GERBER SCIENTIFIC CANADA INC., GERBER SCIENTIFIC, INC. and VIRTEK VISION INTERNATIONAL INC.
Exhibit 2.1
GERBER
SCIENTIFIC CANADA INC.,
GERBER
SCIENTIFIC, INC.
and
VIRTEK
VISION INTERNATIONAL INC.
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September
2, 2008
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TABLE
OF CONTENTS
Page
ARTICLE
1 INTERPRETATION………………………………………………………..…………………………2
1.1 DEFINITIONS………………………………………………………………….…........……………………….…2
1.2 SINGULAR,
PLURAL, ETC…………………………………………………….…….......…….……….………11
1.3 DEEMED
CURRENCY………………………………………………………….……….….......…….…….……11
1.4 HEADINGS,
ETC………………………………………………………………….……….……........…….…….11
1.5 DATE
FOR ANY ACTION……………………………………………………….…….……………......….…..11
1.6 ACCOUNTING
MATTERS……………………………………………………….….…………….……......….11
1.7 CERTAIN
EXPRESSIONS....................................................................................................................................11
1.8 GOVERNING
LAW……………………………………………………………….…..…………….…….......….12
1.9 KNOWLEDGE…………………………………………………………………………...………………….........12
1.10 INCORPORATION
OF SCHEDULE AND EXHIBIT………………………………......…………………..…12
ARTICLE
2 THE OFFER…………………………………………………………………...………………..….…12
2.1 THE
OFFER………………………………………………………………………….....….......……….…….…..12
2.2 CONDITIONS
TO MAKING OF THE OFFER………………………………………..…....……...…..……...14
2.3 DIRECTORS’
CIRCULAR………………………………………………………..……..….....….……..….…...16
2.4 OFFER
DOCUMENTS……………………………………………………………………...........…...……...….17
2.5 SUBSEQUENT
ACQUISITION TRANSACTION OR COMPULSORY ACQUISITION..…...…….......…17
2.6 WAIVER
OF STANDSTILL……………………………………………………………….....……….......……18
2.7 REGISTRAR
AND TRANSFER AGENT AND INFORMATION AGENT…………………..…….......…..18
2.8 SHAREHOLDER
RIGHTS PLAN…………………………………………...…………………..…...…........…18
2.9 OUTSTANDING
OPTIONS………………………………………………………...……………..…….......….19
ARTICLE
3 REPRESENTATIONS AND WARRANTIES OF THE
OFFEROR………………...……..…......….20
3.1 ORGANIZATION
AND QUALIFICATION…………………………………………….…………….............20
3.2 AUTHORITY
RELATIVE TO THIS AGREEMENT………………………………….…………..……...........20
3.3 NO
VIOLATIONS…………………………………………………………………….…………....…..…….......20
3.4 FUNDS
AVAILABLE……………………………………………………………….………..………..…….......21
3.5 COMMON
SHARE OWNERSHIP………………………………………………….……….……………........21
3.6 RESIDENCY………………………………………………………………………..…………...……………......21
ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY…..…………….........................22
4.1 ORGANIZATION
AND QUALIFICATION…………………………………..………………………….......22
4.2 AUTHORITY
RELATIVE TO THIS AGREEMENT………….……………..…………………………..........23
4.3 NO
VIOLATIONS…………………………………………………………..…………………..………….........23
4.4 CAPITALIZATION………………………………………………………..………………………………........24
4.5 NO
MATERIAL ADVERSE CHANGE…………………………………..……………………………….........24
4.6 BROKERAGE
FEES……………………………………………………..………………………..………….......25
4.7 CONDUCT
OF BUSINESS……………………………………………..………………………….………........25
4.8 LICENSES……………………………………………………………..…………………………….….…….......26
4.9 ASSETS………………………………………………………………..……………………………….…….......26
4.10 REPORTS……………………………………………………………..……………………………….……........26
4.11 MINUTE
BOOKS…………………………………………………….……………………………….……........27
4.12 BOOKS
AND RECORDS…………………………………………………………………………......……........27
4.13 OUTSTANDING
ACQUISITIONS OR DISPOSITIONS………………………………..……….……...........28
4.14 NO
UNDISCLOSED MATERIAL
LIABILITIES………………………………..…………………..…...........28
4.15 REAL
PROPERTY…………………………………………………………………………..……………...........28
4.16 NO
GUARANTEES OR INDEMNITIES…………………………………………………………….…............28
4.17 NO
SWAPS……………………………………………………………………………………………...….........29
4.18 NO
UNANIMOUS SHAREHOLDER AGREEMENT……………………………………………….…..........29
Page
4.19 MATERIAL
CONTRACTS………………………………………………………………………………..........29
4.20 INTELLECTUAL
PROPERTY……………………………………………………………………………..........294.21 COMPUTER
SYSTEMS…………………………………………………………………………………............30
4.22 LITIGATION………………………………………………………………………………………………...........31
4.23 OFFICER
OBLIGATIONS……………………………………………………………………………….........…31
4.24 REPORTING
ISSUER STATUS…………………………………………………………………………...........31
4.25 BUSINESS
IN COMPLIANCE WITH LAWS……………………………………………………………........31
4.26 EMPLOYMENT
MATTERS………………………………………………………………………………........31
4.27 TAX
MATTERS……………………………………………………………………………………………........33
4.28 ENVIRONMENTAL
MATTERS………………………………………………………………………….........35
4.29 INSURANCE………………………………………………………………………………………………..........35
4.30 RELATED
PARTY TRANSACTIONS…………………………………………………………………….......36
4.31 PRIVACY
LAWS…………………………………………………………………………………………...........36
4.32 TRANSFERRED
INFORMATION………………………………………………………………………..........36
4.33 CUSTOMERS
AND SUPPLIERS………………………………………………………………………….........36
4.34 PRODUCTS
AND SERVICES……………………………………………………………………………..........37
4.35 COMPETITION
ACT………………………………………………………………………………………........37
ARTICLE
5 CONDUCT OF BUSINESS…………………………………………………………………...……..37
5.1 CONDUCT
OF BUSINESS BY THE COMPANY………………………………………………………..........37
5.2 CONSENT
TO CERTAIN ACTIONS……………………………………………………………………..........41
ARTICLE
6 COVENANTS OF THE COMPANY……………………………………..……………………….....42
6.1 NON-SOLICITATION……………………………………………………………………………………...........42
6.2 RIGHT
TO MATCH………………………………………………………………………………………..........44
6.3 TERMINATION
FEE…………………………………………………………………………………….............45
6.4 INJUNCTIVE
RELIEF……………………………………………………………………………………............47
6.5 SHAREHOLDER
RIGHTS PLAN………………………………………………………………………............47
6.6 BOARD
OF DIRECTORS OF THE COMPANY…………………………………………………………........47
6.7 CONSENTS………………………………………………………………………………………………............47
6.8 MARKET
PURCHASES…………………………………………………………………………………...........47
6.9 COOPERATION…………………………………………………………………………………………............47
ARTICLE
7 COVENANTS OF OFFEROR AND PARENT……………………………………………………...48
7.1 DIRECTORS’
AND OFFICERS’ INSURANCE; INDEMNIFICATION……………………………….........48
7.2 PAYMENT
OF CERTAIN FEES………………………………………………………………………….........49
7.3 GUARANTEE………………………………………………………………………………………………........49
ARTICLE
8 MUTUAL COVENANTS…………………………………………………………………………….50
8.1 NOTICE
PROVISIONS…………………………………………………………………………………….........50
8.2 ADDITIONAL
AGREEMENTS AND FILINGS…………………………………………………………........50
8.3 ACCESS
TO INFORMATION…………………………………………………………………………….........51
8.4 PUBLICITY……………………………………………………………………………………………….............51
8.5 PRIVACY
MATTERS……………………………………………………………………………………...........51
ARTICLE
9 TERMINATION, AMENDMENT AND WAIVER……………………………………………….......52
9.1 TERMINATION……………………………………………………………………………………………........52
9.2 EFFECT
OF TERMINATION……………………………………………………………………………..........54
9.3 AMENDMENT…………………..…………………………………………………………………………........54
9.4 WAIVER…………………………………………………………………………………………………….........54
ARTICLE
10 GENERAL PROVISIONS………………………………………………………………………….55
10.1 NOTICES…………………………………………………………………………………………………...........55
10.2 MISCELLANEOUS………………………………………………………………………………………..........56
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Page
10.3 BINDING
EFFECT AND ASSIGNMENT………………………………………………………………….....56
10.4 EXPENSES…………………………………………………………………………………………………........57
10.5 SURVIVAL…………………………………………………………………………………………………........57
10.6 SEVERABILITY…………………………………………………………………………………………….......57
10.7 COUNTERPART
EXECUTION………………………………………………………………………….........57
iii
THIS AGREEMENT made as of the
2nd
day of September, 2008.
BETWEEN:
GERBER SCIENTIFIC CANADA INC.,
a company governed by the laws of Ontario
(the
“Offeror”)
– and
–
GERBER SCIENTIFIC, INC., a
company governed by the laws of Connecticut
(“Parent”)
– and
–
VIRTEK VISION INTERNATIONAL
INC., a company governed by the laws of the Province of
Ontario
(the
“Company”).
WHEREAS the Offeror desires to
acquire all of the Common Shares (as hereinafter defined) of the Company prior
to the Expiry Time (as hereinafter defined) not currently owned by it and is
prepared to make an offer to acquire such Common Shares;
AND WHEREAS the board of
directors of the Company (the “Board of Directors”) has
determined, after consultation with its financial and legal advisors, that the
consideration per Common Share to be received by the Shareholders (as
hereinafter defined) pursuant to the Offer (as hereinafter defined) is fair and
that the transactions contemplated in the Offer are in the best interests of the
Company and the Shareholders and that the Board of Directors has resolved to
support the Offer and to recommend acceptance of the Offer to holders of Common
Shares, all on the terms and subject to the conditions contained
herein;
AND WHEREAS the Board of
Directors has determined that it would be in the best interests of the Company
and the Shareholders for the Company to enter into this Agreement;
NOW THEREFORE THIS AGREEMENT
WITNESSES that, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each Party, the Parties
hereby covenant and agree as follows:
ARTICLE
1
INTERPRETATION
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1.1
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Definitions
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In this
Agreement, unless there is something in the subject matter or context
inconsistent therewith, the following terms have the meanings set forth
below.
“Affiliate” means, with respect
to any Person, any other Person who directly or indirectly controls, is
controlled by, or is under direct or indirect common control with, such Person,
and includes any Person in like relation to an affiliate; “control” as used with
respect to any Person, means the possession, directly or indirectly, of the
power, in fact, to appoint the directors, management committee or similar
managing body of such Person, through the ownership of voting
securities.
“Agreement”, “this Agreement”, “herein”, “hereto”, and “hereof” and similar
expressions refer to this Agreement, including the Schedules hereto, as the same
may be amended or supplemented from time to time.
“Alternative Transaction” means
any written proposal or offer made to the Company or the Shareholders (including
any take-over bid initiated by advertisement or circular) relating to:
(a) any merger, amalgamation, take-over bid, tender offer, arrangement,
share exchange, dissolution, liquidation, recapitalization or other business
combination involving any purchase by a single Person (other than the Offeror or
any of its Subsidiaries) or combination of Persons (other than the Offeror and
its Subsidiaries) of Common Shares that, if consummated, would result in any
Person (other than the Offeror or any of its Subsidiaries) beneficially owning
20% or more of the voting rights attached to the Common Shares, or any
liquidation or winding-up in respect of the Company; (b) any purchase or sale by
the Company or its Subsidiaries of any assets, where such assets represent 20%
or more of the fair market value of the consolidated assets of the Company (on a
consolidated basis) (or other arrangement having the same economic effect as a
purchase or sale of assets); (c) any sale or acquisition of 20% or more of the
Common Shares or rights or interests therein or thereto; or (d) any similar
business combination or transaction, of or involving the Company and/or any
Subsidiary of the Company, that, if consummated, would result in any Person
(other than the Offeror or any of its Subsidiaries) beneficially owning 20% or
more of the voting rights attached to the Common Shares.
“Annual Financial Statements”
means the annual audited consolidated financial statements of the Company for
the fiscal years ended on January 31, 2008, January 31, 2007 and January 31,
2006, true and complete copies of which have been filed on SEDAR.
“Bid Circular” has the meaning
set forth in Section 2.1(d).
“Board of Directors” has the
meaning set forth in the recitals to this Agreement.
“Books and Records” means the
Financial Records and all other books, records, files and papers of the Company
and its Subsidiaries, including drawings, engineering information, manuals and
data; sales and advertising materials, sales and purchase correspondence, trade
association files, research and development records; lists of present and former
customers and suppliers,
2
personnel,
employment and other records, and all records, data and information stored
electronically, digitally or on computer-related media.
“Business Day” means any day
except a Saturday, Sunday or statutory holiday in Xxxxxxx, Xxxxxxx.
“Cash-Out Amount” has the
meaning set forth in Section 2.8(d).
“Common Shares” means the
common shares of the Company, together with the associated rights issued under
the Shareholder Rights Plan (collectively, the “Common Shares”).
“Company Plans” means all
agreements, health, welfare, supplemental unemployment benefit, bonus, profit
sharing, deferred compensation, share purchase, share compensation, disability,
pension or retirement plans and other employee compensation, retention or
benefit plans, policies or arrangements that are maintained by or binding upon
the Company or its Subsidiaries.
“Company Public Disclosure
Record” means:
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(a)
|
the
Annual Financial Statements;
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(b)
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the
Interim Financial Statements;
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(c)
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the
documents filed by the Company on SEDAR since September 1, 2007;
and
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(d)
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any
material change reports of the Company filed on SEDAR subsequent to the
date hereof up to and including the Effective
Time;
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and any
amendments or replacements thereof filed between the date hereof and the
completion of the Offer.
“Compulsory Acquisition” means
an acquisition by Purchaser of Common Shares not tendered to the Offer utilizing
the provisions of Part XV of the Business Corporations Act
(Ontario).
“Computer Systems” means all
computer and telephone hardware, peripheral equipment, software and firmware,
processed data, technology infrastructure and other computer and telephone
systems and services that are used by or accessible to the Company or its
Subsidiaries to operate their business and to receive, store, process or
transmit data.
“Conditional Option Exercise”
has the meaning set forth in Section 2.8(d).
“Confidentiality Agreement”
means the confidentiality agreement dated as of December 4, 2007 between the
Company and Parent, as amended July 6, 2008 and August 8, 2008.
“Contaminant” means any
asbestos, asbestos containing materials or urea formaldehyde, hydrocarbons,
chlorinated solvents, polychlorinated biphenyls (“PCBs”), PCB-containing
equipment or materials, lead, contaminant pollutants, substances of a
deleterious, dangerous, hazardous, corrosive or toxic nature, dangerous goods,
special subjects, or hazardous waste, or any other substance that is regulated
under any applicable Environmental Law with respect to its presence, use,
collection, storage, transportation, treatment or disposal.
3
“Contemplated Transactions”
means the making of the Offer, the consummation of the transactions contemplated
herein and all actions and negotiations in contemplation thereof, including the
Offer, the take-up of Common Shares under the Offer, any Compulsory Acquisition,
any Subsequent Acquisition Transaction and any subsequent combination of the
Offeror and the Company.
“Contract” means any contract,
agreement, commitment, undertaking, licence, note, bond, mortgage, indenture,
loan or deed of trust, whether or not in writing, including tenant
leases.
“Directors’ Circular” has the
meaning set forth in Section 2.2(p).
“Disclosure Letter” means the
letter dated the date of this Agreement from the Company to the Offeror
delivered concurrently with this Agreement.
“DSU Plan” means the Company’s
Deferred Stock Plan for Non-Employee Directors with an effective date of June
14, 2005.
“DSU” means a Deferred Share
Unit issued under the DSU Plan.
“Effective Time” means the time
that the Offeror shall have taken up the number of Common Shares sufficient to
satisfy the Minimum Condition.
“Employees” means all
individuals employed by each of the Company and its Subsidiaries on a full-time,
part-time or temporary basis including all individuals on disability leave,
parental leave or other absence from work.
“Encumbrances” means any
mortgage, trust, lien, pledge, charge, security interest, restriction, claim,
easement, encroachment, leasehold estate, defect, encumbrance, right to use or
acquire, ownership interest, action, demand or other encumbrance of any nature
whatsoever.
“Environmental Laws” means all
applicable supranational, federal, provincial, municipal, state, local and
foreign statutes, laws, by-laws, ordinances, rules, certificates, orders,
injunctions, arbitral awards, grants, regulations and other authorizations of
any Governmental Authority imposing liability or standards of conduct for or
relating to the regulation of activities, materials, substances, wastes or
Contaminants in connection with or for or to the protection of human health,
occupational health and safety, the environment or natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation) and under common
law.
“Environmental Permit” means
any permit, approval, authorization, license, certificate, registration, or
consent issued by any Governmental Authority pursuant to any Environmental
Laws.
“Expiry Date” means the date on
which the Expiry Time occurs.
“Expiry Time” has the meaning
set forth in Section 2.1(b).
“Fee Escrow Agent” means an
independent escrow agent mutually acceptable to the Offeror and the Company
(which failing any agreement shall be CIBC Mellon Trust Company).
4
“Fee Escrow Agreement” means
the escrow agreement substantially in the form attached to this Agreement as
Exhibit A between the Offeror, Parent, the Company and the Fee Escrow Agent
pursuant to which the Offeror shall deposit the Mitek and RC Termination Fee
Payments pursuant to Section 6.2.
“Financial Records” means all
of the books of account and other financial data and information of the Company
and its Subsidiaries, and includes all records, data and information stored
electronically, digitally or on computer-related media.
“Financial Statements” means
the Annual Financial Statements, the Interim Financial Statements and the Q2
Interim Financial Statements.
“Fully-Diluted Basis” means,
with respect to the number of outstanding Common Shares at any time, such number
of Common Shares calculated assuming that all Options are exercised for Common
Shares.
“GAAP” means Canadian generally
accepted accounting principles, applied on a consistent basis.
“Governmental Authority” means
(a) any domestic, federal, state, provincial, territorial, municipal, local,
foreign or supranational regulatory authority or government department or
agency, commission, ministry, office, court, tribunal, Crown corporation, stock
exchange, central bank, or any other similar entity, (b) any subdivision or
authority thereof or (c) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the above.
“Improvements” means all
buildings, fixtures, sidings, parking lots, roadways, structures, erections,
fixed machinery, fixed equipment and appurtenances situate on, in, under, over
or forming part of, any Real Property.
“Intellectual Property” means
all rights to and interests of the Company and its Subsidiaries in:
|
(a)
|
all
business names, trade names, corporate names, telephone numbers, domain
names, domain name registrations, website names and worldwide web
addresses and other communications addresses;
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(b)
|
all
inventions, patents, patent rights, patent applications (including all
provisional applications, utility applications, reissues, divisions,
continuations, continuation-in-part and extensions of any patent or patent
application);
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(c)
|
all
industrial designs and applications for and registration of industrial
designs, design patents and industrial design registrations;
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(d)
|
all
trade-marks (whether used with wares or services and including the
goodwill attaching to such trade-marks) and registrations and applications
for registration of trade-marks and all trade dress, logos, slogans and
brand names;
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(e)
|
all
copyright in all works (including software programs and databases) and
database rights and registrations and applications for registrations of
copyright;
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5
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(f)
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all
rights and interests in and to processes, lab journals, notebooks, data,
trade secrets, designs, know-how, product formulae and information,
manufacturing, engineering and other drawings and manuals, technology,
blue prints, research and development reports, agency agreements,
technical information, technical assistance, engineering data, design and
engineering specifications, and similar materials recording or evidencing
expertise or information;
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(g)
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all
of the intellectual property affected by the registrations and
applications for registration listed in the Disclosure Letter and the
permissions and licences listed in the Disclosure Letter;
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(h)
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all
other intellectual property rights throughout the world used in carrying
on, or arising from the operation of, the business of the Company and its
Subsidiaries;
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(i)
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all
licences granted by the Company and its Subsidiaries of the intellectual
property listed in items (a) to (h) above;
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(j)
|
all
future income and proceeds from any of the intellectual property listed in
items (a) to (h) above and the licences listed in item (i) above;
and
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(k)
|
all
rights to damages and profits by reason of the infringement of any of the
intellectual property listed in items (a) to (h) above and the licences
listed in item (i) above.
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“Interim Financial Statements”
means the unaudited consolidated financial statements of the Company for the
three month period ended on April 30, 2008, true and complete copies of which
have been filed on SEDAR.
“Latest Mailing Time” has the
meaning set forth in Section 2.1(d).
“Laws” means all applicable
laws, statutes, by-laws, rules, regulations, orders, codes, policies, notices
and directions and judicial, arbitral, administrative, ministerial or
departmental judgments, awards, or other requirements of any Governmental
Authority, court or other authority having jurisdiction over the applicable
Party.
“Leased Premises” means the
Real Property that is leased, subleased, licensed to or otherwise occupied by,
the Company or any of its Subsidiaries, including all Improvements situate on,
in, under, over or forming part of such Real Property.
“Legal Proceeding” means any
litigation, action, application, suit, investigation, hearing, claim, deemed
complaint, grievance, civil, administrative, regulatory or criminal, arbitration
proceeding or other similar proceeding, before or by any court or other tribunal
or Governmental Authority and includes any appeal or review thereof and any
application for leave for appeal or review.
“Licence” means any licence,
permit, authorization, approval or other evidence of authority issued or granted
to, conferred upon, or otherwise created for, the Company or any of its
Subsidiaries by any Governmental Authority.
6
“Material Adverse Change” means
any change, effect, event or occurrence that is, or would reasonably be expected
to, individually or in the aggregate with any other change, effect, event or
occurrence, (a) be material and adverse to the business, affairs, properties,
operations, claims, rights privileges, results of operations, liabilities
(including contingent liabilities) or financial condition of the Company and its
Subsidiaries, taken as a whole, (b) prevent the Company from performing its
obligations under this Agreement in any material respect, or (c) result in an
impairment on the ability of the Offeror and its Subsidiaries to continue
operating the business of the Company and its Subsidiaries after the Effective
Time in substantially the same manner as it was operated immediately prior to
the date of this Agreement; provided, however, that any change, effect, event or
occurrence: (i) relating to general political, economic or financial conditions
in Canada, Germany or the United States (provided that the Company is not
disproportionately affected by such changes), (ii) relating to the state of
North American securities markets in general (provided that the state of the
markets does not affect the Company in a manner that is disproportionate to
others in the industry in which the Company operates, having regard to the
relative size of the Company as compared to others in its industry),
(iii) relating to any action or inaction taken by the Company or its
Subsidiaries at the written request of the Offeror in accordance with the terms
of this Agreement; (iv) relating to any change in applicable Laws (including tax
laws) or regulation or GAAP; (v) that is a change in the market price of the
Common Shares on Toronto Stock Exchange; (vi) arising as the result of any
natural disaster, outbreak, escalation of hostilities, declared or undeclared
acts of war or terrorism; (vii) that is the termination of any existing
business relationship with, or a decrease in the amount of business conducted
with, any single customer or distributor of the Company or its Subsidiaries; or
(viii) relating to conditions prevailing generally in the industries in which
the Company operates, so long as it does not have a disproportionate effect on
the Company as compared to companies in the industry of a similar size; shall be
deemed not to constitute a “Material Adverse Change” and
shall not be considered in determining whether a “Material Adverse Change” has
occurred.
“Material Contract” means any
contract to which the Company or any of the Subsidiaries is a party or by which
any of them or their properties or assets are bound that: (a) provide for
obligations of the Company and/or its Subsidiaries exceeding $100,000; (b) if
terminated, would reasonably be expected to have a Material Adverse Change; (c)
is a contract that contains any non-competition obligations or otherwise
restricts in any material way the business of the Company or any Subsidiary; (d)
is a contract pursuant to which the Company or any Subsidiary provides an
indemnification to any other person (other than the Company or any Subsidiary,
or a director or officer of the Company or any Subsidiary), other than contracts
with suppliers, distributors, sales representatives and customers entered into
in the ordinary course of business; (e) is for borrowed money; (f) contains
a guarantee of an obligation of a third party; or (g) is entered into with any
public entity (öffentlicher
Auftraggeber) within the meaning of Section 98 German Act against
Restraints of Competition (Gesetz gegen
Wettbewerbsbeschränkungen – GWB) or any similar Law without any public
procurement proceeding.
“Minimum Condition” means the
condition set forth in paragraph (a) of Schedule “A”.
“Mitek” means Mitek Inc., a
corporation incorporated under the laws of the State of Delaware.
7
“Mitek Agreement” means the
Asset Purchase Agreement dated as of August 4, 2008 made among the Company,
Mitek and Mitek Holdings Inc., as it may be amended, restated or supplemented
from time to time.
“Mitek and RC Termination Fee
Payments” has the meaning set forth in Section 6.2.
“Offer” has the meaning set
forth in Section 2.1(a).
“Offer Documents” has the
meaning set forth in Section 2.4(a).
“Officer Obligations” means any
obligations or liabilities of the Company or any of its Subsidiaries in
existence on the date hereof to pay any amount to its officers and/or directors
(other than for salary, benefits and directors’ fees in the ordinary course)
and, without limiting the generality of the foregoing, Officer Obligations shall
include the obligations of the Company or any of its Subsidiaries to officers
and/or directors for severance or termination payments on a change of control of
the Company pursuant to any employment agreements or otherwise in existence on
the date hereof.
“Options” means any options to
acquire Common Shares issued pursuant to the Company’s Stock Option Plan, or any
other plan, agreement or arrangement which provides for the issuance of options
to acquire Common Shares.
“Outside Date” means December
1, 2008, or such later date as may be agreed to in writing by the
Parties.
“Parent” means Gerber
Scientific, Inc.
“Parties” means the Offeror,
Parent and the Company, and “Party” means either of
them.
“Person” means any individual,
sole proprietorship, partnership, firm, entity, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, corporation,
limited liability company, unlimited liability company, governmental, regulatory
or court authority, and a natural person in such person’s capacity as executor,
administrator or other legal representative.
“Personal Information” means
information about an identifiable individual as defined in the respective
Privacy Law.
“Pre-Acquisition
Reorganization” has the meaning set forth in Section 5.9.
“Pre-Acquisition Reorganization
Expenses” has the meaning set forth in Section 5.9.
“Premises Lease” means a lease,
an agreement to lease, a sublease, a licence agreement and an occupancy or other
agreement under which the Company or any of its Subsidiaries has the right, or
the Company or any of its Subsidiaries has granted to another Person the right,
to use or occupy any Leased Premises.
“Privacy Law” means the Personal Information Protection and
Electronic Documents Act (Canada), the Freedom of Information and
Protection of Privacy Act (Ontario) and any
8
comparable
Law of any other province or territory of Canada, the German Federal Data Protection Act
(Bundesdatenschutzgesetz – BDSG) as well as any other comparable Law in
any jurisdiction, including, without limitation, Germany and Italy.
“Q2 Interim Financial
Statements” means the unaudited consolidated financial statements of the
Company for the three month period ended on July 31, 2008, true and complete
copies of which were posted in the IntraLinks Virtual data room on August 26,
2008, as supplemented by a memo from Xxxxx Monsberger dated September 2,
2008.
“Real Property” means: (a) the
Leased Premises; and (b) any ownership interest in any lands (together with all
easements, rights-of-way and interests appurtenant to them) and the Improvements
thereon.
“Release” means any release,
spill, leak, pumping, pouring, emission, emptying, discharge, injection, escape,
leaching, disposal, dumping, deposit, spraying, burial, abandonment,
incineration, seepage, placement or migrating to, into or through the
environment.
“Representatives” of a Person
means such Person’s officers, directors, employees, advisors, representatives
and agents.
“Response Period” has the
meaning set forth in Section 5.2(a)(ii).
“RC Subscription Agreement”
means the agreement dated August 4, 2008 providing for the subscription by Royal
Capital for 3,529,412 Common Shares, as it may be amended, restated or
supplemented from time to time.
“Securities Act” means the
Securities Act
(Ontario) and the rules and regulations made thereunder, as now in effect and as
they may be amended from time to time.
“Securities Authorities” means
the TSX and the appropriate securities commissions or similar regulatory
authorities in Canada and each of the provinces thereof.
“Securities Laws” has the
meaning set forth in Section 2.4(a).
“SEDAR” means the System for
Electronic Document Analysis and Retrieval operated by the Canadian Securities
Administrators.
“Separation Time” has the
meaning attributed to it in the Shareholder Rights Plan.
“Shareholder Rights Plan” means
the shareholder rights plan of the Company dated June 23, 2008 entered into
between the Company and Equity Transfer & Trust Company.
“Shareholders” means the
registered or beneficial holders of the issued and outstanding Common
Shares.
“Stock Option Plan” means,
collectively, the Company’s 1998 Incentive Stock Option Plan as amended February
23, 2005, as amended, supplemented or replaced from time to time, and any other
plan, agreement on arrangement which provides for the issuance of options to
acquire Common Shares.
9
“Subsequent Acquisition
Transaction” means any proposed arrangement, amalgamation, merger,
reorganization, consolidation, recapitalization or other transaction involving
the Company and/or its Subsidiaries and the Offeror or an Affiliate of the
Offeror which, if successfully completed, will result in the Offeror owning,
directly or indirectly, all of the Common Shares and/or all of the assets of the
Company.
“Subsidiary” means, with
respect to any Person, (i) any corporation more than 50% of whose shares of any
class or classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or not at
the time shares of any class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is owned by
such Person directly or indirectly through one or more Subsidiaries of such
Person and (ii) any partnership, association, joint venture or other entity in
which such Person directly or indirectly through one or more Subsidiaries of
such Person has more than a 50% equity interest.
“Superior Proposal” has the
meaning set forth in Section 5.1(a).
“Swaps” means any transaction
which is a rate swap transaction, basis swap, forward rate transaction,
commodity swap, hedge, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction, currency option, forward
sale, exchange traded futures contract or any other similar transaction
(including any option with respect to any of these transactions or any
combination of these transactions).
“Take-Up Date” means the date
that the Offeror first takes up Common Shares pursuant to the
Offer.
“Tax Act” means the Income Tax Act (Canada), as
amended.
“Tax Returns” means all
returns, reports, declarations, elections, notices, filings, forms, statements
and other documents (whether in tangible, electronic or other form) and
including any amendments, schedules, attachments, supplements, appendices and
exhibits thereto, made, prepared, filed or required to be made, prepared or
filed by Law in respect of Taxes.
“Taxes” means all federal,
state, local, provincial, branch or other taxes or other governmental levies,
including income, gross receipts, windfall, profits, value added, severance, ad
valorem, property, capital, net worth, production, sales, use, licence, excise,
franchise, employment, environmental, value added, transfer, withholding or
similar taxes, payroll taxes, employment taxes, pension plan premiums, severance
taxes, social insurance premiums, workers’ compensation premiums, employment
insurance, stamp taxes, occupation taxes, premium taxes, alternative or add-on
minimum taxes, goods and services tax, customs duties or other taxes or other
governmental levies of any kind whatsoever imposed or charged by any
Governmental Authority which any person or entity owes or is required to pay,
withhold or collect irrespective of whether such person or entity owes or has to
pay, withhold or collect such Tax on its own behalf or on account for a third
party including by way of a secondary liability (Haftung), together with any
interest, penalties, or additions with respect thereto and any interest in
respect of such additions or penalties.
10
“Termination Fee” has the
meaning set forth in Section 5.3(a)(i).
“Transferred Information” means
the personal information (namely, information about an identifiable individual
other than their business contact information, when used or disclosed for the
purpose of contacting such individual in that individual’s capacity as an
employee or an official of an organization and for no other purpose) to be
disclosed or conveyed to the Offeror or any of its Representatives or agents by
or on behalf of the Company as a result of or in conjunction with the
transactions contemplated herein, and includes all such personal information
disclosed to the Offeror prior to the execution of this Agreement.
“TSX” means the Toronto Stock
Exchange.
|
1.2
|
Singular,
Plural, etc.
|
In this
Agreement, words importing the singular number include the plural and vice versa
and words importing gender include the masculine, feminine and neuter
genders.
|
1.3
|
Deemed
Currency
|
Unless
otherwise expressly stated, all references to currency herein shall be deemed to
be references to Canadian currency.
|
1.4
|
Headings,
etc.
|
The
division of this Agreement into Articles, Sections and Schedules, the provision
of a table of contents hereto and the insertion of the recitals and headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement and, unless otherwise stated, all references in
this Agreement or in the Schedules hereto to Articles, Sections and Schedules
refer to Articles, Sections and Schedules of and to this Agreement or of the
Schedules in which such reference is made, as applicable.
|
1.5
|
Date
for any Action
|
In the
event that any date on which any action is required to be taken hereunder by any
of the Parties is not a Business Day, such action shall be required to be taken
on the next succeeding day which is a Business Day.
|
1.6
|
Accounting
Matters
|
Unless
otherwise stated, all accounting terms used in this Agreement shall have the
meanings attributable thereto under GAAP and all determinations of an accounting
nature required to be made shall be made in a manner consistent with
GAAP.
|
1.7
|
Certain
Expressions
|
The terms
“material” and “materially” shall, when used in this Agreement, be construed,
measured or assessed on the basis of whether the matter would materially affect
a party and its Subsidiaries, associates and other related entities, taken as a
whole. The terms “including” or “includes” shall, when used in this
Agreement, be construed to mean including or includes
11
without
limitation. References to “herein”, “hereby”, “hereunder”, “hereof”
and similar expressions are references to this Agreement and not to any
particular Section of or Schedule to this Agreement.
|
1.8
|
Governing
Law
|
This
Agreement shall be governed, including as to validity, interpretation and
effect, by the laws of the Province of Ontario and the federal laws of Canada
applicable therein, and shall be construed and treated in all respects as an
Ontario contract. Each of the Parties hereby irrevocably attorns to
the non-exclusive jurisdiction of the Courts of the Province of Ontario in
respect of all matters arising under and in relation to this Agreement and the
Offer.
|
1.9
|
Knowledge
|
In this
Agreement, the phrase “to the knowledge of the Company” or other similar phrases
means such knowledge as is actually known to, or which would have or should have
come to the attention of, the officers or employees of the Company and its
Subsidiaries who have overall responsibility for, or knowledge of, the matters
relevant to such statement.
|
1.10
|
Incorporation
of Schedule and Exhibit
|
The
Schedule and Exhibit attached hereto and described below shall, for all purposes
hereof, form an integral part of this Agreement.
Schedule
“A”: Conditions
of the Offer
Exhibit
“A” Fee
Escrow Agreement
ARTICLE
2
THE
OFFER
|
2.1
|
The
Offer
|
|
(a)
|
The
Offeror shall promptly (but in any event within 24 hours, following the
execution of this Agreement) publicly announce its intention to make an
offer and shall make, subject to the terms and conditions hereof, a
take-over bid for all the issued and outstanding Common Shares, including
Common Shares issued after the date of the Offer and prior to the Expiry
Time on the exercise, surrender or cancellation of Options, at a price per
Common Share of $1.05 in cash (the “Offer”). The
Offer shall not be subject to any conditions, save and except for the
conditions set forth in Schedule “A”.
|
|
(b)
|
The
Offer shall, subject to the terms and conditions hereof, be made to the
holders of Common Shares in Canada in accordance with applicable
Securities Laws and to holders of Common Shares in the United States in
accordance with applicable United States Securities Laws and shall be open
for acceptance until a time or times that is (i) not earlier than 5:00
p.m. (Toronto time) on the 36th day after the day that the Offer is mailed
to Shareholders, subject to the right of the Offeror to extend from time
to time the period during which Common Shares may
be
|
12
|
|
deposited
under the Offer and (ii) not later than the Outside Date (the time at
which the Offer initially expires being referred to as its “Expiry
Time”).
|
|
(c)
|
The
Offeror shall prepare with the Company’s co-operation and mail the Offer
and accompanying take-over bid circular (such circular, together with the
Offer, being referred to as the “Bid Circular”) in
accordance with applicable Laws to each Shareholder as soon as reasonably
practicable (with a target date of September 15, 2008) and, in any event,
not later than 11:59 p.m. (Toronto time) on September 22, 2008 (such time
on such date being referred to herein as the “Latest Mailing
Time”). However, if the mailing of the Bid Circular is
delayed by reason of (i) an injunction or order made by a court or
Governmental Authority of competent jurisdiction or (ii) the Company not
having provided to the Offeror information pertaining to the Company that
is necessary for the completion of the Bid Circular by the Offeror, or not
having provided the Offeror with such other assistance in the preparation
of the Bid Circular as may be reasonably requested by the Offeror in order
that the Bid Circular comply in all material respects with Securities
Laws, or not having provided the lists referred to in Section 2.4(b), then
the Latest Mailing Time shall be extended for a period ending on the fifth
Business Day following, (a) in the case of (i) above, the date on which
such injunction or order ceases to be in effect, provided that such
injunction or order is not being contested or appealed, and (b) in the
case of (ii) above, the date on which the Company supplies such
necessary documents, information, lists or other assistance. If
such injunction or order continues in effect or the Company does not
supply the necessary information by such time, then the Offeror may elect
not to proceed with the Offer. In addition, the Latest Mailing
Time shall be extended if an Alternative Transaction with a per Common
Share offering price greater than the per Common Share offering price of
the Offer shall have been (i) publicly announced by any Person other than
the Offeror unless, since such Alternative Transaction was announced, the
Board of Directors has publicly stated that such offer is not a Superior
Proposal and has publicly reaffirmed its recommendation in favour of the
Offer, or (ii) privately submitted to the Company or the Board of
Directors or any committee or member thereof unless the Board of Directors
has confirmed in writing to the Offeror that such Alternative Transaction
is not a Superior Proposal, in which case the Latest Mailing Time shall be
extended until the Board of Directors has publicly stated that such offer
is not a Superior Proposal and has publicly reaffirmed its recommendation
in favour of the Offer, in the case of (i) above or the Board of Directors
has confirmed in writing to the Offeror that such Alternative Transaction
is not a Superior Proposal, in the case of (ii)
above. Notwithstanding the preceding sentence, the Offeror
shall mail the Bid Circular no later than 5:00 p.m. on September 30, 2008,
provided that the Board of Directors has used all reasonable commercial
efforts to evaluate any Alternative Transaction. The Company
and its advisors shall be given an opportunity to review and comment on
the Bid Circular reasonably in advance of its printing, recognizing that
whether or not such comments are appropriate will be determined by the
Offeror, acting reasonably.
|
13
|
(d)
|
The
Company acknowledges and agrees that the Offeror may, in its sole
discretion, modify or waive any term or condition of the Offer; provided,
however, that the Offeror shall not, without the prior written consent of
the Company: (i) modify or waive the Minimum Condition; (ii) decrease the
consideration per Common Share; (iii) change the form of consideration
payable under the Offer (other than to add additional consideration); (iv)
decrease the number of Common Shares in respect of which the Offer is
made; (v) impose additional conditions to the Offer; or
(vi) otherwise vary the Offer (or any terms or conditions thereof) in
a manner that is adverse to the Shareholders.
|
|
(e)
|
The
Offeror agrees that, provided all of the conditions to the Offer set out
in Schedule “A” shall have been satisfied or waived, the Offeror shall
take up and pay for all the Common Shares tendered under the Offer as soon
as reasonably possible and in any event not later than three Business Days
following the time at which it becomes entitled to take up such Common
Shares under the Offer pursuant to applicable Laws.
|
|
2.2
|
Conditions
to Making of the Offer
|
The
obligation of the Offeror to make the Offer by mailing the Bid Circular to
Shareholders is conditional on the prior satisfaction of the following
conditions:
|
(a)
|
the
Board of Directors shall have not allowed the Separation Time to have
occurred and shall have agreed to waive the application of the Shareholder
Rights Plan to the Offer upon the request of the Offeror;
|
|
(b)
|
all
of the holders of DSUs shall have agreed in writing as
follows:
|
|
(i)
|
the
“Settlement Date” for the purposes of the DSU Plan shall be the Take-Up
Date;
|
|
(ii)
|
the
Fair Market Value (as defined in the DSU Plan) of a Deferred Share Unit on
the Settlement Date (as defined in the DSU Plan) shall be $1.05 per
Deferred Share Unit; and
|
|
(iii)
|
the
holder shall elect to receive a cash payment (rather than shares) on the
Settlement Date (as defined in the DSU Plan).
|
|
(c)
|
the
Company shall have terminated the RC Subscription Agreement;
|
|
(d)
|
the
Company shall have terminated the Mitek Agreement;
|
|
(e)
|
the
Company shall have either adjourned indefinitely or cancelled the special
meeting of its Shareholders scheduled for September 10, 2008;
|
|
(f)
|
this
Agreement shall not have been terminated pursuant to Section
7.1;
|
|
(g)
|
the
Company shall have complied in all material respects with all of its
covenants and agreements in this Agreement (without giving effect to,
applying or taking
|
14
|
|
into
consideration any materiality qualification already contained in such
covenant or obligation);
|
|
(h)
|
each
of the representations and warranties of the Company (without giving
effect to any materiality qualifiers therein) provided herein shall be
true and correct at the date the Offer is made, except for any breaches of
representations or warranties which, individually or in aggregate, would
not result in a Material Adverse Change;
|
|
(i)
|
no
circumstance, fact, change, event or occurrence caused by a Person other
than the Offeror shall have occurred that would render it impossible or
impracticable for one or more of the conditions set out in Schedule “A” to
be satisfied;
|
|
(j)
|
the
Offeror shall be satisfied, acting reasonably, that no Material Adverse
Change shall have occurred since the date hereof;
|
|
(k)
|
no
Person shall have commenced a bona fide action for injunctive relief
against the performance of this Agreement or the completion of the
Offer;
|
|
(l)
|
no
Person shall have proposed an Alternative Transaction which the Board of
Directors has determined to be a Superior Proposal;
|
|
(m)
|
assurances
satisfactory to the Offeror, acting reasonably, shall have been received
by the Offeror that all waivers, rulings or orders necessary for the
Offeror to make the Offer and to mail to the Shareholders the Bid Circular
have been or will be obtained from all applicable securities commissions
or other regulatory authorities, provided that the Offeror shall use its
commercially reasonable efforts to obtain any such necessary waivers,
rulings or orders;
|
|
(n)
|
the
Board of Directors shall have unanimously recommended that Shareholders
accept the Offer in accordance with Section 2.3(a) and shall not have
withdrawn such recommendation or changed, modified or qualified such
recommendation in a manner that has substantially the same effect or taken
any other action or made any other public statement in connection with the
Offer inconsistent with such recommendation;
|
|
(o)
|
the
Board of Directors shall have prepared and approved in final form, printed
for distribution to Shareholders and delivered to the depositary of the
Offer, at its offices in Toronto, Ontario on or before 9:00 a.m. (Toronto
time) on September 15, 2008 for mailing with the Bid Circular, a
sufficient quantity of commercial copies of a directors’ circular (the
“Directors’
Circular”) in both the English and French languages unanimously
recommending that Shareholders accept the Offer, provided that the Offeror
delivers a substantially completed draft of the Bid Circular to the Board
of Directors no later than 9:00 a.m. (Toronto time) on September 11,
2008;
|
|
(p)
|
the
Company shall have provided to the Offeror the lists referred to in
Section 2.4(b);
|
15
|
(q)
|
no
cease trade order, injunction or other prohibition at law shall exist
against the Offeror making the Offer or taking-up or paying for any Common
Shares deposited under the Offer or completing a Compulsory Acquisition or
Subsequent Acquisition Transaction;
|
|
(r)
|
no
Law shall have been proposed, enacted, promulgated or applied that would
cease trade, enjoin, prohibit or impose material limitations or conditions
on the Offeror making the Offer or taking-up or paying for any Common
Shares deposited under the Offer or completing a Compulsory Acquisition or
Subsequent Acquisition Transaction or which could have such an effect;
and
|
|
(s)
|
each
of the current directors of the Company shall have delivered a covenant to
resign effective on the Take-Up Date conditioned on execution of a mutual
release with the Company in a form satisfactory to the director and the
Offeror, each acting reasonably.
|
The
foregoing conditions are for the sole benefit of the Offeror and may be waived
by it in its sole discretion in whole or in part, and the foregoing conditions
shall be deemed to be satisfied or waived upon the earlier of the mailing of the
Bid Circular or the commencement of the Offer by advertisement.
|
2.3
|
Directors’
Circular
|
|
(a)
|
The
Company hereby consents to the Offer as set forth in Section 2.1 and
represents that its Board of Directors: (i) has approved this Agreement;
(ii) has, following consultation with its financial and legal advisors,
unanimously determined that the Offer is in the best interests of the
Company and the Shareholders; and (iii) has unanimously resolved to
recommend acceptance of the Offer to holders of Common Shares, provided
that the Offer is not amended except in accordance with the terms of this
Agreement. The Company shall prepare the Directors’ Circular in
accordance with Securities Laws and shall deliver sufficient copies of
such Director’s Circular to the Offeror so as to permit the Offeror to
mail a copy of the Director’s circular to each Shareholder at the same
time as the Bid Circular, Letter of Transmittal and Notice of Guaranteed
Delivery are mailed. The Directors’ Circular will set forth
(among other things) the recommendation of the Board of Directors as
described above. The Offeror and its advisors shall be given an
opportunity to review and comment on the Directors’ Circular prior to its
printing, recognizing that whether or not such comments are appropriate
will be determined by the Board of Directors, acting
reasonably.
|
|
(b)
|
The
Company represents that it has obtained an oral fairness opinion from
Genuity Capital Markets that the consideration to be offered to the
Shareholders under the Offer is fair, from a financial point of view, to
all Shareholders, and that Genuity Capital Markets will provide a written
opinion to such effect on or before the date of the Directors’
Circular. Such fairness opinion will be attached to the
Directors’ Circular.
|
16
|
(c)
|
The
Company represents that the Board of Directors has been advised and
believes that each of the directors and senior officers of the Company
intends to tender or cause to be tendered to the Offer all Common Shares
of which he or she is the beneficial owner and will either exercise or
surrender their Options. The Company represents that any
restrictions imposed by the Company that would prevent any director or
senior officer from tendering such Common Shares to the Offer have been
waived or removed.
|
|
2.4
|
Offer
Documents
|
|
(a)
|
Within
the time periods required by Law, the Offeror shall file or cause to be
filed with the appropriate Securities Authorities the Bid Circular and the
related “Letter of Transmittal” and “Notice of Guaranteed Delivery”
pursuant to which the Offer will be made (collectively, the “Offer
Documents”). The Offer Documents and all documents
relating to, or necessary to complete, a Compulsory Acquisition or
Subsequent Acquisition Transaction, when filed with such Securities
Authorities and when mailed to holders of Common Shares, shall contain (or
shall be amended in a timely manner to contain) all information that is
required to be included therein in accordance with all applicable Canadian
provincial securities laws (collectively, the “Securities Laws”) and
any other applicable Laws in all material respects.
|
|
(b)
|
The
Company agrees to provide such assistance as the Offeror or its agents may
reasonably request in connection with communicating the Offer and any
amendments and supplements thereto to the Shareholders and to such other
Persons as are entitled to receive the Offer in accordance with Securities
Laws, including delivering to the Offeror: (A) on or before September 11,
2008, lists of all registered holders of Common Shares in electronic form,
showing the name and address of each holder and the number of Common
Shares held by each such holder (together with participants lists), all as
shown on the records of the Company as of a date that is not more than
three Business Days prior to the date of delivery of such basic lists; and
(B) from time to time, at the request of the Offeror, acting reasonably,
supplemental lists setting out any changes from the basic lists referred
to in clause (A) above in the names or addresses of the holders of Common
Shares or the number of Common Shares held by each such holder (together
with participants lists).
|
|
2.5
|
Subsequent
Acquisition Transaction or Compulsory
Acquisition
|
If the
Offeror takes up and pays for Common Shares under the Offer, the Offeror shall,
subject to: (i) the terms and conditions hereof; and (ii) the receipt of any
required relief, on terms and conditions satisfactory to the Offeror, acting
reasonably, from applicable securities regulators or authorities in respect of
the Compulsory Acquisition or Subsequent Acquisition Transaction; as soon as
practicable, but in any event within 120 days after the completion of the Offer,
pursue and use its best commercial efforts to consummate a Subsequent
Acquisition Transaction to acquire the remaining Common Shares and/or assets of
the Company; provided, however, that if, as of the final expiration of the
Offer, the Offer has been accepted by Shareholders holding not less than 90% of
the outstanding Common Shares on a Fully-Diluted Basis as at the
Expiry
17
Time,
excluding Common Shares held prior to the commencement of the Offer by the
Offeror or any Affiliate or “associate” (as such term is defined in the
Securities Act), the Offeror shall use its best commercial efforts, subject to
the terms and conditions hereof, complete as soon as practicable the Compulsory
Acquisition. The Company agrees to cooperate fully with the Offeror,
including taking all steps and doing all such acts and things, and causing its
Subsidiaries to take all steps and to do all such acts and things, if
applicable, as may be reasonably requested by the Offeror, in the completion of
any Compulsory Acquisition or Subsequent Acquisition Transaction and related
post-closing reorganizations.
|
2.6
|
Waiver
of Standstill
|
Notwithstanding
the terms of the Confidentiality Agreement, the Company hereby waives the
standstill provisions contained in the Confidentiality Agreement and consents to
the actions of the Offeror in accordance with the terms of this Agreement
(including any legally required disclosure) and to the Offeror acquiring all of
the outstanding Common Shares pursuant to the Offer, and to any purchases made
by the Offeror during the course of the Offer in compliance with applicable Law
and pursuant to any Compulsory Acquisition or Subsequent Acquisition
Transaction. In all other respects, the provisions of the
Confidentiality Agreement shall continue to apply notwithstanding the execution
of this Agreement by the Parties or the announcement of the transactions
contemplated hereunder.
|
2.7
|
Registrar
and Transfer Agent and Information
Agent
|
Provided
this Agreement has not been terminated, the Company agrees to permit (i) the
registrar and transfer agent for the Company to act as depositary in connection
with the Offer (ii) the proxy solicitation/information agent of the Company to
act as information agent in connection with the Offer, and instruct those
parties to furnish to the Offeror (and such Persons as it may designate) at such
times as it may request such information and provide to the Offeror (and such
Persons as it may designate) such other assistance as it may request in
connection with the implementation and completion of the transactions
contemplated hereunder.
|
2.8
|
Shareholder
Rights Plan
|
The
Company and the Board of Directors shall take all further action
necessary:
|
(a)
|
in
order to ensure that the Separation Time (as defined in the Shareholder
Rights Plan) does not occur in connection with this Agreement or any
Contemplated Transactions, Compulsory Acquisition or Subsequent
Acquisition Transaction; and
|
|
(b)
|
otherwise
to give effect to the waiver, if required, of the application of the
Shareholder Rights Plan to the Contemplated Transactions and to ensure
that the Shareholder Rights Plan does not interfere with or impede the
success of the Contemplated Transactions; provided that the Company shall
not waive the application of the Shareholder Rights Plan to the
Contemplated Transactions unless so requested by the
Offeror.
|
18
|
2.9
|
Shareholder
Rights Plan
|
|
|
|
|
(a)
|
The
Offeror and the Company agree that, between the date hereof and the
Take-Up Date, subject to the receipt of any necessary approvals and to
Securities Laws, the Company shall amend the terms of any Options and the
Stock Option Plan to provide that all Options vest no later than
immediately prior to the Take-Up Date and that each holder of vested
Options shall be entitled to, at his or her option: (i) exercise such
Options, in accordance with their terms, and thereby acquire Common
Shares; or (ii) surrender or cancel such Options to the Company, in
exchange for a payment by the Company in the form of Common Shares having
a fair market value equal to the Cash-Out Amount, for the purposes of
tendering to the Offer all Common Shares issued in connection with such
exercise, surrender or cancellation, where “Cash-Out Amount” means an
amount equal to the amount by which $1.05 exceeds the aggregate exercise
price under such Option (net of applicable withholdings). In
addition, the Company shall amend the Stock Option Plan in any other
reasonable manner requested by the Offeror (including, if requested by the
Offeror, to provide that all holders of Options be required to either
receive a Cash-Out Amount or exchange their Options for options to
purchase shares of common stock of Parent prior to the Take-Up Date,
following which all outstanding Options would be terminated), subject to
the receipt of any required regulatory approvals.
|
The
Offeror and the Company agree that all Options tendered to the Company for
exercise, surrender or cancellation, conditional upon the Offeror taking up the
Common Shares under the Offer (a “Conditional Option Exercise”),
shall be deemed to have been exercised or surrendered immediately prior to the
take-up of the Common Shares by the Offeror. The Offeror shall accept
as validly tendered under the Offer all of the Common Shares to be issued
pursuant to the Conditional Option Exercise, provided that the holders of such
Options indicate that such Common Shares are tendered pursuant to the Offer and
provided that such holders agree to surrender any of their remaining Options to
the Company for cancellation effective on the Take-Up Date.
|
(b)
|
The
Company agrees that it will use commercially reasonable efforts to ensure
that all outstanding Options are either exercised, terminated,
surrendered, cancelled or expire prior to the Take-Up Date, provided that,
except as provided in Section 2.8(d), the Company shall not pay the
holders any amount in consideration therefor without the prior approval of
the Offeror, and the Company shall not grant any additional Options or
other rights to purchase or acquire Common Shares, or make any amendments
to outstanding Options without the prior written consent of the
Offeror.
|
The
Company agrees that it will use all reasonable commercial efforts to accelerate
the vesting of all Options, such that all outstanding Options shall be fully
vested and exercisable prior to the Take-Up Date and to satisfy all other
obligations of the Company under the Options so that, upon the acquisition by
the Offeror of the Common Shares pursuant to the Offer, all entitlements under
the Stock Option Plan shall terminate.
19
The
Company agrees to use reasonable commercial efforts to obtain as soon as
practicable, and in any event prior to the Effective Time, the agreement of all
holders of Options that any Options that are not converted, exercised or
surrendered prior to the Take-Up Date shall either be surrendered or terminated
or otherwise dealt with in a manner satisfactory to the Offeror prior to the
Take-Up Date. The Offeror agrees to co-operate with the Company to
facilitate the exercise or surrender of Options and the deposit, pursuant to the
Offer, of all Common Shares issued in connection therewith prior to the Expiry
Time.
|
(c)
|
The
Company shall promptly notify the Offeror in writing of any exercise or
surrender of Options pursuant to Section 2.8(d). Such notice
shall include full particulars of each such exercise or
surrender.
|
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE OFFEROR
As of the
date hereof, the Offeror hereby represents and warrants to the Company as set
forth below and acknowledges that the Company is relying upon these
representations and warranties in connection with the entering into of this
Agreement.
|
3.1
|
Organization
and Qualification
|
The
Offeror is a company organized under the laws of Ontario and has the requisite
power and authority to own the assets it currently owns and to carry on its
business as it is now being conducted.
|
3.2
|
Authority
Relative to this Agreement
|
The
Offeror has the requisite power and authority to enter into this Agreement and
to perform and carry out its obligations hereunder. The execution and
delivery of this Agreement by the Offeror and the completion by the Offeror of
the transactions contemplated hereby have been duly authorized by the board of
directors of the Offeror, and no other proceedings on the part of the Offeror
are necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Offeror and constitutes a legal, valid and binding obligation of the Offeror
enforceable against the Offeror in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other laws affecting the enforcement of
creditors’ rights generally and subject to the qualification that equitable
remedies may only be granted in the discretion of a court of competent
jurisdiction.
|
3.3
|
No
Violations
|
|
(a)
|
None
of the execution and delivery of this Agreement by the Offeror, the
completion of the transactions contemplated hereby nor the fulfilment and
compliance by the Offeror with any of the terms and provisions hereof
will:
|
|
(i)
|
violate,
conflict with, or result in a breach of any provision of, require any
consent, approval or notice under, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
or
|
20
|
|
result
in a right of termination or acceleration under, any of the terms,
conditions or provisions of:
|
|
(A)
|
the
articles of incorporation or any other constating documents of the
Offeror; or
|
|
(B)
|
any
material Contract to which the Offeror or any of its Subsidiaries is a
party, except as would not, individually or in the aggregate, materially
adversely affect the Offeror’s ability to perform its obligations
hereunder; or
|
|
(ii)
|
subject
to compliance with the statutes and policies referred to in
Section 3.3(b) below, violate any judgment, ruling, order, writ,
injunction, award, decree, statute, ordinance, rule or regulation
applicable to the Offeror or any of its Subsidiaries, except as would not,
individually or in the aggregate, materially adversely affect the
Offeror’s ability to perform its obligations hereunder.
|
|
(b)
|
Other
than in connection with or in compliance with the provisions of applicable
Securities Laws, the policies of the TSX, and as otherwise contemplated
herein: (i) there is no legal impediment to the Offeror’s consummation of
the transactions contemplated by this Agreement; and (ii) no
authorization, approval, license, permit, order, authorization of, or
registration, declaration or filing with, any third party or Governmental
Authority is required to be obtained or made by or with respect to the
Offeror in connection with the performance of its obligations
hereunder.
|
|
3.4
|
Funds
Available
|
The
Offeror has sufficient funds, or adequate arrangements (in compliance with
applicable Securities Laws) for financing are in place to ensure that it will
have sufficient funds, to pay the purchase price under the Offer in respect of
all of the outstanding Common Shares (other than Common Shares owned by the
Offeror and its Affiliates and joint actors) on a Fully-Diluted
Basis.
|
3.5
|
Common
Share Ownership
|
None of
the Offeror or its Affiliates beneficially owns any Common Shares or securities
convertible or exchangeable for Common Shares.
|
3.6
|
Residency
|
The
Offeror is not a “non-resident” within the meaning of the Tax Act.
21
ARTICLE 4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Offeror as set forth below and
acknowledges that the Offeror is relying upon these representations and
warranties in connection with the entering into of this Agreement.
|
4.1
|
Organization
and Qualification
|
|
(a)
|
Each
of the Company and its Subsidiaries is an entity duly incorporated,
continued, amalgamated or formed and organized and validly existing under
the laws of its jurisdiction of formation, continuance, incorporation or
organization, has the requisite power and authority to own or lease its
property and assets and to carry on its business as it is now being
conducted, and is duly registered to do business and is in good standing
in each jurisdiction in which the character of its properties (owned or
leased), or the nature of its activities make such registration necessary,
except when the absence of such registration or such lack of good standing
would not constitute a Material Adverse Change. The Company and
its Subsidiaries are registered, licensed or otherwise qualified to do
business under the laws of the jurisdictions specified in the Disclosure
Letter.
|
|
(b)
|
Except
as disclosed in the Disclosure Letter, the Company does not have any
Subsidiaries nor an equity interest in any Person. Except as
set out in the Disclosure Letter, the Company is the registered and
beneficial owner of 100% of the outstanding shares (or equity if no shares
exist) of each of its Subsidiaries with good and valid title to all such
shares, free and clear of all Encumbrances (other than any security
interest in favour of the Company’s bankers) and no Person holds any
securities convertible or exchangeable into securities of such
Subsidiaries or now has any agreement, warrant, option, right or privilege
(whether pre-emptive or contractual) being or capable of becoming an
agreement for the purchase, subscription or issuance of any unissued
shares, securities (including convertible securities) or warrants of any
of the Company’s Subsidiaries. There are no intercompany
agreements within the meaning of Section 291 et sqq. German Stock
Corporations Act (Aktiengesetz – AktG), silent partnership
agreements or similar agreements in respect of any shares or equity of the
Subsidiaries.
|
|
(c)
|
No
bankruptcy, insolvency, liquidation or similar proceedings (whether
mandatory or voluntary) are pending, and no filing for such proceedings
has been made or is required, with respect to the Company or any
Subsidiary. The Company and the Subsidiaries have not entered
into any moratorium agreement or similar agreement with their respective
creditors. The Company and the Subsidiaries have not stopped or
suspended payment of its debts, become unable to pay its debts or
otherwise become insolvent in any jurisdiction. No assets of
the Company or any Subsidiaries have been seized or confiscated by or on
behalf any third party nor are any foreclosure, forfeiture, execution or
enforcement proceedings pending or threatened with respect to the Company,
any Subsidiary or its assets. To the knowledge of the Company,
there are no facts or events
|
22
|
|
which
may reasonably be expected to result in any proceedings or other events as
referred to in this Section 3.7(c).
|
|
4.2
|
Authority
Relative to this Agreement
|
The
Company has the requisite power and authority to enter into this Agreement and
to perform and carry out its obligations hereunder. The execution and
delivery of this Agreement by the Company and the completion by the Company of
the transactions contemplated hereby have been duly authorized by the Board of
Directors, and no other proceedings on the part of the Company are necessary to
authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other laws affecting the enforcement of
creditors’ rights generally and subject to the qualification that equitable
remedies may only be granted in the discretion of a court of competent
jurisdiction.
|
4.3
|
No
Violations
|
|
(a)
|
Except
as disclosed in the Disclosure Letter, none of the execution and delivery
of this Agreement by the Company, the completion of the transactions
contemplated hereby nor the fulfilment and compliance by the Company with
any of the terms and provisions hereof will:
|
|
(i)
|
violate,
conflict with, or result in breach of any provision of, require any
consent, approval or notice under, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
or result in a right of termination or acceleration under any of the
terms, conditions or provisions of:
|
|
(A)
|
the
articles of incorporation of the Company or the constating documents of
any of its Subsidiaries; or
|
|
(B)
|
any
Contract to which the Company or any of its Subsidiaries is a party,
except as would not reasonably be expected to have a Material Adverse
Change; or
|
|
(C)
|
any
applicable Laws, except to the extent that the violation or breach of,
under, any applicable Laws, would not reasonably be expected to have a
Material Adverse Change;
|
|
(ii)
|
subject
to compliance with the statutes and policies referred to in
Section 3.9(b), violate any judgment, ruling, order, writ,
injunction, award, decree, statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, except, as would not
reasonably be expected to cause a Material Adverse Change; or
|
|
(iii)
|
give
rise to any rights of first refusal or trigger any change in control
provisions or any restriction or limitation under any such Contract, or
result in the imposition of any Encumbrance, upon any of the
Company’s
|
23
|
|
assets
or the assets of any the Subsidiaries, except as would not, reasonably be
expected to have a Material Adverse Change or as set forth in the
Disclosure Letter;
|
|
(b)
|
Other
than in connection with or in compliance with the Securities Laws, the
policies and by-laws of the TSX and except as otherwise contemplated
herein: (i) there is no legal impediment to the Company’s consummation of
the transactions contemplated by this Agreement; and (ii) no
authorization, approval, license, permit, order, authorization of, or
registration, declaration or filing with Governmental Authority is
required to be obtained or made by the Company in connection with the
performance of its obligations hereunder.
|
|
4.4
|
Capitalization
|
|
(a)
|
The
Company is authorized to issue an unlimited number of Common
Shares. As at the date hereof, there are 33,473,241 issued and
outstanding Common Shares and Options to acquire an aggregate of 1,652,003
Common Shares outstanding under the Stock Option Plan. All
outstanding Common Shares and the Common Shares to be issued on exercise
of the Options have been duly authorized. All outstanding
Common Shares are, and the Common Shares to be issued on exercise of the
Options will be when issued, validly issued and outstanding as fully paid
and non-assessable Common Shares, free of pre-emptive
rights. All securities of the Company (including the Common
Shares and the Options) have been issued in compliance, in all material
respects, with applicable Securities Laws. As of the date
hereof, upon exercise of the Options for Common Shares, there shall be no
more than 35,125,244 Common Shares outstanding on a Fully-Diluted
Basis.
|
|
(b)
|
All
outstanding shares of the Subsidiaries have been duly authorized and
validly issued, are fully paid and have not been repaid, and there is no
shareholder obligation to make any additional payment or contribution with
respect to any shares of any Subsidiary.
|
|
(c)
|
Except
for the Options outstanding as of the date hereof as set forth in the
Disclosure Letter, there are no options, rights, warrants or other
Contracts of any character whatsoever requiring or permitting the
issuance, sale or transfer by the Company or any Subsidiary of any
securities of the Company or any Subsidiary (including Common Shares) or
any securities convertible into, or exchangeable or exercisable for, or
otherwise evidencing a right to acquire, any securities of the Company or
any Subsidiary (including Common Shares). In addition, there
are no bonds, debentures or other evidence of indebtedness of the Company
outstanding having a right to vote with Shareholders on any
matter.
|
|
4.5
|
No
Material Adverse Change
|
Except as
disclosed in the Company Public Disclosure Record there has not been any
material change in the assets, liabilities or obligations (absolute, contingent
or otherwise) of the Company
24
(on a
consolidated basis) from the position set forth in the Annual Financial
Statements prior to the date hereof and since January 31, 2008, there has not
been any Material Adverse Change.
|
4.6
|
Brokerage
Fees
|
Neither
the Company or any of its Subsidiaries has retained nor will any of them retain
any financial advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this Agreement or any
transaction contemplated hereby, except as set forth in the Disclosure
Letter. The Company has delivered to the Offeror true and correct
copies of all agreements between the Company and its financial advisers which
could give rise to a payment of any fees to such financial
advisor. Other than the foregoing, the Company has not incurred any
obligation or liability, contingent or otherwise, for brokerage fees, finder’s
fees, agents’ commission or other forms of compensation with respect to the
transactions contemplated by this Agreement.
|
4.7
|
Conduct
of Business
|
Since
January 31, 2008, except as disclosed in the Disclosure Letter or in the Interim
Financial Statements, the Company and its Subsidiaries have carried their
business on, in all material respects, in the ordinary course, and neither the
Company nor any of its Subsidiaries has:
|
(a)
|
made
any change in its accounting principles and practices as previously
applied including the basis upon which its assets and liabilities are
recorded on its books and its earnings and profits and losses are
ascertained other than as required by GAAP or by any other general
accounting principles applying to the Subsidiaries;
|
|
(b)
|
declared,
paid or set aside for payment any dividend or distribution of any kind in
respect of any of its outstanding securities nor made any repayments of
capital to Shareholders or incurred any material indebtedness for borrowed
money or any other material liability or obligation or issued any debt
securities or assumed, guaranteed, endorsed or otherwise become
responsible for, the obligations of any other Person (other than in
respect of the Company or one of its Subsidiaries) or made any loans or
advances, except in the ordinary course of business consistent with past
practices;
|
|
(c)
|
transferred,
assigned, sold or otherwise disposed of any of its assets, except in the
ordinary course of business consistent with past practices;
|
|
(d)
|
effected
any lay-off with respect to a significant part of the workforce of the
Company or of any Subsidiary; any action qualifying as a change of
operation (Betriebsänderung)
within the meaning of Section 111 German Shop Constitution Act (Betriebsverfassungsgesetz –
BetrVG) or other restructuring or action materially affecting the
workforce which requires any consent by or consultation with any body of
employee representatives;
|
|
(e)
|
increased
the compensation paid or payable to its Employees or changed the benefits
to which such Employees and former employees are entitled under any
employee benefit plan or created any new employee benefit plan or
modified,
|
25
|
|
amended
or terminated any existing employee benefit plan for any such employees
other than increases or changes made in the ordinary course of business
consistent with past practices, provided that no increases or changes may
have been made to Employees whose salary plus bonus exceeded $100,000 in
2007 (or if not employed for the full year in 2007, any Employee whose
2008 salary plus target or expected bonus would exceed
$100,000);
|
|
(f)
|
purchased,
redeemed or otherwise acquired any Common Shares or agreed to do so;
or
|
|
(g)
|
entered
into or become bound by any Contract, or made or authorized any capital
expenditure, in either case under which the Company has any obligations as
of the date hereof or involving, or that may result in the payment of
money by the Company or any of its Subsidiaries, of an amount in excess of
$50,000.
|
|
4.8
|
Licenses
|
The
Disclosure Letter lists all the Licences and identifies those that by their
terms are not transferable. The Licences are the only licences,
permits, approvals or evidences of authority of any Governmental Authority
material to the operation of the business of the Company and its Subsidiaries
and are held by the Company and its Subsidiaries free and clear of any and all
Encumbrances. The Company and its Subsidiaries are conducting their
business in accordance with all terms and conditions of the Licences and
materially in compliance with applicable Laws. All the Licences are
valid and are in full force and effect, the Company and its Subsidiaries are not
in violation of any term or provision or requirement of any Licence, material to
the operation of the business of the Company and its Subsidiaries, taken as a
whole. No Person has commenced or, to the knowledge of the Company,
threatened to commence proceedings to revoke, amend or impose conditions in
respect of, any Licence.
|
4.9
|
Assets
|
The
Company and its Subsidiaries are the absolute legal and beneficial owners of,
and have good and marketable title to, all of their respective material assets
(except where such assets are leased, licensed or are otherwise held pursuant to
a lesser interest) free of all Encumbrances other than those disclosed in the
Disclosure Letter, and no other property rights are necessary for the conduct of
a material portion of the business of the Company or its Subsidiaries, and there
are no restrictions on the ability of the Company or its Subsidiaries to use,
transfer or otherwise exploit such property rights, except for normal course
approvals from Governmental Authorities, and, other than as set out in the
Disclosure Letter, the Company and its Subsidiaries have not been notified of a
claim that might or could adversely affect their respective rights to use,
transfer or otherwise exploit such property rights and none of the Company or
any of its Subsidiaries has any responsibility or obligation to pay any
commission, royalty, licence, fee or similar payment to any Person with respect
to the property rights thereof outside the ordinary course of
business.
|
4.10
|
Reports
|
|
(a)
|
The
Financial Statements were prepared in accordance with GAAP applied on a
basis consistent with prior periods (except (i) as otherwise indicated in
such
|
26
|
|
Financial
Statements and the notes thereto or, in the case of the Annual Financial
Statements, in the related report of the Company’s independent auditors or
(ii) in the case of the Interim Financial Statements, to the extent they
may not include footnotes, are subject to normal year end adjustments or
may be condensed or summary statements), and fairly present in accordance
with GAAP, the assets, liabilities and financial condition of the Company
and its Subsidiaries on a consolidated basis as at the dates indicated and
the revenue, earnings and results of operations of the Company and its
Subsidiaries on a consolidated basis for the specified period (subject, in
the case of the Interim Financial Statements, to normal year-end audit
adjustments) and reflect appropriate and adequate reserves in respect of
contingent liabilities, if any, of the Company on a consolidated
basis. The Company maintains a system of internal accounting
controls which provides reasonable assurance that transactions are
executed in accordance with management’s authorizations and facilitates
the preparation of the Financial Statements.
|
|
(b)
|
The
documents comprising Company Public Disclosure Record, as of their
respective dates, (i) did not contain any misrepresentation of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and (ii) complied in all
material respects with the requirements of applicable Securities Laws,
except where any such non-compliance would not result in a Material
Adverse Change. The Company has not filed any confidential
material change report with the Securities Authorities that at the date
hereof, remains confidential.
|
|
4.11
|
Minute
Books
|
The
corporate records and minute books of the Company and, where applicable, of each
of its Subsidiaries have been maintained in accordance with all applicable
statutory requirements and are complete and up-to-date in all material respects
except for minutes relating to this Agreement, the Offer or any other
Alternative Transactions.
|
4.12
|
Books
and Records
|
All
material financial transactions of the Company and its Subsidiaries have been
accurately recorded in the Financial Records in accordance with sound business
and financial practice and the Financial Records accurately reflect the basis
for the financial condition and the revenues, expenses and results of operations
of the Company and its Subsidiaries as of and to the date hereof in all material
respects. All Books and Records are in the full possession and
exclusive control of, and are owned exclusively by, the Company and are not
dependent upon any computerized or other system, program or device that is not
exclusively owned and controlled by the Company.
27
|
4.13
|
Outstanding
Acquisitions or Dispositions
|
Other
than as described in the Disclosure Letter, the Company does not have any rights
to purchase any assets, properties or undertakings of third parties nor any
obligation to sell assets, properties or undertakings, outside of the ordinary
course of business.
|
4.14
|
No
Undisclosed Material Liabilities
|
Except:
(a) as disclosed in the Disclosure Letter or disclosed or reflected in the
Interim Financial Statements; and (b) for liabilities and obligations: (i)
incurred in the ordinary and normal course of business since January 31, 2008;
or (ii) pursuant to the terms of this Agreement, none of the Company or any of
its Subsidiaries has incurred any liabilities of any nature, whether accrued,
contingent or otherwise (or which would be required by GAAP to be reflected on
the balance sheet of the Company) that have constituted or would be reasonably
likely to constitute a Material Adverse Change.
|
4.15
|
Real
Property
|
Neither
the Company nor any of its Subsidiaries has any interest in any Real Property
other than the Leased Premises. The Disclosure Letter lists all of
the Premises Leases and sets out, in respect of each Premises Lease other than
leases for less than $10,000 per year: the municipal address and applicable unit
or premises leased; the date of the Premises Lease and any amendments to it; the
parties to the Premises Lease; the area of the space subject to each Premises
Lease; the remaining term and any unexpired options to extend or renew; the
current basic rent; the current percentage rent; and the amount of any prepaid
rent, deposit and identification of any guarantee or indemnity or security given
in respect of the Premises Lease; any current or future rent-free or reduced
rent occupancy. The information set out in the Disclosure Letter with
respect to the Premises Leases is true and complete. Each Premises
Lease is valid and subsisting, in full force and effect, unamended by oral or
written agreement, and the Company or a Subsidiary is entitled to the full
benefit and advantage of each Premises Lease in accordance with its
terms. Each Premises Lease is in good standing and there has not been
any default under any Premises Lease by the Company or the Subsidiaries or, to
the knowledge of the Company, any other party thereto, nor is there any dispute
between the Company or any Subsidiary and any landlord or tenant under any
Premises Lease. A full copy of each Premises Lease has been made
available to the Offeror. There are no arrears of rent or other
defaults under any Premises Lease. None of the Premises Leases has
been assigned by the Company in favour of any Person. The current
uses of each property subject to a Premises Lease comply with applicable Laws in
all material respects.
|
4.16
|
No
Guarantees or Indemnities
|
None of
the Company or any of its Subsidiaries is a party to or bound by any agreement
of guarantee, indemnification or any other like commitment of the obligations,
liabilities (contingent or otherwise) or indebtedness of any other Person, other
than (a) as disclosed in the Disclosure Letter, (b) the indemnification of
directors and officers in accordance with the by-laws of the Company,
indemnification agreements with the Company and applicable Laws, and (c)
standard indemnities and warranties in agreements entered into by the Company in
the
28
ordinary
course of business, the performance of which by the Company would not reasonably
be expected to have a Material Adverse Change.
|
4.17
|
No
Swaps
|
Except as
disclosed in the Disclosure Letter, the Company currently has no outstanding
Swaps.
|
4.18
|
No
Unanimous Shareholder Agreement
|
The
Company is not a party to any unanimous shareholders agreement, pooling
agreement, voting trust or other similar type of arrangements in respect of
outstanding securities of the Company.
|
4.19
|
Material
Contracts
|
Except
for this Agreement and as set forth in the Disclosure Letter, there is no
Material Contract to which the Company, its Subsidiaries or any of its or their
respective properties or assets are bound. Except as set forth in the
Disclosure Letter, none of the Company, its Subsidiaries nor, to the knowledge
of the Company, any of the other parties thereto, is in default or breach of,
nor has the Company or its Subsidiaries received any notice of default or breach
of, or termination under, any Material Contract, and, to the knowledge of the
Company, there exists no state of facts that after notice or lapse of time or
both would constitute a default or breach of such Material
Contract. Except as set forth in the Disclosure Letter, no consent is
required under any Material Contract in connection with the Agreement or any of
the transactions contemplated hereby, nor can any Material Contract be
terminated in the event such transactions are consummated.
|
4.20
|
Intellectual
Property
|
The
Disclosure Letter lists all of the registrations and applications for
registration of the Intellectual Property and all common law trade-marks
included in the Intellectual Property. All of the registrations and
applications for registration of the Intellectual Property are valid and
subsisting, in good standing and are recorded in the name of the Company or its
Subsidiaries. Except as disclosed in the Disclosure Letter, no
application for registration of any Intellectual Property has been rejected,
withdrawn or opposed. Except as disclosed in the Disclosure Letter,
the Company or one of its Subsidiaries is the first and only owner of the
Intellectual Property and is entitled to the exclusive and uninterrupted use of
the Intellectual Property without payment of any royalty or other
fees. No Person other than the Company or its Subsidiaries (in
particular, but not by way of limitation, no Governmental Authority or
educational institution) has any right, title or interest in or license under
any of the Intellectual Property and all individual Persons have waived their
moral rights in any copyright works within the Intellectual
Property. The Company and the Subsidiaries have diligently protected
their legal rights to the exclusive use of the Intellectual
Property. The Company or its Subsidiaries have maintained all
registrations necessary or desirable to protect its rights in the Intellectual
Property. The Disclosure Letter lists all Legal Proceedings relating
to the Intellectual Property which are currently outstanding or
threatened. The Employees and all consultants and independent
contractors retained by the Company or its Subsidiaries have agreed to maintain
the confidentiality of confidential Intellectual Property and have provided
waivers of all moral rights
29
in
copyright works included in the Intellectual Property. All of the
Company’s permissions and licences to use the Intellectual Property of other
Persons (including software and computer programs) are disclosed in the
Disclosure Letter. Neither the Company or any of its Subsidiaries has
permitted or licensed any Person to use any of the Intellectual Property except
as disclosed in the Disclosure Letter. Each licence referred to in
the Disclosure Letter is in full force and effect and neither the Company or its
Subsidiaries nor, to the knowledge of the Company, any licensor or licensee is
in default of its obligations thereunder. No Person has challenged
the validity of any of the registrations or applications for registration of the
Intellectual Property or the Company’s rights to any of the Intellectual
Property. To the knowledge of the Company, neither the use of the
Intellectual Property nor the conduct of its business has infringed or currently
infringes upon the intellectual property rights of any other
Person. Neither the Company or any of its Subsidiaries have received
any notice of infringement and the Company has no knowledge of any facts that
could reasonably be expected to form the basis of Legal Proceedings which could
constitute a bona fide
claim for infringement as such. Except as set out in the Disclosure
Letter, to the knowledge of the Company, no other Person has infringed the
Company’s or its Subsidiaries’ rights to the Intellectual Property, nor does the
Company have knowledge of any facts that could form the basis for a claim of
infringement. No licensee of any Intellectual Property has called on
the Company or its Subsidiaries to take proceedings for infringement pursuant to
section 50 of the Trade-marks
Act (Canada) or any similar provision under applicable Law, nor does the
Company have knowledge of any facts that could form the basis for a licensee to
make such a call. Neither the Company or any of its Subsidiaries has
received any notice or communication from any Governmental Authority or any
other Person as to any prohibition or restriction on the use of the Intellectual
Property. No fee in respect of any Canadian patent has been paid on
the basis that the applicant or patentee qualified as a small entity under the
Patent Act (Canada)
unless: (i) the applicant or patentee did so qualify on the date each
application, or application resulting in a patent, comprised within the Canadian
patent was filed on such basis; or (ii) the difference between any fees paid on
the basis of small entity status and the full fees payable have been timely paid
pursuant to the provisions of Section 78.6 of the Patent Act
(Canada).
|
4.21
|
Computer
Systems
|
The
Computer Systems adequately meet the data processing and other computing needs
of the Company and its Subsidiaries. The Computer Systems function,
operate, process and compute in accordance with all applicable Laws, industry
standards and trade practices. The Company has measures in place to
ensure that the Computer Systems contain appropriate virus protection and
security measures to safeguard against the unauthorized use, copying,
disclosure, modification, theft or destruction of and access to, system programs
and data files comprised by the Computer Systems. The Company has and
maintains an accurate and confidential listing of all applicable accounts,
passwords, encryption algorithms and programs or other access keys required to
provide secure and proper access by the Company and its Employees to the system
programs and data files comprised by the Computer Systems. The data
processing and data storage facilities used by the Company and its Subsidiaries
in connection with the operation of their business are adequately and properly
protected. The Company and its Subsidiaries have and maintains
back-up systems and disaster recovery consistent with current industry
standards, to adequately and properly ensure the continuing availability of the
functionality provided by the Computer Systems in the event of any malfunction
of, or other form of disaster affecting, the Computer
30
Systems. The
Company is, or at the Effective Time will be, in possession of the object code
and user manuals for all application software which is used in its business,
unless otherwise available on the internet. Neither the Company nor
its Subsidiaries is a party to any source code escrow agreements.
|
4.22
|
Litigation
|
Except as
set out in the Disclosure Letter, there is no Legal Proceeding in progress or,
to the knowledge of the Company, threatened against or affecting the Company or
any of the Subsidiaries. There is no order, directive, judgment,
decree, injunction, decision, ruling, award or writ of any Governmental
Authority outstanding against or affecting the Company or any of the
Subsidiaries. Without limiting the generality of the foregoing, there
is no Legal Proceeding involving any product liability claim in progress or, to
the knowledge of the Company, threatened against or affecting the Company or any
of the Subsidiaries alleging any defect in, or failure to warn concerning any
risks or damages inherent in, the design or manufacture of or the materials used
in any of the products manufactured or distributed by or for the Company or any
of the Subsidiaries.
|
4.23
|
Officer
Obligations
|
No
Officer Obligations will become payable upon completion of the Offer, a
Compulsory Acquisition or a Subsequent Acquisition Transaction, except as set
forth in the Disclosure Letter.
|
4.24
|
Reporting
Issuer Status
|
The
Company is a reporting issuer under (where such term is used), and is in
compliance in all material respects with, the Securities Laws of each of the
Provinces of Canada. No delisting, suspension of trading in or cease
trading order with respect to the Common Shares and, to the knowledge of the
Company, no inquiry, review or investigation (formal or informal) of any
Securities Authority, is in effect or ongoing, except as disclosed in the
Disclosure Letter.
|
4.25
|
Business
in Compliance with Laws
|
|
(a)
|
The
operations of each of the Company and its Subsidiaries are conducted, in
all material respects, in compliance with all Laws of each jurisdiction in
which the Company or its Subsidiaries carries on its business and none of
the Company or any of its Subsidiaries has received any notice of any
violation of any such Laws, except for any such non-compliance or
violations that would not reasonably be expected to cause a Material
Adverse Change.
|
|
(b)
|
To
the knowledge of the Company, there is no pending or contemplated change
to any applicable Law that would reasonably be expected to cause a
Material Adverse Change.
|
|
4.26
|
Employment
Matters
|
|
(a)
|
The
Disclosure Letter contains a complete and accurate list of all Employees,
their respective positions, dates of hire with the Company or any
Subsidiaries or predecessors of the Company, current salaries, benefits
and other remunerations
|
31
|
|
and
dates of last salary increases and indicates which Employees are parties
to a written or oral agreement with the Company (including confidentiality
and non-competition agreements). Except as disclosed in the
Disclosure Letter, the Company is not a party to any agreements with past
or present employees, agents or independent contractors. All
written employment contracts with Employees are described in the
Disclosure Letter and full and complete copies of such employment
contracts have been provided to the Offeror. Except as set
forth in the Disclosure Letter, neither the Company nor any of its
Subsidiaries has any employment contracts or arrangements that are not
terminable on the giving of reasonable notice in accordance with Law, nor
do any of them have any management, employment, consulting, retention or
like agreements providing for cash payments or other compensation or
benefits upon the consummation of the transactions contemplated by this
Agreement.
|
|
(b)
|
Except
as disclosed in the Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party, either directly or indirectly, voluntarily, or to
the knowledge of the Company, by operation of law, to any collective
agreement, letters of understanding, letters of intent or other written
communication with any trade union or association that may qualify as a
trade union, which would cover any of the Employees.
|
|
(c)
|
All
obligations of the Company and its Subsidiaries under the Company Plans
have been satisfied in all material respects and there are no deficiencies
required to be funded thereunder, and there are no outstanding defaults or
violations thereunder by the Company or any of its Subsidiaries that would
result in or give rise to any liability to the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have any
knowledge of any such default or violation by any other party to any
Company Plan.
|
|
(d)
|
All
employer payments, contributions or premiums required to be remitted or
paid to or in respect of each Company Plan have been remitted and paid in
a timely fashion in accordance with the terms thereof, all applicable
actuarial reports and all applicable Laws, and no Taxes, penalties or fees
are owing or exigible under or in respect of any Company
Plan.
|
|
(e)
|
Except
as set forth in the Disclosure Letter, neither the execution of this
Agreement nor the consummation of any of the transactions contemplated in
this Agreement will:
|
|
(i)
|
result
in any payment (including bonus, golden parachute, retirement, severance,
unemployment compensation, or other benefit or enhanced benefit) becoming
payable under any Company Plan;
|
|
(ii)
|
increase
any benefits otherwise payable under any Company Plan; or
|
|
(iii)
|
result
in the acceleration of the time of payment or vesting of any benefits
otherwise payable under the Company Plans, or result in any
Company
|
32
|
|
Plan
becoming terminable other than at the sole and unfettered discretion of
the Company.
|
|
(f)
|
The
Company and each of its Subsidiaries has withheld from each payment made
to any of its present or former employees all amounts required by
applicable Laws to be withheld, and has remitted such withheld amounts
within the prescribed periods to the appropriate Governmental
Authority. The Company and each of its Subsidiaries has
remitted all Canada Pension Plan contributions, provincial pension plan
contributions, employment insurance premiums, employer health taxes and
other Taxes payable by it in respect of its Employees to the proper
Governmental Authority within the time required under applicable
Laws.
|
|
4.27
|
Tax
Matters
|
|
(a)
|
Except
as set out in the Disclosure Letter, each of the Company and its
Subsidiaries has duly and timely filed all Tax Returns required to be
filed prior to the date hereof with the appropriate Governmental
Authorities and all such Tax Returns were, at the time of filing, complete
and correct in all material respects. No such Tax Returns have
been amended.
|
|
(b)
|
Except
as set out in the Disclosure Letter, each of the Company and its
Subsidiaries has duly and timely paid all Taxes due or payable by it
whether or not assessed by the appropriate Governmental
Authority. Each of the Company and its Subsidiaries has duly
and timely paid all instalments on account of Taxes for the current year
that are due or payable by it whether or not assessed. The
Financial Statements contain an adequate provision in accordance with GAAP
for all amounts of Taxes payable in respect of each period covered by such
Financial Statements and all prior periods to the extent such Taxes have
not been paid, whether or not due and whether or not shown as being due on
any Tax Returns. On a consolidated basis, the Company has made
adequate provision in accordance with GAAP in its books and records for
amounts at least equal to the amount of all Taxes due or payable by the
Company or any of its Subsidiaries that will not be due or payable by the
Effective Time in respect of any period subsequent to the period covered
by such Financial Statements and that relate to the periods ending on or
prior to the Effective Time.
|
|
(c)
|
Except
as disclosed in the Disclosure Letter, neither the Company nor any of its
Subsidiaries has 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 or any of its
Subsidiaries is or may be liable;
|
|
(ii)
|
to
file any elections, designations or similar filings relating to Taxes for
which the Company or any of its Subsidiaries is or may be
liable;
|
|
(iii)
|
the
Company or any of its Subsidiaries is required to pay or remit any Taxes
or amounts on account of Taxes; or
|
33
|
(iv)
|
any
Governmental Authority may assess or collect Taxes for which the Company
or any of its Subsidiaries is or may be liable.
|
|
(d)
|
There
are no proceedings, investigations, assessments, reassessments, actions,
suits, audits or claims now pending or threatened against the Company or
any of its Subsidiaries in respect of any Taxes. There are no
matters under discussion, audit or appeal with any Governmental Authority
relating to Taxes and neither the Company nor any of its Subsidiaries has
received any notification that any issues involving Taxes have been raised
by any Governmental Authority. No Tax liens exist for Taxes of
the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is a party to any agreement or arrangement with
any Person (other than with the Company or any of its Subsidiaries) or any
Tax authority pursuant to which the Company or any of its Subsidiaries has
or could have any liabilities in respect of Taxes. Neither the
Company nor any Subsidiary of the Company has received a refund of any
Taxes to which it was not entitled.
|
|
(e)
|
The
Company and each of its Subsidiaries have 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 and any non-resident Person, the amount of
all Taxes and other deductions required by any Laws to be withheld from
any such amount and has duly and timely remitted the same to the
appropriate Governmental Authority.
|
|
(f)
|
No
debt or other obligation to pay an amount by the Company or any Subsidiary
has been settled or extinguished without payment by the debtor of an
amount at least equal to the outstanding principal amount of the debt or
obligation.
|
|
(g)
|
There
is no deductible outlay or expense owing by the Company or any Subsidiary
to a Person with whom it was not dealing at arm’s length at the time the
outlay or expense was incurred which is unpaid and which will be included
in the Company’s or any of its Subsidiaries’ income for any taxation year
ending on or after the date hereof.
|
|
(h)
|
No
claim has ever been made by or is expected from any Governmental Authority
in a jurisdiction in which the Company or its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation in that
jurisdiction. The Company and its Subsidiaries are not required
to file any Tax Returns in any jurisdiction outside Canada, the United
States, Italy and Germany.
|
|
(i)
|
The
Disclosure Letter sets forth and accurately describes the amount of loss
carryforwards, investment tax credits and undeducted research and
development expenditures of the Company and each of its Subsidiaries
available for deduction or utilization in periods ending after the date
hereof.
|
34
|
4.28
|
Environmental
Matters
|
Except as
set forth in the Disclosure Letter:
|
(a)
|
all
operations of the Company and its Subsidiaries have been and are in
compliance with all Environmental Laws. To the knowledge of the
Company, no written demands, notices, requests or information exist with
regard to any required current or future modernization measures required
under any Environmental Law;
|
|
(b)
|
the
Company and its Subsidiaries do not require any Environmental Permits for
the conduct of its business;
|
|
(c)
|
neither
the Company nor any Subsidiary is subject to:
|
|
(i)
|
any
written demand, written notice, request for information or, to the
knowledge of the Company, pending or threatened claims or complaints with
respect to the breach of or liability under any Environmental Laws
applicable to the Company or any Subsidiary, including any Environmental
Laws respecting the use, storage, treatment, transportation, disposition
(including disposal or arranging for disposal) discharge, remediation or
corrective action of Contaminants; or
|
|
(ii)
|
written
demand or written notice with respect to liability, by contract (including
real property leases) or operation of applicable Laws, under Environmental
Laws applicable to the Company or any Subsidiary or any of their
respective predecessor entities, divisions or any currently or formerly
owned, leased or operated properties or assets of the foregoing, including
liability with respect to the presence, release, migration, discharge
remediation or corrective action of Contaminants in, on, under or from any
currently or formerly owned, leased or operated properties or assets of
the foregoing;
|
|
(d)
|
there
are no environmental audits, evaluations and assessments relating to any
real property currently or formerly owned, leased or operated by the
Company or its Subsidiaries that are or with reasonable effort could be
within the possession or control of the Company or the Subsidiaries;
and
|
|
(e)
|
neither
the Company nor any of its Subsidiaries have ever been convicted of any
offence for non-compliance with any Environmental Law or occupational
safety and health Laws, been fined or otherwise penalized for
non-compliance with an Environmental Law or occupational safety and health
Laws or settled any prosecution for non-compliance with Environmental Law
or occupational safety and health Laws short of conviction.
|
|
4.29
|
Insurance
|
The
Disclosure Letter sets forth and describes all insurance policies currently
maintained by the Company and its Subsidiaries, including a brief description of
the type of insurance, the name of
35
the
insurer, coverage limits, amount of deductible, expiration date and annual
premiums. Each of such insurance policies is valid and subsisting and
in good standing, there is no default thereunder and the Company is entitled to
all rights and benefits thereunder. There are no pending claims under
any of such insurance policies. Neither the Company nor any of its
Subsidiaries has failed to give any notice or present any claim under any of
such insurance policies in due and timely fashion. To the knowledge
of the Company, there are no circumstances which might entitle the Company or
any of its Subsidiaries to make a claim under any of such insurance policies or
which might be required under any of such insurance policies to be notified to
the insurers. No claim under any of such insurance policies has been
made by the Company or its Subsidiaries.
|
4.30
|
Related
Party Transactions
|
Other
than as set forth on the Disclosure Letter, there are no Contracts or other
transactions currently in place between the Company or any of its Subsidiaries,
on the one hand, and any officer or director of the Company or any of its
Subsidiaries, or any Person who owns 10% or more of the Common Shares on a
Fully-Diluted Basis on the other hand.
|
4.31
|
Privacy
Laws
|
Except as
set out in the Disclosure Letter, the Company has complied in all material
respects at all times with all Privacy Laws in connection with the Company’s
collection, use and disclosure of Personal Information by the Company in
conducting its business; and all Personal Information has been collected, used
and disclosed with the consent of each individual to whom such Personal
Information relates and has been used only for the purposes for which it was
initially collected.
|
4.32
|
Transferred
Information
|
The
Company: (i) has provided all necessary notices to and has obtained or is in the
process of obtaining all necessary consents from each individual to which the
Transferred Information relates for the collection, use and disclosure of such
information for the purposes for which such information is currently and was
historically collected, used and disclosed by the Company and for the completion
of the transactions contemplated herein; and (ii) has not received notice, or
has reason to believe, that any such consent has been withdrawn or
varied. The Transferred Information is necessary for, and solely
relates to, the completion of the transactions as contemplated herein, including
the determination to complete such transactions.
|
4.33
|
Customers
and Suppliers
|
The
Disclosure Letter lists the 10 largest customers and the 10 largest suppliers of
the Company and the Subsidiaries (on a consolidated basis) for each of the last
three successive 12-month periods ending immediately before the date of this
Agreement, and the aggregate amount which each customer was invoiced and each
supplier was paid during such period. The Company is not aware of,
nor has the Company or any Subsidiary received notice of, any intention on the
part of any such customer or supplier to cease doing business with the Company
or any Subsidiary or to modify or change in any material manner any existing
arrangement with the Company or any Subsidiary for the purchase or supply of any
products or services. The relationships of the
36
Company
and its Subsidiaries with each of their principal suppliers, shippers and
customers are satisfactory, and there are no material unresolved disputes with
any such supplier, shipper or customer.
|
4.34
|
Products
and Services
|
The
products produced by the Company and its Subsidiaries have been manufactured in
accordance with, and meet all requirements of, applicable Laws in all material
respects and meet the specifications in all Contracts with their customers
relating to the sale of such products. There are no claims pending
or, to the knowledge of the Company, threatened against the Company and any of
its Subsidiaries greater than $20,000 individually or $125,000 in the aggregate
pursuant to any product warranty or with respect to the production, distribution
or sale of defective or inferior products or with respect to any warnings or
instructions concerning such products. All services provided by the
Company and its Subsidiaries to their customers have been provided, in all
material respects, in accordance with applicable Laws and the terms of all
Contracts relating thereto. Neither the Company nor any of its
Subsidiaries is in breach of any material term of any Contract relating to the
supply of products or services or any instrument ancillary thereto.
|
4.35
|
Competition
Act
|
|
(a)
|
The
aggregate value of the assets in Canada of the Company and its affiliates
or the gross revenues from sales in or from Canada of the Company and its
affiliates, as determined in the manner prescribed in the Competition Act
(Canada) and the Notifiable Transactions Regulations made thereunder, does
not exceed $50 million.
|
|
(b)
|
The
aggregate value of the assets in Canada of the Company and its affiliates
or the gross revenues from sales in, from or into Canada of the Company
and its affiliates, as determined in the manner prescribed in the Competition Act
(Canada) and the Notifiable Transactions Regulations made
thereunder, does not exceed $55 million.
|
|
(c)
|
Since
January 31, 2008, neither the Company nor any of its affiliates was a
party to or otherwise affected by a transaction or event the consequences
of which, if taken into account, would affect the determination of whether
notification is required to be given under Part IX of the Competition Act
(Canada) with respect to the transactions contemplated in this
Agreement.
|
ARTICLE
5
CONDUCT
OF BUSINESS
|
5.1
|
Conduct
of Business by the Company
|
The
Company (which for the purposes of this Section 4.1 includes each of its
Subsidiaries) covenants and agrees that, during the period from the date of this
Agreement until this Agreement is terminated by its terms, unless the Offeror
shall otherwise agree in writing, and
37
except as
otherwise (i) expressly permitted or specifically contemplated by this
Agreement, (ii) required by Law or (iii) as otherwise set forth in the
Disclosure Letter:
|
(a)
|
the
business of the Company shall be conducted only in, and the Company shall
not take any action except in, the ordinary course of business consistent
with past practices, it being acknowledged and agreed that the Company
shall be entitled to take such actions as are deemed appropriate by the
Board of Directors to respond to the unsolicited take over bid by
StockerYale Inc. in a manner consistent with the response conducted by the
Company to such bid prior to the date hereof, after consulting with the
Offeror and without violating Section 5.1 of this
Agreement. The Company shall use commercially reasonable
efforts to maintain and preserve its business organization and goodwill
and assets, to keep available the services of its officers and Employees,
to maintain satisfactory relationships with suppliers, distributors,
customers, Employees and others having business relationships with them;
and shall not make any change in the business, assets, liabilities,
operations, capital or affairs of the Company other than changes in the
ordinary course of business consistent with past practices;
|
|
(b)
|
without
limiting the generality of Section 4.1(a), the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly do or
permit to occur any of the following:
|
|
(i)
|
amend
its or any of its Subsidiaries articles, charter or by-laws or other
comparable organizational documents;
|
|
(ii)
|
amend
the Stock Option Plan or the terms of any of its outstanding securities
(except to provide for the accelerated vesting of Options in accordance
with the provisions of the Stock Option Plan and the “cashless” exercise
of such options as permitted by this Agreement), including any outstanding
indebtedness and credit facilities;
|
|
(iii)
|
declare,
set aside or pay any dividend or other distribution or payment (whether in
cash, shares or property) in respect of the Common Shares owned by any
Person or the securities of any Subsidiary owned by a Person other than
the Company other than any dividends payable to the Company or any other
wholly-owned Subsidiary of the Company;
|
|
(iv)
|
issue,
sell or pledge or agree to issue, sell or pledge any Common Shares or
other securities of the Company, or securities convertible into or
exchangeable or exercisable for, or otherwise evidencing a right to
acquire Common Shares, other than Common Shares issuable upon exercise of
the currently outstanding Options;
|
|
(v)
|
redeem,
purchase or otherwise acquire any of its outstanding Common Shares or
other securities;
|
|
(vi)
|
split,
consolidate or reclassify any of its Common
Shares;
|
38
|
(vii)
|
adopt
a plan of liquidation or resolutions providing for the liquidation,
dissolution, merger, consolidation or reorganization of the Company or any
of its Subsidiaries;
|
|
(viii)
|
reorganize,
amalgamate or merge the Company or any of its Subsidiaries with any other
Person;
|
|
(ix)
|
acquire,
encumber or divest a shareholding or equity interest in any other entity
(including for the avoidance of doubt, each of its Subsidiaries) or any
business;
|
|
(x)
|
enter
into or modify any Contract to do any of the foregoing;
|
|
(xi)
|
sell,
lease, pledge, dispose of or encumber any assets, except in the ordinary
course of business consistent with past practices or except for assets
with an aggregate value of less than $100,000;
|
|
(xii)
|
acquire
(by merger, amalgamation, consolidation, acquisition of shares or assets
or otherwise) another Person or division thereof or make any investment
either by purchase of shares or securities, contribution of capital (other
than to wholly-owned Subsidiaries), property transfer or purchase of any
property or assets of any other Person or division thereof having a value
in excess of $10,000 individually or $25,000 in the
aggregate;
|
|
(xiii)
|
incur,
extend, renew or replace any indebtedness or any other liability or
obligation or issue any debt securities or assume, guarantee, endorse or
otherwise become responsible for, the obligations of any other Person
(other than in respect of the Company or one of its Subsidiaries) or make
any loans or advances, except for fluctuations in working capital in the
ordinary course of business consistent with past practices;
|
|
(xiv)
|
expend
or commit to expend any amounts with respect to capital expenditures in
excess of $10,000 individually or $25,000 in the aggregate except in the
ordinary course of business consistent with past practices and consistent
with budgets presented to the Offeror;
|
|
(xv)
|
pay,
discharge or satisfy any material claims, liabilities or obligations other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Financial
Statements or of liabilities incurred since April 30, 2008 in the ordinary
course of business consistent with past practices;
|
|
(xvi)
|
excluding
investments of available cash in short-term bankers’ acceptances and
similar investments, enter into any xxxxxx, Swaps or other financial
instruments or like transactions;
|
|
(xvii)
|
enter
into, terminate, waive, modify, amend or release any Person from any
obligation under any Material
Contract;
|
39
|
(xviii)
|
make
any changes in financial or tax accounting methods, principles, policies
or practices, except as required by GAAP or by Law;
|
|
(xix)
|
make
any material Tax election or settle or compromise any material Tax
liability;
|
|
(xx)
|
enter
into any Contracts or other transactions with any officer, director or
trustee of the Company or any of the Subsidiaries, or any person who owns
10% or more of the outstanding Common Shares;
|
|
(xxi)
|
except
in accordance with Sections 5.1 and 5.2 hereof, enter into any transaction
or perform any act which might interfere with or be materially
inconsistent with the successful completion of the acquisition of Common
Shares by the Offeror pursuant to the Offer or which would render, or
which reasonably may be expected to render, inaccurate any of the
Company’s representations and warranties set forth in this Agreement or
interfere with the completion of the Offer;
|
|
(xxii)
|
settle
any action, claim or proceeding brought (i) against it and/or its
Subsidiaries or (ii) by any present or former holder of its securities or
any other person in connection with the transactions contemplated by this
Agreement, provided that the Company may settle any such action, claim or
proceeding that has a value of less than $10,000, provided that the
Offeror shall be given notice of the commencement of any action by the
Company or any of its Subsidiaries; or
|
|
(xxiii)
|
authorize
or propose any of the foregoing, or enter into or modify any Contract to
do any of the foregoing;
|
|
(c)
|
the
Company shall use its commercially reasonable efforts to cause the current
insurance (or re-insurance) policies of the Company not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage similar to or greater than the coverage under
the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
|
|
(d)
|
the
Company shall (and cause each Subsidiary to) (i) duly and timely file all
Tax Returns required to be filed by it on or after the date hereof and all
such Tax Returns will be true, complete and correct in all material
respects; (ii) timely withhold, collect, remit and pay all Taxes which are
to be withheld, collected, remitted or paid by it to the extent due or
payable, except for any Taxes contested in good faith pursuant to
applicable Laws, provided that the applicable Laws do not require payment
of Taxes in dispute during the Tax contest; (iii) not make or rescind any
election relating to Taxes; (iv) not make a request for a Tax ruling or
enter into a closing agreement with any Tax authorities; (v) not settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes; (vi) not change any
of its methods of reporting income, deductions or accounting for income
tax purposes
|
40
|
|
from
those employed in the preparation of its income tax return for the tax
year for which it last filed its Tax Return under the Tax Act, except as
may required by applicable Laws; and (vii) promptly inform the Offeror in
writing about any proceedings, investigations assessments, reassessments,
actions, suits, audits or claims pending or threatened against the Company
or any of its Subsidiaries in respect of any Taxes.
|
|
(e)
|
the
Company shall duly and timely file all material forms, reports, schedules,
statements and other documents required to be filed pursuant to any
applicable corporate Laws or Securities Laws;
|
|
(f)
|
the
Company promptly notify the Offeror orally and in writing of (i) any
material change (within the meaning of the Securities Act
(Ontario)), on a consolidated basis, in the operation of its business or
in the operation of its properties and of any material governmental or
third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated); and (ii) the occurrence, or
failure to occur, of any event or state of facts which occurrence or
failure would or would be likely to (x) cause any of the representations
or warranties of the Company contained herein to be untrue or inaccurate;
or (y) result in the failure in any material respect of the Company to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied prior to the Effective Time;
|
|
(g)
|
the
Company shall not create any new Officer Obligations and the Company shall
not grant to any officer, director or Employee an increase in compensation
in any form, make any loan to any officer, director or Employee, or take
any action with respect to the grant of any severance or termination pay
arising from the Offer or a change of control of the Company or enter into
any employment agreement with, any officer, director or Employee, or enter
into any other agreement with respect to any increase of benefits payable
under its current severance or termination pay or any other policies,
other than to permit the accelerated vesting of Options in accordance with
the provisions of the Stock Option Plan; and
|
|
(h)
|
the
Company shall not adopt or amend or make any contribution to any bonus,
profit sharing, option, pension, retirement, deferred compensation,
insurance, incentive compensation, other compensation or other similar
plan, agreement, trust, fund or arrangements for the benefit of Employees
except: (i) with respect to its obligations under existing provisions of
any of the Company Plans; (ii) to accelerate vesting of Options in
accordance with the provisions of the Stock Option Plan; and (iii) to give
effect to Section 2.8(c) hereof.
|
|
5.2
|
Consent
to Certain Actions
|
If the
Company shall be required to obtain the prior written consent of the Offeror,
which consent shall not unreasonably be withheld, conditioned or delayed, to any
action restricted pursuant to the provisions of Section 4.1, the Company shall
provide a written request to the Offeror for the taking of such action and, if
the Offeror has not responded in writing to the Company within five Business
Days of the receipt by the Offeror of such request, the Offeror
41
shall be
deemed for the purposes of this Agreement to have consented to the taking of
such action.
ARTICLE
6
COVENANTS
OF THE COMPANY
|
6.1
|
Non-Solicitation
|
|
(a)
|
Except
as otherwise provided in this Article 5, the Company shall not, directly
or indirectly, through any of its or its Subsidiaries’ Representatives,
(i) solicit, assist, initiate, encourage or otherwise facilitate
(including by way of furnishing non-public information or entering into
any form of agreement, arrangement or understanding) any inquiries, offers
or proposals regarding an Alternative Transaction, (ii) enter into or
participate in any discussions or negotiations regarding an Alternative
Transaction (provided that the Company may advise the party making a
proposal for an Alternative Transaction that such Alternative Transaction
does not constitute a Superior Proposal if such is the case);
(iii) withdraw, modify or qualify (or propose to do so) in a manner
adverse to the Offeror, the approval or recommendation of the Board of
Directors of the Offer, (iv) approve, recommend or remain neutral
regarding, or propose publicly to approve, recommend or remain neutral
regarding, any Alternative Transaction (provided however that the Company
may remain neutral or express no opinion concerning a proposed Alternative
Transaction for a period of five (5) Business Days following the public
disclosure of such Alternative Transaction), or (v) accept,
recommend, approve or enter into any agreement, understanding or
arrangement in respect of an Alternative Transaction; provided that
nothing contained in this Agreement shall prevent the Board of Directors
from doing any of the things otherwise prohibited by the foregoing in
respect of any Person who has made an unsolicited bona fide, written
proposal regarding a transaction that:
|
|
(i)
|
did
not result from a breach of this Section 5.1;
|
|
(ii)
|
involves
the acquisition or offer by such Person of all of the outstanding Common
Shares or all or substantially all of the consolidated assets of the
Company;
|
|
(iii)
|
the
Board of Directors has determined in good faith is funded or in respect of
which adequate arrangements (in compliance with applicable Securities
Laws) have been made to ensure that the required funds will be available
to effect payment in full for all of the Common Shares (on a Fully-Diluted
Basis) or assets as the case may be;
|
|
(iv)
|
would
not be subject to any due diligence and/or access condition in excess of
10 days;
|
|
(v)
|
the
Board of Directors has determined in good faith (after consultation with
its financial advisors and its outside legal counsel) that the transaction
(x) is reasonably capable of completion without undue
delay
|
42
|
|
taking
into account all legal, financial, regulatory and other aspects of such
transaction and the Person making such transaction, and (y) would, if
consummated in accordance with its terms (but not assuming away any risk
of non completion) result in a transaction more favourable from a
financial point of view to the Shareholders than the Offer (including any
adjustment to the terms and conditions of the Offer proposed by the
Offeror pursuant to Section 5.2); and
|
|
(vi)
|
in
the case of Section 5.1(a)(v), the Company shall have complied with all of
the requirements of Section 5.2;
|
(any such
transaction meeting all of the requirements of this Section 5.1(a) being
referred to herein as a “Superior
Proposal”).
|
(b)
|
The
Company shall, and shall cause its and its Subsidiaries’ Representatives
to, immediately terminate any existing discussions or negotiations with
any parties (other than the Offeror) with respect to any proposal that
constitutes, or which could reasonably be expected to constitute, an
Alternative Transaction. The Company shall not amend, modify or
waive any of the standstill provisions of the confidentiality agreements
entered into by the Company with other parties relating to a potential
Alternative Transaction, it being understood and agreed that the
termination of a standstill agreement or a standstill provisions which
occurs as the result of the execution and delivery of this Agreement or
the announcement of the Offer in accordance with the terms of such
agreement is not a violation of this section. Immediately upon
execution of this Agreement, the Company shall request the return or
destruction of all information provided to any third parties who have
entered into a confidentiality agreement with the Company relating to any
potential Alternative Transaction and shall use commercially reasonable
efforts to ensure that such requests are honoured in accordance with the
terms of such confidentiality agreements.
|
|
(c)
|
The
Company shall, as soon as practicable and in any event within 24 hours
following receipt thereof notify the Offeror, at first orally and then in
writing, of any proposal, inquiry, offer (or any amendment thereto) or
request relating to or constituting a bona fide Alternative
Transaction, any request for discussions or negotiations, and/or any
request for non-public information relating to the Company or any
Subsidiary or for access to properties, books and records or a list of the
Shareholders of the Company or Subsidiaries of which the Company’s
Representatives, are or become aware, or any amendments to the
foregoing. Such notice shall include a description of the
background to such offer, the terms and conditions of, and the identity of
the Person making, any proposal, inquiry, offer (including any amendment
thereto) or request, and shall include copies of any such proposal,
inquiry, offer or request or any amendment to any of the
foregoing. The Company shall keep the Offeror promptly and
fully informed of the status, including any change to the material terms,
of any such proposal, inquiry, offer or request, or any amendment to the
foregoing, and will respond promptly to all inquiries by the Offeror with
respect thereto, including requests to provide the Offeror (or its outside
counsel) with copies of all documents and
written
|
43
|
|
communications
relating to any such Alternative Transaction, request or inquiry exchanged
between the Company or any of its Representatives, on the one hand, and
the person making an Alternative Transaction or any of its
Representatives, on the other hand.
|
|
(d)
|
Notwithstanding
Section 5.1(a) or any provision of this Agreement to the contrary, if
after the date of this Agreement, the Company receives a request for
non-public information from a Person in relation to a potential
Alternative Transaction and who proposes an unsolicited bona fide Alternative
Transaction (that was not solicited, encouraged or facilitated after the
date hereof in contravention of Section 5.1(a)), (i) the Board of
Directors determines in good faith consultation with its financial
advisors and its legal counsel, that such Alternative Transaction could
reasonably be likely to constitute a Superior Proposal within five
Business Days of such Person being provided access to such non-public
information, and (ii) the failure to provide such party with access to
such information regarding the Company would result in a breach of the
fiduciary duties of the Board of Directors, then, and only then, the
Company may provide such person with access to information regarding the
Company, subject to the execution of a confidentiality agreement on terms
no less favourable to the Company and no more favourable to the
counterparty than the Confidentiality Agreement, provided however that the
Company sends a copy of any such confidentiality agreement to the Offeror
promptly upon its execution and the Offeror is provided with a list of or
copies of the information provided to such person and is immediately
provided with access to similar information to which such person was
provided and the Company may also enter into or participate in any
discussions or negotiations with respect to such Alternative
Transaction.
|
|
(e)
|
The
Company shall ensure that its and its Subsidiaries’ Representatives are
aware of the provisions of this Section 5.1 and the Company shall be
responsible for any breach of this Section 5.1 by such
Representatives.
|
|
6.2
|
Right
to Match
|
|
(a)
|
Subject
to Section 5.2(b), the Company covenants that it will not accept, approve,
recommend or enter into any agreement, understanding or arrangement in
respect of a Superior Proposal (other than a confidentiality agreement
permitted by Section 5.1(e)) unless:
|
|
(i)
|
the
Company has complied with its obligations under the other provisions of
this Article 5 and has provided the Offeror with a copy of the Superior
Proposal;
|
|
(ii)
|
a
period (the “Response
Period”) of five Business Days shall have elapsed from the date on
which the Offeror received written notice from the Board of Directors that
the Board of Directors has determined, subject only to compliance with
this Section 5.2, to accept, approve, recommend or enter into a binding
agreement to proceed with the Superior
Proposal;
|
44
|
(iii)
|
after
the Response Period, the Board of Directors determines in good faith,
after consultation with its financial advisors and outside counsel, that
such Alternative Transaction continues to constitute a Superior Proposal;
and
|
|
(iv)
|
the
Company concurrently terminates this Agreement pursuant to
Section 7.1(i) and pays to the Offeror the Termination Fee pursuant
to Section 5.3.
|
|
(b)
|
During
the Response Period, the Offeror will have the right, but not the
obligation, to offer to amend in writing the terms of the
Offer. The Board of Directors will review any such written
amendment to determine whether the Alternative Transaction to which the
Offeror is responding would continue to be a Superior Proposal when
assessed against the Offer as it is proposed by the Offeror as
amended. If the Board of Directors does not so determine, the
Board of Directors will cause the Company to enter into an amendment to
this Agreement reflecting the offer by the Offeror to amend the terms of
the Offer and upon the execution by the Parties of such amendment will
reaffirm its recommendation of the Offer, as so amended. If the
Board of Directors does so determine, the Company may approve, recommend,
accept or enter into an agreement, understanding or arrangement to proceed
with the Superior Proposal.
|
|
(c)
|
Each
successive amendment to any Alternative Transaction that results in an
increase in, or modification of, the consideration (or value of such
consideration) to be received by the Shareholders shall constitute a new
Alternative Transaction for the purposes of this Section 5.2(a) and the
Offeror shall be afforded a new Response Period in respect of each such
Alternative Transaction which Response Period shall, however, be three (3)
days.
|
|
6.3
|
Termination
Fee
|
|
(a)
|
If
after the execution of this Agreement:
|
|
(i)
|
the
Offeror shall have terminated this Agreement pursuant to
Section 7.1(g), then the Company shall pay to the Offeror, within
five Business Days of termination of this Agreement, the amount of
$1,150,000 in
immediately available funds to an account designated by the Offeror (the
“Termination Fee”)
and shall direct the Fee Escrow Agent to reimburse the Offeror for the
Mitek and RC Termination Fee Payments;
|
|
(ii)
|
the
Company shall have terminated this Agreement pursuant to
Section 7.1(i), then the Company shall pay the Offeror the
Termination Fee and shall direct the Fee Escrow Agent to reimburse the
Offeror for the Mitek and RC Termination Fee Payments prior to or
concurrently with entering into the definitive agreement relating to the
Superior Proposal;
|
|
(iii)
|
the
Offeror shall have terminated this Agreement pursuant to clause (i) of
Section 7.1(f) on the basis that the Company materially breached any
covenant in Section 5.1 or 5.2 then the Company shall pay the Offeror
the
|
45
|
|
Termination
Fee and shall direct the Fee Escrow Agent to reimburse the Offeror for the
Mitek and RC Termination Fee Payments within five Business Days of such
termination;
|
|
(iv)
|
on
or after the date hereof and prior to the Expiry Time, an Alternative
Transaction is publicly announced or any person has publicly announced an
intention to make an Alternative Transaction (it being acknowledged and
agreed that the formal take over bid for the Company commenced by
StockerYale Inc. and the transactions contemplated by the Mitek Agreement
and the RC Subscription Agreement shall be deemed not to be Alternative
Transactions for the purposes of this clause unless the terms of any such
transactions are materially improved) and such Alternative Transaction
either:
|
|
(A)
|
has
been accepted by the Board of Directors; or
|
|
(B)
|
has
not expired, been withdrawn or been publicly abandoned, and
|
|
(1)
|
the
Offer is not completed as a result of either (a) the Minimum Condition not
having been met or (b) the sale not having been consummated by the Outside
Date, and
|
|
(2)
|
within
12 months of the termination of this Agreement the Person who proposed
such Alternative Transaction either (a) acquires, directly or indirectly,
(i) more than 50% of the issued and outstanding Common Shares, or (ii) the
businesses referred to in the Company Public Disclosure Record as the
“Imaging and Templating segment”.
|
in which
case the Termination Fee and the Mitek and RC Termination Fee Payments shall be
paid to the Offeror by the Company and the Fee Escrow Agent respectively
concurrently with such acquisition of such Common Shares or assets;
|
(v)
|
in
addition, in the event this Agreement is terminated pursuant to Section
7.1(b), (j) or (k), then the Company and the Offeror shall direct the Fee
Escrow Agent to reimburse each of the Offeror and the Company 50% of the
Mitek and RC Termination Fee Payments within five Business Days of such
termination;
|
|
(vi)
|
in
addition, in the event this Agreement is terminated pursuant to
Section 7.1(c), clause (ii) or (iii) of (f), (i), (l), (unless the
condition which is not met is condition (a) on Schedule A attached to this
Agreement), (m) or (n) then the Company and the Offeror shall direct the
Fee Escrow Agent to reimburse the Offeror all of the Mitek and RC
Termination Fee Payments within five Business Days of such
termination.
|
46
|
(b)
|
For
greater certainty, the Company shall not be obligated to make more than
one payment under Section 5.3 if one or more of the events specified
therein occurs.
|
|
6.4
|
Injunctive
Relief
|
Nothing
contained herein shall preclude a Party from seeking injunctive relief to
restrain any breach or threatened breach of the covenants or agreements set
forth in this Agreement or the Confidentiality Agreement or otherwise to obtain
specific performance of any of such acts, covenants or agreements, without the
necessity of posting a bond or security in connection
therewith. Without limiting the generality of the foregoing, the
Offeror shall be entitled to obtain specific performance in the event of a
breach by the Company of its obligations under Section 5.3.
|
6.5
|
Shareholder
Rights Plan
|
If
requested by the Offeror to do so, the Board of Directors shall waive the
application of the Shareholder Rights Plan to the Offer.
|
6.6
|
Board
of Directors of the Company
|
Immediately
following the acquisition pursuant to the Offer by the Offeror of such number of
Common Shares as is at least equal to the Minimum Condition, if so requested by
the Offeror, the Company shall use its commercially reasonable efforts to
facilitate the reconstitution of the Board of Directors through resignations of
the Company’s directors (upon receipt of a full discharge from the Company
regarding their duties as directors in a form satisfactory to such directors and
confirmation that the Company will maintain insurance coverage as contemplated
by Section 6.1) and the appointment of nominees of the Offeror in their
stead.
|
6.7
|
Consents
|
The
Company shall use its commercially reasonable efforts to obtain any consent from
or to provide notice to any Person where consent is required or that has a right
to receive notice in respect of this Agreement or the transaction contemplated
hereunder.
|
6.8
|
Market
Purchases
|
Notwithstanding
the provisions of the Confidentiality Agreement, the Company hereby consents to
the acquisition by the Offeror and/or one or more of its Affiliates, of Common
Shares other than pursuant to the terms of the Offer by way of open market
purchases or otherwise, provided that such Common Shares are acquired in
accordance with applicable Securities Laws.
|
6.9
|
Cooperation
|
Subject
to the fulfillment by the directors of their fiduciary duties, the Company shall
cooperate with any proxy solicitation agent retained by the Offeror, at the
Offeror’s sole expense (separate and apart from the arrangements contemplated by
Section 2.7), and shall use, and shall cause its Subsidiaries, as the case may
be, to take, or refrain from taking, such action as may be reasonably requested
by the Offeror, in furtherance of such cooperation.
47
Upon
request by, and at the expense of, the Offeror, the Company shall (i) effect
such reorganizations of its capital, structure, businesses, operations and
assets or such other transactions as the Offeror may request, acting reasonably
(each, a “Pre-Acquisition
Reorganization”) and (ii) cooperate with the Offeror and its advisors in
order to determine the nature of the Pre-Acquisition Reorganizations that might
be undertaken and the manner in which they might most effectively be undertaken;
provided that: (A) the Pre-Acquisition Reorganizations are not prejudicial to
the Company or its Subsidiaries or the Shareholders in any material respect
(unless the Offeror provides an indemnity in connection therewith reasonably
acceptable to the Company), including in the event that the Offer is not
consummated; (B) the Pre-Acquisition Reorganizations do not impair in any
material respect the ability of the Offeror to consummate the Offer or
materially delay the consummation of the Offer, including the take up and
payment for the Common Shares under the Offer, provided that any delay that
causes the Offer not to be consummated by the Outside Date shall be deemed to
have caused a material delay; (C) any Pre-Acquisition Reorganization shall be
contingent upon the Offeror announcing publicly that it is prepared to proceed
immediately with the take up and payment of at least 66⅔% of the Common Shares
on a Fully-Diluted Basis, and to the satisfaction or waiver by the Offeror of
the other conditions to the Offer set forth in Schedule “A”; (D) any
Pre-Acquisition Reorganization shall be effected immediately prior to any take
up by the Offeror of the Common Shares tendered to the Offer; (E) none of the
Company or its Subsidiaries shall be required to take any action that could
reasonably be expected to result in Taxes being imposed on, or any adverse Tax
or other consequences to, any Shareholder incrementally greater than the Taxes
or other consequences to such party in connection with the completion of the
Offer in the absence of action being taken pursuant to this Section 5.9 (unless
the Offeror provides an indemnity in connection therewith reasonably acceptable
to the Company); and (F) the Offeror reimburses the Company for all fees,
expenses and other obligations of the Company and its Subsidiaries on a
consolidated basis relating to any Pre-Acquisition Reorganization, including
among other costs, the fees of its legal counsel, legal counsel to management,
its auditors and financial advisors (collectively, the “Pre-Acquisition Reorganization
Expenses”). The Offeror shall provide written notice to the
Company of any proposed Pre-Acquisition Reorganization at least ten Business
Days prior to the Expiry Time. Subject to the foregoing, upon receipt
of such notice, the Offeror and the Company shall work co-operatively and use
commercially reasonable efforts to prepare prior to the Expiry Time all
documentation necessary and do all such other acts and things as are necessary
to give effect to such Pre-Acquisition Reorganization. Offeror agrees
to waive any breach of a representation, warranty or covenant by the Company
where such breach is a result of an action taken by the Company with knowledge
of Offeror in good faith pursuant to a request by Offeror in accordance with
this Section 5.9.
ARTICLE
7
COVENANTS
OF OFFEROR AND PARENT
|
7.1
|
Directors’
and Officers’ Insurance; Indemnification
|
|
(a)
|
On
or before the Effective Time, at the election of the Offeror, the Offeror
shall either secure, or cause the Company to secure, pre-paid,
non-cancellable directors’ and officers’ liability insurance for the
Company’s present and former directors and officers and those of the
Subsidiaries, covering claims made prior to and within six years after the
Effective Time, on a “trailing” or “run-off”
basis,
|
48
|
|
which
policy has scope and coverage substantially equivalent in scope and
coverage to that provided by the Company’s current directors’ and
officers’ insurance policy, provided that such insurance is available at a
one-time cost that is not in excess of 250% of the annual cost to the
Company of the Company’s current directors’ and officers’ insurance
policy.
|
|
(b)
|
From
and after the Effective Time, the Offeror agrees to maintain in place the
insurance policy referenced in Section 6.1(a) of this Agreement and agrees
not to take any action, or to cause the Company to take any action, to
terminate such directors’ and officers’ liability insurance or any
indemnity agreements in place for the current and former directors and
officers of the Company and its Subsidiaries, and the Offeror shall cause
the Company (or its successor) to indemnify the current and former
directors and officers of the Company and its Subsidiaries to the fullest
extent to which the Offeror and the Company are permitted to indemnify
such directors and officers under their respective charters, by laws,
contracts of indemnity and under applicable Law from all claims in
connection with the Company and transactions contemplated under this
Agreement following the completion of the Offer and will not amend the
provisions of the Company’s constating documents that provide for such
indemnification in any material respects.
|
|
(c)
|
The
provisions of this Section 6.1 are intended to be for the benefit of, and
will be enforceable by, each individual referred to therein, his or her
heirs and successors and his or her legal representatives and, for such
purpose, the Company hereby confirms that it is acting as agent on their
behalf. Furthermore, the provisions of this Section 6.1 shall
survive the termination of this Agreement.
|
|
7.2
|
Payment
of Certain Fees
|
Within
two Business Days of receipt of evidence of payment of the termination fee and
expense reimbursement payable to Mitek pursuant to the Mitek Agreement (not to
exceed $1,177,500) and the expense reimbursement payable to Royal Capital in
respect of the termination of the RC Subscription Agreement (not to exceed
$100,000) (collectively, the “Mitek and RC Termination Fee
Payments”), the Offeror will pay to the escrow agent under the Fee Escrow
Agreement an amount equal to the Mitek and RC Termination Fee Payments to be
held and dealt with in accordance with the terms of the Fee Escrow
Agreement.
|
7.3
|
Guarantee
|
The
Parent unconditionally and irrevocably guarantees, covenants and agrees to be
jointly and severally liable with the Offeror for the due and punctual
performance of each and every obligation of the Offeror arising under this
Agreement and in respect of the Contemplated Transactions.
49
ARTICLE
8
MUTUAL
COVENANTS
|
8.1
|
Notice
Provisions
|
|
(a)
|
Each
Party will give prompt notice to the other of the occurrence, or failure
to occur, at any time from the date hereof until the earlier to occur of
the termination of this Agreement and the Effective Time of any event or
state of facts of which it is aware which occurrence or failure would, or
would be reasonably likely to:
|
|
(i)
|
cause
any of the representations or warranties of either Party contained herein
to be untrue or inaccurate in any material respect; or
|
|
(ii)
|
result
in the failure to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by either Party hereunder prior
to the Expiry Time, the Take-Up Date or the Effective Time.
|
|
(b)
|
Each
Party will give prompt notice to the other if at any time before the
Expiry Time it becomes aware that the Bid Circular, the Directors’
Circular, an application for an order, any registration, consent, circular
or approval, or any other filing under applicable Laws contains an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements contained therein
not misleading in the light of the circumstances in which they are made,
or that otherwise requires an amendment or supplement to the Bid Circular,
the Directors’ Circular, such application, registration, consent,
circular, approval or filing, and the Offeror and the Company shall
co-operate in the preparation of any amendment or supplement to the Bid
Circular, the Directors’ Circular, application, registration, consent,
circular, approval or filing, as required.
|
|
8.2
|
Additional
Agreements and Filings
|
Subject
to the terms and conditions herein provided, each of the Parties agrees to use
its reasonable efforts to take, or cause to be taken, all reasonable actions and
to do, or cause to be done, all things reasonably necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and to cooperate with each other in connection
with the foregoing, including using commercially reasonable
efforts:
|
(a)
|
to
obtain all necessary consents, approvals and authorizations as are
required to be obtained under applicable Law;
|
|
(b)
|
to
defend all lawsuits or other legal proceedings challenging this Agreement
or the consummation of the transactions contemplated hereby;
|
|
(c)
|
to
cause to be lifted or rescinded any injunction or restraining order or
other order adversely affecting the ability of the Parties to consummate
the transactions contemplated
hereby;
|
50
|
(d)
|
to
effect all necessary registrations and other filings and submissions of
information requested by Governmental Authorities or required under any
applicable Securities Laws, or any other Law relating to the transactions
contemplated herein;
|
|
(e)
|
to
execute and deliver such documents as the other Party may reasonably
require; and
|
|
(f)
|
to
fulfil all conditions within its power and satisfy all provisions of this
Agreement, the Offer and any Compulsory Acquisition or Subsequent
Acquisition Transaction.
|
|
8.3
|
Access
to Information
|
Subject
to the existing Confidentiality Agreement, the Company shall afford the
Offeror’s (and its Affiliates’ and related entities’) Representatives (as such
term is defined in the Confidentiality Agreement) reasonable access, during
normal business hours and at such other time or times as the Offeror may
reasonably request from the date hereof and until the expiration of this
Agreement, to its and its Subsidiaries’ respective properties, books, contracts
and records as well as to its and its Subsidiaries’ respective management
personnel, and, during such period, the Company shall furnish promptly to the
Offeror in writing all information concerning its and its Subsidiaries’
respective businesses, properties and personnel as the Offeror or its
Representatives may reasonably request.
|
8.4
|
Publicity
|
The
Offeror and the Company agree to make a joint press release with respect to this
Agreement and the transactions contemplated herein as soon as practicable after
the date hereof. The Offeror and the Company further agree that, from
the date hereof until the earlier of the completion of the Offer and the
termination of this Agreement, there will be no public announcement or other
disclosure of the transactions contemplated by this Agreement unless they have
mutually agreed thereto or unless otherwise required by applicable Law, based on
the advice of counsel. If the Company is required by Law to make a
public announcement with respect to the transactions contemplated herein, it
will provide as much notice as reasonably possible, including the proposed text
of the announcement.
|
8.5
|
Privacy
Matters
|
|
(a)
|
The
Company covenants and agrees to advise the Offeror of all purposes for
which the Transferred Information was initially collected from or in
respect of the individual to which such Transferred Information relates
and all additional purposes where the Company has notified the individual
of such additional purpose, and where required by law, obtained the
consent of such individual to such use or disclosure.
|
|
(b)
|
The
Offeror covenants and agrees to:
|
|
(i)
|
prior
to the completion of the transactions contemplated herein, collect, use
and disclose the Transferred Information solely for the purpose
of
|
51
|
|
reviewing
and completing the transactions contemplated herein, including the
determination to complete such transactions;
|
|
(ii)
|
after
the completion of the transactions contemplated herein:
|
|
(A)
|
collect,
use and disclose the Transferred Information only for those purposes for
which the Transferred Information was initially collected from or in
respect of the individual to which such Transferred Information relates or
for the completion of the transactions contemplated herein,
unless:
|
|
(1)
|
the
Company or the Offeror has first notified such individual of such
additional purpose, and where required by law, obtained the consent of
such individual to such additional purpose, or
|
|
(2)
|
such
use or disclosure is permitted or authorized by law, without notice to, or
consent from, such individual;
|
|
(B)
|
where
required by Law, promptly notify the individuals to whom the Transferred
Information relates that the transactions contemplated herein have taken
place and that the Transferred Information has been disclosed to the
Offeror; and
|
|
(C)
|
return
or destroy the Transferred Information, at the option of the Company,
should the transactions contemplated herein not be
completed.
|
ARTICLE
9
TERMINATION,
AMENDMENT AND WAIVER
|
9.1
|
Termination
|
This
Agreement may be terminated:
|
(a)
|
by
mutual consent;
|
|
(b)
|
either
by the Offeror or by the Company if any Law makes the making or completion
of the Offer or the transactions contemplated by this Agreement illegal or
otherwise prohibited;
|
|
(c)
|
by
the Offeror prior to the mailing of the Bid Circular if any condition
contained in Section 2.2 is not satisfied or waived by the Offeror at or
before mailing the Bid Circular;
|
|
(d)
|
by
the Company if the Offeror shall not have performed in all material
respects any covenant to be performed by it under this Agreement or if any
representation or warranty of the Offeror shall have been or become untrue
in any material
|
52
|
|
respect
and such failure to perform or inaccuracy is (a) reasonably likely to
prevent, restrict or materially delay consummation of the Offer and (b)
not curable or, if curable, is not cured by the earlier of the date which
is five Business Days from the date of written notice of such breach and
the Expiry Time, provided however, any intentional breach shall be deemed
to be not curable;
|
|
(e)
|
by
the Offeror if (i) the Company shall not have performed in all material
respects, or the Company shall have intentionally or knowingly breached,
any covenant in Sections 5.1 or 5.2 hereof, (ii) the Company shall not
have performed in all material respects any other covenant to be performed
by it under this Agreement, or (iii) any representation or warranty of the
Company (without giving effect to any materiality qualifiers contained
therein) shall have been or become untrue to the extent that the failure
of such representation or warranty to be true and correct is (a)
reasonably likely to cause a Material Adverse Change (other than with
respect to the representations and warranties set forth in Section
3.16(c), which must be true in all respects) or materially impede the
transactions contemplated hereby and (b) not curable or, if curable, is
not cured by the earlier of the date which is five Business Days from the
date of written notice of such breach and the Expiry Time, provided
however, that any intentional breach shall be deemed not to be
curable;
|
|
(f)
|
by
the Offeror if the Board of Directors shall have: (i) withdrawn, modified,
changed or qualified its approval or recommendation of the Offer, (ii)
approved or recommended or publicly proposes to approve or recommend an
Alternative Transaction or entered into a binding written agreement in
respect of an Alternative Transaction (other than a confidentiality
agreement permitted by Section 5.1(e)), or (iii) fails to publicly
recommend or reaffirm its approval of the Offer within four Business Days
of any written request by the Offeror (or, in the event that the Offer
shall be scheduled to expire within such four-Business Day period, prior
to the scheduled expiry of the Offer);
|
|
(g)
|
by
the Company if (i) the Offeror has not mailed the Bid Circular by the
Latest Mailing Time; (ii) the Offer (or any amendment thereto other than
as permitted hereunder or any amendment thereof that has been mutually
agreed to by the Parties) does not conform in all material respects with
Schedule “A” or any amendment thereof that has been mutually agreed to by
the Parties and such non conformity is not cured within five Business
Days; or (iii) the Offer has been terminated, withdrawn or expires without
the Common Shares being taken up thereunder;
|
|
(h)
|
by
the Company in order to enter into a binding written agreement with
respect to a Superior Proposal (other than a confidentiality agreement
permitted by Section 5.1(e)), in compliance with Section 5.2;
|
|
(i)
|
by
the Offeror if the Minimum Condition is not satisfied or any other
condition of the Offer shall not be satisfied or waived at the Expiry Time
of the Offer (as such Expiry Time may be extended from time to time by the
Offeror in its sole discretion);
|
53
|
(j)
|
by
either Party if the Expiry Date does not occur on or prior to the Outside
Date, provided that the failure of the Expiry Date to so occur is not the
result of the breach of a representation, warranty or covenant by the
Party terminating this Agreement;
|
|
(k)
|
by
either the Offeror or the Company, if the Offer terminates or expires at
the Expiry Time without the Offeror taking up and paying for any of the
Common Shares as a result of the failure of any condition to the Offer to
be satisfied or waived, unless the failure of such condition shall be due
to the failure of the party seeking to terminate this Agreement to perform
the obligations required to be performed by it under this
Agreement;
|
|
(l)
|
by
the Offeror, if the Termination Fee becomes payable; or
|
|
(m)
|
by
the Company, if the Termination Fee becomes payable and payment thereof
has been made to the Offeror,
|
in each
case, prior to the Effective Time.
|
9.2
|
Effect
of Termination
|
|
(a)
|
In
the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall forthwith have no further force or effect and there
shall be no obligation on the part of the Offeror or the Company hereunder
except as set forth in Section 5.2, Section 5.3, Section 6.1 and this
Article 7, which provisions shall survive the termination of this
Agreement.
|
|
(b)
|
In
the event the Termination Fee is paid to the Offeror, no other amounts
will be due and payable as damages or otherwise by the Company, and the
Offeror hereby accepts that the payment of such Termination Fee is in lieu
of any damages or any other payment or remedy to which it may be
entitled. The Offeror agrees that the payment of such
Termination Fee constitutes payment of liquidated damages that are a
genuine anticipated assessment or estimate of the damages which it will
suffer or incur as a result of the termination of this
Agreement.
|
|
9.3
|
Amendment
|
This
Agreement may be amended by mutual agreement between the Parties. It
may not be amended except by an instrument in writing signed on behalf of each
of the Parties hereto.
|
9.4
|
Waiver
|
Each of
the Offeror, on the one hand, and the Company, on the other hand,
may:
|
(a)
|
extend
the time for the performance of any of the obligations or other acts of
the other;
|
54
|
(b)
|
waive
compliance with the other’s agreements or the fulfilment of any conditions
to its own obligations contained herein; or
|
|
(c)
|
waive
inaccuracies in any of the other’s representations or warranties contained
herein or in any document delivered by the other
Party;
|
provided,
however, that any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such Party.
ARTICLE
10
GENERAL
PROVISIONS
|
10.1
|
Notices
|
Any
notice, consent, waiver, direction or other communication required or permitted
to be given under this Agreement by a Party shall be in writing and may be given
by delivering same or sending same by facsimile transmission or by delivery
addressed to the Party to which the notice is to be given at its address for
service herein. Any notice, consent, waiver, direction or other
communication aforesaid shall, if delivered, be deemed to have been given and
received on the date on which it was delivered to the address provided herein
(if a Business Day, if not, then the next succeeding Business Day, in the place
of receipt) and if sent by facsimile transmission be deemed to have been given
and received at the time of receipt (if a Business Day, if not, then the next
succeeding Business Day) unless actually received after 5:00 p.m. (local time in
the place of receipt) at the point of receipt in which case it shall be deemed
to have been given and received on the next Business Day.
The
address for service for each of the Parties hereto shall be as
follows:
|
(a)
|
if
to the Company:
|
000 Xxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxx
X0X
0Xx
Fax:
000-000-0000
Attention: President
and Chief Executive Officer
with a
copy to:
XxXxxxxx
Grespan Xxxxxx Xxxx LLP
000
Xxxxxxxxx Xxxxx
Xxxxxxxxx,
Xxxxxxx
X0X
0X0
Fax:
000-000-0000
Attention: Xxx
Xxxxxx
55
|
(b)
|
if
to the Offeror:
|
00 Xxxxxx Xxxx Xxxx
Xxxxx
Xxxxxxx, XX
X.X.X. 00000
Attention: Xxxxxxx
X. Xxxxxxx
Telecopy
No.: (000) 000-0000
with a
copy to:
Goodmans
LLP
000 Xxxxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxx
X0X
0X0
Attention: Xxx
Xxxxxx
Telecopy
No.: 000 000-0000
|
10.2
|
Miscellaneous
|
This
Agreement:
|
(a)
|
except
for the Confidentiality Agreement, constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, between the Parties, with respect to the subject matter
hereof;
|
|
(b)
|
shall
be binding upon and enure to the benefit of the Parties and their
respective successors and assigns; and
|
|
(c)
|
does
not give any other Person (including any Shareholder) any right or
recourse whatsoever.
|
The
Parties shall be entitled to rely upon delivery of an executed facsimile copy of
the Agreement, and such facsimile copy shall be legally effective to create a
valid and binding agreement among the Parties.
|
10.3
|
Binding
Effect and Assignment
|
Except as
expressly permitted by the terms hereof, neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
Parties without the prior express written consent of the other
Party. Notwithstanding the foregoing provisions of this Section 8.3,
the Offeror may assign all or any part of its rights or obligations under this
Agreement to a direct or indirect wholly-owned Subsidiary or other Affiliate of
the Offeror or Parent, provided that any such assignment will have no adverse
tax or other effects to the Company or, the Shareholders, and provided further
that if such assignment takes place, the Offeror and Parent, severally and not
jointly or jointly and severally, shall continue to be liable to the Company for
any default in performance by the assignee.
56
|
10.4
|
Expenses
|
Subject
to Section 5.3 hereof and the terms of the Confidentiality Agreement (in which
the Company agreed to reimburse Parent for certain expenses up to a maximum of
$250,000), all fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such fee, cost or expense, whether or not the Offer is
consummated.
|
10.5
|
Survival
|
Subject
to Section 7.2, the representations and warranties of the Company and the
Offeror contained in this Agreement shall not survive the completion of the
Offer, and shall expire and be terminated on the earlier of the Effective Time
or the termination of this Agreement in accordance with its terms.
|
10.6
|
Severability
|
Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under Law. Any provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining provisions hereof, and any
such invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
|
10.7
|
Counterpart
Execution
|
This
Agreement may be executed by facsimile and in any number of counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same agreement.
[Signatures on following
page]
57
IN WITNESS WHEREOF, the
Company and the Offeror have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly
authorized.
VIRTEK
VISION INTERNATIONAL INC.
Per: /s/ Xxxxxxx
Sorocky
Name: Xxxxxxx
Sorocky
Title: President
& CEO
GERBER
SCIENTIFIC CANADA INC.
Per:
/s/ Xxxx
Xxxx
Name: Xxxx
Xxxx
Title: Chief
Financial Officer
GERBER
SCIENTIFIC, INC.
Per:
/s/ Xxxx
Xxxx
Name: Xxxx
Xxxx
Title: Executive
Vice President and Chief Financial Officer
58
SCHEDULE
“A”
CONDITIONS
OF THE OFFER
The
Offeror will have the right to withdraw the Offer and not take up and pay for,
or extend the period of time during which the Offer is open and postpone taking
up and paying for, the Common Shares deposited under the Offer unless all of the
following conditions are satisfied or the Offeror has waived them at or prior to
the relevant Expiry Time:
|
(a)
|
there
shall have been validly deposited under the Offer and not withdrawn as at
the Expiry Time of the Offer, such number of Common Shares which, together
with any Common Shares beneficially owned or over which control or
direction is exercised by the Offeror and its Affiliates and joint actors,
represents at least 66⅔% of the issued and outstanding Common Shares (on a
Fully-Diluted Basis);
|
|
(b)
|
all
government or regulatory approvals (including those of applicable stock
exchanges or securities law regulatory authorities) that in the Offeror’s
reasonable judgement are necessary to complete the Offer or any Compulsory
Acquisition or Subsequent Acquisition Transaction shall have been obtained
or concluded or, in the case of waiting or suspensory periods, expired or
been terminated, each on terms and conditions satisfactory to the Offeror,
acting reasonably;
|
| (c) |
(i)
|
no
act, action, suit, demand or proceeding shall have been taken by or before
any Canadian or foreign court, tribunal or Governmental Authority or
administrative agency or commission or by or before any elected or
appointed public official in Canada or elsewhere; and
|
|
(ii)
|
no
law, regulation or policy shall have been proposed, enacted, promulgated
or applied; in each case
|
|
(A)
|
to
cease trade, enjoin, prohibit or impose material limitations or conditions
on the purchase by or the sale to the Offeror of any of the Common Shares
or the right of the Offeror to own or exercise full rights of ownership of
the Common Shares (either pursuant to the Offer or a Subsequent
Acquisition Transaction); or
|
|
(B)
|
which,
if the Offer or Compulsory Acquisition or Subsequent Acquisition
Transaction was consummated, would reasonably be expected to lead to a
Material Adverse Change or to materially adversely affect the Offeror or
Parent;
|
|
(C)
|
which
would materially and adversely affect the ability of Offeror to proceed
with the Offer (or any Compulsory Acquisition or any Subsequent
Acquisition Transaction) and/or take up and pay for any Common Shares
deposited under the Offer;
|
|
(D)
|
seeking
to prohibit or limit the ownership or operation by the Offeror of any
material portion of the business or assets of
the
|
|
|
Company
or the Subsidiaries or to compel the Offeror to dispose of or hold
separate any material portion of the business or assets of the Company or
any of the Subsidiaries as a result of the Offer (or any Compulsory
Acquisition or any Subsequent Acquisition Transaction);
|
|
(d)
|
the
Offeror shall have determined, in its sole judgment, acting reasonably,
that there does not exist any prohibition at Law against the Offeror
making or maintaining the Offer, taking up and paying for any Common
Shares deposited under the Offer or completing any Compulsory Acquisition
or Subsequent Acquisition Transaction;
|
|
(e)
|
the
Offeror shall have determined, in its sole judgment, acting reasonably,
that there has not occurred any Material Adverse Change (i) since the date
of the Support Agreement or (ii) prior to the date of the Support
Agreement that has not previously been disclosed to the Offeror in the
Disclosure Letter;
|
|
(f)
|
the
Offeror shall have determined, in its sole judgment, acting reasonably,
that:
|
|
(i)
|
no
representation or warranty of the Company (without giving effect to any
materiality qualifiers contained therein) shall have been or have become
untrue to the extent that the failure of such representation or warranty
to be true and correct is reasonably likely to, individually or in the
aggregate, cause a Material Adverse Change; and
|
|
(ii)
|
the
Company has performed all of the covenants and agreements to be performed
by it under the Agreement in all material respects;
|
and the
Offeror shall have received a certificate to that effect from the President and
Chief Executive Officer and the Chief Financial Officer (or other officer
reasonably satisfactory to the Offeror) to that effect;
|
(g)
|
the
Company shall not have knowingly or intentionally breached a covenant in
Article 5 of the Agreement;
|
|
(h)
|
the
Separation Time shall not have occurred under the Shareholder Rights Plan;
and
|
|
(i)
|
the
Agreement shall not have been terminated or the Offeror shall have
determined in its sole judgment, acting reasonably, that such termination
shall not affect the ability of the Offeror to consummate the Offer or to
complete a Compulsory Acquisition or Subsequent Acquisition Transaction or
that such termination was not related to any matter that is materially
adverse to the business of the Company or to the value of the Common
Shares to the Offeror.
|
The
foregoing conditions shall be for the exclusive benefit of the Offeror, and may
be asserted by the Offeror, at any time.
2
Subject
to the terms of the Support Agreement, the Offeror may waive any of the
foregoing conditions, other than (a) above, in whole or in part at any time and
from time to time, both before and after the relevant Expiry Time, without
prejudice to any other rights which the Offeror may have.
The
failure by the Offeror at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right and each such right will be deemed an
ongoing right which may be asserted at any time and from time to
time. The conditions listed above shall be conclusively deemed to
have been satisfied or waived upon the taking-up by the Offeror of any Common
Shares pursuant to the Offer.
3
EXHIBIT
“A”
FEE
ESCROW AGREEMENT
THIS AGREEMENT is made as of
l,
2008.
AMONG:
GERBER SCIENTIFIC CANADA INC.,
a company governed by the laws of Ontario
(the
“Offeror”)
– and
–
GERBER SCIENTIFIC, INC., a
company governed by the laws of Connecticut
(“Parent”)
– and
–
VIRTEK VISION INTERNATIONAL
INC., a company governed by the laws of the Province of
Ontario
(“Virtek”)
– and
–
[l, a trust company existing under the
laws of Canada and duly authorised to carry on the business of a trust company
in all the Provinces of Canada];
(hereinafter
referred to as the “Escrow
Agent”)
WHEREAS pursuant to a support
agreement between the Offeror, Parent and Virtek dated September 2, 2008 (the
“Support Agreement”),
the Offeror intends to make a take-over bid for all of the issued and
outstanding common shares of Virtek;
AND WHEREAS pursuant to
Section 6.2 of the Support Agreement, it was agreed that the Offeror would
deposit an amount of $1,277,500 (the “Escrow Amount”), representing
the Mitek and RC Termination Fee Payments (as defined in the Support Agreement)
with the Escrow Agent;
AND WHEREAS pursuant to
Section 5.3 of the Support Agreement, the Escrow Amount (or a portion thereof)
shall be returned to the Offeror in certain circumstances where the Support
Agreement is terminated (the “Mitek and RC Termination Fee Payments
Reimbursement”);
AND WHEREAS the Offeror,
Parent and Virtek desire the Escrow Agent to receive, hold and deal with the
Escrow Amount in accordance with the terms and conditions hereof, which the
Escrow Agent is willing to do.
NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree with each other as follows:
ARTICLE
1
DEFINITIONS
AND INTERPRETATION
|
1.1
|
Definitions.
|
In this
Agreement the following expressions have the following meanings except where the
context requires otherwise:
“Agreement” means this escrow
agreement as the same may be supplemented, amended, restated or replaced from
time to time;
“Business Day” means any day
except a Saturday, Sunday or statutory holiday in Toronto, Ontario;
“Claim” means any claim,
demand, complaint, grievance, action, cause or right of action, damage, loss,
cost, fine, penalty or like charge, settlement payment, judgement, award,
liability, obligation, investigation, assessment or reassessment, including
reasonable professional fees and costs incurred in defending, investigating or
pursuing any of the foregoing, or any proceeding, arbitration, mediation or
other dispute resolution procedure relating to any of the foregoing, or any
judgment, order, writ, injunction or decree of any governmental
authority;
“Parties” means the Offeror,
Parent, Virtek and the Escrow Agent collectively and “Party” means any one of
them;
|
1.2
|
Headings.
|
The
division of this Agreement into articles, sections and schedules and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The article, section and
schedule headings in this Agreement are not intended to be full or precise
descriptions of the text to which they refer and are not to be considered part
of this Agreement. All uses of the words “hereto”, “herein”, “hereof”, “hereby”
and “hereunder” and similar expressions refer to this Agreement and not to any
particular section or portion of it. References to an article, section or
schedule refer to the applicable article, section or schedule of this
Agreement.
|
1.3
|
Entire
Agreement.
|
This
Agreement constitutes the entire agreement between the Parties pertaining to the
subject matter hereof and supersedes all prior agreements, negotiations,
discussions and understandings, written or oral, between the
Parties.
2
|
1.4
|
Waiver
of Rights.
|
Any
waiver of, or consent to depart from, the requirements of any provision of this
Agreement shall be effective only if it is in writing and signed by the Party
giving it, and only in the specific instance and for the specific purpose for
which it has been given. No failure on the part of any Party to exercise, and no
delay in exercising, any right under this Agreement shall operate as a waiver of
such right. No single or partial exercise of any such right shall preclude any
other or further exercise of such right or the exercise of any other
right.
|
1.5
|
Severability.
|
If any
provision of this Agreement shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision and such jurisdiction and shall not in any manner affect or render
invalid or unenforceable such provision in any other jurisdiction nor any other
provision of this Agreement in any jurisdiction.
|
1.6
|
Applicable
Law.
|
This
Agreement shall be governed by, and interpreted and enforced in accordance with,
the laws in force in the Province of Ontario and the laws of Canada applicable
therein (excluding any conflict of laws, rule or principle which might refer
such interpretation to the laws of another jurisdiction).
|
1.7
|
Successors
and Assigns.
|
This
Agreement shall enure to the benefit of and shall be binding on and enforceable
by the Parties and, where the context so permits, their respective successors
and permitted assigns. None of the Parties may assign any of its rights or
obligations hereunder without the prior written consent of the other
Parties.
ARTICLE
2
APPOINTMENT
OF ESCROW AGENT
|
2.1
|
Appointment.
|
The
Offeror and Virtek hereby appoint the Escrow Agent as escrow agent hereunder to
receive, hold and deal with the Escrow Amount as herein provided, and the Escrow
Agent accepts the appointment as escrow agent hereunder.
|
2.2
|
Investment.
|
The
Escrow Agent may hold cash balances constituting part or all of the funds in an
interest bearing account, and may, but need not, invest same in its deposit
department, the deposit department of one of its Affiliates or the deposit
department of a Canadian chartered bank, but the Escrow Agent, its Affiliates or
a Canadian chartered bank shall not be liable to account for any profit to any
parties to this Escrow Agreement or to any other person or entity other than at
a rate, if any, established from time to time by
the Escrow Agent, its Affiliates or a Canadian chartered
bank. Rates are subject to change without notice due to market
conditions. For the purpose of this section, “Affiliate” means
affiliated companies within the meaning of the
3
Business Corporations Act
(Ontario) (“OBCA”). All
interest earned and paid on the Escrow Amount shall forthwith be added to the
Escrow Amount and be dealt with as part of the Escrow Amount (i.e., the
proportionate share of any such interest will be added to any release of the
Escrow Amount).
|
2.3
|
Escrow
Agent’s Remuneration and Expenses.
|
The
Offeror agrees to pay the Escrow Agent’s fees in advance for its services
hereunder and shall pay or reimburse the Escrow Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Escrow
Agent in the administration of its duties hereunder (including, without
limitation, legal fees and expenses and the reasonable compensation and
disbursements of all other advisers, agents and assistants not regularly in its
employ). The parties hereto agree that if any of the Escrow Agent’s
fees, expenses and disbursements are in arrears then the Escrow Agent reserves
the right to withhold the release of any escrowed funds. Invoices
with respect to remuneration and expenses of the Escrow Agent shall be sent to
the Offeror, with a copy to Virtek.
ARTICLE
3
RELEASE
OF ESCROW AMOUNT
|
3.1
|
Release.
|
The
Escrow Agent shall be entitled to release all or part of the Escrow Amount as
follows:
|
(a)
|
within
two Business Days from receipt of a joint written direction of the Offeror
and Virtek (the “Release
Notice”) and only to the extent provided in such Release
Notice;
|
|
(b)
|
upon
receipt of a final (and not subject to appeal) judgment, order or decision
of a competent court or arbitral panel, or out of court settlement
regarding the Mitek and RC Termination Fee Payments Reimbursement, within
two Business Days from the receipt by the Escrow Agent of a copy of such
judgment, order, arbitral decision or out of court settlement as the case
may be; the Party delivering such judgment, order, decision or settlement,
as the case may be, to the Escrow Agent shall concurrently provide a copy
thereof to all other Parties.
|
ARTICLE
4
THE
DUTIES AND RIGHTS OF THE ESCROW AGENT
|
4.1
|
Duties.
|
This
agreement sets forth exclusively the duties of the Escrow Agent with respect to
any and all matters pertinent hereto and no implied duties or obligations shall
be read into the agreement against the Escrow Agent, including any agreement
referred to in this Agreement to which the Escrow Agent is not a party. The
Escrow Agent shall be protected in acting and relying upon any notice, request,
waiver, consent, receipt, direction, instruction, affidavit or other paper,
writing or document (collectively referred to as “Documents”) furnished to it
and purporting to have been executed or issued by any officer or person required
to or entitled to execute and deliver to the Escrow Agent any such Documents in
connection with this Agreement, not only as to its due
4
execution
and the validity and effectiveness of its provisions, but also as to the truth
or accuracy of any information therein contained, which it in good faith
believes to be genuine. The Escrow Agent shall have the right not to act and
shall not be liable for refusing to act unless it has received clear and
reasonable documentation that complies with the terms of this
Agreement. Such documentation must not require the exercise of any
discretion or independent judgment.
|
4.2
|
Resignation.
|
The
Escrow Agent may at any time, upon giving at least thirty (30) days notice in
writing to the Parties hereto, specifying the date of its resignation, require
the Parties to discharge it from the agency herein created and appoint a
substitute Escrow Agent in its place. If no such Escrow Agent has
been appointed by the Offeror and Virtek, acting together, upon the expiry of
such notice, the Escrow Agent shall remain in place until a substitute Escrow
Agent is appointed in its place. The Offeror and Virtek shall notify
the Escrow Agent in writing of the appointment of the substitute Escrow Agent,
and the substitute Escrow Agent shall execute and deliver to the Parties hereto
its written undertaking to be bound by the terms and conditions of this
Agreement and the substitute Escrow Agent shall thenceforth be vested with the
same powers, rights, duties and responsibilities as if the substitute Escrow
Agent had been originally named the Escrow Agent hereunder. The Escrow Agent
shall, upon receipt of payment for any outstanding amounts for its services and
expenses then unpaid, shall transfer, deliver and pay over to such substitute
Escrow Agent, who shall be entitled to receive, all cash and property on deposit
with such predecessor Escrow Agent. Such remittance shall be deemed to
constitute a full release and discharge of the obligations of the Escrow Agent
hereunder.
|
4.3
|
Indemnity.
|
In
addition to and without limiting any other protection of the Escrow Agent
hereunder or otherwise by law, the Offeror and Virtek shall, jointly and
severally, indemnify and hold harmless the Escrow Agent and its officers,
directors, employees and agents harmless from and against any and all
liabilities, losses, claims, damages, penalties, actions, suits, demands,
levies, costs, expenses and disbursements including any and all reasonable legal
and adviser fees and disbursements of whatever kind or nature which may at any
time be suffered by, imposed on, incurred by or asserted against the Escrow
Agent, whether groundless or otherwise, howsoever arising from or out of any
act, omission or error of the Escrow Agent in connection with its acting as
Escrow Agent hereunder unless arising from the gross negligence or wilful
misconduct or bad faith on the part of the Escrow Agent. Notwithstanding any
other provision hereof, this indemnity shall survive the removal, or resignation
of the Escrow Agent, and termination of this Agreement.
|
4.4
|
Retain
Experts.
|
The
Escrow Agent may appoint such agents and employ or retain such counsel,
accountants, engineers, appraisers or other experts or advisers as it may
reasonably require for the purpose of discharging its duties and
determining its rights hereunder and may pay reasonable remuneration for all
services performed by any of them, without taxation of costs of any counsel, and
shall not be responsible for any misconduct on the part of any of them. The
Offeror shall pay or reimburse the Escrow Agent for any reasonable fees,
expenses and disbursements of such counsel, advisors, agents or other
experts. The Escrow Agent may act and rely and shall be protected in
acting and
5
relying
in good faith on the opinion or advice of or information obtained from any
agent, counsel, accountant, engineer, appraiser or other expert or adviser,
whether retained or employed by the Offeror, Virtek or the Escrow Agent, in
relation to any matter arising in the performance of its duties under this
Agreement.
|
4.5
|
Limitation
of Liability.
|
The
Escrow Agent shall not be liable for any action taken or omitted by it, or any
action suffered by it to be taken or omitted excepting only direct loss caused
by its own gross negligence, wilful misconduct, fraud or lack of good faith.
Under no circumstances shall the Escrow Agent be liable for any special,
indirect, incidental, consequential, exemplary or punitive losses or damages
hereunder, including any loss of profits, whether foreseeable or unforeseeable.
Excepting gross negligence, wilful misconduct, fraud or lack good faith, the
collective liability of Escrow Agent under or in connection with this Agreement
to any one or more parties exceed the amount of its annual fees for one
year.
|
4.6
|
Proceedings.
|
Without
restricting the generality of the aforementioned indemnities, the Parties
covenant and agree that in the event that proceedings should hereafter be taken
in any court respecting the matters referred to in this Agreement, the Escrow
Agent shall not be obliged to defend any such proceedings or take any
proceedings in court or enter any appearance to such proceedings until the
Parties shall have funded and indemnified the Escrow Agent by good and
sufficient security given against the Escrow Agent’s costs of such
proceedings.
|
4.7
|
Not
Required to Expend Funds.
|
None of
the provisions contained in this agreement or any supplement shall require the
Escrow Agent to expend or risk its own funds or otherwise incur financial
liability in performing its duties or in the exercise of any of its rights or
powers.
|
4.8
|
Recitals.
|
The
Escrow Agent shall not be liable for or by reason of any statements of fact or
recitals in this Agreement and all such statements and recitals are and shall be
deemed to be made by the other parties to the Agreement.
|
4.9
|
Not
a Trust.
|
The
parties hereto agree that the Escrow Agent is not a trustee and this arrangement
is not and shall not be deemed to be a trust for the purposes of the Income Tax Act
(Canada).
6
ARTICLE
5
GENERAL
PROVISIONS
|
5.1
|
Time.
|
Time is
of the essence of each provision of this Agreement. Any extension, waiver or
variation of any provision of this Agreement shall not be deemed to affect this
provision and there shall be no implied waiver of this provision.
|
5.2
|
Notices.
|
All
notices, requests, demands or other communications required or permitted to be
given by one Party to another under this Agreement (each, a “Notice”) shall be given in
writing and delivered by personal delivery or delivery by recognized national
courier, sent by facsimile transmission or delivered by registered mail, first
class postage prepaid, or by e-mail addressed as follows:
|
(a)
|
if
to Virtek:
|
000
Xxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxx
X0X
0Xx
Fax:
000-000-0000
Attention: President
and Chief Executive Office
with a
copy to:
XxXxxxxx
Grespan Xxxxxx Xxxx LLP
000
Xxxxxxxxx Xxxxx
Xxxxxxxxx,
Xxxxxxx
X0X
0X0
Fax: 000-000-0000
Attention: Xxx
Xxxxxx
|
(b)
|
if
to the Offeror or Parent:
|
00 Xxxxxx
Xxxx Xxxx
Xxxxx
Xxxxxxx, XX
X.X.X. 00000
Attention: Xxxxxxx
X. Xxxxxxx
Fax: 000-000-0000
with a
copy to:
Goodmans
LLP
000 Xxxxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxx
X0X
0X0
Attention: Xxx
Xxxxxx
Fax: 000-000-0000
7
|
(c)
|
if
to the Escrow Agent:
|
l
Attention: l
Fax:
(416) l
or at
such other address, facsimile number or e-mail address at which the addressee
may from time to time notify the addressor. Any Notice delivered by personal
delivery or by courier to the Party to whom it is addressed as provided above
shall be deemed to have been given and received on the day it is so delivered at
such address. If such day is not a Business Day, or if the Notice is received
after 4:00 p.m. (addressee’s local time), then the Notice shall be deemed to
have been given and received on the next Business Day. Any Notice sent by
prepaid registered mail shall be deemed to have been given and received on the
fourth Business Day following the date of its mailing. Any Notice transmitted by
facsimile shall be deemed to have been given and received on the day in which
transmission is confirmed. If such day is not a Business Day or if the facsimile
transmission is received after 4:00 p.m. (addressee’s local time), then the
Notice shall be deemed to have been given and received on the first Business Day
after its transmission.
|
5.3
|
Further
Assurances.
|
Each
Party shall do such acts and shall execute such further documents, conveyances,
deeds, assignments, transfers and the like, and will cause the doing of such
acts and will cause the execution of such further documents as are within its
power as any other Party may in writing at any time and from time to time
reasonably request be done and or executed, in order to give full effect to the
provisions of this Agreement.
|
5.4
|
Counterparts.
|
This
Agreement may be executed in any number of counterparts. Each executed
counterpart shall be deemed to be an original. All executed counterparts taken
together shall constitute one agreement.
|
5.5
|
Facsimile
or Scan Execution.
|
To
evidence the fact that it has executed this Agreement, a Party may send a copy
of its executed counterpart to all other Parties by facsimile or e-mail scan
transmission. That Party shall be deemed to have executed this Agreement on the
date it sent such transmission. In such event, such Party shall forthwith
deliver to the other Party the counterpart of this Agreement executed by such
Parties.
TO WITNESS their agreement,
the Parties have duly executed this Agreement.
[SIGNATURE
PAGES TO IMMEDIATELY FOLLOW]
8
|
VIRTEK
VISION INTERNATIONAL INC
|
||||
|
Per:
|
||||
|
Name:
Title:
|
||||
|
GERBER
SCIENTIFIC CANADA INC.
|
||||
|
Per:
|
||||
|
Name:
Title:
|
||||
|
GERBER
SCIENTIFIC, INC.
|
||||
|
Per:
|
||||
|
Name:
Title:
|
||||
|
l
|
||||
|
Per:
|
||||
|
Name:
Title:
|
||||
|
Per:
|
||||
|
Name:
Title:
|
||||
GOODMANS\5623967.10
9
