1
EXECUTION COPY
SHARE PURCHASE AGREEMENT
BY AND AMONG
X.X. XXXXXXX & COMPANY
X.X. XXXXXXX NOVA SCOTIA COMPANY,
NUMETRIX LIMITED,
NUMETRIX HOLDINGS B.V.,
NUMETRIX HOLDINGS, S.A.,
THE ST. MICHAEL'S TRUST CORPORATION,
AS TRUSTEE OF THE SCHENGILI TRUST
AND
XXXXX X. XXXXXXXXX
DATED AS OF MAY 17, 1999
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF PURCHASED SHARES..............................2
1.1 Purchase and Sale of Purchased Shares.............................2
1.2 Closing...........................................................2
1.3 Consideration and Payment.........................................3
1.4 Surrender of Certificates.........................................5
1.5 Taking of Necessary Action; Further Action........................5
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..............6
2.1 Organization of the Company.......................................6
2.2 Company Share Capital.............................................6
2.3 Subsidiaries......................................................7
2.4 Authority.........................................................7
2.5 Company Financial Statements......................................8
2.6 No Undisclosed Liabilities........................................9
2.7 No Changes........................................................9
2.8 Tax and Other Returns and Reports................................11
2.9 Restrictions on Business Activities..............................14
2.10 Title to Properties; Absence of Liens and Encumbrances...........14
2.11 Intellectual Property............................................15
2.12 Agreements, Contracts and Commitments............................19
2.13 Interested Party Transactions....................................20
2.14 Compliance with Laws.............................................21
2.15 Litigation.......................................................21
2.16 Insurance........................................................21
2.17 Minute Books.....................................................22
2.18 Environmental Matters............................................22
2.19 Brokers' and Finders' Fees; Third Party Expenses.................23
2.20 Employee Matters and Benefit Plans...............................23
2.21 Employees........................................................25
2.22 Governmental Authorizations and Licenses.........................25
2.23 Competition Act..................................................26
2.24 Employee Accruals................................................26
2.25 Major Customers..................................................26
2.26 Product Warranties...............................................26
2.27 Representations Complete.........................................26
ARTICLE III OTHER REPRESENTATIONS OF THE BENEFICIAL HOLDERS.................27
3.1 Organization; Authority..........................................27
3.2 Valid Title......................................................28
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3.3 Transfer of Valid Title..........................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER...............28
4.1 Organization, Standing and Power.................................28
4.2 Authority........................................................28
4.3 SEC Documents; Parent Financial Statements.......................29
4.4 Litigation.......................................................29
ARTICLE V CONDUCT PRIOR TO THE CLOSING......................................30
5.1 Conduct of Business of the Company...............................30
5.2 No Solicitation..................................................32
5.3 No Encumbrance................................ ..................33
ARTICLE VI ADDITIONAL AGREEMENTS............................................33
6.1 Other Securities.................................................33
6.2 Access to Information............................................34
6.3 Confidentiality..................................................34
6.4 Expenses.........................................................34
6.5 Public Disclosure................................................35
6.6 Consents.........................................................35
6.7 Legal Requirements...............................................35
6.8 Notification of Certain Matters..................................36
6.9 Certain Benefit Plans............................................36
6.10 Additional Documents and Further Assurances......................36
6.11 Section 116 Certificate..........................................36
6.12 Non-Competition Agreements.......................................36
ARTICLE VII CONDITIONS TO THE PURCHASE......................................37
7.1 Conditions to Obligations of Each Party to Effect the Purchase...37
7.2 Additional Conditions to Obligations of the Beneficial Holders...37
7.3 Additional Conditions to the Obligations of Parent and Buyer.....38
ARTICLE VIII INDEMNIFICATION; ESCROW
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................40
8.1 Indemnification..................................................40
8.2 Escrow Arrangements..............................................41
8.3 Deductible.......................................................42
8.4 Survival of Representations, Warranties and Agreements;
Expiration of Indemnification Obligations.....................43
8.5 Exclusive Remedy.................................................43
8.6 No Company Liability.............................................43
8.7 Consent Required.................................................43
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ARTICLE IX AMALGAMATION.....................................................44
9.1 Shareholder Meeting..............................................44
9.2 Compliance with Laws.............................................45
9.3 Termination of Obligation........................................45
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.................................46
10.1 Termination......................................................46
10.2 Effect of Termination............................................47
10.3 Amendment........................................................47
10.4 Extension; Waiver................................................47
ARTICLE XI GENERAL PROVISIONS...............................................47
11.1 Notices..........................................................47
11.2 Interpretation...................................................49
11.3 Counterparts.....................................................49
11.4 Entire Agreement; Assignment.....................................49
11.5 Severability.....................................................50
11.6 Other Remedies...................................................50
11.7 Governing Law....................................................50
11.8 Arbitration......................................................50
11.9 Rules of Construction............................................54
11.10 Specific Performance.............................................54
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TABLE OF CONTENTS
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SHARE PURCHASE AGREEMENT
This SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of May 17, 1999 by and among X.X. Xxxxxxx & Company, a Delaware
corporation ("Parent"), X.X. Xxxxxxx Nova Scotia Company, a Nova Scotia company
and an indirect wholly owned subsidiary of Parent ("Buyer"), St. Michael's Trust
Corporation, a Barbados corporation (the "Trustee"), as trustee of the Schengili
Trust (the "Trust"), for and on behalf of the Trust, Numetrix Holdings, S.A., a
Luxembourg corporation wholly owned by the Trust ("Luxco"), Numetrix Holdings
B.V., a Netherlands corporation and a wholly owned subsidiary of Luxco (the
"Direct Holder"), Numetrix Limited, an Ontario company (the "Company"), and
Xxxxx X. Xxxxxxxxx, an individual ("JS," and, collectively with Luxco, the
Direct Holder and the Trustee, the "Beneficial Holders").
RECITALS
A. The Boards of Directors of each of Parent, Buyer, the Direct Holder,
Luxco and the Company believe it is in the best interests of each company and
their respective shareholders that Buyer acquire the Company (the "Acquisition")
through the purchase by Buyer of all Common Shares and Preferred Shares (each as
defined herein) in the share capital of the Company.
B. The Direct Holder is the owner of and has good and valid title, free
and clear of any legal or equitable encumbrances, to 40,000,000 Common Shares
(the "Purchased Common Shares") and JS is the owner of and has good and valid
title, free and clear of any legal or equitable encumbrances, to 600,000
Preferred Shares (the "Purchased Preferred Shares," and collectively with the
Purchased Common Shares, the "Purchased Shares").
C. In connection with the Acquisition, (i) the Direct Holder desires to
sell to Buyer, and Buyer wishes to purchase from the Direct Holder, all of the
Purchased Common Shares, and (ii) JS desires to sell to Buyer, and Buyer wishes
to purchase from JS, all of the Purchased Preferred Shares (such purchases,
collectively, the "Purchase"), subject to the terms and conditions herein.
D. Parent, Buyer, the Beneficial Holders, the Trustee and the Company
desire to make certain representations and warranties and other agreements in
connection with the Purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
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ARTICLE I
ARTICLE I PURCHASE AND SALE OF PURCHASED SHARES
I.1 Purchase and Sale of Purchased Shares.
(a) Purchased Common Shares. At the Closing (as defined in
Section 1.2 hereof), and subject to and upon the terms and conditions of this
Agreement, the Direct Holder will sell, transfer, convey, assign and deliver to
Buyer and Buyer will purchase and acquire from the Direct Holder, good and valid
title to the Purchased Common Shares, free and clear of any liens, claims,
charges, restrictions, pledges, security interests, options, rights of any
nature or other legal or equitable encumbrances. At the Closing, the Direct
Holder will deliver to Buyer duly executed instruments of transfer and
assignment of the Purchased Common Shares sufficient to vest in Buyer the
interests in the Purchased Common Shares in accordance with the terms of this
Agreement.
(b) Purchased Preferred Shares. At the Closing, and subject to
and upon the terms and conditions of this Agreement, JS will sell, transfer,
convey, assign and deliver to Buyer and Buyer will purchase and acquire from JS,
good and valid title to the Purchased Preferred Shares, free and clear of any
liens, claims, charges, restrictions, pledges, security interests, options,
rights of any nature or other legal or equitable encumbrances. At the Closing,
JS will deliver to Buyer duly executed instruments of transfer and assignment of
the Purchased Preferred Shares sufficient to vest in Buyer the interests in the
Purchased Preferred Shares in accordance with the terms of this Agreement.
(c) Separate Obligations. The obligations of the Direct Holder
and JS to sell, respectively, the Purchased Common Shares and the Purchased
Preferred Shares to Buyer are separate obligations and not joint and several
obligations.
I.2 Closing. Unless this Agreement is earlier terminated
pursuant to Section 10.1 hereof, the closing of the purchase and sale of the
Purchased Shares (the "Closing") will take place as promptly as practicable, but
no later than five (5) business days, following satisfaction or waiver of the
conditions set forth in Article VII hereof, (but in no event sooner than June 1,
1999, if the Section 116 Certificate (as defined in Section 1.3(c) has not been
obtained) at the offices of Xxxx & Berlis in the City of Xxxxxxx, Xxxxxxx,
unless another place or time is agreed to by Parent and the Direct Holder. The
date upon which the Closing actually occurs is herein referred to as the
"Closing Date."
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I.3 Consideration and Payment.
(a) Definitions.
(i) Aggregate Share Number. The "Aggregate Share Number"
shall mean the aggregate number of Common Shares (as defined in Section 2.2(a))
outstanding immediately prior to the Closing.
(ii) Company Purchase Price. The "Company Purchase Price"
shall mean $83,000,000, less:
(A) any amounts paid by the Company or Buyer at or
prior to the Closing, or to be paid by the Company after the Closing pursuant to
signed agreements entered into prior to the Closing, to the holders of
Convertible Securities (as defined in Section 2.2(b)) in order to obtain the
cancellation of such Convertible Securities as contemplated by Section 6.1
hereof (net of any amounts paid to the Company at or prior to the Closing upon
exercise of Company Options); provided that any payment by Buyer prior to the
Closing (or by the Company after the Closing pursuant to binding agreements
signed prior to the Closing) shall be subject to the consent of the Direct
Holder, which consent shall not unreasonably be withheld; and
(B) the amount by which the sum of (I) all Third Party
Expenses (as defined in Section 6.4) incurred by the Company in connection with
the transactions contemplated hereby (subject to adjustment as provided in
Section 6.4) plus (II) the aggregate of all alternate transaction fees payable
(or which at any point in the future may become payable) by the Company pursuant
to the letter agreement among the Company and HSBC Xxxxx Xxxxx Canada Inc.,
dated as of January 12, 1999 (the "HSBC Engagement Letter") exceeds $500,000.
(b) Purchase Price.
(i) Purchased Preferred Shares. The purchase price to
be paid by Buyer with respect to the Purchased Preferred Shares at the Closing
(the "JS Purchase Price") shall be equal to CDN $4,687,500, which payment shall
be made in US dollars by wire transfer of immediately available funds to an
account or accounts designated by JS or by the delivery to JS of a certified
check or bank draft payable in lawful money of the United States in accordance
with a direction to the Buyer executed by JS.
(ii) Purchased Common Shares. The purchase price to be
paid by Buyer with respect to the Purchased Common Shares at the Closing (the
"Direct Holder Purchase Price") shall be equal to (x) the Company Purchase Price
less the JS Purchase Price, multiplied by (y) a fraction, the numerator of which
shall be the number of Purchased Common Shares, and the denominator of which
shall be the Aggregate Share Number. The Direct Holder Purchase Price shall be
payable as follows:
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(A) by delivery to the Escrow Agent (as defined in
Section 8.2) of an amount equal to ten percent (10%) of the Company Purchase
Price (the "Primary Escrow Amount"), which amount shall be held by the Escrow
Agent subject to the Escrow Agreement (as defined in Section 8.2);
(B) by delivery to the Escrow Agent of an amount equal
to the product of (x) the aggregate number of Common Shares issuable upon
exercise or conversion of all Convertible Securities outstanding as of the
Closing (but excluding from such number all Common Shares underlying Convertible
Securities outstanding as of the Closing for which an adjustment has been made
to the Company Purchase Price under Section 1.3(a)(ii)(A)) and (y) $1.80 (the
"Secondary Escrow Amount"), which amount shall be held by the Escrow Agent
subject to the Escrow Agreement; and
(C) by delivery to the Tertiary Escrow Agent (as
defined in Section 8.2) of an amount equal to forty percent (40%) of the Company
Purchase Price (the "Tertiary Escrow Amount," and, together with the Primary
Escrow Amount and the Secondary Escrow Amount, the "Aggregate Escrow Amount"),
which amount shall be held by the Tertiary Escrow Agent subject to the Tertiary
Escrow Agreement (as defined in Section 8.2);
(D) subject to Section 1.3 (c) below, by payment to
the Direct Holder of an amount equal to the difference between the Direct Holder
Purchase Price and the Aggregate Escrow Amount, which payment shall be made by
wire transfer of immediately available funds to an account or accounts
designated by the Direct Holder or by the delivery to the Direct Holder of a
certified check or bank draft made payable in lawful money of the United States
in accordance with a direction to the Buyer executed by the Direct Holder.
(iii) Per Share Purchase Price. As used in this Agreement,
the "Per Share Purchase Price" shall mean the quotient obtained by dividing (x)
the Company Purchase Price less the JS Purchase Price, by (y) the Aggregate
Share Number.
(c) Section 116 Certificate.
(i) If a certificate pursuant to subsection 116(2) of the
Income Tax Act (Canada) (the "Section 116 Certificate") is not delivered by the
Direct Holder to the Buyer at or before the Closing with a certificate limit not
less than the Direct Holder Purchase Price, Buyer shall be entitled to withhold
from the Direct Holder Purchase Price an amount equal to 40% of the Company
Purchase Price (the "Withheld Amount"), such amount to be held in escrow by Xxxx
& Berlis pursuant to an escrow agreement to be agreed upon by the parties prior
to the Closing (which agreement shall provide that the Withheld Amount shall be
placed in an interest-bearing account), pending release in accordance with
Section 1.3(c)(ii) or remission to the Receiver General of Canada in accordance
with Section 1.3(c)(iii).
(ii) If the Direct Holder delivers to Buyer prior to the
25th day after the end of the month in which the Closing occurs a certificate
issued by the Canadian Minister of National
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Revenue with a certificate limit not less than the Direct Holder Purchase Price
under subsection 116(2) or (4) of the Income Tax Act (Canada), within two
business days thereof, Buyer shall direct Xxxx & Berlis to pay the Withheld
Amount plus any interest on the Withheld Amount (less the amount of any
withholding tax on such interest), if any, to the Direct Holder by wire transfer
of immediately available funds to an account or accounts to be designated by the
Direct Holder, or certified check or bank draft made payable in lawful money of
the United States in accordance with a direction to the Buyer executed by the
Direct Holder.
(iii) If the Direct Holder does not deliver to Buyer the
certificate described in clause (i) or (ii) above, Xxxx & Berlis, on behalf of
the Buyer, shall on or before the 30th day after the end of the month in which
the Closing occurs (A) remit to the Receiver General of Canada the amount
required to be remitted pursuant to section 116 of the Income Tax Act (Canada)
and the amount so remitted shall be credited to Buyer as a payment to the Direct
Holder on account of the Direct Holder Purchase Price, and (B) within two
business days thereof pay the remaining portion of the Withheld Amount plus any
interest on the Withheld Amount (less the amount of any withholding tax on such
interest), if any, to the Direct Holder by wire transfer of immediately
available funds to an account or accounts to be designated by the Direct Holder,
or certified check or bank draft made payable in lawful money of the United
States in accordance with a direction to the Buyer executed by the Direct
Holder.
I.4 Surrender of Certificates.
(a) Surrender of Certificates. The Direct Holder and JS shall
each deliver to Buyer at the Closing all certificates, duly endorsed for
transfer, representing all of the Purchased Shares (the "Certificates").
(b) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing the Purchased Shares shall have been lost, stolen or
destroyed, the Direct Holder and JS, as applicable, shall deliver to the Buyer
an affidavit of that fact and a bond in such sum as Buyer may reasonably request
as indemnity against any claim that may be made against Buyer with respect to
the Certificates alleged to have been lost, stolen or destroyed.
I.5 Taking of Necessary Action; Further Action. If, at any time after
the Closing, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Buyer with full right, title and
possession to the Purchased Shares purchased hereunder, each Beneficial Holder
agrees to take promptly all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Except as disclosed in a document dated as of the date hereof
referring specifically to the representations, warranties or covenants in this
Agreement which reasonably identifies the basis for an exception to a
representation, warranty or covenant in this Agreement and which is delivered by
the Company and the Beneficial Holders to Parent and Buyer prior to the
execution of this Agreement (the "Company Schedules"), the Company and each
Beneficial Holder other than JS jointly and severally represent and warrant, and
JS severally represents and warrants, to Parent and Buyer as set forth below and
acknowledge that Parent and Buyer are relying on such representations and
warranties in connection with Buyer's purchase of the Purchased Shares and the
Other Common Shares (as defined in Section 2.2(c)).
II.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of Ontario. Each of the Company's subsidiaries is duly organized, validly
existing and in good standing in the jurisdiction of its organization. The
Company and each of its subsidiaries has the corporate power to own its
properties and to carry on its business as now being conducted. The Company and
each of its subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have, or would reasonably be expected to have, a material
adverse effect on the business, financial condition, results of operations,
assets (including intangible assets), liabilities or prospects of the Company
and its subsidiaries, taken as a whole (hereinafter referred to as a "Material
Adverse Effect"). The Company and each of its subsidiaries has delivered a true
and correct copy of its Articles of Incorporation and Bylaws (or equivalent
organizational documents), each as amended to date, to Parent and Buyer.
II.2 Company Share Capital
(a) The authorized share capital of the Company consists of an
unlimited number of common shares ("Common Shares"), of which 42,000,000 shares
are issued and outstanding as of the date hereof, and 600,000 of 6%
non-cumulative redeemable preferred shares ("Preferred Shares"), of which
600,000 shares are issued and outstanding. All of the Preferred Shares are held
of record by JS. The Common Shares are held of record by the persons, with the
addresses of record and in the amounts, set forth on Schedule 2.2(a). All
outstanding Common Shares and Preferred Shares are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of the Company or any agreement to which the Company is a party or by
which it is bound.
(b) The Company has reserved 6,000,000 Common Shares for
issuance to employees and consultants pursuant to the 1997 Share Option Plan
(the "1997 Plan"), of which 4,643,400 shares are subject to outstanding,
unexercised options; 1,356,600 shares remain available for future grant; and no
shares have been issued pursuant to the exercise of options. The Company has
reserved 1,509,600 Common Shares for issuance to employees and consultants
pursuant to the 1996 Share Option Plan (the "1996 Plan," and, together with the
1997 Plan, the "Share Option Plans"), of which 1,509,600 shares are subject to
outstanding, unexercised options; no shares remain available for future grant;
and no shares have been issued pursuant to the exercise of options. The Company
has issued a warrant (the "Warrant") to HSBC Capital Canada Inc. ("HSBC"). The
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Warrant entitles the holder thereof to purchase up to 1,200,000 Common Shares.
The Company has provided Parent and Buyer with a true and correct copy of the
Warrant. Schedule 2.2(b) sets forth, for each such outstanding option under the
Share Option Plans (a "Company Option") and the Warrant, the name of the
registered holder of such Company Option or Warrant, the number of Common Shares
subject to such Company Option or Warrant, the exercise price of such Company
Option or Warrant and the vesting schedule for the Warrant. The Company Options
and the Warrant set forth in Schedule 2.2(b) are referred to in this Agreement
as the "Convertible Securities." Except for the Convertible Securities set forth
in Schedule 2.2(b), there are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound obligating the Company or any of its subsidiaries to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares in the share capital of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement.
(c) The Common Shares set forth in Schedule 2.2(a), excluding
the Common Shares held by the Direct Holder, are referred to herein as the
"Other Common Shares," and, together with the Convertible Securities set forth
in Schedule 2.2(b), are collectively referred to herein as the "Other
Securities." The Purchased Shares and the Other Securities, when taken together,
represent all of the issued and outstanding shares in the share capital of the
Company, and all options, warrants, calls, rights, commitments or agreements of
any character, written or oral, to which the Company is a party or by which it
is bound obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares in
the share capital of the Company. Neither the Company nor any Beneficial Holder
is a party to any agreement with any other shareholder governing the business
and affairs of the Company, including without limitation any unanimous
shareholder agreement within the meaning of the Business Corporations Act
(Ontario).
II.3 Subsidiaries. Except as set forth in Schedule 2.3, the Company
does not have any subsidiaries or affiliated companies and does not otherwise
own any shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture or
other business entity. The Company owns all of the issued share capital of each
of its subsidiaries. Schedule 2.3 sets forth the jurisdiction of organization,
issued and outstanding shares, registered shareholders, directors and officers
of each of the Company's subsidiaries.
II.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
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availability of specific performance, injunctive relief or other equitable
remedies. Except as set forth in Schedule 2.4, the execution and delivery of
this Agreement by the Company does not, and, as of the Closing, the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict") (i)
any provision of the Articles of Incorporation or Bylaws of the Company or the
equivalent organizational documents of its subsidiaries, or any shareholders
agreement known to the Company or resolution of the Company's board of directors
or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation, or any judgment, decree, order or
award of any court, governmental body or arbitrator having jurisdiction over the
Company or any Beneficial Holder, applicable to the Company or any of its
subsidiaries or their respective properties or assets, except where such failure
or conduct would not have or could not reasonably be expected to have a Material
Adverse Effect. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
board or commission or other federal, provincial, state, county, local,
municipal or foreign governmental authority, instrumentality, agency or
commission ("Governmental Entity") or any third party (so as not to trigger any
Conflict) is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for: (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable provincial, federal and state securities laws; (ii) the filing with
appropriate Canadian authorities of such forms as may be required by the
Investment Canada Act (Canada); (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4; and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations the absence of which would not have or could not
reasonably be expected to have a Material Adverse Effect.
II.5 Company Financial Statements. Schedule 2.5 sets forth the
Company's unaudited consolidated balance sheet as of February 28, 1999 (the
"Balance Sheet") and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the year then ended, and the
footnotes thereto, and the Company's unaudited consolidated balance sheet as of
February 28, 1998 and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the year then ended, and the
footnotes thereto (all such 1998 and 1999 financial statements and notes,
collectively, the "Company Financials"). The Company Financials present fairly
in all material respects the financial position and the results of operations of
the Company and its subsidiaries as of the dates and during the periods
indicated therein in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"), applied on a basis consistent throughout the
periods indicated and consistent with each other, provided that the unaudited
financial statements as of and for the year ending February 28, 1999 have been
prepared in contemplation of an initial public offering of the Company's
securities. At least five days prior to the Closing, the Company shall deliver
equivalent audited financial statements for such periods, which shall not differ
in any material respect from the Company Financials other than that they shall
have been prepared on the assumption that the initial public offering will not
proceed and instead that the Acquisition will be concluded on substantially the
terms set forth herein and will be
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prepared in accordance with United States generally accepted accounting
principles ("US GAAP"). Upon delivery, such audited financial statements shall
become the "Company Financials" and shall replace the previously delivered
unaudited financials for all purposes herein (and the balance sheet as of
February 28, 1999 included therein shall thereafter constitute the "Balance
Sheet" referred to herein).
II.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
neither the Company nor any of its subsidiaries has any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (where
required to be reflected in financial statements in accordance with generally
accepted accounting principles), except for those liabilities which are
reflected in the Company Financials or those liabilities incurred after February
28, 1999 in the ordinary course of business consistent with past practice.
II.7 No Changes. Except as set forth in Schedule 2.7, since the date
of the Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company or any of its subsidiaries except
in the ordinary course of business as conducted on the date of the Balance Sheet
and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws or other constating documents of the Company or any of its subsidiaries;
(c) capital expenditure or commitment by the Company or any of
its subsidiaries, either individually or in the aggregate, exceeding $50,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company or any of its subsidiaries (whether or not
covered by insurance);
(e) claim of wrongful discharge or dismissal or other unlawful
labor practice or action or, to the Company's knowledge, any union, collective
bargaining or labor organizing activity;
(f) 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 disagreement between the Company and its auditors;
(g) revaluation by the Company or any of its subsidiaries of any
of its assets which individually or in the aggregate would be material,
including without limitation any write down of the value of any inventory;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the shares in the share capital of the Company or
the share capital of any of the Company's subsidiaries, or any direct or
indirect redemption, purchase or other acquisition by the Company of
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16
any shares in the share capital of the Company or by any of the Company's
subsidiaries of shares of their share capital;
(i) increase in the salary or other compensation payable or to
become payable by the Company or any of its subsidiaries to any of the Company's
officers, directors, employees, consultants or advisors, or the declaration,
payment or commitment or obligation of any kind for the payment of a bonus or
other additional salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company or any of its subsidiaries, except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(k) amendment or termination of any Contract (as defined in
Section 2.12);
(l) loan by the Company or any of its subsidiaries to any person
or entity, incurring by the Company or any of its subsidiaries of any
indebtedness, guaranteeing by the Company or any of its subsidiaries of any
indebtedness, issuance or sale of any debt securities of the Company or any of
its subsidiaries or guaranteeing of any debt securities of others, except for
advances to employees for travel and business expenses in the ordinary course of
business, consistent with past practices;
(m) waiver or release of any material right or claim of the
Company or any of its subsidiaries, including any write-off or other compromise
of any account receivable of the Company or any of its subsidiaries in an amount
exceeding $50,000 in the aggregate;
(n) notice of any claim of ownership by a third party of any
Company Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company or any of its subsidiaries of any third party's
intellectual property rights;
(o) issuance or sale by the Company or any of its subsidiaries
of any shares in the share capital of the Company or any of its subsidiaries, or
securities exchangeable, convertible or exercisable therefor, or of any other of
its securities, except pursuant to the exercise or conversion of any Convertible
Securities outstanding on the date hereof;
(p) change in pricing or royalties set or charged by the Company
or any of its subsidiaries to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed Company Intellectual
Property to the Company or any of its subsidiaries except in the ordinary course
of business;
(q) payment, discharge or satisfaction of any encumbrance,
liability or obligation of the Company or any of its subsidiaries (whether
absolute, accrued, contingent or otherwise, and whether due or to become due)
other than payment of accounts payable, scheduled loan payments and tax
liabilities incurred in the ordinary course of business;
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(r) forward purchase contracts or forward sales commitments,
other than in the ordinary course of business;
(s) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company or any of
its subsidiaries; or
(t) negotiation or agreement by the Company or any of its
subsidiaries or any officer or employees thereof to do any of the things
described in the preceding clauses (a) through (s) (other than negotiations with
Buyer, Parent and their representatives regarding the transactions contemplated
by this Agreement).
II.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means any and all provincial, federal, state,
local, municipal and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, goods and services, use and occupation,
workers' compensation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, customs, excise and property taxes,
together with all assessments and reassessments, interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for Taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) Each of the Company and its subsidiaries as of the
Closing will have prepared and filed all required provincial, federal, state,
local and foreign returns, estimates, declarations, information statements and
reports ("Returns") required to be filed with any governmental or taxing
authority relating to any and all Taxes concerning or attributable to the
Company or any of its subsidiaries or their operations and such Returns are true
and correct and have been completed in accordance with applicable law.
(ii) Each of the Company and its subsidiaries as of the
Closing: (A) will have paid or accrued all Taxes it is required to pay or accrue
and (B) will have withheld from each payment made to its past or present
employees, officers, directors, independent contractors, creditors, stockholders
or other third parties all Taxes and other material deductions required to be
withheld and have, within the time required by law, paid such withheld amounts
to the proper governmental authorities.
(iii) Neither the Company nor any of its subsidiaries has
been delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any waiver
of any statute of limitations on or extending the period for the assessment or
collection of any
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Tax. There are no matters relating to Taxes under discussion between any
Governmental Entity and the Company or any subsidiary.
(iv) No audit or other examination of any Return of the
Company or any of its subsidiaries is currently in progress, nor has the Company
or any of its subsidiaries been notified of any request for such an audit or
other examination, nor is any Governmental Entity asserting, or to the Company's
knowledge, threatening to assert against the Company or any of its subsidiaries
any claim for Taxes.
(v) Neither the Company nor any of its subsidiaries has
any liabilities as of February 28, 1999 for unpaid federal, state, local and
foreign Taxes which have not been accrued or reserved against in accordance with
Canadian GAAP on the Balance Sheet (or, following delivery of the audited
Company Financials as contemplated by the last sentence of Section 2.5, in
accordance with US GAAP), whether asserted or unasserted, contingent or
otherwise, and neither the Company nor any of its subsidiaries has knowledge of
any basis for the assertion of any such liability attributable to the Company or
any of its subsidiaries, their assets or operations.
(vi) The Company and its subsidiaries have provided to
Parent and Buyer copies of all federal, provincial and state income, provincial
goods and services and all state sales and use Tax Returns for the Company and
each of its subsidiaries that have been requested by Parent and Buyer.
(vii) Each of the Company and its subsidiaries has
remitted to the appropriate Tax authority when required by law to do so all
amounts collected by it on account of Taxes under Part IX of the Excise Tax Act
(Canada) and any similar provincial legislation and in respect of retail sales
tax.
(viii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company or any of
its subsidiaries relating or attributable to Taxes except for Liens for Taxes
not yet due and payable.
(ix) Neither the Company nor any of its subsidiaries has
any knowledge of any basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of the Company or any of its subsidiaries.
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company or any
of its subsidiaries that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Section 280G or
162 of the U.S. Internal Revenue Code of 1986, as amended (the "Code").
(xi) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to
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any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company or any of its subsidiaries.
(xii) Neither the Company nor any of its subsidiaries is a
party to a Tax sharing or allocation agreement and is not liable for the Taxes
of any other person, whether as a transferee or successor or by contract or
otherwise, nor does the Company or any of its subsidiaries owe any amount under
any such agreement.
(xiii) Each of the Company's and each of its subsidiaries'
Tax basis in its assets for purposes of determining its future amortization,
depreciation and other federal income tax deductions is accurately reflected on
the Company's and each of its subsidiaries' Tax books and records.
(xiv) Neither the Company nor any of its subsidiaries has
participated in or cooperated with a boycott under Section 999 of the Code.
(xv) No power of attorney has been granted by the Company
or any of its subsidiaries with respect to any matter relating to Taxes.
(xvi) Neither the Company nor any of its subsidiaries has
requested or received a ruling from any taxing authority or secured a closing
agreement with any taxing authority.
(xvii) With respect to the Company and each of its
subsidiaries neither (i) 75% or more of the gross revenue of such corporation is
passive income (within the meaning of Section 1297(b) of the Code), nor (ii) the
average percentage of assets (by value) held by such corporation which produced
passive income or which are held for the production of passive income is at
least 50%.
(xviii) To the Company's knowledge, no circumstances exist
which would make the Company or any subsidiary subject to the application of any
of sections 79 to 80.04 of the Income Tax Act (Canada). Neither the Company nor
any of its subsidiaries have acquired property or services from or disposed of
property or provided services to, a person with whom it does not deal at arm's
length (within the meaning of the Income Tax Act (Canada)) for an amount that is
other than the fair market value of such property or services, or has been
deemed to have done so for purposes of the Income Tax Act (Canada).
(xix) The Company has not deducted any material amounts in
computing its income in a taxation year which may be included in a subsequent
taxation year under Section 78 of the Income Tax Act (Canada).
(xx) The Company's non-capital losses and investment tax
credits for purposes of the Income Tax Act (Canada) and for provincial income
tax purposes for the year ended February 28, 1998, and the Company's estimate of
such losses and credits for the year ended February 28, 1999, are set forth in
Schedule 2.8(b)(xx).
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II.9 Restrictions on Business Activities. Except as set forth in
Schedule 2.9, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which the Company or any of its
subsidiaries is a party or otherwise binding upon the Company or any of its
subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company or any of its
subsidiaries, any acquisition of property (tangible or intangible) by the
Company or any of its subsidiaries or the conduct of business by the Company or
any of its subsidiaries. Without limiting the foregoing, neither the Company nor
any of its subsidiaries has entered into any agreement under which the Company
or any of its subsidiaries is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
II.10 Title to Properties; Absence of Liens and Encumbrances.
(a) Except as set forth in Schedule 2.10(a), neither the Company
nor any of its subsidiaries owns any real property, nor has the Company or any
of its subsidiaries ever owned any real property. Schedule 2.10(a) also sets
forth a list of all real property currently leased by the Company and any of its
subsidiaries, the name of the lessor, the date of the lease and each amendment
thereto and the aggregate annual rental and/or other fees payable under any such
lease. Except as disclosed in Schedule 2.10(a), the Company and/or its
subsidiaries, as appropriate, occupy such leased property and have the exclusive
right to occupy such leased property. All such current leases are in full force
and effect, are valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or event of
default (or event which with notice or lapse of time, or both, would constitute
a default).
(b) Each of the Company and its subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any Liens (as
defined in Section 2.8(b)(viii)), except as reflected in the Company Financials
or in Schedule 2.10(b) or in respect of leases disclosed in Schedule 2.10(a) and
except for liens for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
II.11 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
"Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all Canadian, United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part
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thereof ("Patents"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data, formulae, and all documentation relating to any of
the foregoing; (iii) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout the world; (iv)
all mask works, mask work registrations and applications therefor; (v) all
industrial designs and any registrations and applications therefor throughout
the world; (vi) all trade names, logos, common law trademarks and service marks;
trademark and service xxxx registrations and applications therefor and all
goodwill associated therewith throughout the world; (vii) all databases and data
collections and all rights therein throughout the world; (viii) all licenses,
registered user agreements and like rights; (ix) all computer software including
all source code, object code, firmware, development tools, files, records and
data, as well as all media on which any of the foregoing is recorded; (x) any
similar, corresponding or equivalent rights to any of the foregoing; and (xi)
all documentation related to any of the foregoing.
"Company Intellectual Property" shall mean any Intellectual Property
that (i) is owned by (ii) was exclusively licensed to, or (iii) was developed or
created by, the Company or any subsidiary of the Company.
"Registered Intellectual Property" shall mean all Canadian, United
States, and other foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered user agreements; (iv) registered
copyrights and applications for copyright registration; (v) any mask work
registrations and applications to register mask works; and (vi) any other
Company Intellectual Property that is subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
(b) Schedule 2.11(b) lists all Registered Intellectual Property
owned by, licensed to, or filed in the name of, the Company or any of its
subsidiaries (the "Company Registered Intellectual Property") and lists any
proceedings or actions before any court, tribunal (including the Canadian or
United States Patent and Trademark Offices or equivalent authority anywhere in
the world) related to any of the Company Registered Intellectual Property.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in Schedule 2.11(b), is free and
clear of any Liens except as reflected in the Company Financials or Schedule
2.10(b). Each of the Company and its subsidiaries (i) to its knowledge is the
exclusive owner of all trademarks and trade names used in connection with the
operation or conduct of the business of the Company and its subsidiaries,
including the sale of any products or technology or the provision of any
services by the Company or its subsidiaries and (ii) owns exclusively, and has
good title to, all copyrighted works that are products of the Company or any of
its subsidiaries or other works of authorship that the Company or its
subsidiaries otherwise purports to own other than the third party licensed trade
marks, trade names, copyrighted works and other works listed in Schedule
2.11(c).
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(d) To the extent that any Intellectual Property has been
developed or created by any person other than the Company or its subsidiaries
which the Company or its subsidiaries has, directly or indirectly, acquired, the
Company or its relevant subsidiary has a written agreement with such person with
respect thereto and the Company or its subsidiaries thereby has obtained
ownership of, and is the exclusive owner of, all rights in such Intellectual
Property (including the right to seek past and future damages with respect to
such Intellectual Property) to the Company.
(e) Except as set forth in Schedule 2.11(e)(i), neither the
Company nor any of its subsidiaries has transferred ownership of or granted any
license of or right to use or authorized the retention of any rights to use any
Intellectual Property that is or was Company Intellectual Property, to any other
person, other than pursuant to agreements entered into in the ordinary course of
business which are substantially identical to the Company's standard form of
license agreement attached hereto as Schedule 2.11(e)(ii) ("Standard License
Agreements").
(f) The Company and its subsidiaries owns or has a written
license to all Intellectual Property used in and/or necessary to the conduct of
its business as it currently is conducted, including the design, development,
manufacture, use, licensing, copying, distribution or other exploitation, import
and sale of the products, technology and services of the Company and its
subsidiaries and all products, technology or services currently under
development.
(g) Other than "shrink-wrap" and similar widely available
commercial end-user licenses (each, an "End-User License"), the contracts,
licenses and agreements listed in Schedule 2.11(g) include all contracts,
licenses and agreements to which the Company or any of its subsidiaries is a
party with respect to any Intellectual Property of any person other than the
Company or any of its subsidiaries. No person other than the Company or any of
its subsidiaries has ownership rights to improvements made by the Company or any
of its subsidiaries in Intellectual Property which has been licensed to the
Company or any of its subsidiaries.
(h) Schedule 2.11(h) lists all contracts, licenses and
agreements in respect of software programs owned by third parties (whether or
not such contract, license or agreement is with such third parties), between the
Company or any of its subsidiaries and any other person wherein or whereby the
Company or any of its subsidiaries has agreed to, or assumed, any material
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any material obligation or liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Company or any of its subsidiaries or such other person of the Intellectual
Property of any person other than the Company or any of its subsidiaries other
than as provided for in the Company's Standard License Agreement.
(i) (X) The operation of the Business does not infringe or
misappropriate the Intellectual Property (other than Patents) of any person,
violate the rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and neither the Company nor any of its subsidiaries has received
notice from any person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Company or any of its subsidiaries
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infringes or misappropriates the Intellectual Property (other than Patents) of
any person or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor is the Company or any of its subsidiaries aware of any
basis therefor).
(Y) The operation of the Business does not infringe or
misappropriate the Patents of any person, and neither the Company nor any of its
subsidiaries has received notice from any person claiming that such operation or
any act, product, technology or service (including products, technology or
services currently under development) of the Company or any of its subsidiaries
infringes or misappropriates the Patents of any person (nor is the Company or
any of its subsidiaries aware of any basis therefor). The representations and
warranties of this Section 2.11(i)(Y) shall only apply to claims of infringement
or misappropriation or violations arising from (i) the products or technology of
the Company or any of its subsidiaries existing as of the Closing and (ii)
products or technology under development as of the Closing.
(j) To the Company's knowledge after reasonable investigation,
each item of Company Registered Intellectual Property is valid and subsisting,
all necessary registration, maintenance and renewal fees in connection with such
Registered Intellectual Property have been paid and all necessary documents and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States, Canada or foreign jurisdictions, as the case
may be, for the purposes of maintaining such Registered Intellectual Property
except for the trademarks for "Schedulex" included in the Company Intellectual
Property as to which the Company has determined no longer to use or maintain the
registration. Schedule 2.11(j) lists all actions that must be taken by the
Company or any of its subsidiaries within sixty (60) days of the Closing,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Company Intellectual
Property.
(k) There are neither contracts, licenses nor agreements between
either the Company or any of its subsidiaries on the one hand and any other
person on the other with respect to Company Intellectual Property under which
there is any dispute known to the Company or any of its subsidiaries regarding
the scope of such agreement or performance under such agreement including with
respect to any payments to be made or received by the Company or any of its
subsidiaries thereunder.
(l) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property.
(m) Each of the Company and its subsidiaries has taken
reasonable steps in accordance with normal industry practice to protect the
rights of the Company and its subsidiaries in confidential information and trade
secrets of the Company and its subsidiaries or provided by any other person to
the Company or its subsidiaries. Without limiting the foregoing, all current
employees except as set forth in Schedule 2.11(m)(i) and all former employees,
consultants and contractors of the Company hired or engaged since March 31, 1996
have executed proprietary information, confidentiality and assignment agreements
substantially in the Company's standard forms.
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As a matter of contract or otherwise by law, no current or former employee,
consultant or contractor of the Company or any subsidiary has rights to any
Company Intellectual Property.
(n) No Company Intellectual Property or product, technology or
service of the Company or its subsidiaries is subject to any proceeding or
outstanding decree, order, judgment, agreement or stipulation that restricts in
any manner the use, transfer or licensing thereof by the Company or its
subsidiaries or may affect the validity, use or enforceability of such Company
Intellectual Property.
(o) To the knowledge of the Company, no (i) product, technology,
service or publication of the Company or its subsidiaries, (ii) material
published or distributed by the Company or its subsidiaries or (iii) conduct or
statement of the Company or its subsidiaries, constitutes obscene material, a
defamatory statement or material, false advertising or otherwise violates any
law or regulation which would result in a Material Adverse Effect.
(p) Except as set forth in Schedule 2.11(p), each of the Company
and its subsidiaries has taken reasonable steps to ensure that the products of
the Company and its subsidiaries (including existing products and technology and
products and technology currently under development) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 1999, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1998, or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"). Except as set forth in Schedule 2.11(p),
each of the Company and its subsidiaries has taken reasonable steps to ensure
that its products will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 1999. Except as set
forth in Schedule 2.11(p), all of the Company's and its subsidiaries' internal
computer and technology products and systems are Year 2000 Compliant.
(q) Except as set forth in Schedule 2.11(q), neither the Company
nor any of its subsidiaries is obligated to pay any royalties or other
compensation to any person in respect of its ownership, use or license of any of
the Company Intellectual Property.
II.12 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.12(a), neither the Company nor any of its subsidiaries has, is a
party to or is bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations, other than
reasonable notice provisions at common law,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
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(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company or any of its subsidiaries,
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $50,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $50,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the business of the Company or any of its
subsidiaries,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase of
raw materials involving $35,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which the Company or any
of its subsidiaries has granted or may grant in the future, to any party, a
source-code license or option or other right to use or acquire source-code, or
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(xvii) any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty within thirty (30)
days.
Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, as are all noted in Schedule 2.12(b),
neither the Company nor any of its subsidiaries has breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the terms or conditions of any End-User License or any agreement,
contract or commitment required to be set forth on Schedule 2.12(a) (any such
End-User License or any agreement, contract or commitment, a "Contract," it
being understood that this representation applies to license agreements, service
agreements and management agreements in the Company's standard form, which shall
constitute Contracts for purposes of this Agreement, but need not be included in
Schedule 2.12(a)). Each Contract is in full force and effect and, except as
otherwise disclosed in Schedule 2.12(b), is not subject to any default
thereunder of which the Company or any of its subsidiaries has knowledge by any
party obligated to the Company or any of its subsidiaries pursuant thereto. The
Company has no agreements with customers involving credit terms of more than one
year.
II.13 Interested Party Transactions. Except as set forth on Schedule
2.13, (i) no officer, director, Beneficial Holder or, to the Company's knowledge
(without independent inquiry), any other shareholder of the Company or any of
its subsidiaries, and (ii) to the Company's knowledge (without independent
inquiry), no officer, director or shareholder of a shareholder, nor (iii) any
relative or spouse of any of such persons or entities listed in (i) or (ii)
above, or any trust, partnership or corporation in which any of such persons or
entities has or has had an interest, has or has had, directly or indirectly, (A)
an economic interest in any entity which furnished or sold, or furnishes or
sells, services or products that the Company furnishes or sells, or proposes to
furnish or sell, (B) an economic interest in any entity that purchases from or
sells or furnishes to, the Company, any goods or services or (C) a beneficial
interest in any contract or agreement set forth in Schedule 2.12(a) or Schedule
2.11(b); provided, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed an
"economic interest in any entity" for purposes of this Section 2.13.
II.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any Canadian, U.S., foreign, provincial, federal,
state or local statute, law or regulation.
II.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or, to the Company's knowledge,
threatened against the Company or any of its subsidiaries, their respective
properties or any of their respective officers or directors, in their respective
capacities as such nor has the Company or any of its subsidiaries received any
notice of commencement of any lawsuit or proceeding against, or investigation
of, the Company or any of its subsidiaries or their respective affairs. Except
as set forth in Schedule 2.15, there is no investigation pending or, to the
Company's knowledge, threatened against the Company or any of its subsidiaries,
their respective properties or any of their respective officers or directors by
or before any
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Governmental Entity. Schedule 2.15 sets forth, with respect to any such action,
suit, proceeding or investigation identified therein, to the extent known, the
forum, the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Entity has at any time since
January 1, 1994 challenged or questioned the legal right of the Company or any
of its subsidiaries to develop, manufacture, offer or sell any of their
respective products in the present manner or style thereof.
II.16 Insurance. Each of the Company and its subsidiaries maintains
valid and enforceable insurance which is identified in Schedule 2.16, and which
contains provisions which are reasonable and customary in the Company's
industry. There is no claim by the Company or any of its subsidiaries pending
under any of such insurance as to which coverage has been questioned, denied or
disputed by the underwriters of such insurance. True and complete copies of such
insurance together with the most recent inspection reports, if any, received
from insurance underwriters or others as to the condition of the property and
assets of the Company and its subsidiaries have been provided to Buyer. All
premiums due and payable under all such insurance have been paid, and the
Company and its subsidiaries are otherwise in material compliance with the terms
of such insurance (or other policies providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such insurance.
II.17 Minute Books. The minute books of the Company and its
subsidiaries made available to counsel for Parent and Buyer are the only minute
books of the Company and its subsidiaries and contain, in all material respects,
a reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of the
amalgamation of the Company.
II.18 Environmental Matters.
(a) Hazardous Materials. Neither the Company nor any of its
subsidiaries has operated any underground storage tanks, and has no knowledge of
the existence, without further inquiry, at any time, of any underground storage
tank (or related piping or pumps), at any property that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased. No
Hazardous Materials (as defined below) are present as a result of the actions or
omissions of the Company or any of its subsidiaries, or, to the knowledge of the
Company, without further inquiry, as a result of any actions of any third party
or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither the Company nor
any of its subsidiaries has transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any Environmental Laws as defined below in effect on or before the
Closing, nor has the Company or its subsidiaries disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
violation of any Environmental Laws
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or any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Each of the Company and its subsidiaries
currently holds all environmental approvals, permits, orders, registrations,
manifests, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Hazardous Material Activities of the Company
and its subsidiaries and other businesses of the Company and its subsidiaries as
and to the extent that such activities and businesses are currently being
conducted.
(d) Compliance with Environmental Laws. The Company and its
subsidiaries, the operation of their businesses, the property and assets owned,
leased or used by the Company and its subsidiaries and the use, maintenance and
operation thereof have been and are in compliance with all Environmental Laws.
Each of the Company and its subsidiaries has complied in all material respects
with all reporting and monitoring requirements under all Environmental Laws.
Neither the Company nor any of its subsidiaries has received any notice of any
non-compliance with any Environmental Laws, and neither the Company nor any of
its subsidiaries has ever been convicted of an offense for non-compliance with
any Environmental Laws or been fined or otherwise sentenced or settled such
prosecution short of conviction.
(e) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of the Company, threatened concerning any
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
the Company or its subsidiaries. Neither the Company nor any of its subsidiaries
is aware of any fact or circumstance which could involve the Company or its
subsidiaries in any environmental litigation or impose upon the Company or its
subsidiaries any environmental liability.
(f) Definition of "Hazardous Materials". As used herein,
"Hazardous Materials" shall mean any substance that has been designated by any
Governmental Entity or by any Environmental Law to be a pollutant, radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, oil and petroleum products,
urea-formaldehyde and all substances listed as a "hazardous substance,"
"hazardous waste," "hazardous material" or "toxic substance" or words of similar
import, under any Environmental Law.
(g) Definition of "Environmental Laws". As used herein,
"Environmental Laws" shall mean all applicable statutes, regulations,
ordinances, by-laws, and codes and all international treaties and agreements,
now or hereafter in existence in Canada (whether federal, provincial or
municipal) and, to the extent applicable to the conduct of the Company's
Business in the United States (whether federal, state or local) or any other
jurisdiction in which the Company or its subsidiaries carries on business
relating to the protection and preservation of the environment, occupational
health and safety, product safety or product liability including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; the Resource Conservation and Recovery Act of 1976, as
amended; the Federal Water Pollution Control Act, as amended; the Clean Air Act,
as amended; the Environmental Protection Act, R.S.O. 1990,
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c E.19 (Ontario), as amended; the Canadian Environmental Protection Act, R.S.C.
1985, C. 16 (4th Supp.), as amended; and the regulations promulgated pursuant to
such laws.
II.19 Brokers' and Finders' Fees; Third Party Expenses.
Except as set forth on Schedule 2.19, neither the Company nor any of its
subsidiaries has incurred, nor will it or any of its subsidiaries incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or advisory fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby. Schedule 2.19 lists any
agreement, written or oral, with respect to such fees. Schedule 2.19 sets forth
the Company's current reasonable estimate of all Third Party Expenses (as
defined in Section 6.4(a)) expected to be incurred by the Company and any of its
subsidiaries in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby.
II.20 Employee Matters and Benefit Plans.
(a) Compliance. Schedule 2.20(a) contains a true and complete
list of each employee benefit plan or arrangement, and any plan, agreement or
program providing for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation that (i) is
entered into, maintained or contributed to, as the case may be, by the Company
or any of its subsidiaries and (ii) covers any employee or former employee of
the Company (collectively "Benefit Arrangements"). Each Benefit Arrangement has
been maintained and administered in material compliance with its terms and with
the requirements prescribed by any and all statutes, laws, ordinances and
regulations which are applicable to such Benefit Arrangements. No Benefit
Arrangement has unfunded liabilities that, as of the Closing Date, will not be
offset by insurance or fully accrued or reserved against in the Balance Sheet.
Except as required by law, no condition exists that would prevent Buyer or
Parent or any of its subsidiaries from amending or terminating any Benefit
Arrangement.
(b) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(b), no Benefit Arrangement provides, or has any liability to
provide, life insurance, medical or other employee benefits to any current,
former, or retired employee, consultant or director of the Company or any of its
subsidiaries or any affiliate ("Employee") upon his or her retirement or
termination of employment for any reason, except as may be required by statute,
and neither the Company nor any of its subsidiaries has ever represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(c) Certain Health Care Legislation. Neither the Company nor
any of its subsidiaries nor any affiliate has, prior to the Closing and in any
material respect, violated any of the health care continuation requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, the
requirements of the Family Medical Leave Act of 1993, as amended or any similar
provisions of state law applicable to its Employees.
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(d) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(d)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Benefit
Arrangement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee.
(ii) Except as set forth on Schedule 2.20(d)(ii), no
payment or benefit which will or may be made by the Company or any of its
subsidiaries or their affiliates or by Parent or Buyer or any of their
affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement or otherwise will be characterized as "parachute
payment," within the meaning of Section 280G(b)(2) of the Code (but without
regard to clause (ii) thereof).
(e) Employment Matters. Each of the Company and its
subsidiaries (i) is in compliance in all material respects with all applicable
provincial, federal, state, foreign and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any payment to any trust or other fund or
to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). Without limiting the generality of
the foregoing, the Company is in compliance with and there are no legal
proceedings or proceedings of any kind under the Employment Standards Act
(Ontario), the Pay Equity Act (Ontario), the Labour Relations Act (Ontario), the
Workplace Safety & Insurance Act, 1997 (Ontario), the Occupational Health and
Safety Act (Ontario) and the Human Rights Code (Ontario).
(f) Labor. No work stoppage or labor strike against the
Company or any of its subsidiaries is pending or, to the best knowledge of the
Company, threatened. Except as set forth in Schedule 2.20(f), neither the
Company nor any of its subsidiaries is involved in or, to the knowledge of the
Company, threatened with, any labor dispute, grievance, or litigation relating
to labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in liability to the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the Labor Relations Act (Ontario) or the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a liability to the Company or any of its
subsidiaries. Except as set forth in Schedule 2.20(f), neither the Company nor
any of its subsidiaries is presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees, and no collective bargaining agreement is being negotiated by the
Company or any of its subsidiaries.
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II.21 Employees. To the Company's knowledge, no employee of the
Company or any of its subsidiaries is in violation of any term of any employment
contract, patent disclosure agreement, non-competition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company or any of its subsidiaries because of the
nature of the business conducted or presently proposed to be conducted by the
Company or any of its subsidiaries or to the use of trade secrets or proprietary
information of others. Except as set forth on Schedule 2.21, no notice has been
given to the Company or any of its subsidiaries, nor is the Company otherwise
aware, that any employee (other than office and clerical employees) intends to
terminate his or her employment with the Company or any of its subsidiaries.
II.22 Governmental Authorizations and Licenses. Each of the
Company and its subsidiaries possesses all material consents, licenses, permits,
grants or other authorizations issued to the Company or its subsidiaries by a
Governmental Entity (i) pursuant to which the Company or its subsidiaries
currently operates or holds any interest in any of its properties or (ii) which
is required for the operation of its business or the holding of any such
interest therein (collectively called "Company Authorizations"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company and/or its subsidiaries to operate
or conduct its business or hold any interest in its properties or assets.
II.23 Competition Act. The aggregate value of the assets in Canada,
determined as of such time and in such manner as is prescribed by the
Competition Act (Canada) and the regulations thereto, that are owned by the
Company and its subsidiaries, other than assets that are shares of any of the
Company's subsidiaries, does not exceed CDN $35 million, and the gross revenues
from sales in or from Canada, determined for such annual period and in such
manner as is prescribed by the Competition Act (Canada) and the regulations
thereto, generated from the assets referred to above, do not exceed CDN $35
million.
II.24 Employee Accruals. All accruals for unpaid vacation pay,
premiums for unemployment insurance, health premiums, pension plan premiums,
accrued wages, salaries and commissions and Employee Plan payments have been
reflected on the books and records of the Company and its subsidiaries in
accordance with generally accepted accounting principles, except that the
Company does not accrue for unpaid vacation pay (except as set forth in Schedule
2.24).
II.25 Major Customers. Schedule 2.25 sets out the names of certain
major customers of the Company and its subsidiaries (the "Major Customers") and,
to the Company's knowledge without further inquiry, there has been no, and the
Company has no reason to believe that after the Closing Date there will be any,
termination or cancellation of, and no material impairment in the business
relationship between the Company or any of its subsidiaries and any such Major
Customer except that might arise as a result of the change of ownership
contemplated hereunder.
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II.26 Product Warranties. There are no outstanding warranty claims
that would have a Material Adverse Effect on the Company, nor to the Company's
knowledge, have any such claims been threatened.
II.27 Representations Complete. None of the representations or
warranties made by the Company or its subsidiaries or any Beneficial Holder (as
modified by the Company Schedules), nor any statement made in any schedule or
certificate furnished by the Company or any Beneficial Holder pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the shareholders of the Company in connection with soliciting their consent
to this Agreement and the Acquisition, contains or will contain at the Closing,
any untrue statement of a material fact, or omits or will omit at the Closing to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
OTHER REPRESENTATIONS OF THE BENEFICIAL HOLDERS
Each Beneficial Holder other than JS jointly and severally represents
and warrants, and JS severally represents and warrants, to Parent and Buyer as
follows:
III.1 Organization; Authority. The Direct Holder is a corporation
duly organized, validly existing and in good standing under the laws of The
Netherlands. Luxco is a corporation duly organized, validly existing and in good
standing under the laws of Luxembourg. The Direct Holder and each other
Beneficial Holder has all requisite corporate or other power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
(including without limitation, in the case of the Direct Holder and JS, to sell,
transfer and deliver the Purchased Shares to Buyer.) The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
(including without limitation the sale, transfer and delivery of the Purchased
Shares to Buyer) have been duly authorized by all necessary corporate or other
action on the part of the Direct Holder and, to the extent applicable, each
other Beneficial Holder. This Agreement has been duly executed and delivered by
the Direct Holder and each other Beneficial Holder and constitutes the valid and
binding obligation of same, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. The execution and
delivery of this Agreement by the Direct Holder and each other Beneficial Holder
does not, and, as of the Closing, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
the Articles of Incorporation or Bylaws of the Direct Holder or, to the extent
applicable,
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the similar organizational documents of any other Beneficial Holder, or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to any Beneficial Holder, or any
judgment, decree, order or award of any court, governmental body, or arbitrator
having jurisdiction over any Beneficial Holder. No consent, waiver, approval,
order or authorization of, or registration, declaration or filing with any
Governmental Entity or any third party (so as not to trigger any Conflict) is
required by or with respect to the Direct Holder or any other Beneficial Holder
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for: (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable provincial, federal
and state securities laws; (ii) the filing with applicable Canadian authorities
of such forms as may be required by the Investment Canada Act (Canada); and
(iii) such other consents, authorizations, filings, approvals and registrations
the absence of which would not have or could not reasonably be expected to have
a material adverse effect on any Beneficial Holder.
III.2 Valid Title. The Direct Holder has valid and marketable title
to the Purchased Common Shares and JS has valid and marketable title to the
Purchased Preferred Shares.
III.3 Transfer of Valid Title. Delivery of the Certificates pursuant
to this Agreement will pass valid and marketable title to the Purchased Shares
free and clear of any security interests, claims, liens, equities and other
encumbrances.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Each of Parent and Buyer represents and warrants to the Company and
each Beneficial Holder as follows:
IV.1 Organization, Standing and Power. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer is a company duly organized, validly existing and in
good standing under the laws of the Province of Nova Scotia. Each of Parent and
Buyer has the corporate power to own its properties and to carry on its business
as now being conducted.
IV.2 Authority. Parent and Buyer have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Buyer. This
Agreement has been duly executed and delivered by Parent and Buyer and
constitutes the valid and binding obligation of Parent and Buyer, enforceable in
accordance with its terms, except (i) as
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limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. The execution and
delivery of this Agreement by Parent and Buyer do not, and, as of the Closing
Date, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of the Certificate of Incorporation or Bylaws of Parent or similar
organizational documents of Buyer or (ii) any agreement required to be filed by
Parent as an exhibit to any registration statement or report filed with the
United States Securities and Exchange Commission ("SEC"), or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or Buyer which would have a Material Adverse Effect on Parent and its
subsidiaries taken as a whole. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity or any third party (so as not to trigger any conflict) is required by
Parent or Buyer in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for: (i)
such consents, waivers, authorizations, filings, approvals and registrations
which are required to be obtained by the Company; (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable provincial, federal and state securities laws;
(iii) the filing with applicable Canadian authorities of such forms as may be
required by the Investment Canada Act (Canada); and (iv) such other consents,
waivers, authorizations, filings, approvals and registrations, the absence of
which could not reasonably be expected to have a material adverse effect on the
business or financial condition of Parent and its subsidiaries taken as a whole.
IV.3 SEC Documents; Parent Financial Statements. Parent has
furnished or made available to the Company true and complete copies of all
reports and registration statements (other than reports on Forms 3, 4 and 5 and
registration statements on Form S-8) filed by it with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
Securities Act of 1933, as amended (the "Securities Act"), for all periods since
September 23, 1997, all in the form so filed (all of the foregoing being
collectively referred to as the "SEC Documents"). As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances in which they were
made, not misleading, except to the extent corrected by a document subsequently
filed with the SEC. The financial statements of Parent, including the notes
thereto, included in the SEC Documents (the "Parent Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) and present fairly the consolidated financial position of
Parent at the dates thereof and the consolidated results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to
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normal audit adjustments). There has been no change in Parent accounting
policies except as described in the notes to the Parent Financial Statements.
IV.4 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent or Buyer has
received any notice of assertion against Parent or Buyer, which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING
V.1 Conduct of Business of the Company.
(a) Company Conduct. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Closing, each Beneficial Holder shall cause the Company, and the Company
agrees on its behalf and on behalf of each of its subsidiaries (except to the
extent that Parent shall otherwise consent in writing), to carry on the business
of the Company and its subsidiaries in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay the debts of the
Company and its subsidiaries in substantially the same manner as heretofore
conducted and Taxes when due, to pay or perform other obligations when due, and,
to the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact the present
business organization of the Company and its subsidiaries, keep available the
services of the present officers and key employees of the Company and its
subsidiaries and preserve the Company's and subsidiaries' relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with them, all with the goal of preserving unimpaired the
goodwill and ongoing businesses of the Company and its subsidiaries at and after
the Closing. Each Beneficial Holder shall cause the Company, and the Company
agrees on its behalf and on behalf of each of its subsidiaries, to promptly
notify Parent of any event or occurrence or emergency not in the ordinary course
of the business of the Company or any of its subsidiaries, and any material
event involving or adversely affecting the Company, its subsidiaries or their
respective businesses. Except as expressly contemplated by this Agreement, each
Beneficial Holder shall cause the Company, and the Company agrees on its behalf
and on behalf of each of its subsidiaries, not to take any of the following
actions without the prior written consent of Parent, such consent not to be
unreasonably withheld or delayed:
(i) Enter into any commitment, activity or transaction
not in the ordinary course of business;
(ii) Transfer to any person or entity any rights to any
Company Intellectual Property, other than pursuant to Standard License
Agreements;
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(iii) Enter into or amend any agreements pursuant to
which any other party is granted manufacturing, marketing, distribution or
similar rights of any type or scope with respect to any products of the Company
or its subsidiaries;
(iv) Amend or otherwise modify (or agree to do so),
except in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the Company Schedules;
(v) Commence any litigation;
(vi) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of the shares in its share capital, or split, combine or reclassify any of the
shares in its share capital or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares in the share
capital of the Company or its subsidiaries, or repurchase, redeem or otherwise
acquire, directly or indirectly, any shares in the share capital of the Company
or its subsidiaries (or options, warrants or other rights exercisable therefor);
(vii) Except for the issuance of Common Shares upon
exercise or conversion of presently outstanding Convertible Securities or as
contemplated herein, issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(viii) Cause or permit to be made any amendments to its
articles of incorporation or bylaws;
(ix) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of the Company or its subsidiaries;
(x) Sell, lease, license or otherwise dispose of
any of its properties or assets, except in the ordinary course of business and
consistent with past practice;
(xi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or its subsidiaries or guarantee any debt securities of others other
than fluctuations under existing loan facilities;
(xii) Grant any severance or termination pay to any
director, officer employee or consultant, except pursuant to existing agreements
set forth in Schedule 2.12(a) or as required by applicable laws;
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(xiii) Adopt or amend any employee benefit plan,
program, policy or arrangement, or enter into any employment contract, extend
any employment offer, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the salaries
or wage rates of its employees, except as set forth in Schedule 5.1(a)(xiii);
(xiv) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable, other than in the ordinary course of business and consistent with
past practice;
(xv) Excluding payroll obligations performed in the
ordinary course, pay, discharge or satisfy, in an amount in excess of $50,000,
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in
the Company Financials or incurred in the ordinary course of business consistent
with past practice since February 28, 1999 and prior to the date hereof;
(xvi) Make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xvii) Enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(xviii) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;
(xix) Waive or commit to waive any rights with a
value in excess of $25,000, in any one case, or $50,000, in the aggregate;
(xx) Cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxi) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company or any of its subsidiaries directly or indirectly
holds any interest on the date hereof; or
(xxii) Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(i) through (xxi) above, or any
other action that would prevent the Company or any its subsidiaries from
performing or cause the Company or any of its subsidiaries not to perform its
covenants hereunder.
(b) Parent and Buyer Conduct. Parent and Buyer shall
promptly notify the Company of any event or occurrence which may be reasonably
likely to prevent or materially delay Parent or Buyer from carrying out its
material obligations under this Agreement.
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V.2 No Solicitation. Until the earlier of the Closing and the date
of termination of this Agreement pursuant to the provisions of Section 10.1
hereof, each of the Company and each Beneficial Holder will not (nor will the
Company or any Beneficial Holder permit any of its officers, directors,
shareholders, agents, representatives or affiliates to), directly or indirectly,
take any of the following actions with any party other than Parent and Buyer and
their respective designees: (a) solicit, initiate, entertain or encourage any
proposals or offers from, or conduct discussions with or engage in negotiations
with, any person relating to any possible acquisition of the Company (whether by
way of amalgamation, purchase of shares, purchase of assets or otherwise), any
material portion of its share capital or assets or any equity interest in the
Company, (b) provide information with respect to it to any person, other than
Parent or Buyer, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of amalgamation, purchase of shares,
purchase of assets or otherwise), any material portion of its share capital or
assets or any equity interest in the Company, (c) enter into an agreement with
any person, other than Parent or Buyer, providing for the acquisition of the
Company (whether by way of amalgamation, purchase of shares, purchase of assets
or otherwise), any material portion of its share capital or assets or any equity
interest in the Company, or (d) make or authorize any statement, recommendation
or solicitation in support of any possible acquisition of the Company (whether
by way of amalgamation, purchase of shares, purchase of assets or otherwise),
any material portion of its share capital or assets or any equity interest in
the Company by any person, other than by Parent or Buyer. The Company and each
Beneficial Holder shall immediately cease and cause to be terminated any such
contacts or negotiations with third parties relating to any such transaction or
proposed transaction. In addition to the foregoing, if the Company or each
Beneficial Holder receives prior to the Closing or the termination of this
Agreement any offer or proposal relating to any of the above, the Company or
such Beneficial Holder shall immediately notify Parent and the Buyer thereof,
including information as to the identity of the offeror or the party making any
such offer or proposal and the specific terms of such offer or proposal, as the
case may be, and such other information related thereto as Parent and Buyer may
reasonably request. Except as contemplated by this Agreement, disclosure by the
Company or any Beneficial Holder of the terms of this Agreement (other than the
prohibition of this section or as otherwise required by law) shall be deemed to
be a violation of this Section 5.2.
V.3 No Encumbrance. Until the earlier of the Closing Date or the
date of termination of this Agreement, the Company and each Beneficial Holder
will not (nor will the Company or any Beneficial Holder permit any of its
respective officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any action which could in any way and at any time
impair the Direct Holder's good and valid title to the Purchased Shares or could
cause or lead to the creation of any lien, claim, charge, restriction, pledge,
security interest, option, right of any nature or other legal or equitable
encumbrance with regard to the Purchased Shares.
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ARTICLE VI
ADDITIONAL AGREEMENTS
VI.1 Other Securities.
(a) Other Common Shares. Each of the Company and JS agrees to
use its best efforts to cause each holder of Other Common Shares to sell such
holder's Other Common Shares to Buyer at the Closing, on the terms and
conditions set forth in a form of purchase agreement to be mutually agreed upon
by Parent and the Direct Holder, at a price equal to the Per Share Purchase
Price (each such agreement, a "Common Purchase Agreement").
(b) Warrant. Each of the Company and JS agrees to use its
best efforts to cause HSBC, prior to the Closing, to (i) surrender and cancel
the Warrant, and (ii) by executing a written waiver and release in a form to be
mutually agreed upon by Parent and the Direct Holder (a "Waiver"), waive all of
HSBC's rights under the Warrant and release the Company and each of its
successors and affiliates (including Parent and Buyer) of any further liability
thereunder.
(c) Company Options. Each of the Company, JS, Buyer and
Parent agrees to use its best efforts (i) to cause the persons identified on
Schedule 6.1(c) to exercise the Company Options held by such persons and
identified on such schedule prior to the Closing and to have such persons enter
into a Common Purchase Agreement with respect to the Common Shares issuable upon
exercise of such Company Options; and (ii) to cause each other holder of Company
Options, at or immediately following the Closing, to (A) surrender and cancel
such holder's Company Options, and (B) by executing a Waiver, waive all such
holder's rights under such Company Options and release the Company and each of
its successors and affiliates (including Parent and Buyer) of any further
liability thereunder.
VI.2 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Closing to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as Parent may reasonably request
subject to reasonable limits on access to the Company's source codes. No
information or knowledge obtained in any investigation pursuant to this Section
6.2 shall affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
transactions contemplated hereby.
VI.3 Confidentiality. Each of the parties hereto hereby agrees to
keep confidential such information or knowledge obtained in any investigation
pursuant to Section 6.2, or pursuant to the negotiation and execution of this
Agreement or the effectuation of the transactions contemplated hereby; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) becomes known to the
public through no fault of
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such party, (d) is later lawfully acquired by such party from other sources, (e)
is required to be disclosed by order of court or government agency with subpoena
powers or (f) which is disclosed in the course of any litigation between any of
the parties hereto.
VI.4 Expenses
(a) If the Purchase is not consummated, all fees and expenses
incurred in connection with the Purchase, including without limitation, all
legal, accounting, financial advisory, consulting, brokerage and all other fees
and expenses of third parties ("Third Party Expenses") incurred by Parent and
Buyer, on the one hand, or by the Company or any Beneficial Holder, on the other
hand, in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby shall be
the obligation of the respective party incurring such fees and expenses.
(b) Contemporaneously with the Closing, Buyer shall cause the
Company to pay all Third Party Expenses of the Company or any Beneficial Holder
(subject to the delivery to Buyer and Parent of reasonably detailed invoices for
such Third Party Expenses). To the extent that the Direct Holder determines that
any such Third Party Expenses have not been finally submitted or are incomplete
or in dispute, such Third Party Expenses shall not be paid on Closing. Rather,
Parent and the Direct Holder shall reasonably estimate the amount of such Third
Party Expenses and cooperate to establish an escrow as security for such
expenses. Funds shall be released from such escrow to satisfy such Third Party
Expenses as directed by Direct Holder. Any remaining funds after settling all
outstanding Third Party Expenses, together with accrued interest, shall be paid
ratably to the former holders of Common Shares outstanding as of the Closing, in
accordance with the number of Common Shares held by such persons as of the
Closing. The Company Purchase Price will be adjusted downward to reflect the
amount of the escrow contemplated by this section.
VI.5 Public Disclosure. Unless otherwise required by law
(including, without limitation, provincial, federal and state securities laws)
or, as to Parent, by the rules and regulations of the National Association of
Securities Dealers, Inc., prior to the Closing, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made by
any party hereto unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld.
VI.6 Consents. The Company and each Beneficial Holder shall use
commercially reasonable efforts to obtain the consents, waivers and approvals as
may be required in connection with the Purchase (all of which consents, waivers
and approvals are set forth in Schedule 2.4) so as to preserve all rights of and
benefits to the Company under such contracts or to consummate the transactions
contemplated hereby, and shall use commercially reasonable efforts to obtain all
necessary consents, waivers and approvals under any of its material contracts in
connection with the transactions contemplated hereby for the assignment thereof
or otherwise. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
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opinions and proposals made or submitted by or on behalf of any party hereto in
connection with the foregoing.
VI.7 Legal Requirements. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use its reasonable
efforts to take promptly, or cause to be taken, all reasonable best actions, and
to do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that neither Parent nor Buyer shall be required to
agree to any divestiture by Parent, Buyer or the Company, or any of Parent's
subsidiaries or affiliates, of shares of capital stock or of any business,
assets or property of Parent or Buyer or their subsidiaries or affiliates or the
Company or its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
VI.8 Notification of Certain Matters. The Company shall give prompt
notice to Buyer and Parent, and Buyer and Parent shall give prompt notice to the
Company and each Beneficial Holder, of (i) the occurrence or non-occurrence of
any event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of any such party contained in this Agreement to be
untrue or inaccurate at or prior to the Closing and (ii) any failure of any such
party, as the case may be, 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 6.8 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
VI.9 Certain Benefit Plans. Following the Closing, Parent and Buyer
shall take such reasonable actions as are necessary to allow eligible employees
of the Company and its subsidiaries (to the extent permitted by applicable law)
to participate in the employee benefit programs of Parent, or alternative
employee benefits programs substantially comparable to those applicable to
employees of Parent on similar terms, as soon as practicable after the Closing.
For purposes of determining a person's eligibility to participate in the
employee benefit programs of Parent, eligibility for benefit forms and subsidies
and the vesting of benefits under such plans, and for purposes of accrual of
benefits under any severance, sick leave, vacation and other similar programs of
Parent (if any), Parent shall give effect to years of service with the Company
and its subsidiaries as if such person was an employee of Parent.
VI.10 Additional Documents and Further Assurances. Each party
hereto, at the request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
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VI.11 Section 116 Certificate. JS shall deliver to the Buyer and
the Parent, at the Closing, a certificate certifying that JS is not a
non-resident of Canada for the purposes of the Income Tax Act (Canada) and the
Direct Holder shall deliver the Section 116 Certificate, failing which the
provisions of Section 1.3(c) shall apply.
VI.12 Non-Competition Agreements. Each of the Company and JS will
use its best efforts to deliver or cause to be delivered to Parent prior to the
Closing Date from each person identified on Schedule 6.12(b), an executed
Non-Solicitation and Noncompetition Agreement substantially in a form to be
mutually agreed upon by Parent and the Direct Holder (each, a "Non-Competition
Agreement"), each of which shall be in full force and effect as of the Closing
Date.
ARTICLE VII
CONDITIONS TO THE PURCHASE
VII.1 Conditions to Obligations of Each Party to Effect the
Purchase. The respective obligations of each party to this Agreement to effect
the Purchase or the Amalgamation contemplated by Section 9.1 shall be subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Purchase or the Amalgamation
contemplated by Section 9.1 shall be in effect.
(b) Canadian Filings. The parties each shall have filed all
notices and information (if any) required under (i) the Investment Canada Act
(Canada) and shall have received a notice (if required) from the responsible
Minister under the Investment Canada Act (Canada) that he is satisfied or deemed
to be satisfied that the transactions contemplated by this Agreement are likely
to be of net benefit to Canada, and (ii) Part IX of the Competition Act (Canada)
and the applicable waiting period shall have expired.
(c) Escrow Agreements. The Escrow Agreement (as defined in
Section 8.2) and the Tertiary Escrow Agreement (as defined in Section 8.2 and in
a form acceptable to Parent and the Direct Holder) shall have been executed by
the parties thereto and shall be in full force and effect.
VII.2 Additional Conditions to Obligations of the Beneficial
Holders. Additional Conditions to Obligations of the Beneficial Holders. The
obligations of the Beneficial Holders to consummate the Purchase or the
Amalgamation contemplated by Section 9.1 shall be subject to the
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satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by the Beneficial Holders:
(a) Representations and Warranties. The representations and
warranties of Parent and Buyer contained in this Agreement shall be true and
correct in all material respects (except for those representations and
warranties which are by their terms qualified by a standard of materiality,
which representations and warranties shall be true in all respects) on and as of
the Closing Date, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Closing Date; and the Company
shall have received a certificate to such effect signed on behalf of Parent and
Buyer by a duly authorized officer of Parent and Buyer.
(b) Agreements and Covenants. Parent and Buyer shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing; and the Beneficial Holders shall have received a certificate to
such effect signed on behalf of Parent and Buyer by a duly authorized officer of
Parent and by a duly authorized officer of Buyer.
(c) Legal Opinions. The Beneficial Holders shall have
received legal opinions from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to
Parent, and from local counsel to Buyer reasonably acceptable to the Direct
Holder, in forms and substance reasonably acceptable to the Direct Holder.
(d) Repayment of Indebtedness to JS. The Company's
indebtedness to JS shall have been repaid by Buyer at or immediately prior to
the Closing, which repaid indebtedness shall in no event exceed $135,000.
(e) Repayment of Indebtedness to Hongkong Bank of Canada. The
Company's indebtedness to Hongkong Bank of Canada, inclusive of principal,
interest and fees, shall have been repaid by Buyer at or immediately prior to
the Closing, which repaid indebtedness, inclusive of principal, interest and
fees, shall in no event exceed CDN $3,200,000.
VII.3 Additional Conditions to the Obligations of Parent and
Buyer. The obligations of Parent and Buyer to consummate the Purchase or the
Amalgamation contemplated by Section 9.1 shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company and the Beneficial Holders contained in this Agreement
shall be true and correct in all material respects (except for those
representations and warranties which are by their terms qualified by a standard
of materiality, which representations and warranties shall be true in all
respects) on and as of the Closing Date, except for changes contemplated by this
Agreement and except for those
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representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same force
and effect as if made on and as of the Closing Date; and Parent and Buyer shall
have received certificates to such effect signed by the trustee of the Trust, by
a duly authorized officer on behalf of each other Beneficial Holder and by JS on
his own behalf.
(b) Agreements and Covenants. The Company and each Beneficial
Holder shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing; and Parent shall have received
certificates to such effect signed by the trustee of the Trust, by a duly
authorized officer on behalf of each other Beneficial Holder and by JS on his
own behalf.
(c) Third Party Consents. Parent and Buyer shall have been
furnished with evidence satisfactory to it that the Company and the Beneficial
Holders have obtained the consents, approvals and waivers set forth in Schedule
2.4.
(d) Legal Opinions. Parent and Buyer shall have received
legal opinions from Xxxxxxx Xxxxx & Xxxxxxxxx, legal counsel to the Company, and
from local counsel to the Beneficial Holders and the Company's subsidiaries
(other than Numetrix Asia Pte. Limited (Singapore) and Numetrix GmbH
(Switzerland)), which counsel shall be reasonably acceptable to Parent, in forms
and substance reasonably acceptable to Parent.
(e) Certain Agreements. The Non-Competition Agreements shall
have been executed and delivered by the parties thereto and shall be in full
force and effect.
(f) Resignation of Officers and Directors. Except for those
persons identified with an asterisk on Schedule 7.3(f), all directors and
executive officers of the Company and each of its subsidiaries shall have
tendered their resignation effective as of the Closing.
(g) Material Adverse Effect. Since the date of the Balance
Sheet, no event or condition of any character shall have occurred that has or
could be reasonably expected to have a Material Adverse Effect on the Company;
provided, however, that if such an event or condition which is known to Parent
and Buyer has occurred that has or could be reasonably expected to have a
Material Adverse Effect on the Company and the Parent and Buyer elect to waive
the condition to closing contained in this Section 7.3(g), then Parent and Buyer
shall not be entitled to make a claim for indemnification for Losses pursuant to
Article VIII hereof solely resulting from such event or condition.
(h) Delivery of Purchased Shares. Certificates representing
all Purchased Shares shall have been delivered to Buyer, duly endorsed for
transfer.
(i) Audited 1999 Financial Statements. At least five days
prior to the Closing Date, the Company shall have delivered to Parent and Buyer
the audited financial statements referred to in Section 2.5 which satisfy the
requirements set forth in such section.
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(j) HSBC Waiver and Release. HSBC shall have executed a
Waiver as contemplated by Section 6.1(b) in respect of the Warrant, and such
Waiver shall be in full force and effect.
(k) HSBC Engagement Letter. HSBC shall have executed a waiver
and general release in favor of the Company in respect of all claims it may have
under the HSBC Engagement Letter.
(l) Exercise of Certain Company Options. The persons
identified on Schedule 6.1(c) shall have exercised the Company Options held by
such persons and identified on such schedule, and shall have been issued the
underlying Common Shares upon such exercise.
ARTICLE VIII
INDEMNIFICATION; ESCROW
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
VIII.1 Indemnification. Subject to Section 8.3, each Beneficial
Holder other than JS jointly and severally agrees, and JS severally agrees, to
indemnify and hold Buyer, its officers, directors, and affiliates (including
Parent and, after the Closing, the Company) harmless for, from and against any
claims, losses, liabilities, damages, deficiencies, costs and expenses (after
taking into account any insurance proceeds from the Company's insurance policies
currently in effect), including reasonable attorneys' fees and expenses, and
expenses of investigation and defense (hereinafter individually a "Loss" and
collectively "Losses") incurred by Buyer, its officers, directors, or affiliates
(including Parent and, after the Closing, the Company) directly or indirectly
(i) as a result of any inaccuracy or breach of a representation or warranty of
the Company, the Direct Holder or any other Beneficial Holder contained in this
Agreement, or any failure by the Company, the Direct Holder or any other
Beneficial Holder to perform or comply with any covenant contained in this
Agreement, (ii) in connection with the acquisition of the Other Securities,
including without limitation (A) any and all costs and expenses incurred in
connection with the surrender, cancellation, conversion or other transaction
effecting the extinguishment of Convertible Securities (other than any amounts
actually paid to the holders thereof, which amounts are covered in clause (B)
below), (B) subject to Section 8.7, any amounts actually paid to the holders of
the Convertible Securities in connection with such surrender, cancellation,
conversion or other transaction, (C) any and all costs and expenses incurred in
connection with any amalgamation or other subsequent transaction involving the
Company which may be required to acquire all of the Other Common Shares (other
than any amounts actually paid to the holders thereof, which amounts are covered
in clause (D) below), and (D) subject to Section 8.7, any amounts by which the
purchase price per share of such Other Common Shares exceeds the Per Share
Purchase Price and any amounts by which the price per share paid to purchase
Other Common Shares of dissenting shareholders in respect of such amalgamation
or subsequent transaction exceeds the Per Share Purchase Price, or (iii) in
connection with any amounts referred to
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in Section 1.3(a)(ii)(B) which in the future become payable; provided, however,
that the aggregate liability of all Beneficial Holders under this Section 8.1
shall not exceed 50% of the Company Purchase Price; and, provided further, that
JS shall have no liability until the Primary Escrow Fund and the Tertiary Escrow
Fund have been depleted or are no longer available. Any liability in excess of
the amounts available from the Primary Escrow Fund and the Tertiary Escrow Fund
shall be allocated among JS, on the one hand, and all other Beneficial Holders
as a group, on the other hand, in the proportion that CDN $4,687,500 bears to
the Direct Holder Purchase Price, provided that the aggregate liability of JS
shall be limited to CDN $2,343,750, and any remaining liabilities otherwise
allocable to JS in accordance with the above formula shall become the joint and
several liabilities of the other Beneficial Holders. Notwithstanding the
foregoing, in the event the Loss or Losses incurred by Buyer, its officers,
directors, or affiliates (including Parent and, after the Closing, the Company)
result, directly or indirectly, from a breach of any representations or
warranties relating to title to the Purchased Shares being valid or marketable,
or the ability to pass valid and marketable title to such securities, free and
clear of all liens and encumbrances, to Buyer, then the liability of the
Beneficial Holders (other than JS) hereunder with respect to such Loss or Losses
may exceed 50% of the Company Purchase Price, but shall in no event exceed the
Company Purchase Price. Any liability of the Beneficial Holders pursuant to this
section may be satisfied out of the Primary Escrow Fund (as defined in Section
8.2), and may also be satisfied out of the Tertiary Escrow Fund (as defined in
Section 8.2), but only to the extent that the remaining funds in the Primary
Escrow Fund are insufficent to satisfy such liability. Any liability for claims
arising under Section 8.1(ii)(B) and 8.1(ii)(D) may be satisfied out of the
Secondary Escrow Fund, and, in circumstances described in the last sentence of
Section 8.2(b)(ii), out the Primary Escrow Fund (or, if such escrow is
insufficient, the Tertiary Escrow Fund). Buyer, the Beneficial Holders and the
Company each acknowledge that such Losses, if any, would relate to unresolved
contingencies existing at the Closing, which, if resolved at the Closing, would
have led to a reduction in the Company Purchase Price. Nothing herein shall
limit the liability of the Company for any breach of any representation,
warranty or covenant if the Purchase does not close.
VIII.2 Escrow Arrangements.
(a) Primary Escrow. At the Closing, as partial security
for the indemnity provided in Section 8.1, the Direct Holder will be deemed to
have received and deposited, without any action, and the Buyer will deposit, the
Primary Escrow Amount with an institution acceptable to Buyer and the Direct
Holder as escrow agent (the "Escrow Agent"), such deposit to constitute an
escrow fund (the "Primary Escrow Fund") to be governed by the terms of the
escrow agreement in substantially the form attached hereto as Exhibit A (the
"Escrow Agreement"). The Direct Holder, Parent and the Escrow Agent shall
execute the Escrow Agreement immediately prior to the Closing. Payment to the
Direct Holder of the amounts placed in escrow shall be contingent upon the
occurrence or nonoccurrence of those certain events and circumstances as are
more fully set forth in the Escrow Agreement.
(b) Secondary Escrow.
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(i) Establishment of Escrow. At the Closing, as partial
security for the indemnity provided in Section 8.1 for claims arising under
clause (ii)(B) thereof, the Direct Holder will be deemed to have received and
deposited, without any action, and Buyer will deposit, the Secondary Escrow
Amount with the Escrow Agent, such deposit to constitute an escrow fund (the
"Secondary Escrow Fund") to be governed by the terms of the Escrow Agreement.
(ii) Periodic Distributions. Upon the surrender,
cancellation, extinguishment or conversion of any Convertible Securities, there
shall be released from the Secondary Escrow (i) to the Buyer an amount equal to
any payment made to the holder of such Convertible Securities in connection with
such surrender, cancellation, extinguishment or conversion (each such payment, a
"Settlement Payment"), and (ii) to the Direct Holder an amount, if any, by the
which product of (x) the aggregate number of shares issuable upon exercise or
conversion of such Convertible Securities and (y) $1.80 (such product, the
"Permitted Amount") exceeds the Settlement Payment made in respect of such
Convertible Securities. In the event that the Settlement Payment made in respect
of such Convertible Securities exceeds the Permitted Amount, the Escrow Agent
shall, notwithstanding the deductible provided for in Section 8.3, release to
the Buyer from the Primary Escrow Fund, or to the extent such escrow is
insufficient, from the Tertiary Escrow Fund, an amount equal to the amount of
such excess.
(c) Tertiary Escrow. At the Closing, as partial security for
the indemnity provided in Section 8.1, the Direct Holder will be deemed to have
received and deposited, without any action, and the Buyer will deposit, the
Tertiary Escrow Amount with an institution selected by Buyer and located, at the
election of the Direct Holder, in either the Cayman Islands, Guernsey or the
Bahamas, as escrow agent (the "Tertiary Escrow Agent"), such deposit to
constitute an additional escrow fund (the "Tertiary Escrow Fund") to be governed
by the terms of an escrow agreement in a form to be negotiated by the parties
(the "Tertiary Escrow Agreement"), and which shall include provisions acceptable
to both Parent and the Direct Holder to the general effect that:
(i) Buyer shall pay all reasonable expenses and fees of
the Tertiary Escrow Agent;
(ii) the Direct Holder may direct the investment of the
Tertiary Escrow Fund, subject to reasonable limitations similar to those now
imposed upon investments by the Trust;
(iii) the Direct Holder may direct the Tertiary Escrow
Agent to pay to any third party (an "Escrow Assignee") any distribution
otherwise payable to the Direct Holder, provided that such direction does not
have an adverse effect upon Parent or Buyer or their respective rights; and
(iv) any amount in the Tertiary Escrow Fund in excess of
the Tertiary Escrow Amount may be distributed to the Direct Holder or an Escrow
Assignee promptly following request.
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The Direct Holder, Parent, Buyer and the Tertiary Escrow Agent shall execute the
Tertiary Escrow Agreement immediately prior to the Closing. Payment to the
Direct Holder of the amounts placed in escrow shall be contingent upon the
occurrence or nonoccurrence of those certain events and circumstances as will be
more fully set forth in the Tertiary Escrow Agreement.
VIII.3 Deductible. Buyer may not receive any funds pursuant to the
indemnity provided for in Section 8.1 (except pursuant to Section 8.2(b) for
claims arising under Section 8.1(ii)(B)), or from the Primary Escrow Fund or the
Tertiary Escrow Fund, until the aggregate amount of Losses exceeds $75,000
(regardless of whether such Losses result from the actions of the Direct Holder
or any Beneficial Holder, or any combination thereof), after which Buyer may
recover the amount of all Losses in excess of $75,000.
VIII.4 Survival of Representations, Warranties and Agreements;
Expiration of Indemnification Obligations. All representations, warranties,
covenants and agreements and associated indemnity obligations in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
consummation of the Purchase and shall terminate on the first anniversary of the
Closing Date; provided, however, that (i) the representations and warranties
contained in Section 2.11 and associated indemnity obligations shall terminate
on the second anniversary of the Closing Date; (ii) the representations and
warranties contained in Section 2.8 and associated indemnity obligations shall
terminate only on expiration of all applicable statutes of limitations; (iii)
the representations and warranties set forth in Section 2.2, 3.2 and 3.3 and
associated indemnity obligations shall not terminate; and (iv) the indemnity for
claims arising under Section 8.1(ii)(B) shall not terminate. Notwithstanding the
foregoing, as provided in the Escrow Agreement and the Tertiary Escrow
Agreement, the Company's obligations with respect to the Primary Escrow Fund,
the Secondary Escrow Fund and the Tertiary Escrow Fund, as applicable, shall not
terminate as to such amount that is necessary in the reasonable judgment of
Buyer to satisfy any unsatisfied claims relating to such escrowed funds.
VIII.5 Exclusive Remedy. Except for acts constituting fraud,
intentional misrepresentation or other willful misconduct, or grossly negligent
misrepresentation, the indemnification (including the Primary Escrow Fund, the
Secondary Escrow Fund and the Tertiary Escrow Fund) provided for in this Article
VIII, the Escrow Agreement and the Tertiary Escrow Agreement shall be the
exclusive remedy in respect of any matter subject to indemnification or a claim
hereunder.
VIII.6 No Company Liability. Notwithstanding any provision herein,
the inclusion of representations, warranties, covenants and obligations of the
Company herein shall be deemed for all purposes to only apply if the Closing
does not take place for any reason, and the Company shall have no liability to
any party hereunder in the event that the Closing takes place. For greater
certainty, the Beneficial Holders shall not be entitled to seek contribution or
claim any payment from the Company hereunder for any reason, including in
respect of any claims by the Parent or the Buyer in respect of alleged breaches
of representations, warranties and covenants of the
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Company hereunder (it being understood that the Beneficial Holders shall
themselves solely take responsibility for all such breaches on the terms
specified herein whether or not caused by or with the knowledge of the Company).
VIII.7 Consent Required. The indemnification provided in Section 8.1
for claims arising under Sections 8.1(ii)(B) and 8.1(ii)(D) shall not apply to
any payment made by Buyer to a holder of Other Common Shares or to a holder of
Convertible Securities unless, in either case, the Direct Holder has consented
to such payment; provided that the Direct Holder shall not unreasonably withhold
its consent to such payment. Upon the granting of such consent, Buyer and the
Direct Holder shall jointly instruct the Escrow Agent with respect to the
distributions to be made pursuant to Section 8.2(b)(ii) hereof.
ARTICLE IX
AMALGAMATION
IX.1 Shareholder Meeting.
(a) Notwithstanding the general provisions hereof, if, prior
to June 1, 1999, the Beneficial Holders have not obtained (and delivered to the
Buyer and the Parent), from each holder of Other Common Shares and each holder
of Company Options identified on Schedule 6.1(c):
(i) an executed copy of a Common Purchase Agreement (in
respect of the holders of the Other Common Shares), and
(ii) a written commitment by each holder of such Company
Options to exercise all such Company Options immediately prior to the Closing
and to sell the Common Shares issuable on the exercise of such Common Shares to
Buyer on the terms and conditions of a Common Purchase Agreement;
then:
(iii) the Beneficial Holders shall ensure that Company
sends a notice of a meeting of its shareholders (the "Meeting"), which shall be
held immediately following the Closing on the Closing Date; provided that if the
Closing has not taken place on the date set for the Meeting, the Meeting shall
be adjourned until a time immediately after the Closing; and
(iv) at the Buyer's option, the Buyer's obligations
hereunder to complete the Purchase may be assigned to a corporation to be
incorporated under the Business Corporations Act (Ontario) ("NewSub").
(b) At the Meeting, the shareholders of the Company shall
consider and vote upon a proposed amalgamation (the "Amalgamation") between the
Company and NewSub (the corporation resulting from such amalgamation being
herein referred to as "Amalco") on terms whereby:
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(i) each shareholder of NewSub receives one common
share of Amalco for each common share of NewSub previously held;
(ii) each holder of Common Shares (other than NewSub)
receives a non-voting redeemable, retractable preferred share of Amalco,
redeemable and retractable at a price per share equal to the Per Share Purchase
Price and having a paid-up capital equal to the Per Share Purchase Price; and
(iii) the shares held by NewSub in the Company shall
be cancelled.
(c) At the Closing, JS and the Direct Holder will deliver to
the Buyer proxies in favour of the Buyer's designees in respect of their
Purchased Shares for the purposes of the Meeting, which provide that such
shareholders vote in favor of the Amalgamation. Notwithstanding any other
provision hereof, it shall be a condition to the Buyer's (and NewSub's)
obligations hereunder that at the Closing the Buyer and the Parent be satisfied,
acting reasonably, that:
(i) the Meeting shall be able to be held immediately
following Closing;
(ii) the Buyer shall be entitled to vote all the
Purchased Shares at the Meeting in favour of the Amalgamation;
(iii) the Amalgamation will be able to be implemented
on the Closing Date on the terms contemplated above;
(iv) all aspects of the Amalgamation are conducted in
accordance with, or pursuant to exemptions from, all applicable corporate and
regulatory requirements, including Ontario Securities Commission Policy 9.1
("Policy 9.1"); and
(v) all approvals to the implementation of
Amalgamation are able to be obtained, whether pursuant to Policy 9.1 or
otherwise (including, without limitations, any minority approvals which may be
required pursuant to Policy 9.1).
(d) In connection with the Meeting and the proposed
Amalgamation, the parties hereto will take all such further action and to
execute such further documentation as is necessary or desirable to carry out the
purposes and intentions of this Agreement, mutatis mutandis.
IX.2 Compliance with Laws. The Beneficial Holders shall ensure that
all aspects of the Amalgamation are conducted in accordance with, or pursuant to
exemptions from, all applicable corporate and regulatory requirements, including
Policy 9.1 and that all approvals to the Amalgamation are obtained pursuant
thereto.
IX.3 Termination of Obligation. If at the Closing all of the issued
and outstanding Common Shares (together with the Common Shares issuable to the
holders of Company Options as contemplated in Section 9.1(a)(ii) hereof) are
sold to Buyer
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hereunder on the basis of a per share purchase price equal to the Per Share
Purchase Price, the Meeting will not be held.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
X.1 Termination. Except as provided in Section 10.2 below, this
Agreement may be terminated and the Purchase abandoned at any time prior to the
Closing:
(a) by mutual consent of the Parent and the Direct Holder;
(b) by Parent or the Direct Holder if: (i) the Closing has
not occurred before 5:00 p.m. (Colorado time) on June 30, 1999 (provided that
the right to terminate this Agreement under this clause 10.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Closing to occur on or
before such date); (ii) there shall be a final nonappealable order of a federal
or state court in effect preventing consummation of the Purchase; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Purchase by any Governmental Entity that would make
consummation of the Purchase illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Purchase, by any Governmental Entity, which would: (i)
prohibit Parent's, Buyer's or the Company's ownership or operation of all or any
portion of the business of the Company or (ii) compel Parent, Buyer or the
Company to dispose of or hold separate all or a portion of the business or
assets of the Company, Parent or Buyer as a result of the Purchase;
(d) by Parent if neither Parent nor Buyer is in material
breach of its respective obligations under this Agreement and there has been a
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of the Company or any Beneficial Holder and (i) such
breach has not been cured within five (5) business days after written notice to
the breaching party (provided that no cure period shall be required for a breach
which by its nature cannot be cured), and (ii) as a result of such breach the
conditions set forth in Section 7.3(a) or 7.3(b), as the case may be, would not
then be satisfied;
(e) by the Direct Holder if none of the Company or any
Beneficial Holder is in material breach of its respective obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Buyer or Parent and (i)
such breach has not been cured within five (5) business days after written
notice to the breaching party (provided that no cure period shall be required
for a breach which by its nature
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cannot be cured), and (ii) as a result of such breach the conditions set forth
in Section 7.2(a) or 7.2(b), as the case may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 10.1, it shall be sufficient for such action to be authorized by the
board of directors (as applicable) of the party taking such action.
X.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith become
void, and there shall be no liability or obligation on the part of Parent,
Buyer, the Company or any Beneficial Holder, or their respective officers,
directors, shareholders, trustees or beneficiaries, as applicable, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of Sections 6.3 and 6.4
and this Section 10.2 shall remain in full force and effect and survive any
termination of this Agreement.
X.3 Amendment. This Agreement may be amended by the parties hereto
at any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
X.4 Extension; Waiver. At any time prior to the Closing, Parent
and Buyer on the one hand, and the Company or any Beneficial Holder, on the
other, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
XI.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) upon
delivery, if delivered by hand, (b) one business day after the business day of
deposit with Federal Express or similar overnight courier, freight prepaid or
(c) one business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail, postage
prepaid, and shall be addressed:
(a) if to Parent or Buyer at any time, and to the Company
following the Closing, to:
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X.X. Xxxxxxx & Company
Xxx Xxxxxxxxxx Xxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Xx.,
Vice President, General Counsel and Secretary
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and
Xxxx & Berlis
BCE Place
Suite 1800, Box 754
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxx X. Xxxxxx
(b) if to the Company or any Beneficial Holder, prior
to the Closing, to:
Numetrix Limited
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Attention: Xxxxx X. Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000;
or, after the Closing, to JS at the address and
telephone and facsimile numbers set forth in the Escrow Agreement,
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxxxx
Scotia Plaza, Suite 2100
00 Xxxx Xxxxxx Xxxx
-00-
00
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx X. Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
XI.2 Interpretation.
(a) The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(b) Unless otherwise indicated, (i) all references herein to
"Dollars" or "$" shall refer to the lawful currency of the United States of
America, and (ii) all references herein to "CDN $" shall refer to the lawful
currency of Canada. In the event that any obligations or payments hereunder or
contemplated herein (including, without limitation, as contemplated pursuant to
Articles 8 and 9) are incurred or stated to be in Canadian dollars, such amounts
shall be converted into United States dollars on the basis the exchange rate
hereinafter set out. All payments to or from the Beneficial Holders hereunder
shall be made in United States dollars, and, without limiting the generality of
the foregoing, all claims against the amounts held pursuant to the Escrow
Agreement or the Tertiary Escrow Agreement shall be converted into, and paid in,
United States dollars. In the event that any obligations or payments hereunder
or contemplated herein are incurred or stated to be in other than Canadian or
United States dollars, such amounts shall be converted into US dollars on the
basis of the conversion rate stated in The Wall Street Journal dated as of the
date of this Agreement in the table entitled "Currency Trading."
XI.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
XI.4 Entire Agreement; Assignment. This Agreement, the Schedules
and Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof other than the Confidentiality
Agreement previously entered into between the parties; (b) are not intended to
confer upon any other person any rights or remedies hereunder; and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided, except that Parent and Buyer may assign their respective rights and
delegate their respective obligations hereunder to their respective affiliates,
provided that no such assignment shall relieve them of their liabilities
hereunder.
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XI.5 Severability. In the event that any provision of this
Agreement or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect, and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
XI.6 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
XI.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
XI.8 Arbitration.
(a) Initiation of Arbitration Proceedings.
(i) If the Parent or Buyer, on the one hand, or the
Beneficial Holders, JS or the Company, on the other hand (for purposes of this
Section 11.8, each of the foregoing groups shall be considered a single
"party"), wishes to have any matter under this Agreement arbitrated in
accordance with the provisions of this Agreement, it shall give notice to the
other party specifying particulars of the matter or matters in dispute and
proposing the name of a person it wishes to be one of three arbitrators. Within
fifteen (15) days after receipt of such notice, the other party shall give
notice to the first party proposing the name of a person it wishes to be a
second arbitrator, failing which the dispute shall be arbitrated by the first
arbitrator alone. The two persons so selected as arbitrators shall then choose a
third arbitrator. If the two persons so selected are unable to agree on the
third arbitrator, then such third arbitrator shall be selected in accordance
with the Rules of Conciliation and Arbitration of the International Chamber of
Commerce in force at the time the arbitration is initiated (the "Rules"). The
three persons so selected or the single arbitrator, as applicable, are referred
to herein as the "Arbitrators".
(ii) The arbitration shall be conducted in accordance
with the Rules.
(b) Submission of Written Statements
(i) Within thirty (30) days of the appointment of the
Arbitrators, the party initiating the arbitration (the "Claimant") shall send
the other parties (the "Respondent") a Statement of Claim setting out in
sufficient detail the facts and any contentions of law on which it relies, and
the relief that it claims.
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(ii) Within thirty (30) days of the receipt of the
Statement of Claim, the Respondent, shall send the Claimant a Statement of
Defense stating in sufficient detail which of the facts and contentions of law
in the Statement of Claim they admit or deny, on what grounds, and on what other
facts and contentions of law they rely.
(iii) Within thirty (30) days of receipt of the Statement
of Defense, the Claimant may send the Respondent a Statement of Reply.
(iv) All Statements of Claim, Defense and Reply shall be
accompanied by copies (or, if they are especially voluminous, lists) of all
essential documents on which the party concerned relies and which have not
previously been submitted by any party, and (where practicable) by any relevant
samples.
(v) After submission of all the Statements, the
Arbitrators will give directions for the further conduct of the arbitration.
(c) Meetings and Hearings.
(i) Meetings and hearings of the Arbitrators shall take
place in a location selected by the party not initiating the arbitration or in
such other place as the parties shall agree upon in writing and such meetings
and hearings shall be conducted in the English language unless otherwise agreed
by such parties and the Arbitrators. Subject to the foregoing, the Arbitrators
may at any time fix the date, time and place of meetings and hearings in the
arbitration, and will give all the parties adequate notice of these. Subject to
any adjournments which the Arbitrators allow, the final hearing will be
continued on successive working days until it is concluded.
(ii) All meetings and hearings will be in private unless
the parties otherwise agree.
(iii) Any party may be represented at any meetings or
hearings by legal counsel.
(iv) Prior to the arbitration, the parties shall
disclose and produce to each other all reasonable documents on which they intend
to rely at the arbitration hearing and all reasonable documents directly
relevant to the claims or defenses in the case. The parties shall have the
right, acting reasonably, to request the production of other specific documents
if such documents are reasonably likely to lead to the discovery of admissible
evidence, and the Arbitrators shall have the power to order production of such
documents.
(v) Prior to the arbitration, the parties shall
identify all witnesses whom they intend to call as witnesses in the arbitration.
The parties shall be entitled to depose all persons named as witnesses by the
opposing party, as well as any other individuals whom the requesting party
reasonably believes have information relevant to any claim or defense or
otherwise reasonably likely to lead to the discovery of admissible evidence, and
the Arbitrators shall have the power to order production of such documents.
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57
(vi) Each party may examine, cross-examine and
re-examine all witnesses at the arbitration.
(d) The Decision.
(i) The Arbitrators will make a decision in writing
and, unless the parties otherwise agree, will set out the facts and reasons upon
which the decision is based.
(ii) The Arbitrators will send the decision to the
parties as soon as practicable after the conclusion of the final hearing, but in
any event no later than sixty (60) days thereafter, unless that time period is
extended for a fixed period by the Arbitrators on written notice to each party
because of illness or other cause beyond the Arbitrators' control.
(iii) The decision shall be final and binding on the
Parties and shall not be subject to any appeal or review procedure provided that
the Arbitrators have followed the rules provided herein in good faith and has
proceeded in accordance with the principles of natural justice.
(iv) All aspects of the arbitration, including the
submissions of the parties and the decision of the Arbitrators, shall be
maintained on a confidential basis, except to the extent that disclosure of such
matters is required by applicable laws or the rules, policies or regulations of
applicable securities regulatory authorities.
(e) Jurisdiction and Powers of the Arbitrators.
(i) By submitting to arbitration under these Rules, the
parties shall be taken to have conferred on the Arbitrators the following
jurisdiction and powers, to be exercised at the Arbitrators' discretion subject
only to these Rules and the relevant law with the object of ensuring the just,
expeditious, economical and final determination of the dispute referred to
arbitration.
(ii) The Arbitrators shall have jurisdiction to:
(A) determine any question of law arising in the
arbitration;
(B) determine any question as to the Arbitrators'
jurisdiction;
(C) determine any question of good faith,
dishonesty or fraud arising in the dispute;
(D) order any party to furnish further details of
that party's case, in fact or in law;
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(E) proceed in the arbitration notwithstanding the
failure or refusal of any party to comply with these Rules or with the
Arbitrators' orders or directions, or to attend any meeting or hearing, but only
after giving that party written notice that the Arbitrators intend to do so;
(F) receive and take into account such written or
oral evidence tendered by the parties as the Arbitrators determine is relevant,
whether or not strictly admissible in law;
(G) make one or more interim awards;
(H) hold meetings and hearings, and make a
decision (including a final decision) as provided above in section 3(a) or
elsewhere with the concurrence of the parties thereto;
(I) order the parties to produce to the
Arbitrators, and to each other for inspection, and to supply copies of, any
documents or classes of documents in their possession or power which the
Arbitrators determine to be relevant;
(J) order the preservation, storage, sale or other
disposal of any property or thing under the control of any of the parties;
(K) make interim orders to secure all or part of
any amount in dispute in the arbitration; and
(L) award costs.
(iii) In addition, the Arbitrators shall have such
further jurisdiction and powers as may be allowed by the Rules, the Agreement
between the parties, the submission or reference to arbitration, and the laws of
any place in which the Arbitrators hold hearings or in which witnesses attend,
and of any place in which the Arbitrators give any directions or makes any
orders or any award.
(iv) Notwithstanding the parties' intention that the
Arbitrators be able to act free of Court proceedings as set forth herein, the
parties consent to the decision of the Arbitrators being entered in any Court
having jurisdiction for the purposes of enforcement. In addition, if it appears
that the Arbitrators lack the power to make effective interim awards and to
grant equitable or other special interim relief, the Arbitrators or, with the
consent of the Arbitrators, any party, may apply to an appropriate Court for
such relief and it is expressly agreed that the making of any such application
or the grant of such relief by a Court shall not be deemed to be in derogation
of the parties' intention that the dispute be the subject of final and binding
arbitration.
XI.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that
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ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
XI.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, Buyer, the Company, the Direct Holder,
Luxco, the Trust and JS have caused this Agreement to be duly executed, all as
of the date first written above.
"PARENT" "COMPANY"
X.X. XXXXXXX & COMPANY NUMETRIX LIMITED
By ---------------------------------- By ----------------------------------
Name: Name:
Title Title:
"BUYER" "DIRECT HOLDER"
X.X. XXXXXXX NOVA SCOTIA NUMETRIX HOLDINGS B.V.
COMPANY
By ---------------------------------- By ----------------------------------
Name: Name:
Title Title:
"LUXCO" "TRUSTEE"
NUMETRIX HOLDINGS S.A. ST. MICHAEL'S TRUST CORPORATION,
AS TRUSTEE OF THE SCHENGILI TRUST
By ---------------------------------- By ----------------------------------
Name: Name:
Title Title:
"JS"
-------------------------------------
Xxxxx X. Xxxxxxxxx
61
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit A Form of Escrow Agreement
vi
