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EXHIBIT 99.1
ACQUISITION AGREEMENT
dated as of the 28th day of June, 2000
Among
CERTAIN SHAREHOLDERS OF FASTLANE TECHNOLOGIES INC.
as Key Shareholders
- and -
XXXXXX X. XXXX
as the Shareholders' Agent
- and -
FASTLANE TECHNOLOGIES INC.
as the Company
- and -
881229 ALBERTA LTD.
as Purchaser
- and -
QUEST SOFTWARE, INC.
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TABLE OF CONTENTS
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ARTICLE 1 INTERPRETATION................................................... 2
1.1 Definitions................................................. 2
1.2 Schedules................................................... 11
1.3 Construction................................................ 11
ARTICLE 2 THE OFFER........................................................ 12
2.1 The Offer................................................... 12
2.2 Company Approval of the Offer............................... 13
2.3 Condition Precedent to the Offer............................ 13
2.4 Company Co-operation........................................ 13
2.5 Post-Offer Covenants........................................ 14
ARTICLE 3 PURCHASE PRICE................................................... 14
3.1 Purchase Price.............................................. 14
3.2 Allocation of Purchase Price................................ 14
3.3 Closing Payment and Delivery of Exchangeable Shares......... 15
3.4 S. 85(1) Election........................................... 15
ARTICLE 4 INTERIM MATTERS.................................................. 16
4.1 General Maintenance......................................... 16
4.2 Restricted Activities....................................... 17
4.3 Interim Monitoring.......................................... 19
4.4 Employee Matters............................................ 20
4.5 Facilitation................................................ 20
4.6 Breach of Representations and Warranties.................... 20
4.7 Requisite Approvals; Reasonable Efforts..................... 20
4.8 Exclusivity................................................. 20
4.9 Covenants of the Key Shareholders........................... 21
ARTICLE 5 DUE DILIGENCE.................................................... 22
5.1 Access to Assets and Information............................ 22
5.2 Effect of Due Diligence..................................... 22
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TABLE OF CONTENTS
(continued)
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ARTICLE 6 COMPLETION....................................................... 22
6.1 Closing..................................................... 22
6.2 Company's Deliveries........................................ 22
6.3 Key Shareholders' Deliveries................................ 23
6.4 Purchaser's Deliveries...................................... 24
6.5 Purchaser's and Key Shareholders' Conditions Precedent...... 24
6.6 Purchaser's Conditions Precedent............................ 25
6.7 Key Shareholders' Conditions Precedent...................... 28
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 29
7.1 Corporate Status; Enforceability............................ 29
7.2 Capitalization.............................................. 31
7.3 No Conflict................................................. 32
7.4 Cultural Business........................................... 32
7.5 Subsidiaries................................................ 32
7.6 Financial Statements........................................ 33
7.7 Absence of Certain Changes.................................. 33
7.8 Properties.................................................. 35
7.9 Accounts Receivable......................................... 35
7.10 Indebtedness................................................ 36
7.11 Litigation.................................................. 36
7.12 Employees and Employee Benefit Plans........................ 36
7.13 Insurance................................................... 37
7.14 Contracts and Permits....................................... 38
7.15 Corporate Records........................................... 39
7.16 Powers of Attorney; Bank Accounts........................... 39
7.17 Environmental Matters....................................... 40
7.18 Affiliate Relationships..................................... 40
7.19 No Termination of Business Relationship..................... 40
7.20 Compliance with Law; Requisite Approvals.................... 41
7.21 Intellectual Property....................................... 41
7.22 Brokers or Finders.......................................... 46
7.23 Taxes....................................................... 46
7.24 No Undisclosed Liabilities.................................. 47
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TABLE OF CONTENTS
(continued)
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7.25 Change of Control Payments.................................. 47
7.26 Workers' Compensation....................................... 48
7.27 Stock Rights................................................ 48
7.28 U.S. Antitrust Laws......................................... 48
7.29 Disclosure.................................................. 48
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE KEY SHAREHOLDERS........... 48
8.1 Representations and Warranties of Each Key Shareholder...... 48
8.2 Representations and Warranties of Key Shareholder
Corporations................................................ 50
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................. 51
9.1 Corporate Status; Enforceability............................ 51
9.2 Capitalization.............................................. 51
9.3 Exchangeable Shares......................................... 51
9.4 No Conflict................................................. 52
9.5 Governmental Approvals...................................... 52
9.6 Litigation.................................................. 52
9.7 Brokers or Finders.......................................... 52
ARTICLE 10 REPRESENTATIONS AND WARRANTIES OF QUEST.......................... 53
10.1 Corporate Status; Enforceability............................ 53
10.2 Capitalization.............................................. 53
10.3 Exchangeable Shares......................................... 53
10.4 No Conflict................................................. 54
10.5 Governmental Approvals...................................... 54
10.6 Litigation.................................................. 54
10.7 SEC Filings; Financial Statements........................... 54
10.8 Absence of Certain Changes or Events........................ 55
10.9 Brokers or Finders.......................................... 55
ARTICLE 11 INDEMNIFICATION AND ESCROW FUND.................................. 55
11.1 Indemnity and Escrow Fund................................... 55
11.2 Escrow Period............................................... 57
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TABLE OF CONTENTS
(continued)
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11.3 Claims on Escrow Fund....................................... 57
11.4 Objections to Claims........................................ 57
11.5 Attempt to Resolve Conflicts; Arbitration................... 57
11.6 Shareholders' Agent......................................... 59
11.7 Actions of the Shareholders' Agent.......................... 59
11.8 Third-Party Claims.......................................... 59
11.9 Limitations................................................. 60
11.10 Recourse.................................................... 60
ARTICLE 12 QUEST GUARANTEE; MATTERS RELATING TO REGISTRATION RIGHTS......... 61
12.1 Quest Guarantee............................................. 61
12.2 Suspension of Sales......................................... 61
12.3 Notice of Sales............................................. 61
12.4 Indemnity................................................... 62
12.5 Indemnification Procedures.................................. 63
ARTICLE 13 TERMINATION...................................................... 63
13.1 Termination................................................. 63
13.2 Non-Solicitation of Employees............................... 65
13.3 Survival of Obligations Upon Termination.................... 65
ARTICLE 14 GENERAL.......................................................... 65
14.1 Public Announcement; Disclosure............................. 65
14.2 Mutual Drafting............................................. 66
14.3 Brokers' Fees............................................... 66
14.4 Notices..................................................... 66
14.5 Transaction Expenses........................................ 66
14.6 Assignment.................................................. 67
14.7 Governing Law............................................... 67
14.8 Enurement; No Third Party Beneficiaries Rights.............. 67
14.9 Further Assurances.......................................... 67
14.10 Amendment; No Waiver........................................ 67
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TABLE OF CONTENTS
(continued)
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14.11 Non-Merger; Survival........................................ 68
14.12 Severability................................................ 68
14.13 Other Remedies.............................................. 68
14.14 Specific Performance........................................ 68
14.15 Action by Key Shareholders.................................. 68
14.16 Entire Agreement............................................ 69
14.17 Counterpart Execution.......................................S-1
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SCHEDULES
Schedule A Disclosure Schedule
Schedule B Form of Escrow Agreement
Schedule C Form of Exchangeable Share Provisions
Schedule D Form of Exchange Trust Agreement
Schedule E Form of Support Agreement
Schedule F Illustrative Example of Sections 3.2(d) and 3.2(e) Calculations
Schedule G Addresses for Notices
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT dated as of June 28, 2000,
BETWEEN:
XXXX KITCHEN, an individual residing in the City of Halifax in the
Province of Nova Scotia, XXXXX XXXXXX, an individual residing in the
City of Kanata in the Province of Ontario, ALCATEL NETWORKS
CORPORATION, a company constituted under the Canada Business
Corporations Act, 10729 NEWFOUNDLAND LIMITED, a company incorporated
pursuant to the laws of the Province of Newfoundland, and ONTARIO
TEACHERS PENSION PLAN BOARD, a non-share capital corporation governed
by the laws of the Province of Ontario
(each, individually a "KEY SHAREHOLDER" and collectively, the "KEY
SHAREHOLDERS")
- and -
XXXXXX X. XXXX, as the Shareholders' Agent
- and -
FASTLANE TECHNOLOGIES INC., a company continued under the Canada
Business Corporations Act
(the "COMPANY")
- and -
000000 XXXXXXX LTD., a company incorporated pursuant to the laws of
Alberta
(the "PURCHASER")
- and -
QUEST SOFTWARE, INC., a company incorporated pursuant to the laws of
the State of California
("QUEST")
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A. The Key Shareholders are the owners of approximately eighty-three
and nine-tenths percent (83.9%) of the issued and outstanding
shares of the capital stock of the Company; and
B. The Key Shareholders have agreed to sell and transfer, and the
Purchaser has agreed to purchase and accept, on the terms and
conditions hereinafter set forth, all of the Key Shareholders'
right, title, estate and interest in and to such shares;
Accordingly, the parties covenant and agree with one another as
follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including the recitals and the Schedules hereto:
"AFFILIATE" means, with respect to any person, any other person that is
affiliated with such person, and for the purposes of this Agreement:
(i) two persons will be considered to be affiliated with one
another if one of them controls the other, or if both of them
are controlled by a common third person, and
(ii) one person will be considered to control another person if it
has the power to direct or cause the direction of the
management and policies of the other person, whether directly
or indirectly, through one or more intermediaries or
otherwise, and whether by virtue of the ownership of shares
or other equity interests, the holding of voting rights or
contractual rights, or otherwise.
"AGREEMENT" means this Acquisition Agreement together with the
Schedules hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"ASSETS" means all of the assets and property of the Company and its
Subsidiaries, whether tangible or intangible, real or personal, and
including the Principal Assets.
"AVERAGE PRICE OF QUEST COMMON STOCK" shall be deemed to be $47 per
share of Quest Common Stock; provided that for purposes of Section
11.3(b), with respect to any day on which Escrow Shares are delivered
out of the Escrow Fund, the Average Price of Quest Common Stock means
the per share average of the closing prices of one share of Quest
Common Stock, as reported by Nasdaq over the period of twenty (20)
consecutive trading days ending on the trading day immediately
preceding such day on which Escrow Shares are so delivered.
"BUSINESS DAY" means any day of the week except Saturday, Sunday or any
statutory holiday in Ottawa, Ontario.
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"CLAIM CERTIFICATE" has the meaning given such term in Section 11.3(a).
"CLOSING" has the meaning given such term in Section 6.1.
"CLOSING DATE" has the meaning given such term in Section 6.1.
"CLOSING PAYMENT" means the cash portion of the Purchase Price payable
to the Key Shareholders in accordance with Section 3.2, as adjusted in
accordance with Section 3.3(b).
"COMPANY" has the meaning given such term in the preamble to this
Agreement.
"COMPANY BUSINESS" means the business of the Company and its
Subsidiaries, including the business of developing, distributing,
supporting and marketing Company Products.
"COMPANY OPTION VALUE" has the meaning given such term in Section
3.2(e).
"COMPANY OPTIONS" means, as of the date of determination thereof, the
unexercised options to acquire shares in the capital stock of the
Company as of such date.
"COMPANY PRODUCTS" means all software, hardware, goods and services
sold, licensed, distributed or provided by the Company or its
Subsidiaries, whether on a wholesale or retail basis, to their
respective distributors and customers, including the Company's entire
suite of directory management application software.
"COMPANY SHARES" means, as of the date of determination thereof, the
issued and outstanding shares in the capital stock of the Company as of
such date.
"COMPANY SHARES AND OPTIONS" means all of the Company Shares and
Company Options.
"COMPANY TRANSACTION EXPENSES" means any and all costs and expenses of
the Company and its Subsidiaries incurred in connection with this
Agreement and the transactions contemplated herein, including fees and
expenses of legal counsel, financial and business advisors and
accountants.
"CONFIDENTIAL DISCLOSURE DOCUMENT" means the Confidential Disclosure
Document provided to the Purchaser on June 28, 2000.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality and
Non-Disclosure Agreement dated April 13, 2000 between Quest and the
Company.
"CONTESTED DAMAGES" has the meaning given such term in Section 11.5(d).
"DAMAGES" has the meaning given such term in Section 11.1(a).
"DIRECTORS' CIRCULAR" has the meaning given such term in Section
2.2(b).
"DISCLOSURE SCHEDULE" means Schedule A.
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"EMPLOYEES" means all of the employees of the Company and its
Subsidiaries as of the date of this Agreement, as further described in
Section 7.12(a) of the Disclosure Schedule.
"ENVIRONMENTAL LAW" means any federal, provincial, local or other
statute, regulation or rule, any judicial or administrative order or
judgement or written administrative request of any Governmental
Authority, or any provision or condition of any permit, license or
other operating authorization of any Governmental Authority, applicable
to the Company or any of its Subsidiaries, the Company Business or the
Assets, and relating to protection of the environment, persons or the
public welfare from actual or potential exposure (or the effects of
exposure) to any actual or potential release, discharge, spill or
emission (whether past or present) of, or regarding the manufacture,
processing, production, gathering, transportation, use, treatment,
storage or disposal of, any chemical raw material, pollutant,
contaminant or toxic, corrosive, hazardous or non-hazardous substance
or waste.
"ESCROW AGENT" means Montreal Trust Company of Canada, in its capacity
as the Escrow Agent under the Escrow Agreement.
"ESCROW AGREEMENT" means an Escrow Agreement in the form attached
hereto as Schedule B, between Montreal Trust Company of Canada, as
escrow agent thereunder, the Purchaser and the Shareholders' Agent, as
such agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
"ESCROW FUND" has the meaning given such term in Section 11.1(b).
"ESCROW PERIOD" has the meaning given such term in Section 11.2.
"ESCROW PROPERTY" means the Escrow Shares and any other property held
in the Escrow Fund from time to time in accordance with the terms of
this Agreement and the Escrow Agreement.
"ESCROW SHARES" has the meaning given such term in Section 11.1(b).
"EXCHANGE ACT" has the meaning given such term in Section 10.7(a).
"EXCHANGE TRUST AGREEMENT" means an Exchange Trust Agreement in the
form attached hereto as Schedule D between Quest, the Purchaser and
Montreal Trust Company of Canada, as the Trustee thereunder for the
benefit of each of the Securityholders, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"EXCHANGEABLE SHARE OPTIONS" means options to acquire Exchangeable
Shares in accordance with the terms of this Agreement and the Offer.
"EXCHANGEABLE SHARE PROVISIONS" means an Amendment to the Articles of
Incorporation of the Purchaser to be in effect as of the Closing Date
and consisting of the
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Provisions Attaching to Exchangeable Non-Voting Shares in the form
attached hereto as Schedule C, as such provisions may be amended,
supplemented or otherwise modified from time to time.
"EXCHANGEABLE SHARES" means the exchangeable non-voting preferred
shares in the capital stock of the Purchaser, which shares have the
rights and conditions set forth in the Exchangeable Share Provisions.
"EXPIRY DATE" has the meaning given such term in Section 2.1(d).
"EXPIRY TIME" has the meaning given such term in the Takeover Bid
Circular.
"FINANCIAL STATEMENTS" means the audited annual consolidated financial
statements of the Company and its Subsidiaries dated as of December 31,
1999, attached as Section 7.6 of the Disclosure Schedule.
"GAAP" means generally accepted accounting principles in Canada.
"GOVERNMENTAL AUTHORITY" means any federal, provincial, state, local or
other governmental or other regulatory authority.
"HARDWARE" means all computer hardware, peripherals, machine tools,
administrative equipment, testing equipment and all other equipment
owned, leased, or used by the Company or its Subsidiaries other than
Software.
"HAZARDOUS MATERIALS" means any hazardous or toxic substances, wastes
or materials, defined as such or governed by any applicable
Environmental Law.
"INTELLECTUAL PROPERTY" means all: (i) inventions, discoveries, designs
and all improvements thereto (whether patentable or not), and all
patents, patent applications and patent disclosures and utility models,
together with all re-issuances, continuations, continuations-in-part,
revisions, extensions and re-examinations thereof; (ii) trademarks,
service marks, famous names, trade names (in each case whether
registered or not), Internet domain names and corporate names and
applications, registrations and renewals related thereto (or portions
thereof); (iii) copyrights, including moral rights, and applications,
registrations, and renewals related thereto; (iv) trade secrets,
confidential business information, know-how and any designs, methods,
processes, techniques and systems relating to know-how; (v) databases;
(vi) industrial designs; (vii) integrated circuit topographies or mask
works; and (viii) other intellectual property rights of any kind
whatsoever.
"INTERIM PERIOD" means the period from the date of this Agreement to
the earlier of the completion of the Closing and the termination of
this Agreement.
"KEY EMPLOYEES" means Jan Xxxxxxxx, Xxxx Kitchen, Xxxxx Xxxxxx, Xxxx
Xxxxxx Jauvin, Xxxxx Xxxxx, Xxxx-Xxxx Xxxxxxx, Xxx Xxxxxxx and Xxxxx
Xxxxxx.
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"KEY SHAREHOLDER" and "KEY SHAREHOLDERS" have the meanings given such
terms in the preamble to this Agreement.
"LIABILITIES" means all debts, obligations and liabilities of any
nature whatsoever (whether absolute or contingent, known or unknown,
accrued or unaccrued, or due or to become due) to which the Company or
any of its Subsidiaries is at any time subject, including all accrued
and contingent debts, obligations and liabilities in respect of Taxes,
all accrued and contingent debts, obligations and liabilities to the
past or present employees of the Company or any of its Subsidiaries or
any of them for salary, wages, bonuses, holiday pay, vacation and other
earned time off with pay and other forms of recompense or reward, and
all accrued and contingent guarantee and indemnification obligations
and other liabilities of any nature.
"LICENSED SOFTWARE" means all software that has been licensed to the
Company or its Subsidiaries and that is a component of, incorporated
in, bundled with, or specifically required to develop, modify, use or
support the Company Products, but does not include commercially
available off-the-shelf software used to support the services sold,
distributed or provided by the Company or its Subsidiaries.
"MAJORITY KEY SHAREHOLDERS" means, at the time of the determination
thereof, (i) prior to the Closing, Key Shareholders owning of record
not less than fifty-one percent (51%) of the Company Shares owned of
record by all of the Key Shareholders at such time, and (ii) after the
Closing, Key Shareholders owning of record not less than fifty-one
percent (51%) of the Escrow Shares owned of record by all of the Key
Shareholders at such time.
"MATERIAL ADVERSE EFFECT" means any change or effect that, when taken
individually or together with all other adverse changes and effects, is
or is reasonably likely to be materially adverse to: (i) the condition
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole, (ii) the operations, results of operations or prospects of the
Company and its Subsidiaries taken as a whole, (iii) the Assets, or
(iv) the Company Business.
"MATERIAL AUTHORIZATIONS" means all licences, permits, concessions,
franchises and other governmental and regulatory endorsements,
approvals and authorizations required or reasonably necessary to
conduct the Company Business, or to own, use or protect any of the
Assets, in each case in a proper, efficient and lawful manner.
"MATERIAL CONTRACTS" means, with respect to the Company and each of its
Subsidiaries:
(i) all agreements, contracts and commitments, whether written or
oral, between the Company or any of its Subsidiaries and any
party to whom the Company or such Subsidiary provides products
or services, which are either out of the ordinary course of
business consistent with past practice or involve or could
reasonably be expected to involve payments to the Company or
such Subsidiary of more than $100,000 in the aggregate during
any 12-month period;
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(ii) all agreements, contracts and commitments (except for real
property leases, equipment lease contracts, evidence of
indebtedness and insurance contracts), whether written or oral,
between the Company or any of its Subsidiaries and any party to
whom the Company or such Subsidiary is obligated, or can
reasonably be expected to be obligated, to pay more than $25,000
in the aggregate during any 12-month period;
(iii) any agreement, contract or commitment for the license of the
Company's Intellectual Property expected to involve payments to
the Company or any of its Subsidiaries of more than $50,000 in
the aggregate, including any marketing, development, sublicense,
original equipment manufacturer, reseller or other strategic
distribution agreement;
(iv) all agreements, contracts and commitments limiting or
restricting in any manner whatsoever the use by the Company or
any of its Subsidiaries of any of the Proprietary Software and
Licensed Software or the Company's Intellectual Property;
(v) all agreements, contracts and commitments containing any
covenant limiting the freedom of the Company or any of its
Subsidiaries to engage in any line of business or compete,
directly or indirectly, with any person;
(vi) all agreements, contracts and commitments containing, to the
knowledge of the Company and its Subsidiaries, any covenant
limiting the freedom of any Employee or consultant of the
Company or any of its Subsidiaries to engage in any line of
business or compete, directly or indirectly, with any person;
(vii) all agreements, contracts and commitments of indemnification or
guaranty other than the standard warranty and indemnification of
customers in the ordinary course of business consistent with
past practice;
(viii) all agreements, contracts and commitments relating to the
disposition or acquisition of (a) assets not in the ordinary
course of business consistent with past practice or (b) any
ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(ix) all Proprietary Rights Agreements;
(x) all agreements, contracts and commitments pursuant to which the
Company or any of its Subsidiaries grants exclusive rights to a
third party, including those granting exclusive territories for
the distribution of the Company Products or exclusive use of any
Intellectual Property of the Company;
(xi) all agreements, contracts and commitments relating to source
code, including any source code escrow agreements;
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(xii) all agreements, contracts and commitments pursuant to which any
person grants rights to the Company or any of its Subsidiaries
relating to any Licensed Software required to operate the
Proprietary Software or the Company Products;
(xiii) all agreements, contracts and commitments with any present or
former employee or consultant relating to severance payments
that become payable as a result of the consummation of the
transactions contemplated hereunder; and
(xiv) any other agreements, contracts or commitments, the loss of
which, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
"NASDAQ" means the Nasdaq National Market or, if the shares of Quest
Common Stock are not then quoted on the Nasdaq National Market, such
other stock exchange or automated quotation system on which the shares
of Quest Common Stock are listed or quoted.
"NON-KEY SHAREHOLDERS" means all of the owners of any of the Company
Shares and Options other than the Key Shareholders.
"OFFER" has the meaning given such term in Section 2.1(a).
"OPTION EXCHANGE RATIO" means the quotient obtained by dividing (i) an
amount equal to the Purchase Price divided by the Average Price of
Quest Common Stock by (ii) the aggregate number of Company Shares and
Options.
"PERMITTED ENCUMBRANCES" means the liens, security interests and other
encumbrances created pursuant to any of the following:
(i) the General Security Agreement dated December 12, 1996, as
it relates to the Offer of Credit Facilities from the Royal
Bank of Canada set out in the correspondence dated May 26,
1999, in favour of the Royal Bank of Canada;
(ii) the Demand Debenture dated April 21, 1997 in the amount of
$10,000,000 payable to Newbridge Networks Corporation (now
Alcatel Networks Corporation); and
(iii) leases for equipment entered into in the ordinary course of
business consistent with past practice;
in each case as it exists as of the date hereof without any amendments
or modifications thereto.
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"PRINCIPAL ASSETS" means the Intellectual Property, Software, Hardware
and any other asset or property owned by the Company or any of its
Subsidiaries that is or is reasonably likely to be material to the
Company Business.
"PROPRIETARY RIGHTS AGREEMENT" means any agreement or contract with, or
commitment of, any present or former employee or consultant of the
Company or any of its Subsidiaries relating to non-disclosure,
confidentiality, assignment of inventions or proprietary rights,
non-competition and/or non-solicitation.
"PROPRIETARY SOFTWARE" means all software assigned to, owned by or
created by or for the Company, including all software listed as
proprietary software in Section 7.21 of the Disclosure Schedule and all
derivative works from, and modifications and developments of, Licensed
Software that are owned by the Company or its Subsidiaries as provided
for in the Licensed Software licenses.
"PURCHASE PRICE" has the meaning given such term in Section 3.1(a).
"PURCHASER" has the meaning given such term in the preamble to this
Agreement.
"QUEST" has the meaning given such term in the preamble to this
Agreement.
"QUEST COMMON STOCK" means the common stock of Quest.
"QUEST SEC REPORTS" has the meaning given such term in Section 10.7(a).
"RECENT SEC REPORTS" has the meaning given such term in Section
10.7(a).
"REGISTRABLE SECURITIES" has the meaning given such term in the
Exchange Trust Agreement.
"REGISTRATION STATEMENT" has the meaning given such term in the
Exchange Trust Agreement.
"REQUISITE APPROVALS" means all consents, approvals and authorizations
of any nature whatsoever required to be obtained in connection with the
sale and transfer of the Company Shares and Options to the Purchaser
pursuant hereto and to the Offer and all other transactions
contemplated hereunder, including the issuance of the Exchangeable
Shares and the issuance of the shares of Quest Common Stock for which
such Exchangeable Shares are exchangeable.
"SEC" has the meaning given such term in Section 10.7(a).
"SECURITIES ACT" has the meaning given such term in the Exchange Trust
Agreement.
"SECURITYHOLDERS" means, collectively, the Key Shareholders and the
Non-Key Shareholders.
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"SHARE EXCHANGE RATIO" means the quotient obtained by dividing the
aggregate number of Exchangeable Shares to be issued as determined in
accordance with Section 3.2(a) by the number of Company Shares.
"SHAREHOLDERS' AGENT" has the meaning given such term in Section
11.6(a).
"SHAREHOLDERS' SOLICITORS" means Xxxxxx Xxxxxx Xxxxxxx LLP.
"SOFTWARE" means all of the computer software programs (or portions
thereof) and all components thereof, including Proprietary Software and
Licensed Software and all related source and object codes, related
documentation, and all derivatives and versions thereof, including all
those in development, used, developed, marketed, distributed or
licensed by the Company or its Subsidiaries.
"SUBSIDIARY" means, with respect to any person, any corporation,
association or other business entity of which more than fifty percent
(50%) of the securities or other ownership interests having ordinary
voting power is, or with respect to which rights to control management
(pursuant to any contract or other agreement or otherwise) are, at the
time as of which any determination is being made, owned, controlled or
held by such person or one or more subsidiaries of such person.
"SUPPORT AGREEMENT" means a Support Agreement in the form attached
hereto as Schedule E between Quest and the Purchaser, as such agreement
may be amended, supplemented or otherwise modified from time to time.
"TAKEOVER BID CIRCULAR" has the meaning given such term in Section
2.1(b).
"TAXES" means any federal, provincial, municipal or foreign
jurisdiction taxes, or assessments in the nature of taxes, of any
nature whatsoever (including income taxes, capital taxes, sales taxes,
goods and services taxes, property taxes, social security taxes, stamp
taxes, value added taxes and use taxes), and includes any interest,
penalty or other additional obligation associated therewith.
"TRADE PAYABLES" means current trade payables incurred in the ordinary
course of business consistent with past practice.
"WARRANTY OBLIGATIONS" means all contracts, licenses, policies and
agreements, whether written or oral, wherein or whereby the Company or
any of its Subsidiaries has agreed to, or has assumed any obligation or
duty to, warrant, indemnify, reimburse, hold harmless, guarantee or
otherwise assume or incur any obligation or liability in respect of any
of the Company's products or services, or to provide a right of
rescission with respect to the infringement or misappropriation by the
Company or another person of the Intellectual Property of any person.
"YEAR 2000 COMPLIANT" means that the information technology is designed
to be used prior to, during and after the calendar year 2000 A.D., and
the information technology used during each such time period will
accurately receive, provide and process date/time data (including
calculating, comparing and sequencing) from, into and between the 20th
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and 21st centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function, or provide
invalid or incorrect results as a result of date/time data, to the
extent that other information technology, used in combination with the
information technology being acquired, properly exchanges date/time
data with it.
1.2 SCHEDULES
The following schedules are annexed to this Agreement and form a part
hereof:
Schedule A Disclosure Schedule
Schedule B Form of Escrow Agreement
Schedule C Form of Exchangeable Share Provisions
Schedule D Form of Exchange Trust Agreement
Schedule E Form of Support Agreement
Schedule F Illustrative Example of Sections 3.2(d) and 3.2(e)
Calculations
Schedule G Addresses for Notices
1.3 CONSTRUCTION
(a) In this Agreement, unless otherwise expressly stated:
(i) references to a "party" or "parties" are references to a
party or parties to this Agreement, and references to
"herein", "hereby", "hereunder", "hereof" and similar
expressions are references to this Agreement and not to any
particular Article, Section, subsection, clause or
Schedule;
(ii) references to an "Article", "Section", "subsection",
"clause" or "Schedule" are references to an Article,
Section, subsection, clause or Schedule of or to this
Agreement;
(iii) references to dollar amounts are references to United
States dollars;
(iv) words importing the singular shall include the plural and
vice versa, words importing gender shall include the
masculine, feminine and neuter genders;
(v) references to a "person" or "persons" shall include
individuals, corporations, partnerships, associations,
Governmental Authorities and other entities, all as may be
applicable in the context;
(vi) the table of contents and the use of headings is for
convenience of reference only and shall not affect the
construction or interpretation hereof;
(vii) the words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the
words "without limitation";
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(viii) where a word or phrase is defined, its derivatives or other
grammatical forms have a corresponding meaning;
(ix) "knowledge" and the phrase "to the knowledge", as the case
may be, and similar expressions shall mean and be
interpreted, with respect to any person, as being the
knowledge, information and belief of such person after
reasonable inquiry, and to the extent that such reasonable
inquiry was not conducted, to the knowledge, information
and belief that a reasonable person would have had if such
inquiry had been conducted;
(x) references to a statute, regulation or other legal
enactment include all of its amendments and re-enactments;
(xi) references to a manner of conduct include any omission,
representation, statement or undertaking, whether or not in
writing; and
(xii) time is of the essence.
(b) Applicable information disclosed with specificity on the Disclosure
Schedule with reference to any section of Article 7 or 8 of this Agreement shall
not be deemed to be disclosed under and incorporated into any other section of
Article 7 or 8 of this Agreement relating to the same subject matter unless such
other section is expressly cross-referenced where such information is disclosed.
Notwithstanding the foregoing, the mere listing by name and date of any
agreement or other document or the mere attachment of any agreement or other
document on or to the Disclosure Schedule shall not be deemed an exception to
any section of Article 7 or 8 of this Agreement unless a specific reference is
included in the Disclosure Schedule to the particular provision in such
agreement or other document that gives rise to the exception to such section of
this Agreement.
ARTICLE 2
THE OFFER
2.1 THE OFFER
(a) Subject to the terms and conditions of this Agreement, the
Purchaser shall, as soon as reasonably practicable, but not later than ten (10)
Business Days following the date of this Agreement, mail to the Securityholders
an offer to purchase all of the outstanding Company Shares and Options for the
Purchase Price (such offer, as may be amended from time to time as permitted
under this Agreement, is hereinafter called the "OFFER").
(b) The Offer shall be made in substantially the form of the Takeover
Bid Offer and Circular circulated to the parties hereto as of the date hereof
(the "TAKEOVER BID CIRCULAR").
(c) The Offer shall be subject to and only to the conditions set forth
in Sections 6.5 and 6.6. The Purchaser expressly reserves the right to modify
the terms of the Offer and to waive, in whole or in part, any condition of the
Offer except that, without the prior written consent of the Key Shareholders,
the Purchaser shall not reduce the consideration offered under
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the Offer, change the form of consideration payable under the Offer, or modify
the terms and conditions of the Offer in such a manner that makes the Offer less
favorable to the Key Shareholders.
(d) The Offer shall expire twenty-one (21) days after the date of the
mailing of the Offer (or, if such expiry date is not a Business Day, on the next
following Business Day), provided that the Offer may be extended from time to
time, at the sole discretion of the Purchaser, if the conditions thereto set
forth in Sections 6.5 and 6.6 are not satisfied on the expiry date of the Offer
(such date of expiry, as it may be extended in accordance with this Section
2.1(d), the "EXPIRY DATE"). Subject to the satisfaction or waiver of the
conditions set forth in Sections 6.5 and 6.6, the Purchaser shall within the
time periods required by law take up and pay for all Company Shares and Options
validly tendered (and not properly withdrawn) pursuant to the Offer. The
Purchaser shall use its reasonable commercial efforts to consummate the Offer,
subject only to the terms and conditions hereof.
2.2 COMPANY APPROVAL OF THE OFFER
(a) The Company represents that its board of directors, upon
consultation with its advisors, has determined at meeting held on June 28, 2000
unanimously by those in attendance that:
(i) the Offer is fair to the Securityholders; and
(ii) the board of directors of the Company will recommend that
the Securityholders accept the Offer and will approve all
transfers of Company Shares and Options in connection with
the Offer.
(b) The Company represents that its directors have advised it that on
the Closing Date they intend to tender their Company Shares and Options to the
Offer and will so represent in the Company directors' circular relating to the
Offer, which shall be in substantially the form presented to the Company board
of directors on June 28, 2000 (the "DIRECTORS' CIRCULAR").
(c) The Company shall mail the Directors' Circular to the
Securityholders on the same date that the Takeover Bid Circular is mailed to the
Securityholders.
2.3 CONDITION PRECEDENT TO THE OFFER
Notwithstanding anything else in this Agreement, the obligation of the
Purchaser to make the Offer is subject to the condition that the Purchaser shall
have no reason to believe that any of the conditions precedent set forth in
Sections 6.5 and 6.6 cannot be satisfied at or prior to the time by which each
condition is required to be satisfied.
2.4 COMPANY CO-OPERATION
The Company covenants to co-operate with the Purchaser, to take all
reasonable action to support the Offer (including providing the Purchaser with
such shareholder and optionholder lists of the Company and mailing labels as the
Purchaser may reasonably request) and to provide the Purchaser and its counsel
with draft copies of any Directors' Circular, from time to time prior to the
mailing thereof, on a confidential basis, and to provide the Purchaser and its
counsel with a reasonable opportunity to review and provide comments thereon.
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2.5 POST-OFFER COVENANTS
In the event that less than all of the Company Shares and Options have
been tendered to the Offer, the Company agrees to use all reasonable commercial
efforts to enable the Purchaser to acquire the balance of the Company Shares and
Options as soon as practicable after completion of the Offer, whether by way of
compulsory acquisition, arrangement, amalgamation or other type of acquisition
transaction. The Company agrees to use its reasonable commercial efforts, and
represents that its directors have determined unanimously to use their
respective reasonable commercial efforts, to enable the Purchaser to elect or
appoint all of the directors of Company as soon as possible following the
Closing.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE
The aggregate purchase price to be paid by the Purchaser for the
Company Shares and Options (the "PURCHASE PRICE") shall be an amount equal to
One Hundred Million Dollars ($100,000,000).
3.2 ALLOCATION OF PURCHASE PRICE
(a) The Purchase Price shall be payable in the form of cash,
Exchangeable Shares and Exchangeable Share Options. Sixty-five percent (65%)
percent of the Purchase Price shall be payable to the Securityholders in the
form of Exchangeable Shares and Exchangeable Share Options and the remaining
thirty-five percent (35%) of the Purchase Price shall be payable to the
Securityholders in the form of cash.
(b) Holders of Company Shares as of the Closing Date shall receive cash
and Exchangeable Shares in exchange for such Company Shares, and Holders of
Company Options as of the Closing Date shall receive Exchangeable Share Options
in exchange for such Company Options, all as set forth in this Section 3.2.
(c) Each Key Shareholder shall receive a percentage of the cash portion
of the Purchase Price equal to the percentage of the Company Shares owned of
record by such Key Shareholder as of the Closing Date.
(d) The aggregate number of Exchangeable Shares to be issued to the
holders of Company Shares as of the Closing Date shall be equal to the quotient
obtained by dividing (i) an amount equal to the non-cash portion of the Purchase
Price as determined in accordance with Section 3.2(a) less the Company Option
Value by (ii) the Average Price of Quest Common Stock. Each holder of Company
Shares as of the Closing Date shall be entitled to receive for such shares held
by such holder a number of Exchangeable Shares equal to the product obtained by
multiplying the number of such Company Shares held by such holder by the Share
Exchange
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Ratio. The portion of the Purchase Price attributable to the Company Shares
shall be an amount equal to the cash portion of the Purchase Price plus the
product obtained by multiplying the aggregate number of Exchangeable Shares
issued to such holders by the Average Price of Quest Common Stock.
(e) The aggregate number of Exchangeable Share Options to be issued to
the holders of Company Options as of the Closing Date shall be equal to the
product obtained by multiplying the aggregate number of Company Options as of
such date by the Option Exchange Ratio. Each holder of Company Options as of the
Closing Date shall be entitled to receive for such options held by such holder a
number of Exchangeable Share Options equal to the product obtained by
multiplying the number of such Company Options by the Option Exchange Ratio. The
portion of the Purchase Price attributable to the Company Options (the "COMPANY
OPTION VALUE") shall be an amount equal to the product obtained by multiplying
the aggregate number of Exchangeable Share Options issued to such holders by the
Average Price of Quest Common Stock. The exercise price of each Exchangeable
Share Option into which a Company Share Option is exchangeable shall be an
amount equal to the exercise price of such Company Option divided by the Option
Exchange Ratio.
(f) An example, for illustrative purposes only, of the calculations
contemplated in Sections 3.2(d) and 3.2(e) is set forth on Schedule F.
3.3 CLOSING PAYMENT AND DELIVERY OF EXCHANGEABLE SHARES
(a) Notwithstanding any of the provisions of the Offer, subject to the
provisions of Section 6.6(e)(iii), on the Closing Date, the Purchaser will
deliver to the Shareholders' Solicitors (i) the Closing Payment, by wire
transfer or other immediately available funds, and (ii) that portion of the
Exchangeable Shares allocated to the Key Shareholders.
(b) On the Closing Date, the Securityholders shall reimburse the
Purchaser for any Company Transaction Expenses in excess of $150,000 in
accordance with Section 14.5 (converted into United States dollars using the
Noon Buying Rate, as defined in the Take-Over Bid Circular, for the Business Day
immediately preceding the Closing Date), which amounts shall be reimbursed to
the Purchaser by reducing the cash portion of the Purchase Price to be delivered
to the Securityholders by such amounts; provided that in no event shall the
Purchase Price be reduced by an aggregate amount greater than one percent (1%)
of the Purchase Price as a result of such reimbursement. If the aggregate amount
of such reimbursement exceeds one percent (1%) of the Purchase Price, the
Purchaser shall have the right to terminate this Agreement by notice to the
Company and the Key Shareholders.
3.4 S. 85(1) ELECTION
The Securityholders shall be entitled to make an income tax election
pursuant to s. 85(1) of the Income Tax Act (Canada) (and with respect to any
separate election forms which may be filed with any provincial tax authority)
with respect to the sale of their Company Shares to the Purchaser by providing
two (2) duly completed and signed copies of the necessary election forms to the
Purchaser (to the attention of the President) within ninety (90) days after the
Closing Date. These forms will be signed by the Purchaser and returned to the
Securityholders for filing with the Canada Customs and Revenue Agency.
Compliance with the provisions of s. 85(1) of the Income Tax Act (Canada) and
the effect of making such elections shall be the sole responsibility and at the
sole risk of the Securityholders.
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ARTICLE 4
INTERIM MATTERS
4.1 GENERAL MAINTENANCE
Throughout the Interim Period, the Company shall, and shall cause each
of its Subsidiaries to:
(a) carry on the Company Business in the usual, regular and ordinary
course of business consistent with past practice;
(b) maintain its corporate existence and good standing under the laws
of the jurisdiction of its incorporation and maintain its qualification and good
standing and all required and appropriate licenses in each jurisdiction in which
its failure to obtain or maintain such qualification, good standing or licensing
would, individually or in the aggregate, have, or reasonably could be expected
to have, a Material Adverse Effect;
(c) maintain good relations with all of its Employees, suppliers,
customers, licensors, licensees and other business associates, and in all
respects conduct the Company Business in a proper, prudent and lawful manner, in
keeping with good industry and business practices, and with a view to the
promotion and enhancement of the goodwill of the Company and its Subsidiaries in
respect of the Company Business;
(d) maintain its books and records in keeping with GAAP, applied on a
consistent basis, and good industry and business practices;
(e) pay when due all expenses and other amounts payable by it, and
observe, perform and comply with all of its covenants, agreements and
obligations under the Material Contracts, the Material Authorizations and
otherwise;
(f) comply in all material respects with all laws, regulations,
ordinances, orders and decrees applicable to it and to the Company Business;
(g) continue to maintain full insurance coverage on the Assets and its
operations in accordance with good industry and business practices; and
(h) generally take all such other reasonable and ordinary course
actions as may be required to protect and preserve the Company Business and the
Assets and to avoid any event or occurrence that would or is reasonably likely
to result in a Material Adverse Effect.
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4.2 RESTRICTED ACTIVITIES
Throughout the Interim Period, the Company shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of the
Purchaser:
(a) enter into or engage in any transaction or activity outside of the
ordinary course of business consistent with past practice, and in the case of
the Company's Subsidiaries, engage in any business other than acting as a sales
representative office for the Company's Software;
(b) accelerate, amend or change the period of exercisability or the
vesting schedule of any options, warrants or rights to purchase the capital
stock of the Company or authorize cash payments in exchange for any such
options, warrants or rights.
(c) sell, trade, abandon, mortgage, charge or otherwise dispose of or
encumber in any manner any of the Principal Assets, other than property sold or
disposed of for a reasonable price pursuant to a bona fide arm's length
transaction in the ordinary course of business consistent with past practice;
(d) purchase or otherwise acquire any new property or assets of any
kind other than:
(i) capital property acquired in the ordinary course of business
consistent with past practice and having a cost of less than
$25,000 per item, and
(ii) office supplies and similar incidental items purchased in the
ordinary course of business consistent with past practice and
having a cost of less than $50,000 in the aggregate,
and in each case purchased or otherwise acquired for a reasonable price pursuant
to a bona fide arm's length transaction; (e) incur any Liabilities of any nature
other than Trade Payables and other Liabilities incurred in the ordinary course
of business consistent with past practice, or guarantee any indebtedness or
issue or sell any debt securities or guarantee any debt securities of others;
(f) enter into or amend any agreements pursuant to which any other
party is granted marketing, advertising or similar rights of any type or scope
with respect to any of the products or services of the Company, other than
business partnering agreements entered into by the Company in the Company's
standard form of such agreement with the Purchaser's prior written consent,
which consent shall not be unreasonably withheld;
(g) license any source code of the Proprietary Software or make any
escrow or other deposit of a copy of the source code of the Proprietary
Software;
(h) commence any litigation other than for the routine collection of
bills;
(i) terminate, surrender or amend in any material respect any of the
Material Contracts or the Material Authorizations, or enter into any new
agreement or arrangement of a material nature other than business partnering
agreements entered into by the Company in the Company's standard form of such
agreement with the Purchaser's prior written consent, which consent shall not be
unreasonably withheld;
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(j) introduce any new method of conducting the Company Business or
dealing with any of the Principal Assets;
(k) introduce any new accounting methods or any new methods of
preparing, maintaining or otherwise dealing with the books, records, accounts or
files of the Company or any of its Subsidiaries;
(l) pay or agree to pay any management fees, salaries, bonuses,
severance or termination pay or other remuneration to any of its directors,
officers, Employees, consultants, contractors or agents except as required to be
paid pursuant to the terms of contractual obligations existing as at the date of
this Agreement and expressly disclosed in Section 7.12(b) of the Disclosure
Schedule, or enter into any employment agreement, whether oral or written;
(m) terminate, amend or otherwise modify any plan for the benefit of
the Employees;
(n) transfer to any person any rights to the Principal Assets, except
for licenses to customers in the ordinary course of business consistent with
past practice;
(o) acquire or agree to acquire by merging, consolidating or entering
into a joint venture arrangement with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;
(p) declare or pay any dividends or otherwise make any distributions in
respect of any of its shares of capital stock, redeem, purchase for cancellation
or otherwise acquire or retire any of its shares of capital stock, make loans
to, or repay any portion of any indebtedness owing by it to, any of its
Affiliates, or to any person associated with any of its Affiliates;
(q) issue any shares (other than shares issued upon, and as required
by, the exercise of any Company Options set forth in Section 7.2 of the
Disclosure Schedule), warrants, Company Options or other securities, amend its
articles or by-laws, increase or decrease its paid-up capital, or pass, repeal
or amend any resolutions other than (i) those required to authorize and approve
the consummation of the transactions contemplated by this Agreement, and (ii)
those that are passed, repealed or amended in the ordinary course of business
consistent with past practice and that are not reasonably likely to result in a
Material Adverse Effect;
(r) defer the payment of any accounts payable related to the Company
Business beyond the payment deferral periods considered part of the ordinary
course of business consistent with past practice;
(s) reorganize its Assets, capital or debt or enter into any
re-organization by way of merger, amalgamation or liquidation;
(t) revalue any of its Assets, including writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
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(u) pay, discharge or satisfy any claims or Liabilities in an amount in
excess of $25,000 in the aggregate, other than the payment, discharge or
satisfaction of (i) obligations in the ordinary course of business consistent
with past practice, and (ii) Liabilities reflected or reserved against in the
Financial Statements;
(v) make any election with respect to any Taxes other than in the
ordinary course of business consistent with past practice, change any election
with respect to any Taxes, adopt any accounting method with respect to any Taxes
other than in the ordinary course of business consistent with past practice,
change any accounting method with respect to any Taxes, file any tax return
(other than any estimated tax returns, payroll tax returns or sales tax returns)
or any amendment to a tax return, enter into any closing agreement, settle any
claim or assessment with respect to any Taxes, or consent to any extension or
waiver of the limitation period, applicable to any claim or assessment with
respect to any Taxes;
(w) waive or commit to waive any rights or claims with a value in
excess of $25,000 in the aggregate, give any gifts or forgive any indebtedness
owed to the Company or any of its Subsidiaries;
(x) cancel, materially amend or renew any insurance policy other than
in the ordinary course of business consistent with past practice;
(y) 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;
(z) enter into any transactions with its officers, directors or
shareholders or any of their respective Affiliates except as contemplated in
this Agreement;
(aa) fail to pay or otherwise satisfy its material monetary obligations
as they become due, except such as are being contested in good faith;
(bb) take or fail to take any action that is reasonably likely to
result in a Material Adverse Effect; or
(cc) agree or commit to do any of the foregoing.
4.3 INTERIM MONITORING
Throughout the Interim Period, the Purchaser shall be entitled to
monitor the activities of the Company and its Subsidiaries and the operation,
management and administration of the Company Business and the Principal Assets,
and the Company shall ensure that the Purchaser is kept fully apprised of, and
is consulted on, all developments and decisions of a material nature relating to
the Company and its Subsidiaries, the Company Business or the Principal Assets.
The Company shall promptly notify the Purchaser of any event or occurrence not
in the ordinary course of business consistent with past practice, and any event
of which the Company is aware that could reasonably be expected to have a
Material Adverse Effect (even if the likelihood of such event has been disclosed
or could result from anything set forth in the Disclosure Schedule).
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4.4 EMPLOYEE MATTERS
Throughout the Interim Period, the Company shall and shall cause its
Subsidiaries to facilitate and cooperate in the conduct of all such discussions,
interviews and other communications as the Purchaser may wish to have with the
Employees or any of them.
4.5 FACILITATION
Each of the parties shall proceed reasonably, diligently and in good
faith to facilitate or secure the satisfaction of the conditions precedent set
forth in Sections 6.5, 6.6 and 6.7, to the extent that the same is within its
reasonable control, and otherwise to perform and satisfy its covenants,
agreements and other obligations hereunder with a view to completing the
purchase and sale of the Company Shares and Options pursuant hereto and to the
Offer and the other transactions contemplated hereunder and thereunder at the
times and in the manner provided herein and therein.
4.6 BREACH OF REPRESENTATIONS AND WARRANTIES
In the event of, and promptly after becoming aware of, the occurrence
or pending or threatened occurrence of any event which would cause any of the
representations and warranties contained herein not to be true and correct, the
party becoming aware of such occurrence shall give detailed notice thereof to
the other parties.
4.7 REQUISITE APPROVALS; REASONABLE EFFORTS
Subject to the terms and conditions of this Agreement, each of the
parties shall use its reasonable good faith efforts to (i) make all necessary
filings with respect to, and obtain, all Requisite Approvals required of it; and
(ii) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement as promptly as practicable,
provided that nothing in the immediately preceding clause (ii) shall obligate
any of the parties to pay any material amount of money to any third party in
order to cause the consummation of the transactions contemplated by this
Agreement if such amount is not otherwise owing to such third party. Each party,
at the reasonable request of any other party, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
4.8 EXCLUSIVITY
Unless and until this Agreement shall have been terminated pursuant to
Section 13.1, neither the Company nor any of the Key Shareholders shall,
directly or indirectly, (and each such party shall ensure that its respective
officers, directors, employees, Affiliates and legal, accounting, financial and
other advisors do not on its behalf) take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any person (other than
negotiations with the Purchaser) regarding any acquisition of the Company or any
of its Subsidiaries, any merger or consolidation with or involving the Company
or any of its Subsidiaries, or any acquisition of all or a portion of the stock
or assets of the Company or any of its Subsidiaries. The Company and the Key
Shareholders
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will notify the Purchaser immediately upon receipt by the Company, any of its
Subsidiaries or any of the Key Shareholders (or any of their respective
officers, directors, employees, shareholders, Affiliates or advisors) of any
proposal for, or inquiry respecting, any such acquisition, merger or
consolidation or any request for nonpublic information in connection with such
any proposal or inquiry relating thereto or for access to the properties, books
or records of the Company or any of its Subsidiaries by any person that informs
the Company or any of its Subsidiaries that it is considering making, or has
made, such a proposal or inquiry. Such notice to the Purchaser will be made
orally and in writing and will set forth the identity of the person making the
proposal or inquiry, and the terms and conditions of such proposal or inquiry in
reasonable detail.
4.9 COVENANTS OF THE KEY SHAREHOLDERS
(a) Subject only to the terms and conditions of this Agreement, each of
the Key Shareholders agrees:
(i) to unconditionally and irrevocably accept the Offer by
depositing the Company Shares and Options it holds to, and in
accordance with the terms and conditions of, the Offer, at
the Closing Date;
(ii) not to withdraw any of its Company Shares and Options
deposited pursuant to the Offer until August 18, 2000 if the
Closing has not been consummated on or prior to such date;
and
(iii) not to sell, assign, convey or otherwise dispose of any of
its Company Shares and Options other than pursuant to the
Offer, without the prior written consent of the Purchaser.
(b) Each of the Key Shareholders acknowledges that the Purchaser may
from time to time amend the Offer (including extending the time for deposit
under the Offer) in accordance with the terms of Section 2.1(c) of this
Agreement and the Purchaser may waive, in whole or in part, any of the
conditions in the Offer, and any such amendment or waiver shall not in any way
affect the obligations of such Key Shareholder under this Agreement.
(c) If the Key Shareholder is a director of the Company, the Key
Shareholder covenants and agrees with the Purchaser that, in the event that the
Closing occurs, the Key Shareholder shall co-operate with the Purchaser to
provide an orderly transition of control, including resigning as a director and
taking all such actions as required in order that nominees of the Purchaser are
appointed as directors of the Company in place of the existing directors.
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ARTICLE 5
DUE DILIGENCE
5.1 ACCESS TO ASSETS AND INFORMATION
Throughout the Interim Period, the Company shall:
(a) provide the Purchaser and its agents and advisors with full and
complete access to all of the Assets and the books, records, accounts, files,
software and other documentary and computer information, data and materials of
the Company and its Subsidiaries, and to all other relevant information in their
possession, to allow the Purchaser to conduct such examinations and
investigations as it considers appropriate in conjunction with the transactions
contemplated hereby;
(b) cause all of the officers, Employees, consultants, contractors,
agents and advisors of the Company and its Subsidiaries to cooperate fully with
the Purchaser in the conduct of its examinations and investigations; and
(c) facilitate and assist as required with such discussions as the
Purchaser may wish to undertake with any of the customers, suppliers, creditors
or competitors of the Company and its Subsidiaries.
5.2 EFFECT OF DUE DILIGENCE
The respective representations, warranties, covenants, agreements and
other obligations of the Company and each of the Key Shareholders hereunder
shall not in any manner be, or be deemed to be, waived or otherwise affected by
any examination, investigation or due diligence conducted by or on behalf of the
Purchaser.
ARTICLE 6
COMPLETION
6.1 CLOSING
The closing of the purchase and sale contemplated hereunder (the
"CLOSING") shall take place at 10:00 a.m. (Ottawa time) at the offices of Xxxxxx
Xxxxxx Xxxxxxx LLP, 1000 - 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxx, Xxxxxx, on the
Expiry Date (the "CLOSING DATE"), or at such other place and time, or on such
other date, as may be agreed upon by the parties to this Agreement in writing,
but in no event later than August 18, 2000.
6.2 COMPANY'S DELIVERIES
At Closing, the Company shall deliver or cause to be delivered to the
Purchaser:
(a) the Company's certificates contemplated by Sections 6.6(b),
6.6(c) and 6.6(e)(ii);
(b) the Requisite Approvals contemplated by Section 6.6(f);
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(c) all of the books, records, accounts, files, software, including
the Software, and other documentary and computer information, data and materials
of any nature of the Company and its Subsidiaries (which shall include all
corporate and financial books and records required to be maintained by either
the laws of the respective jurisdictions of incorporation of the Company and its
Subsidiaries or good business practices);
(d) valid and binding non-competition agreements, in form and
substance satisfactory to the Purchaser, duly executed by each of the Key
Employees and such other of the Employees as the Purchaser may reasonably
request;
(e) valid and binding employment agreements, in form and substance
satisfactory to the Purchaser, duly executed by each of the Key Employees and
such other of the Employees as the Purchaser may reasonably request;
(f) valid and binding Proprietary Rights Agreements, in form and
substance satisfactory to the Purchaser, duly executed by all Employees;
(g) the written resignations of each of the directors and officers
of the Company and its Subsidiaries, effective as of the Closing Date, together
with written releases, in form and substance satisfactory to the Purchaser,
releasing the Company and its Subsidiaries and the Purchaser and its Affiliates
from any liabilities or claims of any nature whatsoever that such directors and
officers might have in such respective capacities;
(h) the opinion of the Company's solicitors contemplated by Section
6.6(g);
(i) an update to Section 7.2 of the Disclosure Schedule, as
applicable, pursuant to the last sentence of Section 7.2(d), duly executed by
the Company; and
(j) a detailed list of all Company Transaction Expenses, together
with invoices and other documentation evidencing such Company Transaction
Expenses, certified by the President of the Company as being true, correct and
complete as of the Closing Date.
6.3 KEY SHAREHOLDERS' DELIVERIES
At Closing, each of the Key Shareholders shall deliver or cause to be
delivered to the Purchaser:
(a) share certificates representing the Company Shares owned by such
Key Shareholders, duly endorsed for transfer in favour of the Purchaser;
(b) such Key Shareholder's certificate contemplated by Section
6.6(e)(ii);
(c) the Escrow Agreement, duly executed by the Shareholders' Agent;
(d) the certificate contemplated by Section 6.6(e)(iii), if
applicable to such Key Shareholder; and
(e) the opinions of the Key Shareholders' solicitors contemplated by
Section 6.6(g).
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6.4 PURCHASER'S DELIVERIES
At Closing, the Purchaser shall deliver or cause to be delivered to the
Key Shareholders:
(a) the Closing Payment and the Exchangeable Shares and Exchangeable
Share Options in accordance with this Agreement and the Offer;
(b) the certificates of the Purchaser and Quest contemplated by
Section 6.7(b);
(c) the Escrow Agreement, duly executed by the Purchaser and the
Escrow Agent;
(d) a certified copy of the Articles of Incorporation of the
Purchaser containing the Exchangeable Share Provisions;
(e) the Exchange Trust Agreement, duly executed by Quest, the
Trustee and the Purchaser;
(f) the Support Agreement, duly executed by Quest and the Purchaser;
and
(g) the opinions of Quest's and the Purchaser's solicitors
contemplated by Section 6.7(d).
6.5 PURCHASER'S AND KEY SHAREHOLDERS' CONDITIONS PRECEDENT
The respective obligation of each party to effect the transactions
contemplated hereunder shall be subject to the satisfaction prior to the Closing
of the following conditions:
(a) No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereunder by any Governmental
Authority which would (i) make the consummation of any of the transactions
contemplated hereunder illegal; (ii) prohibit the Purchaser's or Quest's
ownership or operation of all or a material portion of the business or assets of
the Company and its Subsidiaries or Quest, or compel the Company, the Purchaser
or Quest to dispose of or hold separate all or a material portion of the
business or assets of the Company, the Purchaser or Quest, respectively, as a
result of the transactions contemplated hereunder; or (iii) render the Purchaser
or the Company unable to consummate the transactions contemplated hereunder.
(b) No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of the
transaction contemplated hereunder shall have been issued by any court or other
governmental entity and remain in effect, and no litigation seeking the issuance
of such an order or injunction, or seeking relief against the Company, the
Purchaser or Quest if the transactions contemplated hereunder are consummated,
shall be pending which, in the good faith judgment of the Purchaser's or Quest's
Board of Directors has a reasonable probability of resulting in such order,
injunction or relief and such relief would have a material adverse effect on the
Purchaser or Quest. In the event any such order or injunction shall have been
issued, each party agrees to use all reasonable commercial efforts to have any
such injunction lifted.
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(c) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
Governmental Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained,
other than filings and approvals relating to the transactions contemplated
hereunder or affecting the Purchaser's ownership of the Company or any of the
Assets if failure to make such filing or obtain such approval would not be
materially adverse to the Purchaser or the Company.
6.6 PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to effect the transactions contemplated
hereunder shall be subject to the satisfaction prior to the Closing of the
following conditions:
(a) The Company shall on the Closing Date have complied with its
covenants under Section 6.2 and each of the Key Shareholders shall on the
Closing Date have complied with its covenants under Section 6.3.
(b) During the Interim Period, the Company shall have complied with
its covenants, agreements and obligations herein, including those under Articles
4 and 5, and the Company shall on the Closing Date have delivered to the
Purchaser a certificate, dated as of the Closing Date, confirming such
compliance.
(c) During the Interim Period, except as shall have been approved in
writing by the Purchaser, there shall not have occurred any event or occurrence
which has had, or is reasonably likely to have, a Material Adverse Effect, and
the Company shall on the Closing Date have delivered to the Purchaser a
certificate, dated as of the Closing Date, stating that, except as has been
disclosed in writing to, and approved in writing by, the Purchaser, no such
event or occurrence has occurred during the Interim Period.
(d) During the Interim Period, there shall not have occurred:
(i) any change in the general economic conditions affecting
the Company Business that would, in the Purchaser's
reasonable opinion, constitute a Material Adverse Effect;
(ii) any material adverse change in the nature or quantum of
Taxes payable by the Company or any of its Subsidiaries
or by a non-resident shareholder of the Company or the
Purchaser under the laws of Canada;
(iii) any change in the laws of Canada relating to foreign
investment and repatriation of capital and income that
would, in the Purchaser's reasonable opinion, have a
material adverse effect on the Purchaser or Quest; or
(iv) any change or proposed change to any law, regulation or
policy (including applicable laws and regulations in
those jurisdictions in which the Company or any of its
Subsidiaries carries on business) which in either case,
in the judgment of the Purchaser has or could have a
material
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adverse effect on the completion of any compulsory
acquisition or any amalgamation, statutory arrangement or
other transaction involving the Purchaser and/or an
Affiliate of the Purchaser and the Company and/or the
holders of the Company Shares and Options for the
purposes of the Company becoming, directly or indirectly,
a wholly-owned subsidiary of the Purchaser or effecting
an amalgamation or merger of the Company's business and
assets with or into the Purchaser and/or an Affiliate of
the Purchaser.
(e) With respect to the representations and warranties of the
Company and the Key Shareholders contained in Articles 7 and 8 respectively:
(i) such representations and warranties shall be true and
correct as at the date hereof and as at the Closing Date;
(ii) the Company, in the case of Article 7, and all of the Key
Shareholders, in respect of their individual
representations in the case of Article 8, shall on the
Closing Date have delivered to the Purchaser a
certificate, dated as of the Closing Date, stating that
such representations and warranties were true and correct
as at the date hereof and are true and correct as at the
Closing Date; and
(iii) any Key Shareholder set forth in Section 8.1 of the
Disclosure Schedule pursuant to the representation and
warranty contained in Section 8.1(h) shall have provided
the Purchaser with a certificate issued pursuant to s.
116(4) of the Income Tax Act (Canada) with a certificate
limit equal to the fair market value of the consideration
to be received by such Key Shareholder from the
Purchaser. If any Key Shareholder has not given the
representation and warranty contained in Section 8.1(h),
the Purchaser shall withhold thirty-three and one-third
percent (33-1/3%) of the fair market value of the
consideration to be given to such Key Shareholder in
excess of the certificate limit of any certificate
provided to the Purchaser by the Key Shareholder on or
before Closing issued pursuant to s. 116(4) of the Income
Tax Act (Canada).
Any amounts withheld by the Purchaser pursuant to clause (iii) of
Section 6.6(e) shall be held by Xxxxxxx Xxxxx, counsel to the Purchaser
and Quest, in trust and invested in an interest bearing account for the
benefit of the affected Key Shareholder. Such amounts, but not the
accrued interest thereon, shall be remitted to the Canada Customs and
Revenue Agency on the last Business Day of the month following the
month in which the Closing Date occurs if the Purchaser has not
received the certificate issued pursuant to s. 116(4) of the Income Tax
Act (Canada) prior to such Business Day, and all accrued interest
thereon, less any applicable withholding tax, shall be released to the
Key Shareholder entitled thereto. If such certificate is received by
the Purchaser prior to such Business Day, such amounts, together with
all accrued interest thereon, less any applicable withholding tax,
shall be released to the Key Shareholder entitled thereto.
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(f) The parties shall by the Closing Date have received all
Requisite Approvals (except where the failure to obtain such Requisite Approvals
would not result, or be reasonably likely to result, in a Material Adverse
Effect or have a material adverse effect on the consummation of the transactions
contemplated hereunder) and copies thereof shall have been delivered to the
Purchaser.
(g) The Purchaser shall on the Closing Date have received opinions
of the Company's and the Key Shareholders' solicitors, dated as of the Closing
Date, in form and substance satisfactory to the Purchaser acting reasonably.
(h) The Purchaser shall have received, on or prior to the Closing
Date, the following consents to the change of control of the Company, in form
and substance satisfactory to the Purchaser, acting reasonably:
(i) the consent of Bank of Montreal, as required by the Lease
dated as of August 9, 1999, between Bank of Montreal, as
landlord, and the Company, as tenant;
(ii) the consent of Northrop Grumman Corporation as required
by the Software License Agreement dated June 25, 1996,
between Northrop Grumman, as licensee, and the Company,
as licensor;
(iii) the consent of MicroEdge, Inc. as required by the OEM
Agreement dated April 1997, between of MicroEdge, Inc.,
as supplier, and the Company, as OEM; and
(iv) the consent of Microsoft Corporation as required by the
License and Marketing Agreement dated December 13, 1999,
between Microsoft Corporation and the Company.
(i) The Nova Scotia Information Highway Investment Agreement dated
1996 between Newbridge Networks Corporation (now Alcatel Networks Corporation)
and Her Majesty the Queen in Right of the Province of Nova Scotia, which effects
and is referred to by the Funding Agreement dated December 20, 1996 between
Newbridge Networks Corporation (now Alcatel Networks Corporation) and the
Company, shall have been assigned to the Purchaser or an Affiliate of the
Purchaser and the Purchaser shall have received confirmation of the
acknowledgement and consent to such assignment, together with a waiver and
release of default, from Her Majesty the Queen in Right of the Province of Nova
Scotia, all in form and substance satisfactory to the Purchaser, acting
reasonably. In addition, the Funding Agreement dated December 20, 1996, shall
have been assigned by Alcatel Networks Corporation to the Purchaser or to an
Affiliate of the Purchaser effective as of the Closing Date, in form and
substance satisfactory to the Purchaser, acting reasonably.
(j) The Purchaser shall have received, on or prior to the Closing
Date, notification in writing from ENCON Insurance Managers Inc. confirming that
ENCON Insurance Managers Inc. has received notice in writing of the change of
control contemplated hereunder prior to the Closing Date and agrees to provide
coverage for wrongful acts occurring on and after the Closing Date, which
notification shall be in form and substance satisfactory to the Purchaser,
acting reasonably.
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(k) The Amended and Restated Shareholders' Agreement dated August
19, 1998 relating to the Company Shares held by certain of the Key Shareholders,
with a Counterpart Agreement dated August 25, 1999, shall have been terminated
on or prior to the Closing Date, and the Purchaser shall have received evidence
of such termination, in form and substance satisfactory to the Purchaser acting
reasonably.
(l) Prior to the Expiry Time, and at the time the Purchaser first
takes up and pays for Company Shares or Company Options under the Offer, there
shall have been validly deposited under the Offer and not withdrawn not less
than ninety percent (90%) of each class of the outstanding Company Shares
(calculated on a diluted basis, which for the purposes hereof shall mean all of
the outstanding Company Shares plus all Company Shares issuable upon exercise or
conversion of all Company Options and any other securities exercisable or
convertible into Company Shares in accordance with their terms at or prior to
the Expiry Time), other than Company Shares held at the date of the Offer by or
on behalf of the Purchaser or an affiliate or associate of the Purchaser.
The foregoing conditions shall be for the sole benefit of the Purchaser and may
be waived in whole or in part by the Purchaser in writing. In the event that any
of the foregoing conditions is not satisfied or waived by the Closing Date, the
Purchaser shall be entitled to terminate this Agreement by notice given to the
Company and the Key Shareholders on the Closing Date.
6.7 KEY SHAREHOLDERS' CONDITIONS PRECEDENT
The obligation of the Key Shareholders to effect the transactions
contemplated hereunder shall be subject to the satisfaction prior to the Closing
of the following conditions:
(a) The Purchaser shall on the Closing Date have complied with its
covenants under Section 6.4.
(b) The representations and warranties of the Purchaser and Quest
contained in Articles 9 and 10, respectively, shall be true and correct as at
the date hereof and as at the Closing Date, and each of the Purchaser and Quest
shall on the Closing Date have delivered to the Key Shareholders a certificate
of a senior officer of the Purchaser and Quest, respectively, dated as of the
Closing Date, stating that the representations and warranties contained in
Article 9 or Article 10, as the case may be, were true and correct as at the
date hereof and are true and correct as at the Closing Date.
(c) The representations and warranties of the Company contained in
Article 7 shall be true and correct as at the date hereof and as at the Closing
Date, and the Company shall on the Closing Date have delivered to the Key
Shareholders a certificate of a senior officer of the Company dated as of the
Closing Date, stating that the representations and warranties contained in
Article 7 were true and correct as at the date hereof and are true and correct
as at the Closing Date. The provisions of this Section 6.7(c) are subject to the
provisions of Section 11.10(b).
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(d) The Key Shareholders shall on the Closing Date have received
opinions of Quest's and the Purchaser's solicitors, dated as of the Closing
Date, in form and substance satisfactory to the Key Shareholders acting
reasonably.
(e) Quest and Xxx Xxxxxxxx, the President of the Company, shall have
agreed upon the allocation amongst some or all of the Employees of options to
purchase an aggregate of four hundred fifty thousand (450,000) shares of Quest
Common Stock, which options shall be issued under the 1999 Stock Incentive Plan
of Quest to those Employees whose employment with the Company is continuing as
of the date of such grant.
(f) The Nova Scotia Information Highway Investment Agreement dated
1996 between Newbridge Networks Corporation (now Alcatel Networks Corporation)
and Her Majesty the Queen in Right of the Province of Nova Scotia, which effects
and is referred to by the Funding Agreement dated December 20, 1996 between
Newbridge Networks Corporation (now Alcatel Networks Corporation) and the
Company, shall have been assigned to the Purchaser or an Affiliate of the
Purchaser and Newbridge Networks Corporation (now Alcatel Networks Corporation)
shall have received confirmation of the acknowledgement and consent to such
assignment, together with a release and waiver of default from Her Majesty the
Queen in Right of the Province of Nova Scotia, all in form and substance
satisfactory to Alcatel Networks Corporation, acting reasonably. In addition,
the Funding Agreement dated December 20, 1996 shall have been assigned by
Alcatel Networks Corporation to the Purchaser or to an Affiliate of the
Purchaser effective as of the Closing Date, in form and substance satisfactory
to Alcatel Networks Corporation, acting reasonably.
(g) The inter-company account between Alcatel Networks Corporation
and the Company with respect to Company payroll, consisting of such amounts as
set out in the Section 7.7(n) of the Disclosure Schedule and such other amounts
of a similar nature incurred between May 1, 2000 and the Closing Date, shall
have been settled as of the Closing Date.
The foregoing conditions shall be for the sole benefit of the Key Shareholders
and may be waived in whole or in part by the Key Shareholders in writing. In the
event that any of the foregoing conditions is not satisfied or waived by the
Closing Date, the Key Shareholders shall be entitled to terminate this Agreement
by notice given to the Purchaser and Quest on the Closing Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
7.1 CORPORATE STATUS; ENFORCEABILITY
(a) The Company is a corporation continued and validly existing under
the laws of Canada. Each of the Company's Subsidiaries is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of its
incorporation.
(b) Each of the Company and its Subsidiaries has all requisite
corporate power and authority to carry on its business as now being conducted or
currently proposed to be conducted.
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Each of the Company and its Subsidiaries is entitled to own, lease or operate
the assets now owned, leased or operated by it, and has no operations or
employees and conducts no business outside of the provinces, states and
countries listed in Section 7.1 of the Disclosure Schedule. The Company's
Subsidiaries do not own, lease or operate any assets other than office
furnishings and equipment used in the ordinary course of business and the lease
of office space for the conduct of their business. The Company's Subsidiaries do
not carry on any business other than acting as sales representative offices for
the Company's Software.
(c) Each of the Company and its Subsidiaries is qualified to do
business and has all required and appropriate licenses in each jurisdiction in
which its failure to obtain or maintain such qualification, good standing or
licensing would, individually or in the aggregate, have, or reasonably could be
expected to have, a Material Adverse Effect.
(d) The Company has all requisite corporate power and authority to
enter into this Agreement and all agreements and other documents to be entered
into in connection herewith and to consummate the transactions contemplated
hereby and thereby.
(e) All corporate action on the part of the Company and its directors
and shareholders, necessary for the authorization, execution and delivery of
this Agreement and all agreements and other documents to be entered into in
connection herewith by the Company, and the performance of the obligations of
the Company hereunder and thereunder, has been taken or will be taken prior to
the Closing Date.
(f) This Agreement and all agreements and other documents to be entered
into in connection herewith have been duly executed and delivered by, and
constitute legal, valid and binding obligations of, the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, preference and other laws relating to or affecting
enforcement of creditors' rights generally.
(g) No dissolution, winding-up, bankruptcy, liquidation or similar
proceedings have been commenced or are pending or proposed in respect of the
Company or any of its Subsidiaries.
(h) The Company is not a reporting issuer in any jurisdiction in
Canada, there is not a published or organized market in respect of the Company
Shares or the Company Options and the number of holders of Company Shares is not
more than fifty (50), exclusive of holders who are in the employment of the
Company or an Affiliate of the Company, and exclusive of holders who were
formerly in the employment of the Company or an Affiliate of the Company and who
while in that employment were, and have continued after that employment to be,
security holders of the Company. For purposes of this Section 7.1(h) only, the
term "Affiliate" shall have the meaning given such term in the Securities Act
(Ontario).
(i) Except as set forth in Section 7.1 of the Disclosure Schedule, the
Company has no Securityholders or holders of any Company Options with a
registered address in Canada which is in any province other than Ontario, Quebec
or Nova Scotia and, to the knowledge of the Company and its Subsidiaries, no
Securityholder or holder of any Company Options who is resident in Canada is a
resident of any province other than Ontario, Quebec or Nova Scotia.
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7.2 CAPITALIZATION
(a) The authorized capital stock of the Company and each of its
Subsidiaries and the issued and outstanding shares of capital stock of the
Company and each of its Subsidiaries are set forth in Section 7.2 of the
Disclosure Schedule.
(b) All of the Company Shares and Options are owned, of record, only by
the Securityholders listed in Section 7.2 of the Confidential Disclosure
Document, and Section 7.2 of the Confidential Disclosure Document sets forth a
true, correct and complete list of the name and, to the Company's knowledge,
address of each Securityholder, and the number of Company Shares and Options
held by each Securityholder, and the vesting schedules with respect to any
Company Options held by each Securityholder. All of the issued and outstanding
shares of capital stock of each of the Company's Subsidiaries are owned, of
record and beneficially, by the Company.
(c) Except as set forth in Section 7.2 of the Confidential Disclosure
Document, all of the Company Shares and the shares of capital stock of each of
the Company's Subsidiaries have been duly authorized, validly issued and are
fully paid and non-assessable, and were issued in compliance with all applicable
federal, provincial and other securities laws (including any filing, notice,
qualification or registration requirements of any Governmental Authority).
(d) Except for the Company Options and as otherwise set forth in
Section 7.2 of the Disclosure Schedule and Section 7.2(d) of the Confidential
Disclosure Document, there are no options, warrants, calls, conversion rights,
rights of exchange, or other rights, plans, agreements or commitments of any
nature whatsoever (including conversion or preemptive rights), written or oral,
granted or issued by the Company or any Subsidiary of the Company, providing for
the purchase, issuance, sale or pledge of any shares of capital stock of the
Company or any such Subsidiary or any securities convertible into or
exchangeable for any shares of the capital stock of the Company or any such
Subsidiary. Section 7.2 of each of the Disclosure Schedule and the Confidential
Disclosure Document will be updated by the Company prior to Closing to
accurately reflect all Company Shares and Options as of the Closing Date.
(e) Except as set forth in Section 7.2 of the Disclosure Schedule,
there are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of the
capital stock of the Company or such Subsidiary or make any investment (in the
form of a loan, capital contribution or otherwise) in any other entity.
(f) Except as set forth in Section 7.2 of the Disclosure Schedule,
there are no voting trusts, proxies or other agreements or understandings with
respect to the voting of the Company Shares or the shares of capital stock of
any Subsidiary of the Company.
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7.3 NO CONFLICT
Except as set forth in Section 7.3 of the Disclosure Schedule, neither
the execution and delivery of this Agreement and the other agreements and
documents to be entered into in connection herewith nor the completion of the
sale and transfer of the Company Shares and Options in accordance with the
provisions hereof and of the Offer nor the consummation of the other
transactions contemplated hereunder and thereunder will result in or constitute
any of the following:
(a) a conflict with, violation of or default under, or any event
that, with notice or lapse of time or both would be a default, breach or
violation of any provision of the articles of incorporation or by-laws,
unanimous shareholders agreement or other constating or governing corporate
document of the Company or any of its Subsidiaries, any Material Authorization
or any agreement, instrument or document to which the Company or any of its
Subsidiaries is a party or by which it is bound;
(b) an event that would permit any party to terminate any Material
Contract or to accelerate the maturity of any obligation of or permit the
subordination of any right of the Company or any of its Subsidiaries;
(c) the termination or impairment of any of the Company's
Intellectual Property;
(d) the creation or imposition of any lien, charge, interest or
encumbrance on any of the Assets or the Company Shares and Options or of any new
Liability; or
(e) a conflict with or violation or breach of any law, rule or
regulation of any Governmental Authority, or any judgment, decree, order or
injunction applicable to the Company or any of its Subsidiaries or the Assets;
or otherwise cause or could reasonably be expected to cause a Material Adverse
Effect.
7.4 CULTURAL BUSINESS
The Company Business is not a "Cultural Business" as such term is
defined in Section 14.1(6) of the Investment Canada Act, as amended.
7.5 SUBSIDIARIES
The Company has never been a subsidiary of any other entity and, except
as set forth in Section 7.5 of the Disclosure Schedule, does not currently own,
nor has it ever owned, directly or indirectly, any interest in any other
corporation, partnership, association, joint venture or other entity. Neither
the Company nor any of its Subsidiaries controls, directly or indirectly, the
management or policies of any other corporation, partnership, association, joint
venture or other entity. Section 7.5 of the Disclosure Schedule sets forth each
Subsidiary of the Company and its jurisdiction of incorporation.
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7.6 FINANCIAL STATEMENTS
(a) The internal financial books and records of the Company and its
Subsidiaries from which the Financial Statements were prepared contain all
financial information of any material nature in respect of the Company and its
Subsidiaries, the Company Business and the Assets and do not contain any
information that is false or misleading.
(b) The Financial Statements and the unaudited quarterly consolidated
financial statements of the Company and its Subsidiaries dated as of March 31,
2000, complete and correct copies of which have been delivered to the Purchaser
(i) were prepared in accordance with such books and records; (ii) were prepared
in accordance with GAAP, applied on a consistent basis throughout the periods
presented; and (iii) accurately, completely and fairly present the Assets,
Liabilities and financial position of the Company and its Subsidiaries and the
results of their operations and cash flows at the dates and for the periods
reflected therein.
(c) Except as set forth in Section 7.6 of the Disclosure Schedule, the
reserves set forth in the Financial Statements are adequate for the Company
Business in light of the contingencies with respect to which they were
established.
7.7 ABSENCE OF CERTAIN CHANGES
Since December 31, 1999, except as set forth in the Financial
Statements and in Section 7.7 of each of the Disclosure Schedule and the
Confidential Disclosure Document, and except for the transactions expressly
contemplated by this Agreement, there has not been:
(a) any event or occurrence that has or could reasonably expected to
have a Material Adverse Effect;
(b) any Company Business or other activity of the Company or any of
its Subsidiaries carried on other than in the ordinary course of business
consistent with past practice;
(c) the entering into of any agreement, commitment or transaction or
the incurrence of any Liabilities outside the ordinary course of business
consistent with past practice;
(d) any increase in the compensation paid or payable by the Company
or any of its Subsidiaries to any of its officers, directors, Employees, agents,
consultants, contractors or shareholders;
(e) any declaration, setting aside or payment of dividends or
distributions in respect of the capital stock of the Company, or any split-up or
other recapitalization in respect of the capital stock of the Company or any
direct or indirect redemption, purchase or other acquisition of any such capital
stock, or any agreement to do any of the foregoing;
(f) any Liabilities incurred by the Company or any of its
Subsidiaries in excess of $50,000 over the aggregate Liabilities reflected in
the Financial Statements;
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(g) any loan made or agreed to be made by the Company or any of its
Subsidiaries, nor has the Company or any of its Subsidiaries become liable or
agreed to become liable as a guarantor with respect to any loan or other
liability;
(h) any amendment to the articles of incorporation, bylaws or other
constating or governing documents of the Company or any of its Subsidiaries;
(i) any change in the accounting methods, practices or policies
followed by the Company or any of its Subsidiaries, whether for general
financial or Tax purposes, from those in effect during the past three fiscal
years of the Company;
(j) any sale, assignment, transfer or licensing of any interest or
rights in the Proprietary Software or the Company's Intellectual Property other
than in the ordinary course of business consistent with past practice;
(k) any purchase or other acquisition of, or any sale, lease,
disposition of, mortgage, pledge or subjection to any lien or encumbrance on,
any asset of the Company or any of its Subsidiaries, other than licenses of
products in the ordinary course of business consistent with past practice;
(l) any capital expenditures or commitments for additions to the
Assets constituting capital assets in an amount exceeding $25,000 per item;
(m) any payment, discharge or satisfaction in an amount in excess of
$25,000 in the aggregate, of any Liabilities, other than the payment, discharge
or satisfaction of (i) obligations in the ordinary course of business consistent
with past practice, and (ii) Liabilities reflected or reserved against in the
Financial Statements;
(n) any failure to pay or otherwise satisfy any Liabilities
presently due and payable except such Liabilities which are being contested in
good faith by appropriate means or proceedings and which are immaterial in
amount;
(o) any issuance of shares of capital stock of the Company or any
options, warrants, or other rights to purchase the shares of capital stock of
the Company;
(p) any actual or threatened amendment, termination or loss of any
Material Contract, any Material Authorization, or any material customer or other
revenue source;
(q) any resignation or termination of any officer, Employee or
consultant of the Company or any of its Subsidiaries, or, to the knowledge of
the Company and its Subsidiaries, any impending or threatened resignation or
termination of employment of any such officer, Employee or consultant;
(r) the entering into of any transaction with any officer, director
or shareholder of the Company or any of its Subsidiaries, other than pursuant to
any Material Contract;
(s) any change in any election in respect of Taxes, adoption or
change in any accounting method in respect of Taxes, the entering into any Tax
allocation agreement, Tax
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sharing agreement, tax indemnity agreement or closing agreement, any settlement
or compromise of any claim or assessment in respect of Taxes, or any consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes with any taxing authority or otherwise;
(t) any fact or circumstance that will or could reasonably be
expected to cause the reserves set forth in the Financial Statements to be
inadequate; or
(u) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 7.7.
7.8 PROPERTIES
Neither the Company nor any of its Subsidiaries owns or holds title to
any real property. With respect to the Assets it leases, each of the Company and
its Subsidiaries is in compliance with such leases in all material respects and
holds a valid leasehold interest in such Assets free of any liens, claims or
encumbrances of any kind whatsoever other than Permitted Encumbrances. Section
7.8 of the Disclosure Schedule sets forth: (i) a true, correct and complete
description of the Principal Assets, (ii) a true, correct and complete list of
all leases or rental contracts under which the Company or any of its
Subsidiaries is a lessee, lessor, sublessee or sublessor, and (iii) a true,
correct and complete list of all equipment used by each of the Company and its
Subsidiaries in the operation of its business which is owned or leased by the
Company or such Subsidiary and which had an original cost of $25,000 or more.
Each of the Company and its Subsidiaries has beneficial ownership of and good
and marketable title to all Assets owned by it, and such Assets are not subject
to any mortgages, liens, pledges, loans or encumbrances of any kind whatsoever
other than Permitted Encumbrances. All real and tangible personal property,
including machinery, equipment and fixtures currently used in the operation of
the Company Business is, and at the time of Closing will be, in good operating
condition and repair, ordinary wear and tear excepted, and is adequate and
suitable for the purposes for which it is presently being used. All improvements
on leased property used in the operation of the Company Business and the present
use thereof are in accordance with all applicable laws and the agreements under
which such improvements are leased. The value of any fixed asset used in the
operation of the Company Business has not been written up or down, other than
pursuant to depreciation or amortization expenses in accordance with GAAP,
applied on a consistent basis. Except as set forth in Section 7.8 of the
Disclosure Schedule, no Key Shareholder has any right, title or interest,
individually or jointly with any other person, directly or indirectly, in or to
any of the Principal Assets.
7.9 ACCOUNTS RECEIVABLE
Section 7.9 of the Disclosure Schedule sets forth (i) a true, correct
and complete list of the accounts and notes receivable of the Company and its
Subsidiaries as of the date of this Agreement (which Section 7.9 of the
Disclosure Schedule will be updated immediately prior to Closing); and (ii) a
complete and accurate schedule showing the aging of such accounts and notes
receivable. Such accounts and notes receivables arose in bona-fide, arms length
transactions in the ordinary course of business consistent with past practice
and such accounts and notes receivable (A) to the knowledge of the Company and
its Subsidiaries, are and will be
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at the Closing valid and binding obligations of the account debtors without
counterclaims, set-offs or other defenses thereto; and (B) are (except to the
extent of the reserves thereon as set forth in the Financial Statements)
collectible in the ordinary course of business consistent with past practice.
Except as set out in Section 7.9 of the Disclosure Schedule, the amounts carried
for doubtful accounts and allowances set forth in the Financial Statements are
reasonable and adequate. The values at which accounts and notes receivable are
carried on the books and records of the Company and its Subsidiaries reflect the
receivables valuation policy of the Company which is consistent with its past
practice and in accordance with GAAP, applied on a consistent basis.
7.10 INDEBTEDNESS
Section 7.10 of the Disclosure Schedule contains a true, correct and
complete list of each and every agreement or other instrument under or pursuant
to which the Company or any of its Subsidiaries has outstanding indebtedness for
borrowed money. The Company has furnished the Purchaser with true, correct and
complete copies of each such agreement and instrument, and any other agreement
or instrument pursuant to which the Permitted Encumbrances arise or were
created, including all amendments with respect thereto through the date of this
Agreement. Neither the Company nor any of its Subsidiaries is in default under
any such agreement or instrument and, to the knowledge of the Company and its
Subsidiaries, no other party to any such agreement or instrument is in default
under any such agreement or instrument.
7.11 LITIGATION
Except as set forth in Section 7.11 of the Disclosure Schedule, no
litigation, arbitration or other judicial or regulatory proceeding is pending
or, to the knowledge of the Company and its Subsidiaries, threatened by or
against the Company or any of its Subsidiaries, any of the Assets or the
officers or directors of the Company or any of its Subsidiaries before any court
or any Governmental Authority and, to the knowledge of the Company and its
Subsidiaries, no facts exist which might form the basis for any such litigation,
arbitration or other proceeding. To the knowledge of the Company and its
Subsidiaries, except as set forth in Section 7.11 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries is the subject of any
investigation for violation of any laws, regulations or administrative orders
applicable to its business by any Governmental Authority or any other person,
and no facts exist which might form the basis for any such investigation. There
is no judgment, writ, decree, injunction, rule or order of any Governmental
Authority outstanding against the Company or any of its Subsidiaries or the
Assets.
7.12 EMPLOYEES AND EMPLOYEE BENEFIT PLANS
(a) Section 7.12(a) of the Confidential Disclosure Document sets forth
a true, correct and complete listing of all of the Employees and information
with respect to each such Employee's position, salary or wage, age, sex, length
of service, benefits entitlement and accrued holiday pay or paid vacation
entitlement. Except as set out in Section 7.12(a) of the Disclosure Schedule,
the Key Employees are the only employees of the Company that participate in the
day-to-day management and operation of the Company.
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(b) Any and all employment agreements, consulting agreements,
directorship agreements, pension plan arrangements, benefits arrangements, union
contracts and other labour contracts and arrangements, and all amendments
thereto are fully and accurately described in Section 7.12(b) of the Disclosure
Schedule, and there are no employment agreements consulting agreements,
directorship contracts, pension plan arrangements, benefits arrangements,
employee stock options, stock purchase, phantom stock or stock appreciation
agreements, union contracts or other labour or personal service contracts or
arrangements of any nature whatsoever to which the Company or any of its
Subsidiaries is a party or by which it is bound other than those described in
Section 7.12(b) of the Disclosure Schedule.
(c) No trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent (i) holds bargaining rights with respect to the
Employees by way of certification, interim certification, voluntary recognition,
designation or successor rights or (ii) has applied to be certified as the
bargaining agent of the Employees.
(d) Neither the Company nor any of its Subsidiaries is involved in any
dispute, disagreement or grievance proceeding with any union or other labour
organization representing any of the Employees, and each of the Company and its
Subsidiaries has a good and friendly working relationship with all such
organizations.
(e) To the knowledge of the Company and its Subsidiaries, none of the
Employees is in violation of any term of any employment contract, or any other
contract, agreement or commitment or of any fiduciary duty, relating to the
relationship of any such Employee with the Company or any of its Subsidiaries
or, to the knowledge of the Company and its Subsidiaries, any other party
because of the nature of the Company Business.
(f) The consummation of the transactions contemplated by this Agreement
will not entitle any current or former employee or consultant of the Company or
any of its Subsidiaries to severance benefits or any other payment, or
accelerate the time of payment or vesting, or increase the amount of,
compensation due any such employee or consultant.
(g) All independent contractors of the Company and its Subsidiaries
have been properly classified and treated as independent contractors for the
purposes of all applicable laws.
(h) All salaries and wages paid by the Company and its Subsidiaries are
in compliance in all material respects with applicable laws.
7.13 INSURANCE
Section 7.13 of the Disclosure Schedule sets forth a true, correct and
complete list and summary of all policies of insurance of any nature whatsoever
maintained by the Company or any of its Subsidiaries, showing, among other
things, the amount of coverage, the company issuing the policy, the expiration
date of each policy and the amount of any premiums thereunder which are due and
payable. Such policies are in full force and effect and such policies, or other
policies covering the same risks, have been in full force and effect, without
gaps, continuously since the dates of their respective purchase. True and
correct copies of all current insurance policies of the Company and each of its
Subsidiaries have been made available to the Purchaser for inspection. Neither
the Company nor any of its Subsidiaries is in default under any of such
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policies, has not made any claim in respect of any such policies, and neither
the Company nor any of its Subsidiaries has failed to give any notice or to
present any claim under any such policy in a due and timely fashion. Neither the
Company nor any of its Subsidiaries has any knowledge of any facts concerning
the Company or any of its Subsidiaries or the Company Business, operations,
Assets or Liabilities, upon which an insurer might be justified in reducing
coverage or increasing premiums on existing policies and all such insurance
policies can be maintained in full force and effect without substantial increase
in premium or reducing the coverage thereof following the Closing. There is no
claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policy.
7.14 CONTRACTS AND PERMITS
Part I of Section 7.14 of each of the Disclosure Schedule and the
Confidential Disclosure Document set forth a true, correct and complete list of
all Material Contracts, Part II of Section 7.14 of the Disclosure Schedule sets
forth a true, correct and complete list of all Material Authorizations, and Part
III of Section 7.14 of the Disclosure Schedule sets forth a list of exceptions
to the representations and warranties set out in paragraphs (a) through (h)
below. True and complete copies of each Material Authorization and written
Material Contract and true and complete written summaries of each oral Material
Contract have been delivered to the Purchaser. Except as set forth in Part III
of Section 7.14 of the Disclosure Schedule:
(a) each of the Material Contracts is a valid, binding and
enforceable agreement of the Company and, to the knowledge of the Company and
its Subsidiaries, the other parties thereto, and will continue to be a valid,
binding and enforceable agreement of the Company and such other parties thereto
after the Closing;
(b) the Company has no reason to believe that the Company will not
be able to fulfill all of its obligations under the Material Contracts which
remain to be performed after the date hereof, and the Company has not been
notified by any Governmental Authority or other party that such Governmental
Authority or other party intends to cancel, terminate or modify any of such
Material Contracts or the basis upon which the Company is paid thereunder, and
to the knowledge of the Company and its Subsidiaries, there are no valid grounds
for any such cancellation, termination or modification;
(c) there has not occurred any default (or event which upon the
provision of notice or lapse of time or both would become such a default) under
any of the Material Contracts on the part of the Company or, to the knowledge of
the Company and its Subsidiaries, any other party thereto;
(d) the Material Contracts, together with the real property leases,
equipment lease contracts, evidence of indebtedness and insurance contracts
disclosed in Sections 7.8, 7.10 and 7.13 of the Disclosure Schedule, are all of
the agreements, contracts and commitments that are material to the Company and
necessary for the operation of the Company Business;
(e) the Material Authorizations are the only governmental and other
permits, licenses, franchises, and other certificates and authorizations that
are required for and are material to the operation of the Company Business;
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(f) the Material Authorizations are in full force and effect and the
continuing validity and effectiveness of such Material Authorizations will not
be affected by the transactions contemplated by this Agreement;
(g) the Company is in compliance in all material respects with all
conditions or requirements of the Material Authorizations, and the Company has
not been notified by any Governmental Authority that such authority intends to
cancel, terminate or modify any of such Material Authorizations, and neither the
Company nor any of its Subsidiaries knows of any valid grounds for any such
cancellation, termination or modification; and
(h) the Company is not contractually liable, nor has it made any
contract or arrangement whereby it may become liable, to any person for any
royalty or other consideration for the use of any of the Principal Assets other
than in respect of Licensed Software and other licenses of Intellectual Property
used in the ordinary course of business consistent with past practice.
7.15 CORPORATE RECORDS
The Company has provided to the Purchaser for its examination the
corporate records and minute books of the Company and each of its Subsidiaries,
which contain complete and accurate copies of:
(a) the articles of incorporation and all by-laws, unanimous
shareholder agreements and other constating or governing corporate documents of
the Company and each of its Subsidiaries;
(b) minutes of all meetings of the directors and shareholders of the
Company and its Subsidiaries held since their respective date of incorporation,
and copies of all written resolutions of the directors and shareholders of the
Company and each of its Subsidiaries passed in lieu of the holding of meetings;
(c) registers of shareholders, share transfers, directors and
officers of the Company and each of its Subsidiaries; and
(d) all other documents and information summaries of any material
nature relating to the corporate activities and status of the Company and each
of its Subsidiaries.
7.16 POWERS OF ATTORNEY; BANK ACCOUNTS
Section 7.16 of the Disclosure Schedule sets forth a true, correct and
complete list of (i) the names and addresses of all persons holding a power of
attorney on behalf of the Company or any of its Subsidiaries; and (ii) the names
and addresses of all banks or other financial institutions in which the Company
or any of its Subsidiaries has an account, deposit, or safe-deposit box, with
the number and a description of the account and the names of all persons
authorized to draw on such accounts or deposits or to have access to such boxes.
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7.17 ENVIRONMENTAL MATTERS
Neither the Company nor any of its Subsidiaries (i) has received any
notices, directives, violation reports, actions or claims from or by any
Governmental Authority concerning the Company or any of its Subsidiaries and any
Environmental Laws or any person alleging that conditions at any real properties
leased by the Company or any of its Subsidiaries have resulted in or caused or
threatened to result in or cause injury or death to any person or damage to any
property, including damage to natural resources, and, to the knowledge of the
Company and its Subsidiaries, no such notices, directives, violation reports,
actions, claims, assessments or allegations exist; (ii) throughout the period of
operation of any real properties by the Company or any of its Subsidiaries, the
Company or such Subsidiary has operated and continues to operate such real
properties in compliance with all Environmental Laws; (iii) to the knowledge of
the Company and its Subsidiaries, no underground storage tanks either are or
have been located at any of such real properties; (iv) there has been no spill,
discharge, release, contamination or cleanup of or by any Hazardous Materials
used, generated, treated, stored, disposed of or handled by the Company or any
of its Subsidiaries at such real properties and, to the knowledge of the Company
and its Subsidiaries, no spill, discharge, release, contamination, clean-up of
or by Hazardous Materials has occurred on or to such real properties by any
third party; (v) neither the Company nor any of its Subsidiaries has used,
generated, treated, stored, disposed of, handled, transported or released any
Hazardous Material in a manner which would give rise to any liability under any
Environmental Laws; (vi) there are no facts, events, or conditions (including
the generation, treatment, transport, storage, emission, disposal, release or
other placement, deposit or location of any substance) which interfere with or
prevent continued compliance by the Company or any of its Subsidiaries with, or
give rise to any present or potential liability (including with respect to past
activities) under any Environmental Laws; and (vii) each of the Company and its
Subsidiaries has obtained all applicable permits, licenses and other
authorizations which are required to be obtained under all applicable
Environmental Laws.
7.18 AFFILIATE RELATIONSHIPS
Except as set forth in Section 7.18 of each of the Disclosure Schedule
and the Confidential Disclosure Document, no officer, director or shareholder of
the Company or any of its Subsidiaries (nor any spouse of any of such persons,
or any trust, partnership or corporation in which any of such persons has or has
had an economic interest) has or has had, directly or indirectly, (i) any
interest in any entity that purchases from or sells or furnishes to the Company
or any of its Subsidiaries any products or services; or (ii) a beneficial
interest in any contract to which the Company or any of its Subsidiaries is a
party or by which it or any of the Assets is bound; 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 "interest in any entity" for purposes
of this Section.
7.19 NO TERMINATION OF BUSINESS RELATIONSHIP
Except as set out in Section 7.19 of the Disclosure Schedule, none of
the entities, governmental or otherwise, with which the Company or any of its
Subsidiaries has a business relationship or any other present material customer
of the Company or any of its Subsidiaries has given notice or other indication
of any intention to cancel or otherwise terminate a business
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relationship with the Company or any of its Subsidiaries and neither the Company
nor any of its Subsidiaries has any knowledge of any event (including the
transactions contemplated hereby) which would precipitate the cancellation or
termination of, or entitle any such entity or material customer to terminate,
such a business relationship.
7.20 COMPLIANCE WITH LAW; REQUISITE APPROVALS
(a) The business and operations of the Company and each of its
Subsidiaries have been and are being conducted in compliance, in all material
respects, with all laws, rules, regulations and licensing requirements
applicable thereto, including federal, provincial and local laws and regulations
affecting the protection of consumers and the health and safety of employees and
equal employment opportunities.
(b) Section 7.20 of the Disclosure Schedule sets forth a true, correct
and complete list of all Requisite Approvals, and all Requisite Approvals
(except where the failure to obtain such Requisite Approvals would not result,
or be reasonably likely to result, in a Material Adverse Effect or a material
adverse effect on the consummation of the transactions contemplated hereunder)
will have been obtained and be in full force and effect as at Closing.
(c) The Company is not bound by any oral or written agreement with any
third party to sell the Company or any of its Subsidiaries or any interest in
the Company or any of its Subsidiaries, including by way of merger, asset sale,
sale of shares or otherwise.
7.21 INTELLECTUAL PROPERTY
(a) To the knowledge of the Company and its Subsidiaries, the Company
owns exclusively or has all rights to, free and clear of all liens, charges,
claims and restrictions other than Permitted Encumbrances, all Intellectual
Property, Software and Hardware necessary and reasonably required for the
Company Business as now conducted. Neither the Company nor any of its
Subsidiaries, nor any of their respective officers, directors or employees, has
received notice of any claim that the Company is, and to the knowledge of the
Company, the Company is not, infringing upon or otherwise acting adversely to
the right or claimed right of any person under or with respect to any of the
Intellectual Property, Software or Hardware described in the foregoing sentence.
In furtherance and not in limitation of the foregoing, to the knowledge of the
Company, no activity in relation to the Company Products, including the
reproduction, use, and sale or distribution of all or any part thereof,
infringes any patent now issued.
(b) No claim has been made or threatened (and to the knowledge of the
Company there are no claims that are likely to be asserted against the Company)
that the Intellectual Property rights of any third party or of any party to this
Agreement other than the Company have been infringed by the Company or by any
person for whom the Company is legally or contractually responsible, nor has any
claim been made or threatened seeking to challenge, deny or restrict the use,
license, sublicense, distribution, display, copying, transmission or creation of
derivative works of any of the Company Products or the making, using, licensing
or selling of the Company Products by the Company, its Subsidiaries or its
distributors.
(c) Section 7.21 of the Disclosure Schedule sets forth a true, correct
and complete description of the Proprietary Software and the Licensed Software
which is owned by or licensed
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to the Company, identifies each location of any copy of the source code relating
thereto, and identifies each patent, trademark registration, service xxxx
registration, domain name registration and copyright registration with respect
to the Company's Intellectual Property, which has been issued to the Company or
has been submitted or applied for by the Company for issuance or registration
and lists the application and registration number, date of application, date of
registration, names of all assignors and registered owners and the country of
filing for each such right, if applicable. All applications for registration of
such Intellectual Property were true and accurate at the time of filing. With
respect to any filed patent applications, and to the extent required based upon
the state of the applications as at the Closing Date, the Company and its
representatives and attorneys have or will have at the Closing Date complied
with the disclosure obligations to patent authorities under applicable legal
requirements for disclosure of the principle of the invention and the best mode
of practicing the invention known to the applicable inventors, and for the
disclosure of prior art and other material information to Governmental
Authorities (e.g., the duty of candor) and, to the knowledge of the Company, for
a full and correct written description of each invention claimed therein and its
operation, use and enablement. Neither the Company nor any of its Subsidiaries
have received notice of, nor does the Company nor any of its Subsidiaries have
any knowledge of, any registrar proceeding or third party oppositions having
been commenced or threatened against such registrations or applications, and all
fees to maintain such Intellectual Property including registration, maintenance
and prosecution fees, and all invoiced professional fees incurred in connection
therewith, have been paid. To the knowledge of the Company, such professional
fees that have been incurred but not yet invoiced do not exceed, in the
aggregate, Fifty Thousand Dollars ($50,000.00).
(d) To the knowledge of the Company and its Subsidiaries, the Assets
include all of the Software and Intellectual Property used in or reasonably
required to conduct the Company Business and all Software and Intellectual
Property required for the development of products currently under development by
the Company. Section 7.21 of the Disclosure Schedule sets out all instances
where the Company, in the development of such products, is using development
licenses that would need to be converted into distribution licenses or replaced
by distribution licenses in order to commercialize such products, and sets out
any information the Company has related to the expected cost of such
distribution licenses.
(e) The Company and its Subsidiaries have taken all actions that they
are contractually obligated to take, and all actions that are customary and
reasonable, to protect the confidentiality of all information in the possession
of the Company and its Subsidiaries that is contractually defined as, or would
reasonably be considered to be, confidential information, including the
Company's trade secrets and the source code of the Proprietary Software. To the
knowledge of the Company and its Subsidiaries, there has been no release of any
source code relating to the Proprietary Software from any escrow pursuant to
which such source code is held by a third party. Except as set forth in Section
7.21 of the Confidential Disclosure Document, all of the Employees and past
employees of the Company and its Subsidiaries and all of the present and past
consultants, contractors and agents of the Company and its Subsidiaries
performing services relating to the development, modification or support of the
Proprietary Software and the Company's Intellectual Property have entered into a
written agreement assigning to the Company all right, title and interest in and
to all Intellectual Property and providing a waiver of all moral rights to such
Intellectual Property, developed, created, conceived or reduced to practice in
the
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course of their employment or, in the case of consultants, contractors and
agents, in the course of their performance of services on behalf of the Company
or its Subsidiaries. Each of the Employees, and each of such consultants,
contractors and agents, has executed a Proprietary Rights Agreement in the
Company's standard form, a true and complete copy of which has been provided to
the Purchaser. All such agreements constitute valid and binding obligations of
the parties thereto.
(f) There are no outstanding options, licenses, or agreements of any
kind relating to the Proprietary Software, the Company Products or the Company's
Intellectual Property other than licenses to use or distribute granted by the
Company in the ordinary course of business consistent with past practice, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the Intellectual Property of any other person other than
licenses for Licensed Software and other licenses for software or other
Intellectual Property used by the Company in the ordinary course of business.
Neither the Company nor any of its Subsidiaries have granted (i) a development
license in relation to its Proprietary Software or in relation to its
Intellectual Property, or (ii) any right or arrangement (including an escrow
arrangement) capable of being converted into a development license in relation
to its Proprietary Software or in relation to its Intellectual Property, nor has
anyone of them otherwise disclosed, licensed, transferred or released the source
code of any of its Proprietary Software to any person other than disclosures to
those of its employees and contractors involved in the development, modification
or support of the Proprietary Software.
(g) To the knowledge of the Company and its Subsidiaries, no person has
interfered with, infringed upon, misappropriated, illegally exported, or
violated any rights with respect to the Proprietary Software or the Company's
Intellectual Property.
(h) To the knowledge of the Company and its Subsidiaries:
(i) no present or former employees, consultants, contractors or
agents of the Company or any of its Subsidiaries have
misappropriated any Intellectual Property of any other person
in the course of the performance of their duties as employees,
consultants, contractors or agents of the Company or its
Subsidiaries;
(ii) none of the Employees is obligated under any fiduciary duty or
any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment,
decree or order of any court or Governmental Authority, that
would interfere with the use of such Employee's best efforts
to promote the interests of the Company and its Subsidiaries
or that would conflict with the Company Business as now
conducted or currently proposed to be conducted; and
(iii) neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereunder, nor
the carrying on of the Company Business by the Employees, nor
the conduct of the Company Business as now conducted or
currently proposed, will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a
default under, or a violation of any fiduciary duty or any
contract, covenant or instrument under which any of the
Employees is now obligated.
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(i) It is not and will not be necessary to utilize any Intellectual
Property owned by or in possession of any of the Employees (or people the
Company or any of its Subsidiaries currently intends to hire) made prior to
their employment by the Company or any of its Subsidiaries, and none of the Key
Shareholders has any right, title or interest, individually or jointly with the
Company or any other party, in or to any of the Proprietary Software or the
Company's Intellectual Property.
(j) To the knowledge of the Company and its Subsidiaries, the
Intellectual Property owned by or licensed to the Company is subsisting, valid
and enforceable and has not been abandoned (except as set out in Section 7.21(c)
of the Disclosure Schedule with respect to trademark applications), adjudged
invalid or unenforceable in whole or in part. Neither the Company, nor any of
its Subsidiaries has received an opinion that any of their respective
Intellectual Property is invalid, unregistrable or unenforceable in whole or in
part.
(k) The Company has obtained all approvals necessary for exporting the
Company Products outside the United States or Canada and importing the Company
Products into any country in which the Company Products are now sold or licensed
for use, and all such export and import approvals in the United States and
Canada and throughout the world are valid, current and in full force and effect.
(l) Section 7.21 of the Disclosure Schedule sets forth a true, correct
and complete list of all Licensed Software and of any restrictions on the
Company's right to use, modify, incorporate, bundle or distribute any Licensed
Software. Except as set out in Section 7.21(l) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries have violated or are violating,
in any material respect, any license, sublicense, or agreement with respect to
any Software other than the Proprietary Software.
(m) To the knowledge of the Company and its Subsidiaries, except as set
out in Section 7.21(m) of the Disclosure Schedule, the Company is entitled to
make, use, sell, transmit, display, copy or otherwise reproduce, develop,
distribute, bundle, modify or otherwise create derivative works regarding,
market, license, sublicense and assign the Proprietary Software and the
Company's Intellectual Property, and otherwise exploit all the rights related
thereto, in the ordinary course of Company Business. With respect to each
license or agreement by which the Company has obtained the rights to exploit the
Intellectual Property rights of any other person, including the rights to make,
use, sell, transmit, display, copy or otherwise reproduce, develop, distribute,
bundle, modify or otherwise create derivative works regarding, market, license,
sublicense or assign Intellectual Property or by which the Company has granted
to any third party the right to so exploit Intellectual Property, except as set
out in Section 7.21(m) of the Disclosure Schedule:
(i) such license or agreement is in full force and effect and is
legal, valid, binding and enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
preference and other laws relating to or affecting enforcement
of creditors' rights generally, and represents the entire
agreement between the parties thereto with respect to the
subject matter thereof;
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(ii) such license or agreement will not cease to be legal, valid,
binding and enforceable and in full force and effect on the
terms identical to those currently in effect as a result of
the consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions
contemplated by this Agreement constitute a breach or default
under such license or agreement, or otherwise give any party
thereto a right to terminate or amend such license or
agreement, so long as the consents set out in Section 7.20 of
the Disclosure Schedule are obtained;
(iii) with respect to each such license or agreement, (A) the
Company has not received any notice of termination or
cancellation under such license or agreement, and no party
thereto has any right of termination or cancellation
thereunder except in accordance with its terms, (B) the
Company has not received any notice of a breach or default
under such license or agreement which breach or default has
not been cured, and (C) the Company has not granted to any
other person any rights, adverse or otherwise, under such
license or agreement; and
(iv) to the knowledge of the Company, no other party to such
license or agreement is in breach or default thereof and no
event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or acceleration under such license or agreement.
(n) No person has revoked the right of the Company to display,
reproduce, distribute, create derivative works regarding, market, license,
sublicense or otherwise exploit the use of any Intellectual Property owned or
controlled by such person.
(o) The Company Products function and perform substantially in
accordance with the functional and performance characteristics attributed to the
Company Products in the Company's marketing materials and in the related
technical specifications. To the knowledge of the Company, there are no defects
in the Proprietary Software that cause or could cause the Company Products to
fail to function or perform substantially in accordance with the functional and
performance characteristics attributed to the Company Products in the Company's
marketing materials and in the related technical specifications. Neither the
Company nor any of its Subsidiaries has received any complaints or claims from
customers alleging that the Company Products fail to function or perform
substantially in accordance with the functional and performance characteristics
attributed to the Company Products in the Company's marketing materials and in
the related technical specifications which remain unresolved. To the knowledge
of the Company, the Proprietary Software is free of all viruses, worms, Trojan
horses and other material known contaminants, and does not contain any bugs,
errors, or problems of a material nature that disrupt or are reasonably likely
to disrupt its operation or that have or are reasonably likely to have an
adverse impact on the operation of other software programs or operating systems.
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(p) All Proprietary Software and, to the knowledge of the Company, all
Licensed Software, is Year 2000 Compliant, and to the knowledge of the Company,
all other software used by the Company in the ordinary course of its business is
Year 2000 Compliant.
(q) Neither the Company nor any of its Subsidiaries have received
notice of, nor does the Company or any of its Subsidiaries have any knowledge
of, any law, regulation, order, action or proceeding that restricts, or that is
reasonably expected to restrict in any manner, the development, use, export,
import, transfer or licensing of any of the Company Products or the Company's
Intellectual Property or that could reasonably be expected to affect the
validity, use, registration or enforceability of any of the Company's
Intellectual Property.
(r) Section 7.21 of the Disclosure Schedule sets forth the standard
Warranty Obligations contained in the Company's standard licensing agreement,
together with a description of the experience of the Company with respect to the
Warranty Obligations and a true, correct and complete list of (a) all other
Warranty Obligations and the duration of each such other Warranty Obligation,
(b) each of the Warranty Obligations which is the subject of any dispute or, to
the knowledge of the Company, threatened dispute, and (c) any unsatisfied claims
under any Warranty Obligations. True and correct copies of all Warranty
Obligations have been delivered to the Purchaser. There have not been any
deviations from the Company's standard form Warranty Obligations except as set
out in Section 7.21 of the Disclosure Schedule, and Employees and agents of the
Company and its Subsidiaries are not authorized to undertake obligations to any
customer or other person in excess of such Warranty Obligations. The Financial
Statements reflect adequate reserves for Warranty Obligations. To the knowledge
of the Company and its Subsidiaries, all Company Products manufactured,
designed, licensed, or sold by the Company are and were free in all material
respects from defects in construction and design and satisfy any and all
contract or other specifications related thereto to the extent stated in writing
in such contracts or specifications, in each case, in all material respects.
(s) Except as otherwise set out in Section 7.21(s) of the Disclosure
Schedule, in each instance where a Company Product was shipped in response to a
purchase order or other standard pre-printed order form, the Company's then
current standard license agreement, including the requirement that the customer
use the activation key process in order to access the Company Product, was
provided in response to such purchase order or standard pre-printed order form.
7.22 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
7.23 TAXES
(a) Except in connection with its Subsidiaries, the Company is not by
agreement or otherwise subject to taxation by any jurisdiction outside of
Canada, and no claim has ever been made by a taxing authority of any
jurisdiction in which the Company does not file Tax returns that the Company is
or may be subject to taxation by that jurisdiction.
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(b) Except as set forth in Section 7.23 of the Disclosure Schedule,
each of the Company and its Subsidiaries has in a timely manner filed all Tax
returns required to be filed by it, and has paid all Taxes required to be paid
by it when due, and adequate provision has been made in the Financial Statements
for all Taxes of any nature whatsoever for which the Company or any of its
Subsidiaries may at any time in the future have any liability or obligation in
respect of operations, activities or transactions occurring prior to the Closing
Date.
(c) Each of the Company and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any present or former employee, creditor or independent contractor.
(d) To the knowledge of the Company, there are no actions by any taxing
authority in connection with assessing additional Taxes against or in respect of
the Company or any of its Subsidiaries for any past period. To the knowledge of
the Company, there is no dispute or claim concerning any Tax liability of the
Company or any of its Subsidiaries threatened, claimed or raised by any taxing
authority. There are no liens for Taxes upon the Assets.
(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax returns required to be
filed by, or which include or are treated as including, the Company or any of
its Subsidiaries or with respect to any Tax assessment or deficiency affecting
the Company or any of its Subsidiaries.
(f) Neither the Company nor any of its Subsidiaries is a party to or
bound by any obligations under any Tax sharing, Tax allocation, Tax indemnity or
similar agreement or arrangement.
7.24 NO UNDISCLOSED LIABILITIES
Except for Liabilities expressly disclosed in the Financial Statements,
Trade Payables and other Liabilities incurred in the ordinary course of business
consistent with past practice, and the Liabilities specifically disclosed in
Section 7.24 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any Liabilities of any nature.
7.25 CHANGE OF CONTROL PAYMENTS
There are no agreements, commitments, employment policies, plans or
arrangements binding on the Company or any of its Subsidiaries pursuant to which
any amounts may become payable by the Company or any of its Subsidiaries
(whether currently or in the future) to current or former officers, directors or
employees of the Company or any of its Subsidiaries or any other person as a
result of or in connection with the transactions contemplated by this Agreement.
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7.26 WORKERS' COMPENSATION
Each of the Company and its Subsidiaries has continually observed and
is presently in full compliance with all workers' compensation and similar
legislation, and there are no pending claims against the Company or any of its
Subsidiaries under any workers' compensation plan.
7.27 STOCK RIGHTS
As of the Closing Date, except as set out in Section 7.27 of the
Disclosure Schedule, the Company shall not be obligated to issue any shares of
its capital stock under any written or unwritten agreement or contingent
obligation whatsoever.
7.28 U.S. ANTITRUST LAWS
The Company and its Subsidiaries taken as a whole do not (i) hold
assets located in the United States (other than investment assets, voting or
non-voting securities of another person and assets included pursuant to Section
801.40(c)(2) of the Regulations under the United States Xxxx-Xxxxx Xxxxxx
Antitrust Improvements Act of 1976) having an aggregate book value of
$15,000,000 or more, or (ii) control any U.S. issuer with annual net sales or
total assets of $25,000,000 or more.
7.29 DISCLOSURE
No statement (including the representations and warranties set forth in
Article 7 of this Agreement) by the Company contained in this Agreement, the
other agreements, documents or applications to be entered into or filed in
connection herewith, the exhibits and schedules attached hereto, or contained in
any document, written statement or certificate furnished or to be furnished to
the Purchaser or Quest or their representatives pursuant hereto or in connection
with the transactions contemplated hereby having regard for the purpose for
which such document, written statement or certificate was furnished, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE KEY SHAREHOLDERS
8.1 REPRESENTATIONS AND WARRANTIES OF EACH KEY SHAREHOLDER
Each Key Shareholder represents and warrants to the Purchaser, with
respect to itself only, as follows:
(a) Such Key Shareholder holds of record and owns beneficially the
number of Company Shares and Options set forth opposite its name in Section 7.2
of the Confidential Disclosure Document. Such Key Shareholder has good and
marketable title to the Company Shares and Options held by it. The Company
Shares and Options held by such Key Shareholder are now, and will on Closing be
transferred to the Purchaser, free and clear of all liens,
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encumbrances, security interests, restrictions on transfer, Taxes, options,
warrants, purchase rights, contracts, commitments, equities, claims, demands or
other interests of third parties of any nature whatsoever.
(b) Except as set out in Section 8.1(b) of the Disclosure Schedule,
such Key Shareholder is not a party to any option, warrant, purchase right or
other contract or commitment that could require such Key Shareholder to sell,
transfer or otherwise dispose of any of the Company Shares or Company Options to
another person as a consequence of entering into this Agreement or otherwise.
(c) This Agreement and all agreements and other documents to be
entered into by such Key Shareholder in connection herewith have been duly
executed and delivered by, and constitute legal, valid and binding obligations
of, such Key Shareholder, enforceable against such Key Shareholder in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, preference and
other laws relating to or affecting enforcement of creditors' rights generally.
(d) Except as set out in Sections 8.1(b) and 8.1(d) of the
Disclosure Schedule, neither the execution and delivery of this Agreement and
the other agreements and documents to be entered into in connection herewith nor
the completion of the sale and transfer of the Company Shares and Options in
accordance with the provisions hereof and of the Offer nor the consummation of
the other transactions contemplated hereunder and thereunder or under such other
agreements and documents will result in or constitute any of the following:
(i) a conflict with, violation of or default under, or any
event that, with notice or lapse of time or both would be
a default, breach or violation of any agreement,
instrument or document to which such Key Shareholder is a
party or by which it is bound;
(ii) the creation or imposition of any lien, charge, interest
or encumbrance on any of the Company Shares or Company
Options of such Key Shareholder; or
(iii) a conflict with or violation or breach of any law, rule
or regulation of any Governmental Authority, or any
judgment, decree, order or injunction applicable to such
Key Shareholder.
(e) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to be obtained by such Key Shareholder in connection with (i) the execution and
delivery of this Agreement and the other agreements and documents to be entered
into in connection herewith, (ii) the completion of the sale and transfer of the
Company Shares and Options in accordance with the provisions hereof and of the
Offer, or (iii) the consummation of the other transactions contemplated
hereunder and thereunder or under such other agreements and documents.
(f) No bankruptcy or similar proceedings have been commenced or are
pending or proposed in respect of such Key Shareholder.
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(g) No litigation, arbitration or other judicial or regulatory
proceeding is pending or, to the knowledge of such Key Shareholder, threatened
by or against such Key Shareholder before any court or any Governmental
Authority which could reasonably be expected to have a material adverse effect
on the ability of such Key Shareholder to consummate the transactions
contemplated hereunder and under the other agreements and documents to be
entered into in connection herewith.
(h) Except as set forth in Section 8.1 of the Disclosure Schedule,
such Key Shareholder is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada).
(i) Except as set forth in Section 8.1 of the Disclosure Schedule,
(i) if such Key Shareholder is an individual, such Key Shareholder is a resident
of the Province of Ontario, and (ii) if such Key Shareholder is a corporation or
other entity, such Key Shareholder's chief executive office is located in the
Province of Ontario.
8.2 REPRESENTATIONS AND WARRANTIES OF KEY SHAREHOLDER CORPORATIONS
Each of the Key Shareholders that is a corporation represents and
warrants to the Purchaser, with respect to itself only, as follows:
(a) Such Key Shareholder is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Such Key Shareholder has all requisite corporate power and
authority to enter into this Agreement and all agreements and other documents to
be entered into by it in connection herewith and to consummate the transactions
contemplated hereby and thereby. All corporate action on the part of such Key
Shareholder necessary for the authorization, execution and delivery of this
Agreement and all other agreements to be entered into in connection herewith by
it, and the performance of the obligations of such Key Shareholder hereunder and
thereunder, has been taken or will be taken prior to the Closing Date.
(c) Neither the execution and delivery of this Agreement and the
other agreements and documents to be entered into in connection herewith nor the
completion of the sale and transfer of the Company Shares and Options in
accordance with the provisions hereof and of the Offer nor the consummation of
the other transactions contemplated hereunder and thereunder will result in or
constitute a default under, or be in contravention or breach of any provision
of, such Key Shareholder's articles of incorporation or bylaws.
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ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Quest and the Purchaser represent and warrant to the Key Shareholders
as follows:
9.1 CORPORATE STATUS; ENFORCEABILITY
(a) The Purchaser is a corporation duly incorporated and validly
existing under the laws of the Province of Alberta. The Purchaser has conducted
and will conduct no business other than holding the Company Shares and Options.
(b) The Purchaser has all requisite corporate power and authority to
enter into this Agreement and all agreements and other documents to be entered
into by it in connection herewith and to consummate the transactions
contemplated hereby and thereby. All corporate action on the part of the
Purchaser necessary for the authorization, execution and delivery of this
Agreement and all agreements and other documents to be entered into in
connection herewith by it, and the performance of the obligations of the
Purchaser hereunder and thereunder, has been taken or will be taken prior to the
Closing Date.
(c) This Agreement and all agreements and other documents to be entered
into by the Purchaser in connection herewith have been duly executed and
delivered and constitute legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, preference and other laws relating to or
affecting enforcement of creditors' rights generally.
9.2 CAPITALIZATION
(a) As of the date of this Agreement, the authorized capital stock of
the Purchaser consists of an unlimited number of Common Shares. As of the
Closing Date, the authorized capital stock of the Purchaser will consist of an
unlimited number of Common Shares, an unlimited number of Subordinate Non-Voting
Shares and an unlimited number of Exchangeable Shares. As of the date of this
Agreement, the only issued and outstanding shares of capital stock of the
Purchaser are Common Shares.
(b) All of the Common Shares of the Purchaser are owned, beneficially
and of record, by Quest. As of the Closing Date, all of the Subordinate
Non-Voting Shares will be owned, beneficially and of record, by Xxxxxxx Xxxxx or
another service provider.
(c) All of the Common Shares of the Purchaser have been duly
authorized, validly issued and are fully paid and non-assessable.
9.3 EXCHANGEABLE SHARES
As of the Closing Date, the Exchangeable Shares will have been duly
authorized and, upon issuance in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable.
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9.4 NO CONFLICT
Neither the execution and delivery of this Agreement and the other
agreements and documents to be entered into in connection herewith nor the
completion of the purchase and transfer of the Company Shares and Options in
accordance with the provisions hereof nor the consummation of the other
transactions contemplated hereunder will result in or constitute any of the
following:
(a) a conflict with, violation of or default under, or any event
that, with notice or lapse of time or both would be a default, breach or
violation of the articles of incorporation or by-laws of the Purchaser or any
agreement, instrument or document to which the Purchaser is a party or by which
it is bound;
(b) the creation or imposition of any lien, charge, interest or
encumbrance on any of the assets of the Purchaser; or
(c) a conflict with or violation or breach of any law, rule or
regulation of any Governmental Authority, or any judgment, decree, order or
injunction applicable to the Purchaser.
9.5 GOVERNMENTAL APPROVALS
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained by the Purchaser in connection with (i) the execution and delivery of
this Agreement and the other agreements and documents to be entered into in
connection herewith, (ii) the completion of the purchase and transfer of the
Company Shares and Options in accordance with the provisions hereof, or (iii)
the consummation of the other transactions contemplated hereunder or under such
other agreements and documents, other than (A) the filing of a notification with
Industry Canada pursuant to Section 12 of the Investment Canada Act, and (B) any
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with, Governmental Authorities under applicable federal, state and
provincial securities laws in connection with the issuance of the Exchangeable
Shares and the issuance and resale of the shares of Quest Common Stock for which
such Exchangeable Shares may be exchanged.
9.6 LITIGATION
No litigation, arbitration or other judicial or regulatory proceeding
is pending or, to the knowledge of the Purchaser, threatened by or against the
Purchaser before any court or any Governmental Authority which could reasonably
be expected to have a material adverse effect on the ability of the Purchaser to
consummate the transactions contemplated hereunder and under the other
agreements and documents to be entered into in connection herewith.
9.7 BROKERS OR FINDERS
The Purchaser has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
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ARTICLE 10
REPRESENTATIONS AND WARRANTIES OF QUEST
Quest represents and warrants to the Key Shareholders as follows:
10.1 CORPORATE STATUS; ENFORCEABILITY
(a) Quest is a corporation duly incorporated and validly existing under
the laws of the State of California.
(b) Quest has all requisite corporate power and authority to enter into
this Agreement and all agreements and other documents to be entered into by it
in connection herewith and to consummate the transactions contemplated hereby
and thereby.
(c) All corporate action on the part of Quest necessary for the
authorization, execution and delivery of this Agreement and all agreements and
other documents to be entered into in connection herewith by it, and the
performance of the obligations of Quest hereunder and thereunder, has been taken
or will be taken prior to the Closing Date.
(d) This Agreement and all agreements and other documents to be entered
into by Quest in connection herewith have been duly executed and delivered and
constitute legal, valid and binding obligations of Quest, enforceable against
Quest in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
preference and other laws relating to or affecting enforcement of creditors'
rights generally.
10.2 CAPITALIZATION
(a) The authorized capital stock of Quest consists of (i) 5,000,000
Preferred Shares, and (ii) 150,000,000 Common Shares. The only issued and
outstanding shares of capital stock of Quest are Common Shares. As of June 15,
2000, 85,436,392 shares of Quest Common Stock were issued and outstanding,
options to acquire 16,087,208 shares of Quest Common Stock were authorized, and
options to acquire 11,206,496 shares of Quest Common Stock were issued and
outstanding.
(b) All of the Common Shares of Quest have been duly authorized,
validly issued and are fully paid and non-assessable.
10.3 EXCHANGEABLE SHARES
As of the Closing Date, the shares of Quest Common Stock for which the
Exchangeable Shares are exchangeable shall have been duly authorized and
reserved for issuance upon the exchange of the Exchangeable Shares in accordance
with the Exchangeable Share Provisions and the Exchange Trust Agreement, and
upon such issuance, will be validly issued, fully paid and non-assessable.
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10.4 NO CONFLICT
Neither the execution and delivery of this Agreement and the other
agreements and documents to be entered into in connection herewith nor the
completion of the purchase and transfer of the Company Shares and Options in
accordance with the provisions hereof nor the consummation of the other
transactions contemplated hereunder will result in or constitute any of the
following:
(a) a conflict with, violation of or default under, or any event
that, with notice or lapse of time or both would be a default, breach or
violation of the articles of incorporation or by-laws of Quest or any agreement,
instrument or document to which Quest is a party or by which it is bound;
(b) the creation or imposition of any lien, charge, interest or
encumbrance on any of the assets of Quest; or
(c) a conflict with or violation or breach of any law, rule or
regulation of any Governmental Authority, or any judgment, decree, order or
injunction applicable to Quest.
10.5 GOVERNMENTAL APPROVALS
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained by Quest in connection with (i) the execution and delivery of this
Agreement and the other agreements and documents to be entered into in
connection herewith, (ii) the completion of the purchase and transfer of the
Company Shares and Options in accordance with the provisions hereof, or (iii)
the consummation of the other transactions contemplated hereunder or under such
other agreements and documents, other than (A) the filing of a notification with
Industry Canada pursuant to Section 12 of the Investment Canada Act, and (B) any
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with, Governmental Authorities under applicable federal, state and
provincial securities laws in connection with the issuance of the Exchangeable
Shares and the issuance and resale of the shares of Quest Common Stock for which
such Exchangeable Shares may be exchanged. 10.6 LITIGATION
No litigation, arbitration or other judicial or regulatory proceeding
is pending or, to the knowledge of Quest, threatened by or against Quest before
any court or any Governmental Authority which could reasonably be expected to
have a material adverse effect on the ability of Quest to consummate the
transactions contemplated hereunder and under the other agreements and documents
to be entered into in connection herewith.
10.7 SEC FILINGS; FINANCIAL STATEMENTS
(a) Quest has filed all forms, reports and documents required to be
filed by it with the United States Securities and Exchange Commission (the
"SEC") under the Securities and Exchange Act of 1934, as amended (the "EXCHANGE
ACT") since August 13, 1999 through the date of this Agreement (collectively,
the "QUEST SEC REPORTS"). As of the respective dates they were filed, (i) the
Quest SEC Reports were prepared, in all material respects, in accordance with
the requirements of the Exchange Act, and (ii) none of Quest SEC Reports
contained, when filed with the SEC (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing), any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
All of Quest's filings with the SEC which were required under Section 13 of the
Exchange Act since December 31, 1999,
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when taken as a whole (collectively, the "RECENT SEC REPORTS"), do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Recent SEC Reports or necessary in order to make
the statements in such Recent SEC Reports, in light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Quest SEC Reports complied in all
material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles in the United States
applied on a consistent basis throughout the periods indicated (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 each presented fairly, in all material
respects, the consolidated financial position of Quest and the consolidated
Quest Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
10.8 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since December 31, 1999, except as contemplated by or as disclosed in
this Agreement, or as disclosed in any Quest SEC Report filed since December 31,
1999 but prior to the date of this Agreement, there has not been any change in
or effect on the business of Quest that is materially adverse to the condition
(financial or otherwise) of Quest and its Subsidiaries taken as a whole, and the
operations or results of operations of Quest and its Subsidiaries taken as a
whole, except for any declines in the price of the shares of Quest Common Stock.
10.9 BROKERS OR FINDERS
Quest has not incurred, and will not incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
ARTICLE 11
INDEMNIFICATION AND ESCROW FUND
11.1 INDEMNITY AND ESCROW FUND
(a) From and after the Closing Date and subject to the limitations
contained in this Article 11, the Securityholders shall indemnify and hold
harmless the Purchaser and the Company and its Subsidiaries from and against any
and all liability, loss, costs, expenses, claims or damages of any nature,
including legal costs on a full indemnity basis, accountants' fees, and all
other reasonable costs and expenses of litigation, investigation, defense or
settlement of claims (including costs of all appeals related thereto) or threats
thereof and amounts paid in settlement to the extent of the amount of such
liability, loss, cost, expense, claim or other damage suffered or incurred by
the Purchaser or the Company or any of its Subsidiaries (whether directly or by
virtue of any third party claim) by reason of the breach by the Company or any
of the Key Shareholders of any representation, warranty, covenant, agreement or
other obligation of the Company or the Key Shareholders or any of them hereunder
(collectively, "DAMAGES").
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(b) To secure performance of such indemnification obligations, the
number of Exchangeable Shares equal in value to ten percent (10%) of the
Purchase Price (the "ESCROW SHARES") shall be deposited with and registered in
the name of Montreal Trust Company of Canada, as escrow agent, on the Closing
Date, such deposit to constitute the escrow fund (the "ESCROW FUND") and to be
governed by the terms set forth herein and in the Escrow Agreement. The Escrow
Fund shall be available to compensate the Purchaser and the Company for any
Damages as hereinafter set forth.
(c) The parties acknowledge and agree that (i) the Purchaser shall be
entitled to obtain compensation for Damages from the Escrow Fund for any breach
by the Company of any representation or warranty set forth in Article 7 and for
any breach by the Company of any covenant, agreement or other obligation of the
Company hereunder, in each case to the full extent of the Escrow Property and
without regard to the ownership of the Escrow Property amongst the
Securityholders or the amount of Exchangeable Shares or other Escrow Property
contributed or accruing to the Escrow Fund by or for the benefit of any
Securityholder, (ii) each Securityholder shall be fully liable for such Damages
to the full extent of its share of the Escrow Property, and (iii) the Purchaser
shall be entitled to be compensated for such Damages from any and all Escrow
Property without regard to the nature of the breach resulting in such Damages.
The Parties further acknowledge and agree that the Purchaser shall be entitled
to obtain compensation for Damages from the Escrow Fund for any breach by any
Key Shareholder of any representation or warranty of such Key Shareholder set
forth in Article 8 and for any breach by any Key Shareholder of any covenant,
agreement or other obligation of such Key Shareholder hereunder, in each case to
the full extent of such Key Shareholder's share of the Escrow Property. Nothing
contained in this Article 11 shall limit the liability of the Company or any of
the Key Shareholders for any breach of any representation, warranty or covenant
if the Closing is not consummated.
(d) For purposes of determining the number and value of the Escrow
Shares to be deposited into the Escrow Fund on the Closing Date, the
Exchangeable Shares shall be valued at the Average Price of Quest Common Stock.
(e) The Escrow Shares shall be exchangeable, in whole or in part, in
accordance with their terms, and the shares of Quest Common Stock for which such
Escrow Shares are exchangeable may be sold and the proceeds from such sale
deposited in the Escrow Fund to be held in accordance with the terms of this
Agreement and the Escrow Agreement, in each case with the prior written consent
of the Purchaser, such consent not to be unreasonably withheld or delayed.
(f) If any Escrow Property is distributed from the Escrow Fund to the
Purchaser in accordance with the terms of this Agreement and the Escrow
Agreement to satisfy Damages claimed by the Purchaser, such Escrow Property
shall be delivered in the following order of priority: first, any cash held in
the Escrow Fund; second, any Escrow Shares; and third, any property held in the
Escrow Fund other than cash or Escrow Shares.
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11.2 ESCROW PERIOD
The Escrow Fund shall be held by the Escrow Agent during the period
commencing on the Closing Date and ending on the date that is one (1) year
following the Closing Date (such period, the "ESCROW PERIOD"); provided that a
portion of the Escrow Fund which, in the reasonable judgment of the Purchaser,
is necessary to satisfy any unsatisfied claims specified in any Claim
Certificate delivered to the Escrow Agent prior to the termination of the Escrow
Period shall remain in the Escrow Fund until such claims have been resolved.
11.3 CLAIMS ON ESCROW FUND
(a) Upon delivery to the Escrow Agent on or before the last day of the
Escrow Period of a certificate of the Purchaser (a "CLAIM CERTIFICATE")
specifying the amount of the Damages claimed by the Purchaser and specifying in
reasonable detail the individual items of such Damages, the date each such item
was paid, or properly accrued or arose, and the nature of such item, the Escrow
Agent shall, subject to Section 11.4, deliver to the Purchaser out of the Escrow
Fund, as promptly as practicable, Escrow Property having a value equal to such
Damages.
(b) For purposes of determining the number and value of the Escrow
Shares to be delivered out of the Escrow Fund, such Escrow Shares shall be
valued at the Average Price of Quest Common Stock.
11.4 OBJECTIONS TO CLAIMS
At the time of delivery of any Claim Certificate to the Escrow Agent, a
duplicate copy of such Claim Certificate shall be delivered to the Shareholders'
Agent and for a period of fifteen (15) days after such delivery, the Escrow
Agent shall make no delivery of any Escrow Property to the Purchaser unless the
Escrow Agent has received written authorization from the Shareholders' Agent to
make such delivery. After the expiration of such 15-day period, the Escrow Agent
may make delivery of any Escrow Property in accordance with Section 11.3;
provided that no such delivery shall be made if the Shareholders' Agent shall
object in a written statement to the claim made in the Claim Certificate and
such statement shall have been delivered to the Escrow Agent and to the
Purchaser prior to the expiration of such 15-day period.
11.5 ATTEMPT TO RESOLVE CONFLICTS; ARBITRATION
(a) If the Shareholders' Agent shall so object in writing to any claim
or claims by the Purchaser made in any Claim Certificate or otherwise, the
Purchaser shall have thirty (30) days to respond in a written statement to the
objection of the Shareholders' Agent. If after delivery of such written
statement to the Shareholders' Agent there remains a dispute as to any claims,
the Shareholders' Agent and the Purchaser shall attempt in good faith for thirty
(30) days to agree upon the rights of the respective parties with respect to
each of such claims. If the Shareholders' Agent and the Purchaser should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties and shall, if a claim is being made against the Escrow Fund, be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and shall distribute the Escrow Property in accordance with the
terms thereof.
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(b) If no such agreement can be reached after good faith negotiation,
either the Purchaser or the Shareholders' Agent may, by notice to the other,
demand binding arbitration of the matter unless the Damages are at issue in
pending litigation with a third party. If the Damages are at issue in pending
litigation, then the arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration. In either such event the
matter shall be settled by arbitration conducted by three arbitrators. Within
fifteen (15) days after such notice is sent, the Purchaser and the Shareholders'
Agent shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator. The decision of the arbitrators as to the
validity and amount of any claim in such Claim Certificate shall be binding and
conclusive upon the parties, and the Escrow Agent shall be entitled to act in
accordance with such decision and withdraw Escrow Property from the Escrow Fund
in accordance therewith.
(c) Any such arbitration shall be held in the City of Ottawa in
accordance with the Arbitration Act (Ontario). The parties agree that any action
to compel arbitration pursuant to this Agreement may be brought in any
appropriate court in the City of Ottawa and in connection with such action to
compel the laws of the Province of Ontario to control. Application may also be
made to such court for confirmation of any decision or award of the arbitrators,
for an order of the enforcement and for any other remedies that may be necessary
to effectuate such decision or award. The parties consent to the jurisdiction of
such arbitrators and of such court and waive any objection to the jurisdiction
of such arbitrators and such court.
(d) If a dispute is submitted for arbitration pursuant to this Section
11.5, then notwithstanding the termination of the Escrow Period, the Escrow
Agent shall continue to hold Escrow Property having a value sufficient to cover
the Damages related to such dispute (the "CONTESTED DAMAGES") until:
(i) delivery of a copy of a settlement agreement executed by the
Purchaser and the Shareholders' Agent setting forth
instructions to the Escrow Agent as to the release of such
Escrow Property that shall be made with respect to the
Contested Damages;
(ii) delivery of a copy of the final decision of the arbitrators
setting forth instructions to the Escrow Agent as to the
release of Escrow Property that shall be made with respect to
the Contested Damages; or
(iii) receipt of a court order or judgment directing the Escrow
Agent to act with respect to the distribution of the Escrow
Property.
The Escrow Agent shall thereupon release the Escrow Property in
accordance with such settlement agreement, arbitrator's instructions, court
order or judgment, as applicable. If any controversy arises involving any party
to this Agreement (other than the Escrow Agent) concerning the subject matter of
this Agreement, including Contested Damages, the Escrow Agent will not be
required to resolve the controversy.
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11.6 SHAREHOLDERS' AGENT
(a) Xxxxxx X. Xxxx is constituted and appointed as agent
("SHAREHOLDERS' AGENT") for and on behalf of the Securityholders to give all
notices and communications on behalf of the Securityholders relating the matters
contemplated in this Article 11, to authorize delivery to the Purchaser of the
Escrow Property from the Escrow Fund in satisfaction of claims by the Purchaser,
to settle any other claims for indemnification, to object to such withdrawal, to
agree to, negotiate, enter into settlements and compromises of, and comply with
orders and awards of arbitrators and/or courts with respect to such claims, and
to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the Majority Key Shareholders from time to time upon not less than
ten (10) days' prior notice to the Purchaser and Quest. No bond shall be
required of the Shareholders' Agent, and the Shareholders' Agent shall receive
no compensation for its services. Notices and communications from the
Shareholders' Agent relating to the matters contemplated in this Article 11
shall constitute notice from the Securityholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Key
Shareholders shall severally, in proportion to their ownership of the Company
Shares and Options immediately prior to the sale of such shares to the
Purchaser, indemnify the Shareholders' Agent and hold it harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Shareholders' Agent and arising out of or in connection with the
acceptance or administration of its duties hereunder.
11.7 ACTIONS OF THE SHAREHOLDERS' AGENT
Any decision, act, consent or instruction of the Shareholders' Agent
shall constitute a decision of all of the Securityholders and shall be final,
binding and conclusive upon each of the Securityholders, and the Escrow Agent
and the Purchaser may rely upon any decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of each
and every Securityholder. The Escrow Agent and the Purchaser shall be relieved
from any liability to any person for any acts done by the Purchaser in
accordance with such decision, act, consent or instruction of the Shareholders'
Agent.
11.8 THIRD-PARTY CLAIMS
In the event that a third party asserts or threatens a claim which the
Purchaser believes may result in a demand against the Escrow Fund, the Purchaser
shall notify the Shareholders' Agent of such claim, and the Shareholders' Agent
on behalf of the Securityholders shall be entitled, at the Securityholders'
expense, to participate in any defense of such claim. Unless the Shareholders'
Agent elects to assume such defense (with counsel reasonably acceptable to the
Purchaser, and provided that the Securityholders have reasonable means to put on
such a defense), the Purchaser shall have the right to settle any such claim
(with its own counsel); provided that the Purchaser may not effect the
settlement of any such claim without the consent of the Shareholders' Agent,
which consent shall not be unreasonably withheld. In the event that the
Shareholders' Agent has consented to any such settlement, the Shareholders'
Agent and the Securityholders shall have no power or authority to object under
any provision of this Article 11 to the amount of any claim by the Purchaser
against the Escrow Fund for indemnity with respect to such settlement.
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11.9 LIMITATIONS
(a) Notwithstanding anything else set forth herein, the Purchaser may
not receive any Escrow Property from the Escrow Fund and shall not otherwise be
entitled to any indemnification under this Article 11 unless and until a Claim
Certificate or Claim Certificates specifying Damages in an amount not less than
One Hundred Thousand Dollars ($100,000) in the aggregate have been delivered to
the Shareholders' Agent as provided in Section 11.3, in which case the Purchaser
shall be entitled to be indemnified out of the Escrow Property and otherwise for
the full amount of any and all Damages, including the initial Damages up to such
$100,000 threshold.
(b) The parties understand and agree that the liability of the Key
Shareholders for the breach of any representation, warranty, covenant agreement
or other obligation under this Agreement, including the indemnity obligations of
the Key Shareholders under this Article 11, shall terminate on the date that is:
(i) two (2) years following the Closing Date with respect to
claims based on a breach of any of the representations and
warranties set forth in Sections 7.1, 7.2, 7.21, 8.1 or 8.2;
(ii) four (4) years following the Closing Date with respect to
claims based on a breach of any of the representations and
warranties set forth in Section 7.23; and
(iii) one (1) year following the Closing Date for all other claims;
except insofar as a claim for indemnification under this Article 11 has been
asserted and such claim has not been resolved on or prior to such date in
accordance with the terms of this Agreement, the Escrow Agreement or otherwise,
in which case the indemnity obligations of the Key Shareholders relating to such
dispute shall survive until the resolution of such dispute.
11.10 RECOURSE
(a) Notwithstanding anything contained herein, each Key Shareholder
shall remain severally liable to the extent of its respective share of the
Purchase Price for Damages arising from the breach of any representations,
warranties, covenants, agreements or other obligations of the Company or such
Key Shareholder hereunder if the Escrow Fund is insufficient to satisfy such
claims, provided that in no event shall any Key Shareholder be liable for any
claims hereunder in an amount exceeding such Key Shareholder's share of the
Purchase Price. If the Closing is consummated, the indemnifications provided
under this Article 11 shall constitute the sole recourse of the Purchaser and
Quest for the breach of any representations, warranties, covenants, agreements
or other obligations of the Company or such Key Shareholder hereunder. Nothing
herein shall limit the Purchaser's right to seek recourse against any person,
including any Key Shareholder, for claims based on fraud.
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(b) The liability of Securityholders, other than the Key Shareholders,
with respect to the indemnity in Section 11.1 shall be limited to the Escrow
Fund, provided however that nothing herein shall limit in any way the
Purchaser's right to seek recourse against any such Securityholder for: (a)
claims based on fraud by such Securityholder; or (b) claims based on a breach of
any other representation, warranty or covenant of such Securityholder in the
Letter of Transmittal and Option Exchange Agreement delivered by such
Securityholder pursuant to the Offer.
(c) Notwithstanding anything contained in this Agreement (including the
provisions of Section 6.7(c)), the Offer or any instrument or document relating
hereto or thereto, each of the Key Shareholders acknowledges and agrees that
none of the Key Shareholders shall have any recourse of any kind whatsoever
against the Company for any breach by the Company of any representation,
warranty, covenant, agreement or other obligation of the Company hereunder, and
each Key Shareholder hereby waives any and all rights and remedies, including
any right of set-off, that it may have against the Company for any such breach.
In furtherance and not in limitation of the foregoing, it is the intent of the
Parties that each of the Purchaser and the Company and its Subsidiaries shall
have the full benefit of the rights granted to them under this Article 11 and
that such rights shall not be affected by any claim of any Key Shareholder
relating to any breach by the Company of any of its representations, warranties,
covenants, agreements or other obligations hereunder.
ARTICLE 12
QUEST GUARANTEE; MATTERS RELATING TO REGISTRATION RIGHTS
12.1 QUEST GUARANTEE
If, for any reason, the Purchaser shall fail to perform any of its
obligations under this Agreement, Quest shall, upon receipt of notice from the
Key Shareholders, forthwith perform or cause the performance of such obligations
subject to all of the terms, conditions, qualifications, provisions and
limitations set forth herein and in the other agreements and documents to be
entered into in connection herewith; provided that the parties agree that Quest
may assert any defense, claim, counterclaim, set-off or other right or remedy
that may be available to the Purchaser in connection with the performance of
such obligations.
12.2 SUSPENSION OF SALES
Each Key Shareholder agrees that it shall not sell Registrable Shares
pursuant to the Registration Statement after receiving notice of a suspension
period pursuant to Section 4.11(a)(iii) of the Exchange Trust Agreement.
12.3 NOTICE OF SALES
Any Key Shareholder proposing to sell Registrable Securities pursuant
to the Registration Statement shall provide Quest with written notice of such
sale at least three (3) Business Days prior to the date of the contemplated
sale.
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12.4 INDEMNITY
In connection with the registration of Registrable Securities pursuant
to Section 4.11 of the Exchange Trust Agreement, Quest will indemnify and hold
harmless the seller of such Registrable Securities, and each other person, if
any, who controls such seller within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, liabilities or expenses (including
reasonable attorneys' fees and disbursements), joint or several, to which such
seller or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, or any post-effective amendment thereof, or the omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) any
untrue statement (or alleged untrue statement) of a material fact contained in
any final prospectus (as amended or supplemented, if Quest shall have filed with
the SEC any amendment thereof or supplement thereto), or the omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and will
reimburse such seller and each such controlling person for any legal or other
expenses reasonably incurred by such seller or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or expense, provided, that Quest will not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon any untrue statement (or alleged untrue statement) or
omission (or alleged omission) of a material fact made in said registration
statement, said preliminary prospectus or said prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
to Quest through an instrument duly executed by, or on behalf of, such seller
specifically for use in the preparation thereof. In connection with the
registration of Registrable Securities under the Securities Act pursuant to
Section 4.11 of the Exchange Trust Agreement, each Key Shareholder severally and
not jointly, will indemnify and hold harmless Quest, each person, if any, who
controls Quest within the meaning of Section 15 of the Securities Act, each
officer of Quest who signs the Registration Statement, and each director of
Quest, against any losses, claims, damages, liabilities or expenses (including
reasonable attorneys' fees and disbursements on a full indemnity basis), joint
or several, to which Quest or such officer, director or controlling person may
become subject under the Securities Act or otherwise, and will reimburse Quest
or such officer, director or controlling person for any legal or other expenses
reasonably incurred by Quest or such officer, director or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or expense, but only insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement (or alleged untrue statement) or omission (or
alleged omission) of a material fact referred to in clause (i) or (ii) of this
Section 12.4, and provided, however, that this paragraph shall apply if and only
if such statement (or alleged untrue statement) or omission (or alleged
omission) was made in reliance upon and in conformity with information furnished
in writing to Quest by or on behalf of such Key Shareholder specifically for use
in such registration statement or prospectus. No Key Shareholder shall be
obligated under this Section 12.4 or under Section 4.11(d) of the Exchange Trust
Agreement for any amount in excess of the proceeds such Key Shareholder shall
have received from the sale or disposition of the shares of Quest Common Stock
included in such registration.
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12.5 INDEMNIFICATION PROCEDURES
Promptly after receipt by an indemnified party of notice of the
commencement of any action, such indemnified party shall if a claim in respect
thereof is to be made against the indemnifying party, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 12.5 or to the extent
that it has not been prejudiced as a proximate result of such failure. In case
any such action shall be brought against any indemnified party, and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, to assume the defense thereof, with counsel approved by such indemnified
party, such approval not to be unreasonably withheld; provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to Quest, the
indemnified party or parties shall have the right to select separate counsel to
assert such legal defenses (in which case the indemnifying party shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties). Upon the permitted assumption by the indemnifying party of
the defense of such action, and approval by the indemnified party of counsel,
the indemnifying party shall not be liable to such indemnified party under this
Section 12.5 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof (other than reasonable
costs or investigation) unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence, (ii) the
indemnifying party shall not have employed counsel approved by the indemnified
party to represent the indemnified party within a reasonable time, (iii) the
indemnifying party and its counsel do not actively and vigorously pursue the
defense of such action or (iv) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party, in the defense of any such claim
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim.
ARTICLE 13
TERMINATION
13.1 TERMINATION
This Agreement may be terminated at any time prior to the Closing Date:
(i) by mutual written agreement of the parties;
(ii) by the Purchaser (provided that neither the Purchaser nor
Quest is in material breach of this Agreement), if there has
been a breach by any of the Key Shareholders or the Company of
any representation, warranty, covenant, agreement or other
obligation set forth in this Agreement on the
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part of any of the Key Shareholders or the Company which is
material and which such Key Shareholder or the Company, as the
case may be, fails to cure within five (5) Business Days after
notice thereof is given by the Purchaser to the Company and
the Key Shareholders (except that no cure period shall be
provided for a breach that by its nature cannot be cured);
(iii) by the Key Shareholders (provided none of the Key Shareholders
or the Company is in material breach of this Agreement), if
there has been a breach by the Purchaser or Quest of any
representation, warranty, covenant, agreement or other
obligation set forth in this Agreement on the part of the
Purchaser or Quest which is material and which the Purchaser
or Quest fails to cure within five (5) Business Days after
notice thereof is given by the Key Shareholders to the
Purchaser and Quest (except that no cure period shall be
provided for a breach by the Purchaser or Quest which by its
nature cannot be cured);
(iv) by the Purchaser, by giving notice to the Company and the Key
Shareholders, if the Closing shall not have occurred on or
before August 18, 2000 by reason of the failure of any
condition precedent under Section 6.5 or 6.6 (unless the
failure results primarily from a breach by the Purchaser or
Quest of any representation, warranty, covenant, agreement or
other obligation of the Purchaser or Quest contained in this
Agreement or the failure of the Purchaser or Quest to fulfill
a condition precedent required to be fulfilled by it prior to
Closing);
(v) by the Purchaser, by giving notice to the Company and the Key
Shareholders, in accordance with Section 3.3(b);
(vi) by the Key Shareholders, by giving notice to the Purchaser and
Quest, if the Closing shall not have occurred on or before
August 18, 2000 by reason of the failure of any condition
precedent under Section 6.5 or 6.7 (unless the failure results
primarily from a breach by any of the Key Shareholders or the
Company of any representation, warranty, covenant, agreement
or other obligation of any of the Key Shareholders or the
Company contained in this Agreement or failure of such Key
Shareholder or the Company, as the case may be, to fulfill a
condition precedent required to be fulfilled by it prior to
Closing); or
(vii) by the Key Shareholders or the Purchaser:
(A) if any permanent injunction or other order of a court or
other competent authority preventing the consummation of
the transactions contemplated in this Agreement shall
have become final and non-appealable; or
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(B) if there shall be any final action taken, or any statute,
rule, regulation or order enacted, promulgated or issued
or deemed applicable to the consummation of the
transactions contemplated in this Agreement by any
Governmental Authority which would make consummation of
the transactions contemplated in this Agreement illegal
or which would prohibit the Purchaser's ownership or
operation of all or a material portion of the Company
Business or the Principal Assets, or compel the Purchaser
to dispose of or hold separately all or a material
portion of the Company Business or the Principal Assets.
13.2 NON-SOLICITATION OF EMPLOYEES
The parties agree that, if this Agreement is terminated pursuant to
this Article 13, for a period of one (1) year following the date of such
termination, (i) neither Quest nor any of its Affiliates shall solicit, induce
or attempt to induce, directly or indirectly and whether on its own behalf or on
behalf of any other person, any person who at any time within the previous one
(l) year period shall have been an employee of the Company or any of its
Affiliates, whether on a full-time or part-time basis, to become employed by or
associated with Quest or any of its Affiliates or any other person, and neither
Quest nor any of its Affiliates shall approach any such employee for such
purpose or authorize or knowingly approve the taking of such action by any other
person or assist any other person in taking such action, and (ii) neither the
Company nor any of its Affiliates shall solicit, induce or attempt to induce,
directly or indirectly and whether on its own behalf or on behalf of any other
person, any person who at any time within the previous one (l) year period shall
have been an employee of Quest or any of its Affiliates, whether on a full-time
or part-time basis, to become employed by or associated with the Company or any
of its Affiliates or any other person, and the neither the Company nor any of
its Affiliates shall approach any such employee for such purpose or authorize or
knowingly approve the taking of such action by any other person or assist any
other person in taking such action.
13.3 SURVIVAL OF OBLIGATIONS UPON TERMINATION
If this Agreement is terminated pursuant to this Article 13, all
obligations of the parties hereunder shall terminate without any liability of
any party to any other party, except for (i) any liability of any party for
breach of this Agreement prior to such termination, (ii) the provisions of
Section 13.2, and (iii) the provisions of Article 14, all of which shall survive
such termination.
ARTICLE 14
GENERAL
14.1 PUBLIC ANNOUNCEMENT; DISCLOSURE
(a) No party shall make any public announcement concerning this
Agreement or the matters contemplated herein, their discussions or any other
memoranda, letters or agreements between the parties relating to the matters
contemplated herein without the prior consent of the other party; provided that
the parties may at any time make disclosure if it is advised by independent
counsel that such disclosure is required by Nasdaq or under applicable law or
regulatory authority, which disclosure will be subject to the prior review of
Purchaser or the Company and the Key Shareholders, as the case may be.
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(b) Except as permitted by Section 14.1(a), under no circumstances will
the parties (or any of their respective officers, directors, employees,
shareholders, Affiliates or advisors) discuss or disclose the existence or terms
of this Agreement or any other agreement or document to be executed and
delivered by any of the parties with or to any third party other than such
legal, accounting and financial advisors of such parties who have a need to know
such information.
14.2 MUTUAL DRAFTING
This Agreement is the joint product of the parties and each provision
hereof has been subject to the mutual consideration, negotiation and agreement
of all of the parties and shall not be construed for or against any party.
14.3 BROKERS' FEES
No party shall be liable to any other party for the payment of any
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby, and each
of the parties agrees to indemnify the others from any such payment or claim
therefor and from any liability, loss, costs (including legal costs on a full
indemnity basis) or damages suffered or incurred in connection therewith.
14.4 NOTICES
All notices and other communications given in connection with this
Agreement shall be in writing, and the respective addresses of the parties for
the service of any such notices or other communications shall be as set forth in
Schedule G. All notices and communications given in connection with this
Agreement shall be sufficiently given if addressed as aforesaid and either
delivered by hand or by reputable courier or overnight courier service or
overnight mail to the intended recipient's address for service as set forth
above, or sent by direct facsimile telecommunication to such party at its fax
number as set forth above (with receipt confirmed). Any notice so given shall be
deemed to have been given and received on the first Business Day on which it is
presented during normal business hours at the address for service of the
addressee thereof, or, in the case of a direct facsimile telecommunication, on
the day on which it is transmitted if transmitted prior to or during normal
business hours on a Business Day, or on the first Business Day following the day
on which it is transmitted if transmitted otherwise. A party may change its
address for service by giving written notice thereof to the other parties.
14.5 TRANSACTION EXPENSES
If the transactions contemplated hereby are not consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses.
If the transactions contemplated hereby are consummated, all Company Transaction
Expenses in excess of $150,000 shall be deemed expenses of the Securityholders
and shall be reimbursed by the Securityholders to the Purchaser in accordance
with Section 3.3.
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14.6 ASSIGNMENT
None of the Key Shareholders or the Company shall assign any rights or
obligations under or in respect of this Agreement without the prior written
consent of the Purchaser. Each of the Purchaser and Quest shall be entitled to
assign the whole or any portion of its interest in and in respect of this
Agreement at any time prior to or following Closing, provided that it shall not
thereby be relieved of its liability to the Key Shareholders for the performance
of its obligations hereunder, unless the Key Shareholders otherwise agree.
14.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario, Canada, and the laws of Canada applicable
therein.
14.8 ENUREMENT; NO THIRD PARTY BENEFICIARIES RIGHTS
(a) This Agreement shall enure to the benefit of and be binding upon
the parties and their respective heirs, administrators, trustees, legal
representatives, receivers, successors and permitted assigns.
(b) No provision of this Agreement is intended, nor will be
interpreted, to provide to create any third party beneficiary rights or any
other rights of any kind in any client, customer, Affiliate, shareholder,
officer, director, employee or partner of any party or any other person unless
specifically provided otherwise herein, and, except as so provided, all
provisions hereof will be solely for the benefit of the respective parties to
this Agreement.
14.9 FURTHER ASSURANCES
Each of the parties shall from time to time and at all times following
the Closing, without further consideration, do and perform all such further acts
and things, and execute and deliver all such further agreements, assurances,
deeds, assignments, conveyances, notices, releases and other documents and
instruments, as may reasonably be required to more fully assure the transfer of
the Company Shares and Options to the Purchaser in accordance with the
provisions of this Agreement, and otherwise to assure the carrying out of the
intent and purpose of this Agreement.
14.10 AMENDMENT; NO WAIVER
(a) This Agreement may be amended only by written instrument executed
by each of the parties.
(b) No failure by any party to exercise, and no delay by any party in
exercising, any right, power or remedy hereunder shall impair any right, power
or remedy which such party may have, nor shall such delay be construed to be a
waiver of any such rights, powers or remedies or an acquiescence in any breach
or default under this Agreement or in connection with the transactions
contemplated hereby. No waiver of any breach or default hereunder of any party
shall be deemed a waiver of any default or breach subsequently occurring
hereunder. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in
-67-
75
an instrument in writing signed on behalf of such party, and a waiver shall
affect only the matter, and the occurrence thereof, specifically identified in
the writing granting such waiver and shall not extend to any other matter or
occurrence.
14.11 NON-MERGER; SURVIVAL
All representations, warranties, covenants, agreements and other
obligations contained in this Agreement or in any other agreement or document
delivered pursuant hereto shall survive the Closing and shall not merge in any
conveyance, transfer, assignment or other document or instrument issuing
pursuant hereto or in connection herewith. Without limiting the generality of
the foregoing, the liability of a party for any breach of any of its
representations, warranties, covenants, agreements or other obligations
hereunder prior to the completion of the purchase and sale contemplated hereby
and by the Offer shall not be extinguished or in any manner diminished by such
completion.
14.12 SEVERABILITY
If any provision of this Agreement, or the application thereof, will
for any reason and to any extent be invalid or unenforceable, the remainder of
this Agreement and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties. 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
the void or unenforceable provision.
14.13 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 on such
party, and the exercise of any one remedy will not preclude the exercise of any
other.
14.14 SPECIFIC PERFORMANCE
THE PARTIES 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. 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 COURT, IN ADDITION TO
ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
14.15 ACTION BY KEY SHAREHOLDERS
Notwithstanding anything contained herein, any waiver of any condition
by the Key Shareholders hereunder and any determination by the Key Shareholders
to terminate this Agreement in accordance with the terms hereof shall be made by
the Majority Key Shareholders.
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76
Any act by the Key Shareholders or by the Shareholders' Agent hereunder or under
the Escrow Agreement shall be made only upon the direction of the Majority Key
Shareholders. All of the Key Shareholders shall be bound by any such act
undertaken in accordance with this Section 14.15.
14.16 ENTIRE AGREEMENT
Except for the Confidentiality Agreement, this Agreement and the Offer
expresses and constitutes the entire agreement among the parties with respect to
the purchase and sale of the Company Shares and Options and the other
transactions contemplated in this Agreement and the Offer, and supersedes any
previous agreements or understandings with respect to the purchase and sale of
the Company Shares and Options, including the Summary of Proposed Terms dated
May 5, 2000 among Quest, the Company, and Newbridge Networks Corporation,
Ontario Teachers' Pension Plan Board, 300188 Nova Scotia Limited, Xxxxxx Xxxxxx
Corporation, Xxxx Kitchen and Xxxxx Xxxxxx, as principal shareholders of the
Company. The Confidentiality Agreement shall survive the execution and delivery
of this Agreement and shall remain in full force and effect until terminated in
accordance with its terms or by the mutual agreement of the parties thereto.
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77
14.17 COUNTERPART EXECUTION
This Agreement may be executed in separate counterparts, and the
executed counterparts shall together constitute one instrument and have the same
force and effect as if both of the parties had executed the same instrument.
IN WITNESS WHEREOF the parties have executed and delivered this
Agreement as of the date first above written.
--------------------------------- -----------------------------------
Witness XXXX KITCHEN
--------------------------------- -----------------------------------
Witness XXXXX XXXXXX
ALCATEL NETWORKS CORPORATION
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
10729 NEWFOUNDLAND LIMITED
By:
-------------------------------
Name:
Title:
ONTARIO TEACHERS PENSION PLAN BOARD
By:
-------------------------------
Name:
Title:
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78
------------------------------------ -----------------------------------
Witness XXXXXX X. XXXX,
as the Shareholders' Agent
FASTLANE TECHNOLOGIES INC.
By:
-------------------------------
Name:
Title:
881229 ALBERTA LTD.
By:
-------------------------------
Name:
Title:
QUEST SOFTWARE, INC.
By:
-------------------------------
Name:
Title:
-71-
79
ACQUISITION AGREEMENT
AMENDING AGREEMENT
THIS AMENDING AGREEMENT is made as of the 4th day of August,
2000.
BETWEEN:
XXXX KITCHEN, an individual residing in the City of Halifax in
the Province of Nova Scotia, XXXXX XXXXXX, an individual residing
in the City of Kanata in the Province of Ontario, ALCATEL
NETWORKS CORPORATION, a company constituted under the Canada
Business Corporations Act, 10729 NEWFOUNDLAND LIMITED, a company
incorporated pursuant to the laws of the Province of
Newfoundland, and ONTARIO TEACHERS PENSION PLAN BOARD, a
non-share capital corporation governed by the laws of the
Province of Ontario
(the "KEY SHAREHOLDERS")
- and -
XXXXXX X. XXXX
(the "SHAREHOLDERS' AGENT")
- and -
FASTLANE TECHNOLOGIES INC., a company continued under the Canada
Business Corporations Act
(the "COMPANY")
- and -
000000 XXXXXXX LTD., a company incorporated pursuant to the laws
of Alberta
(the "PURCHASER")
- and -
QUEST SOFTWARE, INC., a company incorporated pursuant to the laws
of the State of California
("QUEST")
WHEREAS the Key Shareholders, the Shareholders' Agent, the
Company, the Purchaser and Quest are parties to that certain Acquisition
Agreement (the "Agreement") executed and delivered the 28th day of June, 2000.
AND WHEREAS the parties wish to amend the Agreement.
NOW THEREFORE THIS AMENDING AGREEMENT WITNESSETH that in
consideration of the premises and other good and valuable consideration, receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
80
1. AMENDMENTS
(a) Section 1.1 of the Agreement is amended by adding the
following definitions thereto in appropriate alphabetical
order:
"ALCATEL" means Alcatel Networks Corporation, formerly
Newbridge Networks Corporation.
"FUNDING AGREEMENT" means the Funding Agreement dated as of
December 20, 1996, between Alcatel and the Company, as in
effect as of June 28, 2000.
"GOVERNMENT OF NOVA SCOTIA" means Her Majesty the Queen in
Right of the Province of Nova Scotia.
"INVESTMENT AMOUNT" has the meaning given such term in the
Funding Agreement.
"LOAN DOCUMENTS" means the Promissory Note and the Security
Agreement.
"N.S. INVESTMENT AGREEMENT" means the Nova Scotia Information
Highway Investment Agreement dated 1996 between Alcatel and
the Government of Nova Scotia, as in effect as of June 28,
2000.
"PROMISSORY NOTE" means the Amended and Restated Promissory
Note dated as of July 31, 2000, executed by the Company in
favor of the Purchaser, in the original principal amount of
Three Million Five Hundred Thousand Dollars ($3,500,000).
"SECURITY AGREEMENT" means the Security Agreement dated as of
July 31, 2000, executed by the Company in favor of the
Purchaser, as amended, supplemented or otherwise modified from
time to time.
(b) The definition of "Permitted Encumbrances" found in Section
1.1 of the Agreement is amended by adding the following
subclause thereto:
" and
(iv) the Loan Documents."
(c) Each of Sections 1.1 and 11.1(b) of the Agreement is amended
by deleting the phrase "Montreal Trust Company of Canada" in
each place where it appears and replacing it with the phrase
"Computershare Investor Services Inc. (formerly Montreal Trust
Company of Canada)".
(d) Section 2.1(a) of the Agreement is amended by deleting the
phrase "not later than ten (10) Business Days following the
date of this Agreement", and replacing that deleted phrase
with "not later than August 21, 2000".
81
(e) Section 2.1(b) of the Agreement is amended by adding thereto
immediately following the words "as of the date hereof" the
phrase ", with such amendments as are required to reflect (i)
the provisions of the Acquisition Agreement Amending Agreement
dated August 4, 2000 among the parties hereto and (ii) the
proposal of the Minister of Finance dated June 22, 2000 to
amend the provisions of s. 94.2 of the Income Tax Act (Canada)
regarding non-resident trusts and foreign investment
entities."
(f) Section 3.1 of the Agreement is amended by adding at the end
thereof immediately preceding the period the phrase ",subject
to the adjustment set out in Section 3.3(c)."
(g) Section 3.2(a) of the Agreement is amended by deleting the
second sentence thereof and replacing it with the following
sentence:
"Sixty-five million dollars ($65,000,000) of the Purchase
Price shall be payable to the Securityholders in the form of
Exchangeable Shares and Exchangeable Share Options and the
remainder of the Purchase Price shall be payable to the
Securityholders in the form of cash."
(h) Section 3.3 of the Agreement is amended by adding the
following text as sub-section (c):
"(c) Any amount that has been withdrawn from the bank
account established by the Company pursuant to the
Promissory Note upon or before Closing, together with
interest accrued thereon, shall be deducted from the
cash portion of the Purchase Price to be delivered to
the Securityholders pursuant to Section 3.2(a)."
(i) Section 4.2(e) of the Agreement is amended by inserting the
phrase "those incurred pursuant to the Loan Documents, and "
after the phrase "other than".
(j) Section 4.2 of the Agreement is amended by adding the
following text as subsection (cc) immediately following
subsection (bb) thereof:
"(cc) request or receive any further disbursement under the
Funding Agreement;"
(k) Each of Sections 4.9(a)(ii), 6.1, 13.1(iv) and 13.1(vi) of the
Agreement is amended by deleting the date August 18, 2000 and
replacing the deleted date with September 15, 2000.
(l) The following new Section 4.10 is added to the Agreement
immediately following Section 4.9 thereof:
82
"4.10 COVENANT OF THE PURCHASER
The Purchaser covenants that if the consent and
waivers of the Government of Nova Scotia contemplated in
clause (i) of Section 6.7(f) have not been obtained on or
prior to the Closing Date, the Purchaser shall pay to Alcatel
on behalf of the Company simultaneously with the consummation
of the Closing the amount of Canadian $6,418,616.00 (such
amount being equal to eighty percent (80%) of the Investment
Amount) in full satisfaction and discharge of all obligations
and liabilities of the Company under the Funding Agreement,
which satisfaction and discharge shall be in form and
substance satisfactory to the Purchaser acting reasonably and
shall be delivered to the Purchaser against payment of such
amount by the Purchaser; provided that the Purchaser shall not
be obligated to make such payment if Alcatel has not received
on or before Closing from the Government of Nova Scotia the
satisfaction and discharge contemplated in clause (ii) of
Section 6.7(f) or if any condition precedent to the
Purchaser's obligation to consummate the Closing has not been
satisfied or waived by the Purchaser on or prior to the
Closing Date."
(m) Section 6.6(i) of the Agreement is deleted and replaced with
the following:
"Either (i) the satisfaction and discharge of all obligations
and liabilities of the Company under the Funding Agreement
contemplated in Section 4.10 has been delivered to the
Purchaser, or (ii) (A) all right, title and interest of
Alcatel in, under and to the N.S. Investment Agreement has
been assigned to the Purchaser or an Affiliate of the
Purchaser effective as of the Closing Date, (B) all right,
title and interest of Alcatel in, under and to the Funding
Agreement has been assigned to the Purchaser or an Affiliate
of the Purchaser effective as of the Closing Date, (C) there
shall have been delivered to the Purchaser an amendment to the
N.S. Investment Agreement clarifying the definition of "Gross
Annual Sales" thereunder, and (D) there shall have been
delivered to the Purchaser the consent of the Government of
Nova Scotia to the assignments contemplated in clauses (ii)(A)
and (ii)(B) above together with waivers of any default by
Alcatel under the N.S. Investment Agreement and of any default
by the Company under the Funding Agreement and releases, all
in form and substance satisfactory to the Purchaser, acting
reasonably."
(n) Section 6.7(e) of the Agreement is deleted.
(o) Section 6.7(f) of the Agreement is deleted and replaced with
the following:
"Either (i) the consent of the Government of Nova Scotia to
the assignments contemplated in clauses (ii)(A) and (ii)(B) of
Section 6.6(i) together with waivers by the Government of Nova
Scotia of any default by Alcatel under the N.S. Investment
Agreement and of any default by the Company under the Funding
Agreement and releases, have been obtained by Alcatel in form
and substance satisfactory to Alcatel, acting reasonably, or
(ii) the Purchaser has made the payment to Alcatel
83
contemplated in Section 4.10 and Alcatel has received from the
Government of Nova Scotia a full satisfaction and discharge of
all obligations and liabilities of Alcatel under the N.S.
Investment Agreement, which satisfaction and discharge shall
be in form and substance satisfactory to Alcatel, acting
reasonably."
(p) Each of Sections 7.7(c) and 7.7(f) of the Agreement is amended
by inserting the phrase "other than the Liabilities created
pursuant to the Loan Documents" at the end thereof.
(q) Section 7.24 of the Agreement is amended by inserting the
phrase ", the Liabilities created pursuant to the Loan
Documents" after the words "Trade Payables".
(r) Section 14.16 of the Agreement is amended by adding the
following sentence to the end thereof:
"Nothing contained herein shall affect the rights and
obligations of the Purchaser and the Company under the Loan
Documents, which shall remain in full force and effect and
shall not be amended or modified in any respect by this
Agreement or any other agreement or documents to be executed
or delivered in connection herewith."
(s) Schedule "A" of the Agreement is amended by adding the text of
Exhibit "A" hereto to Section 7.12(b) of the Disclosure
Schedule.
(t) Schedule "F" of the Agreement is deleted and replaced with
Exhibit "B" hereto.
2. WAIVERS
(a) The Purchaser waives the Material Adverse Effect constituted
by or which may hereafter be constituted by sales revenue from
the sales and licenses of Company Products being less than
projected by the Company, including without limitation the
failure of the Company to meet projected sales revenue
described in the correspondence from the Purchaser to the
other parties hereto dated July 14, 2000.
(b) The Purchaser waives any right or remedy arising from the
nondisclosure of the information contained in Exhibit "A"
hereto prior to the date hereof.
3. INTERPRETATION
The Agreement and this Amending Agreement shall hereafter be
read together and construed as one document. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to those terms in the
Agreement.
84
4. RATIFICATION
Except and only subject to the amendments herein contained,
the Agreement remains in all respects the same, continues in full force and
effect, and is hereby ratified and confirmed. For greater certainty, the parties
acknowledge and agree that, except as specifically set out in Clause 2 hereof,
this Amending Agreement does not constitute a waiver by the Purchaser of any
right, power or remedy that it may have or an acquiescence in any breach or
default of any other party pursuant to the Agreement.
IN WITNESS WHEREOF the parties have executed and delivered
this Agreement as of the date first above written.
------------------------------------- -------------------------------------
Witness XXXX KITCHEN
------------------------------------- -------------------------------------
Witness XXXXX XXXXXX
ALCATEL NETWORKS CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
10729 NEWFOUNDLAND LIMITED
By:
---------------------------------
Name:
Title:
ONTARIO TEACHERS PENSION PLAN BOARD
By:
---------------------------------
Name:
Title:
------------------------------------- -------------------------------------
Witness XXXXXX X. XXXX,
as the Shareholders' Agent
FASTLANE TECHNOLOGIES INC.
By:
---------------------------------
Name:
Title:
85
881229 ALBERTA LTD.
By:
---------------------------------
Name:
Title:
QUEST SOFTWARE, INC.
By:
---------------------------------
Name:
Title:
