EXHIBIT 2.1
MADE as of the 30th day of July, 2000
AMONG:
REDBACK NETWORKS INC.
-and-
610381 B.C. INC.
-and-
ABATIS SYSTEMS CORPORATION
--------------------------------
ARRANGEMENT AGREEMENT
--------------------------------
Fraser Xxxxxx Casgrain
Barristers and Solicitors
15th Floor - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
TABLE OF CONTENTS
1.0 INTERPRETATION...............................................................................................1
1.1 Definitions .......................................................................................1
1.2 Interpretation Not Affected by Headings, etc........................................................5
1.3 Currency...........................................................................................16
1.4 Number, etc........................................................................................16
1.5 Date For Any Action................................................................................16
1.6 Entire Agreement...................................................................................16
1.7 Accounting Matters.................................................................................16
1.8 Construction.......................................................................................16
1.9 Knowledge..........................................................................................17
1.10 Exhibits...........................................................................................18
1.11 Qualifications to Intellectual Property Representations............................................18
2.0 THE ARRANGEMENT.............................................................................................18
2.1 Implementation Steps by Abatis.....................................................................18
2.2 Implementation Steps by Redback Parties............................................................19
2.3 Interim Order......................................................................................19
2.4 Articles of Arrangement............................................................................20
2.5 Abatis Proxy Circular..............................................................................21
2.6 Securities Compliance..............................................................................21
2.7 Preparation of Filings.............................................................................23
2.8 Lock-Up of Shares Issued Pursuant to the Arrangement...............................................25
3.0 REPRESENTATIONS AND WARRANTIES..............................................................................25
3.1 Representations and Warranties of Abatis...........................................................25
3.1.1 Incorporation and Organization of Abatis..................................................25
3.1.2 Capitalization............................................................................26
3.1.3 Authority and No Violation................................................................27
3.1.4 No Defaults...............................................................................30
3.1.5 Issued Shares and Options.................................................................30
3.1.6 No Other Shares...........................................................................30
3.1.7 Financial Statements......................................................................30
3.1.8 Interim Statements........................................................................31
3.1.9 Business Carried on in Ordinary Course....................................................32
3.1.10 Partnerships or Joint Ventures............................................................34
3.1.11 Minute Books and Corporate Records........................................................35
3.1.12 Accuracy of Books and Records.............................................................35
3.1.13 Guarantees................................................................................35
3.1.14 Interested Persons........................................................................35
3.1.15 Directors and Officers....................................................................37
3.1.16 Employment and Employee Benefit Matters...................................................37
3.1.17 Pension and Retirement Plans..............................................................39
3.1.18 Debt Instruments..........................................................................39
3.1.19 Real Property.............................................................................40
3.1.20 Leases and Leased Property................................................................40
3.1.21 Insurance.................................................................................41
3.1.22 Material Agreements.......................................................................41
3.1.23 No Breach of Material Contracts...........................................................43
3.1.24 Third Party Consents......................................................................44
3.1.25 Financial Forecasts.......................................................................44
3.1.26 Obligations to Customers and Suppliers....................................................44
3.1.27 Warranties and Indemnities................................................................44
3.1.28 Legal Proceedings.........................................................................44
3.1.29 Banking Information.......................................................................45
3.1.30 Tax Matters...............................................................................45
3.1.31 Accounts Receivable.......................................................................46
3.1.32 Compliance with Applicable Laws...........................................................46
3.1.33 Consents and Approvals....................................................................47
3.1.34 No Business Restrictions..................................................................47
3.1.35 Environmental Matters.....................................................................47
3.1.36 Liabilities...............................................................................48
3.1.37 Condition and Sufficiency of Assets.......................................................48
3.1.38 Inventories...............................................................................49
3.1.39 Intellectual Property.....................................................................49
3.1.40 Information Technology....................................................................57
3.1.41 Commitments for Purchases or Sales at Losses..............................................58
3.1.42 Significant Customers.....................................................................58
3.1.43 Significant Suppliers.....................................................................58
3.1.44 Government Programs.......................................................................58
3.1.45 Product Liability.........................................................................58
3.1.46 GST Registration..........................................................................58
3.1.47 Advisory Fees.............................................................................59
3.1.48 Other Negotiations; Brokers; Third Party Expenses.........................................59
3.1.49 [This section intentionally deleted]......................................................59
3.1.50 Disclosure................................................................................59
3.1.51 Approval of Arrangement...................................................................60
3.1.52 Agreements with Certain Shareholders......................................................60
3.2 Representations and Warranties of Redback..........................................................60
3.2.1 Incorporation and Organization............................................................60
3.2.2 Capitalization............................................................................61
3.2.3 Authority and No Violation................................................................61
3.2.4 No Defaults...............................................................................64
3.2.5 Ownership of Exchangeco and Newco and Business of Exchangeco..............................64
3.2.6 Absence of Certain Changes or Events......................................................64
3.2.7 Disclosure................................................................................64
3.2.8 SEC Documents; Redback Financial Statements...............................................64
3.2.9 Exchangeable Shares.......................................................................65
3.2.10 Redback Common Shares.....................................................................65
3.2.11 Other Transactions........................................................................65
3.2.12 Exempt Interest...........................................................................66
3.3 Non-Waiver.........................................................................................66
3.4 Survival...........................................................................................66
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4.0 ESCROW PROVISIONS...........................................................................................66
4.1 Establishment of the Escrow Fund...................................................................66
4.2 Recourse to the Escrow Fund........................................................................66
4.3 Escrow Period; Distribution of Escrow Fund upon Termination of Escrow Period.......................67
4.4 Minimum Threshold..................................................................................67
5.0 COVENANTS...................................................................................................67
5.1 Retention of Goodwill..............................................................................67
5.2 Material Commitments...............................................................................68
5.3 Covenants of Abatis................................................................................68
5.4 Covenants of the Redback Parties...................................................................75
5.5 Tax Deferred Status................................................................................77
5.6 Applications for Regulatory Approvals..............................................................78
5.7 Section 85 Elections...............................................................................78
5.8 Covenants Regarding Non-Solicitation...............................................................78
5.9 Notice by Abatis of Superior Proposal Determination................................................80
5.10 Access to Information..............................................................................82
5.11 Covenant Regarding Representations and Warranties..................................................84
5.12 Closing Matters....................................................................................84
5.13 Indemnification of Directors and Officers..........................................................84
5.14 Employment and Related Matters.....................................................................85
5.15 Prohibition on Voluntary Liquidation...............................................................85
6.0 CONDITIONS..................................................................................................85
6.1 Mutual Conditions Precedent........................................................................85
6.2 Additional Conditions Precedent to the Obligations of the Redback Parties..........................87
6.3 Additional Conditions Precedent to the Obligations of Abatis.......................................89
6.4 Notice and Cure Provisions.........................................................................90
6.5 Satisfaction of Conditions.........................................................................91
7.0 AMENDMENT AND TERMINATION...................................................................................91
7.1 Amendment..........................................................................................91
7.2 Mutual Understanding Regarding Amendments..........................................................91
7.3 Termination........................................................................................92
7.4 Break Fee..........................................................................................94
7.5 Liquidated Damages.................................................................................95
7.6 Remedies...........................................................................................95
7.7 Effect of Break Fee Payment........................................................................95
8.0 GENERAL............................................................................................96
8.1 Notices............................................................................................96
8.2 Assignment.........................................................................................97
8.3 Binding Effect.....................................................................................97
8.4 Waiver and Modification............................................................................97
8.5 No Personal Liability..............................................................................98
8.6 Further Assurances.................................................................................98
8.7 Expenses...........................................................................................98
8.8 Consultation.......................................................................................98
8.9 Governing Laws.....................................................................................98
8.10 Counterparts.......................................................................................99
iii
Exhibit A -- Affiliate's Letter
Exhibit B -- Appropriate Regulatory Approvals
Exhibit C -- Arrangement Resolution
Exhibit D -- Exchange Trust Agreement
Exhibit E -- Plan of Arrangement
-- Appendix 1 - Provisions Attaching to the Exchangeable
Shares of 610381 B.C. Inc.
-- Appendix 2 - Escrow Agreement
-- Appendix 3 - Exercise of Replacement Options
Exhibit F -- Principal Shareholder Voting Agreement
Exhibit G -- Support Agreement
Exhibit H -- Registration Rights Agreement
Exhibit I -- Assumption Agreement
iv
ARRANGEMENT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 30th day of July, 2000.
AMONG:
REDBACK NETWORKS INC., a corporation existing under the laws
of the State of Delaware
(hereinafter referred to as "REDBACK")
AND:
610381 B.C. INC., a company existing under the laws of the
Province of British Columbia (hereinafter referred to as
"EXCHANGECO")
AND:
ABATIS SYSTEMS CORPORATION, a corporation existing under the
federal laws of Canada (hereinafter referred to as "ABATIS")
THIS AGREEMENT WITNESSETH THAT in consideration of the respective covenants
and agreements herein contained and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by each party), the
parties hereby covenant and agree as follows:
1.0 INTERPRETATION
1.1 DEFINITIONS. In this Agreement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
following meanings respectively:
"ABATIS DISCLOSURE SCHEDULE" means that certain Disclosure Schedule
dated as of the date hereof and delivered by Abatis to the Redback Parties
concurrently herewith;
"ABATIS MATERIAL INTELLECTUAL PROPERTY" has the meaning ascribed thereto in
Section 3.1.39(a);
"ABATIS MEETING" means the special meeting of Abatis Shareholders and
Abatis Optionholders, including any adjournment thereof, to be called to
consider the Arrangement;
"ABATIS NON-VOTING COMMON SHARES" means the Class B Non-Voting Common
Shares in the capital of Abatis;
"ABATIS OPTIONHOLDERS" means the holders of Abatis Options;
"ABATIS OPTIONS" means the options to purchase Abatis Voting Common Shares
granted under the Abatis Stock Option Plan which are outstanding and
unexercised on the Effective Date;
"ABATIS REGISTERED INTELLECTUAL PROPERTY" means all Registered Intellectual
Property owned by, or filed in the name of, Abatis;
"ABATIS SHAREHOLDERS" means the holders of Abatis Shares;
"ABATIS SHARES" means the Abatis Voting Common Shares and Abatis Non-Voting
Common Shares, collectively;
"ABATIS STOCK OPTION PLAN" means the Key Employee Stock Option Plan of
Abatis, as amended and in effect on the date hereof;
"ABATIS VOTING COMMON SHARES" means the Class A Voting Common Shares in the
capital of Abatis;
"ACQUISITION PROPOSAL" means any BONA FIDE proposal with respect to merger,
amalgamation, take-over bid, private purchase, sale of material assets (or
any lease, long-term supply agreement, licence, joint venture or other
arrangement having the same economic effect as a sale), any material sale
of shares or rights or interests therein or thereto or similar transactions
involving Abatis, or a proposal to do so, excluding the Arrangement and any
sale of Products in the ordinary course of business or as disclosed in the
Abatis Disclosure Schedule;
"AFFILIATE'S LETTER" means a letter, substantially in the form and content
of Exhibit A hereto;
2
"ANCILLARY AGREEMENTS" means the Support Agreement, the Exchange Trust
Agreement, the Registration Rights Agreement and the Escrow Agreement,
collectively;
"APPROPRIATE REGULATORY APPROVALS" means those sanctions, rulings,
consents, orders, exemptions, permits and other approvals (including the
lapse, without objection, of a prescribed time under a statute or
regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection
being made) of Governmental Entities, regulatory agencies or
self-regulatory organizations, as set out in Exhibit B hereto;
"ARRANGEMENT" means an arrangement under Section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 7.1 hereof or Article 6 of the Plan of Arrangement or made at the
direction of the Court in the Final Order;
"ARRANGEMENT RESOLUTION" means the special resolution of the Abatis
Shareholders and Abatis Optionholders, to be substantially in the form and
content of Exhibit C hereto;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of Abatis in
respect of the Arrangement that are required by the CBCA to be sent to the
Director after the Final Order is made;
"ASSUMPTION AGREEMENT" means the Assumption, Amending and Confirmation
Agreement to be made between Redback and Abatis, substantially in the form
and content of Exhibit I hereto, with such changes thereto as the parties
hereto, acting reasonably, may approve;
"BUSINESS" means the business of Abatis as it is currently conducted,
including, the design, development, manufacture, use, import and sale of
the Products, the co-ordination of consumable internet protocol service
(virtual private networks and product suppliers whose offerings are
compatible with the Products), the licensing of technology underlying the
Products to develop and enhance other markets for the Product technology,
and the performance of services related to these activities;
3
"BUSINESS DAY" means any day on which commercial banks are open for
business in Xxx Xxxxxxxxx, Xxxxxxxxxx xxx Xxxxxxxxx, Xxxxxxx Xxxxxxxx other
than a Saturday, a Sunday or a day observed as a holiday in San Francisco,
California under the laws of the State of California or the federal laws of
the United States of America or in Vancouver, British Columbia under the
laws of the Province of British Columbia or the federal laws of Canada;
"CBCA" means the CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c. C-44, as
it may be amended from time to time prior to the Effective Date;
"CIRCULAR" means the notice of the Abatis Meeting and accompanying
management proxy circular, including all schedules, appendices and exhibits
thereto, to be sent to the Abatis Shareholders and the Abatis Optionholders
in connection with the Abatis Meeting;
"COMPANY ACT" means the COMPANY ACT, R.S.B.C. 1996, c. 62;
"CONFIDENTIALITY AGREEMENT" means the non-disclosure agreement dated as of
May 30, 2000 between Redback and Abatis;
"CORE PRODUCTS AND TECHNOLOGY" has the meaning ascribed thereto in Section
3.1.39(a)(i);
"COURT" means the Supreme Court of British Columbia;
"DEBT INSTRUMENT" means any bond, debenture, mortgage, promissory note or
other instrument evidencing indebtedness for borrowed money;
"DIRECTOR" means the Director appointed pursuant to Section 260 of the
CBCA;
"DISSENT RIGHTS" means the rights of dissent in respect of the Arrangement
described in Section 3.1 of the Plan of Arrangement;
"DROP DEAD DATE" means December 31, 2000, or such later date as may be
agreed upon by the parties hereto;
"EFFECTIVE DATE" means the date shown on the certificate of arrangement to
be issued by the Director giving effect to the Arrangement;
4
"EFFECTIVE TIME" has the meaning ascribed thereto in the Plan of
Arrangement;
"EMPLOYEE BENEFITS" means:
(a) salaries, wages, bonuses, vacation entitlements, commissions,
fees, stock option plans, stock purchase plans, incentive plans,
deferred compensation plans, profit-sharing plans and other similar
benefits, plans or arrangements;
(b) insurance, health, welfare, drug, disability, pension, retirement,
travel, hospitalization, medical, dental, legal counseling, eye care and
other similar benefits, plans or arrangements; and
(c) agreements or arrangements with any labour union or employee
association, written or oral employment agreements or arrangements and
agreements or arrangements for the retention of the services of
independent contractors, consultants or advisors;
"ENCUMBRANCE" means any mortgage, charge, easement, encroachment, lien,
adverse claim, assignment by way of security, security interest, servitude,
pledge, hypothecation, conditional sale agreement, security agreement, title
retention agreement, financing statement, option, right of pre-emption,
privilege, obligation to assign, licence, sublicence (other than
non-exclusive licences and sublicences of Intellectual Property (excluding
source code) made in the ordinary course of business) or other encumbrance;
"ESCROW AGENT" means Montreal Trust Company of Canada, or such other Person
as the Parties hereto may approve, in its capacity as escrow agent under
the Escrow Agreement, and includes any successor escrow agent appointed
thereunder;
"ESCROW AGREEMENT" means an agreement to be made among Redback, Exchangeco,
the Shareholders' Agent and the Escrow Agent, as agent for and on behalf of
each of the Abatis Shareholders, which shall be substantially in the form
and content of Appendix 2 to the Plan of Arrangement, with such changes
thereto as the parties hereto, acting reasonably, may approve;
5
"ESCROW FUND" has the meaning ascribed thereto in Section 4.1;
"ESCROW SECURITIES" has the meaning ascribed thereto in the Plan of
Arrangement;
"EXCHANGE ACT" means the United States SECURITIES EXCHANGE ACT OF 1934;
"EXCHANGE RATIO" has the meaning ascribed thereto in the Plan of
Arrangement;
"EXCHANGE TRUST AGREEMENT" means an agreement to be made among Redback,
Exchangeco and the Trustee, which shall be substantially in the form and
content of Exhibit D hereto, with such changes thereto as the parties
hereto, acting reasonably, may approve;
"EXCHANGEABLE SHARES" means non-voting exchangeable shares in the capital
of Exchangeco, having the rights, privileges, restrictions and conditions
set out in the Share Provisions;
"EXPIRATION DATE" means that date which is 180 days after the Effective
Date;
"FINAL ORDER" means the final order of the Court granted pursuant to
Section 192 of the CBCA approving the Arrangement as such order may be
amended at any time prior to the Effective Date or, if appealed, then,
unless such appeal is abandoned or denied, as affirmed;
"FINANCIAL STATEMENTS" means the audited annual financial statements of
Abatis as at November 30, 1999, consisting of the balance sheet of Abatis
as at November 30, 1999 and the accompanying statement of operations and
deficit and statement of cash flows for the 12-month period ended November
30, 1999, including the notes thereto and the auditor's report thereon;
"FINANCIAL YEAR END" means November 30, 1999;
"FORM S-3" has the meaning ascribed thereto in the Registration Rights
Agreement;
"FORM S-8" has the meaning ascribed thereto in Section 2.6(b);
6
"GOVERNMENTAL ENTITY" means any
(a) multinational, federal, provincial, state, regional, municipal, local
or other government, governmental or public department, central bank or
Tribunal;
(b) any subdivision, agent, commission, board, or authority of any of the
foregoing; or
(c) any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing;
"GUARANTEE" means any agreement, contract or commitment providing for the
guarantee, indemnification, assumption or endorsement or any like
commitment with respect to the obligations, liabilities (contingent or
otherwise) or indebtedness of any Person;
"INFORMATION" has the meaning ascribed thereto in Section 5.10(b);
"INTELLECTUAL PROPERTY" means any or all of the following and all rights
in, arising out of, or associated with:
(a) all Registered Intellectual Property;
(b) all trade secrets including, without limitation, trade secrets that are
inventions (whether patentable or not) and invention disclosures and
all proprietary and confidential information including, without
limitation, know-how, technical data, techniques, manuals,
documentation, reports, records, formulae, processes, descriptions,
schematics, specifications, designs, industrial models, design
criteria, architectures, schematics for hardware products, system
architecture drawings, product test scripts, methodologies, algorithms,
sketches, photographs, plans, drawings, samples, reports, studies,
findings, inventions, prototypes and ideas, whether patentable or not,
whether trade secrets or not and whether in written, graphic or oral
form;
(c) all business data and information including, without limitation,
customer lists, business models, logos, product documentation and
web-site materials and marketing collaterals;
7
(d) all rights in the nature of copyright howsoever arising, worldwide
(whether domestic or foreign) that subsist in and to any original works
(including, without limitation, Software) and which have not been
registered under the applicable copyright legislation;
(e) all trade names, brand names, logos, unregistered trade-marks;
(f) all data, databases and data collections in whatever form or media; and
(g) all physical manifestations of any of the foregoing together with all
documentation applicable thereto;
"INTELLECTUAL PROPERTY RIGHTS" means any and all proprietary, possessory,
use and ownership rights, titles and interest (whether domestic or foreign)
in and to all intellectual property including issued and unissued patents,
registered and unregistered copyrights, registered and unregistered
industrial designs, registered and unregistered trade-marks or service
marks, confidential information, trade-secrets, mask works, semi-conductor
chip designs and integrated circuit topography and all other intellectual
and industrial property rights whatsoever and worldwide (whether registered
Xor unregistered);
"INTERESTED PERSON" means any present or former officer, director,
shareholder, employee, consultant or advisor, excluding attorneys,
accountants and other third party professional advisors of Abatis in
connection with this Agreement and the transactions contemplated herein, of
or to Abatis or any Person with which Abatis or any of the foregoing does
not deal at arm's length within the meaning of the INCOME TAX ACT (Canada)
(including a spouse, parent, child or sibling of any such Person);
"INTERIM FINANCIAL STATEMENTS" means the unaudited financial statements of
Abatis as at May 31, 2000, consisting of the balance sheet of Abatis as at
May 31, 2000 and the accompanying statement of operations and deficit and
statement of cash flows for the period from the Financial Year End to and
including May 31, 2000;
8
"INTERIM ORDER" means the interim order of the Court, as the same may be
amended, granted pursuant to Section 192 of the CBCA in respect of the
Arrangement, as contemplated by Section 2.3;
"INVESTMENT BUSINESS" has the meaning ascribed thereto in Section 3.2.12;
"KEY EMPLOYEES" means those Persons designated as "Key Employees" in the
Abatis Disclosure Schedule;
"KEY EMPLOYEE EMPLOYMENT AGREEMENTS" means the employment agreements
between Abatis and each of the Key Employees, including non-competition
covenants, copies of which are attached to the Abatis Disclosure Schedule;
"LAWS" means all statutes, regulations, statutory rules, principles of law,
orders, published policies and guidelines, and terms and conditions of any
grant of approval, permission, authority or licence of any court,
Governmental Entity, statutory body or self-regulatory authority, and the
term "applicable" with respect to such Laws and in the context that refers
to one or more Persons means that such Laws apply to such Person or Persons
or its or their business, undertaking, property or securities and emanate
from a Person having jurisdiction over the Person or Persons or its or
their business, undertaking, property or securities;
"LEASED PROPERTY" means all the right, title and interest of Abatis in and
to the subject matter (whether realty or personalty) of the Leases;
"LEASES" means the real or personal property leases or subleases, or other
rights of occupancy relating to real property, which Abatis is a party to
or bound by or subject to, including those set forth and described in the
Abatis Disclosure Schedule;
"LETTER OF TRANSMITTAL AND ELECTION FORM" means the letter of transmittal
and election form for use by holders of Abatis Shares, in the form which
will accompany the Circular;
"LICENCES" has the meaning ascribed thereto in Section 3.1.32;
"MATERIAL ADVERSE CHANGE", when used in connection with Redback or Abatis,
means any change, effect, event or occurrence with respect to its condition
9
(financial or otherwise), properties, assets, ownership, capital,
liabilities, obligations (whether absolute, accrued, conditional or
otherwise), businesses, operations or results of operations or those of its
subsidiaries, if any, that is, or would reasonably be expected to be,
material and adverse to the business, properties, assets, operations,
condition (financial or otherwise) or prospects of such party and its
subsidiaries taken as a whole, other than any change, effect, event or
occurrence:
(i) relating to the Canadian or United States' economy or securities
markets in general; or
(ii) generally affecting the industry in which such party operates;
"MATERIAL ADVERSE EFFECT", when used in connection with Redback or Abatis,
means any matter or action that has an effect that is, or would reasonably
be expected to be, material and adverse to the business, properties,
assets, operations, condition (financial or otherwise) or prospects of such
party and its subsidiaries taken as a whole, and "MATERIALLY ADVERSELY
AFFECTED" shall have a corresponding meaning;
"MATERIAL AGREEMENTS" means the agreements, indentures, contracts, leases,
licences, options, instruments and other commitments set forth in the
Abatis Disclosure Schedule;
"NEWCO" means 610380 B.C. Inc., a company existing under the laws of the
Province of British Columbia, and being a wholly-owned subsidiary of
Redback;
"NNM" means the distinct tier of The Nasdaq Stock Market referred to as the
Nasdaq National Market;
"NON-CORE INTELLECTUAL PROPERTY" means any and all Intellectual Property
(owned or licenced by Abatis) that is necessary or incidental to or used in
or useful to the Business or created or acquired by or as part of the
Business (whether in existence or in development or planned) other than the
Abatis Material Intellectual Property;
"PERSON" includes any individual, firm, partnership, joint venture, venture
capital fund, association, trust, trustee, executor, administrator, legal
personal
10
representative, estate, group, body corporate, corporation, company,
unincorporated association or organization, Governmental Entity, syndicate
or other entity, whether or not having legal status;
"PLAN OF ARRANGEMENT" means the plan of arrangement substantially in the
form and content of Exhibit E hereto and any amendments or variations
thereto made in accordance with Section 7.1 hereof or Article 6 of the Plan
of Arrangement or made at the direction of the Court in the Final Order;
"PRE-EFFECTIVE DATE PERIOD" means the period from and including the date
hereof to and including the earlier of the Effective Time and the date of
termination of this Agreement pursuant to Section 7.0;
"PRINCIPAL SHAREHOLDERS" means those Persons designated as "Principal
Shareholders" in the Abatis Disclosure Schedule;
"PRINCIPAL SHAREHOLDER VOTING AGREEMENTS" means the agreements between
Redback and each of the Principal Shareholders, each dated as of the date
hereof, substantially in the form and content of Appendix F hereto, with
such changes thereto as the parties hereto have approved;
"PRODUCTS" means all products that are owned, created, designed, developed,
manufactured, marketed, licensed or sold (whether in existence or in
development or planned) by or on behalf of Abatis, including hardware,
software, firmware, interfaces and every type of device all of which are
set forth in the Abatis Disclosure Schedule, including the Core Products
and Technology;
"REDBACK COMMON SHARES" means the shares of common stock, having a par
value of $0.0001 each, in the capital of Redback;
"REDBACK PARTIES" means Redback and Exchangeco, collectively;
"REGISTERED INTELLECTUAL PROPERTY" means all Canadian, United States and
other foreign: (i) patents, patent applications (including provisional
applications) all reissues, divisions, renewals, extensions, continuations
and continuations in part thereof; (ii) registered trade-marks and
servicemarks, applications to register trade-marks and servicemarks,
intent-to-use applications, other registrations or applications to
trade-marks or servicemarks; (iii) registered copyrights and
11
applications for copyright registration; (iv) mask work registrations and
applications to register mask works; (v) registered industrial designs and
all applications therefor; and (vi) domain names;
"REGISTRATION RIGHTS AGREEMENT" has the meaning ascribed thereto in Section
2.6(d);
"REPLACEMENT OPTION" has the meaning ascribed thereto in Section 2.4(c);
"REPRESENTATIVES" has the meaning ascribed thereto in Section 5.10(a);
"SEC" means the United States Securities and Exchange Commission;
"SEC DOCUMENTS" means, with respect to any Person, each report, schedule,
form, statement or other document filed with the SEC by such Person
pursuant to Section 13(a) or 15(d) of the Exchange Act and all final and
effective registration statements and prospectuses filed by such Person
with the SEC pursuant to the Securities Act;
"SECURITIES ACT" means the Xxxxxx Xxxxxx XXXXXXXXXX XXX XX 0000;
"SHAREHOLDERS' AGENT" means Xxxxxx Xxxxxxx, or such other Person as the
parties hereto may approve, in his capacity as shareholders' agent under
the Escrow Agreement or the Registration Rights Agreement, as the case may
be, and includes any successor shareholders' agent appointed under either
such agreement;
"SHAREHOLDERS' AGREEMENT" means the shareholders' agreement among Newbridge
Networks Corporation, 3494365 Canada, Inc., Xxxx Xxxxxx, Xxxx Xxxxx, Xxx
Xxxxxxxxxx and Abatis made effective as of September 4, 1998, as amended
effective as of November 23, 1999 and April 3, 2000;
"SHARE PROVISIONS" means the rights, privileges, restrictions and
conditions to be attached to the Exchangeable Shares, which shall be
substantially in the form and content of Appendix 1 to the Plan of
Arrangement, with such changes thereto as the parties hereto, acting
Xreasonably, may approve;
12
"SOFTWARE" means all computer software including, without limitation,
application software, systems software, software design tools, interfaces,
object libraries, and microcode in object code or source code forms and
firmware, embedded in or used to develop products, and any related
documentation including, without limitation, technical documentation,
system designs and specifications, flow charts, record and file layouts,
memoranda, correspondence and other such documentation containing or
relating to the design, structure or coding or testing of, or algorithms or
routines used in, or errors discovered in or corrected in such software,
user guides and manuals related thereto and any other documentations or
material (in whatever form, whether human or machine readable, and in
whatever media) relating to such software;
"SOURCE MATERIALS" has the meaning ascribed thereto in Section 3.1.22(n);
"SUBSIDIARY" means, with respect to a specified body corporate, any body
corporate of which more than 50% of the outstanding shares ordinarily
entitled to elect a majority of the board of directors thereof (whether or
not shares of any other class or classes shall or might be entitled to vote
upon the happening of any event or contingency) are at the time owned
directly or indirectly by such specified body corporate and shall include
any body corporate, partnership, joint venture or other entity over which
it exercises direction or control or which is in a like relation to a
subsidiary;
"SUPERIOR PROPOSAL" means any BONA FIDE proposal by a third party directly
or indirectly, to acquire all or substantially all of Abatis's total assets
(which, for greater certainty, shall not include a sale of Products in the
ordinary course of business or as disclosed in the Abatis Disclosure
Schedule) or more than 50% of the outstanding Abatis Shares, whether by way
of merger, amalgamation, arrangement, take-over bid, sale of assets or
otherwise, and that in the good faith determination of the board of
directors of Abatis, after consultation with financial advisors and outside
legal counsel:
(a) is reasonably capable of being completed, taking into account all
legal, financial, regulatory and other aspects of such proposal and the
Person making such proposal; and
(b) would, if consummated in accordance with its terms, result in a
transaction (i) more favourable to the Abatis Shareholders and the
Abatis
13
Optionholders than the transaction contemplated by this Agreement and
(ii) having a value per Abatis Share greater than the per share value
attributable thereto under the transaction contemplated by this
Agreement;
"SUPPORT AGREEMENT" means an agreement to be made among Redback, Newco and
Exchangeco, which shall be substantially in the form and content of Exhibit
G hereto, with such changes thereto as the parties hereto, acting
reasonably, may approve;
"TAX" and "TAXES" means, with respect to any entity, all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings
or profits) and all capital taxes, gross receipts taxes, environmental
taxes, sales taxes, use taxes, AD VALOREM taxes, value added taxes,
transfer taxes, franchise taxes, licence taxes, withholding taxes, payroll
taxes, employment taxes, Canada or Quebec Pension Plan premiums, excise,
severance, social security premiums, workers' compensation premiums,
employment insurance or compensation premiums, stamp taxes, occupation
taxes, premium taxes, property taxes, windfall profits taxes, alternative
or add-on minimum taxes, goods and services tax, customs duties or other
taxes, fees, imports, assessments or charges of any kind whatsoever,
together with any interest and any penalties or additional amounts imposed
by any taxing authority (domestic or foreign) on such entity, and any
interest, penalties, additional taxes and additions to tax imposed with
respect to the foregoing;
"TAX RETURNS" means all returns, declarations, reports, information returns
and statements required to be filed with any taxing authority relating to
Taxes;
"THIRD PARTY EXPENSES" means all legal, accounting, financial advisory,
investment banking, consulting and all other fees and expenses of third
parties incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby;
"THIRD PARTY SOFTWARE" means any software (including "Software") that is
not owned by Abatis but is licenced to Abatis by another Person;
"TRIBUNAL" means:
(a) any court (including a court of equity);
14
(b) any federal, provincial, state, county, municipal or other government
or governmental department, ministry, commission, board, bureau, agency
or instrumentality;
(c) any securities commission, stock exchange or other regulatory or
self-regulatory body;
(d) any board of trade, chamber of commerce or other business or
professional organization or association;
(e) any arbitrator or arbitration tribunal; and
(f) any other tribunal;
"TRUSTEE" means Montreal Trust Company of Canada, or such other Person as
the parties hereto may approve, in its capacity as trustee under the
Exchange Trust Agreement, and includes any successor trustee appointed
thereunder; and
"UNITED STATES DOLLAR EQUIVALENT" means, in respect of an amount expressed
in a currency other than United States dollars (the "FOREIGN CURRENCY
AMOUNT") at any date, the product obtained by multiplying (a) the Foreign
Currency Amount by (b) the noon spot exchange rate on that date for that
foreign currency expressed in United States dollars as reported by the
Federal Reserve Bank of New York or, in the event that spot exchange rate
is not available, any publicly disclosed and widely quoted exchange rate as
quoted by an arm's length third party on that date for the foreign currency
expressed in United States dollars as may be deemed by the board of
directors of Redback, acting reasonably, to be appropriate for that
purpose.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement
into sections and other portions and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation hereof. Unless otherwise indicated, all references in this
Agreement to a "section" followed by a number and/or a letter refer to the
specified section of this Agreement, and all references in this Agreement to an
Exhibit followed by a letter refer to the specified Exhibit to this Agreement.
Unless otherwise indicated, the terms "this Agreement", "hereof", "herein",
"hereunder" and "hereby" and similar expressions refer to this Agreement
(including the Exhibits hereto), as amended or supplemented from time to time
15
pursuant to the applicable provisions hereof, and not to any particular section
or other portion hereof.
1.3 CURRENCY. Unless otherwise indicated, all sums of money referred to in
this Agreement are expressed in lawful money of the United States of America.
1.4 NUMBER, ETC. Unless the context otherwise requires, words importing the
singular shall include the plural and vice versa and words importing any gender
shall include all genders.
1.5 DATE FOR ANY ACTION. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a Business
Day, such action shall be required to be taken on the next succeeding day which
is a Business Day.
1.6 ENTIRE AGREEMENT. This Agreement and the agreements and other documents
referred to herein constitute the entire agreement between the parties with
respect to the Arrangement and other transactions contemplated hereby and
supersede all other prior agreements, understandings, negotiations and
discussions, whether oral or written, between the parties with respect thereto,
other than the Confidentiality Agreement.
1.7 ACCOUNTING MATTERS. Unless otherwise indicated, all accounting terms
used in this Agreement in respect of Abatis shall have the meanings attributable
thereto under Canadian generally accepted accounting principles and all
determinations of an accounting nature in respect of Abatis required to be made
shall be made in a manner consistent with Canadian generally accepted accounting
principles and past practice. Unless otherwise indicated, all accounting terms
used in this Agreement in respect of Redback shall have the meanings
attributable thereto under United States generally accepted accounting
principles and all determinations of an accounting nature required to be made in
respect of Redback shall be made in a manner consistent with United States
generally accepted accounting principles and past practice.
1.8 CONSTRUCTION. In this Agreement, unless otherwise indicated:
(a) the words "include", "including" or "in particular", when following any
general term or statement, shall not be construed as limiting the
general term or statement to the specific items or matters
set forth or to similar items or matters, but rather as permitting the
general term or statement to refer to all other items or matters
16
that could reasonably fall within the broadest possible scope of the
general term or statement;
(b) a reference to a statute means that statute, as amended and in effect
as of the date of this Agreement, and includes each and every
regulation and rule made thereunder and in effect as of the date
hereof;
(c) a reference to an "approval", "authorization", "consent",
"designation", "notice" or "agreement" means an approval,
authorization, consent, designation, notice or agreement, as the
case may be, in writing, signed by an authorized representative of
the party or parties thereto;
(d) the phrase "ordinary course of business", or any variation thereof,
of any Person refers to the business of such Person, carried on in
the regular and ordinary course including commercially reasonable
and businesslike actions that are in the regular and ordinary
course of business for a company operating in the industry in which
such business is conducted notwithstanding that similar actions may
not have been undertaken before by such Person and may be on a
scale or in a quantum greater or different than the scale or
quantum of similar actions undertaken by such Person previously;
(e) where a word, term or phrase is defined, its derivatives or other
grammatical forms have a corresponding meaning;
(f) time is of the essence; and
(g) references to a "party" or "parties" are references to a party or
parties to this Agreement.
1.9 KNOWLEDGE. In this Agreement, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person, "of which
it is aware" or any similar phrase means, unless otherwise indicated, (i) with
respect to any Person who is an individual, the actual knowledge of such Person,
(ii) with respect to Abatis, the actual knowledge of Xxxx Xxxxxxxxx, Xxxx
Xxxxxx, Xxxx Xxxxx or Xxxxxx Tzanadamis, in each case after reasonable enquiry,
and to the extent that such reasonable enquiry was not conducted, includes the
knowledge that a reasonable Person would have had if such reasonable enquiry had
been conducted, and (iii) with respect to Redback and Exchangeco, the actual
knowledge of the President and Chief Executive Officer, Senior Vice-President
and Chief Financial Officer,
17
Vice-President, Business Development or General Counsel and Assistant-Secretary,
in each case after reasonable enquiry, and to the extent that such reasonable
enquiry was not conducted, includes the knowledge that a reasonable Person would
have had if such reasonable enquiry had been conducted.
1.10 EXHIBITS. The following Exhibits are annexed to this Agreement
and are hereby incorporated by reference into this Agreement and form an
integral part hereof:
Exhibit A -- Affiliate's Letter
Exhibit B -- Appropriate Regulatory Approvals
Exhibit C -- Arrangement Resolution
Exhibit D -- Exchange Trust Agreement
Exhibit E -- Plan of Arrangement
Exhibit F -- Principal Shareholder Voting Agreement
Exhibit G -- Support Agreement
Exhibit H -- Registration Rights Agreement
Exhibit I -- Assumption Agreement
1.11 QUALIFICATIONS TO INTELLECTUAL PROPERTY REPRESENTATIONS. None of
the representations of Abatis contained in Sections 3.1.39 and 3.1.40 shall be
untrue solely by reason that the Abatis Material Intellectual Property infringes
the Intellectual Property Rights of another Person unless such infringement also
constitutes a breach or violation of the representation contained in Section
3.1.39(q).
2.0 THE ARRANGEMENT
2.1 IMPLEMENTATION STEPS BY ABATIS. Abatis covenants in
favour of the Redback Parties that Abatis shall:
(a) as soon as reasonably practicable, apply in a manner acceptable to
the Redback Parties, acting reasonably, under Section 192 of the
CBCA for an order approving the Arrangement and for the Interim
Order, and thereafter proceed with and diligently pursue the
obtaining of the Interim Order;
(b) subject to Section 2.5, convene and hold the Abatis
Meeting as promptly as practicable, but in any event not later
than November 30, 2000, for the purpose of considering and, if
deemed advisable, approving the Arrangement and the
transactions contemplated thereby by way of the Arrangement
Resolution (and for any other proper purpose as may be set out
in the notice for such meeting);
18
(c) subject to obtaining the approval(s) as are required by the
Interim Order, proceed with and diligently pursue the application
to the Court for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or waiver
of the other conditions herein contained in favour of each party,
(i) execute and deliver the Escrow Agreement, and
(ii) send to the Director, for endorsement and filing by the
Director, the Articles of Arrangement and such other documents
as may be required in connection therewith under the CBCA to
give effect to the Arrangement.
2.2 IMPLEMENTATION STEPS BY REDBACK PARTIES. The Redback Parties
covenant in favour of Abatis that, on or prior to the Effective Date and subject
to the satisfaction or waiver of the other conditions herein contained in favour
of each such party:
(a) Redback, Newco and Exchangeco shall execute and deliver the Support
Agreement;
(b) Redback and Exchangeco shall execute and deliver the Exchange Trust
Agreement and Escrow Agreement; and
(c) Redback shall execute and deliver the Registration Rights
Agreement.
2.3 INTERIM ORDER. The notice of motion for the application referred to
in Section 2.1(a) shall include a request that the Interim Order provide:
(a) for the class of Persons to whom notice is to be provided in
respect of the Arrangement and the Abatis Meeting and for the
manner in which such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution shall be
two-thirds of the votes cast on the Arrangement Resolution by the
Abatis Shareholders and the Abatis Optionholders present in person
or by proxy at the Abatis Meeting, voting as a single class, such
that each holder of Abatis Shares is entitled to one vote for each
Abatis Share held and each holder of Abatis Options is entitled to
one vote
19
for each Abatis Share such holder would have received on a valid
exercise of such Abatis Options;
(c) that, in all other respects, the terms, restrictions and conditions
of the by-laws and articles of Abatis, including quorum
requirements and all other matters, shall apply in respect of the
Abatis Meeting; and
(d) for the grant of the Dissent Rights.
2.4 ARTICLES OF ARRANGEMENT. The Articles of Arrangement shall, with
such other matters as are necessary to effect the Arrangement, and all as
subject to the provisions of the Plan of Arrangement, provide substantially as
follows:
(a) each outstanding Abatis Share that is not held by a holder who has
exercised its Dissent Rights and is ultimately entitled to be paid
the fair value of its Abatis Shares, will be transferred by the
holder thereof to Exchangeco in exchange for, at the holder's
election, that number of fully paid and non-assessable Exchangeable
Shares, or Redback Common Shares to be issued from treasury,
as the case may be, equal to the Exchange Ratio, and the name of
each such holder of Abatis Shares will be removed from the
register of holders of Abatis Shares and added to the register of
holders of Exchangeable Shares or Redback Common Shares, as the
case may be, and Exchangeco will be recorded as the registered
holder of such Abatis Shares so exchanged and will be deemed to
be the legal and beneficial owner thereof; provided, however,
that notwithstanding the foregoing a holder of Abatis Shares who
is not a resident of Canada for the purposes of the INCOME TAX
ACT (Canada) (it being acknowledged that the parties may, for
this purpose, rely upon a representation as to residency set out
in the Letter of Transmittal and Election Form deposited by such
holder pursuant to the Plan of Arrangement) will not be entitled
to elect to receive Exchangeable Shares, and any election
contrary to this restriction made by any holder of Abatis Shares
shall be and be deemed to be an election to receive Redback
Common Shares;
(b) each outstanding Abatis Share in respect of which an election
under Section 2.4(a) has not been made by the holder
thereof, or in respect of which an effective election under
Section 2.4(a) has not been made, other than Abatis Shares held
by a holder who has exercised its Dissent Rights and is
ultimately entitled to be paid the fair value of its Abatis
Shares, will be transferred by the holder thereof, without any
act or formality on its part, to Exchangeco (or an
20
affiliate thereof) in exchange for that number of fully paid and
non-assessable Redback Common Shares equal to the Exchange Ratio,
and the name of each such holder of Abatis Shares will be removed
from the register of holders of Abatis Shares and added to the
register of holders of Redback Common Shares and Exchangeco (or
its affiliate) will be recorded as the registered holder of such
Abatis Shares so exchanged and will be deemed to be the legal and
beneficial owner of such Abatis Shares; and
(c) each Abatis Option will be exchanged for an option (a "REPLACEMENT
OPTION") to purchase a number (rounded down to the nearest
whole number) of Redback Common Shares equal to the product
obtained when the number of Abatis Voting Common Shares subject
to such Abatis Option is multiplied by the Exchange Ratio, at an
exercise price (rounded up to the nearest whole cent) per Redback
Common Share equal to the quotient obtained when the United
States Dollar Equivalent (immediately prior to the Effective
Time) of the exercise price of such Abatis Option is divided by
the Exchange Ratio. All of the other terms of the Replacement
Options shall be the same as the terms of the Abatis Options for
which they are exchanged, except the vesting or exercise
provisions which shall be as set out in Appendix 3 to the Plan of
Arrangement, and any document or agreement previously evidencing
a Abatis Option shall be deemed to be an agreement between
Redback and the holder thereof evidencing such Replacement
Option.
2.5 ABATIS PROXY CIRCULAR. As promptly as practicable after the
execution and delivery of this Agreement, Redback and Abatis shall jointly
prepare the Circular, together with any and all other documents required by the
CBCA or other applicable Laws in connection with the Arrangement. As promptly as
practicable after the completion of the Circular, but in any event not later
than November 6, 2000, Abatis shall cause the Circular and all other
documentation required in connection with the Abatis Meeting to be sent to each
Abatis Shareholder and Abatis Optionholder and to be filed as required by the
Interim Order and applicable Laws.
2.6 SECURITIES COMPLIANCE.
(a) Redback shall use all reasonable efforts to obtain all
orders required from the securities authorities of the
Provinces of Ontario, Alberta and British Columbia to permit
the issuance of the Exchangeable Shares to be issued pursuant
to the Arrangement and to permit the issuance and first resale
through the facilities of a
21
stock exchange or market in the United States or through the
NNM (provided that such first resale is made in accordance with
the rules of the stock exchange or market upon which the trade is
made or the rules of the NNM in accordance with all laws
applicable to that stock exchange or market or applicable to the
NNM) of:
(i) the Redback Common Shares to be issued pursuant to the
Arrangement;
(ii) the Redback Common Shares to be issued upon exchange of the
Exchangeable Shares from time to time; and
(iii) the Redback Common Shares to be issued from time to time
upon the exercise of the Replacement Options,
in each case without qualification with or approval of or the
filing of any document, including any prospectus or similar
document, or the taking of any proceeding with, or the obtaining
of any further order, ruling or consent from, any Governmental
Entity or regulatory authority under any Canadian federal,
provincial or territorial securities or other Laws or pursuant to
the rules and regulations of any regulatory authority
administering such Laws, or the fulfilment of any other legal
requirement in any such jurisdiction (other than, with respect to
such first resales, any restrictions on transfer by reason of,
among other things, a holder being a "control person" for the
purposes of Canadian federal, provincial or territorial
securities Laws).
(b) As promptly as practicable after the Effective Date,
but in any event within 30 days thereafter, Redback shall
file with the SEC a registration statement on Form S-8 (or other
applicable form) (the "FORM S-8") in order to register under the
Securities Act those Redback Common Shares to be issued from time
to time after the Effective Time upon exercise of the Replacement
Options.
(c) Redback will apply for a "No Action Letter" from the SEC confirming
that the holding period under Rule 144(d) of the Securities Act for
the Redback Common Shares to be issued from time to time after the
Effective Time upon exchange of the Exchangeable Shares will be
treated as having commenced on the date on which the Exchangeable
Shares were first acquired by the holders thereof.
(d) On the Effective Date, Redback and the Shareholders' Agent, as
agent for and on behalf of each of the Persons entitled to receive
Exchangeable Shares pursuant to
22
the Plan of Arrangement, will enter into a registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT"), substantially in
the form and content of Exhibit H hereto, with such changes thereto
as the parties hereto, acting reasonably, may approve.
2.7 PREPARATION OF FILINGS.
(a) Redback and Abatis shall cooperate in:
(i) the preparation of such applications for the orders and the
preparation of such required registration statements and
such other documents reasonably deemed by Redback or Abatis
to be necessary to discharge, in the manner contemplated by
Section 2.6, their respective obligations under United
States and Canadian federal, provincial, territorial or
state securities Laws in connection with the Arrangement and
the other transactions contemplated hereby;
(ii) the taking of all such action as may be required under any
applicable United States and Canadian federal, provincial,
territorial or state securities Laws (including
"blue sky laws"), in connection with the issuance of the
Exchangeable Shares and the Redback Common Shares in
connection with the Arrangement or the issuance or exercise
of the Replacement Options, to the extent the same is
contemplated by Section 2.6; provided, however, that with
respect to the United States "blue sky" and Canadian
provincial qualifications neither Redback nor Abatis shall
be required to register or qualify as a foreign corporation
or to take any action that would subject it to service of
process in any jurisdiction where such entity is not now so
subject, except as to matters and transactions arising
solely from the offer and sale of the Exchangeable Shares
and the Redback Common Shares; and
(iii) the taking of all such action as may be required
under the CBCA in connection with the transactions
contemplated by this Agreement and the Plan of
Arrangement.
(b) Each of Redback and Abatis shall, on a timely basis, furnish to
the other all such information concerning it and its shareholders
as may be required (and, in the case of its shareholders, available
to it) to effect the actions described in Sections 2.5
23
and 2.6 and the foregoing provisions of this Section 2.7, and each
covenants that no information furnished by it (to its knowledge
in the case of information concerning its shareholders) in
connection with such actions or otherwise in connection with the
consummation of the Arrangement and the other transactions
contemplated by this Agreement will contain any untrue statement
of a material fact or omit to state a material fact required to
be stated in any such document or necessary in order to make any
information so furnished for use in any such document not
misleading in the light of the circumstances in which it is
furnished or to be used.
(c) Each of Redback and Abatis shall promptly notify the other
if at any time before or after the Effective Time it becomes
aware that the Circular or an application for an order or a
registration statement described in Section 2.6 contains any
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements contained therein not misleading in light of the
circumstances in which they are made, or that otherwise requires
an amendment or supplement to the Circular or such application or
registration statement. In any such event, Redback and Abatis
shall cooperate in the preparation of a supplement or amendment
to the Circular or such other document, as required and as the
case may be, and, if required, shall cause the same to be
distributed to the Abatis Shareholders and the Abatis
Optionholders and/or filed with the relevant securities
regulatory authorities.
(d) Each of Abatis and Redback shall ensure that the Circular complies
with all applicable Laws and, without limiting the generality of
the foregoing, shall ensure that the Circular does not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements contained therein not misleading in light of the
circumstances in which they are made (other than, in the case of
Abatis, with respect to any information relating to and provided by
the Redback Parties and, in the case of Redback, with respect to
information relating to and provided by Abatis) and shall ensure
that the Circular provides Abatis Shareholders and the Abatis
Optionholders with information in sufficient detail to permit them
to form a reasoned judgment concerning the matters to be placed
before them at the Abatis Meeting.
(e) Redback shall ensure that the Form S-8 and any Form S-3 filed
with the SEC pursuant to this Agreement or the Registration
Rights Agreement complies with all applicable Laws and,
without limiting the generality of the foregoing, that such
24
documents do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading
in light of the circumstances in which they are made (other than
with respect to any information relating to and provided by
Abatis or any third party that is not an affiliate of Redback for
inclusion therein), and Abatis shall provide to Redback, for
inclusion in the Form S-8 and Form S-3, all information regarding
Abatis which is necessary for the completion and filing thereof.
2.8 LOCK-UP OF SHARES ISSUED PURSUANT TO THE ARRANGEMENT.
Notwithstanding any other provision of this Agreement or any of the
documents referred to herein or contemplated hereby, none of the Persons
entitled to receive Exchangeable Shares and/or Redback Common Shares to be
issued pursuant to the Arrangement, the Redback Common Shares to be issued upon
the exchange of the Exchangeable Shares from time to time or the Redback Common
Shares to be issued from time to time upon the exercise of the Replacement
Options shall, directly or indirectly, sell, offer to sell, contract to sell
(including any short sale), grant any option or otherwise transfer or dispose
of:
(a) any of the shares so issued to such holder, at any time on or
before the 60th day following the Effective Date; or
(b) more than 50% of the shares so issued to such holder,
at any time during the period commencing on the 60th day
following the Effective Date and ending on the 90th day
following the Effective Date,
and each of Redback or Exchangeco may, at its discretion, cause a legend to such
effect to be affixed on the certificates representing such shares and provide
stop-transfer instructions to their respective transfer agents with respect such
restrictions.
3.0 REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF ABATIS. Abatis hereby represents
and warrants to and in favour of the Redback Parties as follows and acknowledges
that the Redback Parties are relying on such representations and warranties in
connection with the transactions herein contemplated:
3.1.1 INCORPORATION AND ORGANIZATION OF ABATIS. Abatis is a corporation
duly incorporated under the CBCA, is validly subsisting, has full corporate and
legal power and authority to own, lease and operate the properties currently
owned, leased and operated by it and
25
conduct its business as currently conducted, is duly registered as an
extra-provincial company under the Company Act, is in good standing with the
Office of the Registrar of Companies for the Province of British Columbia with
respect to the filing of annual reports and is in good standing with the
Director with respect to the filing of annual returns. Abatis is duly qualified
or licenced to do business and is in good standing as a foreign corporation or
organization authorized to do business in all jurisdictions in which the
character of the properties owned, leased or operated or the nature of the
business conducted by it would make such qualification or licencing necessary.
No proceedings have been instituted or are pending for the dissolution or
liquidation of Abatis. True and complete copies of the Articles of Incorporation
and by-laws of Abatis have been provided to Redback. Other than as set forth in
the Abatis Disclosure Schedule, no Articles of Amendment have been filed or
authorized by the shareholders of Abatis and no by-laws have been amended or
enacted since April 15, 1999.
3.1.2 CAPITALIZATION. The authorized capital of Abatis consists of an
unlimited number of Abatis Voting Common Shares and an unlimited number of
Abatis Non-Voting Common Shares, of which, as of the date hereof, 9,461,793
Abatis Voting Common Shares and 951,175 Abatis Non-Voting Common Shares are
issued and outstanding. No Abatis Shares are held in treasury or authorized or
reserved for issuance, other than upon the exercise of the Abatis Options. The
Principal Shareholders hold, in the aggregate, 9,462,618 Abatis Voting Common
Shares and Abatis Non-Voting Common Shares and 1,620,000 Abatis Options,
representing not less than 82% of the aggregate number of Abatis Shares and
Abatis Options outstanding as of the date of this Agreement. All outstanding
Abatis Shares have been duly authorized and are validly issued, and other than
as set forth in the Abatis Disclosure Schedule, are fully paid and
non-assessable, were not issued in violation of the terms of any agreement or
other understanding binding upon Abatis at the time at which they were issued
and were issued in compliance with the articles and by-laws of Abatis and all
applicable Laws. Other than as set forth in the Abatis Disclosure Schedule,
there are, and have been, no preemptive rights relating to the allotment or
issuance of any of the issued and outstanding Abatis Shares, other than rights
under the Shareholders' Agreement, such rights having been either complied with
or waived. As of the date hereof, Abatis Options for the purchase of 2,975,552
Abatis Voting Common Shares are outstanding and no Person other than (a) Redback
under this Agreement, (b) certain of the Principal Shareholders under the
Shareholders' Agreement, (c) the holders of Abatis Non-Voting Common Shares with
respect to their right or obligation to convert such shares to Abatis Voting
Common Shares in accordance with the share rights attached to the Abatis
Non-Voting Common Shares, or (d) as otherwise set forth in the Abatis Disclosure
Schedule, has any other agreement, option, commitment, arrangement, or any other
right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, option or commitment (including any such
26
right or privilege under convertible securities, warrants or convertible
obligations of any nature) for:
(x) the purchase, subscription, allotment or issuance of, or
conversion into, any of the unissued shares or any other securities
of Abatis; or
(y) the purchase or other acquisition from Abatis of any of
its undertakings, business or assets, other than the purchase
by customers of Abatis of Products in the ordinary course of
Abatis's business.
There are no outstanding bonds, debentures or other evidences of indebtedness of
Abatis having the right to vote (or that are convertible for or exercisable into
securities having the right to vote) with the holders of the Abatis Shares on
any matter.
3.1.3 AUTHORITY AND NO VIOLATION.
(a) Abatis has all requisite corporate power and authority to enter
into this Agreement and the documents required to be executed by
Abatis in connection with the transactions contemplated herein,
to perform its obligations hereunder and, subject to obtaining
the approval of the Abatis Shareholders and the Abatis
Optionholders as contemplated by Section 2.0, to consummate the
Arrangement and the other transactions contemplated by this
Agreement. The execution and delivery of this Agreement and such
other documents by Abatis and the consummation by Abatis of the
transactions contemplated by this Agreement (including the
transfer of the Abatis Shares to Exchangeco) and such other
documents have been duly authorized by the board of directors of
Abatis and no other corporate proceedings on its part are
necessary to authorize this Agreement and the Escrow Agreement or
the transactions contemplated hereby or thereby, other than:
(i) with respect to the Circular and other matters relating solely
thereto, including the implementation of the Arrangement,
the approval of the board of directors of Abatis; and
(ii) with respect to the completion of the Arrangement, the
approval of the Abatis Shareholders and the Abatis
Optionholders and such other corporate proceedings of Abatis
as may be required by the Interim Order.
27
(b) This Agreement has been duly executed and delivered by Abatis and
constitutes a legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency and other similar Laws affecting creditors' rights
generally, and to general principles of equity. All documents
required to be executed by Abatis in connection with the
transactions contemplated herein will be duly executed and
delivered by Abatis and, when so executed and delivered, will
constitute a legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency and other similar Laws affecting creditors' rights
generally, and to general principles of equity.
(c) The approval of this Agreement and the other documents required to
be executed by Abatis in connection with the transactions
contemplated herein, the execution and delivery by Abatis of this
Agreement and such other documents, and the performance by Abatis
of its obligations hereunder and the completion of the Arrangement
and the transactions contemplated thereby, will not:
(i) conflict with, result in a violation or breach of, constitute
a default or require any consent (other than such as has
already been obtained), to be obtained under, or give rise to
any termination rights or payment obligation under, any
provision of:
(A) its articles, by-laws or other charter documents,
including any unanimous shareholder agreement or any
other agreement or understanding with any party
holding an ownership interest in it;
(B) the Shareholders' Agreement;
(C) any resolutions of its board of directors (or any
committee thereof) or shareholders;
(D) subject to obtaining the Appropriate Regulatory
Approvals relating to Abatis or the transactions
contemplated herein, any Laws; or
(E) subject to obtaining any consent, approval, permit or
acknowledgement which may be required thereunder in
connection with the completion of the transactions
herein contemplated, details of which are set forth
in the Abatis Disclosure Schedule,
28
any licence or registration or any agreement,
contract or commitment, written or oral, which Abatis
is a party to or bound by or subject to;
(ii) give rise to any right of termination or acceleration of
indebtedness, or cause any third party indebtedness to come
due before its stated maturity or cause any available credit
to cease to be available;
(iii) result in the imposition of any Encumbrance upon any of its
assets, or restrict, hinder, impair or limit its ability to
carry on its business as and where it is now being carried
on or as and where it may be carried on in the future; or
(iv) other than as set forth in the Abatis Disclosure Schedule,
result in any payment (including severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming
due to any Interested Person, or any increase in any Employee
Benefits otherwise payable, or the acceleration of
the time of payment, vesting or exercise of any
Employee Benefits, including the vesting or time to
exercise any of the Abatis Options.
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental
Entity or other Person is required to be obtained by Abatis in
connection with the execution and delivery of this Agreement
or any of the other documents contemplated hereby, or the
consummation by Abatis of the transactions contemplated hereby
or thereby, other than:
(i) any approvals required by the Interim Order;
(ii) the Final Order;
(iii) filings with the Director under the CBCA;
(iv) the Appropriate Regulatory Approvals relating to Abatis;
(v) any other consents, approvals, orders, authorizations,
declarations or filings of or with a Governmental Entity
which, if not obtained, would not in the aggregate have a
Material Adverse Effect on Abatis;
29
(vi) the waivers or approvals of ALCATEL Networks Corporation and
of 3494365 Canada Inc. under the Shareholders' Agreement,
which waivers or approvals have been obtained prior to the
date of this Agreement and copies of which are attached to
the Abatis Disclosure Schedule; and
(vii) any other consents or approvals referred to in Section 3.1.24
and set out in the Abatis Disclosure Schedule.
3.1.4 NO DEFAULTS. Except as disclosed in the Abatis Disclosure Schedule,
Abatis is not in default under, and there exists no event, condition or
occurrence which, after notice or lapse of time or both, would constitute such a
default under, any contract, agreement, licence or franchise to which it is a
party which would, if terminated due to such default, cause a Material Adverse
Effect on Abatis.
3.1.5 ISSUED SHARES AND OPTIONS. The Abatis Disclosure Schedule sets
forth a true and complete list, as of the date hereof, of all of the issued and
outstanding Abatis Shares, including the registered holders of all such shares,
and all of the outstanding and unexercised Abatis Options, including the
holders, dates of grant, exercise prices, expiry dates and exercise or vesting
dates of such Abatis Options and the number of Abatis Shares which are the
subject thereof. Except as disclosed in the Abatis Disclosure Schedule, the
certificates evidencing the Abatis Shares bear no restrictive legends and none
of the articles or by-laws of Abatis, the Shareholders' Agreement or any other
shareholder agreement or unanimous shareholder agreement governing the affairs
of Abatis or the relationship, rights and duties of shareholders contains or
provides for any restrictions or restrictive legends with respect to the Abatis
Shares or any of them, other than restrictions contained in the Shareholders'
Agreement, which will terminate as of the Effective Time.
3.1.6 NO OTHER SHARES. Abatis does not own, beneficially, any shares in
the capital of any corporation, and does not hold any securities or obligations
of any kind convertible into or exchangeable for shares in the capital of any
corporation. Abatis is not a party to any agreement for Abatis to acquire any
shares in the capital of any corporation.
3.1.7 FINANCIAL STATEMENTS. The Financial Statements, a copy of which is
included in the Abatis Disclosure Schedule, have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
those of previous years, the requirements of applicable Laws, are correct and
complete and present fairly, in all material respects:
30
(a) all the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of Abatis as
at the Financial Year End; and
(b) the results of operations and cash flows of Abatis for the
12-month period ended on the Financial Year End.
Since the Financial Year End, Abatis has incurred no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or otherwise (whether
or not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and has no knowledge of any potential
liabilities or obligations, which individually or in the aggregate have not been
reflected in the Financial Statements, other than liabilities, indebtedness and
obligations incurred by Abatis in the ordinary course of business, or as
contemplated in this Agreement or as disclosed in the Abatis Disclosure Schedule
(including the Interim Financial Statements forming a part thereof).
3.1.8 INTERIM STATEMENTS. Except as set forth in the Abatis Disclosure
Schedule, the Interim Financial Statements, a copy of which is included in the
Abatis Disclosure Schedule, have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with those of
previous years, are correct and complete and present fairly, in all material
respects:
(a) all the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of Abatis as
at May 31, 2000; and
(b) the revenues, earnings, results of operations and cash flows of
Abatis for the six month period ended on May 31, 2000,
provided, however, that
(i) the Interim Financial Statements do not contain all footnotes
required under generally accepted accounting principles; and
(ii) the Interim Financial Statements are subject to adjustments
for taxes (including investment tax credits), accruals for
bonuses, revenue cut-off, payables cut-off and review of accounts
receivable, the net effect of which would not be material to
Redback in contemplating the acquisition of all of the
outstanding shares of Abatis.
31
3.1.9 BUSINESS CARRIED ON IN ORDINARY COURSE. The Business has been
carried on in the ordinary course since the Financial Year End,
and since the Financial Year End:
(a) there has been no Material Adverse Change with respect to Abatis,
except any Material Adverse Change in Abatis's sales which is
attributable to or results from the announcement of the
transactions contemplated in this Agreement;
(b) there has been no damage, destruction or loss of any material
tangible assets (including any medium in which the Abatis
Material Intellectual Property resides), whether covered by
insurance or not, that could reasonably be expected to have a
Material Adverse Effect on Abatis;
(c) there has been no split, combination or reclassification of any
of the outstanding Abatis Shares, and Abatis has not nor declared
or paid any dividends on or made any other distributions (in
either case, in stock or property) on or in respect of the
outstanding Abatis Shares;
(d) except as set forth in the Abatis Disclosure Schedule, Abatis has
not allotted, reserved, set aside or issued, authorized or
proposed the allotment, reservation, setting aside or issuance
of, or purchased or redeemed or proposed the purchase or
redemption of, any shares in its capital stock or any class of
securities convertible or exchangeable into, or rights, warrants
or options to acquire, any such shares or other convertible or
exchangeable securities, nor has Abatis agreed to do any of the
foregoing, except for:
(i) the issuance of Abatis Voting Common Shares pursuant to
Abatis Options which are or have become fully vested;
(ii) the grant of Abatis Options to certain officers, directors,
employees, consultants and suppliers of Abatis since the
Financial Year End;
(iii)the allotment and reservation for issuance of Abatis Voting
Common Shares pursuant to Abatis Options granted since the
Financial Year End;
(iv) the issuance of 1,626,000 Abatis Voting Common Shares to
ALCATEL Networks Corporation (formerly known as Newbridge
Networks
32
Corporation) pursuant to rights to maintain its pro rata
interest in Abatis under the Shareholders' Agreement; and
(v) the issuance of Abatis Voting Common Shares to employees of
Abatis who have subscribed for Abatis Voting Common Shares,
particulars of which are set forth in the Abatis Disclosure
Schedule;
(e) except as disclosed in the Abatis Disclosure Schedule, there has
been no increase in the salary or other cash compensation payable
or to become payable by Abatis to any of its officers, directors,
employees or advisors, other than in the ordinary course of
business, and there has been no declaration, payment or
commitment or obligation of any kind for the payment or granting
by Abatis of a bonus, stock option or other additional salary or
compensation to any such Person, or any grant to any such Person
of any increase in severance or termination pay, nor has Abatis
agreed to do any of the foregoing;
(f) except as disclosed in the Abatis Disclosure Schedule, there has
been no increase in or modification of any Employee Benefits or
agreement to increase or modify any Employee Benefits (including,
in either case, the granting of stock options, restricted stock
awards or stock appreciation rights) made to, for or with any of
its directors or officers, other than increases in salary or cash
compensation payable or to become payable by Abatis to any of its
officers or directors, provided any such increase is in the
ordinary course of business of Abatis;
(g) Abatis has not acquired or sold, pledged, leased, encumbered or
otherwise disposed of any material property or assets (excluding
the sale of inventory in the ordinary course of business) or
incurred or committed to incur capital expenditures in excess of
$1,325,000, in the aggregate, as of July 26, 2000, nor has Abatis
agreed to do any of the foregoing;
(h) except as set forth in the Abatis Disclosure Schedule, Abatis has
not entered into any material contract, agreement, licence,
franchise, lease transaction, commitment or other right or
obligation and has not amended, modified, relinquished,
terminated or failed to renew any Material Agreement, other than
in the ordinary course of business of Abatis;
33
(i) except as set forth in the Abatis Disclosure Schedule, there has
been no transfer (by way of a licence or otherwise) or agreement
to transfer to any Person of rights to any Abatis Material
Intellectual Property, other than non-exclusive licences in the
ordinary course of business;
(j) except as set forth in the Abatis Disclosure Schedule, Abatis has
not made any change in accounting policies, principles, methods,
practices or procedures (including for bad debts, contingent
liabilities or otherwise), respecting capitalization or expense
of research and development expenditures, depreciation or
amortization rates or timing of recognition of income and
expense;
(k) Abatis has taken all commercially reasonable action required to
maintain, renew or enforce any Abatis Registered Intellectual
Property and to enforce any other Abatis Material Intellectual
Property owned by Abatis;
(l) there has been no notice delivered to Abatis of any claim of
ownership by a third party of any of the Abatis Material
Intellectual Property owned or developed by Abatis or of
infringement by Abatis of any third party's Intellectual
Property;
(m) except as set forth in the Abatis Disclosure Schedule, there has
been no amendment to the articles or by-laws of Abatis;
(n) there has been no disruption in the normal work of Abatis's
workforce or claim of wrongful discharge or other unlawful labour
practice in respect of Abatis;
(o) there has been no waiver by Abatis or agreement to waive, any
right of substantial value and, except as set forth in the Abatis
Disclosure Schedule, Abatis has not entered into any commitment
or transaction not in the ordinary course of business where such
right, commitment or transaction is or would be material in
relation to Abatis or the Business; or
(p) except as set forth in the Abatis Disclosure Schedule, there has
been no creation, or agreement by Abatis to create any
Encumbrance on any of its property or assets (except for any lien
for unpaid Taxes not yet due).
3.1.10 PARTNERSHIPS OR JOINT VENTURES. Except as set forth in the Abatis
Disclosure Schedule, Abatis is not a partner or participant in any partnership,
joint venture, profit-sharing arrangement or other business combination of any
kind and is not party to any agreement under
34
which Abatis agrees to carry on any part of its business or any other activity
in such manner or by which Abatis agrees to share any revenue or profit with any
other Person other than royalty payments to its suppliers under licence
agreements disclosed in the Abatis Disclosure Schedule.
3.1.11 MINUTE BOOKS AND CORPORATE RECORDS. Except as set forth in the
Abatis Disclosure Schedule, the minute and record books of Abatis contain
complete and accurate minutes of all meetings of, and copies of all by-laws and
resolutions passed by, or consented to in writing by, the directors (and any
committees thereof) and shareholders of Abatis since its incorporation and which
are required to be maintained in such books under the CBCA; all such meetings
were duly called and held and all such by-laws and resolutions were duly passed
or enacted. The share certificate books, registers of shareholders, registers of
transfers, registers of directors, registers of holders of Debt Instruments and
other corporate registers of Abatis comply with the provisions of all applicable
Laws and, except as set forth in the Abatis Disclosure Schedule, are complete
and accurate in all material respects. Except for the Shareholders' Agreement,
Abatis is not a party to or bound by or subject to any shareholder agreement or
unanimous shareholder agreement governing the affairs of Abatis or the
relationships, rights and duties of shareholders and is not subject to a
shareholder rights plan or "poison pill" or similar plan.
3.1.12 ACCURACY OF BOOKS AND RECORDS. The books and records, accounting,
financial and otherwise, of Abatis fairly and correctly set out and disclose in
all material respects, in accordance with generally accepted accounting
principles, the financial position of Abatis as at the date hereof and all
material financial transactions of Abatis have been accurately recorded in such
books and records on a consistent basis and in conformity with generally
accepted accounting principles. Except as disclosed in the Abatis Disclosure
Schedule, all records, systems, controls, data or information (including any
digital, electronic, mechanical, photographic or other technological process or
device whether computerized or not) required by Abatis to operate the Business
are in the full possession and control of and are owned exclusively by Abatis.
3.1.13 GUARANTEES. Except as set forth and described in the Abatis
Disclosure Schedule, Abatis is not a party to or bound by or subject to any
Guarantee of the indebtedness of any other Person.
3.1.14 INTERESTED PERSONS.
(a) Except as set forth and described in the Abatis Disclosure
Schedule, since the Financial Year End, no payment has been made
or authorized by Abatis to or for
35
the benefit of any Interested Person, except in the ordinary
course of business and at the regular rates, payable as Employee
Benefits, rents, management and other fees, the reimbursement of
expenses incurred on behalf of Abatis or otherwise.
(b) Except as set forth and described in the Abatis Disclosure
Schedule, since the Financial Year End the aggregate amount of
Employee Benefits, rents, management and other fees,
reimbursement of expenses incurred on behalf of Abatis or other
payments to the Interested Persons have been paid at no greater
rates than those prevailing at the Financial Year End other than
increases in salary or compensation payable or to become payable
by Abatis to any Interested Person who is an officer, director,
employee or advisor of Abatis, in his capacity as such, provided
any such increase is in the ordinary course of business of
Abatis.
(c) Except as set forth and described in the Abatis Disclosure
Schedule:
(i) Abatis is not a party to or bound by or subject to any
agreement, contract or commitment with any Interested
Person, except for contracts of employment or contracts of
service with independent contractors;
(ii) Abatis does not have any loan or indebtedness outstanding
(except for obligations incurred in the ordinary course of
business with respect to Employee Benefits, rents,
management or other fees, the reimbursement of expenses
incurred on behalf of Abatis or otherwise) to any Interested
Person;
(iii)no Interested Person owns, directly or indirectly, in whole
or in part, any property that Abatis uses in the operation
of its business as heretofore carried on; and
(iv) no Interested Person has any cause of action or other claim
whatsoever against, or owes any amount to, Abatis in
connection with Abatis's business as heretofore carried on,
except for any liability reflected in the Financial
Statements or the Interim Financial Statements and claims in
the ordinary course of business such as, without limitation,
for accrued vacation pay and accrued benefits under the
Employee Benefits.
36
3.1.15 DIRECTORS AND OFFICERS. The Abatis Disclosure Schedule sets forth
the names and titles of all directors and officers of Abatis as at the date of
this Agreement.
3.1.16 EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS.
(a) As at July 28, 2000, Abatis had 122 full time and three part time
employees, of which six and zero, respectively, are located in
the United States. The names of such individuals, their years of
service, their job descriptions and the Employee Benefits to
which they are entitled are set forth and described in the Abatis
Disclosure Schedule. To the knowledge of Abatis, without enquiry,
no employee intends to terminate his employment with Abatis,
whether as a result of the transactions contemplated by this
Agreement or otherwise.
(b) The Abatis Disclosure Schedule contains a complete list of
individuals who are not employees of Abatis, and who supply their
services to Abatis under personal services contracts (whether
written, oral or otherwise, and including independent
contractors, employees of agencies, secondees or leased employees
and consultants), specifying location, start and end date of
engagement, services supplied, supplying agency and fees and
other amounts payable by Abatis. There are no complaints, claims
or charges outstanding or, to the knowledge of Abatis,
anticipated relating to the engagement of such individuals.
(c) Abatis has entered into the Key Employees Employment Agreements
with the Key Employees and each such agreement has been
previously made available to Redback and is a legal, valid and
binding obligation of Abatis, in full force and effect,
unamended.
(d) The Abatis Disclosure Schedule contains a complete list of all
Employee Benefits maintained, or otherwise contributed to or
required to be contributed to, by Abatis for the benefit of
employees or former employees of Abatis, and sets out a
description of all policies, handbooks and manuals relating to
employment matters.
(e) Except as set forth and described in the Abatis Disclosure
Schedule:
(i) Abatis is not a party to or bound by or subject to any
agreement or arrangement with respect to Employee Benefits
and no such agreement or
37
arrangement contains any specific provision as to notice of
termination of employment or severance pay in lieu thereof;
(ii) Abatis has no obligations to amend any Employee Benefit and
no amendments will be made or promised prior to the
Effective Date, except with the prior written consent of
Redback;
(iii)all obligations of Abatis as of the Financial Year End with
respect to Employee Benefits are reflected in and have been
fully accrued in the Financial Statements;
(iv) Abatis is not a party to or bound by or subject to any
collective bargaining agreement or other similar arrangement
with any labour union or employee association nor has it
made any commitment to or conducted any negotiation or
discussion with any labour union or employee association
with respect to any future agreement or arrangement and, to
the knowledge of Abatis, there is no current application for
certification or other attempt to organize or establish any
labour union or employee association with respect to
employees of Abatis;
(v) Abatis has, in all material respects, complied with, and
operated its business in accordance with, all applicable
Laws relating to employment and labour matters, including
employment and labour standards, occupational health and
safety, employment equity, pay equity, workers'
compensation, human rights and labour relations matters;
there are no current, pending or, to the knowledge of
Abatis, threatened claims, complaints or proceedings of any
kind involving Abatis, or to Abatis's knowledge, any of its
employees before any Tribunal with respect to any of the
above matters; and there are no facts known to Abatis that
could reasonably be expected to give rise to any such claim,
complaint or proceeding;
(vi) there are no existing or, to the knowledge of Abatis,
threatened labour strikes, slow downs, work stoppages or
other similar labour troubles affecting Abatis;
38
(vii)Abatis has made no material representations or commitments
to its employees with respect to future increases in wages
or other compensation;
(viii) to the actual knowledge of Abatis, without enquiry, no
employee of Abatis is bound by any confidentiality,
non-solicitation or non-competition agreement in favour of
any Person other than Abatis which is material and relevant
to the employment of such employee by Abatis and which
imposes obligations on such employee greater than those owed
by such employee under common law;
(ix) no Person will, as a result of the transactions contemplated
hereby, become entitled to (A) any retirement, severance,
bonus or other such payment, (B) except as provided for in
the Plan of Arrangement, the acceleration of the vesting or
time to exercise of any outstanding stock options or other
Employee Benefits (including the Abatis Options), (C) the
forgiveness or postponement of payment of any indebtedness
owing to Abatis, or (D) receive any additional payments or
compensation under or in respect of any Employee Benefits
(including a "cash-out" of the Abatis Options as provided
for in the Abatis Stock Option Plan);
(x) except as set forth in the Abatis Disclosure Schedule,
Abatis is not a party to any side letter or other written or
oral material commitment with any employee or contractor;
and
(xi) all accruals for unpaid vacation pay, premiums for
employment insurance, health premiums, Canada or Quebec
Pension Plan premiums, accrued wages, salaries and
commissions and other Employee Benefits have been reflected
in the books and records of Abatis.
3.1.17 PENSION AND RETIREMENT PLANS. Abatis does not sponsor or
participate in any pension and/or retirement plan.
3.1.18 DEBT INSTRUMENTS. Except as set forth and described in the Abatis
Disclosure Schedule, Abatis is not bound by or subject to:
(a) any Debt Instrument; or
39
(b) any agreement, contract or commitment to create, assume or issue
any Debt Instrument;
and no Debt Instrument or Encumbrance which Abatis is bound by or subject to is
dependent upon the Guarantee of or any security provided by any other Person.
3.1.19 REAL PROPERTY. Abatis does not own or, except for the Leases of
real property set forth and described in the Abatis Disclosure Schedule, have
any interest in, nor is Abatis a party to or bound by or subject to any
agreement, contract or commitment, or any option to purchase, any real or
immovable property.
3.1.20 LEASES AND LEASED PROPERTY.
(a) Abatis is not a party to or bound by or subject to nor has Abatis
agreed or become bound to enter into, any real or personal
property lease, sublease or other right of occupancy relating to
real property, whether as lessor or lessee, except for the Leases
set forth and described in the Abatis Disclosure Schedule, copies
of which have been provided to Redback prior to the date hereof.
Abatis occupies and has the exclusive right to occupy and use all
immovable Leased Property and has the exclusive right to use all
movable Leased Property.
(b) Each of the Leases is valid and subsisting and in good standing,
all rental and other payments required to be paid by Abatis as
lessee or sublessee and due and payable pursuant to the Leases
have been duly paid to date and Abatis is not otherwise in
default in meeting its obligations under any of the Leases and is
entitled to all rights and benefits thereunder. No event exists
which, but for the passing of time or the giving of notice, or
both, would constitute a default by Abatis or, to the knowledge
of Abatis, any other party to any Lease and no party to any Lease
is claiming any such default or taking any action purportedly
based upon any such default. The completion of the transactions
contemplated herein will not, subject to obtaining any required
consents set out in the Abatis Disclosure Schedule, afford any of
the parties to any Lease or any other Person the right to
terminate any Lease nor will the completion of the transactions
contemplated herein result in any additional or more onerous
obligation on Abatis under any Lease.
40
3.1.21 INSURANCE.
(a) Abatis maintains insurance covering its property, assets and
personnel and protecting its business against loss or damage on a
basis that is comparable to the insurance maintained by
reasonable Persons operating businesses similar to its business
as heretofore carried on. The Abatis Disclosure Schedule sets
forth a list of all insurance policies currently maintained by
Abatis, true and complete copies of which have been provided to
Redback. Each of such insurance policies is valid and subsisting
and in good standing, there is no default, whether as to the
payment of premiums or otherwise, under any material term or
condition of such insurance policies, and, to the knowledge of
Abatis, each Person which is an insured party under any of such
insurance policies is entitled to all rights and benefits
thereunder.
(b) The Abatis Disclosure Schedule sets forth and describes all
pending claims under such insurance policies and includes true
and complete copies of the most recent inspection reports, if
any, received from insurance underwriters as to the condition or
insurance value of the insured property and assets. Abatis has
not failed to give any notice or present any claim under any such
insurance policies in due and timely fashion. To the knowledge of
Abatis, no circumstances have occurred which might entitle Abatis
to make a claim under any such insurance policies or which might
be required under any such insurance policies to be notified to
the insurers thereunder and no material claim under any of such
insurance policies has been made by Abatis since the Financial
Year End.
(c) None of such insurance policies is subject to any premium in
excess of the stipulated or normal rate. No notice of
cancellation of, material increase of premiums under, non-renewal
with respect to, or disallowance of any claim under, any such
insurance policies has been received by Abatis.
3.1.22 MATERIAL AGREEMENTS. Except for the Material Agreements disclosed
in the Abatis Disclosure Schedule, as of the date of this Agreement Abatis is
not a party to or bound by or subject to any of the following:
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
41
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving, in the case of any such
contract, more than $10,000 over the life of the contract;
(c) any contract that expires, or may be renewed at the option of any
Person other than Abatis so as to expire, more than one year
after the date of this Agreement;
(d) any Debt Instrument;
(e) any contract for capital expenditures in excess of $10,000 in the
aggregate;
(f) any contract limiting the right of Abatis to engage in any line
of business or to compete with any other Person;
(g) any confidentiality, secrecy or non-disclosure contract;
(h) any contract pursuant to which Abatis leases any real or personal
property, including the Leases;
(i) any contract pursuant to which Abatis is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures
or other personal property;
(j) any contract with any person with whom Abatis does not deal at
arm's length within the meaning of the INCOME TAX ACT (Canada);
(k) any Guarantee;
(l) any licence, sublicence or other agreement to which Abatis is a
party (or by which it or any Abatis Intellectual Property is
bound or subject) and pursuant to which any Person has been or
may be assigned, authorized to use, or given access to any Abatis
Intellectual Property;
(m) any licence, sublicence or other agreement pursuant to which
Abatis has been or may be assigned or authorized to use, or has
or may have incurred any obligation in connection with, (i) any
third party Intellectual Property that is incorporated in or
forms a part of any current or proposed Product, service or (ii)
any Abatis Material Intellectual Property;
42
(n) any agreement pursuant to which Abatis has deposited or is
required to deposit with an escrow holder or any other Person,
all or part of the source code (or any algorithm or documentation
contained in or relating to any source code) of any Abatis
Intellectual Property ("SOURCE MATERIALS");
(o) any employment contracts with employees and service contracts
with independent contractors;
(p) any agreement to indemnify, hold harmless or defend any other
Person with respect to any assertion of personal injury, damage
to property or Intellectual Property infringement,
misappropriation or violation or warranting the lack thereof
other than any license of Third Party Software that is not part
of the Abatis Material Intellectual Property and which relates to
software that is generally available to the public; and
(q) any other agreement, indenture, contract, lease, deed of trust,
licence, option, instrument or other commitment which is or would
reasonably be expected to be material to the business,
properties, assets, operations, condition (financial or
otherwise) or prospects of Abatis;
whether written or oral, and of any nature or kind whatsoever.
3.1.23 NO BREACH OF MATERIAL CONTRACTS. Except as disclosed in the
Abatis Disclosure Schedule, Abatis has performed all of the material obligations
required to be performed by it, and is entitled to all benefits under, and, to
the knowledge of Abatis, is not alleged to be in default in respect of, any
Material Agreement. Except as disclosed in the Abatis Disclosure Schedule, each
of the Material Agreements is in full force and effect, unamended, and there
exists no breach thereof or default or event of default or event, occurrence,
condition or act with respect to Abatis or, to Abatis's knowledge, with respect
to the other contracting party or otherwise that, with or without the giving of
notice, the lapse of time or the happening of any other event or conditions,
would (A) become a default or event of default under any Material Agreement, or
(B) result in the loss or expiration of any right or option by Abatis (or the
gain thereof by any third party) under any Material Agreement, or (C) result in
the release, disclosure or delivery to any third party of any part of the Source
Materials. Except as set forth in the Abatis Disclosure Schedule, Abatis has
delivered a true, correct and complete copy of each of the Material Agreements
to Redback.
43
3.1.24 THIRD PARTY CONSENTS. The Abatis Disclosure Schedule sets forth
details of each of the Material Agreements which requires a consent or approval
of the other party thereto to the Arrangement or other transactions contemplated
hereby.
3.1.25 FINANCIAL FORECASTS. The financial forecasts previously
delivered to Redback, copies of which are attached to the Abatis Disclosure
Schedule, have been prepared by the management of Abatis in good faith and are
based on assumptions which Abatis believes to be reasonably supported and
consistent with its plans. For greater certainty, nothing in this Section 3.1.25
shall be construed as a representation or warranty that such financial forecasts
will accurately reflect the future financial performance of Abatis.
3.1.26 OBLIGATIONS TO CUSTOMERS AND SUPPLIERS. Except as set forth in
the Abatis Disclosure Schedule, there are no outstanding consulting contracts or
other maintenance obligations with or to customers or other users of the
Products and services of Abatis and Abatis is not required to provide any
bonding or other financial security arrangements in connection with any
transactions with any of its customers or suppliers, whether or not in the
ordinary course of its business. The Abatis Disclosure Schedule sets forth full
details of any and all side letters or other written or oral commitments to
customers which are not contained in the applicable customer contract and which
are material to such contract.
3.1.27 WARRANTIES AND INDEMNITIES. The Abatis Disclosure Schedule sets
forth a complete list of all agreements containing written warranties given to
purchasers of Products and services supplied by Abatis. There are no pending or,
to the best of Abatis's knowledge, threatened warranty or indemnity claims
against Abatis in excess of $25,000 in any individual case, or in excess of
$100,000 in the aggregate, and adequate reserves for all such claims known to
Abatis are reflected in the Financial Statements.
3.1.28 LEGAL PROCEEDINGS. There are no actions, suits, investigations or
proceedings (whether private, governmental or otherwise, and whether or not
purportedly on behalf of Abatis) in progress, pending, or to the knowledge of
Abatis, threatened, against or affecting Abatis (including actions, suits,
investigations or proceedings against any of Abatis's directors, officers or
employees which relate to the business, affairs, assets or operations of
Abatis), at law or in equity, or before or by any Tribunal. There is no
judgment, decree, injunction, ruling, order or award of any Tribunal outstanding
against or affecting Abatis. Except as set forth in the Abatis Disclosure
Schedule, Abatis is not aware of any grounds on which any such action, suit,
investigation or proceeding might be commenced with any reasonable likelihood of
success, and does not have any present plans or intentions to initiate any
litigation, arbitration or other proceedings against any third party.
44
3.1.29 BANKING INFORMATION. The Abatis Disclosure Schedule sets forth
and describes:
(a) the name and location (including municipal address) of each bank,
trust company or other institution in which Abatis has an
account, money on deposit or a safety deposit box and the name of
each Person authorized to draw thereon or to have access thereto;
and
(b) the name of each Person holding a general or special power of
attorney from Abatis and a summary of the terms thereof.
3.1.30 TAX MATTERS.
(a) Save for the requirement to file income tax returns in respect of
the financial year of Abatis ended the Financial Year End (which
is currently being prepared by Abatis's accountants and is
expected to be filed by August 31, 2000) and in respect of the
current taxation year (which return is not yet due), and any
income tax return which is required to be filed as a result of or
in connection with the transactions contemplated herein, Abatis
has duly filed in the prescribed manner and within the prescribed
time all Tax Returns required to be filed by it on or before the
date hereof with any taxing or regulatory authority to which it
is subject; such Tax Returns and the material accompanying such
Tax Returns are accurate and complete in all material respects
and Abatis has provided to Redback true and complete copies of
all Tax Returns filed by Abatis.
(b) Abatis has paid all Taxes that are due and payable, and any
interest, penalties and fines in connection therewith, properly
due and payable, and has paid all of same in connection with all
known assessments, reassessments and adjustments.
(c) Except as set forth in the Abatis Disclosure Schedule, the
Financial Statements or the Interim Financial Statements, and
except for Taxes incurred in the ordinary course of business or
incurred or arising as a result of the transactions contemplated
herein which Taxes are not yet due and payable, there are no
Taxes or fines in respect of Taxes claimed by any Governmental
Entity against Abatis or which are known to Abatis to be due and
owing by Abatis and, to the knowledge of Abatis, there are no
pending or threatened reassessments by any Governmental Entity in
respect of Taxes owing by Abatis, and there are no matters of
dispute or
45
under discussion with any Governmental Entity relating to Taxes
or fines in respect of Taxes asserted by such Governmental Entity
against Abatis.
(d) Except as set forth in the Abatis Disclosure Schedule, the
Financial Statements fully reflect accrued liabilities as at the
Financial Year End for all Taxes which were not yet then due and
payable and for which Tax Returns were not yet then required to
be filed. Except as set forth and described in the Abatis
Disclosure Schedule, there are no actions, suits, investigations
or proceedings and no assessment, reassessment or request for
information in progress, pending or, to the knowledge of Abatis,
threatened against or affecting Abatis in respect of Taxes nor
are any issues under discussion with any taxing authority
relating to any matters which could result in claims for
additional Taxes.
(e) There are no agreements, waivers or other arrangements made by
Abatis providing for an extension of time with respect to any
assessment or reassessment of Tax, the filing of any Tax Return
or the payment of any Tax by Abatis.
(f) Abatis has withheld the amount of all Taxes and other deductions
required under any applicable Laws to be withheld from each
payment made by it and has paid all amounts withheld which are
due and payable before the date hereof and all installments of
Taxes which are due and payable before the date hereof to the
relevant taxing or other authority within the time prescribed
under any applicable Laws.
3.1.31 ACCOUNTS RECEIVABLE. All accounts receivable of and book debts
and other debts due to Abatis reflected in the Financial Statements or which
have come into existence since the Financial Year End were created in the
ordinary course of Abatis's business and, except to the extent that the same
have been paid in the ordinary course of its business since the Financial Year
End, are valid and enforceable and payable in full, without any right of set-off
or counterclaim or any reduction for doubtful accounts other than as reflected
in the Financial Statements and, in the case of accounts receivable which have
come into existence since the Financial Year End, other than a reasonable
allowance for doubtful accounts consistent with Abatis's previous practice.
3.1.32 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in the
Abatis Disclosure Schedule, Abatis has conducted and is conducting its business
in compliance in all material respects with all applicable Laws, in each
jurisdiction in which its business is carried on, is not in material breach of
any of such Laws and is duly licenced or registered in each jurisdiction in
46
which it owns or leases its property and assets or carries on its business, so
as to enable its business to be carried on as now conducted and its property and
assets to be so owned or leased. The Abatis Disclosure Schedule sets out a
complete and accurate list of all licences, permits, approvals, consents,
certificates, registrations and authorizations (whether governmental, regulatory
or similar type) (the "LICENCES"), and there are no other licences, permits,
approvals, consents, certificates, registrations, or authorizations necessary to
carry on its business as presently carried on or to own or lease any of the
property or the assets utilized by Abatis except where the lack of grant of such
to Abatis would not have a Material Adverse Effect on Abatis. Each Licence is
valid and subsisting and in good standing and there is no default or breach of
any Licence and, to the best of the knowledge of Abatis, no proceeding is
pending or threatened to revoke or limit any Licence. No Licence contains any
burdensome term, provision, condition or limitation which has or could have a
Material Adverse Effect on Abatis or the Business, and except as set forth in
the Abatis Disclosure Schedule, requires the consent, approval, permit or
acknowledgement of any Person in connection with the completion of the
transactions herein contemplated.
3.1.33 CONSENTS AND APPROVALS. Except for the Appropriate Regulatory
Approvals set out in Exhibit B, there is no requirement to make any filing with,
give any notice to or to obtain any licence, permit, certificate, registration,
authorization, consent or approval of, any Governmental Entity as a condition to
the lawful consummation of the transactions contemplated by this Agreement or
the Plan of Arrangement, except for the filings, notifications, licences,
permits, certificates, registrations, consents and approvals which relate solely
to the identity of Redback or which are of a purely administrative nature and
could be completed or obtained without adverse effect on Abatis or its business
immediately after the Effective Date.
3.1.34 NO BUSINESS RESTRICTIONS. There is no agreement (non-compete or
otherwise), commitment, judgment, injunction, order or decree to which Abatis is
party or which is otherwise binding upon Abatis which has or reasonably could be
expected to have the effect of prohibiting or impairing any business practice of
Abatis, any acquisition of property (tangible or intangible) by Abatis or the
conduct of business by Abatis, as currently conducted or proposed to be
conducted by Abatis. Without limiting the foregoing, Abatis has not entered into
any agreement under which Abatis is restricted from selling, licencing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
3.1.35 ENVIRONMENTAL MATTERS. Abatis is not in violation of any
applicable Laws relating to the environment and no material expenditures are or,
to the knowledge of Abatis, will be required in order to comply with such
existing Laws. Abatis possesses all necessary
47
environmental licences, permits, approvals, consents, certificates,
registrations and other authorizations in order for it to conduct its business
in material compliance with applicable Laws relating to the environment. There
have been no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by or for Abatis or, to the knowledge of Abatis, by or
for any other Person with respect to any Leased Property or any real property
previously owned, leased, occupied or used by Abatis while Abatis has occupied
such properties.
3.1.36 LIABILITIES. Except as set forth in the Abatis Disclosure
Schedule, there are no material liabilities of Abatis of any kind (whether
accrued, absolute, contingent or otherwise) existing on the date hereof except
for:
(a) liabilities (including liabilities for unpaid Taxes) disclosed
on, reflected in or provided for in the Financial Statements or
the Interim Financial Statements;
(b) liabilities disclosed or referred to in this Agreement, including
the Exhibits hereto and the Abatis Disclosure Schedule;
(c) liabilities incurred in the ordinary course of business and
attributable to the period since the Financial Year End, none of
which has a Material Adverse Effect on Abatis;
(d) liabilities incurred in connection with this Agreement or the
transactions contemplated in this Agreement; and
(e) amounts outstanding, from time to time, under the letter
agreement between Abatis and ALCATEL Networks Corporation, dated
October 28, 1999, which amounts shall not at any time exceed
$18,000,000 in the aggregate.
3.1.37 CONDITION AND SUFFICIENCY OF ASSETS. All facilities, machinery
and equipment owned or used by Abatis in connection with its business are in
good operating condition and in a state of good repair and maintenance,
reasonable wear and tear excepted. Abatis owns or leases all of the property and
assets (excluding Intellectual Property, which is dealt with in Section 3.1.39
below) used in or necessary for the conduct of its business as it is currently
being conducted with good and marketable title to all property and assets which
are owned by Abatis, free and clear of any and all Encumbrances other than as
set forth in the Abatis Disclosure Schedule. Since the incorporation of Abatis
there has not been any significant interruption of operations, supplies, access
or services by contractors of Abatis's business as heretofore carried on due to
inadequate maintenance of any of the property or assets owned and used by
Abatis.
48
With the exception of inventory in transit, and assets which, by their
nature, are portable and intended to be used in different locations (such as
notebook computers), all of the tangible assets of Abatis are situate at the
locations specified in the Abatis Disclosure Schedule.
3.1.38 INVENTORIES. The inventories of Abatis:
(a) consist solely of items of tangible personal property of the kind
and quality regularly used or produced in its business;
(b) are saleable or resaleable (or useable) in the ordinary course of
Abatis's business for the purpose for which they were intended;
(c) are at a level consistent with the requirements of potential
customers of the Business, as reasonably anticipated by Abatis;
(d) are not obsolete; and
(e) have been valued in the Financial Statements in accordance with
generally accepted accounting principles, on a basis consistent
with that of past practice.
3.1.39 INTELLECTUAL PROPERTY.
REPRESENTATIONS WITH RESPECT TO ABATIS MATERIAL INTELLECTUAL PROPERTY
(a) The Abatis Disclosure Schedule includes a description of:
(i) the Business's core Products (including all Software
embedded in Products and all stand-alone Software) and core
services that are, or are planned to be, manufactured,
marketed, sold, licenced, used to provide services to
customers or otherwise exploited by the Business
(collectively, the "CORE PRODUCTS AND TECHNOLOGY");
(ii) all Intellectual Property (including, without limitation,
Software) that is owned by Abatis or that is used by Abatis
under a licence from another Person (together with a
description of the applicable license) and is necessary for
or used in designing, manufacturing or using the Core
Products and Technology or that forms part of or is embedded
in the Core Products and Technology.
49
(iii)all Intellectual Property (including Software) that is owned
by Abatis or that is used by Abatis under a licence
agreement from another Person which relates to
(A) the conduct of the Business; or
(B) the marketing, distribution, sale, licensing or other
exploitation of the Core Products and Technology,
the failure to own or to have the right to use would have a
Material Adverse Effect; and
(iv) all Abatis Registered Intellectual Property;
(collectively, the "ABATIS MATERIAL INTELLECTUAL PROPERTY").
(b) The Abatis Material Intellectual Property comprises all
Intellectual Property that is: (i) necessary to design, develop,
manufacture or to use the Core Products and Technology; or (ii)
material to the conduct of the Business, the failure to own or to
have the right to use would have a Material Adverse Effect.
(c) Except as set forth in the Abatis Disclosure Schedule, each item
of Abatis Material Intellectual Property is solely and
exclusively owned by Abatis free and clear of any Encumbrances or
co-ownership interests or is licenced to Abatis under an existing
written licence agreement that remains in force and which grants
sufficient rights to permit Abatis to use such Intellectual
Property in the manner necessary to carry on the Business and to
design, make and use the Core Products and Technology without
infringing the Intellectual Property Rights of the third party
supplier of that Abatis Material Intellectual Property and which
has been disclosed in the Abatis Disclosure Schedule and copies
of which have been provided to Redback. None of the Abatis
Material Intellectual Property consists of freeware, shareware or
Software provided pursuant to any arrangement other than a
licence agreement which has been disclosed in the Abatis
Disclosure Schedule.
(d) Abatis owns, solely and exclusively, any copyright that subsists
in the Abatis Material Intellectual Property other than the
copyright that subsists in any Third
50
Party Software or other works, provided that such Third Party
Software and other works are licenced to Abatis under a written
licence agreement that is identified in the Abatis Disclosure
Schedule and which has been provided to Redback, or are in the
public domain.
(e) To the extent that any of the Abatis Material Intellectual
Property that is licenced by Abatis is incorporated in or
embedded in the Core Products and Technology, Abatis has complied
with all of the material terms and conditions contained in the
licence agreements applicable to such Abatis Material
Intellectual Property and Abatis has not received notice of and
is not aware of any material breaches, claims or disputes under
such agreements. Abatis is not aware of nor has it received
notice of any breach by any customer or end-user under any
agreement applicable to the use of the Abatis Material
Intellectual Property.
(f) The Abatis Material Intellectual Property that has been developed
by or on behalf of Abatis has been created or developed:
(i) by employees or former employees of Abatis, all of whom
signed employment agreements or other agreements with Abatis
whereby they assigned to Abatis all Intellectual Property
created by them during the course of their employment and
waived their moral rights therein. All such employees work
or access to the Abatis Material Intellectual Property
occurred within the scope and in the regular course of their
employment. To the best of Abatis's knowledge, none of its
employees conceived or created any portion of the Abatis
Material Intellectual Property during their employment with
another Person; or
(ii) by independent contractors or former independent contractors
all of whom Abatis has, directly or indirectly, paid for
such development or creations, and in respect of which
Abatis has an executed written agreement with such Person
whereby such Person assigned to Abatis all rights, title and
interest in such Intellectual Property and waived their
moral rights therein (to the extent applicable).
All of the agreements referred to subsections (i) and (ii) above
constitute Material Agreements and have been listed in the Abatis
Disclosure Schedule and copies thereof have been provided to
Redback. Abatis has not received any notice of and is not aware
of any material claims or disputes under such agreements. Except
as
51
set out in the Abatis Disclosure Statement there are no royalty
or other obligations owing to any other Person in respect
thereof.
(g) Except as set forth in the Abatis Disclosure Schedule, Abatis has
not transferred or assigned ownership of or granted any licence
or right to any Person to copy, make, use, exploit, or authorize
the retention of any rights to copy, make, use or exploit any
Abatis Material Intellectual Property other than to customers
acquiring a non-exclusive licence to use the Core Products and
Technology (only in object code version and as end-users) which
licences are made in the ordinary course of the Business, and to
independent contractors, suppliers and employees, who are subject
to written confidentiality and non-disclosure agreements, and who
are using the Abatis Material Intellectual Property in the course
of performing services for Abatis. Abatis has not subjected the
Abatis Material Intellectual Property to any Encumbrance.
(h) The Material Agreements set out in the Abatis Disclosure Schedule
include all contracts, licences and agreements to which Abatis is
a party with respect to any of the Abatis Material Intellectual
Property.
(i) Each item of Abatis Registered Intellectual Property is, to the
knowledge of Abatis, valid and subsisting. All necessary
registration, maintenance, renewal fees, annuity fees and Taxes
in connection with the Abatis Registered Intellectual Property
have been paid and all necessary documents and certificates in
connection with the Abatis Registered Intellectual Property have
been filed with the relevant patent, copyright, trade-xxxx or
other authorities in the jurisdictions in which such Registered
Intellectual Property is registered, as the case may be, for the
purposes of maintaining such Registered Intellectual Property.
Other than the Abatis Registered Intellectual Property, no
registrations or filings with any Governmental Entity have been
made by or on behalf of Abatis with respect to the Abatis
Material Intellectual Property.
(j) Except as set forth in the Abatis Disclosure Schedule, no royalty
or other fee in respect of the Abatis Material Intellectual
Property is required to be paid by Abatis to any other Person in
relation to the sale or licensing of any of the Abatis Material
Intellectual Property. Except as set out in the Abatis Disclosure
Schedule and the third party supplier licence agreements
disclosed in the Abatis Disclosure Schedule all of which have
been provided to Redback, no royalty or
52
fee in respect of Abatis's use of the Abatis Material
Intellectual Property is required to be paid by Abatis to any
other Person.
(k) Except as set forth in the Abatis Disclosure Schedule, prior to
the Effective Time, Abatis has not and will not provide, directly
or indirectly, the source code for any of the Software that is
included in the Abatis Material Intellectual Property to any
other Person or by licence, transfer, sale, escrow or otherwise
permit any other Person to reverse engineer, disassemble or
decompile any such Software to create such source code.
(l) Except as set forth in the Abatis Disclosure Schedule, all Third
Party Software that is included in the Abatis Material
Intellectual Property could be reasonably replaced by a suitable
alternative if the supplier of such Software were to cease
operations, terminate the applicable license or not provide
support services. Except as set forth in the Abatis Disclosure
Schedule, current copies of source code for all Software that is
included in the Abatis Material Intellectual Property that is
owned by Abatis has been appropriately recorded on machine
readable media, clearly identified and stored by Abatis in an
appropriate secure, fire-proof storage location, physically
separated from the systems area but within the same premises and
such source code together with the applicable documentation is
accurate and contains sufficient detail and content to allow the
full and proper use for which intended and the understanding,
modification and correction of the Software by an experienced
programmer having skills and experience in computer programming
and being reasonably skilled in the relevant programming
language(s) and the associated telecommunications technology but
not being familiar with such Software, without reliance on the
special knowledge or memory of other Persons. A current and
accurate list identifying the location of all copies of source
code for all Software that is included in the Abatis Material
Intellectual Property that is owned by Abatis is set forth in the
Abatis Disclosure Schedule. The Abatis Disclosure Schedule
identifies the written source code escrow agreements that Abatis
has with the licensors or suppliers of Third Party Software that
is included in the Abatis Material Intellectual Property and
copies of such source code escrow agreements have been provided
to Redback.
(m) Abatis owns, or has been granted rights to use (without any
condition, payment or fee except as set out in the Abatis
Disclosure Schedule or in any third party supplier licence
agreement listed therein), the Software that is included in the
Abatis Material Intellectual Property and, except as set out in
the Abatis
53
Disclosure Schedule, the consummation of the transaction
contemplated herein shall not cause any such rights to be
amended, modified or terminated.
(n) The Core Products and Technology including the Software that is
included in the Abatis Material Intellectual Property perform and
function in substantial compliance with the applicable end-user
documentation and specifications delivered to Redback. Abatis is
not aware of and has not received notice from any Person that the
Core Products and Technology or the Software included in the
Abatis Material Intellectual Property contain material defects in
design or workmanship.
GENERAL REPRESENTATIONS WITH RESPECT TO INTELLECTUAL PROPERTY
(o) To the knowledge of Abatis, Abatis owns or has the valid right to
use all trade-marks, service marks, and trade names used by
Abatis (including those described as Abatis Registered
Intellectual Property) in connection with the Business including
the sale of any of the Products or the provision of any services
or technology related thereto by Abatis.
(p) The Abatis Disclosure Schedule sets out all contracts, licences
and agreements between Abatis and any other Person wherein or
whereby Abatis has or may have agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, hold
harmless, guaranty or otherwise assume or incur any obligation or
liability or provide a right of rescission with respect to the
infringement or misappropriation by Abatis or such other Person
of any intellectual property rights owned by any Person other
than Abatis (and copies of substantially all of same have been
provided to Redback) other than any licence of Third Party
Software that is not part of the Abatis Material Intellectual
Property and which is granted for software that is generally
available to the public.
(q) To the knowledge of Abatis, the operation of the Business
including, without limitation, the manufacture, sale, use or
other exploitation (as applicable) of the Abatis Material
Intellectual Property and the manufacture, sale, use and other
exploitation of the Products has not and does not infringe or
misappropriate the Intellectual Property Rights of any Person,
violate the rights of any Person (including rights to privacy or
publicity) or constitute unfair competition or trade practices
under the Laws of any jurisdiction in which Abatis carries on
business. Abatis has not received any notice, complaint, or claim
nor is Abatis aware of any
54
threat from any Person claiming that the manufacture, sale, use
or other exploitation of the Abatis Material Intellectual
Property, the Non-Core Intellectual Property or the manufacture,
sale, use or other exploitation of the Products infringes or
misappropriates the Intellectual Property Rights of any other
Person or constitutes unfair competition or trade practices under
the Laws of any jurisdiction nor is Abatis aware of any basis
therefor.
(r) All Non-Core Intellectual Property that has been developed or
created by or for Abatis has been developed or created:
(i) by employees or former employees of Abatis, all of whom
signed employment agreements or other agreements with Abatis
whereby they assigned to Abatis all Intellectual Property
created by them during the course of their employment and
waived their moral rights therein. All such employees work
or access to the such Intellectual Property occurred within
the scope and in the regular course of their employment. To
the best of Abatis's knowledge, none of its employees
conceived or created any portion of such Intellectual
Property during their employment with another Person; or
(ii) by independent contractors or former independent contractors
all of whom Abatis has, directly or indirectly, paid for
such development or creations, and in respect of which
Abatis has an executed written agreement with such Person
whereby such Person assigned to Abatis all rights, title and
interest in such Intellectual Property and waived their
moral rights therein (to the extent applicable).
Abatis has not received any notice of and is not aware of any
material claims or disputes under such agreements and licences.
(s) Abatis has not subjected the Non-Core Intellectual Property to
any Encumbrance.
(t) Abatis has not transferred or assigned ownership of or granted
any licence or right to any Person to copy, make, use, exploit,
or authorize the retention of any rights to copy, make, use or
exploit any Non-Core Intellectual Property other than to
customers acquiring a non-exclusive licence to use the Products
(only in object code and as end-users) which licences are made in
the ordinary course of the Business, and to independent
contractors and employees, who are subject to
55
written confidentiality and non-disclosure agreements, and who
are using the Non-Core Intellectual Property in the course of
performing services for Abatis.
(u) Except as set forth in the Abatis Disclosure Schedule, no Person
other than Abatis has any ownership rights to any improvements
made by Abatis in Intellectual Property which has been licenced
to Abatis.
(v) To the best of the knowledge of Abatis, except as set forth in
the Abatis Disclosure Schedule, there are no contracts, licences
or agreements between Abatis and any other Person with respect to
Abatis Material Intellectual Property or Non-Core Intellectual
Property under which there is any material dispute known to
Abatis regarding the scope of such contract, licence or
agreement, or performance under such contract, licence or
agreement, including with respect to any payments to be made or
received by Abatis thereunder.
(w) To the best of Abatis's knowledge, no Person is infringing or
misappropriating any Abatis Material Intellectual Property or
Non-Core Intellectual Property provided that in the case of Third
Party Software and Non-Core Intellectual Property Abatis
represents only that it has not received notice of and is not
actually aware of any claims or threatened claims that such Third
Party Software or Non-Core Intellectual Property is being
infringed or has been misappropriated. Subject to the foregoing
proviso, Abatis has no knowledge of any past infringement or
misappropriation of any Abatis Material Intellectual Property or
any Non-Core Intellectual Property.
(x) Abatis has taken commercially reasonable steps to protect and
maintain the confidentiality of the trade secrets and other
confidential information in the Abatis Material Intellectual
Property and the Non-Core Intellectual Property and in any
Intellectual Property provided by any other Person to Abatis.
Without limiting the generality of the foregoing, each employee,
consultant and contractor of Abatis has executed and delivered to
Abatis a proprietary information, confidentiality and assignment
agreement substantially in the form(s) provided to Redback. To
the best of Abatis's knowledge, none of the Abatis Material
Intellectual Property or the Non-Core Intellectual Property has
been copied, published, released or distributed to any Person or
removed from Abatis's premises, except by employees and
independent contractors who are subject to a written
confidentiality and non-disclosure agreement and who are acting
in the scope of their employment or engagement, or to customers
acquiring Products (as
56
end-users) in the ordinary course of the Business (and under
written obligations of confidentiality and non-disclosure) and
only to such other Persons as necessary for the development or
exploitation of such Intellectual Property and who have executed
in favour of Abatis written agreements containing obligations of
confidentiality with respect thereto.
(y) To the best of Abatis's knowledge, none of the Abatis Material
Intellectual Property or the Non-Core Intellectual Property is
subject to any actions or proceedings (whether pending or
threatened) or any outstanding decree, order or judgment that
restricts in any manner the use, transfer or licencing thereof by
Abatis or that may affect the validity, use or enforceability of
the same, provided that in the case of Third Party Software
Abatis represents only that it has not received notice of, and is
not actually aware of any such proceeding, outstanding decree,
order or judgment.
3.1.40 INFORMATION TECHNOLOGY.
(a) The computer systems of Abatis contain, at a minimum, North
American industry standard anti-virus software and Abatis will
continue to take steps and implement procedures in accordance
with industry standards to, so far as reasonably possible, ensure
that such systems are free from viruses and will remain so until
the Effective Time.
(b) Subject to Subsection (c) below, the Core Products and Technology
and the Software included in the Abatis Material Intellectual
Property are free of any disabling codes or instructions (in this
Section, a "DISABLING CODE"), and any virus or other contaminant
(in this Section, a "CONTAMINANT"), that may, or may be used to,
access, modify, delete, damage, disable, interrupt, interfere
with or hinder the operation of such Software, the Core Products
and Technology or any system that operates the same.
(c) Third Party Software and other components supplied by third
parties to Abatis and which are included in the Abatis Material
Intellectual Property are, to the knowledge of Abatis, free of
any Disabling Codes or Contaminants that may, or may be used to,
access, modify, delete, damage, disable, interrupt, interfere
with or hinder the operation of such Software, the Core Products
and Technology or any system that operates the same.
57
(d) Abatis has taken reasonable steps and implemented reasonable
procedures to ensure that its internal operating business systems
are free from Disabling Codes and Contaminants.
(e) Abatis has in place the disaster recovery plans, procedures and
facilities set out in the Abatis Disclosure Schedule and has
taken commercially reasonable steps to safeguard Abatis's
internal operating systems and to restrict unauthorized access
thereto. Abatis believes that such plans, procedures, facilities
and steps are adequate given the size and nature of Abatis and
the Business.
3.1.41 COMMITMENTS FOR PURCHASES OR SALES AT LOSSES. Abatis does not
have any agreement, contract or commitment for purchases or sales of its
Products, technology or services at prices involving material prospective
losses.
3.1.42 SIGNIFICANT CUSTOMERS. The Abatis Disclosure Schedule sets forth
a list of all customers for the Products and services of Abatis.
3.1.43 SIGNIFICANT SUPPLIERS. Except as set out in the Abatis Disclosure
Schedule and subject to the qualification set out in Section 3.1.39(l), none of
the suppliers of Abatis is a sole supplier and the products and services
provided by each such supplier are available from other suppliers.
3.1.44 GOVERNMENT PROGRAMS. Except as set out in the Abatis Disclosure
Schedule, no agreements, loans, funding arrangements or assistance programs are
outstanding in favour of Abatis from any Governmental Entity, and, to the
knowledge of Abatis, no basis exists for any Governmental Entity to seek payment
or repayment from Abatis of any amount or benefit received, or to seek
performance of any obligation of Abatis, under any such program.
3.1.45 PRODUCT LIABILITY. The Abatis Disclosure Schedule identifies,
and Abatis has provided copies to Redback of, all contracts in which warranties
are made by Abatis to any Person acquiring its Products, technology or services.
There is no existing claim, lawsuit, recall or proceeding against Abatis, or to
the knowledge of Abatis, threatened or anticipated claim, lawsuit, recall or
proceeding against Abatis, with respect to the performance of, defects under, or
breach of, any express or implied warranty for any Product or service sold by
Abatis prior to the date hereof.
3.1.46 GST REGISTRATION. Abatis is a registrant for the purposes of the
EXCISE TAX ACT (Canada).
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3.1.47 ADVISORY FEES. Except as set forth in the Abatis Disclosure
Schedule, and except for the accountants and lawyers of Abatis retained to
negotiate, advance, carry out and complete the transactions contemplated herein,
there is no investment banker, broker, finder or other intermediary or advisor
that has been retained by or is authorized to act on behalf of Abatis or any of
its directors, officers or shareholders who might be entitled to any fee,
commission or reimbursement of expenses from Abatis upon consummation of the
transactions contemplated by this Agreement.
3.1.48 OTHER NEGOTIATIONS; BROKERS; THIRD PARTY EXPENSES. None of
Abatis or, to the knowledge of Abatis, any of its directors, officers or
shareholders (nor any investment banker, financial advisor, attorney, accountant
or other Person retained by or acting for or on behalf of Abatis or at Abatis's
direction) (a) has entered into any agreement that conflicts with any of the
transactions contemplated by this Agreement (except the Shareholders' Agreement,
which the parties thereto have agreed to terminate as of the Effective Time and
in respect of which all consents required under such agreement in respect of
this Agreement and the transactions contemplated herein have been obtained), or
(b) except as set forth in the Abatis Disclosure Schedule or referred to in
Section 8.7, has entered into any agreement or had any discussions with any
Person regarding any transaction involving Abatis which could reasonably be
expected to result in any of the Redback Parties, Abatis or any of the officers,
directors, employees, agents or shareholders of any of them being subject to any
claim for liability to such Person as a result of entering into this Agreement
or consummating the transactions contemplated hereby. The Abatis Disclosure
Schedule sets forth the principal terms and conditions of any agreement (other
than any agreement with any of the Redback Parties or any of their respective
affiliates) with respect to, and a reasonable estimate of, all Third Party
Expenses which are reasonably expected to be incurred by Abatis in connection
with the negotiation and implementation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
3.1.49 This section intentionally deleted.
3.1.50 DISCLOSURE. As of the date hereof, the representations and
warranties of Abatis contained in this Agreement and in any agreement,
certificate, affidavit, statutory declaration or other document delivered or
given pursuant to this Agreement, including the Abatis Disclosure Schedule, are
true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained in such representations and warranties not misleading
to the Redback Parties.
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3.1.51 APPROVAL OF ARRANGEMENT.
(a) The board of directors of Abatis has determined unanimously:
(i) that the Arrangement is fair to and in the best
interests of the Abatis Shareholders and the Abatis
Optionholders and is in the best interests of Abatis;
and
(ii) to recommend that the Abatis Shareholders and the
Abatis Optionholders vote in favour of the
Arrangement.
(b) All of Abatis's directors have advised Abatis that they intend
to vote the Abatis Shares and Abatis Options held by them in
favour of the Arrangement and will, accordingly, so represent
in the Circular.
3.1.52 Agreements with Certain Shareholders. Abatis has entered into
agreements with ALCATEL Networks Corporation providing for the termination of
the Newbridge Services Agreement between Abatis and Newbridge Networks
Corporation dated as of September 4, 1998 and the repayment of the aggregate
indebtedness owed by Abatis to ALCATEL Networks Corporation under the letter
agreement between such parties dated October 28, 1999, both as of the Effective
Date, copies of which are attached to the Abatis Disclosure Schedule, and each
such agreement is a legal valid and binding, both as of the Effective Date,
obligation of Abatis, in full force and effect, unamended. Abatis has entered
into a Supplementary Conveyance Agreement with 3494365 Canada Inc. dated as of
November 30, 1999 providing for the transfer of certain technology to Abatis, a
copy of which is attached to the Abatis Disclosure Schedule, and such agreement
is a legal, valid and binding obligation of Abatis in full force and effect,
unamended.
3.2 REPRESENTATIONS AND WARRANTIES OF REDBACK. Redback represents
and warrants to and in favour of Abatis as follows and acknowledges that Abatis
is relying upon such representations and warranties in connection with the
matters contemplated by this Agreement:
3.2.1 INCORPORATION AND ORGANIZATION. Each of the Redback Parties
and Newco has been duly incorporated or formed under the laws of its
jurisdiction of incorporation, is validly subsisting, has full corporate or
legal power and authority to own, lease and operate the properties currently
owned, leased and operated by it and conduct its businesses as currently
conducted, and is in good standing with the appropriate Governmental Entity in
its jurisdiction of incorporation with respect to the filing of annual returns
or equivalent documents. Each of the
60
Redback Parties is duly qualified or licenced to do business and is in good
standing as a foreign corporation or organization authorized to do business in
all jurisdictions in which the character of the properties owned, leased or
operated or the nature of the business conducted by it would make such
qualification or licencing necessary. No proceedings have been instituted or are
pending for the dissolution or liquidation of any of the Redback Parties or
Newco.
3.2.2 CAPITALIZATION. The authorized capital of Redback consists of
750,000,000 Redback Common Shares and 10,000,000 shares of preferred stock,
having a par value of $0.0001 each, of which, as of June 30, 2000, 148,618,192
Redback Common Shares and no shares of preferred stock are issued and
outstanding. Except for (a) $500 million aggregate principal amount of 5%
Convertible Subordinated Notes due April 1, 2007 (the "CONVERTIBLE NOTES"), (b)
warrants to purchase 692,472 Redback Common Shares, and (c) employee stock
options granted by Redback pursuant to employment compensation plans, there are
no options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments (contingent or otherwise) obligating Redback to
issue or sell any shares or securities or obligations of any kind convertible
into or exchangeable for any shares of Redback. No Redback Common Shares and no
shares of preferred stock of Redback are held in treasury or authorized or
reserved for issuance, other than upon the exercise of the warrants and options
referred to above. All outstanding Redback Common Shares have been duly
authorized and are validly issued and outstanding as fully paid and
non-assessable shares. Other than the Convertible Notes, there are no
outstanding bonds, debentures or other evidences of indebtedness of Redback or
Exchangeco having the right to vote (or that are convertible for or exercisable
into securities having the right to vote) with the holders of the Redback Common
Shares on any matter. As of the Effective Date, all of the Replacement Options
will be outstanding as duly authorized and validly existing options to acquire
Redback Common Shares, which will not be issued in violation of the terms of any
agreement or other understanding binding upon Redback at the time at which they
are issued and will be issued in compliance with the constating documents of
Redback and all applicable Laws and, upon exercise in accordance with the terms
and conditions of such Replacement Options and payment of the exercise price
therefor, will result in the issuance of Redback Common Shares which will be
duly authorized and validly issued, which are fully paid and non-assessable and
which will not be issued in violation of the terms of any agreement or other
understanding binding upon Redback at the time at which they are issued and will
be issued in compliance with the constating documents of Redback and all
applicable Laws.
3.2.3 AUTHORITY AND NO VIOLATION.
(a) Each of the Redback Parties and Newco has all requisite
corporate power and authority to enter into this Agreement and
each of the Ancillary Agreements, as
61
applicable, to perform its obligations hereunder and
thereunder, and to consummate the Arrangement and the other
transactions contemplated by this Agreement. The execution and
delivery of this Agreement and each of the Ancillary
Agreements, as applicable, by each of the Redback Parties and
Newco and the consummation by each of the Redback Parties and
Newco of the transactions contemplated by this Agreement and
each of the Ancillary Agreements, as applicable, have been
duly authorized by its respective board of directors and no
other corporate proceedings on its part are necessary to
authorize this Agreement and each of the Ancillary Agreements,
as applicable, or the transactions contemplated hereby or
thereby other than the approval by its board of directors of,
in the case of Exchangeco, the amendment of its memorandum and
articles to create the Exchangeable Shares (which amendment
must also be approved by the shareholders of Exchangeco) and,
in the case of Redback, other matters (if any) relating solely
to the implementation of the Arrangement.
(b) This Agreement has been duly executed and delivered by each of
the Redback Parties and constitutes a legal, valid and binding
obligation, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency and other similar
Laws affecting creditors' rights generally, and to general
principles of equity. Each of the Ancillary Agreements, as
applicable, will be duly executed and delivered by each of the
Redback Parties and Newco, as applicable, and, when so
executed and delivered, will constitute a legal, valid and
binding obligation, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and other similar
Laws affecting creditors' rights generally, and to general
principles of equity.
(c) The approval of this Agreement and each of the Ancillary
Agreements, as applicable, the execution and delivery by each
of the Redback Parties and Newco of this Agreement and each of
the Ancillary Agreements, as applicable, and the performance
by it of its obligations hereunder and thereunder and the
completion of the Arrangement and the transactions
contemplated thereby, will not:
(i) conflict with, result in a violation or breach of,
require any consent to be obtained under or give rise
to any termination rights or payment obligation under
any provision of:
(A) its certificate of incorporation,
memorandum, articles, by-laws or other
charter documents, as applicable, including
any unanimous
62
shareholder agreement or any other agreement
or understanding with any Person holding an
ownership interest in it;
(B) subject to obtaining the Appropriate
Regulatory Approvals relating to the Redback
Parties or the transactions contemplated
herein, any Laws, regulation, order,
judgment or decree; or
(C) any material contract, agreement, licence,
franchise or permit to which it is party or
by which it is bound;
(ii) give rise to any right of termination or acceleration
of indebtedness, or cause any third party
indebtedness to come due before its stated maturity
or cause any available credit to cease to be
available; or
(iii) except as would not, individually or in the
aggregate, have a Material Adverse Effect on the
Redback Parties and Newco, as a whole, result in the
imposition of any Encumbrance upon any of its assets,
or restrict, hinder, impair or limit its ability to
carry on its business as and where it is now being
carried on or as and where it may be carried on in
the future.
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental
Entity or other Person is required to be obtained by any of
the Redback Parties or Newco in connection with the execution
and delivery of this Agreement or any of the Ancillary
Agreements, as applicable, or the consummation by any of the
Redback Parties or Newco of the transactions contemplated
hereby or thereby other than:
(i) the Appropriate Regulatory Approvals relating to
the Redback Parties or the transactions contemplated
herein;
(ii) any approval required in connection with the
amendment of the memorandum or articles of Exchangeco
to create the Exchangeable Shares; and
(iii) any other consents, approvals, orders,
authorizations, declarations or filings of or with a
Governmental Entity which, if not obtained, would not
in the aggregate have a Material Adverse Effect on
the Redback Parties and Newco, as a whole.
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3.2.4 NO DEFAULTS. Subject to obtaining the Appropriate Regulatory
Approvals relating to Redback, Redback is not in default under, and there exists
no event, condition or occurrence which, after notice or lapse of time or both,
would constitute such a default under, any contract, agreement, licence or
franchise to which it is a party which would, if terminated due to such default,
cause a Material Adverse Effect on Redback.
3.2.5 OWNERSHIP OF EXCHANGECO AND NEWCO AND BUSINESS OF EXCHANGECO.
All of the outstanding shares of capital stock of each of Exchangeco and Newco
are validly issued, fully paid and non-assessable and all such shares and other
ownership interests are owned directly or indirectly by Redback, free and clear
of all material liens, claims or encumbrances, and there are no outstanding
options, rights, entitlements, understandings or commitments (pre-emptive,
contingent or otherwise) regarding the right to acquire any such shares of
capital stock or other ownership interests in Exchangeco or Newco. Exchangeco
carries on no business and has not been and is not used for any purpose other
than to carry out this Agreement and the transactions contemplated herein.
3.2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
publicly available reports filed by Redback with the SEC prior to the date of
this Agreement, since December 31, 1999 (and July 10, 2000 in the case of
Exchangeco), each of the Redback Parties has conducted its business only in the
ordinary course of business and there has not occurred:
(a) any Material Adverse Change in respect of the Redback Parties;
or
(b) any agreement or arrangement to take any action which, if
taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement
materially untrue or incorrect as of the date when made.
3.2.7 DISCLOSURE. Redback has publicly disclosed in documents filed
with the SEC, any information regarding any event, circumstance or action taken
or failed to be taken which could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Redback Parties.
3.2.8 SEC DOCUMENTS; REDBACK FINANCIAL STATEMENTS. Redback has
furnished or made available to Abatis or its counsel true and complete copies of
all SEC Documents filed by it with the SEC, all in the form so filed. As of
their respective filing dates, such SEC Documents filed by Redback complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and none of the SEC Documents contained any
untrue
64
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent such
SEC Documents have been corrected, updated or superseded by a document
subsequently filed with the SEC. The financial statements of Redback, including
the notes thereto, included in the SEC Documents comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act) and present fairly the consolidated financial
position of Redback at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited financial statements, to normal year-end adjustments).
3.2.9 EXCHANGEABLE SHARES. The Exchangeable Shares to be issued in
connection with the Arrangement will be duly and validly issued by Exchangeco as
fully paid and non-assessable shares on the Effective Date, and will not be
issued in violation of the terms of any agreement or other understanding binding
upon Exchangeco at the time that such shares are issued and will be issued in
compliance with the memorandum and articles of Exchangeco and all applicable
Laws. Other than rights under Section 41 of the Company Act, which rights will
be waived with respect to the Exchangeable Shares prior to the Effective Time,
there are, and will at the Effective Time be, no preemptive or other rights
relating to the allotment or issuance of Exchangeable Shares in connection with
the Arrangement and the transactions contemplated herein.
3.2.10 REDBACK COMMON SHARES. The Redback Common Shares to be issued
pursuant to the Arrangement or upon the exchange from time to time of the
Exchangeable Shares or upon the exercise from time to time of the Replacement
Options will, when issued and delivered in accordance with the terms of this
Agreement, be duly and validly issued by Redback on their respective dates of
issue as fully paid and non-assessable shares and will not be issued in
violation of the terms of any agreement or other understanding binding upon
Redback at the time that such shares are issued and will be issued in compliance
with the constating documents of Redback and all applicable Laws.
3.2.11 OTHER TRANSACTIONS. Redback is not aware of any transaction or
proposed transaction involving Redback which, if it were to be consummated on or
prior to the Effective Date, would constitute a Redback Control Transaction,
Exchangeable Share Voting Event or Exempt Share Voting Event (as each of such
terms is defined in the Share Provisions).
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3.2.12 EXEMPT INTEREST. The principal business of Redback is not an
"investment business", as defined for purposes of clause (b)(ii)(A) of the
definition of "exempt interest" in proposed subsection 94.1(1) of the INCOME TAX
ACT (Canada) as set out in the draft legislation regarding the taxation of
non-resident trusts and foreign investment entities released by the Department
of Finance of Canada on June 22, 2000 as amended from time to time or as enacted
and in effect from time to time (an "INVESTMENT BUSINESS").
3.3 NON-WAIVER. No investigations made by or on behalf of any of
the parties at any time shall have the effect of waiving, diminishing the scope
of or otherwise affecting any representation or warranty made by any other party
herein or pursuant hereto, unless disclosure of the fact at issue is expressly
made in writing to the other party prior to the execution hereof and such
disclosure contains no material untrue statement.
3.4 SURVIVAL. For greater certainty, the representations and
warranties of Abatis and each Redback Party contained herein shall survive the
execution and delivery of this Agreement and shall terminate on the earlier of
the termination of this Agreement in accordance with its terms and the
Expiration Date.
4.0 ESCROW PROVISIONS
4.1 ESTABLISHMENT OF THE ESCROW FUND. At or promptly after the
Effective Time, Exchangeco and Redback will deposit, or cause to be deposited,
without any act or formality on the part of the Abatis Shareholders, the Escrow
Securities in escrow with the Escrow Agent (such shares, together with any other
property held by the Escrow Agent from time to time under the Escrow Agreement,
being herein referred to as the "ESCROW FUND"), which shall be governed by the
terms set out in the Escrow Agreement. The number of Escrow Securities to be
contributed by or on behalf of each Abatis Shareholder shall be equal to 10% of
each of the Redback Common Shares and Exchangeable Shares to be issued to such
holder at the Effective Time pursuant to the Plan of Arrangement.
4.2 RECOURSE TO THE ESCROW FUND. The Escrow Fund shall be
available to indemnify the Redback Parties, Newco and their respective officers,
directors, employees or agents, for any and all Losses (as defined in the Escrow
Agreement) incurred or sustained, directly or indirectly, by any of them. The
Escrow Fund shall be applied against the Losses in the manner set out in the
Escrow Agreement by applying Redback Common Shares and Exchangeable Shares in
the same ratio as the ratio of Redback Common Shares to Exchangeable Shares
contributed to the Escrow Fund pursuant to Section 4.1. Other than for fraud,
the provisions of this Section 4.0 shall be the sole and exclusive remedy
available to the Redback Parties, Newco and their officers, directors, employees
and agents to obtain recovery from the Abatis Shareholders with
66
respect to any Losses and no such party shall have recourse against the Abatis
Shareholders under this Agreement for any other Losses. Except for liability for
fraud and the liability of a Abatis Shareholder with respect to the loss of his
Deposited Shares (as defined in the Plan of Arrangement), and his share of any
other property included in the Escrow Fund, in satisfaction of Losses in
accordance with this Section 4.0 and the terms of the Escrow Agreement, no
Abatis Shareholder shall have any liability to the Redback Parties, Newco or any
of their respective officers, directors, stockholders, employees or agents for
or in respect of any Losses or any other liabilities arising out of this
Agreement or the transactions or agreements contemplated herein.
4.3 ESCROW PERIOD; DISTRIBUTION OF ESCROW FUND UPON TERMINATION OF
ESCROW PERIOD. The Escrow Fund shall be established at or promptly following the
Effective Time and shall be held by the Escrow Agent until 5:00 p.m. (Pacific
Time) on the Expiration Date; provided that such portion of the Escrow Fund
(consisting of a ratio of Redback Common Shares to Exchangeable Shares equal to
the ratio of Redback Common Shares to Exchangeable Shares contributed to the
Escrow Fund pursuant to Section 4.1) which, in the opinion of Redback, acting
reasonably, is necessary to satisfy any claims made to the Escrow Agent in the
manner provided in the Escrow Agreement prior to the Expiration Date shall
remain in the Escrow Fund until such claims have been resolved. The portion of
the Escrow Fund which is not required to satisfy such claims shall, as soon as
practicable after the Expiration Date, be delivered by the Escrow Agent to the
Persons who contributed the Escrow Securities to the Escrow Fund ratably in
proportion to their respective contributions thereto and IN SPECIE according to
the nature of the Escrow Securities contributed by each such Person.
4.4 MINIMUM THRESHOLD. The Redback Parties, Newco and their
respective officers, directors, employees or agents shall not be entitled to
receive any Escrow Securities or other property comprising the Escrow Fund, and
shall not otherwise be entitled to any indemnification under the Escrow
Agreement, unless and until one or more of them have made claims for
indemnification in the manner provided in the Escrow Agreement specifying Losses
in an aggregate amount of not less than $250,000, in which case such Persons
shall be entitled to be indemnified out of the Escrow Fund in the manner
provided in the Escrow Agreement for the full amount of any and all Losses,
including the initial Losses up to such $250,000 threshold.
5.0 COVENANTS
5.1 RETENTION OF GOODWILL. During the Pre-Effective Date Period,
Abatis will, subject to the fact that the Arrangement and related transactions
are contemplated hereby, continue to carry on the business of Abatis in the
ordinary course of business, working to preserve the attendant goodwill of
Abatis and to contribute to retention of that goodwill to and after the
Effective Date, but subject to the following provisions of this Section 5.0. The
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following provisions of this Section 5.0 are intended to be in furtherance of
this general commitment, subject to the fact that the Arrangement and related
transactions are contemplated hereby.
5.2 MATERIAL COMMITMENTS. During the Pre-Effective Date Period,
Abatis will consult on an ongoing basis with senior officers of Redback in order
that the representatives of Redback will become more familiar with the
philosophy and techniques of Abatis, as well as with its business and financial
affairs and in order to provide experience as a basis for ongoing relationships
after the Effective Date. These consultations will include matters involving any
commitments, arrangements or transactions proposed to be entered into by Abatis
that would give rise to a material liability or commitment of any kind. Abatis
and Redback will develop procedures such that these consultations will be
carried out quickly and effectively without detracting from the ability of
Abatis to arrive at decisions in a timely manner.
5.3 COVENANTS OF ABATIS.
(a) Abatis covenants and agrees that, until the Effective Date or
the earlier termination of this Agreement in accordance with
Section 7.0, except with the consent of Redback to any
deviation therefrom or with respect to any matter contemplated
by this Agreement or the Plan of Arrangement, Abatis will,
(i) carry on its business in, and only in, the ordinary
and regular course in substantially the same manner
as heretofore conducted and, to the extent consistent
with such business, use all reasonable efforts to
preserve intact its present business organization and
keep available the services of its present officers
and employees and others having business dealings
with it to the end that its goodwill and business
shall be maintained;
(ii) not commence to undertake a substantial or unusual
expansion of its business facilities or an expansion
that is out of the ordinary course of business
consistent with prior practice in light of current
market and economic conditions;
(iii) not split, combine or reclassify any of the
outstanding Abatis Shares, nor declare or pay any
dividends on or make any other distributions (in
either case, in stock or property) on or in respect
of the outstanding Abatis Shares;
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(iv) not amend its articles or by-laws;
(v) not allot, reserve, set aside or issue, authorize or
propose the allotment, reservation, setting aside or
issuance of, or purchase or redeem or propose the
purchase or redemption of, any shares in its capital
stock or any class of securities convertible or
exchangeable into, or rights, warrants or options to
acquire, any such shares or other convertible or
exchangeable securities, except for (A) the issuance
of Abatis Voting Common Shares pursuant to fully
vested Abatis Options granted prior to the date
hereof; (B) the issuance of Abatis Voting Common
Shares to employees of Abatis who have entered into
subscription agreements with Abatis prior to the date
hereof, as disclosed in the Abatis Disclosure
Schedule; and (C) the issuance of Abatis Voting
Common Shares to holders of Abatis Non-Voting Common
Shares upon the exercise by the holders thereof of
the right of conversion attached to such shares;
particulars of each of which are set out in the
Abatis Disclosure Schedule;
(vi) not, whether through its board of directors or
otherwise, accelerate, or permit to be accelerated,
the vesting of any unvested Abatis Options or
otherwise amend, vary or modify, or take any other
action under the Abatis Stock Option Plan other than
as contemplated herein;
(vii) not acquire or agree to acquire any Abatis Shares or
other of its outstanding securities, whether by
public or private transaction, or otherwise, except
in connection with the conversion of Abatis
Non-Voting Common Shares into Abatis Voting Common
Shares pursuant to the right of conversion attached
to the Abatis Non-Voting Common Shares;
(viii) not reorganize, amalgamate or merge Abatis with any
other person, nor acquire or agree to acquire by
amalgamating, merging or consolidating with,
purchasing substantially all of the assets of or
otherwise, any business of any corporation,
partnership, association or other business
organization or division thereof;
(ix) not guarantee the payment of indebtedness or incur
indebtedness for money borrowed or issue or sell any
debt securities; provided that Abatis may incur
indebtedness of up to $18,000,000 in the aggregate
(including
69
existing indebtedness) to ALCATEL Networks
Corporation as provided for in the letter agreement
between such parties dated October 28, 1999;
(x) other than in the ordinary course of business or as
specifically contemplated in this Agreement, but
subject to restrictions set out elsewhere in this
Agreement, not enter into or modify any employment,
severance, collective bargaining or other Employee
Benefits, policies or arrangements with, or grant any
bonuses, salary increases, stock options, pension or
supplemental pension benefits, profit sharing,
retirement allowances, deferred compensation,
incentive compensation, severance or termination pay
to, or make any loan to, any officers, directors or
employees of Abatis;
(xi) not, except in the ordinary course of business:
(A) satisfy or settle any claims or liabilities
prior to the same being due, except such as
have been reserved against in the Financial
Statements, which are, individually or in
the aggregate, material; or
(B) grant any waiver, exercise any option or
relinquish any contractual rights which are,
individually or in the aggregate, material;
(xii) use its reasonable commercial efforts to cause its
current insurance (or re-insurance) policies not to
be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement
policies underwritten by insurance and re-insurance
companies of nationally recognized standing providing
coverage equal to or greater than the coverage under
the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and
effect;
(xiii) not settle or compromise any claim brought by any
present, former or purported holder of any of its
securities in connection with the transactions
contemplated by this Agreement or the Arrangement
prior to the Effective Date;
(xiv) not enter into any material contract, agreement,
licence, franchise, lease transaction, commitment or
other right or obligation (which for greater
70
certainty shall include the proposed purchase order
and maintenance services agreement between Protel
Systems Inc. and Abatis or any similar arrangements)
or amend, modify, relinquish, terminate or fail to
renew in any material respect any Material Agreement,
all other than in the ordinary course of business, or
amend, modify, relinquish or terminate any of the Key
Employees Employment Agreements or the agreements
referred to in Section 3.1.52;
(xv) not acquire or sell, pledge, encumber or otherwise
dispose of any material property or assets (except
for the sale of inventory in the ordinary course of
business) and incur or commit to incur capital
expenditures prior to the Effective Date, other than
in the ordinary course of business, and not, in any
event, exceeding $100,000 in the aggregate;
(xvi) not make any changes to existing accounting practices
relating to Abatis, except as required by applicable
Law or required by generally accepted accounting
principles or make any material tax election
inconsistent with past practice; and
(xvii) promptly advise Redback orally and, if then
requested, in writing:
(A) of any event occurring subsequent to the
date of this Agreement that would render any
representation or warranty of Abatis
contained in this Agreement (except any such
representation or warranty which speaks as
of a date prior to the date of this
Agreement), if made on or as of the date of
such event or the Effective Date, untrue or
inaccurate in any material respect;
(B) of any Material Adverse Change in respect of
Abatis; and
(C) of any breach by Abatis of any covenant or
agreement contained in this Agreement.
(b) Abatis shall perform all obligations required or desirable to
be performed by Abatis under this Agreement and shall do all
such other acts and things as may be necessary or desirable in
order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated in this Agreement
and, without limiting the generality of the foregoing, Abatis
shall:
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(i) use all reasonable efforts to obtain the approvals of
holders of Abatis Shares to the Arrangement at the Abatis
Meeting, as provided for in Section 2.3(a) and in the Interim
Order, subject, however, to the exercise by the board of
directors of Abatis of its fiduciary duties as provided
herein;
(ii) apply for and use all reasonable efforts to obtain
all Appropriate Regulatory Approvals relating to Abatis and,
in doing so, to keep Redback reasonably informed as to the
status of the proceedings relating to obtaining the
Appropriate Regulatory Approvals, including providing Redback
with copies of all related applications and notifications, in
draft form, in order for Redback to provide its reasonable
comments;
(iii) apply for and use all reasonable efforts to obtain
the Interim Order and the Final Order;
(iv) continue to provide Redback and its Representatives
with information as reasonably requested by them from
time to time concerning the business, assets,
liabilities and affairs of Abatis subject to and in
accordance with the Confidentiality Agreement, and
with access (on a basis that does not detract
unreasonably from their performance of their business
responsibilities) to management and employees of
Abatis;
(v) carry out the terms of the Interim Order and Final
Order applicable to it and use its reasonable efforts
to comply promptly with all requirements which
applicable Laws may impose on Abatis with respect to
the transactions contemplated hereby and by the
Arrangement;
(vi) defend all lawsuits or other legal, regulatory or
other proceedings challenging or affecting this
Agreement or the consummation of the transactions
contemplated hereby;
(vii) use all reasonable efforts to have lifted or
rescinded any injunction or restraining order or
other order relating to Abatis which may adversely
affect the ability of the parties to consummate the
transactions contemplated hereby;
72
(viii) on or before the Effective Date, effect all necessary
registrations, filings and submissions of information
required by Governmental Entities from Abatis
relating to the transactions contemplated herein;
(ix) in connection with the Arrangement and other
transactions contemplated herein, use its reasonable
efforts to obtain, before the Effective Date, all
necessary waivers, consents and approvals required to
be obtained by Abatis from other parties pursuant to
the Material Agreements (including the consents,
approvals and waivers referred to in Section 6.2(g));
(x) use all reasonable efforts to cause the board of
directors of Abatis to resolve, on or before the
Effective Time, not to permit any early vesting of or
payment of cash for any Abatis Options in connection
with the Change of Control (as defined in the Abatis
Stock Option Plan) of Abatis resulting from the
completion of the transactions contemplated by this
Agreement;
(xi) not approve or register the transfer of any of the
Abatis Shares which are subject to the provisions of
the Principal Shareholder Voting Agreements, except
as expressly permitted by the Principal Shareholder
Voting Agreements;
(xii) obtain waivers from ALCATEL Networks Corporation
and 3494365 Canada Inc. with respect to all
preemptive rights held by such Persons to purchase
Abatis Shares pursuant to the Shareholders'
Agreement;
(xiii) use all reasonable efforts to cause each of Abatis's
affiliates (for the purposes of Rule 145 under the
Securities Act) to execute and deliver to Redback, on
or prior to the Effective Date, an Affiliate's
Letter;
(xiv) use all reasonable efforts to obtain, on or before
the Effective Date, written resignations, effective
as at the Effective Time, from such directors and
officers of Abatis as Redback may request;
(xv) execute and deliver to Redback, on or before the
Effective Date, the Assumption Agreement;
(xvi) use all reasonable efforts to cause the Shareholders'
Agent to execute, on or before the Effective Date,
the Escrow Agreement and the Registration
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Rights Agreement and, in the event that the
Shareholders' Agent named in Section 1.1 has not
executed either such agreement by the Effective Date,
Abatis shall identify a person who is acceptable to
Redback, acting reasonably, to act as agent for and
on behalf of the Abatis Shareholders under the Escrow
Agreement and the Registration Rights Agreement and
to cause such replacement to execute each such
agreement on or before the Effective Date;
(xvii) deliver to Redback on or before the Effective Date
evidence, in a form acceptable to Redback acting
reasonably, of the termination of the Shareholders'
Agreement, such termination to be effective as of the
Effective Time;
(xviii) deliver to Redback, not less than 12 Business Days
prior to the Effective Date, a certificate duly
executed by two directors or senior officers of
Abatis setting forth the aggregate number of Abatis
Shares issued and outstanding as at the date of such
certificate (which shall also be the number of such
shares outstanding as at the Effective Date) and the
aggregate number of Abatis Shares which are or may at
any future time become issuable upon the exercise in
full of all Abatis Options outstanding as at the
Effective Date, including all Abatis Options which
are not fully vested or immediately exercisable as at
the Effective Date (which shall also be the number of
such shares issuable thereunder as at the Effective
Date), and certifying , except as disclosed in the
Abatis Disclosure Schedule, that there are no further
rights, agreements or arrangements of any nature or
kind then outstanding for the acquisition of further
Abatis Shares, or securities convertible into or
exchangeable for Abatis Shares;
(xix) not, notwithstanding any other provision of this
Agreement (including the Exhibits hereto and the
Disclosure Schedule), allot, issue or grant any
Abatis Shares, Abatis Options or other securities
convertible into or exchangeable for Abatis Shares,
or enter into any agreements or arrangements relating
thereto, to or with any Person or for any reason
between the date of the certificate referred to in
Section 5.3(b)(xviii) and the Effective Date; and
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(xx) use all reasonable efforts to assist all Abatis
Shareholders and Abatis Optionholders who are not
residents of Canada for purposes of the INCOME TAX
ACT (Canada) to obtain appropriate clearance
certificates pursuant to Section 116 of such Act.
5.4 COVENANTS OF THE REDBACK PARTIES. Each of the Redback Parties
hereby jointly and severally covenants and agrees:
(a) to perform all obligations required or desirable to be
performed by it under this Agreement and to do all such other
acts and things as may be necessary or desirable in order to
consummate and make effective, as soon as reasonably
practicable, the transactions contemplated by this Agreement
and, without limiting the generality of the foregoing, to:
(i) apply for and use all reasonable efforts to obtain
all Appropriate Regulatory Approvals relating to
Redback and the transactions contemplated in this
Agreement, and, in doing so, to keep Abatis
reasonably informed as to the status of the
proceedings related to obtaining the Appropriate
Regulatory Approvals, including providing Abatis with
copies of all related applications and notifications,
in draft form, in order for Abatis to provide its
reasonable comments;
(ii) use reasonable efforts to cause to be voted in favour
of the Arrangement at the Abatis Meeting all proxies
granted to officers of Redback under the Principal
Shareholder Voting Agreements, to the maximum extent
that such officers are authorized or permitted to do
so under such proxies and under applicable Law;
(iii) defend all lawsuits or other legal, regulatory or
other proceedings to which it is a party challenging
or affecting this Agreement or the consummation of
the transactions contemplated hereby;
(iv) use all reasonable efforts to have lifted or
rescinded any injunction or restraining order or
other order relating to any of the Redback Parties
which may adversely affect the ability of the parties
to consummate the transactions contemplated hereby;
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(v) on or before the Effective Date, effect all necessary
registrations, filings and submissions of information
required by Governmental Entities from Redback or its
subsidiaries relating to the transactions
contemplated herein;
(vi) on or before the Effective Date, cause the memorandum
and articles of Exchangeco to be amended to create
the Exchangeable Shares and the Preferred Shares (as
defined in the Share Provisions);
(vii) execute and deliver to Abatis on or before the
Effective Date, the Assumption Agreement; and
(viii) cause Redback to reserve a sufficient number of
Redback Common Shares for issuance upon the
completion of the Arrangement and the exchange from
time to time of Exchangeable Shares and the exercise
from time to time of Replacement Options;
(b) carry out the terms of the Interim Order and Final Order
applicable to it and use its reasonable efforts to comply
promptly with all requirements which applicable Laws may
impose on Redback or its subsidiaries with respect to the
transactions contemplated hereby and by the Arrangement;
(c) in connection with the consummation of the transactions
contemplated hereby and by the Arrangement, use its reasonable
efforts to obtain, before the Effective Date, all necessary
waivers, consents and approvals required to be obtained by
Redback or its subsidiaries from other parties to loan
agreements, leases or other contracts;
(d) until the Effective Date or the earlier termination of this
Agreement in accordance with Section 7.0, except (i) with the
consent of Abatis to any deviation therefrom which shall not
be unreasonably withheld; or (ii) with respect to any matter
contemplated by this Agreement or the Plan of Arrangement,
Redback will:
(i) not make any changes to existing accounting practices
related to Redback, except as permitted or required
by a change in United States generally accepted
accounting practices or by applicable Law;
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(ii) not reorganize, amalgamate or merge Redback with any
other Person, nor acquire by amalgamating, merging or
consolidating with, purchasing a majority of the
voting securities of or substantially all of the
assets of or otherwise, any business or Person which
acquisition would reasonably be expected to
materially delay the transactions contemplated
hereby; and
(iii) promptly advise Abatis orally and, if then requested,
in writing:
(A) of any event occurring subsequent to the
date of this Agreement that would render any
representation or warranty of Redback
contained in this Agreement (except any such
representation or warranty which speaks as
of a date prior to the occurrence of such
event), if made on or as of the date of such
event or the Effective Date, untrue or
inaccurate in any material respect;
(B) of any Material Adverse Change in respect of
Redback; and
(C) of any material breach by Redback of any
covenant or agreement contained in this
Agreement; and
(e) until the Effective Date or the earlier termination of this
Agreement in accordance with Section 7.0, forthwith give
written notice to Abatis if Redback intends to carry on as its
principal business an Investment Business or if it is
reasonably anticipated that Redback would be carrying on as
its principal business an Investment Business as of a
specified future date, and Redback further agrees not to carry
on as its principal business an Investment Business unless
Redback has given prior written notice thereof to Abatis,
provided that Redback shall not be required to give any notice
to Abatis under this Section 5.4(e) if the giving of such
notice would contravene applicable Laws including applicable
securities Laws.
5.5 TAX DEFERRED STATUS. None of the parties shall, except as
contemplated by this Agreement, take any action which may jeopardize the
exchange of the Abatis Shares for Exchangeable Shares pursuant to the
Arrangement by holders of the Abatis Shares resident in Canada for the purposes
of the INCOME TAX ACT (Canada) from being treated on a tax deferred basis under
the INCOME TAX ACT (Canada) for holders who are otherwise eligible for such
treatment.
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5.6 APPLICATIONS FOR REGULATORY APPROVALS. Each of Abatis and the
Redback Parties covenant and agree to use all reasonable efforts required to
apply for and obtain the Appropriate Regulatory Approvals, and shall proceed
diligently with respect to such applications, in a coordinated and expeditious
manner.
5.7 SECTION 85 ELECTIONS. Exchangeco will execute and jointly file
with each Abatis Shareholder who elects to receive Exchangeable Shares pursuant
to the Plan of Arrangement and who so requests an election pursuant to Section
85 of the INCOME TAX ACT (Canada) and any applicable provincial legislation in
which election such Abatis Shareholder will be entitled to elect the amount
which shall be such Abatis Shareholder's proceeds of disposition and
Exchangeco's cost of the Abatis Shares exchanged for Exchangeable Shares,
provided that (i) such amount is within the limits prescribed by Section 85 of
the INCOME TAX ACT (Canada) and any applicable provincial legislation, (ii) such
Abatis Shareholder provides two completed copies of the appropriate tax election
form to Redback no later than 90 days after the Effective Date, and (iii) such
Abatis Shareholder provides Exchangeco with a letter representing to Exchangeco
that such Abatis Shareholder is a resident of Canada for purposes of the INCOME
TAX ACT (Canada) and is not exempt from Tax. Upon any Abatis Shareholder
complying with the foregoing conditions, Exchangeco will execute the completed
election form received from such shareholder and return such form by mail to
such shareholder within 30 days of its receipt thereof. The Abatis Shareholders
will be solely responsible for the preparation of the foregoing election forms,
and for the filing of such forms with the appropriate Tax authority. Exchangeco
shall not be responsible or liable in any manner whatsoever for the proper
completion and timely filing of any such forms with the appropriate Tax
authority, but will cooperate reasonably with the Abatis Shareholders in
completing and filing such forms in a timely manner, including providing such
information within Redback's possession as is reasonably required by the Abatis
Shareholders to complete such forms.
5.8 COVENANTS REGARDING NON-SOLICITATION.
(a) Subject to Section 5.9, Abatis shall not, directly or
indirectly, through any officer, director, employee,
representative or agent of Abatis:
(i) solicit, initiate or knowingly encourage (including
by way of furnishing information or entering into any
form of agreement, arrangement or understanding) the
initiation of any inquiries or proposals regarding an
Acquisition Proposal;
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(ii) participate in any discussions or negotiations
regarding any Acquisition Proposal;
(iii) withdraw or modify in a manner adverse to Redback
the approval of the board of directors of Abatis of
the transactions contemplated hereby;
(iv) approve or recommend any Acquisition Proposal; or
(v) enter into any agreement, arrangement or
understanding related to any Acquisition Proposal.
Notwithstanding the preceding part of this Section 5.8(a) and
any other provision of this Agreement, nothing shall prevent
the board of directors of Abatis prior to the issuance of the
Final Order from considering, participating in any discussions
or negotiations, or entering into a confidentiality agreement
and providing information pursuant to Section 5.8(c),
regarding an unsolicited BONA FIDE written Acquisition
Proposal that did not otherwise result from a breach of this
Section 5.8 and that the board of directors of Abatis
determines in good faith, after consultation with financial
advisors and outside legal counsel, is reasonably likely to
result in a Superior Proposal; provided, however, that prior
to taking such action, the board of directors must receive an
opinion of outside legal counsel that it is appropriate that
the board of directors of Abatis take such action in order to
discharge properly its fiduciary duties. Abatis shall not
consider, negotiate, accept or recommend an Acquisition
Proposal after the date of the issuance of the Final Order.
Abatis shall, and shall cause its officers, directors and
employees and any financial advisors or other advisors,
representatives or agents retained by it to, cease immediately
all discussions and negotiations regarding any proposal that
constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal.
(b) Abatis shall promptly notify Redback, at first orally and
then in writing, of any Acquisition Proposal and any enquiry
that could lead to an Acquisition Proposal, or any amendments
to the foregoing, or any request for non-public information
relating to Abatis in connection with an Acquisition Proposal
or for access to the properties, books or records of Abatis by
any Person that informs Abatis that it is considering making,
or has made, a proposal that constitutes, or may reasonably be
expected to lead to an Acquisition Proposal. Such notice shall
include a description of the material terms and conditions of
any proposal, the identity of
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the Person making such proposal, enquiry or contact and
provide such other details of the proposal, enquiry or contact
as Redback may reasonably request. Abatis shall:
(i) keep Redback fully informed of the status
including any change to the material terms of any
such Acquisition Proposal or enquiry; and
(ii) provide to Redback as soon as practicable after
receipt or delivery thereof with copies of all
correspondence and other written material sent or
provided to Abatis from any Person in connection with
any Acquisition Proposal or sent or provided by
Abatis to any Person in connection with any
Acquisition Proposal.
(c) If Abatis receives a request for material non-public
information from a Person who has made an unsolicited BONA
FIDE written Acquisition Proposal and Abatis is permitted, as
contemplated under the second sentence of Section 5.8(a), to
negotiate the terms of such Acquisition Proposal, then, and
only in such case, the board of directors of Abatis may,
subject to the execution by such Person of a confidentiality
agreement on terms substantially similar to the
Confidentiality Agreement, provide such Person with access to
information regarding Abatis; provided, however, that the
Person making the Acquisition Proposal shall not be precluded
under such confidentiality agreement from making the
Acquisition Proposal (but not any material amendment thereto)
and provided further that Abatis sends a copy of any such
confidentiality agreement to Redback promptly upon its
execution and concurrently provides Redback with a list of or
copies of the information provided to such Person and access
to similar information to which such Person was provided.
(d) Abatis shall ensure that its officers, directors and employees
and any financial advisors or other advisors, representatives
or agents retained by it are aware of the provisions of this
Section 5.8, and it shall be responsible for any breach of
this Section 5.8 by any such Person.
5.9 NOTICE BY ABATIS OF SUPERIOR PROPOSAL DETERMINATION.
Notwithstanding Sections 5.8(a), (b) and (d), Abatis may accept, approve,
recommend or enter into any agreement, understanding or arrangement in respect
of a Superior Proposal if, and only if:
(a) it has provided Redback with a copy of the Superior Proposal
document;
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(b) five Business Days shall have elapsed from the later of the
date Redback received written notice advising Redback that
Abatis's board of directors has resolved, subject only to
compliance with this Section 5.9 and termination of this
Agreement, to accept, approve, recommend or enter into an
agreement in respect of such Superior Proposal, specifying the
terms and conditions of such Superior Proposal and identifying
the Person making such Superior Proposal, and the date Redback
received a copy of such Superior Proposal; and
(c) it has previously or concurrently will have:
(i) paid to Redback the break fee, if any, payable under
Section 7.4; and
(ii) terminated this Agreement pursuant to Section 7.3.
Any information provided by Abatis to Redback pursuant to this Section
5.9 or pursuant to Section 5.8 shall constitute "Information" under Section
5.10(b).
During such five Business Day period, Abatis agrees that Redback shall
have the right, but not the obligation, to offer to amend the terms of this
Agreement. The board of directors of Abatis will review any offer by Redback to
amend the terms of this Agreement in good faith in order to determine, in its
discretion in the exercise of its fiduciary duties, whether Redback's offer upon
acceptance by Abatis would result in such Superior Proposal ceasing to be a
Superior Proposal. If the board of directors of Abatis so determines, it will
enter into an amended agreement with Redback reflecting Redback's amended
proposal. If the board of directors of Abatis continues to believe, in good
faith and after consultation with financial advisors and outside legal counsel,
that such Superior Proposal remains a Superior Proposal and therefore rejects
Redback's amended proposal, Abatis may terminate this Agreement pursuant to
Section 7.3(c)(iv); provided, however, that Abatis must concurrently therewith
pay to Redback the break fee, if any, payable to Redback under Section 7.4 and
must concurrently with such termination enter into a definitive agreement with
respect to such Acquisition Proposal. Abatis acknowledges and agrees that
payment of the break fee, if any, payable under Section 7.4 is a condition to
valid termination of this Agreement under Section 7.3(c)(iv) and this Section
5.9.
Abatis also acknowledges and agrees that each successive modification
of any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under clause (ii) of this Section 5.9 to initiate an
additional five Business Day notice period.
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5.10 ACCESS TO INFORMATION.
(a) Subject to Sections 5.10(b) and (c) and applicable Laws,
upon reasonable notice, Abatis shall afford Redback's
officers, employees, counsel, accountants and other authorized
representatives and advisors ("REPRESENTATIVES") access,
during normal business hours in the Pre-Effective Date Period,
but without unreasonably interfering with the operation of the
business of Abatis, to such properties, books, contracts and
records and other documents, information or data relating to
Abatis which Redback or its Representatives deem necessary or
advisable to review in making an examination of Abatis and its
business, as well as to its management personnel, and, during
such period, Abatis shall furnish promptly to Redback all
information concerning Abatis's business, properties and
personnel as Redback or its Representatives may reasonably
request. Subject to Sections 5.10(b) and (c) and applicable
laws, upon reasonable notice, Redback shall afford Abatis's
Representatives access, during normal business hours in the
Pre-Effective Date Period, but without unreasonably
interfering with the operation of the business of Redback, to
such of Redback's management personnel as Redback may
determine, acting reasonably, and, during such period, Redback
shall furnish promptly to Abatis all information respecting
material changes in Redback's business, properties and
personnel as Abatis may reasonably request. At the request of
Redback, Abatis will execute or cause to be executed such
consents, authorizations and directions as may be necessary to
enable Redback or its Representatives to obtain full access to
all files and records relating to Abatis or its assets
maintained by any Governmental Entity.
(b) In accordance with the Confidentiality Agreement, each of
Redback and Abatis acknowledges that certain information to be
provided to it under Section 5.10(a) above, or provided to it
prior to the execution of this Agreement, will be non-public
and/or proprietary in nature (the "INFORMATION"). Except as
permitted below, each of Redback and Abatis will keep the
Information confidential and will not, without the prior
written consent of the other, disclose it, in any manner
whatsoever, in whole or in part, to any other Person, and will
not use it for any purpose other than to evaluate the
transactions contemplated by this Agreement. Each of Redback
and Abatis will make all reasonable, necessary and appropriate
efforts to safeguard the Information from disclosure to anyone
other than as permitted hereby and to control the copies,
extracts or reproductions made of the Information. The
Information may be provided to the Representatives of each of
Redback and Abatis who require access to the same to assist it
in proceeding in
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good faith with the transactions contemplated by this
Agreement, and whose assistance is required for such purposes,
provided that it has first informed such Representatives to
whom Information is provided that the Representative has the
same obligations, including as to confidentiality, restricted
use and otherwise, that it has with respect to such
Information. This provision shall not apply to such portions
of the Information that:
(i) are or become generally available to the public
otherwise than as a result of disclosure by a party
or its Representatives; or
(ii) become available to a party on a non-confidential
basis from a source other than, directly or
indirectly, the other party or its Representatives,
provided that such source is not, to the knowledge of
the first party, upon reasonable enquiry, prohibited
from transmitting the Information by a contractual,
legal or fiduciary obligation; or
(iii) were known to a party or were in its possession on a
non-confidential basis prior to being disclosed to it
by the other party or by someone on its behalf; or
(iv) are required by applicable Laws or court order to be
disclosed, provided that if a party or any of its
representatives (the "Compelled Party") is required
to disclose any such information, the Compelled Party
gives the other parties (the "Other Parties") prior
written notice of such disclosure as soon as
practicable, so that the Other Parties will have an
opportunity to seek a protective order or to take
other appropriate action.
The provisions of this Section 5.10(b) shall survive the
termination of this Agreement.
(c) The parties acknowledge that certain Information may be
competitively sensitive and that disclosure thereof shall be
limited to that which is reasonably necessary for the purpose
of:
(i) preparing submissions or applications in order to
obtain the Appropriate Regulatory Approvals;
(ii) preparing the Circular; and
83
(iii) integrating the operations of Redback and Abatis.
5.11 COVENANT REGARDING REPRESENTATIONS AND WARRANTIES. Each of
Abatis and the Redback Parties covenants that it will use all reasonable efforts
to ensure that the representations and warranties given by it and contained in
Section 3.0 are true and correct on and as at the Effective Date (except as
affected by transactions contemplated or permitted by this Agreement or
otherwise consented to by the other parties hereto) or if not true, do not have
a Material Adverse Effect on such party (other than, in the case of Abatis, as a
result of a Material Adverse Change in Abatis's sales which is attributable to
or results from the announcement of the transactions contemplated in this
Agreement).
5.12 CLOSING MATTERS. Each of the Redback Parties and Abatis shall
deliver, at the closing of the Arrangement and other transactions contemplated
hereby, such customary certificates (including "bring-down" certificates),
resolutions, opinions and other closing documents as may be required by the
other party, acting reasonably. The closing of the Arrangement and the
transactions contemplated hereby will take place at 11:00 a.m. (Pacific Time) on
the Effective Date at the offices of Fraser Xxxxxx Casgrain, Suite 1500, 0000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx.
5.13 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Redback agrees that all rights to indemnification or
exculpation now existing in favour of the directors or
officers of Abatis, as provided in its articles of
incorporation or by-laws, a copy of which has been provided to
Redback prior to the date of the execution of this Agreement,
in effect on the date hereof, or as provided in any agreements
between Abatis and its directors and officers set out in the
Abatis Disclosure Schedule, shall survive the Arrangement and
shall continue in full force and effect for a period of not
less than six years from the Effective Time.
(b) Redback agrees that from the Effective Date until the sixth
anniversary thereof it will maintain, or cause Abatis to
maintain, the current directors' and officers' insurance
policy of Abatis, or another policy for the benefit of, and in
the names of, the directors and officers of Abatis or
"discovery" endorsement, on terms and conditions which, to the
extent reasonably practicable, are no less advantageous to the
directors and officers of Abatis and which provide no less
coverage to them
84
than Abatis's existing directors' and officers' insurance, for
all present directors and officers of Abatis, covering claims
made within such period of time.
5.14 EMPLOYMENT AND RELATED MATTERS. Redback covenants and agrees
that from and after the Effective Time it will cause Abatis, for a period of one
year, to deal with any employees of Abatis whose employment is terminated after
the Effective Date in a fair and equitable manner consistent with the existing
termination policies of Abatis as set out in the Abatis Disclosure Schedule.
Nothing herein shall be construed as (i) requiring Redback or
Abatis to continue the employment of any employee of Abatis following the
Effective Time, (ii) limiting Redback's or Abatis's ability to amend, modify or
terminate any Employee Benefit or arrangement of Abatis, Redback or any of
Redback's subsidiaries, or (iii) requiring Redback or Abatis to maintain any
particular level of Employee Benefits for any employee of Abatis following the
Effective Time, except as otherwise provided in the Key Employee Employment
Agreements.
5.15 PROHIBITION ON VOLUNTARY LIQUIDATION. The Redback Parties
shall not, and agree to cause Newco to not, take any action relating to a
voluntary liquidation, dissolution or winding-up of Exchangeco or Newco, as the
case may be, prior to the Redemption Date (as defined in the Plan of
Arrangement).
6.0 CONDITIONS
6.1 MUTUAL CONDITIONS PRECEDENT. The respective obligations of the
parties to complete the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Effective Date, of the following
conditions precedent, each of which may only be waived by the mutual consent of
Redback and Abatis:
(a) the Arrangement shall have been approved at the Abatis Meeting
by not less than two-thirds of the votes cast by the Abatis
Shareholders and the Abatis Optionholders who are represented
in person or by proxy thereat, in the manner contemplated by
Section 2.0;
(b) the Arrangement shall have been approved at the Abatis Meeting
in accordance with any conditions in addition to those set out
in Section 6.1(a) which may be imposed by the CBCA or the
Interim Order;
(c) the Interim Order and the Final Order shall each have been
obtained in form and terms satisfactory to each of Abatis and
Redback, acting reasonably, and shall not
85
have been set aside or modified in a manner unacceptable to
such parties, acting reasonably, on appeal or otherwise;
(d) there shall not be in force any order or decree restraining or
enjoining the consummation of the transactions contemplated by
this Agreement and there shall be no proceeding (other than an
appeal made in connection with the Arrangement), of a judicial
or administrative nature or otherwise, in progress or
threatened that relates to or results from the transactions
contemplated by this Agreement that would, if successful,
result in an order or ruling that would preclude completion of
the transactions contemplated by this Agreement in accordance
with the terms hereof or would otherwise be inconsistent with
the Appropriate Regulatory Approvals which have been obtained;
(e) this Agreement shall not have been terminated pursuant to
Section 7.0;
(f) the Redback Common Shares issuable (i) pursuant to the
Arrangement, (ii) upon exchange of the Exchangeable Shares
from time to time, and (iii) upon exercise of the Replacement
Options from time to time, shall have been authorized for
listing on the NNM, subject to official notice of issuance;
and
(g) all consents, waivers, permits, orders and approvals of any
Governmental Entity (including the Appropriate Regulatory
Approvals), and the expiry of any waiting periods, in
connection with, or required to permit, the consummation of
the Arrangement, the failure of which to obtain or the
non-expiry of which would constitute a criminal offense, or
would have a Material Adverse Effect on Redback or Abatis, as
the case may be, shall have been obtained or received on terms
that will not have a Material Adverse Effect on Redback and/or
Abatis and there shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity, in each case
that has a reasonable likelihood of success,
(i) seeking to prohibit or restrict the acquisition by
Redback or any of its subsidiaries of any Abatis
Shares, seeking to restrain or prohibit the
consummation of the Plan of Arrangement or seeking to
obtain from Abatis or Redback any damages that are
material in relation to Abatis;
(ii) seeking to prohibit or materially limit the ownership
or operation by Redback or any of its subsidiaries of
any material portion of the business or assets of
Abatis or to compel Redback or any of its
subsidiaries to
86
dispose of or hold separate any material portion of
the business or assets of Abatis;
(iii) seeking to impose limitations on the ability of
Redback or any of its subsidiaries to acquire or
hold, or exercise full rights of ownership of, any
Abatis Shares, including the right to vote the Abatis
Shares on all matters properly presented to the
shareholders of Abatis;
(iv) seeking to prohibit Redback or any of its
subsidiaries from effectively controlling in any
material respect the business or operations of
Abatis; or
(v) which otherwise is reasonably likely to have a
Material Adverse Effect on Abatis.
6.2 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
REDBACK PARTIES. The obligations of the Redback Parties to complete the
transactions contemplated by this Agreement shall also be subject to the
fulfilment of each of the following conditions precedent (each of which is for
the Redback Parties' exclusive benefit and may be waived by the Redback Parties
and any one or more of which, if not satisfied or waived, will relieve the
Redback Parties of any obligation under this Agreement):
(a) all covenants and agreements of Abatis under this Agreement to
be performed or observed on or before the Effective Date shall
have been duly performed and observed by Abatis in all
material respects;
(b) the representations and warranties of Abatis contained in this
Agreement shall be true and correct in all material respects
as of the Effective Date as if made on and as of such date
(except to the extent such representations and warranties
speak as of a specified date which is earlier than the date of
this Agreement, in which event such representations and
warranties shall be true and correct in all material respects
as of such earlier specified date, or except as affected by
transactions contemplated or permitted by this Agreement or
otherwise consented to by Redback) and Redback shall have
received a certificate of Abatis addressed to Redback and
dated the Effective Date, signed on behalf of Abatis by two
senior executive officers of Abatis, confirming the same as at
the Effective Date;
(c) between the date hereof and the Effective Date, there shall
not have occurred, in the judgment of Redback, acting
reasonably, a Material Adverse Change to
87
Abatis, other than a Material Adverse Change in Abatis's sales
which is attributable to or results from the announcement of
the transactions contemplated in this Agreement;
(d) the board of directors of Abatis shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have been taken by Abatis, to permit the
consummation of the Arrangement;
(e) the board of directors of Abatis shall have made and shall not
have withdrawn or modified or amended, in any material
respect, prior to the Abatis Meeting, an affirmative
recommendation that the Abatis Shareholders and the Abatis
Optionholders approve the Arrangement;
(f) holders of more than 5% of the issued and outstanding Abatis
Shares shall not have exercised the Dissent Rights in respect
of the Arrangement;
(g) all consents, approvals, authorizations and waivers of any
Persons (other than Governmental Entities) which are required,
necessary or desirable for the completion of the Arrangement
and other transactions contemplated hereby (including all
those consents, approvals, authorizations and waivers required
under the Material Agreements and referred to in the Abatis
Disclosure Schedule), and for the subsequent transfer,
assignment or licencing of any of the Material Agreements by
Abatis to Redback or its affiliates, shall have been obtained
or received on terms which are acceptable to Redback, acting
reasonably;
(h) each of the Principal Shareholder Voting Agreements, the Key
Employee Employment Agreements and the agreements referred to
in Section 3.1.52 shall be and remain in full force and
effect, unamended, and each of the parties thereto (other than
Redback) shall be, in all material respects, in full
compliance with their respective obligations thereunder;
(i) Redback shall have received from Abatis evidence, in form and
content acceptable to Redback, acting reasonably, of the
termination of the Shareholders' Agreement, such termination
to be effective as at the Effective Time; and
(j) the board of directors of Abatis shall have passed the
resolution referred to in Section 5.3(b)(x) and none of the
Abatis Options shall have been "cashed out" as provided for in
the Abatis Stock Option Plan, nor shall the vesting or time to
88
exercise of any of such options have been accelerated, by
reason of the transactions contemplated by this Agreement or
otherwise, other than as provided in the Plan of Arrangement.
The Redback Parties may not rely on the failure to satisfy any of the above
conditions precedent as a basis for a non-compliance by them with their
obligations under this Agreement if the condition precedent would have been
satisfied but for a material default by the Redback Parties in complying with
their obligations hereunder.
6.3 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ABATIS.
The obligations of Abatis to complete the transactions contemplated by this
Agreement shall also be subject to the following conditions precedent (each of
which is for the exclusive benefit of Abatis and may be waived by Abatis and any
one or more of which, if not satisfied or waived, will relieve Abatis of any
obligation under this Agreement):
(a) all covenants of the Redback Parties under this Agreement to
be performed on or before the Effective Date shall have been
duly performed by the Redback Parties in all material
respects;
(b) all representations and warranties of the Redback Parties
contained in this Agreement shall be true and correct in all
material respects as of the Effective Date as if made on and
as of such date (except to the extent such representations and
warranties speak as of a specified date which is earlier than
the date of this Agreement, in which event such
representations and warranties shall be true and correct in
all material respects as of such earlier specified date, or
except as affected by transactions contemplated or permitted
by this Agreement) and Abatis shall have received a
certificate of each of the Redback Parties addressed to Abatis
and dated the Effective Date, signed on behalf of each of the
Redback Parties by two senior executive officers of the
relevant Redback Party, confirming the same as at the
Effective Date;
(c) between the date hereof and the Effective Date, there shall
not have occurred, in the judgment of Abatis, acting
reasonably, a Material Adverse Change to Redback; provided
that a reduction in the market price or value of the Redback
Common Shares on the NNM or any other stock exchange or
quotation system on which the Redback Common Shares may be
listed or posted for trading shall not, in and of itself,
constitute such a Material Adverse Change; and
89
(d) the board of directors of each of the Redback Parties
and Newco shall have adopted all necessary resolutions, and
all other necessary corporate action shall have been taken by
the Redback Parties to permit the consummation of the
Arrangement and the issue of the Exchangeable Shares
contemplated thereby and the issue of Redback Common Shares
pursuant to the Arrangement and upon the exchange from time to
time of the Exchangeable Shares and the issuance and exercise
from time to time of the Replacement Options and the issue
from time to time of Redback Common Shares on the exercise of
the Replacement Options.
Abatis may not rely on the failure to satisfy any of the above conditions
precedent as a basis for noncompliance by Abatis with its obligations under this
Agreement if the condition precedent would have been satisfied but for a
material default by Abatis in complying with its obligations hereunder.
6.4 NOTICE AND CURE PROVISIONS. The Redback Parties and Abatis will give
prompt notice to the other of the occurrence, or failure to occur, at any time
from the date hereof until the Effective Date, of any event or state of facts
which occurrence or failure would, or would be likely to:
(a) cause any of the representations or warranties of the
other contained herein to be untrue or inaccurate in any
material respect on the date hereof or on the Effective Date;
or
(b) result in the failure to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by the other hereunder prior to the Effective Date.
Neither the Redback Parties nor Abatis may elect not to complete the
transactions contemplated hereby pursuant to the conditions precedent contained
in Sections 6.1, 6.2 and 6.3, or exercise any termination right arising
therefrom, unless forthwith and in any event prior to the filing of the Final
Order for acceptance by the Director, the Redback Parties or Abatis, as the case
may be, have delivered a written notice to the other specifying in reasonable
detail all breaches of covenants, representations and warranties or other
matters which the Redback Parties or Abatis, as the case may be, are asserting
as the basis for the non-fulfilment of the applicable condition precedent or the
exercise of the termination right, as the case may be. If any such notice is
delivered, provided that the Redback Parties or Abatis, as the case may be, are
proceeding diligently to cure such matter, if such matter is susceptible to
being cured, the other may not terminate this Agreement until the later of
November 30, 2000 and the expiration of a period of
90
30 days from such notice. If such notice has been delivered prior to the date of
the Abatis Meeting, such meeting shall be postponed until the expiry of such
period. If such notice has been delivered prior to the making of the application
for the Final Order or the filing of the Articles of Arrangement with the
Director, such application and such filing shall be postponed until the expiry
of such period. For greater certainty, in the event that such matter is cured
within the time period referred to herein, this Agreement may not be terminated.
6.5 SATISFACTION OF CONDITIONS. The conditions precedent set out in
Sections 6.1, 6.2 and 6.3 shall be conclusively deemed to have been satisfied,
waived or released when, with the approval of Redback and Abatis, a certificate
of arrangement in respect of the Arrangement is issued by the Director.
7.0 AMENDMENT AND TERMINATION
7.1 AMENDMENT. This Agreement may, at any time and from time to time
before or after the holding of the Abatis Meeting but not later than the
Effective Date, be amended by mutual written agreement of the parties hereto,
and any such amendment may, without limitation:
(a) change the time for performance of any of the obligations or
acts of the parties;
(b) waive any inaccuracies or modify any representation contained
herein or in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants herein
contained and waive or modify performance of any of the
obligations of the parties; and
(d) waive compliance with or modify any conditions precedent
herein contained,
provided, however, that any such change, waiver or modification does not
invalidate any required approval of the Abatis Shareholders and the Abatis
Optionholders to the Arrangement.
7.2 MUTUAL UNDERSTANDING REGARDING AMENDMENTS.
(a) The parties will continue, from and after the date
hereof and through and including the Effective Date, to use
their respective reasonable efforts to maximize present and
future financial and tax planning opportunities for the
holders of Abatis Shares, and for Redback and for Abatis, as
and to the extent that the same shall not prejudice any party
or its security holders. The parties will
91
ensure that such planning activities do not impede the
progress or timing of the Arrangement in any material way.
(b) The parties agree that if the Redback Parties or
Abatis, as the case may be, propose any amendment or
amendments to this Agreement or to the Plan of Arrangement,
the other will act reasonably in considering such amendment
and if the other and its security holders are not prejudiced
by reason of any such amendment the other will co-operate in a
reasonable fashion with the Redback Parties or Abatis, as the
case may be, so that such amendment can be effected subject to
applicable Laws and the rights of the security holders.
7.3 TERMINATION.
(a) If any condition contained in Sections 6.1 or 6.2 is
not satisfied on or before the Effective Date, to the
satisfaction of the Redback Parties, then Redback on behalf of
the Redback Parties may by notice to Abatis terminate this
Agreement and the obligations of the parties hereunder except
as otherwise herein provided, but without detracting from the
rights of the Redback Parties arising from any breach by
Abatis but for which the condition would have been satisfied.
(b) If any condition contained in Sections 6.1 or 6.3 is
not satisfied on or before the Effective Date to the
satisfaction of Abatis, then Abatis may by notice to Redback
on behalf of the Redback Parties terminate this Agreement and
the obligations of the parties hereunder except as otherwise
herein provided, but without detracting from the rights of
Abatis arising from any breach by the Redback Parties but for
which the condition would have been satisfied.
(c) This Agreement may, at any time before or after the
holding of the Abatis Meeting but not later than the Effective
Date:
(i) be terminated by the mutual agreement of
Abatis and Redback on behalf of the Redback Parties
(without further action on the part of the Abatis
Shareholders and the Abatis Optionholders if
terminated after the holding of the Abatis Meeting);
(ii) be terminated by either Abatis or Redback on
behalf of the Redback Parties, if there shall be
passed any law or regulation that makes consummation
of the transactions contemplated by this Agreement
illegal
92
or otherwise prohibited or if any injunction,
order or decree enjoining the Redback Parties or
Abatis from consummating the transactions
contemplated by this Agreement is entered and such
injunction, order or decree shall become final and
non-appealable;
(iii) be terminated by Redback on behalf of the Redback
Parties if
(A) the board of directors of Abatis
shall have failed to recommend or withdrawn
or modified or changed in a manner adverse
to Redback its approval or recommendation of
this Agreement or the Arrangement or shall
have recommended or approved an Acquisition
Proposal; or
(B) through no fault of the Redback
Parties, the Arrangement shall not have been
submitted for the approval of the Abatis
Shareholders and the Abatis Optionholders at
the Abatis Meeting, on or before November
30, 2000, in the manner provided for in
Section 2.0 and in the Interim Order;
(iv) be terminated by Abatis in order to enter into
a definitive written agreement with respect to a
Superior Proposal, subject to compliance with Section
5.8 and the payment of the fee required to be paid
pursuant to Section 7.4(a); or
(v) be terminated by either Abatis or Redback on
behalf of the Redback Parties if the Arrangement,
through no fault of the Redback Parties, shall not
have been approved by the Abatis Shareholders and the
Abatis Optionholders, on or before November 30, 2000,
in the manner provided for in Section 2.0 and in the
Interim Order.
(d) Notwithstanding any other provision hereof, if the
Effective Date does not occur on or prior to the Drop Dead
Date, then this Agreement shall terminate.
(e) If this Agreement is terminated in accordance with the
foregoing provisions of this Section 7.3, no party shall have
any further liability to perform its obligations hereunder,
except as provided for in Section 7.4 or as otherwise
contemplated hereby, and provided that, subject to Section
7.6, neither the termination of this Agreement nor anything
contained in this Section 7.3(e) shall relieve any party
93
from any liability for any breach by it of this Agreement,
including from any inaccuracy in its representations and
warranties and any non-performance by it of its covenants made
herein.
7.4 BREAK FEE.
(a) If:
(i) Abatis shall terminate this Agreement pursuant to
Section 7.3(c)(iv);
(ii) the Redback Parties shall terminate this Agreement
pursuant to Section 7.3(c)(iii);
(iii) either Abatis or the Redback Parties shall terminate
this Agreement pursuant to Section 7.3(c)(v); or
(iv) the Redback Parties shall terminate this
Agreement pursuant to Section 7.3(a) in respect of
the non-satisfaction of either of the conditions
contained in Sections 6.2(a) or (b), other than a
termination pursuant to Section 7.3(a) in respect of
the non-satisfaction of the condition contained in
section 6.2(b) relating to a representation or
warranty which is true and correct as of the date of
this Agreement but which, through no fault of Abatis
after the date of this Agreement, is not true and
correct in all material respects as of the Effective
Date;
then in any such case Abatis shall pay to Redback the sum of
$24,000,000 in immediately available funds to an account
designated by Redback. Such payment shall be due and payable:
(A) in the case of a termination specified in clause (i),
prior to the termination of this Agreement;
(B) in the case of a termination specified in
clause (ii), within five Business Days after written
notice of termination by the Redback Parties;
(C) in the case of a termination specified in
clause (iii), within five Business Days after written
notice of the termination contemplated therein by
either Abatis or the Redback Parties; or
94
(D) in the case of a termination specified in
clause (iv), within five Business Days after written
notice of termination by Redback.
Abatis shall not be obligated to make more than one payment
pursuant to this Section 7.4(a).
(b) If Abatis shall terminate this Agreement pursuant to Section
7.3(b) in respect of the non-satisfaction of either of the
conditions contained in Section 6.3(a) or (b), other than a
termination pursuant to Section 7.3(b) in respect of the
non-satisfaction of the condition contained in Section 6.3(b)
relating to a representation or warranty which is true and
correct as of the date of this Agreement but which, through no
fault of the Redback Parties, is not true and correct in all
material respects as of the Effective Date after the date of
this Agreement, then in any such case Redback shall pay to
Abatis the sum of $24,000,000 in immediately available funds
to an account designated by Abatis. Such payment shall be
due and payable within five Business Days after written
notice of termination by Abatis. Redback shall not be
obligated to make more than one payment pursuant to this
Section 7.4(b).
7.5 LIQUIDATED DAMAGES. Each of the parties acknowledges that the damages
set forth in this Section 7.0 are a genuine pre-estimate of the damages which
the other will suffer or incur as a result of the event giving rise to those
damages and are not penalties. Each of the parties irrevocably waives any right
it may have to raise as a defence in any proceedings that any such damages are
abusive.
7.6 REMEDIES. Subject to Section 7.7, the parties hereto acknowledge and
agree that an award of money damages would be inadequate for any breach of this
Agreement by any party or its representatives and any such breach would cause
the non-breaching party irreparable harm. Accordingly, the parties hereto agree
that, in the event of any breach or threatened breach of this Agreement by one
of the parties, the non-breaching party will also be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance. Such remedies will not be the
exclusive remedies for any breach of this Agreement but will be in addition to
all other remedies available at law or equity to the parties.
7.7 EFFECT OF BREAK FEE PAYMENT. For greater certainty, the parties agree
that the payment of the amount pursuant to Section 7.4 is the sole monetary
remedy of the party entitled to such amount as a result of the occurrence of any
of the events referred to in Section 7.4(a) or (b), as the case may be.
95
Subject to the immediately preceding paragraph, nothing in this
Agreement shall preclude a party from seeking damages in respect of losses
incurred or suffered by such party as a result of any breach of this Agreement
by the other party, seeking injunctive relief to restrain any breach or
threatened breach of the covenants or agreements set forth in this Agreement or
the Confidentiality Agreement or otherwise, or seeking specific performance of
any of such covenants or agreements, without the necessity of posting bond or
security in connection therewith.
8.0 GENERAL
8.1 NOTICES. All notices and other communications which may or are
required to be given pursuant to any provision of this Agreement shall be given
or made in writing and shall be deemed to be validly given if served personally
or by telecopy, in each case addressed to the particular party at:
(a) If to Abatis:
Abatis Systems Corporation
0000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: President and Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
XxXxxxxx Xxxxxxxx
1300 - 000 Xxxxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxx X. Xxxxxxx
---------
Facsimile: (000) 000-0000
and to:
Xxxxxxx Xxxxx & Xxxxx LLP
0000 Xxxx xx Xxxxxxx Tower
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx
00000
ATTENTION: Xxxx X. Xxxxxx
---------
Facsimile: (000) 000-0000
96
(b) If to a Redback Party:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx
00000
ATTENTION: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Xxxxxxx X. Xxxxxx
---------
Facsimile: (000) 000-0000
and to:
Fraser Xxxxxx Casgrain
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxx X. Xxxxxx
---------
Facsimile: (000) 000-0000
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
telecopying thereof.
8.2 ASSIGNMENT. No party hereto may assign its rights or obligations under
this Agreement or the Arrangement.
8.3 BINDING EFFECT. This Agreement and the Arrangement shall be binding
upon and shall enure to the benefit of the parties hereto and their respective
successors.
8.4 WAIVER AND MODIFICATION. Abatis and the Redback Parties may waive or
consent to the modification of, in whole or in part, any inaccuracy of any
representation or warranty made to them hereunder or in any document to be
delivered pursuant hereto and may waive or consent to the modification of any of
the covenants herein contained for their respective benefit or waiver or consent
to the modification of any of the obligations of the other parties hereto. Any
waiver or consent to the modification of any of the provisions of this
Agreement, to be effective, must be in writing executed by the party granting
such waiver or consent.
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8.5 NO PERSONAL LIABILITY.
(a) No director or officer of any Redback Party shall have
any personal liability whatsoever to Abatis under this
Agreement, or any other document delivered in connection with
the Arrangement by or on behalf of a Redback Party.
(b) No director or officer of Abatis shall have any
personal liability whatsoever to any Redback Party under this
Agreement, or any other document delivered in connection with
the Arrangement by or on behalf of Abatis.
8.6 FURTHER ASSURANCES. Each party hereto shall, from time to time, and
at all times hereafter, at the request of the other parties hereto, but without
further consideration, do all such further acts and things and execute and
deliver all such further documents and instruments as shall be reasonably
required in order to fully perform and carry out the terms and intent hereof.
8.7 EXPENSES. Except as provided in Section 7.4, all out-of-pocket
expenses of the parties relating to the Arrangement and the transactions
contemplated hereby, including all Third Party Expenses, shall be paid by the
party incurring such expenses; provided, however, that if Abatis is not required
to make any payment to Redback under Section 7.4, Redback shall, on or promptly
after the Effective Date, pay to Abatis the sum of $200,000 in reimbursement of
all of the professional fees and expenses payable by Abatis to Onabru Ltd. in
connection with the financial advisory services relating to the Arrangement
provided by Onabru Ltd. pursuant to the Financial Advisory Agreement dated July
12, 2000, a true and complete copy of which has been provided to Redback.
8.8 CONSULTATION. Redback and Abatis agree to consult with each other as
to the general nature of any news releases or public statements with respect to
this Agreement or the Arrangement, and to use their respective reasonable
efforts not to issue any news releases or public statements inconsistent with
the results of such consultations. Subject to applicable Laws, each party shall
use its reasonable efforts to enable the other parties to review and comment on
all such news releases prior to the release thereof. The parties agree to issue
jointly a news release with respect to this Arrangement as soon as practicable
following the execution of this Agreement.
8.9 GOVERNING LAWS. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein and shall be treated in all respects as a British
Columbia contract.
98
8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
REDBACK NETWORKS INC.
By:
---------------------------------
610381 B.C. INC.
By:
---------------------------------
ABATIS SYSTEMS CORPORATION
By:
---------------------------------
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EXHIBIT A
FORM OF AFFILIATE'S LETTER
Dear Sirs:
The undersigned, a holder of [CLASS A VOTING COMMON SHARES/CLASS B
NON-VOTING COMMON SHARES] (the "ABATIS COMMON SHARES") in the capital of Abatis
Systems Corporation, a corporation existing under the laws of Canada ("ABATIS"),
is entitled to receive in connection with the arrangement pursuant to Section
192 of the CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1995, c. C-44 (the
"ARRANGEMENT") to be entered into pursuant to the Arrangement Agreement dated as
of July 30, 2000 among Abatis, Redback Networks Inc., a corporation existing
under the laws of the State of Delaware ("REDBACK") and 610381 B.C. Inc., a
company existing under the laws of the Province of British Columbia
("EXCHANGECO"), either exchangeable shares (the "EXCHANGEABLE SHARES") of
Exchangeco or shares of common stock of Redback. The undersigned acknowledges
that the undersigned may be deemed an "affiliate" of Abatis within the meaning
of Rule 145 ("RULE 145") promulgated under the U.S. SECURITIES ACT OF 1933, as
amended (the "SECURITIES ACT"), by the U.S. Securities and Exchange Commission
(the "SEC"), although nothing contained herein should be construed as an
admission of such fact or a waiver of any rights the undersigned may have to
object to any claim that the undersigned is such an affiliate.
If in fact the undersigned were such an affiliate, the undersigned's
ability to sell, assign or transfer:
(a) the Exchangeable Shares received by the undersigned in
exchange for any Abatis Common Shares in connection with the
Arrangement; and
(b) any shares of common stock of Redback (collectively, with
the Exchangeable Shares, the "SECURITIES") for which the
Exchangeable Shares may be exchanged;
may be restricted unless such transaction is registered under the Securities Act
or an exemption from such registration is available. The undersigned understands
that such exemptions are limited and the undersigned has obtained or will obtain
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale
of the Securities of Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned understands that Redback will not be required to maintain the
effectiveness of any registration statement under the Securities Act for the
purpose of resale of Securities by the undersigned other than as provided in the
Registration Rights Agreement.
The undersigned hereby represents and covenants with Redback that the
undersigned will not sell, assign or transfer any of the Securities received by
the undersigned in exchange for Abatis Common Shares in connection with the
Arrangement except:
(a) pursuant to an effective registration statement under the
Securities Act;
(b) in conformity with Rule 145; or
(c) in a transaction which, in the opinion of the general
counsel of Redback or other counsel reasonably satisfactory to
Redback or as described in a "no-action" or interpretative
letter from the staff of the SEC specifically issued with
respect to a transaction to be engaged in by the undersigned,
is not required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of
Securities pursuant to Rule 145, the undersigned will supply Redback with
evidence of compliance with such Rule, in the form of a letter substantially in
the form of Annex I hereto.
Redback covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of Securities
by the undersigned under Rule 145 in accordance with the terms thereof.
The undersigned also understands that there will be placed on any
certificates for the Securities issued to the undersigned a legend stating in
substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF ONLY IN ACCORDANCE WITH THE TERMS OF A LETTER
AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND REDBACK
NETWORKS INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF REDBACK NETWORKS INC."
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The undersigned also understands that unless a sale or transfer by the
undersigned of the undersigned's Securities has been registered under the Act or
is a sale made in conformity with the provisions of Rule 145 under the Act,
Redback reserves the right to put the following legend on the certificates
issued to the undersigned's transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SECURITIES HAVE NOT BEEN ACQUIRED BY THE HOLDER
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth above shall be
removed by delivery of substitute certificates without such legend if (i) the
securities represented thereby have been registered for sale by the undersigned
under the Securities Act or (ii) Redback has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Redback,
or a "no-action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Act no longer apply to the undersigned.
The undersigned acknowledges that:
(a) the undersigned has carefully read this letter and
understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other
disposition of the Securities; and
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(b) the receipt by Redback and Exchangeco of this letter is an
inducement to Redback and Exchangeco to consummate the
Arrangement.
Very truly yours,
DATED:
---------------------
Accepted and agreed to this
REDBACK NETWORKS INC.
By:
---------------------------
4
ANNEX I
[NAME]
On o, the undersigned sold the securities below (the "SECURITIES").
The Securities were received by the undersigned in connection with the
arrangement pursuant to section 192 of the CANADA BUSINESS CORPORATIONS ACT,
R.S.C. 1995, c. C-44 entered into pursuant to the Arrangement Agreement dated as
of July 30, 2000 among Abatis Systems Corporation, a corporation existing under
the laws of Canada, Redback Networks Inc., a corporation existing under the laws
of the State of Delaware ("REDBACK") and 610381 B.C. Inc., a company existing
under the laws of the Province of British Columbia.
The undersigned hereby represents to Redback that the sale of the
Securities was made in compliance with Rule 145 promulgated under the U.S.
SECURITIES ACT OF 1933, as amended.
Very truly yours,
[SPACE TO BE PROVIDED FOR DESCRIPTION OF THE SECURITIES SOLD]
EXHIBIT B
APPROPRIATE REGULATORY APPROVALS
TO BE OBTAINED OR FILED BY REDBACK NETWORKS INC.
o notice of the Arrangement to be filed with the Director of Investments
pursuant to Section 12 of the INVESTMENT CANADA ACT within 30 days of
the Effective Date.
o exemption orders from the Ontario Securities Commission and the British
Columbia Securities Commission from the registration and prospectus
requirements with respect to the Exchangeable Share structure as
described in Section 2.6(a).
o expiration or earlier termination of the waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
o authorization for listing of the Redback Common Shares issuable in
connection with the Arrangement and upon exercise of the Exchangeable
Shares and the Replacement Options on the NNM, subject to the official
notice of issuance.
Such other material authorizations, orders or consents of or,
registration, declaration or filing with, any Governmental Entities as required
by or with respect to the Redback Parties in connection with the execution and
delivery by the Redback Parties of this Agreement or the Arrangement or any
other documents and agreements to be delivered under this Agreement, or
consummation by the Redback Parties of the transactions contemplated by this
Agreement or the Arrangement.
TO BE OBTAINED OR FILED BY ABATIS SYSTEMS CORPORATION
o notice to the Director under the CBCA with respect to the Interim Order
and the Final Order.
o filing of the Articles of Arrangement with the Director under the CBCA
upon receipt of the Final Order.
Such other material authorizations, orders or consents of or,
registration, declaration or filing with, any Governmental Entities as required
by or with respect to Abatis in connection with the execution and delivery by
Abatis of this Agreement or the Arrangement or any other documents and
agreements to be delivered under this Agreement, or consummation by Abatis of
the transactions contemplated by this Agreement or the Arrangement.
EXHIBIT C
ARRANGEMENT RESOLUTION
SPECIAL RESOLUTION OF
THE ABATIS SYSTEMS CORPORATION SECURITYHOLDERS
BE IT RESOLVED THAT:
1. The arrangement (the "ARRANGEMENT") under Section 192 of the CANADA
BUSINESS CORPORATIONS ACT (the "CBCA") involving Abatis Systems Corporation
("ABATIS"), as more particularly described and set forth in the Management Proxy
Circular (the "CIRCULAR") of Abatis accompanying the notice of this meeting (as
the Arrangement may be modified or amended), is hereby authorized, approved and
adopted.
2. The Plan of Arrangement (the "PLAN OF ARRANGEMENT") involving Abatis,
the full text of which is set out as Exhibit E to the Arrangement Agreement made
as of July 30, 2000 between Redback Networks Inc., 610381 B.C. Inc. and Abatis
(the "ARRANGEMENT Agreement") (as the Plan of Arrangement may be or may have
been amended), is hereby approved and adopted.
3. Notwithstanding that this resolution has been passed (and the
Arrangement adopted) by the shareholders and optionholders of Abatis or that the
Arrangement has been approved by the Supreme Court of British Columbia, the
directors of Abatis are hereby authorized and empowered (i) to amend the
Arrangement Agreement, or the Plan of Arrangement to the extent permitted by the
Arrangement Agreement, and (ii) not to proceed with the Arrangement without
further approval of the shareholders and optionholders of Abatis, but only if
the Arrangement Agreement is terminated in accordance with Article 7 thereof.
4. Any officer or director of Abatis is hereby authorized and directed
for and on behalf of Abatis to execute, under the seal of Abatis or otherwise,
and to deliver articles of arrangement and such other documents as are necessary
or desirable to the Director under the CBCA in accordance with the Arrangement
Agreement for filing.
5. Any officer or director of Abatis is hereby authorized and directed
for and on behalf of Abatis to execute or cause to be executed, under the seal
of Abatis or otherwise, and to
deliver or cause to be delivered, all such other documents and instruments and
to perform or cause to be performed all such other acts and things as in such
person's opinion may be necessary or desirable to give full effect to the
foregoing resolution and the matters authorized thereby, such termination to be
conclusively evidenced by the execution and delivery of such document, agreement
or instrument or the doing of any such act or thing.
3
EXHIBIT D
EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the o day of o, 2000.
AMONG:
610381 B.C. INC., a company existing under the laws of
Province of British Columbia
(hereinafter referred to as "EXCHANGECO")
AND:
REDBACK NETWORKS INC., a corporation existing under the laws
of the State of Delaware
(hereinafter referred to as "REDBACK")
AND:
MONTREAL TRUST COMPANY OF CANADA, a trust company existing
under the federal laws of Canada
(hereinafter referred to as the "TRUSTEE")
WHEREAS:
A. Pursuant to an arrangement agreement (the "ARRANGEMENT AGREEMENT")
dated as of July 30, 2000 among Redback, Exchangeco and Abatis Systems
Corporation ("ABATIS"), Exchangeco is to issue exchangeable shares (the
"EXCHANGEABLE SHARES") to certain holders of Class A Voting Common Shares and
Class B Non-Voting Common Shares of Abatis pursuant to the plan of arrangement
(the "PLAN OF ARRANGEMENT") contemplated by the Arrangement Agreement;
B. Pursuant to the Arrangement Agreement, Redback and Exchangeco have
agreed to execute an Exchange Trust Agreement substantially in the form of this
Agreement;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
covenant and agree as follows:
1.0 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" of any person means any other person directly or
indirectly controlled by, or under common control of, that
person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled
by" and "under common control of"), as applied to any person,
means the possession by another person, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of that first mentioned person,
whether through the ownership of voting securities, by
contract or otherwise;
"ARRANGEMENT" means the arrangement under Section 192 of the
CANADA BUSINESS CORPORATIONS ACT involving, among others,
Abatis and its shareholders and contemplated by the Plan of
Arrangement;
"AUTHORIZED PERSON" has the meaning ascribed thereto in
Section 3.14;
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the
obligation of Redback to effect the automatic exchange of
Redback Common Shares for Exchangeable Shares pursuant to
Section 3.12;
"BENEFICIARIES" means the registered holders from time to time
of Exchangeable Shares, other than Redback and its Affiliates;
"BOARD OF DIRECTORS" means the Board of Directors of\
Exchangeco;
"BUSINESS DAY" means any day on which commercial banks are
open for business in San Francisco, California and Vancouver,
British Columbia, other than a Saturday, a Sunday or a day
observed as a holiday in Vancouver, British Columbia under the
laws of the Province of British Columbia or the federal laws
2
of Canada or in San Francisco, California under the laws of
the State of California or the federal laws of the United
States of America;
"CANADIAN DOLLAR EQUIVALENT" means, in respect of an amount
expressed in a currency other than Canadian dollars (the
"FOREIGN CURRENCY AMOUNT") at any date, the product obtained
by multiplying (a) the Foreign Currency Amount by (b) the noon
spot exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported by the Bank of
Canada or, in the event such spot exchange rate is not
available, any publicly disclosed and widely quoted exchange
rate as quoted by an arm's length third party on such date for
such foreign currency expressed in Canadian dollars as may be
deemed by the Board of Directors, acting reasonably, to be
appropriate for such purpose;
"COMPANY ACT" means the COMPANY ACT, R.S.B.C. 1996, c. 62, as
amended;
"CURRENT MARKET PRICE" means, in respect of a Redback Common
Share on any date, the Canadian Dollar Equivalent of the
average of the closing sale price of Redback Common Shares
during a period of 20 consecutive trading days ending not more
than three trading days before such date on the NNM, or, if
the Redback Common Shares are not then quoted on the NNM, on
such other stock exchange or automated quotation system on
which the Redback Common Shares are listed or quoted, as the
case may be, as may be selected by the Board of Directors,
acting reasonably, for such purpose; provided, however, that
if the Redback Common Shares are not quoted on any stock
exchange or automated quotation system, then the Current
Market Price of a Redback Common Share shall be determined by
the Board of Directors, acting reasonably, in good faith and
in its sole discretion, and provided further that any such
selection, opinion or determination by the Board of Directors
shall be conclusive and binding;
"EXCHANGE RIGHT" has the meaning ascribed thereto in
Section 3.1;
"EXCHANGEABLE SHARE" means a share in the class of non-voting
exchangeable shares in the capital of Exchangeco;
3
"HOLDER" means, when used with reference to the Exchangeable
Shares, a holder of Exchangeable Shares as shown from time to
time on the register of members maintained by or on behalf of
Exchangeco in respect of the Exchangeable Shares;
"INDEMNIFIED PARTIES" has the meaning ascribed thereto in
Section 6.1;
"INSOLVENCY EVENT" means the institution by Exchangeco of any
proceeding to be adjudicated a bankrupt or insolvent or to be
wound up, or the consent of Exchangeco to the institution of
bankruptcy, insolvency or winding-up proceedings against it,
or the filing of a petition, answer or consent seeking
dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, including without limitation the COMPANIES
CREDITORS' ARRANGEMENT ACT (Canada) and the BANKRUPTCY AND
INSOLVENCY ACT (Canada), and the failure by Exchangeco to
contest in good faith any such proceedings commenced in
respect of Exchangeco within 20 days of becoming aware
thereof, or the consent by Exchangeco to the filing of any
such petition or to the appointment of a receiver, or the
making by Exchangeco of a general assignment for the benefit
of creditors, or the admission in writing by Exchangeco of its
inability to pay its debts generally as they become due, or
Exchangeco not being permitted, pursuant to solvency
requirements of applicable law, to redeem any Retracted Shares
pursuant to Section 6.6 of the Share Provisions;
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in
the Plan of Arrangement;
"LIQUIDATION EVENT" has the meaning ascribed thereto in
Section 3.12(b);
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed
thereto in Section 3.12(c);
"NEWCO" means 610380 B.C. Inc., a company existing under
the laws of the Province of British Columbia which is a
wholly owned subsidiary of Redback;
"NNM" means the distinct tier of The Nasdaq Stock Market
referred to as the Nasdaq National Market;
4
"OFFICER'S CERTIFICATE" means, with respect to Redback or
Exchangeco, as the case may be, a certificate signed by any
one of the Chairman of the Board, the Chief Executive Officer,
the President, any Senior Vice-President, any Vice-President
or any other senior officer of Redback or Exchangeco, as the
case may be;
"PERSON" includes an individual, firm, partnership, joint
venture, venture capital fund, association, trust, trustee,
executor, administrator, legal personal representative,
estate, group, body corporate, corporation, company,
unincorporated association or organization, government body,
syndicate or other entity, whether or not having legal status;
"PLAN OF ARRANGEMENT" means the plan of arrangement under
Section 192 of the CANADA BUSINESS CORPORATIONS ACT,
substantially in the form and content of Exhibit E annexed to
the Arrangement Agreement, and any amendments or modifications
thereto made in accordance with Section 7.1 of the Arrangement
Agreement and Article 6 of the Plan of Arrangement or made at
the direction of the Court in the Final Order;
"REDBACK" means Redback Networks Inc., a corporation existing
under the laws of the State of Delaware, and any successor
corporation thereto;
"REDBACK AFFILIATES" means Affiliates of Redback;
"REDBACK COMMON SHARE" means a share of common stock, par
value US $0.0001, in the capital of Redback, and any other
securities into which such share may be changed;
"REDBACK SUCCESSOR" has the meaning ascribed thereto in
Section 8.1(a);
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in
the Plan of Arrangement;
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement to be entered into between Redback and Xxxxxx
Xxxxxxx, as agent for and on behalf of each of the Persons
entitled to receive Exchangeable Shares pursuant to
5
the Plan of Arrangement, substantially in the form and content
of Exhibit H annexed to the Arrangement Agreement, with such
changes thereto as the parties thereto, acting reasonably, may
agree upon, in accordance with the terms thereof;
"RETRACTED SHARES" has the meaning ascribed thereto in
Section 3.7;
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in
the Share Provisions;
"SHARE PROVISIONS" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares as set
forth in Appendix 1 to the Plan of Arrangement;
"SUPPORT AGREEMENT" means the Support Agreement among Redback,
Newco and Exchangeco to be entered into in connection with the
Plan of Arrangement, substantially in the form and content of
Exhibit G annexed to the Arrangement Agreement, with such
changes thereto as the parties thereto, acting reasonably may
agree upon, in accordance with the terms thereof;
"TRUST" means the trust created by this Agreement;
"TRUST ESTATE" means the Exchange Right, the Automatic
Exchange Rights and any money or other property which may be
held by the Trustee from time to time pursuant to this
Agreement; and
"TRUSTEE" means Montreal Trust Company of Canada, a
corporation organized and existing under the federal laws of
Canada and authorized to carry on the business of a trust
company in each of the provinces of Canada and, subject to the
provisions of Section 7.0, includes any successor trustee.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this
Agreement into sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. Unless otherwise indicated, all references to a "section" followed by
a number and/or a letter refer to the specified section of this Agreement. The
terms "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to
6
this Agreement and not to any particular, section or other portion hereof and
include any agreement or instrument supplementary or ancillary hereto.
1.3 NUMBER, GENDER AND PERSONS. In this Agreement, unless the context
otherwise requires, words importing the singular number only shall include the
plural and VICE VERSA and words importing any gender shall include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to
be taken under this Agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
2.0 PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST. The purpose of this Agreement is to create
the Trust for the benefit of the Beneficiaries, as herein provided. The Trustee
will hold the Exchange Right and the Automatic Exchange Rights to enable the
Trustee to exercise such rights, in each case as trustee for and on behalf of
the Beneficiaries as provided in this Agreement.
3.0 EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
3.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. Redback hereby grants to
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Beneficiaries the right (the "EXCHANGE RIGHT"), upon the occurrence and during
the continuance of an Insolvency Event, to require Redback to purchase from each
or any Beneficiary all or any part of the Exchangeable Shares held by the
Beneficiary and the Automatic Exchange Rights, all in accordance with the
provisions of this Agreement. Redback hereby acknowledges receipt from the
Trustee, as trustee for and on behalf of the Beneficiaries, of good and valuable
consideration (and the adequacy thereof) for the grant of the Exchange Right and
the Automatic Exchange Rights by Redback to the Trustee. During the term of the
Trust, and subject to the terms and conditions of this Agreement, the Trustee
shall possess and be vested with full legal ownership of the Exchange Right and
the Automatic Exchange Rights and shall be entitled to exercise all of the
rights and powers of an owner with respect to the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange
Rights and the legal title thereto as trustee solely for the
use and benefit of the Beneficiaries in accordance with the
provisions of this Agreement; and
7
(b) except as specifically authorized by this Agreement,
have no power or authority to exercise or otherwise deal in or
with the Exchange Right or the Automatic Exchange Rights, and
the Trustee shall not exercise any such rights for any purpose
other than the purposes for which the Trust is created
pursuant to this Agreement.
3.2 LEGENDED SHARE CERTIFICATES. Exchangeco will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Beneficiaries of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Right in respect of the
Exchangeable Shares held by a Beneficiary; and
(b) the Automatic Exchange Rights.
3.3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and
remain vested in and exercisable by the Trustee. Subject to Section 4.15, the
Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Section 3.0 from Beneficiaries entitled to instruct
the Trustee as to the exercise thereof. To the extent that no instructions are
received from a Beneficiary with respect to the Exchange Right, the Trustee
shall not exercise or permit the exercise of the Exchange Right.
3.4 PURCHASE PRICE. The purchase price payable by Redback for each
Exchangeable Share to be purchased by Redback under the Exchange Right shall be
an amount per share equal to (a) the Current Market Price on the last Business
Day prior to the day of closing of the purchase and sale of such Exchangeable
Share under the Exchange Right, which shall be satisfied in full by Redback
causing to be sent to such holder one Redback Common Share, plus (b) to the
extent not paid by Exchangeco, an additional amount equivalent to the full
amount of all declared and unpaid dividends on each such Exchangeable Share held
by such holder on any dividend record date which occurred prior to the closing
of the purchase and sale. The purchase price for each such Exchangeable Share so
purchased may be satisfied only by Redback issuing and delivering or causing to
be delivered to the Trustee, on behalf of the relevant Beneficiary, one Redback
Common Share and, on the applicable payment date, a cheque for the balance, if
any, of the purchase price without interest (but less any amounts withheld
pursuant to Section 3.13). Upon payment by Redback of such purchase price, the
relevant Beneficiary shall cease to have any right to be paid any amount in
respect of declared and unpaid dividends on each such Exchangeable Share by
Exchangeco.
8
3.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set
forth, a Beneficiary shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Beneficiary on the books of Exchangeco. To cause
the exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver
to the Trustee, in person or by certified or registered mail, at its principal
corporate trust office in Vancouver, British Columbia or at such other places in
Canada as the Trustee may from time to time designate by written notice to the
Beneficiaries, the certificates representing the Exchangeable Shares which such
Beneficiary desires Redback to purchase, duly endorsed in blank for transfer,
and accompanied by such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Company Act and the articles
of Exchangeco and such additional documents and instruments as the Trustee,
Redback or Exchangeco may reasonably require together with (a) a duly completed
form of notice of exercise of the Exchange Right, contained on the reverse of or
attached to the Exchangeable Share certificates, stating (i) that the
Beneficiary thereby instructs the Trustee to exercise the Exchange Right so as
to require Redback to purchase from the Beneficiary the number of Exchangeable
Shares specified therein, (ii) that the Beneficiary has good title to and owns
all such Exchangeable Shares to be acquired by Redback free and clear of all
liens, claims and encumbrances, (iii) the names in which the certificates
representing Redback Common Shares issuable in connection with the exercise of
the Exchange Right are to be issued, and (iv) the names and addresses of the
persons to whom such new certificates should be delivered and (b) payment (or
evidence satisfactory to the Trustee, Exchangeco and Redback of payment) of the
taxes (if any) payable as contemplated by Section 3.8 of this Agreement. If only
a part of the Exchangeable Shares represented by any certificate or certificates
delivered to the Trustee are to be purchased by Redback under the Exchange
Right, a new certificate for the balance of such Exchangeable Shares shall be
issued to the holder at the expense of Exchangeco.
3.6 DELIVERY OF REDBACK COMMON SHARES; EFFECT OF EXERCISE. Promptly after
receipt of the certificates representing the Exchangeable Shares which the
Beneficiary desires Redback to purchase under the Exchange Right, together with
all documents and instruments of transfer and a duly completed form of notice of
exercise of the Exchange Right (and payment of taxes, if any, payable as
contemplated by Section 3.8 or evidence of such payment), duly endorsed for
transfer to Redback, the Trustee shall notify Redback and Exchangeco of its
receipt of the same, which notice to Redback and Exchangeco shall constitute
exercise of the Exchange Right by the Trustee on behalf of the holder of such
Exchangeable Shares, and Redback shall
9
promptly thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Beneficiary of such Exchangeable Shares (or to such other
persons, if any, properly designated by such Beneficiary) the number of Redback
Common Shares issuable in connection with the exercise of the Exchange Right,
which shares shall be duly issued as fully paid and non-assessable and shall be
free and clear of all liens, charges and encumbrances, and on the applicable
payment date cheques for the balance, if any, of the total purchase price
therefor without interest (but less any amounts withheld pursuant to Section
3.13); provided, however, that no such delivery shall be made unless and until
the Beneficiary requesting the same shall have paid (or provided evidence
satisfactory to the Trustee, Exchangeco and Redback of the payment of) the taxes
(if any) payable as contemplated by Section 3.8 of this Agreement. Immediately
upon the giving of notice by the Trustee to Redback and Exchangeco of the
exercise of the Exchange Right as provided in this Section 3.6, the closing of
the transaction of purchase and sale contemplated by the Exchange Right shall be
deemed to have occurred and the holder of such Exchangeable Shares shall be
deemed to have transferred to Redback all of such holder's right, title and
interest in and to such Exchangeable Shares and the related interest in the
Trust Estate and shall cease to be a holder of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive the purchase price therefor, unless the
purchase price is not delivered by Redback to the Trustee within five Business
Days of the date of the giving of such notice by the Trustee, in which case the
rights of the Beneficiary shall remain unaffected until the purchase price is so
delivered by Redback. Upon delivery by Redback to the Trustee of such purchase
price, the Trustee shall deliver such purchase price to such Beneficiary (or to
such other persons, if any, properly designated by such Beneficiary).
Concurrently with such Beneficiary ceasing to be a holder of Exchangeable
Shares, the Beneficiary shall be considered and deemed for all purposes to be
the holder of the Redback Common Shares delivered to it pursuant to the Exchange
Right.
3.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event
that a Beneficiary has exercised its right under Article 6 of the Share
Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares
held by the Beneficiary (the "RETRACTED SHARES") and is notified by Exchangeco
pursuant to Section 6.6 of the Share Provisions that Exchangeco will not be
permitted as a result of solvency requirements or other provisions of applicable
law to redeem all such Retracted Shares, and provided that Newco shall not have
exercised the Retraction Call Right with respect to the Retracted Shares and
that the Beneficiary has not revoked the retraction request delivered by the
Beneficiary to Exchangeco pursuant to Section 6.1 of the Share Provisions, and
provided further that the Trustee has received written notice of the same from
Redback or Exchangeco (which, in such circumstances, Redback hereby
10
undertakes to give or cause to be given to the Trustee), the retraction request
will constitute and will be deemed to constitute notice from the Beneficiary to
the Trustee instructing the Trustee to exercise the Exchange Right with respect
to those Retracted Shares that Exchangeco is unable to redeem. In any such
event, Exchangeco hereby agrees with the Trustee and in favour of the
Beneficiary promptly to forward or cause to be forwarded to the Trustee all
relevant materials delivered by the Beneficiary to Exchangeco or to the transfer
agent of the Exchangeable Shares (including without limitation, a copy of the
retraction request delivered pursuant to Section 6.1 of the Share Provisions) in
connection with such proposed redemption of the Retracted Shares and the Trustee
will thereupon exercise the Exchange Right with respect to the Retracted Shares
that Exchangeco is not permitted to redeem and will require Redback to purchase
such shares in accordance with the provisions of this Section 3.0.
3.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares
to Redback pursuant to the Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing Redback Common Shares to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Beneficiary of the Exchangeable Shares so
sold or in such names as such Beneficiary may otherwise direct in writing
without charge to the holder of the Exchangeable Shares so sold; provided,
however, that such Beneficiary (a) shall pay (and none of Redback, Exchangeco or
the Trustee shall be required to pay) any documentary, stamp, transfer or other
taxes that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Beneficiary or (b) shall
have provided evidence to the satisfaction of the Trustee, Redback and
Exchangeco that such taxes, if any, have been paid in full.
3.9 NOTICE OF INSOLVENCY EVENT. As soon as practicable following the
occurrence of an Insolvency Event or any event that with the giving of notice or
the passage of time or both would be an Insolvency Event, Exchangeco and Redback
shall give written notice thereof to the Trustee. As soon as practicable
following the receipt of notice from Exchangeco and Redback of the occurrence of
an Insolvency Event, or upon the Trustee becoming aware of an Insolvency Event,
the Trustee will mail to each Beneficiary, at the expense of Redback, a notice
of such Insolvency Event, which notice shall contain a brief statement of the
rights of the Beneficiaries with respect to the Exchange Right.
3.10 QUALIFICATION OF REDBACK COMMON SHARES. Redback covenants that if any
Redback Common Shares to be issued and delivered pursuant to the Exchange Right
or the Automatic Exchange Rights require registration or qualification with or
approval of or the filing
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of any document, including any prospectus or similar document, or the taking of
any proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority (i) under any Canadian provincial
securities or other law or regulation or pursuant to the rules and regulations
of any securities or other regulatory authority applicable to holders who are
resident in the Provinces of Alberta, Ontario or British Columbia, or (ii) under
any United States federal or state securities or other law or regulation or
pursuant to the rules and regulations of any United States securities or other
regulatory authority before such shares (or such other shares or securities) may
be issued by Redback and delivered by Redback to the holder of surrendered
Exchangeable Shares or in order that such shares (or such other shares or
securities) may be freely traded thereafter through the facilities of a stock
exchange or market in the United States or through the NNM provided that such
first trade is made in accordance with the rules of the stock exchange or market
upon which the trade is made or the rules of the NNM in accordance with all laws
applicable to that stock exchange or market or applicable to the NNM (other than
any restrictions of general application on transfer by reason of a holder being
a "control person" of Redback for purposes of Canadian provincial securities law
or an "affiliate" of Redback for purposes of United States federal or state
securities law) Redback will in good faith expeditiously take all such actions
and do all such things as are necessary or desirable to cause such Redback
Common Shares (or such other shares or securities) to be and remain duly
registered, qualified or approved under United States and/or Canadian law, as
the case may be provided that nothing herein shall require Redback to prepare,
file with the United States Securities and Exchange Commission or maintain a
registration statement, prospectus or similar document with regard to such
shares or otherwise qualify such shares to be freely tradeable in the United
States except in accordance with the terms of the Registration Rights Agreement.
Redback will in good faith expeditiously take all such actions and do all such
things as are reasonably necessary or desirable to cause all Redback Common
Shares (or such other shares or securities) to be delivered pursuant to the
Exchange Right or the Automatic Exchange Rights to be listed, quoted or posted
for trading on all stock exchanges and quotation systems on which outstanding
Redback Common Shares (or such other shares or securities) have been listed by
Redback and remain listed and are quoted or posted for trading at such time.
3.11 REDBACK COMMON SHARES. Redback hereby represents and warrants that it
has irrevocably reserved for issuance and will, at all times while any
Exchangeable Shares (other than Exchangeable Shares held by Redback or its
Affiliates) are outstanding keep available, free from pre-emptive and other
rights, out of is authorized and unissued capital stock, such number of Redback
Common Shares (or other shares or securities into which Redback Common Shares
may be reclassified or changed) as are now and may hereafter be required to
enable and permit
12
Redback to meet its obligations under this Agreement and the Support Agreement,
to enable and permit Newco to meet its obligations under each of the Liquidation
Call Right, the Retraction Call Right and the Redemption Call Right, and to
enable and permit Exchangeco to meet its obligations under this Agreement and
the Share Provisions.
3.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF REDBACK
(a) Redback will give the Trustee notice of each of the following
events at the time set forth below:
(i) in the event of any determination by the board
of directors of Redback to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to Redback or to effect any other
distribution of assets of Redback among its
shareholders for the purpose of winding up its
affairs, as soon as practicable and in any event at
least 60 days prior to the proposed effective date of
such liquidation, dissolution, winding-up or other
distribution; and
(ii) as soon as practicable following the earlier of
(A) receipt by Redback of notice of, and (B) Redback
otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings
with respect to the involuntary liquidation,
dissolution or winding-up of Redback or to effect any
other distribution of assets of Redback among its
shareholders for the purpose of winding up its
affairs.
(b) As soon as practicable following receipt by the Trustee
from Redback of notice of any event (a "LIQUIDATION EVENT")
contemplated by Section 3.12(a)(i) or (ii) above, the Trustee,
will give notice thereof to the Beneficiaries. Such notice
shall include a brief description of the automatic exchange of
Exchangeable Shares for Redback Common Shares provided for in
Section 3.12(c).
(c) In order that the Beneficiaries will be able to participate on
a PRO RATA basis with the holders of Redback Common Shares
in the distribution of assets of Redback in connection with
a Liquidation Event, on the fifth Business Day prior to the
effective date (the "LIQUIDATION EVENT EFFECTIVE DATE") of a
Liquidation Event all of the then outstanding Exchangeable
Shares shall be automatically exchanged for Redback Common
Shares. To effect such automatic exchange, Redback shall
13
purchase on the fifth Business Day prior to the Liquidation
Event Effective Date each Exchangeable Share then
outstanding and held by the Beneficiaries, and each
Beneficiary shall sell the Exchangeable Shares held by it at
such time, for a purchase price per share equal to (a) the
Current Market Price of a Redback Common Share on the fifth
Business Day prior to the Liquidation Event Effective Date,
which shall be satisfied in full by Redback issuing to the
Beneficiary one Redback Common Share, and (b) to the extent
not paid by Exchangeco, an additional amount equivalent to
the full amount of all declared and unpaid dividends on each
such Exchangeable Share held by such holder on any dividend
record date which occurred prior to the date of the
exchange.
(d) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the transaction of purchase
and sale contemplated by the automatic exchange of
Exchangeable Shares for Redback Common Shares shall be
deemed to have occurred, and each Beneficiary shall be
deemed to have transferred to Redback all of the
Beneficiary's right, title and interest in and to such
Beneficiary's Exchangeable Shares, the related interest in
the Trust Estate and any right of each such Beneficiary to
receive declared and unpaid dividends from Exchangeco and
each such Beneficiary shall cease to be a holder of such
Exchangeable Shares and Redback shall issue to the
Beneficiary the Redback Common Shares issuable upon the
automatic exchange of Exchangeable Shares for Redback Common
Shares, which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of all liens,
charges and encumbrances, and on the applicable payment date
shall deliver to the Trustee for delivery to the Beneficiary
a cheque for the balance, if any, of the total purchase
price for such Exchangeable Shares without interest but less
any amounts withheld pursuant to Section 3.13. Concurrently
with such Beneficiary ceasing to be a holder of Exchangeable
Shares, the Beneficiary shall be considered and deemed for
all purposes to be the holder of the Redback Common Shares
issued pursuant to the automatic exchange of Exchangeable
Shares for Redback Common Shares and the certificates held
by the Beneficiary previously representing the Exchangeable
Shares exchanged by the Beneficiary with Redback pursuant to
such automatic exchange shall thereafter be deemed to
represent Redback Common Shares issued to the Beneficiary by
Redback pursuant to such automatic exchange. Upon the
request of a Beneficiary and the surrender by the
Beneficiary of Exchangeable Share certificates deemed to
represent Redback Common Shares, duly endorsed
14
in blank and accompanied by such instruments of transfer as
Redback may reasonably require, Redback shall deliver or cause
to be delivered to the Beneficiary certificates representing
the Redback Common Shares of which the Beneficiary is the
holder.
3.13 WITHHOLDING RIGHTS. Each of Redback, Exchangeco and the Trustee shall
be entitled to deduct and withhold from any consideration payable under this
Agreement to any holder of Exchangeable Shares such amounts as Redback,
Exchangeco or the Trustee is required to deduct and withhold with respect to
such payment under the INCOME TAX ACT (Canada), the United States Internal
Revenue Code of 1986 or any provision of provincial, state, local or foreign tax
law, in each case as amended. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to the holder, Redback, Exchangeco and the
Trustee are hereby authorized to sell or otherwise dispose of such portion of
the consideration as is necessary to provide sufficient funds to Redback,
Exchangeco or the Trustee, as the case may be, to enable it to comply with such
deduction or withholding requirement and Redback, Exchangeco or the Trustee
shall notify the holder thereof and remit to such holder any unapplied balance
of the net proceeds of such sale.
3.14 INCUMBENCY CERTIFICATE. Each of Redback and Exchangeco shall file
with the Trustee a certificate of incumbency setting forth the names of the
individuals authorized to give instructions, directions or other instruments to
the Trustee (each an "AUTHORIZED PERSON"), together with specimen signatures of
such persons, and the Trustee shall be entitled to rely on the latest
certificate of incumbency filed with it unless it receives notice, in accordance
with Section 11.3 of this Agreement, of a change in Authorized Persons with
updated specimen signatures.
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4.0 CONCERNING THE TRUSTEE
4.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers, duties and
authorities of the Trustee under this Agreement, in its capacity as Trustee of
the Trust, shall include:
(a) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from Redback as Trustee for and on behalf of
the Beneficiaries in accordance with the provisions of this
Agreement;
(b) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement, and in connection therewith
receiving from Beneficiaries Exchangeable Shares and other
requisite documents and distributing to such Beneficiaries
Redback Common Shares and cheques, if any, to which such
Beneficiaries are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(c) holding title to the Trust Estate;
(d) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this Agreement;
(e) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of
Redback and Exchangeco under this Agreement; and
(f) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers, duties and authorities the
Trustee shall have (and is granted) such incidental and additional rights,
powers, duties and authority not in conflict with any of the provisions of this
Agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers, duties
and authorities by the Trustee shall be final, conclusive and binding upon all
persons.
16
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and with a view to the best
interests of the Beneficiaries and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
4.2 NO CONFLICT OF INTEREST. The Trustee represents to Redback and
Exchangeco that at the date of execution and delivery of this Agreement there
exists no material conflict of interest in the role of the Trustee as fiduciary
hereunder and the role of the Trustee in any other capacity. The Trustee shall,
within 30 days after it becomes aware that such material conflict of interest
exists, either eliminate such material conflict of interest or resign in the
manner and with the effect specified in Section 7.0. If, notwithstanding the
foregoing provisions of this Section 4.2, the Trustee has such a material
conflict of interest, the validity and enforceability of this Agreement shall
not be affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this Section 4.2, any interested party may apply to the Supreme
Court of British Columbia for an order that the Trustee be replaced as Trustee
hereunder.
4.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. Redback and Exchangeco
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
Redback Common Shares; and
(b) requisition, from time to time,
(i) from any such registrar or transfer agent any
information readily available from the records
maintained by it which the Trustee may reasonably
require for the discharge of its duties and
responsibilities under this Agreement; and
(ii) from the transfer agent of Redback Common Shares, and
any subsequent transfer agent of such shares, the
share certificates issuable upon the exercise from
time to time of the Exchange Right and pursuant to
the Automatic Exchange Rights.
17
Redback and Exchangeco irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. Redback covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights.
4.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by
Redback and Exchangeco at the Trustee's principal corporate trust office in
Vancouver, British Columbia correct and complete books and records of account
relating to the Trust created by this Agreement, including without limitation,
all relevant data relating to mailings and instructions to and from
Beneficiaries and all transactions pursuant to the Exchange Right and the
Automatic Exchange Rights. On or before March 31, 2001, and on or before March
31 in every year thereafter, until the termination of the Trust pursuant to
Section 10.0, the Trustee shall transmit to Redback and Exchangeco a brief
report, dated as of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the
Trustee on behalf of Beneficiaries in consideration of the
issuance by Redback of Redback Common Shares in connection
with the Exchange Right, during the calendar year ended on
such December 31; and
(c) any action taken by the Trustee in the performance of its
duties under this Agreement which it had not previously
reported and which, in the Trustee's opinion, materially
affects the Trust Estate.
4.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent
necessary, prepare and file on behalf of the Trust appropriate United States and
Canadian income tax returns and any other returns or reports as may be required
by applicable law and, in connection therewith, the Trustee may obtain the
advice and assistance of such accountants, legal counsel or other experts or
advisors as the Trustee may consider necessary or desirable. If requested by the
Trustee, Redback shall retain such experts or advisors for purposes of providing
such advice and assistance.
18
4.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
exercise any or all of the rights, duties, powers or authorities vested in it
by this Agreement at the request, order or direction of any Beneficiary upon
such Beneficiary furnishing to the Trustee reasonable funding, security or
indemnity against the costs, expenses and liabilities which may be incurred by
the Trustee therein or thereby, provided that no Beneficiary shall be obligated
to furnish to the Trustee any such funding, security or indemnity in connection
with the exercise by the Trustee of any of its rights, duties, powers and
authorities with respect to the Exchange Right pursuant to Section 3.0 and with
respect to the Automatic Exchange Rights pursuant to Section 3.0, in either case
subject to Section 4.15.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties, or authorities unless
funded, given security and indemnified as aforesaid.
4.7 ACTION OF BENEFICIARIES. No Beneficiary shall have the right to
institute any action, suit or proceeding or to exercise any other remedy
authorized by this Agreement for the purpose of enforcing any of its rights or
for the execution of any trust or power hereunder unless the Beneficiary has
requested the Trustee to take or institute such action, suit or proceeding and
furnished the Trustee with the funding, security or indemnity referred to in
Section 4.6 and the Trustee shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Beneficiary shall be entitled
to take proceedings in any court of competent jurisdiction such as the Trustee
might have taken; it being understood and intended that no one or more
Beneficiaries shall have any right in any manner whatsoever to affect, disturb
or prejudice the rights hereby created by any such action, or to enforce any
right hereunder or the Exchange Right or the Automatic Exchange Rights except
subject to the conditions and in the manner herein provided, and that all powers
and trusts hereunder shall be exercised and all proceedings at law shall be
instituted, had and maintained by the Trustee, except only as herein provided,
and in any event for the equal benefit of all Beneficiaries.
4.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good faith upon statutory declarations,
certificates, opinions or reports furnished pursuant to the provisions hereof or
required by the Trustee to be furnished to it in the exercise of its rights,
powers, duties and authorities hereunder if such statutory declarations,
certificates, opinions or reports comply with the provisions of Section 4.9, if
applicable, and with any other applicable provisions of this Agreement.
19
4.9 EVIDENCE AND AUTHORITY TO TRUSTEE. Redback and/or Exchangeco shall
furnish to the Trustee evidence of compliance with the conditions provided for
in this Agreement relating to any action or step required or permitted to be
taken by Redback and/or Exchangeco or the Trustee under this Agreement or as a
result of any obligation imposed under this Agreement, including, without
limitation, in respect of the Exchange Right or the Automatic Exchange Rights
and the taking of any other action to be taken by the Trustee at the request of
or on the application of Redback and/or Exchangeco promptly if and when:
(a) such evidence is required by any other section of this
Agreement to be furnished to the Trustee in accordance with
the terms of this Section 4.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Redback and/or
Exchangeco written notice requiring it to furnish such
evidence in relation to any particular action or obligation
specified in such notice.
Such evidence shall consist of an Officer's Certificate of Redback
and/or Exchangeco or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Exchange
Right or the Automatic Exchange Rights or the taking of any other action to be
taken by the Trustee at the request or on the application of Redback and/or
Exchangeco, and except as otherwise specifically provided herein, such evidence
may consist of a report or opinion of any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert or any other person
whose qualifications give authority to a statement made by him, provided that if
such report or opinion is furnished by a director, officer or employee of
Redback and/or Exchangeco it shall be in the form of an Officer's Certificate or
a statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this Agreement shall include a statement by the person giving the evidence:
20
(a) declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
Officer's Certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation
as he believes is necessary to enable him to make the
statements or give the opinions contained or expressed
therein.
4.10 EXPERTS, ADVISERS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from any solicitor,
attorney, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Trustee or by Redback
and/or Exchangeco or otherwise, and may employ such assistants
as may be necessary to the proper discharge of its powers and
duties and determination of its rights hereunder and may pay
proper and reasonable compensation for all such legal and
other advice or assistance referred to above; and
(b) retain or employ such agents, employees and other assistants
as it may reasonably require for the proper determination and
discharge of its powers and duties hereunder, and may pay
reasonable remuneration for all services performed for it (and
shall be entitled to receive reasonable remuneration for all
services performed by it) in the discharge of the trusts
hereof and compensation for all disbursements, costs and
expenses made or incurred by it in the discharge of its duties
hereunder and in the management of the Trust.
4.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in this
Agreement, any moneys held by or on behalf of the Trustee which under the terms
of this Agreement may or ought to be invested or which may be on deposit with
the Trustee or which may be in the hands of the Trustee shall be invested and
reinvested in the name or under the control of the Trustee in securities in
which, under the laws of the Province of British Columbia, trustees are
authorized to invest trust moneys, provided that (i) such securities are stated
to mature within 180 days after their purchase by the Trustee, and (ii) the
Trustee is acting at the written direction of Redback or Exchangeco. Pending the
investment of any moneys
21
as hereinbefore provided, such moneys shall be deposited in the name of the
Trustee in an interest-bearing segregated trust account at any chartered bank in
Canada or, at the direction of Exchangeco, in the deposit department of the
Trustee at the rate of interest then current on similar deposits. Any income
earned in respect of the Trust Estate which is not used by the Trustee as
provided in this Agreement shall be accumulated by the Trustee and added to the
capital of the Trust Estate.
4.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this Agreement or otherwise in respect
of the premises.
4.13 TRUSTEE NOT BOUND TO ACT ON REQUEST. Except as otherwise specifically
provided in this Agreement, the Trustee shall not be bound to act in accordance
with any direction or request of Redback and/or Exchangeco or of the directors
thereof until a duly authenticated copy of the instrument or resolution
containing such direction or request shall have been delivered to the Trustee,
and the Trustee shall be empowered to act upon any such copy purporting to be
authenticated and believed by the Trustee to be genuine.
4.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to Redback and
Exchangeco that, at the date of execution and delivery by it of this Agreement,
it is authorized to carry on the business of a trust company in each of the
Provinces of Canada but if, notwithstanding the provisions of this Section 4.14,
it ceases to be so authorized to carry on business, the validity and
enforceability of this Agreement, the Exchange Right and the Automatic Exchange
Rights shall not be affected in any manner whatsoever by reason only of such
event but the Trustee shall, within 30 days after ceasing to be authorized to
carry on the business of a trust company in any Province of Canada, either
become so authorized or resign in the manner and with the effect specified in
Section 7.0.
4.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or
asserted with respect to any interest of any Beneficiary in any Exchangeable
Shares, including any disagreement between the heirs, representatives,
successors or assigns succeeding to all or any part of the interest of any
Beneficiary in any Exchangeable Shares, resulting in conflicting claims or
demands being made in connection with such interest, then the Trustee shall be
entitled, at its sole discretion, to refuse to recognize or to comply with any
such claims or demands. In so refusing, the Trustee may elect not to exercise
the Exchange Right or any Automatic Exchange Rights subject to such conflicting
claims or demands and, in so doing, the Trustee shall not be or
22
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee shall
be entitled to continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the
Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Exchange Right or
Automatic Exchange Rights subject to such conflicting claims
or demands have been conclusively settled by a valid written
agreement binding on all such adverse claimants, and the
Trustee shall have been furnished with an executed copy of
such agreement certified to be in full force and effect.
If the Trustee elects to recognize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate to fully indemnify it as between all conflicting claims
or demands.
4.16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
provided for by and in this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Beneficiaries, subject to all the terms and conditions
herein set forth.
5.0 COMPENSATION
5.1 FEES AND EXPENSES OF THE TRUSTEE. Redback and Exchangeco jointly and
severally agree to pay the Trustee reasonable compensation for all of the
services rendered by it under this Agreement and will reimburse the Trustee for
all reasonable expenses (including taxes other than taxes based on the net
income of the Trustee) and disbursements, including the cost and expense of any
suit or litigation of any character and any proceedings before any governmental
agency reasonably incurred by the Trustee in connection with its duties under
this Agreement; provided that Redback and Exchangeco shall have no obligation to
reimburse the Trustee for any expenses or disbursements paid, incurred or
suffered by the Trustee in any suit or litigation in which the Trustee is
determined to have acted fraudulently, in bad faith or with negligence,
recklessness or wilful misconduct.
23
6.0 INDEMNIFICATION AND LIMITATION OF LIABILITY
6.1 INDEMNIFICATION OF THE TRUSTEE. Redback and Exchangeco jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this Agreement (collectively, the "INDEMNIFIED PARTIES") against all
claims, losses, damages, reasonable costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal counsel) which,
without fraud, negligence, recklessness, wilful misconduct or bad faith on the
part of such Indemnified Party, may be paid, incurred or suffered by the
Indemnified Party by reason or as a result of the Trustee's acceptance or
administration of the Trust, its compliance with its duties set forth in this
Agreement, or any written or oral instruction delivered to the Trustee by
Redback or Exchangeco pursuant hereto.
In no case shall Redback or Exchangeco be liable under this indemnity
for any claim against any of the Indemnified Parties unless Redback and
Exchangeco are notified by the Trustee of the written assertion of a claim or of
any action commenced against the Indemnified Parties promptly after any of the
Indemnified Parties has received any such written assertion of a claim or shall
have been served with a summons or other first legal process giving information
as to the nature and basis of the claim. Subject to (ii) below, Redback and
Exchangeco shall be entitled to participate at their own expense in the defence
and, if Redback and Exchangeco so elect at any time after receipt of such
notice, either of them may assume the defence of any suit brought to enforce any
such claim. The Trustee shall have the right to employ separate counsel in any
such suit and participate in the defence thereof, but the fees and expenses of
such counsel shall be at the expense of the Trustee unless: (i) the employment
of such counsel has been authorized by Redback or Exchangeco; or (ii) the named
parties to any such suit include both the Trustee and Redback or Exchangeco and
the Trustee shall have been advised by counsel acceptable to Redback or
Exchangeco that there may be one or more legal defences available to the Trustee
that are different from or in addition to those available to Redback or
Exchangeco and that, in the judgment of such counsel, would present a conflict
of interest were a joint representation to be undertaken (in which case Redback
and Exchangeco shall not have the right to assume the defence of such suit on
behalf of the Trustee but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee). This indemnity shall survive the
termination of this Agreement and the resignation or removal of the Trustee.
6.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any
loss which may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss
24
incurred on any investment of funds pursuant to this Agreement, except to the
extent that such loss is attributable to the fraud, negligence, recklessness,
wilful misconduct or bad faith on the part of the Trustee.
7.0 CHANGE OF TRUSTEE
7.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at
any time resign by giving written notice of such resignation to Redback and
Exchangeco specifying the date on which it desires to resign, provided that such
notice shall not be given less than 60 days before such desired resignation date
unless Redback and Exchangeco otherwise agree and provided further that such
resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, Redback and Exchangeco shall
promptly appoint a successor trustee, which shall be a corporation organized and
existing under the federal laws of Canada and authorized to carry on the
business of a trust company in each of the Provinces of Canada, by written
instrument in duplicate, one copy of which shall be delivered to the resigning
trustee and one copy to the successor trustee. Failing acceptance by a successor
trustee of such appointment, a successor trustee may be appointed by an order of
a court of competent jurisdiction upon application of one or more of the parties
hereto or any Beneficiary, at the expense of Redback and Exchangeco.
7.2 REMOVAL. The Trustee, or any trustee hereafter appointed, may (provided
a successor trustee is appointed) be removed with or without cause at any time
on not less than 30 days' prior notice by written instrument executed by Redback
and Exchangeco, in duplicate, one copy of which shall be delivered to the
trustee so removed and one copy to the successor trustee.
7.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under
this Agreement shall execute, acknowledge and deliver to Redback and Exchangeco
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with the like effect as if
originally named as trustee in this Agreement. However, on the written request
of Redback and Exchangeco or of the successor trustee, the trustee ceasing to
act shall, upon payment of any amounts then due it pursuant to the provisions of
this Agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, Redback, Exchangeco and such predecessor
trustee shall execute
25
any and all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers.
7.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a
successor trustee as provided herein, Redback and Exchangeco shall cause to be
mailed notice of the succession of such trustee hereunder to each Beneficiary.
If Redback or Exchangeco shall fail to cause such notice to be mailed within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of Redback and
Exchangeco.
7.5 ASSIGNMENT TO AN AFFILIATE. Notwithstanding the foregoing provisions of
this Section 7.0, the Trustee may assign all of its duties hereunder to any
corporation organized and existing under the federal laws of Canada and
authorized to carry on the business of a trust company in each of the Provinces
of Canada which is an Affiliate of Computershare Investor Services Inc. Such
assignment shall be effective upon notice by the Trustee to Redback and
Exchangeco, without any further documentation or consent of the parties hereto.
8.0 REDBACK SUCCESSORS
8.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.. Redback shall not
consummate any transaction (whether by way of reconstruction, reorganization,
consolidation, merger, transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking, property and assets would become the
property of any other person or, in the case of a merger, of the continuing
corporation resulting therefrom unless:
(a) such other person or continuing corporation (herein called
the "REDBACK SUCCESSOR"), by operation of law, becomes,
without more, bound by the terms and provisions of this
Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction,
an agreement supplemental hereto and such other instruments
(if any) as are satisfactory to the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee
are reasonably necessary or advisable to evidence the
assumption by the Redback Successor of liability for all
moneys payable and property deliverable hereunder and the
covenant of such Redback Successor to pay and deliver or cause
to be delivered the same and its agreement to observe and
perform all the covenants and obligations of Redback under
this Agreement; and
26
(b) such transaction shall, to the satisfaction of the Trustee,
acting reasonably, and in the opinion of legal counsel to the
Trustee, be upon such terms and conditions as substantially to
preserve and not to impair in any material respect any of the
rights, duties, powers and authorities of the Trustee or of
the Beneficiaries hereunder.
8.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of Section 8.1
have been duly observed and performed, the Trustee and, if required by Section
8.1, the Redback Successor and Exchangeco shall execute and deliver the
supplemental agreement provided for in Section 9.0 and thereupon the Redback
Successor shall possess and from time to time may exercise each and every right
and power of Redback under this Agreement in the name of Redback or otherwise
and any act or proceeding by any provision of this Agreement required to be done
or performed by the board of directors of Redback or any officers of Redback may
be done and performed with like force and effect by the board of directors or
officers of such Redback Successor.
8.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly-owned direct or indirect
subsidiary of Redback with or into Redback or the winding-up, liquidation or
dissolution of any wholly-owned direct or indirect subsidiary of Redback, other
than Exchangeco or Newco, provided that all of the assets of such subsidiary are
transferred to Redback or another wholly-owned direct or indirect subsidiary of
Redback and any such transactions are expressly permitted by this Section 8.0.
9.0 AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
9.1 AMENDMENTS, MODIFICATIONS, ETC.. This Agreement may not be amended or
modified except by an agreement in writing executed by Redback, Exchangeco and
the Trustee and approved by the Beneficiaries in accordance with Section 10.2 of
the Share Provisions.
9.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of Section 9.1,
the parties to this Agreement may in writing, at any time and from time to time,
without the approval of the Beneficiaries, amend or modify this Agreement for
the purposes of:
(a) adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder, provided that the
board of directors of each of Exchangeco and Redback is of the
good faith opinion that any such additions will not be
prejudicial to the rights or interests of the Beneficiaries;
27
(b) making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions arising hereunder which, in the good
faith opinion of the board of directors of each of Redback and
Exchangeco and in the opinion of the Trustee, it may be
expedient to make, provided that such boards of directors and
the Trustee is of the good faith opinion that such amendments
and modifications will not be prejudicial to the interests of
the Beneficiaries; or
(c) making such changes in or corrections to this Agreement which,
on the advice of counsel to Redback, Exchangeco and the
Trustee, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error contained herein;
provided that the Trustee and the board of directors of each
of Redback and Exchangeco is of the good faith opinion that
such changes or corrections will not be prejudicial to the
interests of the Beneficiaries.
9.3 MEETING TO CONSIDER AMENDMENTS. Exchangeco, at the request of Redback,
shall call a meeting or meetings of the Beneficiaries for the purpose of
considering any proposed amendment of or modification to this Agreement
requiring their approval pursuant to Section 9.1. Any such meeting or meetings
shall be called and held in accordance with the articles of Exchangeco, the
Share Provisions and all applicable laws.
9.4 CHANGES IN CAPITAL OF REDBACK AND EXCHANGECO. Notwithstanding Section
9.1, at all times after the occurrence of any event contemplated pursuant to
Section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which
either Redback Common Shares or the Exchangeable Shares or both are in any way
changed, this Agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, MUTATIS MUTANDIS, to all
new securities into which Redback Common Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver a
supplemental agreement giving effect to and evidencing such necessary amendments
and modifications.
9.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS. No amendment to or modification
or waiver of any of the provisions of this Agreement otherwise permitted
hereunder shall be effective unless made in writing and signed by all of the
parties hereto. Notwithstanding Section 9.1, from time to time Exchangeco (when
authorized by a resolution of its Board of
28
Directors), Redback (when authorized by a resolution of its board of directors)
and the Trustee may, subject to the provisions of this Agreement, and they
shall, when so directed by this Agreement, execute and deliver by their proper
officers, agreements or other instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more of the following purposes:
(a) evidencing the succession of Redback Successors and the
covenants of and obligations assumed by each such Redback
Successor in accordance with the provisions of Section 8.0 and
the succession of any successor trustee in accordance with the
provisions of Section 7.0;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Exchange Right or the
Automatic Exchange Rights which, in the opinion of the
Trustee, will not be prejudicial to the interests of the
Beneficiaries or are, in the opinion of counsel to the
Trustee, necessary or advisable in order to incorporate,
reflect or comply with any legislation, the provisions of
which apply to Redback, Exchangeco, the Trustee or this
Agreement; and
(c) for any other purposes not inconsistent with the provisions of
this Agreement, including without limitation, to make or
evidence any amendment or modification to this Agreement as
contemplated hereby, provided that, in the opinion of the
Trustee, the rights of the Trustee and Beneficiaries will not
be prejudiced thereby.
10.0 TERMINATION
10.1 TERM. The Trust created by this Agreement shall continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
(b) each of Redback and Exchangeco elects in writing to
terminate the Trust and such termination is approved by the
Beneficiaries in accordance with Section 10.2 of the Share
Provisions; and
29
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King Xxxxxx VI of Canada and the
United Kingdom of Great Britain and Northern Ireland living on
the date of the creation of the Trust.
10.2 SURVIVAL OF AGREEMENT. This Agreement shall survive any termination of
the Trust and shall continue until there are no Exchangeable Shares outstanding
held by a Beneficiary; provided, however, that the provisions of Sections 5.0
and 6.0 shall survive any such termination of this Agreement.
11.0 GENERAL
11.1 SEVERABILITY. If any term or other provisions of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon the determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties to
this Agreement will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are fulfilled to the fullest extent possible.
11.2 ENUREMENT. This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Beneficiaries.
11.3 NOTICES TO PARTIES . All notices and other communications between the
parties to this Agreement shall be in writing and shall be deemed to have been
given if delivered personally or by confirmed telecopy to the parties at the
following addresses (or at such other address for any such party as shall be
specified in like notice):
(a) to Exchangeco or Redback:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
ATTENTION: General Counsel
Facsimile: (000) 000-0000
30
with a copy to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
and to:
Fraser Xxxxxx Casgrain
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
(b) to the Trustee:
Montreal Trust Company of Canada
3rd Floor, 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
11.4 NOTICE TO BENEFICIARIES. Any and all notices to be given and any
documents to be sent to any Beneficiaries may be given or sent to the address of
such Beneficiary shown on the register of members for the Exchangeable Shares in
any manner permitted by the articles of Exchangeco from time to time in force in
respect of notices to the holders of such Exchangeable Shares and shall be
deemed to be received (if given or sent in such manner) at the time specified in
such articles, the provisions of which articles shall apply MUTATIS MUTANDIS to
notices or documents as aforesaid sent to such Beneficiaries.
11.5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or
documents are to be sent to any holder by the Trustee or by such holder to the
Trustee, the making of such
31
payment or sending of such document sent through the post shall be at the risk
of Redback and Exchangeco, in the case of payments made or documents sent by the
Trustee, and at the risk of the holder, in the case of payments made or
documents sent by the holder.
11.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
11.7 JURISDICTION. This Agreement shall be construed and enforced in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein.
32
11.8 ATTORNMENT. Each of the Trustee, Redback and Exchangeco agrees that any
action or proceeding arising out of or relating to this Agreement may be
instituted in the courts of British Columbia, waives any objection which it may
have now or hereafter to the venue of any such action or proceeding, irrevocably
submits to the jurisdiction of the said courts in any such action or proceeding,
agrees to be bound by any judgment of the said courts and not to seek, and
hereby waives, any review of the merits of any such judgment by the courts of
any other jurisdiction and hereby appoints Exchangeco at its registered office
in the Province of British Columbia as attorney for service of process.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
610381 B.C. INC.
Per:
---------------------------------------------------
Authorized Signatory
REDBACK NETWORKS INC.
Per:
---------------------------------------------------
Authorized Signatory
MONTREAL TRUST COMPANY OF CANADA
Per:
---------------------------------------------------
Authorized Signatory
33
EXHIBIT E
PLAN OF ARRANGEMENT UNDER SECTION 192 OF THE CANADA
BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Plan of Arrangement, unless there is something in
the subject matter or context inconsistent therewith, the following terms shall
have the respective meanings set out below and grammatical variations of such
terms shall have corresponding meanings:
(a) "ABATIS" means Abatis Systems Corporation, a corporation
existing under the federal laws of Canada;
(b) "ABATIS OPTION" means an option to purchase Class A Voting
Common Shares of Abatis granted under Abatis's Key Employee
Stock Option Plan and being outstanding and unexercised on the
Effective Date;
(c) "ABATIS SECURITIES" means the Abatis Shares and the Abatis
Options, collectively;
(d) "ABATIS SHARES" means the outstanding Class A Voting Common
Shares and Class B Non-Voting Common Shares, all without par
value, in the capital of Abatis;
(e) "AFFILIATE" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control
of, that Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to
any Person, means the possession by another Person, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of that first mentioned Person,
whether through the ownership of voting securities, by
contract or otherwise;
(f) "ARRANGEMENT" means the arrangement under section 192 of the
CBCA on the terms and subject to the conditions set out in
this Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with section 7.1 of the
Arrangement Agreement or Article 6 hereof or made at the
direction of the Court in the Final Order;
(g) "ARRANGEMENT AGREEMENT" means the agreement made as of
July 30, 2000 among Redback, Exchangeco and Abatis, as
amended, supplemented and/or restated in accordance therewith
prior to the Effective Date, providing for, among other
things, the Arrangement;
(h) "ARRANGEMENT RESOLUTION" means the special resolution passed
by the holders of the Abatis Shares and Abatis Options at the
Meeting;
(i) "ARTICLES OF ARRANGEMENT" means the articles of arrangement of
Abatis in respect of the Arrangement, required by the CBCA to
be sent to the Director after the Final Order is made;
(j) "BUSINESS DAY" means any day on which commercial banks are
open for business in San Francisco, California and Vancouver,
British Columbia, other than a Saturday, a Sunday or a day
observed as a holiday in Vancouver, British Columbia under the
laws of the Province of British Columbia or the federal laws
of Canada or in San Francisco, California under the laws of
the State of California or the federal laws of the United
States of America;
(k) "CANADIAN RESIDENT" means a person who is not a non-resident
of Canada for purposes of the ITA;
(l) "CBCA" means the CANADA BUSINESS CORPORATIONS ACT, R.S.C.
1995, c. C-44, as amended;
(m) "CERTIFICATE" means the certificate of arrangement giving
effect to the Arrangement, issued pursuant to subsection
192(7) of the CBCA after the Articles of Arrangement have been
filed;
(n) "CIRCULAR" means the notice of the Meeting and accompanying
management proxy circular to be sent to holders of Abatis
Shares and Abatis Options in connection with the Meeting;
(o) "COURT" means the Supreme Court of British Columbia;
(p) "CURRENT MARKET PRICE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
2
(q) "DEPOSITARY" means Montreal Trust Company of Canada, at such
offices as will be set out in the Letter of Transmittal and
Election Form;
(r) "DEPOSITED SECURITIES" has the meaning set out in section
2.2(e);
(s) "DIRECTOR" mean the Director appointed under section 260 of
the CBCA;
(t) "DISSENT PROCEDURES" has the meaning set out in section 3.1;
(u) "DISSENTING SHAREHOLDER" means a holder of Abatis Shares who
dissents in respect of the Arrangement in strict compliance
with the Dissent Procedures;
(v) "DIVIDEND AMOUNT" has the meaning ascribed thereto in
section 5.1(a);
(w) "EFFECTIVE DATE" means the date shown on the Certificate;
(x) "EFFECTIVE TIME" means 12:01 a.m. on the Effective Date;
(y) "ELECTION DEADLINE" means 5:00 p.m. (Pacific time) on the
date which is two Business Days before the date of the
Meeting;
(z) "ESCROW AGENT" means Montreal Trust Company of Canada, in its
capacity as escrow agent under the Escrow Agreement, and
includes any successor escrow agent appointed thereunder;
(aa) "ESCROW AGREEMENT" means the Escrow Agreement among Redback,
Exchangeco, the Shareholders' Agent and the Escrow Agent, in
the form and content of Appendix 2 hereto, as amended or
supplemented from time to time in accordance with the terms
thereof;
(ab) "ESCROW AMOUNT" means the number of Escrow Securities;
(ac) "ESCROW SECURITIES" means, collectively, 10% of the Redback
Common Shares and 10% of the Exchangeable Shares to be issued
to the holders of Abatis Shares at the Effective Time pursuant
to this Plan of Arrangement (all of which shall be subject to
adjustment as provided for in section 2.4 hereof);
(ad) "EXCHANGECO" means 610381 B.C. Inc., a company existing under
the laws of the Province of British Columbia, which is a
wholly owned subsidiary of Redback;
3
(ae) "EXCHANGE RATIO" means a number equal to the quotient obtained
when (A) 5,236,154 is divided by (B) the sum of (x) the
aggregate number of Abatis Shares issued and outstanding as at
the Effective Date and (y) the aggregate number of Abatis
Shares which are or may at any future time become issuable
pursuant to Abatis Options outstanding as at the Effective
Date, including, without limitation, all Abatis Options which
are not fully vested or immediately exercisable as at the
Effective Date;
(af) "EXCHANGE TRUST AGREEMENT" means the Exchange Trust Agreement
among Redback, Exchangeco and the Trustee, to be entered into
in connection with this Plan of Arrangement, substantially in
the form and content of Exhibit D annexed to the Arrangement
Agreement, with such changes thereto as the parties to the
Arrangement Agreement, acting reasonably, may agree, in
accordance with the terms thereof;
(ag) "EXCHANGEABLE ELECTED SHARE" means any Abatis Share that the
holder shall have elected, in a duly completed Letter of
Transmittal and Election Form deposited with the Depositary no
later than the Election Deadline, to transfer to Exchangeco
under the Arrangement for a fraction of an Exchangeable Share;
(ah) "EXCHANGEABLE SHARE" means a share in the class of non-voting
exchangeable shares in the capital of Exchangeco;
(ai) "EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable
Shares, which rights, privileges, restrictions and conditions
shall be substantially in the form and content of Appendix 1
hereto;
(aj) "FINAL ORDER" means the final order of the Court approving the
Arrangement, granted pursuant to section 192 of the CBCA, as
such order may be amended at any time prior to the Effective
Date or, if appealed, then, unless such appeal is withdrawn or
denied, as affirmed;
(ak) "HOLDER" means, when used with reference to any Abatis
Securities, the holder of such Abatis Securities shown from
time to time on the securities register maintained by or on
behalf of Abatis in respect of such Abatis Securities and,
when used with reference to any Exchangeable Shares, means the
holder of such Exchangeable Shares shown from time to time on
the register of members
4
maintained by or on behalf of Exchangeco in respect of such
Exchangeable Shares;
(al) "INTERIM ORDER" means the interim order of the Court made in
connection with the process for obtaining shareholder approval
of the Arrangement and related matters;
(am) "ITA" means the INCOME TAX ACT (Canada);
(an) "LETTER OF TRANSMITTAL AND ELECTION FORM" means the Letter of
Transmittal and Election Form for use by holders of Abatis
Shares, in the form which will accompany the Circular;
(ao) "LIQUIDATION CALL PURCHASE PRICE" has the meaning ascribed
thereto in section 5.1(a);
(ap) "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in
section 5.1(a);
(aq) "LIQUIDATION DATE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
(ar) "MEETING" means the special meeting of the holders of Abatis
Securities (including any adjournment thereof) that is to be
convened as provided by the Interim Order to consider and, if
deemed advisable, approve the Arrangement;
(as) "MEETING DATE" means the date of the Meeting;
(at) "NEWCO" means 610380 B.C. Inc., a company existing under the
laws of the Province of British Columbia, which is a wholly
owned subsidiary of Redback;
(au) "NNM" means the distinct tier of The Nasdaq Stock Market
referred to as the Nasdaq National Market;
(av) "PERSON" includes any individual, firm, partnership, joint
venture, venture capital fund, association, trust, trustee,
executor, administrator, legal personal representative,
estate, group, body corporate, corporation, company,
unincorporated association or organization, government body,
syndicate or other entity, whether or not having legal status;
5
(aw) "REDBACK" means Redback Networks Inc., a corporation existing
under the laws of the State of Delaware;
(ax) "REDBACK COMMON SHARE" means a share of common stock, par
value U.S. $0.0001, in the capital of Redback and any other
securities into which such share may be changed;
(ay) "REDBACK CONTROL TRANSACTION" has the meaning ascribed thereto
in the Exchangeable Share Provisions;
(az) "REDBACK ELECTED SHARE" means any Abatis Share that the holder
shall have elected, in a duly completed Letter of Transmittal
and Election Form deposited with the Depositary no later than
the Election Deadline, to transfer to Exchangeco under the
Arrangement for a fraction of a Redback Common Share, or that
is deemed to be a Redback Elected Share pursuant to section
2.3(a);
(ba) "REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed
thereto in section 5.2(a);
(bb) "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in
section 5.2(a);
(bc) "REDEMPTION DATE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
(bd) "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between Redback and the Shareholders' Agent, as
contemplated in section 2.6(d) of the Arrangement Agreement;
(be) "REPLACEMENT OPTION" has the meaning ascribed thereto in
section 2.2(d), and, when used in the plural in a context
where the number of such options is relevant, means the number
of Redback Common Shares issuable under such Replacement
Option once such option has fully vested;
(bf) "SHAREHOLDERS' AGENT" means Xxxxxx Xxxxxxx, in his capacity as
shareholders' agent under the Escrow Agreement or the
Registration Rights Agreement, as the case may be, and
includes any successor shareholders' agent appointed under
either such agreement;
6
(bg) "TRANSFER AGENT" means Montreal Trust Company of Canada or
such other Person as may from time to time be appointed by
Exchangeco as the registrar and transfer agent for the
Exchangeable Shares;
(bh) "TRUSTEE" means Montreal Trust Company of Canada, in its
capacity as trustee under the Exchange Trust Agreement, and
includes any successor trustee appointed thereunder; and
(bi) "UNITED STATES DOLLAR EQUIVALENT" means, in respect of an
amount expressed in a currency other than United States
dollars (the "FOREIGN CURRENCY AMOUNT") at any date, the
product obtained by multiplying (a) the Foreign Currency
Amount by (b) the noon spot exchange rate on that date for
that foreign currency expressed in United States dollars as
reported by the Federal Reserve Bank of New York or, in the
event that spot exchange rate is not available, any publicly
disclosed and widely quoted exchange rate as quoted by an
arm's length third party on that date for the foreign currency
expressed in United States dollars as may be deemed by the
Board of Directors of Redback, acting reasonably, to be
appropriate for that purpose.
1.2 SECTIONS AND HEADINGS. The division of this Plan of Arrangement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to a section or an exhibit
refers to the specified section of or exhibit to this Plan of Arrangement.
1.3 NUMBER, GENDER AND PERSONS. In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular number include the
plural and VICE VERSA and words importing any gender include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this Plan of Arrangement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE 2
ARRANGEMENT
2.1 BINDING EFFECT. This Plan of Arrangement will become effective at, and
be binding at and after, the Effective Time on (i) Abatis, (ii) Redback, Newco
and Exchangeco, (iii)
7
all holders of Abatis Shares, (iv) all holders and all beneficial holders of
Exchangeable Shares, and (v) all holders of Abatis Options.
2.2 ARRANGEMENT. Commencing at the Effective Time, the following shall
occur and shall be deemed to occur in the following order without any further
act or formality:
(a) each Redback Elected Share will be transferred by the holder
thereof, without any act or formality on his part, to
Exchangeco in exchange for that number of fully paid and
non-assessable Redback Common Shares equal to the Exchange
Ratio, and the name of each such holder will be removed from
the register of holders of Abatis Shares and added to the
register of holders of Redback Common Shares, and Exchangeco
will be recorded as the registered holder of such Abatis
Shares so exchanged and will be deemed to be the legal and
beneficial owner thereof;
(b) each Exchangeable Elected Share will be transferred by the
holder thereof, without any act or formality on his part, to
Exchangeco in exchange for that number of fully paid and
non-assessable Exchangeable Shares equal to the Exchange
Ratio, and the name of each such holder will be removed from
the register of holders of Abatis Shares and added to the
register of holders of Exchangeable Shares, and Exchangeco
will be recorded as the registered holder of such Abatis
Shares so exchanged and will be deemed to be the legal and
beneficial owner thereof;
(c) each Abatis Share in respect of which no election has been
made by the holder thereof, or in respect of which an
effective election has not been made (other than Abatis Shares
held by Dissenting Shareholders who are ultimately entitled to
be paid the fair value of the Abatis Shares held by them) will
be deemed to be a Redback Elected Share and will be
transferred by the holder thereof, without any act or
formality on his part, to Exchangeco in exchange for that
number of fully paid and non-assessable Redback Common Shares
equal to the Exchange Ratio, and the name of each such holder
will be removed from the register of holders of Abatis Shares
and added to the register of holders of Redback Common Shares,
and Exchangeco will be recorded as the registered holder of
such Abatis Shares so exchanged and will be deemed to be the
legal and beneficial owner thereof;
(d) each Abatis Option shall, without any act or formality,
be exchanged by the holder thereof for an option (a
"REPLACEMENT OPTION") to purchase a number of Redback Common
Shares equal to the product of the Exchange Ratio multiplied
by the number of Class A Voting Common Shares of Abatis
subject to such
8
Abatis Option. Such Replacement Option shall provide for an
exercise price per Redback Common Share equal to the United
States Dollar Equivalent of the exercise price per share of
such Abatis Option immediately prior to the Effective Time
divided by the Exchange Ratio and rounded up to the nearest
whole cent. If the foregoing calculation results in a
Replacement Option being exercisable for a fraction of a
Redback Common Share, then the number of Redback Common Shares
subject to such Replacement Option shall be rounded down to
the next whole number of Redback Common Shares. The term to
expiry, conditions to and manner of exercise, vesting schedule
and other terms and conditions of each of the Replacement
Options shall be the same as the terms and conditions of the
Abatis Option for which it is exchanged, except that the
vesting provisions applicable thereto shall be as set out in
Appendix 3 hereto, and any document or agreement previously
evidencing an Abatis Option shall be deemed to be an agreement
between Redback and the holder thereof evidencing such
Replacement Option;
(e) each of the Persons entitled to receive Redback Common Shares
and Exchangeable Shares to be issued pursuant to this Plan of
Arrangement, (i) will be deemed to have irrevocably appointed
and authorized the Shareholders' Agent, as the agent of such
Person, to enter into and act under the Escrow Agreement on
his behalf in the manner contemplated in the Escrow Agreement,
(ii) will be deemed to have irrevocably authorized and
directed Redback and Exchangeco, and their respective
representatives and agents, to deposit, or cause to be
deposited, in escrow with the Escrow Agent, 10% of the Redback
Common Shares and 10% of the Exchangeable Shares to be issued
to such Person at the Effective Time under this Plan of
Arrangement (collectively, the "DEPOSITED SECURITIES"), (iii)
will be deemed to have irrevocably authorized the Escrow Agent
to hold and deal with such Person's Deposited Securities in
accordance with the terms of the Escrow Agreement, and (iv)
will be bound by the provisions of the Escrow Agreement in
respect of all of such Person's Deposited Securities; and
(f) each of the Persons entitled to receive Exchangeable Shares to
be issued pursuant to this Plan of Arrangement will be deemed
to have irrevocably appointed and authorized the Shareholders'
Agent, as the agent of such Person, to execute and deliver the
Registration Rights Agreement.
2.3 ELECTIONS
(a) Each Person who, at or prior to the Election Deadline, is a
holder of record of Abatis Shares, will be entitled, with
respect to all or a portion of such shares, to
9
make an election at or prior to the Election Deadline to
receive Exchangeable Shares or Redback Common Shares, or a
combination thereof, in exchange for such holder's Abatis
Shares, on the basis set forth herein and in the Letter of
Transmittal and Election Form; provided that, notwithstanding
anything to the contrary herein, a holder of Abatis Shares who
is not a Canadian Resident will not be entitled to elect to
receive Exchangeable Shares and any such election otherwise
made by any such holder shall be deemed to be an election to
receive Redback Elected Shares.
(b) Holders of Abatis Shares who are Canadian Residents, other
than any such holder who is exempt from tax under the ITA, and
who have elected to receive Exchangeable Shares shall be
entitled to make an income tax election pursuant to subsection
85(1) of the ITA or, if the holder is a partnership,
subsection 85(2) of the ITA (and in each case, where
applicable, the analogous provisions of provincial income tax
law) with respect to the transfer of their Abatis Shares to
Exchangeco by providing two signed copies of the necessary
election forms to the Depositary within 90 days following the
Effective Date, duly completed with the details of the number
of shares transferred and the applicable agreed amounts for
the purposes of such elections. Thereafter, subject to the
election forms complying with the provisions of the ITA (or
applicable provincial income tax law), the forms will be
signed by Exchangeco and returned to such holders of Abatis
Shares within 30 days after the receipt thereof by the
Depositary for filing with the Canada Customs and Revenue
Agency (or the applicable provincial taxing authority).
Exchangeco will not be responsible for the proper completion
of any election form and, except for Exchangeco's obligation
to sign and return duly completed election forms which are
received by the Depositary within 90 days of the Effective
Date, within 30 days after the receipt thereof by the
Depositary, Exchangeco will not be responsible for any taxes,
interest or penalties resulting from the failure by a holder
of Abatis Shares to properly complete or file the election
forms in the form and manner and within the time prescribed by
the ITA (or any applicable provincial legislation). In its
sole discretion, Exchangeco may choose to sign and return an
election form received by the Depositary more than 90 days
following the Effective Date, but Exchangeco will have no
obligation to do so.
2.4 ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Redback
Common Shares or Abatis Shares), reorganization, recapitalization or other like
change with respect to Redback Common Shares or
10
Abatis Shares occurring after the date of the Arrangement Agreement and prior to
the Effective Time.
ARTICLE 3
RIGHTS OF DISSENT
3.1 RIGHTS OF DISSENT. Holders of Abatis Shares may exercise rights of
dissent with respect to such shares pursuant to and in the manner set forth in
section 190 of the CBCA and this section 3.1 (the "DISSENT PROCEDURES") in
connection with the Arrangement; provided that, notwithstanding subsection
190(5) of the CBCA, the written objection to the Arrangement Resolution referred
to in subsection 190(5) of the CBCA must be received by Abatis not later than
5:00 p.m. (Vancouver time) on the last Business Day preceding the Meeting Date.
Holders of Abatis Shares who duly exercise such rights of dissent and who:
(a) are ultimately entitled to be paid fair value for their Abatis
Shares shall be deemed to have transferred such Abatis Shares
to Exchangeco, to the extent the fair value therefor is paid
by Exchangeco, and to Abatis, to the extent the fair value
therefor is paid by Abatis, and, in the case of Abatis Shares
so transferred to Abatis, such shares shall be cancelled on
the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair
value for their Abatis Shares shall be deemed to have
participated in the Arrangement on the same basis as a
non-dissenting holder of Abatis Shares and shall receive
Redback Common Shares on the basis determined in accordance
with section 2.2(c),
but in no case shall Redback, Exchangeco, Newco, Abatis or any other Person be
required to recognize such holders as holders of Abatis Shares after the
Effective Time, and the names of such holders of Abatis Shares shall be deleted
from the registers of holders of Abatis Shares at the Effective Time.
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES. Where a
holder has elected in accordance with Article 2 to receive Exchangeable Shares
in exchange for such holder's Abatis Shares, Redback shall, as soon as
practicable following the later of the Effective Date and the surrender to the
Depositary for cancellation of certificates representing such
11
holder's Abatis Shares, together with such other documents and instruments as
would have been required to effect the transfer of the shares formerly
represented by such certificates under the CBCA and the by-laws of Abatis and
such additional documents and instruments as the Depositary may reasonably
require, cause the Depositary to deliver to such holder a certificate
representing 90% of that number (rounded down to the nearest whole number) of
Exchangeable Shares which such holder has the right to receive (together with
any dividends or distributions with respect thereto pursuant to section 4.4) and
the certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Abatis Shares that are Exchangeable Elected Shares
which is not registered in the transfer records of Abatis, a certificate
representing the proper number of Exchangeable Shares may be issued to the
transferee if the certificate representing such Abatis Shares is presented to
the Depositary, accompanied by all documents required to evidence and effect
such transfer to the transferee. Until surrendered as contemplated by this
section 4.1, each certificate which immediately prior to the Effective Time
represented Abatis Shares that are Exchangeable Elected Shares shall be deemed
at all times after the Effective Time to represent only the right to receive
upon such surrender (i) the certificate representing Exchangeable Shares as
contemplated by this section 4.1, and (ii) any dividends or distributions with a
record date after the Effective Time theretofore paid or payable with respect to
Exchangeable Shares as contemplated by section 4.4.
4.2 EXCHANGE OF CERTIFICATES FOR REDBACK COMMON SHARES. Where a holder has
elected or is deemed to have elected in accordance with Article 2 to receive
Redback Common Shares in exchange for such holder's Abatis Shares, Redback
shall, as soon as practicable following the later of the Effective Date and the
surrender to the Depositary for cancellation of certificates representing such
holder's Abatis Shares, together with such other documents and instruments as
would have been required to effect the transfer of the shares formerly
represented by such certificates under the CBCA and the by-laws of Abatis and
such additional documents and instruments as the Depositary may reasonably
require, cause the Depositary to deliver to such holder a certificate
representing 90% of that number (rounded down to the nearest whole number) of
Redback Common Shares which such holder has the right to receive (together with
any dividends or distributions with respect thereto pursuant to section 4.4) and
the certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Abatis Shares that are or are deemed to be Redback
Elected Shares which is not registered in the transfer records of Abatis, a
certificate representing the proper number of Redback Common Shares may be
issued to the transferee if the certificate representing such Abatis Shares is
presented to the Depositary, accompanied by all documents required to evidence
and effect such transfer to the transferee. Until surrendered as contemplated by
this section 4.2, each certificate which
12
immediately prior to the Effective Time represented one or more outstanding
Abatis Shares that are or are deemed to be Redback Elected Shares shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender (i) the certificate representing Redback Common
Shares as contemplated by this section 4.2, and (ii) any dividends or
distributions with a record date after the Effective Time theretofore paid or
payable with respect to Redback Common Shares as contemplated by section 4.4.
4.3 DEPOSIT OF SECURITIES IN ESCROW. At or promptly after the Effective
Time, Exchangeco shall deposit, or cause to be deposited, with the Escrow Agent
share certificates representing all of the Redback Common Shares and
Exchangeable Shares comprising the Deposited Securities, being in the aggregate
certificates representing all of the Escrow Securities, all of which shall be
held and dealt with in accordance with the terms of the Escrow Agreement.
4.4 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No dividends
or other distributions declared or made after the Effective Time with respect to
Exchangeable Shares or Redback Common Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered certificate
which immediately prior to the Effective Time represented outstanding Abatis
Shares that were exchanged pursuant to section 2.2, unless and until the holder
of record of such certificate shall surrender such certificate in accordance
with section 4.1 or 4.2. Subject to applicable law, at the time of such
surrender of any such certificate (or in the case of clause (ii) below, at the
appropriate payment date), there shall be paid to the holder of record of the
certificates representing whole Abatis Shares, without interest, (i) the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Exchangeable Share or Redback Common
Share, as the case may be, and (ii) on the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole Exchangeable Share or Redback Common Share, as the case
may be.
4.5 NO FRACTIONAL SHARES. No certificates or scrip representing fractional
Exchangeable Shares or fractional Redback Common Shares shall be issued upon the
surrender for exchange of certificates pursuant to section 4.1 and 4.2 and no
dividend, stock split or other change in the capital structure of Exchangeco or
Redback shall relate to any such fractional security and such fractional
interests shall not entitle the owner thereof to exercise any rights as a
security holder of Exchangeco or Redback, as the case may be. In lieu of any
such fractional securities, each Person otherwise entitled to a fractional
interest in an Exchangeable Share or to a
13
fractional interest in a Redback Common Share will receive a cash payment from
the Depositary equal to the product of such fractional interest multiplied by
the Current Market Price on the Effective Date. Redback and Exchangeco shall
from time to time as necessary provide the Depositary with funds sufficient to
satisfy these obligations. The aggregate number of Exchangeable Shares and the
aggregate number of Redback Common Shares for which no certificates are issued
as a result of the foregoing provisions of this section 4.5 shall be deemed to
have been surrendered by the Depositary, on behalf of the owners thereof, to
Exchangeco or Redback, as the case may be, for no additional consideration at
the Effective Time.
4.6 LOST CERTIFICATES. In the event any certificate which immediately prior
to the Effective Time represented one or more outstanding Abatis Shares that
were exchanged pursuant to section 2.2 shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed, the Depositary will issue in
exchange for such lost, stolen or destroyed certificate, cash and/or one or more
certificates representing one or more Exchangeable Shares or Redback Common
Shares (and any dividends or distributions with respect thereto) deliverable in
accordance with such holder's Letter of Transmittal and Election Form. When
authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the Person to whom certificates representing Exchangeable Shares or
Redback Common Shares are to be issued shall, as a condition precedent to the
issuance thereof, give a bond satisfactory to Exchangeco or Redback, as the case
may be, and their respective transfer agents in such sum as Exchangeco or
Redback, as the case may be, may direct or otherwise indemnify Exchangeco or
Redback, as the case may be, in a manner satisfactory to Exchangeco or Redback,
as the case may be, against any claim that may be made against Exchangeco or
Redback, as the case may be, with respect to the certificate alleged to have
been lost, stolen or destroyed.
4.7 EXTINCTION OF RIGHTS. Any certificate which immediately prior to the
Effective Time represented outstanding Abatis Shares that were exchanged
pursuant to section 2.2 and not deposited, with all other instruments required
by section 4.1 or 4.2, on or prior to the third anniversary of the Effective
Date shall cease to represent a claim or interest of any kind or nature as a
shareholder of Exchangeco or Redback. On such date, the Exchangeable Shares or
Redback Common Shares to which the former registered holder of the certificate
referred to in the preceding sentence was ultimately entitled shall be deemed to
have been surrendered to Exchangeco or Redback, as the case may be, together
with all entitlements to dividends, distributions and interest thereon held for
such former registered holder. None of Redback, Exchangeco, Newco, Abatis or the
Depositary shall be liable to any person in respect of any
14
Redback Common Shares or Exchangeable Shares (or dividends, distributions and
interest in respect thereof) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
4.8 LOCK-UP OF SHARES ISSUED PURSUANT TO THE ARRANGEMENT. Notwithstanding
any other provision of this Plan of Arrangement or any of the documents referred
to herein or contemplated hereby, none of the Persons entitled to receive the
Exchangeable Shares and Redback Common Shares to be issued pursuant to the
Arrangement, the Redback Common Shares to be issued upon the exchange of the
Exchangeable Shares from time to time or the Redback Common Shares to be issued
from time to time upon the exercise of the Replacement Options shall, directly
or indirectly, sell, offer to sell, contract to sell (including any short sale),
grant any option or otherwise transfer or dispose of:
(a) any of the shares so issued to such holder, at any time on or
before the 60th day following the Effective Date; or
(b) more than 50% of the shares so issued to such holder, at any
time during the period commencing on the 60th day following
the Effective Date and ending on the 90th day following the
Effective Date;
and each of Redback or Exchangeco may, at its discretion, cause the following
legend to be affixed on the certificates representing such shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A LOCK-UP PROVISION UNDER THE PLAN OF ARRANGEMENT UNDER
SECTION 192 OF THE CANADA BUSINESS CORPORATIONS ACT BETWEEN
ABATIS SYSTEMS CORPORATION AND ITS SHAREHOLDERS, AMONG OTHERS,
PURSUANT TO WHICH THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE AGREES THAT SUCH HOLDER SHALL NOT OFFER TO
SELL, CONTRACT TO SELL OR OTHERWISE SELL, DISPOSE OF OR GRANT
ANY RIGHTS WITH RESPECT TO SUCH SECURITIES FOR A CERTAIN
PERIOD OF TIME (NOT TO EXCEED 90 DAYS) AFTER
_____________________________________ , 2000. THE FOREGOING
RESTRICTION PRECLUDES SUCH HOLDER FROM ENGAGING IN ANY HEDGING
OR OTHER TRANSACTIONS THAT MAY LEAD TO OR RESULT IN A SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE DURING SUCH
PERIOD EVEN IF SUCH SECURITIES WOULD BE SOLD BY SOMEONE OTHER
THAN THE HOLDER"
and provide stop-transfer instructions to their respective transfer agents with
respect such restrictions.
15
4.9 WITHHOLDING AND SALE RIGHTS. Each of Exchangeco, Newco, Redback and
the Depositary shall be entitled to deduct and withhold from (i) any Redback
Common Shares or other consideration otherwise issuable or payable pursuant to
this Plan of Arrangement to any holder of Abatis Shares who is not a Canadian
Resident, or (ii) any dividend or consideration otherwise payable to any holder
of Abatis Shares, Redback Common Shares or Exchangeable Shares, such amounts as
Exchangeco, Newco, Redback or the Depositary, respectively, is required to
deduct and withhold with respect to such issuance or payment, as the case may
be, under the ITA, the United States Internal Revenue Code of 1986 or any
provision of provincial, state, local or foreign tax law, in each case as
amended. To the extent that the amount so required to be deducted or withheld
from the Redback Common Shares, dividends or consideration otherwise issuable or
payable to a holder exceeds the cash portion of the consideration otherwise
payable to such holder, each of Exchangeco, Newco, Redback and the Depositary is
hereby authorized to sell or otherwise dispose of, at such times and at such
prices as it determines, in its sole discretion, such portion of the Redback
Common Shares or other non-cash consideration otherwise issuable or payable to
such holder as is necessary to provide sufficient funds to Exchangeco, Newco,
Redback or the Depositary, as the case may be, to enable it to comply with such
deduction or withholding requirement, and shall notify the holder thereof and
remit to such holder any unapplied balance of the net proceeds of such sale or
disposition (after deducting applicable sale commissions and any other
reasonable expenses relating thereto) in lieu of the Redback Common Shares or
other consideration so sold or disposed of. To the extent that amounts are so
withheld or Redback Common Shares or other consideration are so sold or disposed
of, such withheld amounts, or shares or other consideration so sold or disposed
of, shall be treated for all purposes as having been paid to the holder of the
shares in respect of which such deduction, withholding, sale or disposition was
made, provided that such withheld amounts, or the net proceeds of such sale or
disposition, as the case may be, are actually remitted to the appropriate taxing
authority. None of Exchangeco, Newco, Redback or the Depositary shall be
obligated to seek or obtain a minimum price for any of the Redback Common Shares
or other consideration sold or disposed of by it hereunder, nor shall any of
them be liable for any loss arising out of any such sale or disposition.
16
ARTICLE 5
CERTAIN RIGHTS OF NEWCO TO ACQUIRE EXCHANGEABLE SHARES
5.1 NEWCO LIQUIDATION CALL RIGHT
(a) Newco shall have the overriding right (the "LIQUIDATION CALL RIGHT"),
in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of Exchangeco pursuant to Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less than
all of the holders of Exchangeable Shares (other than any holder of
Exchangeable Shares which is an Affiliate of Redback) on the
Liquidation Date all but not less than all of the Exchangeable Shares
held by each such holder on payment by Newco of an amount per share
(the "LIQUIDATION CALL PURCHASE PRICE") equal to the Current Market
Price of a Redback Common Share on the last Business Day prior to the
Liquidation Date, which, if such right is exercised, shall be
satisfied in full by Newco causing to be delivered to such holder one
Redback Common Share, plus, to the extent not paid by Exchangeco, an
additional amount equivalent to the full amount of all declared and
unpaid dividends on each such Exchangeable Share held by such holder
on any dividend record date which occurred prior to the date of
purchase by Newco (the "DIVIDEND AMOUNT"). In the event of the
exercise of the Liquidation Call Right by Newco, each holder shall be
obligated to sell all the Exchangeable Shares held by the holder to
Newco on the Liquidation Date on payment by Newco to the holder of the
Liquidation Call Purchase Price for each such share, and thereafter
Exchangeco shall have no obligation to redeem any Exchangeable Shares.
(b) To exercise the Liquidation Call Right, Newco must notify the Transfer
Agent, as agent for the holders of Exchangeable Shares, and Exchangeco
of Newco's intention to exercise such right at least 45 days before
the Liquidation Date in the case of a voluntary liquidation,
dissolution or winding-up of Exchangeco and at least five Business
Days before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding-up of Exchangeco. The Transfer
Agent will notify the holders of Exchangeable Shares as to whether or
not Newco has exercised the Liquidation Call Right forthwith after the
expiry of the period during which the same may be exercised by Newco.
If Newco exercises the Liquidation Call Right, then on the Liquidation
Date Newco will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to
the Liquidation Call Purchase Price.
17
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, Newco shall deposit with the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of Redback Common Shares deliverable
by Newco and a cheque or cheques of Newco payable upon presentation at
any branch of the bankers of Newco representing the aggregate Dividend
Amount in payment of the total Liquidation Call Purchase Price, less
any amounts withheld pursuant to section 4.9 hereof. Provided that
Newco has complied with the immediately preceding sentence, on and
after the Liquidation Date the rights of each holder of Exchangeable
Shares will be limited to receiving the Liquidation Call Purchase
Price in respect of each Exchangeable Share held by such holder,
payable by Newco upon presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such holder
and the holder shall on and after the Liquidation Date be considered
and deemed for all purposes to be the holder of the Redback Common
Shares to which it is entitled. Upon surrender to the Transfer Agent
of a certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be required
to effect a transfer of Exchangeable Shares under the CBCA and the
articles of Exchangeco and such additional documents and instruments
as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive
in exchange therefor, and the Transfer Agent on behalf of Newco shall
deliver to such holder, certificates representing the Redback Common
Shares to which the holder is entitled and a cheque or cheques of
Newco payable at par at any branch of the bankers of Newco in payment
of the remaining portion, if any, of the total Liquidation Call
Purchase Price, less any amounts withheld pursuant to section 4.9
hereof. If Newco does not exercise the Liquidation Call Right in the
manner described above or if Newco exercises the Liquidation Call
Right but fails to complete such transaction in accordance with the
requirements set out in this section 5.1, on the Liquidation Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the liquidation price otherwise payable by
Exchangeco in connection with the liquidation, dissolution or
winding-up of Exchangeco pursuant to Article 5 of the Exchangeable
Share Provisions.
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5.2 NEWCO REDEMPTION CALL RIGHT. In addition to Newco's rights contained
in the Exchangeable Share Provisions, including, without limitation, the
Retraction Call Right (as defined in the Exchangeable Share Provisions), Newco
shall have the following rights in respect of the Exchangeable Shares:
(a) Newco shall have the overriding right (the "REDEMPTION CALL RIGHT"),
notwithstanding the proposed redemption of the Exchangeable Shares by
Exchangeco pursuant to Article 7 of the Exchangeable Share Provisions,
to purchase from all but not less than all of the holders of
Exchangeable Shares (other than any holder of Exchangeable Shares
which is an Affiliate of Redback) on the Redemption Date all but not
less than all of the Exchangeable Shares held by each such holder on
payment by Redback to each holder of an amount per Exchangeable Share
(the "REDEMPTION CALL PURCHASE PRICE") equal to the Current Market
Price of a Redback Common Share on the last Business Day prior to the
Redemption Date, which shall be satisfied in full by Newco causing to
be delivered to such holder one Redback Common Share, plus the
Dividend Amount. In the event of the exercise of the Redemption Call
Right by Newco, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Newco on the Redemption Date
on payment by Newco to the holder of the Redemption Call Purchase
Price for each such share, and Exchangeco shall have no obligation to
redeem, or to pay any Dividend Amount in respect of, such shares so
purchased by Newco.
(b) To exercise the Redemption Call Right, Newco must notify the Transfer
Agent, as agent for the holders of Exchangeable Shares, and Exchangeco
of Newco's intention to exercise such right at least 60 days before
the Redemption Date, except in the case of a redemption occurring as a
result of a Redback Control Transaction, an Exchangeable Share Voting
Event or an Exempt Exchangeable Share Voting Event, in which case
Newco shall so notify the Transfer Agent and Exchangeco on or before
the Redemption Date. The Transfer Agent will notify the holders of the
Exchangeable Shares as to whether or not Newco has exercised the
Redemption Call Right forthwith after the expiry of the period during
which the same may be exercised by Newco. If Newco exercises the
Redemption Call Right, on the Redemption Date Newco will purchase and
the holders will sell all of the Exchangeable Shares then outstanding
for a price per share equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, Newco shall deposit with the
Transfer Agent, on or
19
before the Redemption Date, certificates representing the aggregate
number of Redback Common Shares deliverable by Newco and a cheque or
cheques of Newco payable upon presentation at any branch of the
bankers of Newco representing the aggregate Dividend Amount in payment
of the total Redemption Call Purchase Price, less any amounts withheld
pursuant to section 4.9 hereof. Provided that Newco has complied with
the immediately preceding sentence, on and after the Redemption Date
the rights of each holder of Exchangeable Shares will be limited to
receiving the Redemption Call Purchase Price in respect of each
Exchangeable Share held by such holder, payable by Newco upon
presentation and surrender by the holder of certificates representing
the Exchangeable Shares held by such holder and the holder shall on
and after the Redemption Date be considered and deemed for all
purposes to be the holder of the Redback Common Shares to which it is
entitled. Upon surrender to the Transfer Agent of a certificate or
certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the CBCA and the by-laws of
Exchangeco and such additional documents and instruments as the
Transfer Agent may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of Newco shall deliver to
such holder, certificates representing the Redback Common Shares to
which the holder is entitled less any amounts withheld pursuant to
section 4.9 hereof. If Newco does not exercise the Redemption Call
Right in the manner described above or if Newco exercises the
Redemption Call Right but fails to complete such transaction in
accordance with the requirements set out in this section 5.2, on the
Redemption Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the redemption price
otherwise payable by Exchangeco in connection with the redemption of
the Exchangeable Shares pursuant to Article 7 of the Exchangeable
Share Provisions.
ARTICLE 6
AMENDMENTS
6.1 Abatis reserves the right to amend, modify and/or supplement this Plan
of Arrangement at any time and from time to time prior to the Effective Date,
provided that each such amendment, modification and/ or supplement must be (i)
set out in writing, (ii) approved by Redback, (iii) filed with the Court and, if
made following the Meeting, approved by the Court, and (iv) communicated to
holders of Abatis Shares and Abatis Options if and as required by the Court.
20
6.2 Any amendment, modification or supplement to this Plan of Arrangement
may be proposed by Abatis at any time prior to the Meeting (provided that
Redback shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted by the Persons voting at the
Meeting (other than as may be required under the Interim Order), shall become
part of this Plan of Arrangement for all purposes.
6.3 Any amendment, modification or supplement to this Plan of Arrangement
that is approved by the Court following the Meeting shall be effective only if
(i) it is consented to by each of Abatis and Redback, and (ii) if required by
the Court, it is consented to by holders of the Abatis Shares or Abatis Options
voting in the manner directed by the Court.
6.4 Any amendment, modification or supplement to this Plan of Arrangement
may be made following the Effective Date unilaterally by Redback, provided that
it concerns a matter which, in the reasonable opinion of Redback, is of an
administrative nature required to better give effect to the implementation of
this Plan of Arrangement and is not adverse to the financial or economic
interests of any holder of Abatis Shares or Abatis Options.
ARTICLE 7
FURTHER ASSURANCES
7.1 Notwithstanding that the transactions and events set out herein shall
occur and be deemed to occur in the order set out in this Plan of Arrangement
without any further act or formality, each of the parties to the Arrangement
Agreement shall make, do and execute, or cause to be made, done or executed, all
such further acts, deeds, agreements, transfers, assurances, instruments or
documents as may reasonably be required by any of them in order further to
document or evidence any of the transactions or events set out herein.
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APPENDIX 1
PROVISIONS ATTACHING TO THE
EXCHANGEABLE SHARES OF 610381 B.C. INC.
The Exchangeable Shares shall have the following rights, privileges,
restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control of,
that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control of"), as applied to any Person, means the
possession by another Person, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
first mentioned Person, whether through the ownership of voting
securities, by contract or otherwise;
"ARRANGEMENT AGREEMENT" means the agreement made as of July 30, 2000
among Redback, Exchangeco and Abatis Systems Corporation, as amended,
supplemented and/or restated in accordance therewith prior to the
Effective Date, providing for, among other things, the Plan of
Arrangement;
"BOARD OF DIRECTORS" means the board of directors of Exchangeco;
"BUSINESS DAY" means any day on which commercial banks are open for
business in Xxx Xxxxxxxxx, Xxxxxxxxxx xxx Xxxxxxxxx, Xxxxxxx Xxxxxxxx
other than a Saturday, a Sunday or a day observed as a holiday in
Vancouver, British Columbia under the laws of the Province of British
Columbia or the federal laws of Canada or in San Francisco, California
under the laws of the State of California or the federal laws of the
United States of America;
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed
in a foreign currency (the "FOREIGN CURRENCY AMOUNT") at any date the
product obtained by multiplying the Foreign Currency Amount by the
noon spot exchange
rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, any publicly disclosed and widely
quoted exchange rate as quoted by an arm's length third party on such
date for such foreign currency expressed in Canadian dollars as may be
deemed by the Board of Directors, acting reasonably, to be appropriate
for such purpose;
"CBCA" means the CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c.
C-44, as amended;
"COMMON SHARES" means the common shares in the capital of Exchangeco;
"COMPANY ACT" means the COMPANY ACT, R.S.B.C. 1996, c. 62, as amended;
"CURRENT MARKET PRICE" means, in respect of a Redback Common Share on
any date, the Canadian Dollar Equivalent of the average of the closing
sale price of Redback Common Shares during a period of 20 consecutive
trading days ending not more than three trading days before such date
on the NNM, or, if Redback Common Shares are not then quoted on the
NNM, on such other stock exchange or automated quotation system on
which Redback Common Shares are listed or quoted, as the case may be,
as may be selected by the Board of Directors, acting reasonably, for
such purpose; provided, however, that if the Redback Common Shares are
not quoted on any stock exchange or automated quotation system, then
the Current Market Price of a Redback Common Share shall be determined
by the Board of Directors, acting reasonably, in good faith and in its
sole discretion, and provided further that any such selection, opinion
or determination by the Board of Directors shall be conclusive and
binding;
"DIVIDEND AMOUNT" means an amount equal to and in satisfaction of all
declared and unpaid dividends on an Exchangeable Share held by a
holder on any dividend record date which occurred prior to the date of
purchase of such shares by Newco from such holder;
"EXCHANGECO" means 610381 B.C. Inc., a company existing under the laws
of the Province of British Columbia;
"EXCHANGE TRUST AGREEMENT" means the Exchange Trust Agreement among
Redback, Exchangeco and the Trustee, to be entered into in connection
with the Plan of Arrangement substantially in the form and content of
Exhibit D annexed to the Arrangement Agreement, with such changes
thereto as the parties to the
2
Arrangement Agreement, acting reasonably, may agree, in accordance
with the terms thereof;
"EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect of which
holders of Exchangeable Shares are entitled, pursuant to the Company
Act or other applicable law, to vote as shareholders of Exchangeco,
other than an Exempt Exchangeable Share Voting Event and, for greater
certainty, excluding any matter in respect of which holders of
Exchangeable Shares are entitled to vote (or to instruct the Trustee
to vote) in their capacity as Beneficiaries under (and as such term is
defined in) the Exchange Trust Agreement;
"EXCHANGEABLE SHARES" mean the non-voting exchangeable shares in the
capital of Exchangeco having the rights, privileges, restrictions and
conditions set forth herein;
"EXEMPT EXCHANGEABLE SHARE VOTING EVENT" means any matter in respect
of which holders of Exchangeable Shares are entitled to vote as
shareholders of Exchangeco in order to approve or disapprove, as
applicable, any change to the rights attached to, the Exchangeable
Shares, where the approval or disapproval, as applicable, of such
change would be required to maintain the equivalence of the
Exchangeable Shares and Redback Common Shares;
"FINAL ORDER" has the meaning ascribed thereto in the Plan of
Arrangement;
"HOLDER" means, when used with reference to the Exchangeable Shares, a
holder of Exchangeable Shares as shown from time to time on the
register of members maintained by or on behalf of Exchangeco in
respect of the Exchangeable Shares;
"LIQUIDATION AMOUNT" has the meaning ascribed thereto in section 5.1
of these share provisions;
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan
of Arrangement;
"LIQUIDATION DATE" has the meaning ascribed thereto in section 5.1 of
these share provisions;
"NEWCO" means 610380 B.C. Inc., a corporation existing under laws of
the Province of British Columbia and being a wholly-owned subsidiary
of Redback;
3
"NEWCO CALL NOTICE" has the meaning ascribed thereto in section 6.3 of
these share provisions;
"NNM" means the distinct tier of The Nasdaq Stock Market referred to
as the Nasdaq National Market;
"PERSON" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor,
administrator, legal personal representative, estate, group, body
corporate, corporation, company, unincorporated association or
organization, government body, syndicate or other entity, whether or
not having legal status;
"PLAN OF ARRANGEMENT" means the plan of arrangement under section 192
of the CBCA, substantially in the form and content of Exhibit E
annexed to the Arrangement Agreement and any amendments or variations
thereto made in accordance with section 7.1 of the Arrangement
Agreement or Article 6 of the Plan of Arrangement or made at the
direction of the Court in the Final Order;
"PREFERRED SHARES" means the preferred shares in the capital of
Exchangeco;
"PURCHASE PRICE" has the meaning ascribed thereto in section 6.3 of
these share provisions;
"REDBACK" means Redback Networks Inc., a corporation existing under
the laws of the State of Delaware, and any successor corporation
thereto;
"REDBACK COMMON SHARE" mean a share of common stock, par value U.S.
$0.0001, in the capital of Redback, and any other securities into
which such share may be changed;
"REDBACK CONTROL TRANSACTION" means any merger, amalgamation, tender
offer, material sale of shares or rights or interests therein or
thereto or similar transactions involving Redback, or any proposal to
do so;
"REDBACK DIVIDEND DECLARATION DATE" means the date on which the board
of directors of Redback declares any dividend on Redback Common
Shares;
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
the Plan of Arrangement;
4
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan
of Arrangement;
"REDEMPTION DATE" means the date, if any, established by the Board of
Directors for the redemption by Exchangeco of all but not less than
all of the outstanding Exchangeable Shares pursuant to Article 7 of
these share provisions, which date shall be no earlier than January
31, 2010, unless:
(a) there are outstanding fewer than 5% of the number of Exchangeable
Shares originally issued and outstanding on the date of filing
under the CBCA of articles of arrangement attaching to the Plan
of Arrangement (other than Exchangeable Shares held by Redback
and its Affiliates, and as such number of shares may be adjusted
as deemed appropriate by the Board of Directors to give effect to
any subdivision or consolidation of, or stock dividend on, the
Exchangeable Shares, any issue or distribution of rights to
acquire Exchangeable Shares or securities exchangeable for or
convertible into Exchangeable Shares, any issue or distribution
of other securities or rights or evidences of indebtedness or
assets, or any other capital reorganization or other transaction
affecting the Exchangeable Shares), in which case the Board of
Directors may accelerate such redemption date to such date prior
to January 31, 2010 as it may determine, upon at least 60 days'
prior written notice to the registered holders of the
Exchangeable Shares;
(b) a Redback Control Transaction occurs, in which case, provided
that the Board of Directors determines, in good faith and in its
sole discretion, after considering the interests of the holders
of the Exchangeable Shares as well as the interests of all other
persons which the Board of Directors is required to consider,
that it is not reasonably practicable to substantially replicate
the terms and conditions of the Exchangeable Shares in connection
with such Redback Control Transaction and that the redemption of
all but not less than all of the outstanding Exchangeable Shares
is necessary to enable the completion of such Redback Control
Transaction in accordance with its terms, the Board of Directors
may accelerate such redemption date to such date prior to January
31, 2010 as they may determine, upon such number of days' prior
written notice to the registered holders of the Exchangeable
Shares as the Board of Directors may determine to be reasonably
practicable in the circumstances;
5
(c) an Exchangeable Share Voting Event is proposed, in which case,
provided that the Board of Directors has determined, in good
faith and in its sole discretion, after considering the interests
of the holders of the Exchangeable Shares as well as the
interests of all other persons which the Board of Directors is
required to consider, that it is not reasonably practicable to
accomplish the business purpose intended by the Exchangeable
Share Voting Event, which business purpose must be bona fide and
not for the primary purpose of causing the occurrence of a
Redemption Date, in any other commercially reasonable manner that
does not result in an Exchangeable Share Voting Event, the
redemption date shall be the Business Day prior to the record
date for any meeting or vote of the holders of the Exchangeable
Shares to consider the Exchangeable Share Voting Event and the
Board of Directors shall give such number of days' prior written
notice of such redemption to the registered holders of the
Exchangeable Shares as the Board of Directors may determine to be
reasonably practicable in the circumstances; or
(d) an Exempt Exchangeable Share Voting Event is proposed and the
holders of the Exchangeable Shares fail to take the necessary
action at a meeting or other vote of holders of Exchangeable
Shares, to approve or disapprove, as applicable, the Exempt
Exchangeable Share Voting Event, in which case the redemption
date shall be the Business Day following the day on which the
holders of the Exchangeable Shares failed to take such action and
the Board of Directors shall give such number of days' prior
written notice of such redemption to the registered holders of
the Exchangeable Shares as the Board of Directors may determine
to be reasonably practicable in such circumstances,
provided, however, that the accidental failure or omission to give any
notice of redemption under clauses (a), (b), (c) or (d) above to less
than 10% of such holders of Exchangeable Shares shall not affect the
validity of any such redemption;
"REDEMPTION PRICE" has the meaning ascribed thereto in section 7.1 of
these share provisions;
"RETRACTED SHARES" has the meaning ascribed thereto in section 6.1(a)
of these share provisions;
6
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in section
6.1(c) of these share provisions;
"RETRACTION DATE" has the meaning ascribed thereto in section 6.1(b)
of these share provisions;
"RETRACTION PRICE" has the meaning ascribed thereto in section 6.1 of
these share provisions;
"RETRACTION REQUEST" has the meaning ascribed thereto in section 6.1
of these share provisions;
"SUPPORT AGREEMENT" means the Support Agreement among Redback, Newco
and Exchangeco, to be entered into in connection with the Plan of
Arrangement substantially in the form and content of Exhibit G annexed
to the Arrangement Agreement, with such changes thereto as the parties
thereto, acting reasonably, may agree, in accordance with the terms
thereof;
"TRANSFER AGENT" means Montreal Trust Company of Canada or such other
Person as may from time to time be appointed by Exchangeco as the
registrar and transfer agent for the Exchangeable Shares;
"TRANSFER AGENT'S OFFICE" means the Transfer Agent's principal
corporate office in the City of Vancouver or such other office of the
Transfer Agent as may be specified, from time to time, by Exchangeco
by notice to the holders of Exchangeable Shares; and
"TRUSTEE" means the trustee chosen by Redback and Abatis Systems
Corporation, acting reasonably, to act as trustee under the Exchange
Trust Agreement, being a corporation organized and existing under the
federal laws of Canada and authorized to carry on the business of a
trust company in each of the Provinces of Canada and any successor
trustee appointed under the Exchange Trust Agreement.
7
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the
Common Shares and any other shares ranking junior to the Exchangeable Shares,
but shall rank junior to the Preferred Shares, with respect to the payment of
dividends and the distribution of assets in the event of the liquidation,
dissolution or winding-up of Exchangeco, whether voluntary or involuntary, or
any other distribution of the assets of Exchangeco among its members for the
purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, on each Redback Dividend
Declaration Date, declare a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on Redback Common Shares, in
an amount in cash for each Exchangeable Share in U.S. dollars, or the
Canadian Dollar Equivalent thereof on the Redback Dividend Declaration
Date, in each case, corresponding to the cash dividend declared on
each Redback Common Share;
(b) in the case of a stock dividend declared on Redback Common Shares to
be paid in Redback Common Shares, in such number of Exchangeable
Shares for each Exchangeable Share as is equal to the number of
Redback Common Shares to be paid on each Redback Common Share; or
(c) in the case of a dividend declared on Redback Common Shares in
property other than cash or Redback Common Shares, in such type and
amount of property for each Exchangeable Share as is the same as or
economically equivalent to (to be determined by the Board of Directors
as contemplated by section 3.5 hereof) the type and amount of property
declared as a dividend on each Redback Common Share.
Such dividends shall be paid out of money, assets or property of Exchangeco
properly applicable to the payment of dividends, or out of authorized but
unissued shares of Exchangeco, as applicable.
8
3.2 Cheques of Exchangeco payable upon presentation at any branch of the
bankers of Exchangeco shall be issued in respect of any cash dividends
contemplated by section 3.1(a) hereof and the sending of such a cheque to each
holder of an Exchangeable Share shall satisfy the cash dividend represented
thereby unless the cheque is not paid on presentation. Certificates registered
in the name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by section 3.1(b)
hereof and the sending of such a certificate to each holder of an Exchangeable
Share shall satisfy the stock dividend represented thereby. Any other type and
amount of property in respect of any dividends contemplated by section 3.1(c)
hereof shall be issued, distributed or transferred by Exchangeco in such manner
as the Board of Directors shall determine and the issuance, distribution or
transfer thereof by Exchangeco to each holder of an Exchangeable Share shall
satisfy the dividend represented thereby. No holder of an Exchangeable Share
shall be entitled to recover by action or other legal process against Exchangeco
any cash dividend that is represented by a cheque that has not been duly
presented to Exchangeco's bankers for payment or that otherwise remains
unclaimed for a period of six years from the date on which such dividend was
payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on Redback Common Shares.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which Exchangeco shall have sufficient moneys, assets or property properly
applicable to the payment of such dividends.
3.5 The Board of Directors shall determine, in good faith and in its sole
discretion, economic equivalence for the purposes of section 3.1 hereof, and
each such determination shall be conclusive and binding on Exchangeco and its
shareholders. In making each such determination, the following factors shall,
without excluding other factors determined by the Board of Directors to be
relevant, be considered by the Board of Directors:
9
(a) in the case of any stock dividend or other distribution payable in
Redback Common Shares, the number of such shares issued in proportion
to the number of Redback Common Shares previously outstanding;
(b) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase Redback Common Shares (or
securities exchangeable for or convertible into or carrying rights to
acquire Redback Common Shares), the relationship between the exercise
price of each such right, option or warrant and the Current Market
Price;
(c) in the case of the issuance or distribution of any other form of
property (including without limitation any shares or securities of
Redback of any class other than Redback Common Shares, any rights,
options or warrants other than those referred to in section 3.5(a)
above, any evidences of indebtedness of Redback or any assets of
Redback), the relationship between the fair market value (as
determined by the Board of Directors in the manner contemplated above)
of such property to be issued or distributed with respect to each
outstanding Redback Common Share and the Current Market Price;
(d) in the case of any subdivision, redivision or change of the then
outstanding Redback Common Shares into a greater number of Redback
Common Shares or the reduction, combination, consolidation or change
of the then outstanding Redback Common Shares into a lesser number of
Redback Common Shares or any amalgamation, merger, reorganization or
other transaction affecting Redback Common Shares, the effect thereof
upon the then outstanding Redback Common Shares; or
(e) in all such cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that such
consequences may differ from the taxation consequences to holders of
Redback Common Shares as a result of differences between taxation laws
of Canada and the United States (except for any differing consequences
arising as a result of differing marginal taxation rates and without
regard to the individual circumstances of holders of Exchangeable
Shares).
10
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, Exchangeco
shall not at any time without, but may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in section 10.2 of these
share provisions:
(a) pay any dividends on the Common Shares or any other shares ranking
junior to the Exchangeable Shares, other than stock dividends payable
in Common Shares or any such other shares ranking junior to the
Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable
Shares; or
(c) redeem or purchase any other shares of Exchangeco ranking equally with
the Exchangeable Shares with respect to the payment of dividends or on
any liquidation distribution.
The restrictions in sections 4.1(a), (b) and (c) above shall not apply if all
dividends on the outstanding Exchangeable Shares corresponding to dividends
declared and paid to date on Redback Common Shares shall have been declared and
paid on the Exchangeable Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of
Exchangeco or any other distribution of the assets of Exchangeco among its
members for the purpose of winding up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of Exchangeco in respect of each Exchangeable Share held by such holder on the
effective date (the "LIQUIDATION DATE") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of Exchangeco
among the holders of the Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount per share equal to the Current Market Price of a
Redback Common Share on the last Business Day prior to the Liquidation Date (the
"LIQUIDATION AMOUNT"), which shall be satisfied in full by Exchangeco causing to
be delivered to such holder one Redback Common Share, together with the Dividend
Amount.
11
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by Newco of the Liquidation Call Right, Exchangeco shall cause to be delivered
to the holders of the Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Company Act and the articles of Exchangeco and such additional documents and
instruments as the Transfer Agent and Exchangeco may reasonably require, at the
registered office of Exchangeco or at the Transfer Agent's Office. Payment of
the Liquidation Amount for each such Exchangeable Share shall be made by
delivery to each holder, at the address of the holder recorded in the register
of members of Exchangeco for the Exchangeable Shares or by holding for pick-up
by the holder at the registered office of Exchangeco or at the Transfer Agent's
Office, on behalf of Exchangeco of certificates representing Redback Common
Shares (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim or encumbrance) and a cheque of
Exchangeco payable upon presentation at any branch of the bankers of Exchangeco
in respect of the remaining portion, if any, of the total Liquidation Amount (in
each case less any amounts withheld on account of tax required to be deducted
and withheld therefrom) (without interest). On and after the Liquidation Date,
the holders of the Exchangeable Shares shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of
holders in respect thereof, other than the right to receive the Liquidation
Amount, unless payment of the total Liquidation Amount for such Exchangeable
Shares shall not be made upon presentation and surrender of share certificates
in accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Liquidation Amount has been paid
in the manner provided above. Exchangeco shall have the right at any time after
the Liquidation Date to deposit or cause to be deposited the total Liquidation
Amount in respect of the Exchangeable Shares represented by certificates that
have not at the Liquidation Date been surrendered by the holders thereof in a
custodial account with any chartered bank or trust company in Canada. Upon such
deposit being made, the rights of the holders of Exchangeable Shares after such
deposit shall be limited to receiving the Liquidation Amount (in each case less
any amounts withheld on account of tax required to be deducted and withheld
therefrom) (without interest) for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of the
total Liquidation Amount, the holders of the Exchangeable Shares shall
thereafter be considered and deemed for all purposes to be holders of Redback
Common Shares delivered to them.
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5.3 After Exchangeco has satisfied its obligations to pay the holders of
the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant
to Article 5 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of Exchangeco.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject
to the exercise by Newco of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require Exchangeco to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount per share equal to the Current Market Price of a Redback
Common Share on the last Business Day prior to the Retraction Date (the
"RETRACTION PRICE"), which shall be satisfied in full by Exchangeco causing to
be delivered to such holder one Redback Common Share for each Exchangeable Share
presented and surrendered by the holder, together with, on the payment date
therefor, the full amount of all declared and unpaid dividends on any such
Exchangeable Share held by such holder on any dividend record date which
occurred prior to the Retraction Date. To effect such redemption, the holder
shall present and surrender at the registered office of Exchangeco or at the
Transfer Agent's Office the certificate or certificates representing the
Exchangeable Shares which the holder desires to have Exchangeco redeem, together
with such other documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the Company Act and the articles of
Exchangeco and such additional documents and instruments as the Transfer Agent
and Exchangeco may reasonably require, together with a duly executed statement
(THE "RETRACTION REQUEST") in the form of Schedule A hereto or in such other
form as may be acceptable to Exchangeco:
(a) specifying that the holder desires to have all or any number specified
therein of the Exchangeable Shares represented by such certificate or
certificates (the "RETRACTED SHARES") redeemed by Exchangeco;
(b) stating the Business Day on which the holder desires to have
Exchangeco redeem the Retracted Shares (the "RETRACTION DATE"),
provided that the Retraction Date shall be not less than 10 Business
Days nor more than 15 Business Days after the date on which the
Retraction Request is received by Exchangeco and further provided
that, in the event that no such Business Day is specified by the
holder in the Retraction Request, the Retraction Date shall be deemed
to be the 15th
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Business Day after the date on which the Retraction Request is
received by Exchangeco; and
(c) acknowledging the overriding right (the "RETRACTION CALL RIGHT") of
Newco to purchase all but not less than all the Retracted Shares
directly from the holder and that the Retraction Request shall be
deemed to be a revocable offer by the holder to sell the Retracted
Shares to Newco in accordance with the Retraction Call Right on the
terms and conditions set out in section 6.3 below.
6.2 Subject to the exercise by Newco of the Retraction Call Right, upon
receipt by Exchangeco or the Transfer Agent in the manner specified in section
6.1 hereof of a certificate or certificates representing the Retracted Shares,
together with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Company Act and the articles of
Exchangeco and such additional documents and instruments as the Transfer Agent
and Exchangeco may reasonably require, together with a duly executed Retraction
Request, and provided that the Retraction Request is not revoked by the holder
in the manner specified in section 6.7, Exchangeco shall redeem the Retracted
Shares effective at the close of business on the Retraction Date and shall cause
to be delivered to such holder the total Retraction Price with respect to such
shares, provided that all declared and unpaid dividends for which the record
date has occurred prior to the Retraction Date shall be paid on the payment date
for such dividends. If only a part of the Exchangeable Shares represented by any
certificate is redeemed (or purchased by Newco pursuant to the Retraction Call
Right), a new certificate for the balance of such Exchangeable Shares shall be
issued to the holder at the expense of Exchangeco.
6.3 Upon receipt by Exchangeco of a Retraction Request, Exchangeco shall
immediately notify Newco thereof. In order to exercise the Retraction Call
Right, Newco must notify Exchangeco of its determination to do so (the "NEWCO
CALL NOTICE") within three Business Days of notification to Newco by Exchangeco
of the receipt by Exchangeco of the Retraction Request. If Newco does not so
notify Exchangeco within such three Business Day period, Exchangeco will notify
the holder as soon as possible thereafter that Newco will not exercise the
Retraction Call Right. If Newco delivers the Newco Call Notice within such three
Business Day period, and provided that the Retraction Request is not revoked by
the holder in the manner specified in section 6.7, the Retraction Request shall
thereupon be considered only to be an offer by the holder to sell the Retracted
Shares to Newco in accordance with the Retraction Call Right. In such event,
Exchangeco shall not redeem the Retracted Shares and Newco shall
14
purchase from such holder and such holder shall sell to Newco on the Retraction
Date the Retracted Shares for a purchase price (the "PURCHASE PRICE") per share
equal to the Retraction Price per share, plus, on the designated payment date
therefor, to the extent not paid by Exchangeco on the designated payment date
therefor, any Dividend Amount. For the purposes of completing a purchase
pursuant to the Retraction Call Right, Newco shall deposit with the Transfer
Agent, on or before the Retraction Date, certificates representing Redback
Common Shares and a cheque or cheques of Newco payable upon presentation at any
branch of the bankers of Newco representing the aggregate Dividend Amount, less
any amounts withheld on account of tax required to be deducted and withheld
therefrom (without interest). Provided that Newco has complied with the
immediately preceding sentence, the closing of the purchase and sale of the
Retracted Shares pursuant to the Retraction Call Right shall be deemed to have
occurred as at the close of business on the Retraction Date and, for greater
certainty, no redemption by Exchangeco of such Retracted Shares shall take place
on the Retraction Date. In the event that Newco does not deliver a Newco Call
Notice within such three Business Day period, and provided that the Retraction
Request is not revoked by the holder in the manner specified in section 6.7,
Exchangeco shall redeem the Retracted Shares on the Retraction Date and in the
manner otherwise contemplated in this Article 6.
6.4 Exchangeco or Newco, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the holder of the Retracted Shares, at the address
of the holder recorded in the register of members of Exchangeco for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick-up by the holder at the registered office of
Exchangeco or at the Transfer Agent's Office, certificates representing Redback
Common Shares (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or encumbrance)
registered in the name of the holder or in such other name as the holder may
request, and, if applicable and on or before the payment date therefor, a cheque
payable upon presentation at any branch of the bankers of Exchangeco or Newco,
as applicable, representing the aggregate Dividend Amount in payment of the
total Retraction Price or the total Purchase Price, as the case may be, in each
case, less any amounts withheld on account of tax required to be deducted and
withheld therefrom (without interest). The delivery of such certificates and
cheques on behalf of Exchangeco or by Newco, as the case may be, or by the
Transfer Agent shall be deemed to be payment of and shall satisfy and discharge
all liability for the total Retraction Price or total Purchase Price, as the
case may be, to the extent that the same is represented by such share
certificates and cheques (plus any tax deducted and withheld therefrom and
remitted to the proper tax authority), unless such cheques are not paid on due
presentation.
15
6.5 On and after the close of business on the Retraction Date, the holder
of the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made as provided in section 6.4, in which case
the rights of such holder shall remain unaffected until the total Retraction
Price or the total Purchase Price, as the case may be, has been paid in the
manner provided above. On and after the close of business on the Retraction
Date, provided that presentation and surrender of certificates and payment of
the total Retraction Price or the total Purchase Price, as the case may be, has
been made in accordance with the foregoing provisions, the holder of the
Retracted Shares so redeemed by Exchangeco or purchased by Newco shall
thereafter be considered and deemed for all purposes to be a holder of Redback
Common Shares delivered to it.
6.6 Notwithstanding any other provision of this Article 6, Exchangeco
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
Exchangeco believes that on any Retraction Date it would not be permitted by any
of such requirements or other provisions to redeem the Retracted Shares tendered
for redemption on such date, and provided that Newco shall not have exercised
the Retraction Call Right with respect to the Retracted Shares, Exchangeco shall
only be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent of the maximum number that may be so redeemed
(rounded down to a whole number of shares) as would not be contrary to such
requirements or other provisions and shall notify the holder at least two
Business Days prior to the Retraction Date as to the number of Retracted Shares
which will not be redeemed by Exchangeco. In any case in which the redemption by
Exchangeco of Retracted Shares would be contrary to solvency requirements or
other provisions of applicable law, Exchangeco will redeem the maximum number of
Exchangeable Shares which the Board of Directors determines Exchangeco is, on
the Redemption Date, permitted to redeem on a PRO RATA basis (disregarding
fractions) in proportion to the total number of Exchangeable Shares tendered for
retraction by each holder, and Exchangeco shall issue to each holder of
Retracted Shares a new certificate, at the expense of Exchangeco, representing
the Retracted Shares not redeemed by Exchangeco pursuant to section 6.2 hereof.
Provided that the Retraction Request is not revoked by the holder in the manner
specified in section 6.7 and provided further that Newco has
16
not exercised the Retraction Call Right with respect to the Retracted Shares,
the holder of any such Retracted Shares not redeemed by Exchangeco pursuant to
section 6.2 of these share provisions as a result of solvency requirements or
other provisions of applicable law shall be deemed by giving the Retraction
Request to require Redback to purchase such Retracted Shares from such holder on
the Retraction Date or as soon as practicable thereafter on payment by Redback
to such holder of the Purchase Price for each such Retracted Share, all as more
specifically provided in the Exchange Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to Exchangeco before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request, in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Newco shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY EXCHANGECO
7.1 Subject to applicable law, and provided Newco has not exercised the
Redemption Call Right, Exchangeco shall on the Redemption Date redeem all but
not less than all of the then outstanding Exchangeable Shares for an amount per
share equal to the Current Market Price of a Redback Common Share on the last
Business Day prior to the Redemption Date (the "REDEMPTION PRICE"), which shall
be satisfied in full by Exchangeco causing to be delivered to each holder of
Exchangeable Shares one Redback Common Share for each Exchangeable Share held by
such holder, together with any Dividend Amount.
7.2 In any case of a redemption of Exchangeable Shares under this Article
7, Exchangeco shall, at least 75 days before the Redemption Date (other than a
Redemption Date established in connection with a Redback Control Transaction, an
Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event),
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by Exchangeco or the purchase by Newco under the
Redemption Call Right, as the case may be, of the Exchangeable Shares held by
such holder. In the case of a Redemption Date established in connection with a
Redback Control Transaction, an Exchangeable Share Voting Event and an Exempt
Exchangeable Share Voting Event, the written notice of redemption by Exchangeco
or the purchase by Newco under the Redemption Call Right will be sent on or
before the Redemption Date, on as many days prior written notice as may be
determined by the Board of Directors to be reasonably practicable in the
17
circumstances. In any such case, such notice shall set out the formula for
determining the Redemption Price or the Redemption Call Purchase Price, as the
case may be, the Redemption Date and, if applicable, particulars of the
Redemption Call Right.
7.3 On or after the Redemption Date and subject to the exercise by Newco
of the Redemption Call Right, Exchangeco shall cause to be delivered to the
holders of the Exchangeable Shares to be redeemed the Redemption Price for each
such Exchangeable Share, together with the Dividend Amount, upon presentation
and surrender at the registered office of Exchangeco or at the Transfer Agent's
Office of the certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Company Act and the articles of Exchangeco and
such additional documents and instruments as the Transfer Agent and Exchangeco
may reasonably require. Payment of the total Redemption Price for such
Exchangeable Shares, together with payment of such Dividend Amount, shall be
made by delivery to each holder, at the address of the holder recorded in the
register of members of Exchangeco or by holding for pick-up by the holder at the
registered office of Exchangeco or at the Transfer Agent's Office, on behalf of
Exchangeco of certificates representing Redback Common Shares (which shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, claim or encumbrance) and, if applicable, a cheque of
Exchangeco payable upon presentation at any branch of the bankers of Exchangeco
in payment of any such Dividend Amount, in each case, less any amounts withheld
on account of tax required to be deducted and withheld therefrom (without
interest). On and after the Redemption Date, the holders of the Exchangeable
Shares called for redemption shall cease to be holders of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate part of the
total Redemption Price and any such Dividend Amount, unless payment of the total
Redemption Price and any such Dividend Amount for such Exchangeable Shares shall
not be made upon presentation and surrender of certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Redemption Price and any such Dividend Amount have
been paid in the manner hereinbefore provided. Exchangeco shall have the right
at any time after the sending of notice of its intention to redeem the
Exchangeable Shares as aforesaid to deposit or cause to be deposited the total
Redemption Price for and the full amount of such Dividend Amount on (except as
provided in the preceding sentence) the Exchangeable Shares so called for
redemption, or of such of the said Exchangeable Shares represented by
certificates that have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, in a custodial account with
any chartered bank or trust company in Canada named in such notice, less
18
any amounts withheld on account of tax required to be deducted and withheld
therefrom. Upon the later of such deposit being made and the Redemption Date,
the Exchangeable Shares in respect whereof such deposit shall have been made
shall be redeemed and the rights of the holders thereof after such deposit or
Redemption Date, as the case may be, shall be limited to receiving their
proportionate part of the total Redemption Price and such Dividend Amount for
such Exchangeable Shares so deposited, against presentation and surrender of the
said certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of the total Redemption Price and the
full amount of such Dividend Amount, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be holders of
Redback Common Shares delivered to them.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and notwithstanding section 8.2, Exchangeco
may, at any time and from time to time, purchase for cancellation all or any
part of the Exchangeable Shares by private agreement with any holder of
Exchangeable Shares for consideration consisting solely of Common Shares or
Preferred Shares.
8.2 Subject to applicable law and the articles of Exchangeco, Exchangeco
may at any time and from time to time purchase for cancellation all or any part
of the outstanding Exchangeable Shares at any price by tender to all the holders
of record of Exchangeable Shares then outstanding at any price per share. If in
response to an invitation for tenders under the provisions of this section 8.2,
more Exchangeable Shares are tendered at a price or prices acceptable to
Exchangeco than Exchangeco is prepared to purchase, the Exchangeable Shares to
be purchased by Exchangeco shall be purchased as nearly as may be PRO RATA
according to the number of shares tendered by each holder who submits a tender
to Exchangeco, provided that when shares are tendered at different prices, the
pro rating shall be effected (disregarding fractions) only with respect to the
shares tendered at the price at which more shares were tendered than Exchangeco
is prepared to purchase after Exchangeco has purchased all the shares tendered
at lower prices. If part only of the Exchangeable Shares represented by any
certificate shall be purchased, a new certificate for the balance of such shares
shall be issued at the expense of Exchangeco.
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ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and by Article 10, section 11.1
and section 12.2 hereof, the holders of the Exchangeable Shares shall not be
entitled as such to receive notice of or to attend any meeting of the members of
Exchangeco or to vote at any such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
10.2 Any approval given by the holders of the Exchangeable Shares to add
to, change or remove any right, privilege, restriction or condition attaching to
the Exchangeable Shares or any other matter requiring the approval or consent of
the holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution consented to
in writing by the holders of all of the Exchangeable Shares issued and
outstanding or by resolution passed by not less than three-quarters of the votes
cast on such resolution at a meeting of holders of Exchangeable Shares duly
called and held at which the holders of at least one-third of the outstanding
Exchangeable Shares at that time are present or represented by proxy; provided
that if at any such meeting the holders of at least one-third of the outstanding
Exchangeable Shares at that time are not present or represented by proxy within
one-half hour after the time appointed for such meeting, then the meeting shall
be adjourned to such date not less than 10 days thereafter and to such time and
place as may be designated by the Chairman of such meeting. At such adjourned
meeting the holders of Exchangeable Shares present or represented by proxy
thereat may transact the business for which the meeting was originally called,
notwithstanding that the holders of less than one-third of the outstanding
Exchangeable Shares at that time are present or represented by proxy, and a
resolution passed thereat by the affirmative vote of not less than
three-quarters of the votes cast on such resolution at such meeting shall
constitute the approval or consent of the holders of the Exchangeable Shares.
20
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF REDBACK COMMON SHARES
11.1 Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that Redback will not without the prior approval of
Exchangeco and the prior approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 of these share provisions:
(a) issue or distribute Redback Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire Redback Common
Shares) to the holders of all or substantially all of the then
outstanding Redback Common Shares by way of stock dividend or other
distribution, other than an issue of Redback Common Shares (or
securities exchangeable for or convertible into or carrying rights to
acquire Redback Common Shares) to holders of Redback Common Shares who
exercise an option to receive dividends in Redback Common Shares (or
securities exchangeable for or convertible into or carrying rights to
acquire Redback Common Shares) in lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to the holders of all
or substantially all of the then outstanding Redback Common Shares
entitling them to subscribe for or to purchase Redback Common Shares
(or securities exchangeable for or convertible into or carrying rights
to acquire Redback Common Shares); or
(c) issue or distribute to the holders of all or substantially all of the
then outstanding Redback Common Shares:
(i) shares or securities of Redback of any class other than Redback
Common Shares (other than shares convertible into or exchangeable
for or carrying rights to acquire Redback Common Shares);
(ii) rights, options or warrants other than those referred to in
section 11.1(b) above;
(iii) evidences of indebtedness of Redback; or
(iv) assets of Redback;
unless the economic equivalent (determined by the Board of Directors
in accordance with section 3.5 hereof) on a per share basis of such
rights, options,
21
securities, shares, evidences of indebtedness or other assets is
issued or distributed simultaneously to holders of the Exchangeable
Shares; provided that, for greater certainty the above restrictions
shall not apply to any securities issued or distributed by Redback in
order to give effect to and consummate the transactions contemplated
by, and in accordance with, the Arrangement Agreement.
11.2 Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Redback will not without the prior
approval of Exchangeco and the prior approval of the holders of the Exchangeable
Shares given in accordance with section 10.2 of these share provisions:
(a) subdivide, redivide or change the then outstanding Redback Common
Shares into a greater number of Redback Common Shares;
(b) reduce, combine, consolidate or change the then outstanding Redback
Common Shares into a lesser number of Redback Common Shares; or
(c) reclassify or otherwise change Redback Common Shares or effect an
amalgamation, merger, reorganization or other transaction affecting
Redback Common Shares,
unless the same or an economically equivalent (determined by the Board of
Directors in accordance with section 3.5 hereof) change shall simultaneously be
made to the rights attached to the Exchangeable Shares. The Support Agreement
further provides, in part, that the aforesaid provisions of the Support
Agreement shall not be changed without the approval of the holders of the
Exchangeable Shares given in accordance with section 10.2 of these share
provisions.
ARTICLE 12
ACTIONS BY EXCHANGECO UNDER SUPPORT AGREEMENT
12.1 Exchangeco will take all such actions and do all such things as shall
be necessary or advisable to perform and comply with and to ensure performance
and compliance by Redback, Newco and Exchangeco with all provisions of the
Support Agreement and the Exchange Trust Agreement applicable to Redback, Newco
and Exchangeco, respectively, in accordance with the terms thereof including,
without limitation, taking all such actions and doing all such things as shall
be necessary or advisable to enforce to the fullest extent possible for the
22
direct benefit of Exchangeco all rights and benefits in favour of Exchangeco
under or pursuant to such agreement.
12.2 Exchangeco shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement or the Exchange Trust Agreement without the approval of
the holders of the Exchangeable Shares given in accordance with section 10.2 of
these share provisions other than such amendments, waivers and/or forgiveness as
may be necessary or advisable for the purposes of:
(a) adding to the covenants of any or all of the other parties to such
agreement provided that the Board of Directors is of the good faith
opinion, after consultation with counsel, that any such additions will
not be prejudicial to the interests of the holders of the Exchangeable
Shares;
(b) making such amendments or modifications not inconsistent with such
agreement as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the good faith opinion of the
Board of Directors, it may be expedient to make, provided that the
Board of Directors is of the good faith opinion, after consultation
with counsel, that such amendments and modifications will not be
prejudicial to the interests of the holders of the Exchangeable
Shares; or
(c) making such changes in or corrections to such agreement which, on the
advice of counsel to Exchangeco, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error contained therein,
provided that the Board of Directors is of the good faith opinion,
after consultation with counsel, that such changes or corrections will
not be prejudicial to the interests of the holders of the Exchangeable
Shares.
ARTICLE 13
LEGEND; CALL RIGHTS
13.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Retraction Call Right, the Liquidation Call Right,
the Redemption Call Right and the Exchange Trust Agreement
23
(including the provisions with respect to the exchange right and automatic
exchange rights thereunder).
13.2 Each holder of an Exchangeable Share, whether of record or beneficial,
by virtue of becoming and being such a holder shall be deemed to acknowledge
each of the Liquidation Call Right, the Retraction Call Right and the Redemption
Call Right, in each case, in favour of Newco, and the overriding nature thereof
in connection with the liquidation, dissolution or winding-up of Exchangeco or
the retraction or redemption of Exchangeable Shares, as the case may be, and to
be bound thereby in favour of Newco as therein provided.
13.3 Each of Exchangeco, Newco, Redback and the Transfer Agent shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable to any holder of Exchangeable Shares such amounts as Exchangeco, Newco,
Redback or the Transfer Agent is required to deduct and withhold with respect to
such payment under the INCOME TAX ACT (Canada), the United States INTERNAL
REVENUE CODE OF 1986 or any provision of provincial, state, local or foreign tax
law, in each case, as amended. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes hereof as having been paid to
the holder of the Exchangeable Shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are actually remitted
to the appropriate taxing authority. To the extent that the amount so required
to be deducted or withheld from any payment to a holder exceeds the cash portion
of the consideration otherwise payable to the holder, Exchangeco, Newco, Redback
and the Transfer Agent are hereby authorized to sell or otherwise dispose of
such portion of the consideration as is necessary to provide sufficient funds to
Exchangeco, Newco, Redback or the Transfer Agent, as the case may be, to enable
it to comply with such deduction or withholding requirement and Exchangeco,
Newco, Redback or the Transfer Agent shall notify the holder thereof and remit
any unapplied balance of the net proceeds of such sale.
ARTICLE 14
NOTICES
14.1 Any notice, request or other communication to be given to Exchangeco
by a holder of Exchangeable Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by telecopy or by delivery to
the registered office of Exchangeco and addressed to the attention of the
President. Any such notice, request or other communication, if
24
given by mail, telecopy or delivery, shall only be deemed to have been given and
received upon actual receipt thereof by Exchangeco.
14.2 Any presentation and surrender by a holder of Exchangeable Shares to
Exchangeco or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of
Exchangeco or the retraction or redemption of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the registered office of
Exchangeco or to the Transfer Agent's Office, in each case, addressed to the
attention of the President of Exchangeco. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by Exchangeco or the Transfer Agent, as the case may be.
Any such presentation and surrender of certificates made by registered mail
shall be at the sole risk of the holder mailing the same.
14.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of Exchangeco shall be in writing and shall
be valid and effective if given by mail (postage prepaid) or by delivery to the
address of the holder recorded in the register of members of Exchangeco or, in
the event of the address of any such holder not being so recorded, then at the
last known address of such holder. Any such notice, request or other
communication, if given by mail, shall be deemed to have been given and received
on the fifth Business Day following the date of mailing and, if given by
delivery, shall be deemed to have been given and received on the date of
delivery. Accidental failure or omission to give any notice, request or other
communication to one or more holders of Exchangeable Shares shall not invalidate
or otherwise alter or affect any action or proceeding to be taken by Exchangeco
pursuant thereto.
25
SCHEDULE A
NOTICE OF RETRACTION
TO: 610381 B.C. Inc. ("Exchangeco") and 610380 B.C. Inc. ("Newco")
This notice is given pursuant to Article 6 of the provisions (the
"Share Provisions") attaching to the Exchangeable Shares of Exchangeco
represented by this certificate and all capitalized words and expressions used
in this notice that are defined in the Share Provisions have the meanings
ascribed to such words and expressions in such Share Provisions.
The undersigned hereby notifies Exchangeco that, subject to the
Retraction Call Right referred to below, the undersigned desires to have
Exchangeco redeem in accordance with Article 6 of the Share Provisions:
/ / all share(s) represented by this certificate; or
/ / share(s) only.
---
The undersigned hereby notifies Exchangeco that the Retraction Date
shall be
------------------------------------------------------.
NOTE: The Retraction Date must be a Business Day and must not be less
than 10 Business Days nor more than 15 Business Days after the date upon which
this notice is received by Exchangeco. If no such Business Day is specified
above, the Retraction Date shall be deemed to be the 15th Business Day after the
date on which this notice is received by Exchangeco.
The undersigned acknowledges the overriding Retraction Call Right of
Newco to purchase all but not less than all the Retracted Shares directly from
the undersigned and that this notice is and shall be deemed to be a revocable
offer by the undersigned to sell the Retraced Shares to Newco in accordance with
the Retraction Call Right on the Retraction Date for the Purchase Price and on
the other terms and conditions set out in section 6.3 of the Share Provisions.
This notice of retraction, and this offer to sell the Retracted Shares to Newco,
may be revoked and withdrawn by the undersigned only by notice in writing given
to Exchangeco at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that if Exchangeco believes that, as a
result of solvency requirements or other provisions of applicable law,
Exchangeco would not be permitted to redeem all Retracted Shares, the
undersigned will be deemed to have exercised the Exchange Right (as defined in
the Exchange Trust Agreement) so as to require Redback to purchase the
unredeemed Retracted Shares.
The undersigned hereby represents and warrants to Newco and Exchangeco
that the undersigned:
/ / is
/ / is not
(select one)
a non-resident of Canada for purposes of the INCOME TAX ACT (Canada). THE
UNDERSIGNED ACKNOWLEDGES THAT IN THE ABSENCE OF AN INDICATION THAT THE
UNDERSIGNED IS NOT A NON-RESIDENT OF CANADA, WITHHOLDING ON ACCOUNT OF CANADIAN
TAX MAY BE MADE FROM AMOUNTS PAYABLE TO THE UNDERSIGNED ON THE REDEMPTION OR
PURCHASE OF THE RETRACTED SHARES.
The undersigned hereby represents and warrants to Newco and Exchangeco
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by Newco or Exchangeco, as the case may be, free
and clear of all liens, claims and encumbrances.
---------------------------------------
(Date)
---------------------------------------
(Signature of Shareholder)
---------------------------------------
(Guarantee of Signature)
/ / Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up by the
shareholder from the Transfer Agent,
2
failing which the securities and any cheque(s) will be mailed to the last
address of the shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited with
the Transfer Agent. The securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares will be issued and registered in,
and made payable to, the shareholder in the name which appears on the register
of members of Exchangeco and the securities and any cheque(s) resulting from
such retraction or purchase will be delivered to such shareholder as indicated
above, unless the form appearing immediately below is duly completed.
Date:
-----------------------------------------------------------------------
Name of Person in Whose Name Securities or Cheque(s)
Are to be Registered, Issued or Delivered (please print):
-----------------------
Street Address or P.O. Box:
---------------------------------------------------
City, Province and Postal Code:
-----------------------------------------------
Signature of Shareholder:
-----------------------------------------------------
Signature Guaranteed by:
------------------------------------------------------
NOTE: If this notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the remaining
share(s) of Exchangeco represented by this certificate will be issued and
registered in the name of the shareholder as it appears on the register of
Exchangeco, unless the Share Transfer Power on the share certificate is duly
completed in respect of such share(s).
3
APPENDIX 2
ESCROW AGREEMENT
THIS AGREEMENT made as of the o day of o, 2000
AMONG:
610381 B.C. INC., a company existing under the laws of the
Province of British Columbia
(hereinafter referred to as "EXCHANGECO")
AND:
REDBACK NETWORKS INC., a corporation existing under the
laws of the State of Delaware,
(hereinafter referred to as "REDBACK")
AND:
MONTREAL TRUST COMPANY OF CANADA, a trust company existing
under the federal laws of Canada,
(hereinafter referred to as the "ESCROW AGENT")
AND:
XXXXXX XXXXXXX, AS AGENT FOR AND ON BEHALF OF THE
SHAREHOLDERS (AS DEFINED HEREIN)
(hereinafter referred to as the "SHAREHOLDERS' AGENT")
WHEREAS:
A. Pursuant to an arrangement agreement (the "ARRANGEMENT AGREEMENT")
dated as of July 30, 2000 among Redback, Exchangeco and Abatis Systems
Corporation ("ABATIS"), Redback and Exchangeco are to issue certain securities
to holders of certain securities of Abatis pursuant to a plan of arrangement
(the "PLAN OF ARRANGEMENT");
B. Pursuant to the Arrangement Agreement and the Plan of Arrangement, an
Escrow Fund (as defined herein), consisting of certain Escrow Securities (as
defined in the Plan of Arrangement), is to be established to indemnify Redback,
Exchangeco, 610380 B.C. Inc. and their respective officers, directors, employees
or agents (collectively, the "INDEMNIFIED PARTIES") for any and all Losses (as
defined herein); and
C. Pursuant to the Plan of Arrangement, each of the Persons entitled
thereunder to receive Escrow Securities (collectively, the "SHAREHOLDERS") (i)
are deemed to have irrevocably appointed and authorized the Shareholders' Agent
as the agent of such Person, to enter into and act under this Agreement on his
behalf, (ii) are deemed to have irrevocably authorized and directed Redback and
Exchangeco, and their respective representatives and agents, to deposit, or
cause to be deposited, the Escrow Securities with the Escrow Agent at the
Effective Time under the Plan of Arrangement, (iii) are deemed to have
irrevocably authorized the Escrow Agent to hold and deal with such Person's
Escrow Securities in accordance with the terms of this Agreement, and (iv) will
be bound by the provisions of this Agreement in respect of all of such Person's
Escrow Securities.
NOW THEREFORE in consideration of the respective covenants and
agreements in this Agreement and for other valuable consideration (the receipt
and sufficiency of which are hereby acknowledged), the parties hereby covenant
and agree as follows:
1.0 DEFINITIONS AND INTERPRETATION
1.1 Each term denoted in this Agreement by initial capital letters and not
otherwise defined herein shall have the meaning ascribed thereto in the Plan of
Arrangement, unless the context otherwise requires.
1.2 Where used herein, the term "LOSSES" means any and all losses,
liabilities, claims, damages (including incidental and consequential damages),
payments, fines, fees, taxes, penalties, deficiencies or expenses (including
costs of investigation and defence and reasonable legal and accounting fees and
expenses), whether or not involving a Third Party Claim (as defined herein),
incurred or suffered by any Indemnified Party relating to, arising, directly or
indirectly, from or in connection with:
(a) any misrepresentation or breach of any representation,
warranty, obligation, covenant or agreement of Abatis
contained in the Arrangement Agreement or in
2
any other certificate, instrument, agreement or document
delivered pursuant thereto; and
(b) any matter which is disclosed in Schedule "A" attached hereto;
after taking into account any income tax savings or recoveries or insurance
proceeds realized or received in respect thereof.
1.3 The division of this Agreement into sections and other portions and
the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references in this Agreement to a "section" followed by a number
and/or a letter refer to the specified section of this Agreement. Unless
otherwise indicated, the terms "this Agreement", "hereof", "herein", "hereunder"
and "hereby" and similar expressions refer to this Agreement, as amended or
supplemented from time to time pursuant to the applicable provisions hereof, and
not to any particular section or other portion hereof.
1.4 Unless the context otherwise requires, words importing the singular
shall include the plural and VICE VERSA and words importing any gender shall
include all genders.
1.5 If any date on which any action is required to be taken hereunder is
not aBusiness Day, such action shall be required to be taken on the next
succeeding Business Day.
2.0 ESCROW AND ESCROW SECURITIES
2.1 At or promptly after the Effective Time, Exchangeco and Redback will
deposit, or cause to be deposited, on behalf of the respective Shareholders, the
Escrow Securities registered in the name of the Escrow Agent in escrow with the
Escrow Agent, such Escrow Securities, together with any other property (as
contemplated in section 2.2) to be held by the Escrow Agent from time to time
hereunder, being referred to herein as the "ESCROW FUND". The Escrow Fund shall
be held by the Escrow Agent on behalf of the respective Shareholders and
distributed or dealt with by the Escrow Agent in accordance with the terms and
conditions of this Agreement. For the purposes of this Agreement, the Escrow
Securities deposited on behalf of and in respect of each Shareholder, and the
distributions thereon and accretions thereto, shall be considered a separate
pool within the Escrow Fund (each an "ESCROW POOL"), and recourse to the Escrow
Fund in respect of Losses shall be PRO-RATA against each Escrow Pool in
accordance with the
3
number of Escrow Securities set out opposite each Shareholder's name in Exhibit
A hereto. In the event that the terms of this Agreement are inconsistent or
conflict in any way with the provisions of the Arrangement Agreement, this
Agreement shall be deemed to govern.
2.2 If during the term of this Agreement, there is any subdivision,
consolidation, reclassification, exchange, conversion or distribution (including
cash dividends), consolidation, amalgamation, merger, liquidation or wind-up
involving either Exchangeco or Redback, which results in any change in or to the
Escrow Securities or distribution of property in connection with the Escrow
Securities, the Escrow Fund shall be deemed to include any such securities or
other property distributed in connection with the Escrow Securities and the
terms of this Agreement shall be deemed to be amended to the extent necessary to
recognize such distributions and to give effect to the intent of this Agreement.
3.0 RECOURSE TO THE ESCROW FUND
3.1 The Shareholders hereby jointly and severally agree to indemnify and
hold harmless the Indemnified Parties against, and the Escrow Fund shall be
available to indemnify the Indemnified Parties for, any and all Losses incurred
or sustained, directly or indirectly, by any of them. The provisions of this
Agreement shall be the sole and exclusive remedy available to the Indemnified
Parties to obtain recovery from the Shareholders with respect to any Losses,
except to the extent any Loss relates to, arises, directly or indirectly, from
or is connected to any fraudulent act or omission of any Shareholder in which
case the Indemnified Parties shall have full recourse against such Shareholder
in respect of all remedies available at law or in equity.
3.2 At any time prior to 5:00 p.m. (Pacific Time) on the date which is 180
days from the Effective Date (the "EXPIRATION TIME"), Redback, on behalf of any
of the Indemnified Parties, may deliver to the Escrow Agent a certificate (a
"CLAIM NOTICE"):
(a) stating that any of the Indemnified Parties has incurred a
Loss or Losses, or that Redback reasonably anticipates that an
Indemnified Party will incur a Loss or Losses on the basis of
facts or circumstances which exist prior to the Expiration
Time;
(b) specifying in reasonable detail the individual items of
Losses, the amount of such Losses, the date on which each such
Loss was incurred or is reasonably anticipated to be incurred,
the misrepresentation or breach of Abatis that resulted in
such Loss and the basis for and facts giving rise to each such
Loss,
4
and Redback shall concurrently deliver a duplicate copy of such Claim Notice to
the Shareholders' Agent.
For a period of 20 Business Days after delivery of a Claim Notice (the
"DISPUTE PERIOD"), the Shareholders' Agent shall be entitled to deliver to the
Escrow Agent a notice disputing the matters set out in the Claim Notice (a
"DISPUTE NOTICE"). After the expiration of the Dispute Period, unless the
Shareholders' Agent shall have delivered a Dispute Notice within the Dispute
Period, the Escrow Agent shall, subject to section 3.5, deliver to Redback or as
Redback may direct out of the Escrow Fund, as promptly as practicable, Escrow
Securities (in the same ratio as the ratio of Redback Common Shares to
Exchangeco Shares as of the date the Escrow Fund was first established) or other
property from each Escrow Pool comprising the Escrow Fund in accordance with the
ratio set out in section 2.1 herein with an aggregate value of such Escrow
Securities or other property (determined in accordance with section 13.1) equal
to the Losses specified in such Claim Notice. Where the basis for a claim upon
the Escrow Fund by Redback is that an Indemnified Party reasonably anticipates
that it will pay or accrue a Loss, no payment will be made from the Escrow Fund
for such Loss unless and until such Loss is actually incurred.
3.3 Upon receipt of a Dispute Notice within the Dispute Period, the Escrow
Agent shall deliver a copy of such Dispute Notice to Redback. The Escrow Agent
shall make no delivery of Escrow Securities or other property from each Escrow
Pool comprising the Escrow Fund to Redback or as Redback may direct in respect
of any Losses which are the subject of a Dispute Notice received by the Escrow
Agent within the Dispute Period until the Escrow Agent shall have received
either (i) joint written instructions signed by each of Redback and the
Shareholders' Agent, giving instructions to the Escrow Agent with respect to
resolution of a claim specified in a Claim Notice, which direction identifies
such claim and provides specific instructions to the Escrow Agent with respect
to the distribution of Escrow Securities or other property from each Escrow Pool
comprising the Escrow Fund, in respect thereof or (ii) a certificate of either
Redback or the Shareholders' Agent certifying that a claim specified in a Claim
Notice has been resolved by a court of competent jurisdiction, for which a
final, non-appealable order has been issued entitling any of the Indemnified
Parties or the Shareholders, as the case may be, to the release from the Escrow
Fund of Escrow Securities, or other property comprising the Escrow Fund, as
specified in such order (a "DISPUTE RESOLUTION NOTICE").
5
Upon receipt of such Dispute Resolution Notice, the Escrow Agent shall
deliver to Redback or as Redback may direct or to the Shareholders, as the case
may be, out of the Escrow Fund, as promptly as practicable, Escrow Securities or
other property comprising the Escrow Fund in the amounts specified in such
Dispute Resolution Notice.
3.4 As promptly as practicable after the Expiration Time, Redback shall
provide the Escrow Agent written instructions to release to each Shareholder any
part of his Escrow Pool which, in the opinion of Redback, acting reasonably, is
not necessary to satisfy any claims in any Claim Notices outstanding as of the
Expiration Time, subject to any claims for indemnification made by the
Shareholders' Agent pursuant to section 6.5. If no Claim Notices are outstanding
as of the Expiration Time, the Escrow Agent shall distribute the Escrow Fund
pursuant to the written instructions of the Shareholders' Agent given pursuant
to section 12.1(a), which may include instructions to the Escrow Agent to
distribute all or any part of the Escrow Fund to the Shareholders' Agent in
satisfaction of any claim for indemnification he may have pursuant to section
6.5.
3.5 The Indemnified Parties shall not be entitled to receive any Escrow
Securities, or other property comprising the Escrow Fund, and shall not
otherwise be entitled to any indemnification under this Agreement, unless and
until they have, as a group, incurred, or reasonably anticipate incurring, one
or more Losses in an aggregate amount of not less than US$250,000, in which case
the Indemnified Parties shall be entitled to be indemnified out of the Escrow
Fund in the manner provided in this Agreement for the full amount of any and all
Losses, including the initial Losses up to such US$250,000 threshold.
3.6 Redback shall act as trustee on behalf of the Indemnified Parties and
accepts such trust and shall enforce the terms of this Agreement on behalf of
the Indemnified Parties.
4.0 THIRD-PARTY CLAIMS
4.1 In the event Redback becomes aware of a third party claim (a "THIRD
PARTY CLAIM") prior to the Expiration Time which Redback reasonably expects may
result in a Loss and a claim by an Indemnified Party against the Escrow Fund,
Redback shall deliver a Claim Notice specifying such anticipated Losses to the
Escrow Agent in the manner set out in section 3.0. Redback shall promptly and
diligently defend any such Third Party Claim. The Shareholders' Agent, on behalf
of the Shareholders, shall have the right to participate in the negotiation,
settlement or defence of any Third Party Claim and to retain counsel to act on
behalf
6
of the Shareholders, provided that the fees and disbursements of such counsel
will be paid by the Shareholders without recourse to the Escrow Fund. Redback
shall have the right in its sole discretion to settle any Third Party Claim;
provided, however, that if Redback settles any Third Party Claim without the
Shareholders' Agent's consent (which consent shall not be unreasonably withheld
or delayed), the Shareholders' Agent shall be entitled to file with the Escrow
Agent a Dispute Notice, in which case the Escrow Agent shall not release any
Escrow Securities, or other property comprising the Escrow Fund, from the Escrow
Fund with respect to the amount of Losses incurred by the Indemnified Party in
such settlement until a Dispute Resolution Notice shall have been delivered to
the Escrow Agent. In the event that the Shareholders' Agent has consented to any
such settlement in writing, the Shareholders' Agent shall have no power or
authority to object under any provision of section 3.0 to the amount of any
claim by the Indemnified Party against the Escrow Fund with respect to the
amount of Losses incurred by the Indemnified Party in such settlement.
5.0 PROTECTION OF ESCROW FUND;
VOTING OF ESCROW SECURITIES
5.1 The Escrow Agent shall hold and safeguard the Escrow Fund from the
Effective Time until the termination of this Agreement pursuant to section 12.0,
shall treat such fund as an escrow fund in accordance with the terms of this
Agreement and not as the property of Redback and shall hold and dispose of the
Escrow Fund only in accordance with the terms hereof.
5.2 The Escrow Agent, as the registered holder of the Escrow Securities
will vote the Redback Common Shares held as a part of the Escrow Fund at any
meeting of the holders of Redback Common Shares or of shareholders of Redback
generally, in accordance with the written directions of the Shareholders' Agent
and, in the absence of such directions, shall not be required to and shall not
vote the Redback Common Shares held as a part of the Escrow Fund.
6.0 SHAREHOLDERS' AGENT
6.1 Pursuant to the Plan of Arrangement, the Shareholders' Agent has been
appointed as agent for the Shareholders to give and receive notices and
communications, to authorize delivery to Redback, or as Redback may direct, of
Escrow Securities, or other property comprising the Escrow Fund, from the Escrow
Fund in satisfaction of claims by the Indemnified Parties, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and comply with orders of courts with respect to such claims, and to take all
actions necessary or appropriate, in the judgment of the Shareholders' Agent,
for the
7
accomplishment of the foregoing. No bond shall be required of the Shareholders'
Agent, and the Shareholders' Agent shall not receive compensation for his
services under this Agreement.
6.2 A decision, act, consent or instruction of the Shareholders' Agent
shall constitute a decision of all the Shareholders and shall be final, binding
and conclusive upon each such Shareholder, and the Escrow Agent and Redback may
rely upon any such decision, act, consent or instruction of the Shareholders'
Agent as being the decision, act, consent or instruction of every Shareholder
and any notices or communications to or from the Shareholders' Agent shall
constitute notice to or from each of the Shareholders. The Escrow Agent and
Redback are hereby relieved from any liability to any Person for any acts done
by them in accordance with any decision, act, consent or instruction of the
Shareholders' Agent.
6.3 The Shareholders may, from time to time upon not less than 20 days'
prior written notice to Redback, remove the Shareholders' Agent and appoint a
successor shareholders' agent provided, however, that the Shareholders' Agent
may not be removed unless holders of at least a two-thirds interest in the
Escrow Fund agree in writing to such removal and to the identity of the
successor Shareholders' Agent. Any vacancy in the position of Shareholders'
Agent under this Agreement may be filled by written approval of the holders of a
simple majority in interest of the Escrow Fund. In the event of an appointment
of a successor shareholders' agent, such appointment shall be confirmed to the
Escrow Agent forthwith.
6.4 The Shareholders' Agent shall not be liable for any act done or omitted
hereunder as agent of the Shareholders while acting in good faith, or acting on
the advice of counsel. The Shareholders' Agent shall have no duty, obligation or
responsibility to expend his personal funds in support of his activities as
agent of the Shareholders.
6.5 The Shareholders shall jointly and severally indemnify and hold
harmless the Shareholders' Agent against all claims, losses, damages, reasonable
costs, penalties, fines and reasonable expenses (including reasonable expenses
of the Shareholders' Agent's legal counsel) which, without fraud, negligence,
recklessness, wilful misconduct or bad faith on the part of the Shareholder's
Agent, may be paid, incurred or suffered by the Shareholders' Agent by reason or
as a result of the performance by the Shareholders' Agent of his obligations set
out in this Agreement or in the Registration Rights Agreement.
8
7.0 CONCERNING THE ESCROW AGENT
7.1 The Escrow Agent shall be obligated only for the performance of the
Duties (as defined below), and any additional duties as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Redback and the
Shareholders' Agent and are acceptable to the Escrow Agent.
7.2 The Escrow Agent will identify in its books that the Escrow Securities,
or other property comprising the Escrow Fund, held in escrow under this
Agreement from time to time and ensure that the Escrow Securities and such other
property are held separate and distinct from other securities or property held
by it. The Escrow Agent will keep complete and accurate records regarding the
Escrow Fund and will provide any party to this Agreement with full details of
the management and status of the Escrow Fund within a reasonable time following
receipt of a written request therefor.
7.3 The "DUTIES" shall include:
(a) holding and safeguarding the Escrow Fund and dealing with the Escrow
Fund only in accordance with the terms of this Agreement;
(b) investing any moneys forming, from time to time, a part of the Escrow
Fund as provided in this Agreement; and
(c) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of its Duties, the Escrow Agent shall have (and is
granted) such incidental and additional rights, powers, duties and authority not
in conflict with any of the provisions of this Agreement as the Escrow Agent,
acting in good faith and in the reasonable exercise of its discretion, may deem
necessary, appropriate or desirable to effect the purpose of this Agreement. Any
exercise of such discretionary rights, powers, duties and authorities by the
Escrow Agent shall be final, conclusive and binding upon all Persons.
7.4 The Escrow Agent represents to the parties hereto that at the date of
execution and delivery of this Agreement there exists no material conflict of
interest in the role of the Escrow Agent as fiduciary hereunder and the role of
the Escrow Agent in any other capacity. The
9
Escrow Agent shall, within 30 days after it becomes aware that such material
conflict of interest exists, either eliminate such material conflict of interest
or resign in the manner and with the effect specified in section 10.0. If,
notwithstanding the foregoing provisions of this section 7.4, the Escrow Agent
has such a material conflict of interest, the validity and enforceability of
this Agreement shall not be affected in any manner whatsoever by reason only of
the existence of such material conflict of interest. If the Escrow Agent
contravenes the foregoing provisions of this section 7.4, any interested party
may apply to the Supreme Court of British Columbia for an order that the Escrow
Agent be replaced as Escrow Agent hereunder.
7.5 The Escrow Agent is hereby expressly authorized to accept any orders
given in compliance with this Agreement or orders, judgments or decrees of any
court of competent jurisdiction, and is hereby expressly authorized to comply
with and obey such orders, judgments or decrees, and shall not be liable to the
Shareholders' Agent or to any other Person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
7.6 The Escrow Agent shall be held to the exercise of reasonable care in
carrying out its obligations under this Agreement and in exercising its rights,
powers, Duties and authorities hereunder shall act honestly and in good faith
and will treat the Escrow Fund with the same degree of care as if the property
comprising the Escrow Fund were its own. The Escrow Agent shall be without
liability to the parties hereto for any loss, damage, cost, expense (including
legal fees on a solicitor and own client basis), liability or claim which does
not arise from its fraud, bad faith, negligence, recklessness or wilful
misconduct. The Escrow Agent shall not be liable for any error of judgment or
for any act done or step taken or omitted by it in good faith or for any mistake
of fact or law (except for acts of fraud, bad faith, negligence, recklessness or
wilful misconduct).
7.7 The Escrow Agent will not delegate or assign any of its Duties, but
may:
(a) in relation to these presents act and rely on the opinion or advice of
or information obtained from any solicitor, attorney, auditor,
accountant, appraiser, valuator, engineer or other expert, whether
Escrow Agent or by Redback and/or the Shareholders' Agent or otherwise,
retained by the and may employ such assistants as may be necessary to
the proper discharge of its powers and Duties and
10
determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or
assistance referred to above; and
(b) retain or employ such agents, employees and other assistants as it may
reasonably require for the proper determination and discharge of its
powers and the Duties hereunder, and may pay reasonable remuneration
for all services performed for it (and shall be entitled to receive
reasonable remuneration for all services performed by it) in the
discharge of the Duties hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the discharge of its
duties hereunder and in the management of the Escrow Fund.
7.8 The Escrow Fund will not be subject to any right, lien or claim of any
kind ("CLAIMS") in favour of the Escrow Agent or in favour of any of its
creditors. The Escrow Agent will notify each of Redback and the Shareholders'
Agent promptly in writing of any attempt by any person to assert any Claim
against any of the Escrow Fund and will not make any admission or concession in
respect of such Claim except to the extent authorized by Redback and the
Shareholders' Agent.
7.9 Nothing contained in this Agreement shall constitute the Escrow Agent
as trustee for any party hereto or impose on the Escrow Agent any duties or
obligations other than those for which there is an express provision herein. No
covenant or obligation shall be implied in this Agreement against the Escrow
Agent. Except as provided herein, the Escrow Agent shall have no responsibility
or liability for delivery of any Escrow Securities or other property in the
Escrow Fund.
7.10 If it becomes illegal or impossible for the Escrow Agent to carry out
any of the provisions hereof, the Escrow Agent shall incur no liability as a
consequence of the enforceability or lack thereof of this Agreement.
7.11 The Escrow Agent shall not be liable to any party hereto in acting upon
any written notice, request, waiver, consent, receipt or other paper or document
reasonably believed by the Escrow Agent to be signed by the proper party or
parties. Absent its actual knowledge to the contrary, the Escrow Agent will be
entitled to treat as genuine and as the document it purports to be any letter,
paper, facsimile or other document furnished or caused to be furnished
11
to the Escrow Agent by the proper party or parties, and reasonably believed by
the Escrow Agent to be genuine and to have been transmitted by the proper party
or parties.
7.12 In the event of any disagreement between any Person or Persons named in
this Agreement and any other Person resulting in any adverse claims or demands
being made in connection with the Escrow Fund, the Escrow Agent shall be
entitled at its option to refuse to comply with any such claims or demands, so
long as such disagreement shall continue, and in so doing the Escrow Agent shall
not be or become liable for damages or interest to any Person named in this
Agreement, for its refusal to comply with such conflicting or adverse demands;
and the Escrow Agent shall be entitled to continue so to refrain and refuse so
to act until:
(a) the rights of the adverse claimants have been finally adjudicated in a
court of competent jurisdiction; or
(b) all differences have been resolved by agreement of the parties
involved.
7.13 The Duties of the Escrow Agent under this Agreement may be altered,
amended, modified or revoked only by written instrument signed by all of the
parties hereto.
7.14 If the Escrow Agent reasonably requires other or further instruments in
connection with performance of its Duties under this Agreement, the necessary
parties hereto shall join in furnishing such instruments.
7.15 The Escrow Agent shall not be required to expend or risk its own funds
or otherwise incur financial liabilities in the performance of any of its Duties
hereunder, or in the exercise of any of its rights and powers hereunder.
8.0 COMPENSATION
8.1 Redback and Exchangeco jointly and severally agree to pay the Escrow
Agent reasonable compensation for all of the services rendered by it under this
Agreement and will reimburse the Escrow Agent for all reasonable expenses
(including taxes other than taxes based on the net income of the Escrow Agent)
and disbursements, including the cost and expense of any suit or litigation of
any character and any proceedings before any governmental agency reasonably
incurred by the Escrow Agent in connection with its duties under this Agreement;
provided that Redback and Exchangeco shall have no obligation to reimburse the
Escrow Agent
12
for any expenses or disbursements paid, incurred or suffered by the Escrow Agent
in any suit or litigation in which the Escrow Agent is determined to have acted
fraudulently, in bad faith or with negligence, recklessness or wilful
misconduct.
9.0 INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Redback shall indemnify and hold harmless the Escrow Agent and each of
its directors, officers, employees and agents appointed and acting in accordance
with this Agreement (collectively, the "ESCROW AGENT INDEMNIFIED PARTIES")
against all claims, losses, damages, reasonable costs, penalties, fines and
reasonable expenses (including reasonable expenses of the Escrow Agent's legal
counsel) which, without fraud, negligence, recklessness, wilful misconduct or
bad faith on the part of such Escrow Agent Indemnified Party, may be paid,
incurred or suffered by the Escrow Agent Indemnified Party by reason or as a
result of the Escrow Agent's acceptance or administration of the Escrow Fund,
its compliance with its duties set forth in this Agreement, or any written or
oral instruction delivered to the Escrow Agent by Redback or the Shareholders'
Agent on behalf of the Shareholders pursuant hereto.
In no case shall Redback be liable under this indemnity for any claim
against any of the Escrow Agent Indemnified Parties unless Redback is notified
by the Escrow Agent of the written assertion of a claim or of any action
commenced against the Escrow Agent Indemnified Parties promptly after any of the
Escrow Agent Indemnified Parties has received any such written assertion of a
claim or shall have been served with a summons or other first legal process
giving information as to the nature and basis of the claim. Subject to (ii)
below, Redback shall be entitled to participate at its own expense in the
defence and, if Redback so elects at any time after receipt of such notice it
may assume the defence of any suit brought to enforce any such claim. The Escrow
Agent shall have the right to employ separate counsel in any such suit and
participate in the defence thereof, but the fees and expenses of such counsel
shall be at the expense of the Escrow Agent unless: (i) the employment of such
counsel has been authorized by Redback; or (ii) the named parties to any such
suit include both the Escrow Agent and Redback and the Escrow Agent shall have
been advised by counsel acceptable to Redback that there may be one or more
legal defences available to the Escrow Agent that are different from or in
addition to those available to Redback and that, in the judgment of such
counsel, would present a conflict of interest were a joint representation to be
undertaken (in which case Redback shall not have the right to assume the defence
of such suit on behalf of the Escrow Agent but shall be liable to pay the
reasonable fees and expenses of counsel for the Escrow Agent). This indemnity
13
shall survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.
9.2 LIMITATION OF LIABILITY. The Escrow Agent shall not be held liable for
any loss which may occur by reason of depreciation of the value of any part of
the Escrow Fund or any loss incurred on any investment of funds pursuant to this
Agreement, except to the extent that such loss is attributable to fraud,
negligence, recklessness, wilful misconduct or bad faith on the part of the
Escrow Agent.
10.0 RESIGNATION AND REMOVAL OF THE ESCROW AGENT
10.1 The Escrow Agent may resign as Escrow Agent at any time with or without
cause by giving not less than 20 days prior written notice to Redback and the
Shareholders' Agent, such resignation to be effective 20 days following the date
such notice is given; provided that no such resignation shall become effective
until the appointment of a successor escrow agent, to be appointed by Redback
and the Shareholders' Agent by mutual agreement and Redback and the
Shareholders' Agent shall use their best efforts to mutually agree upon a
successor agent within 20 days after receiving such notice. If the parties fail
to agree upon a successor escrow agent within such time, the Shareholders'
Agent, with the consent of Redback, which shall not be unreasonably withheld,
shall have the right to appoint a successor escrow agent. The successor escrow
agent selected in the such manner shall execute and deliver an instrument
accepting such appointment and it shall thereupon be deemed the Escrow Agent
hereunder and it shall without further acts be vested with all the estates,
properties, rights, powers, and duties of the predecessor Escrow Agent as if
originally named as the Escrow Agent. If no successor escrow agent is named, the
Escrow Agent may apply to a court of competent jurisdiction for the appointment
of a successor escrow agent. Thereafter, the predecessor Escrow Agent shall be
discharged from any further duties and liabilities under this Agreement.
11.0 ESCROW AGENT'S DEALING WITH TRANSFER AGENT
11.1 The Escrow Agent is not the transfer agent of the Escrow Securities.
Redback shall deliver to the Escrow Agent a certificate setting forth the name,
address, telephone number and fax number of the transfer agents for each of
Redback and for Exchangeco and shall cause such transfer agent to cooperate with
the Escrow Agent in the performance of its Duties under this Agreement. When
Escrow Securities are required to be delivered by the Escrow Agent, the Escrow
Agent shall be deemed to have completed such delivery when it has delivered
certificates
14
representing the applicable Escrow Securities to the transfer agent with
instructions from the Shareholders' Agent as to how Escrow Securities should be
distributed.
12.0 TERMINATION
12.1 The escrow created by this Agreement shall continue until the earliest
to occur of the following events:
(a) as promptly as practicable after the Expiration Time if there are no
outstanding Claim Notices, in which case the Escrow Agent shall
distribute the Escrow Fund in accordance with the written instructions
of the Shareholders' Agent;
(b) Redback and the Shareholders' Agent agree in writing to terminate such
escrow, in which case the Escrow Agent shall distribute the Escrow Fund
in accordance with the written instructions of Redback and the
Shareholders' Agent; or
(c) 21 years after the death of the last survivor of the descendants of His
Majesty King Xxxxxx VI of Canada and the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation of such
escrow, in which case the Escrow Agent shall distribute the Escrow Fund
in accordance with the written instructions of Redback.
The Shareholders' Agent may, in the written instructions given pursuant to this
section 12.1, set off against any part of the Escrow Fund to be distributed to
the Shareholders any amounts that may be owed to him pursuant to the provisions
of section 6.5. The determination of the value of the Escrow Fund for the
purposes of this right of set off in favour of the Shareholders' Agent shall be
in accordance with the provisions of section 13.1.
12.2 This Agreement shall terminate upon the distribution of all of the
property comprising the Escrow Fund; provided however that the provisions of
sections 8.0 and 9.0 shall survive any termination of this Agreement.
13.0 GENERAL
13.1 For purposes of valuing the Escrow Fund from time to time,
(a) a Redback Common Share or an Exchangeable Share shall have a value
equal to US$148.96428; and
15
(b) any other form of property (including securities other than Escrow
Securities) which may, from time to time, form a part of the Escrow
Fund shall have a value equal to the fair market value of such
property, as determined, acting reasonably and in good faith by the
board of directors of Redback.
Any selection, opinion or determination by the board of directors of Redback
pursuant to this section 13.1 will be conclusive and binding on all parties.
13.2 If any term or other provisions of this Agreement is invalid, illegal
or incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse
to any party. Upon the determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties to this Agreement
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated by this Agreement are fulfilled to
the fullest extent possible.
13.3 This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns.
13.4 All notices and other communications between the parties to this
Agreement shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for any such party as shall be specified in
like notice):
(a) to Exchangeco or Redback:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX
00000
ATTENTION: General Counsel
---------
Facsimile: (000) 000-0000
16
with a copy to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Xxxxxxx X. Xxxxxx
---------
Facsimile: (000) 000-0000
and to:
Fraser Xxxxxx Casgrain
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxx X. Xxxxxx
---------
Facsimile: (000) 000-0000
(b) to the Escrow Agent:
Montreal Trust Company of Canada
Corporate Trust Department
3rd Floor - 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxxxx Xxxxxxx
---------
Facsimile: (000) 000-0000
(c) to the Shareholders' Agent:
Xxxxxx Xxxxxxx
c/o Celtic House International Corporation
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx
X0X 0X0
ATTENTION: General Counsel
---------
Facsimile: (000) 000-0000
with a copy to:
XxXxxxxx Xxxxxxxx
1300 - 000 Xxxxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxx X. Xxxxxxx
---------
Facsimile: (000) 000-0000
17
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
13.5 This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
13.6 This Agreement shall be construed and enforced in accordance with the
laws of the Province of British Columbia and the federal laws of Canada
applicable therein.
13.7 The Escrow Agent may assign all of its duties hereunder to any
corporation organized and existing under the federal laws of Canada and
authorized to carry on the business of a trust company in each of the Provinces
of Canada which is affiliated with Computershare Investor Services Inc. Such
assignment shall be effective upon notice by the Escrow Agent to Redback and
Exchangeco, without any further documentation or consent of the parties hereto.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
610381 B.C. INC.
Per:
---------------------------------
Authorized Signatory
REDBACK NETWORK INC.
Per:
---------------------------------
Authorized Signatory
18
MONTREAL TRUST COMPANY
OF CANADA
Per:
---------------------------------
Authorized Signatory
----------------------------------
XXXXXX XXXXXXX, AS AGENT
FOR AND ON BEHALF OF THE
SHAREHOLDERS
19
SCHEDULE "A"
ADDITIONAL MATTERS TO BE INCLUDED IN THE DEFINITION OF LOSSES
All Schedule numbers referred to in this Schedule "A" refer to Schedules of the
Abatis Disclosure Schedule (as such term is defined in the Arrangement
Agreement).
1. All matters disclosed in item 2 of Schedule 3.1.4, item 4 of
Schedule 3.1.5, item 5 of Schedule 3.1.8, item 8 of Schedule
3.1.9(d), item 1 of Schedule 3.1.23, item 1 of Schedule
3.1.28, item 3 of Schedule 3.1.36, item 2 of Schedule 3.1.48
and item 1 of Schedule 5.3(b)(xviii).
2. All matters disclosed in item 2 of Schedule 3.1.2, item 4 of
Schedule 3.1.4, item 1 of Schedule 3.1.5, item 5 of Schedule
3.1.7, item 7 of Schedule 3.1.8, item 3 of Schedule 3.1.23,
item 2 of Schedule 3.1.28, item 5 of 3.1.36 and item 3 of
Schedule 5.3(b)(xviii).
3. All matters disclosed in item 4 of Schedule 3.1.4, item 2 of
Schedule 3.1.5, item 5 of Schedule 3.1.7, item 7 of Schedule
3.1.8, item 3 of Schedule 3.1.23, item 3 of Schedule 3.1.28,
item 5 of 3.1.36 and item 3 of Schedule 5.3(b)(xviii).
4. All matters disclosed in item 1 of Schedule 3.1.2, item 7 of
Schedule 3.1.9(d) and item 2 of Schedule 3.1.11.
5. All matters disclosed in item 1 of Schedule 3.1.48.
20
APPENDIX 3
EXERCISE OF REPLACEMENT OPTIONS
A. OPTIONS WITH SPECIAL EXERCISE TERMS
o Each Replacement Option issued in exchange for a Abatis Option
containing exercise terms different from those set out in Section 7,
12, 13 and 14 of the Abatis Key Employees Stock Option Plan, (before
giving effect to the Plan of Arrangement) shall become exercisable
at the times and subject to the vesting and exercise conditions
specified in such Abatis Option for, at each time specified
therein, the number of Redback Common Shares which is equal to the
product (rounded to the nearest lower whole number) obtained when
the number of Abatis Shares for which such Abatis Option would
have, but for the Arrangement, been exercisable at such time is
multiplied by the Exchange Ratio.
B. OTHER OPTIONS
Subject to paragraph C below, each Replacement Option other than the
Replacement Options referred to above will become exercisable as
follows:
o With respect to the first 25% of the Redback Common Shares subject
thereto, when the holder thereof has completed 12 months of continuous
service with Abatis and/or Redback from the later of the date of grant
of the Abatis Option for which such Replacement Option is to be
exchanged and the date of commencement of such service.
o With respect to an additional 1/48th of the Redback Common Shares
subject thereto, when the holder thereof has completed each month of
continuous service with Abatis and/or Redback after the first
anniversary of the later of date of grant of the Abatis Option for
which such Replacement Option is to be exchanged and the date of
commencement of such service.
C. CLARIFICATION WITH RESPECT TO FULLY OR PARTIALLY EXERCISABLE OPTIONS
o For greater certainty, and in addition to paragraph A or B above, each
Replacement Option issued in exchange for a Abatis Option which is
fully or partially exercisable as at the Effective Date shall be
immediately exercisable for the number of Redback Common Shares
which is equal to the product (rounded to the nearest lower whole
number) obtained when the number of Abatis Shares for
which such Abatis Option is exercisable as at the Effective Date is
multiplied by the Exchange Ratio.
D. CONTINUED APPLICATION OF OTHER TERMS
o For greater certainty, except as provided in the Plan of
Arrangement (including this Appendix 3), all of the other terms and
conditions of each Replacement Option shall be the same as the terms
and conditions of the Abatis Option for which it is exchanged,
including, without limitation, the terms contained in sections 12, 13
and 14 of the Abatis Key Employees Stock Option Plan.
2
EXHIBIT F
PRINCIPAL SHAREHOLDER VOTING AGREEMENT
THIS AGREEMENT made the 30th day of July, 2000
BETWEEN:
REDBACK NETWORKS INC., a corporation incorporated under the laws of
the State of Delaware
("Parentco")
AND:
THE UNDERSIGNED SHAREHOLDER OF ABATIS SYSTEMS CORPORATION
(the "Holder")
AND:
610381 B.C. INC., a corporation incorporated under the laws of the
Province of British Columbia
("Exchangeco")
WHEREAS:
A. Concurrently herewith, Parentco, Abatis Systems Corporation (the
"Target") and Exchangeco have entered into an Arrangement Agreement of even date
herewith (as such agreement may hereafter be amended or modified from time to
time, the "Arrangement Agreement"), pursuant to which Parentco, Target and
Exchangeco have agreed, subject to certain conditions, to enter into a Plan of
Arrangement (as such plan may hereafter be amended or modified from time to
time, the "Plan of Arrangement"), under which the shares of the Target (the
"Target Shares") will be exchanged by the current holders thereof with
Exchangeco, a newly incorporated wholly-owned subsidiary of Parentco, for
exchangeable shares of Exchangeco or shares of common stock of Parentco, at the
election of such holders;
B. The Holder beneficially owns or holds the number of shares in the
capital of Target, and options to acquire such shares, if any, set forth on the
signature page of this Agreement;
C. The Holder is a party to a letter agreement (the "Alcatel Letter
Agreement") between the Holder and other major shareholders of the Target, and
Alcatel Networks Corporation ("Alcatel"), pursuant to which the Holder and
Celtic House International Corporation (collectively "Celtic House") agree to
make a payment to Alcatel or Alcatel agrees to transfer shares in the Target to
Celtic House, as the case may be, upon the occurrence of certain events based on
the price of common shares of Parentco;
D. The Holder is also a party to a letter agreement (the "Celtic House
Letter Agreement") between the Holder and other major shareholders of the Target
pursuant to which the Holder and such other shareholders agree to transfer
shares in the Target to each other in the event the obligations under the
Alcatel Letter Agreement are triggered;
E. Parentco has required, as an inducement and a condition to entering
into the Arrangement Agreement, that the Holder concurrently therewith enter
into this Agreement with respect to (i) all shares of any class of the Target
and all options to purchase shares of any class of the Target that are
beneficially owned or held by the Holder and (ii) any and all other shares or
securities of the Target issued or issuable in respect thereof on or after the
date hereof (collectively, the "Subject Securities"); and
F. This Agreement sets out the terms and conditions of the agreement of
the Holder to support the Arrangement (as defined in the Arrangement Agreement)
and to vote the Subject Securities in favour of the Arrangement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the payment of the sum of Ten ($10.00) Dollars by Parentco to
the Holder and other valuable consideration (the receipt and sufficiency of
which is hereby acknowledged), the parties hereto covenant and agree as follows:
1. VOTING OF EQUITY SECURITIES
(a) The Holder hereby agrees that, during the period (the "Term") from
the date of this Agreement until the Expiration Date (as defined
below), at any meeting of the
2
shareholders or optionholders of the Target, or of any class of
shareholders of the Target, however called, and in any action by
written consent of the shareholders or optionholders of the Target
or of any class of shareholders of the Target, the Holder shall
(or shall cause the holder of record to, if the Holder is the
beneficial owner but not the holder of record of the Subject
Securities), at the written direction of Parentco, (i) vote all of
the Subject Securities in favor of the transactions contemplated
by the Arrangement Agreement and Plan of Arrangement and any
actions required in furtherance of the transactions contemplated
thereby, (ii) vote all of the Subject Securities to oppose any
action or agreement that would result in a breach of any
representation, warranty, agreement, covenant or other obligation
of the Target under the Arrangement Agreement or the Plan of
Arrangement, and (iii) vote all of the Subject Securities to
oppose any proposed action by the Target or any other party the
result of which could be reasonably inferred to impede, interfere
with, prevent or delay Parentco from completing the transactions
contemplated by this Agreement, the Arrangement Agreement or the
Plan of Arrangement, or to materially change the business,
operations, capital or affairs of the Target, including, but not
limited to: (A) any Opposing Proposal, as hereinafter defined,
involving the Target or any of its subsidiaries; (B) any change in
the management or board of directors of the Target, except (1) as
otherwise agreed to in writing by Parentco, or (2) to appoint a
nominee or nominees of a shareholder of the Target to the board of
directors of the Target in accordance with the terms of the
shareholders' agreement among Alcatel, the Holder, the Target,
Xxxx Xxxxxx, Xxxx Xxxxx and Xxx Xxxxxxxxxx made effective as of
the 4th day of September, 1998, as amended effective as of
November 23, 1999 and April 3, 2000 (the "Shareholders'
Agreement"); (C) a sale, lease, transfer, exclusive licence,
disposition or joint venture of or relating to any of the assets
of the Target outside the ordinary course of business, or of any
of the assets which are material to its business, whether or not
in the ordinary course of business; (D) a reorganization,
recapitalization, dissolution or liquidation of the Target; or (E)
any change in the authorized capital of the Target or any
amendment of the Target's articles, by-laws or other constating
documents, other than in connection with the Arrangement. The
Holder further agrees that, during the Term, it shall not enter
into any agreement or understanding with any person the effect of
which would be inconsistent or contrary to the provisions and
agreements contained herein.
3
(b) The Holder will, concurrently with the execution of this
Agreement, complete, execute and deliver to Parentco a proxy
in the form attached hereto as Exhibit A with respect to the
Subject Securities (the "Proxy"), which, subject to the terms
of this Agreement and the Proxy, shall be irrevocable to the
fullest extent permissible by law during the Term.
(c) The Holder hereby irrevocably constitutes and appoints Parentco
the true and lawful agent, attorney and attorney in fact of the
Holder with respect to the Subject Securities, with full power of
substitution (such power of attorney, being coupled with an
interest, being irrevocable) to, at any time during the Term,
execute and deliver such additional instruments of proxy,
authorizations or consents, and to exercise such other similar
rights of the Holder, in respect of the Subject Securities at any
annual, special or adjourned meeting of the shareholders or
optionholders of the Target, or of any class of shareholders of
the Target, and in any written consent in lieu of any such
meeting, as may in the opinion of Parentco, acting reasonably, be
necessary or desirable to give effect to the terms and intent of
this Agreement.
(d) The Holder hereby revokes any and all other authorities,
whether as agent, attorney-in-fact, attorney, proxy (other
than the Proxy contemplated herein) or otherwise, previously
conferred or agreed to be conferred by the Holder at any time
with respect to the Subject Securities and the matters
contemplated above. No subsequent authority, whether as agent,
attorney-in-fact, attorney, proxy or otherwise, will be
granted with respect to the Subject Securities, in connection
with the matters contemplated above, by or on behalf of the
Holder during the Term, other than as provided for under this
Agreement.
2. TERM
This Agreement shall become effective on the date hereof and shall
terminate at such time (the "Expiration Date") as is the earliest of: (i) the
Effective Time of the Plan of Arrangement (as such term is defined therein);
(ii) the time at which the Arrangement Agreement is terminated in accordance
with its terms; (iii) December 31, 2000; or (iv) upon any amendment to or waiver
by the Target of any of the provisions of the Arrangement Agreement or the Plan
of Arrangement if such amendment or waiver would have a material negative effect
on the consideration which the Holder is entitled to receive in exchange for the
Subject Securities under
4
the Plan of Arrangement (and, for greater certainty, any change to the Exchange
Ratio (as defined in the Plan of Arrangement) shall be deemed to be material for
this purpose), unless the Holder gives its prior written consent to such waiver
or amendment, such consent not to be unreasonably withheld. The termination of
this Agreement shall not prejudice the right of any party hereto in respect of
any breach hereof by the other party or parties.
3. NON-SOLICITATION AGREEMENT
(a) The Holder hereby covenants and agrees not to, directly or
indirectly, prior to the Expiration Date, (i) solicit, initiate or
encourage, directly or indirectly, any submission of proposals or
offers or engage in negotiations with any persons other than
Parentco or any subsidiary thereof or take any action intended,
designed or reasonably likely to facilitate the efforts of any
persons, other than Parentco or any subsidiary thereof, relating
to an Opposing Proposal; (ii) furnish any non-public information
regarding the Target to any person in connection with or in
response to an Opposing Proposal or potential Opposing Proposal;
(iii) engage in any discussions or negotiate with any persons with
respect to any Opposing Proposal; (iv) agree to, approve, endorse
or recommend any Opposing Proposal; or (v) enter into any letter
of intent, term sheet, memorandum of understanding or other
similar document or any agreement contemplating or otherwise
relating to any Opposing Proposal. The Holder shall immediately
cease and cause to be terminated any existing discussions or
negotiations with any persons other than Parentco that relate to
any Opposing Proposal. In the event that the Holder receives from
any third party any offer or indication of interest (whether made
in writing or otherwise) regarding any Opposing Proposal, then the
Holder shall promptly communicate to Parentco the material terms
of each such Opposing Proposal, including the identity of the
third party.
(b) For purposes of this Agreement, "Opposing Proposal" means (i) any
proposal, other than a proposal by Parentco or any of its
subsidiaries, for an arrangement, amalgamation, merger or other
business combination involving the Target or any subsidiary
thereof, (ii) any proposal or offer, other than a proposal or
offer by Parentco or any of its subsidiaries, to acquire from the
Target or any subsidiary thereof in any manner, directly or
indirectly, including by way of joint venture or exclusive
license, an equity interest in the Target or any subsidiary
thereof, any voting securities of the Target or any subsidiary
thereof or a material amount of assets of the Target and its
subsidiaries, taken as a whole, other than the issuance of shares
of the Target pursuant to conversion rights or the exercise of
options, each of which are outstanding on the date hereof and
disclosed in the
5
Arrangement Agreement (which shares, if and when
issued to the Holder, will become Subject Securities for the
purposes of this Agreement), or (iii) any proposal or offer, other
than a proposal or offer by Parentco or any of its subsidiaries,
to acquire from the shareholders of the Target by tender offer,
takeover bid, exchange offer, purchase agreement or otherwise more
than 10% of the outstanding shares of any class of the Target
(other than pursuant to the Alcatel Letter Agreement or the Celtic
House Letter Agreement).
4. COVENANTS OF THE HOLDER
(a) During the period from the date of this Agreement until the
Expiration Date, except in accordance with the provisions of
this Agreement, the Holder agrees that it will not, directly
or indirectly:
(i) sell, transfer, pledge, encumber, hypothecate or
assign, or otherwise dispose of, or enter into any
contract, option, hedging arrangement or other
arrangement or understanding with respect to the
sale, transfer, pledge, hypothecation or assignment,
or other disposition (which, for greater certainty,
shall exclude the act of the exercise of an option
for Target Shares) of, any Subject Securities, other
than pursuant to the obligations of the Holder under
the Alcatel Letter Agreement or the Celtic House
Letter Agreement or as set out in paragraph (d)
below;
(ii) enter into any agreement or commitment providing for
or contemplating any of the events listed in
paragraph (i) above except for the Alcatel Letter
Agreement and the Celtic House Letter Agreement;
(iii) withdraw or revoke, purport or attempt to withdraw or
revoke, or take any actions or steps which would have
the effect, by operation of law or otherwise, of
withdrawing or revoking, the Proxy at any time prior
to the termination of the Proxy in accordance with
its terms;
(iv) deposit any Subject Securities into a voting trust or
grant any proxies or enter into any voting agreement
or arrangement with respect to any Subject
Securities, other than pursuant to this Agreement; or
(v) exercise any statutory or other right of dissent or appraisal
with respect to the Plan of Arrangement.
6
(b) During the Term, the Holder agrees to use all reasonable
efforts to complete the transactions contemplated by the
Arrangement Agreement in accordance with the terms and
conditions of such agreement, and, without limiting the
generality of the foregoing, agrees to assist Parentco to
complete the transactions contemplated by the Arrangement
Agreement, including, without limitation, by co-operating with
Parentco, at Parentco's expense, in obtaining all
governmental, regulatory and other approvals required to
permit Parentco and the Target to complete the transactions
provided for therein.
(c) The Holder will as soon as practicable after the execution
hereof or, in the case of any Subject Securities issued
hereafter, as soon as practicable after such issuance, cause a
legend substantially in the following form to be affixed to
the certificate(s) representing all of the shares of the
Target included in such Subject Securities:
"The shares represented by this certificate are subject to the
provisions of a certain agreement made the 30th day of July, 2000
between Redback Networks Inc., 610381 B.C. Inc. and 3494365 Canada
Inc. and such shares are not transferable, except in compliance
with the terms and conditions of such agreement.";
and will promptly thereafter provide a photocopy of such
certificate(s), bearing the foregoing legend, to Parentco.
d) Notwithstanding the restriction contained in paragraph 4(a), a
Holder may transfer all or any part of the Subject Securities to
an affiliate of such Holder (as such term is defined in the CANADA
BUSINESS CORPORATIONS ACT) (a "Transferee"), provided that prior
to any such transfer the Transferee executes and delivers to
Parentco an agreement, in form and content acceptable to Parentco,
acting reasonably, with respect to the transferred Subject
Securities, (including, without limitation, a duly completed and
executed Proxy), under which the Transferee agrees to be bound by
the terms of this Agreement and further agrees that, prior to the
Transferee ceasing to be an affiliate of the Holder, it will
re-transfer such Subject Securities to the Holder. No such
transfer shall release the Holder from liability for its
obligations under this Agreement.
(e) Immediately upon the Effective Time, the Holder will execute
and deliver to Parentco, if determined to be necessary by
Parentco, a customary form of letter under Rule 145 under the
U.S. SECURITIES ACT OF 1933 if the Holder is an affiliate
7
of the Target under such Act, which letter shall be substantially
in the form appended to the Arrangement Agreement.
(f) If the Holder is a party to the Shareholders' Agreement, the
Holder shall, if requested by Parentco, execute and deliver at
or before the Effective Date (as defined in the Arrangement
Agreement) an agreement, in form and content acceptable to
Parentco, acting reasonably, terminating the Shareholder's
Agreement effective as at the Effective Time (as defined in
the Arrangement Agreement).
5. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
The Holder represents and warrants to Parentco as follows:
(a) the Holder is the sole legal and beneficial owner of the Subject
Securities, free and clear of any encumbrance, pledge,
hypothecation, charge, lien or adverse claim, other than pursuant
to the Shareholders' Agreement, and the Holder has good and
marketable title to and exclusive right to vote the Target Shares
comprising the Subject Securities and, in the case of any options
for Target Shares which comprise a part of the Subject Securities,
the Holder has good title and the exclusive right to vote such
options for Target Shares to the extent that any voting rights are
conferred on the holder of such options;
(b) the only securities of the Target owned, directly or
indirectly, by the Holder are the Subject Securities (as set
forth on the final page of this Agreement) and the Holder will
not purchase or obtain any right or agreement to purchase, any
additional securities of the Target during the period from the
date of this Agreement to the Expiration Date except pursuant
to the exercise of options for Target Shares which comprise a
part of the Subject Securities and except pursuant to the
Alcatel Letter Agreement or the Celtic House Letter Agreement;
(c) the Holder has all necessary right, power and authority to execute
and deliver this Agreement and the Proxy and to perform its
obligations hereunder and thereunder and, if the Holder is a
corporation or other body corporate, the execution and delivery of
this Agreement and the Proxy and the performance and observance of
all of its obligations contained herein and therein have been duly
authorized by all necessary corporate action on its part;
(d) the execution, delivery and performance of this Agreement and the
Proxy by the Holder will not require, on the part of the Holder,
the consent of or filing with any
8
other person other than the consent of each of the parties to the
Shareholders' Agreement, which the Holder has obtained and will
not constitute a violation of, conflict with or result in a
default under (i) if the Holder is a corporation or other body
corporate, the memorandum, articles, by-laws or other constating
documents of the Holder, (ii) any contract, understanding or
arrangement to which the Holder is a party or by which the Holder
is bound, (iii) any judgment, decree or order applicable to the
Holder, or (iv) any law, rule or regulation of any governmental
body applicable to the Holder;
(e) each of this Agreement and the Proxy has been duly executed
and delivered by the Holder and, assuming the due
authorization, execution and delivery of this Agreement by
Parentco and Exchangeco, constitutes a legal, valid and
binding obligation of the Holder, enforceable in accordance
with its terms; and
(f) none of the Subject Securities are subject to any voting trust,
proxy or other agreement or arrangement with respect to the voting
or disposition of the Subject Securities with respect to the
matters referred to herein, other than (i) the Shareholders'
Agreement, the applicable provisions of which have been waived by
each of the parties thereto; (ii) this Agreement; and (iii) with
respect to the disposition of the Subject Securities, the Alcatel
Letter Agreement and the Celtic House Letter Agreement; and, there
are no outstanding options, warrants or rights to purchase,
acquire or convert, or agreements relating to, such Subject
Securities, other than rights and agreements contained in the
Shareholders' Agreement, the Alcatel Letter Agreement, the Celtic
House Letter Agreement and this Agreement, none of which will
impair or interfere with the Holder's ability to perform or comply
with its obligations, or Parentco's ability to enforce its rights,
under this Agreement.
6. EFFECT OF REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE HOLDER
The Holder hereby agrees to indemnify and hold harmless Parentco from
and against any and all liabilities, losses, obligations, costs or expenses
(including reasonable fees and disbursements of legal counsel), arising out of,
resulting from or relating to any breach by the Holder of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
9
7. REPRESENTATIONS AND WARRANTIES OF PARENTCO AND EXCHANGECO
Each of Parentco and Exchangeco hereby represents and warrants to the
Holder as follows:
(a) it is a corporation duly formed under the laws of the state of
Delaware, in the case of Parentco, and under the laws of
British Columbia, in the case of Exchangeco;
(b) it has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement
and under the Arrangement Agreement;
(c) the execution and delivery of each of this Agreement and the
Arrangement Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by
all necessary corporate action on its part;
(d) each of this Agreement and the Arrangement Agreement has been
duly executed and delivered by it; and
(e) assuming the due authorization, execution and delivery thereof
by each of the parties hereto other than Parentco and
Exchangeco, each of this Agreement and the Arrangement
Agreement constitutes a legal, valid and binding agreement of
each of Parentco and Exchangeco, enforceable in accordance
with its terms.
8. COVENANT OF PARENTCO
During the Term, Parentco agrees to use, and agrees to cause Exchangeco
to use, commercially reasonable efforts to complete the transactions
contemplated by the Arrangement Agreement in accordance with the terms and
conditions of such agreement.
9. THIRD PARTY PROCEEDINGS
Notwithstanding the provisions of section 1, the Holder shall not be
obliged, and the holder of the Proxy shall not be entitled, to vote the Subject
Securities in the manner provided therein if at the time of such vote there
shall be in force any order or decree of a Governmental Entity (as defined in
the Arrangement Agreement) restraining or enjoining the Holder or the holder of
the Proxy from voting the Subject Securities, provided that such order or decree
is not the result of any breach of representation, warranty, covenant or
agreement of the
10
Holder in this Agreement, and provided further that the Holder
has notified Parentco of such order or decree and has promptly taken, and
continues to diligently take, all reasonable action to cause such order or
decree to be revoked, vacated or removed.
10. EFFECT OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENTCO AND
EXCHANGECO
Parentco hereby agrees to indemnify and hold harmless the Holder from
and against any and all liabilities, losses, obligations, costs or expenses
(including reasonable fees and disbursements of legal counsel), arising out of,
resulting from or relating to any breach by Parentco or Exchangeco of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
11. ADJUSTMENTS
In the event of any increase or decrease or other change in the Subject
Securities by reason of stock dividend, stock split, recapitalization,
combination, exchange of shares or the like, the number of Subject Securities
subject to this Agreement shall be adjusted appropriately and equitably.
12. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein.
13. FURTHER ASSURANCES
Each party hereto will, at the request of the other party, promptly
execute and deliver any and all such further documents and instruments and take
or cause to be taken any and all such further actions as may reasonably be
required in order to fully perform and carry out the terms and intent of this
Agreement.
14. ASSIGNMENT
This Agreement may not be assigned by any party hereto, except that (i)
Parentco may assign this Agreement to any direct or indirect subsidiary thereof,
provided that no such
11
transfer shall release Parentco from liability for its obligations under this
Agreement, and (ii) the Holder may assign this Agreement to a Transferee of such
Holder in accordance with paragraph 4(d) hereof.
15. REMEDIES
The Holder acknowledges that each of the covenants set out in sections
1, 3 and 4 of this Agreement is reasonable and valid and further acknowledges
that damages for breach of any of the covenants set out in sections 1, 3 and 4
of this Agreement may be inadequate as such breach may cause Parentco
irreparable harm. The Holder further acknowledges and agrees that the balance of
convenience is in favour of Parentco and that Parentco shall be entitled, in
addition to any other remedies or damages that may be available at law or equity
or in this Agreement, to the remedy of specific performance of such covenants or
other commitments and preliminary and permanent injunctive relief to restrain
any breach or threatened breach of those covenants or other commitments or to
otherwise enforce the provisions of this Agreement. The Holder agrees that the
foregoing acknowledgements may be used by Parentco as evidence in any court
application for enforcement of the covenants or other commitments referred to
above by way of specific performance or injunction and hereby waives any
requirement for the posting or securing of any bond or other security in
connection with obtaining any such equitable remedies.
Parentco acknowledges that the covenant set out in section 8 of this
Agreement is reasonable and valid and further acknowledges that damages for
breach of the covenant set out in section 8 of this Agreement may be inadequate
as such breach may cause the Holder irreparable harm. Parentco further
acknowledges and agrees that the balance of convenience is in favour of the
Holder and that the Holder shall be entitled, in addition to any other remedies
or damages that may be available at law or equity or in this Agreement, to the
remedy of specific performance of such covenants or other commitments and
preliminary and permanent injunctive relief to restrain any breach or threatened
breach of those covenants or other commitments or to otherwise enforce the
provisions of this Agreement. Parentco agrees that the foregoing
acknowledgements may be used by the Holder as evidence in any court application
for the enforcement of the covenants or other commitments referred to above by
way of specific performance or injunction and hereby waives any requirement for
the posting or securing of any bond or other security in connection with
obtaining any such equitable remedies.
12
16. NOTICES
All notices or other communication required or permitted hereunder
shall be in writing and shall be deemed duly given if delivered in person, by
confirmed facsimile transmission or by overnight courier service, addressed as
follows:
(a) to Parentco and to Exchangeco:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX
00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Fraser Xxxxxx Casgrain
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
and to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
(b) to the Holder:
3494365 Canada Inc.
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx X0X 0X0
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Abatis Systems Corporation
000-0000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: President
Facsimile: (000) 000-0000
13
and to:
XxXxxxxx Xxxxxxxx
1300 - 000 Xxxxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxx X. Xxxxxxx
Facsimile: (000) 000-0000
17. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall in such event negotiate in
good faith to modify the Agreement to preserve each party's anticipated benefits
under this Agreement.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement. A signed counterpart provided by way of
facsimile shall be as binding upon the parties as an originally signed
counterpart.
19. BINDING EFFECT; BENEFITS
This Agreement shall survive the death or incapacity of any Holder and
shall inure to the benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to or shall confer
on any person other than the parties hereto and their respective heirs, legal
representatives and successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
14
20. NO AGENCY
Nothing herein shall be deemed create any agency or partnership
relationship between the parties hereto.
IN WITNESS WHEREOF, the parties have cause this Agreement to be duly
executed on the day and year first above written.
REDBACK NETWORKS INC.
Per: 3494365 CANADA INC.
---------------------------------- ---------------------------------
Authorized Signatory Print Name of Holder
---------------------------------- ---------------------------------
Print Name and Title Signature of Holder (or if Holder is
a corporation, of an Authorized
Signatory)
---------------------------------
610381 B.C. INC. (Print Name and Title of Authorized
Signatory of Holder, if applicable)
Per:
-------------------------------- ---------------------------------
Authorized Signatory Address
-------------------------------- ---------------------------------
Print Name and Title Telephone
---------------------------------
Facsimile
---------------------------------
Securities beneficially owned or held
by Holder:
3,334,333 Class A Voting
---------------------
Common Shares of the Corporation
Class B
-------------------------
Non-Voting Common Shares of the
Corporation
options granted
---------------------
under the Corporation's Option Plans
15
REDBACK NETWORKS INC.
EXHIBIT A
IRREVOCABLE PROXY
The undersigned holder of securities of Abatis Systems Corporation (the
"Corporation"), a corporation incorporated pursuant to the CANADA BUSINESS
CORPORATIONS ACT, hereby irrevocably (to the fullest extent permitted by law)
nominates and appoints the Senior Vice-President and Chief Financial Officer of
Redback Networks Inc., or, failing him or her, the General Counsel and Assistant
Secretary of Redback Networks Inc., as the sole and exclusive proxy of the
undersigned, with full power of substitution and resubstitution, to attend, act,
vote and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to (i) all shares of any class of
the Corporation and options to purchase shares of the Corporation that are
beneficially owned by the undersigned and (ii) any and all other shares or
securities of the Corporation issued or issuable in respect thereof on or after
the date hereof (collectively, the "Subject Securities"), in accordance with the
terms of this Proxy at any time until the Expiration Date. The Subject
Securities beneficially owned by the undersigned shareholder of the Corporation
as of the date of this Proxy are listed on the final page of this Proxy.
This Proxy is irrevocable (to the fullest extent permitted by law)
until the Expiration Date, is coupled with an interest and is granted pursuant
to the Principal Shareholder Voting Agreement of even date herewith between
Parentco, Exchangeco and the undersigned shareholder (the "Voting Agreement").
All capitalized terms used and not otherwise defined herein shall have the same
meaning as assigned thereto in the Voting Agreement. Upon the undersigned's
execution of this Proxy, any and all prior proxies given by the undersigned with
respect to any of the Subject Securities are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to the Subject
Securities for any of the matters set forth in the ensuing paragraph until the
Expiration Date.
The proxyholder appointed hereunder is hereby authorized and empowered
by the undersigned, at any time prior to the Expiration Date, to act as the
undersigned's proxy to vote the Subject Securities, and, subject to section 9 of
the Voting Agreement, to exercise all voting, consent and similar rights of the
undersigned with respect to the Subject Securities (including, without
limitation, the power to execute and deliver written consents) at every annual,
special or adjourned meeting of the shareholders or the optionholders of the
Corporation or of any class of shareholders of the Corporation and in every
written consent in lieu of such meeting (i) in favour
of the Arrangement Agreement and Plan of Arrangement and other transactions
contemplated by the Arrangement Agreement and Plan of Arrangement, (ii) against
any proposed action by the Target or any other party the result of which could
be reasonably inferred to prevent or delay Parentco from completing the
transactions contemplated by the Arrangement Agreement or the Plan of
Arrangement, or to materially change the business, operations, capital or
affairs of the Target, and (iii) otherwise as contemplated by the Voting
Agreement.
The proxyholder appointed hereunder may not exercise this Proxy on any
other matter except as provided above and in accordance with the Voting
Agreement. The undersigned shareholder may vote and may grant proxies in respect
of the Subject Securities on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the fullest extent permitted by law)
until the Expiration Date. This Proxy shall terminate, and be of no further
force and effect, automatically upon the Expiration Date.
This Proxy is not solicited by or on behalf of management of the
Corporation.
Dated: July 30, 2000 3494365 CANADA INC.
-----------------------------------------------------
Print Name of Shareholder
-----------------------------------------------------
Signature of Shareholder (or if Shareholder is a
corporation, of an Authorized Signatory)
-----------------------------------------------------
(Print Name and Title of Authorized Signatory of
Shareholder, if applicable )
Securities beneficially owned or held by Shareholder:
3,334,333 Class A Voting Common Shares of the
-----------
Corporation
Class B Non-Voting Common Shares of the
-----------
Corporation
options granted under the Corporation's
-----------
Option Plans
2
EXHIBIT G
SUPPORT AGREEMENT
THIS MEMORANDUM OF AGREEMENT made as of the o day of o, 2000
AMONG:
REDBACK NETWORKS INC., a corporation existing under the laws
-----------------------
of the State of Delaware
("REDBACK")
AND:
610380 B.C. INC., a company existing under the laws of the
----------------
Province of British Columbia
("NEWCO")
AND:
610381 B.C. INC., a company existing under the laws of the
----------------
Province of British Columbia
("EXCHANGECO")
WHEREAS:
A. Pursuant to an arrangement agreement (the "ARRANGEMENT AGREEMENT")
dated as of July 30, 2000 among Redback, Exchangeco and Abatis Systems
Corporation ("ABATIS"), Exchangeco is to issue exchangeable shares (the
"EXCHANGEABLE SHARES") to certain holders of Class A Voting Common Shares and
Class B Non-Voting Common Shares of Abatis pursuant to the plan of arrangement
(the "PLAN OF ARRANGEMENT") contemplated by the Arrangement Agreement; and
B. Pursuant to the Arrangement Agreement Redback and Exchangeco have
agreed to execute a support agreement substantially in the form of this
Agreement;
NOW THEREFORE in consideration of the respective covenants and
agreements in this Agreement and for other valuable consideration (the receipt
and sufficiency of which are hereby acknowledged), the parties hereto covenant
and agree as follows:
1.0 DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and
not otherwise defined herein shall have the meaning ascribed thereto in the
rights, privileges, restrictions and conditions (collectively, the "SHARE
PROVISIONS") attaching to the Exchangeable Shares attached as Appendix 1 to the
Plan of Arrangement as set out in the Articles of Arrangement of Abatis, unless
the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this Agreement
into sections and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Agreement.
Unless otherwise indicated, all references to a "section" followed by a number
and/or a letter refer to the specified section of this Agreement. The terms
"this Agreement", "hereof", "herein" and "hereunder" and similar expressions
refer to this Agreement and not to any particular section or other portion
hereof and include any agreement or instrument supplementary or ancillary
hereto.
1.3 NUMBER, GENDER AND PERSONS. In this Agreement, unless the context
otherwise requires, words importing the singular number only shall include the
plural and VICE VERSA and words importing any gender shall include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this Agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day. For the purposes of this
Agreement, a "BUSINESS DAY" means any day on which commercial banks are open for
business in San Francisco, California and Vancouver, British Columbia, other
than a Saturday, a Sunday or a day observed as a holiday in Vancouver, British
Columbia under the laws of the Province of British Columbia or the federal laws
of Canada or in San Francisco, California under the laws of the State of
California or the federal laws of the United States of America.
2
2.0 COVENANTS OF REDBACK AND EXCHANGECO
2.1 COVENANTS REGARDING EXCHANGEABLE SHARES. So long as any Exchangeable
Shares not owned by Redback or its Affiliates are outstanding, Redback will:
(a) not declare or pay any dividend on the Redback Common Shares
unless (i) Exchangeco shall simultaneously declare or pay, as
the case may be, an equivalent dividend (as provided for in
section 3.1 of the Share Provisions) on the Exchangeable
Shares and (ii) Exchangeco shall have or shall be provided
with sufficient money or other assets or authorized but
unissued securities available to enable the due declaration
and the due and punctual payment, in accordance with
applicable law, of any such dividend on the Exchangeable
Shares;
(b) advise Exchangeco sufficiently in advance of the declaration
by Redback of any dividend on the Redback Common Shares and
take all such other actions as are reasonably necessary, in
cooperation with Exchangeco, to ensure that the respective
declaration date, record date and payment date for a dividend
on the Exchangeable Shares shall be the same as the
declaration date, record date and payment date for the
corresponding dividend on the Redback Common Shares;
(c) ensure that the record date for any dividend declared on
Redback Common Shares is not less than 10 Business Days after
the declaration date of such dividend;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Exchangeco, in
accordance with applicable law, to pay and otherwise perform
its obligations with respect to the satisfaction of the
Liquidation Amount, the Retraction Price or the Redemption
Price in respect of each issued and outstanding Exchangeable
Share upon the liquidation, dissolution or winding-up of
Exchangeco, the delivery of a Retraction Request by a holder
of Exchangeable Shares or a redemption of Exchangeable Shares
by Exchangeco, as the case may be, including without
limitation all such actions and all such things as are
necessary or desirable to enable and permit Exchangeco to
cause to be delivered Redback Common Shares to the holders of
Exchangeable Shares in accordance with the provisions of
Article 5, 6 or 7, as the case may be, of the Share
Provisions;
(e) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Newco, in
accordance with applicable law, to perform its obligations
arising upon the exercise by it of the Liquidation Call Right,
the Retraction Call Right or the Redemption Call Right,
including without limitation all such actions and all such
things as are necessary or desirable to
3
enable and permit Newco to cause to be delivered Redback
Common Shares to the holders of Exchangeable Shares in
accordance with the provisions of the Liquidation Call Right,
the Retraction Call Right or the Redemption Call Right, as the
case may be;
(f) not exercise its vote as a shareholder, nor allow any direct
or indirect subsidiary to exercise its own vote as a
shareholder, of Exchangeco to initiate the voluntary
liquidation, dissolution or winding-up of Exchangeco nor take
any action or omit to take any action that is designed to
result in the liquidation, dissolution or winding-up of
Exchangeco;
(g) not exercise its vote as a shareholder, nor allow any direct
or indirect subsidiary of Redback to exercise its own vote as
a shareholder, of Exchangeco to authorize the continuance or
other transfer of the corporate existence of Exchangeco to any
jurisdiction outside of Canada;
(h) at the same time, or as near thereto as is reasonably
practicable, as such materials are first sent to holders of
Redback Common Shares by or on behalf of management of
Redback, mail or cause to be mailed (or otherwise communicate
in the same manner as Redback utilizes in communicating to
holders of Redback Common Shares) to each holder of
Exchangeable Shares, other than Affiliates of Redback, copies
of all proxy materials (including notices of Redback
shareholder meetings but excluding proxies to vote Redback
Common Shares), information statements or circulars, reports
(including without limitation all interim and annual financial
statements) and other written communications that, in each
case, are to be distributed from time to time to holders of
Redback Common Shares;
(i) as soon as is reasonably practicable after receipt by Redback
or the shareholders of Redback (if such receipt is known by
Redback) of any material sent or given to the holders of
Redback Common Shares by or on behalf of a third party,
including without limitation dissident proxy and information
circulars (and related information and material) and tender
and exchange offer circulars (and related information and
material), use reasonable efforts to obtain and deliver to
each holder of Exchangeable Shares, other than Affiliates of
Redback, copies of all such materials, other than proxies to
vote Redback Common Shares;
(j) not call for redemption of any Preferred Shares it holds and
not allow Exchangeco to call for redemption of any of the
issued and outstanding Preferred Shares;
4
(k) forthwith give written notice to the holders of Exchangeable
Shares if it intends to take action which would result in
Exchangeco becoming any of the entities described in
paragraphs (a) to (e.l), inclusive, of the definition of
"specified financial institution" in subsection 248(1) of the
INCOME TAX ACT (Canada); and
(l) forthwith give written notice to the holders of Exchangeable
Shares if it intends to carry on, as its principal business,
an "investment business", as such term is defined for purposes
of clause (b)(ii)(A) of the definition of "exempt interest" in
proposed subsection 94.1(1) of the INCOME TAX ACT (Canada) as
set out in the draft legislation regarding the taxation of
non-resident trusts and foreign investment entities released
by the Department of Finance of Canada on June 22, 2000 as
amended from time to time or as enacted and in effect from
time to time.
Any written materials distributed by Redback to holders of Exchangeable
Shares pursuant to this Section 2.1 shall be sent by mail (or otherwise
communicated in the same manner as Redback utilizes in communications to holders
of Redback Common Shares) to each holder at its respective address shown on the
register of holders of Exchangeable Shares maintained by or on behalf of
Exchangeco.
2.2 SEGREGATION OF FUNDS. Redback will cause Exchangeco to deposit a
sufficient amount of its funds in a separate account of Exchangeco and segregate
a sufficient amount of such other of its assets and property as is necessary to
enable Exchangeco to pay dividends when due and to pay or otherwise satisfy its
respective obligations under Article 5, 6 or 7 of the Share Provisions, as
applicable.
2.3 RESERVATION OF REDBACK COMMON SHARES. Redback hereby represents,
warrants and covenants in favour of Exchangeco and Newco that Redback has
irrevocably reserved for issuance and will, at all times while any Exchangeable
Shares (other than Exchangeable Shares held by Redback or its Affiliates) are
outstanding, keep available, free from pre-emptive and other rights, out of its
authorized and unissued capital stock such number of Redback Common Shares (or
other shares or securities into which Redback Common Shares may be reclassified
or changed as contemplated by section 2.7 hereof) (a) as is equal to the sum of
(i) the number of Exchangeable Shares issued and outstanding from time to time
and (ii) the number of Exchangeable Shares issuable upon the exercise of all
rights to acquire Exchangeable Shares outstanding from time to time and (b) as
are now and may hereafter be required to enable and permit Redback to meet its
obligations under the Exchange Trust Agreement and under any other security or
commitment pursuant to which Redback may now or hereafter be required to
5
issue Redback Common Shares, to enable and permit Newco to meet its obligations
under each of the Liquidation Call Right, the Retraction Call Right and the
Redemption Call Right and to enable and permit Exchangeco to meet its
obligations hereunder and under the Share Provisions.
2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Redback to comply
with its obligations hereunder and to permit Newco to exercise the Liquidation
Call Right, the Retraction Call Right and the Redemption Call Right, Exchangeco
will notify Redback and Newco of each of the following events at the times set
forth below:
(a) promptly, upon the earlier of (i) receipt by Exchangeco of
notice of and (ii) Exchangeco otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of Exchangeco or to effect any other
distribution of the assets of Exchangeco among its
shareholders for the purpose of winding up its affairs;
(b) immediately, upon receipt by Exchangeco of a Retraction
Request;
(c) on the same date on which notice of redemption is given to
holders of Exchangeable Shares, upon the determination of a
Redemption Date in accordance with the Share Provisions; and
(d) as soon as practicable upon the issuance by Exchangeco of any
Exchangeable Shares or rights to acquire Exchangeable Shares
(other than the issuance of Exchangeable Shares and rights to
acquire Exchangeable Shares in exchange for outstanding shares
of any class of Abatis pursuant to the Arrangement).
2.5 DELIVERY OF REDBACK COMMON SHARES TO EXCHANGECO AND NEWCO. In
furtherance of Redback's obligations under sections 2.1(d) and (e) hereof, upon
notice from Exchangeco or Newco of any event that requires Exchangeco or Newco,
as the case may be, to cause to be delivered Redback Common Shares to any holder
of Exchangeable Shares, Redback shall forthwith issue and deliver or cause to be
delivered to Exchangeco or Newco, as the case may be, the requisite number of
Redback Common Shares to be received by, and issued to or to the order of, the
former holder of the surrendered Exchangeable Shares, as Exchangeco or Newco, as
the case may be, shall direct. All such Redback Common Shares shall be duly
authorized and validly issued as fully paid and non-assessable shares of Redback
and shall be free and clear of any lien, claim or encumbrance. In consideration
of the issuance and delivery of
6
each such Redback Common Share, Exchangeco or Newco, as the case may be, shall
issue to Redback, or as Redback shall direct, common or preferred shares of
Exchangeco or Newco having equivalent value and Redback acknowledges and agrees
that such common or preferred shares of Exchangeco or Newco shall be sufficient
consideration for the issuance of the Redback Common Shares to Exchangeco or
Newco, as the case may be. Redback will cause each certificate representing such
Redback Common Shares issued to bear the legends as required below:
(a) each Redback Common Share to be issued pursuant to this
Section 2.5 shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH RULE 145 OF
THE SECURITIES ACT OF 1933, AS AMENDED."
(b) each Redback Common Share to be issued pursuant to this
Section 2.5 prior to the 90th day following the Effective Date
(as such term is defined in the Plan of Arrangement) shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A LOCK-UP PROVISION UNDER THE PLAN OF ARRANGEMENT UNDER
SECTION 192 OF THE CANADA BUSINESS CORPORATIONS ACT BETWEEN
ABATIS SYSTEMS CORPORATION AND ITS SHAREHOLDERS, AMONG OTHERS,
PURSUANT TO WHICH THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE AGREES THAT SUCH HOLDER SHALL NOT OFFER TO
SELL, CONTRACT TO SELL OR OTHERWISE SELL, DISPOSE OF OR GRANT
ANY RIGHTS WITH RESPECT TO SUCH SECURITIES FOR A CERTAIN
PERIOD OF TIME (NOT TO EXCEED 90 DAYS) AFTER _________, 2000.
THE FOREGOING RESTRICTION PRECLUDES SUCH HOLDER FROM ENGAGING
IN ANY HEDGING OR OTHER TRANSACTIONS THAT MAY LEAD TO OR
RESULT IN A SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE DURING SUCH PERIOD EVEN IF SUCH SECURITIES WOULD
BE SOLD BY SOMEONE OTHER THAN THE HOLDER."
7
(c) each Redback Common Share to be issued pursuant to this
Section 2.5 prior to the existence of an effective
registration statement filed pursuant to the Registration
Rights Agreement dated as of the date hereof between Redback
and Xxxxxx Xxxxxxx, as agent for the shareholders of Abatis,
registering such Redback Common Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR
QUALIFIED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NEITHER
THESE SHARES NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) THE
SAME ARE REGISTERED AND QUALIFIED IN ACCORDANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW, (2)
THE SHARES ARE SOLD IN COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (3) IN THE OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO REDBACK NETWORKS INC., SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED. HEDGING TRANSACTIONS INVOLVING
THESE SECURITIES MAY NOT BE CONDUCTED UNLESS CONDUCTED IN
COMPLIANCE WITH THE SECURITIES ACT."
(d) each Redback Common Share to be issued pursuant to this
Section 2.5 in exchange for Exchangeable Shares which are
Escrow Securities (as such term is defined in the Plan of
Arrangement) shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO FORFEITURE
AND CERTAIN OTHER RESTRICTIONS ON TRANSFER PURSUANT TO THE
TERMS OF THE PLAN OF ARRANGEMENT UNDER SECTION 192 OF THE
CANADA BUSINESS CORPORATIONS ACT BETWEEN ABATIS SYSTEMS
CORPORATION AND ITS SHAREHOLDERS, AMONG OTHERS, AND THE ESCROW
AGREEMENT BETWEEN REDBACK NETWORKS INC., 610381 B.C. INC.,
MONTREAL TRUST COMPANY OF CANADA AND XXXXXX XXXXXXX, AS AGENT
FOR THE SHAREHOLDERS OF ABATIS SYSTEMS CORPORATION, AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENTS."
8
2.6 QUALIFICATION OF REDBACK COMMON SHARES. If any Redback Common Shares
(or other shares or securities into which Redback Common Shares may be
reclassified or changed as contemplated by section 2.7 hereof) to be issued and
delivered hereunder require registration or qualification with or approval of or
the filing of any document, including any prospectus or similar document or the
taking of any proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority (i) under any Canadian provincial
securities or other law or regulation or pursuant to the rules and regulations
of any securities or other regulatory authority applicable to holders who are
resident in the Provinces of Alberta, Ontario or British Columbia, or (ii) under
any United States federal or state securities or other law or regulation or
pursuant to the rules and regulations of any United States securities or other
regulatory authority before such shares (or such other shares or securities) may
be issued by Redback and delivered by Redback at the direction of Newco or
Exchangeco, if applicable, to the holder of surrendered Exchangeable Shares or
in order that such shares (or such other shares or securities) may be freely
traded thereafter through the facilities of a stock exchange or market in the
United States or through the NNM provided that such first trade is made in
accordance with the rules of the stock exchange or market upon which the trade
is made or the rules of the NNM in accordance with all laws applicable to that
stock exchange or market or applicable to the NNM (other than any restrictions
of general application on transfer by reason of a holder being a "control
person" of Redback for purposes of Canadian provincial securities law or an
"affiliate" of Redback for purposes of United States federal or state securities
law), Redback will in good faith expeditiously take all such actions and do all
such things as are necessary or desirable to cause such Redback Common Shares
(or such other shares or securities) to be and remain duly registered, qualified
or approved under United States and/or Canadian law, as the case may be,
provided that nothing herein shall require Redback to prepare, file with the
United States Securities and Exchange Commission or maintain a registration
statement, prospectus or similar document with regard to such shares or
otherwise qualify such shares to be freely tradeable in the United States except
in accordance with the terms of the Registration Rights Agreement contemplated
by the Arrangement Agreement. Redback will in good faith expeditiously take all
such actions and do all such things as are reasonably necessary or desirable to
cause all Redback Common Shares (or such other shares or securities) to be
delivered hereunder to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which outstanding Redback Common Shares (or
such other shares or securities) have been listed by Redback and remain listed
and are quoted or posted for trading at such time.
9
2.7 ECONOMIC EQUIVALENCE. So long as any Exchangeable Shares not owned by
Redback or its Affiliates are outstanding:
(a) Redback will not without prior approval of Exchangeco and the
prior approval of the holders of the Exchangeable Shares given
in accordance with section 10.2 of the Share Provisions:
(i) issue or distribute Redback Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Redback Common Shares) to
the holders of all or substantially all of the then
outstanding Redback Common Shares by way of stock
dividend or other distribution, other than an issue
of Redback Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire
Redback Common Shares) to holders of Redback Common
Shares who exercise an option to receive dividends in
Redback Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire
Redback Common Shares) in lieu of receiving cash
dividends; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding Redback Common Shares entitling them to
subscribe for or to purchase Redback Common Shares
(or securities exchangeable for or convertible into
or carrying rights to acquire Redback Common Shares);
or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding Redback
Common Shares (A) shares or securities of Redback of
any class other than Redback Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Redback Common Shares),
(B) rights, options or warrants other than those
referred to in section 2.7(a)(ii) above, (C)
evidences of indebtedness of Redback or (D) assets of
Redback,
unless the economic equivalent on a per share basis of such
rights, options, securities, shares, evidences of indebtedness
or other assets is issued or distributed simultaneously to
holders of the Exchangeable Shares; provided that, for greater
certainty, the above restrictions shall not apply to any
securities issued or distributed by Redback in order to give
effect to and to consummate the transactions contemplated by,
and in accordance with, the Arrangement Agreement and the Plan
of Arrangement.
10
(b) Redback will not without the prior approval of Exchangeco and
the prior approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 of the Share Provisions:
(i) subdivide, redivide or change the then outstanding
Redback Common Shares into a greater number of
Redback Common Shares; or
(ii) reduce, combine, consolidate or change the then
outstanding Redback Common Shares into a lesser
number of Redback Common Shares; or
(iii) reclassify or otherwise change Redback Common Shares
or effect an amalgamation, merger, reorganization or
other transaction affecting Redback Common Shares,
unless the same or an economically equivalent change shall
simultaneously be made to the rights attached to the
Exchangeable Shares.
(c) Redback will ensure that the record date for any event
referred to in section 2.7(a) or (b) above, or (if no record
date is applicable for such event) the effective date for any
such event, is not less than five Business Days after the date
on which such event is declared or announced by Redback (with
contemporaneous notification thereof by Redback to
Exchangeco).
(d) The board of directors of Exchangeco shall determine, in good
faith and in its sole discretion, economic equivalence for the
purposes of any event referred to in section 2.7(a) or (b)
above and each such determination shall be conclusive and
binding on Redback. In making such determination, the
following factors shall, without excluding other factors
determined by the board of directors of Exchangeco to be
relevant, be considered by the board of directors of
Exchangeco:
(i) in the case of any stock dividend or other
distribution payable in Redback Common Shares, the
number of such shares issued in proportion to the
number of Redback Common Shares previously
outstanding;
(ii) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or
purchase Redback Common Shares (or securities
exchangeable for or convertible into or carrying
rights to acquire Redback Common Shares), the
relationship between the exercise price of each such
right, option or warrant and the Current Market
Price;
11
(iii) in the case of the issuance or distribution of any
other form of property (including without limitation
any shares or securities of Redback of any class
other than Redback Common Shares, any rights, options
or warrants other than those referred to in section
2.7(d)(ii) above, any evidences of indebtedness of
Redback or any assets of Redback), the relationship
between the fair market value (as determined by the
board of directors of Exchangeco in the manner
contemplated above) of such property to be issued or
distributed with respect to each outstanding Redback
Common Share and the Current Market Price;
(iv) in the case of any subdivision, redivision or change
of the then outstanding Redback Common Shares into a
greater number of Redback Common Shares or the
reduction, combination, consolidation or change of
the then outstanding Redback Common Shares into a
lesser number of Redback Common Shares or any
amalgamation, merger, reorganization or other
transaction affecting Redback Common Shares, the
effect thereof upon the then outstanding Redback
Common Shares; and
(v) in all such cases, the general taxation consequences
of the relevant event to holders of Exchangeable
Shares to the extent that such consequences may
differ from the taxation consequences to holders of
Redback Common Shares as a result of differences
between taxation laws of Canada and the United States
(except for any differing consequences arising as a
result of differing marginal taxation rates and
without regard to the individual circumstances of
holders of Exchangeable Shares).
(e) Exchangeco agrees that, to the extent required, upon due
notice from Redback, Exchangeco will use its best efforts to
take or cause to be taken such steps as may be necessary for
the purposes of ensuring that appropriate dividends are paid
or other distributions are made by Exchangeco, or
subdivisions, redivisions or changes are made to the
Exchangeable Shares, in order to implement the required
economic equivalent with respect to the Redback Common Shares
and Exchangeable Shares as provided for in this section 2.7.
2.8 TENDER OFFERS. In the event that a tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction with respect to Redback Common
Shares (an "OFFER") is proposed by Redback or is proposed to Redback or its
shareholders and is recommended by the board of directors of Redback, or is
otherwise effected or to be effected with the consent or
12
approval of the board of directors of Redback, and the Exchangeable Shares are
not redeemed by Exchangeco or purchased by Newco pursuant to the Redemption Call
Right, Redback will use its reasonable efforts expeditiously and in good faith
to take all such actions and do all such things as are necessary or desirable to
enable and permit holders of Exchangeable Shares (other than Redback and its
Affiliates) to participate in such Offer to the same extent and on an
economically equivalent basis as the holders of Redback Common Shares, without
discrimination. Without limiting the generality of the foregoing, Redback will
use its reasonable efforts expeditiously and in good faith to ensure that
holders of Exchangeable Shares may participate in each such Offer without being
required to retract Exchangeable Shares as against Exchangeco (or, if so
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of such Offer and only to the extent
necessary to tender or deposit to the Offer and, in such event, Newco shall be
entitled to exercise the Retraction Call Right without compliance with the
notice provisions thereof). Nothing herein shall affect the rights of Exchangeco
to redeem (or Newco to purchase pursuant to the Redemption Call Right)
Exchangeable Shares, as applicable, in the event of a Redback Control
Transaction.
2.9 OWNERSHIP OF OUTSTANDING SHARES. Without the prior approval of
Exchangeco and the prior approval of the holders of the Exchangeable Shares
given in accordance with section 10.2 of the Share Provisions, Redback covenants
and agrees in favour of Exchangeco that, as long as any outstanding Exchangeable
Shares are owned by any Person other than Redback or any of its Affiliates,
Redback (or any successor to Redback by way of merger, consolidation, or
purchase of all or substantially all of the assets of Redback) will be and
remain the direct or indirect beneficial owner of all issued and outstanding
voting shares in the capital of Exchangeco and Newco.
2.10 REDBACK AND AFFILIATES NOT TO VOTE EXCHANGEABLE SHARES. Redback
covenants and agrees that it will appoint and cause to be appointed proxyholders
with respect to all Exchangeable Shares held by it and its Affiliates for the
sole purpose of attending each meeting of holders of Exchangeable Shares in
order to be counted as part of the quorum for each such meeting. Redback further
covenants and agrees that it will not, and will cause its Affiliates not to,
exercise any voting rights which may be exercisable by holders of Exchangeable
Shares from time to time pursuant to the Share Provisions or pursuant to the
provisions of the Company Act (or any successor or other corporate statute by
which Exchangeco may in the future be governed) with respect to any Exchangeable
Shares held by it or by its Affiliates in respect of any matter considered at
any meeting of holders of Exchangeable Shares, including without limitation any
13
approval to be given by the holders of Exchangeable Shares pursuant to Section
10.2 of the Share Provisions.
2.11 RULE 10b-18 PURCHASES. For certainty, nothing contained in this
Agreement, including without limitation the obligations of Redback contained in
Section 2.8 hereof, shall limit the ability of Redback or Exchangeco to make a
"Rule 10b-18 Purchase" of Redback Common Shares pursuant to Rule 10b-18 of the
United States SECURITIES EXCHANGE ACT of 1934, as amended, or any successor
provisions thereof.
2.12 DUE PERFORMANCE. On and after the Effective Date, Redback shall duly
and in a timely manner perform all of its obligations provided for in the Plan
of Arrangement, including any obligations that may arise upon the exercise of
Redback's rights under the Share Provisions.
2.13 ECONOMIC EQUIVALENCE. Redback hereby acknowledges that any
determination of economic equivalence made by the Board of Directors pursuant to
Section 3.5 of the Share Provisions shall, where applicable to Redback, be
conclusive and binding on it.
3.0 REDBACK SUCCESSORS
3.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.. Redback shall not
consummate any transaction (whether by way of reconstruction, reorganization,
consolidation, merger, transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking, property and assets would become the
property of any other person or, in the case of a merger, of the continuing
corporation resulting therefrom unless:
(a) such other person or continuing corporation (the "REDBACK
SUCCESSOR") by operation of law, becomes, without more, bound
by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the
consummation of such transaction, an agreement supplemental
hereto and such other instruments (if any) as are reasonably
necessary or advisable to evidence the assumption by the
Redback Successor of liability for all moneys payable and
property deliverable hereunder and the covenant of such
Redback Successor to pay and deliver or cause to be delivered
the same and its agreement to observe and perform all the
covenants and obligations of Redback under this Agreement; and
(b) such transaction shall be upon such terms and conditions as
substantially to preserve and not to impair in any material
respect any of the rights, duties, powers
14
and authorities of the other parties hereunder or the holders
of the Exchangeable Shares.
3.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of section 3.1
have been duly observed and performed, the parties, if required by section 3.1,
shall execute and deliver a supplemental agreement hereto and thereupon the
Redback Successor shall possess and from time to time may exercise each and
every right and power of Redback under this Agreement in the name of Redback or
otherwise and any act or proceeding by any provision of this Agreement required
to be done or performed by the board of directors of Redback or any officers of
Redback may be done and performed with like force and effect by the directors or
officers of the Redback Successor.
3.3 WHOLLY-OWNED SUBSIDIARIES. Nothing in this Agreement shall be construed
as preventing the amalgamation or merger of any wholly-owned direct or indirect
subsidiary of Redback with or into Redback or another wholly-owned direct or
indirect subsidiary of Redback or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of Redback, other than Exchangeco or Newco, provided
that all of the assets of such subsidiary are transferred to Redback or another
wholly-owned direct or indirect subsidiary of Redback and any such transactions
are expressly permitted by this section 3.0.
4.0 GENERAL
4.1 TERM. This Agreement shall come into force and be effective as of the
date hereof and shall terminate and be of no further force and effect at such
time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any person or entity other than Redback and any of its Affiliates.
4.2 CHANGES IN CAPITAL OF REDBACK AND EXCHANGECO. Notwithstanding the
provisions of section 4.4 hereof, at all times after the occurrence of any event
contemplated by sections 2.7 and 2.8 hereof or otherwise, as a result of which
either Redback Common Shares or the Exchangeable Shares or both are in any way
changed, this Agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, MUTATIS MUTANDIS, to all
new securities into which Redback Common Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
15
4.3 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon the determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties to
this Agreement will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are fulfilled to the fullest extent possible.
4.4 AMENDMENTS, MODIFICATIONS. This Agreement may not be amended or
modified except by an agreement in writing executed by Exchangeco, Newco and
Redback and approved by the holders of the Exchangeable Shares (other than
Redback or any Affiliates of Redback) in accordance with section 10.2 of the
Share Provisions.
4.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 4.4,
the parties to this Agreement may in writing at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this Agreement for the purposes of:
(a) adding to the covenants of any or all parties provided that
the board of directors of each of Exchangeco, Newco and
Redback shall be of the good faith opinion that such additions
will not be prejudicial to the rights or interests of the
holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions which, in the good faith opinion of
the board of directors of each of Exchangeco, Newco and
Redback, it may be expedient to make, provided that each such
board of directors shall be of the good faith opinion that
such amendments or modifications will not be prejudicial to
the rights or interests of the holders of the Exchangeable
Shares; or
(c) making such changes or corrections which, on the advice of
counsel to Exchangeco, Newco and Redback, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error, provided that the Boards of Directors of each
of Exchangeco, Newco and Redback shall be of the good faith
opinion that such
16
changes or corrections will not be prejudicial to the rights
or interests of the holders of the Exchangeable Shares.
4.6 MEETING TO CONSIDER AMENDMENTS. Exchangeco, at the request of Redback,
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval pursuant to section 4.4 hereof. Any such meeting or meetings shall be
called and held in accordance with the articles of Exchangeco, the Share
Provisions and all applicable laws.
4.7 AMENDMENTS ONLY IN WRITING. No amendment to or modification or waiver
of any of the provisions of this Agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by all of the parties hereto.
4.8 ENUREMENT. This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and assigns.
4.9 NOTICES TO PARTIES. All notices and other communications between the
parties to this Agreement shall be in writing and shall be deemed to have been
given if delivered personally or by confirmed telecopy to the parties at the
following address (or at such other address for any such party as shall be
specified in like notice):
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
ATTENTION: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
17
and to:
Fraser Xxxxxx Casgrain
1500 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
ATTENTION: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof and if given by telecopy
shall be deemed to have been given and received on the date of confirmed receipt
thereof unless such day is not a Business Day in which case it shall be deemed
to have been given and received upon the immediately following Business Day.
4.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
4.11 JURISDICTION. This Agreement shall be construed and enforced in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein.
4.12 ATTORNMENT. Each of Redback and Newco agrees that any action or
proceeding arising out of or relating to this Agreement may be instituted in the
courts of British Columbia, waives any objection which it may have now or
hereafter to the venue of any such action or proceeding, irrevocably submits to
the jurisdiction of the said courts in any such action or proceeding, agrees to
be bound by any judgment of the said courts and not to seek, and hereby waives,
any review of the merits of any such judgment by the courts of any other
jurisdiction and hereby appoints Exchangeco at its registered office in the
Province of British Columbia as attorney for service of process.
18
4.13 GUARANTY AND ASSIGNMENT. Redback hereby unconditionally and irrevocably
guarantees the full and punctual performance of all of Newco's obligations
hereunder. Newco may assign all or any portion of its rights and obligations
hereunder to Redback or any Affiliate of Redback without the consent of either
of the other parties hereto, provided that Redback or such Affiliate, as the
case may be, enters into a supplemental agreement reflecting such assignment, in
form and content acceptable to the other parties, acting reasonably.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
REDBACK NETWORKS INC.
Per:
-----------------------------------------------
Authorized Signatory
610380 B.C. INC.
Per:
-----------------------------------------------
Authorized Signatory
610381 B.C. INC.
Per:
-----------------------------------------------
Authorized Signatory
19
EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
REDBACK NETWORKS INC.
o, 2000
TABLE OF CONTENTS
1. Registration Rights........................................................1
1.1 Definitions......................................................2
1.2 Shelf Registration...............................................3
1.3 Demand Registration..............................................4
1.4 Obligations of the Company.......................................5
1.5 Furnish Information..............................................7
1.6 Expenses of Demand Registration..................................7
1.7 Delay of Registration............................................7
1.8 Indemnification..................................................7
1.9 Reports Under Securities Exchange Act of 1934....................9
1.10 No Assignment of Registration Rights...........................10
1.11 Termination of Registration Rights.............................10
2. Miscellaneous.............................................................10
2.1 Successors and Assigns..........................................10
2.2 Governing Law...................................................10
2.3 Counterparts....................................................10
2.4 Titles and Subtitles............................................10
2.5 Notices.........................................................11
2.6 Expenses........................................................11
2.7 Amendments and Waivers..........................................11
2.8 Severability....................................................12
2.9 Aggregation of Stock...........................................12
2.10 Entire Agreement...............................................12
Exhibit A Shareholder Information Questionnaire
i
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made as of o, 2000 (this
"Agreement"), by and among Redback Networks Inc., a Delaware corporation (the
"Company"), and Xxxxxx Xxxxxxx acting as agent (the "Shareholders' Agent") to
the shareholders (each a "Shareholder" and collectively, the "Shareholders") of
Abatis Systems Corporation, a corporation existing under the federal laws of
Canada ("Abatis").
RECITALS
WHEREAS, the Company, Abatis and 610381 B.C. Inc., a company
existing under the laws of the Province of British Columbia and wholly owned
subsidiary of the Company ("Exchangeco"), are parties to that certain
Arrangement Agreement made as of July 30, 2000 (together with all exhibits,
schedules, supplements and any amendments thereto, the "Arrangement Agreement")
pursuant to which the Company will acquire Abatis (the "Arrangement");
WHEREAS, the Company, Abatis, Exchangeco, 610380 B.C. Inc., a
company existing under the laws of the Province of British Columbia and a wholly
owned subsidiary of the Company ("Newco"), and the Shareholders are bound to
effect the Arrangement upon the effectiveness of the related Plan of Arrangement
(together with all exhibits, schedules, supplements and any amendments thereto,
the "Plan of Arrangement");
WHEREAS, the execution and delivery of this Agreement is a
condition to the closing of the Arrangement;
WHEREAS, the Arrangement Agreement and the Plan of Arrangement
(collectively, the "Arrangement Documents") provide that, as of the Effective
Date, each of the shares of Abatis held by the Shareholders will be exchanged
for either (i) shares of the Common Stock of the Company or (ii) non-voting
exchangeable shares of Exchangeco exchangeable into the Common Stock of the
Company ("Exchangeable Shares");
WHEREAS, pursuant to the Plan of Arrangement, each of the
Shareholders will be deemed to have irrevocably appointed the Shareholders'
Agent, as the agent of each such Shareholder, to execute and deliver this
Agreement; and
WHEREAS, the shares of Common Stock of the Company issued to
the Shareholders in exchange for Exchangeable Shares will be granted
registration rights as set forth herein.
THIS AGREEMENT WITNESSETH THAT in consideration of the
respective covenants and agreements herein contained and for other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged by each party), the parties hereby covenant and agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees
as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(d) The term "No-Action Letter" shall mean a letter
received from the SEC stating that the SEC would not recommend an enforcement
action with respect to certain substantive issues addressed therein.
(e) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(f) The term "Registrable Securities" means (i) the
Common Stock of the Company issuable or issued to the Shareholders upon exchange
of the Exchangeable Shares, and (ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange for, or in replacement of the shares referenced in (i) above.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable pursuant
to then outstanding Exchangeable Shares that are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
(i) The term "Shelf Registration" means a registration
effected pursuant to Section 1.2 hereof.
(j) The term "Shelf Registration Statement" means a
"shelf" registration statement filed under the Act providing for the
registration of, and the sale on a continuous or delayed basis by the
Shareholders of, all of the Registrable Securities pursuant to Rule 415 under
the Act and/or any similar rule that may be adopted by the SEC, filed by the
Company pursuant to the provisions of Section 1.2 of this Agreement, including
the prospectus contained therein, any amendments and supplements to such
registration statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such registration statement.
(k) Capitalized terms not otherwise defined herein shall
have the same meanings ascribed to them in the Arrangement Documents.
2
1.2 SHELF REGISTRATION.
(a) The Company shall use reasonable best efforts to
prepare and file, as soon as practicable, but no later than 60 calendar days
following the Effective Date, a Shelf Registration Statement on the appropriate
form and any related qualification or compliance with respect to all of the
Registrable Securities owned by the Shareholders so as to permit or facilitate
the sale and distribution of the Shareholders' Registrable Securities. The
Company shall use all reasonable best efforts to cause such Shelf Registration
Statement to become effective, and, subject to the provisions below, use
commercially reasonable efforts to keep such Shelf Registration Statement
effective until January 31, 2003 (the "Shelf Termination Date"); provided,
however, if the Company, on the Shelf Termination Date, has another effective
shelf registration statement on file unrelated to the Registrable Securities,
then the Company shall use all commercially reasonable efforts to extend the
Shelf Termination Date to terminate concurrently with the termination date of
such other effective shelf registration statement (the "Extended Shelf
Termination Date"). Notwithstanding the foregoing, no Shareholder shall be
entitled to be named as a selling securityholder in the Shelf Registration
Statement or to use the prospectus forming a part thereof for resales of
Registrable Securities unless such Shareholder shall furnish to the Company the
information requested on EXHIBIT A hereto. Notwithstanding the foregoing, the
Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.2:
(i) for more than one year after the Effective
Date, if a No-Action Letter is obtained by the Company confirming that the
holding period under Rule 144(d) for the Registrable Shares to be received on
the exchange of the Exchangeable Shares will be treated as having commenced on
the date on which the Exchangeable Shares were first acquired by the
Shareholders;
(ii) if the Company shall furnish to the
Shareholders a certificate signed by the president of the Company stating that
in the good faith judgment of the board of directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Shelf
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Shelf Registration Statement for a period
of not more than sixty (60) days after such date, provided that such right to
defer filing shall be exercised by the Company not more than once in any twelve
(12) month period; or
(iii) in any jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(b) Subject to the foregoing, the Company shall effect
such registration, qualification, or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky (except that in no event shall the
Company be required to qualify to do business as a foreign corporation in any
jurisdiction where it would not, but for the requirements of this paragraph (c),
be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction) or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act and any other
3
governmental requirements or regulations) covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of the Shareholders.
(c) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1.2 with respect to
the Registrable Securities of a Shareholder that such Shareholder shall furnish
to the Company the information requested on EXHIBIT A hereto, which shall
include such information regarding itself, himself or herself, the Registrable
Securities held by it, him or her, and the intended method of disposition of
such securities, and such other information as shall be reasonably requested by
the Company and required to effect the registration of the Registrable
Securities.
1.3 DEMAND REGISTRATION.
(a) Subject to the limitations of subsection 1.3(b)
hereof, if the Company shall receive at any time following the later of (i) six
months after the Shelf Termination Date (or, if applicable, the Extended Shelf
Termination Date), or (ii) the 31st of December following the Shelf Termination
Date (or, if applicable, the Extended Shelf Termination Date), a written request
from the Shareholders of a majority of the Registrable Securities then
outstanding (the "Initiating Shareholders") that the Company file a registration
statement on Form S-3 or other form if Form S-3 is not available covering the
registration of at least fifty percent (50%) of the Registrable Securities then
outstanding and in no event less than an aggregate amount of Registrable
Securities equal to the lesser of either (i) 500,000 shares of Registrable
Securities (as adjusted from time to time for stock splits and stock dividends),
or (ii) that aggregate number of shares of Registrable Securities with an
anticipated aggregate offering price of at least $50,000,000, then the Company
shall:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Shareholders;
(ii) use all reasonable best efforts to effect,
as soon as practicable, such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Shareholders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Shareholders joining in such request
as are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company, provided, however, that the
Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.3:
(1) if the Company has, within the
twelve (12) month period preceding the date of such request, already effected
one registration for the Shareholders pursuant to this Section 1.3; or
(2) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
4
(iii) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Shareholders.
(b) Notwithstanding the foregoing, if the Company shall
furnish to Shareholders requesting a registration statement pursuant to this
Section 1.3, a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer taking action with respect to such filing for a period of not to
exceed sixty (60) days in any 90-day period or an aggregate of 120 days in any
365 day period.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall:
(a) With respect to Section 1.2 herein, prepare and file
with the SEC, a Shelf Registration Statement on the appropriate form with
respect to such Registrable Securities and use all reasonable best efforts to
cause such Shelf Registration Statement to become effective, and, subject to the
provisions below, use reasonable best efforts to, keep such Shelf Registration
Statement effective until the Shelf Termination Date, or, if applicable, the
Extended Shelf Termination Date. Sixty (60) days prior to the Shelf Termination
Date or, if applicable, the Extended Shelf Termination Date, the Company agrees
to provide each Shareholder of Registrable Securities then outstanding written
notice of the pending termination of the Shelf Registration Statement. If at any
time after a Shelf Registration Statement becomes effective under Section 1.2,
the Company advises the Shareholders in writing that the Shelf Registration
Statement shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or any prospectus comprising a part of such
Shelf Registration Statement shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or the occurrence or existence of any
pending corporate development that, in the reasonable discretion of the Company,
makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related prospectus, the Company shall give notice to the
Shareholders that the availability of the Shelf Registration Statement is
suspended (which notice need not specify the nature of the event giving rise to
such suspension) and the Shareholders shall suspend any further sale of
Registrable Securities pursuant to the Shelf Registration Statement for a period
not to exceed sixty (60) days in any 90-day period or an aggregate of 120 days
in any 365 day period; provided, however, that the Company shall not be allowed
to suspend the use of the Shelf Registration Statement for any period of time
ending on the Shelf Termination Date unless the Shelf Registration Termination
Date is extended for such period of time not to exceed sixty (60) days.
(b) With respect to Section 1.3, prepare and file with
the SEC a registration statement on the appropriate form with respect to such
Registrable Securities and use all reasonable best efforts to cause such
registration statement to become effective, and, upon the request of the
Shareholders of a majority of the Registrable Securities registered thereunder,
keep
5
such registration statement effective for a period of thirty (30) days or,
if earlier, until the distribution contemplated in the Registration Statement
has been completed.
(c) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(d) Furnish to the Shareholders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(e) Use reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Shareholders; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(f) Use reasonable best efforts to cause all such
Registrable Securities registered hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed and
to pay for all fees associated with such listing.
(g) The Company shall notify each Shareholder if the SEC
advises the Company that the exchange of the Exchangeable Shares for Registrable
Securities is required as a condition to the filing of any registration
statement under Section 1. If such exchange is required, the Company's
obligation to register the Registrable Securities under Section 1 shall be
conditioned upon the exchange occurring prior to the filing of the Registration
Statement. If a registration statement must be withdrawn because the SEC takes
the position that the exchange must be made before filing, the expenses of such
prior filing shall be borne by the Company pursuant to Section 1.6 and such
prior filing shall not be deemed to satisfy the Company's obligation to effect a
registration under Section 1.3.
(h) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Shareholder thereof if the
Shareholder shall have obtained an opinion of counsel (which counsel may be
counsel to the Company) reasonably acceptable to the Company to the effect that
such Registrable Securities may lawfully be disposed of without registration,
qualification or legend and any other additional representations or
certifications reasonably requested by the Company, including, if applicable,
receipt of a standard broker's representation letter and other representations
customarily relied upon by transfer agents in Rule 144 sales. Further, the
Company shall cause its transfer agent to transfer promptly any Registrable
Securities being transferred pursuant to Rule 144 upon receipt of a standard
broker's representation letter and other representations customarily relied upon
by transfer agents in Rule 144 sales.
6
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Shareholder that such Shareholder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Shareholder's
Registrable Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.3 if, due to the operation of
subsection 1.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.3(a).
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, and fees and disbursements of counsel for the Company shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.3 if the registration request is subsequently withdrawn at the
request of the Shareholders of a majority of the Registrable Securities to be
registered (in which case all participating Shareholders shall bear such
expenses), unless the Shareholders of a majority of the Registrable Securities
agree to forfeit their right to one such registration pursuant to Section 1.3.
1.7 DELAY OF REGISTRATION . No Shareholder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Shareholder, any underwriter (as defined in the
Act) for such Shareholder, and each person, if any, who controls such
Shareholder or underwriter within the meaning of the Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) 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 (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act,
7
any state securities law or any rule or regulation promulgated under the Act,
the 1934 Act or any state securities law; and the Company will pay to each such
Shareholder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Shareholder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling
Shareholder will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any underwriter,
any other Shareholder selling securities in such registration statement and any
controlling person of any such underwriter or other Shareholder, against any
losses, claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Shareholder expressly for use in connection with such registration; and each
such Shareholder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this subsection
1.8(b) in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 1.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Shareholder (which consent
shall not be unreasonably withheld); provided that in no event shall any
indemnity under this subsection 1.8(b) exceed the net proceeds from the offering
received by such Shareholder.
(c) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party
8
under this Section 1.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section
1.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the provisions of this Section 1.8(d), no
Shareholder shall be required to contribute any amount in excess of the amount
by which the net proceeds received by such holder from the Registrable
Securities sold by it exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. No party shall be liable for contribution with
respect to any action, suit, proceeding or claim settled without its prior
consent, which consent shall not be unreasonably withheld or delayed.
(e) The obligations of the Company and Shareholders under
this Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Shareholders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Shareholder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Shareholder, so long as such
Shareholder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 under the Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
9
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Shareholder of Rule 144 under the Act.
1.10 NO ASSIGNMENT OF REGISTRATION RIGHTS. The
registration rights provided hereunder are not assignable, except to a
transferee upon the death of any Shareholder, a personal legal representative in
the event of incapacity of any Shareholder, a trust or other estate planning
entity established by any Shareholder for the benefit of the Shareholder, or
otherwise by operation of law. Notwithstanding the foregoing, a Shareholder may
transfer all or any part of the Registrable Securities to an affiliate of such
Shareholder (as such term is defined in the CANADA BUSINESS CORPORATIONS ACT) (a
"Transferee") and may transfer the registration rights provided hereunder to
such Transferee, who shall be deemed a Shareholder for all purposes of this
Agreement, provided that (i) such transfer is exempt from the registration and
prospectus requirements of applicable Canadian provincial securities laws, and
(ii) prior to any such transfer, the Transferee executes and delivers to the
Company an agreement, in form and content acceptable to the Company, acting
reasonably, with respect to the transferred Registrable Securities, under which
the Transferee agrees to be bound by the terms of this Agreement and further
agrees that, prior to the Transferee ceasing to be an affiliate of the
Shareholder, it will re-transfer such Registrable Securities to the Shareholder.
No such transfer shall release the Shareholder from liability for its
obligations under this Agreement.
1.11 TERMINATION OF REGISTRATION RIGHTS. No Shareholder
shall be entitled to exercise any right provided for in this Section 1 after ten
(10) years following the Effective Date or, as to any Shareholder, such earlier
time at which all Registrable Securities held by such Shareholder can be sold in
any three (3) month period without registration in compliance with Rule 144 of
the Act. Upon the termination of registration rights pursuant to this Section
1.11, the Company shall have the right to withdraw any registration statement,
or any portion thereof, covering the Registrable Securities.
2. MISCELLANEOUS.
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by
and construed under the internal laws of the State of California.
2.3 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10
2.5 NOTICES. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office or Canada Post, by registered
or certified mail, postage prepaid and addressed to the party to be notified at
the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
2.6 EXPENSES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
2.7 AMENDMENTS AND WAIVERS. Any term of this Agreement,
except as provided in this section 2.7, may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Shareholders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Shareholder and the Company.
2.8 SHAREHOLDERS' AGENT.
(a) Pursuant to the Plan of Arrangement, the
Shareholders' Agent has been appointed as agent for the Shareholders to give and
receive notices and communications, and to take all actions necessary or
appropriate, in the judgment of the Shareholders' Agent, for the accomplishment
of the foregoing. No bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall not receive compensation for his services under this
Agreement.
(b) A decision, act, consent or instruction of the
Shareholders' Agent shall constitute a decision of all the Shareholders and
shall be final, binding and conclusive upon each such Shareholder, and the
Company may rely upon any such decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of every
Shareholder and any notices or communications to or from the Shareholders' Agent
shall constitute notice to or from each of the Shareholders. The Company is
hereby relieved from any liability to any Person for any acts done by them in
accordance with any decision, act, consent or instruction of the Shareholders'
Agent.
(c) The Shareholders may, from time to time upon not less
than 20 days' prior written notice to the Company, remove the Shareholders'
Agent and appoint a successor shareholders' agent; provided, however, that the
Shareholders' Agent may not be removed unless holders of at least a two-thirds
of the Registrable Securities then outstanding agree in writing to such removal
and to the identity of the successor Shareholders' Agent. Any vacancy in the
position of Shareholders' Agent under this Agreement may be filled by written
approval of the holders of a simple majority of the Registrable Securities then
outstanding.
(d) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as agent of the Shareholders while acting in good
faith, or acting on the advice of
11
counsel. The Shareholders' Agent shall have no duty, obligation or
responsibility to expend his personal funds in support of his activities as
agent of the Shareholders.
(e) The Shareholders shall jointly and severally
indemnify and hold harmless the Shareholders' Agent against all claims, damages,
reasonable costs, penalties, fines and reasonable expenses (including reasonable
expenses of the Shareholders' Agent's legal counsel) which, without fraud,
recklessness, willful misconduct or bad faith on the part of the Shareholders'
Agent, may be paid, incurred or suffered by the Shareholders' Agent by reason of
or as a result of the performance by the Shareholders' Agent of his obligations
set out in this Agreement.
2.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.10 AGGREGATION OF STOCK. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
2.11 ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
REDBACK NETWORKS INC.
By:
----------------------------------------
Chief Executive Officer
Address:
By:
-----------------------------------------
Xxxxxx Xxxxxxx, as agent for and
on behalf of the Shareholders
Address:
EXHIBIT A
SHAREHOLDER INFORMATION QUESTIONNAIRE:
All information furnished below by the undersigned for use in the Shelf
Registration Statement is, and on the date such shares registered thereunder,
will be true, correct, and complete in all material respects, and does not, and
on the date on which the undersigned sells such shares, will not, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make such information not misleading. By completing and returning this
information statement, the undersigned hereby consents to the use of his or her
name, address, and share ownership information in the appropriate form of
registration statement of Redback Networks Inc.
A. DATE.
Fill in Date:
----------------------------
B. NAME. Print:
Print and sign name or names
exactly as name or names appear on ----------------------------
share certificate. If certificate is held
in more than one name, all must sign. ----------------------------
Sign:
----------------------------
----------------------------
C. ADDRESS.
Fill in your address:
----------------------------
----------------------------
----------------------------
D. STOCK OWNED.
Fill in number of shares of
Common Stock owned of record Of Record Beneficially
and beneficially.
------------------- ------------------
E. AGGREGATE NUMBER OF SHARES OF COMMON STOCK ACQUIRED IN PRIVATE PLACEMENT OF
COMMON STOCK TO BE REGISTERED:
Shares
-------------------------------------
F. STATUS.
The signatory hereto is an individual ( ), partnership ( ), corporation
( ), or other, as more fully described below ( ). The signatory is not acting in
a fiduciary capacity or as a nominee in selling shares in the public offering,
except as indicated below.
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EXHIBIT I
ASSUMPTION AGREEMENT
STOCK OPTION
ASSUMPTION, AMENDING AND CONFIRMATION AGREEMENT
THIS AGREEMENT made as of the o day of o, 2000.
BETWEEN:
REDBACK NETWORKS INC., a corporation existing under the laws of
the State of Delaware
(hereinafter referred to as "REDBACK")
AND:
ABATIS SYSTEMS CORPORATION, a corporation existing under the
federal laws of Canada
(hereinafter referred to as "ABATIS")
WHEREAS:
A. Abatis has issued and outstanding options entitling directors,
officers, employees and consultants of Abatis to purchase an aggregate of up to
o Class A Voting Common Shares ("ABATIS SHARES") in the capital of Abatis
(collectively the "ABATIS OPTIONS") pursuant to Abatis's Key Employee Stock
Option Plan (the "ABATIS STOCK OPTION PLAN");
B. Pursuant to an arrangement agreement (the "ARRANGEMENT AGREEMENT")
among Redback, 610381 B.C. Inc. ("EXCHANGECO") and Abatis dated as of July 30,
2000, Exchangeco has agreed to acquire all of the issued and outstanding Abatis
Shares in exchange for Shares of Common Stock of Redback ("REDBACK COMMON
SHARES") and exchangeable shares of Exchangeco exchangeable for Redback Common
Shares pursuant to a statutory plan of arrangement (the "PLAN OF ARRANGEMENT")
under section 192 of the CANADA BUSINESS CORPORATIONS ACT;
C. Under the Plan of Arrangement, each Abatis Option will be exchanged for
an option (a "REPLACEMENT OPTION") to purchase Redback Common Shares; and
D. To enable the holders of Abatis Options ("OPTIONHOLDERS") to purchase
Redback Common Shares upon exercise of the Replacement Options Redback has
agreed to assume Abatis's obligations under the Abatis Stock Option Plan, as
amended hereby, and to exchange Abatis Options for Replacement Options on the
basis set out in the Plan of Arrangement.
NOW THEREFORE in consideration of the sum of $10.00 paid by each party
to the other and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Each term denoted herein by initial capital letters and
not otherwise defined herein shall have the meaning ascribed thereto in the Plan
of Arrangement unless the context requires otherwise.
2. ASSUMPTION OF PLAN AND OPTIONS. In order to implement the Plan of
Arrangement and enable Optionholders to purchase Redback Common Shares pursuant
to the Replacement Options on the basis set out in the Plan of Arrangement,
Redback shall, with effect from the Effective Time, assume, observe, perform and
discharge all covenants, terms, conditions and obligations contained in the
Abatis Stock Option Plan and the Abatis Options required to be observed,
performed and discharged by Abatis in the place and stead of Abatis on the terms
and conditions specified herein.
3. AMENDMENT OF PLAN. For greater certainty, the covenants, terms,
conditions and obligations which Redback will observe, perform and discharge in
respect of the Abatis Stock Option Plan shall, with effect from the Effective
Time, be deemed to be those in the Abatis Stock Option Plan, subject to the
amendments as follows:
(a) each and every reference to a "Common Share" thereunder shall
be deemed to be a reference to that fraction of a Redback
Common Share equal to the Exchange Ratio and any reference to
"Common Shares" under the Abatis Stock Option Plan shall be
deemed to be reference to Redback Shares;
(b) each and every reference to Abatis or the "Corporation" in
sections 9, 10, 11 and 17 of the Abatis Stock Option Plan
shall be deemed to be a reference to Redback;
(c) the second paragraph of section 5 of the Abatis Stock Option
Plan shall be deemed to be deleted in its entirety;
(d) section 7 of the Abatis Stock Option Plan shall be deemed to
be deleted in its entirety and replaced with the vesting and
exercise provisions set out in Schedule "A" hereto;
(e) section 22 of the Abatis Stock Option Plan shall be deemed to
be deleted in its entirety and replaced with the following:
"22. NOTICES
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All written notices to be given by the Optionee to Abatis or
to Redback shall be delivered personally or by registered
mail, postage prepaid, addressed as follows:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX
00000
ATTENTION: General Counsel
Facsimile: (000) 000-0000
Any notice given by the Optionee pursuant to the terms of an
Option shall not be effective until actually received by
Redback at the above address."; and
(f) Schedule I to the Abatis Stock Option Plan shall be deemed to
be deleted in its entirety.
4. AMENDMENT OF OPTIONS. For greater certainty, the covenants, terms,
conditions and obligations which Redback will observe, perform and discharge in
respect of each Abatis Option and document evidencing the same shall, pursuant
to the Plan of Arrangement and with effect from the Effective Time, be deemed to
be those in the respective Abatis Option and document evidencing the same,
subject to the amendments as follows:
(a) each and every reference to a Abatis Common Share therein
shall be deemed to be a reference to a fraction of a Redback
Common Share equal to the Exchange Ratio and the total number
of Abatis Shares purchasable (the "ABATIS OPTION SHARES")
pursuant to such Abatis Option shall be deemed to be a
reference to the number of Redback Common Shares equal to the
product (rounded down to the nearest whole number) obtained
when the number of Abatis Option Shares is multiplied by the
Exchange Ratio;
(b) each and every reference to Abatis therein shall be deemed to
be a reference to Redback;
(c) each and every reference to a dollar amount therein shall be
deemed to be a reference to the United States Dollar
Equivalent (immediately prior to the Effective Time) of the
quotient obtained when that dollar amount is divided by the
Exchange Ratio (rounded up to the nearest whole cent); and
(d) the vesting and exercise provisions therein shall be deemed to
be deleted and replaced with the applicable vesting and
exercise provisions set out in Schedule "A" hereto.
5. OTHER TERMS. Other than as provided herein, the term to expiry,
conditions to and manner of exercise and other terms and conditions of the
Replacement Options shall be the same as the terms and conditions of the Abatis
Options for which they are exchanged.
3
6. OPTION CERTIFICATES OR NOTICES. Any document or agreement evidencing a
Abatis Option shall be deemed to evidence a Replacement Option.
7. REGISTRATION. As promptly as practicable after the Effective Date, but
in any event within 30 days thereafter, Redback shall file with the United
States Securities and Exchange Commission a registration statement on Form S-8
(or other applicable form) in order to register under the UNITED STATES
SECURITIES ACT of 1933 those Redback Common Shares to be issued from time to
time after the Effective Time upon exercise of the Replacement Options.
8. NOTIFICATION OF THIS AGREEMENT AND THE ARRANGEMENT. Redback shall, as
promptly as practicable after the Effective Date, deliver to each of the
Optionholders by pre-paid ordinary mail a notice of the terms of this Agreement
and a confirmation of the number of Redback Common Shares and the relevant
exercise price thereof under each of their respective Replacement Options.
9. NOTICES. All notices and other communications which may or are required
to be given pursuant to any provision of this Agreement shall be given or made
in writing and shall be deemed to be validly given if served personally or by
telecopy, in each case addressed to the particular party at:
(a) If to Redback:
Redback Networks Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX
00000
ATTENTION: General Counsel
Facsimile: (000) 000-0000
(b) If to Abatis:
Abatis Systems Corporation
0000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
ATTENTION: President
Facsimile: (000) 000-0000
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
telecopying thereof.
4
10. FURTHER ASSURANCES. Each party hereto shall, from time to time, and at
all times hereafter, at the request of the other parties hereto, but without
further consideration, do all such further acts and things and execute and
deliver all such further documents and instruments as shall be reasonably
required in order to fully perform and carry out the terms and intent hereof.
11. GOVERNING LAWS. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein and shall be treated in all respects as a British
Columbia contract.
12. BINDING EFFECT. This Agreement shall be binding upon and shall enure to
the benefit of the parties hereto and their respective successors.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
REDBACK NETWORKS INC.
Per:
------------
Authorized Signatory
ABATIS SYSTEMS CORPORATION
Per:
------------
Authorized Signatory
5
SCHEDULE "A"
EXERCISE OF REPLACEMENT OPTIONS
A. OPTIONS WITH SPECIAL EXERCISE TERMS
o Each Replacement Option issued in exchange for a Abatis Option
containing exercise terms different from those set out in Section 7,
12, 13 and 14 of the Abatis Stock Option Plan (before giving effect to
this Agreement) shall become exercisable at the times and subject to
the vesting and exercise conditions specified in such Abatis Option
for, at each time specified therein, the number of Redback Common
Shares which is equal to the product (rounded to the nearest lower
whole number) obtained when the number of Abatis Shares for which such
Abatis Option would have, but for the Arrangement, been exercisable at
such time is multiplied by the Exchange Ratio.
B. OTHER OPTIONS
Subject to paragraph C below, each Replacement Option other
than the Replacement Options referred to above will become exercisable
as follows:
o With respect to the first 25% of the Redback Common Shares
subject thereto, when the holder thereof has completed 12 months of
continuous service with Abatis and/or Redback from the later of the
date of grant of the Abatis Option for which such Replacement Option is
to be exchanged and the date of commencement of such service.
o With respect to an additional 1/48th of the Redback Common Shares
subject thereto, when the holder thereof has completed each month of
continuous service with Abatis and/or Redback after the first
anniversary of the later of date of grant of the Abatis Option for
which such Replacement Option is to be exchanged and the date of
commencement of such service.
C. CLARIFICATION WITH RESPECT TO FULLY OR PARTIALLY EXERCISABLE OPTIONS
o For greater certainty, and in addition to paragraph A or B above,
each Replacement Option issued in exchange for a Abatis Option which is
fully or partially exercisable as at the Effective Date shall be
immediately exercisable for the number of Redback Common Shares which
is equal to the product (rounded to the nearest lower whole number)
obtained when the number of Abatis Shares for
which such Abatis Option is exercisable as at the Effective Date is
multiplied by the Exchange Ratio.
D. CONTINUED APPLICATION OF OTHER TERMS
o For greater certainty, except as provided in this Assumption,
Amending and Confirmation Agreement (including this Schedule A), all of
the other terms and conditions of each Replacement Option shall be the
same as the terms and conditions of the Abatis Option for which it is
exchanged, including, without limitation, the terms contained in
sections 12, 13 and 14 of the Abatis Stock Option Plan.
2
