EXHIBIT 99
ACQUISITION AGREEMENT
BY AND AMONG
RAVISENT TECHNOLOGIES INC.
RAVISENT NOVA SCOTIA ULC,
RAVISENT BRITISH COLUMBIA INC.
CINAX DESIGNS INC.
AND
CERTAIN SHAREHOLDERS OF CINAX DESIGNS INC.
Dated as of July 13, 2000
TABLE OF CONTENTS
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Page
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ARTICLE 1 THE ACQUISITION................................................................................ 2
1.1 The Acquisition........................................................................ 2
1.2 Parent Support Agreement............................................................... 3
1.3 Closing................................................................................ 3
1.4 Exemption from Registration............................................................ 3
1.5 Taking of Necessary Action; Further Action............................................. 4
1.6 Contemporaneous Transactions........................................................... 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS............................... 4
2.1 Organization and Qualification......................................................... 4
2.2 Authority Relative to this Agreement................................................... 4
2.3 Capital Stock.......................................................................... 5
2.4 Subsidiaries........................................................................... 6
2.5 No Conflicts........................................................................... 6
2.6 Books and Records; Organizational Documents............................................ 7
2.7 Company Financial Statements........................................................... 7
2.8 Absence of Changes..................................................................... 7
2.9 No Undisclosed Liabilities............................................................. 11
2.10 Restrictions on Business Activities.................................................... 11
2.11 Taxes.................................................................................. 11
2.12 Legal Proceedings...................................................................... 14
2.13 Compliance With Laws and Orders........................................................ 14
2.14 Benefit Plans.......................................................................... 14
2.15 Title to Property...................................................................... 15
2.16 Intellectual Property.................................................................. 15
2.17 Contracts.............................................................................. 17
2.18 Insurance.............................................................................. 18
2.19 Affiliate Transactions................................................................. 18
2.20 Employees; Labor Relations............................................................. 18
2.21 Environmental Matters.................................................................. 20
2.22 Substantial Customers and Suppliers.................................................... 21
2.23 Accounts Receivable.................................................................... 21
2.24 Inventory.............................................................................. 21
2.25 Other Negotiations; Brokers; Third Party Expenses...................................... 21
2.26 Warranty Obligations................................................................... 22
2.27 Foreign Corrupt Practices Act.......................................................... 22
2.28 Financial Projections.................................................................. 22
2.29 Approvals.............................................................................. 23
2.30 Leases in Effect....................................................................... 23
2.31 Takeover Statutes...................................................................... 23
2.32 Information Circular................................................................... 23
2.33 Disclosure............................................................................. 24
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TABLE OF CONTENTS
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(continued)
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLING SECURITYHOLDERS...................................... 24
3.1 Authority.............................................................................. 24
3.2 Title to Securities.................................................................... 25
3.3 Third-Party Consents................................................................... 25
3.4 Financial Condition.................................................................... 25
3.5 Sophistication......................................................................... 25
3.6 Tax Consequences....................................................................... 25
3.7 Residency.............................................................................. 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT, ACQUISITION SUB AND CDN2............................. 26
4.1 Organization, Standing and Power....................................................... 26
4.2 Capital Structure of Parent, Acquisition Sub and CDN2.................................. 26
4.3 Authority.............................................................................. 26
4.4 SEC Filings; Financial Statements of Parent............................................ 27
4.5 Brokers................................................................................ 28
ARTICLE 5 CONDUCT PRIOR TO THE CLOSING................................................................... 28
5.1 Conduct of Business of the Company and its Subsidiaries................................ 28
5.2 No Solicitation........................................................................ 28
ARTICLE 6 ADDITIONAL AGREEMENTS.......................................................................... 29
6.1 Information Circular................................................................... 29
6.2 Access to Information.................................................................. 30
6.3 Confidentiality........................................................................ 30
6.4 Expenses............................................................................... 30
6.5 Public Disclosure...................................................................... 31
6.6 Approvals.............................................................................. 31
6.7 Notification of Certain Matters........................................................ 31
6.8 Additional Documents and Further Assurances............................................ 31
6.9 Company's Accountants.................................................................. 31
6.10 Securities Requirements................................................................ 32
6.11 Conveyance Taxes....................................................................... 32
6.12 Escrow Agreement....................................................................... 32
6.13 Stock Purchase Agreements.............................................................. 32
6.14 Employee Escrow Agreement.............................................................. 32
6.15 Best Efforts........................................................................... 32
6.16 No Transfer............................................................................ 32
6.17 Breach of Representations, Warranties, Agreements and Covenants........................ 33
6.18 Legal Conditions to the Sale of Securities............................................. 33
6.19 Section 85(i) Elections................................................................ 33
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TABLE OF CONTENTS
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(continued)
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ARTICLE 7 CONDITIONS TO THE ACQUISITION TO BE EFFECTED BY THE PLAN OF ARRANGEMENT........................ 33
7.1 Conditions to Obligations of Each Party to Effect the Acquisition...................... 33
7.2 Additional Conditions to Obligations of the Company and the Principals................. 34
7.3 Additional Conditions to the Obligations of Parent, CDN2 and Acquisition Sub........... 34
ARTICLE 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION; ESCROW.... 37
8.1 Survival of Representations, Warranties, Covenants and Agreements...................... 37
8.2 Escrow Fund............................................................................ 37
8.3 Indemnification........................................................................ 37
8.4 Escrow Period.......................................................................... 39
8.5 Claims Upon Escrow Fund................................................................ 39
8.6 Shareholders' Agent.................................................................... 40
8.7 Actions of the Shareholders' Agent..................................................... 41
8.8 Third-Party Claims..................................................................... 41
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER.............................................................. 43
9.1 Termination............................................................................ 43
9.2 Effect of Termination.................................................................. 44
9.3 Amendment.............................................................................. 44
9.4 Extension; Waiver...................................................................... 44
ARTICLE 10 MISCELLANEOUS PROVISIONS...................................................................... 44
10.1 Notices................................................................................ 44
10.2 Entire Agreement....................................................................... 46
10.3 Further Assurances; Post-Closing Cooperation........................................... 46
10.4 Waiver................................................................................. 46
10.5 Third Party Beneficiaries.............................................................. 46
10.6 No Assignment; Binding Effect.......................................................... 46
10.7 Headings............................................................................... 46
10.8 Invalid Provisions..................................................................... 47
10.9 Governing Law.......................................................................... 47
10.10 Construction........................................................................... 47
10.11 Counterparts........................................................................... 47
10.12 Specific Performance................................................................... 47
ARTICLE 11 DEFINITIONS................................................................................... 48
11.1 Definitions............................................................................ 48
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List of Exhibits
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Exhibit 1 - Form of Stock Purchase Agreement
Exhibit 2 - Reserved
Exhibit 3 - Reserved
Exhibit 4 - Rights, Preferences and Privileges of the Exchangeable
Shares
Exhibit 5 - Form of Shareholders' Agreement
Exhibit 6 - Parent Support Agreement
Exhibit 7 - Reserved
Exhibit 8 - Reserved
Exhibit 9 - Form of Escrow Agreement
Exhibit 10 - Parent, CDN2 and Acquisition Sub Officer's Certificates
Exhibit 11 - Parent, CDN2 and Acquisition Sub Secretary's Certificates
Exhibit 12 - Form of Opinion of RBS Lawyers
Exhibit 13 - Form of Opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Exhibit 14 - Company Officer's Certificate
Exhibit 15 - Company Secretary's Certificate
Exhibit 16 - Legal Opinion of Xxxx Xxxx
Exhibit 17 - Non-Competition and Employment Agreement
Exhibit 18 - Employee Escrow Agreement
List of Schedules
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Schedule 2 - Company Disclosure Schedule
Schedule 3 - Parent Disclosure Schedule
Schedule 7.3(g) - List of Key Employees
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT is made and entered into as of July __, 2000, by
and among RAVISENT Technologies Inc., a Delaware corporation ("Parent"),
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Ravisent British Columbia Inc., a British Columbia corporation and a wholly-
owned subsidiary of CDN2 ("Acquisition Sub"), Ravisent Nova Scotia ULC, a Nova
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Scotia unlimited liability company and wholly-owned subsidiary of Parent (such
corporation or such other wholly-owned subsidiary of Parent as may be designated
by Parent as "CDN2") Cinax Designs Inc., a British Columbia corporation (the
"Company") and Xxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx (collectively, the
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"Principals"). Capitalized terms used and not otherwise defined herein have the
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meanings set forth in Article 10.
RECITALS
A. Subject to the terms and conditions of this Agreement, among other
things, all of the issued and outstanding shares of capital stock of the Company
shall be shall be purchased by Parent for (i) cash and (ii), at the option of
the Company Shareholders, Parent Common Stock or Exchangeable Shares or both.
B. The Exchangeable Shares shall be exchangeable by the holders for Parent
Common Stock on a one-to-one basis at any time.
C. In connection with the acquisition of the Company by Parent pursuant to
the terms hereof (the "Acquisition"), (i) the number of shares of Parent Common
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Stock to be issued (including Parent Common Stock to be reserved for issuance
upon exchange of Exchangeable Shares shall be the Aggregate Share Number and
(ii) the amount of cash to paid shall be the Aggregate Cash Consideration.
D. Parent, Acquisition Sub, CDN2 and the Company intend that the
Exchangeable Shares will be generally received by resident Canadian shareholders
of the Company without recognition of any gain or loss pursuant to the Income
Tax Act (Canada) and resident Canadian shareholders of the Company will not be
required to file United States Tax Returns solely as a result of the
Acquisition; provided, however, that the parties hereto acknowledge that the
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Aggregate Cash Consideration and Parent Company Stock to be received by Company
Shareholders shall be taxable consideration in the hands of such shareholders.
E. The Company Shareholders hold their Company Shares as capital property
and it is the intention of Acquisition Sub and the Company Shareholders that the
sale of the Company Shares be made pursuant to subsection 85(1) of the Income
Tax Act (Canada).
F. It is also intended by the parties that the Acquisition shall
constitute a taxable exchange for United States federal income tax purposes (not
qualifying under Section 368 or 351 of the United States Internal Revenue Code
of 1986, as amended).
G. The Company, the Principals, Parent, CDN2 and Acquisition Sub desire to
make certain representations, warranties, covenants and agreements in connection
with the Acquisition.
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H. A portion of the Exchangeable Shares or shares of Parent Common Stock
otherwise issuable by Parent or its Subsidiaries in connection with the
Acquisition shall be placed in escrow by Parent or its Subsidiaries, the release
of which amount shall be contingent upon certain events and conditions, all as
set forth in Article 8 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE 1
THE ACQUISITION
1.1 The Acquisition. At the Closing (as defined in Section 1.4 hereof) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the B.C. Company Act, the Company shall become a
wholly-owned subsidiary of Acquisition Sub pursuant to the following
transactions:
(a) Acquisition Sub shall acquire (i) pursuant to this
Agreement, all of the issued and outstanding Company Shares held by the
Principals and (ii) pursuant to stock purchase agreements (each, a "Stock
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Purchase Agreement" and collectively, the "Stock Purchase Agreements") by and
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among Parent, Acquisition Sub, CDN2 and each individual holder of Company Shares
other than the Principals (each, a "Holder" and collectively, the "Holders"),
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all of the issued and outstanding Company Shares held by the Holders; provided,
however, that in the event Principals or Holders holding less than 10% of the
outstanding Company Shares, do not deliver Stock Purchase Agreements,
Acquisition Sub will pursue a "squeeze-out merger" so that Company will be a
wholly-owned subsidiary of Acquisition Sub. The Stock Purchase Agreements shall
be substantially in the form set out on Exhibit 1 hereto.
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(b) In consideration for the Company Shares, each Principal and
each Holder (collectively, the "Company Shareholders") shall receive in exchange
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for their Company Shares (w) that amount of cash equal to the product of the
Common Cash Amount multiplied by the number of Company Shares held by such
Company Shareholder on the Closing Date, plus (x) at the option of each Company
Shareholder, that number of Exchangeable Shares or shares of Parent Common
Stock, or a combination of the two, rounded down to the nearest whole number,
equal to the product of the Exchange Ratio multiplied by the number of Company
Shares held by such Company Shareholder on the Closing Date, plus (y) that
amount of cash equal to the product of the Closing Price multiplied by the
number of fractional shares of Parent Common Stock that such Company Shareholder
would have been entitled to receive pursuant to (x) if the number of shares had
not been rounded down to the nearest whole number.
(c) A portion of the shares of Parent Common Stock or
Exchangeable Shares to be issued, as the case may be, and the cash to be paid,
to each Company Shareholder in consideration for their Company Shares shall be
deposited into an escrow fund (the "Escrow Fund") as described in Article 8
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hereof.
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(d) All of the shares of Parent Common Stock or Exchangeable
Shares, as the case may be, and 50% of the cash consideration to be paid to each
Company Shareholder who shall be employed by Parent, Acquisition Sub or the
Company after the Closing (each, an "Employee Shareholder") shall be deposited
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into an escrow fund (the "Employee Escrow Fund") and held in the Employee Escrow
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Fund pursuant to the terms of an employee escrow agreement in the form attached
hereto as Exhibit 18 (the "Employee Escrow Agreement").
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(e) All of the unexpired and unexercised Company Options,
Company Warrants and Company Stock Purchase Rights then outstanding shall
terminate;
(f) The Exchangeable Shares to be issued by Acquisition Sub in
consideration for the Company Shares shall have the rights, privileges and
restrictions, and be subject to the conditions, set forth in Exhibit 4 hereto;
(g) Notwithstanding the foregoing, the maximum aggregate number
of shares of Parent Common Stock and Exchangeable Shares to be issued in
exchange for all of the outstanding Company Shares shall be the Aggregate Share
Number. No adjustment shall be made in the aggregate number of shares of Parent
Common Stock and Exchangeable Shares issued pursuant to this Agreement or the
Stock Purchase Agreements as a result of any consideration (in any form
whatsoever) received by the Company from the date hereof to the Closing as a
result of any exercise, conversion or exchange of Company Options, Company
Warrants or Company Stock Purchase Rights.
1.2 Parent Support Agreement. On or before the Closing, Parent, CDN2 and
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Acquisition Sub shall execute and deliver the Parent Support Agreement (the
"Parent Support Agreement") in substantially the form set forth on Exhibit 6.
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1.3 Closing. Unless this Agreement is earlier terminated pursuant to
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Section 9.1, the closing of the transactions contemplated by this Agreement (the
"Closing") will take place at a time mutually agreed to by the Company and
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Parent which time shall be as promptly as practicable following satisfaction or
waiver of the conditions set forth in Article 7 that by their terms are not to
occur at the Closing, at the offices of Xxxx Xxxx, 000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0, unless another place is agreed to by
Parent and the Company. At the Closing, Parent and Acquisition Sub shall
deliver (i) to each Company Shareholder a certificate representing that number
of shares of Parent Common Stock or Exchangeable Shares and cash that each such
Shareholder is entitled to receive pursuant to Section 1.1 hereof less the
number of shares of Parent Common Stock and Exchangeable Shares and the
applicable portion of the Cash Consideration to be placed in the Escrow Fund and
the Employee Escrow Fund on such Company Shareholder's behalf against delivery
of such Company Shareholder's certificate representing all of his Company
Shares, (ii) to the Depositary Agent, the Escrow Shares and (iii) to the
Employee Escrow Agent, the Employee Escrow Shares and the Employee Escrow Cash.
1.4 Exemption from Registration. The parties intend that the Exchangeable
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Shares issued pursuant to the Acquisition and the shares of Parent Common Stock
issued pursuant to the Acquisition and shares of Parent Common Stock issuable in
exchange for the Exchangeable Shares will be issued in transactions (the
"Contemplated Issuances") exempt
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from registration under the Securities Act and from the prospectus and
registration requirements under the Securities Act (British Columbia).
1.5 Taking of Necessary Action; Further Action. If, at any time after the
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Closing, any such further action is necessary or desirable to carry out the
purposes of this Agreement and the Acquisition, the officers and directors of
the Company are fully authorized to take, and will take, all such lawful and
necessary action.
1.6 Contemporaneous Transactions. The parties hereby agree that each of
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the transactions contemplated by this Agreement that is in fact consummated
shall, to the extent permitted by applicable Law and not otherwise provided for
herein, be deemed consummated substantially contemporaneously with any other
transaction that is in fact consummated pursuant to this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPALS
The Company and each of the Principals hereby represent and warrant,
jointly and severally, to each of Parent, Acquisition Sub and CDN2 subject to
such exceptions as are disclosed with respect to specific sections of this
Article 2 in the Disclosure Schedule delivered herewith and dated as of the date
hereof or are disclosed in another section of the Disclosure Schedule if it is
reasonably apparent on the face of the disclosure that it is applicable to
another Section of this Article 2, as follows:
2.1 Organization and Qualification. Each of the Company and its
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Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, and has full
corporate power and authority to conduct its business as now conducted and as
proposed to be conducted and to own, use, license and lease its Assets and
Properties. Each of the Company and its Subsidiaries is duly qualified, licensed
or admitted to do business and is in good standing in each jurisdiction in which
the ownership, use, licensing or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. Section 2.1 of the Disclosure Schedule sets forth each of
the Company's Subsidiaries, the jurisdiction in which each was formed and each
jurisdiction where each of the Company and its Subsidiaries is so qualified,
licensed or admitted to do business and separately lists each other jurisdiction
in which the Company or its Subsidiaries owns, uses, licenses or leases its
Assets and Properties, or conducts business or has employees or engages
independent contractors.
2.2 Authority Relative to this Agreement. Subject only to the requisite
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approval of the Acquisition by the shareholders of the Company, the holders of
Company Options, and the holders of Company Warrants, the Company has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby, and the
performance by the Company of its obligations hereunder, have been duly and
validly authorized by all necessary action by the Board of Directors of the
Company, and no other action on the part of the Board of Directors of the
Company is required to authorize
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the execution, delivery and performance of this Agreement and the consummation
by the Company of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Parent, CDN2 and Acquisition
Sub, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
2.3 Capital Stock. The authorized capital stock of the Company consists
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only of 100,000,000 Class A Shares without par value (the "Company Class A
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Shares") and 50,000,000 Class B Shares without par value (the "Company Class B
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Shares"; the Company Class A Shares and the Company Class B Shares collectively
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referred to herein as the "Company Shares"), of which 9,307,500 Company Class A
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Shares and 60,000 Company Class B Shares are issued and outstanding as of the
date hereof. All of the issued and outstanding Company Shares are validly
issued, fully paid and nonassessable, and have been issued in compliance with
all applicable federal, provincial and foreign securities Laws. No Company
Shares are held as treasury stock. Section 2.3 of the Disclosure Schedule lists
the name and state or province of residence of each holder of Company Shares
provided to the Company by such holder and the number of Company Shares held by
each such holder. With respect to any Company Shares that have been issued
subject to a repurchase option on the part of the Company, Section 2.3 of the
Disclosure Schedule sets forth the holder thereof, the number and type of
securities covered thereby, and the vesting schedule thereof (including a
description of the circumstances under which such vesting schedule can or will
be accelerated). Other than 342,500 Company Class B Shares reserved for issuance
upon exercise of outstanding Company Options and except as set forth in Section
2.3 of the Disclosure Schedule, as of the date hereof no Company Shares are
reserved for issuance and there are no other options, warrants, calls, rights,
commitments or agreements of any character (whether created by statute, the
articles of incorporation or by-laws of the Company, or any agreement or
otherwise) to which the Company is a party or by which it is bound obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
the Company or obligating the Company to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. With respect to each Company
Option, Section 2.3 of the Disclosure Schedule sets forth the holder thereof,
the number and type of securities issuable thereunder, and, if applicable, the
exercise price therefor, the exercise period, the maximum term, and vesting
schedule thereof (including a description of the circumstances under which such
vesting schedule can or will be accelerated). Except as set forth in Section 2.3
of the Disclosure Schedule, all of the Company Options were issued in compliance
with all applicable federal, provincial and foreign securities Laws. Except as
set forth in Section 2.3 of the Disclosure Schedule, none of the Company Options
will vest on an accelerated basis in connection with the Acquisition or any
subsequent termination of the holder's employment or service. Except as set
forth in Section 2.3 of the Disclosure Schedule, the Company is not a party or
subject to any agreement or understanding, and there is no agreement,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend rights or
transferability of shares with respect to the
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Company Shares, including without limitation any voting trust agreement or
proxy. The terms of the Company's Stock Option Plan and the applicable stock
option agreements permit the assumption or substitution of options or warrants,
as applicable, to purchase Parent Common Stock as provided in this Agreement,
without the consent or approval of the holders of such securities, the Company's
shareholders, or otherwise. True and complete copies of all agreements and
instruments relating to or issued under the Company's Stock Option Plan have
been provided to Parent and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to amend, modify
or supplement such agreements or instruments in any case from the form provided
to Parent.
2.4 Subsidiaries. The Company is the owner of all outstanding shares of
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each of its Subsidiaries and all such shares are duly authorized, validly
issued, fully paid and nonassessable. All of the outstanding shares of each
Subsidiary are owned by the Company free and clear of all liens, charges, claims
or encumbrances, or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued shares or other securities of any such Subsidiary, or otherwise
obligating the Company or any such Subsidiary to issue, transfer, sell,
purchase, redeem or otherwise acquire any such securities. The Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other Person other than its
interests in the Company's Subsidiaries set forth in Section 2.1 of the
Disclosure Schedule.
2.5 No Conflicts. The execution and delivery by the Company of this
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Agreement does not, the performance by the Company of its obligations under this
Agreement and the consummation by the Company of the transactions contemplated
hereby do not and will not:
(a) conflict with or result in a violation or breach of any
terms, conditions or provisions of the memorandum, articles or bylaws, as
amended, or equivalent constating documents of the Company or any of its
Subsidiaries;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.5 of the
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to the Company or any of its Subsidiaries or by
which any of their Assets and Properties is bound or affected; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute a default (or an event that, with or without notice or lapse of
time or both, would constitute a default) under, (iii) require the Company to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, (iv) result in or give
to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon the Company
or any of its Assets and Properties under or (vii) result in the loss of a
material benefit under, any of the terms, conditions or provisions of any
Contract or License to which
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the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or their respective Assets and Properties is bound or
affected.
2.6 Books and Records; Organizational Documents. The minute books,
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including the share registers, and other similar records of the Company and its
Subsidiaries have been provided or made available to Parent or its counsel prior
to the execution of this Agreement, are complete and correct in all material
respects and have been maintained in accordance with sound business practices.
Such minute books contain a true and complete record of all material actions
taken at all meetings and by all written consents in lieu of meetings of the
directors, shareholders and committees of the Board of Directors of the Company
and its Subsidiaries through the date hereof. The Company has delivered a true,
correct and complete copy of the Memorandum and Articles of Incorporation and
Bylaws or other charter documents, as applicable, of the Company as amended to
date, to Parent. Neither the Company nor any of its Subsidiaries is in violation
of any provisions of its memorandum or articles or equivalent constating
documents.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule
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sets forth the Company Financials. The Company Financials delivered to Parent
are correct and complete in all respects and have been prepared in accordance
with Canadian GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto, and, in the case of the Interim Financial Statements, subject to
normal year-end adjustments, which adjustments will not be material in amount or
significance). The Company Financials present fairly and accurately the
financial condition and operating results of the Company and its Subsidiaries as
of the dates and during the periods indicated therein, subject, in the case of
the Interim Financial Statements, to normal year-end adjustments, which
adjustments will not be material in amount or significance and except that the
Interim Financial Statements may not contain footnotes. Since the date of the
Company's incorporation, there has been no change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company.
2.8 Absence of Changes. Since the Company Financial Statement Date, there
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has not been any material adverse change in the Business or Condition of the
Company or any occurrence or event which, individually or in the aggregate could
be reasonably expected to have any material adverse change in the Business or
Condition of the Company. In addition, without limiting the foregoing, except as
expressly contemplated hereby, there has not occurred since the Company
Financial Statement Date:
(a) the entering into of any Contract, commitment or transaction
or the incurrence of any Liabilities outside of the ordinary course of business
consistent with past practice;
(b) the entering into of any Contract in connection with any
transaction involving a Business Combination;
(c) the alteration, or entering into of any Contract or other
commitment to alter, its interest in any corporation, association, joint
venture, partnership or business entity
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in which the Company or any of its Subsidiaries directly or indirectly holds any
interest on the date hereof;
(d) the entering into of any strategic alliance, joint
development or joint marketing Contract other than joint marketing efforts in
the ordinary course of business consistent with past practice;
(e) any amendment or other modification (or agreement to do so),
except in the ordinary course of business consistent with past practice, or
violation of the terms of, any of the Contracts set forth or described in the
Disclosure Schedule;
(f) the entering into of any transaction with any officer,
director, shareholder, Affiliate or Associate of the Company, other than
pursuant to any Contract in effect on the Company Financial Statement Date and
disclosed to Parent pursuant to Section 2.18 of the Disclosure Schedule or other
than pursuant to any contract of employment and listed pursuant to Section
2.16(a) of the Disclosure Schedule;
(g) the entering into or amendment of any Contract pursuant to
which any other Person is granted manufacturing, marketing, distribution,
licensing or similar rights of any type or scope with respect to any products of
the Company or Company Intellectual Property other than as contemplated by the
Contracts or Licenses of the Company and its Subsidiaries disclosed in the
Disclosure Schedule or otherwise in the ordinary course of business consistent
with past practice;
(h) the commencement of any Action or Proceeding (other than any
investigation of which the Company is not aware);
(i) the declaration, setting aside or payment of any dividends
on or making of any other distributions (whether in cash, stock or property) in
respect of any Company Shares or Equity Equivalents, or any split, combination
or reclassification of any Company Shares or Equity Equivalents or issuance or
authorization of the issuance of any other securities in respect of, in lieu of
or in substitution for Company Shares or Equity Equivalents, or the repurchase,
redemption or other acquisition, directly or indirectly, of any shares of
Company Shares or Equity Equivalents by the Company except for repurchases of
Company Shares upon termination of employment;
(j) except for (i) the issuance of Company Shares upon exercise
or conversion of then-outstanding Company Options, or Company Warrants listed in
Section 2.3 of the Disclosure Schedule, or (ii) the issuance of options
available for grant under the Company's existing stock option plan in the
ordinary course of business to employees who are not officers of the Company or
of any of its Subsidiaries consistent with past practice, the issuance, grant,
delivery, sale or authorization of or proposal to issue, grant, deliver or sell,
or purchase or proposal to purchase, any shares of Company Shares, Equity
Equivalents or modification or amendment of the rights of any holder of any
outstanding shares of Company Shares or Equity Equivalents (including to reduce
or alter the consideration to be paid to the Company upon the exercise of any
outstanding Company Options, Company Warrants, or other Equity Equivalents), nor
have there been any agreements, arrangements, plans or understandings with
respect to any such modification or amendment;
-8-
(k) any amendments to the Company's memorandum, articles, bylaws
or equivalent constating documents of the Company or any of its Subsidiaries;
(l) any transfer (by way of a License or otherwise) to any
Person of rights to any Company Intellectual Property other than non-exclusive
transfers to the Company's customers, distributors or other licensees in the
ordinary course of business consistent with past practice;
(m) any disposition or sale of, waiver of rights to, license or
lease of, or incurrence of any Lien on, any Assets and Properties (other than
Company Intellectual Property) of the Company and its Subsidiaries, other than
dispositions of inventory, or licenses of products to Persons in the ordinary
course of business of the Company consistent with past practice;
(n) any purchase of any Assets and Properties of any Person
other than acquisitions of inventory, or licenses of products, in the ordinary
course of business of the Company consistent with past practice and in an amount
not in excess of $5,000 in any one case after the date hereof or $25,000 in the
aggregate for the period;
(o) the making of any capital expenditures or commitments by the
Company for additions to property, plant or equipment of the Company
constituting capital assets individually or in the aggregate in an amount
exceeding $25,000;
(p) the write-off or write-down or making of any determination
to write off or write-down, or revalue, any of the Assets and Properties of the
Company, or change in any reserves or liabilities associated therewith;
(q) the payment, discharge or satisfaction of any claim or
Liability, other than the payment, discharge or satisfaction in the ordinary
course of business of Liabilities reflected or reserved against in the Company
Financial Statements or incurred in the ordinary course of business since the
Financial Statement Date;
(r) the failure to pay or otherwise satisfy material Liabilities
of the Company or its Subsidiaries when due;
(s) the incurrence of any Indebtedness or guarantee of any such
Indebtedness in an aggregate amount exceeding $10,000 or issuance or sale of any
debt securities of the Company or any of its Subsidiaries or guarantee of any
debt securities of others;
(t) the grant of any severance or termination pay to any
director, officer employee or consultant, except payments made as required by
Law or pursuant to written Contracts outstanding on the date hereof, the terms
of which are disclosed in the Disclosure Schedule;
(u) an increase in salary, rate of commissions, rate of
consulting fees or any other compensation of any current officer, director,
shareholder, employee, independent contractor or consultant of the Company or
any of its Subsidiaries;
-9-
(v) the payment of any consideration of any nature whatsoever
(other than salary, commissions or consulting fees and customary benefits and
out of pocket expenses paid to any current or former officer, director,
shareholder, employee or consultant of the Company or any of its Subsidiaries)
to any current or former officer, director, shareholder, employee, independent
contractor or consultant of the Company or any of its Subsidiaries;
(w) the establishment or modification of (i) targets, goals,
pools or similar provisions under any Plan, employment Contract or other
employee compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines or similar
provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement;
(x) the adoption, entering into, amendment, modification or
termination (partial or complete) of any Plan;
(y) the payment of any discretionary or stay bonus;
(z) any action, including the acceleration of vesting of any
Company Options or Company Warrants, or other rights to acquire shares of
capital stock of the Company, which would be reasonably likely to interfere with
Parent's ability to account for or complete the Acquisition;
(aa) the making or changing of any election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, the entering into of
any tax allocation agreement, tax sharing agreement, tax indemnity agreement or
closing agreement, settlement or compromise of any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes with any Taxing
Authority or otherwise;
(bb) the making of any change in the accounting policies,
principles, methods, practices or procedures of the Company (including without
limitation 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);
(cc) other than in the ordinary course of business, the making of
any representation or proposal to, or engagement in substantive discussions
with, any of the holders (or their representatives) of any Indebtedness, or to
or with any party which has issued a letter of credit which benefits the
Company;
(dd) the commencement or termination of, or change in, any line
of business except as contemplated in the Company Business Plan;
(ee) the cancellation, amendment or failure to renew any
insurance policy other than in the ordinary course of business consistent with
past practice, or failure to use commercially reasonable efforts to give all
notices and present all claims under all such policies in a timely fashion;
-10-
(ff) any amendment, failure to renew, or failure to use commercially
reasonable efforts to maintain, its existing Approvals or failure to observe any
Law or Order applicable to the conduct of the business of the Company or the
Assets and Properties of the Company and its Subsidiaries;
(gg) any failure to pay or otherwise satisfy any obligations to
procure, maintain, renew, extend or enforce any Company Intellectual Property,
including, but not limited to, submission of required documents or fees during
the prosecution of patent, trademark or other applications for Registered
Intellectual Property rights;
(hh) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the real or personal property or
equipment of the Company individually or in the aggregate in an amount exceeding
$5,000.
(ii) the repurchase, cancellation or modification of the terms of any
Company Common Stock, Equity Equivalents, Company Options, Company Warrants or
other financial instrument that derives the majority of its value from its
convertibility into Company Common Stock or Equity Equivalents, other than
transactions entered into in the ordinary course of business and pursuant to
either (i) contractual provisions or (ii) the Stock Plan, in either case as in
effect at the date of this Agreement;
(jj) any entering into any agreement to do any of the foregoing.
2.9 No Undisclosed Liabilities. The Company has no obligations or
--------------------------
liabilities of any nature (matured or unmatured, fixed or contingent) other than
(i) those set forth or adequately provided for in the balance sheet included in
the Company Financials, (ii) those incurred in the ordinary course of business
and not required to be set forth in the Company Financials under GAAP, (iii)
those incurred in the ordinary course of business since the Financial Statement
Date and consistent with past practice and (iv) those set forth in this
Agreement.
2.10 Restrictions on Business Activities. There is no agreement, judgment,
-----------------------------------
injunction, order or decree binding upon the Company, its Subsidiaries or any of
their assets or properties which has had or could reasonably be expected to have
the effect of prohibiting or impairing any current or future business practice
of the Company or any of its Subsidiaries, any acquisition of property by the
Company or the conduct of business by the Company as currently conducted or as
proposed to be conducted by the Company.
2.11 Taxes.
-----
(a) All Tax Returns required to have been filed by or with respect to
the Company or each of its Subsidiaries have been duly filed (including any
extensions), and each such Tax Return correctly and completely reflects Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by the Company, whether or not shown on any Tax Return, or
claimed to be due by any Tax Authority, have been paid or accrued in accordance
with Canadian GAAP on the Company Financials through the date thereof and in the
books and records of the Company or the relevant Subsidiary in respect of
subsequent periods. All such Tax Returns are true, complete and correct in all
material respects.
-11-
(b) The Company and its Subsidiaries have not incurred any material
liability for Taxes other than as reflected on the Interim Financial Statements.
The unpaid Taxes of the Company and its Subsidiaries (i) did not, as of the most
recent fiscal month end, exceed by any material amount the reserve for liability
for Income Tax (other than the reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Company's most recent balance sheet and (ii) will not exceed by any material
amount that reserve as adjusted for operations and transactions through the
Closing Date.
(c) Neither the Company nor any of its Subsidiaries is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by a Taxing Authority of any jurisdiction in which the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(d) The Company and each of its Subsidiaries has collected or
withheld all amounts required to be collected or withheld by it on account of
Taxes or otherwise, and has remitted the same to the appropriate governmental
authority in the manner and within the time required under any applicable
legislation or, if it is not yet due, has set it aside in appropriate accounts
for payment when due.
(e) The Company does not have knowledge of any actions by any Taxing
Authority in connection with assessing additional Taxes against and in respect
of the Company or its Subsidiaries for any past period. There is no dispute or
claim concerning any Tax liability of the Company or its Subsidiaries (i)
threatened, claimed or raised by any Taxing Authority and (ii) of which the
Company is aware. There are no Liens for Taxes upon the Assets and Properties of
the Company other than Liens for Taxes not yet due. Section 2.11 of the
Disclosure Schedule indicates those Tax Returns, if any, of the Company that
have been audited or examined by Taxing Authorities, and indicates those Tax
Returns of the Company and its Subsidiaries that currently are the subject of
audit or examination.
(f) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or any of
its Subsidiaries with respect to any Tax assessment or deficiency affecting the
Company or any of its Subsidiaries.
(g) The Company has not received any written ruling related to Taxes
or entered into any agreement with a Taxing Authority relating to Taxes.
(h) The liability for Taxes under the Income Tax Act (Canada) of the
Company has been assessed by Revenue Canada for all taxation years up to and
including the taxation years ending September 30, 1998. The assessment of
liability for Taxes under the Income Tax Act (Canada) for the tax year ended
September 30, 1999 is pending. True and complete copies of the federal and
provincial Tax Returns for the Company and copies of all assessments and
reassessments for all taxation years including relating to the most recently
completed taxation year for which the same are available have been provided to
Parent.
-12-
(i) The Company and its Subsidiaries have no liability for the Taxes
of any Person other than the Company (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of Canadian or United States federal,
state, provincial, local or foreign Law), (ii) as a transferee or successor,
(iii) by Contract or (iv) otherwise.
(j) Neither the Company nor any Subsidiary (i) has agreed to make or
is required to make any adjustment under Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws by reason of a change in
accounting method or as a result of transactions or events prior to the date
hereof and (ii) is a "consenting corporation" within the meaning of Section
341(f)(1) of the Code.
(k) Neither the Company nor any of its Subsidiaries is a party to or
bound by any obligations under any tax sharing, tax allocation, tax indemnity or
similar agreement or arrangement.
(l) Neither the Company nor any of its Subsidiaries is involved in,
subject to, or a party to any joint venture, partnership, Contract or other
arrangement that is treated as a partnership for federal, state, local or
foreign Income Tax purposes.
(m) The Company was not included and is not includible in the Tax
Return of any Relevant Group with any corporation other than such a return of
which the Company is the common parent corporation.
(n) No Subsidiary of the Company has made any payments, is obligated
to make any payments, or is a party to any Contract that under certain
circumstances could require it to make any payments which would otherwise be
deductible that are not deductible as a result of the provisions set forth in
Section 280G of the Code or the treasury regulations thereunder or would result
in an excise tax to the recipient of any such payment under Section 4999 of the
Code.
(o) All material elections made by the Company with respect to
Canadian income Taxes affecting the Company are set forth on Section 2.11 of the
Disclosure Schedule. Furthermore, the Company has not:
(i) made any election under Section 85 of the Income Tax
(Canada) with respect to the acquisition or disposition of any property;
(ii) made any election under Section 83 of the Income Tax
(Canada) with respect to the payment out of the capital dividend account of the
Company;
(iii) acquired or had the use of any property from a person with
whom it was not dealing at arm's length other than at fair market value; or
(iv) disposed of anything to a person with whom it was not
dealing at arm's length for proceeds less than the market value thereof.
(p) The Company is not nor has it ever been a United States real
property holding corporation within the meaning of Section 897(c)(1)(A)(ii) of
the Code.
-13-
(q) The Company is not a personal holding company.
(r) The Company is in full compliance with all terms and conditions
of any Tax exemptions or other Tax-sparing agreement or order of a foreign
government and the consummation of the transactions contemplated hereby shall
not have any adverse effect on the continued validity and effectiveness of any
such Tax exemptions or other Tax-sparing agreement or order.
(s) Section 2.11(s) of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most recent
practicable date: (i) the basis of the Company in its assets; (ii) the amount of
any net operating loss, net capital loss, unused investment or other credit,
unused foreign Tax, or excess charitable contribution allocable to the Company,
and (iii) the amount of any deferred gain or loss allocable to the Company
arising out of any Deferred Intercompany Transaction.
2.12 Legal Proceedings.
-----------------
(a) Except as set forth in Section 2.12 of the Disclosure Schedule:
(i) there are no Actions or Proceedings brought or, to the
knowledge of the Company or any of its Subsidiaries, pending or threatened
against the Company or any of its Subsidiaries or their Assets and Properties;
(ii) there are no facts or circumstances known to the Company or
any of its Subsidiaries that could reasonably be expected to give rise to any
Action or Proceeding against, relating to or affecting the Company or any of its
Subsidiaries; and
(iii) neither the Company nor any of its Subsidiaries has
received notice, and does not otherwise have knowledge of any Orders outstanding
against the Company or any of its Subsidiaries.
(b) Prior to the execution of this Agreement, the Company has
delivered to Parent all responses of counsel for the Company to auditor's
requests for information (together with any updates provided by such counsel)
regarding Actions or Proceedings pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against, relating to or affecting the
Company or any of its Subsidiaries. Section 2.12(b) of the Disclosure Schedule
sets forth all Actions or Proceedings against or by the Company or any of its
Subsidiaries or relating to or affecting any of its or their Assets and
Properties since the date of incorporation of the Company to the date hereof.
2.13 Compliance With Laws and Orders. The Company has not violated, and is
-------------------------------
not currently in violation or default under, any Law or Order applicable to the
Company or any of its Subsidiaries or any of its or their Assets and Properties.
2.14 Benefit Plans.
-------------
(a) The Disclosure Schedule contains an accurate and complete list of
all Benefit Plans maintained or sponsored by the Company and covering any
employees of the Company, to which the Company is obligated to contribute or
with respect to which the
-14-
Company has any material liability. For purposes of this Agreement, the term
"Benefit Plans" shall mean all pension, retirement, profit sharing, bonus,
savings, deferred compensation, share option, purchase, or appreciation, group
insurance or other material employee benefit plans, programs or arrangements
maintained or contributed to by the Company and whether or not funded.
(b) Each Benefit Plan and all related trusts, insurance contracts and
funds have been maintained, funded and administered in compliance with all
reporting and disclosure requirements and applicable laws and regulations. As of
the date hereof, no actions, suits, claims (other than routine claims for
benefits), taxes, penalties or liens with respect or relating to the Benefit
Plans are pending or threatened, or have been assessed or incurred.
(c) With respect to each Benefit Plan, the Company has provided
Parent with true and complete copies, to the extent applicable, of (i) all
documents pursuant to which the Benefit Plans are maintained, funded and
administered, including all amendments thereto, (ii) the most recent annual
report filed with the competent authorities, (iii) the most recent financial
statements, and (iv) all governmental rulings and determinations and opinions
(and pending requests for governmental rulings, determinations and opinions).
2.15 Title to Property. The Company and its Subsidiaries have good and
-----------------
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the Company Financials or acquired
after the Financial Statement Date (except properties, interests in properties
and assets sold or otherwise disposed of since the Financial Statement Date in
the ordinary course of business), or with respect to leased properties and
assets, valid leasehold interests in, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except (i) the lien
of current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which is reflected on the Company Financials and (iv) Liens listed
on Section 2.15 of the Disclosure Schedule. The plants, property and equipment
of the Company and its Subsidiaries that are used in the operations of their
businesses are in good operating condition and repair, subject to normal wear
and tear. All properties used in the operations of the Company and its
Subsidiaries are reflected in the Company Financials to the extent Canadian GAAP
require the same to be reflected. Section 2.15 of the Disclosure Schedule
identifies all real property owned by the Company.
2.16 Intellectual Property.
---------------------
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all Intellectual Property that is used or currently
proposed to be used in the business of the Company as currently conducted or as
proposed to be conducted by the Company. The Company has not (i) licensed any
Company Intellectual Property in source code form to any third party or (ii)
entered into any exclusive agreements relating to any Company Intellectual
Property with any third party.
-15-
(b) Section 2.16(b) of the Disclosure Schedule lists (i) all patents
and patent applications and all registered trademarks, trade names and service
marks, registered copyrights, domain names, and maskworks, included in the
Company Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which any other person or entity is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company is
authorized to use any third-party Intellectual Property ("Third Party
-----------
Intellectual Property Rights") which are incorporated in, are, or form a part of
----------------------------
any Company product or which are otherwise used (or currently proposed to be
used) by the Company in the business of the Company as currently conducted or as
proposed to be conducted by the Company, other than off-the-shelf software
programs licensed under standard "shrink wrap" license agreements.
(c) No person or entity (including employees and former employees of
the Company) is infringing, misappropriating or otherwise making any
unauthorized use or disclosure of any Intellectual Property rights of the
Company or any Intellectual Property right of any third party to the extent
licensed by or through the Company. The Company has not entered into any
agreement to indemnify any other person or entity against any charge of
infringement of any Company Intellectual Property.
(d) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Company Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, domain names, service marks
and copyrights held by the Company are valid and subsisting, and the
manufacturing, marketing, licensing or sale of its products does not infringe
any patent, trademark, service xxxx, copyright, trade secret or other
proprietary right of any third party. The Company (i) has not been sued in any
suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; and (ii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party.
(f) The Company has secured valid written assignments and waiver of
any moral rights from all consultants and employees who contributed to the
creation or development of Intellectual Property of the rights to such
contributions that the Company does not already own by operation of law.
(g) The Company has taken all reasonably necessary and appropriate
steps to protect and preserve the confidentiality of all Company Intellectual
Property not otherwise protected by patents, patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
------------------------
Confidential Information by the Company by or to a third party has been pursuant
to the terms of a written agreement between the Company and such third party.
-16-
(h) All products and software programs distributed or licensed to
third parties by the Company and, to the Company's knowledge, all products and
software programs of third parties which are used in the Company's business (i)
will operate in accordance with their specifications prior to, during and after
the calendar year 2000 and are capable of processing, providing, receiving and
manipulating date data within and between the 20th and 21st centuries; (ii)
will, without interruption or manual intervention, continue to consistently,
predictably and accurately record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will consistently, predictably and accurately calculate any
information dependent on or relating to such dates in substantially the same
manner, and with the same functionality, data integrity and performance, as such
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates; and (iii) will not end abnormally or provide invalid or incorrect
results as a result of date data, specifically including date data which
represents or references different centuries or more than one century. The
Company has taken all actions necessary to assure that there shall be no
material adverse change to its business or electronic systems or material
interruptions in the delivery of the Company's products and services by reason
of the advent of the year 2000.
(i) It is the Company's practice to scan all software and data
residing on the Company's computer network with a commercially available and up-
to-date virus scan software. To the Company's knowledge, its software programs
and other Intellectual Property contain no "viruses." For the purposes of this
Agreement, "virus" means any computer code designed to disrupt, disable or harm
in any manner the operation of any software or hardware including worms, bombs,
backdoors, clocks, timers, or other disabling device code, designs or routines
which causes the software to be erased, inoperable, or otherwise incapable of
being used, either automatically or with passage of time or upon command by any
person.
2.17 Contracts.
---------
(a) Section 2.17(a)(1) of the Disclosure Schedule contains a true and
complete list of each of the Contracts (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto and all continuing waivers of any
material terms thereof, have been made available to Parent prior to the
execution of this Agreement) of the Company and its Subsidiaries. Section
2.17(a)(2) of the Disclosure Schedule contains a true and complete list of each
Contract of the Company and its Subsidiaries not terminable by the Company or
any of its Subsidiaries upon 30 days (or less) notice by the Company or any of
its Subsidiaries without penalty or obligation to make payments based on such
termination.
(b) Each Contract required to be disclosed in Section 2.17(a) of the
Disclosure Schedule, unless otherwise stated in Section 2.16(a) of the
Disclosure Schedule, is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, and no party to
such Contract is, nor has received notice that it is, in violation or breach of
or default under any such Contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such Contract).
-17-
(c) Neither the Company nor any of its Subsidiaries is a party to or
bound by any Contract that (i) automatically terminates or allows termination by
the other party thereto upon consummation of the transactions contemplated by
this Agreement or (ii) contains any covenant or other provision which limits the
ability of the Company to compete with any Person in any line of business or in
any area or territory.
2.18 Insurance. The Company and each of its Subsidiaries have policies of
---------
insurance and bonds of the type and in amounts customarily carried by Persons
conducting businesses or owning assets similar to those of the Company and its
Subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in compliance with the terms of such policies and bonds. The Company
has no knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
2.19 Affiliate Transactions.
----------------------
(a) Except as disclosed in Section 2.19(a) of the Disclosure
Schedule, (i) there are no Contracts or Liabilities between the Company or any
of its Subsidiaries, on the one hand, and (1) any current or former officer,
director, shareholder, or to the knowledge of the Company, any Affiliate or
Associate of the Company or (2) any Person who, to the knowledge of the Company,
is an Associate of any such officer, director, shareholder or Affiliate, on the
other hand, (ii) neither the Company nor any of its Subsidiaries provides or
causes to be provided any assets, services or facilities to any such current or
former officer, director, shareholder, Affiliate or Associate, (iii) neither the
Company nor any of its Subsidiaries nor any such current or former officer,
director, shareholder, Affiliate or Associate provides or causes to be provided
any assets, services or facilities to the Company and (iv) neither the Company
nor any of its Subsidiaries beneficially owns, directly or indirectly, any
Investment Assets of any such current or former officer, director, shareholder,
Affiliate or Associate.
(b) Each of the Contracts and Liabilities listed in Section 2.19(a)
of the Disclosure Schedule were entered into or incurred, as the case may be, on
terms no less favorable to the Company or its Subsidiaries (in the reasonable
judgment of the Company) than if such Contract or Liability was entered into or
incurred on an arm's- length basis on competitive terms. Any Contract to which
the Company or any of its Subsidiaries is a party and in which any director of
the Company has a financial interest in such Contract was approved in accordance
with applicable law.
2.20 Employees; Labor Relations.
--------------------------
(a) The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any material
respect in any unfair labor practice. The Company has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries, and
other payments to employees; and is
-18-
not liable for any arrears of wages or any Taxes or any penalty for failure to
comply with any of the foregoing. The Company is not liable for any payment to
any trust or other fund or to any governmental or administrative authority, with
respect to Employment Insurance, social security, Workers Compensation, Canada
Pension Plan, health or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending claims against the Company under any
workers compensation plan or policy or for long term disability. There are no
controversies pending or, to the knowledge of the Company, threatened, between
the Company and any of their respective employees, which controversies have or
could reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal, foreign or
domestic. The Company is not a party to any collective bargaining agreement or
other labor unions contract nor does the Company know of any activities or
proceedings of any labor union to organize any such employees. No employees of
the Company are in violation of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or proposed to be
conducted by the Company or to the use of trade secrets or proprietary
information of others. No employees of the Company have given notice to the
Company, nor is the Company otherwise aware, that any such employee intends to
terminate his or her employment with the Company.
(b) All employees of the Company are terminable by the Company upon
reasonable notice in accordance with applicable Law. Section 2.20(b) of the
Disclosure Schedule sets forth, individually and by category, the name of each
officer, employee and consultant, together with such person's position or
function, annual base salary or wage and any incentive, severance or bonus
arrangements with respect to such person. Except under Company Options and the
Stock Plan, the completion of the transactions contemplated by this Agreement
will not result in any payment or increased payment becoming due from the
Company to any officer, director, or employee of, or consultant to, the Company.
The Company is not a party to any agreement for the provision of labor from any
outside agency. There have been no claims by employees of such outside agencies,
if any, with regard to employees assigned to work for the Company, and no claims
by any governmental agency with regard to such employees except as set forth in
Section 2.20(b) of the Disclosure Schedule.
(c) Since the date of incorporation of the Company, there have been
no federal or provincial claims based on employment equity, sex, sexual or other
harassment, age, disability, race or other discrimination or common law claims,
including claims of wrongful dismissal, severance pay, payment in lieu of notice
or bad faith termination, by any employees of the Company or by any of the
employees performing work for the Company but provided by an outside employment
agency, and there are no facts or circumstances known to the Company that could
reasonably be expected to give rise to such complaint or claim.
(d) The Company has no written employment policies and/or employee
handbooks or manuals except as set forth in Section 2.20(d) of the Disclosure
Schedule.
-19-
(e) To the knowledge of the Company, no officer, employee or
consultant of the Company is obligated under any Contract or other agreement or
subject to any Order or Law that would interfere with the Company's business as
currently conducted.
2.21 Environmental Matters.
---------------------
(a) The Company possesses any and all Environmental Permits necessary
to or required for the operation of its business. The Company will obtain any
Environmental Permits that must be obtained as of or immediately after the
Closing in order for the Acquisition Sub and/or the Company to conduct the
business of the Company as it was conducted prior to the Closing.
(b) The Company is in compliance with (i) all terms, conditions and
provisions of its Environmental Permits; and (ii) all Environmental Laws.
(c) Neither the Company nor any entity previously owned by the
Company has received any notice of alleged, actual or potential responsibility
for, or any inquiry, or to the Company' knowledge, any basis therefor,
regarding, (i) any Release or threatened or suspected Release of any Hazardous
Material, or (ii) any violation of Environmental Law, or (iii) personal injury,
wrongful death, other tortious conduct, or relating to materials, commodities or
products held, used, sold, transferred, manufactured or disposed of by or on
behalf of the Company, containing or incorporating any Hazardous Materials.
(d) Neither the Company nor any entity previously owned by the
Company has any obligation or liability with respect to any Hazardous Material,
including any Release or threatened or suspected Release of any Hazardous
Material, and there are no past or present events, facts or circumstances which
could form the basis of any such obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from, in,
to, on, or under any Site and no Hazardous Material is present in, on, about or
migrating to or from any Site.
(f) Neither the Company nor any entity previously owned by the
Company, has transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Material at or to any location.
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law on
any Site.
(i) There is no (i) underground storage tank, active or abandoned,
(ii) polychlorinated biphenyls ("PCBs"), (iii) PCB- containing equipment, (iv)
----
asbestos-containing material, (v) radon, (vi) lead-based paint, (vii) urea
formaldehyde or (viii) other Hazardous Waste at any Site.
-20-
(j) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted with respect to any Site
which have not been delivered to Parent prior to execution of this Agreement.
(k) The Company is not a party, whether as a direct signatory or as
successor, assign, third party beneficiary or otherwise, to, and is not
otherwise bound by, any lease or other contract under which the Company is
obligated or may be obligated by any representation, warranty, covenant,
restriction, indemnification or other undertaking respecting Hazardous Materials
or under which any other person is or has been released respecting Hazardous
Materials except for under real property leases set forth in Section 2.31 of the
Disclosure Schedule.
(l) The Company and any predecessors of the Company and any entity
previously owned by the Company have provided all notifications and warnings,
made all reports, and kept and maintained all records to the extent required
pursuant to Environmental Laws.
2.22 Substantial Customers and Suppliers. Section 2.22(a) of the
-----------------------------------
Disclosure Schedule lists the 15 largest customers of the Company, collectively,
on the basis of revenues collected or accrued for the most recent complete
fiscal year. Section 2.22(b) of the Disclosure Schedule lists the 15 largest
suppliers of the Company on the basis of cost of goods or services purchased for
the most recent fiscal year. No such customer or supplier has ceased or
materially reduced its purchases from or sales or provision of services to the
Company or, to the knowledge of the Company, has threatened to cease or
materially reduce such purchases or sales or provision of services after the
date hereof. To the knowledge of the Company, no such customer or supplier is
threatened with bankruptcy or insolvency.
2.23 Accounts Receivable. The accounts and notes receivable of the Company
-------------------
reflected on the Company Financials, and all accounts and notes receivable
arising subsequent to the Financial Statement Date, (a) arose from bona fide
sales transactions in the ordinary course of business, consistent with past
practice, and are payable on ordinary trade terms, (b) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms, (c) are not subject to any valid set-off or counterclaim
and (d) do not represent obligations for goods sold on consignment, on approval
or on a sale-or-return basis or subject to any other repurchase or return
arrangement.
2.24 Inventory. All inventory of the Company and its Subsidiaries
---------
reflected on the balance sheet included in the Company Financials consisted, and
all such inventory acquired since the Audited Financial Statement Date consists,
of a quality and quantity usable or saleable in the ordinary course of business.
All items included in the inventory of the Company and its Subsidiaries are the
property of the Company or its Subsidiaries free and clear of any Lien and are
not held by the Company or its Subsidiaries on consignment from others.
2.25 Other Negotiations; Brokers; Third Party Expenses. Neither the
-------------------------------------------------
Company nor, to the knowledge of the Company, any of its Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on
-21-
behalf of the Company or any such Affiliate) (i) has entered into any Contract
that conflicts with any of the transactions contemplated by this Agreement or
(ii) has entered into any Contract or had any discussions with any Person
regarding any transaction involving the Company which could result in Parent's
or the Company's being subject to any claim for liability to said Person as a
result of entering into this Agreement or consummating the transactions
contemplated hereby. Section 2.25 of the Disclosure Schedule sets forth the
principal terms and conditions of any Contract with respect to, and a reasonable
estimate of, all Third Party Expenses expected to be incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby.
2.26 Warranty Obligations. Section 2.26 of the Disclosure Schedule sets
--------------------
forth (a) a list of all forms of written warranties, guarantees and written
warranty policies of the Company in respect of any of the Company's products and
services, which are currently in effect (the "Warranty Obligations"), and the
--------------------
duration of each such Warranty Obligation, (b) each of the Warranty Obligations
which is subject to any dispute or, to the knowledge of the Company, threatened
dispute and (c) the experience of the Company since its incorporation with
respect to warranties, guarantees and warranty policies of or relating to the
Company's products and services. True and correct copies of the Warranty
Obligations have been delivered to Parent prior to the execution of this
Agreement. There have not been any material deviations from the Warranty
Obligations, and salespersons, employees and agents of the Company are not
authorized to undertake obligations to any customer or other Person in excess of
such Warranty Obligations. The balance sheet included in the Interim Financial
Statements reflects adequate reserves for Warranty Obligations. All products
manufactured, designed, licensed, leased, rented or sold by the Company (I) are
and were free from material defects in construction and design and (II) satisfy
any and all Contract or other specifications related thereto to the extent
stated in writing in such Contracts or specifications, in each case, in all
material respects, in each case other than as a result of software "bugs" that
are remediable in the ordinary course without material cost to the Company.
2.27 Foreign Corrupt Practices Act. Neither the Company, nor to the
-----------------------------
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to any
government official or employee or to any political party or campaign from
corporate funds, violated any provision of the Corruption of Foreign Public
Officers Act (Canada), or the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
2.28 Financial Projections. The Company has made available to Parent
---------------------
certain financial projections on June 23, 2000 with respect to the Company's
business which projections were prepared for internal use only. The Company
makes no representation or warranty regarding the accuracy of such projections
or as to whether such projections will be achieved, except that the Company
represents and warrants that such projections were prepared in good faith and
were based on assumptions believed by it to be reasonable at the time.
-22-
2.29 Approvals.
---------
(a) Section 2.30(a) of the Disclosure Schedule contains a list of
all Approvals of Governmental or Regulatory Authorities relating to the business
conducted by the Company which are required to be given to or obtained by the
Company from any and all Governmental or Regulatory Authorities in connection
with the consummation of the transactions contemplated by this Agreement.
(b) Section 2.30(b) of the Disclosure Schedule contains a list of
all non-Governmental or Regulatory Authority Approvals which are required to be
given to or obtained by the Company or any of its Subsidiaries from any and all
third parties in connection with the consummation of the transactions
contemplated by this Agreement.
(c) The Company has obtained all Approvals from Governmental or
Regulatory Authorities necessary to conduct the business conducted by the
Company in the manner as it is currently being conducted and since the date of
incorporation of the Company, there has been no written notice received by the
Company of any violation or non-compliance with any such Approvals. All
Approvals from Governmental or Regulatory Authorities necessary to conduct the
business conducted by the Company as it is currently being conducted are set
forth in Section 2.30(c)(2) of the Disclosure Schedule.
2.30 Leases in Effect. All real property leases and subleases as to which
----------------
the Company or any Subsidiary is a party and any amendments or modifications
thereof, all of which are listed on Section 2.31 of the Disclosure Schedule
(each a "Lease" and collectively, the "Leases"), are valid, in full force and
----- ------
effect, enforceable, and there are no existing defaults on the part of the
Company, and Company has not received nor given notice of default or claimed
default with respect to any Lease, nor is there any event that with notice or
lapse of time, or both, would constitute a default thereunder. No consent is
required from any party under any Lease in connection with the completion of the
transactions contemplated by this Agreement, and Company has not received notice
that any party to any Lease intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or other right thereunder.
2.31 Takeover Statutes. No Takeover Statute applicable to the Company is
-----------------
applicable to the Acquisition or the transactions contemplated hereby other than
the Securities Act (British Columbia) pursuant to which the Acquisition and the
transactions contemplated hereby are exempt from the bid requirement of such
Act.
2.32 Information Circular. The information supplied by the Company for
--------------------
inclusion in the information circular to be sent to the shareholders of the
Company in connection with the Acquisition (such information circular as amended
or supplemented is referred to herein as the "Information Circular") shall not,
--------------------
on the date the Information Circular is first mailed to the Company's
shareholders and at the Closing, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not false or misleading; or omit
to state any material fact necessary to correct any statement in any earlier
communication to shareholders of the Company which has become false or
misleading. Notwithstanding the
-23-
foregoing, the Company makes no representation, warranty or covenant with
respect to any information supplied by Parent or Acquisition Sub which is
contained in any of the foregoing documents.
2.33 Disclosure. No representation or warranty contained in this
----------
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Parent pursuant to any provision
of this Agreement (including the Company Financials and the notes thereto)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in the light
of the circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLING SECURITYHOLDERS
Each Principal represents and warrants to Parent, CDN2 and
Acquisition Sub that the representations and warranties set forth in this
Article 3 are true and correct as of the date hereof. The representations and
warranties of each Principal are made by and on behalf of that Principal alone,
and are not made by or on behalf of any other Principal.
3.1 Authority.
---------
(a) Such Principal has all requisite power and authority to enter
into this Agreement, to execute, deliver and perform its obligations hereunder,
and to consummate the transactions contemplated hereby. This Agreement is a
legal, valid and binding obligation of such Principal, enforceable against such
Principal in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
(b) Subject to satisfaction of the conditions set forth in this
Agreement, to the best of such Principal's knowledge, the execution and delivery
of this Agreement does not and the performance and consummation of the
transactions contemplated hereby will not, conflict with or result in any
material violation of any material statute, law, rule, regulation, judgment,
order, decree, or ordinance applicable to such Principal or any material
agreement affecting such Principal or the Company Shares held by such Principal.
(c) No consent, approval, order or authorization of, or
registration, declaration of, or qualification or filing with, any Governmental
or Regulatory Authority is required by or with respect to such Principal in
connection with the execution, delivery and performance of this Agreement by
such Principal or the consummation by such Principal of the transactions
contemplated hereby, except for such consents, approvals, orders,
authorizations, registrations, declarations, qualifications or filings as may be
required under provincial, federal or state securities or blue sky laws in
connection with the transactions set forth herein.
-24-
3.2 Title to Securities. The Company Shares set forth opposite such
-------------------
Principal's name in Section 2.3 of the Disclosure Schedule hereto are all of the
Company Shares owned by such Principal. Good and marketable and unencumbered
title to all of the Company Shares held by such Principal shall pass to
Acquisition Sub upon consummation of the transactions set forth in this
Agreement.
3.3 Third-Party Consents. Except as contemplated by Section 3.1(c), no
--------------------
consent or approval is needed from any third party in order to effect the sale
or surrender of the Company Shares held by such Principal.
3.4 Financial Condition. The Principals believe that the consideration to
-------------------
be received by them at the Closing is fair consideration and reasonably
equivalent to the value of the Company Shares which they are selling. Such
Principal has not received notice, knowledge or reason for inquiry from Parent,
CDN2 or Acquisition Sub (or to the best of such Principal's knowledge and
belief, anyone else) of any information, fact, condition, event or matter
contrary to such representations or otherwise inconsistent with Parent's, CDN2's
and Acquisition Sub's good faith belief that Acquisition Sub is paying in the
ordinary and normal course of business a fair and reasonable price for such
Company Shares on a going concern basis. Without limiting the generality of the
foregoing, such Principal acknowledges that Parent, CDN2 and Acquisition Sub did
not unduly or unfairly take advantage of the Company's desire to sell the
Company. The Principals do not have any knowledge that Parent, CDN2 or
Acquisition Sub have not conducted themselves in good faith and consistent with
commercially reasonable standards for buyer in regularly conducted and
commercially reasonable sales. Each Principal acknowledges that he has had
available to him all information which he considers material in connection with
the transactions contemplated by this Agreement and has been afforded an
opportunity to ask questions of and receive answers from Parent, Acquisition Sub
and the Company regarding the transactions contemplated by this Agreement.
3.5 Sophistication. Each Principal has a prior and current business and
--------------
personal relationship with the Company, its officers and directors and has the
benefit of the business and financial experience of his professional advisors
who are unaffiliated with Parent, Acquisition Sub, CDN2 and the Company, and who
are not compensated by the Parent, Acquisition Sub, CDN2 and the Company. Each
Principal has the capacity to protect his own interests in connection with the
sale of the Shares.
3.6 Tax Consequences. Each Principal has reviewed with such Principal's
----------------
own tax and other advisors the federal, state, provincial and local tax
consequences of the sale of his Company Shares to Acquisition Sub and the
transactions contemplated by this Agreement. Each Principal is relying solely on
such advisors and not on any statements or representations of Parent,
Acquisition Sub, CDN2 and the Company or any of their agents. Each Principal
understands that he (and not Parent, Acquisition Sub, CDN2 or the Company) shall
be responsible for his own tax liability that may arise as a result of the
transactions contemplated by this Agreement.
3.7 Residency. Each Principal is a resident of Canada for income tax
---------
purposes pursuant to the Income Tax Act (Canada) and is not subject to Taxes
imposed pursuant to the Internal Revenue Code of 1986, as amended.
-25-
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT,
ACQUISITION SUB AND CDN2
Parent, CDN2 and Acquisition Sub hereby represent and warrant to the
Company and the Principals, subject to such exceptions as disclosed with respect
to specific sections of this Article 4 in the Parent Disclosure Schedule
delivered herewith and dated as of the date hereof or are disclosed in another
section of the Parent Disclosure Schedule if it is reasonably apparent on the
face of the disclosure that it is applicable to another section of this Article
4, as follows:
4.1 Organization, Standing and Power. Each of Parent and its subsidiaries
--------------------------------
(including Acquisition Sub and CDN2) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Parent and its subsidiaries (including Acquisition Sub and
CDN2) has the corporate power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership,
use, licensing or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so duly qualified, licensed or admitted and in
good standing that could not reasonably be expected to have a material adverse
effect on the Business or Condition of Parent. Neither Parent nor any of its
subsidiaries (including Acquisition Sub and CDN2) is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
4.2 Capital Structure of Parent, Acquisition Sub and CDN2. The authorized
-----------------------------------------------------
capital stock of Parent consists of 50,000,000 shares of common stock ("Parent
------
Common Stock") and 5,000,000 shares of preferred stock, $.001 par value per
------------
share ("Parent Preferred Stock"), of which 16,596,180 shares of Parent Common
----------------------
Stock and no shares of Parent Preferred Stock were outstanding as of the close
of business on July 5, 2000. All outstanding shares of Parent have been duly
authorized, validly issued, fully paid and are nonassessable and free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof. The shares of Parent Common Stock to be issued
pursuant to the Acquisition, will be duly authorized, validly issued, fully
paid, and non-assessable.
(b) The authorized capital stock of Acquisition Sub consists of
100,000,000 shares of common stock, without par value per share (the
"Acquisition Sub Common Shares") and 100,000,000 shares of preferred stock,
-----------------------------
without par value per share (the "Exchangeable Shares"). As of July 7, 2000,
-------------------
there were issued and outstanding 100 Acquisition Sub Common Shares and no
Exchangeable Shares.
(c) The authorized capital stock of CDN2 consists of 100,000,000
shares of common stock, without par value per share (the "CDN2 Common Shares").
------------------
As of July 7, 2000, there were issued and outstanding 000 XXX0 Xxxxxx Shares.
4.3 Authority. Each of Parent, CDN2 and Acquisition Sub has full corporate
---------
power and authority to execute and deliver this Agreement, to perform their
obligations hereunder and to consummate the transactions contemplated hereby. No
action on the part of the
-26-
Boards of Directors of any of Parent, CDN2 or Acquisition Sub is required to
authorize the execution, delivery and performance of this Agreement and the
consummation by Parent, CDN2 and Acquisition Sub of the transactions
contemplated hereby other than such action by their respective Boards of
Directors as shall cause this Agreement to not terminate as a result of Section
9.1(f). This Agreement has been duly and validly executed and delivered by
Parent, CDN2 and Acquisition Sub and, assuming the due authorization, execution
and delivery hereof by the Company and the Principals, constitutes a legal,
valid and binding obligation of Parent, CDN2 and Acquisition Sub enforceable
against Parent, CDN2 and Acquisition Sub in accordance with its respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws relating to the enforcement of creditors' rights generally and by general
principles of equity.
4.4 SEC Filings; Financial Statements of Parent.
-------------------------------------------
(a) Parent has timely filed all forms, reports, statements and
documents required to be filed by it with the Securities and Exchange Commission
(the "SEC") and the Nasdaq National Market (the "NNM") since the date of the
--- ---
last Report on Form 10-K prepared by Parent and filed with the SEC pursuant to
the Securities Act (collectively together with any such forms, reports,
statements and documents Parent may file subsequent to the date hereof until the
Closing, the "Parent Reports"). Each Parent Report was prepared in accordance
--------------
with the requirements of the Securities Act, the Exchange Act or the NNM, as the
case may be, and did not at the time it was filed contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. No subsidiary
of Parent is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, the NNM,
any other stock exchange or any other comparable Governmental Entity.
(b) Except as is provided in the Parent Reports, each of the
consolidated financial statements (including, in each case, any notes thereto)
contained in the Parent Reports was prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of Parent and the consolidated
subsidiaries of Parent as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring immaterial year-end
adjustments).
(c) Except as and to the extent set forth or reserved against on
the consolidated balance sheet of Parent and the subsidiaries of Parent as
reported in the Parent Reports, including the notes thereto, none of Parent or
any subsidiary of Parent has any Liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for Liabilities or obligations (i) incurred in the ordinary course
of business consistent with past practice since Xxxxx 00, 0000 (xx) that would
not be required to be reflected or reserved against in the balance sheet of
Parent prepared in accordance with U.S. GAAP.
-27-
4.5 Brokers. No broker, finder or investment banker is entitled to any
-------
brokerage, finder's or other fee or commission in connection with the
Acquisition based upon arrangements made by or on behalf of Parent.
ARTICLE 5
CONDUCT PRIOR TO THE CLOSING
5.1 Conduct of Business of the Company and its Subsidiaries. During the
-------------------------------------------------------
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Closing, the Company agrees (unless
otherwise required by this Agreement or Parent has given its prior consent in
writing) to carry on its business in the ordinary course consistent with past
practice, to pay its Liabilities and Taxes consistent with the Company's past
practices, to pay or perform other obligations when due consistent with the
Company's past practices, subject to any good faith disputes over such
Liabilities, Taxes and other obligations and, to the extent consistent with such
business, to use reasonable efforts and institute all policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees, preserve its relationships with customers,
suppliers, distributors, licensors, licensees, independent contractors and other
Persons having business dealings with it and to cause its Subsidiaries to do the
same, all with the express purpose and intent of preserving unimpaired its
goodwill and ongoing businesses at the Closing. Except as expressly contemplated
by this Agreement, neither the Company nor any of its Subsidiaries shall,
without the prior written consent of Parent, take, or agree in writing or
otherwise to take:
(a) any of the actions described in Sections 2.8 (a) through
(jj) hereof;
(b) any other action that would make any of its representations
or warranties contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its agreements and
covenants hereunder;
(c) hire any new employees or engage any new consultants (other
than co-op student employees who do not receive Company Options);
(d) issue additional shares of its capital stock or grant any
warrants, options or other rights to acquire shares of capital stock of the
Company;
(e) notwithstanding the action permitted by this Section 5.1
relating to actions described in Section 2.8(o), the Company shall not make any
capital expenditures or commitments for additions to property, plant or
equipment of the Company constituting capital assets individually in an amount
exceeding $5,000 or in the aggregate in an amount exceeding $10,000;
5.2 No Solicitation. Until the earlier of the Closing and the date of
---------------
termination of this Agreement pursuant to the provisions of Section 9.1 hereof,
neither the Company nor the Principals will directly or indirectly, take any of
the following actions with any Person other than Parent and its designees (and
the Company will use its commercially reasonable efforts to prevent any of the
Company's officers, directors, shareholders, attorneys, investment advisors,
agents, representatives, Affiliates or Associates from taking any such actions):
(a) solicit, initiate, entertain or encourage any proposals or offers from, or
conduct
-28-
discussions with or engage in negotiations with, any Person relating to any
possible Business Combination with the Company or any of its Subsidiaries
(whether such Subsidiaries are in existence on the date hereof or are hereafter
organized), (b) provide information with respect to the Company to any Person,
other than Parent, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such Person with regard to, any possible
Business Combination with the Company or any Subsidiary of the Company (whether
such Subsidiaries are in existence on the date hereof or are hereafter
organized), (c) enter into a Contract with any Person, other than Parent,
providing for a Business Combination with the Company or any Subsidiary (whether
such Subsidiaries are in existence on the date hereof or are hereafter
organized), or (d) make or authorize any statement, recommendation or
solicitation in support of any possible Business Combination with the Company or
any Subsidiary (whether such Subsidiary is in existence on the date hereof or
are hereafter organized) other than by Parent. The Company and the Principals
shall immediately cease and cause to be terminated any such contacts or
negotiations with any Person relating to any such transaction or Business
Combination. In addition to the foregoing, if the Company or any Principal
receives prior to the Closing or the termination of this Agreement any offer or
proposal (formal or informal) relating to any of the above, the Company or such
Principal shall immediately notify Parent thereof and provide Parent with the
details thereof including the identity of the Person or Persons making such
offer or proposal, and will keep Parent fully informed of the status and details
of any such offer of proposal. Each of the Company, the Principals and Parent
acknowledge that this Section 5.2 was a significant inducement for Parent to
enter into this Agreement and the absence of such provision would have resulted
in either (i) a material reduction in the consideration to be paid to the
Company Shareholders or (ii) a failure to induce Parent to enter into this
Agreement.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Information Circular
--------------------
(a) As soon as practicable after the execution of this
Agreement, the Company shall prepare, with the cooperation of Parent, the
Information Circular for the Company Shareholders describing the terms and
conditions of the Acquisition, this Agreement, and the transactions contemplated
hereby. The Information Circular shall constitute a disclosure document for the
offer and issuance of the Exchangeable Shares and the Parent Common Stock to be
received in connection with the Acquisition and Parent Common Stock issuable
pursuant to Exchangeable Shares. Parent and the Company shall each use
reasonable commercial efforts to cause the Information Circular to comply with
applicable Canadian and United States federal and provincial and state
securities laws requirements. Each of Parent and the Company agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Information
Circular, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Circular. The Company and the Principals will
promptly advise Parent, and Parent will promptly advise the Company, in writing
if at any time prior to the Closing either the Company, the Principals or Parent
shall obtain knowledge of any facts that might
-29-
make it necessary or appropriate to amend or supplement the Information Circular
in order to make the statements contained or incorporated by reference therein
not misleading or to comply with applicable law. The Information Circular shall
contain the conclusion of the Board of Directors of the Company that the terms
and conditions of the Acquisition are advisable and fair and reasonable to the
Company Shareholders. Anything to the contrary contained herein notwithstanding,
Company shall not include in the Information Circular any information with
respect to Parent or its Affiliates or Associates, the form and content of which
information shall not have been approved by Parent prior to such inclusion.
6.2 Access to Information. Between the date of this Agreement and the
---------------------
earlier of the Closing or the termination of this Agreement, upon reasonable
notice the Company shall (i) give Parent, CDN2 and Acquisition Sub and their
respective officers, employees, accountants, counsel, financing sources and
other agents and representatives full access to all buildings, offices, and
other facilities of the Company and its Subsidiaries and to the extent permitted
by law to all Books and Records of the Company and its Subsidiaries, whether
located on the premises of the Company or at another location; (ii) permit
Parent, CDN2 and Acquisition Sub to make such inspections as they may require;
(iii) cause its officers to furnish Parent, CDN2 and Acquisition Sub such
financial, operating, technical and product data and other information with
respect to the business and Assets and Properties of the Company and its
Subsidiaries as Parent, CDN2 and Acquisition Sub from time to time may request
to verify the representations and warranties provided herein and for integration
planning purposes, including without limitation financial statements and
schedules; (iv) allow Parent, CDN2 and Acquisition Sub the opportunity to
interview non-clerical employees and other personnel and Affiliates of the
Company with the Company's prior written consent, which consent shall not be
unreasonably withheld or delayed; and (v) assist and cooperate with Parent, CDN2
and Acquisition Sub in the development of integration plans for implementation
by Parent and the Company following the Closing; provided, however, that no
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty made by the Company herein.
6.3 Confidentiality. The parties acknowledge that Parent and Company have
---------------
previously executed a non-disclosure agreement dated November 17, 1999 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms and will apply to all
information exchanged between the parties to this Agreement.
6.4 Expenses. Whether or not the Acquisition is consummated, all fees and
--------
expenses incurred in connection with the Acquisition including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
--------------------
the negotiation and effectuation of the terms and conditions of the Acquisition,
including this Agreement, and the transactions contemplated hereby, except
expenses incurred pursuant to Section 6.9 hereof, shall be the obligation of the
respective party incurring such fees and expenses; provided, that, if the
Acquisition is consummated, Parent agrees to pay the Third Party Expenses
incurred by the Company, provided however that the Company and the Company
Shareholders agree that Parent will have full recourse to the Escrow Fund for
payment of Third Party Expenses in excess of $50,000, whether such Third Party
Expenses have been paid by the Company, accrued by the Company or have been
incurred (and not accrued and paid) by the Company.
-30-
6.5 Public Disclosure. Unless otherwise required by Law (including
-----------------
Canadian and United States federal, provincial or state securities laws) or, as
to Parent, by the rules and regulations of the NASD, prior to the Closing, no
disclosure (whether or not in response to any inquiry) of the existence of any
subject matter of, or the terms and conditions of, this Agreement shall be made
by any party hereto unless approved by Parent and the Company prior to release.
In the event any party is required by law or, as to Parent, by the rules and
regulations of the NASD, prior to the Closing, to make such a disclosure, then
such party shall use its reasonable efforts to consult with the other party as
to the timing and content of such disclosure.
6.6 Approvals. The Company shall use commercially reasonable efforts to
---------
obtain the Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Acquisition (all of such Approvals are set forth in the Disclosure Schedule) so
as to preserve all rights of and benefits to the Company and its Subsidiaries
thereunder and Parent shall provide the Company with such assistance and
information as is reasonably required to obtain such Approvals.
6.7 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, the
Xxxxxxxxxx, Xxxxxx, XXX0, or Acquisition Sub, respectively, contained in this
Agreement to be untrue or inaccurate at or prior to the Closing Date and (ii)
any failure of the Company, the Principals, Parent, CDN2 or Acquisition Sub, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.7 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
6.8 Additional Documents and Further Assurances. Each party hereto, at the
-------------------------------------------
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including, but not
limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government or Regulatory Authority or Person;
provided, however, that Parent shall not be obligated to consent to any
divestitures or operational limitations or activities in connection therewith
and no party shall be obligated to make a payment of money as a condition to
obtaining any such condition or approval) as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
6.9 Company's Accountants. The Company will use commercially reasonable
---------------------
efforts to cause its management and its accountants to facilitate on a timely
basis (i) the preparation of financial statements (including pro forma financial
statements if required) as required by Parent to comply with applicable SEC
regulations, (ii) the review of any Company audit or review work papers for up
to the past three (3) complete fiscal years, including the examination of
selected interim financial statements and data and (iii) the delivery of such
representations from the Company's independent accountants as may be reasonably
requested by Parent or its accountants.
-31-
6.10 Securities Requirements. Parent and the Company covenant to promptly
-----------------------
apply for, and obtain prior to closing, and in any event within sixty (60) days
of the date of this Agreement, all necessary consents, receipts, approvals, or
orders from the applicable Canadian and United States securities regulatory
authorities to ensure that each of the transactions contemplated in this
Agreement, the Escrow Agreement, the Employee Escrow Agreement, the Stock
Purchase Agreements, and the Parent Support Agreement may be completed in
accordance with the applicable securities laws, regulations, policies and rules
of such Canadian provinces and United States jurisdictions where compliance with
such laws, regulations, policies and rules is required in connection with the
transactions.
6.11 Conveyance Taxes. Parent and the Company shall cooperate in the
----------------
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Closing.
6.12 Escrow Agreement. At or before the Closing, Parent, the Depositary
----------------
Agent and the Shareholders' Agent will execute an Escrow Agreement substantially
in the form set out on Exhibit 9 hereto.
6.13 Stock Purchase Agreements. The Company and the Principals shall use
-------------------------
their best efforts to deliver or cause to be delivered to Parent on or prior to
the Closing from each Holder, an executed Stock Purchase Agreement in the form
set out on Exhibit 1 hereto whereby each Holder shall sell all of his or her
Company Shares to Acquisition Sub for the consideration described in Section 1.1
hereof.
6.14 Employee Escrow Agreement. The Company and the Principals shall use
their best efforts to deliver or cause to be delivered to Parent on or prior to
Closing from each Employee Shareholder, an executed employee escrow agreement
(an "Employee Escrow Agreement") in the form set out on Exhibit 1 8 hereto
-------------------------
pursuant to which each such Employee Shareholder shall have deposited (i) one
hundred percent (100%) of his Parent Common Stock and Exchangeable Shares issued
by Parent or Acquisition Sub to him in exchange for his Company Shares (the
"Employee Escrow Shares") and (ii) fifty percent of the Cash Consideration paid
----------------------
by Parent or Acquisition Sub to him in exchange for his Company Shares (the
"Employee Escrow Cash"), in escrow with a third-party escrow agent (the
--------------------
"Employee Escrow Agent"), which shares and cash shall be subject to the terms
---------------------
and conditions of the Employee Escrow Agreement.
6.15 Best Efforts. Each party hereto will use its best efforts to perform
------------
and fulfill all obligations to be performed and fulfilled under this Agreement,
and to cause all conditions precedent to the consummation of the transactions to
be timely satisfied, to the end that the transactions contemplated by this
Agreement shall be effected substantially in accordance with its terms.
6.16 No Transfer. Each Principal agrees not to sell, offer for sale,
-----------
assign, transfer or otherwise encumber any of his Company Shares to any third
party other than Parent, Acquisition Sub or CDN2. Each Principal also waives any
rights of first offer or refusal or
-32-
similar rights that it has with respect to the transfer of any Company security
by any Company Shareholder to Parent, Acquisition Sub and CDN2.
6.17 Breach of Representations, Warranties, Agreements and Covenants.
---------------------------------------------------------------
Each party hereto shall not take, or fail to take, any action which from the
date hereof through the Closing would cause or constitute a material breach of
any of its representations, warranties, agreements and covenants set forth in
this Agreement. In the event of, and promptly after becoming aware of, the
actual, pending or threatened occurrence of any event which would cause or
constitute such a breach or inaccuracy, such offending party shall give detailed
notice thereof to the other parties hereto and shall use its best efforts to
prevent or promptly remedy such breach or inaccuracy.
6.18 Legal Conditions to the Sale of Securities. The Principals shall
------------------------------------------
take, and shall cause to be taken, all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on the Principals with
respect to the consummation of the transactions set forth herein and will
promptly cooperate with and furnish information to the Company and Parent in
connection with any such requirements imposed upon Parent or the Company in
connection with the consummation of the transactions set forth herein.
6.19 Section 85(1) Elections. Acquisition Sub and the Company Shareholders
-----------------------
will elect pursuant to subsection 85(1) of the Income Tax Act (Canada) in the
prescribed form with respect to the transfer of the Company Shares. The elected
amount shall be such amount as stipulated by the Company Shareholders within the
limitations set forth in subsection 85(1) of the Income Tax Act (Canada).
6.20 Shareholders' Agreement. CDN2, Acquisition Sub and each Company
-----------------------
Shareholder will enter into a Shareholders' Agreement in the form of Exhibit 5
hereof (the "Shareholders' Agreement").
-----------------------
ARTICLE 7
CONDITIONS TO THE ACQUISITION
7.1 Conditions to Obligations of Each Party to Effect the Acquisition.
-----------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing of
the following conditions, any of which may be waived, in writing, by agreement
of the parties hereto:
(a) Governmental and Regulatory Approvals. Approvals from any
-------------------------------------
Governmental or Regulatory Authority (if any) deemed appropriate or necessary by
any party to this Agreement, shall have been timely obtained.
(b) No Injunctions or Regulatory Restraints; Illegality. No
---------------------------------------------------
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Acquisition shall be in effect; nor shall there be any
action taken, or any Law or Order enacted, entered, enforced or deemed
applicable to the Acquisition or the other transactions contemplated by the
terms of the Agreement that would prohibit the consummation of the Acquisition
or which would
-33-
permit consummation of the Acquisition only if certain divestitures were made or
if Parent were to agree to limitations on its business activities or operations.
7.2 Additional Conditions to Obligations of the Company and the Principals
----------------------------------------------------------------------
The obligations of the Company and the Principals to effect the Acquisition
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
the Company and the Principals:
(a) Representations and Warranties. Each of the representations
------------------------------
and warranties made by Parent, CDN2 and Acquisition Sub in this Agreement shall
be true and correct when made and on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct on and as of such earlier date.
(b) Performance. Parent, CDN2 and Acquisition Sub shall have
-----------
performed and complied with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Parent, CDN2 and
Acquisition Sub at or before the Closing Date.
(c) Officers' Certificates. Parent, CDN2 and Acquisition Sub
----------------------
shall have delivered to the Company certificates, dated the Closing Date and
executed by their respective President and Chief Executive Officers,
substantially in the forms set forth in Exhibit 10 hereto, and certificates,
dated the Closing Date and executed by the Secretary of Parent, CDN2 and
Acquisition Sub substantially in the forms set forth in Exhibit 11 hereto.
(d) Legal Opinion. The Company and its shareholders
-------------
immediately prior to the Closing Date shall have received a legal opinion from
RBS Lawyers and Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel to Parent, as to the
matters set forth on Exhibit 12 and Exhibit 13 hereto, respectively.
(e) Consideration. The consideration to be paid to the Company
-------------
Shareholders pursuant to Seciton 1.1(a) hereof shall have been delivered to the
parties (or their agent) entitled to receive such consideration as set forth in
Section 1.1 hereof.
(f) Parent Support Agreement. Parent, CDN2 and Acquisition
------------------------
Sub shall have executed and delivered the Parent Support Agreement.
(g) Shareholder Agreement. Parent, CDN2 and Acquisition Sub
---------------------
shall have executed the Shareholders' Agreement.
7.3 Additional Conditions to the Obligations of Parent, CDN2 and
------------------------------------------------------------
Acquisition Sub. The obligations of Parent, CDN2 and Acquisition Sub to effect
---------------
the Acquisition shall be subject to the satisfaction at or prior to the Closing
Date of each of the following conditions, any of which may be waived, in
writing, exclusively by Parent:
(a) Stock Purchase Agreements; Stock Certificates.
---------------------------------------------
-34-
(i) Parent shall have received from Company Shareholders who
hold, in the aggregate, no less than 90% of the Company Shares issued and
outstanding immediately prior to the Closing, an executed Stock Purchase
Agreement in the form set out on Exhibit 1 hereto whereby each such Company
Shareholder agrees to sell all of his Company Shares to Acquisition Sub for the
consideration described in Section 1.1 hereof.
(ii) Parent shall have received all written certificates and
other documents evidencing the Company Shares duly endorsed for transfer to
Acquisition Sub or accompanied by executed Assignments separate from
certificates in favor of Acquisition Sub.
(b) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Company and the Principals in this Agreement shall be
true and correct when made and on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date; provided,
however, that any representation or warranty made as of a specified date earlier
than the Closing Date shall also have been true and correct on and as of such
earlier date.
(c) Performance. The Company and the Principals shall have
-----------
performed and complied with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date.
(d) Officers' Certificates. The Company shall have delivered to
----------------------
Parent a certificate, dated the Closing Date and executed by its President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit 14 hereto, and a certificate, dated the Closing Date and executed by the
Secretary of the Company, substantially in the form set forth in Exhibit 15
hereto.
(e) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Section 2.5 of the Disclosure Schedule.
(f) Legal Opinion. Parent shall have received a legal opinion from
-------------
Xxxx Xxxx, legal counsel to the Company, as to the matters set forth on Exhibit
16 hereto.
(g) Non-Competition Agreements. Each of the persons listed on
--------------------------
Schedule 7.3(g) shall have executed and delivered to Parent an employment and
non-competition agreement substantially in the form attached hereto as Exhibit
17 (a "Non-Competition and Employment Agreement"), and all of such Non-
----------------------------------------
Competition and Employment Agreements shall be in full force and effect.
(h) No Material Adverse Change. There shall have occurred no
--------------------------
material adverse change in the Business or Condition of the Company since the
date hereof.
(i) Legal Proceedings. No Governmental or Regulatory Authority
-----------------
shall have notified either party to this Agreement that it intends to commence
proceedings to restrain or prohibit the transactions contemplated hereby or
force rescission, unless such Governmental or Regulatory Authority shall have
withdrawn such notice and abandoned any such proceedings prior to the time which
otherwise would have been the Closing Date.
-35-
(j) Employees. The following employees shall be employed by the
---------
Company, Parent or one of its Subsidiaries at the Closing (and shall have not
given any notice or other indication that they will not continue to be willing
to be employed by Parent or one of its Subsidiaries following the Acquisition):
Xxxxxxxx, Xxxx
Jankovic, Xxxx
Xxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxx
Xxxx, Xxxxxxx
Xxxxxxxxxxxxx, Xxxx
Xxxxx, Xin (Xxxxxxxxx)
Xxx, Xx Xxxxx (Xxxx)
Long, Xxxxxxx
Xxxxxx, Magail
At least ninety percent (90%) of the engineering and R&D employees of the
Company (excluding co-op student employees) employed by the Company as of the
date of this Agreement shall be employed by the Company, Parent or one of its
subsidiaries at the Closing (and shall have not given any notice or other
indication that they will not continue to be willing to be employed by Parent or
one of its Subsidiaries following the Acquisition). Any engineering and R&D
employee whose employment terminates as a result of death or permanent
disability or whose employment is terminated by the Company for cause with the
prior written approval of Parent will be excluded from the numerator and
denominator in compiling the foregoing percentage. Each employee of the Company
to be employed by Parent or one of its Subsidiaries following the Closing shall
have executed Parent's standard form Proprietary Rights and Inventions
Assignment Agreement.
(k) Amendment of Stock Plan. If required by Parent in writing prior
-----------------------
to Closing, the Company shall have amended the Company Stock Plan to provide
that the number of shares reserved and allocated under the Company Stock Plan
shall equal the number of Company Shares subject to Company Options outstanding
as of the Closing Date plus the number of Company Shares issued pursuant to the
exercise of Company Options prior to the date hereof.
(l) Escrow Agreement. The Shareholders' Agent and the Depositary
----------------
Agent shall have executed an escrow agreement substantially in the form set out
on Exhibit 9 hereto.
(m) Employee Escrow Agreements. Each Employee Shareholder shall have
--------------------------
executed an Employee Escrow Agreement substantially in the form set out on
Exhibit 18 hereto.
(n) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to Parent
-36-
and its counsel, and Parent shall have received all such counterpart originals
or certified or other copies of such documents as it may reasonably request.
(o) Directors and Officers. The directors and officers of the
----------------------
Company in office immediately prior to the Closing shall have resigned as
directors and officers, as applicable, of the Company immediately effective as
of the Closing.
(p) Equity Equivalents. There shall be no unexpired and
------------------
unexercised Company Options or Equity Equivalents of the Company outstanding as
of the Closing.
(q) Shareholder Agreement. Each Company Shareholder who
---------------------
receives Exchangeable Shares pursuant to the Acquisition shall have executed the
Shareholders' Agreement.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; INDEMNIFICATION; ESCROW
8.1 Survival of Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------------------
Notwithstanding any right of Xxxxxx, XXX0, Acquisition Sub, or the Company
(whether or not exercised) to investigate the affairs of Xxxxxx, XXX0,
Acquisition Sub, or the Company (whether pursuant to Section 6.2 or otherwise)
or a waiver by Parent or the Company of any condition to Closing set forth in
Article 7, each party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any instrument delivered pursuant to this
Agreement with respect to matters within the knowledge of that other party. The
representations and warranties set forth in Articles 2 and 4 will survive until
the first anniversary of the Closing Date other than the representations and
warranties in (i) Sections 2.3, 2.15, 2.16, 2.21 and the representations and
warranties in Article 3 (other than Section 3.2), which shall survive until the
third anniversary of the Closing Date and (ii) the representations and
warranties contained in Sections 2.11 and 3.2 shall survive until the expiration
of the statute of limitations applicable to claims with respect to the matters
covered thereby. The liability of each party hereunder shall not be limited
under circumstances involving direct personal participation in fraud or willful
misconduct by such party.
8.2 Escrow Fund. As soon as practicable after the Closing, a combination
-----------
of 177,250 shares of Parent Common Stock and Exchangeable Shares representing
21.4848% of the Aggregate Stock Consideration (the "Escrow Shares") shall be
-------------
registered in the name of, and be deposited with, the Depositary Agent, such
deposit (together with interest and other income thereon) to constitute the
Escrow Fund and to be governed by the terms set forth in the Escrow Agreement
substantially in the form attached hereto as Exhibit 9.
8.3 Indemnification
---------------
(a) Subject-Matter of Indemnification
---------------------------------
(i) The Company Shareholders will jointly and severally
indemnify and hold harmless Parent, CDN2 and Acquisition Sub and their officers,
directors, agents and employees, and each person, if any, who controls or may
control Parent within the
-37-
meaning of the Securities Act (hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
------------------ -------------------
any and all Losses arising out of any misrepresentation or breach of or default
in connection with any of the representations, warranties, covenants and
agreements given or made by the Company or any Company Shareholder in this
Agreement, the Disclosure Schedule, or any certificate, instrument or document
delivered by the Company or any Company Shareholder pursuant to this Agreement
or a Stock Purchase Agreement, such indemnification obligation to exist
regardless of whether any Company Shareholder providing indemnification under
this Section 8.3 has knowledge of the misrepresentation, breach or default that
resulted in Losses giving rise to such indemnification obligation; provided,
however, that no Company Shareholder shall be liable for indemnification under
this Section 8.3 for fraud or misrepresentation committed by any other Company
Shareholder in making representations or warranties pursuant to Section 3.1 or
Section 3.2 hereof or Section 4(a) or 4(b) of a Stock Purchase Agreement.
(ii) The Company Shareholders will jointly and severally indemnify
and hold harmless the Indemnified Persons and the Company for fifty percent
(50%) of all Losses arising as a result of any claim made pursuant to that
certain letter agreement between the Company and Corum Group Ltd. dated October
25, 1999. For the purposes of this Article 8, any indemnification obligation
arising pursuant to this Section 8.3(a)(ii) payable to the Company on or after
the Closing shall be deemed to be an indemnification obligation owed to Parent.
(iii) The Escrow Fund shall be security for the indemnity obligations
provided in this Section 8.3, subject to the limitations in this Agreement;
provided, however, that no more than an aggregate of 123,750 Escrow Shares
(subject to stock splits, stock dividends and the like resulting in additional
shares being placed in the Escrow Fund) will be delivered to an Indemnified
Person out of the Escrow Fund in satisfaction of claims made pursuant to Section
8.3(a)(i) and no more than 53,500 Escrow Shares (subject to stock splits, stock
dividends and the like in affecting such 53,500 Escrow Shares resulting in
additional shares being placed in the Escrow Fund) will be delivered to an
Indemnified Person out of the Escrow Fund in satisfaction of claims made
pursuant to Section 8.3(a)(ii). Notwithstanding the foregoing, the
indemnification provided by the Company Shareholders to the Indemnified Persons
pursuant to Section 8.3 shall not be limited to the Escrow Fund. The parties
hereto acknowledge that the Losses indemnifiable pursuant to this Article 8, if
any, would relate to unresolved contingencies existing at the Closing, which if
resolved at the Closing would have led to a reduction in the cash and the total
number of shares Parent, Acquisition Sub and CDN2 would have agreed to issue in
connection with the Acquisition. The indemnification obligation provided
pursuant to Section 8.3(a)(i) hereof shall terminate on the first anniversary of
the Closing Date and the indemnification obligation provided pursuant to Section
8.3(a)(ii) hereof shall terminate upon expiration of the Escrow Period (as
defined below).
(b) Notwithstanding any other provision of this Agreement, the
liability of each Company Shareholder to the Indemnified Parties pursuant to the
provisions of this Article 8 shall be limited to the value of such Company
Shareholder's portion of the Aggregate Cash Consideration and the Aggregate
Stock Consideration; provided, however, that for the purposes of this section
8.3(b), the value of such Company Shareholder's portion
-38-
of the Aggregate Stock Consideration shall be measured by multiplying the number
of Exchangeable Shares and shares of Parent Common Stock received by such
Company Shareholder in consideration for his Company Shares in connection with
the Acquisition by the closing sales price of Parent Common Stock as traded on
the NNM and reported by The Wall Street Journal on the day that such Company
Shareholder is notified by an Indemnified Party of a claim for indemnification
pursuant to this Article 8; provided, further, however, that the liability of
each Company Shareholder shall not be limited under circumstances involving
direct personal participation in fraud or willful misconduct by such Company
Shareholder.
8.4 Escrow Period. Subject to the following requirements and any
-------------
distributions of Escrow Shares as contemplated by the Escrow Agreement, the
Escrow Fund shall be in existence as soon as practicable following the Closing
and shall terminate at 5:00 p.m., Pacific Time, on the sixth anniversary of the
Closing Date or such earlier date as determined pursuant to the terms of the
Escrow Agreement (the "Escrow Termination Date"; the period of time from the
-----------------------
Closing Date to the Escrow Termination Date is referred to herein as the "Escrow
------
Period"); provided, however, that a portion of the Escrow Fund, which in the
------
reasonable judgment of Parent, is necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Depositary
Agent prior to the termination of the Escrow Period with respect to facts and
circumstances existing prior to expiration of the Escrow Period, shall remain in
the Escrow Fund until such claims have been resolved.
8.5 Claims Upon Escrow Fund.
-----------------------
(a) Claims. Except as set forth in Section 8.5(c), upon
------
receipt by the Depositary Agent on or before the last day of the Escrow Period
of a certificate signed by any officer of Parent (an "Officer's Certificate")
---------------------
specifying in reasonable detail the individual items of indemnifiable Losses
included in the amount so stated, the date each such item was paid, or properly
accrued or arose, and the basis for indemnification, the Depositary Agent shall
deliver to Parent out of the Escrow Fund, as promptly as practicable, Parent
Common Stock and Exchangeable Shares or other assets held in the Escrow Fund
having a value equal to such indemnifiable Losses; provided, however, that any
Officer's Certificate for indemnification pursuant to Section 8.3(a)(i) hereof
must be delivered to the Depositary Agent on or before the first anniversary of
the Closing Date and any Officer's Certificate for indemnification pursuant to
Section 8.3(a)(ii) hereof must be delivered to the Depositary Agent on or before
Escrow Termination Date.
(b) Objections to Claims. At the time of delivery of any
--------------------
Officer's Certificate to the Depositary Agent, a duplicate copy of such
certificate shall be delivered to the Shareholders' Agent and for a period of
thirty (30) days after such delivery, the Depositary Agent shall make no
delivery to Parent of any Escrow Shares unless the Depositary Agent shall have
received written authorization from the Shareholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Depositary
Agent shall make delivery of Exchangeable Shares and shares of Parent Common
Stock from the Escrow Fund, provided that no such payment or delivery may be
made if the Shareholders' Agent shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Depositary Agent prior to the expiration of such thirty (30) day period.
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(c) Resolution of Conflicts; Arbitration. In case the Shareholders'
------------------------------------
Agent shall object in writing to any claim or claims made in any Officer's
Certificate, the Shareholders' Agent and Parent shall attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
claims. If the Shareholders' Agent and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Depositary Agent. The Depositary Agent shall be
entitled to rely on any such memorandum and distribute Exchangeable Shares and
shares of Parent Common Stock from the Escrow Fund in accordance with the terms
thereof. If no such agreement can be reached after good faith negotiation,
either Parent or the Shareholders' Agent may demand arbitration of the dispute
unless the amount of the damage or loss is at issue in a pending Action or
Proceeding involving a Third Party Claim, in which event arbitration shall not
be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three (3) arbitrators, one (1) selected by Parent and one (1)
selected by the Shareholders' Agent, and one (1) selected by the two (2)
arbitrators selected by Parent and the Shareholders' Agent shall select a third
arbitrator. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery of information
relating to any dispute while allowing the parties an opportunity, adequate as
determined in the sole judgment of the arbitrators, to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrators shall rule upon motions to compel, limit or allow discovery as
they shall deem appropriate given the nature and extent of the disputed claim.
The arbitrators shall also have the authority to impose sanctions, including
attorneys' fees and other costs incurred by the parties, to the same extent as a
court of law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to by a party without substantial justification. The decision of a
majority of the three (3) arbitrators as to the validity and amount of any claim
in such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in this Article 8, the
---------
Depositary Agent shall be entitled to act in accordance with such decision and
make or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions regarding the dispute which shall set forth the award, judgment,
decree or order awarded by the arbitrators. Judgment upon any award rendered by
the arbitrators may be entered in any court having competent jurisdiction. Any
such arbitration shall be held in the city of Chicago, Illinois under the
commercial rules of arbitration then in effect of the American Arbitration
Association. For purposes of this Section 8.5, in any arbitration hereunder in
which any claim or the amount thereof stated in the Officer's Certificate is at
issue, Parent shall be deemed to be the Non-Prevailing Party in the event that
the arbitrators award Parent an amount less than or equal to the amount of any
Losses not disputed by the Shareholders' Agent; otherwise, the Company
Shareholders shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of each arbitrator,
the administrative costs of the arbitration and the expenses relating thereto,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
8.6 Shareholders' Agent.
-------------------
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(a) Appointment, Authority. The Company Shareholders shall
----------------------
constitute and appoint an agent (the "Shareholders' Agent") for and on behalf of
-------------------
all Company Shareholders to give and receive notices and communications, to
authorize delivery to Indemnified Parties of the shares of Parent Common Stock,
Exchangeable Shares, cash or other property from the Escrow Fund in satisfaction
of claims by such Indemnified Parties, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the beneficial holders of a majority in interest of the Escrow Fund
from time to time upon not less than ten (10) days' prior written notice to
Parent. Notices or communications to or from the Shareholders' Agent shall
constitute notice to or from each of the Company Shareholders.
(b) Valuation of Escrow Shares. For the purpose of compensating
--------------------------
an Indemnified Party for its Losses pursuant to this Agreement, the Parent
Common Stock and the Exchangeable Shares in the Escrow Fund shall be valued
at the Average Closing Price.
(c) Liability. The Shareholders' Agent shall not be liable for
---------
any act done or omitted hereunder as Shareholders' Agent while acting in good
faith and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Company Shareholders shall severally indemnify the Shareholders'
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Shareholders' Agent and
arising out of or in connection with the acceptance or administration of his
duties hereunder.
(d) Access to Information. The Shareholders' Agent shall have
---------------------
reasonable access to information about the Company and the reasonable assistance
of officers and employees of the Company for purposes of performing its duties
and exercising its rights hereunder, provided that the Shareholders' Agent shall
treat confidentially and not disclose any nonpublic information from or about
the Company to anyone (except as on a need to know basis to individuals who
agree to treat such information confidentially).
8.7 Actions of the Shareholders' Agent. A decision, act, consent or
----------------------------------
instruction of the Shareholders' Agent shall constitute a decision of all
Company Shareholders for whom Escrow Shares otherwise issuable to them are
deposited in the Escrow Fund and shall be final, binding and conclusive upon
each such Company Shareholder, and the Depositary Agent and Parent may rely upon
any decision, act, consent or instruction of the Shareholders' Agent as being
the decision, act, consent or instruction of each and every such Company
Shareholder. The Depositary Agent and Parent are hereby relieved from any
liability to any person or entity for any acts done by them in accordance with
such decision, act, consent or instruction of the Shareholders' Agent.
8.8 Third-Party Claims.
------------------
(a) Notice. In the event Parent becomes aware of a third-party
------
claim which Parent believes may result in a demand against the Escrow Fund
(a "Third Party
-----------
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Claim"), Parent shall promptly notify the Shareholders' Agent of such claim;
-----
provided, however, that no delay in notifying the Shareholders' Agent shall
affect the rights of any Indemnified Person to indemnification hereunder unless
(and then solely to the extent that) the interests of Company Shareholders in
the Escrow Fund are prejudiced or damaged thereby. By written notice to Parent
within twenty (20) days after delivery of notice of such a claim, the
Shareholders' Agent (on behalf of the Company Shareholders for whom the Escrow
Amount is deposited in the Escrow Fund) shall be entitled, at its expense, to
participate in any defense of such claim by Parent, which (subject to the
provisions of Section 8.8(b) with respect to certain third-party claims) shall
--------------
direct the defense and settlement of such claims. Parent shall have the right in
its sole discretion to settle any such claim; provided, however, that Parent may
not effect the settlement of any such claim without the consent of the
Shareholders' Agent, which consent shall not be unreasonably withheld. In the
event that the Shareholders' Agent has consented to any such settlement, the
Shareholders' Agent shall have no power or authority to object under Section 8.6
-----------
or any other provision of this Article 8 to the amount of any claim by Parent
---------
against the Escrow Fund for indemnity with respect to such settlement.
(b) Assumption of Defense. Except in the case of claims for
---------------------
equitable relief and claims for money damages which may exceed the amounts then
remaining and available in the Escrow Fund for indemnification under this
Article 8 (for which claims Parent shall provide reasonable notice and details
---------
with respect thereto to the Shareholders' Agent), the Shareholders' Agent shall
be entitled to assume the defense of such claim, by written notice to Parent
within twenty (20) days after delivery of notice of a third-party claim pursuant
to Section 8.8(a). If the Shareholders' Agent assumes the defense of such a
--------------
claim, (i) the Shareholders' Agent shall defend the Indemnified Person against
the matter with counsel reasonably satisfactory to the Indemnified Person; (ii)
the Indemnified Person may retain separate co-counsel at its sole cost and
expense (except that the Shareholders' Agent shall be responsible for the fees
and expenses of the separate co-counsel to the extent that the counsel the
Shareholders' Agent has selected has a conflict of interest); (iii) the
Indemnified Person will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Shareholders' Agent (not to be withheld unreasonably); and (iv) the
Shareholders' Agent will not consent to the entry of any judgment with respect
to the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases Parent, Acquisition
Sub, CDN2 and the Indemnified Person (and the Company, if applicable) from all
liability with respect thereto, without the written consent of Parent and the
Indemnified Person. In the event the Shareholders' Agent does not timely assume
the defense of such third-party claim as provided herein, then Parent and the
Indemnified Person may defend against, or enter into any settlement with respect
to, the matter in any manner they reasonably may deem appropriate. At any time
after commencement of any such action, the Shareholders' Agent may request an
Indemnified Person to accept a bona fide offer from the other parties to the
action for a monetary settlement payable solely by Company Shareholders (which
does not burden or restrict the Parent or Indemnified Person nor otherwise
prejudice the Parent or the Indemnified Person) whereupon such settlement shall
be accepted unless Parent or the Indemnified Person determines that the dispute
should be continued. In the event such settlement is rejected by Parent or the
Indemnified Person, Company Shareholders shall be liable for indemnity hereunder
only to the extent of the lesser of (i) the amount of the settlement offer or
(ii) the amount for which Parent or the
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Indemnified Person is liable with respect to such action and, if the settlement
offer represents the lesser amount of liability for Parent or the Indemnified
Person (but does not burden or restrict Parent or the Indemnified Person nor
otherwise prejudice Parent or the Indemnified Person), the Shareholders' Agent
shall be entitled to reimbursement of all costs and legal fees incurred in
connection with the applicable matter after the date of rejection of such
settlement by Parent or the Indemnified Person. The party controlling the
defense of any Third Party Claim shall deliver, or cause to be delivered, to the
other party copies of all correspondence, pleadings, motions, briefs, appeals or
other written statements relating to or submitted in connection with the defense
of the Third Party Claim, and timely notices of, and the right to participate in
(as an observer) any hearing or other court proceeding relating to the Third
Party Claim.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
-----------
may be terminated and the Acquisition abandoned at any time prior to the
Closing:
(a) by mutual agreement of the Company, Parent, CDN2 and
Acquisition Sub;
(b) by Parent or the Company (or with respect to the obligations
of any particular Company Shareholder, such Company Shareholder) if: (i) the
Closing has not occurred before 5:00 p.m. (Pacific Time) on the date which is
thirty (30) days after the date of this Agreement or on such later date as the
parties hereto may mutually agree (provided, however, that the right to
terminate this Agreement under this clause 9.1(b)(i) shall not be available to
any party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date); (ii) there shall be a final nonappealable order of a Canadian or United
States federal or provincial or state court in effect preventing consummation of
the Acquisition; or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Acquisition by any
Governmental or Regulatory Authority that would make consummation of the
Acquisition illegal;
(c) by Parent if there shall be any action taken, or any Law or
Order enacted, promulgated or issued or deemed applicable to the Acquisition, by
any Governmental or Regulatory Authority, which would: (i) prohibit Parent's or
the Acquisition Sub's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or Acquisition Sub to dispose of
or hold separate all or a substantial portion of the Assets and Properties of
the Company as a result of the Acquisition;
(d) by Parent if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement or a Stock Purchase
Agreement on the part of the Company or the Company Shareholders and (i) the
Company or the Company Shareholders, as the case may be, have not cured such
breach within fifteen (15) days following receipt by the Company or Company
Shareholders, as the case may be, of written notice of such breach or is not
using its reasonable efforts to cure such breach after written
-43-
notice of such breach to the Company or Company Shareholders, as the case may
be, (provided, however, that, no cure period shall be required for a breach
which by its nature cannot be cured) and (ii) as a result of such breach the
conditions set forth in Section 7.3(d) or 7.3(e), as the case may be, would not
then be satisfied;
(e) by the Company if there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent, CDN2 or Acquisition Sub and (i) Parent has not cured such
breach within fifteen (15) days following receipt by the Company of written
notice of such breach or is not using its reasonable efforts to cure such breach
after written notice of such breach to Parent (provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured), and
(ii) as a result of such breach the conditions set forth in Section 7.2(a) or
7.2(b), as the case may be, would not then be satisfied; or
(f) by Parent, if, at or prior to 11:59 P.M. (California time) on
the date which is 30 days after the date of this Agreement, the Board of
Directors of each of Parent, CDN2 and Acquisition Sub has not approved the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
9.2 Effect of Termination. In the event of a valid termination of this
---------------------
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Xxxxxx, XXX0,
Acquisition Sub, the Principals, the Holders or the Company, or their respective
officers, directors or shareholders or Affiliates or Associates; provided,
however, that each party shall remain liable for any breaches of this Agreement
prior to its termination; and provided further that, the provisions of Sections
6.3, 6.4, 9.2, 10.6, 10.9, 10.10 and 10.11 of this Agreement shall remain in
full force and effect and survive any termination of this Agreement.
9.3 Amendment. This Agreement may be amended by the parties hereto at
---------
any time before the Closing by execution of an instrument in writing signed on
behalf of each of the parties hereto and after the Closing by execution of an
instrument in writing signed on behalf of Parent and the Shareholder Agent.
9.4 Extension; Waiver. At any time prior to the Closing, Xxxxxx, XXX0,
-----------------
Acquisition Sub, the Principals and the Company may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements,
covenants or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Notices. All notices, requests and other communications hereunder
-------
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by
-44-
prepaid first class certified mail, return receipt requested, or mailed by
overnight courier prepaid, to the parties at the following addresses or
facsimile numbers:
If to Parent, CDN2 or Acquisition Sub to:
RAVISENT Technologies Inc.
0 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer and
Attn: General Counsel
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxxxxx, Esq.
If to the Company or the Principals to:
Xxxx 000, 000 Xxxxxx Xx.
Xxxxxxxxx, X.X. X0X 0X0
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
with a copy to:
Xxxx Xxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Facsimile No.: (000) 000-0000
Attn: Xxx Xxxxxxxx
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 10.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 10.1, be deemed given upon facsimile confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided for in this Section 10.1, be deemed given on the earlier of the third
Business Day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided in this Section 10.1, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 10.1). Any
party from time to time may change its address, facsimile number or other
information
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for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
10.2 Entire Agreement. This Agreement supersedes all prior discussions
----------------
and agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof. Except for the
representations and warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement, each of the parties to this Agreement
acknowledges that no other representations or warranties have been relied upon
by that party or made by any other party or its officers, directors, employees,
agents, financial and legal advisors or other representatives.
10.3 Further Assurances; Post-Closing Cooperation. At any time or from
--------------------------------------------
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Acquisition to be satisfied.
10.4 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.5 Third Party Beneficiaries. The terms and provisions of this
-------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity as described in Article 8.
10.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
-----------------------------
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other parties
and any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
10.7 Headings. The headings and table of contents used in this Agreement
--------
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
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10.8 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
10.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the Province of British Columbia and the
laws of Canada applicable therein, without giving effect to any choice of law or
conflict of law provision or rule that would cause the application of the laws
of any jurisdiction other than the Province of British Columbia and the laws of
Canada applicable therein. Parent, Acquisition Sub, CDN2, the Principals, the
Holders and the Company each hereby irrevocably submits to the jurisdiction of
any of the courts of the Province of British Columbia in any action arising out
of or relating to this Agreement, and Parent, Acquisition Sub, CDN2, the
Principals, the Holders and the Company each hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such courts. Parent, Acquisition Sub, CDN2, the Principals, the Holders, and the
Company each hereby waives the defense of inconvenient forum to the maintenance
of such action or proceeding. Parent, Acquisition Sub, CDN2, the Principals, the
Holders, and the Company each hereby irrevocably consent to the service of
copies of any process which may be served in any such action or proceeding by
certified mail, return receipt requested, or by delivery of a copy of such
process to the Company or Parent, as the case may be, at its address specified
in Section 10.1 or by any other method permitted by Law. Parent, Acquisition
Sub, CDN2, the Principals, the Holders, and the Company each agree that a final
judgement in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on judgement or by any other manner
provided by Law.
10.10 Construction. The parties hereto agree that this Agreement is the
------------
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.12 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce
-47-
specifically the terms and provisions hereof in any court having jurisdiction,
this being in addition to any other remedy to which they are entitled at law or
in equity.
ARTICLE 11
DEFINITIONS
11.1 Definitions.
-----------
(a) As used in this Agreement (including the Disclosure Schedule),
the following defined terms shall have the meanings indicated below:
"$" means United States Dollars unless otherwise indicated.
"Actions or Proceedings" means any action, suit, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental or Regulatory
Authority.
"Acquisition" has the meaning ascribed to it in Recital C to this
Agreement.
"Acquisition Sub" has the meaning ascribed to it in the forepart of
this Agreement.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls 10% or more of any class
of equity securities of that Person or any of its Affiliates (including any
equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates, or (c) any director, partner
or officer of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Aggregate Cash Consideration" means $3,400,000.
"Aggregate Consideration" means the Aggregate Cash Consideration plus
the Aggregate Stock Consideration.
"Aggregate Share Number" means 825,000 shares of Parent Common Stock
and Exchangeable Shares (each as appropriately adjusted to reflect the effect of
any stock split, stock dividend, stock combination, reorganization,
reclassification or similar change occurring after the date of this Agreement
and prior to the Closing).
"Aggregate Stock Consideration" means 825,000 shares of Parent Common
Stock and Exchangeable Shares (each as appropriately adjusted to reflect the
effect of any stock split, stock dividend, stock combination, reorganization,
reclassification or similar change occurring after the date of this Agreement
and prior to the Closing.)
-48-
"Agreement" means this Acquisition Agreement, the Exhibits, the Parent
Disclosure Schedule and the Disclosure Schedule and the certificates and
instruments delivered in connection herewith, or incorporated by reference, as
the same may be amended or supplemented from time to time in accordance with the
terms hereof.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned, licensed or leased by such Person, including cash,
cash equivalents, Investment Assets, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of 10% or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Bankruptcy Law" means Title 11, U.S. Code or any similar foreign or
U.S. federal or state law for the relief of creditors.
"BC Company Act" means the Company Act (British Columbia) and all
amendments and additions thereto.
"BC Law" means the Law of British Columbia.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (i) any
amalgamation, consolidation or other business combination to which such Person
is a party, (ii) any sale or other disposition of any capital stock or other
equity interests of such Person, (iii) any tender offer (including a self
tender), exchange offer, recapitalization, restructuring, liquidation,
dissolution or similar or extraordinary transaction, (iv) any sale, dividend or
other disposition of all or a material portion of the Assets and Properties of
such Person or (v) the entering into of any agreement or understanding, the
granting of any rights or options, or the acquiescence of the Company, with
respect to any of the foregoing.
-49-
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California or the Province of British
Columbia are authorized or obligated to close.
"Business or Condition of Parent" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of Parent and each of its Subsidiaries, taken as a whole.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of the Company and each of its Subsidiaries, taken as a whole.
"Canadian GAAP" means generally accepted accounting principles in
Canada, as in effect from time to time.
"Cash Consideration" means that portion of the Aggregate Cash
Consideration to be received by a Company Shareholder from Parent and/or
Acquisition Sub in exchange for Company Shares pursuant to the terms of this
Agreement.
"Closing" means the completion of the transactions contemplated by
Section 1.4.
"Closing Date" means the date upon which the Closing occurs.
"Closing Price" means the average closing sales price of Parent Common
Stock as traded on the NNM and reported by The Wall Street Journal, for the
thirty (30) consecutive trading days ending on the third trading day prior to
the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Cash Amount" means the quotient obtained by dividing the (a)
Aggregate Cash Consideration by (b) the aggregate number of Company Shares
issued and outstanding immediately prior to the Closing.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Financial Statement Date" means December 31, 1999.
"Company Shares" has the meaning ascribed to it in Section 2.3.
"Company Intellectual Property" shall mean any Intellectual Property
of commercial value that is (i) owned by; (ii) licensed to; or (iii) was
developed or created by or for the Company or any of its Subsidiaries.
"Company Option(s)" means any Option to purchase shares of capital
stock of the Company.
-50-
"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, or filed in the name of, the Company or any of
its Subsidiaries.
"Company Shareholder" means a holder of Company Shares.
"Company Stock Purchase Right" means any right, securities,
subscription, warrant, options or other contract to purchase or otherwise
receive or be issued any shares of capital stock or other equity interests of
the Company.
"Company Warrants" means any warrant to buy shares of capital stock of
the Company.
"Contract" means any material contract, including without limitation:
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contact more
than $25,000 over the life of the contract;
(c) any contract that expires or may be renewed at the option of
any person other than the Company so as to expire more than one year after the
date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with generally accepted accounting
principles;
(e) any contract for capital expenditures in excess of $25,000 in
the aggregate;
(f) any contract limiting the freedom of the Company to engage in
any line of business or to compete with any other Person as that term is defined
in the Exchange Act, as defined herein;
(g) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property having an original cost of more than $25,000;
(h) any contract with any person with whom the Company does not
deal at arm's length; or
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person.
-51-
"Depositary Agent" means Montreal Trust.
"Disclosure Schedule" means the schedules delivered to Parent, CDN2
and Acquisition Sub by or on behalf of the Company, containing all lists,
descriptions, exceptions and other information and materials as are included
therein in connection with the representations and warranties made by the
Company in Article 2 of this Agreement or otherwise.
"Employee Escrow Agent" has the meaning ascribed to it in Section
6.19.
"Employee Escrow Cash" has the meaning ascribed to it in Section 6.14
hereof.
"Employee Escrow Fund" has the meaning ascribed to it in Section
1.1(d).
"Employee Shareholder" has the meaning ascribed to it in Section
1.1(d).
"Employee Escrow Shares" has the meaning ascribed to it in Section
6.14 hereof.
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar list of sites published by any governmental authority in Canada or the
United States relating to investigation or cleanup, or which is the subject of
any pending or threatened action, suit, proceeding, or investigation related to
or arising from any location at which there has been a Release of a Hazardous
Material.
"Environmental Law" means any Canadian or United States federal,
provincial, state, local or foreign environmental, health and safety or other
Law relating to Hazardous Materials, including without limitation the Waste
Management Act (British Columbia), the Comprehensive, Environmental Response
Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, the Federal Insecticide, Fungicide
and Rodenticide Act, and the California Safe Drinking Water and Toxic
Enforcement Act.
"Environmental Permit" means any permit, license, approval, consent or
authorization required under or in connection with any Environmental Law and
includes without limitation any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority.
"Equity Equivalents" means securities (including Options to purchase
any shares of Company Shares) which, by their terms, are or may be exercisable,
convertible or exchangeable for or into common shares, preferred shares, or
other securities of the Company at the election of the holder thereof.
-52-
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning ascribed to it in Section 2.14.
"Escrow Amount" means 21.4848% of the shares of Parent Common Stock
and Exchangeable Shares (177,250 shares) issued or issuable to shareholders of
the Company, in connection with the Acquisition.
"Escrow Fund" has the meaning ascribed to it in Section 1.1(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Exchange Ratio" means the quotient obtained by dividing (a) the
Aggregate Share Number by the aggregate number of Company Shares issued and
outstanding immediately prior to the Closing.
"Exchangeable Shares" means shares of a class of preferred stock of
Acquisition Sub that will have the rights, privileges and restrictions, and be
subject to the conditions, set forth on Exhibit 4.
"Financial Statement Date" means December 31, 1999.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, Canada, any foreign country or
any domestic or foreign state, province, county, city or other political
subdivision, and shall include any stock exchange, quotation service and the
National Association of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now defined as or included
in the definition of "special waste," "waste," "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import under any Environmental Law; or (c) any other chemical,
material, substance or waste which is regulated by any Environmental Law or
which could constitute a nuisance.
"Income Tax" means (i) any income, alternative or add-on minimum tax,
gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of
-53-
any such Tax (domestic or foreign); or (ii) any liability of a Person for the
payment of any taxes, interest, penalty, addition to tax or like additional
amount resulting from the application of Treas. Reg. (S)1.1502-6 or comparable
provisions of any Taxing Authority in respect of a Tax Return of a Person.
"Income Tax Act" means the Income Tax Act (Canada), as amended, and
the rules and regulations promulgated thereunder.
"Indebtedness" of any Person means all obligations of such Person (a)
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service xxxx rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, copyrights, mask work rights, brand names, trade
dress, product designs, product packaging, business and product names, logos,
slogans, rights of publicity, trade secrets, inventions (whether patentable or
not), invention disclosures, improvements, processes, formulae, industrial
models, processes, designs, specifications, technology, methodologies, computer
software (including all source code and object code), firmware, development
tools, flow charts, annotations, all Web addresses, sites and domain names, all
data bases and data collections and all rights therein, any other confidential
and proprietary right or information, whether or not subject to statutory
registration, and all related technical information, the information set forth
in manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, utility models, trademarks,
service marks and copyrights, and the right to xxx for past infringement, if
any, in connection with any of the foregoing.
"Interim Financial Statements" means the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of May 31, 2000, and the
related unaudited consolidated statement of operations and statement of cash
flows for the five-month period ended on such date.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, Canada, any foreign country, or any
domestic or foreign state,
-54-
province, county, city or other political subdivision or of any Governmental or
Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including without
limitation any covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, charge or adverse claim or other encumbrance of any kind,
or any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing, except for any restrictions on transfer generally
arising under any applicable federal, provincial or state securities law.
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses and expenses, including interest, reasonable expenses of
investigation, court costs, reasonable fees and expenses of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment (such fees and expenses to
include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise).
"NASD" means the National Association of Securities Dealers, Inc.
"NNM" means the distinct tier of The Nasdaq Stock Market referred to
as the Nasdaq National Market.
"Non-Competition and Employment Agreement" has the meaning ascribed to
it in Section 7.3.
"Officer's Certificate" has the meaning ascribed to it in Section 8.5
hereof.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
-55-
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Parent Common Stock" means the Common Stock of Parent.
"Parent Disclosure Schedule" means descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by Parent in Article 4 of this
Agreement or otherwise.
"Parent Reports" has the meaning ascribed to it in Section 4.4.
"Parent Support Agreement" has the meaning ascribed to it in Section
1.3.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" has the meaning ascribed to it in Section 2.14.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United States,
Canadian, international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks and servicemarks,
applications to register trademarks, intent-to-use applications, other
registrations or applications to trademarks or servicemarks, or trademarks or
servicemarks in which common law rights are owned or otherwise controlled; (iii)
registered copyrights and applications for copyright registration; (iv) any mask
work registrations and applications to register mask works; and (v) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"SEC" means the Securities and Exchange Commission or any successor
entity.
-56-
"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) of the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shareholder Agent" has the meaning ascribed to it in Section 8.6.
"Site" means any of the real properties currently or previously owned,
leased, occupied, used or operated by the Company, any predecessors of the
Company, or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater.
"Company Stock Plan" means the Incentive Stock Option Plan adopted by
the Company.
"Subsidiary" means any Person in which the Company or Parent, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person existing on the date hereof.
"Takeover Statute" means a "moratorium," "control share acquisition"
or other similar antitakeover statute or regulation enacted under provincial,
state or federal laws in the United States or Canada.
"Tax" or "Taxes" means all present and future taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings, dues and other charges
of any nature imposed by any Governmental Authority (including income, capital
(including large corporations), withholding, consumption, sales, use, transfer,
goods and services or other value-added, excise, customs, anti-dumping,
stumpage, countervail, net worth, stamp, registration, franchise, payroll,
employment, health, education, business, school, property, local improvement,
development, education development and occupation taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings, dues and charges)
together with all fines, interest, penalties on or in respect of, or in lieu of
or for non-collection of, those taxes, surtaxes, duties, levies, imposts, rates,
fees, assessments, withholdings, dues and other charges.
"Tax Laws" means the Code, the Income Tax Act and any other applicable
Canadian or United States federal, provincial, state, county, local or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Tax Returns" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or other document issued by, a
Taxing Authority in connection with any Tax.
-57-
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States or Canadian federal, provincial,
state or local jurisdiction or any foreign jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 8.8.
"Third Party Expenses" has the meaning ascribed to it in Section 6.4.
"WARN Act" means the Worker Adjustment and Retraining Notification
Act, as amended.
"Warranty Obligations" has the meaning ascribed to it in Section 2.29.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation," and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. The term "party" or "parties" when used herein refer to Parent, CDN2
and Acquisition Sub, on the one hand, and the Company and the Principals, on the
other.
(c) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person, "known to" any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the actual
knowledge of such Person and (ii) with respect to any other Person, the actual
knowledge of the directors and executive officers of such Person and other
individuals that have a similar position or have similar powers and duties as
the officers and directors of such Person.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Acquisition Sub, CDN2, the Principals and
Company have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
CINAX DESIGNS INC. RAVISENT TECHNOLOGIES INC.
By: /s/ Xxxx Xxxxxxxx By /s/ Xxxxxxx X.X. Xxxxx III
---------------------------- ----------------------------------
Name: Xxxx Xxxxxxxx Name: Xxxxxxx X.X. Xxxxx III
Title: President Title: President and Chief
Executive Officer
RAVISENT BRITISH COLUMBIA INC.. RAVISENT NOVA SCOTIA ULC
By: /s/ Xxx Xxxxxxx /s/ Xxx Xxxxxxx
---------------------------- --------------------------
Name: Xxx Xxxxxxx Name: Xxx Xxxxxxx
Title: President Title: President
PRINCIPAL PRINCIPAL
/s/ Xxxx Xxxxxxxx /s/ Xxxxxxx Xxxxxxxx
------------------------------ ----------------------
Xxxx Xxxxxxxx Xxxxxxx Xxxxxxxx
[SIGNATURE PAGE TO ACQUISITION AGREEMENT]
SCHEDULE 2
COMPANY DISCLOSURE SCHEDULE
SCHEDULE 3
PARENT DISCLOSURE SCHEDULE
SCHEDULE 7.3(g)
LIST OF KEY EMPLOYEES
Xxxxxxxx, Xxxx
Jankovic, Xxxx
Xxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxx
Xxxx, Xxxxxxx
Xxxxxxxxxxxxx, Xxxx
Xxxxx, Xin (Xxxxxxxxx)
Xxx, Xx Xxxxx (Xxxx)
Long, Xxxxxxx
Xxxxxx, Magail
EXHIBIT 1
FORM OF STOCK PURCHASE AGREEMENT
EXHIBIT 4
RIGHTS, PREFERENCES AND PRIVILEGES OF THE EXCHANGEABLE SHARES
EXHIBIT 5
FORM OF SHAREHOLDERS' AGREEMENT
EXHIBIT 6
FORM OF PARENT SUPPORT AGREEMENT
EXHIBIT 9
FORM OF ESCROW AGREEMENT
EXHIBIT 10
OFFICERS' CERTIFICATES FOR PARENT, CDN2 AND ACQUISITION SUB
EXHIBIT 11
SECRETARY'S CERTIFICATES FOR PARENT, CDN2 AND ACQUISITION SUB
EXHIBIT 12
FORM OF OPINION FOR RBS LAWYERS
EXHIBIT 13
FORM OF OPINION FOR XXXXXXX, XXXXXXX & XXXXXXXX LLP
EXHIBIT 14
OFFICERS' CERTIFICATES FOR THE COMPANY
EXHIBIT 15
SECRETARY'S CERTIFICATE FOR THE COMPANY
EXHIBIT 16
FORM OF OPINION FOR XXXX XXXX
EXHIBIT 17
FORM OF NON-COMPETITION AND EMPLOYMENT AGREEMENT
EXHIBIT 18
FORM OF EMPLOYEE ESCROW AGREEMENT
