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EXHIBIT 2.1
ACQUISITION AND AMALGAMATION AGREEMENT
BY AND AMONG
FUTURELINK CORP.
FUTURELINK DISTRIBUTION CORP.
3045207 NOVA SCOTIA COMPANY
1423280 ONTARIO INC.
1423281 ONTARIO INC.
AND
CHARON SYSTEMS INC.
AND
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, HO
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, DATASPEC
TELECOM MULTIMEDIA INC. AND THE CHARON EMPLOYEE TRUST
DATED AS OF JUNE 16 , 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS.............................................................................................2
1.1 Definitions....................................................................................2
ARTICLE II
ISSUANCE OF CLASS A NON-VOTING PREFERENCE SHARES; AMALGAMATION; PURCHASE AND SALE; CAPITAL
REORGANIZATION; CLOSING.................................................................................9
2.1 Issuance of Class A Non-Voting Preference Shares...............................................9
2.2 The Amalgamation...............................................................................9
2.3 No Fractional Shares...........................................................................9
2.4 Purchase and Sale..............................................................................9
2.5 Reorganization of Capital of Exchangeco.......................................................10
2.6 Closing.......................................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.....................................................10
3.1 Corporate Organization........................................................................10
3.2 Capitalization................................................................................11
3.3 No Other Interest.............................................................................11
3.4 Authority; No Violation.......................................................................11
3.5 Consents and Approvals........................................................................12
3.6 Financial Statements..........................................................................13
3.7 Absence of Undisclosed Liabilities............................................................13
3.8 Absence of Certain Changes....................................................................13
3.9 Legal Proceedings.............................................................................15
3.10 Governmental Authorization; Compliance with Laws..............................................16
3.11 Regulatory Compliance.........................................................................16
3.12 Title and Condition of Personal Property......................................................16
3.13 Real and Leased Property......................................................................16
3.14 Technology....................................................................................17
3.15 Environmental Matters.........................................................................18
3.16 Major Customers...............................................................................19
3.17 Employment Agreements.........................................................................19
3.18 Benefit Plans and Labour Matters..............................................................19
3.19 Contracts and Commitments.....................................................................20
3.20 Absence of Breaches or Defaults...............................................................22
3.21 Insurance.....................................................................................22
3.22 Brokers.......................................................................................23
3.23 Minute Books..................................................................................23
3.24 Representations Complete......................................................................23
3.25 Potential Conflicts of Interest...............................................................23
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TABLE OF CONTENTS
(continued)
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3.26 Customs.......................................................................................24
3.27 Insolvency....................................................................................24
3.28 Investments...................................................................................24
3.29 Restrictions on Business Activities...........................................................24
3.30 Residence of the Shareholders.................................................................24
3.31 Competition Act...............................................................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, FUTURELINK ALBERTA, NOVA SCOTIA CO., EXCHANGECO
AND FL ACQUISITION CO..................................................................................25
4.1 Corporate Organization........................................................................25
4.2 Authority; No Violation.......................................................................26
4.3 Capitalization of Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco and FutureLink Alberta.............................................................26
4.4 Consents and Approvals........................................................................28
4.5 Financial Statements and SEC Documents........................................................28
4.6 Parent Filings................................................................................29
4.7 Legal Proceedings.............................................................................29
4.8 Competition Act...............................................................................29
4.9 Regulatory Compliance.........................................................................30
4.10 Insolvency....................................................................................30
4.11 Representations Complete......................................................................30
ARTICLE V
CERTAIN COVENANTS......................................................................................31
5.1 Conduct of Business Pending Payment of Promissory Note........................................31
5.2 Covenant of Parent and Nova Scotia Co.........................................................32
ARTICLE VI
ADDITIONAL AGREEMENTS..................................................................................32
6.1 Public Disclosure.............................................................................32
6.2 United States Securities Laws Matters.........................................................32
6.3 Rule 144 Reporting............................................................................34
6.4 Registration Rights...........................................................................35
6.5 Canadian Securities Laws Matters..............................................................35
6.6 Best Efforts and Further Assurances...........................................................35
6.7 Noncompetition; Confidential Information......................................................36
6.8 Bonus Accrual.................................................................................37
ARTICLE VII
CONDITIONS PRECEDENT...................................................................................38
7.1 Conditions to Obligations of Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco and
FutureLink Alberta............................................................................38
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TABLE OF CONTENTS
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7.2 Conditions to the Obligations of Shareholders.................................................39
ARTICLE VIII
INDEMNIFICATION........................................................................................40
8.1 Indemnity.....................................................................................40
8.2 Indemnification Procedures....................................................................40
8.3 Tax Indemnification...........................................................................42
8.4 Limitations and Payment of Claims.............................................................42
ARTICLE IX
TAX MATTERS............................................................................................42
9.1 Representations and Warranties................................................................42
9.2 Stub Period Returns...........................................................................44
9.3 Indemnification by the Selling Shareholders...................................................44
9.4 Tax Adjustments...............................................................................45
9.5 Access to Information.........................................................................45
9.6 Books and Records.............................................................................45
9.7 Notice of Audit...............................................................................46
9.8 Transfer Taxes................................................................................46
9.9 Miscellaneous.................................................................................46
ARTICLE X
GENERAL PROVISIONS.....................................................................................46
10.1 Survival of Representations and Warranties....................................................46
10.2 Notices.......................................................................................46
10.3 Governing Law.................................................................................48
10.4 Severability..................................................................................48
10.5 Assignment; Binding Effect; Benefit...........................................................48
10.6 Expenses......................................................................................48
10.7 Headings......................................................................................49
10.8 Entire Agreement..............................................................................49
10.9 Counterparts..................................................................................49
10.10 Reproduction of Documents.....................................................................49
10.11 Advice from Independent Counsel...............................................................49
10.12 Currency......................................................................................49
10.13 No Agency; No Joint Venture...................................................................50
10.14 Good Faith....................................................................................50
10.15 Amendment.....................................................................................50
10.16 Extension; Waiver.............................................................................50
10.17 Time of Essence...............................................................................50
10.18 Knowledge.....................................................................................50
10.19 Guarantee.....................................................................................51
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Exhibit A-1 Form of Exchange Agreement
Exhibit A-2 Form of Newco Call Right Agreement
Exhibit B Form of Support Agreement
Exhibit C Exchangeable Share Terms
Exhibit D-1 Form of Lock-Up Agreement
Exhibit D-2 Form of Lock-Up Agreement
Exhibit E Form of Amalgamation Agreement
Exhibit F Form of Registration Rights Agreement
Schedule 2.4 Shareholder Allocations
Schedule 3.1 Jurisdictions
Schedule 3.2 Capitalization
Schedule 3.5 Consents, Approvals
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Absence of Certain Changes
Schedule 3.9 Legal Proceedings
Schedule 3.12 Title and Condition of Personal Property
Schedule 3.13 Leased Real Property
Schedule 3.14 Technology
Schedule 3.16 Top 20 Customers
Schedule 3.17 Employment Agreements
Schedule 3.18 Benefit Plans and Labour Matters
Schedule 3.19 Material Contracts
Schedule 3.21 Insurance
Schedule 3.24 Minute Books
Schedule 3.25 Potential Conflicts
Schedule 3.28 Investments
Schedule 4.29 Restrictions on Business Activities
Schedule 4.3 Capitalization
Schedule 4.7 Legal Proceedings
Schedule 10.1 Tax Matters
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ACQUISITION AND AMALGAMATION AGREEMENT
THIS ACQUISITION AND AMALGAMATION AGREEMENT (the "Agreement"), is made and
entered into as of June 16, 2000, by and among:
FUTURELINK CORP. ("Parent"), a Delaware corporation,
FUTURELINK DISTRIBUTION CORP., ("FutureLink Alberta")
an Alberta corporation and wholly-owned subsidiary of
Parent, 3045207 NOVA SCOTIA COMPANY, ("Nova Scotia Co.")
a Nova Scotia unlimited liability company and wholly-owned
subsidiary of Parent, 1423280 ONTARIO INC., ("Exchangeco"),
an Ontario corporation and wholly-owned subsidiary of
Nova Scotia Co. and 1423281 ONTARIO INC., ("FL Acquisition
Co.") an Ontario corporation and wholly-owned subsidiary
of Exchangeco,
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CHARON SYSTEMS INC. (the "Company")
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▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, HO ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
DATASPEC TELECOM MULTIMEDIA INC. AND CHARON EMPLOYEES TRUST
(collectively, the "Shareholders")
RECITALS:
WHEREAS Parent, Futurelink Alberta, the Company and the Shareholders
are parties to an acquisition and pre-amalgamation agreement dated as of
February 3, 2000 (the "Acquisition and Pre-Amalgamation Agreement"), which
provided for, inter alia, the indirect acquisition by Parent of all of the
issued and outstanding voting and non-voting common shares and preference shares
of the Company (the "Company Shares");
AND WHEREAS the parties to the Acquisition and Pre-Amalgamation
Agreement wish to replace and supersede the Acquisition and Pre-Amalgamation
Agreement with this Agreement;
AND WHEREAS, in furtherance of such acquisition, Parent, FutureLink
Alberta, Exchangeco, FL Acquisition Co., Nova Scotia Co., the Company and the
Shareholders wish to enter into this Agreement in order to provide for, (i) the
amalgamation (the "Amalgamation") of
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FL Acquisition Co. and the Company whereupon each voting and non-voting common
share of the Company (each a "Company Common Share") shall be exchanged for
2.0776 Class B non-voting common shares of Exchangeco ("Class B Non-Voting
Common Shares"), and each issued and outstanding preference share in the capital
of the Company ("Company Preference Share") shall be exchanged for 1 Class C
voting preference share of Exchangeco ("Class C Voting Preference Share"); (ii)
the acquisition by Nova Scotia Co. of all of the issued and outstanding Class C
Voting Preference Shares (the "Acquisition"); and (iii) pursuant to a
reorganization of capital of Exchangeco (the "Reorganization"), the exchange of
each Class B Non-Voting Common Share for one exchangeable non-voting share of
Exchangeco ("Exchangeable Share");
AND WHEREAS, the Shareholders have approved the Amalgamation as
required by the Business Corporations Act (Ontario);
AND WHEREAS, Parent, FutureLink Alberta, Nova Scotia Co., FL
Acquisition Co., Exchangeco, the Company and the Shareholders desire to make
certain representations, warrants, covenants and agreements in connection with
Amalgamation, the Acquisition, the Reorganization, and the transactions
described herein;
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Acquisition" shall have the meaning ascribed thereto in the
recitals to this Agreement;
(b) "Affiliate" shall have the meaning ascribed thereto in the
Business Corporations Act (Ontario), as amended;
(c) "Amalgamated Charon" means the company continuing as a result of
the Amalgamation;
(d) "Amalgamated Charon Shares" means the common shares in the
capital of Amalgamated Charon;
(e) "Amalgamation" means the amalgamation to be effected pursuant to
the Amalgamation Agreement, of FL Acquisition Co. and the
Company, under the laws of the province of Ontario;
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(f) "Amalgamation Agreement" means the agreement to be entered into
between Exchangeco, FL Acquisition Co. and the Company,
substantially in the form attached hereto as Exhibit E;
(g) "Benefit Plans" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or
unregistered which the Company is a party to or bound by or
under which the Company has, or will have, any liability or
contingent liability, relating to:
(i) bonus, incentive pay or compensation, performance
compensation, deferred compensation, profit sharing or
deferred profit sharing, share purchase, share option,
stock appreciation, phantom stock ,vacation or vacation
pay, sick pay, severance or termination pay, employee
loans or separation from service benefits, or any other
type of arrangement providing for compensation or benefits
additional to base pay or salary;
(ii) disability or wage continuation during period of
absence from work (including short term disability, long
term disability and workers compensation), hospitalization,
health, medical or dental treatments or expenses, life
insurance, death or survivor's benefits and supplementary
employment insurance, in each case regardless of whether
or not such benefits are insured or self-insured; or
(iii) retirement or retirement savings including, without
limitation, pension plans, pensions or supplemental
pensions, registered retirement savings plans,
"registered pension plans" (as defined in the Tax Act) and
"retirement compensation arrangements" (as defined in the
Tax Act);
with respect to any of its Employees or former Employees (or any
dependants or beneficiaries of any such Employees or former
Employees), individuals working on contract with the Company (or
eligible dependants of such persons) or other individuals who
provide services to it of a kind normally provided by Employees
(or eligible dependants of such persons);
(h) "Cash Proceeds" shall have the meaning ascribed thereto in
Section 2.4;
(i) "Class A Non-Voting Preference Shares" means the Class A non-
voting preference shares in the capital of Exchangeco;
(j) "Class B Non-Voting Common Shares" means the Class B non-voting
common shares in the capital of Exchangeco;
(k) "Class B Non-Voting Preference Shares" means the Class B non-
voting preference shares in the capital of Exchangeco;
(l) "Class C Voting Preference Shares" means the Class C voting
preference shares in the capital of Exchangeco;
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(m) "Closing Date" shall have the meaning ascribed thereon in Section
2.6;
(n) "Collective Agreements" means the collective agreements and all
related documents including all benefit agreements, letters of
understanding, letters of intent and other written communications
with bargaining agents for the Employees by which the Company is
bound or which impose any obligations upon the Company or set out
the understanding of the parties with respect to the meaning of
any provisions of such collective agreements;
(o) "Company" means Charon Systems Inc., an Ontario corporation;
(p) "Company Authorizations" shall have the meaning ascribed thereto
in Section 3.10;
(q) "Company Common Shares" has the meaning ascribed thereto in the
Recitals to this Agreement;
(r) "Company Preference Shareholders" means ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, Ho ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Dataspec Telecom Multimedia Inc., being
the holders of all of the issued and outstanding Preference
Shares;
(s) "Company Preference Shares" shall have the meaning ascribed
thereto in the Recitals hereto;
(t) "Company Shares" means the Company Common Shares and the
Preference Shares;
(u) "Copyrights" means all copyrights used in or relating to the
business of the Company, whether registered or not, including
those copyright registrations and applications identified in
Schedule 3.14;
(v) "Effective Date" means the date shown on the Articles of
Amalgamation to be issued by the Director under the OBCA
giving effect to the Amalgamation which for greater certainty
shall mean the Closing Date;
(w) "Effective Time" is the time the Articles of Amalgamation are
issued by the Director under the OBCA;
(x) "Employees" means all persons employed or retained by the
Company, including consultants, and for greater certainty,
those employees on long term disability leave or other absence;
(y) "Environmental and Safety Laws" shall mean any federal,
provincial or local laws, ordinances, codes, regulations,
rules, policies and orders that are intended to assure the
protection of the environment, or that classify, regulate,
call for the remediation of, require reporting with respect
to, or list or define air, water,
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groundwater, solid waste, hazardous or toxic substances,
materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other
persons, including the public;
(z) "Exchange Act" shall have the meaning ascribed thereto in
Section 4.5;
(aa) "Exchange Agreement" means the agreement to be made between
Parent, Exchangeco and the Shareholders, substantially in the
form attached as Exhibit A-1 hereto;
(bb) "Exchangeable Shares" means the shares in the capital stock of
Exchangeco having the rights, privileges, restrictions and
conditions, substantially as set forth in Exhibit C hereto;
(cc) "Exchangeco" means 1423280 Ontario Inc., an Ontario corporation;
(dd) "Exchangeco Common Shares" shall have the meaning ascribed
thereto in section 4.3(e) of this Agreement;
(ee) "Facility" has the meaning ascribed thereto in Section 3.15(a);
(ff) "Financial Statements" means the audited financial statements of
the Company dated December 31, 1999;
(gg) "FL Acquisition Co." means 1423281 Ontario Inc., an Ontario
corporation;
(hh) "FL Acquisition Co. Common Shares" shall have the meaning
ascribed thereto in Section 4.3(f) of this Agreement;
(ii) "FutureLink Alberta" means FutureLink Distribution Corp., a
company existing under the laws of Alberta;
(jj) "FutureLink Alberta Common Shares" shall have the meaning
ascribed thereto in Section 4.3(c);
(kk) "Governmental Authorities" means any government, regulatory
authority, governmental department, agency, commission, board,
tribunal, crown corporation, or court or other law, rule or
regulation-making entity having or purporting to have
jurisdiction on behalf of any nation, or province or state or
other subdivision thereof or any municipality, district or other
subdivision thereof;
(ll) "Governmental Entity" shall have the meaning ascribed thereto in
Section 3.5;
(mm) "Indemnified Party" shall have the meaning ascribed thereto in
Section 9.8(a);
(nn) "Indemnifying Party" shall have the meaning ascribed thereto in
Section 9.8(a);
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(oo) "Industrial Designs" means all industrial designs or similar
rights used in or relating to the business of the Company,
whether registered or not, including those industrial design
registrations identified in Schedule 3.14;
(pp) "Intellectual Property Rights" means all right, title and
interest in and to and the benefit of all Patent Rights,
Trade-marks, Copyrights and Industrial Designs;
(qq) "Key Employees" means the Shareholders' Representative and those
individuals who are key employees of the Company, as determined
prior to Closing, by the Shareholders' Representative in his
sole discretion;
(rr) "Leased Property" shall have the meaning ascribed thereto in
Section 3.13;
(ss) "Leases" shall have the meaning ascribed thereto in section 3.13;
(tt) "Legal Expenses" shall have the meaning ascribed thereto in
Section 8.1(a);
(uu) "Liability" shall have the meaning ascribed thereto in Section
3.7;
(vv) "Lien" or "Encumbrance" (or "Liens or Encumbrances" as the
context may require) means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right, easement, title
defect servitude, transfer limit, restriction, option or adverse
claim or other encumbrance of any kind or character whatsoever;
(ww) "Losses" shall have the meaning ascribed thereto in Section
9.8(a);
(xx) "Material Adverse Effect" means any condition, event or
development which is, or could reasonably be expected to result
in or represent, a material adverse effect or material adverse
change (or any condition, event or development involving a
prospective material adverse change) individually or in the
aggregate on or in the business, affairs, prospects, operations,
assets, capitalization, financial condition, rights, results of
operations, or liabilities (including without limitation any
contingent liabilities that may arise through outstanding,
pending or threatened litigation or otherwise), whether
contractual or otherwise, of the Company or Parent (including
their subsidiaries), as the case may be. Any item susceptible of
measurement in monetary terms which does not exceed the amount
of $35,000 shall not be considered a Material Adverse Effect;
(yy) "Material Contracts" shall have the meaning ascribed thereto in
Section 3.19;
(zz) "Minority Shareholders" means ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
Dataspec Telecom Multimedia Inc.;
(aaa) "Newco Call Right Agreement" means the agreement to be made
between Parent, Nova Scotia Co., Exchangeco and the
Shareholders, substantially in the form attached as Exhibit A-2
hereto;
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(bbb) "Non-Disclosure Agreement" means the mutual non-disclosure
agreement dated as of December 20, 1999 between the Company and
Parent;
(ccc) "Nova Scotia Co." means 3045207 Nova Scotia Company, an unlimited
liability company existing under the laws of Nova Scotia;
(ddd) "Nova Scotia Common Shares" has the meaning ascribed thereto in
Section 4.3(d) of this Agreement;
(eee) "OBCA" means the Business Corporations Act (Ontario) as now in
effect and as may be amended from time to time prior to the
Effective Date;
(fff) "Parent" means FutureLink Corp., a corporation existing under the
laws of Delaware;
(ggg) "Parent Indemnified Person" shall have the meaning ascribed
thereto in Section 8.1(a);
(hhh) "Parent Stock" means the common stock of Parent;
(iii) "Party" or "Parties" means Parent, FutureLink Alberta, Nova
Scotia Co., Exchangeco, FL Acquisition Co., the Company and the
Shareholders;
(jjj) "Patent Rights" means all patents and inventions and applications
thereof used in or relating to the business of the Company, and
patents which may be issued out of current applications,
(including divisions, reissues, renewals, re-examinations,
continuations, continuations in part and extensions) applied for
or registered in any jurisdiction, including those issued patents
and patent applications identified in Schedule 3.14;
(kkk) "Person" means any individual, corporation, partnership, limited
liability company, limited liability partnership, firm, joint
venture, association, joint stock company, trust, unincorporated
organization, Governmental Entity or other entity or
organization;
(lll) "Promissory Note" shall have the meaning ascribed thereto in
Section 2.4;
(mmm) "Reorganization" shall have the meaning ascribed thereto in the
Recitals to this Agreement;
(nnn) "Restricted Period" shall have the meaning ascribed thereto in
Section 6.7(a);
(ooo) "SEC Documents" shall have the meaning ascribed thereto in
Section 4.5;
(ppp) "Shareholder Indemnified Person" shall have the meaning ascribed
thereto in Section 8.1(b);
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(qqq) "Shareholder" or "Shareholders" has the meaning ascribed thereto
in the recitals to this Agreement;
(rrr) "Shareholders' Representative" means ▇▇▇▇▇ ▇▇▇▇;
(sss) "Support Agreement" means the agreement to be made between
Parent, Nova Scotia Co. and Exchangeco substantially in the form
attached as Exhibit B hereto;
(ttt) "Tax" or "Taxes" shall mean all taxes, duties, fees, premiums,
assessments, imposts, levies and other charges of any kind
whatsoever imposed by any Governmental Authority, together with
all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those
levied on, or measured by, or referred to as income, gross
receipts, profits, capital, transfer, land transfer, sales, goods
and services, harmonized sales, use, value-added, excise, stamp,
withholding, business, franchising, property, employer health,
payroll, employment, health, social services, education and
social security taxes, all surtaxes, all customs duties and
import and export taxes, all license, franchise and registration
fees and all employment insurance, health insurance and ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and other government pension plan premiums or
contributions;
(uuu) "Tax Act" means the Income Tax Act (Canada), as amended;
(vvv) "Tax Return" shall mean any return, report, declaration,
election, notice, filing information return and statements filed
or required to be filed or any other document (including any
related or supporting information) in respect of Taxes;
(www) "Technical Information" means all right, title and interest in
and to all know-how used in or relating to the business of the
Company including all information of a scientific, technical or
business nature whether in oral, written, graphic, machine
readable, electronic or physical form. Without limiting the
generality of the foregoing, "Technical Information" shall
include all documented research, trade secrets and other
proprietary know-how, processes, computer software and associated
manuals, methods of production, drawings, blueprints, patterns,
plans, flow charts, equipment and parts lists, descriptions and
related instructions, formulas, designs, manuals, records and
procedures used in or relating to the business of the Company;
(xxx) "Technology" means all technology used in or relating to the
business of the Company including all Intellectual Property
Rights and Technical Information;
(yyy) "Third Party Action" shall have the meaning ascribed thereto in
Section 8.2(a); and
(zzz) "Trade-marks" means all trade-marks, trade names, designs,
graphics, logos and other commercial symbols used in connection
with the business of the Company, whether registered or not,
including the trade-marks, trade names, designs, graphics, logos
and other commercial symbols identified in Schedule 3.14.
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ARTICLE II
ISSUANCE OF CLASS A NON-VOTING PREFERENCE SHARES;
AMALGAMATION; PURCHASE AND SALE;
CAPITAL REORGANIZATION; CLOSING
2.1 ISSUANCE OF CLASS A NON-VOTING PREFERENCE SHARES
Immediately prior to the Effective Time, Parent shall cause Exchangeco to issue
Class A Non-Voting Preference Shares having a value equal to $35,000 to a
service provider of Parent or an Affiliate thereof.
2.2 THE AMALGAMATION
Subject to the terms and conditions of this Agreement, at the Effective Time:
(a) FL Acquisition Co. shall be amalgamated with and into the Company;
(b) The Amalgamation shall be effected under Section 175 of the OBCA
pursuant to the terms of the Amalgamation Agreement;
(c) Pursuant to the Amalgamation Agreement, on Amalgamation, the
following shall occur:
(i) each outstanding Company Common Share shall be converted
into 2.0776 fully paid and non-assessable Class B Non-Voting
Common Shares;
(ii) each outstanding Company Preference Share shall be
converted into one fully paid and non-assessable Class C
Voting Preference Share; and
(iii) each outstanding common share in the capital of FL
Acquisition Co. shall be converted into one fully paid and
non-assessable common share in the capital of Amalgamated
Charon.
2.3 NO FRACTIONAL SHARES
In case the number of Class B Non-Voting Common Shares to be issued to a
Shareholder pursuant to Section 2.2 is not a whole number, the number of Class B
Non-Voting Common Shares to which such Shareholder shall be entitled shall be
rounded down to the nearest whole number, and no compensation shall be paid to
such Shareholder for such rounding down.
2.4 PURCHASE AND SALE
Immediately after the Effective Time, upon the terms and subject to the
conditions of this Agreement:
(a) The holders of Class C Voting Preference Shares shall sell and
Parent shall cause Nova Scotia Co. to purchase the Class C Voting
Preference Shares;
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15
(b) The amount payable by Nova Scotia Co. for the Class C Voting
Preference Shares shall be the amount of $7,500,000 (the "Purchase
Price") which shall be satisfied: (i) by the payment on the
Closing Date of $1,000,000 (the "Cash Proceeds") to the holders of
Class C Voting Preference Shares by Nova Scotia Co. by wire
transfer, certified cheque or as otherwise directed by the holders
of Class C Voting Preference Shares all in accordance with the
allocations set forth in Schedule 2.4; and, (ii) by the issuance
on the Closing Date of a promissory note in the principal amount
of $6,500,000 (the "Promissory Note") to holders of Class C Voting
Preference Shares by Nova Scotia Co.
(c) The holders of Class C Voting Preference Shares shall transfer and
deliver to Nova Scotia Co. share certificates representing the
Class C Voting Preference Shares duly endorsed in blank for
transfer and shall take such steps as shall be necessary to cause
Exchangeco to enter Nova Scotia Co. upon the books of Exchangeco
as the holder of the Class C Voting Preference Shares and to issue
one or more share certificates to Nova Scotia Co. representing the
Class C Voting Preference Shares.
2.5 REORGANIZATION OF CAPITAL OF EXCHANGECO
Immediately following the payment of all amounts due under the Promissory Note,
or as reasonably practicable thereafter, Parent shall complete the
Reorganization whereby it will cause Exchangeco to file Articles of Amendment
pursuant to Section 170 of the OBCA providing for the exchange of each Class B
Non-Voting Common Share into one Exchangeable Share.
2.6 CLOSING
The closing (the "Closing") shall take place on June 16, 2000 subject to the
satisfaction or waiver of each of the conditions set forth in Article VII
hereof, or at such other time as the parties hereto agree (the "Closing Date"),
and the transactions contemplated hereby other than the Reorganization
contemplated by Section 2.5, shall be effected as soon as is reasonably
practicable following the Closing. The Closing shall take place at the offices
of Osler, ▇▇▇▇▇▇ & Harcourt LLP, 63rd Floor, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, or at such other location as the parties hereto agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder severally (and not jointly and severally), represents and
warrants that each of the following representations and warranties is true and
correct with respect to (i) the Company, and (ii) such Shareholder, in each case
as applicable.
3.1 CORPORATE ORGANIZATION
The Company is a corporation duly organized, validly existing and in good
standing under the laws of Ontario. The Company has the corporate power and
authority to own or lease its properties and assets and to carry on its business
as presently conducted, and is registered, licensed or otherwise qualified as an
extra-provincial or foreign corporation to do business in
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each jurisdiction listed on Schedule 3.1 hereto, which jurisdictions are the
only jurisdictions in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such qualification necessary, except where the failure to be so qualified would
not individually or in the aggregate have a Material Adverse Effect.
3.2 CAPITALIZATION
(a) Schedule 3.2 sets forth all of the authorized, issued and
outstanding capital stock of the Company, the name and addresses
of the registered and beneficial owners thereof, and the number of
Company Shares so owned. All of the Company Shares have been duly
authorized and validly issued, are fully paid and non-assessable,
and are owned beneficially and of record by the Shareholders free
and clear of any Lien, Encumbrance, pre-emptive right or right of
first refusal of any kind or character or claims thereto. No
Company Shares were issued in violation of any applicable federal
or provincial securities laws. No subscriptions, options or other
rights to purchase Company Shares or other securities of the
Company are outstanding and no securities or obligations
convertible into or exchangeable for Company Shares or other
securities of the Company have been authorized or agreed to be
issued or are outstanding.
(b) Except as disclosed in Schedule 3.2, the Company does not
presently own or control, directly or indirectly, and has no stock
or other interest as owner or principal in, any other Person.
3.3 NO OTHER INTEREST
Other than as described in Section 3.2, no Person, other than Parent and
FutureLink Alberta pursuant to this Agreement, has any agreement, option,
understanding or commitment, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement, option or
commitment, including convertible securities, warrants or convertible options of
any nature for:
(i) the purchase, subscription, allotment or issuance of, or
conversion into, any of the unissued capital stock of the
Company or any securities of the Company;
(ii) the purchase from the Shareholders of any Company Shares; or
(iii) the purchase or other acquisition from the Company of any of
its undertaking, property or assets, other than in the
ordinary course of business.
3.4 AUTHORITY; NO VIOLATION
(a) Each of the Company and the Shareholders has full right, power and
authority to execute and deliver this Agreement and the oth er
agreements contemplated hereby, to perform his, her or its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Board of
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Directors of the Company has unanimously approved this Agreement
and all transactions contemplated hereby. Each of the
Shareholders, collectively being the holders of all of the issued
and outstanding Company Shares, has approved this Agreement and
the transactions contemplated hereby. No other corporate
proceedings on the part of the Company are necessary to approve
this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by the Company and each Shareholder and (assuming due
authorization, execution and delivery by Parent and FutureLink
Alberta) constitutes a valid and binding obligation of the Company
and each Shareholder, enforceable against each of them, except as
enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) The execution and delivery of this Agreement by the Company and
each Shareholder, the consummation of the transactions
contemplated hereby, and compliance with the terms and provisions
hereof, will not, assuming the consents and approvals referred to
in Section 3.5 are obtained, (i) violate any provision of the
Articles of Incorporation or Bylaws of the Company, (ii) violate
any statute, code, ordinance, rule or regulation applicable to the
Company or any Shareholder or any of their assets or properties,
where such violation would reasonably be expected to have a
Material Adverse Effect, (iii) violate any judgment, order, writ,
decree or injunction applicable to the Company or any Shareholder
or any of their properties or assets or (iv) violate, conflict
with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or
result in the creation of any Lien or Encumbrance upon any of the
properties or assets of the Company or any Shareholder under any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any
Shareholder is a party, or by which the Company or any Shareholder
or any of their properties or assets may be bound or affected
except where such violation, conflict or breach would not have a
Material Adverse Effect.
3.5 CONSENTS AND APPROVALS
Except as described on Schedule 3.5, no approval, order, consent of or filing or
registration with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or with
any third party is required on the part of the Company or any Shareholder in
connection with the execution and delivery of this Agreement or the performance
of the Company's and each Shareholder's obligations under this Agreement or any
other documents and agreements to be delivered under this Agreement.
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3.6 FINANCIAL STATEMENTS
The Financial Statements have been prepared in accordance with generally
accepted accounting principles in effect in Canada at the relevant time ("GAAP")
applied on a basis consistent throughout the periods indicated and with each
other and fairly present the financial condition and operating results of the
Company as of the dates, and for the periods indicated therein.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES
Except as set forth on Schedule 3.7, the Company has no direct or indirect debt,
obligation, loss, damages, deficiency, claims, fines, penalty or other liability
of any nature, whether absolute, accrued, contingent or otherwise ("Liability"),
other than Liabilities that will be fully and adequately reflected (as to nature
and amount) and reserved against in the Financial Statements, except for
Liabilities otherwise disclosed in this Agreement and Liabilities that would not
reasonably be expected to have a Material Adverse Effect. Except as shall be set
forth in such financial statements or as otherwise disclosed in this Agreement,
the Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.8 ABSENCE OF CERTAIN CHANGES
Except as disclosed in Schedule 3.8 or as otherwise contemplated in this
Agreement, since July 31, 1999, the Company has conducted its business in the
ordinary course consistent with past practice, has used its best efforts to
ensure that the Company continues to achieve a run rate of revenues consistent
with the previous six (6) months of operation, and except for transactions
contemplated or authorized hereby, and except for events that would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, there has
not occurred:
(a) any purchase or other acquisition of, sale, lease, disposition, or
other transfer of, or Lien or Encumbrance on, any material asset,
tangible or intangible, of the Company, other than in the ordinary
course of business;
(b) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the Company Shares, or any split-up
or other recapitalization in respect of Company Shares, or any
direct or indirect redemption, retirement, purchase or other
acquisition by the Company of any Company Shares or other equity
interest or any bonds, debentures, notes, debt instruments,
evidences of indebtedness or other securities of any kind of the
Company;
(c) the entering into of any material contract by the Company, other
than in the ordinary course of business and as provided to Parent,
or any termination of, or default under, any material contract to
which the Company is a party or by which it is bound;
(d) any amendment to its Articles of Incorporation, Bylaws or other
organizational documents or change to the nature of the Company's
business, or merger of the Company with or amalgamation into or
consolidation with any other Person, subdivision or in any way
reclassification of any capital stock or change or
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agreement to change in any manner the rights of its capital stock
or the character of its business, other than as indicated on
Schedule 3.8;
(e) any change in any business policies or management practices
relating to the Company, including, without limitation, commission
or fee structures; or any change in its billing or investment
policies and practices or any change in any other activity which
(i) has had the effect of accelerating the recording and billing
of fees or accounts receivable or delaying the payment of expenses
or the establishment of reserves in connection with the business
or any accounts of the Company or (ii) has had the effect of
altering, modifying or changing in any manner the historical
financial or accounting practices or policies of the Company,
including accruals of and reserves for tax liabilities;
(f) any change or modification of the compensation or benefits
payable or to become payable by the Company to any of its
directors or employees, except ordinary increases or bonuses
payable in the ordinary course consistent with past practices;
(g) any issuance, transfer, sale or pledge by the Company of any
Company Shares or other securities or of any commitment, option,
right or privilege under which the Company is or may become
obligated to issue any Company Shares or other securities;
(h) any indebtedness for borrowed money incurred by the Company,
except (i) such as may have been incurred or entered into in the
ordinary course of business not exceeding $15,000, or (ii) as
indicated on Schedule 3.8;
(i) any loan made or agreed to be made by the Company, nor has the
Company become liable or agreed to become liable as a guarantor
with respect to any loan;
(j) any loans to employees, shareholders, directors or officers;
(k) any waiver or compromise by the Company of any right or rights
or any payment, direct or indirect, of any material debt,
liability or other obligation, other than in the ordinary course
of business;
(l) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets, other than
in the ordinary course of business;
(m) any actual or threatened termination or loss of (i) any
material contract, lease, license or other agreement to which the
Company was or is a party, (ii) any certificate, license or other
authorization required for the continued operation by the Company
of any portion of any of its business, or (iii) termination or
loss of any customer or other revenue source, which termination or
loss could reasonably be expected to result in loss of revenues to
the Company in excess of $15,000 per year;
(n) any resignation of employment of any key officer or employee of
the Company;
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(o) acceleration of the collection, or sale to any other Person,
of any of its receivables, or delayed the payment of any of its
payables, other than accelerations or delays in the ordinary
course of business consistent with past practice involving amounts
below $10,000;
(p) any revaluation of any assets or properties, or write-down or
write-off of the value of any assets or properties (including,
without limitation, any receivables), in an amount in excess of
$10,000;
(q) any loan or advance to any Person which has not been fully
reflected in the Financial Statements;
(r) any acquisition of all or any part of the assets, properties,
securities or business of any other Person;
(s) except in the ordinary course of business consistent with past
practice, any hiring of new employees, consultants, agents or
other representatives or entering into any employment or
consulting agreements (other than those terminable without
severance, without penalty and without cause on not more than
thirty (30) days notice), or termination, or making any change in
the employment terms or conditions of, any officers, directors,
employees, consultants, agents or other representatives;
(t) entering into any collective bargaining agreement or any other
contract with any labour union or association representing any
employee, or been subjected to any strike, picket, work
stoppage, work slowdown, labour dispute or other labour trouble;
(u) adopting a plan of complete or partial liquidation, dissolution,
rehabilitation, restructuring, recapitalization, redomestication
or other reorganization;
(v) any material alteration to the level of working capital in the
business as compared to that stated in the management accounts
for the period ending October 31, 1999; or
(w) any negotiation or agreement by the Company to do any of the
things described in the preceding clauses (a) through (v) (other
than negotiations with Parent and its representatives regarding
the transactions contemplated by this Agreement).
3.9 LEGAL PROCEEDINGS
There are no legal actions, suits, arbitrations or other legal, administrative
or governmental proceedings or investigations pending or threatened against the
Company or its properties, assets or business, and, except as disclosed in
Schedule 3.9, no Shareholder is aware of any facts which might result in or form
the basis for any such action, suit or other proceeding or which would challenge
the validity or propriety of the transactions contemplated by this Agreement.
The Company is not in default with respect to any judgment, order or decree of
any court or any Governmental Entity.
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3.10 GOVERNMENTAL AUTHORIZATION; COMPLIANCE WITH LAWS
The Company has obtained each federal, provincial, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity that is required for the operation of the Company's business
(the "Company Authorizations"), and all of such Company Authorizations are in
full force and effect. The Company is in compliance with (i) the terms of its
Articles of Incorporation and Bylaws or other organizational documents, (ii) all
laws, statutes, ordinances, rules, regulations or other legal requirements,
whether federal, provincial, local or foreign, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect, and
(iii) all orders, writs, judgments, injunctions, awards and decrees of any
court, other Governmental Entity or arbitrator. None of the Shareholders nor the
Company has received notice of any violation by the Company of, or default by
the Company under, its Articles of Incorporation, Bylaws or other organizational
documents, any law, statute, ordinance, rule, regulation or other legal
requirement, any order, writ, injunction, award or decree of any court, other
Governmental Entity or arbitrator.
3.11 REGULATORY COMPLIANCE
Except as disclosed in Schedule 3.11, the Company has filed all reports,
statements, registrations, applications, filings or other documents and
submissions required to be filed with, or provided to, any Governmental Entity,
except where the failure to make such filings, would not reasonably be expected
to have a Material Adverse Effect. All such reports, statements, registrations,
applications, filings, documents and submissions were in compliance with all
applicable laws, statutes, ordinances, rules or regulations and were complete
and correct in all respects when filed, and no deficiencies have been asserted
by any Governmental Entity with respect thereto, except where any non-compliance
or deficiencies would not reasonably be expected to have a Material Adverse
Effect. There is no action, proceeding, dispute, controversy, inquiry or
investigation pending or, to the knowledge of each Shareholder, threatened by
any such Governmental Entity relating to the Company.
3.12 TITLE AND CONDITION OF PERSONAL PROPERTY
Except as disclosed in Schedule 3.12, the Company has marketable title to all of
its personal property owned by it, free and clear of all Liens or Encumbrances
of any kind or character or claims thereto. The property and equipment of the
Company that are used in the operations of its business are in all material
respects in good operating condition and repair, ordinary wear and use excepted.
3.13 REAL AND LEASED PROPERTY
Schedule 3.13 hereto contains a true and complete list of all real property
leased or subleased by the Company (the "Leased Property"). The Company has
previously delivered to Parent a true and complete copy of all of the lease and
sublease agreements, or, as applicable, a summary of lease terms and conditions
where no written lease exists, as amended to date (the "Leases") relating to the
Leased Property. Except as set forth on Schedule 3.13, the Leases have not been
altered or amended, and are valid, binding and in full force and effect against
the Company, all rent and other sums and charges payable thereunder are current,
no notice of default or
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termination under any of the Leases is outstanding, no termination event or
condition or uncured default on the part of the Company exists under the Leases
and, to the knowledge of each Shareholder, no event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition. To the
knowledge of each Shareholder, the current uses of the Leased Property in
connection with the business of the Company are permitted under current zoning
regulations and the Leased Property is not subject to any building or use
restriction that would restrict or prevent the continuation of such use by the
Company. To the knowledge of each Shareholder, none of the landlords,
sublandlords, tenants or subtenants under any of the Leases is in default in
meeting any of its obligations under the Leases to which it is a party. The
Company owns no real property in fee simple.
3.14 TECHNOLOGY
(a) RIGHTS - Schedule 3.14 to this Agreement contains a true and
complete list and a brief description of all Intellectual
Property Rights which have been registered, or for which
applications for registration have been filed by the Company
in any jurisdiction;
(b) OWNERSHIP - Except as set forth in Schedule 3.14:
(i) the Company is the sole and exclusive owner of the
Technology free and clear of any claim, security interest,
lien, pledge, option, charge or encumbrance of any kind
whatsoever;
(ii) the Company has all right, title and interest in and to the
Technology to the extent necessary to carry on its business;
(iii) the Company has the sole and exclusive right to grant the
rights, licences and privileges provided for in this
Agreement and has not assigned, licensed or otherwise
conveyed such rights, licences or privileges to any other
person; and
(iv) all Technology used by the Company, which is not owned by
the Company, is used by the Company with the consent of or
license from the rightful owner thereof.
(c) VALIDITY - The Intellectual Property Rights owned by the
Company are in full force and effect and the Technology owned
by the Company has not been used or enforced or failed to be
used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the
Technology;
(d) INFRINGEMENTS - Except as set forth in Schedule 3.14, no
Shareholder has any knowledge:
(i) of any claim of adverse ownership or invalidity or other
opposition to or conflict with any of the Technology nor of
any pending or threatened suit, proceeding, claim, demand,
action or investigation of any nature or kind
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against the Company relating to the Technology except for
those claims, oppositions, conflicts, suits, proceedings,
demands, actions, investigations, breaches, violations,
infringements and interferences of the Technology the
consequences of which if decided adversely would not
individually or in the aggregate result in losses of more
than $25,000 ; and
(ii) that the Company or any product or service which the Company
manufactures, uses or sells in the conduct of its business,
or any process, method, packaging, advertising, or material
that the Company employs in the manufacture, marketing for
sale of any such product, or the use of any of the
Technology breaches, violates, infringes or interferes with
any rights of any third party or requires payment for the
use of any Technology of another;
(e) LICENSES AND COVENANTS NOT TO ▇▇▇ - Schedule 3.14 sets forth a
complete and correct list and brief description of all
judgments, covenants not to ▇▇▇, permits, grants, franchises,
licenses and other agreements and arrangements relating to any
of the Technology which bind, obligate or otherwise restrict
the Company; and
(f) THIRD PARTY INFRINGEMENTS - Schedule 3.14 sets forth a
complete and correct list and brief description of all
infringements, violations or appropriations of the Technology
of which any Shareholder is aware.
3.15 ENVIRONMENTAL MATTERS
(a) There has not been any release, spill, emission, leaking,
deposit, disposal, discharge, dispersal or leaching into the
environment by the Company of any hazardous material at, in,
on, under or from any real property leased or used by the
Company (a "Facility") or in connection with its business,
that could, individually or in the aggregate, have Material
Adverse Effect. The Company is not storing any hazardous
materials at, in, on or under the Leased Property or in
connection with its business where such activity is not in
compliance with any Environmental and Safety Law, and the
Company is in compliance, in all respects, with all
Environmental and Safety Laws applicable to it.
(b) Neither the Company nor any Shareholder has (i) received a
notice (oral or written) of any non-compliance of a Facility or
its past or present operations with Environmental and Safety
Laws, or (ii) received notices, administrative actions or suits
are pending or threatened relating to a violation of any
Environmental and Safety Laws arising out of events occurring
prior to the date hereof. The Company's uses of and activities
within the Facilities have at all times complied with all
Environmental and Safety Laws. The Company has all the permits
and licenses required by Environmental and Safety Laws to be
issued and are in full compliance with the terms and conditions
of those permits.
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3.16 MAJOR CUSTOMERS
Schedule 3.16 hereto sets forth a list of the top twenty (20) customers of the
Company by revenue generated in the fiscal year ended July 31, 1999 and for the
five (5) month period ended December 31, 1999. There has been no termination or
cancellation of any relationship between the Company and such customers.
3.17 EMPLOYMENT AGREEMENTS
Schedule 3.17 hereto contains the names, titles, service dates, job
descriptions, annual salary rates, bonuses (monetary or otherwise) and other
compensation of all officers, directors and Employees of the Company paid since
the beginning of the most recent fiscal year or payable to each such Employee.
Except as disclosed in Schedule 3.17, no Employee is on long-term disability
leave, extended absence or receiving benefits pursuant to the Workplace Safety
and Insurance Act (Ontario) or similar workers' compensation legislation in
other provinces. Except as set forth on Schedule 3.17, there are no employment,
consulting, severance or indemnification arrangements, agreements or
understandings between the Company and any officer, director or Employee
including, without limitation, any contracts to employ executive officers, any
severance, change in control or similar arrangements with any officers,
directors or Employees of the Company that will result in any obligation
(absolute or contingent) of the Company to make any payment to any officer,
director or Employee of the Company following either the consummation of the
transactions contemplated hereby, termination of employment, or both.
3.18 BENEFIT PLANS AND LABOUR MATTERS
(a) Schedule 3.18 is a complete list of (or in the case of oral
arrangements, descriptions of all material terms) all Benefit
Plans and agreements currently maintained or contributed to by the
Company, including employment agreements and any other agreements
containing "golden parachute" provisions, retirement plans,
welfare benefit plans and deferred compensation agreements, copies
of which (including any trusts related thereto) have been provided
to Purchaser, and classifications of employees covered thereby as
of the date hereof. Except for the Benefit Plans described in
Schedule 3.18, the Company has no other Benefit Plans or
arrangements with any party. Except as disclosed in Schedule 3.18,
all Benefit Plans listed in Schedule 3.18 are fully funded and in
substantial compliance with all applicable federal, provincial and
local statutes, ordinances, regulations and any Collective
Agreements. Except as disclosed in Schedule 3.18, all reports and
other documents required to be filed with any Governmental Entity
or distributed to plan participants or beneficiaries (including,
but not limited to, actuarial reports, audits or Tax Returns) have
been timely filed or distributed. All Benefit Plans listed on such
Schedule have been operated in all material respects in accordance
with the terms and provisions of the plan documents and all
related documents and policies. The Company has not sponsored,
administered or otherwise participated in or made contributions to
or taken a contribution holiday from any multi-employer pension
plan or other pension plan that is registered (or that should be
registered) with the Ontario Financial Services, the Quebec
Pension Commission (Regie des rentes du Quebec) or with any other
regulatory authority
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in Canada or the United States. No Benefit Plan is under funded on
a termination basis or on a going concern basis as of the date of
this Agreement;
(b) Except as set forth in Schedule 3.18 the Company is not a party,
either directly or by operation of law to any Collective
Agreements which would cover any of its Employees or dependent
contractors of the Company. The Company is not engaged in any
practice which is contrary to any applicable labour relations
legislation. There are no outstanding or threatened labour
tribunal proceedings of any kind, including any proceedings which
could result in certification of any collective bargaining agent
for any Employees or dependent contractors of the Company not
already covered by the Collective Agreements. There is no labour
strike, dispute, slow down or stoppage as of the date hereof,
existing or, to the knowledge of each Shareholder, threatened
against the Company; to the knowledge of each Shareholder, no
union organizational activity exists respecting Employees or
dependent contractors of the Company; and there are no Collective
Agreements other agreements entered into or pending with respect
to the Company. No one has petitioned or applied within the last
five years and, to the knowledge of each Shareholder, no one is
now petitioning or applying, for union representation of any
Employees or dependent contractors of the Company. The Company has
not experienced any labour strike, slow-down, work stoppage or
labour difficulty during the last five years. The Company does not
have any labour problems that might materially affect the value of
the Company or lead to an interruption of its operations at any
location. There are no other arrangements or established practices
relating to the employees covered by any Collective Agreements;
(c) The Company is materially in compliance with all applicable
federal, provincial and local laws relating to Employees including
employment standards, employment practices, terms and conditions
of employment, wages, hours of work, overtime, non-discrimination
in employment, employment and pay equity, health and safety and
human rights, and there have been no claims nor, to the knowledge
of each Shareholder, are there any threatened complaints, charges
or outstanding orders or awards under such laws against the
Company. The Company has complied with and posted plans as
required under the applicable employment and pay equity
legislation. All levies, assessments and penalties made against
the Company pursuant to the Workplace Safety and Insurance Act
(Ontario) (and any applicable workers' compensation legislation in
the other jurisdictions in which the business of the Company is
conducted) have been paid by the Company and the Company has not
been re-assessed under any such legislation during the past five
(5) years.
3.19 CONTRACTS AND COMMITMENTS
Schedule 3.19 hereto contains a complete and accurate list of all contracts and
agreements (including, without limitation, oral and informal arrangements) of
the following categories to which the Company is a party or by which it is bound
as of the date of this Agreement (collectively, the "Material Contracts"):
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(a) material manufacturing, distribution, franchise, license, sales,
agency or advertising contracts;
(b) contracts involving payments to or by the Company in excess of $25,000
per year which are not cancellable (without material penalty, cost or
other liability) within ninety (90) days, other than purchase orders
made in the ordinary course of business consistent with past practice;
(c) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money,
whether as borrower, lender or guarantor;
(d) contracts (other than Leases) containing covenants limiting the
freedom of the Company or a Shareholder to engage in any line of
business or compete with any person or operate at any location;
(e) joint venture or partnership agreements or joint development or
similar agreements;
(f) agreements, contracts or other arrangements with any current or former
officer, director or employee of the Company or any Affiliate of the
Company;
(g) leases or similar agreements with any person under which (i) the
Company is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any person or
(ii) the Company is a lessor or sublessor of, or makes available for
use by any person, any tangible personal property owned or leased by
the Company, in any such case which has an aggregate future liability
or receivable, as the case may be, in excess of $25,000 and is not
terminable by the Company by notice of not more than sixty (60) days
for a cost of less than $10,000;
(h) license, option or other agreements relating in whole or in part to
the Intellectual Property Rights other than as set forth in Schedule
3.14 hereto;
(i) contracts or other instruments under which (i) any person has directly
or indirectly guaranteed indebtedness, liabilities or obligations of
the Company or (ii) the Company has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any person (in each case
other than endorsements for the purpose of collection in the ordinary
course of business);
(j) contracts or other instruments under which the Company has, directly
or indirectly, made any advance, loan, extension of credit or capital
contribution to, or other investment in, any Person;
(k) mortgages, pledges, security agreements, deeds of trust or other
instruments granting a Lien or Encumbrance upon any property of the
Company;
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(l) agreements or instruments providing for indemnification of any Person
with respect to liabilities relating to any current or former business
of the Company, or any predecessor entity;
(m) contracts for the acquisition, sale or lease of any assets or capital
stock or other ownership interests outside the ordinary course of
business or to effect any merger of the Company; and
(n) other than in connection with the transactions contemplated in this
Agreement, any exclusive retainer agreement or arrangement with
attorneys, accountants, actuaries, appraisers, investment bankers or
other professional advisors.
The Company has provided Parent with complete copies of all written Material
Contracts and details of all oral Material Contracts.
3.20 ABSENCE OF BREACHES OR DEFAULTS
The Company is not and, to the knowledge of each Shareholder, no other party is,
in default under, or in breach or violation of any Material Contract and to the
knowledge of each Shareholder, no event has occurred which, with the giving of
notice or passage of time or both would constitute a default under any Material
Contact, except where such breaches, violations or defaults would not reasonably
be expected to have a Material Adverse Effect. Each Material Contract is valid,
binding and enforceable against the Company (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law))
and is in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such Material Contracts will
continue to be valid, binding and enforceable against the Company and in full
force and effect immediately following the consummation of the transactions
contemplated hereby, in each case. To the knowledge of each Shareholder, no
event has occurred which either entitles, or would, on notice or lapse of time
or both, entitle the holder of any indebtedness for borrowed money affecting the
Company (except for the execution or consummation of this Agreement) to
accelerate, or which does accelerate, the maturity of any indebtedness affecting
the Company.
3.21 INSURANCE
Schedule 3.21 hereto sets forth a true and complete list of all insurance
policies providing insurance coverage of any nature to the Company. Such
policies are sufficient for compliance by the Company with all requirements of
law and all Material Contracts. All of such policies are in full force and
effect and are valid and enforceable in accordance with their terms, and the
Company has complied with all material terms and conditions of such policies,
including premium payments. None of the insurance carriers has indicated to the
Company an intention to cancel any such policy. Except as set forth in Schedule
3.21, the Company does not have any claim pending against any of the insurance
carriers under any of such policies.
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3.22 BROKERS
No broker, finder or investment banker has been retained or engaged on behalf of
any Shareholder or the Company, or is entitled to any brokerage, finder's or
other fee, compensation or commission from any such Person in connection with
the transactions contemplated by this Agreement.
3.23 MINUTE BOOKS
Except as disclosed in Schedule 3.23, the minute books of the Company made
available to Parent contain substantially complete and certain records of all
material meetings of Board of Directors, all committees of the Board of
Directors and shareholders or actions by written consent since the time of
incorporation of the Company through the date of this Agreement, and reflect all
transactions referred to in such minutes accurately. All actions taken by the
Company have been duly authorized, and no such actions have been taken in breach
or violation of the Articles of Incorporation, the by-laws or other
organizational documents of the Company.
3.24 REPRESENTATIONS COMPLETE
No representation or warranty by any Shareholder or the Company contained in
this Agreement (including the exhibits and schedules hereto and thereto)
contains any untrue statement of a fact or omits to state a fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which it was made, not false or misleading.
3.25 POTENTIAL CONFLICTS OF INTEREST
Except as set forth on Schedule 3.25, and except for the ownership of less than
1% of the outstanding stock of any publicly-traded company, no Shareholder nor
any Person directly or indirectly controlling or controlled by, or under the
direct or indirect control of, such Shareholder:
(a) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is a competitor,
lessor, lessee, customer or supplier of the Company;
(b) holds a beneficial interest in any contract or other agreement to
which the Company is a party or by which it is obligated or bound or
to which any of the assets of the Company may be subject;
(c) owns, directly or indirectly, in whole or in part, any tangible or
intangible property (including, without limitation, any Intellectual
Property Rights) which the Company is using or the use of which is
necessary for the business of the Company;
(d) has any cause of action or other claim whatsoever against the Company;
or
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(e) has any indebtedness, liability or obligation to the Company and the
Company is not indebted or otherwise obligated to any such person,
except for employment arrangements with employees of the Company.
All purchases and sales or other transactions, if any, between Company and any
such persons have been made on the basis of prevailing market rates and all such
transactions have been made on terms no less favourable to Company than those
which would have been available from unrelated third parties.
3.26 CUSTOMS
The Company has acted in a commercially reasonable manner to value and classify,
in accordance with applicable tariff laws, rules and regulations, all goods that
Company imports to the Canada or exports out of Canada into any other country
(the "Goods"). The Company has not received notice of any material claims
pending against Company by the Canada Customs and Revenue (or other foreign
customs authorities) relating to the valuation, classification or marketing of
the Goods.
3.27 INSOLVENCY
Neither the Company nor any Shareholder is insolvent, has committed an act of
bankruptcy, proposed a compromise or arrangement to its or his creditors
generally, had any petition or receiving order in bankruptcy filed against it,
him or her, taken any proceedings with respect to a compromise or arrangement or
to have a receiver appointed over any part of its or his assets, had an
encumbrancer take possession of any property, nor had an execution or distress
become enforceable or levied upon any of its or his property.
3.28 INVESTMENTS
Schedule 3.28 hereto contains a true and complete list of all securities and
other investments (including, without limitation, short-term investments) owned
by the Company as of the end of the most recent calendar month, including the
date of purchase, book value, market value and carrying value thereof on the
books and records of account of the Company as of such date. None of the
securities and other investments owned by the Company is in default in the
payment of principal or interest or dividends.
3.29 RESTRICTIONS ON BUSINESS ACTIVITIES
Except as set forth in Schedule 3.29, or as otherwise set forth in this
Agreement, there is no agreement (noncompete or otherwise), commitment,
judgement, injunction, order or decree to which either the Company, or any
Shareholder is a party or otherwise binding upon the Company, or any Shareholder
which has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of business by the
Company.
3.30 RESIDENCE OF THE SHAREHOLDERS
None of the Shareholders is a non-resident of Canada for the purposes of the Tax
Act.
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3.31 COMPETITION ACT
The Company, together with all its Affiliated Corporations (as that term is
defined in the Competition Act, R.S.C. 1985, c. C-34 as amended from time to
time) does not have:
(a) assets in Canada that exceed twenty-five million dollars (Canadian) in
aggregate value as of the last day of the period covered by the most
recent audited financial statements in which those assets are
accounted for; nor
(b) gross revenues from sales in, from or into Canada, that exceed
twenty-five million dollars (Canadian) in aggregate value for the
annual period ended on the last day of the period;
(i) covered by the most recent audited financial statements in which
those gross revenues are accounted for; or
(ii) in the case where the period covered by the financial statements
referred to in clause (a) is less than 12 months, covered by
those financial statements and by audited financial statements in
which the gross revenues are accounted for, covering the balance
of the 12-month period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, FUTURELINK ALBERTA,
NOVA SCOTIA CO., EXCHANGECO AND FL ACQUISITION CO.
Parent, FutureLink Alberta, Nova Scotia Co., Exchangeco and FL Acquisition Co.
hereby, jointly and severally, make the following representations and warranties
to the Company and the Shareholders.
4.1 CORPORATE ORGANIZATION
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. FutureLink Alberta is a corporation
duly organized, validly existing and in good standing under the laws of the
Province of Alberta. Nova Scotia Co. is an unlimited liability company duly
organized, validly existing and in good standing under the laws of Nova Scotia.
Exchangeco is a corporation duly organized, validly existing under the laws of
Ontario. FL Acquisition Co. is a corporation duly organized, validly existing
and in good standing under the laws of Ontario. Each of Parent, FL Acquisition
Co., Nova Scotia Co., Exchangeco and FutureLink Alberta has the corporate power
and authority to own or lease their respective properties and assets and to
carry on their respective businesses as they are now being conducted, and are
duly qualified to do business in each jurisdiction in which the nature of the
business conducted by them or the character or location of the properties and
assets owned or leased by them makes such qualification necessary, except where
the failure to be so qualified would not individually or in the aggregate have a
Material Adverse Effect. FL Acquisition Co. is a special purpose corporation
formed solely for the transactions contemplated under this Agreement and has not
carried on business in any manner or incurred any liabilities other than the
issuance of shares to Exchangeco.
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4.2 AUTHORITY; NO VIOLATION
(a) Each of Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco and
FutureLink Alberta has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. No
other corporate proceedings on the part of Parent, FL Acquisition Co.,
Nova Scotia Co., Exchangeco or FutureLink Alberta is necessary to
approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco
and FutureLink Alberta and (assuming due authorization, execution and
delivery by the Company and the Shareholders) constitute valid and
binding obligations of Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco and FutureLink Alberta, enforceable against each of them,
except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally.
(b) Neither the execution and delivery of this Agreement by Parent, FL
Acquisition Co., Nova Scotia Co., Exchangeco or FutureLink Alberta,
nor the consummation by Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco or FutureLink Alberta of the transactions contemplated
hereby, nor compliance by Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco or FutureLink Alberta with any of the terms or provisions
hereof, will (i) violate any provision of the Articles of
Incorporation or Bylaws of Parent, FL Acquisition Co., Nova Scotia
Co., Exchangeco or FutureLink Alberta, (ii) violate any material
statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Parent, FL Acquisition Co., Nova
Scotia Co., Exchangeco or FutureLink Alberta or any of their
respective properties or assets, or (iii) violate, conflict with,
result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in any Lien or
Encumbrance upon any of the properties or assets of Parent, or
FutureLink Alberta under any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent, FL
Acquisition Co., Nova Scotia Co., Exchangeco or FutureLink Alberta is
a party, or by which either of them or any of their respective
properties or assets may be bound or affected.
4.3 CAPITALIZATION OF PARENT, FL ACQUISITION CO., NOVA SCOTIA CO., EXCHANGECO
AND FUTURELINK ALBERTA
(a) As of May 31, 2000 the authorized capital stock of Parent consists
solely of (i) 300,000,000 shares of Parent Stock of which (A)
62,496,355 shares are issued and outstanding, (B) the shares are
issued and held in treasury (which does not include shares reserved
for issuance set forth in Schedule 4.3), and (ii) 20,000,000 shares
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of preferred stock, no par value per share, none of which are issued
and outstanding. FutureLink has filed a Registration Statement on Form
SB-2 pursuant to which it currently intends to issue to the public
6,000,000 new shares of its common stock, not including an additional
900,000 shares that would be issued to the underwriters if they
exercise their over-allotment option in full. All convertible debt
shares, warrants, options and convertible equity shares as set out in
Schedule 4.3. Certain shares of Parent Stock have been issued but not
paid for, underlying certain convertible debt financing, which Parent
does not consider to be fully paid and non-assessable until conversion
or exercise of the outstanding security. Each outstanding share of
Parent Stock is, and all shares of Parent Stock to be issued on the
exchange of Exchangeable Shares will be, duly authorized and validly
issued, fully paid and nonassessable, and each outstanding share of
Parent Stock has not been, and all shares of Parent Stock to be issued
on the exchange of Exchangeable Shares will not be, issued in
violation of any pre-emptive or similar rights or any applicable
securities laws. Each share of Parent Stock to be issued in connection
with this Agreement will be duly authorized for quotation on the
NASDAQ, subject to official notice of issuance.
(b) As of the date of this Agreement, persons or companies whose last
address as shown on the books of the Parent was in Ontario and who
hold Parent Stock do not hold more than 10 percent of the outstanding
Parent Stock, and do not represent in number more than 10 percent of
the total number of holders of Parent Stock. As of the date hereof,
persons or companies who are in Ontario and who beneficially own
Parent Stock do not beneficially own more than 10 percent of the
Parent Stock, and do not represent in number more than 10 percent of
the total number of holders of Parent Stock.
(c) As of the date of this Agreement the authorized capital stock of
FutureLink Alberta consists of an unlimited number of Class A common
shares, an unlimited number of Class B common shares and an unlimited
number of first preferred shares of which, as of the date hereof,
3,321,275 Class A common shares (the "Futurelink Alberta Common
Shares") are issued and outstanding. As of the date hereof, no Class B
common shares or first preferred shares are issued and outstanding. As
of the date hereof, all of the issued and outstanding FutureLink
Alberta Common Shares are owned by Parent, subject only to a security
interest in favour of the Canadian Imperial Bank of Commerce as
support for obligations incurred in the ordinary course of business of
Parent and FutureLink Alberta.
(d) As of the date of this Agreement the authorized capital stock of Nova
Scotia Co. consists of 1,000,000 common shares without nominal or par
value of which, as of the date hereof, 100 common shares (the "Nova
Scotia Co. Common Shares") are issued and outstanding. As of the date
hereof, all of the issued and outstanding Nova Scotia Co. Common
Shares are owned free and clear of any Liens or Encumbrances by
Parent.
(e) As of the date of this Agreement the authorized capital stock of
Exchangeco consists of an unlimited number of Class A voting common
shares, an unlimited
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number of Class B Non-Voting Common Shares, an unlimited number of
Class A Non-Voting Preference Shares, an unlimited number of Class B
Non-Voting Preference Shares and an unlimited number of Class C Voting
Preference Shares of which, as of the date hereof, 100 common shares
(the "Exchangeco Common Shares") are issued and outstanding. As of the
date hereof, immediately prior to the Effective Time, no Class B
Non-Voting Common Shares, Class A Non-Voting Preference Shares, Class
B Non-Voting Preference Shares or Class C Voting Preference Shares are
issued and outstanding. As of the date hereof, all of the issued and
outstanding Exchangeco Common Shares are owned free and clear of any
Liens or Encumbrances by Nova Scotia Co.
(f) As of the date of this Agreement the authorized capital stock of FL
Acquisition Co. consists of an unlimited number of common shares of
which, as of the date hereof, 100 common shares (the "FL Acquisition
Co. Common Shares") are issued and outstanding. As of the date hereof,
all of the issued and outstanding FL Acquisition Co. Common Shares are
owned free and clear of any Liens or Encumbrances by Exchangeco.
(g) Parent is the sole record and beneficial owner of all the outstanding
securities of each of its subsidiaries. There are no outstanding
subscriptions, options, warrants, calls, commitments, agreements, or
obligations of any character calling for the purchase, redemption or
issuance of any equity securities of any subsidiary, nor are there
outstanding any securities which are convertible into or exchangeable
for any equity securities of any subsidiary, and neither Parent nor
any subsidiary has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of any
subsidiaries or their predecessors.
4.4 CONSENTS AND APPROVALS
Neither the execution and delivery of this Agreement by Parent, FL Acquisition
Co., Nova Scotia Co., Exchangeco or FutureLink Alberta nor the consummation of
the transactions contemplated hereby will require any action or consent or
approval of, or review by, or registration or filing by Parent or any of its
Affiliates with, any third party or any Governmental Entity, other than those
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole
or a Material Adverse Effect on the ability of the parties to consummate the
transactions contemplated hereby.
4.5 FINANCIAL STATEMENTS AND SEC DOCUMENTS
Since January 1, 1999, Parent has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (all of the foregoing and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, with amendments read together with underlying documents, are
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the
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rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of Parent
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States GAAP, consistently applied, during the periods
involved and fairly and accurately present in all material respects the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as disclosed in such financial
statements, Parent is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
4.6 PARENT FILINGS
Except as disclosed to the Company and the Shareholders in writing, in materials
filed by Parent to the Securities Act or the Exchange Act, or set forth in press
releases that have been made public by Parent (including but not limited to
those from time to time posted at or available through Nasdaq's website at
▇▇▇▇://▇▇▇.▇▇▇▇▇▇.▇▇▇), there has been no material adverse change in the
financial condition of Parent since September 30, 1999.
4.7 LEGAL PROCEEDINGS
Except as disclosed in Schedule 4.7, there are no legal actions, suits,
arbitrations or other legal, administrative or governmental proceedings or
investigations pending or threatened against Parent or any of its indirect or
direct subsidiaries or their properties, assets or business in which an
unfavourable outcome, ruling or finding would have a Material Adverse Effect,
and Parent is not aware of any facts which might result in or form the basis for
any such action, suit or other proceeding or which would challenge the validity
or propriety of the transactions contemplated by this Agreement. Neither Parent
nor any of its indirect or direct subsidiaries is in default with respect to any
judgment, order or decree of any court or any governmental agency or
instrumentality which would have a Material Adverse Effect.
4.8 COMPETITION ACT
Parent, together with all its Affiliated Corporations (as that term is defined
in the Competition Act, R.S.C. 1985, c. C-34 as amended from time to time)
including for greater certainty FutureLink Alberta, neither:
(a) has assets in Canada that exceed three hundred and seventy-five
million dollars (Canadian) in aggregate value as of the last day of
the period covered by the most recent audited financial statements in
which those assets are accounted for; nor
(b) has gross revenues from sales in, from or into Canada, that exceed
three hundred and seventy-five million dollars (Canadian) in aggregate
value for the annual period ended on the last day of the period;
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(i) covered by the most recent audited financial statements in which
those gross revenues are accounted for; or
(ii) in the case where the period covered by the financial statements
referred to in clause (a) is less than 12 months, covered by
those financial statements and by audited financial statements in
which the gross revenues are accounted for, covering the balance
of the 12-month period.
4.9 REGULATORY COMPLIANCE
Each of Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco and FutureLink
Alberta has filed all reports, statements, registrations, applications, filings
or other documents and submissions required to be filed with, or provided to,
any Governmental Entity, except where the failure to make such filings, would
not reasonably be expected to have a Material Adverse Effect. All such reports,
statements, registrations, applications, filings, documents and submissions were
in compliance with all applicable laws, statutes, ordinances, rules or
regulations and were complete and correct in all respects when filed, and no
deficiencies have been asserted by any Governmental Entity with respect thereto,
except where any non-compliance or deficiencies would not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Schedule 4.7, there is
no action, proceeding, dispute, controversy, inquiry or investigation pending
or, to the knowledge of Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco
and FutureLink Alberta, threatened by any such Governmental Entity relating to
Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco or FutureLink Alberta.
4.10 INSOLVENCY
Neither Parent nor any of its Affiliates is insolvent, has committed an act of
bankruptcy, proposed a compromise or arrangement to its or his creditors
generally, had any petition or receiving order in bankruptcy filed against them,
taken any proceedings with respect to a compromise or arrangement or to have a
receiver appointed over any part of its or his assets, had an encumbrancer take
possession of any property, nor had an execution or distress become enforceable
or levied upon any of its or his property.
4.11 REPRESENTATIONS COMPLETE
None of the representations or warranties made by Parent, FL Acquisition Co.,
Nova Scotia Co., Exchangeco or FutureLink Alberta herein or in any Schedule
hereto, or certificate furnished by Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco or FutureLink Alberta pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain on the
Closing Date any untrue statement of a material fact, or omits or will omit on
the Closing Date to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
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ARTICLE V
CERTAIN COVENANTS
5.1 CONDUCT OF BUSINESS PENDING PAYMENT OF PROMISSORY NOTE
During the period from the Effective Date and continuing until the payment of
the Promissory Note, except as expressly contemplated or permitted by this
Agreement or with the written consent of each of Parent and the Shareholder's
Representative, the Parties agree that Amalgamated Charon shall carry on its
business in the ordinary course consistent with past practice. Without limiting
the generality of the foregoing, and except as previously disclosed by
Amalgamated Charon to Parent and the Shareholder's Representative in writing or
as otherwise contemplated by this Agreement or consented to in writing by Parent
and the Shareholder's Representative, the Parties agree that Amalgamated Charon
shall not:
(a) declare or pay any dividends on, or make other distributions in
respect of, any Amalgamated Charon Shares;
(b) (i) repurchase, redeem or otherwise acquire any Amalgamated Charon
Shares, or any securities convertible into or exercisable for any
Amalgamated Charon Shares, (ii) split, combine or reclassify any
Amalgamated Charon Shares or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for Amalgamated Charon Shares, or (iii) issue, deliver or
sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any
such shares;
(c) amend its Articles of Incorporation or Bylaws;
(d) make any tax election (other than tax elections referred to herein) or
settle or compromise any federal, provincial, local or foreign income
tax liability either not in accordance with past practice, or which
could have a Material Adverse Effect on the business, operations,
condition (financial or otherwise), prospects, assets or properties of
the Company;
(e) purchase or sell securities or other investments, or invest or
reinvest income and proceeds in respect thereof, other than in the
ordinary course of business consistent with past practice;
(f) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose
of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(g) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other
entity;
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(h) other than agreements in the ordinary course of business that do not
require payments by Amalgamated Charon in excess of $150,000 per year
per individual agreement or an aggregate of $750,000 per year for all
such agreements, create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract,
agreement or lease for goods, services or office space to which
Amalgamated Charon is a party or by which Amalgamated Charon or its
properties are bound; or
(i) agree to do any of the foregoing.
For greater certainty, the parties acknowledge that payment by Amalgamated
Charon 60 days after the Closing Date of employment bonuses representing in
aggregate not more than 50% of Charon's earnings, before interest, depreciation
and taxes for the financial year of Charon ending on the Closing Date, to the
employees/independent contractors entitled to such amounts shall be expressly
permitted.
5.2 COVENANT OF PARENT AND NOVA SCOTIA CO.
During the period from the Effective Date and continuing until the payment of
the Promissory Note, except as expressly contemplated or permitted by this
Agreement or with the written consent of the Shareholder's Representative, each
of Parent and Nova Scotia Co. agree that it shall cause Exchangeco not to issue
any additional shares in the capital of Exchangeco.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PUBLIC DISCLOSURE
Unless otherwise permitted by this Agreement, Parent and the Shareholder's
Representative shall consult with each other before issuing any press release or
otherwise making any public statement or making any other non-confidential
disclosure (whether or not in response to an inquiry) regarding the existence or
terms of this Agreement or the transactions contemplated hereby, and neither
shall issue any such press release or make any such statement or disclosure
without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law. In the case of a legal
requirement for public disclosure by the Parent, the Parent shall consult with
the Shareholders' Representative prior to such disclosure as to the nature and
character of the disclosure and will consider any of the Shareholders'
Representative's reasonable requests in respect of modifications of such
disclosure. In addition, without the written approval of the Shareholder's
Representative and the Parent, no Shareholder shall issue any public statement
or make any other non-confidential disclosure regarding the existence or terms
of this Agreement or transactions contemplated hereby.
6.2 UNITED STATES SECURITIES LAWS MATTERS
(a) The Shareholders acknowledge that the certificates representing the
Exchangeable Shares and Parent Stock shall bear a legend in
substantially the following language:
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"The securities represented hereby have been issued pursuant to
Regulation S ("Regulation S") promulgated under the Securities Act of
1933, as amended (the "1933 Act"), and have not been registered under
the 1933 Act. Unless so registered, such securities may not be
transferred, offered, hedged or sold prior to the end of the one-year
distribution compliance period prescribed by Regulation S unless such
transfer, offer, hedge or sale is made in an "offshore transaction"
and not to or for the account of or benefit of a "U.S. Person" (as
such terms are defined in Regulation S) and is otherwise in accordance
with the requirements of Regulation S. Following expiration of any
such one-year distribution compliance period, the securities
represented hereby may not be offered, sold or otherwise transferred
in the United States or to a U.S. Person unless the securities are
registered under the 1933 Act and applicable state securities laws, or
such offers, sales and transfers are made pursuant to an available
exemption from the registration requirements of those laws."
The Shareholders further acknowledge that Parent and Exchangeco may record or
instruct the transfer agent for Parent Stock to record appropriate stock
transfer notations on the Parent's or Exchangeco's stock transfer record to
reflect the restrictions set forth in this Section 6.3.
(b) Each of the Shareholders acknowledges that the Exchangeable Shares are
being offered and sold to him in reliance on specific exemptions from
or non-application of the registration requirements of federal and
state securities laws and that Parent is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgements and understandings of the Shareholders set forth
herein in order to determine the applicability of such exemptions and
the suitability of the Shareholders to acquire the Exchangeable
Shares.
(c) None of the Shareholders is a U.S. Person (as defined in Regulation S
promulgated under the Securities Act of 1933, as amended (the "Act")).
(d) At the time any offer of the Exchangeable Shares was made to such
Shareholder, such Shareholder was located outside the United States.
Such Shareholder is located outside the United States on the date of
the execution and delivery of this Agreement and will be outside the
United States on the Closing Date.
(e) Each of the Shareholders is aware that neither the Exchangeable Shares
nor the Parent Stock have been registered under the Act and may only
be offered or sold pursuant to registration under the Act or an
available exemption therefrom and each Shareholder has not, and will
not, engage in any offering or distribution of the Exchangeable Shares
or engage in any hedging transaction with respect thereto, except in
accordance with the registration or exemptive provisions of the Act.
(f) Except to the extent the offer and sale of the Exchangeable Shares or
Parent Stock have been registered under the Act, each Shareholder (i)
will not, in the case of Exchangeable Shares, during the period
commencing on the Closing Date and ending one year after the Closing
Date (the "Exchangeable Stock Distribution Compliance Period") or, in
the case of Parent Stock, during the period
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commencing on the date of issuance of Parent Stock and ending one year
thereafter (the "Parent Stock Distribution Compliance Period"), offer
or sell or agree to sell the Exchangeable Shares or the Parent Stock
in the United States, to a U.S. Person or for the account or benefit
of a U.S. Person other than in accordance with Rules 903 or 904 , as
applicable, of Regulation S and (ii) will, after the expiration of the
Exchangeable Stock Distribution Compliance Period or Parent Stock
Distribution Compliance Period, offer, sell, pledge or otherwise
transfer the Exchangeable Shares or the Parent Stock, respectively,
only pursuant to registration under the Act or an available exemption
therefrom and, in any case, in accordance with applicable United
States federal and state securities laws.
(g) The transactions contemplated by this Agreement (x) have not been
pre-arranged by any Shareholder with a purchaser located in the United
States which is a U.S. Person, and (y) are not part of a plan or
scheme by any Shareholder to evade the registration provisions of the
Act.
(h) Except as contemplated by this Agreement, neither the Shareholder nor
any of his, her or its affiliates has entered, has the intention of
entering, or will during the Exchangeable Stock Distribution
Compliance Period or the Parent Stock Distribution Compliance Period
enter into, with any U.S. Person, any put option, short position or
other similar instrument or position with respect to such
Shareholder's Exchangeable Shares or Parent Stock or participate in
any other attempt designed to hedge such Shareholder's risk with
respect to the Exchangeable Shares or the Parent Stock in any manner
which does not comply with the Act.
(i) The Shareholders acknowledge that the representations and agreements
contained in this Section 6.2 shall apply to the offer and sale of any
shares of Parent Common Stock or Exchangeable Shares pursuant to the
Exchange Agreement or the Newco Call Right Agreement, all of which
shares shall be issued in accordance with the terms and subject to the
conditions and restrictions contained in this Section 6.2.
6.3 RULE 144 REPORTING
With a view of making available the benefits of Rule 144 promulgated under the
Act, the Parent agrees to use its best efforts to:
(a) Make and keep public information regarding Parent available, as those
terms are understood and defined in Rule 144 under the Act, at all
times from and after the Closing Date;
(b) File with the U.S. Securities and Exchange Commission (the
"Commission") in a timely manner all reports and other documents
required under the Act and the Securities Exchange Act of 1934 (the
"Exchange Act") from and after the Closing Date;
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(c) So long as a Shareholder owns any Exchangeable Shares or any shares of
Parent Stock received on exchange thereof, furnish to the Shareholder
upon request a written statement by Parent as to its compliance with
the reporting requirements of Rule 144 and of the Act and the Exchange
Act, a copy of the most recent annual or quarterly report of Parent,
and such other reports and documents so filed as a Shareholder may
reasonably request in availing itself of any rule or regulation of the
Commission, including Rule 144, permitting a Shareholder to sell any
Exchangeable Shares (or shares of Parent Stock received on exchange
thereof).
6.4 REGISTRATION RIGHTS
At the Closing, Parent and the Shareholders shall enter into the Registration
Rights Agreement, in the form attached as Exhibit F.
6.5 CANADIAN SECURITIES LAWS MATTERS
Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco and FutureLink Alberta
shall use commercially reasonable efforts to obtain, as promptly as practicable
following Closing but in any event no later than the first anniversary of
Closing all orders required from the Ontario Securities Commission, Alberta
Securities Commission, and the Quebec Securities Commission to exempt (a) the
issuance and exchange of the Exchangeable Shares (including transfers to
permitted transferees within Canada from time to time), and (b) the issuance and
first resale of the Parent Stock issued upon the exchange of Exchangeable
Shares, from time to time from the prospectus and registration requirements of
the Securities Act (Ontario), the Securities Act (Alberta) and Securities Act
(Quebec). The Shareholders shall not exercise any right (i) to require Nova
Scotia Co. or Exchangeco to retract, exchange or redeem the Exchangeable Shares
or (ii) which would result in the issuance of Parent Stock into Ontario, Quebec
or any other province of Canada, until the date on which the discretionary
rulings or orders referred to above are issued, or unless such exercise is
permissible under applicable securities laws. This Section 6.5 shall also
operate as a waiver of the rights of a holder of Exchangeable Shares under the
terms thereof such that no holder of Exchangeable Shares may exercise such
rights in a manner contrary to the covenants provided for in this Section 6.5.
Each Shareholder agrees not to transfer any Exchangeable Shares to any Person
who does not first agree to be bound by the provisions of this Section 6.5 and
to cause any subsequent transferee to become so bound as a condition of any
subsequent transfer.
6.6 BEST EFFORTS AND FURTHER ASSURANCES
Each of the Parties to this Agreement shall use its best efforts to effectuate
the transactions contemplated hereby. Each Party hereto, at the reasonable
request of another Party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby. The Parties hereto agree that, subsequent to
the Closing Date, they will at the request of the other Party, execute and
deliver such additional conveyances, transfers and other assurances as, in the
opinion of such Party's counsel, are reasonably required to carry out the intent
of this Agreement. Each Shareholder agrees to take all steps reasonably
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required by Parent to assist (at Parent's sole cost and expense) Parent in
retaining the goodwill of the Company and in particular to retain all Company
employees after Closing.
6.7 NONCOMPETITION; CONFIDENTIAL INFORMATION
(a) To protect the trade secrets, confidential information and goodwill of
the Company, and as a specific material inducement to Parent to enter
into this Agreement and acquire the Company Shares as contemplated
hereby (which the Shareholders acknowledge is conditioned on the
noncompete contained herein), at all times during the period from the
Closing Date until one (1) year after the termination (where such
termination is without cause) or expiration of the employment
agreement between such Shareholder and Parent (the "Restricted
Period") and within a fifty (50) mile radius of each city in the
Provinces of Quebec and Ontario and each other province in which the
Company is doing business on the Closing Date and on the date such
Shareholder's employment with the Company terminates, such Shareholder
shall not:
(i) directly or indirectly, in any capacity, solicit for employment,
or negotiate for the services of, any persons receiving wage
compensation of any type (whether as an employee, consultant, or
independent contractor), from the Company at the time such
Shareholder's employment is terminated or, to the knowledge of
such Shareholder, Parent;
(ii) directly or indirectly, in any capacity accept for employment or
contract for the services of, any persons receiving compensation
of any type, from the Company at the time such Shareholder's
employment is terminated;
(iii) directly or indirectly, in any capacity assist, whether for pay
or otherwise, any Person to do that which the Shareholder could
not do directly under subparagraphs (i) and/or (ii) above;
(iv) directly or indirectly, in any capacity engage, whether for pay
or otherwise, in the same business, or any business similar to,
or competitive with, the business conducted by the Company or
Parent at the time such Shareholder's employment is terminated;
and
(v) directly or indirectly, in any capacity assist, whether for pay
or otherwise, other than the Parent, or any of its Affiliates,
any Person to engage in the same business, or any business
similar to or competitive with, the business conducted by the
Company or Parent at the time such Shareholder's employment is
terminated;
(vi) directly, or indirectly, call upon, solicit or attempt to
solicit, or be interested in or connected, either directly or
indirectly, with any business operation that calls upon, solicits
or attempts to solicit any customer or prospective customer of
the Parent, or any of their Affiliates, within a fifty (50) mile
radius of any city or municipality in any state or province where
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Parent, or any of its Affiliates, actively provides work or
services for customers at the time that the Shareholder's
employment terminates; and
(vii) directly or indirectly, contact any of the Parent's clients or
suppliers anywhere within a fifty (50) mile radius of any city or
municipality in any state or province where Parent, or any of its
Affiliates, actively provides work or services for customers at
the time of the said termination of the Shareholder's employment
which Shareholder contacted, served or developed on behalf of the
Company or Parent or their Affiliated companies during the
Shareholder's employment with the purpose or intent of competing
with the Parent or its Affiliates.
(b) Nothing in Section 6.7(a) shall prohibit a Shareholder from owning up
to 5% of the total issued and outstanding capital of a publicly held
corporation engaged in, concerned with, or interested in any business
in competition with the Company, Parent or its Affiliates.
(c) Each Shareholder shall not at any time disclose or reveal to any
Person (other than directors, officers and authorized employees and
representatives of Parent and its subsidiaries) or use for any purpose
not contemplated by this Agreement any Technology, including without
limitation, computer software, technology, data, customer lists,
know-how, documents, processes, pricing and marketing plans, policies
and strategies, operations, methods, business development techniques,
business and personnel acquisition plans or other confidential or
trade secret information relating to the business, operations or
activities of Parent, including the Company (except and only to the
extent that such information is readily ascertainable from public or
published information or trade sources, or upon advice of counsel, is
required to be disclosed in order to comply with applicable law or
regulatory authority, or an order of a court of competent
jurisdiction, and such employee notifies Parent prior to making such
disclosure).
6.8 BONUS ACCRUAL
The parties agree that the financial statements prepared by Amalgamated Charon
for the fiscal period ending on the Closing Date (the "Closing Financial
Statement") shall include an expense accrual for employee/independent
contractors bonuses representing a total of 50% of Charon's earnings before
interest, taxes and depreciation (all in accordance with Schedule 3.18) which
amounts shall be paid by Amalgamated Charon to such employee/independent
contractors no later that 60 days following the Closing Date. The Closing
Financial Statements shall be prepared on a review engagement basis in a manner
consistent with prior years.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATIONS OF PARENT, FL ACQUISITION CO., NOVA SCOTIA CO.,
EXCHANGECO AND FUTURELINK ALBERTA
The obligation of Parent, FL Acquisition Co., Nova Scotia Co., Exchangeco and
FutureLink Alberta to complete the transactions contemplated herein is subject
to the fulfilment, or waiver by Parent, FL Acquisition Co., Nova Scotia Co.,
Exchangeco and FutureLink Alberta of the following conditions precedent on or
before the Closing Date or such other time as is specified below:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Shareholders made in or pursuant to this Agreement
shall be true and correct as of the Closing Date and Parent shall have
received a certificate to that effect from each of the Shareholders.
(b) EMPLOYMENT AGREEMENTS AND RETENTION. As of the Closing Date, Parent
(or one of its Affiliates) and each Key Employee shall have entered
into an employment agreement in a form satisfactory to both parties
which for greater certainty shall contain terms and conditions which
are, in the aggregate, substantially similar to those currently
enjoyed by such employee. As of the Closing Date, Parent shall be
satisfied, that at least eighty percent (80%) of the Company's
employees and regularly retained consultants as of the date hereof,
remain employees and/or consultants of the Company, on terms
satisfactory to Parent provided that such terms shall be, in the
aggregate, substantially similar to those currently enjoyed by such
employees and consultants.
(c) LOCK-UP AGREEMENT. The Shareholders (other than Minority Shareholders)
shall have entered into a Lock-up Agreement with Parent, substantially
in the form attached hereto as Exhibit D-1. The Minority Shareholders
shall have entered into a Lock-Up Agreement with Parent, substantially
in the form of Exhibit D-2.
(d) LEGAL OPINION. On Closing, the Company and the Shareholders shall
deliver to Parent, FL Acquisition Co., Nova Scotia Co. and FutureLink
Alberta an opinion of counsel for the Company and the Shareholders,
addressing such matters as counsel for Parent may reasonably require,
which shall include, for greater certainty, such matters as are
standard in transactions of this nature completed in Canada;
(e) CONSENTS OF THIRD PARTIES. All material consents, waivers, approvals
required to be obtained by the Company for the authorization,
execution and delivery of this Agreement and the consummation by it of
the transactions contemplated hereby shall have been obtained and made
by the Company.
(f) CLOSING DELIVERIES. In addition to any other instruments and documents
required to be delivered by the Company and the Shareholders pursuant
to this Agreement, the Company and the Shareholders shall have
delivered to Parent on or before the
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Closing Date such certificates, instruments and documentation as are
reasonably required in the opinion of Parent's counsel to complete the
transactions contemplated herein.
7.2 CONDITIONS TO THE OBLIGATIONS OF SHAREHOLDERS
The obligation of the Shareholders to complete the transactions contemplated
herein is subject to the fulfilment, or waiver by Shareholders of the following
conditions precedent on or before the Closing Date or such other time as is
specified below:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Parent and FutureLink Alberta made in or pursuant to
this Agreement shall be true and correct as of the Closing Date as
though made on and as of the Closing Date and the Shareholders shall
have received a certificate signed (i) on behalf of Parent by its
Chief Executive Officer and Chief Financial Officer, (ii) on behalf of
FutureLink Alberta by its President, (iii) on behalf of Nova Scotia
Co. by its President, (iv) on behalf of Exchangeco by its President,
and (v) on behalf of FL Acquisition Co., by its President, in each
case to the foregoing effect.
(b) CLOSING DELIVERIES. In addition to any other instruments and documents
required to be delivered by Parent, FutureLink Alberta, FL Acquisition
Co., Nova Scotia Co. and Exchangeco pursuant to this Agreement,
Parent, FutureLink Alberta, FL Acquisition Co., Nova Scotia Co. and
Exchangeco shall have delivered to the Shareholders before the Closing
Date such certificates, instruments and documentation as are
reasonably required in the opinion of counsel to the Company and the
Shareholders' counsel to complete the transactions contemplated
herein.
(c) LEGAL OPINION. On Closing, Parent, Nova Scotia Co., Exchangeco, FL
Acquisition Co. and FutureLink Alberta shall deliver to the
Shareholders, an opinion of United States and Canadian counsel for
Parent, Nova Scotia Co., Exchangeco, FL Acquisition Co. and FutureLink
Alberta, addressing such matters as counsel for the Company and the
Shareholders may reasonably require, which shall include, for greater
certainty, such matters as are standard in transactions of this
nature.
(d) EMPLOYMENT AGREEMENTS. As of the Closing Date, Parent (or one of its
affiliates) shall have entered into an employment agreement with each
Key Employee, in a form satisfactory to both parties, which for
greater certainty shall contain terms and conditions which are, in the
aggregate, substantially similar to those currently enjoyed by such
employees. In the case of the Shareholders' Representative, such
agreement shall include financial terms and conditions which are the
same or better than those of a regional director of Parent.
(e) REGISTRATION RIGHTS AGREEMENT. The parties shall have entered into the
Registration Rights Agreement referred to in Section 6.4 hereof.
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ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNITY
(a) Subject to the limitations in Section 8.4, each Shareholder shall
severally (and not jointly and severally) indemnify, defend and hold
harmless Parent, FutureLink Alberta and Exchangeco (and the directors,
officers, employees, representatives, agents, Affiliates, successors
and assigns of each) (each a "Parent Indemnified Person") from and
against any Liabilities, interest, costs of investigation,
assessments, judgments, actions, proceedings and suits of whatever
kind and nature and all costs and expenses relating thereto
(including, without limitation, reasonable attorneys' fees and
expenses of investigation ("Legal Expenses") and accountants' fees and
expenses) incurred in connection with the investigation or defense
thereof or in asserting rights hereunder (collectively, "Losses")
arising out of (i) any inaccuracy or breach of any representation or
warranty of any Shareholder or the Company contained in this
Agreement, or in any Exhibit, Schedule or certificate delivered
pursuant hereto or thereto and, (ii) the breach or nonfulfilment of
any covenant, agreement or other obligation of any Shareholder or the
Company contained in this Agreement which breach or nonfulfilment
remains uncured for thirty (30) days after the date of written notice
of the breach or nonfulfilment.
(b) Parent shall indemnify, defend and hold harmless the Shareholders and
their trustees, agents, successors and assigns (each a "Shareholder
Indemnified Person") from and against all Losses (including
specifically, but without limitation, Legal Expenses) arising out of
(a) any inaccuracy or breach of any representation or warranty of
Parent or FutureLink Alberta contained in this Agreement, or (b) the
breach by Parent or FutureLink Alberta of, or the failure by Parent or
FutureLink Alberta to observe, any of its covenants or other
agreements contained in or made pursuant to this Agreement.
8.2 INDEMNIFICATION PROCEDURES
(a) Promptly after receipt by any person entitled to indemnification under
Section 8.1 (an "Indemnified Party") of notice of any claim or of
commencement of any action, suit or proceeding by a person not a party
to this Agreement in respect of which the Indemnified Party will seek
indemnification hereunder (any such claim, suit or proceeding, a
"Third Party Action"), the Indemnified Party shall notify the person
that is obligated to provide such indemnification (the "Indemnifying
Party") thereof in writing, but any failure to so notify the
Indemnifying Party shall not relieve it from any liability that it may
have to the Indemnified Party under Section 8.1, except to the extent
that the Indemnifying Party is prejudiced by the failure to give such
notice. The Indemnifying Party shall be entitled to participate in the
defense of such Third Party Action and to assume control of such
defense (including settlement of such Third Party Action) with counsel
reasonably satisfactory to such Indemnified Party; provided, however,
that:
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(i) the Indemnified Party shall be entitled to participate in the
defense of such Third Party Action and to employ counsel at its
own expense (which shall not constitute Legal Expenses for
purposes of this Agreement) to assist in the handling of such
Third Party Action;
(ii) the Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into any settlement of such
Third Party Action or ceasing to defend against such Third Party
Action, if pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be imposed
against the Indemnified Party or the Indemnified Party would be
adversely affected thereby;
(iii) no Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all
liability in respect of such Third Party Action; and
(iv) the Indemnifying Party shall not be entitled to control the
defense of any Third Party Action unless the Indemnifying Party
confirms in writing its assumption of such defense and continues
to pursue the defense reasonably and in good faith. After written
notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such Third Party
Action in accordance with the foregoing, (i) the Indemnifying
Party shall not be liable to such Indemnified Party hereunder for
any Legal Expenses subsequently incurred by such Indemnified
Party attributable to defending against such Third Party Action,
and (ii) as long as the Indemnifying Party is reasonably
contesting such Third Party Action in good faith, the Indemnified
Party shall not admit any liability with respect to, or settle,
compromise or discharge the claim underlying, such Third Party
Action without the Indemnifying Party's prior written consent,
which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume control of the defense of such
Third Party Action in accordance with this Section 8.2, the
Indemnified Party shall have the right to defend and/or settle
such Third Party Action in such manner as it may deem appropriate
at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 8.2. The reimbursement
of fees, costs and expenses required by this Section 8.2 shall be
made by periodic payments during the course of the investigation
or defense, as and when bills are received or expenses incurred.
(b) If an Indemnified Party has actual knowledge of any facts or
circumstances other than the commencement of a Third Party Action
which cause in good faith it to believe that it is entitled to
indemnification under this Article VIII, then such Indemnified Party
shall promptly give the Indemnifying Party notice thereof in writing,
but any failure to so notify the Indemnifying Party shall not relieve
it
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from any liability that it may have to the Indemnified Party under
Section 8.1, as the case may be, except to the extent that the
Indemnifying Party is prejudiced by the failure to give such notice.
8.3 TAX INDEMNIFICATION
Notwithstanding anything in this Article VIII to the contrary, the rights and
obligations of the Parties with respect to the breach of representations,
warranties, covenants, and agreements set forth in Article IX (concerning Tax
Matters) and the indemnification for Taxes shall be governed by the provisions
of Article IX and not by this Article VIII unless otherwise stated in a specific
section of this Agreement.
8.4 LIMITATIONS AND PAYMENT OF CLAIMS
(a) The right of indemnification or other claim against Parent or
FutureLink Alberta on the one hand, or the Shareholders, on the other
hand, with respect to each representation, warranty, covenant and
agreement contained in this Agreement shall, except with respect to
representations, warranties, covenants and agreements set forth in
Sections 3.2, 3.3 and 4.3 which shall survive forever, terminate on
the date occurring on (i) the thirtieth (30) day after the expiration
of the applicable statute of limitations (or extensions or waivers
thereof) relating to the representations, warranties, covenants and
agreements set forth in Sections 3.9 and 4.6, and (ii) the eighteen
month anniversary of the Closing Date with respect to all other
representations, warranties, covenants and agreements contained in
this Agreement, except in so far as a claim has been asserted by
either Party and not been resolved prior to expiration of the
applicable periods set forth in item (i) or (ii) above.
(b) No Party shall be liable to another Party for any claim under this
Agreement unless the aggregate of Losses suffered exceeds $50,000.
(c) The maximum liability of each Shareholder for all Losses under
Articles VIII and IX shall not exceed an amount equal to such
Shareholder's proportion of the total consideration that it, him or
her receives hereunder, as set out in Schedule 2.4.
ARTICLE IX
TAX MATTERS
9.1 REPRESENTATIONS AND WARRANTIES
Each of the Shareholders hereby severally (and not jointly and severally),
represents and warrants to Parent on the date of this Agreement and on the
Closing Date as follows below. Except as disclosed in the Financial Statements
and Schedule 9.1:
(a) The Company has duly and timely filed its Tax Returns with the
appropriate Governmental Authority and has duly, completely and
correctly reported all income and all other amounts and information
required to be reported thereon.
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(b) The Company has duly and timely paid all Taxes, including all
instalments on account of Taxes for the current year that are due and
payable by it whether or not assessed by the appropriate Governmental
Authority. The Company has established reserves that are reflected on
the Financial Statements that are adequate for the payment by the
Company of all Taxes that are not yet due and payable (and that will
not be due and payable by the Closing Date) and that relate to periods
ending on or prior to the Closing Date.
(c) The Company has not requested or entered into any agreement or other
arrangement or executed any waiver providing for any extension of time
within which (i) to file any Tax Return covering any Taxes for which
the Company is or may be liable; (ii) to file any elections,
designations or similar filings relating to Taxes for which the
Company is or may be liable; (iii) the Company is required to pay or
remit any Taxes or amounts on account of Taxes; or (iv) any
Governmental Authority may assess or collect Taxes for which the
Company is or may be liable.
(d) The Canadian federal and provincial income and capital tax liabilities
of the Company have been assessed by the relevant taxing authorities
and notices of assessment have been issued to the Company by the
relevant taxing authorities for all taxation years prior to and
including the taxation year ended 1998.
(e) There are no actions, suits, proceedings, audits or claims or, to the
knowledge of the Shareholders, investigations, now pending or, to the
knowledge of each Shareholder, threatened, against the Company in
respect of any Taxes and there are no matters under discussion, audit
or appeal with any Governmental Authority relating to Taxes.
(f) The Company has duly and timely withheld from any amount paid or
credited by it to or for the account or benefit of any person,
including any Employees, officers or directors and any non-resident
person, the amount of all Taxes and other deductions required by any
laws, rule or regulation to be withheld from any such amount and has
duly and timely remitted the same to the appropriate Governmental
Authority.
(g) Except pursuant to this Agreement or as specifically disclosed in
writing to the Purchaser, for purposes of the Tax Act or any
applicable provincial or municipal taxing statute, no person or group
of persons has ever acquired or had the right to acquire control of
the Company.
(h) None of Sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of the Tax Act,
or any equivalent provision of the taxation legislation of any
province or any other jurisdiction, have applied or will apply to the
Company at any time up to and including the Closing Date.
(i) The Company has not acquired property from a non-arm's length person,
within the meaning of the Tax Act, for consideration, the value of
which is less than the
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fair market value of the property acquired in circumstances which
could subject it to a liability under Section 160 of the Tax Act.
(j) For all transactions between the Company and any non-resident person
with whom the Company was not dealing at arm's length during a
taxation year commencing after 1998 and ending on or before the
Closing Date, the Company has made or obtained records or documents
that meet the requirements of paragraphs 247(4)(a) to (c) of the Tax
Act.
(k) The Company is duly registered under subdivision (d) of Division V of
Part IX of the Excise Tax Act (Canada) with respect to the goods and
services tax and harmonized sales tax and under Division I of Chapter
VIII of Title I of the Quebec Sales Tax Act with respect to the Quebec
sales tax, and its registration numbers are R131518722 and 1022600164
respectively.
(l) The only reserves under the Tax Act or any equivalent provincial
statute to be claimed by the Company for the taxation year ended
immediately prior to the acquisition of control by the Purchaser are
set out in Schedule 9.
(m) The Company has not filed any elections (other than as described
herein), designations or similar filings which will be applicable for
any period ending after Closing.
9.2 STUB PERIOD RETURNS
Parent shall, at its cost and expense, cause to be prepared and filed on a
timely basis, and shall pay or remit any taxes due on the Closing Date, all Tax
Returns for the Company for any period which ends on or before the Closing Date
and for which Tax Returns have not been filed as of such date. Parent shall also
cause to be prepared and filed on a timely basis, all Tax Returns of the Company
for periods beginning before and ending after the Closing Date. The Shareholders
and Parent shall cooperate fully with each other and make available to each
other in a timely fashion such data and other information as may reasonably be
required for the preparation of any Tax Return of the Company for a period
ending on, prior to or including the Closing Date and shall preserve such data
and other information until the expiration of any applicable limitation period
under any applicable law with respect to Taxes.
9.3 INDEMNIFICATION BY THE SELLING SHAREHOLDERS
Subject to Section 8.4, each Shareholder hereby severally (and not jointly and
severally), agrees to indemnify, defend, and hold Parent and the Company (and
their respective officers, directors, employees, Affiliates, successors and
assigns) harmless from and against:
(a) any and all Taxes incurred by the Company which arise as a direct
result of any inaccuracy, breach, or nonfulfilment of any
representation, warranty, covenant, or agreement of any Shareholder
pursuant to this Agreement;
(b) any and all Taxes imposed on the Company, directly or indirectly, (i)
for any taxable period ending prior to or on the Closing Date, or (ii)
any taxable period
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beginning before and ending after the Closing Date to the extent such
Taxes are apportioned to the portion of the taxable period prior to
Closing Date except with respect to either clause (i) or (ii) to the
extent that such Taxes are set forth in the tax reserve on the
Financial Statements;
(c) any and all unpaid federal, state, local, or foreign Taxes, including
any penalties and interest in respect thereof, imposed on the Company,
directly or indirectly, pursuant to any guaranty, indemnification, Tax
sharing or similar arrangement involving the Company on or before the
Closing Date relating to the sharing of Liability for, or payment of,
Taxes; and
(d) any direct cost or expense (including, without limitation, reasonable
attorneys' and accountants' fees) incurred by the Parent, the Company,
or any of their successors or assigns in connection with any Tax
described in this Section 9.3.
9.4 TAX ADJUSTMENTS
The amount of any Tax or other amount for which indemnification is provided
under Sections 8.1, 9.3 or 9.7 hereof shall be (i) increased to take account of
any Tax incurred by the Indemnified Party arising from the receipt or right to
receive the indemnity payments hereunder (increased by any Tax incurred with
respect to such increased amount) and (ii) reduced to take into account (A) any
reduction of Tax realized by the Indemnified Party arising from the incurrence
or payment of the amount for which indemnification is provided and (B) insurance
proceeds received, if any, by the indemnified party in connection with such Tax.
9.5 ACCESS TO INFORMATION
From the date hereof, the Shareholders shall, and shall cause the Company to,
make available to Parent and Parent's representatives, and Parent shall cause to
be made available to the Shareholders and their representatives: (a) all Tax
Returns and all documents and records in connection with the preparation thereof
for any taxable period or portion thereof ending on or before the Closing Date
and any examination reports and statements of deficiencies assessed against,
proposed to be assessed against, or agreed to by the Company for such taxable
periods; and (b) any Tax sharing or allocation agreement or arrangement
involving the Company at any time during the seven-year period ending on the
Closing Date and a true and complete description of any such unwritten or
informal agreement or arrangement.
9.6 BOOKS AND RECORDS
Parent shall retain or cause the Company to retain all books and records
pertinent to the Company for each taxable period or portion thereof ending on or
prior to the Closing Date until the expiration of the applicable statute of
limitations (giving effect to any and all extensions and waivers) and to abide
by or cause compliance with all record retention agreements entered into by or
on behalf of the Company with any taxing authority.
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9.7 NOTICE OF AUDIT
If any party to this Agreement receives any written notice from any taxing
authority proposing an adjustment to any Tax for which any other party hereto
may be obligated to indemnify under this Agreement, such party shall give prompt
written notice thereof to the other that describes such proposed adjustment in
reasonable detail ("Notice of Audit"), and shall indicate the amount (estimated,
if necessary) of the Tax and other items that may be suffered by Parent or the
Shareholders, as the case may be. The failure to give a Notice of Audit pursuant
to this Section 9.7, however, shall not reduce the obligations of a party
hereunder unless, and to the extent that, such failure prejudices the rights of
the other party to contest such tax.
9.8 TRANSFER TAXES
All transfer, documentary, sales, use, stamp, registration and other such Taxes
and fees (including any penalties and interest) incurred in connection with this
Agreement (including any corporate-level gains tax triggered by the sale of the
Company Shares), shall be paid by the appropriate party as required by
applicable law when due, and such party will file all documentary, sales, use,
stamp, registration and other Taxes and fees, and if required by applicable law,
the other parties will, and will cause their Affiliates to, join in the
execution of any such Tax Returns or other documentation.
9.9 MISCELLANEOUS
All representations and warranties contained in this Article IX with respect to
any Tax shall survive until the thirty-first day after the expiration of the
applicable statute of limitations.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, covenants and agreements of the Parties made in
this Agreement shall survive the Closing and shall terminate on the dates that
the right to indemnification under such representations, warranties, covenants
or agreements terminates as provided in Section 8.4 or 9.9, as the case may be,
and they shall not be affected in any respect by any examination or
investigation conducted by or on behalf of the Parties hereto and any
information which any party may receive pursuant to the schedules hereto or
otherwise.
10.2 NOTICES
All notices and other communications hereunder shall be in writing and shall be
deemed given when delivered personally, 24 hours after sent by facsimile (with
confirmation), 3 days after mailed by registered or certified mail (return
receipt requested) or 1 day after sent by a nationally recognized overnight
courier (next day delivery) (with confirmation) to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
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(a) if to Company, to:
CHARON SYSTEMS INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(b) if to Parent or FutureLink Alberta to:
FutureLink Corp.
▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
and to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇
1 First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
(c) if to the Shareholders, to:
to the applicable address disclosed on Schedule 3.2
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53
10.3 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the Ontario and the laws of Canada applicable therein, and shall be treated in
all respects as an Ontario contract. Each of the Parties irrevocably attorns to
the jurisdiction of the courts of Ontario. The Parties expressly submit and
consent in advance to such jurisdiction in any action or suit commenced in any
such court, and hereby waive any objection which it may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby consent
to the granting for such legal or equitable relief as is deemed appropriate by
such court. Nothing in this Agreement shall be deemed or operate to affect the
right of any party to serve legal process in any other manner permitted by law,
or to preclude the enforcement by any party of any judgment or order obtained in
such forum or the taking of any action under this Agreement to enforce same in
any other appropriate forum or jurisdiction.
10.4 SEVERABILITY
Any part, provision, representation or warranty of this Agreement that is
prohibited or that is held to be void or unenforceable shall be ineffective
solely to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation or warranty of this Agreement that is prohibited or unenforceable
or is held to be void or unenforceable in any jurisdiction shall be ineffective,
as to such jurisdiction, to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Parties waive any provision of law that prohibits or
renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
Person of the economic benefit intended to be conferred by this Agreement, the
Parties shall negotiate, in good-faith, to develop a structure, the economic
effect of which is as close as possible to the economic effect of this
Agreement, without regard to such invalidity.
10.5 ASSIGNMENT; BINDING EFFECT; BENEFIT
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the Parties (whether by operation of law or
otherwise) without the prior written consent of the other Parties. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and permitted
assigns. Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, expressed or implied, is intended to confer on any
person, other than the Parties or their respective successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
10.6 EXPENSES
All costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants incurred by Parent, FutureLink
Alberta and Exchangeco in connection with this Agreement and the transactions
contemplated hereby shall be paid by
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54
Parent. All costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants incurred by the
Company or the Shareholders in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Shareholders.
10.7 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.8 ENTIRE AGREEMENT
This Agreement (including the Exhibits and Schedules and the ancillary documents
expressly referenced herein) constitutes the entire agreement among the Parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings among the Parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any Party
unless made in writing and signed by all Parties hereto.
10.9 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which taken together shall constitute one
and the same agreement.
10.10 REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation, (i) consents, waivers and modifications which may hereafter be
executed, (ii) documents received by any Party at the Closing, and (iii)
financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The Parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a Party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
10.11 ADVICE FROM INDEPENDENT COUNSEL
The Parties understand that this Agreement is a legally binding agreement that
affects such party's rights. Each Party represents to the other Parties that it
has received legal advice from counsel of its choice regarding the meaning and
legal significance of this Agreement and that it is satisfied with its legal
counsel and the advice received from it.
10.12 CURRENCY
Unless otherwise specified, all references to money amounts are to Canadian
currency.
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55
10.13 NO AGENCY; NO JOINT VENTURE
Neither Parent nor the Shareholders is the agent or representative of the other,
and nothing in this Agreement shall be construed to make Parent or the
Shareholders liable to any third party for services performed by such third
party or for debts or claims accruing to such third Party against Parent or the
Shareholders. Nothing contained herein nor the acts of the Parties shall be
construed to create a partnership, agency or joint venture between (i) Parent
and (ii) the Shareholders.
10.14 GOOD FAITH
The Parties shall implement the terms and provisions of this Agreement in good
faith in accordance with applicable law.
10.15 AMENDMENT
Subject to compliance with applicable law, this Agreement may be amended by the
Parties at any time before the Closing Date. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the Parties
hereto.
10.16 EXTENSION; WAIVER
At any time prior to the Closing Date, the Shareholders, on the one hand, and
Parent and FutureLink Alberta on the other hand, by action taken or authorized
by their respective Board of Directors, may, to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
the other Parties, (b) waive any inaccuracies in the representations and
warranties of the other Parties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions of the other Parties contained herein. Any agreement on the part of a
Party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such Parties, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.17 TIME OF ESSENCE
Time is of the essence in the performance of the Parties' respective obligations
hereunder.
10.18 KNOWLEDGE
Any reference to the knowledge of any Party shall mean to the best of the
knowledge, information and belief of such Party after reviewing all relevant
records and making due inquiries regarding the relevant matter of all relevant
employees of such Party and, in the case of the knowledge of the Shareholders,
the relevant senior managers of the Company.
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10.19 GUARANTEE
Parent hereby guarantees all obligations of FutureLink Alberta, Exchangeco and
any other affiliate of Parent under this Agreement.
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57
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first written above.
FUTURELINK CORP.
By: [signed: ▇. ▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
By: [signed: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: CEO
FUTURELINK DISTRIBUTION CORP.
By: [signed: ▇. ▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
By:
---------------------------------------------------
Name:
Title:
3045207 NOVA SCOTIA COMPANY
By: [signed: ▇. ▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
---------------------------------------------------
1423280 ONTARIO INC.
By: [signed: ▇. ▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
---------------------------------------------------
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58
1423281 ONTARIO INC.
By: [signed: ▇. ▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
---------------------------------------------------
CHARON SYSTEMS INC.
By: [signed: ▇▇▇▇▇ ▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
CHARON EMPLOYEE TRUST,
BY ITS TRUSTEES ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇
AND ▇▇▇▇▇ ▇▇
[signed: ▇▇▇▇▇ ▇▇▇▇]
---------------------------------------------------
▇▇▇▇▇ ▇▇▇▇
[signed: ▇▇▇▇ ▇▇▇▇▇▇▇▇]
---------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
[signed: ▇▇▇▇▇ ▇▇]
---------------------------------------------------
▇▇▇▇▇ ▇▇
DATASPEC TELECOM MULTIMEDIA INC.
By: [signed: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
By: [signed: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇]
---------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Secretary
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59
SHAREHOLDERS
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇ ▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇ ▇▇ ▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇ ▇▇ ▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇▇▇▇▇]
WITNESS ▇▇▇▇▇ ▇▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇ ▇▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇ ▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇ ▇▇▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇ ▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇ ▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇ ▇▇▇▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇ ▇▇▇▇▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: Ho ▇▇▇ ▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS Ho ▇▇▇ ▇▇▇▇
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
-------------------------------- --------------------------------------
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60
[signed: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇] [signed: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇]
-------------------------------- --------------------------------------
WITNESS ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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