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EXHIBIT 2.6
MERGER AGREEMENT
AND PLAN OF REORGANIZATION
BY AND AMONG
CRITICAL PATH, INC.,
COMPASS HOLDING CORP.,
COMPASS ACQUISITION CORP.,
3034996 NOVA SCOTIA COMPANY,
3034997 NOVA SCOTIA COMPANY,
AND
THE DOCSPACE COMPANY INC.
DATED AS OF NOVEMBER 3, 1999
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit 1 Form of Shareholder Implementation Agreement
Exhibit 2 Form of Shareholder Reimbursement Agreement
Exhibit 3 Form of Amalgamation Agreement - First Amalgamation
Exhibit 4 Form of Amalgamation Agreement - Second Amalgamation
Exhibit 5 Exchangeable Share Provisions and Class B Preference Share Provisions
Exhibit 6 Form of Voting and Exchange Trust Agreement
Exhibit 7 Form of Exchangeable Share Support Agreement
Exhibit 8 Form of Escrow Agreement
Exhibit 9 Form of Legal Opinion of Counsel to the Company
Exhibit 10 Form of Noncompetition Agreement
Exhibit 11 Form of Release by Toucan Capital Corp.
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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2.2(a)(i) Company Capital Structure
2.2(a)(ii) Company Capital Structure at Initial Closing
2.2(b) Option List
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(b) Company Registered Intellectual Property
2.11(g) Licenses of Others Intellectual Property by the Company
2.11(h) Developer of Company Intellectual Property
2.11(i) Contracts, Licenses and Agreements
2.11(k) Indemnification Agreements
2.11(r) Maintenance of Company Intellectual Property
2.12(a) Agreements, Contracts and Commitments
2.12(c) Required Consents
2.15 Litigation
2.19 Brokers/Finders Fees; Third-Party Expenses
2.20 Employee Benefit Plans and Employees
2.21 Change of Control and Non-Compete Payments
3.2 Authority
4.1 Conduct of the Business
6.3(h) Persons who have entered into Noncompetition Agreements
6.3(i) Key Employees
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
This MERGER AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into as of November 3, 1999, among Critical Path, Inc., a
California corporation ("Parent"), Compass Holding Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Parent Sub"), Compass Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent Sub
("Holding"), 3034996 Nova Scotia Company, a Nova Scotia unlimited liability
company and a wholly owned subsidiary of Holding ("Holding ULC") and 3034997
Nova Scotia Company, a Nova Scotia unlimited liability company and a wholly
owned subsidiary of Holding ULC ("Amalgamation Sub") (collectively Parent,
Parent Sub, Holding, Holding ULC and Amalgamation Sub are referred to as the
"Parent Companies"), and The docSpace Company Inc., an Ontario corporation (the
"Company").
RECITALS
A. The Boards of Directors of each of the Company and the Parent
Companies believe it is in the best interests of each company and their
respective stockholders that the Parent acquire the Company (the "Acquisition"),
subject to the terms and conditions of this Agreement, and in furtherance
thereof, have approved the Acquisition.
B. Pursuant to the Acquisition, among other things, and subject to the
terms and conditions of this Agreement, the following will occur:
(i) the Company will be continued from the corporate laws of the
Province of Ontario to the corporate laws of the Province of Nova Scotia (the
"Continuance");
(ii) Holding ULC will acquire all of the issued and outstanding
common shares of the Company (the "Company Capital Stock") held by the Company's
shareholders who are resident in the United States and shareholders who are
United States persons, identified as such on Schedule 2.2(a)(ii) (the "US
Sellers"), in exchange for cash and shares of Parent common stock ("Parent
Common Stock");
(iii) each of the Company's shareholders who are not United States
residents or persons may elect to contribute all of that shareholder's Company
Capital Stock to a holding company (each, a "Holding Company") to be newly
established to hold those shares (and the securities into which they are
subsequently exchanged as contemplated herein);
(iv) the Company will form a wholly-owned Nova Scotia unlimited
liability company and amalgamate (the "First Amalgamation") with that company to
form an unlimited liability company ("East ULC");
(v) the Company (or its successor East ULC) will amalgamate with
Amalgamation Sub (the "Second Amalgamation") and all of the issued and
outstanding Company
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Capital Stock will be converted into Class B non-voting preference shares
("Class B Shares") of the company that formed as a result of the Second
Amalgamation ("Exchangeco"); and
(vi) a reorganization will be effected (the "Reorganization")
pursuant to which (i) the memorandum and articles of association of Exchangeco
will be amended to provide that Class B Shares held by Holding ULC will be
exchanged for common shares of Exchangeco and all Class B Shares held by other
Shareholders will be exchanged for Class A non-voting preference shares of
Exchangeco ("Exchangeable Shares") and cash; (ii) a voting and exchange trust
agreement will be entered into among Parent, Exchangeco and a Canadian trust
company (the "Voting and Exchange Trust Agreement") in substantially the form
attached as Exhibit 6 and (iii) an exchangeable share support agreement will be
entered into between Parent and Exchangeco (the "Support Agreement") in
substantially the form attached as Exhibit 7.
C. The Exchangeable Shares will be exchangeable into Parent Common
Stock, subject to the terms and conditions of the share provisions attaching to
the Exchangeable Shares and the Voting and Exchange Trust Agreement. Pursuant to
the Voting and Exchange Trust Agreement, a holder of Exchangeable Shares will be
entitled to vote as though the holder held the Parent Common Stock issuable upon
exchange of that holder's Exchangeable Shares.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to the Parent Companies' willingness to enter into this
Agreement, certain affiliates of the Company will enter into a shareholder
implementation agreement in the form attached hereto as Exhibit 1 (the
"Shareholder Implementation Agreement").
E. A portion of the Parent Common Stock and Exchangeable Shares
otherwise receivable by the Company's shareholders in connection with the
Acquisition will be placed in escrow pursuant to an escrow agreement (the
"Escrow Agreement"), in substantially the form attached as Exhibit 8, the
release of which will be contingent upon certain events and conditions.
F. Concurrently with the execution of this Agreement, Parent will enter
into a shareholder reimbursement agreement in the form attached as Exhibit 2
(the "Shareholder Reimbursement Agreement") establishing a fund of $5 million
cash to be used to pay for expenses and tax consequences, if any, of
shareholders of the Company in connection with the establishment of the Holding
Companies.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
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ARTICLE I
THE ACQUISITION
1.1 Implementation Steps by the Company. The Company covenants in favor
of the Parent Companies that:
(a) the Company will adopt or cause to be adopted all directors'
resolutions to be adopted by them which are necessary to approve the
Continuance, the First Amalgamation, the Second Amalgamation (collectively, the
"Amalgamations"), the Amalgamation Agreements in the forms attached hereto as
Exhibit 3 and Exhibit 4 (the "Amalgamation Agreements") and all other
transactions contemplated by this Agreement, the Shareholder Implementation
Agreement and the Amalgamation Agreements;
(b) as soon as reasonably practicable after the execution and
delivery of this Agreement, and in any event within 14 days thereafter, the
Company will obtain the unanimous consent of the shareholders of the Company
(including option holders, warrant holders and others with interests in Company
Capital Stock), to the transactions contemplated by this Agreement and the
Amalgamation Agreements through the execution by each shareholder of the
Shareholder Implementation Agreement, and upon due execution of the Shareholder
Implementation Agreement by all such shareholders of the Company, so notify the
Parent;
(c) in connection with the execution of the Shareholder
Implementation Agreement, and in accordance with applicable law and paragraph
1.1(d), the Company will cause any information required to complete the
transactions contemplated hereby to be sent to each of the Company's
shareholders;
(d) the information submitted to the Company's shareholders in
connection with the execution of the Shareholder Implementation Agreement will
be delivered for review and approval by Parent and will include information
regarding Parent, the terms of the Amalgamations, the Amalgamation Agreements,
the Reorganization and this Agreement and the unanimous recommendation of the
Board of Directors of the Company to execute the Shareholder Implementation
Agreement thereby approving the Continuance, the Amalgamations, the Amalgamation
Agreements, the Reorganization and all other transactions contemplated by this
Agreement and the Amalgamation Agreements;
(e) subject to obtaining the unanimous execution by the shareholders
of the Shareholder Implementation Agreement, the Company will deliver
resolutions of the shareholders of the Company approving this Agreement, the
Related Agreements and the transactions contemplated hereby and thereby
including the Continuance, the Amalgamations and the Reorganization;
(f) the Company and the US Sellers will apply for Section 116
clearance certificates from Revenue Canada;
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(g) subject to obtaining the unanimous execution by the shareholders
of the Shareholder Implementation Agreement and shareholder approval of the
Continuance, and a determination by Revenue Canada as to each of the Section 116
clearance certificates referred to in subsection 1.1(f) above and satisfaction
or waiver (to the extent permitted) of each of the conditions to the Initial
Closing contemplated by Section 6.1, the Company will apply immediately for a
certificate of continuance (the "Certificate of Continuance") continuing the
Company under the Nova Scotia Companies Act (the "Companies Act") and obtain
such Certificate of Continuance from the Registrar of Joint Stock Companies
under the Companies Act (the "Registrar");
(h) in the event that Toucan Capital Corp. ("Toucan") does not
receive a Section 116 clearance certificate from Revenue Canada reasonably
satisfactory to Toucan that provides relief from Canadian withholding taxes and
any applicable bonding, payment or other security obligations on Toucan or its
members, each of the other shareholders of the Company (other than Parent
Companies if any of them is a shareholder) shall execute and deliver to Toucan
an escrow and stockholders indemnity agreement in form and substance
satisfactory to Toucan (the "Double Tax Indemnity Agreement").
(i) subject to the satisfaction and waiver of the conditions to the
Initial Closing contemplated by Section 6.1, and subject to obtaining the
Certificate of Continuance, and, if obtained, immediately thereafter, the
Company will do all such things, provide all such documents and pay all such
fees necessary to approve the Amalgamations, the Amalgamation Agreements and the
transactions contemplated by this Agreement and the Amalgamation Agreements;
(j) subject to obtaining the unanimous execution by the shareholders
of the Shareholder Implementation Agreement, the Company will apply to the
appropriate Nova Scotia court under the Companies Act (the "Court") for an order
approving the First Amalgamation ("First Approval Order");
(k) subject to obtaining the First Approval Order, the Company (or
its successor East ULC) will file with the Registrar the First Amalgamation
Agreement and the First Approval Order, together with proof of compliance with
any terms and conditions that may have been imposed by the Court in the First
Approval Order; and
(l) subject to the completion of the First Amalgamation, the Company
(or its successor East ULC) will jointly apply with Holding ULC and Amalgamation
Sub to the Court for an order approving the Second Amalgamation (the "Second
Approval Order").
1.2 Implementation Steps by the Parent Companies. The Parent Companies
covenant in favor of the Company that:
(a) they will adopt or cause to be adopted all directors'
resolutions to be adopted by them which are necessary to approve this Agreement,
the Related Agreements, the Amalgamations, the Amalgamation Agreements and the
transactions contemplated by this Agreement and the Amalgamation Agreements;
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(b) Amalgamation Sub will cause to be adopted a shareholder
resolution sufficient to approve the Second Amalgamation, the Second
Amalgamation Agreement and the transactions contemplated by this Agreement and
the Second Amalgamation Agreement, including the adoption of the Exchangeable
Share Provisions;
(c) subject to the approval by the shareholders of the Company of
the Second Amalgamation and the Second Amalgamation Agreement by the execution
of the Shareholder Implementation Agreement, Amalgamation Sub will jointly apply
with the Company (or its successor East ULC) to the Court for the Second
Approval Order;
(d) subject to obtaining the Second Approval Order, the Parent
Companies will file with the Registrar the Second Amalgamation Agreement and the
Second Approval Order, together with proof of compliance with any terms and
conditions that may have been imposed by the Court in the Second Approval Order.
1.3 First Amalgamation Agreement. The First Amalgamation Agreement will,
with such other matters as are necessary to effect the First Amalgamation, and
subject to the terms and conditions of this Agreement and exhibits hereto,
provide that on the First Amalgamation each common share of the issued and
outstanding Company Capital Stock immediately prior to the First Amalgamation
shall be converted into and exchanged for one validly issued, fully paid and
non-assessable voting common share of East ULC ("East ULC Common Share"). Each
stock certificate of the Company evidencing ownership Company Capital Stock
shall continue to evidence ownership of such East ULC Common Shares.
1.4 Second Amalgamation Agreement. The Second Amalgamation Agreement
will, with such other matters as are necessary to effect the Second
Amalgamation, and subject to the terms and conditions of this Agreement and
exhibits hereto, provide that on the Second Amalgamation:
(a) Conversion of Amalgamation Sub Common Shares. Each common share
of Amalgamation Sub issued and outstanding immediately prior to the Second
Amalgamation shall be converted into and exchanged for one validly issued, fully
paid and non-assessable voting common share of Exchangeco ("Exchangeco Common
Share"). Each stock certificate of Amalgamation Sub evidencing ownership of any
such shares shall continue to evidence ownership of such Exchangeco Common
Shares.
(b) Conversion of Company Common Shares. Each Company Common Share
(or common share of its successor East ULC) issued and outstanding immediately
prior to the Second Amalgamation, including those held by the Parent Companies,
shall be converted into one validly issued, fully paid and non-assessable Class
B Non-Voting Preference Share of Exchangeco ("Class B Shares").
(c) Adjustments to Conversion of Company Common Shares. The
conversion of Company Common Shares pursuant to paragraph 1.4(b) 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
capital stock of Exchangeco or Company Capital Stock), reorganization,
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recapitalization or other like change with respect to capital stock of
Exchangeco or Company Capital Stock occurring after the date hereof and prior to
the Final Closing.
1.5 Reorganization of Capital of Exchangeco. Immediately after the
Second Amalgamation, Exchangeco shall effect a capital reorganization whereby
each outstanding Class B Share held by the Parent Companies shall be transferred
to Exchangeco in exchange for Exchangeco Common Shares and all other Class B
Shares shall be transferred by the holder thereof to Exchangeco in exchange for
that amount of cash and that number of fully paid and non-assessable
Exchangeable Shares as determined in accordance with Section 1.6. The terms and
provisions of the Exchangeable Shares, including the basis on which the
shareholders shall have the right to exchange Exchangeable Shares of Exchangeco
for shares of Parent Common Stock, shall be as set forth in the provisions
attaching to the Exchangeable Shares set forth in the form attached as Exhibit 5
and the voting and exchange trust agreement set forth in the form attached as
Exhibit 6 (the "Voting and Exchange Trust Agreement").
1.6 Allocation of Consideration. The aggregate purchase price to be paid
by Parent in connection with the Acquisition will be $30,000,000 cash (subject
to reduction as described below) and 4,092,280 shares of Parent Common Stock.
Within fifteen days of the date of this Agreement, the Company shall deliver to
Parent and Holding ULC a schedule (the "Initial Closing Schedule") which shall
set forth:
(A)(i) a listing of all of the US Sellers together with the
number of shares of Company Capital Stock held by each, and (ii) the aggregate
amount of cash to be paid by Holding ULC to each US Seller in consideration for
the acquisition of their shares of Company Capital Stock at the Initial Closing
(as to each US Seller, the "Initial Closing Cash Payment"), and (iii) the
aggregate number of shares of Parent Common Stock to be issued to each US Seller
in consideration for their shares of Company Capital Stock at the Initial
Closing (as to each US Seller, the "Initial Closing Parent Shares"). In no event
shall the aggregate of all Initial Closing Cash Payments to be paid to the US
Sellers exceed $30,000,000 less the amount outstanding as of the Initial Closing
Date under the Convertible Promissory Note (the "Convertible Promissory Note")
dated August 3, 1999 (the "Aggregate Cash Purchase Price") and in no event shall
the aggregate of all Initial Closing Parent Shares to be issued to the US
Sellers exceed 4,092,280 shares of Parent Common Stock (the "Aggregate Share
Number"). The aggregate amount of purchase price consideration payable to all US
Sellers identified on the Initial Closing Schedule, either in the form of cash
or shares of Parent Common Stock (valued for this purpose at $39.098 per share)
or a combination of the two, allocated to each share of Company Capital Stock to
be acquired by Holding ULC at the Initial Closing will be equal; however, the
form of consideration (cash or shares) to be allocated to each shareholder may
be different;
(B)(i) a listing of all of the non-US Sellers together with the
number of shares of Company Capital Stock held by each, and (ii) the aggregate
amount of cash to be issued by Exchangeco to each non-US Seller upon exchange of
their Class B Shares in the Reorganization (as to each non-US Seller, the
"Reorganization Cash Payment"), and (iii) the aggregate number of Exchangeable
Shares to be issued to each non-US Seller upon exchange of
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their Class B Shares in the Reorganization (as to each non-US Seller, the
"Reorganization Exchangeable Shares"). In no event shall the aggregate of all
Reorganization Cash Payments to be paid to the non-US Sellers exceed the
Aggregate Cash Purchase Price less the aggregate amount of cash paid as Initial
Closing Cash Payments and in no event shall the aggregate of all Reorganization
Exchangeable Shares to be issued to the non-US Sellers exceed the Aggregate
Share Number less the aggregate number of Initial Closing Parent Shares issued
to US Sellers in connection with the Initial Closing. The aggregate amount of
purchase price consideration, either in the form of cash or Exchangeable Shares
(the Parent Common Stock into which the Exchangeable Shares may be converted is
valued for this purpose at $39.098 per share) or a combination of the two,
allocated to each share of Company Capital Stock to be converted to Class B
Shares and subsequently to Exchangeable Shares shall be equal; however, the form
of consideration (cash or shares) to be allocated to each share may be
different.
Parent acknowledges that the Company has informed Parent of Company's
intention to set forth on the Initial Closing Schedule an allocation among its
shareholders of the Aggregate Cash Purchase Price to reflect first the payment
of any required purchase price withholding tax, second the payment of the tax
liabilities of the US Sellers associated with the Acquisition and third the
payment of the tax liabilities of the non-US Sellers associated with the
Acquisition, with any remaining cash consideration being allocated among all of
the Company's shareholders based upon their respective equity interests in the
Company. Notwithstanding the foregoing, the relevant Parent Companies shall be
obligated to distribute the Aggregate Cash Purchase Price that is payable under
this Section 1.6 only according to the allocation set forth on the Initial
Closing Schedule.
1.7 Purchase of Company Capital Stock from U.S. Sellers. Upon the
Initial Closing (as defined in Section 7.1), Holding ULC will acquire each
issued and outstanding share of Company Capital Stock held by US Sellers in
exchange for the cash and number of shares of Initial Closing Parent Shares per
share of Company Capital Stock payable to the U.S. Sellers in the amounts set
forth on the Initial Closing Schedule; however, all such cash and Parent Common
Stock will be held in escrow in accordance with the provisions set forth in
Section 7.2 and the acquisition of all Company Capital Stock by Holding ULC from
the US Sellers will be unwound if the Second Amalgamation is not completed; and
provided further, however that such amounts identified on Initial Closing
Schedule 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 capital stock of Exchangeco or Company Capital
Stock), reorganization, recapitalization or other like change with respect to
capital stock of Exchangeco or Company Capital Stock occurring after the date
hereof and prior to the Initial Closing. If at the time of the unwinding the
First Amalgamation shall have occurred, the Company and the shareholders of the
Company (or its successor East ULC) shall take such actions as are necessary to
cause East ULC to file a valid and timely election to be treated as an
association taxable as a corporation for United States federal income tax
purposes.
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1.8 Escrow Amount. In addition to the foregoing, Exchangeco shall be
entitled to withhold a percentage of the Exchangeable Shares issuable to non-US
Sellers (other than Exchangeable Shares that may be issuable to any Parent
Companies) and a percentage of the Parent Common Stock issuable to the US
Sellers (collectively the "Escrow Amount") such that the total percentage of the
shares so withheld equal 11.875 percent of the aggregate number of Parent Common
Stock issuable (i) to the US Sellers and (ii) issuable to non-US Sellers holding
Exchangeable Shares on the exchange of the Exchangeable Shares, on the terms and
conditions contained in the Escrow Agreement. The Escrow Amount will be withheld
on a pro rata basis among all the shareholders of the Company based upon their
respective equity interests in the Company.
1.9 Taking of Necessary Action; Further Action. If, at any time after
the Final Closing, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Exchangeco with full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of the Company (or its successor East ULC) and Amalgamation Sub, the
resolutions passed by the Company and Amalgamation Sub will provide that the
officers and directors of the Company and Amalgamation Sub are fully authorized
in the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to
the Parent Companies, subject to such exceptions as are specifically disclosed
in the disclosure letter (referencing the appropriate section number) supplied
by the Company to Parent (the "Company Schedules") and dated as of the date
hereof. Any information disclosed on the Company Schedules under any section
number set forth therein shall be deemed to be disclosed and incorporated into
any other section under the Company Schedules where such disclosure would on its
face and without reference to any separate or independent document or
information reasonably be deemed to apply.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of Ontario, Canada. The Company has the corporate power to own its properties
and to carry on its business as now being conducted. The Company is duly
qualified to do business and in good standing in each other jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, prospects, assets (including intangible assets), financial condition
or results of operations (hereinafter referred to as a "Material Adverse
Effect") of the Company. The Company has delivered a true, correct and complete
copy of its Articles of Amalgamation and By-laws, each as amended to date, to
Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of an
unlimited number of common shares, of which forty-two (42) shares are issued and
outstanding as of the date of this
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Agreement. The Company Capital Stock is held by the persons, with the domicile
addresses and in the amounts set forth on Schedule 2.2(a)(i). Immediately prior
to the Initial Closing, there will be 10,000,000 common shares issued and
outstanding to be held by the persons and in the amounts set forth on Schedule
2.2(a)(ii). All outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Articles of Amalgamation or By-laws of the
Company or any agreement to which the Company is a party or by which it is
bound.
(b) Except for the Company Convertible Promissory Note described in
Schedule 2.2(b), there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company. Except for the Company Convertible
Promissory Note described in Schedule 2.2(b), there are no options, warrants,
calls, rights, commitments or agreements of any character, written or oral, to
which the Company is a party or by which it is bound obligating the Company to
grant, extend, accelerate the vesting of, change the price of, otherwise amend
or enter into any such option, warrant, call, right, commitment or agreement. As
a result of the Second Amalgamation, Parent will be the record and sole
beneficial owner of all Company Capital Stock and rights to acquire or receive
Company Capital Stock from the Company.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the entering into by all shareholders of
the Company of the Shareholder Implementation Agreement, each of the Company and
East ULC has or will have prior to the Final Closing, all requisite corporate
power and authority to enter into this Agreement and the Related Agreements (as
defined below) and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby have,
or will have prior to the Final Closing, been duly authorized by all necessary
corporate action on the part of the Company and East ULC, subject only to the
entering into by all shareholders of the Company of the Shareholder
Implementation Agreement. The Company's Board of Directors has unanimously
approved this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby. This Agreement has been, and, when executed and
delivered, each of the Related Agreements shall be duly executed and delivered
by the Company or East ULC, as applicable, and constitutes the valid and binding
obligation of the Company, or East ULC, as applicable, enforceable against the
Company or East ULC, as applicable, in accordance with its terms. Subject only
to the entering into by all shareholders of the Company of the Shareholder
Implementation Agreement, the execution and delivery of this Agreement by the
Company does not, and the execution and delivery of the Related Agreements by
the Company will not, and, as of the Amalgamations and the Reorganization, the
consummation of the transactions contemplated hereby and thereby will not,
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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 (any
such event, a "Conflict") (i) any provision of the Articles of Amalgamation or
By-laws or similar constating documents of the Company or East ULC when formed
or (ii) any 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 East
ULC, as applicable, or its properties or assets, except in those instances where
such Conflict would not have a Material Adverse Effect on the Company or East
ULC, as applicable. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict), is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or any Related Agreement or the consummation of the transactions contemplated
hereby or thereby, except for (i) obtaining consent from the Ontario Ministry of
Finance and obtaining the Certificate of Continuance; (ii) obtaining the
Approval Orders for the Amalgamations and the related filings with the
Registrar, all under the Companies Act, (iii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, state and provincial securities laws and (iv)
such other consents, waivers, authorizations, filings, approvals and
registrations which are set forth on Schedule 2.4. For purposes of this
Agreement, the term "Related Agreements" means the Shareholder Implementation
Agreement, the Escrow Agreement, the Shareholder Reimbursement Agreement, the
Voting and Exchange Trust Agreement, the Exchangeable Share Support Agreement
and the Amalgamation Agreements.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
audited balance sheet as of July 31, 1999 (the "Balance Sheet") and the related
audited statements of operations and cash flows for the twelve-month period then
ended (collectively, the "Company Financials"). The Company Financials have been
prepared in accordance with Canadian generally accepted accounting principles
("GAAP") applied on a basis consistent throughout the periods indicated and
consistent with each other. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein. The aggregate value of the assets in Canada of the
Company together with each of its affiliates (as such term is defined in the
Competition Act (Canada)) determined in accordance with the Competition Act,
does not exceed Canadian $35 million. The aggregate gross revenues from sales
in, from or into Canada of the Company together with it each of its respective
affiliates (as such term is defined in the Competition Act), determined in
accordance with, and for the period prescribed by the Competition Act (Canada)
does not exceed Canadian $35 million.
2.6 No Undisclosed Liabilities. The Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with Canadian generally accepted accounting principles), which individually or
in the aggregate, (i) has not been reflected in the Balance Sheet or the
footnotes thereto, or (ii) has not arisen in the ordinary course of the
Company's business since July 31, 1999,
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consistent with past practices and in the aggregate do not exceed $25,000 (it
being the understanding of the parties that the representations contained in
this Section 2.6 are not intended to expand the scope of any representation
(including the representation contained in Section 2.11(n)) contained elsewhere
in this Agreement).
2.7 No Changes. Since July 31, 1999, 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 Amalgamation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company of $25,000 in
any individual case or $50,000 in the aggregate;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with 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;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, 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 in each case in the ordinary course of
business or as otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness (other than indebtedness to Parent or its
affiliates), guaranteeing by the Company
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15
of any indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(m) waiver or release of any material right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company in an amount in excess of $1,000;
(n) commencement or notice or, to the Company's knowledge, threat of
commencement of any lawsuit or proceeding against or investigation of the
Company or its affairs;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(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;
(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;
(r) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
(s) negotiation or agreement by the Company or any officer or
employees thereof 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).
2.8 Tax and Other Returns and Reports. Except as set forth in Schedule
2.8:
(i)The Company has filed all tax returns required to be filed by
it in all applicable jurisdictions and the Company has paid all Governmental
Charges (as defined below).
(ii) Adequate provision has been made in the Company's
Financials for all Governmental Charges, and all professional fees related
thereto, payable in respect of the business or assets of the Company for all
periods up to the date of the balance sheet comprising part of the Company's
Financials.
(iii) Canadian federal and provincial income tax assessments
have been issued to the Company covering all past periods up to and including
the fiscal year ended 1999 and such assessments, if any amounts were owing prior
to the date hereof in respect thereof, have been paid, and only the fiscal years
subsequent to 1996 remain open for reassessment of additional taxes, interest or
penalties.
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16
(iv) Assessments for all other applicable Governmental Charges
have been issued and any amounts owing thereunder have been paid, and only the
time period subsequent to 1996 remains open for reassessment of additional
Governmental Charges.
(v)There are no actions, proceedings or claims of any kind in
progress, pending or threatened against the Company in respect of any
Governmental Charges and, in particular, there are no currently outstanding
reassessments or written enquiries which have been issued or raised by any
governmental authority relating to any such Governmental Charges.
(vi) The Company has withheld or collected and remitted all
amounts required to be withheld or collected and remitted by it in respect of
any Governmental Charges.
(vii) Correct and complete copies of all federal and provincial
tax returns, including schedules thereto, filed by the Company since 1996 and
all written communications with or from any Governmental Entity relating thereto
have been made available to Parent.
(viii) "Governmental Charges" means all taxes, levies,
assessments, reassessments and other charges together with all related
penalties, interest and fines, due and payable to any domestic or foreign
government (federal, provincial, municipal or otherwise) or to any regulatory
authority, agency, commission or board of any domestic or foreign government, or
imposed by any court or any other law, regulation or rulemaking entity having
jurisdiction in relevant circumstances;
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, 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.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor and the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and enforceable by the Company in accordance with their respective terms, and
there is not, under any of such leases, any existing default by the Company or
event of default (or event which with notice or lapse of time, or both, would
constitute a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and
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mixed, used or held for use in its business, free and clear of any Liens (as
defined below), except as reflected in the Company Financials or in Schedule
2.10(b) and except for Liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby ("Permitted Encumbrances"). For purposes of this Agreement, the
term "Lien" shall mean any lien, pledge, charge, claim, security interest or
other encumbrance of any sort.
2.11 Intellectual Property.
(a) For the purposes of this Section 2.11, the following terms have
the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all Canadian and
United States and foreign patents and utility models and applications
therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in inventions and
discoveries ("Patents"); (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists,
and all documentation embodying or evidencing any of the foregoing;
(iii) all copyrights, copyrights registrations and applications therefor
and all other rights corresponding thereto throughout the world
("Copyrights"); (iv) all mask works, mask work registrations and
applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology ("Maskworks");
(v) all industrial designs and any registrations and applications
therefor throughout the world; (vi) all trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations
and applications therefor and all goodwill associated therewith
throughout the world ("Trademarks"); (vii) all databases and data
collections and all rights therein throughout the world; and (viii) all
computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of
the foregoing is recorded; (ix) all World Wide Web addresses, sites and
domain names; and (x) any similar, corresponding or equivalent rights to
any of the foregoing anywhere in the world.
"Business" means the business of the Company, including the manufacture,
use, licensing, distribution and sale of any products or technology or
the provision of any services by the Company, as currently conducted or
as reasonably is contemplated to be conducted by the Company in the
future.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by or licensed to the Company.
"Registered Intellectual Property" shall mean all Canadian, United
States, international and foreign: (i) Patents, including applications
therefor; (ii) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations
or
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applications related to Trademarks; (iii) Copyrights registrations and
applications to register Copyrights; (iv) Mask Work registrations and
applications to register Mask Works; and (v) any other Company
Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued by, filed
with, or recorded by, any state, government or other public legal
authority at any time.
(b) Schedule 2.11(b) lists all Registered Intellectual Property in
whole or in part owned by, assigned to, or filed in the name of, the Company
(the "Company Registered Intellectual Property").
(c) Each item of Company Intellectual Property that is owned by the
Company, including all Company Registered Intellectual Property listed on
Schedule 2.11(b), is free and clear of any Lien other than a Permitted
Encumbrance (it being the understanding of the parties that nothing in this
subsection shall be deemed to constitute a representation or warranty as to any
matter covered by subsection (n) of this Section 2.11 or any other subsection of
this Section 2.11).
(d) The Company: (i) is the exclusive owner of all Trademarks,
including trade names, trade dress and similar designations of origin used in
connection with the operation or conduct of the Business and (ii) owns
exclusively, and has good title to, all copyrighted works that are software
products of the Company or other works of authorship that the Company otherwise
purports to own (it being the understanding of the parties that nothing in this
subsection shall be deemed to constitute a representation or warranty as to any
matter covered by subsection (n) of this Section 2.11 or any other subsection of
this Section 2.11).
(e) The Company has not transferred ownership of, or granted any
license of or right to use or authorized the retention of any rights to use, any
Intellectual Property that is, or was, Company Intellectual Property, to any
other person except in the ordinary course of the Company's business.
(f) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Business
including (i) the making, using, selling, marketing, or importing of any product
or device, (ii) the practice of any process, (iii) the offering or performance
of any service, or (iv) the copying, display, performance, distribution,
creation of derivative works of, or the exploitation of any device or work,
including any of the foregoing with respect to products, technology or services
currently under development by Company.
(g) The contracts, licenses and agreements listed on Schedule
2.11(g) include all material contracts, licenses and agreements pursuant to
which any person, including any affiliate of Company, has licensed any
Intellectual Property to the Company. The Company is neither in breach of, nor
has it failed to perform under any of the foregoing contracts, licenses and
agreements and, to the knowledge of the Company, no other party to such
contracts, licenses and agreements is in breach of or has failed to perform
thereunder.
(h) The contracts, licenses and agreements listed on Schedule
2.11(h) include all contracts and agreements pursuant to which any person,
including any third party developer or
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consultant, has developed any device or technology, authored any work, or
otherwise created any thing in which any Intellectual Property rights might
arise, either separately or jointly with the Company or any other person, which
the Company uses or possess or which the Company believes it owns.
(i) The contracts, licenses and agreements listed on Schedule
2.11(i) include all material contracts, licenses and agreements pursuant to
which the Company has licensed or transferred to any third person or any
affiliate of the Company any material Company Intellectual Property. The Company
is neither in breach of, nor has it failed to perform under any of the foregoing
contracts, licenses and agreements and, to the knowledge of the Company, no
other party to such contracts, licenses and agreements is in breach of or has
failed to perform thereunder.
(j) The consummation of the transactions contemplated by this
Agreement and the Related Agreements will not cause or obligate the Company (i)
to grant to any third party any rights or licenses with respect to any
Intellectual Property of the Company; or (ii) pay any royalties or other amounts
in excess of those being paid by Company prior to the Initial Closing or Final
Closing.
(k) Schedule 2.11(k) lists all agreements, licenses and contracts
pursuant to which Company has agreed to indemnify, hold harmless, or otherwise
agree to be liable for any losses cost or damages of, a third party with respect
to any Intellectual Property or product or service of Company.
(l) As of the Initial Closing Date and the Final Closing Date, all
material Company Intellectual Property that is owned by the Company, including
any item thereof, will be fully transferable, alienable or licensable by the
Company without restriction and without payment of any kind to any third party.
(m) The consummation of the transactions contemplated by this
Agreement will not result in the loss of, or otherwise adversely affect, any
ownership rights of Company in any Company Intellectual Property or result in
the breach or termination of any license, contract or agreement to which Company
is a party respecting any material Company Intellectual Property.
(n) The operation of the Business, including (i) the making, using,
selling, marketing, or importing of any product or device, (ii) the practice of
any process, (iii) the offering or performance of any service, or (iv) the
copying, distribution, performance, display, creation of derivative works of, or
the exploitation of any device or work, including any of the foregoing with
respect to products, technology or services currently under development by
Company, does not, and, to the knowledge of the Company, will not when conducted
in substantially the same manner following the Final Closing by the Company,
infringe or misappropriate the Intellectual Property of any person, violate the
rights of any person, or constitute unfair competition or trade practices under
the laws of any jurisdiction, and the Company has not received notice from any
person claiming that such operation or any act, product, technology or service
of the Business infringes or misappropriates the Intellectual Property of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction (nor is the Company aware of any basis therefor).
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Without limiting the foregoing, the Company has not misappropriated the trade
secrets of, or, to the knowledge of the Company, infringed the Copyright or Mask
work of any third party.
(o) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any dispute known to the Company regarding the scope of such
agreement, or performance under such contract, license or agreement including
with respect to any payments to be made or received by the Company thereunder.
(p) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property that is owned by the Company.
(q) No Company Intellectual Property that is owned by the Company or
any product, technology or service of the Business is subject to any proceeding
or outstanding decree, order, judgment, agreement or stipulation that restricts
in any manner the use, transfer or licensing thereof by the Company or could
affect the validity, use or enforceability of such Company Intellectual
Property.
(r) Schedule 2.11(r) lists all action, including the payment of any
fees, that must, or should be performed by, or on behalf of, the Company in the
ninety-day period following the Final Closing Date, with respect to any
application for, perfection of, preservation of, or continuation of any rights
of Company with respect to any Company Intellectual Property, including the
filing of any patent applications, response to Patent Office actions or payment
of fees, including renewal fees.
(s) The Company has not claimed small business status, or other
particular status in the application for any Registered Company Intellectual
Property which claim of status was not at the time made, or which has since
become inaccurate or false or that will no longer be true and accurate as a
result of the Initial Closing and Final Closing.
(t) Except for software products licensed to the Company under those
agreements set forth on Schedule 2.11(g), all software products of the Company
were written and created solely by either (i) employees of the Company acting
within the scope of their employment or (ii) by third parties who have validly
assigned or validly waived all of their rights, including Intellectual Property
rights in such products to the Company, and no third party owns or has any
rights to such software products or any Intellectual Property rights therein.
(u) The Company has no knowledge of any facts or circumstances that
would be reasonably expected to render any Company Intellectual Property invalid
or unenforceable. Without limiting the foregoing, Company knows of no
information, materials, facts, or circumstances, including any information or
fact that would constitute prior art, that would render any of the Company
Registered Intellectual Property invalid or unenforceable, or would adversely
effect any pending application for any Company Registered Intellectual Property
and the Company has not misrepresented, or failed to disclose, and is not aware
of any misrepresentation or failure to disclose, any fact or circumstances in
any application for any Company Register Intellectual Property that
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would constitute fraud or a material misrepresentation with respect to such
application or that would otherwise effect the validity or enforceability of any
Company Registered Intellectual Property.
(v) The Company has taken all steps reasonable under the
circumstances to protect the confidentiality and trade secret status of any
material confidential information of the Company and knows of no basis on which
it could be claimed that the Company has failed to protect the confidentiality
of any material Confidential Information of the Company.
(w) All employees of the Company have entered into a valid and
binding agreement with the Company sufficient to vest title in the Company of
all Intellectual Property created by such employee in the scope of his or her
employment with the Company.
2.12 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement with a
firm or other organization,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of $25,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement containing any covenant limiting the freedom
of the Company to engage in any line of business or to compete with any person,
(x) any agreement relating to capital expenditures and involving
future payments in excess of $25,000,
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(xi) any agreement relating to the disposition or acquisition of
assets or any interest in any business enterprise outside the ordinary course of
the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $25,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
(xvi) any agreement pursuant to which the Company has granted or
may grant in the future, to any party a source-code license or option or other
right to use or acquire source-code, or
(xvii) any other agreement that involves $25,000 or more or is
not cancelable without penalty of $10,000 or more within thirty (30) days of the
date on which notice of cancellation is given.
The Company has not breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment required to be set forth on
Schedule 2.12(a) (any such agreement, contract or commitment, a "Contract"),
where such breach, violation or default could have a Material Adverse Effect on
the Company. Each Contract is in full force and effect and is not subject to any
default thereunder of which the Company has knowledge by any party obligated to
the Company pursuant thereto. Schedule 2.12(c) identifies each Contract that
requires a consent, waiver or approval to preserve all rights of, and benefits
to, Exchangeco under such Contract as a result of entering into this Agreement
or effecting the Amalgamation or the other transactions contemplated by this
Agreement (each a "Required Consent").
2.13 Interested Party Transactions. To the Company's knowledge, no
officer, director or stockholder of the Company (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an economic interest),
has or has had, directly or indirectly, (i) an economic interest in any entity
which furnished or sold, or furnishes or sells, services or products that the
Company furnishes or sells, or proposes to furnish or sell, (ii) an economic
interest in any entity that purchases from, or sells or furnishes to, the
Company, any goods or services or (iii) a beneficial interest in any contract or
agreement set forth in Schedule 2.12(a); provided, that ownership of no more
than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
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2.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, provincial, state or local
statute, law or regulation.
2.15 Litigation. There is no action, suit or proceeding of any nature
pending or to the Company's knowledge threatened against the Company, its
properties or any of its officers or directors, in their respective capacities
as such. Except as set forth in Schedule 2.15, to the Company's knowledge, there
is no investigation pending or threatened against the Company, its properties or
any of its officers or directors in their respective capacities as such by or
before any governmental entity. Schedule 2.15 sets forth, with respect to any
pending or threatened action, suit, proceeding or investigation, the forum, the
parties thereto, the subject matter thereof and the amount of damages claimed or
other remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company 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 material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company provided to counsel
for Parent are the only minute books of the Company and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
stockholders or actions by written consent since the time of incorporation of
the Company.
2.18 Environmental Matters.
(a) Definitions. In this section,
(i) "Environment" means the ambient air, all layers of the
atmosphere, surface water, underground water, all land, all living organisms and
the interacting natural systems that include components of air, land, water,
organic and inorganic matter and living organisms, and includes indoor spaces;
(ii) "Environmental Law" means all federal, provincial,
municipal or local statutes, regulations, by-laws, Environmental Permits, orders
or rules, and any policies or guidelines of any governmental or regulatory body
or agency, and any requirements or obligations arising under the common law,
relating to the Environment, the transportation of dangerous goods and
occupational health and safety;
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(iii) "Environmental Permits" means all permits, licenses,
approvals, consents, authorizations, registrations and certificates issued by or
provided to, as the case may be, any government, governmental or regulatory body
or agency pursuant to an Environmental Law;
(iv) "Premises" means all real property, buildings and
facilities, including any part of any such property, building or facility,
owned, leased, or operated by the Company in connection with its business; and
(v) "Substance" means any substance or material which under any
Environmental Law is defined to be "hazardous", "toxic", "deleterious",
"caustic", "dangerous", a "contaminant", a "pollutant", a "dangerous good", a
"waste", a "source of contamination" or a source of a "pollutant".
(b) Hazardous Activities.
(i) The Company has not emitted, discharged, deposited or
released or caused or permitted to be emitted, discharged, deposited or
released, any Substances on or to the Premises, or in connection with the
operation of the business of the Company, except in compliance with
Environmental Law;
(ii) to the knowledge of the Company, the soil and subsoil, and
the surface and ground water in, on or under the Premises do not contain any
Substances, nor do the Premises contain any underground storage tanks; all
Substances which have been or are being treated or stored on the Premises have
been generated, treated and stored in compliance with Environmental Law;
(iii) to the knowledge of the Company, no polychlorinated
biphenyls, asbestos containing materials, lead or ureaformaldehyde is or has
ever been on, at, in or under the Premises; and
(iv) the Company has not permitted the Premises to be used for
the disposal of any Substance.
(c) Permits. The Company holds all Environmental Permits necessary
for the conduct of its business. All Environmental Permits obtained by the
Company in connection with its business (including any applicable expiry dates)
are valid and in full force and effect.
(d) Proceedings. There are no proceedings against or involving the
Company, either in progress, pending, or, to the knowledge of the Company,
threatened which allege the violation of, or non-compliance with, any
Environmental Law by the Company.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby. Schedule
2.19 sets forth the principal terms and conditions of any agreement, written or
oral, with respect to such fees. Schedule 2.19 sets forth the Company's current
reasonable
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estimate of all Third Party Expenses (as defined in Section 5.4) expected to be
incurred by the Company in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby.
2.20 Employee Matters and Benefit Plans. The Company is not a party to
or bound by any:
(a) written contract or commitment for the employment of any
employee, officer or agent;
(b) oral contract or commitment for the employment of any employee,
officer or agent, except for contracts of indefinite hire terminable by the
Company without cause on reasonable notice as determined by the laws of the
applicable jurisdiction;
(c) contract with or commitment to any trade union, council of trade
unions, employee bargaining agent or affiliated bargaining agent (collectively
called "labour representatives") and the Company has not conducted negotiations
with respect to any such future contracts or commitments; no labour
representatives hold bargaining rights with respect to any employees of the
Company; no labour representatives have applied to have the Company declared a
related employer pursuant to the Labour Relations Act (Ontario); and there are
no current or threatened attempts to organize or establish any trade union or
employee association with respect to the Company; or
(d) bonus, pension, profit sharing, deferred compensation,
retirement, hospitalization, disability, insurance or similar plan or practice,
formal or informal, with respect to any of its employees or others, other than
the Canada Pension Plan, the Ontario Health Insurance Plan and other similar
health plans established and administered by any other province and workers'
compensation insurance provided pursuant to statute.
There is no work stoppage or other concerted action, grievance or dispute
existing or, to the knowledge of the Company, threatened against the Company.
Correct and complete copies of all the contracts, commitments and plans set out
in Schedule 2.20 and all related documents or, where oral, correct and complete
written summaries of the terms thereof have been made available to Parent. For
the purpose of the foregoing, related documents means, in the case of pension,
profit sharing, deferred compensation, retirement, hospitalization, disability
or insurance or similar plans, all documentation establishing or creating such
plans, all amendments thereto and all documentation related thereto including
without limitation, trust agreements, funding agreements and other similar
agreements, the most recent financial statements and the most recent actuarial
report, if any, related thereto and all reports, returns and filings in respect
of such plans made with any regulatory agency within the 3 years prior to the
date hereof.
2.21 Change of Control and Non-Compete Payments. Schedule 2.21 sets
forth each plan or agreement pursuant to which any amounts may become payable
(whether currently or in the future) to current or former employees, officers
and directors of the Company as a result of or in connection with the
Amalgamations.
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2.22 Year 2000 Compliance. All of the Company's internal computer
systems and each Constituent Component (as defined below) of those systems and
all computer-related products and services and each Constituent Component of
those products and services of the Company fully comply with the Year 2000
Qualification Requirements. "Year 2000 Qualification Requirements" means that
the internal computer systems and each Constituent Component (as defined below)
of those systems and all computer-related products of each Constituent Component
(as defined below) of those products of the Company and each of its subsidiaries
(i) have been reviewed to confirm that they store, process (including sorting
and performing mathematical operations, calculations and computations), input
and output data containing date and information correctly regardless of whether
the date contains dates and times before, on or after January 1, 2000, (ii) have
been designed to ensure date and time entry recognition, calculations that
accommodate same century and multi-century formulas and date values, leap year
recognition and calculations, and date data interface values that reflect the
century, (iii) accurately manage and manipulate data involving dates and times,
including single century formulas and multi-century formulas, and will not cause
an abnormal ending scenario within the application or generate incorrect values
or invalid results involving such dates, (iv) accurately process any date
rollover, and (v) accept and respond to two-digit year date input in a manner
that resolves any ambiguities as to the century. "Constituent Component" means
all software (including operating systems, programs, packages and utilities),
firmware, hardware, networking components, and peripherals provided as part of
the configuration.
2.23 Representations Complete. None of the representations or warranties
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the stockholders of the Company in connection with soliciting their consent
to this Agreement and the Amalgamations, and other transactions contemplated
hereby, contains or will contain at the time of the Amalgamations, any untrue
statement of a material fact, or omits or will omit at the time of the
Amalgamations to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES
The Parent Companies represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Each of Parent Sub and Holding are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Holding ULC and Amalgamation Sub are corporations duly organized,
validly existing and in good standing under the laws of Nova Scotia. Each of the
Parent Companies have the corporate power to own its respective properties and
to carry on its respective businesses as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction
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in which the failure to be so qualified would have a material adverse effect on
their respective ability to consummate the transactions contemplated hereby.
3.2 Authority. The Parent Companies have all requisite corporate power
and authority, and all necessary shareholder approvals to enter into this
Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Parent Companies. This Agreement has been, and the Related
Agreements when executed and delivered will be have been duly executed and
delivered by the Parent Companies and constitute the valid and binding
obligations of the Parent Companies, enforceable in accordance with their terms.
The execution and delivery of this Agreement and the Related Agreements by
Parent and Amalgamation Sub does not, and, the consummation of the transactions
contemplated hereby and thereby will not, Conflict with (i) any provision of the
Articles of Incorporation or Bylaws of Parent or any of similar constating
documents of the other Parent Companies or (ii) any 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 Parent Companies or their respective properties or assets. No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any third party (so as
not to trigger any Conflict), is required by or with respect to the Parent
Companies in connection with the execution and delivery of this Agreement or any
of the Related Agreements or the consummation of the transactions contemplated
hereby and thereby, except for (i) obtaining the Certificate of Continuance,
(ii) obtaining the Approval Orders for the Amalgamations and the related filings
with the Registrar, all under the Companies Act, (iii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal, state and provincial securities laws
and (iv) such other consents, waivers, authorizations, filings, approvals and
registrations which are set forth on Schedule 3.2.
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 150,000,000 shares of
Common Stock, of which 43,429,673 shares were issued and outstanding as of
October 29, 1999, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding as of October 29, 1999. The authorized capital stock of
Amalgamation Sub consists of 1,000 shares of Common Stock, 1,000 shares of
which, as of the date hereof, are issued and outstanding and are held by Holding
ULC. All such shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and nonassessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof. All shares of capital stock of
each of Parent Sub, Holding and Holding ULC are beneficially owned by Parent.
(b) The shares of Parent Common Stock to be issued in connection
with the Initial Closing will, when issued in accordance with the terms of this
Agreement, be duly authorized, validly issued, fully paid and non-assessable.
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(c) The shares of Parent Common Stock to be issued pursuant to the
Exchangeable Share Provisions pursuant to the terms of this Agreement will, when
issued in accordance with, the terms of the Exchangeable Share Provisions, if
applicable, be duly authorized, validly issued, fully paid and nonassessable.
(d) The Exchangeable Shares to be issued in the Reorganization will,
when issued in accordance with the terms of this Agreement, be duly authorized,
validly issued, fully paid and non-assessable.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the U.S. Securities and Exchange
Commission (the "SEC") for all periods subsequent to March 31, 1998, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act, and none of the
SEC Documents 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 under which they were
made, not misleading, except to the extent corrected by a subsequently filed
document with the SEC. The financial statements of Parent, including the notes
thereto, included in the SEC Documents (the "Parent Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto) and present fairly the consolidated financial position of Parent
at the dates thereof and of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal audit
adjustments).
3.5 Amalgamation Sub. Since the date of its incorporation, Amalgamation
Sub has neither engaged in or transacted any business or activity of any nature
other than activities related to its corporate organization and the execution
and delivery of this Agreement and the Related Agreements. Amalgamation Sub has
no assets or liabilities or obligations of any kind whatsoever, and other than
this Agreement and the Related Agreements, is not a party to any contract,
agreement or undertaking of any nature.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of (i) the termination of
this Agreement and (ii) the Final Closing, the Company agrees (except to the
extent that Parent shall otherwise consent in writing) to carry on its business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Governmental Charges when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep
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available the services of its present officers and key employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the time of the
Amalgamations. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of its business, and any
material event involving the Company or its business. Except as expressly
contemplated by this Agreement or disclosed in Schedule 4.1, the Company shall
not, without the prior written consent of Parent (which consent shall not be
unreasonably withheld):
(a) Enter into any commitment or transaction not in the ordinary
course of business.
(b) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than pursuant to end-user licenses in the
ordinary course of business);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(e) Commence any litigation;
(f) Declare, set aside 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 capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of the Convertible Promissory Note, issue, grant, deliver
or sell or authorize or propose the issuance, grant, 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;
(h) Cause or permit any amendments to its Articles of Amalgamation
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
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(j) Acquire or agree to acquire any assets in an amount in excess of
$25,000 in the case of a single transaction or in excess of $50,000 in the
aggregate in any 30-day period;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(l) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others;
(m) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to standard
written agreements outstanding on the date hereof;
(n) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its employees;
(o) 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;
(p) Pay, discharge or satisfy, in an amount in excess of $15,000 (in
any one case) or $25,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or incurred after the date of the Company Financials by
the Company in the ordinary course of business or expenses consistent with the
provisions of this Agreement incurred in connection with any transaction
contemplated and permitted hereby;
(q) Make or change any material election in respect of Governmental
Charges, adopt or change any accounting method in respect of Governmental
Charges, enter into any closing agreement, settle any claim or assessment in
respect of Governmental Charges, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of
Governmental Charges;
(r) Enter into any strategic alliance, development or joint
marketing agreement; or
(s) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (r) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of (i) the Final Closing and (ii)
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, the Company will not (nor will the Company permit any of the
Company's officers, directors, agents, representatives
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or affiliates to) directly or indirectly, take any of the following actions with
any party other than Parent and its designees: (a) solicit, conduct discussions
with or engage in negotiations with any person, relating to the possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its capital stock or
assets, (b) provide information with respect to it to any person, other than
Parent, relating to the possible acquisition of the Company (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its capital stock or assets, (c) enter into an agreement
with any person, other than Parent, providing for the acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its capital stock or assets or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
capital stock or assets by any person, other than by Parent. In addition to the
foregoing, if the Company receives prior to the Amalgamation or the termination
of this Agreement any offer or proposal relating to any of the above, the
Company shall immediately notify Parent thereof, including information as to the
identity of the offeror or the party making any such offer or proposal and the
specific terms of such offer or proposal, as the case may be, and such other
information related thereto as Parent may reasonably request.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Subject to any applicable contractual
confidentiality obligations (which the Company shall use its best efforts to
cause to be waived) each party shall afford the others and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Amalgamation to (a) all of its properties,
books, contracts, agreements and records, and (b) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of it as the others may reasonably request. No
information or knowledge obtained in any investigation pursuant to this Section
5.1 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
Amalgamation.
5.2 Confidentiality. Each of the parties hereto hereby agrees to and
reaffirms the terms and provisions of the confidentiality agreements between
Parent and the Company previously entered into.
5.3 Expenses. Except as otherwise contemplated by the Shareholder
Reimbursement Agreement, whether or not the transactions contemplated hereby are
consummated, all fees and expenses incurred in connection with the transactions
contemplated hereby including, without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses.
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5.4 Public Disclosure. Upon execution and delivery of this Agreement by
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Acquisition. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
Dealers, Inc., prior to the Final Closing, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made by
any party hereto unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld.
5.5 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts identified on
Schedule 2.12(c) as may be required in connection with the transactions
contemplated hereby.
5.6 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and capital
stock; and further provided that the Company shall not be obligated to complete
the Initial Closing before January 4, 2000.
5.7 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent or Amalgamation Sub, respectively, contained in this Agreement to be
untrue or inaccurate at or prior to the Initial Closing except as contemplated
by this Agreement (including the Company Schedules) and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.7 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.8 NMS Listing. Parent shall cause to be listed on the Nasdaq National
Market the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the transactions contemplated hereby
and upon the exchange of the Exchangeable Shares, upon official notice of
issuance.
5.9 Cooperation With Financial Statements. The Company will use its best
efforts to cause the Company's management and its independent auditors to
facilitate on a timely basis (i) the
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preparation of historical and pro forma financial statements as required by
Parent to comply with applicable SEC regulations, and (ii) the review of the
Company's 1997 and 1998 audit work papers, including the examination of selected
interim financial statements and data.
5.10 Employee Benefits.
(a) Parent shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Parent, or alternative benefits programs substantially comparable to those
applicable to employees of Parent on similar terms, as soon as practicable after
the Final Closing. Employees of the Company who are employed by Parent or the
Company following the Final Closing shall be granted credit for service with the
Company prior to the Final Closing for all purposes as if such service with the
Company was service with Parent or a subsidiary of Parent.
(b) Parent shall reserve an aggregate of $5,000,000 in cash, which
will be distributed to those employees of the Company to be identified by mutual
agreement of the Parent and the Company in the amounts mutually agreed upon by
Parent and the Company prior to the Initial Closing and distributed in
accordance with the terms of such agreement.
5.11 Registration Rights. Upon the issuance and release from the Interim
Escrow of Parent Common Stock to US Sellers at the Final Closing and upon the
issuance of Parent Common Stock to holders (collectively, including the US
Sellers, the "Holders") of Exchangeable Shares pursuant to the terms of the
Exchangeable Share Provisions, the Holders shall have registration rights with
respect to such shares of Parent Common Stock (the "Registrable Securities")
subject to the following terms and conditions:
(a) Registration on Form S-3. Within five (5) business days after
Parent becomes a registrant entitled to use a Form S-3 registration statement or
any successor form thereto to register the resale (which shall not be through an
underwritten public offering) of the Registrable Securities (the "S-3 Date"),
Parent shall use reasonable best efforts to cause the Registrable Securities to
be registered so as to permit the resale thereof, and in connection therewith
shall prepare and file a Form S-3 registration statement or any successor form
thereto providing for an offering to be made on a continuous basis pursuant to
Rule 415 under the Securities Act (the "Registration Statement") with the SEC
under the Securities Act of 1933, as amended (the "Securities Act") to effect
such registration within five (5) business days after the S-3 Date, and
thereafter Parent shall use its reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as soon
as practicable after the filing thereof; provided, however, that if Parent shall
furnish to the Chief Executive Officer of the Company and to Toucan, to the
attention of the name and at the address provided by Toucan in writing to the
Parent, a certificate signed by the Chief Executive Officer of Parent stating
that, in the good faith judgment of the Board of Directors or Chief Executive
Officer of Parent, it would be seriously detrimental to Parent and its
shareholders for the Registration Statement to be filed on or before the date
filing would otherwise be required, and it is therefore in the best interests of
Parent to defer the filing of the Registration Statement, then Parent may delay
the filing of the Registration Statement, once but not more than once, for a
period not in excess of forty-five (45) days.
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(b) Expenses of Registration. Parent shall pay all Registration
Expenses (as hereafter defined) in connection with any registration,
qualification or compliance pursuant to this Section 5.13, and each Holder shall
pay all Selling Expenses (as hereafter defined) and other expenses that are not
Registration Expenses relating to the Registrable Securities resold by such
Holder. For purposes of this Section 5.13(b), "Registration Expenses" shall mean
all expenses, except as otherwise stated below, incurred by Parent in complying
with Sections 5.13(a) and 5.13(c), including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for Parent, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.
For purposes of this Section 5.13(b), "Selling Expenses" shall mean all selling
discounts commissions and stock transfer or other Governmental Charges
applicable to the Registrable Securities and all fees and disbursements of
counsel for any Holder.
(c) Registration Procedures. In the case of any registration
effected by Parent pursuant to this Section 5.13, Parent will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. Parent will:
(i) Use reasonable best efforts to keep such registration
effective until the earlier of (A) all Holders having completed the distribution
described in the registration statement relating thereto or (B) the sixth
anniversary of the date of the Final Closing;
(ii) Promptly prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement;
(iii) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(iv) Subject to Section 5.13(h)(ii) hereof, notify each Holder
of Registrable Securities covered by the Registration Statement at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(v) Cause all such Registrable Securities registered pursuant to
the Registration Statement to be listed on each securities exchange or quotation
system on which similar securities issued by Parent are then listed or quoted,
and in connection therewith, file with the
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Nasdaq National Market an application for listing of additional shares with
respect to the Registrable Securities;
(vi) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to the Registration Statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of the Registration Statement;
(vii) Use its reasonable best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdiction within the United States and
Puerto Rico as shall be reasonably appropriate for the distribution of the
Registrable Securities covered by the Registration Statement; provided, however,
that Parent shall not be required in connection therewith or as a condition
thereto to qualify to do business in or file a general consent to service of
process in any jurisdiction wherein it would not but for the requirements of
this paragraph be obligated to do so; and
(viii) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of at least twelve months, but not more than eighteen months,
beginning with the first month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
(d) Information by Holder. Each Holder of Registrable Securities
shall furnish to Parent such information regarding such Holder and the
distribution proposed by such Holder as Parent may reasonably request in
connection with any registration, qualification or compliance referred to in
this Section 5.13, but only to the extent that such information is required in
order for Parent to comply with its obligations under all applicable securities
and other laws and to ensure that the Registration Statement relating to such
Registrable Securities conforms to the applicable requirements of the Securities
Act and the rules and regulations thereunder. Each Holder covenants that it will
promptly notify Parent of any changes in the information set forth in the
Registration Statement or otherwise provided by such Holder to Parent regarding
such Holder or such Holder's plan of distribution as a result of which the
Registration Statement or any prospectus relating to the Registrable Securities
contains or would contain an untrue statement of a material fact regarding such
Holder or its intended method of distribution of such Registrable Securities or
omits to state any material fact regarding such Holder or its intended method of
distribution of such Registrable Securities required to be stated therein or
necessary to make the statements therein, not misleading.
(e) Indemnification and Contribution.
(i) Parent agrees to indemnify and hold harmless each Holder
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Holder may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement, alleged untrue statement, omission or alleged
omission of a material fact in the Registration Statement, any prospectus
included in the Registration Statement, or
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any amendment or supplement to the Registration Statement or any such
prospectus, and Parent will, as incurred, reimburse such Holder for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; provided, however, that Parent
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of, or is based upon (A) an untrue statement or alleged
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to Parent by such Holder in an
instrument executed by such Holder and specifically stated to be for use in the
preparation of the Registration Statement, (B) the failure of such Holder to
comply with any of the covenants and agreements contained in Sections 5.13(f) or
5.13(h) hereof, or (C) any untrue statement in any prospectus that is corrected
in any subsequent prospectus that was delivered to the Holder prior to the
pertinent sale or sales by the Holder.
(ii) Each Holder, severally and not jointly, agrees to indemnify
and hold harmless Parent from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which Parent may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon (A) an untrue statement, alleged untrue
statement, omission or alleged omission of a material fact in the Registration
Statement, any prospectus included in the Registration Statement, or any
amendment or supplement to the Registration Statement or any such prospectus in
reliance upon and in conformity with written information furnished to Parent by
such Holder in an instrument executed by such Holder and specifically stated to
be for use in preparation of the Registration Statement, provided, however, that
no Holder shall be liable in any such case for any untrue statement included in
any Prospectus which statement has been corrected in a writing delivered to
Parent at least two business days before the sale from which such loss arose,
(B) the failure of such Holder to comply with any of the covenants and
agreements contained in Sections 5.13(f) or 5.13(h) hereof, or (C) any untrue
statement in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Holder prior to the pertinent sale or sales by the Holder;
and each Holder, severally and not jointly, will, as incurred, reimburse Parent
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim. In no event shall
the amount payable by any Holder to Parent pursuant to this Section 5.13(e)(ii)
by reason of a sale of Parent Common Stock by such Holder exceed the amount of
the gross proceeds to such Holder from the sale of Parent Common Stock from
which such liability arose.
(iii) Promptly after receipt by any indemnified person under
subsections (i) or (ii) above of a notice of a claim or the beginning of any
action in respect of which indemnity is to be sought against an indemnifying
person pursuant to this Section 5.13(e), such indemnified person shall notify
the indemnifying person in writing of such claim or of the commencement of such
action (provided, however, that no failure to provide such notice shall relieve
any indemnifying person of any liability hereunder except to the extent that
such indemnifying person is prejudiced thereby), and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After
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notice from the indemnifying person to such indemnified person of the
indemnifying person's election to assume the defense thereof, the indemnifying
person shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense
thereof; provided, however, that, if the indemnifying person shall propose that
the same counsel represent it and the indemnified person, and if counsel for the
indemnified person shall reasonably have concluded that there is an actual
conflict of interest posed by the representation proposed by the indemnifying
person, the indemnified person shall be entitled to retain its own counsel
reasonably satisfactory to the indemnifying person at the expense of such
indemnifying person; provided, however that if more than one indemnified person
makes a claim against an indemnifying person based on substantially similar
facts, the indemnifying person shall not be responsible for the fees of more
than one counsel for all indemnified persons whose claims are based on
substantially similar facts.
(iv) If the indemnification provided for in this Section 5.13(e)
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (i) or (ii) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof), in such proportion as is
appropriate to reflect the relative fault of each such party, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Parent on the one hand or a
Holder on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Parent and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5.13(e)(iv) were determined by any method
of allocation which does not take account of the equitable considerations
referred to above in this Section 5.13(e)(iv). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, or liabilities (or
actions in respect thereof) referred to above in this Section 5.13(e)(iv) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action,
proceeding or claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(v) The obligations of the Parent and the Holders under this
Section 5.13(e) shall be in addition to any liability which Parent and the
respective Holders may otherwise have and shall extend, upon the same terms and
conditions, to each director and officer of Parent or any Holder, and to each
person, if any, who controls Parent or any Holder within the meaning of the
Securities Act or the Exchange Act.
(f) Restrictions on Transferability. The shares of Parent Common
Stock issuable pursuant to the terms of the Exchangeable Share Provisions in a
transaction exempt from the registration requirements of the Securities Act (the
"Restricted Shares") shall not be transferable except (A) in accordance with the
Registration Statement, in which case Holder must comply with
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the requirement of delivering a current prospectus, (B) in accordance with Rule
144, or (C) pursuant to an exemption from the registration requirements of the
Securities Act. Parent shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Restricted Shares in order to enforce the
foregoing restrictions.
(g) Restrictive Legend. Each certificate representing Restricted
Shares shall bear substantially the following legends (in addition to any
legends required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE MERGER AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, COMPASS ACQUISITION CORP., COMPASS HOLDING
CORP. 3034996 NOVA SCOTIA COMPANY, 3034997 NOVA SCOTIA COMPANY AND THE DOCSPACE
COMPANY INC. DATED NOVEMBER 3, 1999 (THE "AGREEMENT"), AND NO TRANSFER OF SHARES
SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. COPIES OF
THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.
The legend contained in this Section 5.13(g) shall be removed from a
certificate in connection with any sale in compliance with the terms of this
Agreement and pursuant to the Registration Statement, but shall not be removed
in any other circumstance without Parent's prior written consent (which consent
shall not be unreasonably withheld or delayed and shall be granted if such
legend is no longer appropriate).
(h) Transfer of Shares After Registration.
(i) Restriction. Restricted Shares are not transferable on the
books of Parent unless the certificate submitted to Parent's transfer agent
evidencing such Restricted Shares is accompanied by a separate certificate, in
form and substance reasonably satisfactory to Parent, executed by an officer of,
or other person duly authorized by, the Holder for purposes of establishing
compliance with this Agreement.
(ii) Notice to Parent of Proposed Sale and Right of Parent to
Suspend Use of Registration Statement. If any Holder shall propose to sell any
Registrable Securities pursuant to the Registration Statement, it shall notify
Parent of its intent to do so at least three (3) full business days prior to
such sale. Such notice shall be deemed to constitute a representation that any
information previously supplied by such Holder (including without limitation the
information referred to in Section 5.13(d) hereof) is accurate as of the date of
such notice. At any time within
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such three (3) business-day period, Parent may refuse to permit the Holder to
resell any Registrable Securities pursuant to the Registration Statement (the
"Suspension Right"); provided, however, that in order to exercise its Suspension
Right, Parent must deliver a certificate (the "Suspension Notice") in writing to
the Holder to the effect that, in the good faith judgement of the Board of
Directors or Chief Executive Officer of Parent, a delay in such sale is
necessary because a sale pursuant to such Registration Statement in its
then-current form would be seriously detrimental to Parent and its shareholders
and therefore it is in the best interests of Parent to delay the sale under the
Registration Statement. In no event shall such delay exceed forty-five (45)
calendar days (a "Suspension Period"), and provided further, however, that in no
event shall Parent be permitted to exercise its Suspension Right more than three
times in any single calendar year. The date on which a Suspension Notice is
delivered by the Company to the first Holder desiring to sell Registrable
Securities who is so notified in any Suspension Period shall be considered the
start of such Suspension Period and shall constitute one exercise of a
Suspension Right under this subsection, provided, however, any subsequent
Suspension Notice delivered during a Suspension Period shall not be considered a
separate exercise of Parent's Suspension Right. Each Suspension Notice shall set
forth (a) the date on which the Suspension Period covered by such Suspension
Notice commenced and (b) the number of times Parent has exercised its Suspension
Right previously during the same calendar year. Parent agrees that any
Suspension Right imposed on the Holders will be imposed consistently among all
Holders requesting to sell any Registrable Securities during any Suspension
Period.
(i) 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 Registrable Securities 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 Amalgamation;
(ii) File with the SEC in a timely manner all reports and other
documents required of Parent under the Securities Act and the Exchange Act; and
(iii) So long as a Holder owns any Registrable Securities, to
furnish to that Holder 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 Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing such Holder to sell any such Registrable Securities without
registration.
(j) Transfer of Registration Rights. The rights and obligations of
any Holder under this Section 5.13 may be assigned to a transferee or assignee
in connection with any transfer or assignment of Registrable Securities by a
Holder; provided that: (i) such transfer may otherwise be effected in accordance
with applicable securities laws, (ii) Parent is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned under, (iii) each
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transferee shall agree to be bound by all of the provisions of this Section
5.13; and (iv) such assignment shall be effective only if immediately following
such transfer the further disposition of such Registrable Securities by the
transferee or assignee is restricted under the Securities Act.
5.12 Securities Compliance. The Parent Companies and the Company shall
use all reasonable efforts to obtain all orders required from the applicable
Canadian securities authorities to permit (a) the issuance of the Exchangeable
Shares in exchange for Company Capital Stock; (b) the issuance of Parent Common
Stock upon exchange of the Exchangeable Shares in accordance with their terms or
the Voting and Exchange Trust Agreement; and (c) the sale of the Parent Common
Stock outside of Canada, in each case without qualification with or approval of
or the filing of any document, including any prospectus or similar document, or
the taking of any proceeding with, or the obtaining of any further order, ruling
or consent from, any governmental entity or regulatory authority under the
Canadian federal and provincial securities or other laws applicable to residents
of Ontario, British Columbia, Alberta and Nova Scotia or pursuant to the rules
and regulations of any regulatory authority administering such laws, or the
fulfillment of any other legal requirement in any such jurisdiction (other than,
with respect to such first resales, any restrictions on transfer by reason of,
among other things, a holder being a "control person" of Parent or the Company
for purposes of Canadian federal, provincial or territorial securities laws).
5.13 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 Amalgamation or By-laws, or any agreement between the
Company and such persons that has been provided to Parent's counsel prior to the
date hereof, shall survive the Amalgamations and shall continue in full force
and effect and Parent agrees to assume, effective at the time of the Final
Closing, all such liability of the Company with respect to such indemnification.
This Section 5.13 shall survive the Amalgamations, 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.
5.14 Tax Matters. The parties agree that they will use their respective
commercially reasonable efforts to cause the Amalgamations, the Reorganization
and the issuance of the Exchangeable Shares in connection with the
Reorganization to the Company's shareholders who are Canadian resident taxpayers
to be tax-deferred for Canadian income tax purposes and not to take any action
reasonably expected to be inconsistent therewith.
ARTICLE VI
CONDITIONS TO THE CLOSINGS
6.1 Initial Closing Conditions. The conditions to the obligations of the
parties at the Initial Closing (as defined in Section 7.1) are as follows:
(a) Conditions to Obligations of Each Party. The respective
obligations of each party to this Agreement to complete the Initial Closing
shall be subject to the satisfaction, on or before the Initial Closing Date (as
defined in Section 7.1), of the following conditions, each of which
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may only be waived by the mutual consent of Parent on behalf of the Parent
Companies and the Company:
(i) Shareholder Approval. This Agreement and the Related
Agreements and the transactions contemplated hereby and thereby shall have been
approved and adopted by all of the shareholders option holders, warrant holders,
or other holders of interests to shares in the Company by the execution of the
Shareholder Implementation Agreement.
(ii) 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 consummation of the transactions contemplated by this
Agreement and the Related Agreements shall be in effect.
(iii) Nasdaq Listing. The shares of Parent Common Stock issuable
to stockholders of the Company pursuant to the Exchangeable Share Provisions and
to the US Sellers in connection with the Initial Closing and such other shares
required to be reserved for issuance in connection with this Agreement and the
Second Amalgamation shall have been authorized for listing on the Nasdaq Stock
Market upon official notice of issuance.
(b) Additional Conditions to Obligations of the Company. The
obligations of the Company to complete the Initial Closing shall be subject to
the satisfaction at or prior to the Initial Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Company:
(i) Representations and Warranties. The representations and
warranties of the Parent Companies contained in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of the Parent Companies contained
in this Agreement shall be true and correct in all material respects on and as
of the Initial Closing Date except for (i) changes contemplated or permitted by
this Agreement, and (ii) except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such particular date). The Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by a duly
authorized officer of Parent.
(ii) Agreements and Covenants. The Parent Companies shall have
performed or complied (which performance or compliance shall be subject to the
ability of the Parent Companies to cure as provided in Section 9.1(e) below) in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Initial
Closing Time, and the Company shall have received a certificate to such effect
signed by a duly authorized officer of Parent.
(iii) Shareholder Reimbursement Agreement. Parent and the
Company shall have entered into the Shareholder Reimbursement Agreement.
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(iv) Tax Opinion. The Company and shareholders of the Company
shall have received a tax opinion from Xxxxxx Xxxxxxxx in a form satisfactory to
the Company.
(v)Secretary's Certificate. Parent shall have delivered a
Secretary's Certificate to the Company, in form and substance reasonably
satisfactory to the Company.
(vi) Section 116 Certificate. A determination by Revenue Canada
shall have been received by each US Seller regarding such shareholder's
application for a Section 116 clearance certificate, as contemplated by
subsections (f) and (g) of Section 1.1 hereof, and in the event that Toucan does
not receive a Section 116 clearance certificate from Revenue Canada reasonably
satisfactory to Toucan that provides relief from Canadian withholding taxes and
any applicable bonding, payment or other security obligations on Toucan or its
members, each of the other shareholders of the Company (other than any of the
Parent Companies if any of them is a shareholder) shall have executed and
delivered the Double Tax Indemnity Agreement (with the understanding of the
parties being that this condition shall not be waivable by the Company without
the prior written consent of Toucan).
(c) Additional Conditions to the Obligations of the Parent
Companies. The obligations of the Parent Companies to complete the Initial
Closing shall be subject to the satisfaction at or prior to the Initial Closing
Date of each of the following conditions, any of which may be waived, in
writing, exclusively by Parent:
(i)Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the Initial
Closing Time except for (i) changes contemplated by this Agreement, and (ii)
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such particular
date). Parent shall have received a certificate with respect to the foregoing
signed on behalf of the Company by a duly authorized officer of the Company.
(ii) Agreements and Covenants. The Company shall have performed
or complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 9.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Parent and
Amalgamation Sub shall have received a certificate to such effect signed by a
duly authorized officer of the Company. All conditions in favor of the Parent
Companies to the Initial Closing set out in the Shareholder Implementation
Agreement shall have been satisfied.
(iii) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 2.12(c).
(iv) Board Approval. The Board of Directors of the Company shall
have adopted all necessary resolutions, and all other necessary corporate action
shall have been taken by
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the Company, to permit the consummation of the Amalgamations as contemplated by
this Agreement.
(v) Board Recommendation. The Board of Directors of the Company
shall have made and shall not have modified or amended, in any material respect,
an affirmative recommendation that the holders of the Company Common Shares
execute the Shareholder Implementation Agreement.
(vi) Legal Opinion. The Parent Companies shall have received a
legal opinion from Gowling, Strathy & Xxxxxxxxx, legal counsel to the Company,
in substantially the form attached hereto as Exhibit 9.
(vii) Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition or results of operations of the Company since July 31, 1999.
(viii) Noncompetition Agreements; Invention Assignment. Each
person listed on Schedule 6.3(h) shall have executed and delivered to Parent a
Noncompetition and Nonsolicitation Agreement in substantially the form of
Exhibit 10 (the "Non-Competition Agreements") and all of such agreements shall
be in full force and effect. Each employee of the Company listed on the Company
Schedules as not having executed a valid and binding agreement with the Company
sufficient to vest title in the Company of all Intellectual Property created by
such employee in the scope of his or her employment with the Company shall have
executed such an agreement, in a form satisfactory to Parent's counsel, acting
reasonably.
(ix) Key Employees. Each person listed on Schedule 6.3(i) shall
have accepted an offer of employment with Parent.
(x) Escrow Agreement. Parent, the Company, Escrow Agent and the
Stockholders' Representative (as defined in the Escrow Agreement) shall have
entered into the Escrow Agreement.
(xi) Resignation of Directors and Officers. All directors and
officers of the Company shall have resigned their respective offices as
directors and officers of the Company effective as of the Final Closing.
(xii) Release by Toucan. Toucan, the Company and Parent shall
have entered into a full and final release of any and all claims any of them may
have against one another and each of their directors, officers and employees in
the form attached as Exhibit 11 or other form satisfactory to Parent's counsel.
(xiii) Repayment of Convertible Promissory Note. The Company
shall have repaid to the Company the amount outstanding under the Convertible
Promissory Note or, to the extent the amount outstanding has not been so repaid,
the Aggregate Cash Purchase Price shall be reduced by the amount outstanding on
the Initial Closing Date as is provided for in Section 1.6.
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6.2 Final Closing Conditions. The respective obligations of the parties
to complete the Final Closing (as defined in Section 7.3) shall be subject to
the receipt by the relevant parties of the documents referred to in Section 7.3.
ARTICLE VII
CLOSING PROCEDURE
7.1 Initial Closing
The Initial Closing will take place on the date that is three (3)
business days after the Company has notified the Parent that all parties have
signed the Shareholder Implementation Agreement and each of the conditions to
the Initial Closing set forth in Section 6.1 have been satisfied or waived, and
in any event no later than January 4, 2000 (the "Initial Closing Date") at 9:00
a.m. Eastern Standard Time (the "Initial Closing Time") at the offices of Xxxx
Xxxxxx in Toronto, Ontario, or at such other time or place as may be agreed upon
by the parties, at which time and place:
(a) Each of the Parent Companies will execute and deliver or cause
to be delivered each of the following to the Company, as applicable to that
Parent Company:
(i) this Agreement and each of the Related Agreements to be
signed on behalf of each of the applicable Parent Companies, and the Voting and
Exchange Trust Agreement to be signed on behalf of the Trustee, which, in the
case of certain of the agreements, will be effective as of the Reorganization;
(ii) a cheque, wire transfer or banker's draft payable to U.S.
counsel to the Parent, in trust, on behalf of the US Sellers as payment of the
cash portion payable to the US Sellers in accordance with Section 1.6;
(iii) a cheque, wire transfer or banker's draft payable to the
escrow agent, to be agreed to by the parties, on behalf of the Company
shareholders in the amount of $5,000,000 in respect of the Shareholder
Reimbursement Agreement;
(iv) share certificates representing shares of Parent Common
Stock registered in the name of the US Sellers in accordance with their
respective holdings of Company Capital Stock in the manner contemplated by
Section 1.6;
(v) a share certificate representing one share of Parent Special
Voting Stock registered in the name of the Trustee;
(vi) an executed copy of the officer's certificate required by
sections 6.1(b)(i) and (ii);
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(vii) unsigned and unsworn copies of the definitive forms of the
Second Amalgamation Agreement, together with all resolutions and other ancillary
documents and instruments necessary or desirable to effect the Second
Amalgamation;
(viii) unsigned copies of the definitive form of the amendments
to the memorandum and articles of association of Exchangeco together with all
resolutions and other ancillary documents and instruments necessary or desirable
to effect the Reorganization; and
(ix) the following documents in form and substance satisfactory
to the Company shall have been delivered to the Company:
(A) a duly certified copy of the constating documents of
each of the Parent Companies, the resolutions authorizing the execution and
delivery of this Agreement, the Related Agreements and all such other documents,
instruments and agreements as may be required to be delivered in connection
herewith or therewith and the entering into and performance of all transactions
contemplated herein and therein; and
(B) such other documents relating to this Agreement or the
Related Agreements and the transactions contemplated herein, therein or in
respect thereof as the Company may reasonably require.
(b) The Company will execute and deliver or cause to be delivered to
the Parent:
(i) this Agreement, each of the Related Agreements and the
Non-Competition Agreements to be signed, as applicable, on behalf of the Company
and each of the applicable Shareholders, which, in the case of certain of the
agreements, will be effective as of the Reorganization;
(ii) share certificates representing shares of Company Capital
Stock registered in the name of the Shareholders in accordance with their
respective holdings of Company Capital Stock, each duly endorsed in blank for
transfer;
(iii) an executed copy of the officer's certificate required by
sections 6.1(c)(i) and (ii) and the consents, approvals and waivers required by
section 6.1(c)(iii);
(iv) legal opinion of Gowling, Strathy & Xxxxxxxxx in the form
attached to this Agreement as Exhibit 10;
(v) resignations of each of the directors and officers of the
Company, effective as of the Final Closing;
(vi) release of Toucan required by section 6.1(c)(xii);
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(vii) documents evidencing filing of the Articles of
Continuance, or if the filing has not occurred, signed copies of the Articles of
Continuance of the Company together with all ancillary documents and instruments
necessary or desirable to effect the Continuance;
(viii) unsigned and unsworn copies of the definitive forms of
the First Amalgamation Agreement, together with all resolutions and other
ancillary documents and instruments executed or filed to effect the First
Amalgamation;
(ix) unsigned and unsworn copies of the definitive forms of the
Second Amalgamation Agreement, together with all resolutions and other ancillary
documents and instruments necessary or desirable to effect the Second
Amalgamation;
(x) unsigned copies of the definitive form of the amendments to
the memorandum and articles of association of Exchangeco together with all
resolutions and other ancillary documents and instruments required to effect the
Reorganization;
(xi) the following documents in form and substance satisfactory
to the Parent shall have been delivered to the Parent:
(A) a duly certified copy of the constating documents of the
Company, the resolutions authorizing the execution and delivery of this
Agreement, the Related Agreements and all such other documents, instruments and
agreements as may be required to be delivered in connection herewith or
therewith and the entering into and performance of all transactions contemplated
herein and therein; and
(B) such other documents relating to this Agreement or the
Related Agreements and the transactions contemplated herein, therein or in
respect thereof as the Company may reasonably require;
(xii) in the event that Toucan does not receive a Section 116
clearance certificate from Revenue Canada reasonably satisfactory to Toucan that
provides relief from Canadian withholding taxes and any applicable bonding,
payment or other security obligations on Toucan or its members, each of the
other shareholders of the Company (other than the Parent Companies if any of
them is a shareholder) shall execute and deliver to Toucan a Double Tax
Indemnity Agreement but under no circumstances shall Parent assume or incur any
liability with respect thereto.
7.2 Interim Escrow
Provided the conditions set forth in section 6.1 have been satisfied, or
waived by the parties as provided in this Agreement, all cheques, stock
certificates and documents tabled at the Initial Closing shall be held in escrow
by counsel to the Parent and released in accordance with an Interim Escrow
Agreement containing the following terms:
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(a) All shares of Parent Common Stock will initially be held by US
counsel to the Parent and all funds will initially be deposited by US counsel to
the Parent in an interest bearing trust account.
(b) The shares of the Company Capital Stock tendered by the US
Sellers will be deemed to have been transferred to Holding ULC and the US
Sellers will cease to be shareholders of the Company at the completion of the
Initial Closing.
(c) The certificate representing the share of Special Voting Stock
of the Parent will be held by counsel to the Parent.
(d) If the Continuance has not occurred, all documents required to
effect the Continuance will be dated the date after the Initial Closing Date and
will be released to Nova Scotia counsel to the Company and filed with the
Registrar under the Companies Act so as to effect the Continuance promptly after
the Initial Closing.
(e) Promptly upon counsel to the Parent receiving confirmation from
Nova Scotia counsel to the Company as to the completion of the Continuance, all
documents required to effect the First Amalgamation will be released from
escrow, dated, signed and sworn by the applicable parties, as the case may be,
and will be delivered to Nova Scotia counsel to the Company who will apply to
and obtain from the Supreme Court of Nova Scotia an order under section 134 of
the NS Act and file the order with the Registrar under the Companies Act.
(f) Promptly upon counsel to the Parent receiving confirmation from
Nova Scotia counsel to the Parent as to the completion of the First Amalgamation
and all applicable securities commission orders having been obtained
satisfactory to counsel to the Parent and Company, each acting reasonably, all
documents required to effect the Second Amalgamation will be released from
escrow, dated, signed and sworn by the applicable parties, as the case may be,
and will be delivered to Nova Scotia counsel to the Parent who will apply to and
obtain from the Supreme Court of Nova Scotia an order under section 134 of the
NS Act and file the order with the Registrar under the Companies Act.
(g) Promptly upon counsel to the Parent receiving confirmation from
Nova Scotia counsel to the Parent as to the completion of the Second
Amalgamation, all documents required to effect the Reorganization will be
released from escrow, dated and signed by the applicable parties and will be
delivered to Nova Scotia counsel to the Parent who will file same with the
Registrar under the Companies Act.
(h) All other documents and items will be released from the Interim
Escrow Agreement upon the Final Closing as described in section 7.3.
7.3 Final Closing
The Final Closing shall take place on the next business day after the
Reorganization is completed (the "Final Closing Date") at 9:00 a.m. Eastern
Standard Time (the "Final Closing Time")
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at the offices of Xxxx Xxxxxx in Toronto, Ontario, or at such other time or
place as may be agreed upon by the parties, at which time and place:
(a) the following documents in form and substance satisfactory to
the Company and the Parent shall have been delivered:
(i) documents evidencing filing of the Articles of Continuance;
(ii) court approval of the First Amalgamation and a copy of the
order as filed with the Registrar under the Companies Act;
(iii) court approval of the Second Amalgamation and a copy of
the order as filed with the Registrar under the Companies Act; and
(iv) a copy of the amendment to the memorandum and articles of
association of Exchangeco effecting the Reorganization, as filed with the
Registrar under the Companies Act;
(b) all certificates representing Exchangeable Shares, cash and
shares of Holding Companies will be released to the Shareholders entitled
thereto, subject to any applicable withholding tax, by delivery to Company
counsel unless otherwise directed, less Exchangeable Shares which are held as
part of the Escrow Amount;
(c) all certificates representing Parent Common Stock and cash held
by counsel pursuant to section 7.2(a) (including interest earned thereon) will
be released to the Shareholders entitled thereto, subject to any applicable
withholding tax, by delivery to Company counsel unless otherwise directed, less
Parent Company Stock which is held as part of the Escrow Amount;
(d) Common shares of Exchangeco will be released to Holding ULC;
(e) Copies of the Related Agreements, the Non-Competition Agreements
and any other agreements, documents or instrument held pursuant to the Interim
Escrow Agreement will be released, as applicable, to the Company, each of the
applicable Parent Companies, and shareholders by delivery to Company counsel (as
to the shareholders) unless otherwise directed, and
(f) The certificate representing the share of Special Voting Stock
of the Parent held by counsel to the Parent shall be released to the Trustee.
7.4 Failure to Consummate Final Closing
If for any reason, the Final Closing does not occur by January 31, 2000,
the Interim Escrow Agreement will terminate and:
(a) All documents and funds remaining in escrow will be returned to
the party depositing them to the extent those documents continue to remain in
escrow. Interest earned on any funds will be paid to the party to whom the funds
are returned.
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(b) Each share of the Company Capital Stock originally tendered by a
US Seller will be transferred by Holding ULC to that US Seller, provided that,
if the Company (or a successor entity) is then an unlimited liability company,
Holding ULC will transfer the Company Capital Stock to one or more companies
owned by the US Sellers, as directed by the Stockholder Representative. If at
the time of the unwinding the First Amalgamation shall have occurred, the
Company and the shareholders of the Company shall take such actions as are
necessary to cause East ULC to file a valid and timely election to be treated as
an association taxable as a corporation for United States federal income tax
purposes.
(c) The parties will have their respective rights and remedies under
this Agreement and the Shareholder Implementation Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
8.1 Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules), and all
of the Parent Companies' representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement, shall survive the Final
Closing and continue until 5:00 p.m., California time, on the first anniversary
of the Final Closing Date.
8.2 Obligation of the Company to Indemnify, Reimburse, etc. Subject to
the provisions of Section 8.4 hereof, the Company, its successors and assigns,
jointly and severally, shall indemnify, reimburse, defend, protect and hold
harmless each of the Parent Companies and each of their successors and assigns
and each of their respective directors, officers, employees, affiliates, agents,
and their respective successors and assigns (each a "Parent Indemnitee") from
and against any claims, losses, liabilities, damages, causes of action, costs
and expenses (including reasonable attorney's, accountant's, consultant's and
expert's fees and expenses) (collectively "Losses") resulting from, imposed
upon, incurred or suffered by any of them, directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Company (as such
representations and warranties may be updated by the Company to reflect changes
in the subject matter thereof as permitted or contemplated by the terms of this
Agreement).
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8.3 Obligation of Parent to Indemnify, Reimburse, etc.
(a) Subject to the provisions of Section 8.4 hereof, Parent and
Amalgamation Sub and their respective successors and assigns, jointly and
severally, shall indemnify, reimburse, defend, protect and hold harmless the
Company and its successors and assigns and each of its shareholders, directors,
officers, employees, affiliates, agents, and their respective successors and
assigns (each a "Company Indemnitee") from and against any Losses resulting
from, imposed upon, incurred or suffered by any of them, directly or indirectly,
based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty, covenant or agreement of Parent.
(b) In addition to the foregoing, upon the completion of the Final
Closing, Parent and its successors and assigns, jointly and severally, shall
indemnify, reimburse, defend, protect and hold harmless the Holding Companies
from and against any Losses resulting from, imposed upon, incurred or suffered
by any of them as a result of the ownership interests in Exchangeco, an
unlimited liability company, following the Final Closing that the respective
Holding Companies would not have been subject to had Exchangeco been organized
as a corporation or limited partnership, provided in no event will the amount of
the indemnity in respect of a Holding Company exceed the net value after tax of
the Parent Common Stock held by such Holding Company to the Shareholder(s) of
that Holding Company.
8.4 Limits on Indemnification, Reimbursement, etc. Absent fraud or
willful misconduct of any party (for which there shall be no limitation of
liability of any party), no Parent Indemnitee and no Company Indemnitee shall
have any right to seek indemnification, reimbursement or defense under this
Agreement or the Escrow Agreement until Losses which would otherwise be
indemnifiable hereunder have been incurred by such party and other indemnitees
associated with or related to such party exceed $400,000. For purposes of the
foregoing, only losses that individually exceed $5,000 shall be counted towards
the $400,000 deductible amount.
8.5 Escrow Arrangements. Concurrent with the Final Closing, the Escrow
Amount shall be placed in an escrow fund (the "Escrow Fund"), to be governed by
the terms of the Escrow Agreement. The Escrow Fund shall be available to
compensate Parent and its affiliates for Losses for which Parent or its
affiliates are entitled to indemnification under Article VIII. The parties
acknowledge that after the Effective Date and absent fraud or willful
misconduct, the maximum amount payable under the indemnification obligations of
the Company under Section 8.2 is the Escrow Amount. The terms and conditions of
the Escrow Fund shall be set forth more fully in the Escrow Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
may be terminated and the Final Closing abandoned at any time prior to the Final
Closing:
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(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) if the Second Amalgamation has
not occurred by January 31, 2000 (provided that the right to terminate this
Agreement under this clause 9.1(b) shall not be available to any party whose
willful failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Second Amalgamation to occur on or before such
date); (ii) there shall be a final nonappeallable order of a federal, state or
provincial court in effect preventing consummation of the Second Amalgamation;
or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Second Amalgamation by any
governmental entity that would make consummation of the Second Amalgamation
illegal;
(c) by Parent if the Initial Closing has not occurred prior to
January 4, 2000 (provided that the right to terminate this Agreement under this
clause 9.1(c) shall not be available to Parent if its willful failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the failure of
the Initial Closing to occur on or before such date);
(d) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Second Amalgamation, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of any portion of the business
of the Company or (ii) compel Parent or the Company to dispose of or hold
separate, as a result of the Second Amalgamation, any portion of the business or
assets of the Company or Parent;
(e) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company within thirty (30) days
through the exercise of its reasonable best efforts, then for so long as the
Company continues to exercise such reasonable best efforts Parent may not
terminate this Agreement under this Section 8.1(d) unless such breach is not
cured within thirty (30) days (but no cure period shall be required for a breach
which by its nature cannot be cured);
(f) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Amalgamation Sub and as a result of such breach the
conditions set forth in Section 6.2(a) or 6.2(b), as the case may be, would not
then be satisfied; provided, however, that if such breach is curable by Parent
or Amalgamation Sub within thirty (30) days through the exercise of its
reasonable best efforts, then for so long as Parent or Amalgamation Sub
continues to exercise such reasonable best efforts the Company may not terminate
this Agreement under this Section 9.1(e) unless such breach is not cured within
thirty (30) days (but no cure period shall be required for a breach which by its
nature cannot be cured).
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Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
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,
except as set forth in Section 9.3, there shall be no liability or obligation on
the part of the Parent Companies or the Company, or their respective officers,
directors or stockholders, provided that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 5.2, 5.3 and 5.4 and Article X of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
9.3 Amendment. Except as is otherwise required by applicable law or the
Shareholder Implementation Agreement after the shareholders of the Company
approve this Agreement, this Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
9.4 Extension; Waiver. At any time prior to the Final Closing, Parent
and Amalgamation Sub, on the one hand, and the Company, on the other, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (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
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to any of the Parent Companies, to:
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X0X0
Attention: Xxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "agreement" when used herein shall be deemed in
each case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. As used in this Agreement, the phrase "to the
best of [a party's] knowledge," "to [a party's] knowledge," "[a party] is not
aware," and similar phrases shall mean the knowledge of such party, or of the
officers and directors of such party, after careful consideration of the matters
set forth in the representation that is so qualified and a reasonably diligent
review of all files, documents, agreements and other materials in such person's
possession or subject to his or her control. Unless otherwise expressly stated,
all references in this Agreement to "dollars" or "$" shall be deemed to be
references to the currency of the United States. 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.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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10.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) except with respect to Sections 5.13,
8.2 and 8.3, 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, except that each of the
Parent Companies may assign its respective rights and delegate its respective
obligations hereunder to its respective affiliates.
10.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. 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.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof;
provided, however, that matters relating to the Amalgamations and the
Continuance and the corporate governance and organization of the Company shall
be governed by the laws of the Provinces of Ontario and Nova Scotia, as
applicable. Each of the parties hereto agrees that process may be served upon
them in any manner authorized by the laws of the State of California and the
Province of Ontario for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation 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.
10.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or Canada or any state
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or province having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.10 Share Legends. All certificates representing any of the shares of
Parent Common Stock to be issued pursuant to this Agreement shall have endorsed
thereon any legend required by Federal or state securities laws.
(Remainder of page intentionally left blank)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
THE DOCSPACE COMPANY INC. CRITICAL PATH, INC.
By /s/ Xxxx Xxxxxxx By /s/ Xxxxx Xxxxxxxxx
----------------------------- ---------------------------------------
Xxxx Xxxxxxx Name: Xxxxx Xxxxxxxxx
President and Chief Title: Vice President Strategic
Executive Officer Development and General Counsel
COMPASS HOLDING CORP.
By /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President Strategic
Development and General Counsel
COMPASS ACQUISITION CORP.
By /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President Strategic
Development and General Counsel
3034996 NOVA SCOTIA COMPANY
By /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President Strategic
Development and General Counsel
3034997 NOVA SCOTIA COMPANY
By /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President Strategic
Development and General Counsel
***MERGER AGREEMENT AND PLAN OF REORGANIZATION***
