copy will be deemed to be an
original.
(g) This Agreement may be executed in any number of counterparts with
the same effect as if all parties had signed a single document. All
counterparts shall be construed together and shall constitute one
agreement. This Agreement shall be a valid and binding agreement
between those parties who have signed this Agreement and shall not
be invalid or unenforceable as between such parties because one or
more intended parties to this Agreement has not signed this
Agreement for whatsoever reason.
(h) The headings and captions contained herein are for convenience and
shall not control or affect the meaning or construction of any
provision hereof.
(i) This Agreement, the Plan of Arrangement and the Arrangement
Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof.
(j) The parties hereto (including the Company Securityholders)
acknowledge and irrevocably agree that notwithstanding any other
provision in this Agreement, Section 2 of this Agreement shall
survive the termination of this Agreement and the termination of the
duties of the Escrow Agent and Depositary under this Agreement for
the applicable periods set forth in Section 2.5.
35
(k) Each reference to "Dollars" or "$" in this Agreement refers to the
lawful currency of the United States of America.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
36
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day and year first above written.
WITNESS: )
)
)
----------------------------------- -----------------------------------
(Signature) ) XXXXXX XXXXXXX
)
)
-----------------------------------
(Address) )
)
)
-----------------------------------
(Occupation) )
RADISYS CANADA INC.
By:
-----------------------------------
Name:
Title:
RADISYS CORPORATION
By:
-----------------------------------
Name:
Title:
CONVEDIA CORPORATION
By:
-----------------------------------
Name:
Title:
COMPUTERSHARE INVESTOR SERVICES INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
COMPUTERSHARE TRUST COMPANY OF CANADA
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
SCHEDULE "F"
PLAN OF ARRANGEMENT
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Plan of Arrangement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the meanings set
out below:
(a) "ACQUIRED COMPANIES" means, collectively, the Company and its
Subsidiaries.
(b) "ACTUAL GROSS PROFIT DOLLARS" means Gross Profit Dollars calculated
for the Calculation Period.
(c) "AFFILIATE" has the meaning ascribed thereto in the Securities Act.
(d) "AGGREGATE ESCROW AMOUNT" means $12,000,000, being the sum of (A)
the Pro Rata Escrow Amount, plus (B) the Preference Share Escrow
Amount.
(e) "AGGREGATE EXERCISE PRICE" means the aggregate of the Exercise
Prices for all Company Options immediately before the Effective
Time.
(f) "AGGREGATE PREFERENCE AMOUNT" shall mean the product of the number
of Preference Shares issued and outstanding on the Effective Date
multiplied by the Per Share Preference Amount.
(g) "ARRANGEMENT" means an arrangement under section 192 of the CBCA on
the terms and subject to the conditions set out in this Plan of
Arrangement, subject to any amendments or variations thereto made in
accordance with Section 8.3 of the Arrangement Agreement or Article
6 of this Plan of Arrangement or made at the direction of the Court
in the Final Order.
(h) "ARRANGEMENT AGREEMENT" means the arrangement agreement dated as of
July 26, 2006, between the Company, the Purchaser and the Parent and
any amendment thereto made in accordance with such agreement.
(i) "ARRANGEMENT RESOLUTION" means the special resolution of the Company
Securityholders entitled to vote thereon approving this Plan of
Arrangement.
(j) "ARTICLES OF ARRANGEMENT" means the articles of arrangement of the
Company in respect of the Arrangement that are required by the CBCA
to be sent to the Director after the Final Order is made in order
for the Arrangement to become effective.
(k) "AUDITED FINANCIAL STATEMENTS" means the audited consolidated
financial statements of the Company and its Subsidiaries for the
fiscal years ended March 31, 2005 and March 31, 2006, consisting of
balance sheets and statements of loss, changes in shareholders'
equity and cash flows and all notes thereto as reported on by the
auditors of the Company.
(l) "BALANCE SHEET" means the balance sheet of the Company as at June
30, 2006, forming part of the Financial Statements.
(m) "BUSINESS DAY" means a day of the year in which banks are not
required or authorized to be closed in the City of Portland, Oregon
or the City of Vancouver, British Columbia.
(n) "CALCULATION PERIOD" means the period beginning on October 1, 2006
and ending on September 30, 2007.
(o) "CANADIAN TAX ACT" means the Income Tax Act (Canada), as amended,
and the regulations promulgated thereunder.
(p) "CBCA" means the Canada Business Corporations Act, as amended, and
the regulations made thereunder, as promulgated or amended from time
to time.
(q) "CERTIFICATE" means the certificate of arrangement giving effect to
the Arrangement, issued pursuant to subsection 192(7) of the CBCA
upon the Articles of Arrangement having been received by the
Director.
(r) "CIRCULAR" means the notice of the Company Meeting and accompanying
management information circular of the Company, including all
appendices thereto, to be sent to Company Securityholders entitled
to receive the same in connection with the Company Meeting.
(s) "CLASS A COMMON SHARES" means the Class A Voting Common Shares of
the Company.
(t) "CLASS B COMMON SHARES" means the Class B Non-Voting Common Shares
of the Company.
(u) "CLOSING DATE" has the meaning ascribed thereto in the Arrangement
Agreement.
(v) "CLOSING DATE EXCESS TRANSACTION EXPENSES" shall be the amount, if
any, by which the Closing Date Transaction Expenses exceed the
Transaction Expense Limit.
(w) "CLOSING DATE TRANSACTION EXPENSES" shall be the amount calculated
by the Company in accordance with Section 7.4(a) of the Arrangement
Agreement and means all accounting, advisory, legal, and other third
party fees and expenses actually and reasonably incurred by the
Company in connection with the negotiation and execution of the
Arrangement Agreement and the completion of the Arrangement,
including all fees and expenses of the Financial Advisor and the
Company's legal counsel, as of the Closing Date.
(x) "CODE" means the U.S. Internal Revenue Code of 1986.
(y) "COMMON SHARES" means, collectively, the Class A Common Shares and
the Class B Common Shares.
(z) "COMMON SHARES OUTSTANDING" means the aggregate number of Common
Shares issued and outstanding on the Effective Date.
(aa) "COMPANY" means Convedia Corporation, a corporation incorporated
under the laws of Canada.
2
(bb) "COMPANY MEETING" means the special meeting of the Company
Securityholders, including any adjournment or postponement thereof,
to be called and held in accordance with the Interim Order to
consider the Arrangement Resolution.
(cc) "COMPANY OPTIONS" means all options to purchase Class A Common
Shares granted under the Company Stock Option Plan.
(dd) "COMPANY SECURITYHOLDERS" means, collectively, the holders of all
Shares and Company Options.
(ee) "COMPANY SHAREHOLDERS" means, collectively, the holders of all
issued and outstanding Shares.
(ff) "COMPANY STOCK OPTION PLAN" means the Convedia Corporation Stock
Option Plan dated September 17, 2001, as amended.
(gg) "COURT" means the Supreme Court of British Columbia.
(hh) "CRA" means the Canada Revenue Agency.
(ii) "DEPOSITARY" means Computershare Investor Services Inc., in its
capacity as depositary under the Indemnification and Escrow
Agreement, or such other Person as is appointed to act as depositary
in accordance with and for purposes of the Indemnification and
Escrow Agreement.
(jj) "DIRECTOR" means the Director appointed pursuant to section 260 of
the CBCA.
(kk) "EFFECTIVE DATE" means the date shown on the Certificate.
(ll) "EFFECTIVE TIME" means 9:00 a.m. (Pacific Standard Time) on the
Effective Date or such other time on the Effective Date to which the
Company, the Purchaser and the Parent agree in writing.
(mm) "ENCUMBRANCE" means pledges, liens, charges, security interests,
leases, title retention agreements, mortgages, restrictions,
development or similar agreements, title defects, options, rights of
first offer or rights of first refusal, adverse claims, restrictive
covenants, joint use agreements, demands and equities of any kind or
nature whatsoever or howsoever arising and any rights or privileges
capable of becoming any of the foregoing.
(nn) "ESCROW AGENT" means Computershare Trust Company of Canada, in its
capacity as escrow agent under the Indemnification and Escrow
Agreement, or such other Person as is appointed to act as escrow
agent in accordance with and for purposes of the Indemnification and
Escrow Agreement.
(oo) "ESCROW FUND" means the funds comprising the Aggregate Escrow Amount
at any time and from time to time, and any income earned thereon,
less any payments or deductions therefrom, being held by the Escrow
Agent pursuant to the Indemnification and Escrow Agreement.
3
(pp) "ESTIMATED NET WORKING CAPITAL" means the Net Working Capital
determined by the Company in accordance with the Arrangement
Agreement as of the close of business on the Closing Date.
(qq) "EXCHANGE RATE" means the closing buying rate quoted in the U.S.
edition of the Wall Street Journal for the purchase of U.S. Dollars
with Canadian Dollars on the third Business Day prior to the
Effective Date.
(rr) "EXERCISE PRICE" means the applicable option exercise price in
respect of an option to purchase Class A Common Shares granted under
the Company Stock Option Plan.
(ss) "EXERCISING SHAREHOLDER HOLDBACK AMOUNT" has the meaning ascribed
thereto in the Indemnification and Escrow Agreement.
(tt) "EXISTING SHAREHOLDER AGREEMENTS" means, collectively, the
Shareholder Agreement, Investor Rights Agreement, Market Stand-Off
Agreement and Management Rights Agreement.
(uu) "FINAL CONSIDERATION" shall mean the dollar amount determined in
accordance with the following:
(i) if the Actual Gross Profit Dollars achieved during the
Calculation Period are less than 75% of the Projected Gross
Profit Dollars, then the Final Consideration shall be $0;
(ii) if the Actual Gross Profit Dollars achieved during the
Calculation Period are equal to or greater than 75% of the
Projected Gross Profit Dollars but are less than or equal to
100% of the Projected Gross Profit Dollars, then the Final
Consideration shall equal: (A) the product of (x) $5,000,000
multiplied by (y) the fraction having a numerator equal to the
Actual Gross Profit Dollars achieved during the Calculation
Period and a denominator equal to the Projected Gross Profit
Dollars; minus (B) the Post-Closing Excess Transaction
Expenses, if any;
(iii) if the Actual Gross Profit Dollars achieved during the
Calculation Period are greater than 100% of the Projected
Gross Profit Dollars but are less than 140% of the Projected
Gross Profit Dollars, then the Final Consideration shall
equal: (A) the sum of (x) $5,000,000 plus (y) the product of
(I) $12,500,000 multiplied by (II) the fraction having a
numerator equal to the Actual Gross Profit Dollars achieved
during the Calculation Period and a denominator equal to the
Projected Gross Profit Dollars, minus one; minus (B) the
Post-Closing Excess Transaction Expenses, if any; and
(iv) if the Actual Gross Profit Dollars achieved during the
Calculation Period are equal to or greater than 140% of the
Projected Gross Profit Dollars, then the Final Consideration
shall equal $10,000,000 minus the Post-Closing Excess
Transaction Expenses, if any, provided that, in no event shall
the Final Consideration exceed $10,000,000.
(vv) "FINAL MAXIMUM PER SHARE CONSIDERATION" means the quotient obtained
by dividing: (A) $10,000,000; by (B) the number of Fully Diluted
Shares.
4
(ww) "FINAL ORDER" means the final order of the Court approving the
Arrangement, as such order may be amended by the Court at any time
prior to the Effective Date or, if appealed, then, unless such
appeal is withdrawn or denied, as affirmed or amended on appeal.
(xx) "FINAL PER SHARE CONSIDERATION" means the quotient obtained by
dividing: (A) the Final Consideration; by (B) the number of Fully
Diluted Shares.
(yy) "FINANCIAL ADVISOR" means Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated.
(zz) "FINANCIAL STATEMENTS" means, collectively, the Audited Financial
Statements and the Unaudited Financial Statements.
(aaa) "FULLY DILUTED SHARES" means the sum of: (A) the Common Shares
Outstanding; (B) the Outstanding Options; and (C) the aggregate
number of Class A Common Shares that would be issued to the holders
of the Preference Shares if all such Preference Shares were
converted in accordance with their terms into Class A Common Shares
on the Effective Date.
(bbb) "FUNDED DEBT" means, without duplication:
(i) all indebtedness, obligations and liabilities of the Acquired
Companies with respect to borrowed money (including by the
issuance of debt securities and any share capital, other than
the Preference Shares, that is classified as debt under U.S.
GAAP, consistently applied, and all penalties, fees and costs
arising or becoming due by reason of any prepayment or payment
prior to the maturity of such Funded Debt);
(ii) any lease of any property the discounted present value of the
rental obligations of an Acquired Company as lessee under
which, in accordance with U.S. GAAP, is required to be
capitalized on the balance sheet of such Acquired Company;
(iii) all indebtedness secured by a lien on the property or assets
of an Acquired Company, whether or not such Acquired Company
has assumed or become liable for the payment of such
indebtedness;
(iv) all indebtedness, obligations and liabilities of an Acquired
Company representing the deferred purchase price of property
or services (excluding trade payables incurred in the ordinary
course of business);
(v) all reimbursement and other obligations of Acquired Company
with respect to letters of credit, bankers acceptances,
customer advances and other extensions of credit whether or
not representing obligations for borrowed money; and
(vi) all direct guaranties and indemnities of an Acquired Company
in respect of, and to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, or
to assure an obligee against failure to make payment in
respect of, liabilities, obligations or indebtedness or others
of the kind referred to in clauses (i) through (v) above,
provided that, notwithstanding the foregoing the TPC Obligations
shall not be treated as or included in any calculation of Funded
Debt.
5
(ccc) "GOVERNMENTAL AUTHORITY" means (i) any multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, ministry, central bank, court,
tribunal, arbitral body, commission, board, bureau or agency,
domestic or foreign, (ii) any subdivision, agent or authority of any
of the foregoing, or (iii) any quasi-governmental or private body,
including any tribunal, commission, regulatory agency or
self-regulatory organization, exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing.
(ddd) "GROSS PROFIT DOLLARS" shall mean revenues from the sales of the
current and future products and services of the Acquired Companies,
regardless of which sales channel or entity of the Company, the
Purchaser, the Parent or their Affiliates such products and services
are sold through, minus the associated cost of sales of such
products and services. All revenues and costs shall be calculated in
accordance with U.S. GAAP applied on a basis consistent with past
practice and the Management Plan.
(eee) "INDEMNIFICATION AND ESCROW AGREEMENT" means the indemnification and
escrow agreement between the Escrow Agent, the Depositary, the
Purchaser, the Company, the Parent, the Representative and, pursuant
to the operation of this Plan of Arrangement, each of the Company
Securityholders, in the form attached as Appendix "A" to this Plan
of Arrangement.
(fff) "INITIAL CONSIDERATION" means (i) $105,000,000, minus (ii) the
Closing Date Excess Transaction Expenses, if any, minus (iii) the
amount of any Funded Debt outstanding on the Effective Date, if any,
minus (iv) the Net Working Capital Deficiency, if any, minus (v) the
Aggregate Preference Amount.
(ggg) "INITIAL PER SHARE CONSIDERATION" means the quotient obtained by
dividing: (A) the sum of the Initial Consideration, plus the
Aggregate Exercise Price; by (B) the number of Fully Diluted Shares.
(hhh) "INTERIM ORDER" means the interim order of the Court, as the same
may be amended by the Court (with the consent of the Company, the
Purchaser and the Parent, each acting reasonably), in respect of the
Arrangement.
(iii) "INVESTOR RIGHTS AGREEMENT" means the investor rights agreement,
dated September 17, 2001, entered into between the Company and all
holders of Preference Shares, as amended.
(jjj) "LAW" means all laws (including common law), by-laws, statutes,
rules, regulations, principles of law and equity, orders, rulings,
ordinances, judgments, injunctions, determinations, awards, decrees
or other requirements, whether domestic or foreign, and the terms
and conditions of any grant of approval, permission, authority or
license of any Governmental Authority or self-regulatory authority,
and the term "APPLICABLE" with respect to such Laws and in a context
that refers to one or more Persons, means such Laws as are
applicable to such Person or Persons or such Person or Persons
business, undertaking, property or securities and emanate from a
Governmental Authority or self-regulatory authority having
jurisdiction over such Person or Persons or such Person or Persons
business, undertaking, property or securities.
(kkk) "LETTER OF TRANSMITTAL" means the letter of transmittal to be sent
by the Company to the Company Securityholders for use in connection
with the Arrangement.
6
(lll) "MANAGEMENT PLAN" means the amended management plan of the Company
dated July 24, 2006 (8:34 a.m.).
(mmm) "MANAGEMENT RIGHTS AGREEMENT" means the management rights agreement,
dated September 17, 2001, entered into between the Company and
certain holders of Preference Shares, as amended.
(nnn) "MARKET STAND-OFF AGREEMENT" means the market stand-off agreement,
dated September 17, 2001, entered into between the Company, certain
holders of Common Shares and all holders of Preference Shares, as
amended.
(ooo) "NET WORKING CAPITAL" means the value of (i) the total assets
(excluding plant and equipment), minus (ii) total liabilities
(excluding items to the extent included in Funded Debt, and
excluding any liabilities relating to the treatment of Preference
Shares under U.S. GAAP) as the terms "total assets" and "total
liabilities" are used in the Balance Sheet and as are determined in
accordance with U.S. GAAP applied on a basis consistent with the
Financial Statements and in a manner consistent with the preparation
of the Balance Sheet in each case calculated as of the close of
business on the Closing Date.
(ppp) "NET WORKING CAPITAL DEFICIENCY" means the amount, if any, by which
the Estimated Net Working Capital is determined to be less than
$2,000,000.
(qqq) "NON-RESIDENT HOLDER" has the meaning ascribed thereto in Section
5.4.
(rrr) "OPTION HOLDBACK AMOUNT" has the meaning ascribed thereto in the
Indemnification and Escrow Agreement.
(sss) "OUTSTANDING OPTIONS" means the aggregate number of Class A Common
Shares issuable upon the exercise of Company Options outstanding as
of the Effective Date assuming all such Company Options were fully
vested and exercisable as of the Effective Date.
(ttt) "PARENT" means RadiSys Corporation, a corporation governed by the
laws of the State of Oregon.
(uuu) "PER SHARE PREFERENCE AMOUNT" shall mean $0.675 per Preference
Share.
(vvv) "PERSON" means any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company
(including any limited liability company, unlimited liability
company or joint stock company), firm, enterprise, association,
organization or any other entity, including a Governmental
Authority.
(www) "POST-CLOSING EXCESS TRANSACTION EXPENSES" shall be (A) the amount,
if any, by which the Total Transaction Expenses exceed the
Transaction Expense Limit; minus (B) the Closing Date Excess
Transaction Expenses.
(xxx) "POST-CLOSING TRANSACTION EXPENSES" means all fees and expenses, if
any, incurred by and that may become payable to the Financial
Advisor in respect of the payment of the Final Consideration.
7
(yyy) "PREFERENCE SHARE ESCROW AMOUNT" means $5,150,000.
(zzz) "PREFERENCE SHARES" means the Series 1 Preference Shares of the
Company.
(aaaa) "PROJECTED GROSS PROFIT DOLLARS" means Gross Profit Dollars
projected for the Calculation Period prepared by the Company
totalling $31,500,000.
(bbbb) "PRO RATA ESCROW AMOUNT" means $6,850,000.
(cccc) "PURCHASE PRICE" means the sum of the Initial Consideration, the
Aggregate Preference Amount and the Final Consideration, if any.
(dddd) "PURCHASER" means RadiSys Canada Inc. a corporation incorporated
under the laws of Canada.
(eeee) "REPRESENTATIVE" means Xxxxxx Xxxxxxx, the representative
designated and appointed as such by the Company Securityholders
pursuant to the operation of the Indemnification and Escrow
Agreement.
(ffff) "REPRESENTATIVE HOLDBACK AMOUNT" has the meaning ascribed thereto
in the Indemnification and Escrow Agreement.
(gggg) "REVIEW PERIOD" has the meaning ascribed thereto in Section
3.2(b).
(hhhh) "SECURITIES ACT" means the Securities Act (British Columbia) and
the rules, regulations and published policies made thereunder, as
now in effect and as they may be promulgated or amended from time
to time.
(iiii) "SHAREHOLDER AGREEMENT" means the shareholder agreement, dated
September 17, 2001, entered into between the Company, certain
holders of Common Shares and all holders of Preference Shares, as
amended.
(jjjj) "SHARES" means, collectively, the issued and outstanding Common
Shares and Preference Shares.
(kkkk) "SUBSIDIARY" means, with respect to a specified Person, any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or
other Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of
that corporation or other Person (other than securities or other
interests having such power only upon the happening of a
contingency that has not occurred) are held by the specified
Person or one or more of its Subsidiaries. When used in this Plan
of Arrangement without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
(llll) "TOTAL EXERCISING SHAREHOLDER HOLDBACK AMOUNT" has the meaning
ascribed thereto in the Indemnification and Escrow Agreement.
(mmmm) "TOTAL OPTION HOLDBACK AMOUNT" has the meaning ascribed thereto in
the Indemnification and Escrow Agreement.
8
(nnnn) "TOTAL TRANSACTION EXPENSES" shall be the sum of the Closing Date
Transaction Expenses and the Post-Closing Transaction Expenses.
(oooo) "TPC OBLIGATIONS" means all financial obligations, including any
repayment or royalty obligations of the Company to the Minister of
Industry under the Technology Partnerships Canada Contribution
Agreement (Project No. 721 452407) between the Company and Her
Majesty the Queen in Right of Canada, as represented by the
Minister of Industry, dated July 2, 1997, as amended.
(pppp) "TRANSACTION EXPENSE LIMIT" means $2,600,000.
(qqqq) "UNAUDITED FINANCIAL STATEMENTS" means the Balance Sheet and
accompanying statements of earnings, retained earnings and changes
in financial position, including any notes thereto, for the three
(3) month period ended June 30, 2006.
(rrrr) "U.S. GAAP" means generally accepted accounting principles for
financial reporting in the United States, as in effect as of the
date of the Arrangement Agreement.
1.2 SECTIONS AND HEADINGS
The division of this Plan of Arrangement into sections and the insertion of
headings are for reference purposes only and shall not affect the interpretation
of this Plan of Arrangement. Unless otherwise indicated, any reference in this
Plan of Arrangement to a section or subsection or to an appendix refers to the
specified section or subsection of or appendix to this Plan of Arrangement.
1.3 NUMBER, GENDER AND PERSONS
In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa and words
importing any gender include all genders.
1.4 DATE OF ANY ACTION
In the event that any date on which any action is required to be taken hereunder
by any of the parties hereto is not a Business Day, such action shall be
required to be taken on the next succeeding day which is a Business Day.
1.5 TIME
Time shall be of the essence in every matter or action contemplated hereunder.
1.6 CURRENCY
Unless otherwise indicated, each reference to "Dollars" or "$" in this Plan of
Arrangement refers to lawful currency of the United States of America.
1.7 APPENDICES
The appendices to this Plan of Arrangement, as listed below, are an integral
part of this Plan of Arrangement:
9
APPENDIX DESCRIPTION
----------- ------------------------------------------
Appendix "A" Indemnification and Escrow Agreement
ARTICLE 2
BINDING EFFECT
2.1 BINDING EFFECT
This Plan of Arrangement, within the meaning of section 192 of the CBCA, will
become effective at the Effective Time, in the order set forth in Section 3.1
and shall be binding upon (i) the Company, (ii) the Purchaser, (iii) the Company
Shareholders, (iv) the Representative, (v) all holders and all beneficial owners
of Company Options and the other securities of the Company described in Section
3.1(b), in each case that are outstanding at the Effective Time, (vi) the Escrow
Agent and (vii) the Depositary.
ARTICLE 3
ARRANGEMENT
3.1 ARRANGEMENT
Commencing at the Effective Time, each of the events set out below shall occur
and shall be deemed to occur, except as otherwise expressly noted, in the
following order and without any further act or formality. Notwithstanding the
foregoing, events described in Sections 3.1(c), (g), (h), (i) and (j) will be
deemed to occur contemporaneously:
(a) the Existing Shareholder Agreements shall be terminated, and
thereafter, none of the parties to such agreements will have any
rights, liabilities or other obligations thereunder;
(b) all securities of the Company (including, for greater certainty, any
securities convertible into, exercisable or exchangeable for, or any
rights of whatever description to purchase or acquire, any
securities of the Company), other than the Shares, the Company
Options and other than securities representing indebtedness of the
Company that are not convertible into, exercisable or exchangeable
for, or providing rights to purchase or acquire any other securities
of the Company, shall be deemed to have been surrendered to the
Company and terminated and cancelled by the Company on a basis that
does not entitle the holders thereof to any consideration, and
thereafter, neither the holders of any such security nor the Company
will have any rights, liabilities or other obligations in respect of
such securities;
(c) subject to Section 3.1(l), each Company Option which is outstanding
immediately prior to the Effective Time shall be deemed to have
expired and each shall be terminated and cancelled by the Company
without any further act or formality on the part of the holder
thereof on a basis that does not entitle the such holder to any
consideration other than an amount per Company Option payable by the
Purchaser in cash equal to the sum of: (A) the Initial Per Share
Consideration minus the applicable Exercise Price; plus (B) the
Final Maximum Per Share Consideration payable only at the time, in
accordance with, subject to the conditions of, and subject to
reduction as set out in, Section 3.2, which amount shall be
disbursed by the Depositary in accordance with the provisions of
Section 5.1 of this Plan of Arrangement and the Indemnification and
Escrow Agreement;
10
(d) with respect to each Company Option, the holder thereof shall cease
to be the holder of such Company Option and such holder's name shall
be removed from the register of options maintained by the Company
with respect to the Company Stock Option Plan;
(e) the Company Stock Option Plan will terminate and thereafter, neither
the Company nor any of its successors or assigns shall have any
further liability or obligation under the Company Stock Option Plan
or Company Options, other than as provided in this Plan of
Arrangement and in the Indemnification and Escrow Agreement;
(f) each Company Securityholder will be deemed to become a party to and
bound by the Indemnification and Escrow Agreement in such Person's
capacity as a Company Securityholder, as if such Person was an
original signatory thereto and with effect from the Effective Time;
(g) subject to Section 3.1(l), all Common Shares issued and outstanding
immediately prior to the Effective Time, shall be deemed to be
transferred (free and clear of all Encumbrances) by the holder
thereof at the Effective Time without any further act or formality
on its part to the Purchaser for an amount per Common Share equal to
the sum of: (i) the Initial Per Share Consideration payable to the
holder thereof in cash; plus (ii) the Final Maximum Per Share
Consideration payable only at the time, in accordance with, subject
to the conditions of, and subject to reduction as set out in,
Section 3.2, which amount shall be disbursed by the Depositary in
accordance with the provisions of Section 5.1 of this Plan of
Arrangement and the Indemnification and Escrow Agreement;
(h) subject to Section 3.1(l), all Preference Shares issued and
outstanding immediately prior to the Effective Time, shall be deemed
to be transferred (free and clear of all Encumbrances) by the holder
thereof at the Effective Time without any further act or formality
on its part to the Purchaser for an amount per Preference Share
equal to the sum of: (i) the Initial Per Share Consideration payable
to the holder thereof in cash; plus (ii) the Per Share Preference
Amount payable to the holder thereof in cash; plus (iii) the Final
Maximum Per Share Consideration payable only at the time, in
accordance with, subject to the conditions of, and subject to
reduction as set out in, Section 3.2, which amount shall be
disbursed by the Depositary in accordance with the provisions of
Section 5.1 of this Plan of Arrangement and the Indemnification and
Escrow Agreement;
(i) in respect of the Company Options and the Shares, the Purchaser will
deliver or cause to be delivered by wire transfer to the Depositary
payment in the amount of the Initial Consideration, to be disbursed
by the Depositary in accordance with the provisions of Section 5.1
of this Plan of Arrangement and the Indemnification and Escrow
Agreement;
(j) in respect of the Preference Shares, the Purchaser will deliver or
cause to be delivered by wire transfer to the Depositary payment in
the amount of the Aggregate Preference Amount, to be disbursed by
the Depositary in accordance with the provisions of Section 5.1 of
this Plan of Arrangement and the Indemnification and Escrow
Agreement;
(k) with respect to each Share transferred to the Purchaser pursuant to
Sections 3.1(g) or 3.1(h):
(i) the holder of each such Share shall cease to be the holder of
such Share and the holder's name shall be removed from the
Company's securities register with respect to such Shares; and
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(ii) the Purchaser shall be deemed to be the transferee of each
such Share (free and clear of any Encumbrance), shall be
entered in the Company's securities register with respect to
such Shares and will be entitled to exercise all of the
rights, privileges, conditions and restrictions attaching to
the Shares as the registered and beneficial holder thereof;
(l) each Company Shareholder and each holder of Company Options shall be
deemed to irrevocably authorize and direct the Depositary, the
Purchaser, and their representatives and agents, to segregate and
deduct their respective portion of the Aggregate Escrow Amount and,
where applicable, the Option Holdback Amount, Exercising Shareholder
Holdback Amount or Representative Holdback Amount from the amount
payable to each such Company Shareholder and holder of Company
Options and, in the case of the Aggregate Escrow Amount, Option
Holdback Amount or Exercising Shareholder Holdback Amount, to
deposit such amount with the Escrow Agent to be held and disbursed
in accordance with the Indemnification and Escrow Agreement and, in
the case of the Representative Holdback Amount, to deliver such
amount to the Representative's legal counsel in accordance with
Section 11.2(c) of the Indemnification and Escrow Agreement; and
(m) in accordance with the Indemnification and Escrow Agreement, each
Company Securityholder will be: (i) deemed to have irrevocably
appointed and authorized the Representative, as agent of such
Company Securityholder, to enter into and act under the
Indemnification and Escrow Agreement on his behalf in the manner
contemplated in the Indemnification and Escrow Agreement; and (ii)
deemed to have irrevocably authorized the Representative to deal
with the Escrow Agent, the Depositary, the Escrow Fund and, where
applicable, the Option Holdback Amount or Exercising Shareholder
Holdback Amount in accordance with the terms of the Indemnification
and Escrow Agreement.
3.2 FINAL CONSIDERATION
(a) Upon the final determination of the Actual Gross Profit Dollars,
Final Consideration and the Final Per Share Consideration
conclusively in accordance with Section 3.2(b), the amount payable
pursuant to Sections 3.1(c)(B), 3.1(g)(ii) and 3.1(h)(iii) will be
adjusted and reduced, if necessary, to equal the Final Per Share
Consideration and the Purchaser shall deliver or cause to be
delivered by wire transfer to the Depositary payment in the amount
of the Final Consideration no later than 10 Business Days after the
date of the final determination of such amount in full satisfaction
of the amount payable pursuant to Sections 3.1(c)(B), 3.1(g)(ii) and
3.1(h)(iii), as the case may be. The Final Consideration shall be
disbursed by the Depositary to each former holder of Shares and each
former holder of Company Options in an amount per Share or Company
Option, as the case may be, equal to the Final Per Share
Consideration in accordance with the provisions of Section 5.1 of
this Plan of Arrangement and the Indemnification and Escrow
Agreement.
(b) The Purchaser will use commercially reasonable efforts to determine
and to deliver to the Representative copies of the Purchaser's
computations of the Actual Gross Profit Dollars, Final Consideration
and the Final Per Share Consideration within 30 days after the end
of the Calculation Period. The Representative shall notify the
Purchaser in writing within 30 days following receipt of such
calculations (the "REVIEW PERIOD") of the Representative's
acceptance of or disagreement with the Purchaser's calculations of
the Actual Gross Profit Dollars, Final Consideration and the Final
Per Share Consideration. Failure by the Representative to notify the
Purchaser of either acceptance of or disagreement with the
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Purchaser's calculations of the Actual Gross Profit Dollars, Final
Consideration and the Final Per Share Consideration shall be deemed
acceptance thereof. If the Representative disagrees with the
Purchaser's calculations of the Actual Gross Profit Dollars, Final
Consideration and the Final Per Share Consideration, the
Representative shall, prior to the expiration of the Review Period,
notify the Purchaser in writing of such disagreement and deliver
with such notice the Representative's proposed calculations of the
Actual Gross Profit Dollars, Final Consideration and the Final Per
Share Consideration. The Purchaser shall have a period of 20 days
after delivery of the Representative's proposed calculations of the
Actual Gross Profit Dollars, Final Consideration and the Final Per
Share Consideration to review such proposed calculations. If the
Purchaser disputes the Representative's proposed calculations, then
the Purchaser and the Representative shall engage an independent
public accounting firm of U.S. national reputation (other than the
auditors of the Company immediately prior to the Effective Date or
the auditors of the Purchaser or their respective Affiliates) to
resolve the dispute and conclusively determine the Actual Gross
Profit Dollars, Final Consideration and the Final Per Share
Consideration, which determination shall be final and binding upon
all parties, including the Company Shareholders and the former
holders of Company Options. The fees and expenses of such accounting
firm shall be paid one-half by the Purchaser and one-half by the
Company Shareholders and former holders of Company Options out of
the Escrow Amount.
(c) Notwithstanding the foregoing, the Company Shareholders and holders
of Company Options acknowledge that: (i) subject to the terms of the
Arrangement Agreement, upon the completion of the transactions
contemplated by the Arrangement Agreement, the Purchaser and the
Parent may operate the business of the Acquired Companies and their
respective businesses in any way consistent with the Purchaser's and
the Parent's reasonable business judgment, but not inconsistent with
the covenants and agreements contained in the Arrangement Agreement,
in order to maximize the value of its consolidated businesses as a
whole, including the Affiliates of the Purchaser; provided that, the
Purchaser and the Parent will act in good faith in connection with
the operation of the Acquired Companies businesses' efforts and the
business efforts of the Affiliates of the Parent to achieve the
Final Consideration, taking into account both the long and short
term objectives of its consolidated businesses as a whole, including
its business reputation with customers, stockholders and financing
partners and the Affiliates of the Purchaser; (ii) the Final
Consideration is speculative and is subject to numerous factors
outside the control of the Purchaser and the Parent; and (iii) the
Purchaser and the Parent owe no fiduciary duty or express or implied
duty to the former Company Shareholders or former holders of Company
Options who may receive the Final Consideration, if any, other than
as expressly provided in the Arrangement Agreement.
(d) Notwithstanding anything herein to the contrary, the provisions of
this Section 3.2 shall survive the closing of the transactions
contemplated by the Arrangement Agreement.
(e) Solely for the purpose of confirming the computations of Final
Consideration and Final Per Share Consideration, the Purchaser shall
provide the Representative with reasonable access to all necessary
supporting financial and other business records of the Purchaser,
the Parent and the Company as the Representative may reasonably
request (subject to any confidentiality agreements or covenants
relating to such information). Notwithstanding the foregoing, the
Purchaser, the Parent and the Company shall not be required to
disclose any information, records, files or other data to the
Representative where prohibited by applicable Laws.
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3.3 EXCHANGE RATE
For purposes of Section 3.1 and the calculation of the amounts under Section
3.1(c), any Exercise Price in respect of options to purchase Class A Common
Shares granted under the Company Stock Option Plan that is denominated in
Canadian Dollars shall be converted into U.S. Dollars using the Exchange Rate.
3.4 LIQUIDATION EVENT AND LIQUIDATION PREFERENCE
The Arrangement shall be deemed to constitute a "Liquidation Event" (as such
term is defined in the rights, privileges, restrictions and conditions attached
to the Preference Shares (the "PREFERENCE SHARE RIGHTS") set out in Schedule "A"
to the Restated Articles of Incorporation of the Company dated December 10, 2001
and filed with Industry Canada on December 18, 2001) and the Aggregate
Preference Amount paid to the holders of the Preference Shares in accordance
with this Plan of Arrangement shall be deemed to constitute payment of the
"Liquidation Preference" (as such term is defined in the Preference Share
Rights) to the holders of the Preference Shares.
ARTICLE 4
RIGHTS OF DISSENT
4.1 RIGHTS OF DISSENT
None of the Company Securityholders or the holders of any other securities
referred to in Section 3.1(b), in each case, at the Effective Time, shall have
any rights of dissent in connection with the Arrangement.
ARTICLE 5
CERTIFICATES, INSTRUMENTS AND AGREEMENTS
5.1 PAYMENT OF CONSIDERATION
(a) At or prior to the Effective Time, the Purchaser shall deposit, or
cause to be deposited, with the Depositary, for the benefit of the
Company Shareholders and the holders of Company Options, cash in the
aggregate amount equal to the net payments contemplated by Section
3.1 to be made at and as of the Effective Time for disbursement in
accordance with the Indemnification and Escrow Agreement.
(b) With respect to Shares, upon surrender to the Depositary for
cancellation of a certificate or certificates which immediately
prior to the Effective Time represented Shares that were exchanged
under the Arrangement, together with a duly completed Letter of
Transmittal and with such other documents and instruments as would
have been required to effect the transfer of the Shares formerly
represented by such certificate or certificates under the CBCA and
the by-laws of the Company, and such additional documents and
instruments as the Depositary may reasonably require, the Company
Shareholder surrendering such certificate or certificates shall be
entitled to receive in exchange therefor the net cash payment,
rounded up to the nearest whole cent, which such Company Shareholder
is entitled to receive pursuant to Section 3.1 and in accordance
with the Indemnification and Escrow Agreement, and the certificate
or certificates so surrendered shall forthwith be cancelled.
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(c) With respect to Company Options, as soon as practicable following
the later of the Effective Date and the surrender of the instrument
or agreement representing a holder's Company Options, together with
a duly completed Letter of Transmittal and such additional documents
and instruments as the Depositary may reasonably require, such
holder shall be entitled to receive the net cash payment, rounded up
to the nearest whole cent, which such holder is entitled to receive
pursuant to Section 3.1 and in accordance with the Indemnification
and Escrow Agreement.
(d) Subject to Section 5.3, the Depositary shall, as soon as practicable
following the later of the Effective Date and the date of deposit
with the Depositary of the documentation as provided in Section
5.1(b) or Section 5.1(c), as applicable, to:
(i) forward or cause to be forwarded by first class mail (postage
paid) to the Company Shareholder or holder of Company Options,
as the case may be, at the address specified in the Letter of
Transmittal; or
(ii) if requested by the Company Shareholder or holder of Company
Options, as the case may be, in the Letter of Transmittal,
make available at the Depositary for pick-up by the Company
Shareholder or the holder of Company Options, as the case may
be; or
(iii) if the Letter of Transmittal neither specifies an address nor
contains a request as described in clause (ii) above, forward
or cause to be forwarded by first class mail (postage paid) to
the Company Shareholder or holder of Company Options, as the
case may be, at the last known address of such Company
Shareholder or holder of Company Options as shown on the
Company's records,
a cheque representing the net cash payment, if any, payable to such
Company Shareholder or holder of Company Options, as the case may
be, in accordance with the provisions hereof and the Indemnification
and Escrow Agreement.
(e) No Company Shareholder or holder of Company Options at the Effective
Time shall be entitled to receive any consideration with respect to
the Shares or Company Options, respectively, other than net cash
payment (rounded up to the nearest whole cent), if any, which the
Company Shareholders and holders or Company Options are entitled to
receive in accordance with Section 3.1 and, for greater certainty,
no Company Shareholder or holder of Company Options will be entitled
to receive any interest, dividends, premium or other payment in
connection therewith.
(f) Until such time as a former Company Shareholder complies with the
provisions of Section 5.1(b) or 5.2, the net cash payment (rounded
up to the nearest whole cent), if any, to which such Company
Shareholder is entitled shall, subject to Section 5.3, be paid to
the Depositary to be held in trust for such Company Shareholder for
delivery to the Company Shareholder, with interest, if any, earned
thereon accrued and payable to the Company Shareholder, upon deposit
with the Depositary of the documentation as provided in Section
5.1(b) or 5.2.
(g) Until such time as a former holder of Company Options complies with
the provisions of Section 5.1(c) or 5.2, the net cash payment
(rounded up to the nearest whole cent), if any, to which such holder
is entitled shall, subject to Section 5.3, be paid to the Depositary
to be held in trust for such holder for delivery to the holder, with
interest, if any, earned thereon
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accrued and payable to the holder, upon deposit with the Depositary
of the documentation as provided in Section 5.1(c) or 5.2.
(h) Until surrendered as contemplated by this Section 5.1, each
certificate or other instrument which immediately prior to the
Effective Date represented Shares or Company Options shall be deemed
at all times following the Effective Time to represent only the
right to receive upon such surrender the net cash payment (rounded
up to the nearest whole cent) which the holder thereof is entitled
to receive pursuant to the provisions hereof and the Indemnification
and Escrow Agreement.
5.2 LOST CERTIFICATES
In the event any certificate, instrument or agreement which immediately prior to
the Effective Time represented one or more outstanding Shares or Company Options
that were transferred or surrendered, terminated and cancelled pursuant to
Section 3.1 shall have been lost, stolen or destroyed, upon providing such
indemnity as the Purchaser or the Depositary may reasonably require and the
making of an affidavit of that fact by the Person claiming such certificate,
instrument or agreement to be lost, stolen or destroyed, the Depositary will pay
in exchange for such lost, stolen or destroyed certificate, instrument or
agreement, the net cash payment (rounded up to the nearest whole cent) which
such Company Shareholder or holder of Company Options, as the case may be, is
entitled to receive pursuant to Section 3.1. When authorizing such payment in
exchange for any lost, stolen or destroyed certificate, instrument or agreement,
the Person to whom the payment is made shall, as a condition precedent to the
delivery thereof, give a bond satisfactory to the Purchaser and the Depositary
in such sum as the Purchaser may reasonably direct or otherwise indemnify the
Purchaser and the Company in a manner satisfactory to the Purchaser against any
claim that may be made against the Purchaser or the Company with respect to the
certificate, instrument or agreement alleged to have been lost, stolen or
destroyed.
5.3 EXTINCTION OF RIGHTS
If any holder of Shares or Company Options fails for any reason to deliver to
the Depositary for cancellation the certificates formerly representing Shares or
the instrument or agreement formerly representing Company Options (or an
affidavit of loss and bond or other indemnity pursuant to Section 5.2), together
with such other documents or instruments required for such holder to receive
payment for Shares or Company Options, on or before the later of the first
anniversary of the Effective Date or such other date as may be require in order
to obtain the Final Order, certificates formerly representing Shares or the
instrument or agreement formerly representing Company Options shall cease to
represent an entitlement to receive the consideration specified in Section 3.1.
On such date, the cash amount to which the former holder of the certificates,
instrument or agreement referred to in the preceding sentence was entitled,
shall be deemed to have been surrendered for no consideration to the other
Company Shareholders and holders of Company Options and shall be paid into the
Escrow Fund and distributed to the other Company Shareholders and holders of
Company Options pro rata in accordance with the terms of the Indemnification and
Escrow Agreement. None of the Company, the Purchaser, the Parent, the
Representative or the Depositary shall be liable to any Person in respect of any
cash paid in accordance with the foregoing. For purposes of determining the
amount that a particular Company Shareholder or holder of Company Options is
entitled to receive pursuant to the foregoing, "pro rata" shall be determined by
reference by the total number of Shares or Company Options held by the
particular Company Shareholder or holder of Company Options at the last moment
in time prior to the Effective Time as compared to the total number of Shares
and Company Options held by all Company Shareholders and holders of Company
Options entitled to receive a portion of the surrendered amount referred above
at such time.
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5.4 WITHHOLDING RIGHTS
Notwithstanding any provision to the contrary contained herein, the Company, the
Purchaser and the Depositary shall be entitled to deduct and withhold from any
consideration otherwise payable to any holders of Shares or Company Options
under this Plan of Arrangement, such amounts as the Company, the Purchaser or
the Depositary is required to deduct and withhold with respect to such payment
under the Canadian Tax Act, the Code or any provision of federal, provincial,
state, local or foreign tax law, in each case, as amended or succeeded. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes as having been paid to the holder of Shares or Company Options, as
the case may be, in respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the appropriate
taxing authority. The Purchaser and the Company Securityholders shall use
commercially reasonable efforts to as soon as reasonably practicable provide the
Escrow Agent or Depositary, as applicable, such information or tax forms as the
Escrow Agent or Depositary reasonably requests in connection with its
obligations under the appropriate tax laws and/or regulations applicable in
respect of withholding, backup withholding and information reporting including,
without limitation, tax identification numbers (if any) for any Purchaser
Indemnified Party, the Representative and each of the Company Securityholders
and Forms W-9 and W8. Any amount deducted or withheld pursuant to section 116 of
the Canadian Tax Act from any holder of Shares or Company Options who is a
non-resident of Canada or has not certified that he is resident in Canada for
income tax purposes (a "NON-RESIDENT HOLDER") shall be remitted either: (i) to
the relevant taxing authority on the last business day of the period within
which remittance is required; or (ii) to such Non-Resident Holder upon delivery
by such Non-Resident Holder to the Purchaser or the Depositary of a clearance
certificate acceptable to the Purchaser or the Depositary, as the case may be,
acting reasonably, issued pursuant to section 116 of the Canadian Tax Act having
a certificate limit not less than the full amount of the consideration to be
paid to such Non-Resident Holder pursuant to the terms hereof, whichever shall
first occur. Notwithstanding that the time for remittance of amounts deducted or
withheld in respect of any such Non-Resident Holder has occurred without an
acceptable clearance certificate being provided to the Purchaser or the
Depositary, if the Purchaser or the Depositary is provided with a letter
acceptable to the Purchaser or the Depositary, as the case may be, acting
reasonably, from CRA advising that all or any portion (the "PORTION") of the
amounts deducted or withheld pursuant to section 116 of the Canadian Tax Act in
respect of such Non-Resident Holder is not required to be remitted at that time,
the Purchaser or the Depositary will continue to hold such Portion in accordance
with that letter until such a clearance certificate is provided or until CRA
requires the Portion to be remitted, whichever shall first occur. For purposes
of the foregoing, the Depositary shall act as the agent for the Purchaser for
purposes of deducting, withholding and remitting any amounts required to be
deducted, withheld or remitted in respect of a Non-Resident Holder.
ARTICLE 6
AMENDMENTS
6.1 AMENDMENTS TO PLAN OF ARRANGEMENT
(a) The Company reserves the right to amend, modify and/or supplement
this Plan of Arrangement at any time and from time to time prior to
the Effective Date; provided that, each such amendment, modification
and/or supplement must be (i) set out in writing, (ii) approved by
the Purchaser and the Parent, (iii) filed with the Court and, if
made following the Company Meeting, approved by the Court and (iv)
communicated to and approved by the Company Securityholders if and
as required by the Court.
(b) Any amendment, modification and/or supplement to this Plan of
Arrangement may be proposed by the Company at any time prior to the
Company Meeting (provided that the
17
Purchaser shall have consented thereto) with or without any other
prior notice or communication, and if so proposed and accepted by
the Company Securityholders voting at the Company Meeting (other
than as may be required under the Interim Order), shall become part
of this Plan of Arrangement for all purposes.
(c) Any amendment, modification and/or supplement to this Plan of
Arrangement that is approved by the Court following the Company
Meeting shall be effective only if (i) such amendment, modification
and/or supplement is consented to by each of the Company, the
Purchaser and the Parent and (ii) if required by the Court, it is
consented to by the Company Securityholders in the manner directed
by the Court.
(d) Any amendment, modification and/or supplement to this Plan of
Arrangement may be made following the Effective Date unilaterally by
the Purchaser; provided that, any such amendment, modification
and/or supplement (i) concerns a matter which, in the reasonable
opinion of the Purchaser, is of an administrative nature required to
better give effect to the implementation of this Plan of Arrangement
and is not adverse to the financial or economic interests of any
Company Securityholder, or (ii) is made with the written consent of
the Representative. The Company shall notify the Representative in
writing of any amendment, modification and/or supplement to this
Plan of Arrangement made hereunder.
ARTICLE 7
FURTHER ASSURANCES
Notwithstanding that the transactions and events set out herein shall occur and
be deemed to occur in the order set out in this Plan of Arrangement, within the
meaning of section 192 of the CBCA and, in particular, that the share exchanges,
within the meaning of subsection 192(1)(f) of the CBCA, shall become effective
in accordance with subsection 192(8) of the CBCA, without any further act or
formality, each of the Persons named in Section 2.1 hereof shall make, do and
execute, or cause to be made, done and executed, all such further acts, deeds,
agreements, transfers, assurances, instruments or documents as may reasonably be
required by any of them in order further to document or evidence any of the
transactions or events set out herein.
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