August 19, 1999
CONFIDENTIAL
Metrowerks Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxx, Chairman of the Board
Dear Sirs:
This letter agreement (the "Agreement") sets out the terms and
conditions upon which Motorola, Inc. (the "Purchaser") will cause a direct or
indirect wholly-owned subsidiary of the Purchaser (the "Offeror") to make an
offer (the "Offer"), on substantially the terms and conditions summarized in
Schedule "A" forming part of this Agreement, to purchase all of the issued and
outstanding common shares (including any common shares which may become
outstanding pursuant to the exercise of outstanding options to acquire common
shares) (the "Common Shares") of Metrowerks Inc. (the "Company"). The term
"Offer" shall include any amendments to, or extensions of, the Offer made in
accordance with the terms of this Agreement, including, without limitation,
removing or waiving any condition or extending the date by which Common Shares
may be deposited. The Purchaser has, concurrently with the execution of this
Agreement, entered into employment and non-competition agreements with certain
of the Company's key employees (the "Employment Agreements"), lock-up agreements
with Xxxx Xxxxxxxx and Xxxxxxx Xxxxxxx, the Company's principal shareholders
(the "Lock-up Agreements"), and an option agreement with the Company pursuant to
which the Purchaser has been granted the option to purchase Common Shares (the
"Option Agreement"). This Agreement also sets out the terms and conditions of
the agreement by the Company, among other things, to recommend that the holders
of the Common Shares accept the Offer and not to solicit expressions of interest
for, or assist or encourage competing offers for, the Common Shares.
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All references to dollar amounts in this Agreement are to United States
dollars, unless otherwise stated.
1. COVENANTS OF THE OFFEROR. Upon execution of this Agreement, the Purchaser
will cause the Offeror:
(a) not later than September 2, 1999 (the "Proposed Offer Date"),
to make a take-over bid to purchase 100% of the Common Shares
issued and outstanding as of such date, on substantially the
terms and conditions summarized in Schedule "A" forming part
of this Agreement;
(b) subject to the satisfaction of the terms and conditions of the
Offer, to take-up and pay for Common Shares tendered under the
Offer in accordance with Canadian securities laws and United
States securities laws, if applicable; and
(c) upon the last take-up and payment of Common Shares under the
Offer, to proceed expeditiously with a compulsory acquisition
or subsequent acquisition transaction whereby holders of
Common Shares will receive cash consideration per Common Share
in a transaction which is at least as favourable to holders of
Common Shares as the Offer.
The Purchaser shall cause the Offeror to mail the Offer and
accompanying take-over bid circular (such circular, together with the Offer,
being referred to herein as the "Bid Circular") in accordance with applicable
laws to each holder of Common Shares (a "Shareholder") as soon as reasonably
practicable and not later than 11:59 p.m. (Toronto time) on September 2, 1999
(such time on such date being referred to herein as the "Latest Mailing Time");
provided, however, that if the mailing of the Offer is delayed by (i) an
injunction or order made by a court or regulatory authority of competent
jurisdiction or (ii) the Offeror not having obtained any regulatory waiver,
consent or approval which is necessary to permit it to mail the Offer or take up
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and pay for the Common Shares tendered under the Offer, then, provided that such
injunction or order is being contested or appealed or such regulatory waiver,
consent or approval is being actively sought, as applicable, the Latest Mailing
Time shall be extended for a period ending on the fifth business day following
the date on which such injunction or order ceases to be in effect or such
waiver, consent or approval is obtained, as applicable, provided however that if
such event has not occurred by September 30, 1999, this Agreement will
terminate.
The Offer will be made in accordance with applicable laws and shall be
open for acceptance for a period of 21 calendar days, subject to the right of
the Offeror to extend the period during which Common Shares may be deposited
under the Offer (the "Expiry Time"). The Purchaser shall cause the Offeror to
use all reasonable efforts to consummate the Offer, subject to the terms and
conditions hereof and thereof.
At the sole discretion of the Purchaser, the Offer may be structured so
as to permit Shareholders who hold Common Shares indirectly through a holding
company incorporated under the Canada Business Corporation Act and meeting the
requirements described below (a "Holdco") to deposit all of the issued and
outstanding shares of such Holdco (the "Holdco Shares") and all Common Shares
held by such Holdco to the Offer (the "Holdco Alternative"), and the Offeror
will purchase the Holdco Shares in lieu of the Common Shares owned by such
Holdco that have been deposited directly under the Offer. The aggregate
consideration payable for the Holdco Shares would be identical to that which the
Holdco would have been entitled to receive had the Common Shares owned by such
Holdco been purchased directly under the Offer. If a Shareholder chooses to use
the Holdco Alternative, such Shareholder would thereby dispose of its entire
direct interest in its Holdco and its entire indirect interest in its Common
Shares as a result of the sale of its Holdco Shares to the Offeror, and each
Holdco would become a wholly-owned subsidiary of the Offeror. A valid deposit of
Holdco Shares and all Common Shares held by such Holdco under the Offer would
constitute an acceptance of the Offer.
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If the Holdco Alternative is made available by the Purchaser, a
Shareholder wishing to utilize the Holdco Alternative must first advise the
Offeror of such intention, in writing, at least seven days prior to the Expiry
Time and must enter into a share purchase agreement (a "Holdco Share Purchase
Agreement") with the Offeror in which such Shareholder shall provide the Offeror
with representations, warranties and covenants: (i) to the effect that the
Holdco will have no assets other than the Common Shares and no tax or other
liabilities; (ii) as to the due incorporation of the Holdco and its corporate
authority; (iii) as to the ownership of the outstanding shares of the Holdco and
the Common Shares held by the Holdco; (iv) that the Holdco has never carried on
any business or operations of any kind; (v) that the Holdco has not declared any
dividends or other distributions which would represent a liability on the part
of the Holdco to its shareholders; (vi) as to the paid up capital of each class
and series of shares of the Holdco; (vii) as to the adjusted cost base of the
Common Shares to the Holdco; and (viii) as to such other matters as the Offeror
may reasonably require. The Holdco Share Purchase Agreement shall also provide
that the Shareholders shall indemnify the Offeror against any and all
liabilities of the Holdco (including liabilities arising prior to or as a result
of the sale of the Holdco Shares to the Offeror), and with an opinion of counsel
addressing such matters as are customary in a share purchase transaction. The
Offeror may also require a Shareholder wishing to utilize the Holdco Alterative
to provide it with any such legal opinions, or to obtain any such approvals,
authorizations or income tax rulings, as the Offeror considers reasonably
necessary to provide assurance that the Holdco does not have, and will not have
as a result of the sale of the Holdco Shares to the Offeror, any tax or other
liabilities.
The Purchaser will use its reasonable efforts to determine whether the
Holdco Alternative can be made available on a basis which is without tax or
other legal risk to the Purchaser and the Offeror.
2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER. Notwithstanding the
foregoing, the obligations of the Purchaser to cause the Offeror to make the
Offer shall be subject to the satisfaction, on the Proposed Offer Date (or any
earlier date on which the Offeror proposes to make the Offer or on any later
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date on which the Offer is required to be made pursuant to Section 1 hereof), of
each of the following conditions precedent:
(i) each of the conditions set forth in paragraphs (d) through (h)
of section 4 of Schedule "A" hereto shall have been satisfied;
and
(ii) each of the Specified Representations and Warranties shall be
true and correct in all respects, each of the other
representations and warranties set forth in this Agreement
shall be true and correct in all material respects, and the
Company shall have performed in all respects any covenant or
complied in all respects with any agreement to be performed by
it under this Agreement prior to such date.
The Company shall deliver to the Purchaser and the Offeror, prior to
the making of the Offer by the Offeror on the Proposed Offer Date (or any
earlier date on which the Offeror proposes to make the Offer or on any later
date on which the Offer is required to be made pursuant to Section 1 hereof), a
certificate of a senior officer of the Company confirming the matters set forth
in paragraphs (i) and (ii) above.
The foregoing conditions precedent are for the sole benefit of the
Purchaser and may be waived by the Purchaser in whole or in part at any time or
from time to time.
3. DIRECTORS' CIRCULAR. The Company hereby approves of and consents to the Offer
and to the inclusion in the Bid Circular of reference to the determinations,
approvals and recommendations of the Company's board of directors (the "Board")
and of Broadview International referred to in Sections 5(ee) and (ff) hereof.
The Company agrees to prepare and file in accordance with all applicable laws
and make available for mailing, concurrently and together with the Bid Circular,
sufficient copies of a directors' circular meeting the requirements of Canadian
securities laws, in both the English and French languages as circumstances may
require, and a Schedule 14D-9F meeting the requirements of U.S. securities laws
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relating to the Offer (collectively, the "Directors' Circular"). Prior to the
final approval of the Directors' Circular by the Board, the Company shall
provide the Purchaser with a reasonable opportunity to review and comment on the
form of the Directors' Circular, the Purchaser recognizing that whether any such
comments are appropriate will be determined by the Board, acting reasonably. The
Company agrees to provide the Purchaser and its counsel in writing with any
comments that the Company receives from the applicable securities regulatory
authorities in Canada or the U.S. on the Directors' Circular or in connection
with the Offer. The Directors' Circular and all information supplied by the
Company for inclusion in the Bid Circular and any amendments or supplements
thereto, at the time filed with applicable securities regulatory authorities or
first published, sent or given to Shareholders, as the case may be, shall not
contain any misrepresentation (as defined in the Securities Act (Ontario)) or
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
4. COVENANTS OF THE COMPANY. The Company hereby covenants that from the date
hereof until the earlier of: (i) the Offeror having caused the boards of
directors of the Company and each of its subsidiaries to consist of persons
designated or selected by the Purchaser or having abandoned the Offer; or (ii)
this Agreement having been terminated pursuant to Section 11 hereof:
(a) The Company shall operate the business and affairs of the
Company and its subsidiaries in the ordinary course of
business in substantially the same manner as previously
conducted and in compliance with applicable laws, except (i)
with the prior written consent of the Purchaser to any
deviation therefrom; (ii) with respect to any binding
commitments which were disclosed in Section 4(a) of the
Disclosure Letter; or (iii) with respect to any matter
specifically contemplated by this Agreement, including the
making of the Offer, and, in furtherance of the foregoing:
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(i) the Company will not declare, set aside or pay any
dividends on or make any other distributions or
payments (whether in cash, stock, securities or other
property or any combination thereof) in respect of
any Common Shares, take or authorize any action to
implement any of the foregoing or split, combine or
reclassify any shares in the capital of the Company;
(ii) the Company will not amend its Articles of
Amalgamation or by-laws or the articles or by-laws of
any of its subsidiaries;
(iii) neither the Company nor any of its subsidiaries shall
enter into any agreement, arrangement or
understanding with any Shareholder for the sale or
purchase of any asset, the making of any loan, the
assumption of any liability or the issuance of any
security;
(iv) neither the Company nor any of its subsidiaries will
enter into or amend any employment agreement,
consulting services agreement, non-competition
agreement, severance agreement or arrangement with
respect to the termination of employment, or any
arrangement with respect to the increase of
compensation or fringe benefits, with any of its
directors, officers, consultants or key employees;
(v) neither the Company nor any of its subsidiaries will
dismiss any senior employee of the Company or any
subsidiary of the Company, other than in consultation
and cooperation with the Purchaser and with the prior
written consent of the Purchaser;
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(vi) neither the Company nor any of its subsidiaries will
authorize or commit to the use of cash not in the
ordinary course of business and consistent with past
practice;
(vii) neither the Company nor any of its subsidiaries will
adopt, enter into, amend or terminate any bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care,
employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare
of any employee or retiree, except as required to
comply with changes in applicable law;
(viii) each of the Company and its subsidiaries will use its
reasonable best efforts to maintain with financially
responsible insurance companies insurance on its
tangible assets and its businesses in such amounts
and against such risks and losses as are consistent
with past practice;
(ix) the Company will not sell, deliver, reserve, set
aside, pledge, dispose of, issue, authorize or
propose or commit to the issuance of (whether through
the allotment, reservation, issuance or granting of
options, warrants, commitments, subscriptions, rights
to purchase or otherwise) or otherwise encumber any
securities of the Company or any of its subsidiaries,
or amend the terms of any outstanding securities of
the Company or any of its subsidiaries, including any
Common Shares or any securities convertible into or
exchangeable for, or rights, warrants or options to
acquire, or any equity equivalents (including stock
appreciation rights) of, any Common Shares or other
securities of the Company or any of its subsidiaries
or accelerate any vesting or other rights or waive
any rights under any outstanding rights, warrants or
options to acquire any such shares, voting securities
or convertible securities, provided that,
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notwithstanding the foregoing, the Company may issue
Common Shares pursuant to the exercise of fully
vested options or other rights to purchase Common
Shares which are outstanding as of the date hereof or
which become outstanding pursuant to Section 4(e)
hereof;
(x) the Company will not, and will not permit any of its
subsidiaries to, acquire or agree to acquire any
material amount of assets or securities, or enter
into any partnership, joint venture, association or
similar arrangement, or acquire or agree to acquire
(whether by amalgamating, merging, consolidating or
entering into a business combination with or
purchasing or leasing or otherwise) any business or
undertaking or any corporation, partnership,
association or other business organization or
division thereof;
(xi) the Company will not, and will not permit any of its
subsidiaries to, sell, lease, transfer, license,
mortgage or otherwise dispose of or encumber any of
its property or assets, real or personal, that,
individually or in the aggregate, are material to the
Company and its subsidiaries taken as a whole;
(xii) the Company will not, and will not permit any of its
subsidiaries to, license or otherwise alienate or
encumber in any manner, any of the Owned Software (as
hereinafter defined), Owned Intellectual Property (as
hereinafter defined) or other proprietary technology,
other than to its customers in the ordinary course of
business consistent with past practice;
(xiii) the Company will not redeem, purchase, acquire or
offer to purchase any of its outstanding Common
Shares or any of the common shares of any of its
subsidiaries, or any options, warrants or rights to
acquire any Common Shares or any of the common shares
9908182314
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of any of its subsidiaries, or any security
convertible into or exchangeable for Common Shares or
any of the common shares of any of its subsidiaries;
(xiv) the Company will not, and will not allow any of its
subsidiaries to, enter into, amend, assign or
terminate any agreements, or waive, assign, transfer
or release any rights under any covenants or
agreements that, individually or in the aggregate,
are material to the Company and its subsidiaries
taken as a whole and will not modify, amend, assign,
waive or terminate any confidentiality agreement the
Company has entered into with third parties (except
as contemplated by Section 7(a));
(xv) neither the Company nor any of its subsidiaries will
effect or enter into any agreement to change its debt
capitalization (including but not limited to any
increase in the amount of its borrowings or any
conversion of short-term borrowings into long-term
borrowings), will not incur any liability or
indebtedness for borrowed money, and will not make
any loans, advances or capital contributions to, or
investments in, any other person, other than to the
Company or any direct or indirect subsidiary of the
Company;
(xvi) the Company will not guarantee or permit its
subsidiaries to guarantee the payment of any
indebtedness;
(xvii) neither the Company nor any of its subsidiaries shall
expend funds for capital expenditures other than in
accordance with its current capital expenditure plans
(which shall have been disclosed in writing to the
Purchaser on or before the date of this Agreement);
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(xviii) neither the Company nor any of its subsidiaries shall
take any steps to terminate its corporate existence
or to adopt a plan of complete or partial liquidation
or to adopt resolutions providing for or authorizing
such a liquidation or a dissolution, merger,
amalgamation, plan of arrangement, consolidation,
restructuring, recapitalization, reorganization or
similar transaction;
(xix) neither the Company nor any of its subsidiaries shall
recognize any labour union (unless legally required
to do so) or enter into or amend any collective
bargaining agreement;
(xx) neither the Company nor any of its subsidiaries shall
change any accounting principle used by it, unless
required by one of the relevant Canadian or United
States securities regulatory authorities, a change in
United States generally accepted accounting
principles or the Financial Accounting Standards
Board;
(xxi) the Company and it subsidiaries shall prepare and
file on or before the due date therefor all Tax
Returns required to be filed by the Company and its
subsidiaries, and shall pay all Taxes (including
estimated Taxes) due on any such Tax Returns or which
are otherwise required to be paid. Such Tax Returns
shall be prepared in accordance with the most recent
Tax practices as to elections and accounting methods
except for new elections that may be made therein
that were not previously available;
(xxii) to the extent the Company or any of its subsidiaries
has knowledge of the commencement or scheduling of
any Tax audit, the assessment of any Tax, the
issuance of any notice of Tax due or any bill for
collection of any Tax due, or the commencement or
scheduling of any other administrative or judicial
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proceeding with respect to the determination,
assessment or collection of any Tax of the Company or
any of its subsidiaries, the Company shall provide
prompt notice to the Purchaser of such matter,
setting forth information describing any asserted Tax
liability in reasonable detail and including copies
of any notice or other documentation received from
the applicable Tax authority with respect to such
matter;
(xxiii) neither the Company nor any of its subsidiaries shall
take any of the following actions:
(i) make, revoke or amend any Tax election;
(ii) execute any waiver of restrictions on
assessment or collection of any Tax; or
(iii) enter into or amend any agreement or
settlement with any Tax authority;
(xxiv) neither the Company nor any of its subsidiaries shall
settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) or
settle, pay, discharge or compromise any claims not
required to be paid, individually in an amount in
excess of $10,000 and in the aggregate in an amount
in excess of $50,000, other than in consultation and
cooperation with the Purchaser, and, with respect to
any such settlement, with the prior written consent
of the Purchaser;
(xxv) the Company will advise the Purchaser as soon as
practicable of any matter coming to its attention
which could reasonably be expected to cause any of
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the representations or warranties of the Company
contained herein to be, or with the passage of time
to become, incorrect or untrue in any way that could
reasonably be expected to constitute or give rise to
a Material Adverse Effect; and
(xxvi) neither the Company nor any of its subsidiaries shall
authorize, commit or propose or agree to take any
action which could reasonably be expected to make any
of the representations or warranties of the Company
contained in this Agreement untrue or incorrect, or
which could reasonably be expected to result in any
of the conditions of the Offer (as set forth in
section 4 of Schedule "A" hereto) not being
satisfied.
(b) The Company shall provide lists of shareholders of all classes
and series of securities of the Company and a list of holders
of stock options and any other rights, warrants or convertible
or exchangeable securities currently outstanding (with full
particulars as to the number held, date of purchase, grant or
acquisition, exercise or conversion price, vesting and expiry
date) prepared by the Company or the transfer agent of the
Company (as well as security position listing from each
depository, including without limitation The Canadian
Depository for Securities Limited) and deliver such lists to
the Offeror within two (2) business days after execution of
this Agreement and obtain and deliver to the Offeror
thereafter on demand supplemental lists setting out any
changes thereto, all such deliveries to be both in printed
form and if available in computer-readable format. The Company
shall, if requested by the Purchaser, in connection with the
Offer, permit its registrar and transfer agent to act as the
Offeror's depositary under the Offer. The Company shall
otherwise co-operate in good faith with the Offeror to
facilitate the mailing of the Offer.
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(c) Notwithstanding the pre-agreement investigation of the Company
conducted by or on behalf of the Purchaser, subject to
restrictions imposed by applicable law, the Company shall give
the Offeror and its authorized agents, reasonable ongoing
access during the term of this Agreement to all of the
Company's and its subsidiaries' personnel, assets, properties,
books, records, agreements and commitments and shall
reasonably cooperate with the Offeror and any such authorized
persons in their review of and shall furnish such persons with
all information with respect to the Company and its
subsidiaries and their ongoing operations and activities,
provided that the Offeror shall designate an individual or
individuals to co-ordinate such access and further provided
that the Offeror shall not unreasonably disrupt the normal
business operation of the Company or its subsidiaries, and
further provided that the confidentiality agreement dated
August 8, 1999 between the Company and the Purchaser (the
"Confidentiality Agreement") shall continue in full force and
effect, save and except for paragraph 1 thereof.
(d) The Company and its subsidiaries shall participate and
co-operate in all reasonable respects with the Offeror and
shall use their respective reasonable best efforts to take all
appropriate action or to do or cause to be done all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including to diligently make
all required regulatory filings and applications (including,
without limitation, filings and applications under the United
States Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976)
and to obtain all licences, permits, consents, approvals,
authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its
subsidiaries as are necessary for the consummation of the
transactions contemplated by this Agreement and to fulfil the
conditions to the Offer. The Company will participate and
cooperate in all reasonable respects with the Offeror in the
preparation and filing of the Bid Circular and the Schedule
14D-1F relating thereto. The Company will cooperate in all
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respects with the Offeror and assist the Offeror in preparing
the valuation (i) required to enable the Offeror to cause the
Company to transfer the shares of Metrowerks Corporation (the
Company's United States subsidiary) to the Purchaser on a tax
free basis pursuant to Section 88(1) of the Income Tax Act
(Canada) immediately following the successful completion of
the Offer and (ii) of the Owned Intellectual Property (as
hereinafter defined).
(e) The Company will (i) accelerate the vesting of any outstanding
unvested option issued under the Company's Amended and
Restated (#2) 1995 Stock Option Plan or any predecessor plan
(the "Plan"), subject to obtaining the consent of the holder
where required under the terms of the Plan; and (ii) upon the
written direction of the Purchaser, take any action in respect
of the options outstanding under the Plan that is permitted
under the terms of the Plan and under all applicable laws.
(f) The Company agrees to use its reasonable best efforts to
co-operate with the Offeror in structuring a transaction or
carrying out any necessary reorganization immediately prior to
the completion of the Offer that is beneficial to the Offeror
and not detrimental to the Shareholders, provided such
transaction or reorganization shall not delay the completion
of the Offer.
(g) Upon the take-up and payment for Common Shares by the Offeror
pursuant to the Offer, and provided the Offeror thereby
acquires at least a majority of the outstanding Common Shares,
the Company shall use its reasonable best efforts to (i)
ensure that the Offeror will have the ability to immediately
replace the members of the Board with individuals designated
by the Offeror, and (ii) assist the Offeror in acquiring
pursuant to a subsequent acquisition transaction, or other
transaction proposed by the Offeror, all of the Common Shares
not tendered to the Offer.
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(h) The Company agrees to use its reasonable best efforts to
preserve intact the goodwill and present relationships of the
Corporation and its subsidiaries with the Employees (as
hereinafter defined) and with customers, suppliers and other
persons with whom the Company and its subsidiaries have
business relationships, and to ensure that such relationships
are maintained following the completion of the Offer, and the
Company shall advise the Purchaser forthwith if it has reason
to believe that any such relationship will not continue after
the completion of the Offer in substantially the same manner
as prior to the date of this Agreement.
(i) The Company and its subsidiaries will consult on an ongoing
basis with representatives of the Purchaser to report on
operational matters and as to the general status of the
business, and in order that the representatives of the
Purchaser will become more familiar with the philosophy and
techniques of the Company and its subsidiaries, as well as
with their business and financial affairs, and in order to
provide experience as a basis for ongoing relationships in
connection with the acquisition of the Company by the
Purchaser.
(j) In furtherance of the transactions contemplated by this
Agreement and the Lock-up Agreements, the Company hereby
covenants and agrees to direct its transfer agent to place a
stop transfer order on the Common Shares held by Xxxx Xxxxxxxx
and Xxxxxxx Xxxxxxx and not to amend, terminate or waive any
of the terms of such stop transfer order (other than to permit
the transfer of such Common Shares to the Offeror) during the
term of this Agreement.
Nothing contained in this Agreement shall give to the Purchaser or the
Offeror, directly or indirectly, rights to control or direct the Company's
operations prior to the completion of the Offer. Prior to the completion of the
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Offer, the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision of its operations.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Purchaser as follows:
Except as otherwise disclosed in the Disclosure Letter,
(a) Organization
(i) The Company is a corporation duly organized and
validly existing under the laws of Canada and has all
requisite corporate power and authority to own, lease
and operate its properties and to carry on its
business as now being conducted.
(ii) Each subsidiary of the Company is a corporation duly
organized and validly existing under the laws of its
jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and
operate its properties and to carry on its business
as now being conducted.
(iii) All of the outstanding shares of the subsidiaries of
the Company are validly issued, fully paid and
non-assessable and all such shares are owned directly
or indirectly by the Company, free and clear of all
liens, claims or encumbrances and there are no
outstanding options, rights, entitlements,
understandings, subscriptions, warrants rights,
contracts, voting trusts, proxies or other
commitments or understandings, restrictions or
arrangements relating to the issuance, sale, voting,
transfer or ownership thereof, or commitments
(pre-emptive, contingent or otherwise) regarding the
right to acquire any such shares or other right with
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respect to any shares of or in any of its
subsidiaries. The Company has disclosed the names and
jurisdictions of incorporation of each of its
subsidiaries in the Disclosure Letter. Other than
such subsidiaries, the Company does not have any
ownership interest in any other person or entity.
(iv) The Company and each of its subsidiaries is duly
registered, licensed or otherwise qualified as a
foreign or extra-provincial corporation to carry on
business and is in good standing in each jurisdiction
where the character of the properties owned, leased
or operated by it or the nature of its activities
makes such registration, licence or qualification
necessary (except where the failure to be so
registered, licensed or otherwise qualified could not
reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect).
(b) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement. This Agreement has been
duly executed and delivered by the Company and constitutes a
legal, valid and binding agreement enforceable by the
Purchaser against the Company in accordance with its terms,
subject, however, to the usual limitations with respect to
enforcement imposed by law in connection with bankruptcy or
similar proceedings and the availability of equitable
remedies. No approval, authorization, registration, consent or
order or other action of or filing with any person, including
any court, administrative agency or other governmental
authority is required for the execution and delivery of this
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Agreement and the documents to be delivered hereunder or the
consummation by the Company of the transactions contemplated
hereby or thereby.
(c) Articles of Incorporation and By-laws. The Company has
furnished to the Purchaser a complete and correct copy of the
Articles of Amalgamation and the by-laws of the Company and
the equivalent charter or organizational documents of each of
the Company's subsidiaries. Such documents are in full force
and effect and no other organizational documents are
applicable to or binding upon the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries
is in violation of any of the provisions of its charter or
organizational documents.
(d) No Conflict. Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby nor compliance with any of the provisions
hereof will (i) conflict with or result in any breach of any
provision of the Company's or any of its subsidiaries'
Articles of Incorporation or Amalgamation, as the case may be,
or By-laws, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage,
indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) violate any
law, order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its
subsidiaries or any of their properties or assets (except in
the case of (iii) for such violations that could not
reasonably be expected to, in the aggregate, constitute a
Material Adverse Effect).
- 20 -
(e) Capitalization. As at the date hereof, the authorized capital
of the Company consists of an unlimited number of Class A
Preferred Shares, an unlimited number of Class B Preferred
Shares and an unlimited number of Common Shares. As at July
31, 1999, (i) no Class A Preferred Shares, no Class B
Preferred Shares, and 14,639,058 Common Shares were issued and
outstanding, and (ii) options to acquire up to a maximum of
2,056,350 Common Shares had been granted to directors,
officers and employees of the Company and are outstanding. The
Disclosure Letter sets forth a list of all options to acquire
Common Shares granted by the Company, including the name of
each option holder, the date of grant, the expiry date, the
number of options granted, the exercise price and the vesting
period. No securities have been issued or granted by the
Company or any of its subsidiaries since July 31, 1999. Except
as described above, there are no securities outstanding and
there are no options, warrants, conversion or exchange
privileges or subscriptions, calls, contracts, commitments,
understandings, restrictions, arrangements, or other rights,
agreements, arrangements or commitments (pre-emptive,
contingent or otherwise) obligating the Company or any
subsidiary to issue, deliver or sell or cause to be issued,
delivered or sold any shares of the Company or any of its
subsidiaries or securities or obligations of any kind
convertible into or exchangeable for any shares of the
Company, any subsidiary or any other person, nor are there
outstanding any stock appreciation rights, phantom equity or
similar rights, agreements, arrangements or commitments based
upon the book value, income or any other attribute of the
Company or any subsidiary. All of the outstanding Common
Shares have been duly authorized and are validly issued and
outstanding as fully paid and non-assessable shares, free of
pre-emptive rights. There are no outstanding bonds, debentures
or other evidences of indebtedness of the Company or any
subsidiary having the right to vote (or that are convertible
for or exercisable into securities having the right to vote)
with the holders of the Common Shares on any matter. There are
no outstanding contractual obligations of the Company or any
of its subsidiaries to repurchase, redeem or otherwise acquire
- 21 -
securities or with respect to the voting or disposition of any
outstanding securities of any of its subsidiaries. No holder
of securities issued by the Company has any right to compel
the Company to register or otherwise qualify such securities
for public sale in Canada or the United States. The Disclosure
Letter describes the capitalization of each of the
subsidiaries of the Company including, among other things, the
authorized and issued capital of such subsidiaries and the
names of each of the registered and beneficial holders of
securities of such subsidiaries and the number of securities
held by such Persons.
(f) U.S. Holders. As of April 30, 1999 and July 31, 1999, less
than 40% of the outstanding Common Shares were held by "U.S.
holders" (as such term is defined for the purposes of Schedule
14D-1F under the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act")). For the twelve calendar month
periods ended April 30, 1999 and July 31, 1999, the aggregate
trading volume of the Common Shares on national securities
exchanges in the United States and on the NASDAQ National
Market ("NASDAQ") did not exceed the aggregate trading volume
of the Common Shares on securities exchanges in Canada and on
the Canadian Dealing Network, Inc. ("CDN") (based on volume
figures published by such exchanges, NASDAQ and CDN). The most
recent annual report and annual information form filed by the
Company with applicable Canadian securities regulatory
authorities or with the United States Securities Exchange
Commission do not indicate that U.S. holders hold 40% or more
of the outstanding Common Shares. The Company is a "foreign
private issuer" within the meaning of Rule 3b-4 promulgated
under the Exchange Act and Rule 405 of the Securities Act of
1933 and is not an "Investment Company" as defined under the
United States Investment Company Act of 1940, as amended.
- 22 -
(g) Reports. The Company has complied with its obligation to file
all forms, reports, statements, schedules and documents
required to be filed by it with securities regulators under
applicable Canadian and U.S. securities laws. Each of such
reports and the prospectus of the Company dated February 17,
1999 (together with all financial statements, schedules,
documents or exhibits included or incorporated by reference
therein) (collectively, the "Reports") complied with all
applicable requirements of law as in effect on the date so
filed. None of the Reports, at the time filed, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Company has not filed any confidential material change report
with any securities authority or regulator or any stock
exchange or other self-regulatory authority which at the date
hereof remains confidential. The Company has publicly
disclosed in the Reports any information regarding any event,
circumstance or action taken or failed to be taken by the
Company or its subsidiaries which could individually or in the
aggregate reasonably be expected to have a Material Adverse
Effect. The Disclosure Letter sets forth a complete list of
all Reports filed since July 31, 1998.
(h) Financial Statements. The consolidated financial statements of
the Company as of and for the year ended July 31, 1998, and
for the three quarters ended April 30, 1999, all as contained
in the Reports (collectively, the "Company Financial
Statements"), were prepared in accordance with United States
generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as
otherwise stated in such financial statements) and present
fairly the consolidated financial position and results of
operations of the Company and its subsidiaries for the periods
and as of the dates thereof (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments) and
reflect appropriate and adequate reserves in respect of
contingent liabilities, if any, of the Company and its
subsidiaries on a consolidated basis. There has been no change
- 23 -
in the Company's accounting policies, except as described in
the notes to the Company Financial Statements, since July 31,
1998. The Disclosure Letter accurately describes all
disagreements, disputes and other matters under discussion
with the Company's auditors in respect of the Company's
financial statements and financial statement presentation
since July 31, 1998.
(i) Absence of Certain Changes. Except for changes resulting from
the transactions contemplated hereby, or as disclosed in the
Reports or the Disclosure Letter, since July 31, 1998, the
Company has conducted its business in the ordinary and regular
course consistent with past practice and there has not
occurred:
(i) any material change (as defined in the Securities Act
(Ontario)) in its affairs or in its business, assets,
liabilities, financial condition, results of
operations or prospects;
(ii) any acquisition, sale or transfer of any material
asset of the Company or any of its subsidiaries, or
any entry by the Company or any of its subsidiaries
into any commitment or transaction material to the
Company and its subsidiaries taken as a whole;
(iii) any change in accounting methods or practices
(including any change in depreciation or amortization
policies or rates) by the Company or any of its
subsidiaries or any revaluation by the Company of any
of its assets or any of its subsidiaries' assets;
(iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the
shares of the Company, or any direct or indirect
redemption, purchase or other acquisition by the
Company of any of its shares of capital stock;
- 24 -
(v) any issuance or sale of any securities of the Company
(other than Common Shares pursuant to the exercise of
employee stock options);
(vi) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including
the granting of stock options, stock appreciation
rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit
plan or agreement or arrangement, or any other
increase in the compensation payable or to become
payable to any officers or key employees of the
Company or any of its subsidiaries, and neither the
Company nor any of its subsidiaries has authorized or
otherwise committed itself to do any of the
foregoing;
(vii) any Material Contract entered into by the Company or
any of its subsidiaries, other than in the ordinary
course of business, or any amendment or termination
of, or default under, any Material Contract to which
the Company or any of its subsidiaries is a party or
by which it is bound; or
(viii) any agreement by the Company or any of its
subsidiaries to do any of the things described in the
preceding clauses (i) through (vii) (other than
negotiations with the Purchaser and its
representatives regarding the transactions
contemplated by this Agreement).
(j) Absence of Undisclosed Liabilities. The Company has no
obligations or liabilities of any nature (matured or
unmatured, fixed or contingent), other than:
- 25 -
(i) those set forth or adequately provided for in the
balance sheet included in the Company Financial
Statements;
(ii) those incurred in the ordinary course of business and
not required to be set forth in the Company Financial
Statements under United States generally accepted
accounting principles; and
(iii) those incurred in the ordinary course of business
since July 31, 1998 and consistent with past
practice.
(k) Material Contracts. The Disclosure Letter lists all of the
Material Contracts. None of the Company, its subsidiaries, nor
to the knowledge of the Company, any of the other parties
thereto, is in default or breach of, nor has the Company or
any of its subsidiaries received any notice of default or
termination under, any Material Contract and there exists no
state of facts which after notice or lapse of time or both
would constitute such a default or breach.
(l) Customers and Suppliers. Since July 31, 1998, there has been
no termination or cancellation of, and no modification or
change in, the business relationship with any customer or
group of customers which singly or in the aggregate provided
more than 5% of the consolidated gross revenues of the Company
and its subsidiaries for the fiscal year ended July 31, 1998.
The Disclosure Letter lists all independent contractors and
consultants which are currently retained or have in the past
been retained by the Company or any of its subsidiaries to
develop computer software or engage in any other activities
which could reasonably be expected to produce or give rise to
Owned Software or Owned Intellectual Property (as hereinafter
defined) and the Disclosure Letter accurately sets out the
periods during which each such independent contractor or
- 26 -
consultant was so retained and a general description of the
services provided by each such independent contractor and
consultant.
(m) Insurance. The Disclosure Letter lists all of the existing
insurance policies of the Company and its subsidiaries. The
Company has made available to the Purchaser accurate
particulars of the policies of insurance maintained by the
Company and its subsidiaries at the date hereof, including the
name of the insurer, the risks insured against and the amount
of coverage. All such policies are in full force and effect.
None of the Company or its subsidiaries or, to the knowledge
of the Company, any of the other parties thereto, is in
default or breach of, whether as to the payment of premiums or
otherwise, nor has the Company or any of its subsidiaries
received any notice of default or termination under, any such
policy and there exists no state of facts which after notice
or lapse of time or both could reasonably be expected to
constitute such a default or breach.
(n) Books and Records. The books, records and accounts and the
documents and other information provided to the Purchaser by
the Company and the representatives of the Company and its
subsidiaries, (i) have been maintained in accordance with good
business practices on a basis consistent with prior years,
(ii) are stated in reasonable detail and accurately and fairly
reflect the transactions and dispositions of the assets of the
Company and its subsidiaries and (iii) accurately and fairly
reflect the basis for the Company Financial Statements. The
Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance
with management's general or specific authorization; and (ii)
transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with United
States generally accepted accounting principles or any other
criteria applicable to such statements and (B) to maintain
accountability for assets.
- 27 -
(o) Litigation. The Disclosure Letter describes all suits, claims,
actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against or relating to
the Company or any of its subsidiaries or affecting any of
their properties, licenses or assets before any court or
Governmental Entity or regulatory authority or body and the
Company is not otherwise aware of any basis for any such
claim, action, proceeding or investigation. Neither the
Company nor any of its subsidiaries, nor their respective
assets and properties, is subject to any outstanding judgment,
order, writ, injunction or decree that involves or may
involve, or restricts or may restrict, or requires or may
require, the expenditure of any amount of money as a condition
to or a necessity for the right or ability of the Company or
any of its subsidiaries, as the case may be, to conduct its
business in any manner in which it has been carried on prior
to the date hereof, or prevent or delay consummation of the
transactions contemplated by this Agreement.
(p) Environmental Matters.
(i) Except as disclosed in the Reports, (i) the Company
and its subsidiaries have conducted their respective
businesses in compliance with all applicable
Environmental Laws (as defined below) including,
without limitation, having all permits, licenses and
other approvals and authorizations necessary for the
operation of their respective businesses, (ii) none
of the properties owned by the Company or any of its
subsidiaries contains any Hazardous Substance (as
defined below) as a result of any activity of the
Company or any of its subsidiaries in amounts
exceeding the levels permitted by applicable
Environmental Laws, (iii) neither the Company nor any
of its subsidiaries has received any notices, demand
letters or requests for information from any
Governmental Entity or third party indicating that
the Company or any of its subsidiaries may be in
- 28 -
violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its
businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims,
hearings, investigations or proceedings pending or
threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no reports
have been filed, or are required to be filed, by the
Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened
or actual violation of any Environmental Law, (vi) no
Hazardous Substance has been disposed of, released or
transported in violation of any applicable
Environmental Law from any properties owned, leased
or operated by the Company or any of its subsidiaries
as a result of any activity of the Company or any of
its subsidiaries during the time such properties were
owned, leased or operated by the Company or any of
its subsidiaries, (vii) no underground storage tanks
have been installed, closed or removed from any
properties owned, leased or operated by the Company
or any of its subsidiaries during, in the case of the
Company, the time such properties were owned, leased
or operated by the Company and during, in the case of
each subsidiary, the time such subsidiary has been
owned by the Company, (viii) there is no asbestos or
asbestos containing material present in any of the
properties owned, leased or operated by the Company
and its subsidiaries, and no asbestos has been
removed from any of such properties during the time
such properties were owned, leased or operated by the
Company or any of its subsidiaries, and (ix) neither
the Company, its subsidiaries nor any of their
respective properties are subject to any liabilities
or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or
arising under any Environmental Law.
- 29 -
(ii) As used herein, "Environmental Law" means applicable
federal, state, local or non-U.S. laws or treaties or
any statute, ordinance, by-law, regulation, binding
agreement with a Governmental Authority, company
permit, or order, as the foregoing may be enacted,
amended, issued, interpreted or entered into,
relating to pollution or protection of the
environment, natural resources or human health,
including laws relating to the release of Hazardous
Substances.
(iii) As used herein, "Hazardous Substance" means any
substance presently or hereafter listed, defined,
designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated,
under any Environmental Law. Hazardous Substance
includes any substance to which exposure is regulated
by any Governmental Authority or any Environmental
Law including, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial
substance or petroleum or any derivative or
by-product thereof, radon, radioactive material,
asbestos, or asbestos containing material, urea
formaldehyde foam insulation, lead or polychorinated
biphenyls.
(q) No Contaminants. Neither the Company nor any of its
predecessors or any of their respective subsidiaries has ever
owned any real property. The Disclosure Letter lists all real
property or premises leased by the Company or any of its
subsidiaries. The real property on which the buildings or
other structures currently or previously leased by the Company
or its subsidiaries (the "Company Property") has not been and
is not now used as a landfill or waste disposal site, nor has
any hazardous substance or contaminant been deposited in or
disposed of on, in, under, or at, the Company Property, nor
has there been any release, spill, emission or discharge of
any contaminant at the Company Property which would give rise
to any action or claim by a third party or a Governmental
- 30 -
Entity relating to any violation of or any liability under any
such Environmental Laws or other requirements.
(r) Tax Matters.
(i) The Company and each of its subsidiaries have timely
filed, or caused to be filed, all Tax Returns
required to be filed by them (all of which returns
were correct and complete) and have paid, or caused
to be paid, all Taxes that are due and payable and
the Company has provided adequate accruals in
accordance with United States generally accepted
accounting principles in its most recently published
financial statements for any Taxes for the period
covered by such financial statements that have not
been paid, whether or not shown as being due on any
Tax Returns. The Company and each of its subsidiaries
have made adequate provision in their respective
books and records for any Taxes accruing in respect
of any period subsequent to the period covered by
such financial statements. Since such publication
date, no Tax liability not reflected in such
statements or otherwise provided for has been
assessed, proposed to be assessed, incurred or
accrued other than in the ordinary course of
business. The Company and its subsidiaries have
withheld from all payments made by them, or otherwise
collected, all amounts in respect of Taxes required
to be withheld therefrom or collected by them, and
have remitted same to the applicable Governmental
Entity within the required time periods. Neither the
Company nor any of its subsidiaries has any liability
for the Taxes of any other Person.
(ii) Neither the Company nor any of its subsidiaries has
received any written notification that any issues
have been raised (and are currently pending) by
Revenue Canada, the United States Internal Revenue
Service or any other taxing authority, including,
- 31 -
without limitation, any sales Tax authority, in
connection with any of the Tax Returns referred to
above, and, no waivers of statutes of limitations or
extensions of time have been given or requested with
respect to the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation
or sharing of Taxes with any entity that is not a
direct, wholly-owned subsidiary of the Company. All
Tax liability of the Company and its subsidiaries has
been assessed for all fiscal years up to and
including the fiscal year ended July 31, 1998. There
are no proposed (but unassessed) additional Taxes and
none has been asserted. No Tax liens have been filed
other than for Taxes not yet due and payable.
(iii) No claim has ever been made by an authority in any
jurisdiction where the Company or any of its
subsidiaries does not file Tax Returns that the
Company or any of its subsidiaries is or may be
subject to taxation by that jurisdiction. There are
no liens or encumbrances on any of the assets of the
Company or any of its subsidiaries that arose in
connection with any failure (or alleged failure) to
pay any Tax.
(iv) Each of the Company and its subsidiaries has
disclosed on its U.S. federal income Tax Returns all
positions taken therein that could give rise to a
substantial understatement of U.S. federal income Tax
within the meaning of U.S. Code Section 6662.
(v) There are no outstanding rulings of, or requests for
rulings with, any Tax authority expressly addressed
to either the Company or any of its subsidiaries that
are, or if issued would be, binding upon the Company
or any of its subsidiaries.
- 32 -
(vi) The Disclosure Letter lists all federal, state, local
and foreign income Tax Returns filed with respect to
any of the Company and its subsidiaries for any Tax
year which may be subject to reassessment by any Tax
authority, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that
currently are the subject of an audit. The Company
has delivered to the Purchaser correct and complete
copies of all income Tax Returns, examination
reports, and statements of deficiencies assessed
against or agreed to by any of the Company and its
subsidiaries for any Tax year which may be subject to
reassessment by any Tax authority.
(vii) Neither the Company nor any of its subsidiaries has
made any payments, is obligated to make any payments,
or is a party to any agreement that under certain
circumstances could obligate it to make any payments
that will not be deductible under U.S. Code Sections
162(m) or 280G (or any similar provisions of state,
local or foreign law).
(s) Non-Arms Length Transactions.
(i) None of the Company or its subsidiaries has made any
payment or loan to, or has borrowed any monies from
or is otherwise indebted to, any officer, director,
employee or shareholder of such company or any Person
not dealing with it at arm's length (within the
meaning of the Income Tax Act (Canada)) or any
affiliate of any of the foregoing, except as
disclosed in the Company Financial Statements and
except for usual compensation paid in the ordinary
course of business consistent with past practice.
- 33 -
(ii) Except as disclosed in the Reports and except for
Contracts made solely between the Company and its
subsidiaries and except for contracts of employment,
none of the Company or its subsidiaries is a party to
any Contract with any officer, director, employee or
shareholder of such company or any Person not dealing
with it at arm's length (within the meaning of the
Income Tax Act (Canada)) or any affiliate of any of
the foregoing.
(t) Employees.
(i) The Disclosure Letter lists all individuals employed
by, and all individuals engaged on a contractual
basis to provide employment or sales services to, the
Company or any of its subsidiaries as at the date
hereof (the "Employees"). For each of such Employee,
the Disclosure Letter lists such Employee's employer,
place of employment, date of hire, title or job
classification, salary, commission (if any), bonus
entitlement (if any) and benefits and any
circumstances unique to such Employee. Except for the
Employment Agreements, neither the Company nor any of
its subsidiaries is a party to or bound by any
Contracts relating to employment, severance,
retention, bonus or confidentiality or any consulting
Contracts with any Employee or former employee of the
Company or any of its subsidiaries.
(ii) There exist no employment, consulting, severance or
indemnification agreements or arrangements between
the Company or any of its subsidiaries and any
current or former director or officer of the Company
or any of its subsidiaries pursuant to which the
Company or any such subsidiary has, or may have,
obligations, and there are no employment policies or
plans, including policies regarding incentive
compensation, stock options, severance pay or other
terms and conditions upon which any such director or
officer can be terminated which are binding on the
- 34 -
Company or any of its subsidiaries, and no such
director or officer is entitled to any severance
benefits from the Company or any of its subsidiaries.
(iii) Each of the Company and each of its subsidiaries has
been and is being operated in full compliance with
all laws relating to employees, including employment
standards, occupational health and safety, pay equity
and employment equity. There have been no complaints
under such laws against the Company or any of its
subsidiaries.
(iv) There are no complaints nor, to the knowledge of the
Company, are there any threatened complaints, against
the Company or any of its subsidiaries, before any
employment standards branch or tribunal or human
rights tribunal. Nothing has occurred which might
lead to a complaint against the Company or any of its
subsidiaries, under any human rights legislation or
employment standards legislation. There are no
outstanding decisions or settlements or pending
settlements under employment standards legislation
which place any obligation upon the Company or any of
its subsidiaries to do or refrain from doing any act.
(v) All workers compensation assessments under
legislation in Canada, the United States or any
country or economic region in which either the
Company or any of its subsidiaries, directly or
indirectly, has assets or operations in relation to
the Company and each of its subsidiaries have been
paid or accrued, and neither the Company nor any of
its subsidiaries has been subject to any special or
penalty assessment under such legislation which has
not been paid.
- 35 -
(u) Employee Benefit Plans; ERISA
(i) The Disclosure Letter lists all of the employee
benefit, health, welfare, supplemental employment
benefit, bonus, pension, supplementary executive
retirement, profit sharing, deferred compensation,
stock compensation, stock option or purchase,
retirement, hospitalization insurance, medical,
dental, legal, disability and similar plans or
arrangements or practices applicable to the Employees
or to former employees of the Company or any of its
subsidiaries which are currently maintained or
participated in by the Company or its subsidiaries,
including employee benefit plans within the meaning
set forth in Section 3(3) of the United States
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or other similar arrangements for
the provision of benefits (excluding any
"Multi-employer Plan" within the meaning of Section
3(37) of ERISA or a "Multiple Employer Plan" with the
meaning of Section 413(c) of the United States Income
Tax Code (the "Code")) (the "Company Plans"), and
each loan to an individual non-officer Employee in
excess of $10,000, and each loan to an officer or
director of the Company.
(ii) The Company and its subsidiaries do not maintain or
contribute to or have any obligation or liability to
or with respect to any Company Plans. The Disclosure
Letter lists all Multi-employer Plans to which the
Company or any of its subsidiaries makes
contributions or has any obligation or liability to
make contributions. Neither the Company nor any of
its subsidiaries maintains or has any liability with
respect to any Multiple Employer Plan. Neither the
Company nor any of its subsidiaries has any
obligations to create or contribute to any additional
such plan, program, arrangement or practice or to
amend any such plan, program, arrangement or practice
so as to increase benefits or contributions
- 36 -
thereunder, except as required under the terms of the
Company Plans, or to comply with applicable law.
(iii) The Company hereby represents that (i) there have
been no prohibited transactions within the meaning of
Section 406 or 407 of ERISA or Section 4975 of the
Code with respect to any of the Company Plans that
could result in penalties, Taxes or liabilities, (ii)
except for premiums due, there is no outstanding
liability under Title IV of ERISA with respect to any
of the Company Plans, (iii) neither the Pension
Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate
any of the Company Plans subject to Title IV of ERISA
other than in a "standard termination" described in
Section 4041(b) of ERISA, (iv) none of the Company
Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as
of the last day of the most recent fiscal year of
each of the Company Plans ended prior to the date of
this Agreement, (v) the current value of all
projected benefit obligations under each of the
Company Plans which is subject to Title IV of ERISA
did not, as of its latest valuation date, exceed the
then current value of the assets of such plan
allocable to such benefit liabilities by more than
the amount, if any, disclosed in the Reports as of
July 31, 1998, based upon reasonable actuarial
assumptions currently utilized for such Company Plan,
(vi) each of the Company Plans has been operated and
administered in accordance with applicable laws
during the period of time covered by the applicable
statute of limitations, (vii) each of the Company
Plans which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been
determined by the United States Internal Revenue
Service to be so qualified and such determination has
not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent
- 37 -
amendment thereto or a failure to amend, except that
it may be necessary to make additional amendments
retroactively to maintain the "qualified" status of
such Company Plans, the period for making any such
necessary retroactive amendments has not expired,
(viii) with respect to Multi-employer Plans, neither
the Company nor any of its subsidiaries has made or
suffered a "complete withdrawal" or a "partial
withdrawal", as such terms are respectively defined
in Sections 4203, 4204 and 4205 of ERISA and no event
has occurred or is expected to occur which presents a
risk of a complete or partial withdrawal under said
Sections 4203, 4204 and 4205 of ERISA, (ix) there are
no pending or, to the knowledge of the Company and
its subsidiaries, threatened or anticipated claims
involving any of the Company Plans other than claims
for benefits in the ordinary course, (x) the Company
and its subsidiaries have no current liability under
Title IV or ERISA, and the Company and its
subsidiaries do not reasonably anticipate that any
such liability will be asserted against the Company
or any of its subsidiaries, and (xi) no act, omission
or transaction (individually or in the aggregate) has
occurred with respect to any Company Plan that has
resulted or could result in any direct or indirect
liability to the Company or any of its subsidiaries
under Sections 409 or 502(c)(i) or (l) of ERISA or
Chapter 43 of Subtitle (A) of the Code. None of the
Company Controlled Group Plans has an "accumulated
funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code) or is required to
provide security to a Company Plan pursuant to
Section 401(a)(29) of the Code. Each Company Plan can
be unilaterally terminated by the Company or a
subsidiary of the Company at any time without
liability, other than for amounts previously
reflected in the financial statements (or notes
thereto) included in the Reports.
- 38 -
(iv) All of the Company Plans are registered where
required by, and are in good standing under, all
applicable Laws or other legislative, administrative
or judicial promulgations applicable to the Company
Plans and there are no actions, claims, proceedings
or governmental audits pending (other than routine
claims for benefits) relating to the Company.
(v) All of the Company Plans have been administered and
funded in compliance with their terms and all
applicable Laws or other legislative, administrative
or judicial promulgations applicable to the Company
Plans, and there are no unfunded liabilities in
respect of the Company Plans and all required
contributions thereunder have been made in accordance
with all applicable Laws or other legislative,
administrative or judicial promulgations applicable
to the Company Plans and the terms of such Company
Plans.
(vi) No amendments to any Employee Plan have been promised
and no amendments to any Employee Plan will be made
or promised prior to the completion of the Offer
which affect or pertain to the Employees.
(vii) True and complete copies of all the Company Plans as
amended as of the date hereof and, if available,
current plan summaries and employee booklets in
respect thereof as are applicable to the Employees
and all related documents or, where oral, written
summaries of the terms thereof, are described in the
Disclosure Letter; for the purpose of the foregoing,
"related documents" means all current plan
documentation and amendments relating thereto,
summary plan descriptions and summaries of any
modifications, all related trust agreements, funding
agreements and similar agreements, the most recent
annual reports filed with any Governmental Entity,
and the three most recent actuarial reports, if any,
related thereto.
- 39 -
(viii) There are no agreements or undertakings by the
Company or any of its subsidiaries to provide
post-retirement profit sharing, medical, health, life
insurance or other benefits to Employees or any
former employee of the Company or any of its
subsidiaries.
(ix) The assets of each Employee Plan which is a
registered pension plan are at least equal to the
liabilities, contingent or otherwise of such plan on
a plan termination basis and each such plan is fully
funded on a going concern and solvency basis in
accordance with its terms, applicable actuarial
assumptions and applicable laws.
(v) Labour Matters. Neither the Company nor any of its
subsidiaries is bound by or a party to any collective
bargaining contracts with any trade union, counsel of trade
unions, employee bargaining agent or affiliated bargaining
agent (collectively, "labour representatives"), and neither
the Company nor any of its subsidiaries has conducted any
negotiations with respect to any such future contracts; no
labour representatives hold bargaining rights with respect to
any of the Employees; no labour representatives have applied
to have the Company or any of its subsidiaries declared a
related employer; there are no current or threatened attempts
to organize or establish any trade union or employee
association with respect to the Company or any of its
subsidiaries; there is no strike, dispute, slowdown, lockout,
shutdown, work stoppage, unresolved labour union grievance,
labour arbitration, unfair labour practice, successor rights
or common employer proceeding or other concerted action or
formal grievance existing against the Company or any of its
subsidiaries.
- 40 -
(w) Software
(i) The Disclosure Letter sets forth under the caption
"Owned Software" a true, correct and complete list of
all computer programs (source code or object code)
owned by the Company or any subsidiary of the
Company, including without limitation, any computer
programs in the development or testing phase
(collectively, the "Owned Software"), and the
Disclosure Letter also sets forth under the caption
"Licensed Software" a true, correct and complete list
of all computer programs (source code or object code)
licensed to the Company or any subsidiary of the
Company by another person (other than any
off-the-shelf computer program that is so licensed
under a shrink wrap license and any computer program
that is used by the Company and its subsidiaries
primarily for financial, accounting, administrative
or other non- technical applications and is not
otherwise material to the Company and its
subsidiaries (collectively, the "Excluded Software"))
(collectively, the "Licensed Software" and, together
with the Owned Software, the "Software").
(ii) The Company directly or through its subsidiaries, has
good, marketable and exclusive title to, and the
valid and enforceable power and unqualified right to
sell, license, lease, transfer, use or otherwise
exploit, all existing versions and releases of the
Owned Software and all copyrights thereof, free and
clear of all liens and encumbrances. The Company,
directly or through its subsidiaries, is in actual
possession of the source code and object code for
each computer program included in the Owned Software,
and the Company, directly or through its
subsidiaries, is in possession of all other
documentation (including without limitation all
related engineering specifications, program flow
- 41 -
charts, installation and user manuals, if any)
required for the use of the Owned Software as
currently used in the Company's business or as
offered or represented to the Company's customers or
potential customers. The Company, directly or through
its subsidiaries, is in actual possession of the
object code and user manuals, if any, for each
computer program included in the Licensed Software.
The Software, together with the Excluded Software,
constitutes all of the computer programs reasonably
necessary to conduct the Company's business as now
conducted, and includes all of the computer programs
used in the development, marketing, licensing, sale
or support of the products and the services presently
offered by the Company. No person other than the
Company and its subsidiaries has any right or
interest of any kind or nature in or with respect to
the Owned Software or any portion thereof or any
rights to sell, license, lease, transfer, use or
otherwise exploit the Owned Software or any portion
thereof, except for license rights that have been
granted to customers of the Company in the ordinary
course of business.
(iii) The Disclosure Letter sets forth a true, correct and
complete list, by computer program, of (A) all
persons other than the Company and its subsidiaries
that have been provided with the source code or have
a right to be provided with the source code
(including any such right that may arise after the
occurrence of any specified event or circumstance,
either with or without the giving of notice or
passage of time or both) for any of the Owned
Software, and (B) all source code escrow agreements
relating to any of the Owned Software (setting forth
as to any such escrow agreement the source code
subject thereto and the names of the escrow agent and
all other persons who are actual or potential
beneficiaries of such escrow agreement), and
identifies with specificity all agreements and
arrangements pursuant to which the execution,
- 42 -
delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby
would entitle any third party or parties to receive
possession of the source code for any of the Owned
Software or any related technical documentation. No
person (other than the Company and its subsidiaries
and any person that is a party to a contract that
restricts such person from disclosing any information
concerning such source code) is in possession of, or
has or has had access to, any source code for any
computer program included in the Owned Software.
(iv) There are no defects in any computer program included
in the Software that would adversely affect the
functioning thereof in accordance with any published
specifications therefor. Each computer program
included in the Software is in machine readable form.
The Disclosure Letter sets forth a true, correct and
complete list of any current developments or
maintenance efforts with respect to the Owned
Software, including without limitation the
development of new computer programs, enhancements or
revisions to existing computer programs included in
the Owned Software and software fixes in progress for
any person to whom or to which the Company or a
subsidiary of the Company has sold, licensed, leased,
transferred or otherwise furnished Software or
related products or services.
(v) None of the sale, license, lease, transfer, use,
reproduction, distribution, modification or other
exploitation by the Company, any subsidiary of the
Company or any of their respective successors or
assigns of any version or release of any computer
program included in the Software obligates or will
obligate the Company, any subsidiary of the Company
or any of their respective successors or assigns to
pay any royalty, fee or other compensation to any
other person. All such royalties, fees and
compensation payable by the Company or any subsidiary
- 43 -
of the Company that have become due and payable (as
determined without giving effect to any grace period,
forbearance or extension of time for such payment)
have been fully paid and discharged.
(vi) Neither the Company nor any of its subsidiaries
markets, or has marketed, and none of them has
supported or is obligated to support, any Licensed
Software.
(vii) No agreement, license or other arrangement pertaining
to any of the Software (including without limitation
any development, distribution, marketing, user or
maintenance agreement, license or arrangement) to
which the Company or any subsidiary of the Company is
a party will terminate or become terminable by any
party thereto as a result of the execution, delivery
or performance of this Agreement or the consummation
of the transactions contemplated hereby.
(x) Intellectual Property.
(i) The Disclosure Letter sets forth a true, correct and
complete list (including, to the extent applicable,
registration, application or file numbers) of all
patents, copyrights, trademarks, trade names, service
marks and domain names owned by the Company or any
subsidiary of the Company, and all registrations of
or applications for registration of any of the
foregoing, including any additions thereto or
extensions, continuations, renewals or divisions
thereof (setting forth the registration, issue or
serial number and a description of the same)
(collectively, together with all trade dress, trade
secrets, processes, formulae, designs, know-how and
other intellectual property rights that are so owned,
the "Owned Intellectual Property"). The Purchaser has
- 44 -
heretofore been furnished with true, correct and
complete copies of each registration or application
for registration covering any of the Owned
Intellectual Property which is registered with, or in
respect of which any application for registration has
been filed with, any Governmental Entity.
(ii) The Owned Intellectual Property, together with all
patents, copyrights, trademarks, trade names, service
marks, domain names, trade dress, trade secrets,
processes, formulae, designs, know-how and other
intellectual property rights held by the Company or
any subsidiary of the Company under a license or
similar arrangement (collectively, the "Licensed
Intellectual Property" and, together with the Owned
Intellectual Property, the "Intellectual Property"),
includes all of the intellectual property rights
owned or licensed by the Company and its subsidiaries
that are reasonably necessary to conduct the
Company's business as it is now conducted, and
includes all of the intellectual property rights
owned or licensed by the Company and its subsidiaries
that are used in the development, marketing,
licensing or support of the Software. The Company,
directly or through its subsidiaries, has good,
marketable and exclusive title to, and the valid and
enforceable power and unqualified right to use, the
Owned Intellectual Property free and clear of all
liens and encumbrances and no person or entity other
than the Company and its subsidiaries has any right
or interest of any kind or nature in or with respect
to the Owned Intellectual Property or any portion
thereof or any rights to use, market or exploit the
Owned Intellectual Property or any portion thereof,
except for license rights that have been granted to
customers of the Company in the ordinary course of
business.
(y) No Infringement. Neither the existence nor the sale, license,
lease, transfer, use, reproduction, distribution, modification
or other exploitation by the Company, any subsidiary of the
- 45 -
Company or any of their respective successors or assigns of
any Software or Intellectual Property, as such Software or
Intellectual Property, as the case may be, is or was sold,
licensed, leased, transferred, used or otherwise exploited by
such persons, does or did (i) infringe on any patent,
trademark, copyright or other right of any other Person or
(ii) constitute a misuse or misappropriation of any trade
secret, know-how process, proprietary information or other
right of any other Person. Neither the Company nor any of its
subsidiaries has received any complaint, assertion, threat or
allegation or otherwise has notice of any lawsuit, claim,
demand, proceeding or investigation involving matters of the
type contemplated by the immediately preceding sentence or is
aware of any facts or circumstances that could reasonably be
expected to give rise to any such lawsuit, claim demand
proceeding or investigation. There are no restrictions on the
ability of the Company, any subsidiary of the Company or any
of their respective successors or assigns to commercially
exploit any Software, any Owned Intellectual Property or any
Licensed Intellectual Property that relates to any of the
Software.
(z) Compliance with Laws. The Company and its subsidiaries have
complied with and are not in violation of any applicable Laws,
orders, judgments and decrees. Without limiting the generality
of the foregoing, all securities of the Company (including,
without limitation, all options, rights or other convertible
or exchangeable securities) have been issued in compliance
with all applicable securities Laws and all securities to be
issued upon exercise of any such options, rights and other
convertible or exchangeable securities will be issued in
compliance with all applicable securities Laws.
(aa) Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company
or any of its subsidiaries that has or could reasonably be
expected to have the effect of prohibiting, restricting or
impairing any business practice of the Company or any of its
- 46 -
subsidiaries, any acquisition of property by the Company or
any of its subsidiaries or the conduct of business by the
Company or any of its subsidiaries as currently conducted.
(bb) Representations Complete. None of the representations or
warranties made by the Company herein or in the Disclosure
Letter, when such documents are read together in their
entirety, contains any untrue statement of a fact, or omits to
state any fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances
under which made, not misleading.
(cc) No Defaults. Neither the Company nor any of its subsidiaries
is in default under, and there exists no event, condition or
occurrence which, after notice or lapse of time or both, would
constitute such a default under any contract, agreement,
license or franchise to which it is a party.
(dd) Year 2000 Compliance. None of the systems of the Company
(including, without limitation, telecommunications, automation
and computer related systems of the Company), assets or
technology (including, without limitation, all computer
software (including embedded software) and hardware owned or
licensed by the Company or its subsidiaries or used by any of
them) has or will have any Year 2000 Error (as hereinafter
defined). For the purposes hereof, "Year 2000 Error" means (a)
any failure of computer hardware or software products or
technology properly to record, store, process, calculate or
present calendar dates falling on and after (and if
applicable, spans of time including) December 31, 1999 as a
result of the occurrence, or use of data consisting of, such
dates; (b) any failure of computer hardware or software
products or technology to calculate any information dependent
on or relating to dates on or after December 31, 1999 in the
same manner, and with the same functionality, data integrity
and performance, as such computer hardware or software
- 47 -
products or technology records, stores, processes, calculates
and presents calendar dates on or before December 31, 1999, or
information dependent on or relating to such dates; or (c) any
loss of functionality or performance with respect to the
introduction of records or processing of data containing dates
falling on or after December 31, 1999, and for greater
certainty, Year 2000 Error shall not include any failure in
the performance of any applications created by authorized
licensees of the Company's products.
(ee) Recommendation of the Offer. The Board, after consultation
with its advisers and after receiving the report of the
independent committee of the Board, by a resolution of Board,
has unanimously (i) determined that the Offer is fair to the
Shareholders from a financial point of view and that this
Agreement and the transactions contemplated hereby are in the
best interests of the Company and the Shareholders, (ii)
approved this Agreement and the transactions contemplated
hereby, and (iii) resolved to recommend that the Shareholders
accept and tender their Common Shares to the Offer, subject to
Section 7 of this Agreement and compliance with Section 11 of
this Agreement, if applicable.
(ff) Fairness Opinion. The Company has received an opinion of its
financial advisor, Broadview International, to the effect
that, in the context of the transactions contemplated by this
Agreement, the Offer is fair to the Shareholders from a
financial point of view. Broadview International has
authorized the Company to permit references to such fairness
opinion to be included in the Bid Circular.
(gg) Support of Directors. Each of the directors of the Company has
advised the Company that he or she intends to tender his or
her Common Shares to the Offer.
- 48 -
(hh) Consents and Approval. No governmental or regulatory
authorization, approval, order, consent or filing is required
on the part of any of the Company, the Purchaser or the
Offeror, and no consent, approval or authorization of any
other party is required in connection with the Offer and the
completion of the transactions contemplated hereby.
(ii) Title to Assets. The Company and each of its subsidiaries has
good title to all of its leasehold interests and other
properties as reflected in the most recent balance sheet
included in the Company Financial Statements, except for such
properties and assets that have been disposed of in the
ordinary course of business since the date of such balance
sheet, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever, except (i)
the lien for current Taxes, payments of which are not yet
delinquent, or (ii) such imperfections in title and easements
and encumbrances, if any, as are not substantial in character,
amount or extent and do not detract from the value or
interfere with the present use of the property subject thereto
or affected thereby, or otherwise impair the Company's
business operations (in the manner presently carried on by the
Company). All leases under which the Company leases any real
or personal property are in good standing, valid and effective
in accordance with their respective terms, and there is not,
under any such leases, any existing default or event which
with notice or lapse of time or both could become a default.
(jj) Employment Agreements. Each of the Employment Agreements is in
full force and effect and is enforceable in accordance with
its terms against the Employee which is a party thereto,
except as such enforceability may be limited by principles of
public policy and subject to laws relating to bankruptcy,
insolvency and the relief of debtors and to rules of law
governing specific performance, injunctive relief and other
- 49 -
equitable remedies, and there has been no amendment to or
breach of any such Employment Agreements.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and
warrants to the Company as follows:
(a) Organization. The Purchaser is, and the Offeror will be at the
date of the Offer, a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation.
(b) Authority. The Purchaser has all requisite corporate power and
authority to enter into this Agreement, and the Offeror will
have at the date of the Offer all necessary corporate power
and authority to make the Offer and to carry out the
transactions contemplated hereby and by the Offer. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the
part of the Purchaser, and no other corporate proceedings on
the part of the Purchaser are necessary to authorize this
Agreement. The Agreement has been duly executed and delivered
by the Purchaser and constitutes a legal, valid and binding
agreement enforceable by the Company against the Purchaser in
accordance with its terms, subject, however, to the usual
limitations with respect to enforcement imposed by law in
connection with bankruptcy or similar proceedings and the
availability of equitable remedies.
(c) No Conflict. Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby nor compliance with any of the provisions
hereof will (i) conflict with or result in any breach of any
provision of the constating documents of the Purchaser or the
Offeror, as the case may be, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse
- 50 -
of time or both) a default (or give rise to any right of
termination cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other
instrument or obligation to which the Purchaser or any of its
subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, other than such
violations, breaches or defaults that shall have been waived,
cured or otherwise consented to in accordance with the terms
of such agreements or instruments or (iii) to the best of its
knowledge, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Purchaser or any
of its subsidiaries or any of their properties or assets,
except in the case of (ii) and (iii) for violations, breaches
or defaults that could not reasonably be expected to, in the
aggregate, materially and adversely affect the Purchaser and
its subsidiaries taken as a whole.
(d) Financing. The Offeror has entered into adequate arrangements
sufficient to ensure, upon satisfaction of the conditions of
the Offer, that the required funds are available to effect the
full payment by the Offeror of the cash consideration payable
pursuant to the Offer.
(e) Lock-up Agreements. The Purchaser has executed and delivered
the Lock-up Agreements and has not entered into any other
agreements with Xxxx Xxxxxxxx or Xxxxxxx Xxxxxxx in respect of
the Offer.
7. EXCLUSIVITY.
(a) Neither the Company nor any of its subsidiaries shall, or
shall authorize or permit any of its respective officers,
directors or employees or any investment banker, financial
adviser, lawyer, accountant or other representative retained
by it to, without the Purchaser's prior written consent,
encourage, entertain, solicit or initiate any inquiries,
- 51 -
proposals or offers from, entertain, engage in or participate
in any discussions or negotiations with, or provide any
information to, any person or entity (or group thereof) in
connection with or for the purpose of soliciting a competing
offer or transaction, an alternate proposal, indication of
interest or letter of intent with respect to (i) an offer for
or the acquisition of any shares of the Company, (ii) the sale
of all or any portion of the assets of the Company or its
subsidiaries other than in the ordinary course of business,
(iii) any amalgamation, merger or other business combination
involving the Company or its subsidiaries, (iv) any
reorganization, recapitalization, liquidation or winding-up of
or similar transaction involving the Company or any of its
subsidiaries, or (v) any similar transaction which would
accomplish the objectives to be achieved pursuant to any of
the transactions described in clauses (i), (ii), (iii) or (iv)
above or which would prevent the successful completion of the
Offer (an "Acquisition Proposal"). Without limiting the
generality of the foregoing, the Company shall immediately
cease discussions with any Person other than the Purchaser
regarding an Acquisition Proposal, close any data room which
it has established, cease to provide any access whatsoever to
any third party to any non-public information (whether or not
in writing) of the Company (other than access provided
pursuant to a continuing legal obligation of the Company
entered into prior to the date hereof), terminate any
confidentiality or other agreement with any such third party
under which it has agreed to provide access to such non-public
information and arrange for the return of all non-public
information provided to any such third party, and shall not,
following the execution of this Agreement, enter into any
discussions or confidentiality or other agreement with any
third party under which it agrees to provide access to
non-public information of the Company.
(b) For the purposes hereof, "Superior Proposal" means an
Acquisition Proposal that has not been solicited, initiated,
assisted or encouraged (except as expressly permitted by the
terms of this Agreement) by or on behalf of the Company or by
any adviser to or director, officer, employee, investment
- 52 -
banker, financial adviser, lawyer, accountant or other
representative of the Company or any affiliate or associate
thereof, made to the Company in writing and duly authorized by
the board of directors of the Person making such Acquisition
Proposal (i) to purchase or otherwise acquire all of the
Common Shares, (ii) that provides for a cash consideration per
Common Share that exceeds the cash consideration offered by
the Offeror pursuant to the Offer, (iii) that is made or
proposed to be made by means of a take-over bid, amalgamation
or plan of arrangement and is available to all holders of
Common Shares, (iv) with conditions no more beneficial, taken
as a whole, to the Person making the offer than those
contained in the Offer for the benefit of the Offeror, and (v)
which the Board determines to be more favourable to the
Shareholders from a financial point of view than the Offer and
which it intends to recommend to the Shareholders.
(c) Subject to compliance with the terms of this Agreement,
nothing contained in Section 7(a) shall prevent the Board from
considering, negotiating, approving, recommending to the
Shareholders or entering into an agreement in respect of an
unsolicited bona fide Acquisition Proposal where the Board
determines in good faith, after consultation with its
financial advisor and after receiving written opinion of
outside counsel, that such Acquisition Proposal is a Superior
Proposal and that the taking of such action is required in the
proper exercise of its fiduciary duties. The Company shall
immediately inform the Purchaser orally and in writing of, and
immediately provide the Purchaser with, full details and
complete copies of and any other information regarding any
Superior Proposal, and with all details and information
relating to any approach to the Company or any proposal
(whether or not in writing) made to the Company which could
give rise to a Superior Proposal.
- 53 -
8. FEES AND EXPENSES. The Company and the Purchaser will each pay their
respective fees and expenses (including fees and expenses of legal counsel,
investment bankers, brokers or other representatives or consultants) in
connection with the transactions contemplated hereby.
9. COMMISSIONS. The Company represents and warrants to the Purchaser that it has
not dealt with any broker or finder in connection with this letter or the
transactions contemplated herein and that no person or entity is entitled to any
brokerage or finder's fee, commission or other compensation on account of any
such dealings with the Company, other than Broadview International, which the
Company has agreed to pay an advisory fee pursuant to an agreement dated August
5, 1999, a copy of which was provided to the Purchaser. The Company shall
indemnify, save and hold the Offeror harmless from and against any and all
losses, costs or expenses (including, without limitation, any and all attorneys'
fees related to suits, actions or judgements incident hereto), whether direct,
contingent or consequential, and no matter how arising, in any way related to or
arising from any breach of the representations and warranties contained in this
paragraph.
10. BINDING NATURE. The parties acknowledge that this Agreement represents the
binding and legally enforceable obligations of the parties hereto with respect
of the matters covered hereby. The parties each agree to proceed in good faith
to cause their respective counsel, accountants and personnel to obtain any and
all necessary authorizations, regulatory approvals and consents as may be
required or desirable to consummate the Offer.
11. TERMINATION: BREAK-UP FEE.
(a) This Agreement may be terminated (i) at the option of the
Purchaser, by written notice to the Company, if (A) the Board
fails to make, or modifies, supplements or amends in a manner
determined by the Purchaser to be adverse to the Purchaser or
the Offeror, or withdraws, the recommendation to holders of
Common Shares described in Section 3 (other than as a direct
result of and in direct response to a material breach by the
- 54 -
Purchaser of its obligations hereunder), or accepts or
recommends a Superior Proposal, or (B) the Company is in
breach of or in default under any obligation contained in this
Agreement, any of the Specified Representations and Warranties
is inaccurate or untrue in any respect, or any of the other
representations and warranties of the Company set forth in
this Agreement is inaccurate or untrue in any material
respect, or (C) a Change of Control of the Company shall have
occurred within six months of the date of this Agreement,
provided that the Offer remains outstanding at such time, or
(D) the Company shall have entered into a definitive agreement
providing for, or publicly announced its intention to effect,
any transaction involving a Change of Control of the Company,
or (E) an Acquisition Proposal shall have been made directly
to the holders of the Common Shares or any Person shall have
publicly announced an intention to make an Acquisition
Proposal and after such Acquisition Proposal shall have been
made known, made or announced, the minimum tender condition
set out in section 4(a) of Schedule "A" hereto shall not have
been met; or (ii) at the option of the Company, by written
notice to the Purchaser, if (A) the Company shall have
received a Superior Proposal which the Board proposes to
accept or recommend or is recommending to the Shareholders,
provided that such right of termination may be exercised by
the Company only if after giving written notice to the
Purchaser of the terms of such Superior Proposal, the
Purchaser has not within a period of five business days
following receipt of such notice, agreed to increase the cash
consideration payable pursuant to the Offer to an amount at
least equal to the consideration offered pursuant to the
Superior Proposal and the Company shall not enter into any
agreement in respect of a Superior Proposal until the
provisions of this Section 11(a)(ii)(A) and Section 11(b) have
been complied with or (B) the Purchaser is in breach of or in
default under any material obligation contained in this
Agreement or any of the representations and warranties of the
Purchaser set forth in Section 6 hereof is inaccurate or
untrue in any material respect. Notwithstanding anything to
the contrary in this Section 11(a), the termination of this
- 55 -
Agreement shall not affect any right any party has with
respect to the breach of this Agreement by the other party
prior to the termination of this Agreement.
(b) In the event that (i) this Agreement is terminated by the
Purchaser pursuant to Section 11(a)(i), or this Agreement is
terminated by the Company under Section 11(a)(ii)(A), then the
Company shall immediately, and in the case of a termination by
the Company prior to such termination, pay to the Offeror a
termination fee equal to $4,700,000. Any termination of this
Agreement by the Company shall not be effective unless and
until such termination fee has been paid.
(c) This Agreement may be terminated by the Purchaser or by the
Company if any court of competent jurisdiction or other
governmental body located or having jurisdiction within
Canada, the United States or any country or economic region in
which either the Company or the Purchaser, directly or
indirectly, has material assets or operations, shall have
issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting
the Offer and such order, decree, ruling or other action is or
shall have become final and nonappealable; provided that such
right of termination shall not be available to any party if
such party shall have failed to make reasonable efforts to
prevent or contest the imposition of such injunction or action
and such failure materially contributed to such imposition.
(d) In the case of any termination of this Agreement, this
Agreement shall be void and of no further force and effect
except for this Section 11, provided that nothing herein shall
relieve any party from liability for any breach of this
Agreement, and further provided that if the Company becomes
obligated to and has paid the fees provided for in Section
11(b), the Company shall have no further liability under this
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Agreement. For greater certainty, the termination of this
Agreement shall not affect the Confidentiality Agreement which
shall continue in full force and effect following the
termination hereof.
12. PUBLICATION/DISCLOSURE. Except as may otherwise be required by law
or by regulatory authorities having discretion over such matters, each party
hereto agrees that it will not publish, file with any securities commission or
other regulatory authority, or otherwise make public or make any public
disclosure with respect to this Agreement or the negotiations related to this
Agreement, in each case without the prior approval of the other party. If any
party deems that it is required by law or such regulatory authority to make any
public announcement or release concerning this Agreement, such party agrees to
provide a written copy thereof to the other party in advance of any such
announcement or release and to reasonably consider any suggested modifications,
which will be provided by the other party in a timely matter. The parties
acknowledge that the terms of this Agreement will be summarized in the Bid
Circular and in the Directors' Circular.
13. NOTICES. Any notice required or permitted to be given hereunder shall be
written, and shall be either (i) personally delivered, (ii) sent by a reputable
common carrier guaranteeing next business day delivery, or (iii) sent by
facsimile, to the respective addresses of the parties set forth below, or to
such other place as any party hereto may by notice given as provided herein
designate for receipt of notices hereunder. Any such notice shall be deemed
given and effective upon receipt or refusal of receipt thereof by the primary
party to whom it is to be sent.
If to the Company: Metrowerks Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: President
Xxxxxxxxx: (000) 000-0000
- 57 -
with a required copy to: Tory Xxxx XxxXxxxxxxx & Xxxxxxxxxx
Suite 3000, Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Ontario
M5K 1N2
Attention: Xxxx X. Xxxxxx
Xxxxxxxxx: (000) 000-0000
If to the Purchaser or the Offeror:
Motorola, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Business Development
Facsimile: (000) 000-0000
with a required copy to:
Motorola, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Xxxxxxx
Xxxxxxxxx: (000) 000-0000
14. NOTIFICATION OF CERTAIN MATTERS. Each of the Company and the Purchaser
agrees to give prompt notice to the other of, and to use its reasonable best
efforts to prevent or promptly remedy, (a) the occurrence or failure to occur,
or the impending or threatened occurrence or failure to occur, of any event
which would be likely to cause any of its representations or warranties in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
date of termination of this Agreement and (b) any failure on its part to comply
with or satisfy 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 14 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
- 58 -
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. The parties hereto irrevocably submit to the non-exclusive
jurisdiction of the courts of the Province of Ontario in respect of the
interpretation and enforcement of this Agreement.
16. COUNTERPARTS. This Agreement may be executed by facsimile signature, or
otherwise, in two or more counterparts, all of which taken together will
constitute one binding agreement.
17. ENTIRE AGREEMENT. This Agreement constitutes and comprises the entire
agreement and understanding between the Company and the Purchaser with regard to
the subject matter hereof and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof (other than the Confidentiality Agreement, save and except
for paragraph 1 thereof, which shall continue in full force and effect).
18. BENEFICIARIES. Except as expressly provided herein, no third party shall be
entitled to enforce any provision hereof, and no third party is intended to
benefit from this Agreement.
19. AUTHORSHIP. The parties hereto agree that the terms and language of this
Agreement and all agreements contemplated hereby were the results of
negotiations between the parties and, as a result, there shall be no presumption
that any ambiguity in this Agreement shall be resolved against either party.
20. SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
- 59 -
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
21. ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise, except that the Purchaser may assign all or any of its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of the
Purchaser, provided that no such assignment shall relieve the Purchaser of its
obligations hereunder if such assignee does not perform such obligations.
22. AMENDMENT; WAIVER. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by each of the parties hereto. Any party hereto may (a) extend the time
for the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
- 60 -
If the foregoing accurately expresses the Company's understanding and
agreement with respect to the matters described herein, please execute this
letter below and return it to us.
MOTOROLA, INC.
By:
---------------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Corporate Vice President and Director,
Strategic Management and Planning,
Semiconductor Products Sector
Accepted and Agreed as of August 19, 1999.
METROWERKS INC.
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
Title: Chairman & CEO
SCHEDULE A
----------
TERMS OF THE OFFER
------------------
1. GENERAL TERMS. The Offer shall be made to purchase all of the Common Shares
by way of a take-over bid circular prepared in compliance with the Securities
Act (Ontario) and other applicable provincial securities laws and, if necessary,
in accordance with the applicable laws of the United States. The Offer shall be
made on the terms herein set forth and upon such other terms and conditions as
are required by law and shall be open for an initial period of 21 calendar days
(determined in accordance with the minimum period for a formal offer under the
Securities Act (Ontario)) or such longer period as may be permitted in the
circumstances prescribed in section 2 below.
The Purchaser shall have the right to vary the terms of the Offer to
effect one or more of the following:
(a) increase the consideration offered for the Common Shares;
(b) extend the period during which Common Shares may be deposited
to the Offer;
(c) waive any condition of the Offer or reduce the minimum deposit
condition contained in paragraph 4(a) hereof; and
(d) comply with applicable securities laws.
2. MAXIMUM OFFER PERIOD. The Offeror shall no later than 60 calendar days from
the date of the Offer either:
(a) abandon the Offer and return all Common Shares deposited
thereunder; or
(b) waive any conditions that have not been satisfied, if any, and
take up and pay for all Common Shares deposited under the
Offer.
- 2 -
The Offer may be extended by the Offeror beyond the date which is 60
calendar days from the date of the Offer, from time-to-time, in the event that
the Offeror first takes up and pays for all deposited Common Shares.
3. PRICE OF THE OFFER. The Offeror shall pay, for each whole Common Share
validly deposited under the Offer and not withdrawn, $6.25 in cash.
4. CONDITIONS OF THE OFFER. The Offer shall not be subject to any conditions
other than the following:
(a) there shall have been validly deposited and not withdrawn
pursuant to the Offer a number of Common Shares which
constitutes at least 77% of the Common Shares outstanding
(calculated on a fully diluted basis but excluding Common
Shares issuable pursuant to the Option Agreement) (the
"minimum share tender condition");
(b) all regulatory approvals which are necessary in connection
with the Offer shall have been obtained, and no governmental
authority or other person shall have opposed or threatened to
oppose the purchase of the Common Shares (including any
application for interim relief);
(c) the Offeror shall have obtained such orders or exemptive
relief from the appropriate governmental or regulatory
authorities in each applicable jurisdiction as are necessary
in connection with completing the Offer and the transactions
contemplated thereby;
(d) there shall not exist any prohibition at law against the
Offeror making the Offer or taking up and paying for Common
Shares deposited under the Offer, or completing any subsequent
compulsory acquisition or going private transaction;
(e) (i) no act, action, suit or proceeding shall
have been threatened or taken before or by
any domestic or foreign court, tribunal or
governmental agency or other regulatory
authority or administrative agency or
commission or before or by
- 3 -
any elected or appointed public official or
private person, or by any other person, in
Canada or elsewhere, whether or not having
the force of law; and
(ii) no law, regulation, policy, directive or
order, whether or not having the force of
law, shall have been proposed, enacted,
promulgated or applied,
to cease trade, enjoin, prohibit or impose material
limitations or conditions on the purchase by or the sale to
the Offeror of the Common Shares or the rights of the Offeror
to own or exercise full rights of ownership of Common Shares
or which, if the Offer were consummated, could materially and
adversely affect the Company and/or its subsidiaries (taken as
a whole), or the Offeror's ability subsequently to effect a
going private transaction, or which has had or could
reasonably be expected to have a Material Adverse Effect;
(f) no law, regulation, policy, directive or order, whether or not
having the force of law, shall have been proposed, enacted,
promulgated or applied, which has had or could reasonably be
expected to have a Material Adverse Effect;
(g) there shall not have occurred (or if there shall have occurred
prior to the date hereof, there shall not have been generally
disclosed or the Purchaser shall not otherwise discover, if
not previously disclosed to the Purchaser in writing prior to
the commencement of the Offer) any condition, event or
development which is, or could reasonably be expected to
result in or represent, a Material Adverse Effect;
(h) no Employee who has signed an Employment Agreement shall have
taken any action following the execution of such agreement
which would have constituted a breach of such agreement if it
had been in effect at the date such action was taken, and the
covenants and agreements contained in each of the Lock-up
Agreements and the Option Agreement, to be performed or
complied with by a party other than the Purchaser or the
Offeror, shall have been performed or complied with; and
- 4 -
(i) each of the Specified Representations and Warranties shall be
true and correct in all respects, each of the other
representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material
respects, and the Company shall have performed in all respects
any covenant or complied in all respects with any agreement to
be performed by it under this Agreement.
The foregoing conditions are for the exclusive benefit of the Offeror and may be
asserted by the Offeror regardless of the circumstances (including any action or
inaction by the Offeror) giving rise to such assertion or may be waived by the
Offeror in whole or in part at any time and from time to time, in its sole
discretion and shall be exclusive of any other right which the Offeror may have
under the Offer. The failure by the Offeror at any time to exercise or assert
any of the foregoing rights shall not be deemed to constitute a waiver of any
such right, the waiver of any such right with respect to particular facts or
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances and each such right shall be deemed an on-going right which
may be asserted at any time and from time to time by the Offeror. Any
determination by the Offeror concerning the foregoing conditions shall be final
and binding upon all parties.
SCHEDULE B
DEFINITIONS
"CHANGE OF CONTROL" means, with respect to a party, the occurrence of any of the
following events: (i) an acquisition (whether directly from such party or
otherwise) of any voting securities of such party (the "VOTING SECURITIES") by
any "PERSON" (as the term is used for purposes of Section 13(d) or 14(d) of the
Exchange Act), immediately after which such Person has or would have "BENEFICIAL
OWNERSHIP" (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of thirty-three and one third percent (33 1/3%) or more of the combined voting
power of such party's then outstanding Voting Securities; (ii) the individuals
who, as of the date hereof, are members of the board of directors of such party
(the "INCUMBENT BOARD"), cease for any reason to constitute at least
seventy-five percent (75%) of the board of directors; provided, however, a
"Change of Control" shall not be deemed to occur if any of such individuals
voluntarily failed to stand for re-election or resign or if the aggregate number
of directors is reduced so long as, after giving effect to such failure to stand
for re-election, resignation or reduction, at least seventy-five percent (75%)
of the remaining directors are members of the Incumbent Board; provided, further
however, that if the election, or nomination for election, by such party's
stockholders of any new director was approved by a vote of at least seventy-five
percent (75%) of the Incumbent Board, such new director shall, for purposes of
this Agreement be considered a member of the Incumbent Board; provided, further,
however, that an individual shall not be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened "ELECTION CONTEST" (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the board of directors (a "PROXY
CONTEST") including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; (iii) the consummation of , or agreement to
consummate: (A) a merger, consolidation, share exchange or reorganization of
such party in which the stockholders of such party, as a group, cease to hold a
majority equity interest in the surviving entity; (B) a liquidation or
dissolution of or appointment of a receiver, rehabilitation, conservator or
similar person for, such party; or (C) the sale or other disposition of all or
substantially all of the assets of such party to any Person (other than a
transfer to a subsidiary); or (iv) any other change in "control" of such party.
For purposes of the immediately preceding clause, the term "control" shall have
- 2 -
the meaning ascribed thereto pursuant to Rule 405 of the rules and regulations
promulgated pursuant to the Securities Act of 1933, as amended.
"CONTRACT" means any pending and/or executory contract, agreement, arrangement
or understanding to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their respective
assets is bound or affected;
"DISCLOSURE LETTER" means that certain letter dated August 19, 1999 and
delivered by the Purchaser to the Company concurrently with the execution of
this Agreement;
"GOVERNMENTAL ENTITY" means any (a) multinational, federal, provincial, state,
regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau or agency, domestic or foreign, (b) any subdivision, agent, commission,
board, or authority of any of the foregoing or (c) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing authority under
or for the account of any of
"LAWS" means all statutes, regulations, statutory rules, principles of law,
orders, published policies and guidelines, and terms and conditions of any grant
of approval, permission, authority or license of any court, Governmental Entity,
statutory body (including The Toronto Stock Exchange or the Montreal Exchange)
or self-regulatory authority, and the term "applicable" with respect to such
Laws and in the context that refers to one or more Persons, means that such Laws
apply to such Person or Persons or its or their business, undertaking, property
or securities and emanate from a Person having jurisdiction over the Person or
Persons or its or their business, undertaking, property or securities;
"MATERIAL ADVERSE EFFECT" means any matter or action that has an effect that is,
or would reasonably be expected to be, material and adverse to the business,
assets, liabilities, financial condition, results of operations or prospects of
the Company and its subsidiaries taken as a whole, other than any change,
effect, event or occurrence relating to (i) the Canadian or United States
economy in general, or (ii) as disclosed in the Disclosure Letter; and for
greater certainty, shall not include any change, effect, event or occurrence
resulting from the announcement of the transactions contemplated in this
Agreement;
- 3 -
"MATERIAL CONTRACT" means any Contract which:
(a) imposes a purchase right or right of first refusal or security
interest in any asset of the Company having a value in excess
of $100,000;
(b) is a warranty or guaranty creating an obligation, contingent
or otherwise, in an amount in excess of $100,000 in the
aggregate given to any customer or other party by the Company
or any of the Company's affiliates with respect to any of the
Company's products or to Company's or any of the Company's
affiliates' performance or the performance of any employees of
the Company or any subsidiary of the Company (or series of
related warranties or guaranties creating such an obligation);
(c) is a contract under which the Company or any of the Company's
affiliates has acquired or licensed any real or personal
property or assets of a third party or under which the Company
or any of its affiliates otherwise uses any properties or
assets of another party or which are jointly owned by the
Company or any of its affiliates with any other party or
parties, in each case involving property or assets having a
value of more than $100,000, or aggregate payments of more
than $100,000;
(d) is an agreement with an original equipment manufacturer;
(e) is a distribution, agency or sales representation agreement;
(f) any other contract which provides for aggregate annual
payments to or from the Company or its subsidiaries having an
aggregate value of $100,000 or more or having a term of more
than one year;
(g) requires aggregate annual future payments or expenditures in
excess of $100,000 or having a term of more than one year that
relates to cleanup, abatement or other actions in connection
with environmental liabilities;
- 4 -
(h) a contract containing a covenant limiting the freedom of the
Company to engage in any line of business similar to the
business currently conducted by it or to compete with any
person or entity in a similar business;
(i) an employment, severance or consulting contract with an
employee or former employee of the Company or any of its
subsidiaries that is not terminable at will by the Company or
its subsidiaries;
(j) a collective bargaining agreement relating to the Employees;
(k) a contract for capital expenditures or the acquisition or
construction of fixed assets which requires payments in excess
of $100,000;
(l) a licence to use computer software (other than off-the-shelf
software marketed to the public generally) used or held for
use by the Company or its subsidiaries and involving aggregate
payments of more than $100,000;
(m) a contract to which the Company or any of its subsidiaries is
a party, a breach or default under which could reasonably be
expected to have a Material Adverse Effect; or
(n) that is otherwise material to the business and operations of
the Company and its subsidiaries.
"PERSON" includes any individual, firm, partnership, joint venture, venture
capital fund, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity, syndicate or
other entity, whether or not having legal status;
"SPECIFIED REPRESENTATIONS AND WARRANTIES" means the representations and
warranties of the Company set forth in Sections 5(a)-(h) and Sections 5(ee)-(gg)
of this Agreement;
"SUBSIDIARY" has the meaning ascribed thereto in the Securities Act (Ontario);
- 5 -
"TAX" and "TAXES" means, with respect to any entity, (A) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all capital taxes, gross receipts taxes, environmental taxes, sales
taxes, use taxes, ad valorem taxes, value added taxes, transfer taxes, franchise
taxes, license taxes, withholding taxes, payroll taxes, employment taxes, Canada
or Quebec Pension Plan premiums, excise, severance, social security premiums,
workers' compensation premiums, unemployment insurance or compensation premiums,
stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits
taxes, alternative or add-on minimum taxes, goods and services tax, customs
duties or other taxes, fees, imports, assessments or charges of any kind
whatsoever, together with any interest and any penalties or additional amounts
imposed by any taxing authority (domestic or foreign) on such entity, and any
interest, penalties, additional taxes and additions to tax imposed with respect
to the foregoing, and (B) any liability for the payment of any amount of the
type described in the immediately preceding clause (A) by contract, as a result
of being a "transferee" (within the meaning of section 6901 of the United States
Internal Revenue Code or any other applicable Laws) of another entity or a
member of an affiliated or combined group, or otherwise; and
"TAX RETURNS" means all returns, declarations, reports, information returns and
statements required to be filed with any taxing authority relating to Taxes
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return and declaration of
estimated Tax.
