SHARE PURCHASE AGREEMENT
dated as of
November 15, 2000
by and among
INSILICON CORPORATION,
INSILICON CANADA LTD.,
INSILICON CANADA HOLDINGS ULC,
XENTEC INC.
and
THE SHAREHOLDERS AND OPTIONHOLDERS OF
XENTEC INC.
TABLE OF CONTENTS
Page
SECTION 1.....................................................................1
1. Purchase..............................................................1
1.1 Purchase and Sale of Stock.....................................1
1.2 Ancillary Documents............................................2
1.3 Pre-Closing Amalgamation.......................................2
1.4 Closing........................................................3
1.5 Actions at the Closing.........................................3
1.6 Payment........................................................4
1.7 Earnout Shares.................................................4
1.8 Effect on Capital Stock........................................5
1.9 No Further Ownership Rights in Company Capital Stock...........6
1.10 Taking of Necessary Action; Further Action.....................6
1.11 Withholding....................................................6
1.12 Lost, Stolen or Destroyed Certificates.........................6
SECTION 2.....................................................................7
2. Representations and Warranties of the Company and the
Company's Founding Shareholders.......................................7
2.1 Organization; Subsidiaries.....................................7
2.2 Articles of Incorporation and Bylaws...........................8
2.3 Capital Structure..............................................8
2.4 Authority......................................................9
2.5 No Conflicts; Required Filings and Consents....................9
2.6 Financial Statements...........................................9
2.7 Absence of Undisclosed Liabilities............................10
2.8 Absence of Certain Changes....................................10
2.9 Litigation....................................................12
2.10 Restrictions on Business Activities...........................12
2.11 Permits; Regulation...........................................12
2.12 Title to Property.............................................13
2.13 Intellectual Property.........................................13
2.14 Environmental Matters.........................................15
2.15 Taxes.........................................................16
2.16 Employee Matters..............................................17
2.17 Employee Benefit Plans........................................19
2.18 Certain Agreements Affected by the Purchase...................21
2.19 Material Contracts............................................22
2.20 Interested Party Transactions.................................23
2.21 Insurance.....................................................23
2.22 Compliance With Laws..........................................24
2.23 Minute Books and Corporate Records............................24
2.24 Complete Copies of Materials..................................24
2.25 Brokers' and Finders' Fees....................................24
2.26 Accounts Receivable...........................................24
-i-
TABLE OF CONTENTS
(continued)
Page
2.27 Customers and Suppliers.......................................25
2.28 Third Party Consents..........................................25
2.29 Product Releases..............................................25
2.30 Bank Accounts.................................................25
2.31 Shareholder Loans.............................................25
SECTION 3....................................................................25
3. Representations and Warranties of the Shareholders...................25
3.1 Power, Authorization and Validity.............................25
3.2 Shares Entirely for Own Account...............................26
3.3 General Solicitation..........................................26
3.4 Disclosure of Information.....................................26
3.5 Financial Sophistication......................................26
3.6 Title to Stock................................................26
3.7 Exemption from Registration Requirements......................27
3.8 Restricted Securities.........................................27
3.9 Further Limitations on Disposition............................27
3.10 Legends.......................................................28
3.11 No Violation..................................................28
3.12 Acknowledgment................................................28
SECTION 4....................................................................29
4. Representations and Warranties Concerning Holdcos....................29
4.1 Incorporation.................................................29
4.2 Capitalization................................................29
4.3 Restricted Activities.........................................29
4.4 No Obligations................................................30
4.5 No Agreements.................................................30
4.6 No Employees..................................................31
4.7 No Dividends..................................................31
4.8 No Joint Venture Interests, etc...............................31
4.9 Litigation....................................................31
4.10 Compliance....................................................31
4.11 Bank Accounts.................................................31
4.12 Books and Records.............................................32
4.13 Voting........................................................32
4.14 Articles and By-laws..........................................32
4.15 No Undisclosed Facts..........................................32
SECTION 5....................................................................33
5. Representations and Warranties of Exchangeco, Callco and Parent......33
5.1 Organization, Standing and Power..............................33
5.2 Capital Structure.............................................33
-ii-
TABLE OF CONTENTS
(continued)
Page
5.3 Authority.....................................................34
5.4 No Conflict; Required Filings and Consents....................34
5.5 SEC Documents; Financial Statements...........................34
5.6 Litigation....................................................35
5.7 Broker's and Finders' Fees....................................35
5.8 Investment Canada.............................................35
5.9 Exchangeco and Callco Formation...............................35
5.10 Nasdaq Listing................................................36
SECTION 6....................................................................36
6. Conduct Prior to the Closing.........................................36
6.1 Conduct of Business of the Company............................36
6.2 No Solicitation...............................................38
SECTION 7....................................................................39
7. Additional Agreements................................................39
7.1 Further Assurances............................................39
7.2 Consents; Cooperation.........................................39
7.3 Access to Information.........................................40
7.4 Confidentiality...............................................41
7.5 Public Disclosure.............................................41
7.6 Escrow Agreement..............................................41
7.7 Blue Sky Laws.................................................41
7.8 Employee Retention Stock Bonus................................41
7.9 Employee Option Grants........................................42
7.10 Share Lockup..................................................42
7.11 Class B Shareholders Agreement................................42
7.12 Exchangeable Share Support Agreement..........................43
7.13 Exchange Rights Agreement.....................................43
7.14 Ontario Securities Law Matters................................43
7.15 Directors and Officers........................................43
7.16 Rule 144 Reporting............................................43
7.17 Amalgamation with Class A Holding Companies...................43
7.18 Auditors' Consents............................................44
7.19 Section 85 Election...........................................44
7.20 Holdcos Loans.................................................44
SECTION 8....................................................................44
8. Conditions to the Purchase...........................................44
8.1 Conditions to Obligations of Each Party to Effect
the Purchase..................................................44
8.2 Additional Conditions to Obligations of the Company
and Shareholders..............................................45
8.3 Additional Conditions to the Obligations of Exchangeco,
Callco and Parent.............................................46
-iii-
TABLE OF CONTENTS
(continued)
Page
SECTION 9....................................................................48
9. Termination, Amendment and Waiver....................................48
9.1 Termination...................................................48
9.2 Effect of Termination.........................................49
9.3 Expenses and Termination Fees.................................49
9.4 Extension; Waiver.............................................49
SECTION 10...................................................................50
10. Escrow and Indemnification...........................................50
10.1 Survival of Representations and Warranties....................50
10.2 Escrow Fund...................................................50
10.3 Indemnification...............................................50
10.4 Damages Threshold and Valuation of Escrow Shares..............51
10.5 Escrow Period.................................................51
10.6 Method of Asserting Claims....................................52
10.7 Representative of the Shareholders; Power of Attorney.........52
10.8 Indemnity by Parent, Exchangeco and Callco....................52
SECTION 11...................................................................52
11. General Provisions...................................................52
11.1 Notices.......................................................52
11.2 Interpretation................................................54
11.3 Counterparts..................................................54
11.4 Entire Agreement; Nonassignability; Parties in Interest.......54
11.5 Severability..................................................55
11.6 Remedies Cumulative...........................................55
11.7 Governing Law.................................................55
11.8 Dispute Resolution............................................55
11.9 Rules of Construction.........................................56
11.10 Amendments and Waivers........................................56
-iv-
TABLE OF CONTENTS
(continued)
Page
SCHEDULES AND EXHIBITS
inSilicon Corporation Guarantee
Company Disclosure Schedules*
Schedule A - Shareholder List*
Schedule B - Arbitration Procedures
Exhibit A - Provisions Attaching to the Exchangeable Shares*
Exhibit B - Form of Non-Competition Agreement*
Exhibit C-1 - Form of Employment Agreement*
Exhibit C-2 Form of Consulting Agreement*
Exhibit D - Form of Registration Rights Agreement*
Exhibit E - Form of Escrow Agreement*
Exhibit F - Form of Exchangeable Share Support Agreement*
Exhibit G - Form of Exchange Rights Agreement*
Exhibit H - inSilicon 2000 Stock Plan*
* The schedules and exhibits to this agreement have not been filed herewith,
pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Commission upon
request.
-v-
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 15th day of November, 2000, by and among inSilicon Corporation, a
Delaware corporation (the "Parent"); inSilicon Canada Ltd., a corporation
governed by the laws of Canada and indirect subsidiary of Parent ("Exchangeco");
inSilicon Canada Holdings ULC, a Nova Scotia unlimited liability company and
indirect subsidiary of Parent ("Callco"); Xentec Inc., a corporation governed by
the laws of Canada (the "Company"); the shareholders of the Company listed on
Schedule A (each individually, a "Shareholder" and collectively, the
"Shareholders"); and the optionholders of the Company listed on Schedule A (each
individually, an "Optionholder" and collectively, the "Optionholders").
RECITALS
A. The Company is in the business of providing comprehensive FPGA and ASIC
design services, integration expertise, and technology for the product
development requirements of electronics companies. The Shareholders are the sole
owners of all of the Company's issued and outstanding Class A and Class B shares
of the Company's capital stock. Exchangeco and Callco wish to purchase from the
Shareholders, and the Shareholders wish to sell to Exchangeco and Callco, all of
the issued and outstanding capital stock of the Company (the "Company Capital
Stock") on the terms and conditions set forth herein (the "Purchase"). In
connection with the Purchase, Parent and certain employees of the Company,
namely, Xerxes Wania, Xxxxx Xxxxxx and Xxxxxx Xxxxx (the "Founding
Shareholders"), desire to enter into certain agreements;
B. Concurrently with the execution of this Agreement, and as a condition
and inducement to the Company's willingness to enter into this Agreement, Parent
has agreed fully and unconditionally to guarantee the representations,
warranties, covenants, agreements and other obligations of Exchangeco and Callco
in this Agreement, the Escrow Agreement; and
C. The Company, the Shareholders, Parent, Exchangeco and Callco desire to
make certain representations and warranties and other agreements in connection
with the transaction described herein.
AGREEMENT
The parties hereby agree as follows:
SECTION 1
1. Purchase.
1.1 Purchase and Sale of Stock.
(a) Class A Common Shares. Subject to the terms and conditions of
this Agreement, Exchangeco and Callco agree to purchase at the Closing (as
defined below) and the holders of the Company's Class A Common Shares (the
"Class A Shareholders") agree to sell to Exchangeco and Callco at the Closing,
all of the issued and outstanding Class A Common Shares in the capital of the
Company (the "Class A Shares") at an aggregate purchase price of (a)
US$2,933,000 in cash (the "Cash Consideration") and (b) 997,000 shares of
Exchangeco's exchangeable preferred shares having the terms and conditions set
out in Exhibit A (the "Exchangeable Shares") payable as provided in Section 1.6.
The Exchangeable Shares to be issued to the Class A Shareholders (including the
Escrow Shares and the Earnout Shares, each as defined below) shall be referred
to as the "Class A Consideration Shares."
(b) Class B Common Shares. Subject to the terms and conditions of
this Agreement, Exchangeco agrees to purchase at the Closing (as defined below)
and the holders of the Company's Class B Common Shares (the "Class B
Shareholders") agree to sell to Exchangeco at the Closing, all of the issued and
outstanding Class B Common Shares in the capital of the Company (the "Class B
Shares") in exchange for an aggregate purchase price of 36,378 Exchangeable
Shares and 15,678 Shares of Parent Common Stock payable as provided in Section
1.6. Class B Shareholders who are residents of Canada shall receive Exchangeable
Shares, and all other Class B Shareholders shall receive Parent Common Stock.
The Exchangeable Shares and Parent Common Stock issued to the Class B
Shareholders shall be referred to as the "Class B Consideration Shares." This
Section 1.1(b) shall replace any rights that Class B Shareholders have under any
Xentec Class B Shareholders' Agreements, including those dated January 28, 2000
and June 29, 2000.
(c) The Class A Shares and Class B Shares represent all of the
issued and outstanding Company Capital Stock as at the Closing Date (as defined
below).
1.2 Ancillary Documents. Concurrent with the execution of this Agreement,
the Company, the Shareholders, Parent, Exchangeco and Callco shall take such
actions and execute and deliver such agreements and other instruments and
documents as necessary or appropriate to effect the transactions contemplated by
this Agreement in accordance with its terms, including without limitation the
following:
(a) Parent, Company and each of the Founding Shareholders shall
enter into a Non-Competition Agreement in the form attached hereto as Exhibit B
(the "Non-Competition Agreement");
(b) Parent, Company and each of Xerxes Wania and Xxxxx Xxxxxx shall
enter into an Employment Agreement in the form attached hereto as Exhibit C-1
(the "Employment Agreement"); and
2
(c) Parent, Company and Xxxxxx Xxxxx shall enter into a consulting
agreement in the form attached hereto as Exhibit C-2 (the "Consulting
Agreement").
1.3 Pre-Closing Amalgamation. Prior to the Closing (as defined below) the
existing Class A Shareholders, being Cimex Holding Inc., 1291480 Ontario Inc.
and 000000 Xxxxxx Inc. shall be amalgamated into the Company (the
"Amalgamation"). After the Amalgamation, the "Class A Shareholders" and "Class B
Shareholders" will be as set forth in Schedule A hereto. All references to
"Class A Shareholders" and "Class B Shareholders" shall include the
post-Amalgamation Shareholders and all references to the "Company" shall include
the predecessor corporations.
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place as soon as practicable, and in no
event later than three business days after the satisfaction or waiver of each of
the conditions set forth in Section 8 below or at such other time as the parties
agree (the "Closing Date"). The Closing shall take place at the offices of
Osler, Xxxxxx & Harcourt, 0 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx X0X 0X0, or
at such other location as the parties agree.
1.5 Actions at the Closing. At the Closing, the Company, the Shareholders,
the Optionholders, Parent, Exchangeco and Callco shall take such actions and
execute and deliver such agreements and other instruments and documents as
necessary or appropriate to effect the transactions contemplated by this
Agreement in accordance with its terms, including without limitation the
following:
(a) Each of the Shareholders will deliver to Exchangeco and Callco a
certificate or certificates representing all of such Shareholder's Company
Capital Stock, together with stock powers duly endorsed in blank for transfer of
such Company Capital Stock to Exchangeco and Callco, and the Shareholders shall
deliver all other documents required of the Shareholders pursuant to this
Agreement;
(b) Each of the Optionholders will deliver to Parent all original
agreements relating to Company Stock Options (as defined below), which
agreements shall be cancelled and replaced as described in Section 1.8(a);
(c) Exchangeco and Callco will deliver to each Class A Shareholder
(i) by cashier's check or wire transfer the Cash Consideration owed to such
Class A Shareholder in accordance with Section 1.6 below and (ii) a certificate
or certificates representing the number of Class A Consideration Shares owed to
such Class A Shareholder in accordance with Section 1.6 below, net of the
amounts deposited in escrow as set forth in Section 10 below and net of the
Earnout Shares issuable in accordance with Section 1.7 below, and Exchangeco,
Callco and Parent will deliver all other documents required of Exchangeco,
Callco and Parent herein;
(d) Exchangeco will deliver to each Class B Shareholder a
certificate or certificates representing the number of Class B Consideration
Shares owed to such Class B Shareholder in accordance with Section 1.6 below,
and Exchangeco, Callco and Parent will deliver all other documents required of
Exchangeco, Callco and Parent herein;
3
(e) Parent will deliver to each Optionholder an agreement for Parent
Options as described in Section 1.8(a);
(f) Parent and each Class A Shareholder will enter into a
Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement");
(g) Exchangeco, Callco, Parent and each of the Class A Shareholders
shall enter into an Escrow Agreement in the form attached hereto as Exhibit E
(the "Escrow Agreement");
(h) Exchangeco and Parent shall enter into an Exchangeable Share
Support Agreement in the form attached hereto as Exhibit F (the "Exchangeable
Share Support Agreement"); and
(i) Exchangeco, Parent and each Shareholder will enter into an
Exchange Rights Agreement in the form attached hereto as Exhibit G (the
"Exchange Rights Agreement").
1.6 Payment. At the Closing, the Cash Consideration and the Class A
Consideration Shares (together, the "Class A Purchase Price") and the Class B
Consideration Shares shall be paid by Exchangeco and Callco as follows:
(a) the Cash Consideration shall be paid to the Class A Shareholders
in accordance with Schedule A hereto, less any expenses due pursuant to Section
9.3.
(b) fifteen percent (15%) of the aggregate Class A Consideration
Shares shall be placed in Escrow in accordance with Schedule A hereto as
provided in Section 10 below which shall be for the purpose of enforcing the
Class A Shareholders' indemnification obligations under Section 10 below;
(c) 415,000 of the Class A Consideration Shares shall be withheld as
earnout shares issuable in accordance with Section 1.7 below; and
(d) the remaining Class A Consideration Shares after the holdbacks
set forth in subparagraphs (b) and (c) above (the "Remaining Amount") shall be
paid to the Class A Shareholders in accordance with Schedule A hereto.
(e) the Class B Consideration Shares shall be paid to the Class B
Shareholders in accordance with Schedule A hereto.
1.7 Earnout Shares. Exchangeco shall reserve 415,000 of the Class A
Consideration Shares (the "Earnout Shares)" for potential issuance to the Class
A Shareholders based upon three earnout goals. The amount of Earnout Shares
withheld from each Class A Shareholder is set forth in Schedule A hereto and
shall be issuable as set forth below. For purposes of this section, in the event
an employee is transferred from Company to Parent, such employee shall not be
deemed to have terminated employment.
4
(a) Employee Retention Earnout. Exchangeco shall issue up to an
aggregate of 115,000 Earnout Shares to Messrs. Wania and Ouslis on the first and
second anniversary of the Closing Date based upon the Employee Retention Factor
(as defined below) multiplied by the following number of Earnout Shares:
Earnout Shares
-----------------------------------
Year 1 Year 2 Total
------ ------ ------
Wania........ 32,500 32,500 65,000
Ouslis....... 25,000 25,000 50,000
The Employee Retention Factor shall be calculated based upon the cumulative
number of Company engineering employees at the Closing Date, as identified on
Schedule 1.7(a), that terminate employment through the respective anniversary
dates as follows:
Cumulative
Terminated Employees Employee
-------------------- Retention
Year 1 Year 2 Factor
------ ------ ---------
0-2 0-4 100%
3-4 5-7 75%
4-6 8-10 50%
>6 >10 0%
(b) Revenue Earnout. Exchangeco shall issue up to an aggregate of
100,000 Earnout Shares to the Class A Shareholders on a pro rata basis based
upon the net product revenue derived from the Company's products, including
products sold by affiliates of the Company, and net services revenue derived
from the provision of services by the Company's employees during the period from
the Closing Date to September 30, 2001. The amount of Earnout Shares issued
shall vary based upon net revenue achievement as follows:
Net Revenue Achievement Earnout Shares
----------------------- --------------
Over US$2,500,000 100,000
US$1,700,000-US$2,499,999 67,000
US$1,300,000-US$1,699,999 33,500
Under US$1,300,000 0
(c) Product Delivery Earnout. Exchangeco shall issue up to an
aggregate of 200,000 Earnout Shares to the Class A Shareholders on a pro rata
basis based upon the timing of the Parent's release of a Bluetooth radio
intellectual property product. The amount of Earnout Shares issued shall vary
based upon the number of months (as rounded) between the Closing Date and
commercial release as follows:
Months from
Closing Date Earnout Shares
------------ --------------
Under 15 200,000
15-18 133,000
19-24 67,500
Over 24 0
5
1.8 Effect on Capital Stock. The Company Capital Stock to be purchased by
Exchangeco and Callco at the Closing shall consist solely of the Company's Class
A and Class B Common Shares, and at such time there shall be no other
outstanding securities or rights to purchase or otherwise acquire securities of
the Company, except as described below. Accordingly, prior to or upon the
Closing:
(a) Company Stock Options. Immediately following the Closing, each
option to purchase Company Capital Stock ("Company Option") issued and
outstanding under the Company Employee Stock Option Plan (the "Company Stock
Option Plan") shall be cancelled and replaced with an option to purchase Parent
Common Stock ("Parent Option") with similar terms and conditions as those set
forth in the Company Stock Option Plan immediately prior to the Closing, except
that (i) such Parent Option will be exercisable for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Capital Stock that were issuable upon exercise of such Company Option
immediately prior to the Closing multiplied by 0.3216, (rounded down to the
nearest whole number) (ii) the exercise price of such Parent Option shall equal
to the exercise price of the Company Option immediately prior to the Closing
divided by 0.3216, and (iii) the vesting of each Parent Option shall be
accelerated by 12 months. Schedule A hereto lists the amount of Class B Shares
underlying the Company Options held by each optionholder and the amount of
Parent Common Stock underlying the replacement option.
(b) Adjustments. The amount of Exchangeable Shares or Parent Common
Stock to be issued shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization or other like change with respect to
Exchangeable Shares or Parent Common Stock or Company Capital Stock occurring
after the date of this Agreement and prior to the Closing.
1.9 No Further Ownership Rights in Company Capital Stock. All Exchangeable
Shares or Parent Common Stock issued upon the surrender for exchange of shares
of Company Capital Stock in accordance with the terms hereof shall be deemed to
have been issued and cash in the amount of the Cash Consideration shall be
deemed to have been paid in full satisfaction of all rights pertaining to such
shares of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Company of shares of Company Capital Stock which
were outstanding immediately prior to the Closing.
1.10 Taking of Necessary Action; Further Action. If at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement the officers and directors of the Company, Exchangeco, Callco
and the Parent are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
1.11 Withholding. Each of Exchangeco, Callco and the Company shall be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Capital Stock such amounts as may be required to be deducted or withheld
therefrom under the United States Internal Revenue Code 1986 or any provision of
state, local or foreign tax law or under any other applicable legal
6
requirement. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
1.12 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, Exchangeco shall issue and pay in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such Exchangeable Shares or Parent
Common Stock and Cash Consideration as may be required pursuant to Section 1.6;
provided, however, that Exchangeco and Callco may, in their discretion and as a
condition precedent to such issuance and payment, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as
Exchangeco and Callco may reasonably direct as indemnity against any claim that
may be made against Exchangeco or Parent Common Stock or Parent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
SECTION 2
2. Representations and Warranties of the Company and the Company's
Founding Shareholders.
In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results or prospects of such entity and its subsidiaries, taken as a whole, or
to prevent or materially delay consummation of the transactions contemplated
under this Agreement or otherwise to prevent such entity and its subsidiaries
from performing their obligations under this Agreement based on the value
attributed to the Company by the transactions contemplated hereby.
Any reference to a party's "knowledge" means (i) with respect to any
natural person, the actual knowledge, after reasonable inquiry, of such person,
or (ii) with respect to any corporation or entity, the actual knowledge of such
party's executive officers provided that such persons shall have made due and
diligent inquiry of those employees of such party whom such executive officers
reasonably believe would have actual knowledge of the matters represented.
Except as disclosed in a document dated the same date as this Agreement
and delivered by the Company to Parent prior to the execution and delivery of
this Agreement and referring to the representations and warranties in this
Agreement (the "Company Disclosure Schedule"), the Company and the Founding
Shareholders severally represent and warrant to Exchangeco, Callco and Parent as
follows:
2.1 Organization; Subsidiaries. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company has the requisite corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted, except where the failure to have such power,
7
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company does not currently own and
has never owned, of record or beneficially, or control, directly or indirectly,
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity.
2.2 Articles of Incorporation and Bylaws. The Company has delivered a true
and correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of the Company, each as amended to date, to Parent.
The Company is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents.
2.3 Capital Structure. The authorized capital stock of the Company
consists of an unlimited number of Class A Common Shares and an unlimited number
of Class B Common Shares, of which there were issued and outstanding as of the
date of this Agreement, 4,000,000 Class A Common Shares and 161,863 Class B
Common Shares. Schedule A hereto contains a complete and accurate list of each
of the Company's Shareholders and the amount of Class A Common Shares and Class
B Common Shares held by such Shareholder. There are no other outstanding shares
of capital stock or voting securities and no outstanding commitments to issue
any shares of capital stock or voting securities other than pursuant to the
exercise of options outstanding as of such date under the Company Stock Option
Plan. All outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws of the
Company or any agreement to which the Company is a party or by which it is
bound, except for a call right and drag along right in favor of the Company
under the Class B Shareholders Agreements that shall terminate upon the
execution of this Agreement. All outstanding shares of Company Capital Stock
were issued in compliance with all applicable Canadian federal and provincial
securities laws. As of the close of business on November 15, 2000, the Company
has reserved 460,380 Class B Common Shares for issuance to employees and
consultants pursuant to the Company Stock Option Plan, of which 161,863 shares
have been issued pursuant to option exercises or direct stock purchases, 298,517
shares are subject to outstanding, unexercised options, and no shares are
subject to outstanding stock purchase rights. Since November 15, 2000, the
Company has not issued or granted additional options under the Company Stock
Option Plan. Section 2.3 of the Company Disclosure Schedule sets forth a true
and complete list as of the date of this Agreement of all holders of outstanding
options under the Company Stock Option Plan, including the number of shares of
Company Capital Stock subject to each such option, the exercise or vesting
schedule, the number of options vested and unvested as of the date hereof, the
exercise price per share and the term of each such option. On the Closing Date,
the Company shall deliver to Parent an updated Section 2.3 of the Company
Disclosure Schedule current as of such date. Except (i) for
8
the rights created pursuant to this Agreement and (ii) as set forth in this
Section 2.3, there are no options, warrants, calls, rights, commitments,
agreements or arrangements of any character to which the Company is a party or
by which the Company is bound relating to the issued or unissued capital stock
of the Company or obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement.
Except as set forth in Section 2.3 of the Company Disclosure Schedule, there are
no contracts, commitments or agreements relating to voting, purchase or sale of
the Company's capital stock (i) between or among the Company and any of its
shareholders and (ii) to the best of the Company's knowledge, between or among
any of the Company's shareholders, except for the shareholders delivering
Irrevocable Proxies (as defined below). The holders of Company Options have
executed this Agreement consenting to the assumption or substitution of options
to purchase Parent Common Stock as provided in this Agreement. True and complete
copies of all agreements and instruments relating to or issued under the Company
Stock Option Plan have been made available to Parent and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form made available to Parent.
2.4 Authority. The Company has all requisite corporate power, authority
and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. The Company's
Board of Directors has unanimously approved the Purchase and this Agreement.
This Agreement has been duly executed and delivered by the Company and assuming
due authorization, execution and delivery by the other parties hereto,
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms subject to equitable remedies and
creditors' rights qualifications.
2.5 No Conflicts; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of the Articles of Incorporation or Bylaws of the Company, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties or assets.
(b) Except as set forth on Section 2.5 of the Company Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any government, regulatory authority, governmental
department, agency, commission, board, tribunal, dispute settlement panel or
body, bureau, official, minister, crown corporation, court or other law, rule or
regulation-making entity having or purporting to have jurisdiction on behalf of
any nation, or province or state or other geographic or political subdivision or
any
9
municipality, district or other subdivision thereof ("Governmental Entity") is
required to be obtained or made by the Company in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
2.6 Financial Statements. Section 2.6 of the Company Disclosure Schedule
includes a true, correct and complete copy of the Company's audited financial
statements for each of the fiscal years ended December 31, 1998 and 1999,
respectively, and its unaudited financial statements (balance sheet, statement
of operations and statement of cash flows) as at, and for the nine-month period
ended September 30, 2000 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with Canadian generally
accepted accounting principles (except that the unaudited financial statements
do not have notes thereto) applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of the Company in all
material respects as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments. The Company maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with Canadian generally accepted accounting
principles.
2.7 Absence of Undisclosed Liabilities. The Company has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet for the period ended September 30, 2000 (the "Company Balance
Sheet"), (ii) those incurred in the ordinary course of business and not required
to be set forth in the Company Balance Sheet under Canadian generally accepted
accounting principles, (iii) those incurred in the ordinary course of business
since the date of the Company Balance Sheet and consistent with past practice,
and (iv) those incurred in connection with the execution of this Agreement.
2.8 Absence of Certain Changes. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, since September 30, 2000 (the "Company Balance
Sheet Date") there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(c) capital expenditure or capital commitment by the Company, in any
individual amount exceeding $25,000, or in the aggregate, exceeding $100,000;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of the Company
(whether or not covered by insurance) which would constitute a Material Adverse
Effect;
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action having a Material Adverse Effect;
10
(f) material change in accounting methods or practices (including
any change in depreciation or amortization policies or rates, any change in
policies in making or reversing accruals, or any change in capitalization of
software development costs) by the Company or any revaluation by the Company of
any of its assets;
(g) revaluation by the Company of any of their respective assets;
(h) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock, except repurchases of Company Capital Stock from terminated
Company employees at the original per share purchase price of such shares;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any officers, directors, employees or advisors
of the Company, except in the ordinary course of business consistent with past
practice, or the declaration, payment, or commitment or obligation of any kind
for the payment by the Company of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement, or other than as set forth in Section 2.16 below, the establishment
of any bonus, insurance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation, the granting of stock
options, stock appreciation rights, performance awards), stock purchase or other
employee benefit plan;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business;
(k) termination or material amendment of any material contract,
agreement or license (including any distribution agreement) to which the Company
is a party or by which it is bound;
(l) loan by the Company to any person or entity, or guaranty by the
Company of any loan, except for (x) travel or similar advances made to employees
in connection with their employment duties in the ordinary course of business,
consistent with past practices and (y) trade payables in the ordinary course of
business, consistent with past practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, in excess of $25,000 in the aggregate, other than in the ordinary
course of business;
(n) the commencement or notice or, to the Company's knowledge,
threat of commencement of any lawsuit or proceeding against or, to the Company's
knowledge, investigation of the Company or its affairs by any Governmental
Entity;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.13 below) or of
infringement by the Company of any third party's Intellectual Property rights;
11
(p) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities except pursuant to the exercise of options;
(q) change in pricing or royalties set or charged by the Company to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to the Company; or
(r) agreement by the Company, or any officer or employee of the
Company on behalf of such entity to do any of the things described in the
preceding clauses (a) through (r) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
2.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of the Company,
threatened against the Company or any of its properties or any of its officers
or directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company. There is no judgment, decree or order against the Company or, to the
best knowledge of the Company, any of its directors or officers (in their
capacities as such), that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement, or that could reasonably
be expected to have a Material Adverse Effect on the Company. All litigation to
which the Company is a party (or, to the knowledge of the Company, threatened to
become a party) is disclosed in the Company Disclosure Schedule.
2.10 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon the Company which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of the Company, any acquisition of
property by the Company or the overall conduct of business by the Company as
currently conducted or as proposed to be conducted by the Company. The Company
has not entered into any agreement under which the Company is restricted from
selling, licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.11 Permits; Regulation.
(a) The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders necessary for the Company, to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "Company Authorizations") and no suspension or cancellation of any Company
Authorization is pending or, to the best of the Company's knowledge, threatened,
except where the failure to have, or the suspension or cancellation of, any
Company Authorization would not have a Material Adverse Effect on the Company.
The Company is not in conflict with, or in default or violation of, (i) any laws
applicable to the Company or by which any property or asset of the Company is
bound or affected, except as set out in Section 2.11(a) of the Company
Disclosure Schedule, (ii) any Company Authorization, or (iii) any note, bond,
mortgage, indenture, contract, agreement, lease,
12
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any property or asset of the
Company is bound or affected, except for any such conflict, default or violation
that could not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect on the Company.
(b) The Company has obtained, in all countries where the Company is
directly marketing or has directly marketed any product produced, manufactured,
marketed or distributed at any time by the Company (the "Products"), all
applicable licenses, registrations, approvals, clearances and authorizations
required by local, state or federal agencies in such countries regulating the
safety, effectiveness and market clearance of the Products currently or
previously marketed by the Company in such countries, except for any such
failures as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company has identified and made available for
examination by Parent all information relating to regulation of its Products,
including licenses, registrations, approvals, permits, device listings,
inspections, the Company's recalls and product actions, audits and the Company's
ongoing field tests. The Company has identified in writing to Parent all
international locations where regulatory information and documents are kept.
2.12 Title to Property.
(a) The Company has good and marketable title to all of its
respective properties, interests in properties and assets, real and personal,
reflected in the Company Balance Sheet or acquired after the Company Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Company Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any kind or character, except (i) the lien of current taxes
not yet due and payable, (ii) such imperfections of title, liens and easements
as do not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties, and (iii) liens securing debt
which is reflected on the Company Balance Sheet or otherwise disclosed in
Section 2.12 of the Company Disclosure Schedule. The plants, property and
equipment of the Company that are used in the operation of its business are in
good operating condition and repair having regard to their age and the uses to
which they are put. All properties used in the operations of the Company and its
Subsidiaries are reflected in the Company Balance Sheet to the extent Canadian
generally accepted accounting principles require the same to be reflected.
Section 2.12(a) of the Company Disclosure Schedule sets forth a true, correct
and complete list of all real property owned or leased by the Company, the name
of the lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and other fees payable under such lease. Such leases are
in good standing, are valid and effective in accordance with their respective
terms, and there is not under any such leases any existing default by the
Company or, to the Company's knowledge, any third party or event of default (or
event which with notice or lapse of time, or both, would constitute a default by
the Company or, to the Company's knowledge, any third party).
(b) Section 2.12(b) of the Company Disclosure Schedule also sets
forth a true, correct and complete list of all equipment (the "Equipment") owned
or leased by the Company, and such Equipment is, taken as a whole, (i) adequate
for the conduct of the
13
Company's business, consistent with its past practice, and (ii) in good
operating condition (except for ordinary wear and tear having regard to their
age and the uses to which they are put).
2.13 Intellectual Property.
(a) For purposes of this Agreement, the Company's intellectual
property (the "Intellectual Property") shall include:
(i) all copyrights, copyright registrations, proprietary
processes, trade secrets, license rights, marketing rights, specifications,
technical manuals and data, drawings, inventions, designs, patents and patent
applications, trade names, trademarks, service marks, domain names, product
information and data, know-how and development work-in-progress, customer lists,
software, business and marketing plans and other intellectual or intangible
property, whether pending, applied for or issued, whether filed in Canada, the
United States or in other countries and all rights with respect to any of the
foregoing, including without limitation the items listed in Section 2.13 of the
Company Disclosure Schedule, together with all associated goodwill;
(ii) all things authored, discovered, developed, made,
perfected, improved, designed, engineered, acquired, produced, conceived or
first reduced to practice by the Company or any of its employees or agents that
are embodied in, derived from or relate to the Company's business, in any stage
of development, including, without limitation, modifications, enhancements,
designs, concepts, techniques, methods, ideas, flow charts, coding sheets, notes
and all other information relating to the Company's business; and
(iii) any and all design and code documentation,
methodologies, processes, trade secrets, copyrights, design information, product
information, technology, formulae, routines, engineering specifications,
technical manuals and data, drawings, inventions, know-how, techniques,
engineering work papers, and notes, development work-in-process, and other
proprietary information and materials of any kind.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby (including without
limitation the continued conduct by the Company or Parent after the Closing Date
of the business as presently conducted by the Company and the use, copying,
selling, displaying, transmitting, licensing or incorporation of any
Intellectual Property in any product of Parent or an affiliate of Parent) will
not breach, violate or conflict with any agreement to which the Company is a
party governing any Intellectual Property as to cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any such
Intellectual Property or, to the Company's knowledge, in any material way impair
the right of Parent or any of its affiliates to use, sell, license or dispose
of, or to bring any action for the infringement of, any such intellectual
property or portion thereof.
(c) Neither the development, marketing, license, sale or use of any
product or intellectual property currently licensed, used or sold by the Company
or currently under development violates or will violate any license or agreement
to which the Company is a party or, to the Company's knowledge, infringes or
will infringe any copyright, patent,
14
trademark, service xxxx, trade secret or other intellectual property or other
proprietary right of any other party. To the Company's knowledge, all registered
trademarks, domain names, patents and copyrights held by the Company are valid
and subsisting, and, to the Company's knowledge, the Company has title to them
free and clear of any liens, encumbrances or adverse interests except as
disclosed on Section 2.13(c) of the Company Disclosure Schedule. There is no
pending or, to the Company's knowledge, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any of the Company's assets (including without limitation the Intellectual
Property) used in the conduct of the business of the Company as presently
conducted nor, to the Company's knowledge, is there any basis for any such
claim, nor has the Company received any notice asserting that any such asset
(including without limitation the Intellectual Property) or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party, nor to the Company's knowledge is there any basis for any
such assertion. To the Company's knowledge, there is no material unauthorized
use, infringement or misappropriation on the part of any third party of the
Company's assets (including without limitation the Intellectual Property).
(d) The Company has taken reasonable steps (including, without
limitation, entering into confidentiality and non-disclosure agreements with all
officers and employees of and consultants to the Company with access to or
knowledge of the Company's assets (including without limitation the Intellectual
Property)) to maintain the secrecy and confidentiality of, and its proprietary
rights in, the Company's assets (including without limitation the Intellectual
Property). The Company Disclosure Schedule contains a complete and accurate list
of all applications, filings and other formal actions made or taken pursuant to
federal, state, local and foreign laws by the Company to perfect or protect its
interest in its assets, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks, domain names
and copyright or mask work registrations.
(e) All filing fees required under applicable law to maintain the
Company's rights in the Intellectual Property, including, without limitation,
patent and trademark registration and prosecution fees and all professional fees
in connection therewith pertaining to the Intellectual Property due and payable
on or before the Closing Date, have been paid by the Company.
2.14 Environmental Matters. The Company is in compliance with all federal,
provincial, state, local and foreign laws, common law, rules, codes,
administrative orders and regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and there are no events or circumstances attributable to
actions of the Company arising during the Company's occupation or, to the
Company's knowledge, attributable to actions of a third party that could form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company relating to any Hazardous Materials or the violation of
any Environmental Laws.
15
2.15 Taxes.
(a) The Company and any predecessor corporations have duly and
timely filed their Tax Returns with the appropriate Governmental Entity and have
duly, completely and correctly reported all income and all other amounts and
information required to be reported thereon
(b) The Company and any predecessor corporations have duly and
timely paid all Taxes, including all installments on account of Taxes for the
current year that are due and payable by them whether or not assessed by the
appropriate Governmental Entity. The Company has established reserves that are
reflected on the Company Balance Sheet that are at least equal to the liability
of the Company for all Taxes that are not yet due and payable (and that will not
be due and payable by the Closing Date) and that relate to periods ending on or
prior to the Closing Date.
(c) The Company and any predecessor corporations have not requested,
or entered into any agreement or other arrangement or executed any waiver
providing for, any extension of time within which (i) to file any Tax Return
covering any Taxes for which the Company or any predecessor corporations is or
may be liable; (ii) to file any elections, designations or similar filings
relating to Taxes for which the Company or any predecessor corporations is or
may be liable; (iii) the Company or any predecessor corporations is required to
pay or remit any Taxes or amounts on account of Taxes; or (iv) any Governmental
Entity may assess or collect Taxes for which the Company or any predecessor
corporations is or may be liable.
(d) All Canadian federal and provincial income and capital tax
liabilities of the Company has been assessed by the relevant taxing authorities
and notices of assessment have been issued to each such entity by all relevant
taxing authorities for all taxation years prior to and including the taxation
year ended December 31, 1998.
(e) There are no proceedings, investigations, audits or Claims now
pending or, to the knowledge of the Company, threatened, against the Company or
any predecessor corporations in respect of any Taxes and there are no matters
under discussion, audit or appeal with any Governmental Entity relating to
Taxes.
(f) The Company and any predecessor corporations 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, officers or directors 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 Entity.
(g) Except pursuant to this Agreement or as specifically disclosed
in writing to Parent, for purposes of the Income Tax Act (Canada) or any other
applicable taxing statute, no person or group of persons has ever acquired or
had the right to acquire control of the Company or any predecessor corporations.
(h) None of Sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of the
Income Tax Act (Canada), or any equivalent provision of the taxation legislation
of any province
16
or any other jurisdiction, have applied or will apply to the Company or any
predecessor corporations at any time up to and including the Closing Date.
(i) The Company and any predecessor corporations have not acquired
property from a non-arm's length person, within the meaning of the Income Tax
Act (Canada), for consideration, the value of which is less than the fair market
value of the property acquired in circumstances which could subject it to a
liability under Section 160 of the Income Tax Act (Canada).
(j) For all transactions between the Company or any predecessor
corporations and any non-resident person with whom the Company or any
predecessor corporations was not dealing at arm's length during a taxation year
commencing after 1998 and ending on or before the Closing Date, the Company and
any predecessor corporations have made or obtained records or documents that
meet the requirements of paragraphs 247(4)(a) to (c) of the Income Tax Act
(Canada).
(k) The Company and any predecessor corporations are duly registered
under subdivision (d) of Division V of Part IX of the Excise Tax Act (Canada)
with respect to the goods and services tax and harmonized sales tax and the
registration number is 88030066RC.
(l) The Company and any predecessor corporations have not filed any
elections, designations or similar filings which will be applicable for any
period ending after closing.
(m) For purposes of this Agreement:
(i) "Tax Returns" includes, all returns, reports,
declarations, elections, notices, filings, information returns and statements
filed or required to be filed in respect of Taxes; and
(ii) "Taxes" includes, all taxes, duties, fees, premiums,
assessments, imposts, levies and other charges of any kind whatsoever imposed by
any Governmental Entity, together with all interest, penalties, fines, additions
to tax or other additional amounts imposed in respect thereof, including those
levied on, or measured by, or referred to as income, gross receipts, profits,
capital, transfer, land transfer, sales, goods and services, harmonized sales,
use, value-added, excise, stamp, withholding, business, franchising, property,
employer health, payroll, employment, health, social services, education and
social security taxes, all surtaxes, all customs duties and import and export
taxes, all license, franchise and registration fees and all employment
insurance, health insurance and Canada, Quebec and other government pension plan
premiums or contributions.
2.16 Employee Matters.
(a) Section 2.16(a) of the Company Disclosure Schedule sets forth a
complete list of all persons currently employed by the Company, including for
greater certainty, those employees on long term disability leave or other
absence ("Employees"), together with the titles, service dates and material
terms of employment, including current wages, salaries or hourly rate of pay,
and bonus (whether monetary or otherwise) paid since the beginning of the
17
most recently completed fiscal year or payable to each such Employee, the date
upon which such wage, salary, rate or bonus became effective and the date upon
which each such Employee was first hired by the Company. Except as disclosed, no
Employee is on long-term disability leave, extended absence or receiving
benefits pursuant to the Workplace Safety and Insurance Act (Ontario) or similar
workers' compensation legislation in other provinces.
(b) Except for those written employment contracts with salaried
Employees identified in Section 2.16(b) of the Company Disclosure Schedule,
there are no written contracts of employment entered into with any Employees or
any oral contracts of employment which are not terminable on the giving of
reasonable notice in accordance with applicable law.
(c) Except for the Benefit Plans or as set out in Section 2.16(c) of
the Company Disclosure Schedule, there are no employment policies or plans,
which are binding upon the Company.
"Benefit Plans" means all non-governmental plans, arrangements,
agreements, programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or unregistered to
which the Company is a party to or bound by or under which the Company has, or
will have, any liability or contingent liability, relating to:
(i) employment benefits relating to disability or wage
continuation during period of absence from work (including short term
disability, long term disability and workers' compensation), hospitalization,
health, medical or dental treatments or expenses, life insurance, death or
survivor's benefits and supplementary employment insurance, in each case
regardless of whether or not such benefits are insured or self-insured
(collectively, "Insurance Plans");
(ii) benefits relating to retirement or retirement savings
including, without limitation, pension plans, pensions or supplemental pensions,
registered retirement savings plans, "registered pension plans" (as defined in
the Income Tax Act (Canada)) and "retirement compensation arrangements" (as
defined in the Income Tax Act (Canada) (collectively, "Pension Plans"); and
(iii) employment benefits relating to bonus, incentive pay or
compensation, performance compensation, deferred compensation, profit sharing or
deferred profit sharing, share purchase, share option, stock appreciation,
phantom stock, vacation or vacation pay, sick pay, severance or termination pay,
employee loans or separation from service benefits, or any other type of
arrangement providing for compensation or benefits additional to base pay or
salary (collectively, "Compensation Plans").
(d) The Company has been and is being operated in full compliance
with all applicable laws relating to employees, including employment standards,
occupational health and safety laws, human rights, labor relations and pay
equity, except as set forth in Section 2.11(a) of the Company Disclosure
Schedule and for such non-compliance as could not reasonably be expected to have
a Material Adverse Effect. The Company has complied with and posted plans as
required under the Ontario Pay Equity Act. There have been no claims nor, to
18
the knowledge of the Company, are there any threatened complaints under such
laws against the Company.
(e) There are no claims or complaints nor, to the knowledge of the
Company, are there any threatened claims or complaints, against the Company
pursuant to any laws relating to employees, including employment standards,
discrimination in employment, human rights, labor relations, occupational health
and safety laws, worker's compensation, pay or employment equity. To the
knowledge of the Company nothing has occurred which might lead to a claim or
complaint against the Company, under any such laws.
(f) All current assessments under the Workplace Safety and Insurance
Act (Ontario) in relation to the Company have been paid or accrued and the
Company has not been subject to any special or penalty assessment under such
legislation which has not been paid.
(g) The Company is not a party, either directly or by operation of
law, to any collective agreement, letters of understanding, letters of intent or
other written communication with any trade union or association which may
qualify as a trade union, which would cover any of its Employees. There are no
outstanding or, to the knowledge of the Company, threatened labor tribunal
proceedings of any kind, including any proceedings which could result in
certification of a trade union as bargaining agent for Employees, and there have
not been any such proceedings within the last two years. There are no threatened
or apparent union organizing activities involving any Employees of the Company.
2.17 Employee Benefit Plans.
(a) Section 2.17 of the Company Disclosure Schedule sets forth a
complete list of the Benefit Plans. Current and complete copies of all written
Benefit Plans or, where oral, written summaries of the material terms thereof,
have been provided or made available to Parent together with current and
complete copies of all documents relating to the Benefit Plans, including, as
applicable:
(i) all documents establishing, creating or amending any of
the Benefit Plans;
(ii) all trust agreements and funding agreements;
(iii) all insurance contracts, investment management
agreements, subscription and participation agreements;
(iv) all financial statements and accounting statements and
reports, and investment reports and the most recent actuarial reports;
(v) all reports, statements, annual information returns or
other returns, filings and material correspondence with any regulatory
authority;
(vi) all legal opinions, consultants' reports and
correspondence relating to the administration of any Benefit Plan or the use of
the funds held under such plans;
19
(vii) all booklets, summaries, manuals and written
communications of a general nature distributed or made available to any
employees or former employees concerning any Benefit Plans;
(viii) a copy of the most recent letter of confirmation of
registration of the Pension Plan(s); and
(ix) a copy of any statement of investment policies and goals
prepared in respect of the Pension Plans whether or not such statement has been
filed with the applicable Governmental Entity.
(b) Each Benefit Plan is, and has been, established, registered
(where required), qualified, administered and invested, in compliance with (i)
the terms thereof, and (ii) all applicable laws; and the Company has not
received any notice from any person questioning or challenging such compliance
(other than in respect of any claim related solely to that person), and has no
knowledge of any such notice from any person questioning or challenging such
compliance.
(c) All obligations to or under the Benefit Plans (whether pursuant
to the terms thereof or any applicable laws) have been satisfied, and there are
no material outstanding defaults or violations thereunder by the Company nor
does the Company have any knowledge of any material default or violation by any
other party to any Benefit Plan.
(d) Except as disclosed in Section 2.17(d) of the Company Disclosure
Schedule or as contemplated by this Agreement, there have been no improvements,
increases or changes to, or promised improvements, increases or changes to, the
benefits provided under any Benefit Plan. None of the Benefit Plans provide for
benefit increases or the acceleration of funding obligations that are contingent
upon or will be triggered by the entering into of this Agreement or the
completion of the transactions contemplated herein except as contemplated by
this Agreement.
(e) All employer or employee payments, contributions or premiums
required to be remitted, paid to or in respect of each Benefit Plan have been
paid or remitted in a timely fashion in accordance with the terms thereof and
all applicable laws, and no Taxes, penalties or fees are owing or exigible under
any Benefit Plan.
(f) There is no proceeding, action, investigation by a Governmental
Entity, suit or claim (other than routine claims for payment of benefits)
pending or threatened involving any Benefit Plan or their assets, and, to the
Company's knowledge, no facts exist which could reasonably be expected to give
rise to any such proceeding, action, suit or claim (other than routine claims
for benefits).
(g) To the Company's knowledge, no event has occurred respecting any
registered Benefit Plan which would result in the revocation of the registration
of such Benefit Plan or entitle any person (without the consent of the Company)
to wind-up or terminate any Benefit Plan, in whole or in part, or which could
otherwise reasonably be expected to adversely affect the tax status of any such
plan.
20
(h) There are no going concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies respecting any of the
Benefit Plans.
(i) No material changes have occurred in respect of any Benefit Plan
since the date of the most recent financial, accounting, actuarial or other
report, as applicable, issued in connection with any Benefit Plan, which could
reasonably be expected to adversely affect the relevant report (including
rendering it misleading in any material respect).
(j) The Company has not received, or applied for, any payment of
surplus out of any Benefit Plan.
(k) The Company has not taken any contribution or premium holidays
under any Benefit Plan and, where so disclosed, the Company was entitled under
the terms of the Benefit Plan and under all applicable laws to take such
contribution or premium holidays; and there have been no withdrawals or
transfers of assets from any Benefit Plan and where so disclosed, such
withdrawals or transfers of assets were in accordance with the terms of such
Benefit Plan and all applicable laws.
(l) All employee data necessary to administer each Benefit Plan is
in the possession of the Company and is complete, correct and in a form which is
sufficient for the proper administration of the Benefit Plan in accordance with
the terms thereof and all applicable laws.
(m) None of the Benefit Plans, other than the Pension Plans and
stock options, provide benefits beyond retirement or other termination of
service to Employees or former employees or to the beneficiaries or dependants
of such employees, or such benefits have been properly accrued on the Financial
Statements in accordance with generally accepted account principles.
(n) None of the Benefit Plans require or permit a retroactive
increase in premiums or payments, and the level of insurance reserves, if any,
under any insured Benefit Plan is reasonable and sufficient to provide for all
incurred but unreported claims.
(o) The Company does not and has never maintained any "employee
benefit plan" (as such term is defined by Section 3.3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) in respect of employees
resident in the United States. The Company is not and has never been a member of
a "controlled group" or under "common control" (within the meaning of Section
414(b) and (c) of the Internal Revenue Code) with any other entity that is or
has ever been subject to ERISA.
2.18 Certain Agreements Affected by the Purchase. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of the Company, (ii)
materially increase any benefits otherwise payable by the Company, or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits, except as contemplated by this Agreement.
21
2.19 Material Contracts.
(a) Subsections (i) through (ix) of Section 2.19(a) of the Company
Disclosure Schedule contain a list of all contracts and agreements to which the
Company is a party and that are material to the business, results of operations,
or condition (financial or otherwise), of the Company (such contracts,
agreements and arrangements as are required to be set forth in Section 2.19(a)
of the Company Disclosure Schedule being referred to herein collectively as the
"Material Contracts"). Material Contracts shall include, without limitation, the
following and shall be categorized in the Company Disclosure Schedule as
follows:
(i) each contract and agreement (other than routine purchase
orders and pricing quotes in the ordinary course of business covering a period
of less than 1 year) for the purchase of inventory, spare parts, other materials
or personal property with any supplier or for the furnishing of services to the
Company under the terms of which the Company: (A) paid or otherwise gave
consideration of more than $50,000 in the aggregate during the calendar year
ended December 31, 1999, (B) is likely to pay or otherwise give consideration of
more than $50,000 in the aggregate during the calendar year ended December 31,
2000, (C) is likely to pay or otherwise give consideration of more than $50,000
in the aggregate over the remaining term of such contract, or (D) cannot be
cancelled by the Company without penalty or further payment of less than
$25,000;
(ii) each customer contract and agreement (other than routine
purchase orders, pricing quotes with open acceptance and other tender bids, in
each case, entered into in the ordinary course of business and covering a period
of less than one year) to which the Company is a party which (A) involved
consideration of more than $100,000 in the aggregate during the calendar year
ended December 31, 1999, (B) is likely to involve consideration of more than
$100,000 in the aggregate during the calendar year ended December 31, 2000, (C)
is likely to involve consideration of more than $100,000 in the aggregate over
the remaining term of the contract, or (D) cannot be cancelled by the Company
without penalty or further payment of less than $50,000;
(iii) (A) all distributor, manufacturer's representative,
broker, franchise, agency and dealer contracts and agreements to which the
Company is a party (specifying on a matrix, in the case of distributor
agreements, the name of the distributor, product, territory, termination date
and exclusivity provisions) and (B) all sales promotion, market research,
marketing and advertising contracts and agreements to which the Company is a
party which: (1) involved consideration of more than $25,000 in the aggregate
during the calendar year ended December 31, 1999, (2) are likely to involve
consideration of more than $25,000 in the aggregate during the calendar year
ended December 31, 2000, or (3) are likely to involve consideration of more than
$25,000 in the aggregate over the remaining term of the contract;
(iv) all management contracts with independent contractors or
consultants (or similar arrangements) to which the Company is a party and which
(A) involved consideration or more than $25,000 in the aggregate during the
calendar year ended December 31, 1999, (B) are likely to involve consideration
of more than $25,000 in the aggregate during
22
the calendar year ended December 31, 2000, or (C) are likely to involve
consideration of more than $25,000 in the aggregate over the remaining term of
the contract;
(v) all contracts and agreements (excluding routine checking
account overdraft agreements involving xxxxx cash amounts) under which the
Company has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness or under which the Company has imposed (or may
impose) a security interest or lien on any of their respective assets, whether
tangible or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the ability of
the Company or, after the Closing, Parent or any of its affiliates, to compete
in any line of business or with any person or in any geographic area or during
any period of time, or to solicit any customer or client;
(vii) all contracts and agreements between or among the
Company, on the one hand, and any affiliate of the Company, on the other hand;
(viii) all contracts and agreements to which the Company is a
party under which it has agreed to supply products to a customer at specified
prices, whether directly or through a specific distributor, manufacturer's
representative or dealer; and
(ix) all other contracts or agreements (A) which are material
to the Company or the conduct of its businesses, or (B) the absence of which
would have a Material Adverse Effect on the Company.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, each Company license, each Material
Contract and each other material contract or agreement of the Company which
would not have been required to be disclosed in Section 2.19(a) of the Company
Disclosure Schedule had such contract or agreement been entered into prior to
the date of this Agreement, is a legal, valid and binding agreement subject to
equitable remedies and creditors' rights, and, to the Company's knowledge, none
of the Company licenses or Material Contracts is in default by its terms or has
been cancelled by the other party; the Company is not in receipt of any claim of
default under any such agreement; and the Company does not anticipate any
termination or change to, or receipt of a proposal with respect to, any such
agreement as a result of the Purchase or otherwise. The Company has furnished
Parent with true and complete copies of all such written agreements together
with all written amendments, written waivers or other written changes thereto.
2.20 Interested Party Transactions. The Company is not indebted to any
director, officer, employee or agent of the Company (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to the Company, except as set forth in Section 2.20 of
the Company Disclosure Schedule.
2.21 Insurance. Section 2.21 of the Company Disclosure Schedule lists each
of the insurance policies carried by the Company. There is no material claim
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and the Company is otherwise in compliance with the terms of such
23
policies and bonds. The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.22 Compliance With Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not reasonably be expected to
have a Material Adverse Effect on the Company and except as disclosed in Section
2.11(a) of the Company Disclosure Schedule.
2.23 Minute Books and Corporate Records. The minute and record books of
the Company made available to Parent and its counsel contain a complete summary
of all formal meetings of directors and shareholders and copies of all by-laws
and resolutions passed by the directors and shareholders of the Company since
the time of incorporation of the Company through the date of this Agreement; all
such meetings were duly called and held and all such by-laws and resolutions
were duly passed or executed and reflect all transactions referred to in such
minutes, by-laws or resolutions accurately in all material respects. The share
certificate books, registers of shareholders, registers of transfers, registers
of directors, registers of holders of debt instruments and other corporate
registers of the Company are complete and accurate in all material respects.
2.24 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document which has been requested by
Parent or its counsel in connection with their legal and accounting review of
the Company.
2.25 Brokers' and Finders' Fees. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.26 Accounts Receivable. All the accounts receivable and notes receivable
owing to the Company as of the Company Balance Sheet Date constitute, and as of
the Closing Date will constitute, valid and enforceable claims arising from bona
fide transactions in the ordinary course of business, and there are no known or
asserted claims, refusals to pay or other rights of set off against any thereof.
There is (a) no account debtor or note debtor delinquent in its payment by more
than 90 days, (b) no account debtor or note debtor that has refused (or, to the
best knowledge of the Company, threatened to refuse) to pay its obligations for
any reason, (c) to the best knowledge of the Company, no account debtor or note
debtor that is insolvent or bankrupt and (d) no account receivable or note
receivable which is pledged to any third party by the Company. Except to the
extent of a reserve which the Company has established specifically for doubtful
accounts receivable and notes receivable (which reserve is set forth on the
Company Balance Sheet, is at the date hereof, and will be on the Closing Date,
in the Company's judgment reasonable under the circumstances and is consistent
with past practice), to the knowledge of the Company as of the date hereof and
the Closing Date, all of the accounts receivable of the Company existing at the
Closing are expected to be paid in full by not later than the 90th day after the
Closing and, to the knowledge of the Company as of the date hereof and the
Closing Date, all of the notes receivable are expected to be paid in accordance
with the terms thereof.
24
2.27 Customers and Suppliers. Expect as set forth in Section 2.27 of the
Company Disclosure Schedule, as of the date hereof, no customer which
individually accounted for more than 10% of the Company's gross revenues during
the 12-month period preceding the Company Balance Sheet Date, and no supplier of
the Company, has cancelled or otherwise terminated, or made any written threat
to the Company to cancel or otherwise terminate its relationship with the
Company, or has at any time on or after the Company Balance Sheet Date decreased
materially its services or supplies to the Company in the case of any such
supplier, or its usage of the services of the Company in the case of Lucent
Technologies, and to the Company's knowledge, no such supplier or Lucent
Technologies intends to cancel or otherwise terminate its relationship with the
Company or to decrease materially its services or supplies to the Company or its
usage of the services of the Company, as the case may be. The Company has not
knowingly breached, so as to provide a benefit to the Company that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of the Company.
2.28 Third Party Consents. Except as set forth in Section 2.28 of the
Company Disclosure Schedule, no consent or approval is required to be obtained
by the Company from any third party with whom the Company has contracted or any
Governmental Entity in order to effect the Purchase, this Agreement or any of
the transactions contemplated hereby.
2.29 Product Releases. The Company has provided Parent a Schedule of
Product Releases, which Schedule is attached as Section 2.29 of the Company
Disclosure Schedule. As of the date hereof and as of the Closing Date, the
Company has a good faith reasonable belief that it can achieve the release of
products on the schedule described in Section 2.29 and is not aware of any
change in its circumstances or other fact that has occurred that would cause it
to believe that it will be unable to meet such release schedule.
2.30 Bank Accounts. Section 2.30 of the Company Disclosure Schedule sets
forth a list of the financial institutions in which the Company maintains any
depository account, trust account or safety deposit box and the names of all
persons authorized to draw on or who have access to such accounts or safety
deposit boxes.
2.31 Shareholder Loans . As of the Closing, there will be no outstanding
Shareholder loans owed by the Company to any Shareholder.
SECTION 3
3. Representations and Warranties of the Shareholders.
Each Shareholder hereby represents and warrants to Exchangeco, Callco and
Parent, as to himself, herself or itself, as the case may be, as follows:
3.1 Power, Authorization and Validity. The Shareholder has all requisite
legal and, to the extent applicable, corporate power, and authority to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved and authorized by all necessary action,
including, if applicable, corporate action, by or on behalf of such Shareholder.
This
25
Agreement and any other agreement to be entered into by such Shareholder has
been duly executed and delivered by such Shareholder and this and any other
agreement to be entered into under the terms of this Agreement constitutes a
valid and binding obligation of the Shareholder enforceable against him in
accordance with its terms, subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief and equitable remedies. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to the Shareholder
in connection with the execution and delivery of this Agreement by the
Shareholder or the consummation by the Shareholder of the transactions
contemplated hereby.
3.2 Shares Entirely for Own Account. This Agreement is made with the
Shareholder in reliance upon the Shareholder's representation to the Company,
which by such Shareholder's execution of this Agreement such Shareholder hereby
confirms, that any Exchangeable Shares or Parent Common Stock distributed by
Exchangeco to the Shareholder will be acquired for investment for such
Shareholder's own account, not as a nominee or agent, and that such Shareholder
has no present intention of selling, granting any participation in, or otherwise
distributing the Shares except in accordance with applicable federal and state
securities laws.
3.3 General Solicitation. The offer and sale of the Exchangeable Shares or
Parent Common Stock to the Shareholders was not accompanied by the publication
of any advertisement.
3.4 Disclosure of Information. The Shareholder believes it has received
all the information it considers necessary or appropriate for deciding whether
to acquire the Exchangeable Shares or Parent Common Stock. The Shareholder
further represents that it has received the Parent's Disclosure Document dated
November 14, 2000, including all appendices thereto (the "Parent Disclosure
Document") and had an opportunity to ask questions and receive answers from
Exchangeco and Parent regarding the terms and conditions of the offering of the
shares of Exchangeco's Exchangeable Shares and Parent's Common Stock.
3.5 Financial Sophistication. By reason of the Shareholders' business or
financial experience or together with the Shareholders' professional advisor or
advisors, the Shareholders are each capable of evaluating the merits and risks
of their investment in the Exchangeable Shares and Parent Common Stock, have the
ability to protect their own interests in this transaction and are financially
capable of bearing the economic risk of their investment, including a total loss
of this investment.
3.6 Title to Stock. The Shareholder is the sole registered and beneficial
owner of the shares of the Company Capital Stock reflected next to such
Shareholder's name on Schedule A and has good, valid and marketable title to
such shares of Company Capital Stock free and clear of all restrictions, claims,
liens, charges, encumbrances and equities whatsoever, except private company
restrictions. The Shareholder has never owned, or had any other right to
acquire, shares of Company Capital Stock other than those listed on Schedule A
and has never transferred any shares of Company Capital Stock. The Shareholder
represents that he, she or it has full right, power and authority to sell,
transfer and deliver such shares to Exchangeco or Callco, and,
26
upon delivery of the certificate or certificates therefor duly endorsed for
transfer to Exchangeco or Callco and Exchangeco's or Callco's payment for and
acceptance thereof, will transfer to Exchangeco or Callco good, valid and
marketable title thereto free and clear of any restriction, claim, lien, charge,
encumbrance or equity whatsoever. The Shareholder is not party to any voting
trust, agreement or arrangement affecting the exercise of the voting rights of
the shares of Company Capital Stock. There is no action, proceeding, claim or,
to the Shareholder's knowledge, investigation against the Shareholder or the
Shareholder's assets, properties or, as applicable, any of the Shareholder's
respective officers or directors, pending or, to the Shareholder's knowledge,
threatened, at law or in equity, or before any court, arbitrator or other
tribunal, or before any administrative law judge, hearing officer or
administrative agency relating to or in any other manner impacting upon the
shares of Company Capital Stock held by such Shareholder.
3.7 Exemption from Registration Requirements. The Shareholder understands
that the Exchangeable Shares or Parent Common Stock have not been, and will not
be, registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon the exemption contained in Section 4(2) of the
Securities Act and Regulation D promulgated thereunder from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Shareholder's
representations as expressed herein.
3.8 Restricted Securities. The Shareholder understands that the
Exchangeable Shares or Parent Common Stock are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Exchangeco or Parent in a transaction not involving a public
offering and that under such laws and applicable regulations such Exchangeable
Shares or Parent Common Stock may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection, the
Shareholder represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.9 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Shareholder further agrees not to make any
disposition of all or any portion of the Exchangeable Shares or shares of Parent
Common Stock unless and until:
(a) there is then in effect a "Registration Statement" under the
Securities Act covering such proposed disposition, and such disposition is made
in accordance with such Registration Statement; or
(b) an exemption from registration under the Securities Act is
available and, if reasonably requested by Exchangeco, the Shareholder shall have
furnished Exchangeco with an opinion of counsel, reasonably satisfactory to
Exchangeco, that such disposition will not require registration under the
Securities Act; provided that no such opinion shall be required to exchange the
Exchangeable Shares into Parent Common Stock.
27
3.10 Legends. It is understood that certificates for the Exchangeable
Shares or shares of Parent Common Stock, and any securities issued in respect
thereof or exchange therefor, may bear one or more restrictive legends
including, but not limited to, the following legends:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT."
"THESE SECURITIES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET FORTH
IN A SHARE PURCHASE AGREEMENT DATED NOVEMBER 15, 2000 (A COPY OF WHICH MAY BE
OBTAINED FROM THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE), AND MAY NOT BE
SOLD, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF SUCH AGREEMENT."
3.11 No Violation. The execution, delivery and performance of this
Agreement, and the consummation of the Purchase and the other transactions
contemplated by this Agreement do not and will not conflict with or result in a
violation of the Articles of Incorporation, Bylaws, partnership agreement or
other applicable charter document of the Shareholder, or conflict with, or (with
or without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of, or constitute a default or result in the creation or
imposition of any lien, charge or encumbrance upon any of the Shareholder's
shares of Company Capital Stock under, (a) any instrument, indenture, lease,
mortgage or other agreement or contract to which the Shareholder is a party or
to which such Shareholder or any of such Shareholder's assets or properties may
be subject or (b) any federal, state, local or foreign judgment, writ, decree,
order, ordinance, statute, rule or regulation applicable to the Shareholder or
the Shareholder's assets or properties. No consent or approval is required to be
obtained by the Shareholder from any third party or any Governmental Entity in
order to effect the Purchase, this Agreement or any of the transactions
contemplated hereby, except for such consents or approvals that have been
obtained and the continuance and Amalgamation described in Section 7.17.
3.12 Acknowledgment. The Shareholder hereby acknowledges that the
Shareholder has read this Agreement and the other documents applicable to such
Shareholder to be delivered in connection with the consummation of the
transactions applicable to such Shareholder contemplated hereby and has made an
independent examination of the transactions contemplated hereby (including the
tax consequences thereof). The Shareholder acknowledges that the Shareholder has
had an opportunity to consult with and has relied solely upon the advice, if
any, of the Shareholder's legal counsel, financial advisors, or accountants with
respect to the transactions contemplated hereby to the extent the Shareholder
has deemed necessary, and has not been advised or directed by Exchangeco, Callco
or Parent, the Company or their respective legal counsel or other advisors in
respect of any such matters and has not relied on any such parties in connection
with this Agreement and the transactions contemplated hereby.
28
SECTION 4
4. Representations and Warranties Concerning Holdcos.
Each of Xerxes Wania, Xxxxx Xxxxxx and Xxxxxx Xxxxx hereby represent and
warrant to Exchangeco, Callco and Parent, as to Cimex Holding Inc., 1291480
Ontario Inc. and 000000 Xxxxxx Inc., respectively, as follows:
4.1 Incorporation. Cimex Holding Inc. ("Cimex") is a corporation duly
incorporated and organized and validly existing and in good standing under the
laws of Canada and has the corporate power to enter into and perform its
obligations under this Agreement. 1291480 Ontario Inc. ("1291480") is a
corporation duly incorporated and organized and validly existing and in good
standing under the laws of Ontario and has the corporate power to enter into and
perform its obligations under this Agreement. 166482 Canada Inc. ("166482") is a
corporation duly incorporated and organized and validly existing and in good
standing under the laws of Ontario and has the corporate power to enter into and
perform its obligations under this Agreement.
4.2 Capitalization. Subject to Section 7.20, the authorized share capital
of Cimex consists solely of unlimited common shares, of which 100 shares are
issued (and no more), and unlimited preference shares, of which none are issued,
being all of the Cimex's shares, are validly issued and outstanding as fully
paid and non-assessable shares. All of Cimex's Shares are registered in the name
of Xerxes Wania, Xxxxxx Xxxxx and Xxxxx Xxxxx and are beneficially owned by
Xerxes Wania, Xxxxxx Xxxxx and Xxxxx Xxxxx free and clear of all mortgages,
liens, charges, pledges, encumbrances, claims, security interests, restrictions
or rights whatsoever. Subject to Section 7.20, the authorized share capital of
1291480 consists solely of unlimited common shares, of which 100 shares are
issued (and no more), being all of the 1291480's shares, are validly issued and
outstanding as fully paid and non-assessable shares. All of 1291480's Shares are
registered in the name of Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxxxx
Xxxxxx and are beneficially owned by Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxxx
and Xxxxxxx Xxxxxx free and clear of all mortgages, liens, charges, pledges,
encumbrances, claims, security interests, restrictions or rights whatsoever.
Subject to Section 7.20, the authorized share capital of 166482 consists solely
of unlimited Class A Shares, of which 1,160,704 shares are issued (and no more),
unlimited Class B Shares, Class C Shares, Class D Shares and Class E Shares, of
which none are issued, being all of the 166482's shares, are validly issued and
outstanding as fully paid and non-assessable shares. All of 166482's Shares are
registered in the name of Xxx Xxxxx, Xxxxxx Xxxxx and 1794091 Canada Inc. and
are beneficially owned by Xxx Xxxxx, Xxxxxx Xxxxx and 1794091 Canada Inc. free
and clear of all mortgages, liens, charges, pledges, encumbrances, claims,
security interests, restrictions or rights whatsoever.
4.3 Restricted Activities. Since its incorporation, the sole activity of
Cimex has been the acquisition and ownership of the Company's Class A Shares.
Cimex owns or holds no property or assets or any interests therein of any nature
or kind whatsoever other than the Class A Shares of the Company and Cimex has
never carried on nor currently carries on any active business. Since its
incorporation, the sole activity of 1291480 has been the acquisition and
ownership of the Company's Class A Shares. 1291480 owns or holds no property or
assets or any interests therein of any nature or kind whatsoever other than the
Class A Shares of the
29
Company and 1291480 has never carried on nor currently carries on any active
business. Since its incorporation, the sole activity of 166482 has been the
acquisition and ownership of the Company's Class A Shares. 166482 owns or holds
no property or assets or any interests therein of any nature or kind whatsoever
other than the Class A Shares of the Company and 166482 has never carried on nor
currently carries on any active business.
4.4 No Obligations. At the time of the Amalgamation, Cimex will have no
indebtedness or any obligations or liabilities of any other manner or amount
whatsoever, (whether actual or contingent) including, without limitation, any
liabilities in respect of federal or provincial income, corporate, capital,
goods and services, sales, excise or any other taxes, duties or imposts of any
nature or kind whatsoever, or in respect of any judgments, orders, fines,
penalties, awards or decrees of any court, tribunal or governmental,
administrative or regulatory department, commission, board, bureau, agency or
instrumentality, domestic or foreign. At the time of the Amalgamation, 1291480
will have no indebtedness or any obligations or liabilities of any other manner
or amount whatsoever (whether actual or contingent), including, without
limitation, any liabilities in respect of federal or provincial income,
corporate, capital, goods and services, sales, excise or any other taxes, duties
or imposts of any nature or kind whatsoever, or in respect of any judgments,
orders, fines, penalties, awards or decrees of any court, tribunal or
governmental, administrative or regulatory department, commission, board,
bureau, agency or instrumentality, domestic or foreign. At the time of the
Amalgamation, 166482 will have no indebtedness or any obligations or liabilities
of any other manner or amount whatsoever (whether actual or contingent),
including, without limitation, any liabilities in respect of federal or
provincial income, corporate, capital, goods and services, sales, excise or any
other taxes, duties or imposts of any nature or kind whatsoever, or in respect
of any judgments, orders, fines, penalties, awards or decrees of any court,
tribunal or governmental, administrative or regulatory department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
4.5 No Agreements. Cimex has no subsidiaries and is not a party to or
bound or affected by any contract (whether or not in writing), agreements,
commitments, understandings, leases, licenses, mortgages, indentures, bonds,
notes and other instruments, except for this agreement and the agreement by
which it purchased the Class A Shares of the Company. Cimex is not a party to or
bound by any agreement of guarantee, support, indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person, firm or
corporation, except for such loans described in Section 7.20. 1291480 has no
subsidiaries and is not a party to or bound or affected by any contract (whether
or not in writing), agreements, commitments, understandings, leases, licenses,
mortgages, indentures, bonds, notes and other instruments, except for this
agreement and the agreement by which it purchased the Class A Shares of the
Company. 1291480 is not a party to or bound by any agreement of guarantee,
support, indemnification, assumption or endorsement or any other like commitment
of the obligations, liabilities (contingent or otherwise) or indebtedness of any
other person, firm or corporation, except for such loans described in Section
7.20. 166482 has no subsidiaries and is not a party to or bound or affected by
any contract (whether or not in writing), agreements, commitments,
understandings, leases, licenses, mortgages, indentures, bonds, notes and other
instruments, except for this agreement and the agreement by which it purchased
the Class A Shares of the Company. 166482 is not a party to or bound by any
agreement of guarantee, support, indemnification, assumption or endorsement or
any other like commitment of the obligations, liabilities (contingent or
30
otherwise) or indebtedness of any other person, firm or corporation, except for
such loans described in Section 7.20.
4.6 No Employees. Cimex has not had and does not have any employees and
its directors and officers receive no remuneration or compensation from Cimex.
1291480 has not had and does not have any employees and its directors and
officers receive no remuneration or compensation from 1291480. 166482 has not
had and does not have any employees and its directors and officers receive no
remuneration or compensation from 166482.
4.7 No Dividends. No dividends or other distributions of any kind have
been declared or set aside by Cimex which have not been fully paid. No dividends
or other distributions of any kind have been declared or set aside by 1291480
which have not been fully paid. No dividends or other distributions of any kind
have been declared or set aside by 166482 which have not been fully paid.
4.8 No Joint Venture Interests, etc. Cimex is not a partner, co-tenant,
joint venturer or otherwise a participant in any partnership, joint venture,
co-tenancy or other jointly owned business. 1291480 is not a partner, co-tenant,
joint venturer or otherwise a participant in any partnership, joint venture,
co-tenancy or other jointly owned business. 166482 is not a partner, co-tenant,
joint venturer or otherwise a participant in any partnership, joint venture,
co-tenancy or other jointly owned business.
4.9 Litigation. There are no claims, investigations, actions, suits or
proceedings commenced, pending or threatened by, against or affecting Cimex,
whether at law or in equity in any court or before or by any federal,
provincial, municipal or other governmental or administrative or regulatory
department, commission, board, tribunal, bureau, agency or instrumentality,
domestic or foreign. There are no claims, investigations, actions, suits or
proceedings commenced, pending or threatened by, against or affecting 1291480,
whether at law or in equity in any court or before or by any federal,
provincial, municipal or other governmental or administrative or regulatory
department, commission, board, tribunal, bureau, agency or instrumentality,
domestic or foreign. There are no claims, investigations, actions, suits or
proceedings commenced, pending or threatened by, against or affecting 166482,
whether at law or in equity in any court or before or by any federal,
provincial, municipal or other governmental or administrative or regulatory
department, commission, board, tribunal, bureau, agency or instrumentality,
domestic or foreign.
4.10 Compliance. Cimex is in full compliance with all laws, rules or
regulations to which it is subject. 1291480 is in full compliance with all laws,
rules or regulations to which it is subject. 166482 is in full compliance with
all laws, rules or regulations to which it is subject.
4.11 Bank Accounts. Cimex does not maintain any depository account, trust
account or safety deposit box and has not granted any powers of attorney.
1291480 does not maintain any depository account, trust account or safety
deposit box and has not granted any powers of attorney. 166482 does not maintain
any depository account, trust account or safety deposit box and has not granted
any powers of attorney.
31
4.12 Books and Records. The books and records of Cimex fairly and
correctly set out and disclose in all respects, in accordance with generally
accepted accounting principles in Canada consistently applied, the financial
position of Cimex as of the date hereof and all financial transactions of Cimex
have been accurately recorded in such books and records. The corporate records
and minute books of Cimex contain complete and accurate minutes of all meetings
or resolutions of the directors and shareholders of Cimex held since its
incorporation and all such meetings were duly called and held and the share
certificate books, register of shareholders, register of transfers and register
of directors and officers of Cimex are complete and accurate. The books and
records of 1291480 fairly and correctly set out and disclose in all respects, in
accordance with generally accepted accounting principles in Canada consistently
applied, the financial position of 1291480 as of the date hereof and all
financial transactions of 1291480 have been accurately recorded in such books
and records. The corporate records and minute books of 1291480 contain complete
and accurate minutes of all meetings or resolutions of the directors and
shareholders of 1291480 held since its incorporation and all such meetings were
duly called and held and the share certificate books, register of shareholders,
register of transfers and register of directors and officers of 1291480 are
complete and accurate. The books and records of 166482 fairly and correctly set
out and disclose in all respects, in accordance with generally accepted
accounting principles in Canada consistently applied, the financial position of
166482 as of the date hereof and all financial transactions of 166482 have been
accurately recorded in such books and records. The corporate records and minute
books of 166482 contain complete and accurate minutes of all meetings or
resolutions of the directors and shareholders of 166482 held since its
incorporation and all such meetings were duly called and held and the share
certificate books, register of shareholders, register of transfers and register
of directors and officers of 166482 are complete and accurate.
4.13 Voting. Xerxes Wania has not previously granted or agreed to grant
any proxy in respect of the shares of Cimex or entered into any voting trust,
vote pooling or other agreement with respect to the right to vote, call meetings
of shareholders or give consents or approvals of any kind as to the shares of
Cimex. Xxxxx Xxxxxx has not previously granted or agreed to grant any proxy in
respect of the shares of 1291480 or entered into any voting trust, vote pooling
or other agreement with respect to the right to vote, call meetings of
shareholders or give consents or approvals of any kind as to the shares of
1291480. Xxx Xxxxx has not previously granted or agreed to grant any proxy in
respect of the shares of 166482 or entered into any voting trust, vote pooling
or other agreement with respect to the right to vote, call meetings of
shareholders or give consents or approvals of any kind as to the shares of
166482.
4.14 Articles and By-laws. Xerxes Wania has made available to Parent a
true and complete copy of the articles and by-laws of Cimex, including any and
all amendments thereto, and such articles and by-laws are in full force and
effect. Xxxxx Xxxxxx has made available to Parent a true and complete copy of
the articles and by-laws of 1291480, including any and all amendments thereto,
and such articles and by-laws are in full force and effect. Xxx Xxxxx has made
available to Parent a true and complete copy of the articles and by-laws of
166482, including any and all amendments thereto, and such articles and by-laws
are in full force and effect.
4.15 No Undisclosed Facts. There are no facts which may materially affect
Cimex or its shares or the ability to amalgamate Cimex with any other
corporation prior to Closing which
32
have not been previously disclosed to Parent. There are no facts which may
materially affect 1291480 or its shares or the ability to amalgamate 1291480
with any other corporation prior to Closing which have not been previously
disclosed to Parent. There are no facts which may materially affect 166482 or
its shares or the ability to amalgamate 166482 with any other corporation prior
to Closing which have not been previously disclosed to Parent.
SECTION 5
5. Representations and Warranties of Exchangeco, Callco and Parent.
Each of Exchangeco, Callco and Parent represent and warrant to the Company
and the Shareholders as follows:
5.1 Organization, Standing and Power. Each of Exchangeco and Parent is a
corporation duly organized, and validly existing and in good standing under the
laws of its jurisdiction of organization. Callco is an unlimited liability
company duly organized, and validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Exchangeco, Callco and Parent has
the corporate or other power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly qualified to
do business and is validly subsisting in each jurisdiction in which the failure
to be so qualified and validly subsisting would have a Material Adverse Effect
on Exchangeco, Callco or Parent. Exchangeco has delivered a true and correct
copy of the Articles of Incorporation and Bylaws or other charter documents, as
applicable, of Exchangeco, each as amended to date, to the Company. Callco has
delivered a true and correct copy of the Articles of Association and Bylaws or
other charter documents, as applicable, of Callco, each as amended to date, to
the Company. Parent has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of Parent,
each as amended to date, to the Company. Neither Parent nor any of its
subsidiaries is in violation of any material provisions of its Certificate of
Incorporation or Bylaws or equivalent organizational documents.
5.2 Capital Structure. The authorized capital stock of Exchangeco, on the
date hereof, consists of an unlimited number of Common Shares, of which one (1)
common share is issued and outstanding as of the close of business on November
14, 2000. Exchangeco shall file articles of amendment prior to the Closing Date
to create an unlimited number of Exchangeable Shares and junior preferred
shares. The authorized capital stock of Callco consists of 10,000,000 common
shares, of which 100 common shares are issued and outstanding as of the close of
business on November 14, 2000. The authorized capital stock of Parent consists
of 100,000,000 shares of Common Stock, $0.001 par value, of which 14,129,080
shares were issued and outstanding as of the close of business on September 30,
2000. As of the close of business on September 30, 2000, Parent has reserved
4,706,454 shares of Common Stock for issuance to employees, directors and
independent contractors pursuant to the Parent Stock Option Plan (as defined
below), of which approximately 215,000 shares have been issued pursuant to
option exercises, and 2,523,345 shares are subject to outstanding, unexercised
options. There are no other outstanding shares of capital stock or voting
securities of Parent other than shares of Parent Common Stock issued after
September 30, 2000 upon the exercise of options issued under the Parent's 2000
Stock Plan (the "Parent Stock Option Plan"). Other than as contemplated under
this Agreement, there are no other options, warrants, calls, rights, commitments
or agreements of
33
any character to which Exchangeco, Callco or Parent is a party or by which any
of them is bound obligating Exchangeco, Callco or Parent to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of Exchangeco, Callco or Parent or
obligating Exchangeco, Callco or Parent to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. The Exchangeable Shares
and Parent Common Stock to be issued pursuant to the Purchase will be duly
authorized, validly issued, fully paid, and non-assessable.
5.3 Authority. Each of Exchangeco, Callco and Parent has all requisite
corporate or other power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Exchangeco, Callco and Parent (other than, with respect to the Purchase, the
filing and recordation of appropriate documents as required by Canadian law).
This Agreement has been duly executed and delivered by each of Exchangeco,
Callco and Parent and constitutes the valid and binding obligations of
Exchangeco, Callco and Parent.
5.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Articles of Incorporation or Bylaws of Exchangeco, as amended, (ii) any
provision of the Articles of Association or Bylaws of Callco, as amended, (iii)
any provision of the Certificate of Incorporation or Bylaws of Parent, as
amended, or (iv) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to each of
Exchangeco, Callco or Parent or its properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to either Exchangeco, Callco or Parent in connection with the
execution and delivery of this Agreement by Exchangeco, Callco or Parent or the
consummation by Exchangeco, Callco or Parent of the transactions contemplated
hereby, except for (i) the filing of appropriate documents as required by
Canadian Law, (ii) the filing by Parent of a Form 8-K with the SEC and National
Association of Securities Dealers ("NASD") within 15 days after the Closing
Date, (iii) any filings as may be required under applicable state securities
laws and the securities laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Exchangeco and
would not prevent, materially alter or delay any the transactions contemplated
by this Agreement.
5.5 SEC Documents; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since March 23, 2000, and previously has made
available to the Company copies, in the form filed with the SEC, of (i) its Form
S-1, and (ii) its Quarterly
34
Reports on Form 10-Q for the periods ended March 31, 2000 and June 30, 2000, and
Parent will have made available to the Company true and complete copies of any
additional documents filed with the SEC by Parent after the date hereof and
prior to the Closing (collectively, the "Parent SEC Documents") and the Parent
Disclosure Document. As of their respective filing dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Parent SEC Documents or the
Parent Disclosure Document contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed Parent SEC Document prior to the date hereof.
(b) The financial statements of Parent, including the notes thereto,
included in the Parent SEC Documents (the "Parent Financial Statements") were
complete and correct in all material respects as of their respective filing
dates, complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with United States generally accepted accounting principles applied
on a basis consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto or, in the case of
unaudited statements, included in Quarterly Reports on Forms 10-Q). The Parent
Financial Statements fairly present the consolidated financial condition and
operating results of Parent and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in Parent
accounting policies except as described in the notes to the Parent Financial
Statements.
5.6 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent or any of its
subsidiaries, threatened against Parent or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Parent. There is no
judgment, decree or order against Parent or any of its subsidiaries or, to the
knowledge of Parent or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Parent.
5.7 Broker's and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
5.8 Investment Canada. Exchangeco and Callco are WTO Investors within the
meaning of the Investment Canada Act.
5.9 Exchangeco and Callco Formation. Exchangeco and Callco have been
formed for the sole purpose of effecting the Purchase and apart from this
Agreement have no liabilities.
35
5.10 Nasdaq Listing. Parent is not required to file with the Nasdaq
National Market a Notification Form for Listing of Additional Shares with
respect to the shares of Parent Common Stock issuable pursuant to this Agreement
and the transactions contemplated hereby for such shares to be listed on the
Nasdaq National Market.
SECTION 6
6. Conduct Prior to the Closing.
6.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Company agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by the Parent), to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to pay debts and Taxes when due subject
(i) to good faith disputes over such debts or Taxes and (ii) in the case of
Taxes of the Company, to Parent's consent to the filing of material Tax Returns
if applicable, to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve intact
its present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall be
unimpaired at the Closing. The Company agrees to promptly notify Parent of any
event or occurrence not in the ordinary course of its business, and of any event
which could have a Material Adverse Effect. Without limiting the foregoing,
except as expressly contemplated by this Agreement, the Company shall not do,
cause or permit any of the following, or allow, cause or permit any of the
following, without the prior written consent of Parent:
(a) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it;
(c) Stock Option Plans, Etc. Except as contemplated by this
Agreement, accelerate, amend or change the period of exercisability or vesting
of options or other rights granted under its stock plans or authorize cash
payments in exchange for any options or other rights granted under any of such
plans;
(d) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
36
(e) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement;
(f) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property except non-exclusive licenses entered into
in the ordinary course;
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its business, taken as a whole, except in the ordinary course
of business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Leases. Enter into operating lease in excess of $10,000;
(k) Payment of Obligations. Pay, discharge or satisfy in an amount
in excess of $10,000 in any one case or $100,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financial Statements;
(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(m) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend
any employee benefit or stock purchase or option plan, or hire any new employees
(except that it may hire a replacement for any current employee if it first
provides Parent advance notice regarding such hiring decision), pay any special
bonus or special remuneration to any employee or director, or increase the
salaries or wage rates of its employees;
37
(p) Severance Arrangement. Grant any severance or termination pay
(i) to any director or officer or (ii) to any other employee except (A) payments
made pursuant to standard written agreements outstanding on the date of this
Agreement or (B) grants which are made in the ordinary course of business in
accordance with its standard past practice;
(q) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its business, taken as a whole;
(s) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(t) Notices. The Company shall give all notices and other
information required to be given to the employees of the Company, any collective
bargaining unit representing any group of employees of the Company, and any
applicable government authority in connection with the transactions provided for
in this Agreement;
(u) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(v) Accounting Policies and Procedures. Make any change to its
accounting methods, principles, policies, procedures or practices, except as may
be required by Canadian generally accepted accounting practices or applicable
statutory accounting principles; or
(w) Other. Take or agree in writing or otherwise to take, any of the
actions described in Sections 6.1(a) through (v) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder other than actions taken in the ordinary course of business.
6.2 No Solicitation. The Company and the officers, directors, employees or
other agents of the Company will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Competing Transaction (as defined
below) or engage in negotiations with, or (ii) disclose any nonpublic
information relating to the Company to, or afford access to the properties,
books or records of the Company to, any person that has advised the Company that
it may be
38
considering making, or that has made, a Competing Transaction. The Company will
promptly notify Parent after receipt of any Competing Transaction occurring
after the date hereof or any notice that any person is considering making a
Competing Transaction or any request for nonpublic information relating to the
Company or the request after the date hereof for access to the properties, books
or records of the Company by any person that has advised the Company that it may
be considering making, or that has made, a Competing Transaction and will keep
Parent fully informed of the status and details of any such Competing
Transaction notice or request. For purposes of this Agreement, "Competing
Transaction" means any offer or proposal for, or any indication of interest in,
a merger or other business combination involving the Company or the acquisition
of any significant equity interest in, or a significant portion of the assets
of, the Company, other than the transactions contemplated by this Agreement.
SECTION 7
7. Additional Agreements.
7.1 Further Assurances. Each of the parties to this Agreement shall use
its reasonable commercial efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
7.2 Consents; Cooperation.
(a) Each of Parent, Exchangeco, Callco and the Company shall use its
reasonable commercial efforts to promptly (i) obtain from any Governmental
Entity any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Parent, Exchangeco, Callco or any of
their subsidiaries or the Company in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder and (ii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Purchase required under the Securities Act and the Exchange Act and any
other applicable federal, state or foreign securities laws.
(b) Notwithstanding anything to the contrary in Section 7.2(a), (i)
neither Parent nor any of it subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on Parent or of Parent combined with
the Company after the Closing or (ii) neither the Company nor its Subsidiaries
shall be required to divest any of their respective businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation
that could reasonably be expected to have a Material Adverse Effect on the
Company.
(c) From the date of this Agreement until the earlier of the Closing
or the termination of this Agreement, each party shall promptly notify the other
party in writing of any pending or, to the knowledge of such party, threatened
action, proceeding or investigation by
39
any Governmental Entity or any other person (i) challenging or seeking material
damages in connection with this Agreement or the transactions contemplated
hereunder or (ii) seeking to restrain or prohibit the consummation of the
Purchase or the transactions contemplated hereunder or otherwise limit the right
of Parent or its subsidiaries to own or operate all or any portion of the
businesses or assets of the Company or its subsidiaries.
(d) Each of Parent and the Company shall give or cause to be given
any required notices to third parties, and use its reasonable commercial efforts
to obtain all consents, waivers and approvals from third parties (i) necessary,
proper or advisable to consummate the transactions contemplated hereunder, (ii)
disclosed or required to be disclosed in the Company Disclosure Schedule or the
Parent Disclosure Schedule, or (iii) required to prevent a Material Adverse
Effect on the Company or Parent from occurring prior or after the Closing. In
the event that Parent or the Company shall fail to obtain any third party
consent, waiver or approval described in this Section 7.2(d), it shall use its
reasonable commercial efforts, and shall take any such actions reasonably
requested by the other party, to minimize any adverse effect upon Parent and the
Company, their respective subsidiaries and their respective businesses resulting
(or which could reasonably be expected to result after the Closing) from the
failure to obtain such consent, waiver or approval.
(e) Each of Parent and the Company will, and Parent will cause its
subsidiaries to, take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
7.3 Access to Information.
(a) The Company shall afford Parent and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Closing to (i) all of the Company's properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of the Company as Parent may reasonably
request. The Company agrees to provide to Parent and its accountants, counsel
and other representatives copies of internal financial statements promptly upon
request. Parent shall afford the Company and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing to (i) all of Parent and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Parent and its
subsidiaries as the Company may reasonably request. Parent agrees to provide to
the Company and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request.
40
(b) Subject to compliance with applicable law, from the date hereof
until the Closing, each of Parent and the Company shall confer on a regular and
frequent basis with one or more representatives of the other party to report
operational matters of materiality and the general status of ongoing operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 7.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Purchase.
7.4 Confidentiality. The parties acknowledge that Parent and the Company
have previously executed a non-disclosure agreement (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms. Each party hereto agrees that any
information obtained by such party (the "Receiving Party") pursuant to or in
connection with this Agreement and the transactions contemplated hereby which
may be proprietary or otherwise confidential to any other party hereto (the
"Disclosing Party") will not be disclosed by the Receiving Party without the
prior written consent of the Disclosing Party. Each party further acknowledges
and understands that any information obtained which may be considered "inside"
non-public information will not be utilized by such party in connection with
purchases and/or sales of the Parent Common Stock except in compliance with
applicable state and federal anti-fraud statutes.
7.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
7.6 Escrow Agreement. On or before the Closing, the Escrow Agent, Parent,
Exchangeco, Callco and the Shareholders' Representative (as defined in Section
10 below) will execute the Escrow Agreement contemplated by Section 10 in the
form attached hereto as Exhibit E ("Escrow Agreement").
7.7 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock, Exchangeable Shares,
exchange of Exchangeable Shares and granting and exercise of stock options in
connection with the Purchase. The Company shall use its reasonable commercial
efforts to assist Parent as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable in connection with the
issuance of Parent Common Stock and Exchangeable Shares in connection with the
Purchase.
7.8 Employee Retention Stock Bonus. On the first anniversary of the
Closing Date, Parent shall issue an aggregate of $500,000 of Parent Common Stock
to the Company employees listed on Schedule 7.8 hereto, provided that each
employee remains employed by the Company or an affiliate of the Parent
continuously through the first anniversary of the Closing Date, unless
41
such employee is terminated other than for cause. Schedule 7.8 sets forth the
amount of shares available for each eligible employee. Forfeited amounts will be
reallocated to remaining employees.
7.9 Employee Option Grants.
(a) Upon the Closing, Parent shall issue options to purchase up to
approximately 150,000 shares of Parent Common Stock to certain employees of the
Company as set forth on Schedule 7.9(a). The options will be issued pursuant to
Parent's 2000 Stock Plan, which is attached hereto as Exhibit H. The exercise
price shall be the closing price of the Parent's Common Stock on the Closing
Date, and the options will vest over four years in accordance with Parent's 2000
Stock Plan and expire after ten years, subject to continued employment.
(b) Within one year from the Closing Date, Parent shall issue
additional options to purchase an aggregate of 40,000 shares of Parent Common
Stock to Company engineering employees assigned to the development of a
Bluetooth radio intellectual property product as mutually agreed to by Xerxes
Wania and Parent. These options will expire after ten years, xxxxx xxxx (i.e.,
vest all at once) at the end of four years from the date of grant and have an
exercise price equal to the fair market value of Parent's Common Stock on the
date of grant. Vesting of the options shall be accelerated upon the commercial
release of the Bluetooth radio based upon the number of months (as rounded)
between the Closing Date and the commercial release as follows:
Months to Commercial
Release Vesting Acceleration
-------------------- --------------------
Under 15 100%
15-18 50%
Over 18% 0%
7.10 Share Lockup. Subject to the rights of the Class A Shareholders under
the Registration Rights Agreement, each of the Shareholders and Optionholders
will not, without the prior written consent of Parent, sell, make any short sale
of, grant any option for the purchase of, hedge, or otherwise dispose of any of
the Exchangeable Shares or the Parent Common Stock issuable upon exchange of the
Exchangeable Shares or upon the exercise of Company Options during the first
year following the Closing Date, and each Shareholder or Optionholder agrees not
to sell more than 25% of such shares during each quarter ending with the
quarterly anniversary dates during the second year following the Closing Date
plus the remainder of any shares available for sale pursuant to this Section in
a prior quarter. Parent shall have the right to impose a legend on the stock
certificates evidencing the shares which are subject to this Agreement in such
form as it shall reasonably conclude is appropriate.
7.11 Class B Shareholders Agreement. Upon the execution of this Agreement
by the Company and each of the Class B Shareholders, the Class B Shareholders
Agreement is hereby terminated; provided that, if the transactions contemplated
hereby are not completed on the Closing Date, the Class B Shareholder Agreements
will be deemed not to have been terminated.
42
7.12 Exchangeable Share Support Agreement. On or before the Closing,
Exchangeco, Callco and Parent will execute the Exchangeable Share Support
Agreement.
7.13 Exchange Rights Agreement. On or before the Closing, Exchangeco,
Callco, Parent and Shareholders will execute the Exchange Rights Agreement.
7.14 Ontario Securities Law Matters. Exchangeco hereby covenants and
agrees to use commercially reasonable efforts to obtain at its expense, as
promptly as practicable following the date hereof, a discretionary ruling of the
Ontario Securities Commission granting an exemption from the prospectus and
registration requirements of the Securities Act (Ontario) in connection with any
and all trades of securities contemplated by or under the terms of the
Exchangeable Shares or the Exchange Rights Agreement.
7.15 Directors and Officers. Parent agrees that all rights to
indemnification or exculpation existing as of the date of this Agreement in
favor of the directors, officers, employees and other agents of the Company in
the Company's Articles of Incorporation or Bylaws, or any agreement between the
Company and such persons that has been provided to Parent's counsel prior to the
date hereof and is listed on Schedule 7.15, shall survive the Purchase and shall
continue in full force and effect and Parent agrees to assume, effective at the
time of the Closing, all such liability of the Company with respect to such
indemnification. This Section 7.15 shall survive the Purchase, is intended to
benefit the indemnified parties, shall be binding upon all successors and
assigns of Exchangeco and Parent, and shall be enforceable by the indemnified
parties.
7.16 Rule 144 Reporting . With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the sale
of the Parent Common Stock to the public without registration, or pursuant to a
registration on Form S-3, Parent agrees to use its reasonable best efforts to:
(i) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the Purchase;
(ii) File with the SEC in a timely manner all reports and
other documents required of Parent under the Securities Act and the Securities
Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); and
(iii) So long as a Shareholder owns any Parent Common Stock or
Exchangeable Shares, to furnish to that Shareholder forthwith upon request a
written statement by Parent as to its compliance with the reporting requirements
of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of Parent, and such other reports and
documents of Parent as such Shareholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such Shareholder to sell
any such Parent Common Stock without registration.
7.17 Amalgamation with Class A Holding Companies. The Company and Xerxes
Wania, Xxxxx Xxxxxx and Xxxxxx Xxxxx shall cause Cimex Holding Inc., 1291480
Ontario Inc. and 000000 Xxxxxx Inc. to be amalgamated before the Closing,
pursuant to the Canada Business Corporations Act. All Class A Shares and Class B
Shares of the Company shall become Class A
43
Shares and Class B Shares, respectively, of the amalgamated company and all
references herein to Class A Shares and Class B Shares of the Company shall be
deemed to be references to Class A Shares and Class B Shares, respectively, of
the amalgamated company. Upon completion of the Amalgamation, the Class A Shares
and Class B Shares will be issued as set out in Schedule A.
7.18 Auditors' Consents. The Company shall use its reasonable commercial
efforts to ensure that PriceWaterhouseCoopers provides Parent with any consents
required to be filed by Parent with the SEC.
7.19 Section 85 Election. It is intended that the transfer hereunder of
the Class A Shares and Class B Shares be on a tax-deferred basis to the Class A
Shareholders and Class B Shareholders for purposes of the Income Tax Act
(Canada) (the "ITA") and applicable provincial income tax statutes. In order to
give effect to this intention, Exchangeco and the Class A Shareholders and Class
B Shareholders shall, in a timely manner, jointly execute and file elections
under Section 85 of the ITA in the prescribed form and elections in the
prescribed form under the corresponding provisions of applicable provincial
income tax statutes in respect of the transfer hereunder of the Class A Shares
and Class B Shares. The elected amounts (the "Elected Amounts") for purposes of
each such election will be determined by the Class A Shareholders and Class B
Shareholders.
7.20 Holdcos Loans. The Class A Shareholders, including the shareholders
(collectively, the "Holdco Shareholders") of Cimex Holding Inc., 1291480 Ontario
Inc. and 000000 Xxxxxx Inc. (collectively, the "Holdco's") agree that prior to
Closing, the loans made by the Holdco Shareholders to their Holdcos will be sold
to each Holdco by the Holdco Shareholders holding such loans. The purchase price
for such loans will be satisfied by the issuance of additional Holdco shares
having a value equal to the principal amount of the loan. Each Holdco's shares
will be valued based on its holdings of Xentec shares using the value given to
the Xentec shares pursuant to this Agreement based on the exchange rate
established for Xentec shares on Closing. Appropriate changes will be made to
the schedules to this Agreement to reflect the additional Holdco shares to be
issued provided that nothing in this section will require any additional
Exchangeable Shares or Parent Common Stock to be issued to the Holdco
Shareholders or Class A Shareholders.
SECTION 8
8. Conditions to the Purchase.
8.1 Conditions to Obligations of Each Party to Effect the Purchase. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction on or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by agreement of all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the
44
consummation of the Purchase shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Purchase, which makes the consummation of the Purchase illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(b) Governmental Approval. The Company and Exchangeco and their
respective subsidiaries shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary to be obtained prior to
Closing for consummation of or in connection with the Purchase and the several
transactions contemplated hereby.
(c) Escrow Agreement. Exchangeco, Callco, the Company, Escrow Agent
and the Shareholders' Representative (as defined in Section 9 below) shall have
entered into an Escrow Agreement substantially in the form attached hereto as
Exhibit E.
(d) Registration Rights Agreement. Parent and each of the
Shareholders shall have entered into the Registration Rights Agreement.
(e) Exchangeable Share Support Agreement. Exchangeco, Callco and
Parent shall have entered into the Exchangeable Share Support Agreement.
(f) Exchange Rights Agreement. Exchangeco, Callco, Parent and
Shareholders shall have entered into the Exchange Rights Agreement.
(g) Holding Companies. The Amalgamation described in Section 7.17
shall have been completed.
8.2 Additional Conditions to Obligations of the Company and Shareholders.
The obligations of the Company and the Shareholders to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by the Company:
(a) Representations, Warranties and Covenants. (i) Each of the
representations and warranties of Exchangeco, Callco and Parent in this
Agreement that is expressly qualified by a reference to materiality shall be
true in all respects as so qualified, and each of the representations and
warranties of Exchangeco in this Agreement that is not so qualified shall be
true and correct in all material respects, on and as of the Closing as though
such representation or warranty had been made on and as of such time (except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and (ii)
Exchangeco, Callco and Parent shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Closing.
(b) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets
45
(including intangible assets), liabilities, business, operations, results of
operations of Parent and its subsidiaries, taken as a whole; provided, however,
that a "material adverse change" shall not be deemed to have occurred solely as
a result of any of the following (or any combination of the following): (i) any
effect or change occurring as a result of (A) general economic or financial
conditions or (B) other developments which are not unique to such person and its
subsidiaries but also affect other persons who participate or are engaged in the
lines of business in which such person and its subsidiaries participate or are
engaged; and (ii) failure of the Parent's and its subsidiaries' results of
operations to meet any internal or external predictions, projections, estimates
or expectations.
(c) Bank Guarantees. Parent shall have caused any Shareholder's
guarantee of the Company's debt obligations as set forth on Schedule 8.2(c) of
the Company Disclosure Schedule to be eliminated.
(d) Certificates of Exchangeco and Parent.
(i) Compliance Certificate of Exchangeco and Parent. The
Company shall have been provided with a certificate executed on behalf of each
of Exchangeco, Callco and Parent by its President and its Chief Financial
Officer to the effect that, as of the Closing, each of the conditions set forth
in Section 8.2(a) and (b) above has been satisfied with respect to Exchangeco,
Callco or Parent, as the case may be.
(ii) Certificate of Secretary of Exchangeco, Callco and
Parent. The Company shall have been provided with a certificate executed by each
of the Secretary or Assistant Secretary of Exchangeco, Callco and Parent
certifying:
(A) resolutions duly adopted by the Board of Directors
of Exchangeco, Callco and Parent, as the case may be, authorizing the execution
of this Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of Exchangeco, Callco
and Parent, as the case may be, executing this Agreement and all agreements and
documents contemplated hereby.
(e) Good Standing. The Company shall have received a certificate or
certificates of the Secretary of State of the State of Delaware and any
applicable franchise tax authority of such state, certifying as of a date no
more than three business days prior to the Closing that Parent has filed all
required reports, paid all required fees and taxes and is, as of such date, in
good standing and authorized to transact business as a domestic corporation.
8.3 Additional Conditions to the Obligations of Exchangeco, Callco and
Parent. The obligations of Exchangeco, Callco and Parent to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) Each of the
representations and warranties of the Company, the Shareholders and Holdcos in
this Agreement
46
that is expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties of the
Company, the Shareholders and Holdcos in this Agreement that is not so qualified
shall be true and correct in all material respects, on and as of the Closing as
though such representation or warranty had been made on and as of such time
(except that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date), and (ii)
the Company and the Shareholders shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Closing.
(b) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations or
results of operations or prospects of the Company; provided, however, that a
"material adverse change" shall not be deemed to have occurred solely as a
result of any of the following (or any combination of the following): (i) any
effect or change occurring as a result of (A) general economic or financial
conditions or (B) other developments which are not unique to such person but
also affect other persons who participate or are engaged in the lines of
business in which such person participates or is engaged; and (ii) failure of
the Company's results of operations to meet any internal or external
predictions, projections, estimates or expectations.
(c) Certificates of the Company.
(i) Compliance Certificate of the Company. Parent shall have
been provided with a certificate executed on behalf of the Company by its
President and its Chief Financial Officer to the effect that, as of the Closing,
each of the conditions set forth in Sections 8.3(a) and (b) above has been
satisfied.
(ii) Compliance Certificate of Class A Shareholders. Parent
shall have been provided with a certificate executed by each Class A Shareholder
to the effect that, as of the Closing, each of the conditions set forth in
Sections 8.3(a) and (b) above has been satisfied.
(iii) Certificate of Secretary of the Company. Parent shall
have been provided with a certificate executed by the Secretary of the Company
certifying:
(A) resolutions duly adopted by the Board of Directors
of the Company authorizing the execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby;
(B) the Articles of Incorporation and Bylaws of the
Company, as in effect immediately prior to the Closing, including all amendments
thereto; and
(C) the incumbency of the officers of the Company
executing this Agreement and all agreements and documents contemplated hereby.
(d) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained those consents,
waivers, approvals or
47
authorizations of those Governmental Entities and third parties whose consent or
approval are required to be obtained by the Company in connection with the
Purchase.
(e) Injunctions or Restraints on Purchase and Conduct of Business.
No proceeding brought by any administrative agency or commission of other
governmental authority or instrumentality, domestic or foreign, seeking to
prevent the consummation of the Purchase shall be pending. In addition, no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's conduct or operation of the
business of the Company, following the Purchase shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(f) Good Standing. Parent shall have received a Certificate of
Compliance issued by Industry Canada certifying as of a date no more than one
business day prior to the Closing that the Company, as of such date, is
amalgamated under the Canada Business Corporations Act ("Act") and not
discontinued under that Act and that it has not been dissolved and it has sent
to the Director the required Annual Returns..
(g) Resignation of Directors and Officers. Parent shall have
received letters of resignation from each of the directors and officers of the
Company in office immediately prior to the Closing, which resignations in each
case shall be effective as of the Closing.
(h) Option Conversion. All of the Company's outstanding options
shall have been converted into options to purchase Parent's Common Stock.
(i) Employment Agreements. The Founding Employees shall have entered
into an Employment Agreement or Consulting Agreement with the Company or Parent
in the forms attached hereto as Exhibits C-1 and C-2.
SECTION 9
9. Termination, Amendment and Waiver.
9.1 Termination. At any time prior to the Closing, this Agreement may be
terminated and the Purchase may be abandoned:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if, without fault of the
terminating party:
(i) the Closing shall not have occurred on or before January
31, 2001 (or such later date as may be agreed upon in writing by the parties);
or
(ii) there shall be any applicable federal, state or foreign
law that makes consummation of the Purchase illegal or otherwise prohibited or
if any court of
48
competent jurisdiction or Governmental Entity shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Purchase and such order, decree, ruling or other action shall
have become final and nonappealable.
(c) by Exchangeco, Callco or Parent, if the Company or the
Shareholders shall materially breach any of its representations, warranties or
obligations hereunder and such breach shall not have been cured within ten
calendar days of receipt by the Company or the Shareholders of written notice of
such breach, provided that Exchangeco, Callco or Parent is not in material
breach of any of its representations, warranties or obligations hereunder, and
provided further, that no cure period shall be required for a breach which by
its nature cannot be cured;
(d) by the Company, if Exchangeco, Callco or Parent shall materially
breach any of its representations, warranties or obligations hereunder and such
breach shall not have been cured within ten calendar days following receipt by
Exchangeco, Callco or Parent of written notice of such breach, provided that the
Company is not in material breach of any of its representations, warranties or
obligations hereunder, and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Exchangeco, Callco, Parent or
the Company or their respective officers, directors, shareholders or affiliates,
except to the extent that such termination results from the breach within its
control by a party hereto of any of its representations, warranties or covenants
set forth in this Agreement; provided that, the provisions of Section 7.4
(Confidentiality), Section 9.3 (Expenses and Termination Fees) and this Section
9.2 shall remain in full force and effect and survive any termination of this
Agreement.
9.3 Expenses and Termination Fees. Whether or not the Purchase is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated including, without limitation, filing fees and
the fees and expenses of advisors, accountants, legal counsel and financial
printers, shall be paid by the party incurring such expense; provided, however,
that any out-of-pocket expense incurred by the Company in excess of $40,000 for
fees and expenses of legal counsel plus any other expenses, including, without
limitation, fees and expenses of financial advisors and accountants, if any,
shall remain an obligation of the Class A Shareholders. If Parent or the Company
receives any invoices for amounts in excess of said amounts, it may, with
Parent's written approval, pay such fees; provided, however, that such payment
shall, if not promptly reimbursed by the Class A Shareholders at Parent's
request, constitute Damages (as defined below) recoverable under the Escrow
Agreement.
9.4 Extension; Waiver. At any time prior to the Closing any party may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties, (ii) waive any inaccuracies
in the representations and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such party contained herein. Any
49
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
SECTION 10
10. Escrow and Indemnification.
10.1 Survival of Representations and Warranties. All covenants to be
performed prior to the Closing, and all representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the Purchase and continue until 18 months after the
Closing Date (the "Escrow Termination Date"); provided that if any claims for
indemnification have been asserted with respect to any such representations and
warranties prior to the Escrow Termination Date, the representations and
warranties on which any such claims are based shall continue in effect until
final resolution of any claims, and provided further that representations,
warranties and covenants relating to Taxes shall survive until 30 days after
expiration of all applicable statutes of limitations relating to such Taxes and
the representations and warranties in Section 2.3 (Capital Structure), Section
3.4 (Title to Stock) and Section 5.2 (Capital Structure) shall continue
indefinitely; and provided further that the representations and warranties in
Section 2.13 (Intellectual Property) shall survive until 18 months after the
Closing Date with the "knowledge" qualifiers in italics and 12 months without
the "knowledge" qualifiers in italics. All covenants to be performed after the
Closing shall continue indefinitely.
10.2 Escrow Fund. As soon as practicable after the Closing Date, a portion
of the Exchangeable Shares to be issued in the Purchase shall, without any act
of any Shareholder, be registered in the name of, and be deposited with, State
Street Bank and Trust Company of California, N.A. (or other institution selected
by Exchangeco and consented to by the Shareholders' Representative (as defined
below) as escrow agent) (the "Escrow Agent"), such deposit to constitute the
escrow fund (the "Escrow Fund") and to be governed by the terms set forth herein
and in the Escrow Agreement attached hereto as Exhibit D. As soon as practicable
after the Closing, fifteen percent (15%) of the Class A Consideration Shares
that each Class A Shareholder is entitled to receive in the Purchase in exchange
for the Company Capital Stock (the "Initial Escrow Shares" and, together with
the New Shares (as defined below), the "Escrow Shares") shall be deposited by
Exchangeco into the Escrow Fund. In the event that any Damages (as defined
below) arise, the Escrow Fund shall be available to compensate the Indemnified
Persons (defined below) pursuant to the indemnification obligations of the Class
A Shareholders pursuant to Section 10.3 and in accordance with the Escrow
Agreement.
10.3 Indemnification. Subject to the limitations set forth in this Section
9, from and after the Closing, each Founding Shareholder , on a pro rata basis
based on the number of Class A Shares held by the Founding Shareholder and the
other shareholders of that Founding Shareholder's holding company listed on
Schedule A (collectively, "Founding Shareholder Family"), severally shall
protect, defend, indemnify and hold harmless Exchangeco, Callco, Parent and the
Company and their respective affiliates, officers, directors, employees,
representatives and agents (Exchangeco, Callco, Parent, the Company and each of
the foregoing persons or entities is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all losses, costs, damages,
50
liabilities, fees (including without limitation attorneys' fees) and expenses
(collectively, the "Damages"), that any of the Indemnified Persons incurs by
reason of, arising out of or in connection with any claim, demand, action or
cause of action resulting from misrepresentation, breach of, or default in
connection with, any of the representations, warranties, covenants or agreements
of the Company or that Founding Shareholder and his Founding Shareholder Family
contained in this Agreement, including any exhibits or schedules attached
hereto, which becomes known to Exchangeco, Callco or Parent during the Escrow
Period. The maximum aggregate liability of any Founding Shareholder under this
Agreement shall be limited to the Class A Purchase Price received by his
Founding Shareholder Family; provided, however, that nothing herein shall limit
the liability: (i) of the Company for any breach of representation, warranty or
covenant if the Purchase does not close, and (ii) of any officer, director or
Shareholder of the Company for such person's or entity's fraud or intentional
misrepresentation. For greater certainty, no Founding Shareholder will have any
liability for breaches by Shareholders other than the Founding Shareholder
himself and members of his Founding Shareholder Family.
10.4 Damages Threshold and Valuation of Escrow Shares. Notwithstanding the
foregoing, Exchangeco may not receive any amount of the Escrow Shares from the
Escrow Fund unless and until a certificate signed by an officer of Exchangeco
(an "Officer's Certificate") identifying Damages in the aggregate amount in
excess of $75,000 has been delivered to the Escrow Agent and the Shareholders'
Representative and such amount is determined pursuant to this Section 10 to be
payable, in which case Callco shall purchase Escrow Shares equal in value to the
full amount of such Damages without deduction; provided, however, that only
individual Damages in excess of $5,000 will be indemnifiable. The number of
Escrow Shares to be purchased by Callco shall be equal to the number calculated
by dividing the dollar amount specified in the Officer's Certificate by the
average closing price of Parent Common Stock (as reported in the Wall Street
Journal) for the ten day period immediately prior to the date upon which the
Escrow Shares are to be delivered to Exchangeco. The proceeds from such a sale
shall be allocated by the Escrow Agent between Callco and Exchangeco as directed
by Exchangeco.
10.5 Escrow Period. Subject to the following requirements, the Escrow Fund
shall remain in existence until the Escrow Termination Date (the "Escrow
Period"). Upon the expiration of the Escrow Period, the Escrow Fund shall
terminate with respect to all Escrow Shares; provided, however, that the number
of Escrow Shares, which, in the reasonable judgment of Exchangeco, subject to
the objection of the Shareholders' Representative (as defined in Section 10
below) and the subsequent arbitration of the claim in the manner provided in the
Escrow Agreement, are necessary to satisfy any unsatisfied claims specified in
any Officer's Certificate delivered to the Escrow Agent prior to the expiration
of such Escrow Period with respect to facts and circumstances existing on or
prior to the Escrow Termination Date shall remain in the Escrow Fund (and the
Escrow Fund shall remain in existence) until such claims have been resolved. As
soon as all such claims have been resolved, the Escrow Agent shall deliver to
the Founding Shareholders on behalf of each Founding Shareholder Family all
Escrow Shares and other property (if any) remaining in the Escrow Fund and not
required to satisfy such claims. Deliveries of Escrow Shares to the Founding
Shareholders on behalf of each Founding Shareholder Family pursuant to this
Section 10.5 and the Escrow Agreement shall be made in proportion to their
respective original contributions to the Escrow Fund.
51
10.6 Method of Asserting Claims. All claims for indemnification by any
Indemnified Person pursuant to this Section 10 shall be made in accordance with
the provisions of the Escrow Agreement.
10.7 Representative of the Shareholders; Power of Attorney. Xerxes Wania
shall be appointed as agent and attorney-in-fact (the "Shareholders'
Representative") for each Founding Shareholder and member of each Founding
Shareholder Family for and on behalf of Founding Shareholder and member of each
Founding Shareholder Family, to give and receive notices and communications on
behalf of each Founding Shareholder and member of each Founding Shareholder
Family, to enter into and perform the Escrow Agreement, to authorize delivery to
Callco of Escrow Shares, or other property from the Escrow Fund in satisfaction
of claims by Callco or any other Indemnified Person, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Shareholders' Representative for the
accomplishment of the foregoing.
10.8 Indemnity by Parent, Exchangeco and Callco. Parent, Exchangeco and
Callco agree to indemnify and hold harmless the Shareholders (the "Company
Indemnitees") from and against any Damages based upon, arising out of or
otherwise in respect of any breach of any representation, warranty or covenant
of Exchangeco, Callco or Parent contained herein or in any Exhibit or Schedule
attached hereto or in any certificate delivered pursuant hereto or thereto,
which breach becomes known to Company and is asserted in writing to Parent on or
before the Escrow Termination Date, at which date this indemnification provision
shall terminate, provided however that no such compensation shall be payable to
the Company Indemnitees unless and until the amount of all Damages to Company
Indemnitees exceeds $75,000 in the aggregate, whereupon compensation shall be
payable for all such Damages without any deduction; provided, however, that only
individual Damages in excess of $5,000 will be indemnifiable. Nothing herein
shall limit the liability: (i) of Exchangeco, Callco or Parent for any breach of
representation, warranty or covenant if the Purchase does not close, and (ii) of
any officer or director of Exchangeco, Callco or Parent for such person's or
entity's fraud or intentional misrepresentation.
SECTION 11
11. General Provisions.
11.1 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
five days after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice,
52
(a) if to Exchangeco, Callco or Parent to:
inSilicon Corporation
000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to the Company or Shareholders, to:
Xentec Inc.
0-0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Attention: Xerxes Wania
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Torys
Suite 3000, Maritime Life Tower
00 Xxxxxxxxxx Xxxxxx Xxxx
Xxx 000, TD Centre
Toronto, Ontario M5K 1N2 Canada
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Lang Xxxxxxxx
X.X. Xxx 000, Xxxxx 0000
XXX Xxxxx, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx MSJ 2T7
Attention: Xxxxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
53
(c) if to the Stockholder Representative, to:
Xerxes Wania
c/o Xentec Inc.
0-0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Torys
Suite 3000, Maritime Life Tower
00 Xxxxxxxxxx Xxxxxx Xxxx
Xxx 000, TD Centre
Toronto, Ontario M5K 1N2 Canada
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
11.2 Interpretation. When a reference is made in this Agreement to
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof," and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to November 15, 2000.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All references to currency are in United States dollars.
11.3 Counterparts . This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
11.4 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements, including any
Xentec Class B Shareholder Agreements, and understandings, both written and
oral, among the parties with respect to the subject matter hereof, except for
the Confidentiality Agreement, which shall continue in full force and effect,
and shall survive any termination of this Agreement or the Closing, in
accordance with its terms; (b) are not intended to confer upon any other person
any rights or remedies hereunder; and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided.
54
11.5 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
11.6 Remedies Cumulative. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
11.7 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the Province of
Ontario, Canada and the laws of Canada applicable therein, without giving effect
to principles of conflicts of law. The parties attorn to non-exclusive
jurisdiction of Ontario courts.
11.8 Dispute Resolution.
(a) Any claim, action, dispute or controversy of any kind arising
out of or relating to this Agreement or concerning any aspect of performance by
Parent, Exchangeco, Callco, the Shareholders or the Company under the terms of
this Agreement or the transactions contemplated hereby ("Dispute") shall be
submitted to arbitration pursuant to the Arbitration Act, 1991 (Ontario). Such
dispute shall not be made the subject matter of an action in any court by any
party unless the Dispute has been submitted to arbitration and finally
determined in accordance with the provisions of Schedule B. Any such action
commenced thereafter shall only be for the purpose of enforcing the decision of
the arbitration and the costs incidental to the action. In any such action the
decision of the arbitrator shall be conclusively deemed to determine the rights
and liabilities as between the parties to the arbitration in respect of the
Dispute.
(b) All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding. Any attorney-client privilege and
other protection against disclosure of privileged or confidential information
(including, without limitation, any protection afforded the work-product of any
attorney) that could otherwise be claimed by a party shall be available to, and
may be claimed by, any such party in any arbitration proceeding. No party waives
any attorney-client privilege or any other protection against disclosure of
privileged or confidential information by reason of anything contained in, or
done pursuant to, the arbitration provisions of this Agreement.
(c) The arbitration shall be conducted and concluded as soon as is
reasonably practicable, based on a schedule established by the arbitrator.
55
(d) The obligation to arbitrate any Dispute shall be binding upon
the successors and assigns of each of the parties.
(e) No provision of, nor the exercise of any rights under this
Agreement shall limit the right of any party to apply for injunctive relief or
similar equitable relief with respect to the enforcement of this Agreement or
any agreement executed in connection herewith or contemplated hereby, and any
such action shall not be deemed an election of remedies. Such rights can be
exercised at any time except to the extent such action is contrary to a final
award or decision in any arbitration proceeding. The institution and maintenance
of an action for injunctive relief or similar equitable relief shall not
constitute a waiver of the right of any party, including without limitation the
plaintiff, to submit any dispute to arbitration nor render inapplicable the
compulsory arbitration provisions of this Agreement.
11.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
11.10 Amendments and Waivers. Any term of this Agreement may be amended or
waived only with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 11.10 shall be binding upon the parties and their respective successors
and assigns.
[Signature Page Follows]
56
The Company, Shareholders, Optionholders, Parent, Exchangeco and Callco
have executed this Agreement as of the date first written above.
COMPANY
XENTEC INC.
By: /s/ Xerxes Wania
-----------------------------------
Name: Xerxes Wania
Title: President
EXCHANGECO
INSILICON CANADA LTD.
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
CALLCO
INSILICON CANADA HOLDINGS ULC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
PARENT
INSILICON CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President & Chief Executive Officer
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
CLASS A SHAREHOLDERS:
PRE-AMALGAMATION
Cimex Holding Inc.
By: /s/ Xerxes Wania
-----------------------------
Name: Xerxes Wania
Title: President
1291480 Ontario Inc.
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name: Xxxxx Xxxxxx
Title: President
166482 Canada Inc.
By: /s/ Xxxxxx Xxxxx
-----------------------------
Name: Xxxxxx Xxxxx
Title: President
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
CLASS A SHAREHOLDERS:
POST AMALGAMATION
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xerxes Wania
----------------------------------------- ---------------------------------
Witness Xerxes Wania
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xerxes Wania /s/ Xxxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xerxes Wania /s/ Xxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxxx Xxxxx /s/ Xxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxxx Xxxxxx /s/ Xxxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxxx Xxxxxx /s/ Xxxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxx
3794091 Canada Inc.
By: /s/ Xxxxxx Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: President
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
CLASS B SHAREHOLDERS
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxx Forniica /s/ Xxxxxxxx Xxxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxxx Xxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxxxx Xxx
----------------------------------------- ---------------------------------
Witness Xxxxxxxxx Xxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxx Xxxxxxx
/s/ illegible
----------------------------------------- ---------------------------------
Witness Xxxx Xxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Birdie
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------------- ---------------------------------
Witness Xxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxxxxxx Xxxxxx
/s/ illegible
----------------------------------------- ---------------------------------
Witness Xxxxxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Maxim Smirnov
/s/ illegible
----------------------------------------- ---------------------------------
Witness Maxim Smirnov
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
OPTIONHOLDERS
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xxx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxxxx Xxx
----------------------------------------- ---------------------------------
Witness Xxxxxxxxx Xxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Xxxx Xxxxxxx
/s/ illegible
----------------------------------------- ---------------------------------
Witness Xxxx Xxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ Maxim Smirnov
/s/ illegible
----------------------------------------- ---------------------------------
Witness Maxim Smirnov
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxx Xxxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxx Xxxxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxxx Xxxxxxxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxx Xxxxxxxx
----------------------------------------- ---------------------------------
Witness Xxx Xxxxxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxxxx Xx
----------------------------------------- ---------------------------------
Witness Xxxxxxx Xx
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Birdie
SIGNED, SEALED & DELIVERED
In the presence of:
/s/ illegible /s/ Xxxxx Xxxxxx
----------------------------------------- ---------------------------------
Witness Xxxxx Xxxxxx
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
GUARANTEE
inSilicon Corporation ("Guarantor") guarantees each and every representation,
warranty, covenant, agreement and other obligation of Exchangeco and Callco,
and/or any of its respective permitted assigns (and where any such
representation or warranty is made to the knowledge of Exchangeco and Callco,
such guarantee shall be deemed made to the knowledge of Guarantor), and the full
and timely performance of its obligations under the provisions of the foregoing
Agreement and the related agreements contemplated thereby. This is a guarantee
of payment and performance, and not of collection, and Guarantor acknowledges
and agrees that this guarantee is unconditional, and no release or
extinguishment of Exchangeco's and Callco's obligations or liabilities (other
than in accordance with the terms of the Agreement and the related agreements
contemplated thereby), whether by decree in any bankruptcy proceeding or
otherwise, shall affect the continuing validity and enforceability of this
guarantee, as well as any provision requiring or contemplating performance by
Guarantor.
We understand that the Company is relying on this guarantee in entering into the
Agreement.
inSilicon Corporation
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President & Chief Executive Officer
SCHEDULE B
ARBITRATION PROCEDURES
1. As used in this Schedule, the term "Arbitrators" means the Sole Arbitrator
appointed pursuant to section 3 of this Schedule or the Arbitration Board
appointed pursuant to section 4 of this Schedule, as the case may be. Unless
otherwise defined in this Schedule, all capitalized terms defined in the
Agreement have the same meaning as provided for those terms in the Agreement.
2. Where any Dispute, which, pursuant to Section 10.8 of the Agreement, is to be
settled by arbitration (each a "Matter"), the provisions of this Schedule shall
constitute a submission for the purposes of the Arbitration Act, 1991 (Ontario).
Except as expressly provided otherwise in this schedule, the provisions of the
Arbitration Act, 1991 (Ontario) shall apply in respect of any arbitration
pursuant to this Schedule.
3. Any party to the Agreement (the "Applicant") may commence arbitration by
delivering a written complaint (a "Complaint") to all parties against whom the
Applicant seeks a remedy. In the Complaint, the Applicant shall describe the
Dispute and nominate an arbitrator. Within 10 days of the receipt of the
Complaint, the party against whom the Applicant seeks a remedy (the
"Respondent") may by notice to the Applicant concur in the appointment of that
arbitrator or may appoint a single additional arbitrator. If there is more than
one Respondent, the Respondents shall agree as to whether the Respondents will
appoint an arbitrator and who that arbitrator will be but if these Respondents
cannot agree as to whether or not to appoint an arbitrator or who that
arbitrator will be, any Respondent, on notice to the other Respondents and to
the Applicant, may apply to a judge of the Ontario Superior Court of Justice to
appoint the arbitrator on behalf of the Respondents. If the Respondents do not
deliver a notice to the Applicant concurring in the Applicant's choice of
arbitrator or appointing a single additional arbitrator, or a notice of an
application to a judge of the Ontario Superior Court of Justice for the
appointment of an arbitrator, within 10 days of receipt of the Complaint, the
Respondents shall be deemed to have concurred in the appointment of the
arbitrator appointed by the Applicant and such arbitrator (the "Sole
Arbitrator") shall determine the Matter acting alone.
4. If the Respondents appoint an additional arbitrator pursuant to section 3 of
this Schedule, then, within 10 days of the appointment of such additional
arbitrator, the arbitrators so appointed shall agree on the appointment of an
additional arbitrator and they shall forthwith notify the Applicant and the
Respondents of such appointment, failing which the selected arbitrator may be
appointed by a judge of the Ontario Superior Court of Justice on the application
of either the Applicant or any of the Respondents, on notice to each other. Upon
such appointment the third arbitrator shall be the Sole Arbitrator.
5. Any decision of the Arbitrators made with respect to any Matter or with
respect to any aspect of, or any matter related to, the arbitration hereunder
(including, without limitation, the procedures of the arbitration) shall be made
by either the Sole Arbitrator or by the majority of the Arbitration Board (or in
default of agreement by such majority, then by the Chairperson), as the case may
be. All decisions of the Arbitrators with respect to any Matter shall be
rendered in writing and shall contain a brief recital of the facts upon which
the decision is made and the
B-1
reasons for such decision.
6. The following shall apply to the arbitration of any Matter, except as the
parties to any particular arbitration may agree or as the Arbitrators in their
discretion otherwise direct:
(a) Within 10 days of the appointment of the Arbitrators, the Applicant shall
deliver to each Respondent and the Arbitrators a written statement (the
"Claim") concerning the Matter setting forth, with particularity, its
position with respect to the Matter and the material facts upon which it
intends to rely. No party may be added to an arbitration by a Claim
without leave of the Arbitrators as provided for in subsection 6(g) of
this Schedule.
(b) Within 10 days after the delivery of the Claim, each Respondent shall
deliver to the Applicant and the Arbitrators a written response (the
"Answer") to the Applicant setting forth, with particularity, its position
on the Matter and the material facts upon which it intends to rely. No
party may be added to an arbitration by an Answer without leave of the
Arbitrators as provided for in subsection 6(g) of this Schedule.
(c) If any Respondent fails to deliver an Answer within the time limit
referred to in subsection 6(b) of this Schedule, that Respondent shall,
subject to subsection 6(f), be deemed to have admitted the Claim.
(d) Within 10 days after the delivery of any Answer, the Applicant may deliver
to the Respondent who delivered the Answer and the Arbitrators a written
reply (the "Reply") to that Answer, setting forth, with particularity, its
response, if any, to the Answer. No party may be added to an arbitration
by a Reply without leave of the Arbitrators as provided for in subsection
6(g) of this Schedule.
(e) Within the time provided for the delivery of the Answer to the Claim, any
Respondent may also deliver to the Applicant and the Arbitrators a
counter-complaint (the "Counter-Complaint") setting forth, with
particularity, any additional Matter between the Respondent and the
Applicant for the Arbitrators to decide. Within 10 days of the delivery of
a Counter-Complaint, the Applicant shall deliver to each Respondent making
a Counter-Complaint and the Arbitrators an Answer to such
Counter-Complaint setting forth, with particularity, its position on the
Counter-Complaint and the material facts upon which it intends to rely. If
the Applicant fails to deliver an Answer to the Counter-Complaint within
such 10-day period, the Applicant will be deemed, subject to subsection
6(f) to have admitted the Counter-Complaint. Within 10 days after the
delivery of an Answer to the Counter-Complaint, the Respondent who made
the Counter-Complaint may deliver to the Applicant and the Arbitrators a
Reply to such Answer setting forth, with particularity, its response to
such Answer. Any Matter submitted to arbitration in accordance with this
subsection 6(e) shall be governed by, and dealt with as if it were the
subject of a Complaint in accordance with, this Schedule, except that it
shall be deemed a submission to the Arbitrators already appointed, and
shall be determined by the Arbitrators accordingly. No party may be added
to an arbitration by a Counter-Complaint without leave of the Arbitrators
as provided for in subsection 6(g) of this Schedule.
B-2
(f) The time limits set for the delivery of the documents referred to in
subsections 6(a) to (e) inclusive of this Schedule may be extended for any
period by the parties to the particular arbitration by agreement or by the
Arbitrators for such period, on such terms, and for such reasons as they
in their discretion may determine upon application made to them by either
the Applicant or a Respondent, as the case may be, on notice to each other
party, either before the expiry of the time limit in issue or within 2
days thereafter, and may relieve the applying party of the consequences of
its failure to comply with the time limit in issue. If any other party
wishes to oppose the application, it shall be given an opportunity to make
submissions on the application.
(g) If, after reading written submissions from all parties to an arbitration,
the Arbitrators determine that it is necessary to enable the Arbitrators
to adjudicate effectively and completely on a Matter to add additional
parties to the arbitration, they shall so order. Immediately after making
such an order, the Arbitrators shall resign and new Arbitrators shall be
appointed in accordance with the procedures and time limits set out in
sections 3 and 4 of this Schedule. For the purposes of appointing
arbitrators under this subsection, all parties added to the arbitration
are deemed to be Respondents. The parties may re-appoint one or more of
the previous Arbitrators.
(h) Each party to the arbitration shall be required to produce to each other
party all documents within its possession, custody or control which are
relevant to the Matter no later than 7 days prior to the time such other
party is required to deliver its Statement in accordance with subsection
6(i).
(i) Within 7 days following the completion of the steps set out in subsections
6(a) to (g) of this Schedule, any party may, upon written notice to each
of the other parties and to the Arbitrators, request the Arbitrators to
give direction and make any order which is, in the discretion of the
Arbitrators, reasonable regarding any procedural matters which properly
should be resolved before the arbitration proceeds further, including: the
amendment of any Complaint, Counter-Complaint or Answer; the provision of
particulars by any party to the Complaint, Counter-Complaint or Answer
filed by that party; the adequacy of the production of documents made by
any party in accordance with subsection 6(h); the propriety of any claim
of privilege made in respect of any document in accordance with subsection
6(h); the need for further disclosure by any party; and the need for
discoveries in connection with the arbitration, either by way of oral
examination or written interrogatories. In making any order or giving any
direction in respect of any procedural matter the Arbitrators may impose
such terms as are reasonable in order to ensure the completion of the
arbitration in a timely manner. The notice requesting any direction or
order pursuant to this subsection shall state the direction or order
sought and set out the reasons for seeking such direction or order.
Nothing in this subsection shall be taken to limit the jurisdiction of the
Arbitrators to deal with procedural matters in accordance with the
Arbitration Xxx 0000 (Ontario).
(j) Each party to the arbitration shall prepare a statement of fact and law to
the Arbitrators (a "Statement") setting out:
its arguments with respect to each Matter; and
B-3
the facts upon which its analysis of each Matter is based.
Each Statement shall also have attached to it copies of all documents,
including affidavits, on which the party relies to establish those facts.
Each party shall deliver its Statement to the Arbitrators and to each
other party within 30 days of the completion of the steps set out in or
pursuant to subsections 6(a) to (i) of this Schedule or, if a step
provided for in this section 6 is not taken, upon the expiry of the time
limit provided therefor.
(k) Within 30 days of the delivery of the last Statement to the Arbitrators,
each party may, at its option, make a reply to any Statement (a "Reply
Statement") or the Arbitrators may require any party to provide a Reply
Statement within the same 30 day period. In such Reply Statement, if any,
a party may request a Preliminary Hearing in accordance with subsection
6(l). The request for a Preliminary Hearing shall identify each Matter for
which clarification is required.
(l) Following the receipt of Reply Statements by the Arbitrators, if any, the
Arbitrators may, within 15 days following receipt of the Reply Statement
or, if no Reply Statements are delivered, 30 days after the delivery of
the last Statement, notify the parties of the need for a preliminary
hearing (the "Preliminary Hearing"). A Preliminary Hearing shall be
required where the Arbitrators determine, in their discretion, that there
are questions of fact arising from the Statements which require
clarification whether or not any of the parties have requested a
Preliminary Hearing. Where the Arbitrators give notice to the parties of a
Preliminary Hearing, the notice shall identify each Matter for which
clarification is required. The Arbitrators will confirm a date and place
within Toronto, Ontario in consultation with counsel for each party for
the Preliminary Hearing but, in any case, such a Preliminary Hearing shall
be not less than 30 days and no more than 45 days from the date of the
notice of a Preliminary Hearing.
(m) Evidence at the Preliminary Hearing shall be taken orally under oath and
duly recorded by a certified special examiner or court reporter. Each
party to the arbitration shall have the right to cross examine witnesses
called by the other parties to give evidence at the Preliminary Hearing.
The Preliminary Hearing shall be held in private and no persons shall be
present except the parties and their legal representatives and the
witnesses, except with the consent of the parties, and subject to the
discretion of the Arbitrators to exclude witnesses. Each party to the
arbitration shall have the right to make oral submissions at the
Preliminary Hearing.
(n) 30 days following the receipt of the last Reply Statement or, if no Reply
Statements are delivered, 60 days after the delivery of the last
Statement, where no Preliminary Hearing is called, or 20 days following
the Preliminary Hearing, the Arbitrators shall deliver their preliminary
award (the "Preliminary Award"). The Preliminary Award will set out the
preliminary decision with reasons of the Arbitrators with respect to each
Matter.
(o) Unless otherwise agreed by the Parties, the Arbitrators shall convene a
Hearing to be held in Toronto, Ontario no less than 30 days and no more than 45
days from the delivery of the Preliminary Award. At the Hearing, counsel for
each party will be given an opportunity orally to
B-4
comment on the Preliminary Award. The Chairperson shall determine, in his or her
sole discretion, the order in which the Parties will present their comments and
whether any additional evidence may be submitted or heard. If the Chairperson
determines that such additional evidence may be submitted or heard, the
Chairperson shall give such direction, in his or her sole discretion, regarding
the submissions or hearing of such evidence.
(p) Within 20 days from the date of the Hearing or the agreement of the Parties
not to proceed to a Hearing, the Arbitrators shall deliver their award (the
"Final Award") to the parties.
7. Every claim or award of the Arbitrators made pursuant hereto shall be final
and binding upon the parties to the arbitration and there shall be no appeal
therefrom. The Arbitrators shall have jurisdiction to award the costs of the
arbitration, including the fees of the Arbitrators, as between the parties to
the arbitration as the Arbitrators see fit, and to direct the payment of
interest in respect any award at such rates and from and to such dates as are
determined by the Arbitrators to be appropriate. Each party shall pay its own
expenses of legal counsel.
8. Each of the Arbitrators shall be paid their normal professional fees for
their time and attendances in dealing with the Matter, which fees, unless
otherwise directed by the Arbitrators in accordance with section 7 of this
Schedule, shall be paid as to one half by the Applicant and as to the other half
by the Respondents.
9. All notices and all other documents required or permitted by this Schedule to
be given by any party to the arbitration to any other of them shall be given in
accordance with Section 10.1 of the Agreement. All notices and all other
documents required or permitted by this Schedule to be given by any party to the
arbitration to the Arbitrators shall be given in accordance with the
Arbitrators' instructions.
10. In the computation of time under this Schedule or an order or direction
given by the Arbitrators pursuant to this Schedule, except where a contrary
intention appears or the parties otherwise agree:
(a) where there is a reference to a number of days between two events, those
days shall be counted by excluding the day on which the first event
happens and including the day on which the second event happens, even if
they are described as clear days or the words "at least" are used;
(b) statutory holidays shall not be counted;
(c) where the time for doing any act under this Schedule or any order or
direction given by the Arbitrators expires on a statutory holiday or on a
Saturday or Sunday, the act may be done on the next day that is not a
statutory holiday or a Saturday or a Sunday; and
(d) service of a document or notice provided for in this Schedule or any order
or direction given by the Arbitrators made after 4:00 p.m. (Toronto time)
or at any time on a statutory holiday or a Saturday or a Sunday shall be
deemed to have been made on the next day that is not a statutory holiday
or a Saturday or a Sunday.
B-5
